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EXHIBIT 2.20
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into and is effective this
24th day of October, 1997 by and between Balanced Care Corporation, a Delaware
corporation ("Purchaser"), with offices at 0000 Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxxxxxx, Xxxxxxxxxxxx, 00000, and Triangle Retirement Services, Inc., a
North Carolina corporation ("Seller"), with offices at 0000 Xxxxx Xxxx Xxxxx,
Xxxxxxx, Xxxxx Xxxxxxxx, 00000.
RECITALS:
Seller owns an 87-room, 117-bed assisted living facility with an
Alzheimer's care unit located at 000 Xxxxxx Xxxx, Xxxxxxx, Xxxxx Xxxxxxxx that
is licensed as a "Home for the Aged" by the North Carolina Department of Human
Resources, Division of Facility Services for 161 residents (the "Facility").
Purchaser desires to purchase substantially all of the assets of Seller and the
Business (as hereinafter defined) related thereto and Seller desires to sell
such assets to Purchaser.
This Agreement sets forth the terms and conditions upon which
Purchaser is purchasing the assets (other than Excluded Assets, as hereinafter
defined) owned by Seller and used in the conduct of its Business, and Seller is
selling to Purchaser such assets (other than Excluded Assets).
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Accounts Receivable" shall mean as of any date any trade accounts
receivable (including, without limitation, any third party receivables arising
in connection with any Third Party Payor Programs) notes receivable, bid or
performance deposits, employee advances and other miscellaneous receivables
associated with the Business through and as of such date.
1.2 "Accreditation Body" shall mean CARF, JCAHO, the Department of
Human Resources, and all other Persons having jurisdiction over the
accreditation, certification, evaluation or operation of the Business.
1.3 "Accrued Expenses" shall mean as of any date accrued rents,
insurance premiums, payroll and benefits, and other accrued expenses set forth
in Schedule 1.3.
1.4 "Affiliate" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For the
purpose of the foregoing,
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ownership, directly or indirectly, of 20% or more of the voting stock or other
equity interest shall be deemed to constitute control.
1.5 "Agreement" shall mean this Asset Purchase Agreement.
1.6 "Ancillary Agreements" shall mean the real property conveyances
described in Section 5.2.1, the xxxx of sale, assignment and assumption
described in Section 5.2.2 and the Escrow Agreement attached as Exhibit 1.28.
1.7 "Annual Financial Statements" shall have the meaning given to it
in Section 6.4.1.
1.8 "Assumed Liabilities" shall have the meaning given to it in
Section 4.2.
1.9 "Books and Records" shall have the meaning given to it in Section
6.14.
1.10 "Business" shall mean the operation of the Facility as an
assisted living facility/home for the aged and an Alzheimer's care unit and any
other ancillary health care services owned, operated, delivered, managed,
developed, constructed, maintained, used, occupied or possessed by Seller in
connection therewith (including, without limitation, any outpatient and
contract rehab therapy services).
1.11 "CARF" shall mean the Commission on Accreditation of
Rehabilitation Facilities.
1.12 "Champus" shall mean the Civilian Health and Medical Program of
the Uniform Service, a program of medical benefits covering retirees and
dependents of members or former members of a uniformed service provided,
financed and supervised by the United States Department of Defense and
established by 10 U.S.C. Sections 1071 et seq.
1.13 "Closing" shall have the meaning given to it in Section 5.1.
1.14 "Closing Date" shall have the meaning given to it in Section 5.1.
1.15 "Closing Inventory" shall mean all Inventory relating to the
Business on the Closing Date.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
1.17 "Contract" shall mean all alliance agreements, transfer
agreements, other agreements (including, without limitation, Resident's
Agreements, Management Agreements and Provider Agreements), contracts, contract
rights, commitments, customer accounts, orders, leases, guaranties, warranties
and representations, and franchises relating to the Purchased
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Assets or the operation of the Business or the ownership, construction,
development, maintenance, repair, management, use, occupancy, possession or
operation thereof, or the operation of any of the programs or services in
conjunction with the Business and all renewals, replacements and substitutions
therefor, issued by any Governmental Authority, Accreditation Body or Third
Party Payor or maintained or used by Seller with any third Person, but shall
not include any of the Excluded Assets.
1.18 "Current Liabilities" shall mean all liabilities classified as
current liabilities in accordance with GAAP.
1.19 "Damages" shall have the meaning given to it in Section 14.4.
1.20 "Department of Human Resources" shall mean the North Carolina
Department of Human Resources, Division of Facility Services.
1.21 "Due Diligence Date" shall mean October 13, 1997.
1.22 "Employee" shall mean any individual employed by Seller in the
conduct of the Business as listed on Schedule 1.22 (such Schedule being subject
to change between the date hereof and the Closing Date as a result of employee
changes in the ordinary course of Seller's Business consistent with past
practices) other than E. Xxx Xxxxxx, Xx. and Xxxxx X. Xxxxxx.
1.23 "Encumbrance" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the Purchased Assets, including, but not
limited to, a mortgage, judgment lien, mechanic's lien, lease, security
interest, easement and right-of-way.
1.24 "Environmental Law" shall mean any (a) federal statute [including
but not limited to the Federal Water Pollution Control Act (33 U.S.C. Sections
1251 et seq.), the Toxic Substances Control Act (15 U.S.C. Sections 2601 et
seq.), the Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections
9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections
6901 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections
1801 et seq.), and the Federal Insecticide Fungicide and Rodenticide Act (7
U.S.C. Sections 136 et seq.)]; (b) other Legal Requirements; (c) any common
law doctrine; and (d) any provision or condition of any permit, license or
other operating authorization relating to (i) the protection of the environment
or the public welfare from actual or potential exposure (or the effects of
exposure) to any actual or potential release, discharge, disposal or emission
(whether past or present) of any Regulated Substance or (ii) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any Regulated Substance.
1.25 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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1.26 "ERISA Plans" shall mean defined benefit pension plans and
defined contribution pension plans qualified under Section 401(a) of the Code.
1.27 "Escrow Agent" shall mean The Title Company of North Carolina,
Agent for First American Title Insurance Company.
1.28 "Escrow Agreement" shall mean the escrow agreement entered into
between Escrow Agent, Seller and Purchaser in substantially the form of Exhibit
1.28.
1.29 "Escrow Fund" shall mean $150,000 to be held by the Escrow Agent
in Raleigh, North Carolina pursuant to the terms and conditions of the Escrow
Agreement.
1.30 "Excluded Assets" shall mean those assets that are not included
in the sale contemplated hereby and as are further defined in Section 2.2.
1.31 "Facility" shall have the meaning given to it in the Recitals of
this Agreement.
1.32 "Financial Statements" shall mean the Annual Financial Statements
and the Interim Financial Statements, collectively.
1.33 "GAAP" shall mean generally accepted accounting principles in
the United States of America.
1.34 "Governmental Authorities" shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any government, quasi-governmental unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise.
1.35 "Indemnifying Party" shall have the meaning given to it in
Section 14.4.
1.36 "Indemnified Party" shall have the meaning given to it in Section
14.4.
1.37 "Interim Financial Statements" shall have the meaning given to it
in Section 6.4.2.
1.38 "Inventory" shall mean the inventory of Seller, including,
without limitation, dry storage goods, janitorial supplies, food and beverage
supplies, office supplies, medical supplies and pharmaceutical supplies.
1.39 "JCAHO" shall mean the Joint Commission on Accreditation of
Healthcare Organization.
1.40 "Knowledge" and words of similar import shall mean, with respect
to any Party, actual knowledge of a particular fact or other matter being
possessed by an individual, and the
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knowledge that reasonably could be expected to be obtained in the course of the
Party's relationship to the subject matter.
1.41 "Legal Requirements" shall mean all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building,
health code, zoning, subdivision and other land use and health care licensing
statutes, ordinances, by-laws, codes, rules and regulations), promulgated or
issued by any Governmental Authority, Accreditation Body or Third Party Payor
other than Environmental Laws. Without limiting the foregoing, the term Legal
Requirements includes all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances.
1.42 "Managed Care Plans" shall mean all health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans and similar arrangements.
1.43 "Management Agreement" shall mean any agreement, whether written
or oral, between Seller and any other Person pursuant to which Seller provides
any payment, fee or other consideration to any other Person to operate or
manage the Business (except any employment agreements).
1.44 "Medicaid" shall mean the medical assistance program established
by Title XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and
any statute succeeding thereto.
1.45 "Medicare" shall mean the health insurance program for the aged
and disabled established by Title XVIII of the Social Security Act (42 U.S.C.
Sections 1395 et seq.) and any statute succeeding thereto.
1.46 "Party" shall mean either Seller or Purchaser, individually, as
the context so requires, and the term "Parties" shall mean Seller and Purchaser
together.
1.47 "Payables" as of any date shall mean any of the trade accounts
payable associated with the Business as of such date in accordance with GAAP
consistently applied.
1.48 "Payroll Practice/Employee Arrangement" shall have the meaning
given to it in Section 6.18.
1.49 "Permits" shall mean all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, contracts, interim licenses, permits
and other authorizations of every nature whatsoever required by, or issued to
or on behalf of Seller under, any Legal Requirements benefiting, relating or
effecting the Business or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Business and all
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renewals, replacements and substitutions therefor, now or hereafter required or
issued by any Governmental Authority, Accreditation Body or Third Party Payor.
1.50 "Permitted Encumbrances" shall mean those Encumbrances as
specifically set forth on Schedule 1.50 hereto.
1.51 "Person" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association or other
entity.
1.52 "Prepaid Expenses" as of any date shall mean payments made by
Seller with respect to the Business which constitute prepaid expenses of the
Business in accordance with GAAP consistently applied.
1.53 "Proprietary Rights" shall have the meaning given to it in
Section 6.8.1.
1.54 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements for the benefit of Seller in
connection with the operation of the Business relating to any right to payment
or other claim arising out of or in connection with Seller's participation in
any Third Party Payor Program.
1.55 "Purchase Price" shall have the meaning given to it in Section
3.1.1.
1.56 "Purchased Assets" shall have the meaning given to it in Section
2.1.
1.57 "Purchaser" shall have the meaning given to it in the preamble of
this Agreement.
1.58 "Purchaser Damages" shall have the meaning given to it in Section
14.2.
1.59 "Purchaser Indemnitees" shall have the meaning given to it in
Section 14.2.
1.60 "Real Property" shall mean the real property owned by Seller in
connection with the Business as more fully described in Schedule 1.60 hereto.
