EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of December
30, 2002 by and among MARRIOTT INTERNATIONAL, INC., a Delaware corporation
("Parent"), MARRIOTT SENIOR HOLDING CO., a Delaware corporation and wholly owned
subsidiary of Parent ("MSHC"), MARRIOTT MAGENTA HOLDING COMPANY, INC., a
Delaware corporation and wholly owned subsidiary of Parent and MSHC ("Holdco";
and, together with Parent and MSHC, "Sellers"), and SUNRISE ASSISTED LIVING,
INC., a Delaware corporation ("Buyer"; and, together with Sellers, the
"Parties").
R E C I T A L S
WHEREAS, Parent and MSHC currently own all of the issued and
outstanding capital stock of Marriott Senior Living Services, Inc., a Delaware
corporation (the "Company");
WHEREAS, prior to the Closing (as defined herein), Parent and
MSHC will transfer all of the issued and outstanding capital stock of the
Company to Holdco in exchange for shares of capital stock of Holdco, as further
described herein (the "Restructuring");
WHEREAS, after the Restructuring Holdco will own all of the
issued and outstanding capital stock of the Company;
WHEREAS, prior to the Closing (as defined herein), Sellers,
Company and the Company Subsidiaries are transferring the CNL Assets (as defined
herein) as part of the CNL Transaction;
WHEREAS, as part of the Acquisition Transactions (as defined
herein), Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding capital stock of the Company for the consideration and
upon the terms and conditions described herein (the "Purchase");
WHEREAS, as security for the performance of Buyer's obligation
to consummate the transactions contemplated by this Agreement, Buyer will within
three (3) Business Days (as defined herein) of the date hereof either (i) cause
to be delivered to Parent an irrevocable standby letter of credit in the face
amount of $14.5 million in the form of Exhibit A-1 attached hereto (the "L/C")
or (ii) deposit in escrow with an Approved Bank (as defined herein) $14.5
million in cash subject to an escrow agreement in the form of Exhibit A-2,
provided that if an escrow is established under clause (ii), Buyer may replace
such escrow with the L/C issued by an Approved Bank; and
WHEREAS, Buyer and Sellers desire to make certain
representations, warranties and agreements in connection with the Purchase.
A G R E E M E N T
In consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein and
intending to be legally bound, the Parties agree as follows:
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ARTICLE I
DEFINITIONS
1.1 DEFINITIONS.
For all purposes of this Agreement and the Exhibits and
Schedules delivered pursuant to this Agreement, the following definitions shall
apply:
"AAA" has the meaning set forth in Section 2.4(d).
"Acquisition Transactions" means (i) the Stock Purchase
Agreement Transactions, and (ii) the CNL Transaction, collectively.
"Action" means any claim, action, demand, complaint, hearing,
petition, investigation, arbitration, judgment, injunction, order, decree,
ruling, suit or other proceeding, whether civil or criminal, regulatory or
otherwise, in law or in equity, before any arbitrator or Governmental Entity.
"Active Employees" has the meaning set forth in Section
6.1(b).
"Additional Cost Amounts" has the meaning set forth in Section
5.9(k).
"Adjusted Working Capital" means working capital of the
Company and the Company Subsidiaries (total current assets less current
liabilities), subject to the adjustments and exclusions set forth on Schedule
2.3(c). An illustration of the calculation of Estimated Adjusted Working Capital
as of September 6, 2002 is attached to Schedule 2.3(c).
"Affiliate" means, with respect to a specified Person, a
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the specified
Person.
"Affiliated Group" means any affiliated group within the
meaning of Code Section 1504(a) or any similar group defined under a similar
provision of state, local or foreign law.
"Agreement" means this Stock Purchase Agreement as amended or
supplemented together with all Exhibits and Schedules attached hereto or
expressly incorporated herein by reference.
"Allocated Loss Adjustment Expenses" has the meaning set forth
in Section 5.9(l)(1).
"Alternative Proposal" has the meaning set forth in Section
4.7.
"Applicable Owner 9 Operating Agreement" means the Operating
Agreement listed as Item 3 on Schedule 3.1(e)(1)(a).
"Approval" means any approval, authorization, consent,
qualification or registration, or any extension, modification, amendment or
waiver of any of the foregoing, obtained from, or any notice, statement or other
communication filed with or delivered to, any Governmental Entity or other
Person.
"Approved Bank" means Bank of America, N.A., XX Xxxxxx &
Company, Citibank, N.A., Allfirst Bank or any other comparable national bank
approved by Parent.
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"Assumed Financial Support Arrangement" has the meaning set
forth in Section 5.7(a).
"Assumption and Reimbursement Agreement" means an Assumption
and Reimbursement Agreement dated the Closing Date, in substantially the form
attached hereto as Exhibit B.
"Auditors" has the meaning set forth in Section 2.3(c).
"Burning Tree Option" means the right to purchase all of the
issued and outstanding shares of Helpful Acres, Inc. pursuant to the Purchase
and Sale Contract dated August 19, 1999 between Burning Tree Club, Inc. and the
Company, as amended on January 21, 2000, February 27, 2001 and June 11, 2002.
"Business" means the business of the Company and the Company
Subsidiaries, taken as a whole after giving effect to the CNL Transaction.
"Business Day" means the period from 9:00 a.m. to 5:00 p.m.
any weekday that is not a banking holiday in New York City.
"Buyer" has the meaning set forth in the Preamble hereto.
"Buyer Patient Injury Claim" has the meaning set forth in
Section 5.9(e).
"Buyer's Benefit Plans" has the meaning set forth in Section
6.4(a).
"Buyer's Disability Plan" has the meaning set forth in Section
6.4(b).
"Buyer's Flex Plan" has the meaning set forth in Section
6.4(g).
"Buyer's Representatives" has the meaning set forth in Section
4.2.
"Closing" has the meaning set forth in Section 2.8(a).
"Closing Date" has the meaning set forth in Section 2.8(b).
"Closing Date Statement" has the meaning set forth in Section
2.3(c).
"CNL" means CNL Retirement Properties, Inc. and/or its
Affiliates.
"CNL Assets" means the assets of the Company and the Company
Subsidiaries to be sold to CNL pursuant to the CNL Transactions and the related
liabilities assumed by CNL.
"CNL-5 Credit Support" has the meaning set forth in Section
5.7(d).
"CNL Transaction" means, collectively, the transactions
described on Schedule 1.1(a) hereto.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Commercially Reasonable Efforts" means, as to a Party, an
undertaking by such Party to perform or satisfy an obligation or duty or
otherwise act in a manner reasonably calculated to obtain the
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intended result by action or expenditure not disproportionate or unduly
burdensome in the circumstances, which means, among other things, that such
Party shall not be required to (i) expend funds other than for payment of the
reasonable and customary costs and expenses of employees, counsel, consultants,
representatives or agents of such Party in connection with the performance or
satisfaction of such obligation or duty or other action, (ii) institute
litigation or arbitration as a part of its Commercially Reasonable Efforts or
(iii) amend, waive or modify a term or condition of, or grant any concessions
under or with respect to, any Contract or relationship with respect to which an
Approval is sought or any other agreement or relationship with such Person.
"Company" has the meaning set forth in the Recitals hereto.
"Company Intellectual Property" has the meaning set forth in
Section 3.1(g)(1).
"Company Proprietary Information" means any and all
information related to the Business, the Company or any Company Subsidiary that
has not been or is not made generally available to the public without
restriction on use or disclosure, by the Company or the Company Subsidiaries
prior to the Closing Date.
"Company Subsidiary" means each Subsidiary of (i) the Company
or (ii) any Subsidiary of the Company.
"Compete" means (i) to, directly or indirectly, conduct,
facilitate, participate or engage in, or bid for or otherwise pursue a business,
whether as a principal, sole proprietor, partner, stockholder, or agent of, or
consultant to or manager for, any Person or in any other capacity, or (ii) to,
directly or indirectly, have any ownership interest in any Person or business
which conducts, facilitates, participates or engages in, or bids for or
otherwise pursues a business, whether as a principal, sole proprietor, partner,
stockholder, or agent of, or consultant to or manager for, any Person or in any
other capacity.
"Competing SLS Activity" means a business activity that
Competes with the Senior Living Services Business.
"Competing SLS Business" means a business that Competes with
the Senior Living Services Business.
"Confidentiality Agreement" has the meaning set forth in
Section 4.1(a).
"Contract" means any legally binding agreement (whether or not
written), promise, undertaking, contract, arrangement, bond, note, commitment,
franchise, indemnity, indenture, lease or other instrument.
"Contract Restrictions" has the meaning set forth in Section
5.18.
"Direct Claim Notice" has the meaning set forth in Section
10.3(e).
"Disclosure Schedules" means the Schedules dated the date of
this Agreement and delivered contemporaneously herewith relating to this
Agreement, as they may be supplemented or amended in accordance with Section
5.10 of this Agreement.
"EC&O" has the meaning set forth in Section 5.9(e).
"Employee" has the meaning set forth in Section 3.1(n)(1).
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"Employee Pension Benefit Plan" has the meaning set forth in
Section 3.1(n)(1).
"Employment-Related Claim" has the meaning set forth in
Section 6.9.
"Encumbrance" means any charge, easement, encumbrance, lease,
mortgage, deed of trust, option, encroachment, security interest, lien, pledge
or restriction of any kind (whether on voting, sale, transfer, disposition or
otherwise), except for any restrictions on transfer generally arising under any
applicable federal or state securities law.
"Environmental Claim" means any written notice, claim, demand,
action, suit, complaint, proceeding or other written communication by any Person
alleging liability under any Environmental Laws, including information requests
issued by Governmental Entities pursuant to any Environmental Law and notices of
potential responsibility pursuant to CERCLA.
"Environmental Laws" means all federal, state, local and
foreign statutes, laws and regulations relating to pollution or protection of
human health or the environment (including air, surface water, ground water,
land surface and subsurface strata).
