Exhibit 10.10
STOCK PURCHASE AGREEMENT
dated as of June 18, 2004
among
FORTRESS BROOKDALE ACQUISITION LLC,
"Seller"
PROVIDENT SENIOR LIVING TRUST
"Acquiror"
and
BLC SENIOR HOLDINGS, INC.
"Indemnitor"
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms.......................................1
ARTICLE II
AGREEMENT TO PURCHASE THE SHARES; REAL PROPERTY
MATTERS AND DUE DILIGENCE
Section 2.01. Agreement to Purchase the Shares............................2
Section 2.02. Closing.....................................................2
Section 2.03. Purchase Price..............................................2
Section 2.04. Adjustments and Apportionments..............................2
Section 2.05. Due Diligence Deposit.......................................4
Section 2.06. Transactions to be Effected; Closing and Other Deliveries...4
Section 2.07. Payments and Computations...................................5
Section 2.08. Property Due Diligence......................................5
Section 2.09. Capital Expenditure Reserves................................6
Section 2.10. New Title Policies; New Surveys.............................8
Section 2.11. Real Property Matters to which Real Property May Be
Subject..................................... ...............8
Section 2.12. No Other Representations....................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INDEMNITOR AND SELLER
Section 3.01. Incorporation, Qualification and Authority of Seller and
Indemnitor Parties..................... ....................9
Section 3.02. Incorporation, Qualification and Authority of the Company
and the Company Subsidiaries......... .....................10
Section 3.03. Capital Structure of the Company and the Company
Subsidiaries; Ownership and Transfer of the Shares ........10
Section 3.04. No Conflict................................................11
Section 3.05. Consents and Approvals.....................................12
Section 3.06. Financial Statements; Absence of Undisclosed Liabilities...13
Section 3.07. Absence of Certain Changes.................................14
Section 3.08. Absence of Litigation......................................14
Section 3.09. Compliance with Laws.......................................14
Section 3.10. Governmental Licenses and Permits..........................15
Section 3.11. Environmental Matters......................................15
Section 3.12. Material Contracts.........................................16
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Section 3.13. Employee Benefits; Employees...............................17
Section 3.14. Acquired Personal Property Assets..........................17
Section 3.15. Real Property Assets.......................................18
Section 3.16. Ground Leased Assets.......................................19
Section 3.17. Insurance..................................................19
Section 3.18. Acquired Real Property; Existing Mortgages.................20
Section 3.19. Taxes......................................................20
Section 3.20. Brokers....................................................22
Section 3.21. Excluded Assets; Excluded Liabilities......................22
Section 3.22. Regulatory Filings.........................................22
Section 3.23. No Certificates of Need or Provider Agreements.............23
Section 3.24. Operator Matters...........................................23
Section 3.25. Books and Records..........................................25
Section 3.26. Information Supplied.......................................25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Section 4.01. Incorporation and Authority of Acquiror....................25
Section 4.02. Qualification of Acquiror..................................26
Section 4.03. No Conflict................................................26
Section 4.04. Consents and Approvals.....................................26
Section 4.05. Securities Matters.........................................27
Section 4.06. Financial Ability..........................................27
Section 4.07. Investigation..............................................27
Section 4.08. Brokers....................................................27
Section 4.09. Information Supplied.......................................27
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01. Conduct of Business Prior to the Closing...................28
Section 5.02. Access to Information......................................30
Section 5.03. Books and Records..........................................32
Section 5.04. Confidentiality; Exclusivity...............................32
Section 5.05. Regulatory and Other Authorizations; Reasonable Efforts....33
Section 5.06. Intercompany Obligations...................................34
Section 5.07. Intercompany Arrangements..................................34
Section 5.08. Excluded Assets; Excluded Liabilities......................34
Section 5.09. Change of Name.............................................34
Section 5.10. Existing Mortgage Lender Consents..........................34
Section 5.11. Private Placement..........................................35
Section 5.12. Registration Statement; Additional Financial Statements....35
Section 5.13. Certain Insurance Claims...................................36
Section 5.14. Notice of Certain Events...................................37
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Section 5.15. Further Action.............................................37
ARTICLE VI
CONDITIONS TO CLOSING AND RELATED MATTERS
Section 6.01. Conditions to Obligations of Seller and Indemnitor.........37
Section 6.02. Conditions to Obligations of Acquiror......................38
ARTICLE VII
TERMINATION, WAIVER AND DEFAULT
Section 7.01. Termination................................................40
Section 7.02. Notice of Termination......................................41
Section 7.03. Effect of Termination......................................41
Section 7.04. Extension; Waiver..........................................41
Section 7.05. Acquiror's Default.........................................41
Section 7.06. Seller's Default...........................................41
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification by Indemnitor..............................42
Section 8.02. Indemnification by Acquiror................................43
Section 8.03. Notification of Third Party Claims.........................44
Section 8.04. Payment; Interest on Payment...............................46
Section 8.05. Exclusive Remedies.........................................46
Section 8.06. Additional Indemnification Provisions......................47
Section 8.07. Mitigation of Losses.......................................48
Section 8.08. No Recourse to Seller and Parent Entities..................48
ARTICLE IX
CASUALTY AND CONDEMNATION OF THE REAL PROPERTY
Section 9.01. Casualty...................................................49
Section 9.02. Condemnation Pending Closing...............................50
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Survival...................................................51
Section 10.02. Expenses; Transaction Costs................................51
Section 10.03. Notices....................................................52
Section 10.04. Public Announcements.......................................53
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Section 10.05. Severability...............................................53
Section 10.06. Entire Agreement...........................................53
Section 10.07. Assignment.................................................54
Section 10.08. No Third-Party Beneficiaries...............................54
Section 10.09. Amendment..................................................54
Section 10.10. Disclosure Schedules.......................................54
Section 10.11. Governing Law; Submission to Jurisdiction; Waivers.........54
Section 10.12. Specific Performance.......................................55
Section 10.13. Rules of Construction......................................55
Section 10.14. Counterparts...............................................55
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THIS STOCK PURCHASE AGREEMENT dated as of June 18, 2004 (this
"Agreement"), is made among FORTRESS BROOKDALE ACQUISITION LLC, a Delaware
limited liability company ("Seller"), PROVIDENT SENIOR LIVING TRUST, a
Maryland real estate investment trust ("Acquiror"), and BLC SENIOR HOLDINGS,
INC., a Delaware corporation ("Indemnitor").
PRELIMINARY STATEMENTS
A. Seller owns 1,000 shares of common stock, par value $0.01 per
share (the "Shares"), of Brookdale Living Communities, Inc., a Delaware
corporation (the "Company"), which Shares constitute all of the issued and
outstanding shares of capital stock of the Company;
B. The Company owns, directly or indirectly, all of the outstanding
Equity Shares (as that term is defined in Exhibit A) in each of the entities
listed on Schedule 1 (each a "Company Subsidiary," and collectively, the
"Company Subsidiaries");
C. Indemnitor is the direct or indirect holder of one-hundred
percent (100%) of the beneficial ownership interest in (1) Tenant Holding
Company and (2) Manager (as those terms are defined in Exhibit A), and
Indemnitor will derive significant benefits if the transactions contemplated
herein are consummated;
D. On or prior to the Closing Date (as that term is defined in
Exhibit A), (1) Seller shall cause the Company and the Company Subsidiaries to
convey, assign, transfer and deliver to Indemnitor all the Excluded Assets (as
that term is defined in Exhibit A), (2) Indemnitor shall assume the Excluded
Liabilities (as that term is defined in Exhibit A), and (3) the Company and
Indemnitor shall be renamed "Old Brookdale Inc." and "Brookdale Living
Communities, Inc.", respectively, all as more particularly described herein;
E. Seller desires to sell to Acquiror, and Acquiror desires to
purchase from Seller, the Shares upon the terms and subject to the conditions
set forth herein; and
F. Concurrent with the execution of this Agreement, the parties
hereto are entering into the Tax Matters Agreement (as that term is defined in
Exhibit A).
NOW, THEREFORE, the parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement have the meanings specified in Exhibit A, or elsewhere in this
Agreement.
ARTICLE II
AGREEMENT TO PURCHASE THE SHARES; REAL PROPERTY MATTERS AND DUE DILIGENCE
Section 2.01. Agreement to Purchase the Shares. On the terms and
subject to the conditions set forth in this Agreement, at the Closing, Seller
will sell, convey, assign, transfer and deliver to Acquiror, free and clear of
all Liens, and Acquiror will purchase, acquire and accept from Seller, the
Shares, including all Seller's right, title and interest therein and thereto.
Section 2.02. Closing. The purchase and sale contemplated by this
Agreement will take place at a closing (the "Closing") at 10:00 a.m., New York
time, on the third Business Day following the date on which the last
unfulfilled or unwaived condition set forth in Article VI (other than any such
condition to be fulfilled at the Closing) shall be fulfilled or waived in
accordance with the terms of this Agreement, at the offices of Sidley Xxxxxx
Xxxxx & Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other
date or place as the parties hereto may mutually agree in writing (the date on
which the Closing shall occur is hereinafter referred to as the "Closing
Date"), subject to the rights of the parties to terminate this Agreement
pursuant to Article VII.
Section 2.03. Purchase Price. The aggregate purchase price for the
Shares payable by Acquiror to Seller shall be an amount in cash equal to the
sum of (i) $735,000,000 (the "Base Purchase Price"), plus (ii) in accordance
with Section 10.02, Transaction Costs not exceeding $7,350,000, minus (iii)
the outstanding principal balance of the Assumed Mortgage Debt allocable to
the Acquired Real Property Assets as of the Closing Date (the resulting
amount, the "Purchase Price"), as further increased or decreased in accordance
with Sections 2.04(c), 2.09, 9.01 and 9.02 (the "Closing Adjustments"). The
Purchase Price, as adjusted, by the Closing Adjustments, is hereinafter
referred to as the "Final Purchase Price". Schedule 2.03 lists each of the
Real Property Assets and sets forth the portion of the Final Purchase Price
that is allocable to each of the Real Property Assets (each, an "Allocable
Portion"); provided, that Acquiror will revise Schedule 2.03 to reflect
adjustments, if any, to the Allocable Portions of the Acquired Real Property
Assets pursuant to Sections 2.09(d) and 10.02. The Allocable Portions shall be
the basis upon which the initial Lease Basis (as defined in the form of
Property Lease) is determined for each of the Acquired Real Property Assets.
Section 2.04. Adjustments and Apportionments. (a) Seller and
Acquiror acknowledge and agree that, as of the Closing Date, certain costs and
expenses relating to the Acquired Real Property Assets owned by the Company or
a Company Subsidiary, including real estate Taxes, water meter and water
charges, sewer rents, and debt service under the Assumed Mortgage Debt (all
such costs and expenses, collectively, "Real Property Expenses"), (x) may have
accrued during the period prior to the Closing Date (the "Pre-Closing Period")
but will not be due and payable by the Company or a Company Subsidiary until
after the Closing Date (such accrued expenses, if any, that are unpaid as of
the Closing Date being hereinafter referred to as "Accrued Expenses") or (y)
will not accrue until the period on or after the Closing Date (the
"Post-Closing Period") but have been paid by the Company or a Company
Subsidiary during the Pre-Closing Period (such unaccrued expenses, if any,
that have been prepaid as the Closing Date being hereinafter referred to as
"Prepaid Expenses"). The expenses described in this Section
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2.04(a) shall be pro rated as of 12:01 am (New York time) on the Closing Date
and apportioned (on the basis of a 365-day year) to (i) Seller with respect to
the Pre-Closing Period and (ii) Acquiror with respect to the Post-Closing
Period (it being acknowledged and agreed by the parties hereto that each of
the Net Tenants shall, pursuant to the terms of the respective Property
Leases, be responsible for all Real Property Expenses relating to each of the
Acquired Real Property Assets leased by such Net Tenant with respect to the
Post-Closing Period, other than debt service relating to the Post-Closing
Period under the Assumed Mortgage Debt, as set forth in the respective
Property Leases).
(b) Not later than ten (10) Business Days prior to the Closing Date,
Seller shall prepare and deliver to Acquiror a written statement setting
forth, as of the anticipated Closing Date, a reasonably detailed good faith
calculation of the apportionments contemplated by Section 2.04(a) for each of
the Acquired Real Property Assets. Acquiror shall have the right to review
such written statement and shall notify Seller of any objection thereto within
three (3) Business Days after the receipt thereof. Seller and Acquiror shall
negotiate in good faith to attempt to resolve any such objection made by
Acquiror, provided that if such parties are unable to agree upon a reasonably
detailed calculation of such apportionments at least five (5) Business Days
prior to the Closing Date, such dispute shall be resolved by a nationally
recognized accounting firm reasonably acceptable to each of Seller and
Acquiror. If Acquiror does not notify Seller of any such objection within such
three (3) Business Day period, Acquiror shall be deemed to have agreed with
the apportionments specified in Seller's written statement. If, after the
Closing, an error or omission in the calculation of the apportionments set
forth above is found by one of the parties, such error or omission shall be
promptly corrected and the party receiving the over-payment shall pay the
amount of the over-payment to the party entitled thereto. The foregoing
obligation to correct apportionments shall survive the Closing for a period of
one-hundred eighty (180) days.
(c) The Base Purchase Price shall be (i) reduced by the excess, if
any, of the aggregate amount of Accrued Expenses over the aggregate amount of
Prepaid Expenses and (ii) increased by the excess, if any, of the aggregate
amount of Prepaid Expenses over the aggregate amount of Accrued Expenses, as
such amounts are mutually agreed or finally resolved in accordance with
Section 2.04(b), in each case, without duplication as to any amounts paid or
payable by the Net Tenants under the Property Leases.
(d) Upon the written request of Seller, Acquiror shall purchase the
Shares subject to the obligations set forth in Schedule 2.04(d) hereof (the
"Specified Liabilities"), which Specified Liabilities shall be paid at Closing
and shall not be deemed Excluded Liabilities. At least three (3) Business Days
prior to the Closing Date, Seller shall deliver to Acquiror payoff statements
or other evidence satisfactory to Acquiror as to the amount of the Specified
Liabilities at the Closing (the aggregate amount of such Specified Liabilities
being hereinafter referred to as the "Pay-off Amount") provided, that for
purposes of the last two sentences of Section 2.03, neither the Final Purchase
Price, the Allocable Portion nor the initial Lease Basis (as defined in the
form of Property Lease) shall be deemed reduced by any adjustments to the cash
portion of the Purchase Price made pursuant to this Section 2.04(d). Acquiror
shall cause the Company or a Company Subsidiary to pay the Specified
Liabilities at or immediately following the Closing.
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Section 2.05. Due Diligence Deposit. Prior to the date hereof,
Seller advanced to Acquiror a due diligence deposit in the amount of $375,000
(the "Due Diligence Deposit") to be used by Acquiror to pay any reasonable and
documented costs and expenses, including attorneys' fees and expenses,
incurred by Acquiror, its contractors and consultants in connection with
Acquiror's due diligence review of the Real Property Assets, the Company and
the Company Subsidiaries (the "Due Diligence Review"). If the transactions
contemplated herein are not consummated for any reason other than Seller's or
Indemnitor's failure to perform their respective obligations hereunder, then
within ten (10) Business Days after the termination of this Agreement,
Acquiror shall repay to Seller the Due Diligence Deposit, less any Transaction
Costs incurred by Acquiror in connection with the Due Diligence Review. If
either Seller or Indemnitor fails to perform its respective obligations
hereunder, then Acquiror shall not be obligated to return to Seller any
portion of the Due Diligence Deposit. If the transactions contemplated herein
are consummated, then Seller shall be entitled to set-off the Due Diligence
Deposit against the Transaction Costs for which Seller is responsible under
this Agreement that have been incurred by Acquiror.
Section 2.06. Transactions to be Effected; Closing and Other
Deliveries. At the Closing, upon the terms and subject to the conditions set
forth in this Agreement:
(a) Acquiror shall pay to Seller a net amount (the "Closing Amount")
equal to the Final Purchase Price less the Pay-off Amount by wire transfer of
immediately available funds to an account designated in writing by Seller at
least three (3) Business Days prior to the Closing Date;
(b) Seller shall deliver to Acquiror (A) one or more stock
certificates evidencing the Shares, duly endorsed in blank or accompanied by
powers duly executed in blank in proper form for transfer and (B) written
resignations of each of the directors and officers of the Company and each of
the Company Subsidiaries;
(c) To further document the transactions contemplated by this
Agreement, each of the Acquiror, Seller and the Indemnitor Parties, as
applicable, shall execute and deliver to each other each of the following
agreements to which it is a party: (i) the Property Leases; (ii) the Agreement
Regarding Leases; (iii) the Lease Guaranty; (iv) the Guaranty of Agreement
Regarding Leases; and (v) the Management Agreements (each of the agreements
referenced in clauses (i) through and including (v), together with this
Agreement and the Tax Matters Agreement, being hereinafter referred to
collectively as the "Transaction Agreements");
(d) Seller and Acquiror shall jointly prepare and deliver a final
closing statement (the "Closing Statement") setting forth the Final Purchase
Price and the Closing Amount, and including a reasonably detailed calculation
of each of (i) the components of the Purchase Price (other than the Base
Purchase Price), (ii) the Closing Adjustments, if any, all as determined in
accordance with the applicable provisions of this Agreement and (iii) the
Specified Liabilities; and
(e) Seller shall deliver, or shall cause to be delivered, to
Acquiror each of the following:
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(i) each (A) New Title Policy (or endorsements (including
non-imputation endorsements) to the existing owner's policies), if
any, together with any customary title affidavits required by a
title company in order to issue any New Title Policy, each executed
by Seller and the applicable Company or any of the Company
Subsidiaries and in form and substance acceptable to the applicable
title company, and (B) New Survey, if any, in each case, required to
be delivered pursuant to Section 2.10;
(ii) an affidavit, in accordance with the Foreign
Investment in Real Property Tax Act, confirming that Seller is a
"United States Person" within the meaning of Section 1445 of the
Code;
(iii) copies of the Transfer Notices, together with
evidence of their delivery to, and acceptance by, the applicable
governmental and quasi-governmental authorities, if applicable; and
(iv) such other documents and instruments as may
reasonably be required by Acquiror or the applicable title company
in order to consummate the transactions contemplated by this
Agreement and to otherwise effect the agreements of the parties
pursuant to this Agreement.
(f) In addition to the foregoing, at or prior to the Closing, (i)
Seller and Indemnitor will deliver to Acquiror the certificate referred to in
Section 6.02(a)(iii), and (ii) Acquiror will deliver to Seller the certificate
referred to in Section 6.01(a)(iii).
Section 2.07. Payments and Computations. All payments to be made by
either party under this Agreement will be paid by wire transfer of immediately
available funds to the account or accounts designated by the party receiving
such payment. All computations of interest with respect to any amounts due
from or to either party pursuant to this Agreement will be made on the basis
of a year of 365 days, in each case for the actual number of days (excluding
the first day, but including the last day) occurring in the period for which
such interest is payable.
Section 2.08. Property Due Diligence. (a) Promptly following the
execution of this Agreement, Acquiror shall deliver to Seller a due diligence
document request and checklist (which may be supplemented from time to time
during the Review Period) identifying the materials requested to be reviewed
by Acquiror in connection with the Due Diligence Review. Not later than
fifteen (15) days after the date of this Agreement, Seller shall cause the
Company and the Company Subsidiaries to make available to Acquiror, its
attorneys, accountants and other professional and consultants, copies of all
books, records, documents, reports, analyses, assessments and other written
material relating to each of the Real Property Assets, including all title
insurance policies, surveys, engineering and environmental reports, operating
and capital statements, rent rolls and all other due diligence materials
reasonably requested by Acquiror in connection with the Due Diligence Review.
(b) Acquiror shall have a period (the "Review Period") of sixty (60)
days from the date of this Agreement (the expiration date of such period being
hereinafter referred to as the "Due Diligence Expiration Date") to complete
the Due Diligence Review (including
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obtaining and reviewing title commitments or title bring-downs and engineering
reports, environmental reports and surveys relating to the Real Property
Assets). If Acquiror, in its reasonable discretion, determines that any
material matter relating to any of the Real Property Assets (including leases,
historical and projected financial statements and information, operating and
capital statements, title, real estate tax information, xxxxxxxx and
collections, operating and real estate tax pass-through escalation
calculations, survey, engineering, fitness and quality, physical condition,
environmental condition, financial condition of one or more of the tenants,
value and profitability, current or potential uses, current or future zoning
or suitability for renovation or construction) is not acceptable to Acquiror
and that it does not wish to proceed with its acquisition of such Real
Property Asset, then Acquiror may, by written notice to Seller before 5:00
p.m. (New York time) on the Due Diligence Expiration Date (time being of the
essence), terminate this Agreement in its entirety, whereupon this Agreement
shall terminate and be of no further force and effect as provided in Article
VII. If Acquiror does not elect to terminate this Agreement prior to the time
set forth above, Acquiror's right to terminate this Agreement pursuant to this
Section 2.08(b) shall expire and be of no further force and effect.
(c) Seller shall use reasonable commercial efforts during the Review
Period to permit Acquiror and its Representatives, upon prior reasonable
notice to Seller, and during normal business hours, to access each of the Real
Property Assets for the purpose of inspecting the Real Property Assets. Seller
agrees that any environmental investigation undertaken by Acquiror may include
invasive sampling of soil, groundwater, or parts of buildings or structures,
on any Real Property Asset occupied by or otherwise affiliated with the
Company or any Company Subsidiary without Seller's prior written consent;
provided, however, that Acquiror shall give Seller not less than twenty-four
(24) hours' prior notice thereof (which notice shall include the identity of
the Representatives of Acquiror that will perform such inspections and the
proposed scope thereof) and Seller, Indemnitor or their respective
Representatives shall have the right to be present during such inspections.
Acquiror shall use reasonable commercial efforts not to interfere in any
material respect with Seller's use or operation of the Real Property Assets
during such inspections. If Acquiror takes, or causes to be taken, any sample
from a Real Property Asset in connection with the foregoing, Acquiror shall,
upon the request of Seller, provide to Seller a portion of such sample to
allow Seller, if it so chooses, to perform its own testing. If Acquiror
performs environmental sampling, Acquiror shall have Acquiror's environmental
consultant carry and maintain in force, at its expense, at all times during
the performance of such sampling, general liability insurance in the minimum
amount of $1 million combined single limit for injury to or death of one or
more persons per occurrence and for damage to property per occurrence.
Notwithstanding any provisions of this Agreement to the contrary, Acquiror
shall not, and shall cause its environmental consultant not to, contact or
communicate with any Governmental Authority regarding any Hazardous Materials
on any Real Property Asset, or the environmental condition of any Real
Property Asset, unless required by Law; provided, however, that such
restriction shall not apply following the Closing.