1.61 "Regulated Substance" shall mean petroleum, petroleum
hydrocarbons or petroleum products and any other chemical, material, substance
or waste that is identified (by listing or characteristic) and regulated (or
the clean-up of which can be required) by any Legal Requirement intended to
protect the environment or the public health or welfare, including but not
limited to Legal Requirements relating to clean air, clean water, hazardous and
solid waste disposal, safe drinking water, endangered species, occupational
safety and health, oil spill prevention, groundwater protection, and toxic
substances control.
1.62 "Related Party" means (i) Seller, (ii) any Affiliate of Seller,
(iii) any officer, director, shareholder or partner of any Person identified in
clauses (i) or (ii) preceding, and (iv)
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any spouse, sibling, ancestor or lineal descendant of any natural Person
identified in any one of the preceding clauses.
1.63 "Resident Agreements" shall mean all contracts, agreements and
consents executed by or on behalf of any resident or other Person seeking
services at the Facility as more fully described in Schedule 1.63 hereto,
including, without limitation, assignments of benefits and guarantees, and such
resident's related medical and/or other records.
1.64 "Retained Liabilities" shall have the meaning given to it in
Section 4.2.
1.65 "Security Right" means, with respect to any security, any option,
warrant, subscription right, preemptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any kind
relating to such security, whether issued or unissued, or any other security
convertible into or exchangeable for any such security. "Security Right"
includes any right relating to issuance, sale, assignment, transfer, purchase,
redemption, conversion, exchange, registration or voting and includes rights
conferred by statute, by the issuer's governing documents or by agreement.
1.66 "Seller" shall have the meaning given to it in the preamble of
this Agreement, individually and collectively, as the context may require.
1.67 "Seller Damages" shall have the meaning given to it in Section
14.3.
1.68 "Seller Indemnitees" shall have the meaning given to it in
Section 14.3.
1.69 "Survival Date" shall have the meaning given to it in Section
14.1.
1.70 "Taxes" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any Governmental Authority, including, without
limitation, income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on minimum, estimated and franchise taxes (including any interest,
penalties or additions attributable to or imposed on or with respect to day
such assessment).
1.71 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.72 "Third Party Payor Programs" shall mean all third party payor
programs which Seller participates, including, without limitation, Medicare,
Medicaid, Champus, Blue Cross and/or Blue Shield, Managed Care Plans, other
private insurance plans and employee assistance programs.
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1.73 "Third Party Payors" shall mean Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which maintains Third
Party Payor Programs.
ARTICLE II. TRANSFER OF ASSETS AND PROPERTIES
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, Seller shall sell and convey to Purchaser, free and clear of all
Encumbrances whatsoever (other than Permitted Encumbrances and except as
expressly provided herein), and Purchaser shall purchase from Seller, the
Business as a going concern and all Seller's rights, title and interest in and
to the assets, properties and rights of every kind and description, real,
personal and mixed, tangible and intangible, wherever situated owned by Seller
and used in the Business (the "Purchased Assets") as the same shall exist on
the Closing Date (other than the Excluded Assets), including, without
limitation, the following:
2.1.1 Real Property. The Real Property, together with the
buildings, structures, improvements and fixtures located thereon, and all
rights, privileges, easements, licenses, hereditaments and other appurtenances
relating thereto;
2.1.2 Equipment, Machinery and Other Tangible Personal
Property. All machinery, equipment, leasehold improvements, automobiles,
supplies, office furniture and office equipment, computing and
telecommunications equipment and other items of personal property that are
owned by Seller and used in connection with the Business, including those
described in Schedule 2.1.2 hereto;
2.1.3 Contracts Relating to the Business. All of the interest
of Seller in all Contracts relating to the acquisition or ownership by Seller
of any of the Purchased Assets or the operation of the Business and the
Resident Agreements listed on Schedule 1.63 hereto, all as listed on Schedule
2.1.3 hereto, together with those Contracts not required to be listed on
Schedule 2.1.3 by reason of the provisions of Section 6.10.
2.1.4 Sales, Rental and Marketing Materials, Manuals. All
sales data, rental data, catalogs, brochures, reference sources, suppliers'
names, mailing lists, art work, photographs, public relations material and
advertising material used in the Business, whether in electronic form or
otherwise;
2.1.5 Permits, Licenses. All of Seller's interest in Permits
relating to the Business, including those listed in Schedule 2.1.5 hereto, to
the extent such Permits are transferable to Purchaser;
2.1.6 Trade Secrets. All policies and procedures, methods of
delivery of services, trade secrets, designs, drawings and specifications,
market studies, consultants' reports, prototypes, and all similar property of
any nature, tangible or intangible, of Seller used in the Business;
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2.1.7 Intellectual Property. All right, title and interest of
Seller in the patents, trademarks, trademark registrations, trade names,
service marks, copyrights and copyright registrations described in Schedule
2.1.7;
2.1.8 Goodwill. All of the interest of Seller in and to the
goodwill incident to the Business, including but not limited to the value of
the Facility name associated with the Business and the value of good customer
relations;
2.1.9 Inventory. All Closing Inventory;
2.1.10 Resident Funds. All deposits and escrow accounts of,
or for the benefit of, any of Seller's residents at the Closing Date which are
transferred to Purchaser subject to the rights of such residents;
2.1.11 Prepaid Expenses. Certain of Seller's Prepaid
Expenses and rents of, or for the benefit of, the Business at the Closing Date,
as described in Schedule 2.1.11, to the extent the benefits thereof are
transferable to Purchaser;
2.1.12 Computer Software. All computer applications software,
owned or licensed, whether for general business usage (e.g., accounting, word
processing, graphics, spread-sheet analysis, etc.), or specific,
unique-to-the-business usage, and all computer operating, security or
programming software, owned or licensed by Seller and used in the operation of
the Business; and
2.1.13 Other Intangible Assets. All other intangible assets
(including all causes of action, rights of action, contract rights and
warranty and product liability claims against third parties) relating to the
Purchased Assets or the Business.
2.2 Excluded Assets. Notwithstanding Section 2.1, the
following assets (collectively, the "Excluded Assets") shall be excluded from
this Agreement, and shall not be assigned or transferred to Purchaser:
2.2.1 Accounts Receivable. All Accounts Receivable of Seller
existing on the Closing Date;
2.2.2 Cash. All other cash, cash equivalents on hand or in
bank accounts, short-term notes receivable and unbilled costs and fees up
through and including the Closing Date;
2.2.3 Pensions. Assets constituting any pension or other
funds for the benefit of Employees existing on the Closing Date;
2.2.4 Corporate Books, Books and Records. Corporate minute
books and stock books of Seller and the Books and Records of Seller;
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2.2.5 Third Party Claims. Any claims and rights against third
parties (including, without limitation, insurance carriers) to the extent they
relate to liabilities or obligations that are not assumed by Purchaser
hereunder (except the amount of costs and expenses Purchaser shall have
incurred with respect to such claims and rights);
2.2.7 Taxes. Claims for refunds of Taxes and other charges
imposed by any Governmental Authority; and
2.2.8 Vehicle Lease. Seller's lease agreement with respect to
a 1997 528i BMW automobile, such automobile, and the cash deposit held by the
lessor in the amount of $600.00, shall be retained by Seller.
2.2.9 Other Assets. Assets listed on Schedule 2.2.9.
ARTICLE III. CONSIDERATION AND TERMS
3.1 Consideration for Purchased Assets.
3.1.1 Purchase Price. The aggregate consideration to be paid
by Purchaser to Seller for the Purchased Assets and the Business (the "Purchase
Price") shall be $8,300,000 plus the amount, if any, of the Prepaid Expenses at
the Closing Date, to be paid by certified or cashier's check drawn on a
national bank or by wire transfer as follows:
(i) $150,000 (the "Escrow Fund"), to be paid to Escrow Agent
upon execution of this Agreement, and applied to the Purchase Price at Closing
or, if Closing fails to occur, to be distributed in accordance with the terms
of this Agreement and the Escrow Agreement; and
(ii) the Purchase Price less the amount of the Escrow Fund to
Seller at the time of Closing.
3.1.2 Other Consideration. As additional consideration, Purchaser
shall also assume the Assumed Liabilities at the time of Closing.
3.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets, the covenant-not-to-compete referred to
in Section 12.2, and the Business in accordance with the allocation set forth
in Schedule 3.3. Purchaser and Seller shall report the federal, state and local
income and other tax consequences of the purchase and sale contemplated hereby
in a manner consistent with such allocation.
ARTICLE IV. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
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4.1 General Limitation on Assumption of Liabilities. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3 and 4.4
below, Seller shall transfer the Purchased Assets to Purchaser free and clear
of all Encumbrances, and without any assumption of liabilities and obligations,
and Purchaser shall not, by virtue of its purchase of the Purchased Assets,
assume or become responsible for any liabilities or obligations of Seller or
any other Person. For purposes of this Section 4.1 the phrase "liabilities and
obligations" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, xxxxxx or inchoate, liquidated or unliquidated, secured
or unsecured.
4.2 Assumed Liabilities and Obligations. On the Closing Date,
Purchaser shall acquire the Purchased Assets subject only to, and shall
undertake, assume, perform and otherwise pay, satisfy and discharge, and hold
Seller harmless from the following liabilities and obligations, excluding any
liabilities and obligations to Affiliates of Seller (collectively, the "Assumed
Liabilities"):
(i) all obligations of Seller accruing after the Closing Date under
the Contracts contemplated by Section 2.1.3, including, without limitation,
those set forth in Schedule 1.63 and Schedule 2.1.3, provided that the rights
thereunder have been duly and effectively assigned to Purchaser;
(ii) all obligations of Seller accruing after the Closing Date under
the Permits described in Section 2.1.5, provided that the rights thereunder
have been duly and effectively assigned to Purchaser; and
(iii) all obligations of Seller to its Employees for vacation accrued
or earned as of the Closing Date.