"Environmental Permit" means any license, permit, franchise,
certificate of authority or order or any extension, modification, amendment or
waiver of the foregoing required by any Governmental Entity in connection with
Regulated Substances or otherwise pursuant to any applicable Environmental Laws
to be issued for the conduct of the Business as presently conducted.
"Equity Interests" means any capital stock, other equity
interest, other ownership interest or any securities or other interests
convertible into or exchangeable or exercisable for capital stock, other equity
interests, or other ownership interests, or any other rights, warrants or
options to acquire any of the foregoing securities or interests of or in any
Person.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Plans" has the meaning set forth in Section 3.1(n)(1).
"Escrow Fund" has the meaning set forth in Section 4.14.
"Estimated Adjusted Working Capital" has the meaning set forth
in Section 2.3(b).
"Estimated Insurance Adjustment" has the meaning set forth in
Section 5.9(h).
"E&Y" has the meaning set forth in Section 2.3(c).
"Facility" or "Facilities" has the meaning set forth in
Section 3.1(f)(1).
"Final Adjusted Working Capital" has the meaning set forth in
Section 2.3(c).
"Final Insurance Adjustment" has the meaning set forth in
Section 5.9(h).
"Financial Statements" has the meaning set forth in Section
3.1(c)(1)(i).
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"GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied consistently
throughout the periods involved.
"Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the related regulations, rules and
published interpretations.
"Holdco" has the meaning set forth in the Preamble hereto.
"Included Claims" has the meaning set forth in Section 10.5.
"Included Software" means software owned by or licensed to
Sellers or the Company that is currently used in the Business and that is listed
on Schedule 3.1(g)(1).
"Indebtedness" has the meaning set forth in Section 3.1(e).
"Indemnifiable Claim" means any claim of an Indemnifiable Loss
for or against which any party is entitled to indemnification under this
Agreement.
"Indemnifiable Loss" means any cost, damage, disbursement,
fee, expense, liability, loss, deficiency, penalty, judgment, fine or settlement
of any kind or nature, including reasonable legal, accounting and other
professional fees and expenses and amounts paid in settlement, that are actually
imposed on or otherwise actually incurred, suffered or sustained by the
specified Person, provided that Indemnifiable Losses shall not include
internally allocated overhead and similar costs.
"Indemnified Party" means the party entitled to
indemnification hereunder.
"Indemnifying Party" means the party obligated to provide
indemnification hereunder.
"Independent Accountants" has the meaning set forth in Section
2.3(c).
"Insurance Statements" has the meaning set forth in Section
5.9(k).
"Intercompany Obligations" has the meaning set forth in
Section 3.1(s).
"Intercreditor Agreements" means the Intercreditor Agreements
each dated as of the Closing Date, substantially in the form of Exhibit F
attached hereto.
"Interim Financial Statements" has the meaning set forth in
Section 3.1(c)(1).
"IRS" means the Internal Revenue Service or any successor
entity.
"Land Contract" has the meaning set forth in Section
3.1(f)(4).
"Law" means any constitutional provision, statute, law, rule,
regulation, ordinance or interpretation of any Governmental Entity or any Order.
"Leases" has the meaning set forth in Section 3.1(f)(2).
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"Liability" has the meaning set forth in Section 3.1(c)(3).
"Lifecare Agreements of Undertakings" means the Agreements of
Undertaking set forth on Schedule 5.7(a)(2), collectively.
"Litigation" has the meaning set forth in Section 11.20.
"L/C" has the meaning set forth in the Recitals hereto.
"Management Agreement" has the meaning set forth in Section
3.1(e)(2).
"Marriott Word Xxxx" has the meaning set forth in Section
5.5(a).
"Material Adverse Effect" means a material adverse effect on
the business, operations, assets, liabilities, properties, financial condition,
cash flows or results of operations of the Company and the Company Subsidiaries,
taken as a whole after giving effect to the CNL Transaction.
"Material Contract" has the meaning set forth in Section
3.1(e)(1).
"Medical Services" means (i) medical, surgical, dental,
nursing, chiropractic, or mental health examination or treatment, physical or
other therapies provided to any person including the furnishing of food or
beverage in connection therewith; (ii) assisting Facility residents with
activities of daily living; (iii) furnishing or dispensing of drugs or medical,
surgical, dental, or chiropractic supplies or appliances; and/or (iv) the
handling of or performing postmortem examination on human bodies.
"MCC" means Marriott Continuing Care, LLC, a Delaware limited
liability company.
"MICC" has the meaning set forth in Section 5.7(d).
"MSHC" has the meaning set forth in the Preamble hereto.
"Noncompete Period" has the meaning set forth in Section
5.12(a).
"NHI Leases" means the Leases numbered 16-19 on Schedule
3.1(f)(2).
"Operating Licenses" means the Permits required by state
health departments or comparable Governmental Entities in order to operate (as
opposed to own) Senior Living Facilities, and all certificates of need or
certificates of authority required by state health planning agencies or
comparable Governmental Entities to operate Senior Living Facilities.
"Order" means any award, decision, verdict, subpoena, decree,
injunction, judgment, order, ruling, assessment or writ issued, made or rendered
by a Governmental Entity or arbitrator.
"Other Managed Facilities" means the Facilities designated as
Other Managed Facilities on Schedule 1.1(c).
"Other Managed Facility Management Agreements" means the
Management Agreements designated as Other Managed Facility Management Agreements
on Schedule 1.1(c).
"Owner 1 Continuing Agreement" has the meaning set forth in
Section 2.6(a).
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"Owner 1 Facilities" means the Facilities designated as Owner
1 Facilities on Schedule 1.1(c).
"Owner 1 Management Agreements" means the Management
Agreements designated as Owner 1 Management Agreements on Schedule 1.1(c).
"Owner 1 New Management Agreement" has the meaning set forth
in Section 2.6(a).
"Owner 2 Facilities" means the Facilities designated as Owner
2 Facilities on Schedule 1.1(c).
"Owner 2 Management Agreements" means the Management
Agreements designated as Owner 2 Management Agreements on Schedule 1.1(c).
"Owner 2 Subordinated Facility Obligations" has the meaning
set forth in Section 5.7(d).
"Owner 6 Correspondence" has the meaning set forth in Section
2.4(a).
"Owner 6 Facilities" means the Facilities designated as Owner
6 Facilities on Schedule 1.1(c).
"Owner 6 Management Agreements" means the Management
Agreements designated as Owner 6 Management Agreements on Schedule 1.1(c).
"Owner 10 Facilities" means the Facilities designated as Owner
10 Facilities on Schedule 1.1(c).
"Owner 10 Management Agreements" means the Management
Agreements designated as Owner 10 Management Agreements on Schedule 1.1(c).
"Owner 10 Management Agreement Amendments" has the meaning set
forth in Section 5.16(a).
"Owner 10 Memorandum" has the meaning set forth in Section
5.16(a).
"Owner 10 New Management Agreement" has the meaning set forth
in Section 5.16(b).
"Parent" has the meaning set forth in the Preamble hereto.
"Parent Marks" has the meaning set forth in Section 5.5(a).
"Parent's Benefit Plans" has the meaning set forth in Section
6.4(a).
"Parent's Disability Plans" has the meaning set forth in
Section 6.4(a).
"Parent's Flex Plans" has the meaning set forth in Section
6.4(g).
"Parties" has the meaning set forth in the Preamble hereto.
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"Patient Injury Claims" mean claims brought by or on behalf of
Facility residents or their heirs, successors or representatives relating to an
event, accident or occurrence involving the delivery of Medical Services to
Facility residents.
"Payroll Taxes" has the meaning set forth in Section 6.4(j).
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permit" means any license, permit, franchise, certificate of
authority or order or any extension, modification, amendment or waiver of the
foregoing, issued by any Governmental Entity, but excluding Environmental
Permits.
"Permitted Encumbrance" means any Encumbrance that (i) is
disclosed in the Financial Statements, (ii) is disclosed in title reports made
available to Buyer as identified on Schedule 1.1(b) (in respect of the SPTMRT
Leased Properties) or in other title reports made available to Buyer in respect
of any other properties or in schedules to the Management Agreements, (iii)
constitutes a statutory lien arising in the ordinary course of business securing
amounts not yet due and payable or being contested in good faith, or (iv) does
not singly or in the aggregate with other such items materially detract from the
value of the property subject thereto or materially detract from or interfere
with the use of property subject thereto in the ordinary conduct of the Business
as presently conducted.
"Person" means an association, a corporation, an individual, a
general or limited partnership, a limited liability company, a limited liability
partnership, a joint venture, a trust or any other entity or organization,
including a Governmental Entity.
"Plans" has the meaning set forth in Section 3.1(n)(1).
"Predecessor Acquisition Agreements" has the meaning set forth
in Section 5.14.
"Premiums" has the meaning set forth in Section 5.9(h).
"Pre-Closing Claim" means (i) any claim or cause of action
relating to the Business, the Company or any Company Subsidiary arising out of,
relating to or resulting from any action, inaction, event, condition, facts or
circumstances that occurred or existed at or prior to the Closing, whether
pending or threatened at the Closing Date or thereafter (except to the extent
taken into account in determining Final Adjusted Working Capital) or (ii) any
Liability of the Company or any Company Subsidiary (except to the extent such
Liability was reflected in the most recent balance sheet included in the
Financial Statements or taken into account in determining Final Adjusted Working
Capital) to the extent such Liability was incurred at or prior to Closing,
provided that Pre-Closing Claim shall not include any Liabilities under any
contracts or commitments to the extent such Liability is incurred under such
contract or commitment after the Closing; and provided further that Pre-Closing
Claim shall not include any Environmental Claims or Buyer Patient Injury Claims.
"Pre-Closing Covenants" has the meaning set forth in Section
10.4.
