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AGREEMENT AND PLAN OF MERGER
AMONG
NATIONAL SENIOR CARE, INC.,
NCARE ACQUISITION CORP.
AND
MARINER HEALTH CARE, INC.
DATED AS OF JUNE 29, 2004
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TABLE OF CONTENTS
ARTICLE I THE MERGER........................................................1
Section 1.1 The Merger....................................................1
Section 1.2 Conversion of Shares..........................................2
Section 1.3 Stock Options; Restricted Stock...............................2
Section 1.4 Payment of Aggregate Purchase Price...........................3
Section 1.5 Dissenting Shares.............................................5
Section 1.6 Change in Control Payments....................................5
Section 1.7 Payment Beneficiaries.........................................6
Section 1.8 Withholding...................................................6
ARTICLE II THE SURVIVING CORPORATION.........................................6
Section 2.1 Certificate of Incorporation..................................6
Section 2.2 By-laws.......................................................6
Section 2.3 Directors and Officers........................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................7
Section 3.1 Organization and Qualification................................7
Section 3.2 Authority.....................................................8
Section 3.3 Conflicts; Non-Contravention..................................9
Section 3.4 Capitalization...............................................10
Section 3.5 Subsidiaries.................................................11
Section 3.6 Company SEC Filings..........................................12
Section 3.7 Financial Statements.........................................12
Section 3.8 Absence of Certain Changes...................................12
Section 3.9 Absence of Undisclosed Liabilities...........................12
Section 3.10 Health Care Facilities; Real Property Owned or Leased........12
Section 3.11 Title to Non-Real Property Assets; Condition of Personal
Property.....................................................16
Section 3.12 Taxes........................................................16
Section 3.13 Licenses; Compliance with Applicable Law; Health Care
Regulation...................................................18
Section 3.14 Accounts Payable/Accounts Receivable.........................23
Section 3.15 Contractual and Other Obligations............................23
Section 3.16 Compensation.................................................26
Section 3.17 Employee Benefit Plans.......................................26
Section 3.18 Labor and Employment Matters.................................28
Section 3.19 Insurance....................................................29
Section 3.20 Certain Transactions and Conduct of Business.................30
Section 3.21 Intellectual Property........................................31
Section 3.22 Litigation; Disputes.........................................31
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Section 3.23 Computer Software............................................32
Section 3.24 Finders' Fees................................................32
Section 3.25 Changes in Compensation......................................32
Section 3.26 No Additional Representations................................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB.......32
Section 4.1 Organization.................................................32
Section 4.2 Authority....................................................32
Section 4.3 Conflicts; Non-Contravention.................................33
Section 4.4 Ownership....................................................33
Section 4.5 Litigation; Disputes.........................................33
Section 4.6 Finders' Fees................................................33
Section 4.7 Financing....................................................33
Section 4.8 Purchaser Ownership of Company Securities....................34
Section 4.9 Purchaser Diligence..........................................34
Section 4.10 Solvency of the Surviving Corporation........................34
ARTICLE V COVENANTS OF THE COMPANY.........................................34
Section 5.1 Conduct of the Company.......................................34
Section 5.2 Access to Information........................................37
Section 5.3 Notices of Certain Events....................................38
Section 5.4 Certain Filings; Stockholders Meeting; Takeover Statutes.....38
Section 5.5 Options......................................................40
Section 5.6 Retention Plan...............................................40
Section 5.7 Financial Reports and Taxes..................................40
Section 5.8 Cooperation as to Real Property Matters......................40
Section 5.9 No Solicitations.............................................41
Section 5.10 Bankruptcy Matters...........................................42
Section 5.11 Restricted Agreements........................................42
ARTICLE VI COVENANTS OF PURCHASER...........................................43
Section 6.1 Conduct of the Purchaser.....................................43
Section 6.2 Notices of Certain Events....................................43
Section 6.3 Purchaser Financing..........................................43
Section 6.4 Director and Officer Liability...............................44
Section 6.5 Employee Policies...........................................45
Section 6.6 Bankruptcy Matters...........................................45
Section 6.7 Solvency of the Surviving Corporation........................45
ARTICLE VII COVENANTS OF PURCHASER AND THE COMPANY...........................46
Section 7.1 Commercially Reasonable Best Efforts; HSR Matters............46
Section 7.2 Public Disclosure............................................47
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Section 7.3 Further Assurances...........................................47
ARTICLE VIII CONDITIONS TO THE MERGER.........................................49
Section 8.1 Conditions to the Obligations of Each Party..................49
Section 8.2 Conditions to the Obligations of Purchaser and Merger Sub....49
Section 8.3 Conditions to the Obligations of the Company.................52
ARTICLE IX TERMINATION......................................................53
Section 9.1 Termination..................................................53
Section 9.2 Effect of Termination........................................54
ARTICLE X MISCELLANEOUS....................................................58
Section 10.1 Notices......................................................58
Section 10.2 Survival.....................................................60
Section 10.3 Expenses.....................................................60
Section 10.4 Invalidity...................................................60
Section 10.5 Successors and Assigns.......................................61
Section 10.6 Governing Law................................................61
Section 10.7 Counterparts.................................................61
Section 10.8 Entire Agreement; Amendments.................................61
Section 10.9 Knowledge and Notices........................................61
Section 10.10 Certain Rules of Construction................................61
Section 10.11 Specific Performance.........................................62
Section 10.12 Representations and Warranties and Company Disclosure
Schedule.....................................................63
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LIST OF DEFINED TERMS
"2002 Plan" 1.3(a)
"2003 Plan" 1.2(a)
"Accreditation Body" 3.13(d)(i)
"Acquisition Proposal" 5.9(a)
"Acquisition Transaction" 5.9(a)
"Aggregate Deferred Restricted Stock Price 1.3(b)
"Aggregate Option Price" 1.3(a)
"Aggregate Purchase Price" 1.3(b)
"Aggregate Stock Price" 1.2(a)
"ALTA" 3.10(b)
"Alternative Structure" 8.2(c)(iii)
"Ancillary Businesses" 3.13(f)
"Bankruptcy Orders" 3.3
"Benefit Plans" 3.17(a)
"Bring Down Opinion" 8.3(d)
"Business" Preamble
"CERCLA" 3.13(d)(iv)
"Certificate of Need" 3.13(d)(ii)
"Change of Control Payment" 1.6
"Charter Documents" 3.1
"Closing" 1.1(b)
"Closing Date" 1.1(b)
"Code" 1.8
"Common Stock" 1.2(a)
"Company 10-K" 3.6(a)
"Company 10-Q" 3.6(a)
"Company Break-Up Fee" 9.2(g)(ii)
"Company Disclosure Schedule" Article III
"Company Material Adverse Change" 3.1
"Company Material Adverse Effect" 3.1
"Company Plan of Reorganization" 3.3
"Company Representatives" 5.9(a)
"Company SEC Filings" 3.6(a)
"Company Securities" 3.4
"Company Stockholders Meeting" 5.4(a)
"Company Subsidiary Securities" 3.5
"Company" Preamble
"Company's Board" 1.3(a)
"CON" 3.13(d)(ii)
"Confidentiality Agreement" 5.2(b)
"consistent with past practice" 10.11(c)
"Corporate Integrity Agreement" 3.13(d)(iii)
"Costs" 6.4(a)
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"Covered Acquisition Transaction" 9.2(g)(iv)
"CSFB" 4.6
"Debt Commitment Letter" 6.3
"Debt Satisfaction" 7.3(d)
"Deferred Restricted Stock" 1.3(b)
"defined benefit plan" 3.17(c)
"defined contribution plan" 3.17(d)
"Effective Time" 1.1(b)
"employment loss" 3.18(c)
"Encumbrance" 3.10(b)
"End Date" 9.1(b)
"Environmental Laws" 3.13(d)(iv)
"Environmental Liabilities and Costs" 3.13(e)
"Equity Commitment Letter" 4.7
"ERISA" 3.17(a)
"Exchange Act" 3.3
"Exchange Agent" 1.4(a)
"Facilities" 3.10(a)
"Facility" 3.10(a)
"filed" 3.6(a)
"filings" 3.6(a)
"Financial Advisor" 3.2(d)
"Financial Statements" 3.7
"Financing Schedule" 4.7
"GAAP" 3.7
"GCL" 1.1(a)
"Global Settlement" 3.13(d)(v)
"golden parachute" 3.15(a)(viii)
"Governmental Authority" 3.13(d)(vi)
"Governmental Agreements" 3.13(b)
"Hazardous Material" 3.13(d)(vii)
"HIPAA" 3.13(i)
"HSR Act" 3.3
"in the ordinary course of business 10.10(c)
"Income Tax Return" 3.12(f)
"Income Taxes" 3.12(g)
"Indemnified Parties" 6.4(a)
"Intellectual Property" 3.21(d)
"knowledge" 10.9
"Land Use Requirement 8.2(c)(ii)
"LC" 9.2(c)(i)
"LC Issuer" 9.2(c)(i)
"LC Proceeds" 9.2(c)(i)
"Lease" 3.10(c)
"Leased Real Property" 3.10(a)
"Leases" 3.10(c)
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"Legal Requirement" 3.13(d)(viii)
"Lenders Fee Title Properties" 3.10(b)
"License" 3.13(d)(ix)
"Linked Property" 8.2(c)(i)
"Listed Executives" 3.25
"mass layoff" 3.18(c)
"Major Equipment Leases" 3.15(a)(i)
"Managed Real Property" 3.10(a)
"Material Benefit Cost Increase" 6.5
"Material Contracts" 3.15(a)
"Medicaid" 3.13(d)(x)
"Medicare" 3.13(d)(xi)
"Merger" 1.1(a)
"Merger Certificate" 1.1(b)
"Merger Consideration Fund" 1.4(d)
"Merger Sub" Preamble
"Monthly Financials" 5.7
"multiemployer plan" 3.17(c)
"NOLs" 8.2(a)
"Noticed Actions" 3.13(a)
"off balance sheet arrangement" 3.7
"Omega Encumbrances" 3.5
"Option Price" 1.3(a)
"Options" 1.3(a)
"OSHA" 3.13(h)
"Other Taxes" 3.12(g)
"Other Tax Return" 3.12(f)
"Owned Real Property" 3.10(a)
"Permits" 3.13(d)(xii)
"Permitted Ancillary Lease" 3.10(b)
"Permitted Awards" 5.5
"Permitted Encumbrances" 3.10(b)
"Person" 1.4(e)
"plant closing" 3.18(c)
"PBGC" 3.17(h)
"PL/GL" 3.13(a)
"Preferred Stock" 3.4
"Programs" 3.13(d)(xiii)
"prohibited transaction" 3.17(a)
"Provider Agreements" 3.13(d)(xvi)
"Proxy Statement" 5.4(a)
"Purchaser Break-Up Fee and Expense
Reimbursement" 9.2(g)(i)
"Purchaser Expenses" 9.2(g)(iii)
"Purchaser" Preamble
"RCRA" 3.13(d)(iv)
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"Real Property" 3.10(a)
"Reimbursement Source Obligations" 3.13(d)(xv)
"reportable event" 3.17(j)
"Restricted Agreements" 5.11
"Restricted Stock" 1.3(b)
"Retention Plan" 5.6
"SEC" 3.6(a)
"Securities Act" 3.6
"Senior Credit Facility" 3.4
"Shares" 1.2(a)
"Significant Suppliers" 3.15(c)
"Stock Price" 1.2(a)
"Structural Assumptions" 4.7
"Structural Documents" 6.3
"Subsequent Transactions" 7.3(b)
"Subsidiary" 3.1
"Superior Proposal" 9.1(i)
"Surviving Corporation" 1.1(a)
"Takeover Statute" 3.2(b)
"Tax Return" 3.12(a)
"Taxes" 3.12(g)
"Taxing Authority" 3.12(h)
"Third Party Payor Program" 3.13(d)(xvi)
"Third Party Payors" 3.13(d)(xvii)
"transactions contemplated by this Agreement" 10.10(a)
"WARN" 3.18(c)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of the 29th day of June,
2004, by and among MARINER HEALTH CARE, INC., a Delaware corporation (the
"Company"), NATIONAL SENIOR CARE, INC., a Delaware corporation ("Purchaser") and
NCARE Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
Purchaser ("Merger Sub").
WHEREAS, the Company's subsidiaries are engaged in the ownership and
operation of a portfolio of skilled nursing facilities, long-term acute care
hospitals and other health care facilities and related activities (such
activities being hereinafter referred to as the "Business"); and
WHEREAS, the Boards of Directors of Purchaser, Merger Sub and the
Company have approved this Agreement and the Merger (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. (a) At the Effective Time (as defined in
subsection (b) below), Merger Sub shall be merged (the "Merger") with and into
the Company in accordance with Sections 251(a), (b) and (c) of the General
Corporation Law of the State of Delaware (the "GCL"), whereupon the separate
existence of Merger Sub shall cease and the Company shall be the surviving
corporation (the "Surviving Corporation").
(b) The Merger shall become effective at the time and on the date
on which a Certificate of Merger meeting the requirements of Sections 103 and
251(c) of the GCL (the "Merger Certificate") is filed with the Secretary of
State of the State of Delaware or, if later, the date specified in the Merger
Certificate (the "Effective Time"). The Certificate of Merger shall be submitted
for filing concurrently with the Closing of the Merger (the "Closing"). The
Closing shall take place at the offices of Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx
LLP, 405 Lexington Avenue, New York, New York, at 10:00 a.m. on the date which
is five (5) business days after the satisfaction or, to the extent permitted
hereby, waiver of all conditions to the Merger, other than those conditions that
by their nature are to be fulfilled at the closing, but subject to the
satisfaction or waiver of such conditions (the "Closing Date"), or on such other
date or at such other place as the parties may agree.
(c) From and after the Effective Time, the Surviving Corporation
shall possess all the assets, rights, privileges, powers and franchises and be
subject to all of the liabilities, restrictions, disabilities and duties of the
Company and Merger Sub, all as provided under the GCL.
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Section 1.2 Conversion of Shares. At the Effective Time:
(a) Each share of common stock, $.01 par value per share (the
"Common Stock") of the Company outstanding (including Restricted Stock (as
defined below) under the Company's 2003 Outside Directors' Stock Incentive Plan
(the "2003 Plan"), vested at the Effective Time pursuant to Section 1.3(b), the
issuance of which has not been deferred), but excluding (i) shares of such
Common Stock as to which appraisal rights are timely and properly perfected and
not withdrawn prior to the Effective Time, (ii) shares of Common Stock covered
by clause (b) below and (iii) Restricted Stock under the 2003 Plan as to which
issuance remains deferred immediately prior to the Effective Time (such
outstanding Common Stock of the Company other than the shares referred to in
clauses (i), (ii) and (iii) of this Section 1.2(a) being referred to as the
"Shares"), shall be converted automatically into the right to receive $30.00
(Thirty Dollars and 00/100) in cash per Share (such price per Share being
referred to as the "Stock Price" and the Stock Price multiplied by such Shares
being referred to as the "Aggregate Stock Price") payable, without interest, in
the manner provided in Section 1.4, to the holder of such Shares, upon surrender
of (1) the certificate that formerly evidenced such Shares or (2) book-entry
Shares. All Shares converted pursuant to this Section 1.2(a) shall, from and
after the Effective Time, no longer be outstanding and shall automatically be
cancelled and retired and cease to exist, and each holder thereof shall cease to
have any rights with respect thereto, except the right to receive the Stock
Price.
(b) Each share of Common Stock that is held by the Company as
treasury stock or owned by Purchaser or any subsidiary of Purchaser immediately
prior to the Effective Time shall be cancelled, retired and cease to exist and
no payment shall be made with respect thereto.
(c) Each share of common stock of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into and become one
validly issued, fully paid and non-assessable share of Common Stock of the
Surviving Corporation and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
Section 1.3 Stock Options; Restricted Stock.
(a) All options to acquire Common Stock outstanding immediately
prior to the Effective Time (the "Options") under the Company's 2002 Stock
Incentive Plan (the "2002 Plan"), whether or not then exercisable, shall (by all
necessary and appropriate action which shall be taken by the Board of Directors
of the Company (the "Company's Board") or such appropriate committee or
committees thereof) be canceled at the Effective Time and each holder of an
Option shall (i) be entitled to receive therefor an amount in cash equal to the
excess, if any, of the Stock Price over the per share exercise price of such
Option, multiplied by the total number of shares of Common Stock subject to such
Option (the "Option Price" for each such Option and the aggregate amount so
payable with respect to all Options being referred to as the "Aggregate Option
Price"), without interest, in the manner provided in Section 1.4, to the holder
of such Option, upon surrender of the agreement representing the applicable
Option, in full settlement of the Company's (and the Surviving Corporation's)
obligations under each such Option, or (ii) to the extent that the per share
exercise price of any Option equals or exceeds the Stock Price, at the Effective
Time, not receive or be entitled to receive any consideration from
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Purchaser, Merger Sub or the Surviving Corporation in respect of such Option.
Each Option shall after the Effective Time, represent for all purposes, only the
right to receive the cash consideration, if any, therefor contemplated by this
Section 1.3(a).
(b) All Restricted Stock awarded prior to the Effective Time (the
"Restricted Stock") under the 2003 Plan shall (by all necessary appropriate
action which shall be taken by the Company's Board or such committee or
committees thereof) be fully vested at the Effective Time. All Restricted Stock
that remains deferred at the Effective Time (the "Deferred Restricted Stock")
shall be cancelled and the holder thereof shall be entitled to receive, in lieu
thereof, an amount equal to the Stock Price multiplied by the number of shares
of Common Stock subject to such Restricted Stock award (the "Deferred Restricted
Stock Price" for each such award and the aggregate amount so payable with
respect to all Deferred Restricted Stock awards being referred to as the
"Aggregate Deferred Restricted Stock Price"), payable, without interest, in the
manner provided in Section 1.4 to each holder of the Deferred Restricted Stock,
upon surrender of the award representing the Deferred Restricted Stock. Each
share of Deferred Restricted Stock shall, after the Effective Time, represent
for all purposes, only the right to receive the cash consideration contemplated
by this Section 1.3(b). The sum of the Aggregate Stock Price, the Aggregate
Option Price and the Aggregate Deferred Restricted Stock Price is being referred
to as the "Aggregate Purchase Price."
(c) The Company shall deliver to Purchaser, at least ten days
prior to the Closing Date, updated lists of (i) the holders of Options,
indicating the number of Options held by each holder thereof and the exercise
price, expiration date and exercisability of such Options, and (ii) the holders
of Restricted Stock and Deferred Restricted Stock, indicating, with respect to
both items, as applicable, the number of shares of Common Stock subject to each
award held by each holder thereof, whether such Restricted Stock is issued and
outstanding or the issuance thereof has been deferred, the vesting schedule
thereof and the forfeiture date thereof.
Section 1.4 Payment of Aggregate Purchase Price.
(a) Prior to the Effective Time, Purchaser shall designate a bank
or trust company, reasonably acceptable to, and on terms approved by the
Company, to act as exchange agent ("Exchange Agent") for the payment of the
Aggregate Purchase Price to stockholders of the Company, holders of Options and
holders of Deferred Restricted Stock, entitled to payment thereof pursuant to
Sections 1.2(a), 1.3(a) and 1.3(b) hereof, respectively. Immediately prior to
the Effective Time, Purchaser shall deposit, or cause to be deposited, by wire
transfer in immediately available funds, in trust with the Exchange Agent, in
cash, the Aggregate Purchase Price. Promptly after the Effective Time but in no
event more than five (5) business days after the Effective Time, Purchaser will
send, or will cause the Exchange Agent to send, to each holder of Shares,
Options or Deferred Restricted Stock, as the case may be, at the Effective Time
a letter of transmittal applicable to the Shares, Options or Deferred Restricted
Stock, as the case may be, held by such holder for use in exchanging such
holder's Shares, Options or Deferred Restricted Stock, as the case may be, for
the consideration payable with respect to the Shares, Options or Deferred
Restricted Stock held by such holder, as the case may be, pursuant to Sections
1.2(a), 1.3(a) and 1.3(b) hereof, as appropriate (which shall be in form and
substance satisfactory to the Purchaser and which shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the certificates representing Shares or
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other documentation representing such Options or Deferred Restricted Stock
awards, as the case may be, to the Exchange Agent).
(b) Each holder of Shares, Options and Deferred Restricted Stock
that have been converted into a right to receive the appropriate consideration
as set forth in Sections 1.2(a), 1.3(a) and 1.3(b) hereof, upon surrender to the
Exchange Agent of: (i) a certificate or certificates representing such Shares,
or, in the case of Shares represented by a book-entry position, transmission of
an agents' message to the Exchange Agent in connection with the book-entry
Shares to be surrendered; (ii) an agreement representing the Options to be
surrendered; or (iii) an award representing the Deferred Restricted Stock to be
surrendered, will be entitled to receive, in exchange therefor, cash which such
holder has the right to receive pursuant to Sections 1.2(a), 1.3(a) or 1.3(b)
hereof, as applicable, in the form of a check to be mailed (or made available by
hand if so elected by the surrendering holder of a Share, Option or Deferred
Restricted Stock, provided that payment by hand is permissible by the Exchange
Agent) to such holder. The certificate or certificates for Shares, the
electronic position for book-entry Shares, the agreement representing the Option
or award representing Deferred Restricted Stock, as the case may be, so
surrendered shall be cancelled and the holder thereof shall receive the
appropriate consideration therefor.
(c) After the Effective time there shall be no further
registration of transfers of Shares. If after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
cancelled and exchanged as provided for, and in accordance with the procedures
set forth, in this Section.
(d) All monies delivered by Purchaser to the Exchange Agent (the
"Merger Consideration Fund") shall be invested by the Exchange Agent as set
forth in an Exchange Agent Agreement between the Company and the Exchange Agent
(so long as such directions do not impair the rights of the holders of Shares)
in direct obligations of the United States of America, obligations for which the
full faith and credit of the United States of America is pledged to provide for
the payment of principal and interest, commercial paper rated of the highest
quality by Xxxxx'x Investors Service Inc. or Standard & Poor's Corporation or
certificates of deposit issued by a commercial bank having combined capital,
surplus and undivided profits aggregating at least $500,000,000 (provided that
no such investment made prior to the thirtieth day after the Effective Time
shall mature more than seven (7) days after such investment is made), and any
net earnings with respect thereto shall be paid to the Surviving Corporation as
and when requested by the Surviving Corporation, provided that, subject to
Section 1.4(e), at all times funds sufficient for the payment of the Stock
Price, Options Price and Deferred Restricted Stock Price, in accordance with the
provisions hereof shall be available to the Exchange Agent.