Except for the Assumed Liabilities, Purchaser does not and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller existing on the Closing Date or arising out of any
transactions entered into, or any state of facts existing, prior to the Closing
Date (the "Retained Liabilities"), and Seller agrees to pay and satisfy when
due all Retained Liabilities. Except for the obligations and liabilities
included in the Assumed Liabilities, the term "Retained Liabilities" shall
include, without limitation, liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security of Seller;
(ii) obligations incurred by Seller after Closing;
(iii) for expenses or fees incident to or arising out of the
negotiation, preparation, approval or authorization of this Agreement and the
consummation of the transactions
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contemplated hereby, including, without limitation, all legal and accounting
fees and all brokers or finders fees or commissions payable by Seller;
(iv) under or arising out of this Agreement;
(v) obligations of Seller with respect to matters occurring prior to
the Closing Date and against which Seller is insured or otherwise indemnified
or which would have been covered by insurance (or indemnification) but for a
claim by the insurer (or their indemnitor) that the insured (or the
indemnities) had breached its obligations under the policy of insurance (or the
contract of indemnity) or had committed fraud in the insurance application;
(vi) to any Related Party;
(vii) to indemnify Seller's officers, directors, shareholders,
Employees or agents;
(viii) Federal, state or local tax liabilities or tax obligations of
Seller in respect to periods prior to Closing, and the transactions
contemplated hereunder, including, without limitation, income taxes payable
under the Code, any income tax, any franchise tax, any tax recapture, any
FICA, workers' compensation, and all other taxes due or payable for a period
prior to Closing; notwithstanding the foregoing, all sales and use taxes,
transfer taxes, and all other impositions of tax (but not any license or fee
(or similar charge, however characterized) payable by Purchaser with respect to
its conduct of the Business, which shall be the sole liability of Purchaser)
arising solely by reason of the transfers contemplated by this Agreement
(excluding all federal, state and local income and gross receipt taxes on the
earnings or gross receipts of Seller prior to the Closing Date, which shall
remain the sole responsibility of Seller) shall be the responsibility of and
shall be borne equally by Seller and Purchaser (any real estate and personal
property taxes for the year in which Closing occurs shall be prorated to the
Closing Date (based on a calendar year or fiscal year for which such taxes are
levied basis), if the tax rates for the year in which Closing occurs shall not
be fixed prior to the Closing Date for a particular item of the Purchased
Assets, the proration of taxes thereon shall be based upon the tax rate for
the year prior to Closing applied to the latest assessment valuation; however,
in the event that any such taxes are increased or decreased for the year in
which Closing occurs, Seller or Purchaser shall then reimburse the other party
for amounts in excess of or less than the proration as determined as of the
Closing Date);
(ix) for long term indebtedness and other obligations or guarantees of
Seller;
(x) for Current Liabilities reflected on the books of Seller at the
Closing Date;
(xi) for Accrued Expenses and Payables reflected on the books of
Seller at the Closing Date; and
(xii) if applicable, for or in connection with any cost reports
required to be filed by Seller in connection with the Facility with respect to
periods prior to Closing.
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4.3 Offer of Employment. Purchaser shall offer employment on and as of
Closing, on an at-will basis, to all Employees actively at work in
substantially similar jobs, at substantially the same base salaries or wages
and substantially the same benefits as were paid or provided by Seller
immediately prior to the Closing Date.
4.4 Vacation, Workers' Compensation and Disability Claims.
4.4.1 Seller's Liability. Seller shall remain liable for all
workers' compensation, disability and occupational diseases of or with respect
to all of Seller's Employees attributable to entitlements, injuries, claims,
conditions, events and occurrences occurring on or before the Closing Date.
4.4.2 Purchaser's Liability. Purchaser shall be liable for
all vacation entitlements, workers' compensation, disability and occupational
diseases of or with respect to all Employees of Seller hired by Purchaser,
attributable to entitlements, injuries, claims, conditions, events and
occurrences occurring after the Closing Date and vacation taken after the
Closing Date earned prior to such date.
4.4.3 Workers' Compensation; Unemployment Compensation.
Schedule 4.4.3 attached hereto sets forth a true and correct summary of the
following with respect to the Employees:
(i) a listing of all workers' compensation contracts;
(ii) the workers' compensation loss experience for the past
three years;
(iii) a summary report and experience rating for unemployment
compensation; and
(iv) the turnover rate for the Facility (to the extent known
to Seller).
ARTICLE V. CLOSING
5.1 Time; Location. The Parties shall consummate the purchase and sale
of the Purchased Assets on or before November 30, 1997 (the "Closing"). The
date of the Closing shall be referred to as the "Closing Date." The Closing
shall take place at the offices of Seller's counsel, Xxxxxxx Xxxxxxxxx Xxxxxxx
& Xxxxxxx, L.L.P., Suite 1900, 000 Xxxxxxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxx
Xxxxxxxx, 00000 (or at such other place as the parties shall mutually
determine), at such time and date on or before November 30, 1997 as may be
mutually agreed upon by the Parties.
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5.2 Documents. At Closing, Seller shall execute and deliver the
following instruments of transfer and assignment:
5.2.1 Deed. A duly executed special warranty deed, in
recordable form, transferring good and marketable fee simple title to the Real
Property, subject only to Permitted Encumbrances, and such affidavits or other
instruments as Purchaser's title insurance company may reasonably request,
including but not limited to affidavits relating to (i) exceptions for (A)
judgments, bankruptcies, taxes and municipal claims, (B) parties in possession
other than current occupants pursuant to agreements with Seller, (C) mechanics'
or materialmen's liens and (D) encroachments or survey discrepancies of any
nature; (ii) payoff letters, lien releases and satisfaction pieces and (iii)
gap indemnities;
5.2.2 Xxxx of Sale. A general xxxx of sale, assignment and
assumption substantially in the form of Exhibit 5.2.2 hereto, transferring to
Purchaser good and indefeasible title to all of the tangible personal property
included in the Purchased Assets, subject only to Permitted Encumbrances and
the Assumed Liabilities and assigning to Purchaser, to the extent assignable,
Seller's right, title and interest in each of the Contracts, Permits and other
agreements included in the Purchased Assets, together with all consents of
third parties that are required to make each such assignment effective to such
third parties;
5.2.3 Title Certificates. Certificates of title to all
vehicles included in the Purchased Assets, if any, with assignments to
Purchaser;
5.2.4 Property Tax Statements. All real estate and personal
property tax statements or bills for or relating to the Real Property or any of
the other Purchased Assets for the applicable current tax year or years, and
all tax assessments or notices thereof upon which such taxes are based;
5.2.5 Plans and Specifications. To the extent not delivered
prior to Closing, all plans, specifications and other drawings in Seller's
possession or reasonably obtainable by Seller and used in the construction of
the Facility or any renovations thereof (including, without limitation, any
as-built plans and architectural specifications) and all guarantees and
warranties made by third parties with respect to the improvements, buildings,
personalty, the property under the Contracts or any of the other Purchased
Assets;
5.2.6 Building Permits. To the extent not delivered prior to
Closing, all building permits, zoning permits, occupancy permits and
subdivision plans and, to the extent the following are in Seller's possession
or reasonably obtainable by Seller, surveys and hazardous waste studies
prepared within 36 months before the date hereof, for or relating to the
Purchased Assets;
5.2.7 Contracts and Other Permits. To the extent not
delivered prior to Closing, all Contracts, Permits, or other instruments or
agreements relating to the ownership, operation, use, occupancy, licensure,
accreditation or maintenance of the Business;
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5.2.8 Occupancy; Rent Roll; Surveys. To the extent not
delivered prior to Closing:
(i) occupancy reports for the Facility for the last year
(which reports shall be prepared based on the number of operational beds);
(ii) the current rent roll for the Facility listing all of
the residents and their respective rent payments; and
(iii) federal and/or state surveys or inspections and any
plans of correction for the Facility for the current year and the two
immediately preceding years;
5.2.9 Other Documents. The Ancillary Agreements, and such
additional instruments of conveyance and transfer as Purchaser may reasonably
require in order to more effectively vest in it, and put it in possession of,
the Purchased Assets.
5.3 Reasonable Steps. Seller shall make such reasonable efforts as may
be appropriate so that on the Closing Date, Purchaser shall be placed in actual
possession and control of all of the Purchased Assets.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser, that each of the following representations and warranties is true
and correct as of the date hereof:
6.1 Organization, Good Standing and Power. Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is
a party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof and to be performed by
it.
6.2 Authorization of Agreement and Enforceability. Seller has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party, the performance
by it of all terms and conditions hereof and thereof to be performed by it and
the consummation of the transactions contemplated hereby and thereby,
including, without limitation, obtaining such shareholder's consents as is
required under the North Carolina Business Corporation Act. This Agreement
constitutes, and the Ancillary Agreements to which Seller is party, upon
Seller's execution and delivery thereof, will constitute the legal, valid and
binding obligations of Seller, enforceable in accordance with their terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws presently or hereafter in effect
relating to or affecting the enforcement of
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creditors' rights generally and by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
6.3 No Violation; Consents. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements to which it is a party,
and the consummation of the transactions contemplated hereby and thereby will
not (with or without the giving of notice or the lapse of time, or both) (i)
violate any provision of the charter or bylaws of Seller, (ii) except with
respect to notices and consents required to be given by Seller to any
Accreditation Body or Governmental Authority in connection with the sale and
change of ownership of the Purchased Assets and the Business, violate or
require any consent, authorization or approval of, or exemption by, or filing
under any provision of any law, statute, rule or regulation to which Seller,
the Business or the Purchased Assets are subject, (iii) violate any judgment,
order, writ or decree of any court applicable to Seller, the Business or the
Purchased Assets, (iv) except as identified on Schedule 2.1.3, conflict with,
result in a breach of, constitute a default under, or accelerate or permit the
acceleration of the performance required by, or require any consent,
authorization or approval under any agreement, Contract, commitment, lease or
other instrument, document or undertaking to which Seller is a party or any of
the Purchased Assets is bound or (v) result in the creation or imposition of
any Encumbrances upon the Purchased Assets.
6.4 Financial Statements.
6.4.1 Annual Financial Statements. Included with Schedule
6.4.1 attached hereto are the audited balance sheets of the Business at
December 31, 1996 and 1995, and the related statements of income and cash
flows for the years then ended, as prepared by Seller (collectively, the
"Annual Financial Statements"). Except as disclosed on Schedule 6.4.1, the
Annual Financial Statements (i) have been prepared in accordance with the
Books and Records of Seller; (ii) have been prepared in accordance with GAAP,
consistently applied throughout the periods covered thereby; (iii) fairly
present in all material respects the financial condition and the results of
operations of the Business as of the relevant dates thereof and for the periods
covered therein and (iv) contain and reflect all necessary adjustments and
accruals for a fair presentation of the financial condition and results of
operations of the Business as of the relevant dates thereof and for the periods
covered by the Annual Financial Statements.
6.4.2 Interim Financial Statements. Included with Schedule
6.4.2 attached hereto is an unaudited balance sheet as of June 30, 1997 and the
statements of income and cash flows of the Business for the six-month periods
ended June 30, 1997 and 1996 prepared by Seller (collectively, the "Interim
Financial Statements"). Except as disclosed on Schedule 6.4.2, such Interim
Financial Statements (i) have been prepared in accordance with the Books and
Records of Seller; (ii) have been prepared in accordance with GAAP consistently
applied throughout the periods covered thereby; (iii) fairly present in all
material respects the financial condition and results of operations of the
Business as of the date thereof and for the periods covered therein and (iv)
contain and reflect all necessary adjustments and accruals, subject to normal
year-end adjustments for a fair presentation of the financial condition and the
results of operations of the Business as of the date thereof and for the
periods covered by the Interim Financial Statements.