Section 2.09. Capital Expenditure Reserves. (a) The Base Purchase
Price was agreed upon between Seller and Acquiror on the assumption that none
of the Real Property Assets is in need of significant deferred maintenance
expenditures, and that the annual capital expenditure requirement of $450 per
unit, which will be set forth in and calculated pursuant to the Agreement
Regarding Leases, is sufficient to provide for anticipated future capital
expenditures to maintain each of the Real Property Assets in their current
condition. If, during
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the course of the Due Diligence Review in respect of any Real Property Asset,
Acquiror determines, pursuant to third party reports received by Acquiror
(each, an "Acquiror Cap Ex Report"), that the anticipated costs to perform
deferred maintenance and previously unidentified future capital expenditures
reasonably necessary to be performed during the twelve (12) month period
following the Closing Date will exceed the amount of the capital expenditure
requirement for such period as set forth in and calculated pursuant to the
form of Agreement Regarding Leases (the amount of such excess, with reference
to any Real Property Asset, being hereinafter referred to as the "Cap Ex
Reserve Shortfall"), then Acquiror shall provide to Seller not later than five
(5) Business Days after the Due Diligence Expiration Date a written statement
specifying the Cap Ex Reserve Shortfall, if any, for each of the Real Property
Assets, including copies of all Acquiror Cap Ex Reports supporting such
determination. Acquiror shall provide copies of each Acquiror Cap Ex Report as
promptly as practicable after such report shall have been received by
Acquiror. If Acquiror does not timely notify Seller of any Cap Ex Reserve
Shortfall in respect of a Real Property Asset as provided above, Acquiror
shall be deemed to have agreed that the amount of the Cap Ex Reserve Shortfall
in respect of such Real Property Asset is zero.
(b) For a period of ten (10) Business Days after the receipt of the
statement delivered by Acquiror in accordance with Section 2.09(a), Seller
shall have the right to review the statement and to obtain its own third party
reports relating to any specified Cap Ex Reserve Shortfall (each such report,
a "Seller Cap Ex Report"). Seller shall provide copies of each Seller Cap Ex
Report as promptly as practicable after such report shall have been received
by Seller. If Seller objects to any Cap Ex Reserve Shortfall specified in
Acquiror' statement in respect of any Real Property Asset and determines,
pursuant to a Seller Cap Ex Report, that the amount of such Cap Ex Reserve
Shortfall is overstated by more than five percent (5%), then Seller shall
provide to Acquiror not later than five (5) Business Days after the expiration
of such review period a written statement specifying the amount of such
overstatement for each of the Real Property Assets, including copies of all
Seller Cap Ex Reports supporting such determination. If Seller does not notify
Acquiror in writing of any objection within such review period, Seller shall
be deemed to have agreed to the amount of each Cap Ex Reserve Shortfall
specified in Acquiror's statement.
(c) Seller and Acquiror shall negotiate in good faith to attempt to
resolve any such objection that is timely made by Seller, provided that if
such parties are unable to agree upon the amount of the Cap Ex Reserve
Shortfall for any Real Property Asset within ten (10) Business Days after the
date of the written statement sent by Seller specifying an overstatement,
Seller and Acquiror shall cause the preparers of the applicable Acquiror Cap
Ex Report and the applicable Seller Cap Ex Report to select an independent
third party to provide a capital expenditure report for such Real Property
Asset and the amount of the Cap Ex Reserve Shortfall specified in such
independent report shall be final and binding on Acquiror and Seller for the
purposes of this Section 2.09. The fees and expenses of any such independent
third party shall be a Transaction Cost.
(d) Upon Seller and Acquiror having agreed or deemed to have agreed
upon the amount of the Cap Ex Reserve Shortfall (or such amount having been
determined in accordance with Section 2.09(c)), Seller may, at its sole
option: (i) decrease the Base Purchase Price by the amount of the Cap Ex
Reserve Shortfall so agreed or determined; (ii) deposit into
7
escrow (with a third party mutually acceptable to Seller and Acquiror pursuant
to escrow instructions in form and substance reasonably acceptable to Seller
and Acquiror) on the Closing Date the amount of the Cap Ex Reserve Shortfall
so agreed or determined for disbursement to Acquiror (and its Affiliates) from
time to time after the Closing Date to pay for the deferred maintenance and
capital items specifically identified in the applicable third party reports;
or (iii) direct Acquiror to perform (or to cause third parties to perform) the
deferred maintenance work and the capital items specifically identified in the
applicable third party reports, in which case the Allocable Portions of the
applicable Acquired Real Property Assets shall be increased in the aggregate
by the aggregate amount of the Cap Ex Reserve Shortfall so agreed or
determined (such increase to be allocated by Acquiror among the applicable
Acquired Real Property Assets in such manner as Acquiror shall reasonably
determine).
Section 2.10. New Title Policies; New Surveys. During the Review
Period, Acquiror shall have the opportunity to review the existing owner's
title insurance policies and surveys of the Real Property Assets. If, upon
such review, Acquiror shall reasonably determine that the existing owner's
title insurance policy for any Real Property Asset is insufficient to protect
the interests of Acquiror with respect to such Real Property Asset and
Acquiror delivers notice thereof to Seller on or before the Due Diligence
Expiration Date specifying the applicable Real Property Asset and identifying
the interests of Acquiror that are not protected, Seller shall, at its option
and at its sole cost and expense, cause either (a) the title insurance company
that issued the existing owner's title insurance policy for the applicable
Real Property Asset to issue to Acquiror, on the Closing Date, relevant
endorsements to such existing title insurance policies in order to adequately
protect the interests of Acquiror, including a non-imputation endorsement, or
(b) a title insurance company reasonably selected by Seller to provide to
Acquiror on the Closing Date an owner's title insurance policy (or in the case
of a New York-style closing, a marked title insurance commitment representing
such title insurance policy) covering title to the applicable Real Property
Asset in an amount approximating the fair market value thereof (in either
case, a "New Title Policy"). Similarly, if Acquiror shall reasonably determine
that the existing survey for any Real Property Asset is insufficient to
protect the interests of Acquiror with respect to such Real Property Asset and
Acquiror delivers notice thereof to Seller on or before the Due Diligence
Expiration Date specifying the applicable Real Property Asset and identifying
the interests of Acquiror that are not protected, Seller shall, at its sole
cost and expense, deliver to Acquiror, on or before the Closing Date, a survey
of the applicable Real Property Asset performed by a surveyor licensed in the
state in which such asset is located and certified to Acquiror as having been
prepared in accordance with 1999 minimum standard details for a land survey
jointly adopted by ALTA/ACSM (a "New Survey"). If Acquiror shall fail to
deliver any written notice to Seller contemplated by this Section 2.10 with
respect to any Real Property Asset on or before the Due Diligence Expiration
Date, Acquiror shall be deemed to have waived its right to request a New Title
Policy or New Survey with respect to such Real Property Asset.
Section 2.11. Real Property Matters to which Real Property May Be
Subject. At the Closing, except as set forth in Schedule 3.15, the Company and
the Company Subsidiaries shall own good and valid insurable fee title to the
Acquired Real Property Assets, free and clear of any and all Liens other than
Permitted Liens.
8
Section 2.12. No Other Representations. No representation, warranty
or covenant made by Seller or Indemnitor in this Agreement or any document
delivered pursuant to this Agreement shall survive the Closing except as
expressly provided in this Agreement. Acquiror has not relied upon, and
neither Seller nor Indemnitor is liable or bound in any manner by, any verbal
or written statements, representations, real estate brokers' "set-ups" or
information pertaining to the Real Property Assets furnished by any real
estate broker, agent, employee, servant to other Persons unless the same are
expressly set forth in this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INDEMNITOR AND SELLER
Seller hereby represents and warrants to Acquiror as to the matters
specified in Sections 3.01(a), 3.04(a), 3.05(a), 3.19(h), 3.25 and 3.26 and
Indemnitor hereby represents and warrants to Acquiror as to the matters
specified in Sections 3.01(b), 3.02, 3.03, 3.04(b), 3.05(b), 3.06 through 3.24
(other than Section 3.19(h)) and 3.26, as follows:
Section 3.01. Incorporation, Qualification and Authority of Seller
and Indemnitor Parties. (a) Seller is a limited liability company duly formed,
validly existing and in good standing under the Laws of the State of Delaware
and has all requisite limited liability company power to operate its business
as now conducted and is duly qualified as a foreign limited liability company
to do business, and is in good standing, in each jurisdiction where the
character of its owned, operated or leased properties or the nature of its
activities makes such qualification necessary, except for failures to so
qualify or be in good standing that, individually or in the aggregate, has not
had, and would not reasonably be expected to have, a Material Adverse Effect.
Seller has all requisite limited liability company power to enter into, and to
consummate the transactions contemplated by, and to carry out its obligations
under, each of the Transaction Agreements to which Seller is or will be a
party. The execution and delivery by Seller of each of the Transaction
Agreements to which Seller is or will be a party, and the consummation by
Seller of the transactions contemplated by, and the performance by Seller of
its obligations under, each of such Transaction Agreements have been duly
authorized by all requisite limited liability company action on the part of
Seller and its members. This Agreement and the Tax Matters Agreement have
been, and at the Closing, each of the other Transaction Agreements to which
Seller is then a party will be, duly executed and delivered by Seller, and
(assuming due authorization, execution and delivery by Acquiror) this
Agreement and the Tax Matters Agreement constitute, and as of the Closing each
of the other Transaction Agreements to which Seller is then a party will
constitute, the legal, valid and binding obligations of Seller enforceable
against it in accordance with their respective terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance or similar Laws relating to or affecting creditors' rights
generally and subject, as to enforceability, to the effect of general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(b) Each of the Indemnitor Parties is a corporation, limited
liability company or limited partnership duly formed, validly existing and in
good standing under the Laws of the State of Delaware or Illinois and has all
requisite corporate, limited partnership or limited liability company power to
operate its business as now conducted and is duly qualified as a
9
foreign corporation, limited liability company or limited partnership to do
business, and is in good standing, in each jurisdiction where the character of
its owned, operated or leased properties or the nature of its activities makes
such qualification necessary, except for failures to so qualify or be in good
standing that, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect. Each of the
Indemnitor Parties has all requisite corporate, limited liability company or
limited partnership power to enter into, and to consummate the transactions
contemplated by, and to carry out its obligations under, each of the
Transaction Agreements to which it is or will be a party. The execution and
delivery by each of the Indemnitor Parties of each of the Transaction
Agreements to which such Indemnitor Party is or will be a party, and, the
consummation by each of the Indemnitor Parties of the transactions
contemplated by, and the performance by each of the Indemnitor Parties of its
obligations under, each of such Transaction Agreements have been duly
authorized by all requisite corporate, limited liability company or limited
partnership action, as applicable, on the part of such Indemnitor Party and
its stockholders, partners or members, as applicable. This Agreement and the
Tax Matters Agreement have been, and at the Closing, each of the other
Transaction Agreements to which any of the Indemnitor Parties is then a party
will be, duly executed and delivered by the applicable Indemnitor Parties, and
(assuming due authorization, execution and delivery by Acquiror) this
Agreement and the Tax Matters Agreement constitute, and as of the Closing each
of the other Transaction Agreements to which each of the Indemnitor Parties is
then a party will constitute, the legal, valid and binding obligations of the
applicable Indemnitor Party, enforceable against it in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance or similar Laws
relating to or affecting creditors' rights generally and subject, as to
enforceability, to the effect of general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
Section 3.02. Incorporation, Qualification and Authority of the
Company and the Company Subsidiaries. Each of the Company and the Company
Subsidiaries is a corporation, limited liability company or limited
partnership duly formed, validly existing and in good standing under the Laws
of its jurisdiction of incorporation, formation or organization and has the
requisite power and authority to operate its business as now conducted. Each
of the Company and the Company Subsidiaries is duly qualified as a foreign
corporation, limited liability company or limited partnership to do business
and is in good standing in each jurisdiction where the character of its owned,
operated or leased properties or the nature of its activities makes such
qualification necessary, except for failures to so qualify or be in good
standing that, individually or in the aggregate, do not have, and would not
reasonably be expected to have, a Material Adverse Effect. Each of the Company
Subsidiaries has been formed to acquire, hold, finance, lease and operate its
respective Real Property Assets, and, except for the acquisition, holding,
financing, leasing and operation of such Real Property Assets, has not
conducted any other business.
Section 3.03. Capital Structure of the Company and the Company
Subsidiaries; Ownership and Transfer of the Shares. (a) Schedule 3.03(a) sets
forth (i) all the authorized Capital Stock of the Company and of each of the
Company Subsidiaries and (ii) the number of Equity Shares of each class or
series of Capital Stock of the Company and of each of the Company Subsidiaries
that are issued and outstanding, together with the registered holder thereof.
Except as set forth in Schedule 3.03(a), there are no shares of Capital Stock
or other
10
Equity Shares of the Company or any of the Company Subsidiaries issued and
outstanding. All the outstanding Equity Shares of the Company and of each of
the Company Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and were not issued in violation of any
preemptive or subscription rights. There are no options, calls, warrants or
convertible or exchangeable securities, or conversion, preemptive,
subscription or other rights, or agreements, arrangements or commitments, in
any such case, obligating or which may obligate the Company or any of the
Company Subsidiaries to issue, sell, purchase, return or redeem any of their
respective Equity Shares or securities convertible into or exchangeable for
any of their respective Equity Shares, and there are no Equity Shares of the
Company or any of the Company Subsidiaries reserved for issuance for any
purpose. There are no capital appreciation rights, phantom stock plans,
securities with participation rights or features, or similar obligations and
commitments of the Company or any of the Company Subsidiaries. Seller directly
and indirectly (through ownership of the Company) owns all the outstanding
Equity Shares of the Company and the Company Subsidiaries, free and clear of
all Liens. Seller has the limited liability company power and authority to
sell, convey, assign, transfer, and deliver the Shares as provided in this
Agreement, and the sale, conveyance, assignment, transfer and delivery will
convey to Acquiror good and marketable title to such Shares, free and clear of
any and all Liens. Immediately following the Closing, Acquiror (and/or any one
or more assignees duly designated by Acquiror pursuant to Section 10.07), will
directly and indirectly (through ownership of the Company) own all the
outstanding Equity Shares of the Company and the Company Subsidiaries, free
and clear of all Liens. Except for this Agreement, there are no options, calls
or warrants or other rights, agreements, arrangements or commitments
obligating (i) Seller to sell any of the Shares or (ii) the Company or any
Company Subsidiary to sell any of the Equity Shares of any Company Subsidiary.
Except for this Agreement or as set forth in Schedule 3.03(a), there are no
voting trusts, stockholder agreements, proxies or other rights or agreements
in effect with respect to the voting, transfer or dividend rights of the
Shares or of the Equity Shares of any Company Subsidiary. Except as set forth
in Schedule 3.03(a), on the Closing Date, the Company has no Subsidiaries
other than the Company Subsidiaries.
(b) Immediately following the Closing, neither Seller nor any of its
Affiliates will have any claims with respect to the Shares (except for any
claims for indemnification under Section 8.02 that may arise following the
Closing), or to any interest, dividends or other distributions in respect
thereof.
Section 3.04. No Conflict.
(a) Provided that all consents, approvals, authorizations and other
actions described in Section 3.05(a) have been obtained or taken, except as
otherwise provided in this Article III and except as may result from any facts
or circumstances solely relating to Acquiror or its Affiliates (as opposed to
any other third party), the execution, delivery and performance by Seller of,
and the consummation by Seller of the transactions contemplated by, this
Agreement, the Tax Matters Agreement and the other Transaction Agreements to
which Seller will be a party, do not and will not (a) violate or conflict with
the organizational documents of Seller, the Company or any of the Company
Subsidiaries, (b) conflict with or violate any Law or other Governmental Order
applicable to Seller, the Company or any of the Company Subsidiaries or by
which any of them or any of their respective properties or assets is bound or
affected, or (c) result in any breach of or loss of any contractual benefit
under, or constitute a default (or event
11
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to any Person any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Lien on the
Shares or any of the assets or properties of the Company or any of the Company
Subsidiaries pursuant to, or, except for the consents listed on Schedule
3.04(a) (the "Seller Required Third Party Consents") or the consents listed on
Schedule 5.10, require any consent or approval which has not been obtained
with respect to, or the payment of any penalty or liquidated damages under,
any note, bond, loan or credit agreement, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other material instrument to
which Seller, the Company or any of the Company Subsidiaries is a party or by
which any of them or any of their respective properties or assets is bound or
affected, except, in the case of clause (c), any such conflicts, violations,
breaches, loss of contractual benefits, defaults, rights or Liens, failure to
obtain consents or approvals, or payments that, individually or in the
aggregate, do not have, and would not reasonably be expected to have, a
Material Adverse Effect.
(b) Provided that all consents, approvals, authorizations and other
actions described in Section 3.05(b) have been obtained or taken, except as
otherwise provided in this Article III and except as may result from any facts
or circumstances solely relating to Acquiror or its Affiliates (as opposed to
any other third party), the execution, delivery and performance by Indemnitor
of, and the consummation by it of the transactions contemplated by, this
Agreement, the Tax Matters Agreement and the other Transaction Agreements to
which it will be a party, do not and will not (a) violate or conflict with the
organizational documents of any of the Indemnitor Parties, the Company or any
of the Company Subsidiaries, (b) conflict with or violate any Law or other
Governmental Order applicable to any of the Indemnitor Parties, the Company or
any of the Company Subsidiaries or by which any of them or any of their
respective properties or assets is bound or affected or (c) result in any
breach of or loss of any contractual benefit under, or constitute a default
(or event which with the giving of notice or lapse of time, or both, would
become a default) under, or give to any Person any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Lien on the Shares or any of the assets or properties of the Company or any of
the Company Subsidiaries pursuant to, or, except for the consents listed on
Schedule 3.04(b) (the "Indemnitor Required Third Party Consents") or the
consents listed on Schedule 5.10, require any consent or approval which has
not been obtained with respect to, or the payment of any penalty or liquidated
damages under, any note, bond, loan or credit agreement, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other material
instrument to which any of the Indemnitor Parties, the Company or any of the
Company Subsidiaries is a party or by which any of them or any of their
respective properties or assets is bound or affected, except, in the case of
clause (c), any such conflicts, violations, breaches, loss of contractual
benefits, defaults, rights or Liens, failure to obtain consents or approvals,
or payments that, individually or in the aggregate, do not have, and would not
reasonably be expected to have, a Material Adverse Effect.
Section 3.05. Consents and Approvals.
(a) Except as may result from any facts or circumstances solely
relating to Acquiror or its Affiliates (as opposed to any other third party),
the execution and delivery by Seller of this Agreement and the Tax Matters
Agreement do not, and the execution and delivery by Seller at the Closing of
the other Transaction Agreements to which Seller will be a party will not, and
the performance by Seller of, and the consummation by Seller of the
transactions
12
contemplated by, this Agreement, the Tax Matters Agreement and the other
Transaction Agreements to which Seller is or will be a party will not, except
for the consents listed on Schedule 3.05(a) (each, a "Seller Required
Governmental Approval"), require any consent, approval, license, permit,
order, qualification, authorization of, or registration or other action by, or
any filing with or notification to, any Governmental Authority, including
under any Environmental Property Transfer Law (each, a "Governmental
Approval"), to be obtained or made by any of Seller, the Company and the
Company Subsidiaries that is material or any Seller Required Governmental
Approvals the failure to obtain or make any or all of which could reasonably
be expected to prevent or materially delay the consummation by Seller of the
transactions contemplated by, or the performance by Seller of any of its
obligations under, any of the Transaction Agreements to which Seller is or
will be a party.
(b) Except as may result from any facts or circumstances solely
relating to Acquiror or its Affiliates (as opposed to any other third party),
the execution and delivery by Indemnitor of this Agreement and the Tax Matters
Agreement do not, and the execution and delivery by each of the Indemnitor
Parties at the Closing of the other Transaction Agreements to which it will be
a party will not, and the performance by it of, and the consummation by it of
the transactions contemplated by, this Agreement, the Tax Matters Agreement
and the other Transaction Agreements to which it is or will be a party will
not, except for the consents listed on Schedule 3.05(b) (each, an "Indemnitor
Required Governmental Approval"), require any Governmental Approval to be
obtained or made by any of the Indemnitor Parties, the Company and the Company
Subsidiaries that is material or any Indemnitor Required Governmental
Approvals the failure to obtain or make any or all of which could reasonably
be expected to prevent or materially delay the consummation by any of the
Indemnitor Parties of the transactions contemplated by, or the performance by
it of any of its obligations under, any of the Transaction Agreements to which
it is or will be a party.
Section 3.06. Financial Statements; Absence of Undisclosed
Liabilities. (a) Schedule 3.06(a) sets forth (i) the consolidated balance
sheets of the Company and the Company Subsidiaries as at each of December 31,
2003, 2002 and 2001, (ii) the consolidated statements of operations,
stockholders' equity and cash flows of the Company and the Company
Subsidiaries for the fiscal years ended December 31, 2003, 2002 and 2001, and
(iii) the unaudited consolidated balance sheet of the Company and the Company
Subsidiaries as at March 31, 2004, and the unaudited consolidated statements
of operations and cash flows of the Company and the Company Subsidiaries for
the three-month period ended March 31, 2004, together with, in the case of
each of clauses (i), (ii) and (iii) above, the exhibits, schedules and notes
thereto (collectively, the "Financial Statements"). The Financials Statements
described in clauses (i) and (ii) above have been audited by, and are
accompanied with the report of, Ernst & Young LLP. Each of the Financial
Statements is complete and correct in all material respects, has been prepared
in accordance with GAAP and in conformity with the practices consistently
applied by the Company and the Company Subsidiaries and, except as disclosed
in Schedule 3.06(a), without modification of the accounting principles used in
the preparation thereof throughout the periods involved and presents fairly,
in all material respects, the financial position and results of operations of
the Company and the Company Subsidiaries as at the indicated dates and for the
periods indicated therein subject in the case of the unaudited quarterly
financial statements, to normal and customary year-end adjustments that are
not material in amount or significance.
13
(b) Except as set forth in the Financial Statements and except for
liabilities and obligations of a type required to be disclosed on a balance
sheet prepared in accordance with GAAP incurred in the ordinary course of
business consistent with past practice since the date of the Financial
Statements and not in violation of this Agreement or the Tax Matters
Agreement, and except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, to the Knowledge of
the Selling Parties, there are no liabilities or obligations of the Company or
any of the Company Subsidiaries of any nature (whether accrued, absolute,
contingent or otherwise), whether or not required to be reflected on a
financial statement prepared in accordance with GAAP.