"Pre-Closing Events" means, in respect of any Management
Agreement, (i) facts, circumstances or events that relate to, result from or
arise out of any action or inaction by the Company, any Company Subsidiary or
any of their respective Affiliates under or with respect to such Management
Agreement occurring or existing at or prior to the Closing and (ii) facts,
circumstances or events that relate to, result from or arise out of performance
of a Specified Practice (as defined below) during the 90-
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day period following the Closing Date if within 45 days after the Closing, Buyer
notifies Sellers that it intends to alter the manner in which the Company or any
Company Subsidiary performs its obligations under such Management Agreement,
specifying in reasonable detail the practice to be changed (the "Specified
Practice") and the manner in which it will be changed and Buyer has made
Commercially Reasonable Efforts to change such practice after providing the
notice and within 90 days of the Closing Date.
"Prime Rate" means the rate that Citibank, N.A. (or any
successor entity) publishes from time to time as its prime lending rate, as in
effect from time to time.
"Property" or "Properties" has the meaning set forth in
Section 3.1(f)(1).
"Property 2 Facility" means the Facility designated as the
Property 2 Facility on Schedule 1.1(c).
"Property 2 Management Agreement" means the Management
Agreement designated as the Property 2 Management Agreement on Schedule 1.1(c).
"Property Working Capital" means the working capital balances
held or controlled by the Parent, the Company or any Company Subsidiary, or any
of their respective Affiliates on behalf of the "owners" (or "tenants" or
"lessees", as applicable) of the Facilities in accordance with the applicable
Management Agreement.
"Proposed Final Adjusted Working Capital" has the meaning set
forth in Section 2.3(c).
"Purchase" has the meaning set forth in Recitals hereto.
"Purchase Price" has the meaning set forth in Section 2.2.
"Regulated Substance" means (i) any "hazardous substance" or
"pollutant" or "contaminant," as such terms are defined in the Comprehensive
Environmental Response, Compensation and Liability Act (Title 42 United States
Code Section 9601 et seq.) ("CERCLA"), or Title 40 Code of Federal Regulations
Part 302, (ii) "petroleum," as that term is defined in the Resource Conservation
and Recovery Act, as amended (Title 00 Xxxxxx Xxxxxx Code Section 6691 et seq.),
or Title 40 Code of Federal Regulations Section 280.1, or (iii) any other
substance or waste which is regulated under any applicable Environmental Law
with respect to its collection, storage, transportation for disposal, treatment
or disposal.
"Related Agreements" means the Transition Services Agreement,
the Tax Sharing Agreement, the Assumption and Reimbursement Agreement, the
Sublease and the Intercreditor Agreements.
"Release" means any presence, emission, spill, seepage, leak,
escape, leaching, discharge, injection, pumping, pouring, emptying, dumping,
disposal, migration, or release of Regulated Substances from any source into or
upon the environment, including the air, soil, improvements, surface water,
groundwater, the sewer, septic system, storm drain, publicly owned treatment
works, or waste treatment, storage, or disposal systems.
"Remediation" means any investigation, clean-up, removal
action, remedial action, restoration, repair, response action, corrective
action, monitoring, sampling and analysis, installation, reclamation, closure,
or post-closure in connection with the suspected, threatened or actual Release.
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"Representatives" has the meaning set forth in Section 5.2(a).
"Restructuring" has the meaning set forth in the Recitals
hereto.
"Retained Support Arrangement" has the meaning set forth in
Section 5.7(c).
"SEC" means the Securities and Exchange Commission or any
successor entity.
"Section 2.4 Adjustment Amount" has the meaning set forth in
Section 2.4(c).
"Section 2.4 Payment Notice" has the meaning set forth in
Section 2.4(c).
"Section 2.5 Adjustment Amount" has the meaning set forth in
Section 2.5(c).
"Section 2.5 Payment Notice" has the meaning set forth in
Section 2.5(d).
"Section 2.6 Adjustment Amount" has the meaning set forth in
Section 2.6(b).
"Section 2.6 Adjustment Statement" has the meaning set forth
in Section 2.6(c).
"Section 2.6 Measurement Period" has the meaning set forth in
Section 2.6(b).
"Section 2.6 Objection Notice Period" has the meaning set
forth in Section 2.6(c).
"Section 2.7 Adjustment Amount" has the meaning set forth in
Section 2.7(b).
"Section 2.7 Payment Notice" has the meaning set forth in
Section 2.7(c).
"Section 5.16 Adjustment Amount" has the meaning set forth in
Section 5.16(c).
"Section 5.16 Adjustment Statement" has the meaning set forth
in Section 5.16(d).
"Section 5.16 Measurement Period" has the meaning set forth in
Section 5.16(c).
"Section 5.16 Objection Notice Period" has the meaning set
forth in Section 5.16(d).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller Patient Injury Claim" has the meaning set forth in
Section 5.9(e).
"Sellers" has the meaning set forth in the Preamble hereto.
"Sellers' Costs" has the meaning set forth in Section 5.9(h).
"Sellers' Representatives" has the meaning set forth in
Section 4.2.
"Senior Living Facility" means any limited service or full
service retirement or senior living service facility or community, including
independent and/or assisted living facilities, nursing homes, congregate care
facilities and other health care facilities providing full-time residential,
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recreational, personal care, home care, assisted living, nursing care, other
health care and like services, in any combination, to senior citizens.
"Senior Living Services Business" means the business of
developing, owning, operating or managing any health care, therapy, assisted
living, nursing and related medical, full-time residential, supportive and
personal care services to or relating primarily to senior citizens at a Senior
Living Facility; provided that "Senior Living Services Business" shall not
include the business of developing, owning, operating or managing lodging
facilities or time shares (or the sale thereof) or any businesses ancillary
thereto.
"SPTMRT Leased Properties" means those fourteen (14)
properties leased by the Company from SPTMRT Properties Trust pursuant to the
leases set forth on Schedule 3.1(f)(2) hereof.
"Stock" means the capital stock of the Company.
"Stock Purchase Agreement Transactions" means the Purchase and
the execution and delivery of the Related Agreements and the consummation of the
transactions contemplated hereby and thereby (other than the CNL Transaction).
"Subject Policies" has the meaning set forth in Section
5.9(k).
"Sublease" means the Sublease dated as of the Closing Date,
substantially in the form of Exhibit J hereto.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, limited partnership, or
other business association or entity, at least a majority of the voting
securities or economic interests of which is directly or indirectly owned or
controlled by such Person or by any one or more of its Subsidiaries.
"Substitute Support Arrangement" has the meaning set forth in
Section 5.7(a).
"Target Adjusted Working Capital" means negative $32.2
million.
"Tax" means any tax imposed of any nature, including federal,
state, local or foreign net income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax or FICA), real or personal property tax or
ad valorem tax, sales or use tax, excise tax, stamp tax, any withholding or
backup withholding tax, value added tax, severance tax, prohibited transaction
tax, premiums tax, occupation tax, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental Entity
responsible for the imposition of any such tax.
"Tax Return" means any return, declaration, report or similar
statement required to be filed with respect to any Taxes (including any attached
schedules), including any information return, claim for refund, declaration of
estimated Tax, and any amendment to any of the foregoing.
"Tax Sharing Agreement" means the Tax Sharing and
Indemnification Agreement dated as of the Closing Date, substantially in the
form of Exhibit C attached hereto.
"Third Party Claim" has the meaning set forth in Section
10.3(a).
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STOCK PURCHASE AGREEMENT
12
"Third Party Owner" shall have the meaning set forth in
Section 3.1(f)(1).
"Transition Services Agreement" means the Transition Services
Agreement dated as of the date hereof between Marriott International
Administrative Services, Inc., Buyer and the Company.
"Underlying Obligation" has the meaning set forth in Section
5.7(b).
"WARN Act" has the meaning set forth in Section 6.8.
"Year-End Financial Statements" has the meaning set forth in
Section 3.1(c)(1)(i).
"2003 Insurance Year" has the meaning set forth in Section
5.9(i).
ARTICLE II
PURCHASE AND SALE/CLOSING
2.1 PURCHASE AND SALE.
On the basis of the representations, warranties and covenants
contained in this Agreement, and subject to the terms and conditions of this
Agreement, Sellers agree to sell the Stock and to deliver the certificates
evidencing such Stock, to Buyer, and Buyer agrees to purchase such Stock from
Sellers, which shall constitute all of the issued and outstanding Stock for the
consideration hereinafter set forth. The certificates will be duly endorsed in
blank or accompanied by duly executed stock powers in favor of Buyer or its
nominee as Buyer may have directed at least two Business Days prior to the
Closing Date and otherwise in a form acceptable for transfer on the books of the
Company.
2.2 PURCHASE PRICE.
Subject to the terms and conditions of this Agreement
(including adjustments to the Purchase Price described in Sections 2.3, 2.4,
2.5, 2.6, 2.7, 4.11, 4.12, 5.7(e) and 5.16), the aggregate purchase price for
the Stock shall be equal to $88,600,000 (the "Purchase Price"). Such payment
shall be made by wire transfer of immediately available funds in U.S. Dollars on
the Closing Date to an account designated by Parent to Buyer in writing at least
three (3) Business Days prior to the Closing Date.
2.3 WORKING CAPITAL ADJUSTMENT.
(a) At the Closing, the Purchase Price shall be adjusted
as provided herein to reflect the differences between the Target Adjusted
Working Capital (i.e. negative $32.2 million) and the Estimated Adjusted Working
Capital.