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6.5 Inventory. The level of Inventory maintained by Seller and
included in the Purchased Assets is sufficient to carry on the Business as
historically conducted. The Inventory is good, usable, merchantable and
saleable in the ordinary course of Seller's Business.
6.6 Absence of Certain Changes or Events. Except as set forth in
Schedule 6.6 hereto, since the date of the Interim Financial Statements, in
connection with the Business, Seller has not:
(i) amended in any material respect or terminated any
Contract or Permit other than in the ordinary course of Seller's Business
consistent with past practice;
(ii) suffered the occurrence of any events that,
individually or in the aggregate, have had, or could reasonably be expected to
have, a material adverse effect on the Purchased Assets or the results of
operations of the Business;
(iii) incurred any damage or destruction having a material
adverse effect on the Purchased Assets or the results of operations of the
Business by fire, storm or similar casualty, whether or not covered by
insurance;
(iv) sold, transferred, replaced or leased any of the
Purchased Assets or sold any Inventory at a discount, except for transactions
in the ordinary course of Seller's Business consistent with past practice;
(v) waived or released any material rights with respect to
the Purchased Assets or the Business;
(vi) transferred or granted any rights to any Proprietary
Rights;
(vii) entered into any transaction or made any commitments
(for capital expenditures or otherwise) other than in the ordinary course of
Seller's Business consistent with past practice;
(viii) changed its methods of accounting;
(ix) increased the compensation of Employees, except
following normal review procedures or as reasonably deemed necessary in the
ordinary course of Seller's Business consistent with past practice;
(x) suffered any major or key personnel changes;
(xi) materially altered its conduct in its relations with
suppliers and residents;
(xii) materially altered its marketing efforts with respect
to the Business; or
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(xiii) received any notice nor gained any knowledge that its
Permits to operate the Facility have been or will be suspended, revoked, or
restricted in any manner.
6.7 Real Property.
6.7.1 Title to Properties; Absence of Liens and Encumbrances.
Seller owns and will transfer to Purchaser at Closing good, marketable and
indefeasible title to all of the Purchased Assets, including, without
limitation, the Real Property, free and clear of all Encumbrances, other than
Permitted Encumbrances. Copies of all title insurance policies and surveys
written in favor of Seller relating to the Real Property have been delivered to
Purchaser.
6.7.2 Structures and Improvements. All structures and other
improvements on the Real Property (i) are located within the lot lines of the
Real Property and (ii) do not encroach on the properties of any other Person.
All structures and improvements located upon the Real Property and all elements
thereof, including but not limited to the landscaping, fixtures, and equipment
associated therewith, shall be sold, transferred and conveyed to Purchaser
hereunder, AS IS, WHERE IS, AND SUBJECT TO ALL FAULTS. Seller makes no
warranties or representations, express or implied, with respect to the state of
condition and repair of the structures and improvements located upon the Real
Property including, but not limited to, the fixtures and mechanical equipment
used with respect to such structures and improvements.
6.7.3 Location. The Real Property is considered a separate
parcel or parcels of land for taxing and conveyancing purposes and the Real
Property is not located in a flood plain, flood hazard area or designated
wetlands area.
6.7.4 Use and Operation. To the extent known to Seller, the
use and operation of the Real Property conforms to all applicable building,
zoning, safety and subdivision laws, other Legal Requirements, and all
restrictive covenants and restrictions and conditions affecting title. Seller
has received no written notice that the use and operation of the Real Property
violates any Legal Requirement.
6.7.5 Utilities. To the extent known to Seller, all utilities
(including water, electric, storm and sanitary sewage and telephone utilities)
required to operate the Facility are available to the Facility and such
utilities enter the boundaries of such Facility through adjoining public
streets, permanent easements or rights of way of record in favor of Seller.
Such utilities are all connected pursuant to valid permits, are all in good
working order and are adequate to service the operations of the Facility as
currently conducted and permit full compliance with all Legal Requirements.
Seller has not received any written notice of any proposed, planned or actual
curtailment of service of any utility supplied to the Facility.
6.7.6 Assessments; Notices. Seller has not received any
written notice of assessments for public improvements against the Real Property
or any written notice or order by any Governmental Authority, any insurance
company that has issued a policy with respect to any
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of such properties or any board of fire underwriters or other body exercising
similar functions that relates to violations of building, safety or fire
ordinances or regulations, that claims any defect or deficiency with respect
to any of such properties or requests the performance of any repairs,
alterations or other work to or in any of such properties or in the streets
bounding the same.
6.7.7 Condemnation. To the extent known to Seller, there is
no pending condemnation, expropriation, eminent domain or similar proceeding
affecting all or any portion of the Real Property. Seller has received no
written notice of any such proceeding.
6.7.8 Access. All present driveways and other access routes
to the Real Property are from public streets and no other Person has any right
to use any such driveways or other access routes.
6.8 Proprietary Rights.
6.8.1 Logos and Tradenames. Schedule 2.1.7 hereto sets forth
a correct and complete list of all patents, logos, trademarks, trade names,
service marks, copyrights and applications or registrations therefor used in
and material to the Business (collectively, the "Proprietary Rights").
6.8.2 Licenses. Except as disclosed in Schedule 0.0.0.: (i)
Seller owns or possesses adequate licenses or other valid rights to use
(without the making of any payment to others or the obligation or grant rights
to others in exchange) all the Proprietary Rights material to the Business;
(ii) the Proprietary Rights included in the Purchased Assets constitute all the
material rights necessary to conduct the Business in accordance with past
practice and are being conveyed to Purchaser together with the other Purchased
Assets; (iii) the validity of the Proprietary Rights and the rights therein of
Seller have not been questioned in any litigation to which Seller is a party,
nor, to Seller's Knowledge, is any such litigation threatened; and (iv) to the
best of Seller's Knowledge, the conduct of the Business does not conflict with
patent rights, licenses, trademark rights, trade name rights, copyrights or
other intellectual property rights of others.
6.9 Contracts and Commitments. Except as listed and described on
Schedule 1.63 and Schedule 2.1.3, neither Seller nor any party acting on behalf
of Seller with Seller's Knowledge and consent is a party to any written or oral
(for which Purchaser shall be bound following the Closing Date):
(i) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of services by another party,
involving in any one case $10,000 or more;
(ii) Contract to sell or supply products or to perform
services, involving in any one case $10,000 or more (except for any Resident's
Agreement);
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(iii) Contract continuing over a period of more than six
months from the date hereof or exceeding $10,000 in value (except for any
Resident's Agreement);
(iv) representative, sales agency, dealer or distributor
Contract;
(v) lease under which Seller is either lessor or lessee;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit agreement, loan agreement or other
Contract or for the borrowing or lending of money (including without limitation
loans to or from Employees) or guarantee, pledge or undertaking of the
indebtedness of any other Person;
(vii) Contract for any charitable or political contribution;
(viii) Contract limiting or restraining Seller or any
successor or assign from engaging or competing in any likeness of business with
any Person;
(ix) license, franchise, distributorship or other agreement,
including those that relate in whole or in part to any patent, trademark, trade
name, service xxxx or copyright or to any ideas, technical assistance or other
know-how of or used by the Business;
(x) Contract or commitment to assign, option, sell, transfer
or otherwise convey any right, title or interest of Seller in and to all or any
portion of the Business or the Purchased Assets; or
(xi) any other material Contract not made in the ordinary
course of Seller's Business consistent with past practice.
Each of the Contracts and other instruments, documents and
undertakings listed on Schedule 1.63 and Schedule 2.1.3 is valid and
enforceable in accordance with its terms, Seller is in compliance with the
provisions thereof, Seller is not in default in the performance, observance or
fulfillment of any material obligation, covenant or condition contained
therein, and no event has occurred that with or without the giving of notice or
lapse of time, or both, would constitute a default by Seller thereunder or a
default by any other party thereto. Except as set forth on Schedule 1.63 and
Schedule 2.1.3, no advance payments have been received by Seller by or on
behalf of any party to any of the Contracts, commitments, leases and other
instruments listed on Schedule 1.63 and Schedule 2.1.3 for services to be
rendered or products to be delivered to such party after the Closing Date.
Except as set forth on Schedule 1.63 and Schedule 2.13, no consent or approval
of any party to any Contract, commitment, lease or other instrument, document
or undertaking is required for the execution of this Agreement or the
consummation of the transactions contemplated hereby.
6.10 Permits, Licenses. To the extent known to Seller, Seller has all
Permits that are required to operate the Business; and, Seller is in material
compliance with the terms and
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conditions of the Permits. Schedule 2.1.5 hereto sets forth a correct and
complete list of all Permits, each one of which is in full force and effect. To
Seller's Knowledge, no suspension or cancellation of any of the Permits is
threatened and no cause exists for such suspension or cancellation. Any Permits
that cannot be transferred or require consent or approval for the transfer
thereof are specifically identified on Schedule 2.1.5 hereto as nontransferable
or requiring such consent or approval.
6.11 Compliance with Laws. To the extent known to Seller, except as
described in Schedule 6.11 hereto, Seller has at all times conducted, and is
presently conducting, the Business so as to comply in all material respects
with all Legal Requirements applicable to the conduct of operation of the
Business or the ownership or use of the Purchased Assets.
6.12 Legal Proceedings. Except as described in Schedule 6.12 hereto,
there is no claim, action, suit, proceeding, investigation or inquiry pending
before any Governmental Authority or, to Seller's Knowledge, threatened against
Seller with respect to the Business or any of the Purchased Assets, or relating
to the transactions contemplated by this Agreement, nor to Seller's Knowledge
is there any basis for any such claim, action, suit, proceeding, investigation,
or inquiry. Except as set forth on Schedule 6.12 hereto, Seller is not a party
to or subject to the provisions of any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental, regulatory or
administrative official, body or authority that relates to the Purchased Assets
or the Business or that might affect the transactions contemplated by this
Agreement.
6.13 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.13, Seller has no material liabilities or obligations (as defined in
Section 4.1) relating to the Business except (i) those liabilities and
obligations set forth on the Financial Statements of Seller previously provided
to Purchaser and not heretofore paid or discharged; (ii) those liabilities and
obligations arising in the ordinary course of Seller's Business consistent with
past practice under any Contract or commitment specifically disclosed on
Schedule 2.1.3 hereto or not required to be disclosed because of the term or
amount involved; and (iii) those liabilities and obligations incurred in the
ordinary course of Seller's Business consistent with past practice since the
date of the Interim Financial Statements provided to Purchaser.
6.14 Books and Records. All books of account and other financial
records of Seller directly relating to the Business (the "Books and Records")
are materially complete and correct and have been made available to Purchaser.