(e) Any portion of the Merger Consideration Fund made available to
the Exchange Agent pursuant to Sections 1.4(a) and that remains unclaimed by the
holders of Shares, Options or Deferred Restricted Stock, 24 months after the
Effective Time shall be returned to Purchaser, upon demand, and any such holder
that has not exchanged such holder's Shares, Options or Deferred Restricted
Stock in accordance with this Section 1.4 prior to that time shall thereafter
look only to Purchaser to exchange such Shares, Option or Deferred Restricted
Stock. Notwithstanding the foregoing, Purchaser shall not be liable to any
holder of Shares, Options or Deferred Restricted Stock for any amount paid to a
public official pursuant to
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applicable abandoned property laws. Any amounts remaining unclaimed by holders
of Shares, Options or Deferred Restricted Stock three (3) years after the
Effective Time (or such earlier date prior to such time as such amounts would
otherwise escheat to or become property of any governmental entity) shall, to
the extent permitted by applicable law, become the property of Purchaser, free
and clear of any claims or interest of any Person previously entitled thereto.
For purposes of this Agreement, "Person" means an individual, a corporation, a
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
(f) In the event that any certificates evidencing Shares shall
have been lost, stolen or destroyed, the Exchange Agent shall pay, in exchange
for such lost, stolen or destroyed certificates, upon the making of an affidavit
of that fact by the holder thereof, the Stock Price related to the Shares
represented by such certificates; provided, however, that Purchaser may, in its
discretion and as a condition precedent to the payment of the Stock Price,
require the owner of such lost, stolen or destroyed certificates to deliver a
bond in such sum as Purchaser may reasonably direct as indemnity against any
claim that may be made against Purchaser, the Surviving Corporation or the
Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
(g) If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
capital stock of the Company shall occur by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of shares
(other than upon the exercise of Options), or any similar transaction, or any
stock dividend thereon with a record date during such period, the Aggregate
Purchase Price shall be appropriately adjusted to provide the holders of Shares,
Options or Deferred Restricted Stock the same economic effect as contemplated by
this Agreement prior to such event.
Section 1.5 Dissenting Shares. Notwithstanding Section 1.2, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with the GCL shall not be
converted into a right to receive the Stock Price unless such holder fails to
perfect or withdraws or otherwise loses his right to appraisal. If after the
Effective Time such holder fails to perfect or withdraws or loses his right to
appraisal, such Shares shall be treated as if they had been converted as of the
Effective Time into a right to receive the Stock Price. The Company shall give
Purchaser prompt notice of any demands received by the Company for appraisal of
Shares, and Purchaser shall have the right to participate in all negotiations
and proceedings with respect to such demands. The Company shall not, except with
the prior written consent of Purchaser, make any payment with respect to, or
settle or offer to settle, any such demands. Purchaser shall be responsible for
any and all payments required to be made with respect to Shares for which the
holder thereof has perfected (and not withdrawn) his dissenter's rights, as well
as the costs and expenses of all proceedings relating to the adjudication and/or
settlement thereof, subject to Purchaser's right to enforce the closing
condition set forth in Section 8.2(e) hereof with respect to the maximum
permissible number of Shares which may be the subject of perfected appraisal
rights.
Section 1.6 Change in Control Payments. Immediately prior to the
Effective Time, Purchaser shall deposit, or cause to be deposited, by wire
transfer in immediately available
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funds, in trust with the Company, in cash, an amount sufficient to satisfy all
Change of Control Payments (as defined below), which are due and payable at the
Closing. Purchaser shall pay or cause the Surviving Corporation to pay each
employee of the Company listed on Schedule 1.6 of the Company Disclosure
Schedule who, by reason of the consummation of the Merger, is entitled to
receive a payment of compensation from the Company pursuant to an agreement or
arrangement existing on the date hereof (a "Change in Control Payment") the
amount to which he or she is entitled pursuant to such agreement or arrangement.
The Surviving Corporation will make all such Change of Control Payments at the
Effective Time (unless, pursuant to Schedule 1.6 of the Company Disclosure
Schedule or the terms and conditions of such agreement or arrangement, such
payment is due at a later time, in which event, the applicable Change of Control
Payment will be made at such later time, in each case upon satisfaction of the
conditions to such payment set forth in Schedule 1.6 of the Company Disclosure
Schedule or the terms and conditions of such agreement or arrangement).
Section 1.7 Payment Beneficiaries. The provisions of Sections 1.3(a) and
(b) and Section 1.6 hereof are intended to be for the benefit of, and will be
enforceable by, each employee of the Company entitled to receive a payment with
respect to an Option, payment in consideration of Deferred Restricted Stock or a
Change of Control Payment, and his or her heirs and his or her representatives.
Section 1.8 Withholding. The Surviving Corporation shall be entitled to
deduct and withhold from the amounts payable pursuant to this Agreement to any
holder of Shares, Options or Deferred Restricted Stock or Person entitled to a
Change in Control Payment such amounts as the Surviving Corporation is required
to deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any provisions of
state, local or foreign tax law. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of such Shares, Options or Deferred Restricted
Stock or Person entitled to a Change in Control Payment in respect of which such
deduction and withholding was made by the Surviving Corporation.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The certificate of
incorporation of the Company in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law
Section 2.2 By-laws. The by-laws of the Company in effect at the
Effective Time shall be the by-laws of the Surviving Corporation until amended
in accordance with applicable law.
Section 2.3 Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Sub at the Effective Time shall be
the directors of the Surviving Corporation, and (ii) the officers of Merger Sub
at the Effective Time shall be the officers of the Surviving Corporation.
6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Merger Sub and Purchaser
that, subject to Section 10.12 hereof, except as disclosed anywhere in the
Company Disclosure Schedule delivered by the Company to Purchaser simultaneously
with the execution and delivery hereof (the "Company Disclosure Schedule";
reference herein and in the Company Disclosure Schedule to the Company shall
include all Subsidiaries (as defined below), unless the context otherwise
requires):
Section 3.1 Organization and Qualification. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to own its properties and to
conduct the businesses in which it is now engaged. The Company is authorized or
qualified to do business and is in good standing in each other jurisdiction in
which the character of the property owned, leased or operated by the Company, or
the nature of the business or activities conducted by the Company, make such
authorization or qualification necessary, except where the failure to be so
qualified or in good standing would not have a Company Material Adverse Effect
(as defined below). The Company Disclosure Schedule sets forth all jurisdictions
in which the Company is authorized or qualified to do business. Except for the
Subsidiaries listed on the Company Disclosure Schedule, the Company has no
Subsidiaries, owns no capital stock or other proprietary interest, directly or
indirectly, in any other corporation, association, trust, partnership, limited
liability company, joint venture or other entity and has no agreement with any
person, firm or corporation to acquire any such capital stock or other
proprietary interest. The Company has full power, authority and legal right, and
all necessary approvals, Permits (as defined below), Licenses (as defined below)
and authorizations to own its properties and to conduct the Business; except
where the failure to have such approvals, Permits, Licenses or authorizations
would not have a Company Material Adverse Effect. The copies of the certificate
of incorporation and by-laws of the Company and each of the Subsidiaries
("Charter Documents") and minute books and stock ledgers of the Company and the
Subsidiaries, all of which have been made available to Purchaser, are complete
and correct in all material respects (except for the stock ledgers that are
complete and correct in all respects), and neither the Company nor any
Subsidiaries are in violation of any Charter Documents. As used in this
Agreement, a "Subsidiary" of the Company is an entity, whether incorporated or
unincorporated, (i) in which the Company owns, directly or indirectly, more than
fifty percent (50%) of the securities or other ownership interests having by
their terms ordinary voting power to elect more than fifty percent (50%) of the
directors or other persons performing similar functions, (ii) in which the
Company (or an entity which is otherwise a Subsidiary of the Company) is a
general partner, managing member or has similar authority or (iii) the
management of the entity in question which the Company (or an entity which is
otherwise a Subsidiary of the Company) has the power to direct. Other than the
definition of "Company Material Adverse Change" and "Company Material Adverse
Effect" in the following sentence, for purposes of this Section 3.1 only, all
references to the Company shall be deemed to be references to the Company only
and not the Subsidiaries. "Company Material Adverse Change" or "Company Material
Adverse Effect," as the case may be, shall mean any change, effect, event or
condition occurring on or prior to November 21, 2004 (i) which, individually or
in the aggregate, has had a material adverse effect on the business, results of
operations or financial condition or assets of the Company and the Subsidiaries,
taken as a whole, or (ii) that could
7
reasonably be expected to prevent or materially delay the Company's ability to
consummate the transactions contemplated hereby; provided, however, that, in no
event will any of the following, alone or in combination, constitute a Company
Material Adverse Effect or a Company Material Adverse Change: (a) a change in
the trading prices of any of the Company's securities, in and of itself; (b)
general economic, political and financial market changes and the effects,
changes, events, circumstances and conditions resulting therefrom, to the extent
not having a materially disproportionate impact on the Company and the
Subsidiaries taken as a whole than the effect on similarly situated companies;
(c) reductions in regulatory reimbursement rates affecting the Company taking
effect after the Effective Time and the effects, changes, events, circumstances
and conditions resulting therefrom, to the extent not having a materially
disproportionate impact on the Company and the Subsidiaries taken as a whole
than the effect on similarly situated companies; (d) any effects, changes,
events, circumstances or conditions resulting from the announcement or pendency
of any of the transactions provided for in this Agreement; (e) any effects,
changes, events, circumstances or conditions resulting from compliance by the
Purchaser or the Company with the terms of, or the taking of any action
specifically required to be taken in, this Agreement; and (f) the effect of any
matters specifically disclosed in the Company Disclosure Schedule or in the
Company SEC Filings (as defined below) as filed or amended through the date
hereof, excluding any disclosures set forth under captions entitled "Risk
Factors," and "Forward-looking Statements" unless the same information is
appropriately set forth on the Company Disclosure Statement.
Section 3.2 Authority. (a) The Company has the full legal right,
corporate power and authority to enter into this Agreement and the transactions
contemplated hereby and to perform its obligations pursuant to the terms of this
Agreement, subject to the approval and adoption of this Agreement by the
Company's stockholders and the consents set forth in the Company Disclosure
Schedule to consummate the Merger. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other laws of general
application referring to or affecting enforcement of creditors' rights, or by
general equitable principles (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(b) At a meeting duly called and held, the Company's Board
unanimously (i) determined that this Agreement and the transactions contemplated
hereby, including the Merger, are in the best interests of the Company and the
Company's stockholders and declared the advisability of the Merger, (ii)
approved and authorized this Agreement, the Merger and the other transactions
contemplated hereby, (iii) resolved, subject to its fiduciary duties, to
recommend approval and adoption of this Agreement and the Merger by the
Company's stockholders and (iv) took all appropriate and necessary action to
render any anti-takeover statute or regulation of any jurisdiction, including
Section 203 of the GCL (each, a "Takeover Statute"), inapplicable to this
Agreement, the Merger and the other transactions contemplated by this Agreement.
No other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery or performance of this Agreement or to
consummate the Merger and the other transactions contemplated by this Agreement
(other than, with respect to the consummation of the Merger, the approval and
adoption of this Agreement by the stockholders of the Company in accordance with
the GCL and the filing of the Certificate of
8
Merger in accordance with the GCL). The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any class
or series of the Company's capital stock necessary to approve the Merger,
approve and adopt this Agreement and in favor of the transactions contemplated
hereby.
(c) The Company has no knowledge of any state anti-takeover or
similar statute (other than the Takeover Statute) that is applicable to
Purchaser or Merger Sub in connection with the Merger, this Agreement or any of
the transactions contemplated hereby or thereby.
(d) X.X. Xxxxxx Securities, Inc. (the "Financial Advisor") has
delivered to the Company's Board its written opinion, dated as of the date of
this Agreement, that, as of such date and based on the assumptions,
qualifications and limitations contained therein, the Stock Price is fair to the
holders of Shares from a financial point of view.
(e) Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Financial Advisors, Inc.
("Xxxxxxxx Xxxxx") has delivered to the Company's Board, its written opinion
dated as of the date of this Agreement, as to the matters set forth on Schedule
3.2(e) hereto (the "Initial Opinion").
Section 3.3 Conflicts; Non-Contravention. Neither the execution,
delivery or performance of this Agreement by the Company, nor the consummation
of the transactions contemplated hereby, violates or conflicts with any
provision of the certificate of incorporation or by-laws of the Company or the
equivalent organizational documents of any of the Subsidiaries or any provision
of the Joint Plan of Reorganization of the Company confirmed on April 3, 2002
(the "Company Plan of Reorganization") or any order, stipulation, settlement,
ruling, decree or agreement pursuant to or in connection with the bankruptcy
proceeding to which the Company was subject (collectively, "Bankruptcy Orders")
or assuming (a) the filing of a Certificate of Merger, (b) compliance with
applicable requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations promulgated thereunder, (c) compliance with
the requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act");
(d) compliance with Legal Requirements relating to Licenses and Permits with
respect to the Facilities (as such terms are defined below); and (e) the
approval and adoption of this Agreement by the stockholders of the Company in
accordance with the GCL, violates or conflicts with, any statute, ordinance,
regulation, order, judgment or decree of any court or Governmental Authority (as
defined below), or violates or conflicts with or will result in any breach of
any of the terms of or constitute a default (or any event which, with notice or
lapse of time or both, would become a default) under or give others any right of
termination, amendment, acceleration or cancellation of, result in any payment
or other obligation or give others any right to any payment or offer of any
payment, or the creation of any lien pursuant to the terms of any contract or
agreement to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any of the assets of the Company or any Subsidiary
is bound, except where the occurrence of any of the foregoing would not result
in a Company Material Adverse Effect. Other than (i) the filing of a Certificate
of Merger in accordance with the GCL, (ii) compliance with applicable
requirements of the Exchange Act and the HSR Act, (iii) compliance with Legal
Requirements relating to Licenses issued by a Governmental Authority with
respect to the licensure of the Facilities consistent with past practice, (iv)
other consents and approvals set forth in the
9
Company Disclosure Schedule and (v) approval of the Merger by the Company's
stockholders, no consents, approvals or authorizations of, or filings with, any
Governmental Authority or any other person or entity are required in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except where the failure to obtain the
required consents, if any, with respect to Licenses, Permits, certificates,
contracts, leases and other agreements would not have a Company Material Adverse
Effect.
Section 3.4 Capitalization. The authorized capital stock of the Company
consists of (a) 80,000,000 shares of Common Stock and (b) 10,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"). As of the
date hereof, there are issued and outstanding (a) 20,015,000 shares of Common
Stock, including 11,250 Shares subject to Restricted Stock awards the issuance
of which has not been deferred, (b) Options to purchase an aggregate of
1,961,060 shares of Common Stock having the respective exercise prices set forth
on the Company Disclosure Schedule and (c) 30,000 shares of Common Stock subject
to Restricted Stock awards, the issuance of which Restricted Stock has been
deferred. None of the Preferred Stock is issued or outstanding. All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable and free of preemptive rights,
except for the issued and outstanding Restricted Stock. Except as set forth in
this Section 3.4 there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, (iii) no options, warrants, restricted stock awards or other rights to
acquire from the Company, and no obligation of the Company to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company and (iv) no phantom stock or
other derivative rights related to any securities of the Company (the items in
clauses (i)-(iv) being referred to collectively as the "Company Securities").
There are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Company Securities.
Section 3.5 Subsidiaries. Each Subsidiary of the Company is a
corporation, limited liability company or limited partnership duly incorporated,
formed or organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each Subsidiary has all
corporate, partnership or limited liability company, as the case may be, power
and all governmental Licenses, Permits, authorizations, consents and approvals
required to carry on its business as now conducted and is duly qualified to do
business as a foreign corporation, partnership or limited liability company, as
the case may be, and in good standing in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or be in
good standing or possess governmental Licenses, Permits, authorizations,
consents and approvals would not have a Company Material Adverse Effect. Except
as set forth in the Company Disclosure Schedule, all of the outstanding capital
stock of each Subsidiary of the Company is owned by the Company, directly or
indirectly, free and clear of any Encumbrance, except for (i) Encumbrances in
connection with the Company's current senior credit facility (the "Senior Credit
Facility") and mortgages obtained from Omega Healthcare Investors, Inc. (the
"Omega Encumbrances"), and (ii) such other Encumbrances as would not have a
Company Material Adverse Effect. The Company Disclosure Schedule sets forth, for
each Subsidiary, the outstanding capital stock, jurisdiction of incorporation
and all jurisdictions in which it is qualified to do business as a foreign
corporation. There are no outstanding (i) securities of the
10
Company or any of its Subsidiaries convertible into or exchangeable for shares
of capital stock or other voting securities or ownership interests in any
Subsidiary of the Company, or (ii) options or other rights to acquire from the
Company or any of its Subsidiaries, and no other obligation of the Company or
any of its Subsidiaries to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable for
any capital stock, voting securities or ownership interests in, any Subsidiary
of the Company (the items in clauses (i) and (ii) being referred to collectively
as the "Company Subsidiary Securities"). There are no outstanding obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any outstanding Company Subsidiary Securities.
Section 3.6 Company SEC Filings. (a) The Company has made available to
Purchaser (i) the Company's annual report on Form 10-K for the fiscal year ended
December 31, 2003 (the "Company 10-K"), (ii) its quarterly report on Form 10-Q
for its fiscal quarter ended March 31, 2004 (the "Company 10-Q"), (iii) its
current reports on Form 8-K filed on March 16, 2004 and May 11, 2004, (iv) its
proxy or information statements relating to meetings of, or actions taken
without a meeting by, the stockholders of the Company held since January 1,
2003, (v) all registration statements filed under the Securities Act of 1933, as
amended (the "Securities Act"), including all prospectuses contained therein or
constituting a prospectus thereunder (including under Rule 428 promulgated by
the SEC under such act) since January 1, 2002 and any other registration
statement that was in effect at any time since January 1, 2002, (vi) all
amendments to any of the foregoing and all materials incorporated therein by
reference and (vii) all certifications and statements with respect to any of the
foregoing required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002,
and the rules and regulations of the SEC promulgated thereunder (the filings
referred to in clauses (i) through (vii) being hereinafter referred to as the
"Company SEC Filings"). As used in this Section, the terms "filings" and "filed"
shall be broadly construed to include any manner in which a document or
information is furnished, supplied or otherwise made available to the Securities
and Exchange Commission (the "SEC").
(b) As of its filing date, each Company SEC Filing complied as to
form in all material respects with the requirements of the applicable act and,
as of its filing date and in the case of registration statements and
prospectuses at all times while available for use by the Company or a selling
stockholder, did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(c) All issued and outstanding Company Securities were offered,
issued, sold and delivered by the Company in compliance, in all material
respects, with all applicable federal and state laws concerning the issuance of
securities.
(d) Except as set forth on the Company Disclosure Schedule, the
Company is not a party to any agreement or commitment obligating it to register
under the Securities Act or offer for sale any Company Securities.
(e) Since January 1, 2002, the Company has made all necessary
filings with the SEC required of it under the Exchange Act and other federal
securities laws.
11
Section 3.7 Financial Statements. The audited consolidated financial
statements and unaudited condensed consolidated interim financial statements of
the Company and its Subsidiaries included in the Company 10-K, the Company 10-Q
or other Company SEC Filings referred to in Section 3.6 (collectively, the
"Financial Statements") fairly present in all material respects, in conformity
with generally accepted accounting principles in the United States applied on a
consistent basis ("GAAP") (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its Subsidiaries as of the
balance sheet dates presented and their consolidated results of operations and
cash flows for the periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year-end audit adjustments. Neither the
Company nor any of its Subsidiaries are parties, nor at the respective balance
sheet dates in the Financial Statements since the effective date of Item 303 of
Regulation S-X promulgated by the SEC, were parties, to any securitization
transaction or "off balance sheet arrangement," as defined in Item 303 of
Regulation S-X, other than as described in the Management Discussion and
Analysis section of the Company 10-K or Company 10-Q. The Company has made and
kept books and records and accounts, which, in reasonable detail, on a
consolidated basis, accurately and fairly reflect in all material respects the
activities of the Company.
Section 3.8 Absence of Certain Changes. Except as contemplated hereby or
as set forth on the Company Disclosure Schedule, subsequent to December 31, 2003
there has not been any Company Material Adverse Change. Except as contemplated
hereby or as set forth on the Company Disclosure Schedule, subsequent to
December 31, 2003 through the date of this Agreement, there has not been: (a)
any sale, transfer, lease, license or disposition of any Facilities or material
real property or interests therein or material tangible assets or any purchase,
acquisition, lease or license of any Facilities or material real property or
interests therein, or material tangible assets; (b) any material damage or
destruction (whether or not insured) affecting the Facilities; (c) any
transaction by the Company outside the ordinary course of business; (d) any
declaration or payment of any dividend or distribution in respect of the capital
stock, or any direct or indirect redemption, purchase, or other acquisition of
any capital stock, of the Company; and (e) any change in accounting methods or
practices (including any change in revenue recognition, depreciation or
amortization polices or rates) by the Company or any revaluation by the Company
of any of its assets.
Section 3.9 Absence of Undisclosed Liabilities. The Company and the
Subsidiaries do not have any liabilities or obligations, contingent or
otherwise, except (a) liabilities and obligations in the respective amounts
reflected on or reserved against in the Company's consolidated balance sheet as
of December 31, 2003 included in the Financial Statements, and (b) liabilities
and obligations incurred consistent with past practice since December 31, 2003
which would not be prohibited by this Agreement or which, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect.
Section 3.10 Health Care Facilities; Real Property Owned or Leased.