(b) Not less than two (2) Business Days prior to the
Closing Date, Sellers will give to Buyer a good faith estimate of the Adjusted
Working Capital as of the Closing Date (the "Estimated Adjusted Working
Capital"). If the Estimated Adjusted Working Capital (i) is greater (i.e., less
negative) than the Target Adjusted Working Capital, the Purchase Price payable
at the Closing will be increased by the absolute difference between Estimated
Adjusted Working Capital and the Target Adjusted Working Capital, or (ii) is
less (i.e., more negative) than the Target Adjusted Working Capital, the
Purchase Price payable at the Closing will be decreased by the absolute
difference between the Estimated Adjusted Working Capital and the Target
Adjusted Working Capital. For illustrative purposes, (i) if the Estimated
Adjusted Working Capital is negative $30.0 million, the Purchase Price payable
at Closing will be
TC1:469823 EXECUTION
STOCK PURCHASE AGREEMENT
13
increased by $2.2 million and (ii) if the Estimated Adjusted Working Capital is
negative $34.0 million, the Purchase Price payable at Closing will be decreased
by $1.8 million.
(c) Promptly following the Closing Date, but in no event
later than 60 days after the Closing Date, Sellers shall prepare and submit to
Buyer a statement (the "Closing Date Statement") setting forth in reasonable
detail, Sellers' calculation of the Adjusted Working Capital as of the Closing
Date prepared in accordance with GAAP on a basis consistent with the Financial
Statements (provided, however, that in determining the Closing Date Statement,
the exclusions and adjustments set forth on Schedule 2.3(c) shall be given
effect) (the "Proposed Final Adjusted Working Capital"). The Closing Date
Statement, will be accompanied by a report of Ernst & Young, LLP, independent
auditors ("E&Y") acting on behalf of Sellers, of agreed upon procedures on the
Closing Date Statement. In the event Buyer disputes the correctness of the
Proposed Final Adjusted Working Capital, Buyer shall notify Sellers in writing
of its objections within 15 days after receipt of the Closing Date Statement and
shall set forth, in writing and in reasonable detail, the reasons for Buyer's
objections. Buyer agrees that any adjustments proposed in accordance with the
foregoing will not involve changes in or challenges to Sellers' accounting
methodologies, policies or procedures that have been consistently applied with
respect to the Financial Statements and the Closing Date Statement or are
consistent with Schedule 2.3(c). If Buyer fails to deliver its notice of
objections within 15 days after receipt of the Closing Date Statement, Buyer
shall be deemed to have accepted Sellers' calculation. To the extent Buyer does
not object, in writing in accordance with and within the time period
contemplated by this Section 2.3(c), to a matter in the Closing Date Statement,
Buyer shall be deemed to have accepted Sellers' calculation and presentation in
respect of the matter and the matter shall not be considered to be in dispute.
Sellers and Buyer shall endeavor in good faith to resolve any disputed matters
within 15 days after receipt of Buyer's notice of objections. If Sellers and
Buyer are unable to resolve the disputed matters, Sellers and Buyer shall
appoint Deloitte & Touche LLP, or if such firm is unable to serve in such
capacity, another nationally recognized accounting firm mutually acceptable to
Buyer and Sellers (the "Independent Accountants"; and together with E&Y, the
"Auditors") to resolve the matters in dispute (in a manner consistent with this
Section 2.3(c) and with any matters not in dispute), and the determination of
such firm in respect of the correctness of each matter remaining in dispute
shall be final, binding and conclusive on Sellers and Buyer. The determination
of the Independent Accountants shall be based solely on presentations by Sellers
and Buyer and shall not be by independent review. The Adjusted Working Capital
as of the Closing Date, as finally determined pursuant to this Section 2.3(c)
(whether by failure of Buyer to deliver notice of objection, by agreement of
Sellers and Buyer or by determination of the Independent Accountants selected as
set forth above), is referred to herein as the "Final Adjusted Working Capital."
(d) If the Final Adjusted Working Capital is less (i.e.,
more negative) than the Estimated Adjusted Working Capital, Sellers shall pay to
Buyer the amount of such difference, with simple interest thereon from the
Closing Date to the date of payment at a floating rate per annum equal to the
Prime Rate. If the Final Adjusted Working Capital is greater (i.e., less
negative) than the Estimated Adjusted Working Capital, Buyer shall pay to
Sellers the amount of such difference, with simple interest thereon from the
Closing Date to the date of payment at a floating rate per annum equal to the
Prime Rate. Such payment shall be made in immediately available funds not later
than five Business Days after the determination of the Final Adjusted Working
Capital becomes final, binding and conclusive on the Parties pursuant to Section
2.3(c) by wire transfer to a bank account designated in advance in writing by
the Party entitled to receive the payment.
(e) Subject to any applicable privileges (including the
attorney-client privilege), after the Closing Buyer shall cause the Company and
the Company Subsidiaries and their respective employees and agents, and Sellers
shall cause their respective employees and agents, to assist the Auditors in the
preparation of the agreed upon procedures report and shall provide the other
Party and the
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STOCK PURCHASE AGREEMENT
14
Auditors access at all reasonable times to the personnel, properties, books and
records (including those underlying the preparation of the Closing Date
Statement) of such Party and its Subsidiaries (including, in the case of Buyer,
the Company and any Company Subsidiary) for the purpose of preparing the Closing
Date Statement, the agreed upon procedures report or in connection with any
dispute under this Section 2.3.
(f) The fees and expenses, if any, of the Auditors shall
be paid one-half by Sellers and one-half by Buyer without any adjustment of the
Purchase Price.
2.4 OWNER 6 FACILITIES ADJUSTMENT.
(a) With respect to each Owner 6 Facility, the Purchase
Price shall be subject to reduction in accordance with this Section 2.4 upon the
termination by the "owner" (or "tenant" or "lessee", as applicable) of the Owner
6 Management Agreement relating to such Owner 6 Facility, so long as (A) at any
time on or prior to the one year anniversary of the Closing Date, Buyer or any
of its Affiliates receives a written communication from the applicable
counterparty to the Owner 6 Management Agreement providing notice of termination
of the applicable Owner 6 Management Agreement or threatening termination of the
applicable Owner 6 Management Agreement, to the extent that such termination or
threatened termination is based, in whole or in part, on Pre-Closing Events
(including any of the matters addressed in the notice of default dated November
13, 2002 from Owner 6 to Parent (or any related prior or subsequent
correspondence from Owner 6 (collectively, the "Owner 6 Correspondence"), (B)
the applicable Owner 6 Management Agreement is terminated and such termination
results from the execution, delivery or performance of this Agreement or the
consummation of any of the Stock Purchase Agreement Transactions; provided that
if based on a breach of the non-competition provisions or territorial
restrictions in the Management Agreements, it must be based on a breach of the
non-competition provisions or territorial restrictions in the Management
Agreements listed on Schedule 2.4, or (C) at any time on or prior to the one
year anniversary of the Closing Date, Buyer otherwise discovers facts,
circumstances or events that could form the basis of termination of the Owner 6
Management Agreement by the "owner" (or "tenant" or "lessee", as applicable)
that relate to, are based upon, result from or arise out of any action or
inaction of the Company or any Company Subsidiary or any of their respective
Affiliates under or with respect to such Owner 6 Management Agreement occurring
or existing at or prior to the Closing (as opposed to facts, circumstances or
events that are only of general application to other Management Agreements) and
Buyer notifies Sellers thereof in writing in accordance with Section 2.4(b)
below and in any event not later than 15 days after the first anniversary of the
Closing, in each case, regardless of whether such facts, circumstances or events
or rights of termination were disclosed to Buyer or any of its Affiliates or
were the subject of any representation or warranty of Sellers or Buyer or any of
its Affiliates was otherwise aware of such facts, circumstances or events, or
such rights of termination prior to the Closing. Notwithstanding anything to the
contrary herein, except as set forth in the next sentence or where a notice of
termination has been delivered by the applicable counterparty to an Owner 6
Management Agreement prior to the first anniversary of the Closing Date, the
Purchase Price shall be subject to reduction as provided above in this Section
2.4 in connection with termination of a Management Agreement only if termination
of the applicable Management Agreement occurs, or a dispute arises with the
"owner" (or "tenant" or "lessee", as applicable) regarding the termination of
such Management Agreement (based on matters for which a Purchase Price
adjustment is available hereunder), prior to the expiration of the applicable
statute of limitations with respect to the claims alleged under the Management
Agreement as the basis for such termination. The Parties hereby acknowledge that
any termination of an Owner 6 Management Agreement based upon any of the matters
addressed in the Owner 6 Correspondence shall entitle Buyer to a reduction to
the Purchase Price in accordance with this Section 2.4 without any further
notice being required to be provided by Buyer pursuant to this Section 2.4(a).
TC1:469823 EXECUTION
STOCK PURCHASE AGREEMENT
15
(b) Each Party shall promptly deliver to the other any
additional Owner 6 Correspondence received by such Party. Promptly following the
discovery by Buyer of any facts, circumstances or events which Buyer believes
establishes a basis for a Purchase Price reduction under this Section 2.4, Buyer
shall notify Parent (on behalf of Parent and the other Sellers) in writing of
any such facts, circumstances or events which writing shall (x) include copies
of any notices or correspondence received from the applicable counterparty to
the Management Agreement, with respect to such facts, circumstances or events
and (y) specify that such notice is delivered pursuant to this Section 2.4.
Sellers shall have the rights set forth under Section 10.10 in connection with
any notice delivered under this Section 2.4(b); it being understood that Buyer's
failure to provide the written notice contemplated under this Section 2.4(b)
shall not act as a waiver of Buyer's right to a Purchase Price reduction
hereunder unless, and only to the extent that, such failure materially
prejudices Sellers' rights under Section 10.10. Buyer and Parent hereby agree to
enter into a mutually acceptable joint defense agreement with respect to the
matters addressed in any written notice delivered under this Section 2.4(b).