(c) Attached as Schedule 3.06(c) are (i) pro forma consolidated
balance sheets of the Company and the Company Subsidiaries as at December 31,
2003 and March 31, 2004 and (ii) pro forma consolidated statements of
operations of the Company and the Company Subsidiaries for fiscal year ended
December 31, 2003 and the three-month period ended March 31, 2004
(collectively, the "Pro Forma Financial Statements"). The Pro Forma Financial
Statements have been presented assuming that the transactions contemplated by
Sections 5.06, 5.07 and 5.08 had been completed as of (A) in case of the
balance sheets, December 31, 2003 and March 31, 2004, respectively, and in the
case of the statements of operations, January 1, 2003, and January 1, 2004,
respectively, and have been prepared in accordance with GAAP and in conformity
with the practices consistently applied by the Company and the Company
Subsidiaries in the preparation of the Financial Statements, and present
fairly, in all material respects, the financial position and results of
operations of the Company and the Company Subsidiaries for the indicated
periods assuming that the transactions contemplated by Sections 5.06, 5.07 and
5.08 had been completed as of the dates indicated in this sentence. Prior to
the Closing Date, Seller shall cause its accountants, Ernst & Young LLP or
another nationally-recognized accounting firm, to conduct a review of the Pro
Forma Financial Statements and deliver to Acquiror such reviewed financial
statements substantially in form and substance as Schedule 3.06(c), with any
changes or deviations not material in amount or significance, together with
the report of such accountants regarding such review.
Section 3.07. Absence of Certain Changes. The Company and the
Company Subsidiaries have conducted their respective businesses in the
ordinary course consistent with past practice, and there has not occurred any
event or events (a) that individually or in the aggregate, have had, or would
reasonably be expected to have, a Material Adverse Effect or (b) since
December 31, 2003, that had such event or events occurred after the date of
this Agreement, would have constituted a breach by Seller of clauses
(i)-(viii), (x) or (xi) of Section 5.01(d).
Section 3.08. Absence of Litigation. Except as set forth on Schedule
3.08 (the "Existing Litigation Matters"), there are no Actions pending or, to
the Knowledge of the Selling Parties, threatened against the Company, the
Company Subsidiaries and the Real Property Assets. None of the Existing
Litigation Matters, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect.
Section 3.09. Compliance with Laws. Excluding Environmental Laws and
Governmental Orders arising under Environmental Laws (which are covered in
Section 3.11) and Tax laws (which are covered in Section 3.19), neither the
Company nor any of the Company
14
Subsidiaries is in violation of any Laws or Governmental Orders applicable to
it or its assets, properties or businesses, except for violations that,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect. Neither the Company nor any
Company Subsidiary is a party to, or bound by, any Governmental Order that
affects in any material respect the ownership, use or operation of any of the
Real Property Assets.
Section 3.10. Governmental Licenses and Permits. (a) Excluding
Environmental Permits (which are covered in Section 3.11), each of the Company
and the Company Subsidiaries holds all material governmental qualifications,
registrations, filings, licenses, permits, orders, approvals or authorizations
necessary to conduct its respective business and to own or use its respective
assets and properties, as such businesses, assets and properties are
conducted, owned and used on the date hereof (collectively, the "Material
Permits").
(b) All Material Permits are valid and in full force and effect in
all material respects. Except as set forth in Schedule 3.10(b) and excluding
Environmental Permits (which are covered in Section 3.11), none of the Company
and the Company Subsidiaries is in default or violation of any of the Material
Permits in any material respect. Except as set forth in Schedule 3.10(b), (i)
no Material Permit has been revoked, suspended, non-renewed, terminated or
impaired in any material respect, (ii) none of the Company and the Company
Subsidiaries currently is the subject of any pending or, to the Knowledge of
the Selling Parties, threatened Action seeking the revocation, suspension,
non-renewal, termination, modification or impairment of any Material Permit in
any material respect, and (iii) to the Knowledge of the Selling Parties, there
is no existing condition of the Company or any of the Company Subsidiaries,
nor has the Company or any of the Company Subsidiaries received any notice
from any Governmental Authority of any fact or condition, which, if left
uncured, would result in the revocation, limitation, suspension or non-renewal
of any Material Permit, except where such revocation, limitation, suspension
or non-renewal, individually or in the aggregate, would not reasonably be
expected to have a material and adverse effect on any Real Property Asset.
None of the Company and the Company Subsidiaries is operating under a
Governmental Order or voluntary agreement with any regulatory authorities of
any jurisdiction in which it now holds a Material Permit which restricts in
any material respect its authority to do the business authorized pursuant to
such Material Permit or which would prohibit or materially delay the
consummation of the transactions contemplated hereby. Subject to obtaining the
consents set forth in Schedule 3.04(a), none of the Material Permits will be
subject to revocation, limitation, suspension, non-renewal, withdrawal,
termination or modification as a result of the consummation of the
transactions contemplated hereby, except where such revocation, limitation,
suspension, non-renewal, withdrawal, termination or modification, individually
or in the aggregate, would not reasonably be expected to have a material and
adverse effect on any Real Property Asset.
Section 3.11. Environmental Matters. (a) To the Knowledge of the
Selling Parties, all environmental reports obtained by each of the Company and
the Company Subsidiaries within the past three (3) years with respect to the
Real Property Assets have been delivered or made available to Acquiror; (b)
none of the Real Property Assets, the Company and the Company Subsidiaries is
subject to a written notice or written request for information or order from
or agreement with a Governmental Authority or third party respecting a Release
or threatened Release or the violation of any Environmental Law; (c) there has
been no Release on, at or under any real property formerly owned, leased or
otherwise used by any of the Company
15
and the Company Subsidiaries during the period that it was owned, leased or
otherwise used by the Company or a Company Subsidiary or, to the Knowledge of
the Selling Parties, the Real Property Assets, or arising out of the conduct
by the Company or the Company Subsidiaries of their respective businesses,
that would reasonably be expected to result in the imposition of any material
liability to any of the Company and the Company Subsidiaries under the
Environmental Laws; (d) to the Knowledge of the Selling Parties, there has
been no Release at any parcels of real property other than any real property
referred to in item (c) that would reasonably be expected to have a material
and adverse effect on any Real Property Asset, the Company or any Company
Subsidiary; (e) to the Knowledge of the Selling Parties, none of the Real
Property Assets is subject to any Lien in favor of any Governmental Authority
for (i) material liability under any Environmental Laws or (ii) material costs
incurred by a Governmental Authority in response to a Release or threatened
Release; (f) with respect to any of the Real Property Assets, the Company and
the Company Subsidiaries, there are no material Actions pending or, to the
Knowledge of the Selling Parties threatened, arising under or relating to an
Environmental Law or Hazardous Materials or the making of any claim based on
an Environmental Law for personal injury, wrongful death or property damage;
(g) the Company and the Company Subsidiaries have operated and are operating
their respective businesses in compliance in all material respects with
applicable Environmental Laws; and (h) to the knowledge of the Selling
Parties, the Company and the Company Subsidiaries have obtained all material
Environmental Permits that are necessary in connection with the operation of
their respective businesses as conducted on the date of this Agreement, all
such permits are in good standing and the Company and the Company Subsidiaries
are in compliance in all material respects with the terms and conditions of
such permits.
Section 3.12. Material Contracts. (a) Schedule 3.12(a) lists each of
the Material Contracts as in effect on the date of this Agreement and, where
applicable, the applicable Real Property Asset to which they relate and, in
the case of each Material Contract evidencing indebtedness for borrowed money
or an intercompany obligation, the name of the lender thereunder, the maturity
date thereof (and any extension terms thereunder) and the outstanding
principal amount thereof as of the date hereof.
(b) Each Material Contract is a legal, valid and binding obligation
of the Company or any Company Subsidiary, as applicable, and, to the Knowledge
of the Selling Parties, each other party to such Material Contract, and is
enforceable against the Company or such applicable Company Subsidiary, as
applicable, and, to the Knowledge of the Selling Parties, each such other
party, in accordance with its terms (except in each case as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws now or hereafter in effect relating to or affecting creditors' rights
generally, including the effect of statutory and other Laws regarding
fraudulent conveyances and preferential transfers, and subject to the
limitations imposed by general equitable principles (whether or not such
enforceability is considered in a proceeding at law or in equity)), and none
of the Company or any Company Subsidiary or, to the Knowledge of the Selling
Parties, any other party to a Material Contract is in material default or
material breach or has failed to perform any material obligation under a
Material Contract, and, to the Knowledge of the Selling Parties, there does
not exist any event, condition or omission that would constitute such a
material breach or material default (whether by lapse of time or notice or
both), or give to the other party thereto any rights of termination,
16
amendment, acceleration or cancellation of, or result in the payment of any
penalty or liquidated damages under, a Material Contract.
Section 3.13. Employee Benefits; Employees. (a) Except as set forth
in Schedule 3.13(a), as of the Closing Date, none of the Company, the Company
Subsidiaries and their respective ERISA Affiliates has any (i) "employee
benefit plans", as defined in Section 3(3) of ERISA, or (ii) incentive,
profit-sharing, stock option, stock purchase, other equity-based, employment,
consulting, compensation, vacation or other leave, change in control,
retention, supplemental retirement, severance, health, medical, disability,
life insurance, deferred compensation and other employee compensation and
benefit plans, programs, policies, agreements, arrangements and practices, in
each case established or maintained by Seller or any of its ERISA Affiliates
or to which Seller or any of its ERISA Affiliates contributed or is obligated
to contribute thereunder, for the benefit of any of the current or former
employees or independent contractors of any of the Company, the Company
Subsidiaries and their respective ERISA Affiliates (collectively, the "Benefit
Plans").
(b) As of the Closing Date, (i) none of the Company and the Company
Subsidiaries will have any employees, (ii) none of the Company and the Company
Subsidiaries will have any obligation or liability that will not have been
assumed by Indemnitor with respect to any of the former employees or
independent contractors of the Company, the Company Subsidiaries and their
respective ERISA Affiliates and (iii) each of the Company and the Company
Subsidiaries is not reasonably expected to incur any obligation or liability
with respect to any of the former employees or independent contractors of the
Company, the Company Subsidiaries and their respective ERISA Affiliates.
(c) None of the Company, the Company Subsidiaries and their
respective ERISA Affiliates has sponsored, maintained, contributed to or been
obligated to contribute to any Benefit Plan subject to Section 412 of the
Code, Section 302 of ERISA, or Title IV of ERISA within the five years prior
to the Closing Date. As of the Closing Date, none of the Company and the
Company Subsidiaries will have any obligation or liability with respect to any
Benefit Plan, and neither the Company nor any Company Subsidiary is reasonably
expected to incur any obligation or liability with respect to any Benefit
Plan.
(d) Each of the Company, the Company Subsidiaries and their
respective ERISA Affiliates (i) is in compliance in all material respects with
all applicable Laws respecting employment, employment practices, terms and
conditions of employment and wages and hours, and (ii) has withheld all
amounts required by applicable Laws or by agreement to be withheld from the
wages, salaries and other payments to such current and former employees and
independent contractors.
(e) For purposes of this Agreement, "ERISA Affiliate" shall mean any
Person that would be treated as a single employer or under common control with
the Company under Section 4001 of ERISA or Section 414 of the Code.
Section 3.14. Acquired Personal Property Assets. (a) Schedule
3.14(a) sets forth a true and complete list of the carrying value of the
material assets located on the Real Property Assets as of December 31, 2003,
other than real property and fixtures appurtenant
17
thereto, beneficially owned by the Company and the Company Subsidiaries and
used in the conduct of their respective businesses. Prior to Closing, Seller
shall supplement Schedule 3.14(a) to include a true and complete list of the
material assets (whether or not required by GAAP to be reflected on a balance
sheet), other than real property and fixtures appurtenant thereto,
beneficially owned by the Company and the Company Subsidiaries and used in the
conduct of their respective businesses without values assigned to such
personal property (collectively, "Acquired Personal Property Assets").
(b) Except as set forth in Schedule 3.14(b) or in the Financial
Statements, the Company or a Company Subsidiary has good (and, in the case of
marketable securities, marketable) title to each of the Acquired Personal
Property Assets that it purports to own, free and clear of all Liens other
than Permitted Liens, and (ii) valid leasehold interests in or valid rights
under contract to use each of the Acquired Personal Property Assets that it
purports to lease or license. The acquisition by the Company and each Company
Subsidiary of its Acquired Personal Property Assets complied in all material
respects with all applicable Laws. The Company and the Company Subsidiaries
are in possession of all of the Acquired Personal Property Assets and,
immediately after the Closing, after giving effect to the transactions and
terminations contemplated by Sections 5.06, 5.07 and 5.08, such Acquired
Personal Property Assets will be substantially the same as the personal
property of the Company and the Company Subsidiaries that is located on the
Real Property Assets and used in the conduct of their respective businesses as
of the date hereof.
Section 3.15. Real Property Assets. Schedule 3.15 sets forth a true
and complete list and a brief description of each of the Real Property Assets
showing the name of the applicable facility and common address and record
title holder. Seller has provided or made available to Acquiror for each Real
Property Asset, the legal description thereof, the location thereof, the
improvements thereto and the uses being made thereof. Except as set forth in
Schedule 3.15, the Company and the Company Subsidiaries owns good, marketable
and insurable (at ordinary rates) title in fee simple absolute to all of the
Real Property Assets (other than the Ground Leased Asset) and to all
buildings, structures and other improvements thereon, in each case subject
only to the Permitted Liens. Except as set forth on Schedule 3.15, the Company
and the Company Subsidiaries have fulfilled and performed in all material
respects all of their respective obligations, and all obligations binding upon
any Real Property Asset, under each of the agreements or encumbrances to which
any Real Property Asset is subject, and none of the Company and the Company
Subsidiaries is in breach or default under, or in violation of or
noncompliance with, in any material respect, any such agreements or
encumbrances, and no event has occurred and no condition or state of facts
exists which, with the passage of time or the giving of notice or both, would
constitute such a breach, default, violation or noncompliance. Subject to
obtaining the Seller Required Third Party Consents, the Indemnitor Required
Third Party Consents and the consents listed on Schedule 5.10, the
consummation of the transactions contemplated by this Agreement and the Tax
Matters Agreement will not result in any breach or violation of, default under
or noncompliance with, or any forfeiture or impairment of any rights under,
any agreement or encumbrance to which any of the Real Property Assets is
subject, or require any consent, approval or act of, or the making of any
filing with, any Person party to or benefited by or possessing the power or
authority to exercise rights or remedies under or with respect to any such
agreement or encumbrance. All public utilities, including water, sewer, gas,
electric, telephone and drainage facilities, give adequate service to the Real
Property Assets, and
18
each of the Real Property Assets has unlimited access to and from publicly
dedicated streets, the responsibility for maintenance of which has been
accepted by the appropriate Governmental Authority. Complete and correct
copies of any surveys in the Company's or any of the Company Subsidiaries'
possession and any policies of title insurance currently in force and in the
possession of the Company or any of the Company Subsidiaries with respect to
each such parcel have heretofore been delivered or made available to Acquiror.
Subject to Article IX and except as set forth in Schedule 3.15, neither the
whole nor any part of any Real Property Asset, including any Ground Leased
Asset or any real property leased, used or occupied by any of the Company or
the Company Subsidiaries, is subject to any pending suit for condemnation or
other taking by any public authority, and, to the Knowledge of the Selling
Parties, no such condemnation or other taking is threatened or contemplated.
Subject to Article IX, neither the whole nor any part of any Real Property
Asset, including any Ground Leased Asset or any real property leased, used,
owned or occupied by any of the Company or the Company Subsidiaries, is
subject to any casualty or loss that has not been repaired and restored (and
for which all costs in connection therewith have been paid in full).
Section 3.16. Ground Leased Assets. Schedule 3.16 sets forth a true
and complete list of each of the Real Property Assets that is a ground leased
property or partially ground leased property (each a "Ground Leased Asset").
No default has occurred and is continuing under any ground lease or similar
agreement relating to any of the Ground Leased Assets. Schedule 3.16 also
contains a description of each of the ground leases and any amendments or
modifications thereto and the location and the legal description of the real
property covered thereby, under which (i) the Company or any of the Company
Subsidiaries is lessee of, or holds, uses or operates, any real property owned
by any third Person or (ii) any of the Company and the Company Subsidiaries is
lessor of any of the owned Real Property Assets and the terms of such lease is
greater than six (6) months (other than resident leases and occupancy
agreements and leases to license holders required for regulatory purposes).
Except as set forth in Schedule 3.16, the Company and the Company
Subsidiaries, as the case may be, has the right to quiet enjoyment of all the
Ground Leased Assets described in such Schedule for the full term of each such
lease or similar agreement (and any renewal option) relating thereto, and the
leasehold or other interest of the Company in such leased real property is not
subject or subordinate to any agreement or Lien other than Permitted Liens.
Except as set forth on Schedule 3.16, and except for Permitted Liens, there
are no agreements or other documents governing or affecting the occupancy or
tenancy of any of the Ground Leased Assets by the Company or any of the
Company Subsidiaries. Complete and correct copies of any surveys in Seller's,
the Company's or the Company Subsidiaries' possession and any policies of
title insurance currently in force and in the Company's or the Company
Subsidiaries' possession with respect to each such parcel of Ground Leased
Assets have heretofore been delivered or made available by Seller to Acquiror.
Section 3.17. Insurance. Schedule 3.17 sets forth a true and
complete list as of the date hereof of all current policies of property and
liability insurance covering the Company and the Company Subsidiaries. Except
as set forth on Schedule 3.17, none of the insurance policies covering the
Company and the Company Subsidiaries provides for claims to be made on an
occurrence or equivalent basis. Each of the Company and the Company
Subsidiaries is, and at all times has been, covered on an uninterrupted basis
by valid and effective insurance policies or binders which are in full force
and effect (and all premiums due and payable thereon have
19
been paid in full on a timely basis), and no written notice of cancellation,
termination, revocation or limitation or other indication that any insurance
policy is no longer in full force or effect or that the issuer of any policy
is not willing or able to perform its obligations thereunder has been received
by any of Seller, the Company or the Company Subsidiaries and, to the
Knowledge of the Selling Parties, none of the Company and the Company
Subsidiaries is in default of any provision thereof, except for such defaults
that, individually or in the aggregate, have not had, and would not reasonably
be expected to have, a Material Adverse Effect.
Section 3.18. Acquired Real Property; Existing Mortgages. As of the
Closing Date, none of the Company nor any of the Company Subsidiaries will
own, beneficially or of record, or have any interest in any real property
other than the Acquired Real Property Assets. Schedule 3.18 contains a true,
correct and complete statement of (i) the mortgages, deeds of trust, deeds to
secure debt or other liens securing payment of borrowed money, including
related guarantees as stated thereon, with respect to the Real Property Assets
(collectively, the "Existing Mortgages") to which any of the Company and the
Company Subsidiaries is a party as mortgagor, trustor or obligor and (ii) as
of May 31, 2004, the current principal balance of each of the Existing
Mortgages.
Section 3.19. Taxes. Except as set forth in Schedule 3.19:
(a) (i) All income and other material Tax Returns required to be
filed by or on behalf of the Company and each of the Company Subsidiaries have
been duly and timely filed with the appropriate Tax Authority (after giving
effect to any valid extensions of time in which to make such filings); (ii)
all such Tax Returns are complete and accurate in all material respects as
they relate to the Company and the Company Subsidiaries (Schedule 3.19(a)(ii)
sets forth all pending tax contests for which a GAAP reserve has been
established); (iii) all amounts shown due on such Tax Returns and all income
and other material Taxes payable without the filing of a Tax Return, in both
cases insofar as they relate to the Company and the Company Subsidiaries or
their assets, have been fully and timely paid; (iv) neither the Company nor
any Company Subsidiary is currently the beneficiary of any extension of time
within which to file any income or other material Tax Return, (v) neither the
Company nor any Company Subsidiary has waived or been requested to waive any
statute of limitations in respect of income or other material Taxes which
waiver is currently in effect, and (vi) neither the Company nor any Company
Subsidiary has been a member of any consolidated, combined or unitary group
other than each such group of which it is a member on the date hereof, and the
Company and each Company Subsidiary currently file federal income Tax Returns
on a consolidated basis with the "affiliated group" (as defined in Section
1504 of the Code) of which the Company is the common parent. Schedule
3.19(a)(vi) lists each material income Tax Return filed with respect to the
Company and the Company Subsidiaries for taxable years ended 2001, 2002 and
2003. True, correct and complete copies of each Tax Return listed on Schedule
3.19(a)(vi) and each other material Tax Return filed with respect to the
Company and the Company Subsidiaries have been delivered or made available to
Acquiror.
(b) Each of the Company and the Company Subsidiaries has complied in all
material respects with all applicable Laws relating to the withholding of
Taxes and have duly and timely withheld from employee salaries, wages and
other compensation and have paid over to the appropriate Tax Authority all
material amounts required to be so withheld and paid over.
20
(c) All deficiencies asserted or assessments made in writing as a
result of any examinations by any Tax Authority of Tax Returns of or covering
the Company or any of the Company Subsidiaries insofar as they relate to the
Company and the Company Subsidiaries, have been fully paid, and no other
audits or investigations by any Tax Authority relating to any Tax Returns of
or covering the Company or any of the Company Subsidiaries insofar as such Tax
Returns relate to the Company and the Company Subsidiaries, are in progress
with respect to which (i) the Company or any of Company Subsidiaries has
received written notice thereof from a Tax Authority or (ii) the Company or
the Company Subsidiary, as applicable, or any of their respective officers or
directors has knowledge based upon personal contact with any agent of any such
Tax Authority.
(d) Neither the Company nor any Company Subsidiary is a party to any
Tax sharing or similar Tax agreements pursuant to which it will have any
obligation to make any payments after the Closing Date.
(e) There are no Tax rulings, requests for rulings, or closing
agreements relating to the Company or any of the Company Subsidiaries which
could affect the Company's or any Company Subsidiary's liability for Taxes for
any period after the Closing Date.
(f) Neither the Company nor any Company Subsidiary is required to
make any adjustment for any Post-Closing Taxable Period pursuant to (i)
Section 481(a) of the Code (or any corresponding provision of Law) as a result
of a change in accounting method, or (ii) a closing agreement under Section
7121 the Code (or any corresponding provision of Law).
(g) Neither the Company nor any Company Subsidiary is a party to any
agreement, contract, arrangement, or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Section 280G of the Code (or any corresponding
provision of state, local, or foreign Tax law).
(h) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(i) There are no Liens for Taxes upon any assets of any of the
Company and the Company Subsidiaries except for Permitted Liens.
(j) Through the Closing Date and for the last six (6) taxable years
ending December 31, 2003, no written claim has been made by a Tax Authority in
a jurisdiction where the Company or any Company Subsidiary has never paid
Taxes or filed Tax Returns asserting that the Company or such Company
Subsidiary, as the case may be, is or may be subject to Taxes assessed by such
jurisdiction.
(k) None of the Company and the Company Subsidiaries has distributed
stock of another Person, or has had its stock distributed by another Person,
in a transaction that was purported or intended to be governed in whole or in
part by Section 355 or 361 of the Code.