(a) Identification of Health Care Facilities. The Company
Disclosure Schedule sets forth for each skilled nursing home, long-term acute
care hospital and other health care facility and other offices or facilities
(each, a "Facility" and collectively the "Facilities") owned, leased, operated
or managed by the Company or its Subsidiaries (i) the facility number or
12
other identification of each Facility, (ii) the street address, and town or
city, county and state jurisdiction, (iii) the real property tax or parcel
identification number(s) associated with each Facility, (iv) identification as a
skilled nursing home, LTAC, office, or other usage, (v) identification as owned
in fee, leased from third parties, or managed, (vi) the number of beds for which
the facility is licensed, (vii) whether the Facility is located in a state that
requires CONs (as defined below) for such Facilities, (viii) the identification
of the Subsidiary or Subsidiaries of the Company which own, lease, or manage
such Facility and which hold the operating license therefor and (ix)
identification of any minority interests, joint ventures, contracts of sale,
options, management contracts or other agreements whereby the Company or its
Subsidiaries do not have 100% ownership and operation of any Facility. All
Facilities owned in fee by the Company or its Subsidiaries are referred to as
"Owned Real Property"; all Facilities leased by the Company or its Subsidiaries
(other than by the Company to a Subsidiary, or by a Subsidiary to the Company or
another Subsidiary) are referred to as "Leased Real Property"; all Facilities
operated or managed by the Company or its Subsidiaries that are not currently
leased or owned by the Company or its Subsidiaries are referred to as "Managed
Real Property"; and the Owned Real Property, the Leased Real Property and the
Managed Real Property are collectively referred to as the "Real Property." The
Real Property includes all interests in real property necessary to conduct the
Business and other operations of the Company and the Subsidiaries consistent
with past practice. Schedule 3.10(b) of the Company Disclosure Schedule lists
certain real property which are non-operating assets of the Company and are
referred to herein as "Other Real Property".
(b) Owned Real Property. With respect to each Owned Real Property:
(i) the Company or a Subsidiary (as the case may be) has insurable indefeasible
fee simple title to such Owned Real Property, free and clear of all
Encumbrances, except Permitted Encumbrances (as such terms are defined below),
(ii) except for Permitted Encumbrances or as otherwise set forth in the Company
Disclosure Schedule, the Company or such Subsidiary has not leased, licensed or
otherwise granted to any Person the right to use or occupy such Owned Real
Property or any portion thereof, other than the Company's or such Subsidiaries'
respective patients, employees and contractors in such capacity only; and (iii)
except as otherwise set forth in the Company Disclosure Schedule, other than the
right of Purchaser pursuant to this Agreement, there are no outstanding
agreements, contracts, options, rights of first offer or rights of first refusal
to purchase such Owned Real Property or any portion thereof, or any air or
development rights or other interest therein. To the knowledge of the Company,
the Company and the Subsidiaries have not transferred any air or development
rights relating to any of the Owned Real Property. Except as otherwise set forth
in the Company Disclosure Schedule, neither the Company nor any Subsidiary is a
party to any agreement or option to purchase any real property or interest
therein. American Land Title Association ("ALTA") policies of title insurance
(or marked title insurance commitments having the same force and effect as title
insurance policies) have been issued by national title insurance companies
insuring the interest of the lender under our Senior Credit Facility on December
19, 2003 to each of the Owned Real Property in the manners set forth therein
(the "Lender's Fee Title Policies"), and, to the knowledge of the Company, such
Lender's Fee Title Policies are valid and in full force and effect and no claim
has been made under any such policy. The Company has made available to Purchaser
true and complete copies of all Lender's Fee Title Policies, if any, in the
possession of the Company.
13
The term "Encumbrance" means any mortgage, deed of trust, deed to secured
debt, lien, security interest, security agreement, conditional sale, installment
sale or other title retention agreement, limitation, pledge, option, charge,
assessment, restrictive agreement, restriction, encumbrance, adverse interest,
charge, restriction on transfer or otherwise, or any exception to or defect in
title or other ownership interest (including reservations, rights of way,
possibilities of reverter, encroachments, easements, rights of entry, covenants,
conditions, leases and licenses), but excepting standard ALTA exceptions.
The term "Permitted Encumbrances" shall mean with respect to each Real
Property or other assets of the Company: (A) as to the Owned Real Property only,
the Encumbrances set forth in the Lender's Fee Title Policies; (B) as to the
Leased Property only, Encumbrances existing as of the date hereof (C) real
estate Taxes, assessments and other governmental levies, fees or charges imposed
with respect to such real property that are not due and payable as of the
Effective Time, or that are being contested in good faith and for which
appropriate reserves have been established in accordance with GAAP; (D) the
Leases (as defined below); (E) any Permitted Ancillary Lease (as defined below),
(F) zoning, building codes and other land use Legal Requirements regulating the
use or occupancy of such real property or the activities conducted thereon that
are imposed by any Governmental Authority (as defined below) having jurisdiction
over such real property provided same are either (1) not violated by the
existing structures on or use of such real property or (2) if violated, such
non-conforming structures or uses are "grandfathered" and allowed under
applicable law; (G) easements, covenants, conditions, restrictions and other
similar matters of record or as set forth on the Company Disclosure Schedule (H)
Encumbrances securing the Senior Credit Facility and the Omega Encumbrances
(each as defined below) set forth on the Company Disclosure Schedule; (I)
encumbrances for warehousemen, mechanics and materialmen and other similar
statutory encumbrances incurred in the ordinary course of business consistent
with past practice; (J) rights of current patients and residents to occupy or
possess their residence in the Company's skilled nursing facilities, assisting
living facilities, independent living facilities and long-term acute care
facilities (which shall not include rights of any so-called "life care" patients
or residents); and (K) rights of owners of leased personal property. "Permitted
Ancillary Lease" means a short term lease or sub-lease of a non material portion
of an operational Facility, in any event such portion not to exceed 5,000 square
feet, to a third party to facilitate the provision of services by such third
party at such Facility related or reasonably incident to the primary business of
the owner, lessee, or sublessee, as applicable, entered into in the ordinary
course of business, having a term of no longer than one year, provided that such
lease may be renewed with the consent of Purchaser (which consent shall not be
unreasonably withheld) at the end of the initial one year term for additional
one year terms and other non-material leases of a portion of the real estate on
which a Facility is situated that do not interfere with the operations of the
Facility.
(c) Leased Real Property. The Company Disclosure Schedule sets
forth a true and complete list of all leases as same may have been amended,
extended or renewed (each such lease, together with such respective associated
documents, being a "Lease" and, collectively, the "Leases") for all Leased Real
Property (including the date and name of the parties to such Lease document).
The Company has made available or delivered to Purchaser a true and complete
copy of each such Lease document. With respect to each of the Leases, except as
otherwise set forth on the Company Disclosure Schedule and except as would not
have a Company Material Adverse Effect: (i) such Lease is valid, binding,
enforceable and in full force and effect except as
14
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other laws of general application referring to or
affecting enforcement of creditors' rights, or by general equitable principles
(regardless of whether enforcement is sought in a proceeding at law or in
equity); (ii) the Company's or Subsidiary's possession and quiet enjoyment of
the Leased Real Property under such Lease has not been disturbed, and, to the
knowledge of the Company, there are no disputes with respect to such Lease;
(iii) neither the Company nor, to the knowledge of the Company, any Subsidiary
has received written notice that the Company or such Subsidiary is in breach or
default under such Lease, and the Company has no knowledge of any state of facts
which with notice or lapse of time or both would constitute such a breach or
default, and neither the Company nor any Subsidiary has sent a notice of default
to any third party under any Lease; (iv) neither the Company nor any Subsidiary
has subleased, licensed or otherwise granted any Person the right to use or
occupy such Leased Real Property or any portion thereof, other than Permitted
Ancillary Leases and residency by the Company's or any Subsidiaries' respective
patients or residents in such capacity only and in the ordinary course of
business; (v) neither the Company nor any Subsidiary has granted or entered into
any so called "life care agreements" that are currently in effect; (vi) neither
the Company nor any Subsidiary has mortgaged, collaterally assigned or granted
any other security interest in such Lease or any interest therein; (vii) all
rent due and owing by the Company or any Subsidiary under such Lease from and
after May 13, 2002 has been paid in full; (viii) neither the Company nor, to the
Company's knowledge, any Subsidiary has received any written notice to the
effect that such Lease will not be renewed at the termination of the term
thereof or that any such Lease will be renewed only at a substantially higher
rent; and (ix) to the knowledge of the Company, the full security deposit
required under such Lease continues to be held by the landlord thereunder.
(d) Provisions Affecting all Real Property. With respect to this
Section 3.10(d), except as would not result in a Company Material Adverse
Effect: all structural, mechanical and other physical systems, including but not
limited to heating, ventilating, air conditioning, plumbing, electrical,
mechanical, parking, sewer and drainage systems at each Facility are in working
condition. All water, sewer, gas, electric, telephone, drainage and other
utilities required for use and operation of each Facility are connected to
municipal or public utility services and are adequate to service the operation
of the Business and the other operations conducted at each Facility. To the
knowledge of the Company, each parcel of Real Property has direct access (or a
valid easement allowing it access) to a public street adjoining such parcel of
Real Property, and such access is not dependent on any land or other real
property interest that is not included in such parcel of Real Property. Neither
the Company nor any Subsidiary has received written notice from any Governmental
Authority or other entity having jurisdiction over the Real Property or any
portion thereof describing the violation of any Legal Requirements relating to
Permits or any covenants, conditions, restrictions, easements and other
Encumbrances and similar matters affecting such Facility. The Company has
obtained all Permits necessary for the operation for its Facilities, all of
which are in full force and effect, and neither the Company nor any Subsidiary
has received any written notice from any Governmental Authority or other entity
having jurisdiction over the Real Property or any portion thereof describing a
violation of or threatening a suspension, revocation, modification or
cancellation of any Permit. There are no pending, or to the Company's knowledge,
threatened condemnation, fire, health, safety, building, zoning, land use,
assessment, or similar proceedings relating to the Facilities. Except for
Permitted Encumbrances and other than as set forth in the Company Disclosure
Schedule, there are no parties other than the Company or a Subsidiary in
possession of any Facilities and there
15
are no sublease, concession, occupancy, license or similar arrangements
affecting any Facilities (except for residency at the Facilities by current
residents or patients in such capacity only and in the ordinary course of
business). Except as set forth in the Company Disclosure Schedule, no
construction, improvements, or alterations, the cost of which exceeds $100,000,
are in process, under construction, planned or required at any Facilities. No
portion of the Real Property or any improvements or buildings thereon has
suffered any damage by fire, earthquake, flood or other casualty which has not
heretofore been repaired and restored in to operational use and in accordance
with applicable Legal Requirements and the requirements of any Lease.
Section 3.11 Title to Non-Real Property Assets; Condition of Personal
Property. With respect to assets other than real property, to the knowledge of
the Company and except as otherwise set forth on the Company Disclosure
Schedule, the Company has good title to the owned assets reflected on the
balance sheet set forth in the Financial Statements, subject to the Permitted
Encumbrances. Except as otherwise set forth on the Company Disclosure Schedule,
the Company leases or owns all non-real property assets necessary for use in the
operations of the Business as currently conducted, consistent with past
practices, other than inventory and supplies which need to be purchased and
replenished in the ordinary course of business. All of such non-real property
assets necessary for operation of the Facilities are located in the Facilities.
All such properties and assets and fixtures and Facility equipment are in
working condition and have been maintained and serviced in accordance with the
normal practices of the Company, except where the failure to be in working
condition or maintained and serviced as described above would not have a Company
Material Adverse Effect. At the Effective Time, none of the personal property
assets of the Company will be subject to any Encumbrances other than the
Permitted Encumbrances. There are no material personal property assets located
at any of the Facilities of the Company that are not owned or leased by the
Company, except in connection with any Permitted Ancillary Lease. Except as
otherwise set forth on the Company Disclosure Schedule, all Major Equipment
Leases (as defined below) are in full force and effect and all rent and other
charges thereunder due and owing from and after May 13, 2002 have been or will
be paid by the Company. To the knowledge of the Company and except as otherwise
set forth on the Company Disclosure Schedule, all leases of personal
property(other than Major Equipment Leases) used by the Company are in full
force and effect and all rent and other charges there under due and owing from
and after May 13, 2002 have been paid by the Company except where the failure of
such leases to be in full force and effect or failure to pay rent and other
charges thereunder would not have a Company Material Adverse Effect.
Section 3.12 Taxes.
(a) In all material respects, the Company and the Subsidiaries
have (i) duly and timely filed (or there has been filed on their behalf) with
the appropriate governmental authorities all Income Tax Returns required to be
filed by them, (ii) duly and timely paid in full or made provision in accordance
with GAAP in the Financial Statements for the payment of all Income Taxes due
and owing for all periods or portions thereof ending through the date of such
Financial Statements. No material federal or state administrative or court
proceedings are presently pending, or to the knowledge of the Company,
threatened, with regard to any Income Taxes or Income Tax Returns of the Company
or any Subsidiary;
16
(b) The Company and the Subsidiaries have (i) duly and timely
filed (or there has been filed on their behalf) with the appropriate
governmental authorities all federal, state and local Other Tax Returns required
to be filed by them and (ii) duly and timely paid in full or made provision in
accordance with GAAP in the Financial Statements for the payment of all Other
Taxes due and owing for all periods or portions thereof ending through the date
of such Financial Statements, except where a failure to make the filings or
payments required by clauses (i) and (ii) would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect;
(c) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Other Taxes or Other Tax Returns of the Company or any Subsidiary
wherein an adverse determination or ruling in any one such proceeding or in all
such proceedings in the aggregate would reasonably be expected to have a Company
Material Adverse Effect;
(d) In all material respects, the Company and the Subsidiaries
have complied with all rules and regulations relating to Income Tax information
reporting and the payment and withholding of Income Taxes. The Company and the
Subsidiaries have complied with all rules and regulations relating to Other Tax
information reporting and the payment and withholding of Other Taxes except
where the failure to so comply would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect;
(e) Neither the Company nor any of the Subsidiaries is a party to
any tax sharing, tax indemnity or other agreement or arrangement with respect to
Taxes with any entity not included in the Financial Statements most recently
filed with the SEC;
(f) As used in this Agreement, "Tax Return" means any declaration,
return, report, schedule, certificate, statement or other similar document
(including relating or supporting information) required to be filed or, where
none is required to be filed with a Taxing Authority, the statement or other
document issued by a Taxing Authority in connection with any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax, (ii) "Income Tax Return" means a Tax Return with
respect to Income Taxes and (iii) "Other Tax Return" means a Tax Return with
respect to Taxes other than Income Taxes;
(g) As used in this Agreement, "Taxes" means any and all federal,
state or local, taxes, rates, levies, assessments and other governmental charges
of any kind whatsoever whether imposed directly or through withholding (together
with any and all interest, penalties, additions to tax and additional amounts
applicable with respect thereto), including income, franchise, premium, windfall
or other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
net worth, excise, withholding, ad valorem and value added taxes, (ii) "Income
Taxes" means federal or state taxes imposed on income or profits, of the Company
or any of its Subsidiaries determined in whole, in part or in the alternative on
such income or profits and (ii) "Other Taxes" means Taxes other than Income
Taxes;
17
(h) As used in this Agreement, "Taxing Authority" means with
respect to any Tax, the Governmental Authority that imposes such Tax, and the
agency (if any) charged with the collection of such Tax for such entity or
subdivision.
Section 3.13 Licenses; Compliance with Applicable Law; Health Care
Regulation
(a) General. Each of the Company and the Subsidiaries has complied
with all applicable Legal Requirements necessary to maintain or operate the
Facilities except where the failure to so comply would not have a Company
Material Adverse Effect. Neither the Company nor any Subsidiary is subject to or
has received any written notice of any action, suit, proceeding, hearing,
governmental investigation, governmental audit, assessment, charge, complaint,
claim, civil monetary penalty, demand or written notice alleging any failure to
comply with applicable Legal Requirements necessary to maintain or operate the
Facilities (collectively the "Noticed Actions") except for (i) such Noticed
Actions directed to the Company (excluding any Subsidiary) as are not material,
(ii) such Noticed Actions applicable to a specific Facility or Subsidiary as
individually or in the aggregate would not have a Company Material Adverse
Effect; and (iii) professional liability or general liability ("PL/GL") claims.
Since January 1, 2004, no Company Material Adverse Change has occurred in
Programs relating to the Business or with respect to Third Party Payor Programs.
(b) Health Care Regulatory Compliance. (i) With respect to this
Section 3.13(b)(i), except as would not result in a Company Material Adverse
Effect: The Company and each Subsidiary have conducted, and are presently
conducting, its Facilities and other businesses so as to comply with all Legal
Requirements applicable to the conduct of operation of such Facilities and other
businesses. The Company and each Subsidiary are in compliance with the statutes
and regulations related to fraud, abuse, false claims/statements, referrals and
prohibition of kickbacks. The Company and each Subsidiary have complied with all
applicable billing policies, procedures, limitations and restrictions of Third
Party Payor Programs (as defined below). There are no Reimbursement Source
Obligations (as defined below) of the Company and the Subsidiaries other than
those recorded or reserved on the Financial Statements. Each cost report and
other required claims and filings with Governmental Authorities with respect to
Medicare and each state Medicaid program in which they participate, required to
be filed by or on behalf of the Company or any Subsidiary prior to the Effective
Time, has been or will have been timely prepared and filed in accordance with
applicable Legal Requirements. To the Company's knowledge, all of such filings
were, when filed or as amended, true and complete. The Company and each
Subsidiary have available for inspection by Purchaser prior to the date of this
Agreement each such filing since May 13, 2002.
(ii) Except as set forth on the Company Disclosure Schedule,
each Facility and its related Subsidiary is qualified for participation in the
Medicare and Medicaid programs and is a party to Provider Agreements for such
programs which are in full force and effect. To the Company's knowledge, neither
the Company, any Subsidiary, nor any current director, executive or Facility
manager of the Company or any Subsidiary has been debarred, disqualified,
suspended or excluded from any Medicare, Medicaid or any other Third Party Payor
Program, including, without limitation, under 42 U.S.C. 1320a-7, or from being a
health care provider, owner, operator or licensee. The Company and each
Subsidiary are in compliance, in all material respects, with the Global
Settlement, the Corporate Integrity
18
Agreements (each as defined below) and all consent and settlement orders, and
similar agreements (excluding plans of correction) with or imposed by any
Governmental Authority (collectively, "Governmental Agreements"), all of which
are set forth on the Company Disclosure Schedule. Neither the Company nor any
Subsidiary is currently subject to any fines, penalties, or sanctions nor, are
any such fines, penalties or sanctions threatened except for such current or
threatened fines, penalties or sanctions as would not have a Company Material
Adverse Effect.
(c) Health Care Licensing. With respect to this Section 3.13(c),
except as would not result in a Company Material Adverse Effect: (i) The Company
and each Subsidiary are in compliance with the terms and conditions of all
Licenses and CONs held by them. Without limiting the generality of the
foregoing, the facilities, equipment and operations of each Facility of the
Company and any Subsidiary satisfies the applicable Legal Requirements relating
to facility licensing of the state in which such Facility is located and the
Legal Requirements for participation in the Medicare and Medicaid Programs. The
Company and each Subsidiary have posted all surety bonds, deposits, and escrows
which may be required under any Legal Requirements, Licenses, CONs or any
Governmental Agreements. The Company and each Subsidiary have maintained patient
deposit funds in escrow or trust accounts in accordance with all Legal
Requirements; and (ii) the Company and each Subsidiary has all Licenses and CONs
that are required to operate each of their respective Facilities (including,
without limitation, those required under any Legal Requirements) consistent with
past practice, and all such Licenses issued by an Accreditation Body with
respect to the Facilities and Provider Agreements under the Medicare or Medicaid
programs are set forth on the Company Disclosure Schedule.
(d) Definitions Relating to Compliance and Regulation. For
purposes of this Agreement, the following definitions shall apply:
(i) "Accreditation Body" shall mean the Centers for Medicare
and Medicaid Services, state regulatory agencies responsible for licensure for
skilled nursing facilities and long-term acute care hospitals, Medicaid
certification and issuance of CONs for skilled nursing facilities and long-term
acute care hospitals and with respect to long-term acute care hospitals only,
the Joint Commission on Accreditation of Healthcare Organizations.
(ii) "Certificate of Need" or "CON" shall mean the
Certificate of Need issued by an Accreditation Body for any Facility of the
Company or any Subsidiary that is a nursing Facility for the number of beds
listed on such CON and the rights thereunder to operate such beds or other
nursing Facility, service or activity subject to a Certificate of Need.
(iii) "Corporate Integrity Agreement" shall mean that certain
Corporate Integrity Agreement dated April 3, 2002 by and between the Department
of Health and Human Services Office of Inspector General and the Company
attached as an exhibit to the Global Settlement and any monitoring agreements
between the Company or any Subsidiary and any third party required by the terms
of the Corporate Integrity Agreement.
(iv) "Environmental Laws" shall mean all federal, state, and
local, statutes, regulations, ordinances, and other provisions having the force
or effect of law, all judicial and administrative orders and determinations, and
all applicable common law effective
19
prior to or at the Effective Time, including any amendments thereto, concerning
pollution or protection of the environment, including, without limitation, all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
Hazardous Materials(as defined below). The term "Environmental Laws" shall
include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq. ("CERCLA") and the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section 6901 et seq. ("RCRA"), and their state equivalents or analogs.
(v) "Global Settlement" refers to the agreement between the
Company and the United States pursuant to which the Company reached a settlement
with the United States to resolve certain claims or causes of action asserted by
the United States arising prior to January 18, 2000.
(vi) "Governmental Authority" means any of the following: (A)
the United States of America; (B) any state, commonwealth, territory or
possession of the United States of America and any political subdivision thereof
(including counties, municipalities and the like); (C) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board, including, without limitation, any
Accreditation Body or (D) any other national, federal, state or provincial
government or courts and administrative bodies thereof.
(vii) "Hazardous Material" shall mean any hazardous material,
hazardous substance, hazardous waste, regulated substance, toxic substance,
pollutant, chemical substances or mixtures, medical waste, pesticides,
contaminants, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, or radiation, that have been or currently are regulated or defined by
any Environmental Laws. Notwithstanding the foregoing, the term "Hazardous
Material" shall not mean or include (i) standard cleaning, pesticide and
maintenance fluids, petroleum products and oil, batteries, equipment and
materials in normal quantities customarily used in the ordinary course of
business, and in material compliance with applicable Environmental Laws; or (ii)
such of the foregoing that may be naturally occurring in the soil or groundwater
in, at, under or about any real property.
(viii) "Legal Requirement" shall mean all laws, statutes,
ordinances, bylaws, codes, rules, regulations, restrictions, the Corporate
Integrity Agreement, and all orders, judgments, decrees and injunctions
(including, without limitation, all applicable building, fire, health code,
occupational safety and health, zoning, subdivision and other land use,
Americans with Disabilities Act, and health care licensing statutes, ordinances,
bylaws, codes, rules and regulations), promulgated or issued by any Governmental
Authority. Without limiting the generality of the foregoing, the term Legal
Requirements includes all Permits and Licenses issued or entered into by any
Governmental Authority or any Accreditation Body applicable to the Company or
the Subsidiaries.