(c) Upon termination by the "owner" (or "tenant" or
"lessee", as applicable) of any Owner 6 Management Agreement which triggers
Buyer's right to a post-Closing Purchase Price reduction in accordance with
Section 2.4(a), the Purchase Price shall be adjusted by an amount equal to the
amount set forth on Schedule 2.4 corresponding to such Owner 6 Management
Agreement, together with simple interest thereon from the date of delivery of
the Section 2.4 Payment Notice to the date of payment at a floating rate per
annum equal to the Prime Rate (the "Section 2.4 Adjustment Amount"). Promptly
following the effectiveness of any termination of such Owner 6 Management
Agreement, Buyer shall provide Parent (on behalf of Parent and the other
Sellers) with written notice directing payment of the Section 2.4 Adjustment
Amount and summarizing in reasonable detail the basis for the termination of
such Owner 6 Management Agreement (the "Section 2.4 Payment Notice"). For
purposes of this Section 2.4, a Management Agreement will be deemed to be
terminated when, following the delivery of a notice of termination, the Company
ceases receiving the management fees with respect to the Management Agreement.
(d) In the event Sellers object to Buyer's right to a
Section 2.4 Adjustment Amount pursuant to a Section 2.4 Payment Notice, Parent
(on behalf of Parent and the other Sellers) shall notify Buyer in writing of
their objections within 30 days after receipt of the Section 2.4 Payment Notice,
which notice shall set forth in reasonable detail the reasons for Sellers'
objections. Sellers and Buyer shall endeavor in good faith to resolve any
disagreement between Sellers and Buyer with respect to Buyer's right to such
Section 2.4 Adjustment Amount within 30 days after receipt of Sellers' notice of
objections. If Sellers and Buyer are unable to resolve all such disagreements
within 30 days after receipt of Sellers' notice of objections, any such
remaining disputes shall be settled (in a manner consistent with this Section
2.4 and with any matters not in dispute), by final and binding arbitration in
accordance with the then current Commercial Arbitration Rules of the American
Arbitration Association ("AAA"). If Sellers and Buyer can select a mutually
agreed upon arbitrator, the remaining disputes will be resolved by such
arbitrator. However, in the event Sellers and Buyer are unable to agree upon a
single arbitrator within ten (10) days after having received written notice from
a Party requesting that an arbitrator be selected, the remaining disputes shall
be resolved by three arbitrators, one selected by Buyer, one selected by
Sellers, with the two arbitrators selecting the third arbitrator who shall be
chairman of the panel. The arbitrator(s) selected shall have expertise in the
nature of the matters in dispute. The arbitration shall be held in Washington,
D.C. Each party shall bear its own expenses and shall equally share the filing
and other administrative fees of the AAA and the expenses of the arbitrator(s).
This provision shall be governed and enforceable under the Federal Arbitration
Act, 9 U.S.C. Sections 1-16. The local law of the state of Delaware, except its
laws of arbitration and choice of laws, shall apply to all substantive matters
pertaining to the dispute. To the extent the arbitrator(s) determine that Buyer
is entitled to a post-Closing Purchase Price reduction pursuant to this Section
2.4, Sellers shall pay the Section 2.4 Adjustment
TC1:469823 EXECUTION
STOCK PURCHASE AGREEMENT
16
Amount, as determined following resolution of all disputed matters pursuant to
this Section 2.4(d), within 10 days after the final resolution of such disputed
matters. Legal fees and costs shall be paid as determined by the arbitrator in
such arbitration.
(e) To the extent Sellers do not object in writing within
30 days after receipt of the Section 2.4 Payment Notice, Sellers shall be deemed
to have accepted such Purchase Price reduction and shall pay to Buyer the
Section 2.4 Adjustment Amount within five Business Days thereafter.
(f) Any payment under this Section 2.4 shall be made in
immediately available funds by wire transfer to a bank account designated in
advance in writing by Buyer.
(g) The Purchase Price reduction set forth in this
Section 2.4, if paid with respect to any Management Agreement, shall constitute
the sole and exclusive remedy available to Buyer for the loss of the value of
such Management Agreement, whether Buyer also would be entitled to recover
damages for the loss of the value of such Management Agreement based on breach
of representation and warranty, breach of covenant or agreement or otherwise; it
being understood that the foregoing shall not limit Buyer's right to be
indemnified for any Indemnifiable Loss under a Pre-Closing Claim with respect to
such Management Agreement (other than for the loss of the value of such
Management Agreement due to the termination thereof).
(h) For purposes of this Section 2.4, references to the
Company shall be deemed to mean the Company or the applicable Company Subsidiary
that is a party to the relevant Owner 6 Management Agreement.
(i) Notwithstanding anything to the contrary in this
Section 2.4, to the extent any Owner 6 Management Agreement is terminated prior
to the Closing, the Purchase Price payable by Buyer at the Closing shall be
reduced by an amount equal to the amount set forth on Schedule 2.4 corresponding
to such Management Agreement, and the other provisions of this Section 2.4 shall
not apply with respect to such terminated Owner 6 Management Agreement
post-Closing.
2.5 OTHER MANAGED FACILITIES ADJUSTMENT.
(a) With respect to each Owner 2 Facility and Other
Managed Facility, the Purchase Price shall be subject to reduction in accordance
with this Section 2.5 upon the termination by the "owner" (or "tenant" or
"lessee", as applicable) of the Owner 2 Management Agreement relating to such
Owner 2 Facility or the Other Managed Facility Management Agreement relating to
such Other Managed Facility (as the case may be), so long as (A) at any time on
or prior to the one year anniversary of the Closing Date, Buyer or any of its
Affiliates receives a written communication from the applicable counterparty to
the Owner 2 Management Agreement or Other Managed Facility Management Agreement
providing notice of termination of the applicable Owner 2 Management Agreement
or Other Managed Facility Management Agreement or threatening termination of the
applicable Owner 2 Management Agreement or Other Managed Facility Management
Agreement, to the extent that such termination or threatened termination is
based, in whole or in part, on Pre-Closing Events, (B) the applicable Owner 2
Management Agreement or Other Managed Facility Management Agreement (as the case
may be) is terminated and such termination results from the execution, delivery
or performance of this Agreement, or the consummation of any of the Stock
Purchase Agreement Transactions; provided that, if based on a breach of the
non-competition provisions or territorial restrictions in the Management
Agreements, it must be based on a breach of the non-competition provisions or
territorial restrictions in the Management Agreements listed on Schedule 2.5, or
(C) at any time on or prior to the one year anniversary of the Closing Date,
Buyer otherwise discovers facts, circumstances or events that could form the
basis of
TC1:469823 EXECUTION
STOCK PURCHASE AGREEMENT
17
termination of the Owner 2 Management Agreement or Other Managed Facility
Management Agreement by the "owner" (or "tenant" or "lessee", as applicable)
that relate to, are based upon, result from or arise out of any action or
inaction of the Company or any Company Subsidiary, or any of their respective
Affiliates under or with respect to such Owner 2 Management Agreement or Other
Managed Facility Management Agreement occurring or existing at or prior to the
Closing (as opposed to facts, circumstances or events that are only of general
application to other Management Agreements) and Buyer notifies Sellers thereof
in writing in accordance with Section 2.5(b) below, and in any event not later
than 15 days after the first anniversary of the Closing, in each case,
regardless of whether such facts, circumstances or events or rights of
termination were disclosed to Buyer or any of its Affiliates or were the subject
of any representation or warranty of Sellers or Buyer or any of its Affiliates
was otherwise aware of such facts, circumstances or events, or such rights of
termination prior to the Closing. Notwithstanding anything to the contrary
herein, except where a notice of termination has been delivered by the
applicable counterparty to the Owner 2 Management Agreement or Other Managed
Facility Management Agreement prior to the first anniversary of the Closing
Date, the Purchase Price shall be subject to reduction as provided above in this
Section 2.5 in connection with the termination of a Management Agreement only if
termination of the applicable Management Agreement occurs, or a dispute arises
with the "owner" (or "tenant" or "lessee" as applicable) regarding the
termination of such Management Agreement (based on matters for which a Purchase
Price adjustment is available hereunder), prior to the expiration of the
applicable statute of limitations with respect to the claims alleged under the
Management Agreement as the basis for such termination.
(b) Promptly following the discovery by Buyer of any
facts, circumstances or events which Buyer believes establishes a basis for a
Purchase Price reduction under this Section 2.5, Buyer shall notify Parent (on
behalf of Parent and the other Sellers) in writing of any such facts,
circumstances or events, which writing shall (x) include copies of any notices
or correspondence received from a counterparty to the applicable Management
Agreement with respect to such facts, circumstances or events and (y) specify
that such notice is delivered pursuant to this Section 2.5. Seller shall have
the rights set forth in Section 10.10 in connection with any notice delivered
under this Section 2.5(b); it being understood that Buyer's failure to provide
the written notice contemplated under this Section 2.5(b) shall not act as a
waiver of Buyer's right to a Purchase Price reduction hereunder unless, and only
to the extent that, such failure materially prejudices Sellers' rights under
Section 10.10. Buyer and Parent hereby agree to enter into a mutually acceptable
joint defense agreement with respect to the matters addressed in any written
notice delivered under this Section 2.5(b).
(c) Subject to Section 2.5(d), upon termination of the
obligations of Buyer and its Affiliates under any Owner 2 Management Agreement
or Other Managed Facility Management Agreement which triggers Buyer's right to a
post-Closing Purchase Price reduction in accordance with Section 2.5(a), the
Purchase Price shall be adjusted by an amount equal to the amount set forth on
Schedule 2.5(c)(i) corresponding to such Owner 2 Management Agreement or Other
Managed Facility Management Agreement, together with simple interest thereon
from the date of delivery of the Section 2.5 Payment Notice to the date of
payment at a floating rate per annum equal to the Prime Rate (the "Section 2.5
Adjustment Amount"); provided however, that, notwithstanding anything to the
contrary in this Section 2.5, Buyer shall not be entitled to any post-Closing
Purchase Price reduction with respect to any Owner 2 Management Agreement or
Other Managed Facility Management Agreement if the aggregate management fees
payable to Buyer or its Affiliates under the Management Agreements for the
Facilities listed on Schedule 2.5(c)(i), as a whole, during the period from the
Closing Date through the second anniversary of the Closing Date exceed the
amount set forth on Schedule 2.5(c)(ii) and to the extent any Purchase Price
adjustment has been made at Closing under Section 2.5(j) such adjustment shall
be reversed and Buyer shall pay the amount of such Purchase Price adjustment
back to Parent. For purposes of this Section 2.5, a Management Agreement will be
deemed to be terminated, when, following
TC1:469823 EXECUTION
STOCK PURCHASE AGREEMENT
18
the delivery of a notice of termination, the Company ceases receiving the
management fees with respect to the Management Agreement.