All of the Books and Records have been maintained in accordance with good
business practices and, where applicable, in accordance with GAAP.
6.15 Employees. Schedule 1.22 sets forth a true and correct list of
all individuals currently employed by Seller in the conduct of the Business and
their present position and rate of compensation and date of hire. Except as set
forth on Schedule 1.22, none of the individuals employed by Seller have been
given any credit for service under any Payroll Practice/Employee Arrangement
prior to their respective dates of hire.
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6.16 Labor Relations. No Employee of Seller is represented by any
union or other labor organization. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other labor
trouble is pending or, to Seller's Knowledge, threatened against, involving,
affecting or potentially affecting Seller. No complaint against Seller is
pending or, to Seller's Knowledge, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any similar
state or local agency, by or on behalf of any Employee of Seller. Two days
prior to the Closing Date, Seller shall provide Purchaser with a compilation of
any existing liability for Employee sick leave, vacation time, severance pay or
any similar item. To Seller's Knowledge, except as set forth on Schedule 1.22,
Seller has no liability for any occupational disease of any of its Employees,
former Employees or others. Neither the execution and delivery of this
Agreement, the performance of the provisions hereof nor the consummation of
the transactions contemplated hereby will trigger any severance pay obligation
under any Contract or under any law.
6.17 Payroll Practice/Employee Arrangement.
6.17.1 Benefit Plans. Schedule 6.17 contains a complete list
of each employee benefit plan subject to ERISA, and/or holiday, vacation or
other bonus practice or any other employee pay practice, arrangement, agreement
or commitment (the "Payroll Practice/Employee Arrangement") and maintained by
or with respect to which Seller has any liability or obligation, whether
actual or contingent, with respect to the Employees or their respective
beneficiaries.
6.17.2 Plan Liability. Seller has not taken any action that
may result in Purchaser being a party to, or bound by, an ERISA Plan, and
Purchaser shall have no liability under, or be subject to any liability on
account of, any ERISA Plan or Payroll Practice/Employee Arrangement following
the consummation of the transaction contemplated hereby.
6.17.3 Retirement Benefits. No ERISA Plan or other employee
arrangement has provided for the payment of retiree benefits by Purchaser.
6.18 No Finder. With the exception of Xxxx X. Xxxx & Associates, LLC,
Seller has not taken any action that would give to any Person a right to a
finder's fee or any type of brokerage commission in relation to, or in
connection with, the transactions contemplated by this Agreement.
6.19 Interest in Business. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to acquire in any way all or any part of, or
interest in, the Business.
6.20 [RESERVED].
6.21 Condition of Assets. All buildings, structures and equipment that
are part of the Purchased Assets, as well as all other tangible personal
property comprising the Purchased Assets, shall be sold, transferred, and
conveyed to Purchaser hereunder AS IS, WHERE IS, AND
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SUBJECT TO ALL FAULTS, and Seller makes no warranties or representations,
express or implied, with respect to the state of condition and repair thereof.
It is provided, however, that this disclaimer shall not affect any warranties
which Seller may make to Purchaser in the Deed referenced in the foregoing
Section 5.2.1.
6.22 Affiliate Transactions. Except as set forth in Schedule 6.22
hereto, Seller and its Affiliates provide no services or products to the
Business.
6.23 Insurance. Schedule 6.23 sets forth a complete list of all
insurance policies maintained with respect to the Business for the past three
years and all insurance policies known by Seller to have been maintained by any
other Person which may provide any coverage for liabilities relating in any
manner to any Environmental Law. Schedule 6.23 also sets forth a true and
correct summary of the loss experiences for the past three years under each
such policy. Subject to policy deductibles and exclusions, Seller's policies of
liability insurance provide coverage for occurrences prior to the Closing Date.
6.24 No Significant Items Excluded. Except for Excluded Assets, there
are no assets or properties of Seller or any Related Party that are of material
importance to the ongoing operation of the Business by Purchaser in
substantially the same manner in which the Business has been conducted by
Seller prior to the date of this Agreement.
6.25 Surveys. Seller has provided Purchaser with copies of Seller's
federal and/or state surveys or inspections and any plans of correction for the
current year and the two immediately preceding years for the Facility. Each
such survey or inspection was prepared in material compliance with all
applicable Legal Requirements.
6.26 Occupancy Reports. Seller has provided Purchaser with copies of
Seller's occupancy reports for the Facility for the last year. Each such
occupancy report was prepared based on the number of operational beds (i.e.,
double occupancy rooms were only counted as such when both beds were occupied).
6.27 Tax Returns. Seller has filed or caused to be filed, or will file
or cause to be filed, all Tax Returns that are required to be filed by it prior
to or on the Closing Date, pursuant to all Legal Requirements of each
Governmental Authority with taxing power over it. All such Tax Returns were or
will be, as the case may be, correct and complete in all material respects.
Seller has paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to
such Tax Returns, except (i) such Taxes, if any, as are being contested in good
faith and disclosed on Schedule 6.27, (ii) such Taxes that are fully reserved
against on the Financial Statements of Seller previously provided to Purchaser,
and Taxes accruing that are not yet due. Except as set forth on Schedule 6.27,
Seller is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has been made by a taxing authority of a
jurisdiction other than one in which the Facility is located. Seller has paid,
or will withhold and pay, all Taxes required to have been withheld in
connection with amounts paid or owing to any Employee, independent contractor,
creditor,
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stockholder or other third party.
6.28 Completeness and Accuracy. To the extent known to Seller, all
information set forth on any Schedule hereto is true, correct and complete. No
representation or warranty of Seller contained in this Agreement contains or
will contain any untrue statement of material fact, or omits or will omit to
state any material fact necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. All Contracts,
Permits and other documents and instruments furnished or made available to
Purchaser by Seller are or will be true, complete and accurate originals or
copies of originals and include all amendments, supplements, waivers and
modifications thereto.
6.29 Seller's Assets. Neither Seller nor Seller's "ultimate parent
entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, Sections
801.1 et seq) had: (i) annual net sales of $100,000,000 or more as stated on
its last regularly prepared statement of income and expenses; or (ii) total
assets of $100,000,000 or more as stated on its last regularly prepared
balance sheet.
6.30 Discounted Rates; Rate Limitations; Free Care. Attached hereto
is Schedule 6.30 that sets forth a true and complete list of the following for
the Facility: (i) any services that are provided based on a discount factor
from the rates regularly charged at the Facility; (ii) any restrictions or
limitations on rates which may be charged to private pay residents for
services provided at the Facility; (iii) any percentage of beds or slots in any
program at the Facility that must be reserved for Medicare or Medicaid eligible
residents and (iv) any amount of welfare, free or charity care or discounted
government assisted resident care provided at the Facility.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and
to consummate the transactions contemplated hereby, Purchaser represents and
warrants to Seller, that each of the following representations and warranties
is true and correct as of the date hereof:
7.1 Organization, Good Standing, Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has all requisite corporate power and authority to
own and lease the Purchased Assets, to carry on the Business and to execute and
deliver this Agreement and the Ancillary Agreements to which Purchaser is a
party, to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof to be performed by it.
7.2 Authorization of Agreement and Enforceability. Purchaser has
taken all necessary corporate action to authorize the execution and delivery of
this Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and the Ancillary Agreements, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding
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obligations of Purchaser, enforceable in accordance with their terms except to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws presently or hereafter in effect relating to
or affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
7.3 No Violations; Consents. Except as set forth on Schedule 7.3, the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser, (ii) except with respect to notices and
consents required to be given by Purchaser to any Accreditation Body or
Governmental Authority in connection with the sale and change of ownership of
the Purchased Assets and the Business, violate, or require any consent,
authorization or approval of, or exemption by, or filing under any provision of
any contract, law, statute, rule or regulation to which Purchaser is subject,
(iii) violate any judgment, order, writ or decree of any court applicable to
Purchaser, (vi) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the performance required by,
or require any consent, authorization or approval under any agreement,
contract, commitment, lease or other instrument, document or undertaking to
which Purchaser is a party or (v) result in the creation or imposition of any
Encumbrance upon its assets.
7.4. Legal Proceedings. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any Governmental Authority or, to
Purchaser's Knowledge, threatened against Purchaser or any of Purchaser's
properties, assets, operations or businesses that might prevent or delay the
consummation of the transactions contemplated hereby.
7.5 No Finder. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
7.6 Purchaser's Assets. Neither purchaser nor Purchaser's "ultimate
parent entity" (as such term is defined in 16 CFR, Chapter 1, Subchapter H, ss.
801.1 et seq) had: (i) annual net sales of $100,000,000 or more as stated on
its last regularly prepared statement of income and expenses; or (ii) total
assets of $100,000,000 or more as stated on its last regularly prepared balance
sheet.
ARTICLE VIII. COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions. Between the date of this Agreement and the
Closing Date, Seller covenants that it will, in its conduct of the Business,
except as otherwise agreed by Purchaser in writing:
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8.1.1 Access to Information. Give to Purchaser and its
counsel, accountants, consultants and other representatives, for the purpose
of audit, review and copying, reasonable access to such of the books,
accounts, Contracts and records of Seller as are relevant to the Purchased
Assets and the Business, and furnish or otherwise make available to Purchaser
all such information concerning the Purchased Assets and the Business as
Purchaser may reasonably request. Accordingly, Seller shall provide Purchaser
with the following:
(i) Seller's occupancy reports for the Facility, as soon as
the same become available through the Closing Date, but no later than the last
day of any given week (which reports shall be prepared based on the number of
operational beds);
(ii) rent rolls for the Facility, as soon as the same become
available through the Closing Date, but no later than five days after the end
of any given month;
(iii) Seller's federal and/or state surveys or inspections
and any plans of correction for the Facility, as soon as the same become
available through the Closing Date, but no later than fifteen days after
received by Seller;
(iv) if applicable, Seller's cost reports for the Facility
for the current year and the two immediately preceding years, together with
the current rate schedule for the Facility;
(v) monthly statements of profit and loss of Seller for the
Facility, as soon as the same become available through the Closing Date, but no
later than fifteen days after the last day of each month.