(ix) "License" shall mean a license or Provider Agreement
issued by an Accreditation Body to operate a Facility or provide services or
products pursuant to a Program.
20
(x) "Medicaid" means 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.
(xi) "Medicare" means 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
(xii) "Permits" shall mean all permits, licenses (for purposes
of this definition the term "license" shall exclude items covered by the defined
term "License"), franchises, certificates of occupancy, approvals,
registrations, 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 the Company or any Subsidiary under any Legal
Requirements benefiting, relating or affecting the Business or any of the
Facilities of the Company or any Subsidiary, or the construction, development,
expansion, maintenance, management, use or operation thereof, or the operation
of any programs or services in conjunction with the Business or such Facilities
and all renewals, replacements and substitutions therefore, required or issued
by any Governmental Authority, except for any Accreditation Body or Third Party
Payor.
(xiii) "Programs" means any Federal health care program as
defined in Section 1128B(h) of the Social Security Act (42 U.S.C. 1320a-7b(f))
or any State health care program as defined in Section 1128B of the Social
Security Act (42 U.S.C. 1320a-7(h)).
(xiv) "Provider Agreements" shall mean all participation,
provider, supplier and reimbursement agreements for the benefit of the Company
or any Subsidiary in connection with the operation of any of their Facilities
relating to any right to payment or other claim arising out of or in connection
with the Company's or such Subsidiary's participation in any Third Party Payor
Program.
(xv) "Reimbursement Source Obligations" means (a) any fees,
fines, penalties or civil monetary penalties that have arisen from the Company's
and Subsidiaries' participation in Medicaid, Medicare or other Third Party Payor
Programs; (b) Medicaid, Medicare or Third Party Payor overpayments, recoupments,
denial of payment, assessments or any other financial obligations arising from
any adjustments or reductions in Medicaid, Medicare or Third Party Payor
reimbursement; or (c) all other monetary or non-monetary obligations, sanctions,
remedies or liabilities of any kind or nature whatsoever that have arisen from
the Company's or any Subsidiary's participation in Medicaid, Medicare or Third
Party Payor Programs.
(xvi) "Third Party Payor Program" shall mean Medicare,
Medicaid and the managed care agreements set forth on the Company Disclosure
Schedule.
(xvii) "Third Party Payors" shall mean any Person or Persons
that maintain(s) a Third Party Payor Program.
(e) Environmental. Except as set forth in the Company Disclosure
Schedule or in the Company Form 10-K for the year ended December 31, 2003: (i)
the assets, properties,
21
businesses and operations of the Company and the Subsidiaries are in compliance
with applicable Environmental Laws, except for such non-compliance which has not
had a Company Material Adverse Effect; (ii) the Company and the Subsidiaries
have obtained and, as currently operating, are in compliance with all Permits
necessary under any Environmental Law for the conduct of the business and
operations of the Company and the Subsidiaries in the manner now conducted
except for such non-compliance which has not had a Company Material Adverse
Effect; and (iii) to the knowledge of the Company, neither the Company nor any
of the Subsidiaries nor any of their respective assets, properties, businesses
or operations has received or is subject to any currently outstanding order,
decree, judgment, complaint, agreement, claim, citation, written notice, or
proceeding indicating that the Company or any of the Subsidiaries is (a) liable
for a violation of any Environmental Law, or (b) liable for any Environmental
Liabilities and Costs, where in each case such liability would be material. For
purposes of this Agreement, "Environmental Liabilities and Costs" means all
damages, penalties, obligations or clean-up costs assessed or levied pursuant to
any Environmental Law.
(f) Ancillary Business Legal Requirements. The Company Disclosure
Schedule sets forth all material ancillary businesses conducted by the Company
or any Subsidiary, including without limitation, the provision of medical
products or services to the Facilities or patients residing in the Facilities
(such as durable medical equipment, pharmacy, imaging, respiratory services),
personnel related businesses (nurse recruiting and training, personnel staffing)
and transportation services (collectively, "Ancillary Businesses"). The Company
does not engage in the manufacture, assembly or processing of products. The
Company and the Subsidiaries possess or have applied for all material Permits to
own and operate such Ancillary Businesses, all of which are conducted in
material compliance with Legal Requirements. To the extent that applicable Legal
Requirements require personnel with professional licenses to manage or otherwise
operate any Ancillary Business (such as pharmacy), the Company and the
Subsidiaries utilize such licensed personnel. Neither the Company nor any
Subsidiary sells medical products or medical services other than (i) to patients
at the Facilities for use while resident at the Facilities and (ii) outpatient
rehabilitation conducted at the Facilities.
(g) Restricted Payments. The Company has not taken any action that
would cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect. Neither the Company nor any
Subsidiary, nor, to the knowledge of the Company, any director, officer, agent,
employee of the Company or any Subsidiary acting for or on behalf of the Company
or any Subsidiary, has paid or caused to be paid, in connection with the
business of the Company or any of the Subsidiaries: (i) any bribe, kickback,
direct or indirect unlawful payment or other similar payment to any Governmental
Authority or any supplier or agent of any supplier, or (ii) any contribution,
payment, gift or entertainment to any political party or candidate (other than
from personal funds of directors, officers or employees not reimbursed by their
respective employers or other than in compliance with applicable Legal
Requirements).
(h) OSHA. Except as would not result in a Company Material Adverse
Effect, the Company and the Facilities are in compliance with the Occupational
Health and Safety Act ("OSHA") and the Company is not subject to any consent,
decree, compliance order, administrative order, or a cooperative compliance plan
with respect to and implemented under OSHA.
22
(i) HIPAA. Except as would not result in a Company Material
Adverse Effect, the Company and the Subsidiaries are in compliance with the
Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and have
adopted and filed all compliance plans and policies required thereunder.
(j) Bankruptcy Proceedings. The Company is in compliance in all
material respects with the Company Plan of Reorganization and the Bankruptcy
Orders. All of the distributions and payments required to be made under the
Company Plan of Reorganization to date have been made, completed and paid in
full.
Section 3.14 Accounts Payable/Accounts Receivable. Since December 31,
2003, the accounts and notes payable and other accrued expenses of the Company
are and have been paid in the ordinary course of business in a manner consistent
with past practice. All accounts receivable of the Company represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business and since December 31, 2003, are being collected
in the ordinary course of business in a manner consistent with past practice,
and as to which reserves have been maintained on the Company's books and records
which are adequate in accordance with GAAP and calculated consistent with past
practice.
Section 3.15 Contractual and Other Obligations. (a) To the extent not
already filed as Exhibits to the Company's SEC Filings, the Company Disclosure
Schedule lists the following contracts and other agreements, to which the
Company or any of the Subsidiaries is a party (collectively, the "Material
Contracts").
(i) Equipment Leases. Any agreement (or group of related
agreements, including, and as part of, master lease agreements) for the lease of
medical equipment, motor vehicles, computers and related devices and,
telecommunications equipment, regardless of amount providing for lease payments
in excess of One Million Dollars ($1,000,000) per annum (excluding leases which
may have been initiated at the Facility level) (collectively referred to as
"Major Equipment Leases").
(ii) National and Blanket Vendor Agreements. Any agreement
(or group of related agreements as part of a master purchase arrangement) for
the purchase or sale of medical products or services, food, supplies,
maintenance or other products or services which provide that the vendor will
supply all of the Company's requirements (or the requirements of a majority of
the Facilities) for any category of products or services or grant an exclusive
or preferred right to the vendor, regardless of the dollar amount of
consideration, and any national group purchasing organizations of which the
Company is a member.
(iii) Joint Venture Agreements. Any agreement concerning a
partnership, joint venture, limited liability company, corporation or other
entity which is not a 100% owned Subsidiary of the Company, including
stockholders, operating, joint venture and related management agreements.
(iv) Management Agreements. Any agreement pursuant to which
the Company or any Subsidiary manages or operates a Facility not owned or leased
by the Company
23
or a Subsidiary, or pursuant to which an unrelated third party manages a
Facility which is owned or leased by the Company or any Subsidiary.
(v) Debt Agreements; Mortgages. An agreement (or group of
related agreements) under which the Company or any Subsidiary has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation or under which there is imposed an Encumbrance on
any of the assets of the Company or any Subsidiary, tangible or intangible, in
each case for which the indebtedness or obligation is in excess of One Million
Dollars ($1,000,000).
(vi) Non-Competition Agreements. Any agreement concerning
non-competition or which would restrict the Company or any Subsidiary from
engaging in any line of business activity in the health care or medical products
or services industries, whether generally or within any geographic territory.
(vii) Related Party Agreements. Any agreement (other than the
types of agreements referred to in the following clause (viii)) between the
Company or any Subsidiary on the one hand, and any of their directors, officers,
executives, key employees or any Person affiliated with such individuals.
(viii) Employment Agreements. Any employment, executive,
management, consulting or severance agreement applicable to any individual or
current or former employee of the Company or any Subsidiary involving
compensation of more than $150,000 per annum or which would require any
severance, "golden parachute," bonus or other compensation of more than $250,000
to be paid in connection with a change in control of the Company, other than
those terminable upon reasonable notice without penalty by the Company.
(ix) Incentive Compensation Agreements. Any profit sharing,
stock option, stock purchase, stock appreciation, deferred compensation,
severance, bonus plan or program, or other incentive plan or arrangement for the
benefit of its current or former directors, officers, and employees of the
Company or its Subsidiaries.
(x) Union Agreements. Any collective bargaining or
recognition agreement with any labor organization.
(xi) Acquisition Agreements. Any currently pending agreements
relating to (i) the acquisition of the Facilities, real property, capital stock,
business or leases of any Person; (ii) the sale or divestiture of any Facility,
real property, lease or business unit of the Company or any Subsidiary or the
capital stock of any Subsidiary; or (iii) any other sale of material assets of
the Company or any Subsidiary outside the ordinary course of business.
(xii) Governmental and Provider Agreements. Any Governmental
Agreement and any Medicare or Medicaid Provider Agreement and managed care
agreements that the Company believes are material to its business.
(xiii) Lending/Guaranty Agreements. Any agreement under which
the Company or any of the Subsidiaries has advanced or loaned any other Person
or guaranteed
24
obligations of any other Person, an amount individual or in the
aggregate exceeding One Million Dollars ($1,000,000).
(xiv) License/Franchise Agreements. Any material license,
franchise or other agreement relating to the use of patents, trademarks,
copyrights, logos, brand names, business formats, with a third party to which
the Company or any Subsidiary is a party.
(xv) Agreements Relating to Securities. Any current or
pending agreement relating to the subscription for or issuance of, or repurchase
or redemption of, or the registration or transfer of, shares of capital stock of
the Company or any Subsidiary, or options, warrants or securities exercisable or
convertible therefore.
(xvi) Real Estate Leases. The Leases.
(xvii) Other Material Agreements. Any other agreement (or
group of related agreements) which the Company considers material or, regardless
of the amount of consideration, pursuant to which the consequences of a default
or termination would result in a Company Material Adverse Change.
(b) The Company has made available or delivered to Purchaser a
correct and complete copy of each written agreement (as amended to date) listed
on the Company Disclosure Schedule (unless otherwise noted thereon). With
respect to each such agreement and except as would not have a Company Material
Adverse Effect, (i) the agreement is valid, binding and enforceable, and in full
force and effect except as limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other laws of general
application referring to or affecting enforcement of creditors' rights, or by
general equitable principles (regardless of whether enforcement is sought in a
proceeding at law or in equity); (ii) the agreement will continue to be legal,
valid, binding and enforceable, and in full force and effect following the
consummation of the transactions contemplated hereby except as limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other laws of general application referring to or affecting
enforcement of creditors' rights, or by general equitable principles (regardless
of whether enforcement is sought in a proceeding at law or in equity); (iii)
neither the Company nor any Subsidiary (and, to the knowledge of the Company, no
other party) is in breach or default, and to the knowledge of the Company no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (iv) neither the Company nor any Subsidiary (and, to the
knowledge of the Company, no other party) has repudiated any provision of the
agreement.
(c) The Company Disclosure Schedule sets forth a complete and
accurate list of all Significant Suppliers. For purposes of this Agreement
"Significant Suppliers" are the twenty (20) suppliers who supplied the largest
amount by dollar volume of products or services, other than professional
services, to the Company during the past four (4) fiscal quarters ending on the
Interim Balance Sheet Date. Except to the extent set forth on the Company
Disclosure Schedule, none of the Company's Significant Suppliers has canceled or
substantially reduced or, to the knowledge of the Company, is currently
attempting to cancel or substantially reduce, the supply of products or services
to the Company.
25
Section 3.16 Compensation. (a) Except as set forth in the Company
Disclosure Schedule or in the Retention Plan (provided in Section 5.6), the
transactions contemplated by this Agreement will not result in any liability for
severance, "golden parachute" or bonus payments to any employee or independent
contractor of the Company. Except for the Retention Plan and the Options, the
Company has not informed any employee or independent contractor providing
services to the Company that such person will receive any increase in
compensation or benefits or any ownership interest in the Company or the
Business in connection with the transactions contemplated by this Agreement.
(b) Subsequent to December 31, 2003, there have been no increases in
the compensation payable or to become payable to any of the employees of the
Company and there have been no payments or provisions for any material awards,
bonuses, loans, profit sharing, pension, retirement or welfare plans or similar
or other disbursements or arrangements for or on behalf of such employees (or
related parties thereof), in each case, other than in the ordinary course of
business, those to be paid under the Retention Plan, and recent increases to
certain executive employees as set forth in the Company Disclosure Schedule.
Except for bonuses that may be due to employees of the Company for the current
year as set forth in the Company Disclosure Schedule and those to be paid under
the Retention Plan, all bonuses heretofore granted to employees of the Company
have been paid in full to such employees or accrued on the balance sheets
contained in the Financial Statements. The vacation/sick time policy of the
Company, including as to carryover of unused vacation or sick time, is set forth
in the Company Disclosure Schedule.
Section 3.17 Employee Benefit Plans. (a) Except as set forth in the
Company Disclosure Schedule, the Company does not maintain or sponsor, or
contribute to, any pension, profit-sharing, savings, bonus, incentive or
deferred compensation, severance pay, medical, life insurance, welfare or other
employee benefit plan. All pension, profit-sharing, savings, bonus, incentive or
deferred compensation, severance pay, medical, life insurance, welfare or other
employee benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (hereinafter referred to as
"ERISA"), in which the employees participate are hereinafter referred to as the
"Benefit Plans." Except as set forth in the Company Disclosure Schedule, all
Benefit Plans comply in all material respects with all requirements of the
Department of Labor and the Internal Revenue Service, and with all other
applicable laws and regulations and the constituents documents and terms of such
Benefit Plans, and the Company has not taken or failed to take any action with
respect to the Benefit Plans which might create any liability on the part of the
Company or Purchaser except for claims in the ordinary course for benefits with
respect to the Benefit Plans and any requirements of the Company to contribute
to a Benefit Plan as set forth in the terms and conditions of such Benefit Plan
and claims which, individually or in the aggregate, would not create any
material liability on the part of the Company or Purchaser. Except as set forth
in the Company Disclosure Schedules, true, correct and complete copies of the
following documents with respect to each Benefit Plan have been made available
by the Company to Purchaser: (i) all documents constituting the Benefit Plan,
including but not limited to, trust agreements, plan documents, insurance
policies and amendments thereto, (ii) the Forms 5500 or 5500 C/R and any
financial statements attached thereto for the most recently completed year for
which such forms have been filed; (iii) the Internal Revenue Service
determination letters; (iv) the most recent Summary Plan Description and all
modifications to such Summary Plan Description; (v) all material notices that
have been
26
given to the Company or such Benefit Plans within the three (3) years preceding
the date of this Agreement by the IRS, Department of Labor, or any other
governmental agency with respect to any Benefit Plan; and (vi) all employee
manuals or handbooks containing personnel or employee relations policies of the
Company. Except as set forth in the Company Disclosure Schedule, no Benefit Plan
contains any provision or is subject to any Legal Requirement that would
prohibit the transactions contemplated by this Agreement or that would give rise
to any vesting of benefits, severance, termination or other payments or
liabilities as a result of the transactions contemplated by this Agreement.
Except as set forth in the Company Disclosure Schedule, the Benefit Plans are
not presently under audit or examination (nor has notice been received of a
potential audit or examination) by the IRS, the Department of Labor or any other
governmental agency. With respect to each Benefit Plan, there has occurred no
"prohibited transaction" within the meaning of the Code or ERISA. The
requirements of COBRA have been met with respect to each such Benefit Plan
subject to COBRA.
(b) Except as set forth in the Company Disclosure Schedule, each
Benefit Plan intended to qualify under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service as to its
qualification and has been amended to reflect all requirements of the Tax Reform
Act of 1986 and all subsequent legislation which is required to be adopted prior
to the end of the applicable remedial amendment period.
(c) Except as set forth in the Company Disclosure Schedule, the
Company does not currently maintain, sponsor or contribute to a "defined benefit
plan" (within the meaning of Section 3(35) of ERISA) or a "multiemployer plan"
(within the meaning of Section 3(37) of ERISA), nor has the Company or any
Subsidiary incurred any withdrawal liability with respect to any multiemployer
plan or any liability in connection with the termination or reorganization of
any multiemployer plan that would be reasonably be expected to have a Company
Material Adverse Effect. Except as set forth in the Company Disclosure Schedule,
without limiting the generality of the foregoing, in connection with
divestitures or closings of Facilities, there are no liabilities, or pending
claims, relating to withdrawal liability with respect to multi-employer plans.
(d) Except as set forth in the Company Disclosure Schedule, there
are no contributions which are or hereafter will be required to have been made
to trusts in connection with any Benefit Plan that would constitute a "defined
contribution plan" (within the meaning of Section 3(34) of ERISA).
(e) Except as set forth in the Company Disclosure Schedule, other
than claims in the ordinary course for benefits with respect to the Benefit
Plans, there are no actions, suits or claims (including claims for income Taxes,
interest, penalties, fines or excise Taxes with respect thereto) pending with
respect to any Benefit Plan, or, to the best knowledge of the Company, any
circumstances which might give rise to any such action, suit or claim (including
claims for income Taxes, interest, penalties, fines or excise Taxes with respect
thereto).
(f) Except as set forth in the Company Disclosure Schedule, the
Company has no obligation to provide health or other welfare benefits to former,
retired or terminated employees, except as specifically required under Section
4980B of the Code or Section 601 of
27
ERISA. The Company has complied with all of the requirements of Section 4980B of
the Code and Section 601 of ERISA and the regulations thereunder.
(g) Except as set forth in the Company Disclosure Schedule, all
contributions, premiums or payments under or with respect to each Benefit Plan
which are due on or before the Effective Time have been or will have been made
or accrued in all material respects.
(h) Except as set forth in the Company Disclosure Schedule, the
Company and each Subsidiary has not incurred and has no reason to expect that it
will or could incur, any material liability to the Pension Benefit Guaranty
Corporation ("PBGC") (other than premium payments) or otherwise under Title IV
of ERISA (including any withdrawal liability as defined in Title IV of ERISA, to
any entity) or under the Code with respect to any employee pension benefit plan
that the Company, any Subsidiary or any other entity, that together with the
Company or any Subsidiary is treated as a single employer under Code Section
414, has maintained, contributed to, or been required to contribute to.
(i) The market value of assets under each such Benefit Plan which is
a defined benefit plan (other than any multiemployer plan) equals or exceeds the
present value of all vested and nonvested liabilities thereunder determined in
accordance with PBGC methods, factors, and assumptions applicable to a defined
benefit plan terminating on the date for determination.
(j) Except as set forth in the Company Disclosure Schedule, since
May 13, 2002 no such Benefit Plan which is a defined benefit plan (other than
any multiemployer plan) has been completely or partially terminated or been the
subject of a "reportable event" with the meaning of ERISA. No proceeding by the
PBGC to terminate any such a defined benefit plan (other than any multiemployer
plan) has been instituted or, to the knowledge of the Company, threatened
(k) The Benefit Plans cover only employees and directors of the
Company and the Subsidiaries and there is no Person or entity (other than the
Company and the Subsidiaries) that, together with the Company, would be treated
as a single employer or a commonly controlled entity under Section 414(b), (c)
or (m) of the Code.
Section 3.18 Labor and Employment Matters. (a) Except as set forth on the
Company Disclosure Schedule or in the Company 10-K, (i) none of the employees of
the Company or any Subsidiary are represented by any labor organization and
there are no organizational campaigns, demands, petitions or proceedings pending
or threatened by any labor organization or group of employees seeking
recognition or certification as collective bargaining representative of any
group of employees of the Company or any Subsidiary, (ii) there are no union
claims to represent the employees of the Company or any Subsidiary and (iii)
there are no strikes, controversies, slowdowns, work stoppages, lockouts or
labor disputes pending or threatened against or affecting the Company or any
Subsidiary.
(b) (i) With respect to this paragraph 3.18(b)(i), except as would
not have a Company Material Adverse Effect or as set forth in the Company
Disclosure Schedule: the Company and Subsidiaries are, and have at all times
during at least the last three (3) years been,
28
in compliance with all applicable Legal Requirements respecting immigration,
employment and employment practices, and the terms and conditions of employment,
including, without limitation, employment standards, equal employment
opportunity, family and medical leave, wages, hours of work, and is not engaged
in any unfair labor practices as defined in the National Labor Relations Act or
any other applicable Legal Requirement. (ii) There are (A) no complaints,
claims, controversies, charges, lawsuits or other proceedings related to the
Company or any Subsidiary pending, or, to the Company's knowledge, threatened,
in any court or with any agency responsible for the enforcement of federal,
state or local labor or employment Legal Requirements regarding breach of any
express or implied contract of employment, any Legal Requirement or regulation
governing employment or the termination thereof or other illegal,
discriminatory, wrongful or tortious conduct in connection with the employment
relationship, the terms and conditions of employment, or applications for
employment with the Company or any Subsidiary and (B) no pending actions or
investigations by any federal, state, or local Governmental Authority
responsible for the enforcement of immigration, labor, equal employment
opportunity, family and medical leave, wages, hours of work, occupational health
and safety or any other employment Legal Requirement, or to the knowledge of the
Company, are any such actions or investigations threatened with respect to or
relating to the Company or any Subsidiary, in each case which are material.