(d) In the event that any Owner 2 Management Agreement or
Other Managed Facility Management Agreement (as the case may be) as to which
Buyer is entitled to an adjustment under this Section 2.5 is terminated by the
"owner" (or "tenant" or "lessee", as applicable) thereof prior to the second
anniversary of the Closing Date for a reason that entitles Buyer to a
post-Closing Purchase Price reduction under this Section 2.5, then within 30
days after the second anniversary of the Closing Date, Buyer shall provide
Parent (on behalf of Parent and the other Sellers) with written notice directing
payment of the Section 2.5 Adjustment Amount as to each such Management
Agreement, summarizing in reasonable detail the basis for the termination of
each such Management Agreement and including the calculation of the aggregate
management fees payable to Buyer or its Affiliates under each such Management
Agreement for purposes of verifying whether any post-Closing Purchase Price
reductions are payable under Section 2.5(a) (the "Section 2.5 Payment Notice").
In the event that any Owner 2 Management Agreement or Other Managed Facility
Management Agreement (as the case may be) as to which Buyer is entitled to an
adjustment under this Section 2.5 is terminated by the "owner" (or "tenant" or
"lessee", as applicable) thereof on or following the second anniversary of the
Closing Date for a reason that entitles Buyer to a post-Closing Purchase Price
reduction under this Section 2.5, then within 10 days after such termination,
Buyer shall provide Parent (on behalf of Parent and the other Sellers) with a
Section 2.5 Payment Notice (provided, however, that such Section 2.5 Payment
Notice need not restate the calculation of the aggregate management fees
actually received by Buyer or its Affiliates under each such Management
Agreement referenced in the preceding sentence to the extent previously
provided).
(e) In the event Sellers object to Buyer's right to a
Section 2.5 Adjustment Amount pursuant to a Section 2.5 Payment Notice, Parent
(on behalf of Parent and the other Sellers) shall notify Buyer in writing of
their objections within 30 days after receipt of the Section 2.5 Payment Notice,
which notice shall set forth in reasonable detail the reasons for Sellers'
objections. Sellers and Buyer shall endeavor in good faith to resolve any
disagreement between Sellers and Buyer with respect to Buyer's right to such
Section 2.5 Adjustment Amount within 30 days after receipt of Sellers' notice of
objections. If Sellers and Buyer are unable to resolve all such disagreements
within 30 days after receipt of Sellers' notice of objections, any such
remaining disputes shall be settled (in a manner consistent with this Section
2.5 and with any matters not in dispute), by final and binding arbitration in
accordance with the then current Commercial Arbitration Rules of the AAA. If
Sellers and Buyer can select a mutually agreed upon arbitrator, the remaining
disputes will be resolved by such arbitrator. However, in the event Sellers and
Buyer are unable to agree upon a single arbitrator within ten (10) days after
having received written notice from a Party requesting that an arbitrator be
selected, the remaining disputes shall be resolved by three arbitrators, one
selected by Buyer, one selected by Sellers, with the two arbitrators selecting
the third arbitrator who shall be chairman of the panel. The arbitrator(s)
selected shall have expertise in the nature of the matters in dispute. The
arbitration shall be held in Washington, D.C. Each party shall bear its own
expenses and shall equally share the filing and other administrative fees of the
AAA and the expenses of the arbitrator(s). This provision shall be governed and
enforceable under the Federal Arbitration Act, 9 U.S.C. Sections 1-16. The local
law of the state of Delaware, except its laws of arbitration and choice of laws,
shall apply to all substantive matters pertaining to the dispute. To the extent
the arbitrator(s) determine that Buyer is entitled to a post-Closing Purchase
Price reduction pursuant to this Section 2.5, Sellers shall pay the Section 2.5
Adjustment Amount, as determined following resolution of all disputed matters
pursuant to this Section 2.5(e), within 10 days after the final resolution of
such disputed matters. Legal fees and costs shall be paid as determined by the
arbitrator(s) in such arbitration.
TC1:469823 EXECUTION
STOCK PURCHASE AGREEMENT
19
(f) To the extent Sellers do not object in writing within
30 days after receipt of the Section 2.5 Payment Notice, Sellers shall be deemed
to have accepted such Purchase Price reduction and shall pay to Buyer the
Section 2.5 Adjustment Amount within five Business Days thereafter.
(g) Any payment under this Section 2.5 shall be made in
immediately available funds by wire transfer to a bank account designated in
advance in writing by Buyer.
(h) The Purchase Price reduction set forth in this
Section 2.5, if paid with respect to any Management Agreement, shall constitute
the sole and exclusive remedy available to Buyer for the loss of the value of
such Management Agreement, whether Buyer also would be entitled to recover
damages for the loss of the value of such Management Agreement based on breach
of representation and warranty, breach of covenant or agreement or otherwise; it
being understood that the foregoing shall not limit Buyer's right be indemnified
for any Indemnifiable Loss under a Pre-Closing Claim with respect to such
Management Agreement (other than for the loss of the value of such Management
Agreement due to the termination thereof).
(i) For purposes of this Section 2.5, references to the
Company shall be deemed to mean the Company or the applicable Company Subsidiary
that is a party to the relevant Owner 2 Management Agreement or Other Managed
Facility Management Agreement (as the case may be).
(j) Notwithstanding anything to the contrary in this
Section 2.5, to the extent any Owner 2 Management Agreement or Other Managed
Facility Management Agreement is terminated prior to the Closing, the Purchase
Price payable by Buyer at the Closing shall be reduced by an amount equal to the
amount set forth on Schedule 2.5(c)(i) corresponding to such Management
Agreement, and the other provisions of this Section 2.5 shall not apply with
respect to such terminated Owner 2 Management Agreement or Other Managed
Facility Management Agreement (as the case may be) post-Closing.
2.6 OWNER 1 FACILITIES ADJUSTMENT.
(a) In the event that, with respect to any Owner 1
Management Agreement, (i) on the first anniversary of the Closing Date, Buyer or
any assignee of such Owner 1 Management Agreement or any Affiliate of Buyer,
including the Company or any Company Subsidiary, is a party to such Owner 1
Management Agreement or a new management agreement with respect to the same
Owner 1 Facility (each, an "Owner 1 Continuing Agreement"), or (ii) at any time
during the three-year period commencing on the first anniversary of the Closing
Date, Buyer or any Affiliate of Buyer, including the Company or any Company
Subsidiary, enters into a new management agreement with respect to any Owner 1
Facility (each, an "Owner 1 New Management Agreement"), Sellers shall be
entitled to a post-Closing adjustment to the Purchase Price relating to the
Owner 1 Facility to which such Owner 1 Continuing Agreement or Owner 1 New
Management Agreement relates, in accordance with this Section 2.6. Buyer may
assign any Owner 1 Management Agreement or Owner 1 Continuing Agreement, in
whole or in part at any time, provided that any such assignment shall not
relieve Buyer of its payment obligations under this Section 2.6.
(b) For each Owner 1 Continuing Agreement or Owner 1 New
Management Agreement, the amount of the adjustment under this Section 2.6 (the
"Section 2.6 Adjustment Amount") shall be equal to the product of (x) the
difference between (A) the average base fee percentage (i.e., the base fee
calculated as a percentage of gross property revenues) for the remaining number
of 12-month periods under the term of such Owner 1 Continuing Agreement or Owner
1 New Management Agreement, as the case may be, including any possible
extensions of the term thereof (not subject to any conditions, other than the
delivery of notice of such extension, that have not been satisfied as of the
date
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of the calculation under this Section 2.6(b) or are within the reasonable
control of the operator or manager) at the operator's or manager's option
without the consent of the "owner" (or "tenant" or "lessee," as applicable),
calculated from the Closing Date (for Owner 1 Continuing Agreements) or the
effective date (for Owner 1 New Management Agreements), as the case may be,
minus (B) 3.5%, multiplied by (y) the gross property revenues derived from the
operation of the Owner 1 Facility to which such Owner 1 Continuing Agreement or
Owner 1 New Management Agreement relates during the immediately preceding
12-month period (i.e., in the case of a Owner 1 Continuing Agreement, the
12-month period ending on the first anniversary of the Closing Date and, in the
case of a Owner 1 New Management Agreement, the twelve month period ending on
the effective date of the Owner 1 New Management Agreement) (each, a "Section
2.6 Measurement Period"), multiplied by (z) a number equal to the lesser of (A)
the remaining number of 12-month periods under the term of such Owner 1
Continuing Agreement or Owner 1 New Management Agreement, as the case may be,
including any possible extensions of the term thereof (not subject to any
conditions, other than the delivery of notice of such extension, that have not
been satisfied as of the date of the calculation under this Section 2.6(b) or
are within the reasonable control of the operator or manager) at the operator's
or manager's option without the consent of the "owner" (or "tenant" or "lessee,"
as applicable), calculated from the Closing Date (for Owner 1 Continuing
Agreements) or the effective date (for Owner 1 New Management Agreements), as
the case may be (including, for any partial year, the actual number of days
remaining under the term of such Owner 1 Continuing Agreement or Owner 1 New
Management Agreement, as the case may be, including any possible extensions of
the term thereof (not subject to any conditions, other than the delivery of
notice of such extension, that have not been satisfied as of the date of the
calculation under this Section 2.6(b) or are within the reasonable control of
the operator or manager) at the operator's or manager's option without the
consent of the "owner" (or "tenant" or "lessee," as applicable), calculated from
the Closing Date (for Owner 1 Continuing Agreements) or the effective date (for
Owner 1 New Management Agreements), as the case may be divided by 360 or if the
remaining term of the Owner 1 Continuing Agreement or Owner 1 New Management
Agreement, as the case may be, is cancelable by the "owner" (or "tenant" or
"lessee," as applicable) without cause or a default by the Company during such
period, the number of days prior notice required to be given by the "owner" (or
"tenant" or "lessee," as applicable) prior to termination of the Management
Agreement divided by 360); and (B) five. For example, if the base fee percentage
is 5.0%, gross revenues derived from the operation of the Owner 1 Facility
during the immediately preceding 12 months is $10,000,000, and the remaining
term of the management agreement is eight years, the Section 2.6 Adjustment
Amount with respect to such management agreement would be $750,000 ($10,000,000
x (5.0%-3.5%) x 5). Notwithstanding anything to the contrary in this Section
2.6, Sellers shall not be entitled to more than one adjustment under this
Section 2.6 with respect to each Owner 1 Facility and the aggregate amount of
all adjustments under this Section 2.6 shall not exceed $7.2 million.