8.1.2 Conduct of Business. Operate the Business in the usual,
regular and ordinary manner as such Business was conducted prior to the date
hereof and, to the extent consistent with such operation, use its best efforts
until the Closing Date to (i) preserve and keep intact the Business, (ii) keep
available the services of the Employees; (iii) preserve its relationships with
residents, suppliers and others having business dealings with Seller in
connection with the Business and (iv) maintain current marketing activities;
8.1.3 Maintenance of Properties. Maintain the Purchased
Assets, whether owned or leased, in good order and condition, in accordance
with Seller's past practices, reasonable wear and tear and fire or other
casualty excepted;
8.1.4 Maintenance of Books and Records. Maintain the Books
and Records in the usual, regular and ordinary manner, on a basis consistent
with past practice;
8.1.5 Compliance with Applicable Law. Comply in all material
respects with all Legal Requirements applicable to the Purchased Assets and to
the conduct of the Business;
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8.1.6 Performance of Obligations. Perform all the material
obligations of Seller relating to the Purchased Assets and the Business in
accordance with the past practices of Seller;
8.1.7 Approvals, Consents. Use its reasonable commercial
efforts to obtain in writing as promptly as possible any approvals and consents
as required to be obtained by Seller in order to effectuate the transactions
contemplated hereby and deliver to Purchaser copies of such approvals and
consents. Accordingly, Seller shall cooperate with Purchaser's efforts to
obtain the necessary licenses to operate the Facility from the appropriate
Accreditation Bodies, including, without limitation, the Department of Human
Resources. Upon execution and delivery of this Agreement, Seller shall
promptly:
(i) provide Purchaser with copies of all Permits and, with
respect to the Facility's administrator, a copy of his or her license and
record of continuing education credits;
(ii) notify each Accreditation Body and Third Party Payor as
required by any Legal Requirement of the pending change of ownership of the
Facility; and
(iii) provide such other notices as required by all Legal
Requirements including (A) notices to residents of the Facility and (B) notices
to the appropriate county department of social services. Prior to sending the
notices, Seller shall provide copies to Purchaser for review and approval,
which approval shall not be unreasonably withheld;
8.1.8 Notice of Material Damage. Give to Purchaser prompt
notice in writing of any fact that, if known on the date hereof, would have
been required to be set forth or disclosed in or pursuant to this Agreement, or
which would result in the breach in any material respect by Seller of any of
its representations, warranties, covenants or agreements hereunder;
8.1.9 Cost Reports. File, or cause to be filed, all Medicare
and Medicaid cost reports that are required to be filed after the Closing Date,
without regard to any extensions, pursuant to all applicable Legal
Requirements. Any liability of Seller required to be paid as a result of any
such cost report for any period prior to the Closing Date shall be paid by
Seller. Purchaser shall cause any refund which may be received after the
Closing Date as a result of any such cost report filed for any period prior to
the Closing Date to be paid to Seller;
8.1.10 Pay Employees to Closing Date. Pay all wages, salaries
and other sums due Employees through the close of business on the day prior to
the Closing Date;
8.1.11 Transfer of Employees. Take all reasonably necessary
steps to transfer to Purchaser the employment of all Employees electing to
continue their employ with Purchaser as of the Closing Date;
8.1.12 Compliance with Agreement. Not undertake any course of
action materially inconsistent with satisfaction of the conditions applicable
to it set forth in this Agreement, and use all reasonable efforts to do all
such acts and take all such measures as may be
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reasonably necessary to comply with the representations, agreements, conditions
and other provisions of this Agreement.
8.1.13 Update Schedule. Promptly disclose to Purchaser any
information contained in the representations and warranties of Seller contained
in Article VI or in the Schedules to this Agreement which is no longer complete
or correct; provided that no such disclosure shall be deemed to modify, amend
or supplement such Seller's representations and warranties; and
8.1.14 Compliance with Bulk Sales Laws. If applicable,
provide any notices required under Sections 25-6-101 et seq. of North
Carolina's Uniform Commercial Code pertaining to bulk transfers in accordance
with the provisions thereof. Prior to sending such notices, Seller shall
provide copies to Purchaser for review and approval, which approval shall not
be unreasonably withheld;
8.2 Other Deliveries. At its own cost and expense, Seller shall have
delivered with respect to the Real Property, as soon as possible but in any
event not later than three days before Closing:
8.2.1 Surveys. Existing surveys of such property currently in
Seller's possession or reasonably obtainable by Seller;
8.2.2 Affidavits. ALTA extended coverage
statements/affidavits in form and substance satisfactory to Purchaser's title
insurer regarding title, mechanic's liens and such other customary matters as
may be reasonably requested by Purchaser or Purchaser's title insurer; and
8.2.3 FIRPTA Certificates. A certificate, duly executed and
acknowledged by an officer of Seller, in the form prescribed by Treasury
Regulation Section 1.1445-2(b)(2)(iii), stating Seller's name, address and
Federal tax identification number, and that Seller is not a "foreign person"
within the meaning of Section 1445 of the Code.
8.3 Prohibited Actions. Between the date of this Agreement and the
Closing Date, in its conduct of the Business, Seller shall not, except as
otherwise agreed by Purchaser in writing:
8.3.1 Sale of Purchased Assets. Sell, transfer, assign,
lease, encumber or otherwise dispose of any of the Purchased Assets other than
in the ordinary course of Seller's Business consistent with past practices;
8.3.2 Business Changes. Change in any material respect the
character of the Business;
8.3.3 Incurrence of Material Obligations. Incur any material
fixed or contingent obligation or enter into any material agreement, commitment
or other transaction or arrangement, commitment or other transaction or
arrangement that is not the ordinary course of Seller's
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Business consistent with past practices and with respect to which Purchaser
will be bound subsequent to Closing;
8.3.4 Incurrence of Liens. Subject to lien, security
interest or any other Encumbrance, other than Permitted Encumbrances, any of
the Purchased Assets;
8.3.5 Change in Employee Compensation and Benefits. Increase
the rate of compensation paid, or pay any bonus, to anyone connected with the
Business, except for those increases or bonuses planned, in the ordinary
course of Seller's Business consistent with past practices, or establish or
adopt any new pension or profit-sharing plan, deferred compensation agreement
or employee benefit arrangement of any kind whatsoever covering or affecting
Employees;
8.3.6 Publicity; Advertisement. Except as required by law,
publicize, advertise or announce to any third-party, except as required
pursuant to this Agreement to obtain the consent of such third-party, the
entering into of this Agreement, the terms of this Agreement or the
transactions contemplated hereby;
8.3.7 No Release. Except in the ordinary course of Seller's
Business consistent with past practices, cancel, release or relinquish any
material debts of or claims against others held by Seller with respect to the
Business or waive any material rights relating to the Business; and
8.3.8 No Termination or Modification. Terminate or materially
modify any material, Contract or Permit listed on Schedule 1.63 or Schedule
2.1.3 or other authorization or agreement affecting the Business or the
Purchased Assets or the operation thereof.
ARTICLE IX. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 Advise of Changes. Advise Seller promptly in writing of
any fact that, if known at the Closing Date, would have been required to be set
forth or disclosed in or pursuant to this Agreement, or which would result in
the breach by Purchaser of any of its representations, warranties, covenants
or agreements hereunder;
9.1.2 Compliance with Agreement. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to it set
forth in this Agreement, and Purchaser shall use its best efforts to do all
such acts and take all such measures as may be reasonably necessary to comply
with the representations, agreements, conditions and other provisions of this
Agreement;
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9.1.3 Examinations. Promptly undertake all examinations,
inspections, surveys and audits, including, without limitation, title searches
and surveys of the Real Property, environmental assessments and audits and
engineering surveys, as Purchaser deems necessary in connection with the
acquisition of the Purchased Assets or the Business; and
9.1.4 Seller's Employees. Take all reasonable steps to ensure
that the transfer of employment of all of the Employees electing to continue
their employ with Purchaser as are able to be accomplished prior to or on the
Closing Date.
9.2 Investigation. Purchaser shall use reasonable efforts to conduct
an investigation of the Business of Seller in such a manner as to prevent
disruption of relations with the Employees, residents and suppliers of Seller,
which investigation shall include such due diligence as is customary for
transactions of the type contemplated herein.
9.3 Approvals, Consents. Purchaser shall use its best efforts to
obtain in writing as promptly as possible any approvals and consents as
required to be obtained by Purchaser in order to effectuate the transactions
contemplated hereby and deliver to Purchaser copies of such approvals and
consents. Accordingly, Purchaser take all commercially reasonable action to
obtain the necessary licenses to operate the Facility from the Department of
Human Resources, as applicable, including:
(i) notifying each Accreditation Body and Third Party Payor
as required by any Legal Requirement of the pending change of ownership of the
Facility; and
(ii) providing such other notices as required by all Legal
Requirements including, if applicable, (A) notices to residents of the Facility
and (B) notices to the appropriate county department of social services. Prior
to sending the notices, Purchaser shall provide copies to Seller for review
and approval, which approval shall not be unreasonably withheld;
9.4 Publicity; Advertisement. Except as required by law,
Purchaser shall not publicize, advertise or announce to any third-party, except
as required pursuant to this Agreement to obtain the consent of such
third-party, the entering into of this Agreement, the terms of this Agreement
or the transactions contemplated hereby; provided, however, the foregoing shall
not be applicable to disclosures made by Purchaser to Purchaser's lender in
response to such lender's reasonable requests.
ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to proceed with Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Seller, any one or more of which may
be waived in whole or in part by Purchaser:
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10.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement and the Ancillary
Agreements to which Seller is a party shall have been true in all material
respects on the date hereof and shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
10.2 Performance of Agreement. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement and the
Ancillary Agreements to which Seller is a party to be performed or complied
with by it at or prior to the Closing Date.
10.3 Seller's Certificate. Purchaser shall have received a certificate
from Seller, dated as of the Closing Date, reasonably satisfactory in form and
substance to Purchaser and its counsel, certifying as to the matters specified
in Section 10.1 and Section 10.2 hereof. The matters set forth in such
certificate shall constitute representations and warranties of Seller
hereunder.
10.4 Secretary's Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Seller with respect to:
(i) the incumbency and specimen signature of each officer or
representative of Seller executing this Agreement, the certificate referred to
in Section 10.3 and the Ancillary Agreements to which Seller is a party; and
(ii) the resolutions of the board of directors of Seller
and, if necessary, the stockholders of Seller, authorizing the execution and
delivery of this Agreement and the Ancillary Agreements to which Seller is a
party and the performance by Seller of the transactions contemplated hereby and
thereby.
10.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which if successfully asserted might otherwise have a
material adverse effect on the conduct of the Business or impose any additional
material financial obligation on, or require the surrender of any material
right by, Purchaser.
10.6 Actions and Proceedings. All corporate actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement or incidental hereto and all other related legal matters
shall be reasonably satisfactory to counsel for Purchaser, and such counsel
shall have been furnished with such certified copies of such
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corporate actions and proceedings and such other instruments and documents as it
shall have reasonably requested, including, without limitation:
(i) certificates of the appropriate public officials to the
effect that Seller is a validly existing corporation in good standing in its
state of incorporation as of a date not more than 10 days prior to the Closing
Date;
(ii) incumbency and specimen signature certificates dated the
Closing Date, signed by the officers of Seller and certified by its Secretary;
and
(iii) true and correct copies of (A) the charter documents of
Seller as of a date not more than 30 days prior to the Closing Date, certified
by the Secretary of State of its state of incorporation and (B) the bylaws of
Seller as of the Closing Date, certified by the Secretary of Seller.