(c) Except as set forth in the Company Disclosure Schedule, since
January 1, 2003, neither the Company nor any Subsidiary has effectuated (i) a
"plant closing" as defined in the Worker Adjustment and Retraining Notification
Act of 1988 ("WARN") affecting any site of employment or one or more Facilities
or operating units within any site of employment or Facility of the Company or
any Subsidiary, or (ii) a "mass layoff" as defined in WARN affecting any site of
employment or Facility of the Company or any Subsidiary; nor has the Company or
any Subsidiary been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. None of the employees of the Company or any
Subsidiary has suffered an "employment loss," as defined in WARN, since January
1, 2003.
(d) The Company Disclosure Schedule sets forth a complete list of
all foreign national employees on whose behalf the Company or any Subsidiary has
submitted applications and petitions to the U.S. Department of Labor, U.S.
Immigration and Naturalization Service, or U.S. Department of State for
immigration employment and visa benefits. The Company Disclosure Schedule
identifies and describes any pending or, to the knowledge of the Company,
threatened actions against the Company or any Subsidiary for violations under
the Immigration Reform and Control Act of 1986 respecting such employees of the
Company or any Subsidiary.
(e) The Company and all Subsidiaries have complied with all hiring
and employment obligations applicable under Office of Federal Contract
Compliance Programs rules and regulations, except for such noncompliance as
would not have a Company Material Adverse Effect.
Section 3.19 Insurance.
(a) The Company has made available to Purchaser accurate and
complete copies of:
29
(i) all policies of insurance to which the Company or any
Subsidiary is or was a party or under which the Company or any Subsidiary or the
Facilities or other assets of the Company is or has been covered at any time
since May 13, 2002, including without limitation, PL/GL, building, fire,
property, hazard and flood, motor vehicle, worker's compensation and employer
liability insurance;
(ii) all pending applications by the Company or any Subsidiary
for any such policies of insurance or renewals thereof; and
(iii) An "ACCORD" certificate for the Company's current
insurance program with respect to the insurance policies maintained by the
Company and the Subsidiaries.
(b) The Company has made available to Purchaser any self-insurance,
captive insurance or reserve arrangement, stop loss, claims management, or
claims administration agreement, established by the Company or any Subsidiary,
including, without limitation, with respect to PL/GL claims, any reserves
established thereunder.
(c) Except as set forth on the Company Disclosure Schedule:
(i) Except as would not have a Company Material Adverse
Effect, since May 13, 2002, neither the Company nor any Subsidiary has received
(A) any refusal of coverage or notice of any reservation of rights other than
reservation of rights letters received by the Company in the ordinary course of
business or (B), except for routine notices of non-renewal in connection with
expiration of policies, any written notice of cancellation that any policy of
insurance is no longer in full force or effect or that the issuer of any policy
of insurance is not willing or able to perform its obligations thereunder; and
(ii) Since May 13, 2002, the Company and the Subsidiaries have
paid or caused to be paid, all premiums due, in all material respects, and have
otherwise performed all of their respective obligations (except as would not
have a Company Material Adverse Effect), under each policy of insurance issued
after January 18, 2000 to which it is a party or that provides coverage with
respect to the Company, any Subsidiary, the Facilities or other assets used by
the Company or any Subsidiary; and
(iii) Except as would not have a Company Material Adverse
Effect, the Company and the Subsidiaries have given notice to the insurer of all
claims that may be insured as required by the insurance company thereby; and
(iv) Each material policy of insurance is valid, binding,
enforceable, and in full force and effect except as limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws of general application referring to or affecting enforcement of
creditors' rights, or by general equitable principles (regardless of whether
enforcement is sought in a proceeding at law or in equity).
Section 3.20 Certain Transactions and Conduct of Business. (a) Except as
set forth in the Company Disclosure Schedule, neither the Company nor any
Subsidiary is restricted from conducting the Business or from engaging in any
business line in any location by court decree,
30
any order of any Governmental Authority, the Company Plan of Reorganization or
any Bankruptcy Order.
(b) The Company has not since the effective date of the
Xxxxxxxx-Xxxxx Act of 2002, taken any action prohibited by Section 402 of the
Xxxxxxxx-Xxxxx Act of 2002 and the adopted rules promulgated thereunder.
(c) The Company has not granted any material general power of
attorney or proxy (revocable or irrevocable) to any person, firm or corporation.
Section 3.21 Intellectual Property. Except as set forth on the Company
Disclosure Schedule:
(a) The Company and the Subsidiaries own, free of all Encumbrances
other than Permitted Encumbrances, or have a valid and binding license to use,
all Intellectual Property (as defined below) material to the conduct of the
businesses of the Company and the Subsidiaries, taken as a whole.
(b) Except for defaults and infringements which would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect (i) neither the Company nor any Subsidiary is in default
(or with the giving of notice or lapse of time or both, would be in default)
under any license to use such Intellectual Property, (ii) to the knowledge of
the Company, all Intellectual Property material to the conduct of the businesses
of the Company and the Subsidiaries taken as a whole and owned by the Company or
any of the Subsidiaries is not being infringed by any third party, and (iii) to
the knowledge of the Company, neither the Company nor any Subsidiary is
infringing any Intellectual Property of any third party.
(c) Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect (i) there is no
pending or, to the Company's knowledge, threatened significant claim or dispute
regarding the ownership of, or use by, the Company or any Subsidiary of any
Intellectual Property, and (ii) the consummation by the Company of the
transactions contemplated hereby will not result in the loss of use of any
Intellectual Property utilized in the business of the Company or any of the
Subsidiaries.
(d) For purposes of this Agreement, the term "Intellectual Property"
means patents and patent rights, trademarks and trademark rights, trade names
and trade name rights, service marks and service xxxx rights, service names and
service name rights, copyrights and copyright rights and all pending
applications for and registrations of any of the foregoing, and computer and
network software programs and trade secrets and trade secret rights.
Section 3.22 Litigation; Disputes. With respect to this paragraph 3.22,
except as would not be material: (a) there are no claims, disputes, actions,
suits, investigations or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary, any
Facility, or the Business or any of the assets of the Company or any Subsidiary,
(b) to the Company's knowledge, there is no basis for any such claim, dispute,
action, suit, investigation or proceeding against or affecting the Company, any
Subsidiary, any Facility, the Business or any of the assets of the Company; (c)
the Company has no knowledge of any default under any such action, suit or
proceeding; and (d) to its knowledge, the Company is not in
31
default in respect of any judgment, order, writ, injunction or decree of any
court or of any federal, state, municipal or other government department,
commission, bureau, agency or instrumentality or any arbitrator, provided,
however, that this Section 3.22 excludes professional liability and tort claims
by residents in connection with their stay at a Facility.
Section 3.23 Computer Software. The Company Disclosure Schedule sets forth
the material computer software systems utilized on a corporate-wide basis by the
Company and the Subsidiaries, identifies such systems as proprietary systems
owned by the Company or licensed or otherwise provided by third parties and the
licenses or other contracts pursuant to which such systems are utilized by the
Company and the Subsidiaries.
Section 3.24 Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Company or any Subsidiary who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement,
except for the Financial Advisor pursuant to an engagement letter, a copy of
which has been provided to Purchaser. The Company Disclosure Schedule contains
the Company's good faith estimate of all professional fees of attorneys,
accountants and investment bankers) relating to the Merger.
Section 3.25 Changes in Compensation. Except for the senior executives
listed on the Company Disclosure Schedule (the "Listed Executives"), the Company
has made no changes to the compensation or benefits payable to any of its
employees other than changes in the ordinary course of business and consistent
with past practice. With respect to the Listed Executives the Company Disclosure
Schedule sets forth the most recent changes in compensation and benefits
received by them.
Section 3.26 No Additional Representations. No representations or
warranties are made by the Company except as set forth in this Agreement or in
the Company Disclosure Schedule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND MERGER SUB
Each of Purchaser and Merger Sub hereby represents and warrants to the
Company that:
Section 4.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to own its properties and to conduct
the business in which it is now engaged. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to own its properties and to
conduct the businesses in which it is now engaged.
Section 4.2 Authority. Each of Purchaser and Merger Sub has the full
right, corporate power and authority to enter into this Agreement and the
transactions contemplated hereby and to perform its obligations pursuant to the
terms of this Agreement. The execution and delivery of this Agreement by each of
Purchaser and Merger Sub, the performance by each of Purchaser and Merger Sub of
its respective covenants and agreements hereunder and the consummation by
32
each of Purchaser and Merger Sub of the transactions contemplated hereby have
been duly authorized by all corporate action of Purchaser and Merger Sub. This
Agreement has been duly and validly executed and delivered by Purchaser and
Merger Sub and constitutes a valid and legally binding obligation of Purchaser
and Merger Sub, respectively, enforceable against each of them in accordance
with its terms except as limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other laws of general
application referring to or affecting enforcement of creditors' rights, or by
general equitable principles (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.3 Conflicts; Non-Contravention. Neither the execution, delivery
or performance of this Agreement by Purchaser or Merger Sub, nor their
consummation of the transactions contemplated hereby, violates or conflicts with
any provision of the certificate of incorporation or by-laws of Purchaser or
Merger Sub or assuming (i) the filing of a certificate of merger in accordance
with the GCL, (ii) compliance by the Company with applicable requirements of the
Exchange Act, (iii) compliance with the requirements of the HSR Act and (iv)
compliance with Legal Requirements relating to Licenses and Permits with respect
to the Facilities, violates or conflicts with any statute, ordinance,
regulation, order, judgment or decree of any court or governmental agency or
board, or violates or conflicts with or will result in any breach of any of the
terms of or will constitute a default (or any event which with notice or lapse
of time or both would become a default) under or give others any right of
termination, amendment, acceleration or cancellation of, result in any payment
or other obligation or give others any right to any payment or offer of any
payment, or the creation of any lien pursuant to the terms of any contract or
agreement to which either Purchaser or Merger Sub is a party or by which either
Purchaser or Merger Sub or any of their assets is bound.
Section 4.4 Ownership. Purchaser owns 100% of the issued and outstanding
capital stock of Merger Sub.
Section 4.5 Litigation; Disputes. There are no claims, disputes, actions,
suits, investigations or proceedings pending or, to the best knowledge of
Purchaser, threatened against or affecting Purchaser or Merger Sub, or their
properties or assets, which could prevent, enjoin, alter, or materially delay
any of the transactions contemplated by this Agreement.
Section 4.6 Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Purchaser or Merger Sub who might be entitled to any fee or commission
in connection with the transactions contemplated by this Agreement, except for
Credit Suisse First Boston, Inc. ("CSFB"), Xxxxx Xxxxxxxx and MetCap Securities,
LLC, the fees of which shall be payable by Purchaser.
Section 4.7 Financing. Purchaser has delivered to the Company's Board a
schedule setting forth the structure of the financing and the material
intercompany transactions (the "Structural Assumptions") that Purchaser
presently intends to implement in connection with the Merger and the
consummation of the transactions, including the Subsequent Transactions (as
defined below) contemplated hereby (the "Financing Schedule"), as well as its
proposed sources of equity and debt financing (which includes a minimum required
equity commitment of $200,000,000 (the "Equity Commitment"), which will be
included in the financing to consummate the Merger and the other transactions
contemplated hereby. Purchaser has also
33
delivered to the Company's Board of Directors appropriate documentation
substantiating the sources of financing that are, or will be, available as
required to fund the equity component of the financing for the Merger set forth
in the Financing Schedule (the "Equity Commitment Letter"). Purchaser has
available to it the funds and/or assets described in the Equity Commitment
Letter.
Section 4.8 Purchaser Ownership of Company Securities. Except as set forth
on the Purchaser Disclosure Schedule, Purchaser does not, directly or
indirectly, beneficially own any shares of Common Stock of the Company or any
options, warrants or other rights to acquire such Common Stock.
Section 4.9 Purchaser Diligence. Purchaser has completed its legal,
regulatory and business diligence of the Company so as to execute and deliver
this Agreement. Nothing herein shall be construed as limiting the Purchaser's
rights under this Agreement or the Company's obligations under Sections 5.2, 5.8
and 7.3 hereof.
Section 4.10 Solvency of the Surviving Corporation. At the Closing Date
and immediately after giving effect to the transactions contemplated by this
Agreement (after giving effect to the Subsequent Transactions and all financings
to be undertaken by Purchaser and its affiliates in connection therewith and
with the Merger) the Company will be in compliance with all relevant provisions
of the GCL (and such transactions, Subsequent Transactions and financing will
not violate the relevant provisions of the GCL) and assuming the accuracy in all
material respects as of the Closing Date of the representations and warranties
contained in Article III, (i) each of the Surviving Corporation and the
Subsidiaries will not have incurred debts beyond its ability to pay such debts
as they mature or become due, (ii) the then present fair salable value of the
assets of each of the Surviving Corporation and the Subsidiaries will exceed the
amount that will be required to pay their probable liabilities (including the
probable amount of all contingent liabilities) and their respective debts as
they become absolute and matured, (iii) the assets of each of the Surviving
Corporation and the Subsidiaries, in each case at a fair valuation, will exceed
their respective debts (including the probable amount of all contingent
liabilities) and (iv) each of the Surviving Corporation and the Subsidiaries
will not have unreasonably small capital to carry on their respective business,
either (A) as presently conducted or (B) as intended by Purchaser to be
conducted. No transfer of property is being made and no obligation is being
incurred in connection with the transactions contemplated by this Agreement or
the Subsequent Transactions with the intent to hinder, delay or defraud any
present or future creditors of the Surviving Corporation and the Subsidiaries.
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
Section 5.1 Conduct of the Company. (a) Except as expressly contemplated
by this Agreement or as set forth in the Company Disclosure Schedule, from the
date hereof until the Effective Time, the Company and each Subsidiary shall
conduct their business in the ordinary course consistent with past practice and
shall use their commercially reasonable best efforts to preserve intact their
business organizations, assets and good will, their relationships with
34
suppliers, Governmental Authorities and Third Party Payors and to keep available
the services of their present officers and employees. Without limiting the
generality of the foregoing, except to the extent in the ordinary course of
business, consistent with past practice or except as otherwise approved in
writing by Purchaser, or as expressly contemplated by this Agreement, from the
date hereof until the Effective Time, the Company will not, and will not permit
any Subsidiary (to the extent consistent with the Company's fiduciary
obligations to holders of minority interests in any Subsidiary) to:
(i) sell, lease, license or otherwise dispose of any
Subsidiaries, Facilities, Real Property, Ancillary Businesses, Licenses,
Permits, CONs or other material assets or property except (A) pursuant to
existing contracts, commitments or disposition plans set forth on the Company
Disclosure Schedule, (B) sale of inventory and supplies or (C) transfers between
the Company and/or its Subsidiaries;
(ii) enter into or amend any agreement with or affecting any
director, officer or employee, which foregoing restriction includes, without
limitation, (A) the increase in the compensation payable by the Company or any
Subsidiary to, or to become payable by the Company or any Subsidiary to, any of
their respective directors, officers or employees, except as required pursuant
to the terms of any contract, agreement, plan or arrangement set forth on the
Company Disclosure Schedule or annual compensation increases in the ordinary
course of business consistent with past practices (except that the Company may
implement the changes in compensation and benefits set forth in the Company
Disclosure Schedule with respect to the Listed Executives), or (B) enter into,
adopt, amend, modify, or terminate any material bonus, profit sharing,
incentive, severance, or other material plan, collective bargaining agreement,
contract, or commitment for the benefit of any of its directors, officers, or
employees (or take any such action with respect to any other material Benefit
Plan (except that the Company may implement the Retention Plan));
(iii) other than renewals set forth in the terms and
conditions of the existing Leases and other than development and disposition
plans currently in process set forth on a schedule thereof provided to
Purchaser, open, acquire, purchase, lease or license any new Facility, or enter
into or purchase any lease or license therefor, or renew, extend, amend or
terminate any Lease;
(iv) amend, assign or terminate any Material Contract or enter
into any contract that would have constituted a Material Contract if in
existence on the date of this Agreement;
(v) except as permitted under the existing credit lines of the
Company or any relevant Subsidiary, incur, guarantee or assume any indebtedness
for borrowed money, or any capitalized lease obligation;
(vi) other than in connection with PL/GL claims, pay,
discharge or satisfy any claim, liability or obligation; provided, however, that
it is expressly acknowledged and agreed that nothing in this Agreement will
prevent the Company or any Subsidiary from satisfying claims or otherwise
discharging its liabilities and obligations under the Company Plan of
Reorganization;
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(vii) subject to clause (v) in the following paragraph, incur
or create or suffer any Encumbrance on any of the assets of the Company or any
Subsidiary (other than Permitted Encumbrances);
(viii) other than with respect to Taxes, incur or assume any
liability or obligation;
(ix) make any material change in any method of accounting or
accounting practice or policy other than those required by GAAP;
(x) enter into any Governmental Agreements; or
(xi) make, change or rescind any express or deemed election
relating to Taxes.
(b) Notwithstanding the foregoing, from the date hereof until the
Effective Time, and whether or not in the ordinary course of business, the
Company will not, and will not permit any Subsidiary (to the extent consistent
with the Company's fiduciary obligations to holders of minority interests in any
Subsidiary) to:
(i) adopt or propose any change in the Company's articles of
incorporation or in the case of the Company's by laws, adopt or propose any
change which would have a Company Material Adverse Effect (for purposes of this
clause (i), even if such event resulting in a Company Material Adverse Effect
occurs after November 21, 2004).
(ii) declare or pay any dividends or make any distributions on
its Shares other than to the Company or any entity wholly-owned, directly or
indirectly, by the Company;
(iii) (1) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any Company Securities or Company Subsidiary
Securities, other than the issuance of Shares upon the exercise of Options and
as permitted in Section 5.5, (2) split, combine or reclassify any Company
Securities or Company Subsidiary Securities, (3) repurchase, redeem or otherwise
acquire any Company Securities, or (4) grant, amend or modify the terms and
conditions of any Options except as permitted in Section 5.5 or enter into any
agreement to do any of the foregoing;
(iv) make, or commit to make, any capital expenditure (or
series of related capital expenditures), other than as contemplated in the
Company's 2004 capital expenditure budget provided to the Purchaser including,
for the avoidance of doubt, the contingency amount set forth in such budget
which may be spent on capital expenditures in the reasonable discretion of the
Company's Chief Executive Officer or Chief Financial Officer;
(v) incur or suffer any Encumbrances on any real property of
the Company or any Company Subsidiary, other than Permitted Encumbrances, or
enter into any agreement to do so.
36
(vi) sell, transfer, lease, license or otherwise dispose of
any skilled nursing facility or any Subsidiary which owns such a facility, or
enter into any agreement, contract, option, rights of first offer or rights of
first refusal, to do any of the foregoing except for the planned dispositions
set forth on the Company Disclosure Statement;
(vii) merge or consolidate any Subsidiary with any other
Person (other than a wholly-owned Subsidiary or the Company) or acquire the
capital stock or all or substantially all of the assets of any business or
entity (other than capital stock or assets of an existing wholly owned
Subsidiary);
(viii) take or agree to take any action that is intended to
make, or has the purpose of making, any representation and warranty of the
Company hereunder inaccurate in any material respect at, or as of any time prior
to, the Effective Time; or
(ix) terminate the engagement of Xxxxxxxx Xxxxx or modify the
terms of such engagement in a manner as to eliminate the requirement that
Xxxxxxxx Xxxxx be requested to render the Bring Down Opinion (as defined below).
Section 5.2 Access to Information. (a) Subject to the applicable Legal
Requirements and contractual restrictions imposing confidentiality or
non-disclosure obligations or restrictions, the Company and each Subsidiary will
permit Purchaser and its attorneys, accountants, investment bankers, and other
professional advisors and representatives to have reasonable access prior to the
Effective Time to the Facilities, offices, properties and to the books and
records (including, without limitation, contracts, documents and Tax records) of
the Company and each Subsidiary and personnel at the Company and each
Subsidiary, during normal working hours and upon reasonable notice, to
familiarize itself with the Company's and each Subsidiary's respective
Facilities, properties, business, operating and financial condition and to
conduct any and all financial, legal, regulatory, business and other due
diligence procedures as Purchaser or its representatives may reasonably deem
appropriate for any purpose germane to this Agreement and in connection with a
Subsequent Transaction (as defined below); provided, however, that Purchaser and
its representatives shall take reasonable steps to avoid disruption of the
normal operations of the Company or any Subsidiary.
(b) Purchaser hereby acknowledges that it is subject to the
Confidentiality Agreement dated March 30, 2004 with the Company (as amended from
time to time), which sets forth certain obligations regarding confidential
treatment of certain information of the Company and each of the Subsidiaries
(the "Confidentiality Agreement"), and Purchaser hereby confirms that the
Confidentiality Agreement remains in full force and effect and its
Representatives (as defined in the Confidentiality Agreement) will continue to
comply with the terms, conditions and restrictions thereunder, and that any and
all Evaluation Material (as defined in the Confidentiality Agreement) obtained
during any review of the Company or any Subsidiary contemplated by this
Agreement will be subject to the terms of the Confidentiality Agreement (unless
specifically exempted from the restrictions of such Confidentiality Agreement by
the terms and conditions thereof), provided, however, that such Evaluation
Material may be provided to counterparties to Subsequent Transactions (as
defined below) and the Representatives of such counterparties, subject to their
being bound by confidentiality agreements containing terms and conditions
37
substantially similar to those contained in the Confidentiality Agreement and
specifically designating the Company as a third party beneficiary thereto.
Section 5.3 Notices of Certain Events. The Company shall promptly notify
Purchaser of:
(a) any notice or other communication from any Person alleging that
the consent or approval of such Person (or another Person) is or may be required
in connection with the transactions contemplated by this Agreement and such
consent or approval is material;
(b) any notice or other communication, which is material, from any
Governmental Authority in connection with the transactions contemplated by this
Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the its knowledge, threatened against, relating to or involving
or otherwise affecting the Company or any of its Subsidiaries which, if pending
on the date of this Agreement, would have been required to have been disclosed
pursuant to the terms hereof or which relate to the consummation of the
transactions contemplated by this Agreement;
(d) the occurrence, to Company's Knowledge, of any event that has
had a Company Material Adverse Change (for this purpose, even if such event
occurs on or after November 21, 2004);
(e) the occurrence of any event or the discovery of any information
which would cause any representation or warranty of the Company, or any
information set forth on the Company Disclosure Schedule, to be untrue or
inaccurate in any material respect;
(f) the occurrence of any event or the discovery of any information
which would delay in any material respect, or render impossible, the performance
by the Company of its obligations under this Agreement or the consummation of
the transactions contemplated hereby;
(g) any written notice of default received with respect to a Lease
or other Material Contract; and
(h) any notice of claim by any Governmental Authority with respect
to the actual suspension, revocation or termination of any License, Permit or
CON or the exclusion, disqualification or debarment of the Company or any
Subsidiary from any Third Party Payor Program.