(l) As of December 31, 2003, the Company's and the Company
Subsidiaries' total net operating losses available for federal income tax
purposes were approximately $93 million ("NOLs"). As of the Closing Date,
after giving effect to the divestiture of the Excluded
21
Assets, the Company's and the Company Subsidiaries' total NOLs available for
federal income tax purposes will be approximately $92 million. As of December
31, 2003, the Company has no general business credits available for federal
income tax purposes. As of the Closing Date, after giving effect to the
divestiture of the Excluded Assets, the Company's will have no general
business credits available for federal income tax purposes. As of December 31,
2003, the Company's and the Company Subsidiaries' total tax basis in their
assets for federal income tax purposes was approximately $514 million. As of
the Closing Date, after giving effect to the divestiture of the Excluded
Assets, the Company and the Company Subsidiaries' total tax basis in their
assets for federal income tax purposes will be approximately $440 million.
(m) As of the end of the Company's taxable year ending on the
Closing Date, none of the Company and the Company Subsidiaries will have any
accumulated earnings and profits for federal income tax purposes.
Section 3.20. Brokers. Neither Seller, Indemnitor nor any of their
respective Affiliates has employed any broker or finder or incurred any
liability for any investment banking fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by the
Transaction Agreements for which any of the Company, the Company Subsidiaries,
Acquiror or its Affiliates has or could have any liability.
Section 3.21. Excluded Assets; Excluded Liabilities. Prior to the
Closing Date, (i) each of the Company and the Company Subsidiaries will have
sold, transferred, assigned or otherwise distributed all of the Excluded
Assets to Indemnitor or one of its wholly owned subsidiaries and (ii)
Indemnitor or one of its wholly owned subsidiaries will have assumed all of
the Excluded Liabilities. Immediately prior to the Closing, the only assets
and liabilities of the Company and the Company Subsidiaries will be (i) the
Acquired Real Property Assets (subject to any Permitted Liens), (ii) the
Acquired Personal Property Assets, (iii) the Assumed Mortgage Debt, (iv) the
Specified Liabilities and (v) any Excluded Liabilities which Indemnitor shall
have assumed pursuant to Section 5.08.
Section 3.22. Regulatory Filings. Seller has made available for
inspection by Acquiror (i) each annual statement filed with or submitted to
any regulatory authorities by each of the Company and the Company Subsidiaries
since January 1, 1999, and (ii) any reports of examination (including, without
limitation, financial, market conduct and similar examinations) of each of the
Company and the Company Subsidiaries issued by any regulatory authority, in
any case, since January 1, 1999. Except as set forth in Schedule 3.22, all
material deficiencies or violations noted in the examination reports described
in clause (ii) above have been resolved to the material satisfaction of the
regulatory department that noted such deficiencies or violations. Each of the
Company and the Company Subsidiaries has filed all material reports,
statements, documents, registrations, filings or submissions required to be
filed with any Governmental Authority since January 1, 1999. All such
registrations, reports, statements, documents, filings and submissions were in
material compliance with applicable Laws when filed, and no material
deficiencies have been asserted by any such Governmental Authority or other
regulatory body with respect to such registrations, filings or submissions
that have not been or are not in the process of being satisfied. The
representations and warranties contained in this Section 3.22 shall not apply
to Taxes and Tax Returns, which are addressed in Section 3.19.
22
Section 3.23. No Certificates of Need or Provider Agreements. No
Certificates of Need (hereinafter defined) or Provider Agreements (hereinafter
defined) are used or required in connection with the ownership, operation and
maintenance of any of the Real Property Assets. For purposes of this
Agreement, the term "Provider Agreements" shall mean any provider agreements
held by or issued to Seller or any Real Property Asset under which the
applicable Real Property Asset is eligible to receive payment under Title XIX
("Medicaid") or any other governmental or quasi-governmental third party payor
programs or any private or quasi-private healthcare reimbursement or private
payor programs (including so-called "HMO" and "PPO" programs) ("Third Party
Payor Programs") as well as any other agreement, arrangement, program or
understanding with any federal, state or local governmental agency or
organization or private organization pursuant to which the applicable Real
Property Asset qualifies for payment or reimbursement for medical or
therapeutic care or other goods or services rendered or supplied to any
resident. For purposes of this Agreement, the term "Certificate of Need" shall
mean a certificate of need or similar permit or approval (not including
conventional building permits or health care licenses) from a Governmental
Authority related to the construction and/or operation of any Real Property
Asset for the use of a specified number of beds in a nursing facility,
assisted living facility and/or rehabilitation hospital, or alteration of the
applicable Real Property Asset or modification of services provided at the
applicable Real Property Asset.
Section 3.24. Operator Matters.
(a) Each of Seller, the Company and the Company Subsidiaries has
been issued and is in good standing with respect to any and all material
permits, licenses, regulatory approvals, approvals, accreditations and
comparable authorizations from all applicable Governmental Authorities
(including, but not limited to any Health Department (hereinafter defined))
that are necessary for the use, operation and maintenance of each of the Real
Property Assets and the conduct of its business thereon (collectively,
"Operator Licenses"). Except as set forth in Schedule 3.24(a), none of Seller,
the Company, the Company Subsidiaries and the Real Property Assets is the
subject of any proceeding, examination or to Knowledge of the Selling Parties,
investigation, by any Health Department or other Governmental Authority
concerning an actual or alleged material violation of any laws, ordinances,
rules or regulations or any Operator Licenses. The Operator Licenses (i) have
not been and will not be transferred to any location other than the applicable
Real Property Asset; and (ii) are not and will not be pledged as collateral
for any loan or indebtedness that will not be released at Closing or assumed
by Acquiror. As used herein, "Health Departments" shall mean departments of
health and/or any Governmental Authorities of the state where the applicable
Real Property Asset is located which have jurisdiction over the licensing,
ownership and/or operations of the applicable parcel of Real Property Asset as
a Living Facility.
(b) No Litigation Relating to Licensing Matters. None of Seller, the
Company, the Company Subsidiaries and, to Knowledge of the Selling Parties,
Manager is involved in any litigation, proceeding, or investigation (by or
with any Person, resident, Health Department or Governmental Authority) which,
if determined or resolved adversely, would have a material adverse impact on
the conduct by any of Seller, the Company and the Company Subsidiaries of its
business or any Real Property Asset.
23
(c) Operator Reporting. Seller has made available to Acquiror copies
of all of the census information concerning the number of licensed beds and/or
units occupied by bona fide residents, rents rolls, monthly financial
statements and other reports, materials and information concerning Seller's
business operations and compliance with Laws, Operator Licenses and Material
Permits for each of the Real Property Assets (the "Operator Reports") for the
periods set forth therein which are true and correct in all material respects.
All materials reports, documents and notices, required to be filed, maintained
or furnished by any of Seller, the Company and the Company Subsidiaries to any
Governmental Authority with respect to each of the Real Property Assets have
been so filed, maintained or furnished. There are no defects or deficiencies
to or with respect to any Real Property Asset cited in any survey or
inspection report provided, submitted or made by or to any Governmental
Authority under any Law that remains uncured.
(d) No Violations. To the Knowledge of the Selling Parties, none of
Seller, the Company, the Company Subsidiaries and the Real Property Assets is
the subject of any proceeding by any Governmental Authority, and no notice of
any violation has been issued, or, to the Knowledge of the Selling Parties,
will be issued, by a Governmental Authority that would, directly or
indirectly, or with the passage of time, (i) impact Acquiror's (or its
designees) ability to accept and/or retain residents at any Real Property
Asset, (ii) have a material and adverse effect on any of Seller's, the
Company's, the Company Subsidiaries' or Manager's ability to accept and/or
retain residents or operate any Real Property Asset or result in the
imposition of a material fine or for services rendered to eligible residents,
or (iii) modify, limit or annul or result in the transfer, suspension, or
revocation or imposition of probationary use of the Operator Licenses.
(e) No Facility Violations. Except as set forth in Schedule 3.24(e),
no statement of charges or deficiencies has been made or penalty enforcement
action has been undertaken against any of Seller, the Company, the Company
Subsidiaries and the Real Property Assets or against any officer or director
of any of Seller, the Company or the Company Subsidiaries by any Governmental
Authority since January 1, 2003 which remains uncured.
(f) No Recoupment Efforts. None of Seller, the Company, the Company
Subsidiaries and Manager is a participant in any governmental program whereby
any Governmental Authority may have the right to recover funds by reason of
the advance of governmental funds.
(g) Admissions Hold. There is no suspension, ban or limitation upon
the admission of residents to the any Real Property Asset (i) by any
Governmental Authority having jurisdiction over the licensure or certification
of such Real Property Asset or (ii) pursuant to any applicable Law.
(h) Substantial Compliance; No Adverse Regulatory Actions. No
Governmental Authority with jurisdiction over any Real Property Asset has: (i)
made a determination that any Real Property Asset is not in compliance in all
material respects with any applicable regulatory requirements which has not
been
24
cured; or (ii) taken adverse regulatory action with respect to any Real
Property Asset that is material in significance and has not been cured,
including, without limitation, the imposition of any civil money penalties in
excess of $50,000 that have not been paid.
Section 3.25. Books and Records. Seller has delivered or made
available to Acquiror copies of each of the following: (i) copies of corporate
tax documents and real estate transfer tax forms and returns relating to the
Real Property Assets (where applicable); (ii) all Material Contracts, and
material licenses, and material permits (including any operator licenses)
relating to any of the Company, the Company Subsidiaries and the Real Property
Assets, together with copies of all material correspondence relating to any of
the Company, the Company Subsidiaries and the Real Property Assets; (iii) an
updated list of security deposits, if any, with respect to the Real Property
Assets held by any of Seller, the Company and the Company Subsidiaries; (iv)
all plans and specifications related to all Improvements located at the Real
Property Assets, to the extent in Seller's possession or reasonable control or
otherwise available to Seller; (v) copies of currently valid certificates of
occupancy (or comparable permits or licenses) with respect to Improvements
located at each of the Real Property Assets; (vi) copies of currently valid
material permits and licenses relating to the operation of each of the Real
Property Assets as senior independent and/or assisted living facilities; and
(vii) a consolidated tax balance sheet for the Company and the Company
Subsidiaries for the years ending December 31, 2002 and December 31, 2003. At
the Closing, keys to all locks located on the Acquired Real Property Assets
shall be in the possession of the Company, one of the Company Subsidiaries or
Manager.
Section 3.26. Information Supplied. None of the information supplied
by Seller or Indemnitor specifically for inclusion in the Offering Memorandum,
as set forth in Schedule 3.26, contains, as of the date hereof, any untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by Indemnitor specifically
for inclusion in the Registration Statement will contain, at the time the
Registration Statement becomes effective under the Securities Act, any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to Seller and Indemnitor as
follows:
Section 4.01. Incorporation and Authority of Acquiror. Acquiror is a
real estate investment trust duly formed, validly existing and in good
standing under the Laws of the State of Maryland and has all requisite trust
power to enter into, and to consummate the transactions contemplated by, and
to carry out its obligations under, each of the Transaction Agreements to
which Acquiror is or will be a party. The execution and delivery by Acquiror
of each of the Transaction Agreements to which Acquiror is or will be a party,
and the consummation of the transactions contemplated by, and the performance
by Acquiror of its obligations under, each of such Transaction Agreements have
been duly authorized by all requisite action on the part of Acquiror and its
shareholders. This Agreement and the Tax Matters Agreement have been, and
25
at the Closing each of the Transaction Agreements to which Acquiror is then a
party will be, duly executed and delivered by Acquiror, and (assuming due
authorization, execution and delivery by Seller) this Agreement and the Tax
Matters Agreement constitute, and as of the Closing each of the other
Transaction Agreements to which Acquiror is then a party will constitute, the
legal, valid and binding obligations of Acquiror enforceable against Acquiror
in accordance with their respective terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance or similar Laws relating to or affecting creditors' rights
generally and subject, as to enforceability, to the effect of general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
Section 4.02. Qualification of Acquiror. Acquiror has all requisite
power and authority to operate its business as now conducted and is duly
qualified to do business and, to the extent legally applicable, is in good
standing in each jurisdiction where the character of its owned, operated or
leased properties or the nature of its activities makes such qualification
necessary, except for such failures as would not materially impair or delay
the ability of Acquiror to consummate the transactions contemplated by, or
perform its material obligations under, the Transaction Agreements to which
Acquiror is or will be a party.
Section 4.03. No Conflict. Provided that all consents, approvals,
authorizations and other actions described in Section 4.04 have been obtained
or taken, except as otherwise provided in this Article IV and except as may
result from any facts or circumstances relating to Seller, Indemnitor, the
Company or the Company Subsidiaries (as opposed to any other third party), the
execution, delivery and performance by Acquiror of, and the consummation by
Acquiror of the transactions contemplated by, this Agreement, the Tax Matters
Agreement and each of the other Transaction Agreements to which Acquiror will
be a party, do not and will not (a) violate or conflict with the
organizational documents of Acquiror, (b) conflict with or violate any Law or
other Governmental Order applicable to Acquiror or (c) result in any breach
of, or constitute a default (or event which with the giving of notice or lapse
of time, or both, would become a default) under, or give to any Person any
rights of termination, amendment, acceleration or cancellation of, or result
in the creation of any Lien on any of the assets or properties of Acquiror
pursuant to, any note, bond, loan or credit agreement, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other material
instrument to which Acquiror or any of its Affiliates is a party or by which
any of them or any of their respective assets or properties is bound or
affected, except, in the case of clause (c), any such conflicts, violations,
breaches, loss of contractual benefits, defaults, rights or Liens as would not
materially impair or delay the ability of Acquiror to consummate the
transactions contemplated by, or perform its material obligations under, any
of the Transaction Agreements to which Acquiror is or will be a party.
Section 4.04. Consents and Approvals. Except as set forth in
Schedule 4.04, or as may result from any facts or circumstances solely
relating to Seller or its Affiliates (as opposed to any other third party),
the execution and delivery by Acquiror of this Agreement and the Tax Matters
Agreement do not, and the execution and delivery by Acquiror at the Closing of
the other Transaction Agreements to which Acquiror will be a party will not,
and the performance by Acquiror of, and the consummation by Acquiror of the
transactions contemplated by, each of the Transaction Agreements to which
Acquiror is or will be a party will not, require any Governmental Approval,
except where the failure to obtain such Governmental
26
Approval, could reasonably be expected to prevent or materially delay Acquiror
from consummating the transactions contemplated by or performing any of its
material obligations under any of the Transaction Agreements to which Acquiror
is or will be a party.
Section 4.05. Securities Matters. The Shares are being acquired by
Acquiror for its own account and without a view to the public distribution or
sale of the Shares or any interest in them. Acquiror has sufficient knowledge
and experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the Shares, and Acquiror
is capable of bearing the economic risks of such investment, including a
complete loss of its investment in the Shares.
Section 4.06. Financial Ability. Acquiror presently intends to
finance the Final Purchase Price, in part, by issuing stock in Acquiror
pursuant to a private placement transaction (the "Private Placement"). Subject
to receipt of offering proceeds of at least $535,000,000 upon the consummation
of the Private Placement, Acquiror will have, at the Closing, the financial
ability to consummate the transactions contemplated by this Agreement.
Section 4.07. Investigation. Acquiror acknowledges and agrees that
it has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning, the Real Property Assets, the
Company, the Company Subsidiaries and their respective businesses. Acquiror
further acknowledges and agrees that the only representations, warranties,
covenants and agreements made by Seller and Indemnitor are the
representations, warranties, covenants, and agreements expressly set forth in
this Agreement and the Tax Matters Agreement and Seller and Indemnitor make
and have made no other express or implied representation or warranty with
respect to the Real Property Assets (including with respect to title, physical
condition, environmental condition, fitness and quality, income and expenses
of operation, value and profitability, current or potential uses, current or
future zoning or suitability for renovation or construction), the Company, the
Company Subsidiaries or their respective businesses or otherwise or with
respect to any other information provided by Seller and Indemnitor or any of
their Affiliates or Representatives. Acquiror has not relied upon any other
representations or other information made or supplied by or on behalf of each
of Seller or Indemnitor or by any Affiliate or Representative of each of
Seller or Indemnitor. No officer of Acquiror has actual knowledge that the
representations and warranties of Seller or Indemnitor set forth in Article
III are inaccurate or have been breached except for inaccuracies and breaches
relating to matters that, individually or in the aggregate, have not had, or
would not be reasonably expected to have, a Material Adverse Effect.
Section 4.08. Brokers. Neither Acquiror nor any of its Affiliates
has employed any broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders' fees in connection with
the transactions contemplated by this Agreement and the Tax Matters Agreement
for which Seller or any of its Affiliates has or could have any liability.
Section 4.09. Information Supplied. None of the information supplied
or to be supplied by or on behalf of Acquiror specifically for inclusion in
the Offering Memorandum or the Registration Statement will contain, at any
time the Offering Memorandum is distributed to prospective investors or the
Registration Statement becomes effective under the Securities Act,
27
as applicable, any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, except that no representation or warranty
is made by Acquiror with respect to the information supplied by Seller or
Indemnitor specifically for inclusion in the Offering Memorandum and as set
forth in Schedule 3.26. The Offering Memorandum and the Registration Statement
will comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act, and the rules and regulations thereunder
("Applicable Securities Rules").
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01. Conduct of Business Prior to the Closing. Except as
otherwise contemplated by or necessary to effectuate the transactions
contemplated by this Agreement (including the matters expressly contemplated
by Sections 5.08 and 5.09), from the date of this Agreement through the
Closing, unless Acquiror otherwise consents in advance (and the consent of
Acquiror to any request for any such consent shall not be unreasonably
withheld or delayed, it being agreed that if Acquiror fails to respond to
Seller's written request for consent for a period of ten (10) Business Days
after Acquiror's receipt thereof, then such requested consent shall be deemed
given), Seller will cause the Company and the Company Subsidiaries to: (a)
conduct their businesses in the ordinary course consistent with past practice;
(b) use reasonable commercial efforts to preserve intact their business
organizations, to keep available the services of consultants and agents of
their businesses and to maintain the current significant business
relationships and goodwill with customers, suppliers and service providers of
the Company and the Company Subsidiaries; (c) maintain replacement cost
casualty insurance; and (d) not take any of the following actions:
(i) repurchase, redeem, repay or otherwise acquire any
outstanding Equity Shares or other securities of the Company or any of
the Company Subsidiaries;
(ii) transfer, issue, sell or dispose of any Equity Shares or
other securities of the Company or any of the Company Subsidiaries or
grant options, warrants, calls or other rights to purchase or otherwise
acquire Equity Shares or other securities of the Company or any of the
Company Subsidiaries;
(iii) effect any recapitalization, reclassification, stock split
or like change in the capitalization of the Company or any of the
Company Subsidiaries;
(iv) amend the certificate of incorporation or by-laws (or other
comparable organizational documents) of the Company or any of the
Company Subsidiaries;
(v) make any material change in the policies, practices or
principles of the Company or any of the Company Subsidiaries in effect
on the date hereof with respect to accounting, preparation and filing
of Tax Returns (other than any change required by applicable Laws or
GAAP);
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(vi) sell, lease, exchange, or otherwise dispose of any property
or assets (other than transactions occurring in the ordinary course of
business consistent with past practices), for which the aggregate
consideration paid or payable in any individual transaction is in
excess of $500,000 or in the aggregate in excess of $1,000,000;
(vii) incur any financial indebtedness for borrowed money from
third party lending sources (other than current trade accounts payable
incurred in respect of property or services purchased in the ordinary
course of business consistent with past practices) or assume, grant,
guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any loans or
advances (other than, in each case, in the ordinary course of business
consistent with past practices or which will otherwise be repaid prior
to the Closing or which constitutes an Excluded Liability);
(viii) except in the ordinary course of business and consistent
with past practice, enter into or amend (in any material respect) or,
than pursuant to its current terms, terminate, renew or extend any
other Material Contract relating to an Acquired Personal Property Asset
or an Acquired Real Property Asset;
(ix) enter into any new line of business or introduce any new
product or service that is unrelated to the operation of senior living
facilities;
(x) enter into, amend or, other than pursuant to its current
terms, terminate, renew or extend any contract, agreement, lease,
license, commitment, instrument, arrangement, relationship or
understanding with any Affiliate of the Company or any of the Company
Subsidiaries including any stockholder, member, director or officer of
the Company or any of the Company Subsidiaries (or any of their
respective family members or Affiliates);
(xi) settle or compromise any Action or threatened Action,
except in each case for claims under policies and certificates of
insurance within applicable policy limits and claims not in excess of
$1,000,000 so long as any such claims will not adversely affect any of
the Acquired Real Property Assets and Acquired Personal Property
Assets;
(xii) pay, discharge or satisfy any liabilities or obligations,
other than payment, discharge or satisfaction, in the ordinary course
of business consistent with past practice or in accordance with their
terms, of liabilities or obligations that (A) are reflected on the
Financial Statements, (B) are identified in amounts that are reasonably
determinable prior to Closing, and for which Indemnitor is responsible
under the Transaction Agreements, or (C) were incurred since the date
of the Financial Statements in the ordinary course of business
consistent with past practice;
(xiii) enter into any agreement relating to the ownership and
operation of the Acquired Real Property Assets, unless such agreement
shall be fully cancelable or terminable without penalty prior to the
Closing Date;
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(xiv) allow any Acquired Real Property Asset or any material
Acquired Personal Property Asset to become subject to any Lien other
than a Permitted Lien;
(xv) directly or indirectly offer to sell, or solicit any offers
to purchase or negotiate for the sale or disposal of any Acquired Real
Property Asset or any material Acquired Personal Property Asset with
any Person other than Acquiror;
(xvi) create any severance obligation for Acquiror, the Company
or any Company Subsidiary with respect to any employee, except for
obligations that are Excluded Liabilities;
(xvii) enter into any lease or other binding agreement, or
amend, modify, extend or terminate any existing lease or other binding
agreement, with respect to the Acquired Real Property Assets, other
than leases and other agreements with residential tenants of the
Acquired Real Property Assets that are entered, amended, modified,
extended or terminated in the ordinary course of business consistent
with past practice;
(xviii) enter into any agreement, or amend, modify, extend or
terminate any existing agreement, relating to the construction,
demolition, or alteration of any of the Acquired Real Property Assets,
other than capital repairs (a) required by Law or any Governmental
Authority or (b) identified in the third party reports referenced in
Section 2.09 not in excess of $250,000 with respect to each Real
Property Asset; or
(xix) announce or enter into any legally binding commitment with
respect to any of the foregoing.