10.7 Consents. Any third-party consents, approvals, authorizations or
Permits (including, without limitation, those required by any Governmental
Authorities) necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained.
10.8 Condition of Purchased Assets. At the Closing Date, the Purchased
Assets shall be operating to the reasonable satisfaction of the Purchaser and
shall remain substantially undamaged by fire, storm, or other casualty.
10.9 Environmental Report. At its own cost and expense, Purchaser
shall have obtained a written report from a qualified geotechnical or
engineering firm, in a form and substance, satisfactory to Purchaser,
concerning the presence, handling, treatment and disposal of Regulated
Substances on, in or under the Real Property and disclosing (i) the results of
a review of prior uses of the Real Property disclosed by local public records,
including the chain of title; (ii) contacts with local officials to determine
whether any records exist with respect to the disposal of Regulated Substances
on the Real Property; and (iii) if recommended to or required by Purchaser,
soil samples and groundwater samples consistent with good engineering
practice. Such report shall confirm that the Real Property is not contaminated
by the presence of Regulated Substances to the extent that clean-up is required
or that a condition exists which violates any Environmental Law or which would
prevent Purchaser from obtaining any Permit required to operate the Business of
the Facility.
10.10 Title Insurance. Purchaser shall have obtained for all Real
Property final marked commitments to issue to Purchaser ALTA (1990-Form B with
appropriate state endorsements) owner's or leasehold policies of title
insurance in coverage amounts equal to the fair market value of the Real
Property, insuring good and marketable title to the Real Property with
mechanic's liens coverage and such endorsements as Purchaser may reasonably
request and with exceptions only for ALTA standard printed exceptions (other
than mechanic's and materialmen's liens and rights of possession) and Permitted
Encumbrances.
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10.11 Closing Documents. Purchaser shall have received the other
documents referred to in Section 5.2 which shall be in form and substance
satisfactory to Purchaser in its reasonable discretion.
10.12 Opinion of Counsel. Purchaser shall have received the favorable
opinion of counsel for Seller, addressed to Purchaser and Purchaser's lender,
reasonably satisfactory to Purchaser and its counsel as to the matters set
forth in Sections 6.1, 6.2 and 6.3 hereof, as to which such counsel shall
opine, but only to the extent of its actual knowledge with respect to matters
set forth in Section 6.3 after making such inquiries and reviewing such
materials as are customary in connection with the opinions given therein.
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to proceed with any Closing under this
Agreement is subject to the fulfillment prior to or at the time of Closing of
the following conditions with respect to Purchaser, any one or more of which
may be waived in whole or in part by Seller:
11.1 Accuracy of Representations and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects on the date hereof and shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date.
11.2 Performance of Agreement. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
11.3 Purchaser's Certificate. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of
all matters specified in Section 11.1 and Section 11.2 hereof. The matters set
forth in such certificate shall constitute representations and warranties of
Purchaser hereunder.
11.4 Secretary's Certificate. Seller shall have received a
certificate, dated as of the Closing Date, of the Secretary or any Assistant
Secretary of Purchaser with respect to:
(i) the incumbency and specimen signature of each officer or
representative of Purchaser executing this Agreement, the certificate referred
to in Section 11.3 and the Ancillary Agreements to which Purchaser is a party;
and
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(ii) the resolutions of the board of directors of Purchaser
authorizing the execution and delivery of this Agreement and the Ancillary
Agreements to which Purchaser is a party and the performance by Purchaser of
the transactions contemplated hereby and thereby.
11.5 Injunction. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any Governmental Authority or other Person shall have been instituted,
threatened or anticipated which questions the validity or legality of the
transactions contemplated hereby.
ARTICLE XII. OBLIGATIONS AFTER THE CLOSING DATE
12.1 Covenant Not to Interfere. Seller covenants and agrees that for a
period of three (3) years after the Closing Date, Seller will not solicit for
employment by Seller or any Affiliates any Person who is an Employee of the
Business as of the Closing Date.
12.2 Noncompetition. For a period of three years following the Closing
Date, Seller will not, directly or indirectly, unless acting in accordance with
Purchaser's written consent, own, manage, operate, finance or participate in
the ownership, management, operation or financing of or permit its name to be
used by or in connection with any business or enterprise engaged in the
Business acquired by Purchaser hereunder and located within a 25-mile radius of
the Facility. Seller acknowledges that the provisions of this Section are
reasonable and necessary to protect the interests of Purchaser, that any
violation of this Section will result in an irreparable injury to Purchaser and
that damages at law would not be reasonable or adequate compensation to
Purchaser for violation of this Section and that, in addition to any other
available remedies, Purchaser shall be entitled to have the provisions of this
Section specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages or posting a bond or other
security to an equitable accounting of all earnings, profits and other benefits
arising out of any violation of this Section. In the event that the provision
of this Section shall ever be deemed to exceed the time, geographic scope or
other limitations permitted by applicable law, then the provisions shall be
deemed reformed to the maximum extent permitted by applicable law.
12.3 Transition of Employees. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 [RESERVED].
12.5 Certain Transitional Matters.
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12.5.1 Transfer of Assets. Seller agrees that Purchaser, from
and after the Closing, shall have the right and authority to collect for
Purchaser's own account all items which shall be transferred to Purchaser as
provided herein.
12.5.2 Seller's Remittance of Funds. After the Closing, Seller
shall promptly transfer and deliver to Purchaser any cash or other property, if
any, that Seller may receive related to the Business or the Purchased Assets
other than the Excluded Assets and that relates to the operation of the Business
after the Closing Date.
12.5.3 Purchaser's Remittance of Funds. After the Closing,
Purchaser shall promptly transfer and deliver to Seller any cash or other
property, if any, that Purchaser may receive related to the Excluded Assets or
to the operation of the Business prior to the Closing Date.
12.5.4 Assumed Liabilities Controlled by Purchaser. From and
after the Closing, Purchaser shall have complete control over the payment,
settlement or other disposition of, or any dispute involving, any Assumed
Liability, and Purchaser shall have the right to conduct and control all
negotiations and proceedings with respect thereto. Seller shall notify Purchaser
promptly of any claim made with respect to any Assumed Liability and shall not,
except with the prior written consent of Purchaser, voluntarily make any payment
of, or settle or offer to settle, or consent to any compromise with respect to,
any such Assumed Liability. Seller shall cooperate with Purchaser in connection
with any negotiations or proceedings involving any Assumed Liability.
12.6 Audits. Following the Closing Date, Seller shall cooperate, and
request Seller's independent public accountants to cooperate at Purchaser's
cost and expense, with Purchaser and its auditors in the preparation of audited
financial statements of Seller for the years ended December 31, 1996 and 1995
and unaudited financial statements as of September 30, 1997 and for the
nine-month periods ending September 30, 1997 and 1996, prepared in accordance
with GAAP, to the extent required in connection with any registration statement
or other form filed by Purchaser with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, for a public offering and sale of
securities of Purchaser and for other filings under the Securities Exchange
Act of 1934, as amended. In addition, Seller will provide its independent
public accountants with any information necessary to complete such audits
including a management representation letter substantially in the form of
Exhibit 12.6 attached hereto.
12.7 Further Assurances of Seller. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and
other documents, and take such other action, as Purchaser may reasonably
request (i) to transfer to and vest in Purchaser, and protect its rights, title
and interest in, all the Purchased Assets and (ii) otherwise to consummate the
transactions contemplated by this Agreement. In addition, from and after the
Closing Date, Seller shall afford Purchaser and its attorneys, accountants and
other representatives access, during normal business hours, to any
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Books and Records relating to the Business as may reasonably be required in
connection with the preparation of financial information or tax returns of
Purchaser.
12.8 Further Assurances of Purchaser. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
relating to the Business as may reasonably be required in connection with the
preparation of financial information or Tax Returns for periods concluding on
or prior to the Closing Date. Purchaser shall cooperate in all reasonable
respects with Seller with respect to its former interest in the Business and in
connection with financial account closing and reporting and claims and
litigation asserted by or against third parties, including, but not limited to,
making employees available at reasonable times to assist with, or provide
information in connection with financial account closing and reporting and
claims and litigation, provided that Seller reimburses Purchaser for its
reasonable out-of-pocket expenses (including costs of employees so assisting)
in connection therewith.
ARTICLE XIII. TERMINATION
13.1 Termination of Agreement. This Agreement may be terminated:
(i) by the mutual consent of Seller and Purchaser;
(ii) by Seller or Purchaser if Closing has not taken place on
or before, November 30, 1997; provided however, that no Party then in material
breach of any of its obligations hereunder shall have the right to terminate;
(iii) by Purchaser upon notice to Seller if any of the
conditions set forth in Article X hereof have not been satisfied or become
impossible to satisfy by the Closing Date (other than by reason of the material
failure of Purchaser to fulfill its obligations under this Agreement);
(iv) by Seller upon notice to Purchaser if any of the
conditions set forth in Article XI hereof have not been satisfied or become
impossible to satisfy by the Closing Date (other than by reason of the material
failure of Seller to fulfill its obligations under this Agreement);
(v) by Seller if Purchaser materially breaches or fails to
fulfill its obligations under this Agreement, which failure continues and
remains uncured for 15 consecutive calendar days after Seller gives written
notice of such failure to Purchaser; and/or
(vi) by Purchaser if Seller materially breaches or fails to
fulfill its obligations under this Agreement, which failure continues and
remains uncured for 15 consecutive calendar days after Purchaser gives written
notice of such failure to Seller.
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13.2 Return of Documents. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the agreement of the other Party, shall destroy all
such documents and copies thereof.
13.3 Escrow Fund. Upon termination of this Agreement, the Escrow Fund
shall be disbursed as follows and in accordance with the terms and conditions
of the Escrow Agreement:
(i) if this Agreement is terminated pursuant to Section
13.1(i), Section 13(iii) or Section 13.1(vi), the Escrow Fund shall be released
to Purchaser in accordance with this Agreement and the Escrow Agreement;
(iii) if this Agreement is terminated pursuant to Section
13.1(ii), Section 13.1(iv) or Section 13.1(v), the Escrow Fund shall be
released to Seller in accordance with this Agreement and the Escrow Agreement.