Section 5.4 Certain Filings; Stockholders Meeting; Takeover Statutes. (a)
The Company's Board (i) shall recommend to the stockholders of the Company that
such stockholders approve the Merger, approve and adopt this Agreement, and
approve the other transactions contemplated by this Agreement and (ii) shall use
commercially reasonable efforts to solicit and obtain such approvals and
adoption by holders of a majority of the outstanding Shares. Notwithstanding the
foregoing, the Company's Board may fail to comply with clauses (i) or (ii)
hereinabove and may withdraw, modify or change such recommendation of the
Merger, this Agreement and the other transactions contemplated by this Agreement
if it has determined in
38
good faith, based on such matters as they deem relevant and after receiving
advice from outside legal counsel, that the failure to withdraw, modify or
change its recommendation of the Merger, this Agreement and the other
transactions contemplated by this Agreement would be reasonably likely to result
in a breach of the directors' fiduciary duties under applicable law. Unless this
Agreement has previously been terminated pursuant to Section 9.1, whether or not
the Company's Board has made a recommendation, or has withdrawn, modified or
changed in any manner adverse to the interests of Purchaser, its recommendation
of the Merger, this Agreement or the transactions contemplated by this
Agreement, the Company shall take all steps necessary (including, without
limitation, the preparation (as promptly hereafter as practicable) and filing
with the SEC (as promptly as practicable following receipt from Purchaser of the
Debt Commitment Letter as defined below) of a proxy statement with respect
thereto (the "Proxy Statement"), to duly call, give notice of, convene and hold
a meeting of its stockholders (the "Company Stockholders Meeting")) for the
purpose of approving the Merger, approving and adopting this Agreement and
approving the transactions contemplated by this Agreement and for such other
purposes as may be deemed necessary by the Company in connection with
effectuating the Merger and the other transactions contemplated by this
Agreement; provided, however, that in any event, the Company shall file with the
SEC the Proxy Statement, and mail the Proxy Statement and convene the Company
Stockholders Meeting as promptly as practical following receipt from Purchaser
of the Debt Commitment Letter. Purchaser shall be given reasonable opportunity
to review and comment on the Proxy Statement, including all amendments and
supplements thereto, prior to the filing thereof with the SEC. The Company
agrees to provide Purchaser and Purchaser's counsel copies of any comments the
Company or its counsel may receive from the SEC or its staff with respect to the
Proxy Statement promptly after receipt of such comments. The Company shall use
commercially reasonable efforts to respond to such comments promptly and shall
provide Purchaser and Purchaser's counsel with copies of any written responses
by the Company or its counsel.
(b) If any state or federal takeover statute is or may become
applicable to the Merger, this Agreement, or the other transactions contemplated
by this Agreement, the Company, Purchaser and Merger Sub and their respective
Boards of Directors, subject to compliance by their Board of Directors' with
their fiduciary duties, will grant such approvals and will take such other
actions as are necessary so that this Agreement and the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and, subject to compliance with
such Board of Directors' fiduciary duties, will otherwise act to eliminate or
minimize the effects of any state or federal takeover statute on the Merger and
the other transactions contemplated by this Agreement.
(c) None of the information supplied or to be supplied by Purchaser
or Merger Sub, on the one hand, or the Company, on the other hand, for inclusion
or incorporation by reference in the Proxy Statement, at the date such Proxy
Statement is first mailed to stockholders of the Company and at the time of the
Stockholders' Meeting, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which
they are made, not misleading. If at any time prior to the date of the
consummation of the transactions contemplated herein should the Company or
Purchaser discover information relating to the Company or Purchaser, or any of
their respective affiliates, officers or directors, which should be set forth in
an amendment and/or a supplement to the Proxy Statement, the Company and
39
Purchaser shall take all appropriate action so that the Proxy Statement would
not, at the date of mailing of the Proxy Statement to stockholders and at the
time of the Company stockholder meeting, include any misstatement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The party discovering such
information shall promptly notify the other party and, to the extent required by
Legal Requirements, an appropriate amendment or supplement describing that
information shall be promptly filed with the SEC or any other applicable
Governmental Authority and, to the extent required by Legal Requirements,
disseminated to the Company's stockholders.
Section 5.5 Options. No options or warrants for Common Stock shall be
granted, amended or modified, except as contemplated in Section 1.3 and except
that options to purchase common stock under the 2002 Plan set forth in the
Company Disclosure Schedule up to the limits set forth in the 2002 Plan may be
granted in the ordinary course of business to employees who are not senior
executives of the Company or any Subsidiary, and up to 7,500 shares of
restricted common stock may be granted to each of two new directors who may fill
vacancies on the Company's Board (collectively, "Permitted Awards").
Section 5.6 Retention Plan. The Company shall implement the program set
forth in Schedule 5.6 to the Company Disclosure Schedule (which Schedule 5.6 has
been mutually approved by Purchaser and the Company) providing for selected
personnel of the Company identified by the Company's Chief Executive Officer
with a compensation program and budget for their retention by the Company and
continued employment from the date of this Agreement until the Effective Time
and thereafter (in the discretion of the Surviving Corporation) to assist in the
implementation of the transactions contemplated by the Merger and the transition
of management and ownership as contemplated by the Merger (collectively, the
"Retention Plan"). The Company shall be permitted to incur the budgeted expenses
under the Retention Plan, and to enter into appropriate documentation (subject
to the reasonable approval of Purchaser) with the covered personnel setting
forth the amount to be paid to each identified individual pursuant to the
Retention Plan and the other relevant terms relating thereto.
Section 5.7 Financial Reports and Taxes. No later than twenty-five days
after the end of each month commencing with May 2004 and continuing through the
later of the Effective Time or the termination of this Agreement, the Company
shall deliver to Purchaser unaudited financial statements (without footnotes) as
at the end of such month, including balance sheets, statements of operations and
statements of cash flows, which shall be prepared on a basis consistent with
past practice (collectively, the "Monthly Financials"), which Monthly Financials
shall in the case of each month which is the end of a fiscal quarter of the
Company be prepared also on a quarterly basis. The Monthly Financials shall be
subject to the Confidentiality Agreement. From the date hereof through the
Effective Time, the Company shall comply with its obligations as to Taxes and
Tax Returns in the same manner as required in Section 3.11 as to periods prior
to the date hereof.
Section 5.8 Cooperation as to Real Property Matters. The Company shall
make available to Purchaser or its designees all appraisals, valuations,
engineering reports, environmental studies and reports, architectural plans and
drawings and other reports and analysis relating to the Real Property which may
be in the possession of the Company or the
40
Subsidiaries. The Company will use commercially reasonable efforts to satisfy
and remove from record all Encumbrances on or with respect to the Real Property
or any part thereof as Purchaser may request, including but not limited to,
Permitted Encumbrances listed on Exhibit B to the title indemnity agreement
provided to Fidelity National Title Insurance Company in connection with the
Company's December 2003 financing, and (by bonding or otherwise) all mechanics
and materialmen liens (notwithstanding that some or all of such Encumbrances may
be included within Permitted Encumbrances for the purposes of the
representations in this Agreement); provided, however, that the failure to
remove any Permitted Encumbrance, despite the Company's use of commercially
reasonable efforts, shall not, in and of itself, be a condition to Purchaser's
obligations under this Agreement.
Section 5.9 No Solicitations. (a) From the date hereof until the Effective
Time or such earlier date as this Agreement shall terminate in accordance with
its terms, neither the Company, nor any of its Subsidiaries shall directly or
indirectly (i) solicit, knowingly encourage or initiate discussion or inquiries
with or (ii) enter into negotiations or agreements with, or furnish any
information that is not publicly available to, any corporation, partnership,
company, Person or other entity or group (other than Purchaser, an affiliate of
Purchaser or their authorized representatives) concerning, or take any other
action to facilitate, any Acquisition Proposal (as defined below), and the
Company and the Subsidiaries will instruct their officers, directors and
advisors and financial and legal representatives and consultants (collectively,
the "Company Representatives") not to take any action contrary to, or
inconsistent with, the foregoing provisions of this sentence. The Company and
the Subsidiaries shall, and shall cause the Company Representatives to,
immediately cease and terminate all existing activities, discussions and
negotiations with respect to any Acquisition Proposal. Notwithstanding the
foregoing, the Company and the Company Representatives shall not be prohibited
from (x) complying with its disclosure obligations under Sections 14d-9 and
14e-2 of the Exchange Act with regard to an Acquisition Proposal, or (y)
engaging in any activities described in clause (ii) above (or entering into an
agreement resulting from such activities), in response to an inquiry, proposal
or offer from a third party if such action is taken by, or upon the authority
of, the Company's Board after the Board determines in good faith after
consultation with outside legal counsel that such action is necessary in order
for its directors to comply with their respective fiduciary duties under
applicable law. The Company will notify Purchaser within 72 hours if any
inquiries or proposals are received by, any information is requested from, or
any negotiations or discussions are sought to be initiated with, the Company,
the Subsidiaries or the Company Representatives with respect to an Acquisition
Proposal. An "Acquisition Proposal" means any inquiry, proposal or offer from
any Person (other than Purchaser or an affiliate of Purchaser) relating to (1)
any direct or indirect acquisition or purchase of a business or assets, or
assets of the Company or the Subsidiaries that constitutes thirty percent (30%)
or more of the net revenues or assets of the Company and the Subsidiaries, taken
as a whole, or any direct or indirect acquisition or purchase of Shares that
would result in a Person or group owning thirty percent (30%) or more of the
Shares or voting power (or of securities or rights convertible into or
exercisable for such Shares or voting power) of the Company, (2) any tender
offer or exchange offer or other acquisition or series of acquisitions of Shares
that, if consummated, would result in any Person or group beneficially owning
thirty percent (30%) or more of the Shares or voting power (or of securities or
rights convertible into or exercisable for such Shares or voting power) of the
Company, or (3) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of the Subsidiaries that constitutes thirty
41
percent (30%) or more of the net revenues or assets of the Company and the
Subsidiaries taken as a whole, in each case other than the transactions
contemplated by this Agreement. Each of the transactions referred to in the
foregoing definition of Acquisition Proposal, other than the Merger, is referred
to herein as an "Acquisition Transaction."
(b) Each time, if any, that the Company's Board determines, in
accordance with the previous paragraph, that it must enter into negotiations
with, or furnish any information that is not publicly available to, any Person
(other than Purchaser, an affiliate of Purchaser or their authorized
representatives) concerning any Acquisition Proposal, the Company shall (i) give
Purchaser prompt notice of such determination; and (ii) promptly provide
Purchaser with a summary of the material terms of any Acquisition Proposal and
of any material negotiations or communications between the Company or the
Subsidiaries or any of the Company Representatives and any Person (other than
Purchaser or its representatives) concerning any Acquisition Proposal. Prior to
the Company's Board or the Company accepting an Acquisition Proposal or, in
connection with an Acquisition Proposal, prior to withdrawing, modifying or
changing in a manner adverse to Purchaser or Merger Sub the approval or
recommendation of the Company's Board of the Merger and this Agreement, the
Company shall give Purchaser notice of the Company's Board or the Company's
intention to accept such Acquisition Proposal or to withdraw, modify or change
the approval or recommendation of the Company's Board, which notice shall
include the identity of the person making such Acquisition Proposal and the
material terms of such Acquisition Proposal, and a right, during a period of at
least five (5) business days from Purchaser's receipt of such notice (except
that such period shall be at least ten (10) business days if such notice is
given within sixty (60) days after the date of this Agreement) to submit a
revised proposal containing terms and conditions as Purchaser deems appropriate
(except that in no event may Purchaser submit a revised proposal with a purchase
price per Share less than the Stock Price) and if the Company's Board, in the
reasonable exercise of its fiduciary duties based on such matters as the
Company's Board may deem relevant and after receiving advice from outside legal
counsel, determines that Purchaser's revised proposal is no less favorable to
the Company or its stockholders than the terms and conditions in such
Acquisition Proposal, then this Agreement shall be modified to reflect
Purchaser's revised proposal and this Agreement shall otherwise continue in full
force and effect; provided, however, that Purchaser shall not relinquish any
rights nor be relieved of any obligations arising under this Agreement as a
result of submitting any revised proposal, and provided further, that nothing
herein shall preclude Purchaser from terminating this Agreement to extent
entitled to do so pursuant to Section 9.1 hereof.
Section 5.10 Bankruptcy Matters. From the date hereof until the Closing
Date, the Company will continue to perform in all material respects its
obligations under the Company Plan of Reorganization and the Bankruptcy Orders.
Section 5.11 Restricted Agreements. The Company is party to certain
agreements that are subject to confidentiality or non-disclosure obligations or
restrictions ("Restricted Agreements") which have not been made available to the
Purchaser. With respect to the Restricted Agreements that, in the Company's
reasonable belief are material the Company agrees to use its commercially
reasonable best efforts to make the Restricted Agreement or a summary thereof
available to Purchaser for inspection and review.
42
ARTICLE VI
COVENANTS OF PURCHASER
Section 6.1 Conduct of the Purchaser. Purchaser agrees that it will take
all commercially reasonable best efforts necessary to cause Merger Sub to
perform its obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement.
Section 6.2 Notices of Certain Events. The Purchaser shall promptly notify
the Company of:
(a) any notice or other communication from any Person alleging that
the consent or approval of such Person (or another Person) is or may be required
in connection with the transactions contemplated by this Agreement (if such
consent or approval is material);
(b) any notice or other communication (which is material) from any
Governmental Authority in connection with the transactions contemplated by this
Agreement;
(c) the occurrence of any event or the discovery of any information
which would cause any representation or warranty of the Purchaser to be untrue
or inaccurate;
(d) the occurrence of any event or the discovery of any information
which would delay in any material respect, or render impossible, the performance
by the Purchaser of its obligations under this Agreement or the consummation of
the transactions contemplated hereby; and
(e) any material adverse change in the Structural Assumptions set
forth on the Financing Schedule that Purchaser intends to obtain or implement to
consummate the Merger and the transactions contemplated hereby (provided,
however, that the content of such notice shall not, in and of itself, give the
Company any right to terminate this Agreement prior to the End Date, but this
proviso shall not modify the representations, warranties and covenants made by
the Purchaser in Section 4.7 and Section 6.3 hereof or in any way effect the
Company's ability to draw on the LC (as defined below) in accordance with
Section 9.2(c) below).
Section 6.3 Purchaser Financing. At the Closing, Purchaser will have
sufficient cash available to it to pay the Aggregate Purchase Price and Change
of Control Payments that will be due and payable at the Closing. Purchaser shall
use its commercially reasonable best efforts to obtain and implement all
necessary financing and Structural Assumptions set forth in the Financing
Schedule with such changes as Purchaser may desire, in order to have available
to it the Aggregate Purchase Price and such Change of Control Payments at or
prior to the Closing; provided, however, that in no event will Purchaser make
any changes in the Structural Assumptions that would be reasonably expected to
have a material adverse effect on the solvency of the Company upon the
consummation of the Merger, the Subsequent Transactions and the other
transactions contemplated herein, provided further, however, that
notwithstanding the foregoing, so long as Purchaser obtains and tenders to the
Company the Aggregate Purchase Price and such Change of Control Payments on or
prior to the End Date, Purchaser shall not be
43
in breach of this covenant. In connection with the foregoing, Purchaser is
seeking, from one or more reputable financial institutions, a financing
commitment for the transactions contemplated hereby containing customary terms
for financing transactions of a similar size and nature to the transaction
contemplated herein (the "Debt Commitment Letter"), predicated on Purchaser's
commitment to provide the Equity Commitment. Purchaser has requested a reputable
investment banking organization to issue a Debt Commitment Letter within forty
(40) days after the date hereof. Notwithstanding the foregoing, the failure to
obtain the Debt Commitment Letter shall not, in and of itself, be a breach of
this Agreement by Purchaser and shall not, in and of itself, give the Company
any right to terminate this Agreement or to exercise any other remedy prior to
the End Date. No later than the later of (a) three business days prior to the
date initially scheduled for the Company Stockholders Meeting and (b) eight (8)
days prior to the Closing, Purchaser shall deliver to, or make available for
review by, the Company copies of the definitive documentation required to
implement each of the Structural Assumptions (collectively, the "Structural
Documents") and thereafter through the Effective Time Purchaser shall not make
any material changes or supplements to or waivers of any provisions of the
Structural Assumptions or Structural Documents.
Section 6.4 Director and Officer Liability.
(a) Purchaser and the Surviving Corporation shall jointly and
severally, from and after the Effective Time, indemnify and hold harmless each
present and former director and officer of the Company, determined as of the
Effective Time (the "Indemnified Parties"), in respect of acts or omissions in
their capacity as such, against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time (including any matters arising in connection with the transactions
contemplated by this Agreement), to the fullest extent permitted by Law (and
Purchaser and the Surviving Corporation shall jointly and severally advance
expenses as incurred to the fullest extent permitted by Law); provided, that any
determination required to be made with respect to whether an officer or director
is entitled to indemnification or advancement of expenses shall be made by
independent counsel selected by Purchaser and such Person.
(b) The Company shall purchase a six-year "tail" prepaid policy
prior to the Effective Time on terms and conditions no less advantageous to the
Indemnified Parties than the existing directors' and officers' liability
insurance maintained by the Company and which shall include first dollar
coverage or such other level of self-insured retention as may be reasonably
obtained; provided, that the amount paid by the Company shall not exceed six
times the current annual premium paid by the Company for the Company's existing
officers' and directors' liability insurance. If such "tail" prepaid policies
have been obtained by the Company prior to the Closing, the Surviving
Corporation shall, and Purchaser shall cause the Surviving Corporation to,
maintain such policies in full force and effect, and continue to honor the
respective obligations thereunder.
(c) The obligations of Purchaser and the Surviving Corporation under
this Section 6.4 shall not be terminated or modified by Purchaser or the
Surviving Corporation in a
44
manner as to adversely affect any Indemnified Party to whom this Section applies
without the consent of the affected Indemnified Party. In the event that either
Purchaser or the Surviving Corporation or any of their respective successors or
assigns (i) consolidates with or merges into any other Persons, or (ii)
transfers at least 50% of its properties or assets to any Person, then and in
each case, proper provision shall be made so that the applicable successors and
assigns or transferees assume the obligations set forth in this Section.
(d) The provisions of this Section 6.4 are intended to be for the
benefit of, and will be enforceable by, each Indemnified Person, his or her
heirs and his or her representatives and are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise, all of which shall remain in
effect for a period of at least six years.
Section 6.5 Employee Policies. For a period of twelve (12) months
following the Effective Time, the Surviving Corporation and its Subsidiaries
shall not make any general across the board adverse change in compensation,
health and welfare benefits, bonus plans or vacation and leave plans, affecting
employees of the Company or its Subsidiaries employed at the Effective Time;
provided, however, that in the event the cost of health and welfare benefits
incurred by the Surviving Corporation and its Subsidiaries (taken as a whole)
increases by more than 15% (a "Material Benefit Cost Increase"), the Surviving
Corporation may take such action as may be reasonably necessary (such as
increasing co-payment obligations or deductible thresholds) to limit the
increase in the cost of health and welfare benefits to a level that does not
constitute a Material Benefit Cost Increase. The Surviving Corporation and its
Subsidiaries shall maintain the Company's and its Subsidiaries' respective
severance payment policies that are in effect on the date hereof, for a period
of twelve (12) months following the Effective Time, with respect to each
employee of the Company or its Subsidiaries employed at the Effective Time.
Section 6.6 Bankruptcy Matters. Following the Closing Date, the Surviving
Corporation will complete all distributions and administer all claims as and
when required by the Company Plan of Reorganization.
Section 6.7 Solvency of the Surviving Corporation. Purchaser shall furnish
or cause to be furnished to the Company's Board copies of any solvency opinions
or similar materials obtained from third parties in connection with the
financing of the transactions contemplated by this Agreement and the Subsequent
Transactions, to the extent contractually permitted by the issuer of such
opinion. Purchaser shall use commercially reasonable best efforts to cause the
firms issuing any such solvency opinions to allow the Company's Board to rely
thereon; provided that no material fee or expense is associated with obtaining
such reliance unless the Company agrees to reimburse Purchaser for any such fees
or expenses. Following the Effective Time and until the earlier to occur of six
(6) years thereafter or the expiration of the applicable statute of limitation,
Purchaser shall not take or fail to take any action that if such action had been
deemed to have been taken or such failure to act had been deemed to have
occurred immediately prior to the Effective Time would have caused the
representations and warranties set forth in Section 4.10 hereof to be untrue as
of the Effective Time. The provisions of this Section 6.7 are intended to be for
the benefit of, and will be enforceable by, each holder of Shares and their
respective successors, heirs and personal representatives.
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ARTICLE VII
COVENANTS OF PURCHASER AND THE COMPANY
The parties hereto agree that:
Section 7.1 Commercially Reasonable Best Efforts; HSR Matters.
(a) Each of the parties hereto agrees to use its commercially
reasonable best efforts to take, or cause to be taken, all actions, and to do or
cause to be done, and to assist and cooperate with the other party hereto in
doing, all things reasonably necessary, proper, or advisable to consummate and
make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including, without limitation (i) the obtaining
of all necessary waivers, consents, Licenses and Permits, and approvals from
Governmental Authorities, making of all necessary registrations and filings, and
the taking of all reasonable steps as may be necessary to obtain any approval or
waiver from, or to avoid any action or proceeding by, any Governmental
Authority, (ii) obtaining all necessary consents, approvals or waivers from any
Persons other than Governmental Authorities, such as landlords and lenders,
(iii) assisting Purchaser in its obtaining the debt financing contemplated by
Section 4.7 hereof and (iv) defending any lawsuits or any other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including without
limitation, seeking to have any temporary restraining order or injunction
entered into by any court or administrative authority vacated or reserved;
provided that nothing in this Section 7.1(a) shall require any party hereto to
waive any condition set forth in Article VIII or limit the Company's and
Subsidiary's rights under Section 5.9
(b) Without limiting the generality of Section 7.1(a) hereof, the
parties shall, as promptly as practicable, prepare and file any notifications
required under the HSR Act with respect to the transactions contemplated hereby.