Section 5.02. Access to Information. (a) From the date of this
Agreement until the Closing Date, upon reasonable prior written notice, and
except as determined in good faith to be appropriate to ensure compliance with
any applicable Laws and subject to any applicable privileges (including the
attorney-client privilege), contractual confidentiality obligations and
privacy rights of residents, Seller shall, and shall cause the Company and
each of the Company Subsidiaries and each such Person's respective
Representatives to: (i) afford the Representatives of Acquiror reasonable
access to the offices, properties, books and records of the Company and the
Company Subsidiaries; (ii) furnish to the Representatives of Acquiror such
additional financial and operating data and other information regarding the
Company's and the Company Subsidiaries' businesses conducted by them as
Acquiror may from time to time reasonably request; and (iii) afford the
Representatives of Acquiror and its Affiliates reasonable access to the
employees of Seller and their Affiliates in respect of the Company and the
Company Subsidiaries (and the businesses conducted by the Company and the
Company Subsidiaries) and use their reasonable commercial efforts (without any
requirement of Seller, the Company and the Company Subsidiaries or any of
their respective Representatives to incur any expense to a third party) to
make available to the Representatives of Acquiror and its Affiliates the
employees of third party outsourcing companies who provide services to, and
are located on the premises of, the Company and the Company Subsidiaries, in
each case, whose assistance and expertise is necessary to assist Acquiror in
connection with Acquiror's preparation to integrate the Company and the
Company Subsidiaries and their businesses and personnel into Acquiror's
organization following the Closing; provided, however, that such investigation
shall be on a basis and follow
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procedures that the parties shall mutually agree, and shall not unreasonably
interfere with any of the businesses or operations of Seller, the Company, the
Company Subsidiaries or any of their respective Affiliates; and provided,
further, that the auditors and accountants of Seller, the Company, the Company
Subsidiaries or any of their respective Affiliates shall not be obligated to
make any work papers available to any Person unless and until such Person has
signed a customary agreement relating to such access to work papers in form
and substance reasonably acceptable to such auditors or accountants. If so
reasonably requested by Seller, Indemnitor, the Company or any of the Company
Subsidiaries, Acquiror shall enter into a customary joint defense agreement
with any one or more of Seller, the Company and the Company Subsidiaries with
respect to any information to be provided to Acquiror pursuant to this Section
5.02(a).
(b) In addition to the provisions of Section 5.03, from and after
the Closing Date, in connection with any reasonable business purpose,
including the preparation of Tax Returns and the determination of any matter
relating to the rights or obligations of Seller, Indemnitor or any of their
respective Affiliates under this Agreement, upon reasonable prior written
notice, and except as determined in good faith to be appropriate to ensure
compliance with any applicable Laws (including any rights of any current or
former employee of the Company or any Company Subsidiary with respect to
privacy or confidentiality of such employee's personnel, medical and other
records and information) and subject to any applicable privileges (including
the attorney-client privilege), contractual confidentiality obligations and
privacy rights of residents, Acquiror shall, and shall cause the Company and
the Company Subsidiaries and their respective Affiliates and Representatives
to: (i) afford the Representatives of Seller, Indemnitor and their Affiliates
reasonable access, during normal business hours, to the offices, properties,
books and records of the Company and the Company Subsidiaries and the
businesses conducted by them; (ii) furnish to Seller, Indemnitor and their
respective Affiliates and Representatives such additional financial and other
information regarding the Company and the Company Subsidiaries and the
businesses conducted by them as Seller, Indemnitor or their respective
Representatives may from time to time reasonably request; and (iii) make
available to the Representatives of Seller, Indemnitor and their Affiliates
the employees of Acquiror and its Affiliates in respect of the Company and the
Company Subsidiaries and the businesses conducted by them whose assistance,
expertise, testimony, notes and recollections or presence is necessary to
assist Seller, Indemnitor or any of the respective Affiliates in connection
with Seller's or Indemnitor's inquiries for any of the purposes referred to
above, including, at Seller's sole cost and expense, reimbursement to Acquiror
or such Affiliates; provided, that the requesting party will reimburse
Acquiror for the reasonable value of the time and any out-of-pocket expenses
of such Persons who appear as witnesses in hearings or trials at the request
of Seller or Indemnitor, as applicable; provided, however, that such
investigation shall be on a basis and follow procedures that the parties shall
mutually agree, and that such investigation shall not unreasonably interfere
with the business or operations of Acquiror or any of its Affiliates;
provided, further, that the auditors and accountants of Acquiror or its
Affiliates shall not be obligated to make any work papers available to any
Person unless and until such Person has signed a customary agreement relating
to such access to work papers in form and substance reasonably acceptable to
such auditors or accountants. If so reasonably requested by Acquiror, Seller,
Indemnitor or the applicable Affiliate thereof shall enter into a customary
joint defense agreement with Acquiror and its Affiliates (including the
Company and the Company Subsidiaries) with respect to any information to be
provided to Seller pursuant to this Section 5.02(b).
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Section 5.03. Books and Records. Subject to Section 5.04(a), Seller
and its Affiliates shall have the right to retain copies of all books and
records of the Company and each of the Company Subsidiaries and their
respective businesses relating to periods ending on or prior to the Closing
Date subject to compliance with all applicable privacy Laws relating to
information (including employment and medical records) regarding current or
former employees of the Company or any Company Subsidiary. Acquiror agrees
that, with respect to all original books and records of the Company and each
of the Company Subsidiaries existing as of the Closing Date, it will (and will
cause each of the Company Subsidiaries to) (a) comply in all material respects
with all applicable Laws relating to the preservation and retention of records
and (b) apply preservation and retention policies to such books and records
that are no less stringent than those generally applied by Acquiror in respect
of its other books and records. Following the Closing, Seller shall promptly
deliver to Acquiror all original books and records of the Company and the
Company Subsidiaries in the possession of Seller or any of its Affiliates
(other than the Company and the Company Subsidiaries).
Section 5.04. Confidentiality; Exclusivity.
(a) From and for a period of twelve (12) months following the
Closing, Seller, Indemnitor and their Affiliates, on the one hand, and
Acquiror and its Affiliates (including the Company and the Company
Subsidiaries), on the other hand, shall, and shall cause their respective
Representatives to maintain in confidence and not use to the detriment of the
other party (including for the purposes of competing with the other party or
its Affiliates), any written, oral or other information relating to and
obtained from the other party or its Affiliates, except that the foregoing
requirements of this Section 5.04(a) shall not apply to a party to the extent
that (i) any such information is or becomes generally available to the public
other than (A) in the case of Acquiror, as a result of disclosure by Seller,
its Affiliates or any of its respective Representatives and (B) in the case of
Seller, as a result of disclosure by Acquiror, the Company or any Company
Subsidiary (after the Closing Date) or any of their respective Affiliates, or
any of their respective Representatives, (ii) any such information is required
by applicable Law, Governmental Order or a Governmental Authority to be
disclosed after prior notice that has been given to Acquiror or Seller, as
applicable, (iii) any such information is to be disclosed in connection with
any Action, or (iv) any such information was or becomes available to such
party on a non-confidential basis and from a source (other than a party to
this Agreement or any Affiliate or Representative of such party) that is not
bound by a confidentiality agreement. Each of the parties hereto shall
instruct its Affiliates and Representatives having access to such information
of such obligation of confidentiality.
(b) The parties hereto agree to deal with one another on an
exclusive basis during the term of this Agreement with respect to the
transactions contemplated herein, and Seller shall not solicit or entertain
offers for, or enter into any discussions relating to, any similar
transactions with respect to the sale of the Company, the Company Subsidiaries
or any of the Acquired Real Property Assets.
(c) Notwithstanding anything to the contrary in this Agreement,
Seller and Indemnitor may provide information at any time, whether written or
oral (including, without limitation, copies of documents), relating to this
Agreement and the transactions contemplated hereby in connection with the
matters, and to the Persons, set forth in Schedule 5.04(c).
32
Section 5.05. Regulatory and Other Authorizations; Reasonable
Efforts. (a) Subject to the terms and conditions of this Section 5.05, the
parties hereto agree to use their reasonable best efforts to take, or cause to
be taken, all actions and to do, or to cause to be done, all things necessary,
proper, advisable or appropriate to consummate and make effective the
transactions contemplated by the Transaction Agreements as soon as
practicable, including to cooperate in good faith to facilitate the Closing
and to refrain from taking any action that could reasonably be expected to
cause a condition to the Closing to not be satisfied or otherwise materially
impair, delay or impede the Closing. In furtherance of the foregoing, the
parties hereto shall promptly make all filings and notifications with, and
shall use their reasonable best efforts to promptly obtain all authorizations,
consents, orders and approvals of, all Governmental Authorities that may be or
become necessary for their respective execution and delivery of, and the
performance of their respective obligations pursuant to, and the consummation
of the transactions contemplated by, this Agreement and comply at the earliest
practicable date with a request for information, documents or other materials
by any such Governmental Authorities to obtain such authorizations, consents,
orders and approvals; provided, however, that in no event shall Acquiror or
any of its Affiliates be required to agree to (i) the divestiture of any
business or entity or (ii) any requirement imposed by a Governmental Authority
that would reasonably be expected to have a (A) Material Adverse Effect taken
as a whole, or (B) material and adverse effect on the aggregate economic value
and business benefits that would reasonably be expected to be obtained by
Acquiror and its Affiliates from the transactions contemplated by this
Agreement. The parties will cooperate with the reasonable requests of each
other in promptly seeking to obtain all such authorizations, consents, orders
and approvals (including by making available, upon reasonable notice,
appropriate Representatives of the Company and the Company Subsidiaries for
participation in meetings with Governmental Authorities).
(b) Prior to the Closing, each of Seller and Acquiror shall promptly
notify one another of any communication it receives from any Governmental
Authority relating to the matters that are the subject of this Agreement and
permit the other party to review in advance any proposed material written
communication by such party to any Governmental Authority and shall provide
each other with copies of all correspondence, filings or communications
between such party or any of its Representatives, on the one hand, and any
Governmental Authority or members of its staff, on the other hand; provided,
however, that Acquiror or Seller, as applicable, may redact from such
correspondence, filings and communications any confidential competitive
information of Acquiror, Seller or their respective Affiliates, as the case
may be. Prior to the Closing, neither Seller nor Acquiror shall agree to
participate in any meeting with any Governmental Authority in respect of any
such filings, investigation or other inquiry unless it consults with the other
party in advance.
(c) The parties hereto shall use their reasonable best efforts to
obtain any other consents and approvals (including from any ground lessors and
from the holders of the Existing Mortgages) and to make any other
notifications that may be required in connection with the transactions
contemplated by this Agreement; provided, however, that, except for
Transaction Costs, none of Seller, Indemnitor, the Company Subsidiaries or
Acquiror shall be required to compensate any third party, commence or
participate in litigation or offer or grant any accommodation (financial or
otherwise) to any third party to obtain any such consent or approval.
Notwithstanding the foregoing, Seller and Indemnitor shall obtain each of the
Seller Required Third Party Consents and the Indemnitor Required Third Party
Consents prior to the
33
Outside Date or, if the Outside Date shall have been extended in accordance
with Section 7.01(b), the Extended Outside Date.
Section 5.06. Intercompany Obligations. Seller shall, and shall
cause its Affiliates to, take such action and make such payments as may be
necessary so that, prior to or concurrently with the Closing, the Company and
the Company Subsidiaries, on the one hand, and Seller and its Affiliates
(other than the Company and the Company Subsidiaries), on the other, shall
settle, discharge, offset, pay or repay in full all intercompany loans, notes
and advances (regardless of their maturity) and all intercompany receivables
and payables (including amounts relating to intercompany Tax sharing
agreements, whether written or oral), for the amount due, including any
accrued and unpaid interest, but excluding any penalty, termination or similar
amounts; provided, however, that if each such item is not paid in full in
cash, the method of discharge must be reasonably satisfactory to Acquiror.
Section 5.07. Intercompany Arrangements. Except as otherwise agreed
in writing by Seller and Acquiror or as expressly provided in the Transaction
Agreements, Seller shall, and shall cause its Affiliates to, take such actions
as may be necessary to terminate prior to or concurrently with the Closing
Date, without any penalty to or premium payable by the Company or the Company
Subsidiaries, all contracts, agreements, leases, licenses, commitments and
other instruments, arrangements, relationships and understandings between the
Company and the Company Subsidiaries, on the one hand, and Seller and its
Affiliates (other than the Company and the Company Subsidiaries), on the
other.
Section 5.08. Excluded Assets; Excluded Liabilities. Prior to the
Closing, (i) Seller will cause the Company and the Company Subsidiaries, as
applicable, to transfer, convey assign or otherwise distribute to Indemnitor
or one of Indemnitor's wholly owned subsidiaries all of the Company's or any
Company Subsidiary's right, title and interest in and to all the Excluded
Assets, and (ii) Indemnitor shall, or shall cause, one of its wholly owned
subsidiaries to assume all the Excluded Liabilities. The distribution of the
Excluded Assets and the assumption of the Excluded Liabilities shall be
effected pursuant to written instruments of transfer and assumption, as
applicable, reasonably satisfactory to Acquiror, and may include a transfer or
assumption of some or all of such Excluded Assets or Excluded Liabilities, as
applicable, to a direct or indirect Subsidiary of the Company followed by a
distribution of the Capital Stock of such Subsidiary.
Section 5.09. Change of Name. Prior to the Closing Date, Seller
shall cause the Company to be renamed "Old Brookdale Inc." and Indemnitor to
be renamed "Brookdale Living Communities, Inc.".
Section 5.10. Existing Mortgage Lender Consents. (a) The purchase
and sale of the Shares and the assumption of the debt outstanding under the
Existing Mortgages may require certain consents and agreements of the Existing
Mortgage Lenders set forth in Schedule 5.10. Seller and Acquiror shall use
their reasonable best efforts in accordance with Section 5.05(c) to secure all
such consents and agreements. Seller, on the one hand, and Acquiror, on the
other hand, will promptly notify the other if it reasonably believes that,
notwithstanding the parties' reasonable best efforts pursuant to Section
5.05(c), it will be unable to obtain one or more of the consents of the
Existing Mortgage Lenders prior to the Extended Outside Date. Following the
delivery of any such notification, the parties hereto shall negotiate in good
faith the terms on
34
which such parties would be willing to cause each Real Property Asset subject
to an Existing Mortgage with any such non-consenting Existing Mortgage Lender
to be treated as an Excluded Real Property Asset; provided, however, that, if
the parties are unable to agree on reasonable terms, then either Seller or
Acquiror may elect to terminate this Agreement in its entirety, in which event
(i) this Agreement shall be of no further force or effect as provided in
Article VII and (ii) Acquiror shall promptly pay to Seller the Due Diligence
Deposit, less any Transaction Costs incurred by Acquiror.
(b) Notwithstanding anything to the contrary contained in the forms
of Property Leases or Agreement Regarding Leases, the parties hereto agree
that they will use their reasonable best efforts in accordance with Section
5.05(c) to obtain consents and agreements, as applicable, from each of the
Existing Mortgage Lenders to the effect that (i) each Property Lease shall be
cross-defaulted with the other Property Leases under the Agreement Regarding
Leases, but to the extent such Existing Mortgage Lenders do not agree to the
same, the same shall not be a condition to Closing, and only the leases
appurtenant to the properties where such consent is obtained shall be
cross-defaulted, and (ii) such Existing Mortgage Lender agree to recognize the
tenants under each Property Lease and shall not disturb the leasehold interest
of the applicable tenant if an Event of Default (as such term is defined in a
Property Lease) has not occurred and is not continuing under such Property
Lease, but to the extent such lenders do not agree to the same. the same shall
not be a condition to Closing.
Section 5.11. Private Placement. As promptly as practicable
following the date hereof, Acquiror shall complete its preparation of an
appropriate offering memorandum (together with any amendment thereof or
supplement thereto, the "Offering Memorandum") in connection with the Private
Placement. Seller and its counsel shall be given a reasonable opportunity to
review and comment on the Offering Memorandum but only to the extent
statements included therein are based on information supplied by Seller or
Indemnitor specifically for inclusion or incorporation by reference therein.
If requested by Seller, Acquiror shall include in the Offering Memorandum a
notice to the effect that Seller does not accept and shall not have any
responsibility or liability for the content of the Offering Memorandum (except
as to information supplied by Seller or Indemnitor specifically for inclusion
or incorporation by reference therein). Acquiror shall use its reasonable best
efforts to consummate the Private Placement prior to August 15, 2004.
Section 5.12. Registration Statement; Additional Financial
Statements. (a) Acquiror expects to file with the Securities and Exchange
Commission (the "SEC") a registration statement covering shares of common
stock of Acquiror pursuant to various agreements with the initial purchasers
of such shares sold in the Private Placement (together with any amendment
thereof or supplement thereto, the "Registration Statement"). Acquiror shall
provide Indemnitor and its counsel with a reasonable opportunity to review and
comment on the Registration Statement, each response to any correspondence
from the SEC or the staff of the SEC (or any other Governmental Authority)
relating thereto, and all other documentation prepared in connection with the
listing of the shares covered thereby on any securities exchange, but only to
the extent statements included therein are based on information supplied by
Indemnitor specifically for inclusion or incorporation by reference therein.
If requested by Indemnitor, Acquiror shall include in the Registration
Statement, a notice to the effect that Indemnitor does not accept and shall
not have any responsibility or liability for the content of the Registration
35
Statement (except as to information supplied by it specifically for inclusion
or incorporation by reference therein).
(b) If Acquiror (i) shall be obligated to provide financial
statements of the Company or any of the Company Subsidiaries, including as
part of the presentation of any required pro forma financial statements, for
any period in any filing to be made pursuant to Applicable Securities Rules
(including the Registration Statement) or (ii) shall be advised by the
underwriters or initial purchasers in connection with any offering of its
securities, including the Private Placement, that such financial statements
are advisable in order to assure a successful marketing of such offering, then
Indemnitor shall use its reasonable commercial efforts to engage Indemnitor's
accountants, Ernst & Young LLP, so long as they are independent for purposes
of the Securities Act, or another nationally recognized accounting firm
reasonably acceptable to Acquiror, to conduct an audit of, or if no audit is
required, to perform the procedures specified by the American Institute of
Certified Public Accountants for a review of interim financial information as
described in Statement of Auditing Standards No. 71, Interim Financial
Information, with respect to, such required or advisable financial statements
and, to the extent required by the SEC or deemed advisable by the underwriters
or initial purchasers, the comparable period in the prior year and shall use
reasonable commercial efforts to facilitate any such audit or review.
Indemnitor will also reasonably cooperate with Acquiror, in connection with
any such audit or review and shall use reasonable commercial efforts to cause
any accounting firm referred to above to provide such reasonable cooperation
as well. All costs incurred by Indemnitor pursuant to this Section 5.12(b)
(including any audit or review by Ernst & Young LLP and consultants) shall be
paid by Acquiror.
Section 5.13. Certain Insurance Claims. From and after the Closing
Date, the Company and the Company Subsidiaries shall cease to be insured by
Seller's or its Affiliates' (other than the Company or any Company Subsidiary,
as the case may be) insurance policies or by any of their self-insured
programs to the extent such insurance policies or programs cover the Company
or the Company Subsidiaries; provided, however, that Seller shall use its
reasonable commercial efforts, subject to the terms of the occurrence-based
third party liability insurance policies and any workers' compensation
insurance policies and/or comparable workers' compensation self-insurance
programs sponsored by Seller and/or its Affiliates and that apply to the
locations at which the businesses of the Company and the Company Subsidiaries
operate (the "Occurrence Policies"), (i) to retain and extend the right to
make or submit claims and receive recoveries for the benefit of the Company
and the Company Subsidiaries under the Occurrence Policies with respect to any
Losses arising out of actions, omissions, events or facts relating to the
assets (including the Acquired Personal Property Assets), properties
(including the Acquired Real Property Assets) or business of the Company and
the Company Subsidiaries occurring on or prior to the Closing Date (each, an
"Insured Claim"), (ii) to submit, and to cause its Affiliates to cooperate
with the Company and the Company Subsidiaries in submitting, as soon as
practicable good faith Insured Claims on behalf of the Company and the Company
Subsidiaries under the Occurrence Policies (without any obligation on the part
of Acquiror, the Company or any of the Company Subsidiaries to reimburse
Seller for any increased costs incurred by Seller as a result of such claims
or to make claims under insurance policies sponsored by Acquiror and/or its
Affiliates) and (iii) to pay promptly over to the Company any and all amounts
received by Seller or its Affiliates under the Occurrence Policies with
respect to Insured Claims.
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Section 5.14. Notice of Certain Events. Each party hereto shall
promptly notify the other parties hereto of any of the following events: (a)
the occurrence or non-occurrence of any event which would be likely to cause
(i) any representation or warranty of such party contained in this Agreement
to be untrue or inaccurate in any material respect (including if such party
receives a notice of violation relating to any Hazardous Material, becomes
aware that it is not in compliance with all Environmental Laws in all material
respects, receives written notice from any tenant that such party is in
default under any lease or becomes aware of any material default by a tenant
under any lease) or (ii) any covenant, condition or agreement of such party
contained in this Agreement not to be complied with or satisfied (including if
such party reasonably believes that it will be unable to obtain one or more of
the consents of the Existing Mortgage Lenders prior to the Outside Date); and
(b) any failure of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, that the delivery of any notice pursuant to this Section 5.14 shall
not limit or otherwise affect the remedies available to the party receiving
such notice. In addition, Seller and Indemnitor will promptly inform Acquiror
of the happening of any event which would render any information supplied by
Seller or Indemnitor specifically for inclusion in the Offering Memorandum or
in any Registration Statement incorrect in any material respect or would
require the amendment of the Offering Memorandum or any such Registration
Statement.
Section 5.15. Further Action. From and after the Closing Date, the
parties hereto shall execute and deliver, or shall cause to be executed and
delivered, such documents and other papers and shall take, or shall cause to
be taken, such further actions as may be reasonably required to carry out the
provisions of this Agreement and give effect to the transactions contemplated
by this Agreement, including the transfer of the Excluded Assets and
assumption of the Excluded Liabilities.
ARTICLE VI
CONDITIONS TO CLOSING AND RELATED MATTERS
Section 6.01. Conditions to Obligations of Seller and Indemnitor.
The obligations of Seller and Indemnitor to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or waiver
by Seller and Indemnitor, at or prior to the Closing, of each of the following
conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of Acquiror contained in this Agreement are
true and correct (without giving effect to any limitations as to materiality)
as of the Closing as if made on the Closing Date (other than representations
and warranties made as of another date, which representations and warranties
were true and correct as of such date), except to the extent that any breaches
of such representations and warranties, individually or in the aggregate, have
not had, or would not reasonably be expected to have, a Material Adverse
Effect; (ii) the covenants contained in this Agreement to be complied with by
Acquiror on or before the Closing have been complied with in all material
respects; and (iii) Seller and Indemnitor have received a certificate dated
the Closing Date of Acquiror to such effect signed by a duly authorized senior
executive officer of Acquiror.
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(b) Approvals of Governmental Authorities. Each of the Seller
Required Governmental Approvals, the Indemnitor Required Governmental
Approvals and the Governmental Approvals set forth in Schedule 4.04 has been
received or deemed received and is in full force and effect.
(c) No Governmental Order or Proceeding. As of the Closing, there is
no Governmental Order in existence that prohibits or restrains the
consummation of the transactions contemplated by this Agreement and no suit,
action or proceeding or investigation by any Governmental Authority has been
commenced (and be pending) seeking to prohibit or restrain the consummation of
the transactions contemplated by this Agreement.
(d) Approvals of Existing Mortgage Lenders. Subject to Section 5.10,
each of the written consents and approvals of the Existing Mortgage Lenders in
Schedule 5.10 has been received or deemed received and is in full force and
effect.