(c) Within 90 days following the first anniversary of the
Closing Date, Buyer shall prepare and submit to Parent (on behalf of Parent and
the other Sellers) a statement (the "Section 2.6 Adjustment Statement") setting
forth, in reasonable detail, a list of each of the Owner 1 Continuing Agreements
and the calculation of the Section 2.6 Adjustment Amount with respect thereto.
Within 90 days following the effective date of any Owner 1 New Management
Agreement, Buyer shall prepare and submit to Parent (on behalf of Parent and the
other Sellers) a Section 2.6 Adjustment Statement setting forth, in reasonable
detail, the calculation of the Section 2.6 Adjustment Amount with respect to
such Owner 1 New Management Agreement. In the event that Sellers have any
objections with respect to a Section 2.6 Adjustment Statement, Parent (on behalf
of Parent and the other Sellers) shall notify Buyer in writing of their
objections within 30 days after receipt of the Section 2.6 Adjustment Statement,
which notification shall set forth, in reasonable detail, the reasons for
Sellers' objections. If Sellers fail to deliver a notice of objection within 30
days after receipt of a Section 2.6 Adjustment Statement, Sellers shall be
deemed to have accepted the Section 2.6 Adjustment Statement and Buyer's
calculations therein
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shall not be considered in dispute. In the event Sellers fail to deliver a
notice of objection within 30 days after receipt of a Section 2.6 Adjustment
Statement (the "Section 2.6 Objection Notice Period"), Buyer shall pay an amount
equal to the aggregate Section 2.6 Adjustment Amount within five Business Days
after the end of the Section 2.6 Objection Notice Period.
(d) If Sellers timely deliver a notice of objection,
Sellers and Buyer shall endeavor in good faith to resolve all of Sellers'
objections within 30 days after receipt of Sellers' notice of objections. If
Sellers and Buyer are unable to resolve the disputed matters with respect to a
Section 2.6 Adjustment Statement within 30 days after receipt of Sellers' notice
of objections, Sellers and Buyer shall refer the matter to the Independent
Accountants to resolve the matters in dispute (in a manner consistent with this
Section 2.6 and with any matters not in dispute), and the determination of the
Independent Accountants in respect of the correctness of each matter remaining
in dispute shall be final, binding and conclusive on Sellers and Buyer. The
determination of the Independent Accountants shall be based solely on
presentations by Sellers and Buyer and shall not be by independent review.
Subject to any applicable privileges (including the attorney-client privilege),
Buyer shall make available to Sellers and, upon request, to the Independent
Accountants, the books, records, documents and work papers underlying the
preparation of the Section 2.6 Adjustment Statement. Subject to any applicable
privileges (including the attorney-client privilege), Sellers shall make
available to Buyer and, upon request, to the Independent Accountants, the books,
records, documents and work papers created or prepared by or for Sellers in
connection with the review of the Section 2.6 Adjustment Statement. The fees and
expenses, if any, of the Independent Accountants shall be paid one-half by
Sellers and one-half by Buyer. Buyer shall pay the Section 2.6 Adjustment
Amount, as determined following resolution of all disputed matters pursuant to
this Section 2.6(d), within 10 days after the final resolution of such disputed
matters.
(e) Any payment under this Section 2.6 shall be made in
immediately available funds by wire transfer to a bank account designated in
advance in writing by Parent.
2.7 PROPERTY 2 MANAGEMENT AGREEMENT ADJUSTMENT.
(a) With respect to the Property 2 Facility, the Purchase
Price shall be subject to reduction in accordance with this Section 2.7 upon the
termination by the "owner" (or "tenant" or "lessee", as applicable) of the
Property 2 Management Agreement, so long as (i) such termination occurs prior to
the fifth anniversary of the Closing and (ii) such termination does not result
from actions or inactions taken by the Company or any Company Subsidiary after
the Closing or performance of the Property 2 Facility after the Closing. In the
event Buyer or any of its Affiliates receives a termination notice or any other
correspondence from the "owner" (or "tenant" or "lessee", as applicable) which
Buyer believes establishes a basis for a Purchase Price reduction under this
Section 2.7, Buyer shall provide Parent (on behalf of Parent and the other
Sellers) with a copy of such notice or correspondence promptly after the receipt
thereof. Sellers shall have the rights set forth in Section 10.10 in connection
with any notice delivered under this Section 2.7(a); it being understood that
Buyer's failure to provide the written notice contemplated under this Section
2.7(a) shall not act as a waiver of Buyer's right to a Purchase Price reduction
hereunder unless, and only to the extent that, such failure materially
prejudices Sellers' rights under Section 10.10.
(b) Subject to Section 2.7(c), upon termination of the
obligations of Buyer and its Affiliates under the Property 2 Management
Agreement which triggers Buyer's right to a Purchase Price reduction in
accordance with Section 2.7(a), the Purchase Price shall be adjusted by an
amount equal to the amount set forth on Schedule 2.7(b) corresponding to the
period in which such termination occurred, together with simple interest thereon
from date of delivery of the Section 2.7 Payment Notice at a floating rate per
annum equal to the Prime Rate (the "Section 2.7 Adjustment Amount").
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(c) In the event that the Management Agreement as to
which Buyer is entitled to an adjustment under this Section 2.7 is terminated by
the "owner" (or "tenant" or "lessee", as applicable) thereof for a reason that
entitles Buyer to a post-Closing Purchase Price reduction under this Section
2.7, then within 30 days after the termination of such Management Agreement,
Buyer shall provide Parent (on behalf of Parent and the other Sellers) with
written notice directing payment of the Section 2.7 Adjustment Amount as to such
Management Agreement, summarizing in reasonable detail the basis for the
termination of such Management Agreement (the "Section 2.7 Payment Notice"). For
purposes of this Section 2.7, a Management Agreement will be deemed to be
terminated when, following the delivery of a notice of termination, the Company
ceases receiving the management fees with respect to the Management Agreement.
(d) In the event Sellers object to Buyer's right to a
Section 2.7 Adjustment Amount pursuant to a Section 2.7 Payment Notice, Parent
(on behalf of Parent and the other Sellers) shall notify Buyer in writing of
their objections within 30 days after receipt of the Section 2.7 Payment Notice,
which notice shall set forth in reasonable detail the reasons for Sellers'
objections. Sellers and Buyer shall endeavor in good faith to resolve any
disagreement between Sellers and Buyer with respect to Buyer's right to such
Section 2.7 Adjustment Amount within 30 days after receipt of Sellers' notice of
objections. If Sellers and Buyer are unable to resolve all such disagreements
within 30 days after receipt of Sellers' notice of objections, any such
remaining disputes shall be settled (in a manner consistent with this Section
2.7 and with any matters not in dispute), by final and binding arbitration in
accordance with the then current Commercial Arbitration Rules of the AAA. If
Sellers and Buyer can select a mutually agreed upon arbitrator, the remaining
disputes will be resolved by such arbitrator. However, in the event Sellers and
Buyer are unable to agree upon a single arbitrator within ten (10) days after
having received written notice from a Party requesting that an arbitrator be
selected, the remaining disputes shall be resolved by three arbitrators, one
selected by Buyer, one selected by Sellers, with the two arbitrators selecting
the third arbitrator who shall be chairman of the panel. The arbitrator(s)
selected shall have expertise in the nature of the matters in dispute. The
arbitration shall be held in Washington, D.C. Each party shall bear its own
expenses and shall equally share the filing and other administrative fees of the
AAA and the expenses of the arbitrator(s). This provision shall be governed and
enforceable under the Federal Arbitration Act, 9 U.S.C. Sections 1-16. The
local law of the state of Delaware, except its laws of arbitration and choice of
laws, shall apply to all substantive matters pertaining to the dispute. To the
extent the arbitrator(s) determine that Buyer is entitled to a post-Closing
Purchase Price reduction pursuant to this Section 2.7, Sellers shall pay the
Section 2.7 Adjustment Amount, as determined following resolution of all
disputed matters pursuant to this Section 2.7(d), within 10 days after the final
resolution of such disputed matters. Legal fees and costs shall be paid as
determined by the arbitrator(s) in such arbitration.
(e) To the extent Sellers do not object in writing within
30 days after receipt of the Section 2.7 Payment Notice, Sellers shall be deemed
to have accepted such Purchase Price reduction and shall pay to Buyer the
Section 2.7 Adjustment Amount within five Business Days thereafter.
(f) Any payment under this Section 2.7 shall be made in
immediately available funds by wire transfer to a bank account designated in
advance in writing by Buyer.