The parties shall respond as promptly as practicable to (i) any inquiries or
requests received from the Federal Trade Commission or the Department of Justice
for additional information or documentation and (ii) any inquiries or requests
received from any state attorney general, foreign antirust authority or other
Governmental Authority in connection with antitrust or related matters. Each
party shall (1) give the other party prompt notice of the commencement or threat
of commencement of any legal proceeding by or before any court or Governmental
Authority with respect to the Merger or any of the other transactions
contemplated by this Agreement, (2) keep the other party informed as to the
status of any such legal proceeding or threat, and (3) promptly inform the other
party of any communication to or from the Federal Trade Commission, the
Department of Justice or any other Governmental Authority regarding the Merger.
Except as may be prohibited by any Governmental Authority or by any Legal
Requirement, Purchaser, on the one hand, and the Company, on the other hand,
will consult and cooperate with one another, and will consider in good faith the
views of one another, in connection with any analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal made or submitted in connection
with any legal proceeding under or relating to the HSR Act. Purchaser, on the
one hand, and the Company, on the other, will permit authorized representatives
of the other party to be present at each meeting or conference relating to any
such legal proceeding and to have access to and be consulted in connection with
any document, opinion or proposal made or submitted to any Governmental
Authority in connection with any such legal proceeding. Nothing herein shall be
deemed to
46
require Purchaser or its affiliates to agree to divest, sell, dispose of, hold
separate or otherwise take or commit to take any action that limits its freedom
of action with respect to it or any of its affiliates' ability to retain, any of
its businesses, properties or assets, as they exist at this time, if any such
action would result in a material adverse effect on the results of operations,
financial conditions of the Purchaser and its affiliates and the Company taken
as a whole or Purchaser's ability to consummate the transactions contemplated
hereby. Furthermore, neither the Company nor any Company Subsidiary shall agree
to divest, sell, dispose of, hold separate or otherwise take or commit to take
any action that limits its freedom of action with respect to it or any of its
affiliates' ability to retain, any of its businesses, property or assets,
without the prior written consent of Purchaser, if such action would result in a
Material Adverse Effect on the Company.
Section 7.2 Public Disclosure. The parties shall cooperate in the
Company's preparation and prompt issuance of a mutually acceptable press release
announcing the execution of this Agreement and filing of a Current Report on
Form 8 - K with the SEC including as an exhibit thereto a copy of this Agreement
and any other ancillary document or agreement that is material to the
transactions contemplated hereby. Thereafter, as long as this Agreement is in
effect, except to the extent required by applicable Legal Requirements, neither
the Company nor Purchaser shall issue any press release or public announcements
or make any public filings of any kind concerning the Merger or other
transactions contemplated by this Agreement without the prior written consent of
the other, and in the event any such public announcement, release or disclosure
is required by applicable Legal Requirements, the parties will consult prior to
making thereof and use their commercially reasonable best efforts to agree upon
a mutual satisfactory text.
Section 7.3 Further Assurances. (a) Purchaser and the Company shall
execute and deliver such certificates and other documents and take such other
actions as may reasonably be requested by the other party in order to consummate
or implement the transactions contemplated hereby; provided, however, that
nothing in this Section 7.3 shall require any party hereto to waive any
condition set forth in Article VIII or limit the Company's and Subsidiary's
rights under Section 5.9.
(b) The Company shall, to the extent compatible with fulfilling the
conditions to the consummation of this Agreement, and its other obligations
under this Agreement cooperate, and cause its Subsidiaries to cooperate, with
Purchaser in the provision of due diligence information with respect to
transactions with respect to, Facilities, operations, businesses or assets of
the Company or the Subsidiaries which Purchaser may desire to implement on or
after the Effective Time ("Subsequent Transactions"), including, without
limitation, providing assistance in obtaining regulatory approvals from
Governmental Authorities and Accreditation Bodies, consents, access agreements,
lien waivers, estoppel certificates, subordination, non-disturbance, attornment,
similar agreements from third parties; provided, however, that no Subsequent
Transaction or the closing thereof shall be a condition to the obligations of
Purchaser or the Company under Article VIII of this Agreement; and, provided,
further, however, that for purposes of this Section 7.3, the Company shall not
be required, in connection with such cooperation, to breach any agreement to
which it is a party or subject, incur any costs or expenses to third parties
unless Purchaser shall advance any costs or expenses therefor, or enter into any
agreement or undertake any obligation with respect thereto unless such agreement
or obligation is subject to the Closing and does not become effective until on
or after
47
the Effective Time. The provision of due diligence and other information
regarding the Company to counterparties to Subsequent Transactions shall be
subject to the confidentiality requirements of Section 5.2(b) above. Further,
while Purchaser may file and pursue applications for consents and approvals with
Governmental Authorities, including with respect to Licenses, in connection with
Subsequent Transactions, Purchaser will not take any such actions that could
impair, or result in any change of ownership status prior to the Effective Time
with respect to any Licenses held by the Company or its Subsidiaries. Purchaser
and the Company shall cooperate in the provision of such information as may be
reasonably requested by Xxxxxxxx Xxxxx in connection with the preparation and
rendering of the Bring Down Opinion (as defined below).
(c) The Company shall cooperate and cause the Subsidiaries to
cooperate, with the Purchaser, and shall take all reasonable actions in the name
of the Company or the Subsidiaries, at the request of the Purchaser, to apply
for and attempt to obtain additional Bankruptcy Orders and/or to enforce the
terms and conditions of the Company Plan of Reorganization and existing
Bankruptcy Orders so as to remove Encumbrances and extinguish pre-petition
liability and obligations of the Company or its Subsidiaries, to the fullest
extent permitted or required by the Company Plan of Reorganization, Bankruptcy
Orders and applicable bankruptcy laws.
(d) The Company shall cooperate, and cause the Subsidiaries to
cooperate with the Purchaser, in the negotiation, documentation and closing of
the satisfaction, payoff, defeasance, refinancing or restructuring of any debt
obligations of the Company which Purchaser may desire to implement on or after
the Effective Time and the removal of Encumbrances in connection therewith
(collectively, "Debt Satisfaction"), provided, however, that the Company shall
not be required to enter into any agreement, or amend or modify any existing
agreement, or incur any obligation, to effectuate such Debt Satisfaction unless
such agreement, amendment, modification or obligation is subject to the Closing
and does not become effective until on or after the Effective Time, and shall
not be required to pay (other than contemporaneously with the Effective Time in
amounts and with funding arranged and provided by the Purchaser) any amounts to
holders of debt obligations of the Company to effectuate such Debt Satisfaction.
(e) Purchaser shall, as promptly as practicable hereafter, prepare
and submit all necessary applications for Governmental Authority consents or
approvals, Licenses and Permits with respect to Purchaser's obtaining control
and ownership of the Company, and Purchaser shall diligently prosecute such
applications to completion. The Company shall, and shall cause the Company
Subsidiaries to, cooperate with Purchaser in the preparation and prosecution of
such applications including, without limitation, providing such information and
executing such documents required to be submitted in connection with such
applications. Purchaser shall use commercially reasonable best efforts to obtain
all necessary Governmental Authority consents and approvals, Licenses and
Permits in connection with the Merger. The Company shall use commercially
reasonable best efforts to implement, if feasible, an Alternative Structure (as
defined herein) where necessary.
(f) Subject to applicable Legal Requirements and contractual
restrictions imposing confidentiality or non-disclosure obligations or
restrictions, the Company shall cooperate and cause the Subsidiaries to
cooperate, with the Purchaser upon Purchaser's
48
reasonable request, in (i) supplying to Purchaser's lender or lenders all
agreements, documents, instruments, reports, financial information and
statements, and other information regarding the Company and the Subsidiaries,
the Real Property, the Business and the other activities of or related to any of
the foregoing, and (ii) attempting to respond to questions raised by Purchaser's
lender; provided, however, that (1) failure of Purchaser to obtain its financing
despite the Company's cooperation, shall not be a condition to Purchaser's
obligations under this Agreement and (2) the Company shall not be required, in
connection with such cooperation, to incur any costs or expenses to third
parties unless Purchaser shall advance any costs or expenses therefor or to
enter into any agreements, commitments or other arrangements that are binding
until immediately after the Effective Time.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1 Conditions to the Obligations of Each Party. The obligations
of the Company, Purchaser and Merger Sub to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) This Agreement shall have been approved and adopted, the Merger
shall have been approved and the other transactions contemplated hereby shall
have been approved by the requisite vote of the stockholders of the Company in
accordance with the GCL;
(b) All waiting periods under the HSR Act shall have been terminated
or expired and no challenge, proceeding, claim or delay with respect to the
Merger shall have been imposed by the Federal Trade Commission, Department of
Justice or any other governmental agency which has not been withdrawn or
terminated;
(c) There shall not have been any statute, rule, regulation or
executive or any other order or similar action of any Governmental Authority
enacted or issued, which would render the parties unable to consummate the
Merger or make the Merger illegal or prohibit, restrict or delay consummation of
the Merger (other than a de minimus civil violation of any Legal Requirement
that does not affect the ability of the Surviving Corporation, the Purchaser or
their affiliates to obtain and maintain Licenses for the ownership and operation
of health care facilities or participation in any Program or Third Party Payor
Program); and
(d) There shall not have been instituted any action or proceeding
before any court or administrative agency, by any Governmental Authority or any
other person, challenging or otherwise relating to the Merger.
(e) The consummation of the Merger shall not result in the violation
of any Legal Requirement (other than de minimus civil violation of any Legal
Requirement that does not affect the ability of the Surviving Corporation, the
Purchaser or their affiliates to obtain and maintain Licenses for the ownership
and operation of health care facilities or participation in any Program or Third
Party Payor Program).
Section 8.2 Conditions to the Obligations of Purchaser and Merger Sub. The
obligations of Purchaser and Merger Sub to consummate the Merger are subject to
the satisfaction of the following further conditions:
49
(a) The representations and warranties made by the Company herein
shall have been true and correct when made and shall be true and correct in all
material respects as of the Effective Time (other than those qualified by
materiality or Company Material Adverse Effect or Company Material Adverse
Change (which qualifications shall be disregarded for purposes of determining
compliance with the condition set forth in this Section 8.2(a)), which shall be
true and correct in all respects), with the same force and effect as if made as
of the Effective Time, other than such representations and warranties as are
made as of another date (which shall be true and correct as of such other date),
provided that the foregoing condition shall be deemed satisfied so long as any
failures of such representations and warranties to be true and correct as of the
Effective Time, taken together, has not had, individually or in the aggregate, a
Company Material Adverse Effect which causes a reduction in value of the Company
of at least $100 million; provided, however, that (i) any amounts that could be
included in the calculations made pursuant Sections 8.2(c)(i) and 8.2(c)(ii)
below shall not be included in the calculation of a reduction in value caused by
a Company Material Adverse Effect, (ii) the amount of any insurance proceeds
that are reasonably expected to be available (based on the Company's good faith
substantiation thereof including applicable insurance policies then in effect)
shall be applied to offset any decrease in value occasioned by any particular
change, event, effect as condition to the extent of any such insurance proceeds
and (iii) any reduction in the amount of available net operating losses ("NOLs")
from the amount of NOLs reported in the Company's financial statements dated
March 31, 2004 shall not constitute a Company Material Adverse Change and will
not be included in any calculation of a reduction in value related to a Company
Material Adverse Effect or a Company Material Adverse Change. For the avoidance
of doubt, it is expressly acknowledged and agreed that the changes, events,
effects or conditions included in the calculation set forth in this Section
8.2(a) are wholly independent from the amounts associated with any changes,
events, effects or conditions included in the calculations to be made pursuant
to Sections 8.2(c)(i) and 8.2(c)(ii). At the Effective Time, the Company shall
have delivered to Purchaser and Merger Sub a certificate dated the date of the
Effective Time to such effect. Such certificate shall attach an update of the
Company Disclosure Schedule as of the Effective Time, subject to Section 10.12
hereof.
(b) Each of the covenants and agreements of the Company to be
performed or complied with by the Company at or prior to the Effective Time
shall have been performed or complied with in all material respects and, at the
Effective Time, the Company shall have delivered to Purchaser and Merger Sub a
certificate dated the date of the Effective Time to such effect.
(c) That none of the following events shall have occurred:
(i) (x) any one or more of the Encumbrances (other than the
Permitted Encumbrances) or (y) any easements, covenants, conditions,
restrictions, and other similar matters of record or set forth in the Company
Disclosure Schedule affecting title to or use of Owned Real Property that
materially impair the use or occupancy of such real property in the operation of
the Business and the operations of the Company and its Subsidiaries conducted
thereon or contain any right of reversion or reverter with respect to (1) Owned
Real Property or, (2) Leased Real Property or Managed Real Property that is
linked to an Owned Real Property by way of a managed care agreement, income or
patient sharing arrangement, referral arrangement or other similar arrangement
or agreement (such leased or managed property, a "Linked
50
Property") causes the Purchaser's lender to reduce the loan amount by at least
$50,000,000 in the aggregate;
(ii) any one or more violations of any Land Use Requirement or
Environmental Laws with respect to Owned Real Property and/or Linked Property,
that causes the Purchaser's lender to reduce the loan amount and such reduction,
together with any reduction determined under Section 8.2(c)(i), aggregates at
least $75,000,000. The term "Land Use Requirement" shall mean zoning, building
code and other land use Legal Requirements regulating the use or occupancy of
any real property or the activities conducted thereon that are imposed by any
Governmental Authority having jurisdiction over such real property but shall
exclude any amounts attributable to deferred maintenance or capital expenditures
unless the subject thereof, if not remediated, would constitute a violation of
any Land Use Requirement or Environmental Law; or
(iii) if Purchaser has complied with its obligations arising
pursuant to the last sentence of Section 7.3(b), failure to obtain, primarily as
a result of actions taken directly by the Company which shall constitute a
breach of a representation, warranty or covenant by the Company, any necessary
License required in order to make consummation of the Merger not in violation of
any applicable Legal Requirements and in connection therewith a failure to
implement, in compliance with Legal Requirements, an "Alternative Structure".
The term "Alternative Structure" shall mean the use of a management agreement,
identity of interest transaction, retention of ownership in a liquidating trust
for the benefit of the Company's stockholders or other structure for the purpose
of allowing Purchaser to obtain the desired financial benefits from a skilled
nursing facility or long-term acute care facility or group of such facilities
until the required License(s) are obtained, in each case which can be
implemented in compliance with Legal Requirements and is reasonably acceptable
to Purchaser and the Company;
(d) Purchaser shall have received a copy of the resolutions of the
Company's Board authorizing this Agreement and the Merger and of the
stockholders of the Company approving the Merger, approving and adopting this
Agreement and approving the transactions contemplated by this Agreement (other
than the Subsequent Transactions), which copy shall be certified by an officer
of the Company as being in full force and effect;
(e) The holders of no more than ten percent (10%) of the Shares
(other than Shares beneficially owned, directly or indirectly by Purchaser or
any Person acting in concert with Purchaser) shall have perfected appraisal
rights under Section 262 of the GCL;
(f) The parties shall have obtained all necessary third party and
Governmental Authority consents and approvals to the transactions contemplated
hereby, including, without limitation, applicable lessors and lenders to the
Company; provided, however, (i) that it is understood and expressly agreed that
the parties will deem that all such necessary third party and Governmental
Authority consents and approvals have been obtained if the consents and
approvals obtained are subject only to conditions customarily imposed by the
applicable regulatory authorities in transactions of the type contemplated by
this Agreement, and (ii) the consents and approvals obtained are sufficient, if
upon consummation of the transactions
51
contemplated by this Agreement the Company will not reasonably be expected to
experience a Company Material Adverse Effect.
(g) There shall not have occurred a general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or the over-the-counter market in the United States (other than a
shortening of trading hours or any coordinated trading halt triggered solely as
a result of a specified increase or decrease in a market index) or a declaration
of a banking moratorium or any material suspension of payments in respect of
banks in the United States or any material limitation by any U.S. Governmental
Entity on the extension of credit by banks or other lending institutions in the
United States any of which shall have been in effect for a continuous period of
four (4) business days; provided, however, that, if any such events shall be in
effect on the Closing Date for less than four (4) business days, Purchaser may
postpone the Closing for a sufficient period of time (not to exceed four (4)
business days) to determine the applicability of this condition.
Section 8.3 Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger are subject to the satisfaction of the
following further conditions:
(a) The representations and warranties made by Purchaser and Merger
Sub herein (i) were true and correct, when made and (ii) shall be true and
correct as of the Effective Time as if made on and as of such date (provided,
however, that such representations and warranties which are by their express
provisions made as of a specific date need be so true and correct only as of
such specific date), except to the extent that any failure of such
representations and warranties to be so true and correct as of the Effective
Time would not prevent or materially delay the ability of Merger Sub or
Purchaser to consummate the transactions contemplated by this Agreement, and
each of the covenants and agreements of Purchaser and Merger Sub to be performed
or complied with by Purchaser and Merger Sub at or prior to the Effective Time
shall have been performed or complied with in all material respects and, at the
Effective Time, Purchaser and Merger Sub shall have delivered to the Company a
certificate dated as of the date of the Effective Time to such effect,
confirming the accuracy of the Structural Assumptions and Structural Documents
and the absence of any material changes, supplements or waivers of any provision
thereof, and certifying that the Structural Documents are in full force and
effect;
(b) The Company shall have received a copy of the resolutions of the
Board of Directors of Purchaser and the Board of Directors of Merger Sub
authorizing the Merger, the Agreement, the transactions contemplated thereby and
the Subsequent Transactions to be implemented at the Effective Time, if any,
which copy shall be certified by an executive officer of Purchaser or Merger
Sub, as the case may be as being in full force and effect;
(c) At the Closing, Purchaser shall have available to it sufficient
monies to enable Purchaser to pay the Aggregate Purchase Price and the Change of
Control Payments, if any, due at the Closing; and
(d) The Company shall have received the opinion of Xxxxxxxx Xxxxx
confirming as of the Effective Time the conclusions set forth in the Initial
Opinion (the "Bring Down Opinion").
52
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company);
(a) by mutual written consent of the Company, Merger Sub and
Purchaser;
(b) by either the Company or Purchaser, if the Merger has not been
consummated on or prior to December 31, 2004 (the "End Date") (including,
without limitation, due to the failure of any of the conditions to such parties'
obligations as set forth in Article VIII to be satisfied); provided, however,
that the right to terminate this Agreement under this clause shall not be
available to any party whose action or failure to act has been the cause of, or
resulted in, the failure of the transaction contemplated hereby to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement;
(c) (i) by either the Company or Purchaser, if there shall be any
Legal Requirement (other than failure to obtain Licenses under the circumstances
as set forth in Section 9.1(c)(ii) hereof) that makes consummation of the Merger
illegal or otherwise prohibited or if any judgment, injunction, order or decree
of a court of competent jurisdiction shall permanently restrain or prohibit the
consummation of the Merger, and such judgment, injunction, order or decree shall
become final and non-appealable; provided, however, that the party terminating
this Agreement pursuant to this clause shall have used its commercially
reasonable best efforts to have such judgment, injunction, order or decree
vacated; or (ii) by the Purchaser in the event of the failure to obtain any
necessary License required to consummate the transactions contemplated hereby
without being in violation of any Legal Requirements, if such failure is
primarily a result of actions taken directly by the Company which shall
constitute a breach of a representation, warranty or covenant by the Company,
and if such License is not obtainable, the failure of the Company to implement
an Alternative Structure that is in compliance with Legal Requirements;
(d) by the Company if there has been a material breach by Purchaser
or Merger Sub of any of their respective representations, warranties or
covenants contained in this Agreement that would cause the condition set forth
in Section 8.3(a) not to be satisfied and such breach or condition is not
curable by the End Date;
(e) by Purchaser, if there has been a material breach by the Company
of any of the covenants or agreements set forth in Section 5.4(a) or Section
5.9, provided, however, that Purchaser may not terminate this Agreement based on
an allegation that the Company has failed to "promptly" take relevant actions
under Section 5.4(a);
(f) by Purchaser, if any of the Company's representations,
warranties or covenants (other than those set forth in Sections 5.4(a) or 5.9)
contained in this Agreement that would cause the condition set forth in Sections
8.2(a), 8.2(b) or 8.2(c) not to be satisfied and such breach or condition is not
curable by the End Date;
53
(g) by Purchaser, if the Company's Board shall have withdrawn, or
modified or changed, in a manner materially adverse to Purchaser, its approval
or recommendation of the Merger, this Agreement or the other transactions
contemplated by this Agreement or shall have recommended any Acquisition
Proposal (other than the Merger);
(h) by either Purchaser or the Company if the Company's stockholders
shall have failed to approve the Merger, approve and adopt this Agreement and
approve the other transactions contemplated by this Agreement at the Company
Stockholders Meeting (or any adjournment or postponement thereof);
(i) by the Company in connection with a Superior Proposal if upon
such termination of this Agreement, the Company promptly (i) enters into a
definitive agreement with respect to such Superior Proposal and (ii) if
applicable, pays any Purchaser Break Up Fee and Expense Reimbursement to
Purchaser as provided in Section 9.2 of this Agreement. For purposes hereof, the
term "Superior Proposal" shall mean any Acquisition Proposal which the Board of
Directors of the Company determines, taking into account all legal, financial
and regulatory aspects of such proposal, the likelihood of obtaining financing,
and the identity of the Person making the proposal, represents a transaction
more favorable to the Company's stockholders than the transaction contemplated
by this Agreement which, for the avoidance of doubt, may include a transaction
where the consideration per share to be received by stockholders of the Company
has a lower value than the Stock Price or is comprised of cash and/or other
property or securities;
(j) by Purchaser if more than ten percent (10%) of the Shares (other
than Shares beneficially owned, directly or indirectly by Purchaser or any
Person acting in concert with Purchaser) shall have perfected appraisal rights
under Section 262 of the GCL; or
(k) by the Company if, on or after the date the Company is entitled
to draw upon the LC (as defined below) in accordance with this Agreement, the
Company shall have submitted a Certification for Drawing Letter of Credit, in
the form attached to the LC, to the LC Issuer (as defined below) and the LC
Issuer shall not have honored the requested draw under the LC (without prejudice
to the Company's ability to pursue the proceeds of the LC).
Section 9.2 Effect of Termination.