(e) Other Documents. The Acquiror has executed and delivered to the
Seller and/or the applicable Indemnitor Parties each of the Transaction
Agreements to which it is a party.
(f) Consummation of Private Placement. The Private Placement has
been consummated and has resulted in net proceeds to Acquiror of at least
$535,000,000.
(g) Required Consents. Each of the Seller Required Third Party
Consents and the Indemnitor Required Third Party Consents has been received or
deemed received and is in full force and effect.
Section 6.02. Conditions to Obligations of Acquiror. The obligation
of Acquiror to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or waiver by Acquiror, at or prior to the
Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of Seller and Indemnitor contained in this
Agreement are true and correct (without giving effect to any limitations as to
materiality) as of the Closing as if made on the Closing Date (other than
representations and warranties made as of another date, which representations
and warranties were true and correct as of such date), except to the extent
that any breaches of such representations and warranties, individually or in
the aggregate, have not had, or would not reasonably be expected to have, a
Material Adverse Effect; (ii) the covenants contained in this Agreement to be
complied with by Seller and Indemnitor on or before the Closing have been
complied with in all material respects; and (iii) Acquiror has received a
certificate dated the Closing Date of Seller and Indemnitor to such effect
signed by a duly authorized senior executive officer of each of Seller and
Indemnitor.
(b) Approvals of Governmental Authorities. Each of the Seller
Required Governmental Approvals, the Indemnitor Required Governmental
Approvals and the Governmental Approvals set forth in Schedule 4.04 has been
received or deemed received, and is in full force and effect, and, subject to
Section 5.05(a), do not contain any restrictions or limitations not reasonably
acceptable to Acquiror.
38
(c) Approvals of Existing Mortgage Lenders. Subject to Section 5.10,
each of the written consents and approvals of the Existing Mortgage Lenders in
Schedule 5.10 has been received or deemed received, is in full force and
effect, and is in form and substance reasonably satisfactory to Acquiror.
(d) Approvals of Ground Lessors. Each of the written consents and
approvals of the ground lessors under each Ground Leased Asset, if any, has
been received or deemed received, is in full force and effect, and, subject to
Section 5.05(c), is in form and substance reasonably satisfactory to Acquiror.
(e) No Governmental Order or Proceeding. As of the Closing, there is
no Governmental Order in existence that prohibits or restrains the
consummation of the transactions contemplated by this Agreement and no suit,
action or proceeding or investigation by any Governmental Authority has been
commenced (and be pending) seeking to prohibit or restrain the consummation of
the transactions contemplated by this Agreement.
(f) No Material Adverse Effect. There has not occurred any event or
events that, individually or in the aggregate, have had or would reasonably be
expected to have a Material Adverse Effect.
(g) No Excluded Assets or Excluded Liabilities. Each of the Company
and the Company Subsidiaries has sold, transferred and assigned all of the
Excluded Assets and Seller or Indemnitor has assumed the Excluded Liabilities,
and the only assets and liabilities of the Company and the Company
Subsidiaries immediately prior to the Closing are, subject to any Permitted
Liens, (i) the Acquired Real Property Assets, (ii) the Acquired Personal
Property Assets, (iii) the Assumed Mortgage Debt, (iv) the Specified
Liabilities and (v) any Excluded Liabilities which Indemnitor shall have
assumed as provided in Section 5.08. Seller shall have delivered to Acquiror
duly executed copies of the instruments of assignment and assumption
contemplated by Section 5.08.
(h) Consummation of Private Placement. The Private Placement has
been consummated and resulted in net proceeds to Acquiror of at least
$535,000,000.
(i) Required Consents. Each of the Seller Required Third Party
Consents and the Indemnitor Required Third Party Consents has been received or
deemed received and is in full force and effect, and is in form and substance
reasonably satisfactory to Acquiror.
(j) Other Documents. Each of the Seller and the Indemnitor Parties
has executed and delivered to the Acquiror each of the Transaction Agreements
to which Seller or such Indemnitor Party is a party, including as follows:
(i) Property Leases. Each of the Property Owners and the Net
Tenants has executed and delivered a Property Lease, with respect to each
of the Acquired Real Property Assets.
(ii) Agreement Regarding Leases. Each of the Tenant Holding
Company and the Property Owners Holding Company has executed and delivered
the Agreement Regarding Leases.
39
(iii) Guaranty Agreements. The Tenant Holding Company has
executed and delivered a Lease Guaranty, with respect to each of the
Property Leases, and the Indemnitor has executed and delivered the
Guaranty of Agreement Regarding Leases.
(iv) Management Agreement. Each of the Manager and the Net
Tenants has executed and delivered a Management Agreement containing
termination provisions reasonably satisfactory to Acquiror with respect to
each of the Acquired Real Property Assets.
(v) Other Deliveries. Each of the documents and other deliveries
contemplated by Section 2.06(e).
(k) Organizational Documents of Indemnitor, Tenant Holding Company
and Each Net Tenant. Each of Indemnitor, Tenant Holding Company and the Net
Tenants has been formed, and Acquiror has reasonably approved the
organizational documents of each of such entities.
ARTICLE VII
TERMINATION, WAIVER AND DEFAULT
Section 7.01. Termination. This Agreement may be terminated prior to
the Closing:
(a) by the mutual written consent of Seller and Acquiror;
(b) by either Seller or Acquiror if the Closing shall not have
occurred on or before September 30, 2004 (the "Outside Date"); provided,
however, that if, on or prior to the Outside Date, the conditions specified in
Sections 6.01(b), 6.01(c), 6.01(d), 6.02(b), 6.02(c), 6.02(d) and 6.02(e) have
not been satisfied or if, for reasons outside the reasonable control of
Seller, Indemnitor and Acquiror, any of the other conditions specified in
Article VI has not been satisfied, then either Seller or Acquiror may by
written notice given to the other party, extend the Outside Date to November
30, 2004 (the "Extended Outside Date"); provided, further, that the right to
terminate this Agreement under this Section 7.01(b) shall not be available to
any party whose failure to take any action required to fulfill any of such
party's obligations under this Agreement shall have been the cause of, or
shall have resulted in, the failure of the Closing to occur prior to such
date;
(c) by either Seller or Acquiror in the event of the issuance of a
final, non-appealable Governmental Order restraining or prohibiting the
consummation of the transactions contemplated by this Agreement;
(d) by Acquiror in accordance with Section 2.08(b), 5.10, 7.06, or
8.01(b)(i);or
(e) by Seller in accordance with Section 5.10 or 7.05, or if the
Private Placement shall not have been consummated on or before August 15,
2004.
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Section 7.02. Notice of Termination. Any party desiring to terminate
this Agreement pursuant to Section 7.01 shall give written notice of such
termination to the other party or parties, as the case may be, to this
Agreement.
Section 7.03. Effect of Termination. If this Agreement is terminated
as provided in Section 7.01, except as set forth in Section 5.04 and this
Article VII, this Agreement shall forthwith become void and there shall be no
liability on the part of any party to this Agreement; provided, however, that
nothing in this Agreement shall relieve any party hereto from liability for
any willful breach of the representations and warranties contained in this
Agreement or any failure to perform their respective obligations under this
Agreement.
Section 7.04. Extension; Waiver. At any time prior to the Closing,
the parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party (it being understood that time is
"of the essence" with respect to the Outside Date and the Extended Outside
Date), (b) waive any inaccuracies in the representations and warranties of the
other party contained in this Agreement or in any certificate, instrument,
schedule or other document delivered pursuant to this Agreement or (c) waive
compliance with any of the agreements or conditions contained in this
Agreement. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party granting such extension or waiver.
Section 7.05. Acquiror's Default. If Acquiror shall fail to purchase
the Shares on the Closing Date and each of Seller and Indemnitor has each
performed and Seller is ready, willing and able to convey the Shares
hereunder, in each case in accordance with the terms hereof, then Seller and
Indemnitor shall have the right to treat this Agreement as having been
breached by Acquiror, in which event Seller's and Indemnitor's sole and
exclusive remedies on account of such breach shall be (i) the right to
terminate this Agreement by written notice to Acquiror or Acquiror's attorney
and, if the Private Placement shall have been consummated, to be reimbursed
for all reasonable and documented out-of-pocket costs and expenses incurred by
Seller and its Affiliates (including the Company and the Company Subsidiaries)
or (ii) the right to xxx Acquiror for damages and/or specific performance of
this Agreement. Upon such termination, Acquiror shall forfeit all rights and
claims with respect to the Shares pursuant to this Agreement. In the event of
such termination, Acquiror shall (i) immediately return to Seller or destroy
all due diligence materials, reports and studies delivered to Acquiror by
Seller (without Acquiror retaining copies thereof) and copies of any reports
or studies conducted by or at the direction of Acquiror and in its possession
and (ii) promptly pay to Seller the Due Diligence Deposit, less any
Transaction Costs incurred by Acquiror in connection with the Due Diligence
Review.
Section 7.06. Seller's Default. If Seller shall fail to convey the
Shares on the Closing Date and Acquiror is ready, willing and able to purchase
the Shares hereunder, in each case in accordance with the terms hereof, then
Acquiror shall have the right to treat this Agreement as having been breached
by Seller and Indemnitor, in which event, Acquiror's sole and exclusive
remedies on account of such breach shall be (i) the right to terminate this
Agreement by written notice to Seller, Indemnitor or Seller's attorney and to
be reimbursed for all reasonable and documented out-of-pocket costs and
expenses incurred by Acquiror and its
41
Affiliates or (ii) the right to xxx Seller and Indemnitor for damages and/or
specific performance of this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification by Indemnitor. (a) Subject to the Tax
Matters Agreement, and Sections 8.01(b), 8.03, 8.04, 8.06, 8.07 and 10.01,
Indemnitor shall indemnify, defend and hold harmless Acquiror and its
Affiliates (including, without limitation, the Company and the Company
Subsidiaries) and Representatives (collectively, the "Acquiror Indemnified
Parties") against, and reimburse each Acquiror Indemnified Party for, all
Losses that such Acquiror Indemnified Party may at any time suffer or incur,
or become subject to, as a result of or in connection with:
(i) any inaccuracy or breach of any representation or warranty
made by Seller or Indemnitor in this Agreement or in the certificate to
in Section 6.02(a)(iii) (other than any inaccuracy of any referred
representation or warranty made by Indemnitor in Section 3.19, which is
covered by the Tax Matters Agreement);
(ii) any failure by Seller or Indemnitor to perform or comply
with any of its covenants or agreements contained in this Agreement;
(iii) any Environmental Claim relating to the Acquired Real
Property Assets or the Acquired Personal Property Assets arising out of
actions, omissions, events or facts occurring on or prior to the
Closing Date or to the treatment, storage, recycling or Release at any
property to which Hazardous Material was transported from any Acquired
Real Property Asset on or prior to the Closing Date;
(iv) any Third Party Claim arising out of actions, omissions,
events or facts occurring on or prior to the Closing Date relating to
the assets (including the Acquired Personal Property Assets),
properties (including the Acquired Real Property Assets) or business of
the Company and the Company Subsidiaries, including the Actions and
matters described in Schedules 3.08 and 3.24(e);
(v) any Excluded Assets and any Excluded Liabilities; and
(vi) any fees and expenses payable to attorneys, consultants or
accountants retained or hired by or on behalf of Seller, Indemnitor,
the Company, the Company Subsidiaries and their respective Affiliates
and Representatives in connection with the transactions contemplated by
the Transaction Agreements.
(b) Notwithstanding any other provision to the contrary, Indemnitor
shall not be required to indemnify, defend or hold harmless any Acquiror
Indemnified Party against, or reimburse any Acquiror Indemnified Party for:
(i) any Losses pursuant to Section 8.01(a)(i) (other than Losses
arising solely as a result of or in connection with the inaccuracy or
breach of any representation
42
or warranty made by Seller or Indemnitor in Sections 3.01, 3.02, 3.03
or 3.21, as to which this Section 8.01(b) shall not apply) with respect
to any claim for inaccuracy or breach of representation if (1) any
officer of Acquiror obtained actual knowledge on or before the date
hereof that such representation was not true and correct, or (2) any
officer of Acquiror obtained actual knowledge (whether during the Due
Diligence Review, by notice from Seller or otherwise) that such
representation was not true and correct after the date hereof but
before the Closing Date, unless on or before the Closing Date (x)
Acquiror shall have notified Seller or Indemnitor in writing, providing
reasonable detail, of such inaccuracy or breach and (y) Seller and
Indemnitor shall have agreed prior to the Closing that Acquiror shall
not be obligated to close the transactions contemplated by this
Agreement (it being understood that if Acquiror thereafter elects not
to so close, this Agreement shall automatically terminate and no party
hereto shall have the right to xxx any other party hereto or any
Releasee for damages or specific performance of this Agreement);
provided, that Indemnitor shall have the burden of proof with respect
to clauses (1) and (2) above;
(ii) with respect to any claim (or series of related claims
arising from the same underlying facts, events or circumstances), (A)
unless such claim (or series of related claims arising from the same
underlying facts, events or circumstances) involves Losses in excess of
$100,000 and (B) until the aggregate amount of all Losses of the
Acquiror Indemnified Parties exceeds $2,000,000, after which Indemnitor
shall be liable for all Losses of the Acquiror Indemnified Parties,
including such $2,000,000; provided, however, that this clause (ii)
shall not apply to any Third Party Claim relating to or arising out of
the operation of the senior living business conducted by Seller,
Indemnitor and their respective Affiliates and including, prior to the
Closing Date, by the Company and the Company Subsidiaries (the "Seller
Operations");
(c) The cumulative aggregate indemnification obligation of the
Indemnitor under Sections 8.01(a)(i), 8.01(a)(iii) and 8.01(a)(iv) shall in no
event exceed $75,000,000 in the aggregate; provided, however, that the
foregoing limitation shall not apply to any Third Party Claim relating to or
arising out of the Seller Operations.
(d) For purposes of this Article VIII and for purposes of
determining whether Acquiror Indemnified Parties are entitled to
indemnification from Indemnitor pursuant to Sections 8.01(a)(i) and 8.01(b)
hereof, any breach of or inaccuracy in any representation or warranty (other
than any representation or warranty contained in Sections 3.06, 3.07 and 3.18
and the first sentence of Section 3.14, as to which this Section 8.01(d) shall
not apply) of Indemnitor or Seller shall be determined without regard to any
materiality qualifications set forth in such representation or warranty, and
all references to the terms "material," "materially," "materiality," "Material
Adverse Effect" or any similar terms shall be ignored for purposes of
determining whether such representation or warranty was true and correct when
made or deemed made.
Section 8.02. Indemnification by Acquiror. (a) Subject to Sections
8.02(b), 8.03, 8.04, 8.06, 8.07 and 10.01, Acquiror shall indemnify, defend
and hold harmless Seller and their respective Affiliates (including the
Indemnitor, but not the Company or the Company Subsidiaries) and
Representatives (collectively, the "Seller Indemnified Parties") against, and
43
reimburse each Seller Indemnified Party for, all Losses that such Seller
Indemnified Party may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any inaccuracy of any representation or warranty made by
Acquiror in this Agreement or in the certificate referred to in Section
6.01(a)(iii);
(ii) any failure by Acquiror to perform or comply with any of
its covenants or agreements contained in this Agreement; and
(iii) any Third Party Claim to the extent relating to or arising
out of any injury or death of any person or any property damage
inflicted by any Representatives of Acquiror during any entry on or
inspection of the Real Property Assets, including any invasive testing,
performed by or on behalf of Acquiror pursuant to Section 2.08(c), but
excluding any claims arising from (i) property damage arising from
discovery of an existing condition during such inspection or testing
and (ii) the presence of groundwater monitoring xxxxx, which at
Seller's option, Acquiror will either cause to be filled and abandoned
in accordance with applicable Law or left intact and functional.
(b) Notwithstanding any other provision to the contrary, Acquiror
shall not be required to indemnify, defend or hold harmless any Seller
Indemnified Party against, or reimburse any Seller Indemnified Party for, any
Losses pursuant to Section 8.02(a)(i) (other than Losses arising out of,
resulting from, relating to or in connection with the inaccuracy or breach of
any representation or warranty made by Seller in Section 4.01, 4.02, or 4.08,
as to which this Section 8.02(b) shall not apply) (i) with respect to any
claim (or series of related claims arising from the same underlying facts,
events or circumstances), unless such claim (or series of related claims
arising from the same underlying facts, events or circumstances) involves
Losses in excess of $75,000 and (ii) until the aggregate amount of all Losses
of the Seller Indemnified Parties exceeds $2,000,000, after which Acquiror
shall be liable for all Losses of the Seller Indemnified Parties, including
such $2,000,000. The cumulative aggregate indemnification obligation of the
Acquiror under Sections 8.02(a)(i) and 8.02(a)(iii) shall in no event exceed
$75,000,000 in the aggregate.
(c) For purposes of this Article VIII and for purposes of
determining whether Seller Indemnified Parties are entitled to indemnification
from Acquiror pursuant to Sections 8.02(a)(i) and 8.02(b), any breach of or
inaccuracy in any representation or warranty (other than any representations
or warranty contained in the last sentence of Section 4.07 as to which this
Section 8.02(c) shall not apply) of Acquiror shall be determined without
regard to any materiality qualifications set forth in such representation or
warranty, and all references to the terms "material," "materially,"
"materiality," or any similar terms shall be ignored for purposes of
determining whether such representation or warranty was true and correct when
made or deemed made.
Section 8.03. Notification of Third Party Claims. (a) A Person that
may be entitled to be indemnified under this Agreement (the "Indemnified
Party"), shall promptly notify the party or parties liable for such
indemnification (the "Indemnifying Party") in writing of any pending or
threatened claim or demand by a third party that the Indemnified Party has
determined has given or could reasonably give rise to a right of
indemnification under this
44
Agreement (including a pending or threatened claim or demand asserted by a
third party against the Indemnified Party, such claim being a "Third Party
Claim"), describing in reasonable detail the facts and circumstances with
respect to the subject matter of such claim or demand; provided, however, that
the failure to provide such notice shall not release the Indemnifying Party
from any of its obligations under this Article VIII except to the extent the
Indemnifying Party is actually prejudiced by such failure, it being understood
that (i) notices for claims in respect of an inaccuracy or breach of a
representation or warranty must be delivered prior to the expiration of any
applicable survival period specified in Section 10.01 for such representation
or warranty and (ii) notices for claims in respect of a breach or failure to
perform any covenant or agreement must be delivered prior to the date that is
six months after the last day of the effective period of such covenant or
agreement; provided, further, that if, prior to such applicable date, a party
hereto shall have notified the other party hereto in writing of a claim for
indemnification under this Article VIII (whether or not formal legal action
shall have been commenced based upon such claim), such claim shall continue to
be subject to indemnification in accordance with this Article VIII
notwithstanding the passing of such applicable date.
(b) Upon receipt of a notice of a claim for indemnity from an
Indemnified Party pursuant to Section 8.03(a), and subject to Section 8.03(e),
the Indemnifying Party may, by notice to the Indemnified Party delivered
within ten (10) Business Days of the receipt of notice of such claim, assume
the defense and control of any Third Party Claim but shall allow the
Indemnified Party a reasonable opportunity to participate in the defense of
such Third Party Claim with its own counsel and at its own expense. The
Indemnified Party may take any actions reasonably necessary to defend such
Third Party Claim prior to the time that it receives a notice from the
Indemnifying Party as contemplated by the preceding sentence. The Indemnifying
Party shall select counsel, contractors and consultants of recognized standing
and competence. To the extent the principal remedy sought in any Third Party
Claim is equitable relief, the Indemnifying Party shall consult with the
Indemnified Party as to the selection of counsel to defend such Third Party
Claim. Each Indemnified Party, shall, and shall cause each of its Affiliates
and Representatives to, cooperate in good faith with the Indemnifying Party in
the defense of any Third Party Claim. The Indemnifying Party shall not be
authorized to consent to a settlement of, or the entry of any judgment arising
from, any Third Party Claim, without the consent of any Indemnified Party,
provided that the Indemnified Party shall not withhold its consent if such
settlement or judgment involves solely the payment of money without any
finding or admission of any violation of Law or admission of any wrongdoing
and the Indemnifying Party shall (i) pay or cause to be paid all amounts
arising out of such settlement or judgment concurrently with the effectiveness
of such settlement and (ii) obtain, as a condition of any settlement or
judgment, a complete and unconditional release of each relevant Indemnified
Party from any and all liability in respect of such Third Party Claim.
(c) If any Indemnifying Party receives a notice of a claim for
indemnity from an Indemnified Party pursuant to Section 8.03(a) that does not
involve a Third Party Claim, the Indemnifying Party shall notify the
Indemnified Party within thirty (30) days following its receipt of such
notice, whether the Indemnifying Party disputes its liability to the
Indemnified Party under this Article VIII. If the Indemnifying Party does not
so notify the Indemnified Party that it disputes such liability, the claim
specified by the Indemnified Party in such notice shall be conclusively deemed
to be a liability of the Indemnifying Party under this Article VIII, and the
Indemnifying Party shall pay, subject to the limitations set forth in Section
8.01(b) or 8.02(b), if
45
applicable, the amount of such liability to the Indemnified Party on demand
or, in the case of any notice in which the amount of the claim (or any portion
of the claim) is estimated, on such later date when the amount of such claim
(or such portion of such claim) becomes finally determined. If the
Indemnifying Party has timely disputed its liability with respect to such
claim as provided above, the Indemnifying Party and the Indemnified Party
shall resolve such dispute in accordance with Section 10.11.
(d) If an Indemnified Party determines in good faith that it is
reasonably likely that a Third Party Claim would materially adversely affect
it other than as a result of monetary damages for which it would be entitled
to indemnification under this Agreement (including with respect to remediation
of any environmental matters), the Indemnified Party may, by notice to the
Indemnifying Party, assume the exclusive right to defend, compromise or settle
such Third Party Claim with its own counsel and at its own expense, provided,
however, that the Indemnifying Party will not be bound by any determination of
a Third Party Claim so defended or any compromise or settlement effected
without its written consent.
(e) Notwithstanding the foregoing, no Indemnifying Party shall have
any liability under this Article VIII for any Losses arising out of or
relating to any Third Party Claim that is settled or compromised by an
Indemnified Party without the consent of such Indemnifying Party (which
consent shall not be unreasonably withheld or delayed).
Section 8.04. Payment; Interest on Payment. In the event an Action
for indemnification under this Article VIII shall have been finally
determined, the amount of such final determination shall be paid to the
Indemnified Party, on demand in immediately available funds. An Action and the
liability for and amount of Losses, shall be deemed to be "finally determined"
for purposes of this Article VIII when the parties to such Action have so
determined by mutual agreement or, if disputed, when a final non-appealable
Governmental Order with respect thereto shall have been entered. Any amounts
not paid when due pursuant to this Article VIII shall bear interest from the
date thereof until the date paid at a rate equal to the rate publicly
announced from time to time by Citibank, N.A. as its prime or base rate.