13.4 Remedies.
13.4.1 Seller's Remedies. If this Agreement is terminated by
Seller as permitted under Section 13.1, the right to receive the Escrow Fund as
set forth in Section 13.3 shall be the sole and exclusive remedy of Seller as
liquidated damages, and shall be in lieu of all other rights and remedies which
may otherwise be available at law or in equity.
13.4.2 Purchaser's Remedies. If Purchaser terminates this
Agreement pursuant to Section 13.1(vi), in addition to Purchaser's right to
receive the Escrow Fund as permitted under Section 13.3, Purchaser may seek any
other remedies that may otherwise be available at law or in equity, including,
without limitation, an action for specific performance and reimbursement from
Seller for all actual costs and expenses incurred by Purchaser in connection
with this Agreement and the transactions contemplated hereby. Purchaser shall
be entitled only to receive the Escrow Fund if it terminates this Agreement
pursuant to Section 13.1(iii).
ARTICLE XIV. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
14.1 Survival of Representations and Warranties. All representations
and warranties of the Parties shall survive for two years from the Closing Date
(the "Survival Date"). Notwithstanding the foregoing, there shall be no
termination of any such representation or warranty as to which a claim has been
asserted prior to the termination of the applicable survival period. Except as
otherwise expressly provided in this Agreement, all covenants, agreements,
undertakings and indemnities set forth in this Agreement shall survive
indefinitely. Any Party's right to the indemnification or other remedies based
upon the representations and warranties, covenants, agreements and
undertakings of the other Party will not be affected by any investiga-
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tion, knowledge or waiver of any condition by such Party. Any investigation by
such Party shall be for its own protection only and shall not affect or impair
any right or remedy hereunder.
14.2 Indemnification by Seller. Seller shall indemnify, defend, save
and hold Purchaser and its officers, directors, employees, agents and
Affiliates (collectively, "Purchaser Indemnitees") harmless from and against
all demands, claims, allegations, assertions, actions or causes of action,
assessments, losses, damages, deficiencies, liabilities, costs and expenses
(including reasonable legal fees, interest, penalties, and all reasonable
amounts paid in investigation, defense or settlement of any of the foregoing
and whether or not any such demands, claims, allegations, etc., of third
parties are meritorious; collectively, "Purchaser Damages") asserted against,
imposed upon, resulting to, required to be paid by, or incurred by any
Purchaser Indemnitees, directly or indirectly, in connection with, arising out
of, which could result in, or which would not have occurred but for, a breach
of any representation or warranty made by Seller in this Agreement, in any
certificate or document furnished pursuant hereto by Seller or any Ancillary
Agreement to which Seller is or is to become a party, a breach or
nonfulfillment of any covenant or agreement made by Seller in or pursuant to
this Agreement and in any Ancillary Agreement to which Seller is or is to
become a party, and any Retained Liability.
14.3 Indemnification by Purchaser. Purchaser shall indemnify, defend,
save and hold Seller and its officers, directors, Employees, agents and
Affiliates (collectively, "Seller Indemnitees") harmless from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing and whether or not
any such demands, claims, allegations, etc., of third parties are meritorious;
collectively, "Seller Damages") asserted against, imposed upon, resulting to,
required to be paid by, or incurred by any Seller Indemnitees, directly or
indirectly, (i) in connection with, arising out of, which could result in, or
which would not have occurred but for, a breach of any representation or
warranty made by Purchaser in this Agreement or in any certificate or document
furnished pursuant hereto by Purchaser or any Ancillary Agreement to which
Purchaser is a party, a breach or nonfulfillment of any covenant or agreement
made by Purchaser in this Agreement or in any Ancillary Agreement to which
Purchaser is a party, and any Assumed Liability or (ii) in connection with or
arising out of the operation of the Business and the Purchased Assets following
the Closing Date.
14.4 Notice of Claims. If any Purchaser Indemnitee or Seller
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Seller Damages, as the case
may be ("Damages") for which it is entitled to indemnification under this
Article XIV, such Indemnified Party shall so notify the Party from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by
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this Section shall not affect any of such party's rights under this Article XIV
or otherwise except and to the extent that such failure is actually prejudicial
to the rights or obligations of the Indemnified Party. Notwithstanding the
foregoing, any Purchaser Indemnitee shall be required to notify Seller's Agent
of any claim for Purchaser Damages as required herein even though the same may
be included in the $25,000 threshold set forth in Section 14.6, and Seller shall
have the right to dispute any such claim.
14.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement. The Indemnified Party
shall permit the Indemnifying Party to participate in the defense of any such
action or suit through counsel chosen by the Indemnifying Party, provided that
the fees and expenses of such counsel shall be borne by the Indemnifying Party.
If the Indemnified Party permits the Indemnifying Party to undertake, conduct
and control the conduct and settlement of such action or suit, the Indemnifying
Party shall not thereby permit to exist any Encumbrance upon any asset of the
Indemnified Party; the Indemnifying Party shall not consent to any settlement
that does not include as an unconditional term thereof the giving of a complete
release from liability with respect to such action or suit to the Indemnified
Party; the Indemnifying Party shall permit the Indemnified Party to participate
in such conduct or settlement through counsel chosen by the Indemnified Party;
and the Indemnifying Party shall agree promptly to reimburse the Indemnified
Party for the full amount of any Damages including fees and expenses of counsel
for the Indemnified Party incurred after giving the foregoing notice to the
Indemnifying Party and prior to the assumption of the conduct and control of
such action or suit by the Indemnifying Party.
14.6 Limitation of Liability. Notwithstanding the foregoing, Seller's
liabilities and obligations to indemnify Purchaser Indemnitees against any
Purchaser Damages shall be subject to all of the following limitations:
14.6.1 Threshold. No indemnification shall be made under
Section 14.2 until the aggregate amount of Purchaser Damages thereunder exceeds
$25,000, but if the aggregate amount of Purchaser Damages thereunder exceeds
$25,000 in the aggregate, then indemnification shall be made by Seller
thereunder to the full extent of the Purchaser Damages.
14.6.2 Time Period. Seller shall be obligated to indemnify
Purchaser Indemnitees by virtue of Section 14.2 only for those Purchaser
Damages as to which Purchaser has given Seller's Agent written notice thereof
on or before the Survival Date.
14.6.3 Fraud; Intentional Misrepresentation. The limitations
set forth in Sections 14.6.1 and 14.6.2 shall not apply to Purchaser Damages
arising out of fraud, the breach of any representation or warranty contained
herein or pursuant hereto if such representation or warranty was made with
actual knowledge that it contained an untrue statement of a fact or omitted to
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state a fact necessary to make the statements of facts contained therein not
misleading or misrepresented.
The foregoing limitations relate only to indemnification and do not diminish or
in any way relieve Seller of any of its obligations or liabilities with
respect to the Retained Liabilities.
ARTICLE XV. GENERAL
15.1 Expenses. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
15.2 Publicity. All notices to third parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and among Purchaser and Seller. Except as may be
required by law, no Party shall act unilaterally in this regard without prior
written approval of the other Party, such approval not be unreasonably
withheld.
15.3 Disclosure. Seller acknowledges and agrees that this Agreement
and the transactions contemplated hereunder may be disclosed in a registration
statement or other form filed by Purchaser with the Securities and Exchange
Commission under the Securities Act of 1933 for a public offering and sale of
securities by Purchaser.
15.3 Waivers. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
15.4 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
15.5 Notices. All notices, requests, demands, elections and other
communications which either Party to this Agreement may be required to give
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, by a reputable courier service which requires a signature
upon delivery, by mailing the same by registered or certified first class
mail, postage prepaid, return receipt requested, or by telecopying with receipt
confirmation (followed by a first class mailing of the same) to the Party to
whom the same is so given or made. Such notice, request, demand, waiver,
election or other communication will be deemed to
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have been given as of the date so delivered or electronically transmitted or two
days after mailing thereof.
15.5.1 Notice to Seller.
If to Seller, to:
Triangle Retirement Services, Inc.
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
with a required copy to:
Xxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxx, L.L.P.
Suite 1900, 000 Xxxxxxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Esquire
15.5.2 Notice to Purchaser.
If to Purchaser, to:
Balanced Care Corporation
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Director, Legal Services
with a required copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: _______________, Esquire
Or to such other addresses as such Party shall have specified by notice to the
other Party hereto.
15.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Ancillary Agreements and documents delivered at
Closing pursuant hereto and thereto constitute the entire agreement and
understanding between the Parties hereto as to the matters set forth herein and
therein and supersede and revoke all prior agreements and understandings, oral
and written, between the Parties hereto or thereto or otherwise with respect to
the subject matter hereof or thereof. No change, amendment, termination or
attempted waiver of any of the
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provisions hereof shall thereof be binding upon any Party unless set forth in
an instrument in writing signed by the Party to be bound or their respective
successors in interest.
15.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
15.8 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
15.9 Construction. Within this Agreement, the singular shall include
the plural and the plural shall include the singular, and any gender shall
include all other genders, all as the meaning and the context of this Agreement
shall require.
15.10 Governing Law and Choice of Forum. The validity and
interpretation of this Agreement shall be construed in accordance with, and
governed by the internal laws of, the State of North Carolina but without
regard to its rules governing conflict of laws.
15.11 Cooperation. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other
and their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.12 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision
of this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.13 Attorneys' Fees. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the non-prevailing Party shall pay to the prevailing Party's
reasonable out-of-pocket attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
15.14 Successors and Assigns. The covenants, agreements, and
conditions contained herein or granted hereby shall be binding upon and shall
inure to the benefit of Purchaser and Seller, and each of their respective
successors and permitted assigns. Seller shall not assign, or otherwise
transfer any interest in this Agreement to any other Person without the prior
written consent of Purchaser, which consent shall not unreasonably be
withheld. Purchaser may assign and transfer its interest in this Agreement
without Seller's consent to any of Purchaser's Affiliates or to any lender
providing financing for the transactions contemplated hereby.
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Purchaser will promptly provide Seller with a copy of any such assignment, and
Seller agrees to execute and deliver any consents reasonably required by
Purchaser's lender in connection therewith, provided such assignment does not
expand any of Seller's obligations and liabilities hereunder. Notwithstanding
any permitted assignment of this Agreement by Purchaser, Purchaser shall remain
liable to Seller for all obligations and liabilities to be performed by or on
behalf of Purchaser hereunder.
[NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties
have caused this Agreement to be signed in their respective names by an officer
thereof duly authorized as of the date first above written.
PURCHASER:
BALANCED CARE CORPORATION, a Delaware
corporation
By: /s/ XXXXX X. XXXXX
-----------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
SELLER:
TRIANGLE RETIREMENT SERVICES, INC., a
North Carolina corporation
By: /s/ E. XXX XXXXXX, XX.
----------------------------------
Name: E. Xxx Xxxxxx, Xx.
Title: President
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