(a) Upon termination of this Agreement, all of the provisions of
this Agreement other than Sections 5.2(b) and 9.2 and Article X shall become
null and void and of no force and effect and there shall be no liability or
obligation under this Agreement on the part of Purchaser, Merger Sub or the
Company (other than with respect to the provisions of Sections 5.2(b) and 9.2
and Article X),
(b) Upon termination, the Company shall pay to Purchaser, without
duplication, the Purchaser Break-Up Fee and Expense Reimbursement as follows:
(i) (A) if Purchaser shall terminate this Agreement pursuant
to Section 9.1(e), (B) if the Company shall terminate this Agreement pursuant to
Section 9.1(i) by reason of the Company accepting a Superior Proposal and the
Superior Proposal is a Covered Acquisition Transaction, or (C) if the Company
shall terminate this Agreement pursuant to Section 9.1(i) by
54
reason of the Company accepting, within sixty (60) days after the date of this
Agreement, a Superior Proposal that is not a Covered Acquisition Transaction;
(ii) if Purchaser shall terminate this Agreement pursuant to
Section 9.1(g) and at any time after the date of this Agreement and on or prior
to the date of such termination an Acquisition Proposal shall have been publicly
made or reaffirmed to the Company or publicly announced, and in each case, not
withdrawn prior to such termination, and within nine (9) months of the
termination of this Agreement, the Company enters into a definitive agreement
with respect to an Acquisition Proposal which is a Covered Acquisition
Transaction; or
(iii) if (A) the Company or Purchaser shall terminate this
Agreement pursuant to Section 9.1(h), (B) the Company's Board shall have, at or
prior to the Company Stockholders Meeting, failed to recommend, or modified or
changed, in a manner materially adverse to Purchaser, its approval or
recommendation of, the Merger, this Agreement or the other transactions
contemplated by this Agreement or shall have recommended any Acquisition
Proposal (other than the Merger), (C) at any time after the date of this
Agreement and, on or prior to the date of the Company Stockholders Meeting, an
Acquisition Proposal shall have been publicly made or reaffirmed to the Company
or publicly announced and, in each case, not withdrawn prior to such termination
and (D) within nine (9) months of the termination of this Agreement, the Company
enters into a definitive agreement with respect to a Covered Acquisition
Transaction;
(c) (i) Purchaser has caused to be delivered to the Company an
irrevocable letter of credit issued by HSBC Bank USA (the "LC Issuer") in the
face amount of $40,000,000 (the "LC"). If, at any time on or prior to the close
of business on October 20, 2004, Purchaser shall deliver to the Company, by wire
transfer of immediately available funds from a Qualified Source (as defined
below), cash in the amount of $40,000,000, the Company shall promptly, but in
any event within two (2) business days, return the LC to Purchaser undrawn for
returning to the LC Issuer for cancellation. Such cash provided by the Purchaser
or the proceeds from the LC drawn pursuant to Section 9.2(c)(iii) are
hereinafter referred to as the "LC Proceeds." A "Qualified Source" shall include
(i) Xx. Xxxxx Xxxxxx, provided that at the request of the Company, Purchaser
shall provide an appropriate legal opinion from Jenkens Xxxxxxxxx Xxxxxx Xxxxxx
LLP, in form and substance reasonably satisfactory to the Company, that the
payment is duly authorized and is not a fraudulent conveyance or subject to any
preference risk under applicable state and federal bankruptcy law, or (ii) any
other source which may be approved by the Company in its sole discretion..
(ii) If the Closing shall have occurred on or prior to October
21, 2004, the Company shall, at the Closing, deliver the LC to Purchaser undrawn
for return to the LC Issuer for cancellation or the LC Proceeds, as the case may
be.
(iii) If the Closing shall fail to occur at or prior to the
close of business on October 21, 2004 for any reason other than a termination of
this Agreement pursuant to Sections 9.1(a) or by Purchaser pursuant to Sections
9.1(c), (e), (f), (g) (in connection with the Company accepting an
Acquisition Proposal for a Covered Acquisition Transaction), (h) or (j), or by
the Company pursuant to Section 9.1(c)(i), 9.1(h) or 9.1(i), the LC may be drawn
upon by
55
the Company on or after October 22, 2004 (unless cash has been substituted
therefor) and the LC Proceeds shall be held by the Company in accordance with
the remaining provisions of this Section 9.2(c). If this Agreement was
terminated prior to the close of business on October 21, 2004 pursuant to
Sections 9.1(a), (c), (e), (f), (g) (in connection with the Company accepting
an Acquisition Proposal for a Covered Acquisition Transaction), (h), (i), or
(j), the Company shall, within two (2) business days of such termination,
deliver the LC to Purchaser undrawn for return to the LC Issuer for cancellation
or the LC Proceeds, as the case may be, which return shall be in addition to any
payment to Purchaser of Purchaser's Break Up Fee and Expense Reimbursement
required, if any, in connection with such termination pursuant to Section
9.2(b).
(iv) If the Closing shall occur at any time after the Company
has drawn upon or received the LC Proceeds, the Company shall, on or prior to
the Effective Time, transmit to the Purchaser or its designee an amount of cash
equal to the LC Proceeds, by wire transfer of immediately available funds.
(v) The Company shall be entitled to retain the LC Proceeds as
the Company Break-Up Fee unless (A) the Closing shall not have occurred on or
prior to December 31, 2004 as a result of the failure to satisfy the conditions
set forth in (i) Section 8.2(a), (b) or (c) that may otherwise be required
pursuant to this Agreement or (ii) Section 8.3(d) and Purchaser shall not be in
breach of Section 6.3 or (B) this Agreement shall have been terminated pursuant
to Section 9.1(a) or by Purchaser pursuant to Section 9.1(c), (e), (f), (g)
(in connection with the Company accepting an Acquisition Proposal for a Covered
Acquisition Transaction), (h) or (j) or by the Company pursuant to Section
9.1(c)(i), 9.1(h) or 9.1(i), in any of which events under clauses (A) or (B) the
Company shall, within two (2) business days of such termination, pay an amount
equal to the LC Proceeds to the Purchaser or its designee by wire transfer of
immediately available funds, which payment shall be in addition to any payment
to Purchaser of Purchaser's Break Up Fee and Expense Reimbursement, if any,
required in connection with such termination pursuant to Section 9.2(b).
(vi) In the event that Purchaser shall dispute the Company's
right to submit a draw to obtain the LC Proceeds, the Company shall nevertheless
be permitted to draw on the LC and receive the LC Proceeds but such draw shall
be without prejudice to Purchaser's right to assert subsequently that such draw
was improper and to obtain from the Company the LC Proceeds.
(d) Unless the Company is required to pay the Purchaser Break-Up Fee
and Expense Reimbursement pursuant to Section 9.2(b), the Company shall pay to
Purchaser an amount equal to the Purchaser Expenses, without duplication, (i) if
the Purchaser shall terminate this Agreement pursuant to Section 9.1(f) and,
prior to the time of such termination, the Company shall not be entitled to
terminate this Agreement; (ii) if Purchaser shall terminate this Agreement
pursuant to Section 9.1(g) and at any time after the date of this Agreement, and
on or prior to the date of such termination an Acquisition Proposal shall have
been publicly made or reaffirmed to the Company or publicly announced and not
withdrawn prior to such termination, and within nine (9) months of the
termination of this Agreement, the Company enters into a definitive agreement
with respect to any Acquisition Proposal which is not a Covered Acquisition
Transaction, (iii) if (A) the Company or Purchaser shall terminate this
Agreement pursuant to Section 9.1(h), (B) the Company's Board shall have, at or
prior to the Company
56
Stockholders Meeting, failed to recommend, or modified or changed, in a manner
materially adverse to Purchaser, its approval or recommendation of the Merger,
this Agreement or the other transactions contemplated by this Agreement or shall
have recommended any Acquisition Proposal (other than the Merger), (C) at any
time after the date of this Agreement and, on or prior to the date of the
Company Stockholders Meeting, an Acquisition Proposal shall have been publicly
made or reaffirmed to the Company or publicly announced and, in each case, not
withdrawn prior to such termination and (D) within nine (9) months of the
termination of this Agreement, the Company enters into a definitive agreement
with respect to an Acquisition Proposal which is not a Covered Acquisition
Transaction, (iv) if (A) the Company or Purchaser shall terminate this Agreement
pursuant to Section 9.1(h), (B) the Company's Board shall have, at or prior to
the Company Stockholders Meeting, failed to recommend, or modified or changed,
in a manner materially adverse to Purchaser, its approval or recommendation of
the Merger, this Agreement or the other transactions contemplated by this
Agreement (in the absence of an Acquisition Proposal) and (C) within nine (9)
months of the termination of this Agreement, the Company enters into a
definitive agreement with respect to an Acquisition Proposal, which is a Covered
Acquisition Transaction or (v) if the Company shall terminate this Agreement
pursuant to Section 9.1(i), by reason of the Company accepting, more than sixty
(60) days after the date of this Agreement, a Superior Proposal which is not a
Covered Acquisition Transaction.
(e) (i) The Purchaser Break-Up Fee and Expense Reimbursement
required to be paid pursuant to Section 9.2(b)(i) shall be paid concurrently
with the termination of this Agreement, and the Purchaser Break-Up Fee and
Expense Reimbursement required to be paid pursuant to Section 9.2(b)(ii) or
9.2(b)(iii) shall be paid to Purchaser at the time the Company enters into a
definitive agreement with respect to a Covered Acquisition Transaction.
(ii) Any Purchaser Expenses required to be paid pursuant to
Section 9.2(d) (i) shall be paid to the Purchaser concurrently with the
termination of this Agreement. Any Purchaser Expenses required to be paid
pursuant to Section 9.2(d) (ii), (iii), (iv) or (v) shall be paid to the
Purchaser at the time the Company enters into a definitive agreement with
respect to the applicable Acquisition Proposal.
(f) Notwithstanding anything to the contrary contained herein, in
the event that the Agreement is terminated pursuant to Section 9.1(g) and (i),
Purchaser shall have voted against the approval of this Agreement, approval and
adoption of the Merger, or approval of the other transactions contemplated by
this Agreement at the Company Stockholders Meeting (or any adjournment or
postponement thereof) and (ii) with Purchaser's vote in favor of such approvals
and adoption at the Company Stockholders Meeting (or any adjournment or
postponement thereof) such approval and adoption would have been obtained at the
Company Stockholders Meeting (or any adjournment or postponement thereof), the
Company shall not be obligated to pay the Purchaser Break-Up Fee and Expense
Reimbursement to Purchaser.
(g) (i) "Purchaser Break-Up Fee and Expense Reimbursement" means
$20.0 million.
(ii) "Company Break-Up Fee" means $40.0 million.
57
(iii) "Purchaser Expenses" means all of Purchaser's actual and
reasonable out-of-pocket expenses incurred in connection with the transactions
contemplated in this Agreement, including in connection with preparing and
negotiating this Agreement, carrying out its due diligence of the Company, the
Subsidiaries and the Business, the Company's assets and liabilities, and costs
of any financing of the transactions contemplated hereby (including, without
limitation, in connection with each of the foregoing, regulatory filing fees,
commitment fees, due diligence costs, title and survey costs, reasonable
attorneys', accounting, appraisal, engineering, investment banking and any other
professional fees and expenses) but not to exceed the sum of $5 million
(iv) "Covered Acquisition Transaction" shall mean any Superior
Proposal that provides a per share value to the Company's stockholders greater
than the Stock Price, determined at the time of execution of the definitive
agreement relating to such Superior Proposal.
(h) All payments under this Section 9.2 to be made by the Company
shall be made by wire transfer of immediately available funds to an account
designated by Purchaser or the Company, as applicable.
(i) The Company and Purchaser each acknowledge that the agreements
contained in this Section 9.2 are an integral part of the transactions
contemplated by this Agreement, and that, without such agreements, the Company
and Purchaser would not enter into this Agreement. Accordingly, if the Company
or Purchaser fails to promptly pay any amounts owing pursuant to this Section
9.2 when due, the Company or Purchaser, as applicable, shall, in addition
thereto, pay to Purchaser and its affiliates, or the Company and its affiliates,
as applicable, all costs and expenses (including the reasonable fees and
disbursements of counsel) incurred in collecting such amounts, together with
interest on such amounts (or any unpaid portion thereof) from the date such
payment was required to be made until the date such payment is received by the
Purchaser and its affiliates, or the Company and its affiliates, as applicable,
at the prime rate of Citibank, N.A. as in effect from time to time during such
period plus two percent (2%).
(j) The parties agree that the amounts provided for in Section 9.2
constitute a fair and reasonable estimate of the damages to the intended
recipient thereof resulting from the failure to consummate the Merger (which
cannot be determined with precision), serve as liquidated damages and that, upon
payment of the specified amount, neither party shall have any further liability
to the others under this Agreement or in connection with the transactions
contemplated hereby
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by recognized
national overnight courier, facsimile transmission or certified or registered
mail, return receipt requested as follows:
58
If to Purchaser or the Merger Sub:
National Senior Care, Inc.
The Highlands
000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx, President
Fax: (000) 000-0000
With a copy to:
SMV Property Holdings, LLC
c/o Cammeby's International Ltd.
00 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
With a copy to
Xxxxxxx Xxxxxxxxx, Esq.
Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
With a copy to
Xxxx Xxxxxxxx, Esq.
Xxxxx & XxXxxxxx
2300 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
If to the Company, to:
C. Xxxxxxxxx Xxxxxx
President & CEO
Mariner Health Care, Inc.
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
59
With a copy to:
Xxxxxxx Xxxxx, General Counsel
Mariner Health Care, Inc.
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
and
Xxxxxxx X. Xxxxxx, Esq.
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
16th Floor
000 Xxxxxxxxx Xxxxxx XX
Xxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
or to such other person or address as any party shall specify by notice in
writing to the other party. Except for a notice of change of address, which
shall be effective only upon receipt thereof, all such notices and other
communications shall be deemed to have been given on (a) the date received (or
refused) if personally delivered, (b) the day of delivery (or next business day
if the delivery date is not a business day) if sent by recognized national
overnight courier, (c) the date of transmission (or next business day if the
transmission is not on, or is after 5:00 p.m. eastern time, on a business day)
if sent by telecopy as indicated on the confirmation thereof, or (d) five (5)
business days following deposit in the mail if sent by mail.
Section 10.2 Survival. The representations and warranties and agreements
contained herein, in the Company Disclosure Statement (or any updates thereof)
and in any certificate or other writing delivered pursuant hereto shall not
survive the Effective Time, except for the provisions of Article I, Section 5.6
(Retention Plan), Section 6.4 (Director and Officer Liability Insurance),
Section 6.7 (Solvency of the Surviving Corporation), Section 7.2 (Public
Disclosure), Section 7.3 (Further Assurances), and Article X hereof.
Section 10.3 Expenses. Except as otherwise provided in this Agreement,
each of the parties hereto shall bear such party's own expenses in connection
with this Agreement and the transactions contemplated hereby.
Section 10.4 Invalidity. Should any provision of this Agreement be held by
a court of competent jurisdiction to be enforceable only if modified, such
holding shall not affect the validity of the remainder of this Agreement, the
balance of which shall continue to be binding upon the parties hereto with any
such modification to become a part hereof and treated as though originally set
forth in this Agreement. The parties further agree that any such court is
expressly authorized to modify any such unenforceable provision of this
Agreement in lieu of severing such unenforceable provision from this Agreement
in its entirety, whether by rewriting the offending provision, deleting any or
all of the offending provision, adding additional language to this Agreement, or
by making such other modifications as it deems warranted to carry out the intent
and agreement of the parties as embodied herein to the maximum extent permitted
by law.
60
The parties expressly agree that this Agreement as modified by the court
shall be binding upon and enforceable against each of them. In any event, should
one or more of the provisions of this Agreement be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and if such provision or
provisions are not modified as provided above, this Agreement shall be construed
as if such invalid, illegal or unenforceable provisions had never been set forth
herein.
Section 10.5 Successors and Assigns. Except as contemplated hereby, this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Company, Merger Sub and Purchaser, respectively.
Section 10.6 Governing Law. The validity of this Agreement and of any of
its terms or provisions, as well as the rights and duties of the parties under
this Agreement, shall be construed pursuant to and in accordance with the laws
of the State of Delaware, without regard to conflict of laws principles.
Section 10.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
Section 10.8 Entire Agreement; Amendments. This Agreement and the
documents referred to herein (including the Company Disclosure Schedule)
constitute the entire agreement among the parties with respect to the subject
matter hereof, and supersede all prior agreements and understandings, oral and
written, with respect to their subject matter, except that the Confidentiality
Agreement shall remain in full force and effect. Any provision of this Agreement
may be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Company, Purchaser and Merger Sub or, in the case of a waiver, by the party
against whom the waiver is to be effective; provided that after the adoption of
this Agreement by the stockholders of the Company, no such amendment or waiver
shall, without the further approval of such stockholders and each party's Board
of Directors, alter or change (i) the amount or kind of consideration to be
received in exchange for any shares of capital stock of the Company or (ii) any
of the terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any Shares. The foregoing notwithstanding, the
parties acknowledge that ministerial computations are not amendments or
modifications of this Agreement and do not alter or change the consideration to
be received in exchange for the capital stock of the Company.
Section 10.9 Knowledge and Notices. When the term "knowledge" is used in
this document it means to the actual knowledge of the Company's Chief Executive
Officer, Chief Financial Officer, Chief Accounting Officer, General Counsel, and
Vice President - Real Estate, and includes such knowledge as would have been
obtained by making inquiry of the person who is responsible for the business
unit having primary responsibility for the subject matter or aspect of the
business at issue. When reference is made to the Company receiving notice, it
shall mean notices received as of the date of this Agreement.
Section 10.10 Certain Rules of Construction. (a) References in this
Agreement to any gender include references to all genders, and references to the
singular include references to the
61
plural and vice versa. The words "include," "includes," and "including" when
used in this Agreement shall be deemed to be followed by the phrase "without
limitation.", unless preceded by a negative predicate. Unless the context
otherwise requires, references in this Agreement to Articles and Sections shall
be deemed references to Articles and Sections to this Agreement. Unless the
context otherwise requires, the words "hereof," "hereby" and "herein" and words
of similar meaning when used in this Agreement refer to this Agreement in its
entirety and not to any particular Article, Section or provision of this
Agreement. The words "transactions contemplated by this Agreement" or words of
similar meaning when used in this Agreement shall not include any Subsequent
Transactions or Alternate Structures; provided, however, that this shall not
limit the Company's obligations to cooperate with respect to Subsequent
Transactions and Alternate Structures as expressly set forth herein. The words
"cooperate," "assist," "effort" or words of similar meaning, when used in this
Agreement in connection with imposing an obligation on the Company and/or the
Subsidiaries shall mean the taking by the Company and/or its Subsidiaries of
such actions upon the request of Purchaser that are reasonably within the
control and ability of the Company to take and will not materially interfere
with the ordinary operations of the Business.
(b) To the extent any representation or warranty regarding the
enforceability of an agreement is qualified by references to the application of
laws governing bankruptcy or insolvency, such qualification shall not apply to
the Company Plan of Reorganization or any Bankruptcy Orders
(c) The phrases "in the ordinary course of business," "consistent
with past practice" and other phrases of similar import shall be used herein
with respect to the Company and the Subsidiaries to mean the manner in which the
Company and the Subsidiaries have operated from and after May 13, 2002
Section 10.11 Specific Performance. The Company acknowledges and agrees
that the Purchaser would be damaged irreparably in the event that the
obligations of the Company to close the transactions contemplated by this
Agreement and, after Purchaser's delivery of the Debt Commitment Letter, to call
and hold a Company Stockholders Meeting pursuant to Section 5.4 hereof, are not
performed in accordance with their specific terms or are otherwise breached.
Accordingly, the Company agrees that Purchaser, if it does not elect to
terminate this Agreement in connection with any such breach or non-performance
of the Company, shall be entitled to an injunction or injunctions, and to
enforce specifically (i) the closing under this Agreement as long as Purchaser
is not otherwise in breach of any of its obligations under this Agreement in a
manner that would permit the Company to terminate this Agreement and all of the
conditions to the Company's obligations shall have been fulfilled and (ii) after
the Purchaser's delivery of the Debt Commitment Letter, the obligations of the
Company under Section 5.4 to duly call, give notice of, convene and hold a
Company Stockholders Meeting for the purposes of the approving the Merger,
approving and adopting this Agreement and approving the transactions
contemplated by this Agreement, in any court having personal and subject matter
jurisdiction, in addition to any other remedy to which Purchaser may be entitled
at law or in equity. Any remedy for damages available for any intentional
violation by a party of its covenants shall be limited to the applicable
break-up fee, if any, or reimbursement of expenses, if any, that would otherwise
by payable to such party pursuant to this Agreement.
62
Section 10.12 Representations and Warranties and Company Disclosure
Schedule. The Company will use its commercially reasonable best efforts to
identify disclosures in the Company Disclosure Schedule by referring to a
specific section of this Agreement with cross references as appropriate;
provided, however that, the failure to repeat an item identified in a Company
Disclosure Schedule, employ a section reference or cross-reference such item in
another section where such reference would be appropriate shall not, in and of
itself, constitute a breach of a representation or warranty of the section from
which the reference is omitted. It is expressly acknowledged and agreed that the
Company shall have the ability to update the Company Disclosure Schedule
immediately prior to the Closing Date so that when the Company's representations
and warranties are restated at Closing as required by Section 8.2(a) hereof,
such representations and warranties will be modified by the Company Disclosure
Schedule as so updated immediately prior to the Closing Date; provided, however,
that such updates shall not be considered a modification of the Company
Disclosure Schedule for purposes of determining the existence of a Company
Material Adverse Change or the purpose of determining the occurrence of any of
the events in Section 8.2(c); and provided, further, that in the event the
Purchaser elects to consummate the Merger and the transactions contemplated by
this Agreement, Purchaser shall be deemed to have irrevocably and forever waived
the right to assert that any of the matters set forth on any update of the
Company Disclosure Schedule provides the basis for, or otherwise constitutes a
breach by the Company of any of its representations and warranties set forth
herein.
[SIGNATURES ARE ON NEXT PAGE]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
NATIONAL SENIOR CARE, INC.
By: /s/ Xxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President
NCARE ACQUISITION CORP.
By: /s/ Xxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President
MARINER HEALTH CARE, INC.
By: /s/ C. Xxxxxxxxx Xxxxxx
-----------------------------------
Name: C. Xxxxxxxxx Xxxxxx
Title: Chief Executive Officer
64