Nothing in this Section 8.04 shall operate to bar an Indemnified Party from
seeking and (where appropriate) obtaining interest on any claim to the extent
ordered by a court adjudicating any Action brought by the Indemnified Party
against an Indemnifying Party.
Section 8.05. Exclusive Remedies. Each of the parties hereto
acknowledges and agrees that, (a) prior to the Closing, other than in the case
of actual fraud by the other parties hereto, the sole and exclusive remedy of
such party hereto for any inaccuracy of any representation or warranty
contained in this Agreement shall be refusal to close the purchase and sale of
the Shares hereunder and (b) following the Closing, other than in the case of
actual fraud by the other parties hereto or any of their respective Affiliates
or Representatives, the indemnification provisions of this Article VIII and,
with respect to Taxes, the Tax Matters Agreement, shall be the sole and
exclusive remedies for any inaccuracy of the representations or warranties
contained in this Agreement and for any failure to perform or comply with any
covenants or agreements that, by their terms, were to have been performed or
complied with prior to the Closing. Notwithstanding anything in this Agreement
to the contrary, no Indemnifying Party shall have any liability under this
Agreement for Losses related to Taxes, which Losses shall be governed
exclusively by the Tax Matters Agreement.
46
Section 8.06. Additional Indemnification Provisions. (a) The parties
hereto agree, for themselves and on behalf of their respective Affiliates and
Representatives, that, with respect to each indemnification obligation in this
Agreement, (i) all Losses shall be net of any Eligible Insurance Proceeds (as
set forth in subsection (e) below) and (ii) in no event shall the Indemnifying
Party have liability to the Indemnified Party for any punitive, incidental,
special, indirect or consequential damages, except to the extent that the
Indemnified Party pays punitive, incidental, special, indirect or
consequential damages to a third party in respect of a Third Party Claim.
(b) Any amount payable by an Indemnifying Party pursuant to this
Article VIII shall be paid promptly and payment shall not be delayed pending
any determination of Eligible Insurance Proceeds or Retained Insurance
Proceeds. In any case where an Indemnified Party recovers from a third Person,
any amount in respect of any Loss for which such Indemnified Party has
actually been reimbursed by an Indemnifying Party pursuant to this Article
VIII (other than Retained Insurance Proceeds), such Indemnified Party shall
promptly pay over to the Indemnifying Party the amount so recovered (after
deducting therefrom the amount of expenses incurred by it in procuring such
recovery), but not in excess of the sum of (i) any amount previously paid by
the Indemnifying Party to or on behalf of the Indemnified Party in respect of
such Loss and (ii) any amount expended by the Indemnifying Party in pursuing
or defending any claim arising out of such matter.
(c) The parties hereto shall, for all tax and financial accounting
purposes, to the extent permitted by Law, treat the assumption and payment of
liabilities hereunder by Indemnitor as a distribution by Indemnitor to the
Company occurring prior to the Closing, and, accordingly, as not includible in
the taxable income of Acquiror. Correspondingly, the parties hereto shall, for
all tax and financial accounting purposes, to the extent permitted by Law,
treat any payment from Acquiror to Indemnitor pursuant to this Article VIII as
a capital contribution by the Company to Indemnitor occurring prior to the
Closing, and, accordingly, as not includible in the taxable income of
Indemnitor.
(d) All payments required to be made by an Indemnifying Party under
this Article VIII to any Indemnified Party shall be without set-off,
counterclaim or deduction of any kind.
(e) If any portion of Losses to be reimbursed by the Indemnifying
Party may be covered, in whole or in part, by third-party insurance coverage
(each, an "Insurance Policy"), the Indemnified Party shall promptly give
notice thereof to the Indemnifying Party (a "Notice of Insurance"). If the
Indemnifying Party so requests within 30 days after receipt of a Notice of
Insurance, the Indemnified Party shall use its commercially reasonable efforts
to collect the maximum amount of insurance proceeds thereunder, in which event
(i) all such proceeds actually received, net of costs reasonably incurred by
the Indemnified Party in seeking such collection, shall be considered
"Eligible Insurance Proceeds" and (ii) the Indemnifying Party shall reimburse
the Indemnified Party for all reasonable costs incurred in connection with
such collection and the amount of any prospective or retroactive increase in
premiums actually paid by the Indemnified Party under the Insurance Policy (as
such increased premiums are incurred) directly related to the payment of
Eligible Insurance Proceeds for such Loss for three years following the next
renewal of such Insurance Policy. If the Indemnifying Party does not request
47
that the Indemnified Party seek coverage of any portion of such Loss under the
Insurance Policy within 30 days after receipt of a Notice of Insurance, (i)
any proceeds that the Indemnified Party may receive thereunder shall be
considered "Retained Insurance Proceeds" and (ii) the Indemnifying Party shall
have no liability for any premium increases thereunder relating to the
collection of such Retained Insurance Proceeds.
(f) If the indemnification provided for in Subsections 8.01(a)(i)
and 8.02(a)(i) with respect to Losses relating to any inaccuracy of any
representation or warranty contained in Sections 3.26 and 4.09 is unavailable
or insufficient to hold harmless an Indemnified Party, then each Indemnifying
Party shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses (i) in such proportion as is appropriate to reflect
the relative benefits received by the Acquiror Indemnified Parties, on the one
hand, and the Seller Indemnified Parties, on the other hand, from the sale of
the shares of common stock of Acquiror in the Private Placement and the use of
the proceeds of the Private Placement or (ii) if the allocation provided by
clause (i) above is not permitted by applicable Law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of Acquiror Indemnified Parties, on the
one hand, and the Seller Indemnified Parties, on the other hand, in connection
with the statements or omissions which resulted in such Losses as well as any
other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Company, Indemnitor, Seller or Acquiror and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission.
(g) Notwithstanding anything to the contrary in this Article VIII,
to the extent that the Indemnified Party or an Affiliate realizes an actual
Tax benefit as a result of the event giving rise to the indemnity payment
hereunder (such as, by way of example but not limitation, a Tax savings
resulting from the payment of an indemnified amount that is deductible by the
Indemnified Party, in a case in which the indemnity payment itself does not
give rise to gross income for Tax purposes), the Indemnified Party shall
promptly rebate to the Indemnifying Party the amount of such Tax benefit.
Section 8.07. Mitigation of Losses. Each of the parties agrees to
take all reasonable steps to mitigate their respective Losses upon and after
becoming aware of any event or condition which would reasonably be expected to
give rise to any Losses that are indemnifiable hereunder. The Indemnifying
Party shall not be liable for Losses hereunder to the extent that such Losses
resulted solely from the Indemnified Party's failure to mitigate its Losses in
accordance with the preceding sentence.
Section 8.08. No Recourse to Seller and Parent Entities. Each of
Acquiror and Indemnitor and their respective existing and future Affiliates
(collectively, the "Releasing Parties") does hereby absolutely release and
discharge, effective as of the Closing, each of (i) Seller, Capital Z
Financial Services Fund II L.P., their respective existing and future
Affiliates (other than Indemnitor and its Subsidiaries) and their respective
existing and future officers and directors and (ii) the existing and future
officers and directors of Indemnitor and its Subsidiaries (collectively, the
"Releasees") from any and all Losses which any of the Releasing Parties ever
had or now has or have or hereafter can, shall or may have, for, upon or by
reason of any matter,
48
cause or thing whatsoever to the extent arising from, in connection with,
related to or as a result of (a) the matters addressed in this Agreement and
the other Transaction Agreements, (b) the Private Placement and (c) any action
or inaction of any of the Releasees relating to or associated with the
foregoing, in each case, relating to any period from the beginning of the
world to the end of time, regardless of when brought; provided, however, such
release and discharge shall not release or discharge (i) any Releasee from any
Losses to the extent arising from, in connection with, related to or as a
result of any fraud, gross negligence or willful misconduct by or on behalf of
such Releasee, (ii) Seller from its agreements set forth in Sections 5.04,
5.14, 8.02(b), 8.03, 8.05, 8.06 and 8.07 and Article X, or (iii) Indemnitor
and its successors and assignees from any of its obligations under the
Transaction Agreements, including the obligations of Indemnitor pursuant to
this Article VIII in respect of representations, warranties, covenants and
agreements of Seller and Indemnitor.
ARTICLE IX
CASUALTY AND CONDEMNATION OF THE REAL PROPERTY
Section 9.01. Casualty. (a) If, on or prior to the date of the
Closing, all or a "material part" (as defined below) of any Real Property
Asset shall be damaged or destroyed by fire or other casualty (a "casualty
event"), then, in any such event, Acquiror may, at its option, either (i)
elect to exclude such Real Property Asset from the transactions contemplated
by this Agreement, whereupon such Real Property Asset shall be deemed to be an
Excluded Real Property Asset, the Purchase Price shall be reduced by the
Allocable Portion relating to such Excluded Real Property Asset and the
parties hereto shall be released of all obligations and liabilities of
whatsoever nature in connection with such Excluded Real Property Asset (other
than Seller's obligation to cause such asset to be transferred or distributed
in accordance with Section 5.08 and Indemnitor's indemnification obligations
hereunder in respect of such Excluded Real Property Asset), or (ii) proceed to
close the transactions contemplated by this Agreement, in which event all of
the provisions of Subsections 9.01(b)(i) and 9.01(b)(ii) below shall apply. If
a Real Property Asset is elected to be treated as an Excluded Real Property
Asset pursuant to clause (i) of this Section 9.01(a), then Seller shall use
all reasonable commercial efforts to cause such Excluded Real Property Asset
to be transferred from the Company or the related Company Subsidiary prior to
the Closing Date. If Acquiror shall fail to make an election pursuant to this
Section 9.01(a) prior to the earlier of (A) thirty (30) days after Acquiror's
receipt of written notice of the applicable casualty event from Seller and (B)
the Closing Date, then Acquiror shall be deemed to have made an election
pursuant to clause (ii) of this Section 9.01(a).
(b) If, on or prior to the Closing Date, less than a material part
of any Real Property Asset shall be damaged or destroyed by a casualty event,
Acquiror shall nevertheless consummate the transactions contemplated herein
pursuant to all the terms and conditions of this Agreement (without any
adjustment to the Purchase Price except as otherwise set forth herein) with
respect to such damaged Real Property Asset, subject to the following: (i)
Seller shall not (x) adjust and settle any insurance claims with respect to
such damaged Real Property Asset, or (y) enter into any construction or other
contract for the repair or restoration of such damaged Real Property Asset, in
each case, without Acquiror's prior written consent (except no such consent
shall be necessary to repair or restore any emergency or hazardous condition
at such damaged Real Property Asset), which consent shall not be unreasonably
withheld or delayed,
49
and (ii) at the Closing, Seller shall (1) pay over to Acquiror the amount of
any insurance proceeds, to the extent collected by Seller in connection with
such casualty event, less the amount of the actual and reasonable unreimbursed
expenses incurred by Seller in connection with collecting such proceeds and
making any repairs to the applicable Real Property Asset occasioned by such
casualty event pursuant to any contract (provided that such contract was
reasonably approved by Acquiror as required by this Section) and (2) assign to
Acquiror in form reasonably satisfactory to Acquiror all of Seller's right,
title and interest in and to any insurance proceeds that are uncollected at
the time of the Closing and that may be paid in respect of such casualty
event. Seller shall reasonably cooperate with Acquiror in the collection of
such proceeds, which obligation shall survive the Closing. To the extent that
insurance proceeds are paid over to Acquiror with respect to any damage to an
Acquired Real Property Asset pursuant to clause (ii) of this Section 9.01(b),
Acquiror shall use reasonable commercial efforts to cause such damage to be
repaired; provided, however, that the foregoing shall not require Acquiror to
expend any funds in excess of such insurance proceeds actually received by
Acquiror in respect of such damage pursuant to clause (ii) of this Section
9.01(b).
For the purpose of this Section, the phrase a "material part" of a
Real Property Asset shall mean a portion of such Real Property Asset the cost
of repair or restoration of such portion is estimated by a reputable
contractor selected by Seller and reasonably satisfactory to Acquiror, to be
in excess of five percent (5%) of the Allocable Portion relating to such Real
Property Asset.
(c) If, prior to the Closing Date, any Real Property Asset or any
portion thereof shall be damaged or destroyed by a casualty event, Seller
shall promptly give Acquiror written notice of such event, including
information in reasonable detail regarding the extent of the damage to such
Real Property Asset or portion thereof.
Section 9.02. Condemnation Pending Closing. If, prior to the Closing
Date, condemnation or eminent domain proceedings shall be commenced by any
competent public authority against any Real Property Asset or any portion
thereof, Seller shall promptly give Acquiror written notice thereof. After
notice of the commencement of any such proceedings (from Seller or otherwise)
and in the event that the taking of such Real Property Asset pursuant to such
proceedings would constitute a "Material Taking" (hereinafter defined),
Acquiror shall have the right (i) to accept title to such Real Property Asset
subject to such proceedings, whereupon any award payable to Seller shall be
paid to Acquiror and Seller shall deliver to Acquiror at the Closing all
assignments and other documents reasonably requested by Acquiror to vest such
award in Acquiror, or (ii) elect to exclude such Real Property Asset from the
transactions contemplated by this Agreement, whereupon such Real Property
Asset shall be deemed to be an Excluded Real Property Asset, the Purchase
Price shall be reduced by the Allocable Portion relating to such Excluded Real
Property Asset and the parties hereto shall be released of all obligations and
liabilities of whatsoever nature in connection with such Excluded Real
Property Asset (other than Seller's obligation to cause such asset to be
transferred or distributed in accordance with Section 5.08 and Indemnitor's
indemnification obligations hereunder in respect of such Excluded Real
Property Asset). For the purposes of Section 9.01(a), a taking shall be deemed
to be a "Material Taking" with respect to any Real Property Asset if such
taking materially and adversely affects access to such Real Property Asset, or
leaves a remaining balance of such Real Property Asset which may not be
economically operated for the
50
purpose for which the Real Property Asset was operated prior to such taking,
or if in the reasonable estimation of an appraiser selected by Seller, subject
to Acquiror's reasonable approval, the taking would result in a claim for
condemnation proceeds equal to or in excess of five percent (5%) of the
Allocable Portion of the Purchase Price. If a Real Property Asset is elected
to be treated as an Excluded Real Property Asset pursuant to clause (ii) of
Section 9.01(a), then Seller shall use all reasonable commercial efforts to
cause such Excluded Real Property Asset to be transferred from the Company or
the related Company Subsidiary prior to the Closing Date. If Acquiror shall
fail to make an election pursuant to this Section 9.02 prior to the earlier of
(A) thirty (30) days after Acquiror's receipt of written notice of the
applicable proceedings from Seller and (B) the Closing Date or if a taking of
any Real Property Asset in any proceedings would not constitute a Material
Taking, then Acquiror shall be deemed to have made an election pursuant to
clause (i) of this Section 9.02.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Survival. Notwithstanding the Closing hereunder, (x)
the representations and warranties of Seller, Indemnitor and Acquiror
contained in or made pursuant to this Agreement or in any certificate
furnished pursuant to this Agreement shall survive in full force and effect
until the date that is eighteen (18) months after the Closing Date, at which
time such representations and warranties shall terminate and expire (and no
claims shall be made for indemnification under Sections 8.01 or 8.02 after
such termination and expiration); provided, however, that (i) the
representations and warranties made in the sixth sentence of Section 3.03(a)
shall survive the Closing indefinitely, (ii) the representations and
warranties made in Sections 3.01, 3.02, 3.03 (other than the sixth sentence of
Section 3.03(a)), 3.13, 3.19, 3.20, 4.01 and 4.02 shall survive until the
expiration of the applicable statute of limitations and (y) the covenants and
agreements of Seller, Indemnitor and Acquiror contained in or made pursuant to
this Agreement shall survive for the period provided in such covenants and
agreements, if any, or until fully performed.
Section 10.02. Expenses; Transaction Costs. Except as may be
otherwise specified in this Agreement, all Transaction Costs shall be paid by
Seller, except that all cost and expenses incurred by the Company or any
Company Subsidiary and payable to a third party (x) in connection with
obtaining any third-party consent or approval required to be obtained as a
condition to any party's obligations under this Agreement or (y) consisting of
legal, accounting, consulting, actuarial or other professional fees or
disbursements, shall be reimbursed by Seller to the Company or such Company
Subsidiary, as applicable, prior to the Closing. No later than three (3)
Business Days prior to the Closing Date, Seller shall prepare and deliver to
Acquiror a written notice setting forth the amount of Transaction Costs to be
included in the Purchase Price pursuant to Section 2.03, which amount shall
increase the Allocable Portions, and be added to the Lease Basis (as defined
in the form of the Property Lease) under the Property Leases, in the manner
and amounts designated by Acquiror; provided, however, that the aggregate
amount to be included in the Purchase Price and added to the Lease Basis (as
defined in the form of the Property Lease) under this Section 10.02 shall in
no event exceed $7,350,000.
51
Section 10.03. Notices. All notices, requests, claims, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be given or made (and shall be deemed to have been duly
given or made upon receipt) by delivery in person, by overnight courier
service, by facsimile with receipt confirmed (followed by delivery of an
original via overnight courier service) or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 10.03):
(i) if to Seller:
Fortress Brookdale Acquisition LLC
c/o Fortress Investment Group LLC
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx Slate Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Coco, Esq.
Facsimile: (000) 000-0000
(ii) if to Acquiror:
Provident Senior Living Trust
c/o Fortress Investment Group LLC
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxxxxx, Xx.
Facsimile: (000) 000-0000
with a copy to:
Sidley Xxxxxx Xxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(iii) if to Indemnitor:
BLC Senior Holdings, Inc.
c/o Brookdale Living Communities, Inc.
000 X. Xxxxxx Xxxxxx
00
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Winston & Xxxxxx LLP
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Head, Esq.
Facsimile: (000) 000-0000
Section 10.04. Public Announcements. Except as may be required by
Law or Applicable Securities Rules, none of the parties to this Agreement, nor
any of their respective Affiliates or Representatives, shall make any public
announcements in respect of this Agreement or the transactions contemplated by
this Agreement without the prior consent of the other parties, and prior to
any announcement the parties shall cooperate as to the timing and contents of
any such announcement. Prior to the Closing, neither of the parties to this
Agreement, nor any of their respective Affiliates or Representatives, shall
make any disclosure concerning plans or intentions relating to the customers,
agents or employees of, or other Persons with significant business
relationships with, the Company or any of the Company Subsidiaries without
first obtaining the prior written approval of the other party, which approval
will not be unreasonably withheld. Notwithstanding the foregoing, Seller and
Indemnitor acknowledge that Acquiror is a newly-formed real estate investment
trust which is in the process of preparing to implement the Private Placement
and may, subject to Sections 5.04(a), 5.11 and 5.12, disclose the transactions
contemplated hereunder in its offering materials or governmental filings in
connection with any securities offerings or as required under Applicable
Securities Rules ("REIT Disclosure") and any such REIT Disclosure shall be
permitted to be made by Acquiror and its Representatives regardless of the
provisions of this Section 10.04.
Section 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced under any Law or
as a matter of public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated by this Agreement
is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties to this Agreement shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated by this Agreement be consummated as originally
contemplated to the greatest extent possible.
Section 10.06. Entire Agreement. Except as otherwise expressly
provided in the this Agreement, or as otherwise expressly agreed in writing by
the parties, this Agreement constitutes the entire agreement of the parties
hereto and supersedes all prior agreements and undertakings, both written and
oral, between or on behalf of Seller and/or its Affiliates, on the
53
one hand, and Acquiror and/or its Affiliates, on the other hand, with respect
to the subject matter of this Agreement.
Section 10.07. Assignment. This Agreement shall not be assigned by
any party hereto, except that Acquiror may assign any or all of its rights
(but not its obligations) hereunder to one or more Affiliates of Acquiror
designated in a written notice delivered by Acquiror to Seller at least three
(3) Business Days prior to the Closing; provided, however, that no such
assignment by Acquiror shall (x) release Acquiror from any liability or
obligation under this Agreement or (y) be permissible if it could reasonably
be expected to delay, hinder or jeopardize the consummation of any
transactions contemplated by this Agreement. This Agreement shall be binding
upon, shall inure to the benefit of, and shall be enforceable by the parties
hereto and their permitted successors and assigns.
Section 10.08. No Third-Party Beneficiaries. Except as provided in
Article VIII with respect to Seller Indemnified Parties, Acquiror Indemnified
Parties and the Releasees, this Agreement is for the sole benefit of the
parties to this Agreement and their successors and permitted assigns and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
Section 10.09. Amendment. No provision of this Agreement may be
amended, waived or modified except by a written instrument signed by all the
parties to such agreement.
Section 10.10. Disclosure Schedules. Any disclosure with respect to
a Schedule shall be deemed to be disclosed for other Sections of this
Agreement to the extent that such disclosure sets forth facts in sufficient
detail so that the relevance of such disclosure would be reasonably apparent
to a reader of such disclosure; provided, however, that no representation or
warranty contained in this Agreement shall be deemed to be modified or
qualified by any disclosure set forth in the Schedules, if, by its terms, such
representation or qualification is incapable of being modified or qualified by
any disclosure set forth in the Schedules. No reference to or disclosure of
any item or other matter in any Section or Schedule of this Agreement shall be
construed as an admission or indication that such item or other matter is
material or that such item or other matter is required to be referred to or
disclosed in this Agreement.
Section 10.11. Governing Law; Submission to Jurisdiction; Waivers.
THIS AGREEMENT AND EACH OTHER TRANSACTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW PRINCIPLES OF SUCH STATE
THAT MIGHT REFER THE GOVERNANCE, CONSTRUCTION OR INTERPRETATION OF SUCH
AGREEMENTS TO THE LAWS OF ANOTHER JURISDICTION. EACH OF THE PARTIES HERETO
AGREES IRREVOCABLY AND UNCONDITIONALLY TO:
(a) submit for itself and its property in any Action relating to
this Agreement, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive jurisdiction of the Courts of the State of New York
sitting in the County of New York, the court
54
of the United States of America for the Southern District of New York, and
appellate courts having jurisdiction of appeals from any of the foregoing, and
agrees that all claims in respect of any such Action shall be heard and
determined in such New York State court or, to the extent permitted by Law, in
such federal court;
(b) consent that any such Action may and shall be brought in such
courts and waives any objection that it may now or hereafter have to the venue
or jurisdiction of any such Action in any such court or that such Action was
brought in an inconvenient court and agrees not to plead or claim the same;
(c) WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THIS
AGREEMENT, OR ITS PERFORMANCE UNDER OR THE ENFORCEMENT OF THIS AGREEMENT;
(d) agree that service of process in any such Action may be effected
by mailing a copy of such process by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such party at its
address as provided in Section 10.03; and
(e) agree that nothing in this Agreement shall affect the right to
effect service of process in any other manner permitted by the Laws of the
State of New York.
Section 10.12. Specific Performance. Seller and Indemnitor
acknowledge that, in view of the uniqueness of the transactions contemplated
by this Agreement, Acquiror would not have an adequate remedy at law for money
damages in the event that transactions contemplated by this Agreement shall
not have been performed in accordance with its terms, and therefore agree that
Acquiror shall be entitled to specific performance of the terms hereof and any
other similar equitable remedy to which Acquiror may be entitled.
Section 10.13. Rules of Construction. Interpretation of this
Agreement shall be governed by the following rules of construction: (a) words
in the singular shall be held to include the plural and vice versa, and words
of one gender shall be held to include the other gender as the context
requires; (b) references to the terms Article, Section, paragraph, Exhibit and
Schedule are references to the Articles, Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified; (c) references to "$"
shall mean U.S. dollars; (d) the word "including" and words of similar import
when used in this Agreement shall mean "including without limitation," unless
otherwise specified; (e) the word "or" shall not be exclusive; (f) references
to "insurance policy" shall include all related riders and amendments; (g)
provisions shall apply, when appropriate, to successive events and
transactions; (h) the headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement; and (i) this Agreement shall be construed without regard to
any presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.
Section 10.14. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties to each such agreement in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall
55
constitute one and the same agreement. Delivery of an executed counterpart of
a signature page to this Agreement by facsimile shall be as effective as
delivery of a manually executed counterpart of this Agreement.
[SIGNATURE PAGE FOLLOWS]
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the date first written above by their respective duly
authorized officers.
FORTRESS BROOKDALE ACQUISITION LLC,
a Delaware limited liability company
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Secretary
BLC SENIOR HOLDINGS, INC.,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxx
----------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman, Chief Executive Officer
PROVIDENT SENIOR LIVING TRUST,
a Maryland real estate investment trust
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
---------------------------------------------
Name: Xxxxxx X. Xxxxxxxx, Xx.
Title: Chief Executive Officer
TABLE OF EXHIBITS
Exhibit A Definitions
Exhibit B Form of Property Lease
Exhibit C Form of Agreement Regarding Leases
Exhibit D Form of Lease Guaranty
Exhibit E Form of Guaranty of Agreement Regarding Leases
i
TABLE OF SCHEDULES
Schedule A Excluded Assets
Schedule 1 Company Subsidiaries
Schedule 2.03 Real Property Assets; Allocable Portion
Schedule 2.04(d) Specified Liabilities
Schedule 3.03(a) Authorized Capital Stock of Company and Company
Subsidiaries
Schedule 3.04(a) Seller Required Third Party Consents
Schedule 3.04(b) Indemnitor Required Third Party Consents
Schedule 3.05(a) Seller Required Governmental Approvals
Schedule 3.05(b) Indemnitor Required Governmental Approvals
Schedule 3.06(a) Financial Statements
Schedule 3.06(c) Pro Forma Financial Statements
Schedule 3.08 Existing Litigation Matters
Schedule 3.10(b) Material Permits
Schedule 3.12(a) Material Contracts
Schedule 3.13(a) Employee Benefit Plans
Schedule 3.14(a) Acquired Personal Property Assets
Schedule 3.14(b) Liens on Acquired Personal Property Assets
Schedule 3.15 Real Property Assets
Schedule 3.16 Ground Leased Assets
Schedule 3.17 Insurance
Schedule 3.18 Existing Mortgages
Schedule 3.19 Taxes
Schedule 3.19(a)(ii) Pending Tax Contests
Schedule 3.19(a)(vi) Tax Returns
i
Schedule 3.22 Regulatory Filings
Schedule 3.24(a) Operator Licenses
Schedule 3.24(e) Facility Violations
Schedule 3.26 Offering Memorandum
Schedule 4.04 Consents and Approvals
Schedule 5.04(c) Confidentiality
Schedule 5.10 Existing Mortgage Lender Consents
ii
EXHIBIT A
DEFINITIONS
"Accrued Expenses" shall have the meaning set forth in Section
2.04(a).
"Acquired Personal Property Assets" shall have the meaning set forth
in Section 3.14(a).
"Acquired Real Property Assets" means the Real Property Assets other
than any Excluded Real Property Assets.
"Acquiror" shall have the meaning set forth in the introductory
paragraph.
"Acquiror Cap Ex Report" shall have the meaning set forth in Section
2.09(a).
"Acquiror Indemnified Parties" shall have the meaning set forth in
Section 8.01(a).
"Action" means any civil, criminal or administrative action, suit,
demand, claim, arbitration, hearing, litigation, dispute or other proceeding
or investigation by or before any Governmental Authority or arbitrator.
"Affiliate" means, with respect to any specified Person, any other
Person that, at the time of determination, directly or indirectly through one
or more intermediaries, Controls, is Controlled by or is under common Control
with such specified Person; provided, however, that for the purposes of this
Agreement, Seller shall not be deemed an Affiliate of Acquiror nor, after the
Closing, of the Company or any of the Company Subsidiaries.
"Agreement" means this Stock Purchase Agreement, dated as of the
date first set forth above, by and among Seller, Acquiror and Indemnitor,
including the Schedules and the Exhibits, and all amendments to such agreement
made in accordance with Section 10.09.
"Agreement Regarding Leases" means the Agreement Regarding Leases
among Property Owners Holding Company, Tenant Holding Company, Manager and
Acquiror, and is substantially in the form of Exhibit C.
"Allocable Portion" shall have the meaning set forth in Section
2.03.
"Applicable Securities Rules" shall have the meaning set forth in
Section 4.09.
"Assumed Mortgage Debt" means the Existing Mortgages listed on
Schedule 3.18 relating to the Acquired Real Property Assets.
"Base Purchase Price" shall have the meaning set forth in Section
2.03.
"Benefit Plans" shall have the meaning set forth in Section 3.13(a).
i
"Business Day" means any day that is not a Saturday, a Sunday or any
other day on which commercial banks in the City of New York, New York are
required or authorized by Law to be closed.
"Cap Ex Reserve Shortfall" shall have the meaning set forth in
Section 2.09(a).
"Capital Stock" means capital stock of or other type of ownership
interest in, as applicable, a Person, whether preferred, common or otherwise
and whether or not carrying any voting rights.
"casualty event" shall have the meaning set forth in Section
9.01(a).
"Certificate of Need" shall have the meaning set forth in Section
3.23.
"Closing" shall have the meaning set forth in Section 2.02.
"Closing Adjustments" shall have the meaning set forth in Section
2.03.
"Closing Amount" shall have the meaning set forth in Section
2.06(a).
"Closing Date" shall have the meaning set forth in Section 2.02.
"Closing Statement" shall have the meaning set forth in Section
2.06(d).
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Company" shall have the meaning set forth in the recitals hereof.
"Company Subsidiary" or "Company Subsidiaries" shall have the
meaning set forth in the recitals hereof.
"Control" means, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. The terms
"Controlled by", "under common Control with" and "Controlling" shall have
correlative meanings.
"Due Diligence Deposit" shall have the meaning set forth in Section
2.05.
"Due Diligence Expiration Date" shall have the meaning set forth in
Section 2.08(b).
"Due Diligence Review" shall have the meaning set forth in Section
2.05.
"Eligible Insurance Proceeds" shall have the meaning set forth in
Section 8.06(e).
"Environmental Claim" means any Action or Governmental Order,
including any Third Party Claim or any Action required pursuant to any
Environmental Law, arising (i) pursuant to, or in connection with, any actual
or alleged requirement or violation of any Environmental Law, (ii) in
connection with any Hazardous Material or actual or alleged activity
ii
associated with any Hazardous Material, (iii) from any abatement, removal,
cleanup, corrective or other response action in connection with any Hazardous
Material, Environmental Law or other directive of any Governmental Authority,
or (iv) from any actual or alleged damage, loss, injury, threat or harm to the
environment.
"Environmental Law" means any Law relating to pollution or
protection of the indoor or outdoor environment, including a Release or the
use, handling, transportation, treatment or storage of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under or issued pursuant to
any Environmental Law.
"Environmental Property Transfer Law" means any Law that requires
any notification or disclosure to any Person of environmental conditions in
connection with the sale of stock, or the transfer, sale, lease or closure of
any property or the transfer of any ownership interest in any Person which
owns property.
"Equity Shares" means shares of or other ownership interests in
Capital Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
3.13(e).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Excluded Assets" means all of the assets and properties of the
Company and the Company Subsidiaries, including those assets set forth in
Schedule A, other than (i) the Acquired Real Property Assets and (ii) the
Acquired Personal Property Assets.
"Excluded Liabilities" means (a) all of the liabilities and
obligations (whether absolute, contingent or otherwise) of the Company and the
Company Subsidiaries with respect to the Seller Operations and the Excluded
Assets (including any Excluded Real Property Assets), whether or not of type
required to be reflected or reserved on a balance sheet prepared in accordance
with GAAP and (b) all of the liabilities and obligations (whether absolute,
contingent or otherwise) of the Company and the Company Subsidiaries with
respect to the Acquired Real Property Assets that are of type required to be
reflected or reserved on a balance sheet prepared in accordance with GAAP,
other than (i) the Assumed Mortgage Debt, (ii) the Permitted Liens and (iii)
the Specified Liabilities.
"Excluded Real Property Assets " means any Real Property Assets
excluded from the transaction contemplated herein in accordance with Article
IX.
"Existing Litigation Matters" shall have the meaning set forth in
Section 3.08.
"Existing Mortgages" shall have the meaning set forth in Section
3.18.
iii
"Existing Mortgage Lenders" shall mean the holders from time to time
of the Existing Mortgages.
"Extended Outside Date" shall have the meaning set forth in Section
7.01(b).
"Final Purchase Price" shall have the meaning set forth in Section
2.03.
"Financial Statements" shall have the meaning set forth in Section
3.06(a).
"GAAP" means generally accepted accounting principles consistently
applied in the United States.
"Governmental Approval" shall have the meaning set forth in Section
3.05(a).
"Governmental Authority" means any United States federal, state or
local or any supra-national or non-U.S. government, political subdivision,
governmental, regulatory or administrative authority, instrumentality, agency,
body or commission, self-regulatory organization or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Authority.
"Ground Leased Asset" shall have the meaning set forth in Section
3.16.
"Guaranty of Agreement Regarding Leases" shall mean that certain
Guaranty of Agreement Regarding Leases by Indemnitor in favor of Property
Owners Holding Company with respect to Tenant Holding Company's obligations
under the Agreement Regarding Leases, and is substantially in the form of
Exhibit E.
"Hazardous Materials" means any substance that (i) is or will
foreseeably be regulated by or defined by any Environmental Law, including any
substance which is defined as a "hazardous waste", "hazardous material",
"hazardous substance", "extremely hazardous waste", "restricted hazardous
waste", "contaminant", "toxic waste" or "toxic substance" under any provision
of Environmental Law, and including petroleum, petroleum products, asbestos,
asbestos-containing material, radioactive materials and polychlorinated
biphenyls or (ii) is any indoor air contaminant the exposure to which could
reasonably be expected to result in injury to humans.
"Health Departments" shall have the meaning set forth in Section
3.24(a).
"Improvement" shall mean all the buildings, structures and
improvements of every nature whatsoever now or hereafter located at the real
property described on Schedule 2.03, including, but not limited to, all gas
and electric fixtures, radiators, heaters, docks and docking facilities,
engines and machinery, boilers, ranges, elevators and motors, plumbing,
heating and air conditioning fixtures, carpeting and other floor coverings,
water heaters and cleaning apparatus which are or shall be attached to the
land.
"Indemnified Party" shall have the meaning set forth in Section
8.03(a).
iv
"Indemnifying Party" shall have the meaning set forth in Section
8.03(a).
"Indemnitor" shall have the meaning set forth in the introductory
paragraph.
"Indemnitor Parties" means, collectively, Indemnitor, Tenant Holding
Company, Manager, each of the Net Tenants, and each of their respective
Affiliates (other than Seller) that is or at the Closing will be a party to
any Transaction Agreement.
"Indemnitor Required Governmental Approval" shall have the meaning
set forth in Section 3.05(b).
"Indemnitor Required Third Party Consents" shall have the meaning
set forth in Section 3.04(b).
"Insured Claim" has the meaning set forth in Section 6.13.
"Insurance Policy" shall have the meaning set forth in Section
8.06(e).
"IRS" means the Internal Revenue Service.
"Knowledge of the Selling Parties" means the actual knowledge of the
officers of Indemnitor and the Company with respect to the Real Property
Assets and each of the Company Subsidiaries.
"Law" means any U.S. federal, state, local or non-U.S. statute, law,
ordinance, regulation, rule, code, order or other requirement or rule of law.
"Lease Guaranty" shall mean each of the guaranty agreements by
Tenant Holding Company in favor of the applicable Property Owner with respect
to the applicable Net Tenant's obligations under a Property Lease, and is
substantially in the form of Exhibit D.
"Lien" means any mortgage, pledge, lien, lease, easement,
encumbrance, claim, right of first offer or refusal, charge, option, agreement
or security interest of any kind or nature.
"Living Facility" shall mean the independent and/or assisted living
facility being operated or proposed to be operated on the property leased
pursuant to the Property Leases.
"Losses" means, without duplication, all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including any
Action brought by any Governmental Authority or Person), including reasonable
attorneys' fees and costs of investigation.
"Management Agreement" shall mean the Management Agreement between
the Manager and a Net Tenant with respect to an Acquired Real Property Asset.
"Manager" shall mean Brookdale Provident Management, LLC, a Delaware
limited liability company.
v
"Material Adverse Effect" means a material adverse effect (a) on the
ability of Seller or any of the Indemnitor Parties to perform their respective
obligations under the Transaction Agreements to which it is or will be a party
or (b) on the assets, liabilities or businesses of the Company and the Company
Subsidiaries, taken as a whole, but shall not include any adverse effect to
the extent attributable to (i) the announcement of the transactions
contemplated by this Agreement, (ii) any adverse change in general economic
conditions affecting the industry in which the Company and the Company
Subsidiaries participate or the U.S. economy as a whole, or (iii) any adverse
change in regulatory conditions in the industry in which the Company and the
Company Subsidiaries participate.
"Material Contract" means any written or, to the Knowledge of the
Selling Parties, oral contract, agreement, lease, license, instrument or other
legally binding and enforceable commitment to which the Company or any of the
Company Subsidiaries is a party or is otherwise subject which requires an
annual payment in excess of $100,000.
"Material Permits" shall have the meaning set forth in Section
3.10(a).
"Material Taking" shall have the meaning set forth in Section 9.02.
"Medicaid" shall have the meaning set forth in Section 3.23.
"Net Tenants" shall mean each of the Delaware limited liability
companies that is 100% owned by Tenant Holding Company and is the lessee under
a Property Lease.
"New Survey" shall have the meaning set forth in Section 2.10.
"New Title Policy" shall have the meaning set forth in Section 2.10.
"NOLs" shall have the meaning set forth in Section 3.19(l).
"Notice of Insurance" shall have the meaning set forth in Section
8.06(e).
"Occurrence Policies" shall have the meaning set forth in Section
5.13.
"Offering Memorandum" shall have the meaning set forth in Section
5.11.
"Operator Licenses" shall have the meaning set forth in Section
3.24(a).
"Operator Reports" shall have the meaning set forth in Section
3.24(c).
"Outside Date" shall have the meaning set forth in Section 7.01(b).
"Pay-off Amount" shall have the meaning set forth in Section
2.04(d).
"Permitted Liens" means the following Liens: (a) Liens for Taxes,
assessments or other governmental charges or levies that are not yet due or
payable or that are being contested in good faith by appropriate proceedings;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen, repairmen and other Liens imposed by Law and on a
basis consistent with past practice for amounts not yet due or that are being
contested in good
vi
faith by appropriate proceedings; (c) Liens incurred or deposits made in the
ordinary course of business and on a basis consistent with past practice in
connection with workers' compensation, unemployment insurance or other types
of social security; (d) zoning, building, land use and other similar
restrictions imposed by Law or imposed by a Governmental Authority; (e)
defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the asset
subject to the Lien or materially interfering with the ordinary conduct of
business; (f) any set of facts an accurate up-to-date survey would show;
provided, however, such facts do not materially interfere with the present
use, enjoyment and occupation of the Real Property Asset; (g) the Assumed
Mortgage Debt; (h) any matters shown on the existing owner's title insurance
policies and surveys delivered to Acquiror pursuant to Section 2.08(a) (unless
such matters are not shown on any New Title Policies and New Surveys delivered
pursuant to Section 2.10) but not mortgages, deeds of trusts and other similar
documents evidencing debt unrelated to the Assumed Mortgage Debt; (i) Real
Property Expenses accrued or unaccrued, fixed or not fixed, becoming due and
payable after the Closing Date to the extent reflected in a final statement of
apportionment prepared and delivered in accordance with Section 2.04; (j) the
Property Leases; and (k) with respect to the Acquired Personal Property
Assets, the Liens disclosed in Schedule 3.14(b).
"Person" means any natural person, general or limited partnership,
corporation, limited liability company, limited liability partnership, firm,
association or organization or other legal entity.
"Post-Closing Period" shall have the meaning set forth in Section
2.04(a).
"Post-Closing Taxable Period" means a taxable period, excluding a
partial taxable period, that, to the extent it relates to the Company or a
Company Subsidiary, begins after the Closing Date.
"Pre-Closing Period" shall have the meaning set forth in Section
2.04(a).
"Pre-Closing Taxable Period" means a taxable period, excluding a
partial taxable period, that, to the extent it relates to the Company or a
Company Subsidiary, ends on or before the Closing Date.
"Prepaid Expenses" shall have the meaning set forth in Section
2.04(a).
"Private Placement" shall have the meaning set forth in Section
4.06.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 3.06(c).
"Property Lease" shall mean each lease between a Property Owner, as
lessor, and a Net Tenant, as lessee, which lease demises a Real Property
Asset, and is substantially in the form of Exhibit B.
"Property Owners" shall mean the indirect subsidiaries of Acquiror
that following the Closing will own the applicable Acquired Real Property
Assets and are the lessors under the Property Leases.
vii
"Property Owners Holding Company" shall mean the Delaware limited
liability company that owns 100% of the equity of each of the Property Owners.
"Provider Agreements" shall have the meaning set forth in Section
3.23.
"Purchase Price" shall have the meaning set forth in Section 2.03.
"Real Property Assets" means those parcels of real property,
together with the improvements thereon, listed on Schedule 2.03.
"Real Property Expenses" shall have the meaning set forth in Section
2.04(a).
"Registration Statement" shall have the meaning set forth in Section
5.12(a).
"REIT Disclosure" shall have the meaning set forth in Section 10.04.
"Release" means the presence, release, spill, emission, leaking,
emitting, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration of Hazardous Materials in or into the indoor or outdoor
environment, including the movement of Hazardous Materials through or in the
air, soil, surface water or groundwater.
"Releasees" shall have the meaning set forth in Section 8.08.
"Releasing Parties" shall have the meaning set forth in Section
8.08.
"Representative" of a Person means the directors, officers,
stockholders, partners, members, employees, trustees, counsel, controlling
persons (if any), representatives and agents of such Person, and each of the
heirs, executors, successors and permitted assigns of any of the foregoing.
"Retained Insurance Proceeds" shall have the meaning set forth in
Section 8.06(e).
"Review Period" shall have the meaning set forth in Section 2.08(b).
"SEC" shall have the meaning set forth in Section 5.12(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the introductory
paragraph hereof.
"Seller Cap Ex Report" shall have the meaning set forth in Section
2.09(b).
"Seller Indemnified Parties" shall have the meaning set forth in
Section 8.02(a).
"Seller Operations" shall have the meaning set forth in Section
8.01(b).
"Seller Required Governmental Approval" shall have the meaning set
forth in Section 3.05(a).
viii
"Seller Required Third Party Consents" shall have the meaning set
forth in Section 3.04(a).
"Shares" shall have the meaning set forth in the recitals hereof.
"Specified Liabilities" shall have the meaning set forth in Section
2.04(d).
"Subsidiary" of any Person means any corporation, general or limited
partnership, joint venture, limited liability company, limited liability
partnership or other Person that is a legal entity, trust or estate of which
(or in which) (a) the issued and outstanding capital stock having ordinary
voting power to elect a majority of the board of directors (or a majority of
another body performing similar functions) of such corporation or other Person
(irrespective of whether at the time capital stock of any other class or
classes of such corporation or other Person shall or might have voting power
upon the occurrence of any contingency), (b) more than 50% of the interest in
the capital or profits of such partnership, joint venture or limited liability
company or (c) more than 50% of the beneficial interest in such trust or
estate, is at the time of determination directly or indirectly owned or
Controlled by such Person.
"Tax" or "Taxes" means (i) any federal, state, local or foreign net
income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer
(including real estate transfer taxes), stamp, or environmental tax (including
taxes under Code Section 59A), or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest or penalty, addition to tax or additional amount imposed by any
Governmental Authority; and (ii) any liability of the Company or any Company
Subsidiary for the payment of amounts with respect to payments of a type
described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or as a result of any obligation of
the Company or any Company Subsidiary under any Tax sharing arrangement or Tax
indemnity arrangement.
"Tax Authority" means any Governmental Authority having jurisdiction
over the assessment, determination, collection or imposition of any Tax.
"Tax Matters Agreement" shall mean that certain Tax Matters
Agreement, dated as of the date hereof, by and among Seller, Indemnitor and
Acquiror.
"Tax Returns" means all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax Authority relating to Taxes.
"Tenant Holding Company" shall mean Brookdale Provident Properties,
LLC, a Delaware limited liability company that is 100% owned by Indemnitor and
as of the Closing will be a party to the Agreement Regarding Leases.
"Third Party Claim" shall have the meaning set forth in Section
8.03(a).
"Third Party Payor Programs" shall have the meaning set forth in
Section 3.23.
ix
"Transaction Agreements" shall have the meaning set forth in Section
2.06(c).
"Transaction Costs" means all reasonable and documented
out-of-pocket costs and expenses incurred by Seller, Acquiror, the Company and
the Company Subsidiaries in connection with the negotiation and documentation
of the Transaction Agreements, the purchase and sale of the Shares, the
investigation and of the Real Property Assets, including any title insurance
premiums, surveys costs, transfer, documentary, sales, use, stamp,
registration or similar Taxes, recording costs, engineering reports,
environmental assessments, fees and disbursements of counsel, accountants,
contractors and consultants and any financing costs (incurred with respect to
existing indebtedness) or assumption or consent fees paid to Existing Mortgage
Lenders, but excluding any costs or expenses relating to (A) the organization
of Acquiror and any so-called operating partnership being formed by Acquiror,
(B) any post-Closing reorganization of the Company and the Company
Subsidiaries, including any change in the ownership structure, type of entity
or the manner in which their assets are held, (C) any financing transactions
undertaken by Acquiror unrelated to the assumption of the Existing Mortgages,
and (D) the raising of capital by Acquiror, including any costs relating to
the Private Placement, the Offering Memorandum and any Registration Statement.
"Transfer Notices" shall mean all notices required to be given to
any Governmental Authority in connection with the transactions contemplated by
this Agreement.
x