(g) The Purchase Price reduction set forth in this
Section 2.7, if paid with respect to any Management Agreement, shall constitute
the sole and exclusive remedy available to Buyer for the loss of the value of
such Management Agreement, whether Buyer otherwise would be entitled to recover
damages for the loss of the value of such Management Agreement based on breach
of representation and warranty, breach of covenant or agreement or otherwise; it
being understood that the foregoing shall not limit Buyer's right be indemnified
for any Indemnifiable Loss under a Pre-Closing Claim with respect to
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such Management Agreement (other than for the loss of the value of such
Management Agreement due to termination thereof).
(h) Notwithstanding anything to the contrary in this
Section 2.7, to the extent the Property 2 Management Agreement is terminated
prior to the Closing, the Purchase Price payable by Buyer at the Closing shall
be reduced by an amount equal to the amount set forth on Schedule 2.7(b), and
the other provisions of this Section 2.7 shall not apply with respect to such
terminated Management Agreement post-Closing.
2.8 THE CLOSING.
(a) Unless this Agreement shall have been terminated
pursuant to Article IX hereof, the transactions contemplated by this Agreement
shall take place at a closing (the "Closing") to be held at the offices of
O'Melveny & Xxxxx LLP, 0000 Xxxxxx Xxxxxxxxx, Xxxxx 0000, XxXxxx, Xxxxxxxx, or
at such other location as may be agreed by Sellers and Buyer.
(b) The Closing shall take place on the third Business
Day following the satisfaction or waiver of the conditions contained in Article
VIII (other than conditions which, by their nature, are to be satisfied on the
Closing Date), or on such other date as may be agreed upon in writing by Buyer
and Sellers (the date on which the Closing occurs is herein referred to as the
"Closing Date"). The Parties shall use Commercially Reasonable Efforts to
cause the conditions set forth in Article VIII to be satisfied so that the
Closing will occur on or before March 28, 2003; provided that, if payroll,
general ledger and accounts payable systems can practicably be transferred by
February 28, 2003, the Closing shall occur no later than February 28, 2003,
provided that all conditions to Closing under Article VIII have been satisfied
or waived.
2.9 ACTIONS OF SELLERS AT CLOSING. At the Closing and
unless otherwise waived in writing by Buyer, Sellers shall deliver to Buyer the
following:
(a) Copies of resolutions duly adopted by the board of
directors of each Seller, and of the stockholders of Holdco, authorizing and
approving such Sellers' performance of the transactions contemplated hereby and
the Related Agreements to which it is a party and the execution and delivery of
this Agreement and the Related Agreements to which it is a party and the
documents described herein and therein, certified as true and of full force and
effect as of Closing, by appropriate officers of each Seller;
(b) Certificates of incumbency for the officers of each
Seller executing this Agreement, and Related Agreement and any other agreements
or instruments contemplated herein or therein dated as of the Closing Date;
(c) Certificates of good standing of each Seller and of
the Company and MCC from its state of organization and foreign qualifications
for MCC and the Company in all states in which they are currently qualified to
do business as a foreign corporation or limited liability company, as
applicable;
(d) The L/C (if issued) and any documentation required to
release any cash remaining in the Escrow Fund; and
(e) The opinions, certificates, consents and other
documents including the stock certificates referred to herein as then
deliverable by Sellers.
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2.10 ACTIONS OF BUYER AT CLOSING. At the Closing and
unless otherwise waived in writing by Sellers, Buyer shall deliver to Sellers
the following:
(a) An amount equal to the Purchase Price in immediately
available funds;
(b) Copies of resolutions duly adopted by the board of
directors of Buyer authorizing and approving Buyer's performance of the
transactions contemplated hereby and the Related Agreements to which it is a
party and the execution and delivery of this Agreement and the Related
Agreements to which it is a party and the documents described herein and
therein, certified as true and of full force and effect as of Closing, by
appropriate officers of Buyer;
(c) A certificate of incumbency for the officers of Buyer
executing this Agreement and any other agreements or instruments contemplated
herein dated as of the Closing Date;
(d) A certificate of good standing of Buyer from its
state of incorporation; and
(e) The opinions, certificates, consents and other
documents referred to herein as then deliverable by Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SELLERS.
Consistent with Section 11.3, except as otherwise indicated on
the Schedules hereto and subject to Section 4.10, Sellers jointly and severally
represent and warrant to Buyer as follows:
(a) ORGANIZATION AND RELATED MATTERS.
Each Seller, the Company and the Company Subsidiaries is a
corporation, limited liability company or limited partnership duly organized (or
duly formed, as applicable), validly existing and in good standing under the
laws of the jurisdiction of its organization (or formation). Each Seller and the
Company and each applicable Company Subsidiary has all necessary corporate or
limited liability company power and authority to execute, deliver and perform
this Agreement and the Related Agreements to which it is a party. Schedule
3.1(a)(1) lists all of the Company Subsidiaries and the Company's or such
Company Subsidiary's ownership interest therein, the jurisdiction in which the
Company or such Company Subsidiary was organized (or formed) and each foreign
jurisdiction in which the Company and each Company Subsidiary is qualified or
licensed to do business. Each of the Company and the Company Subsidiaries has
all necessary corporate, limited liability company or limited partnership power
and authority to own, lease and operate its respective properties and assets and
to carry on its respective businesses as now conducted. Each of the Company and
the Company Subsidiaries is duly qualified or licensed to do business as a
foreign corporation, limited liability company or limited partnership, as
applicable, and is in good standing in all jurisdictions in which the character
or the location of its owned, operated or leased assets or the nature of the
business it conducts requires such licensing or qualification, except where the
failure to be so qualified or licensed or in good standing would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect. The Company has made available to Buyer true and complete copies of its
certificate of incorporation and bylaws and the organizational documents of each
of the Company Subsidiaries, except as set forth on Schedule 3.1(a)(2).
TC1:469823 EXECUTION
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(b) STOCK.
(1) The authorized capital stock of the Company
consists of (i) 1,000 shares of common stock, no par value, of which 100 shares
are issued and outstanding and (ii) 2,000 shares of preferred stock, no par
value, of which 1,000 shares have been designated Series A Preferred Stock and
400 of which shares are issued and outstanding. As of the date of this Agreement
Sellers own, beneficially and of record, all of the issued and outstanding
Stock. As of the Closing Date, Holdco will own, beneficially and of record, all
of the issued and outstanding Stock. Other than such issued and outstanding
shares of Stock, there are no outstanding Equity Interests of the Company. As of
the date of this Agreement, Parent and MSHC have good, valid and marketable
title, free and clear of all Encumbrances, to the Stock, with full right and
lawful authority to sell and transfer such shares to Buyer pursuant to this
Agreement. As of the Closing Date, Holdco will have good, valid and marketable
title, free and clear of all Encumbrances, to the Stock, with full right and
lawful authority to sell and transfer such shares to Buyer pursuant to this
Agreement.
(2) Except as set forth on Schedule 3.1(b)(2),
the Company owns all of the Equity Interests in each Company Subsidiary,
beneficially and of record. Schedule 3.1(b)(2) sets forth (i) the authorized
capital stock and other Equity Interests of each Company Subsidiary that is a
corporation and the number of issued and outstanding shares and the beneficial
and of record owners thereof, and (ii) the nature and amount of the Equity
Interests in any Company Subsidiary that is a limited liability company or
limited partnership and the Persons who own or hold such Equity Interests.
Except as set forth on Schedule 3.1(b)(2), the Company does not own, directly or
indirectly, any Equity Interest in any Person, and neither the Company nor any
Company Subsidiary is obligated to purchase any Equity Interest, or make any
investment (in the form of a loan, capital contribution or otherwise), in any
Person. All of the Equity Interests of each Company Subsidiary owned by the
Company are owned by the Company, free and clear of all Encumbrances.
(3) Except as set forth on Schedule 3.1(b)(3), and
except for this Agreement, there are no outstanding Contracts or other rights
to subscribe for or purchase, or Contracts or other obligations to issue, sell
or grant any rights to acquire, any Equity Interests in the Company or any
Company Subsidiary.
(4) Except as set forth on Schedule 3.1(b)(4), and
except for this Agreement, there are no outstanding Contracts of Sellers, the
Company or any Company Subsidiary to repurchase, redeem or otherwise acquire,
or affecting the voting rights of (including voting agreements, voting trusts
and shareholder agreements), or requiring the registration for sale of, any
Equity Interests of the Company or any Company Subsidiary. There are no issued
and outstanding bonds, debentures, notes or other indebtedness having the right
to vote on any matters on which the stockholders, partners, members or owners
of the Company or any Company Subsidiary (as the case may be) may vote.
(5) All outstanding Equity Interests of the Company
and the Company Subsidiaries are duly authorized, validly issued and
outstanding and are fully paid and nonassessable. There are no preemptive or
similar rights (under contract or otherwise) in respect of any Equity Interests
of the Company or any of the Company Subsidiaries.
(c) FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES OR
EVENTS; NO UNDISCLOSED LIABILITIES.
(1) Financial Statements.
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(i) Attached hereto as Schedule 3.1(c)(1)(i) are
true and complete copies of (i) the audited consolidated balance sheets
of the Company as of December 28, 2001 and December 29, 2000 and the
related consolidated statements of operations, shareholder's equity and
cash flows for each of the three fiscal years in the period ending
December 28, 2001 (collectively, the "Year-End Financial Statements"),
(ii) the unaudited consolidated balance sheet of the Company as of
September 6, 2002 and the related unaudited consolidated statements of
operations, shareholder's equity and cash flows for the thirty-six week
periods ended September 6, 2002 and September 7, 2001 (collectively,
the "Interim Financial Statements" and, collectively with the Year-End
Financial Statements, the "Financial Statements"). The Financial
Statements fairly present in all material respects the financial
condition, results of operations and cash flows of the Company and the
Company Subsidiaries on a consolidated basis as of and for the periods
covered thereby. The Financial Statements (A) are consistent in all
material respects with the books and records of the Company and the
Company Subsidiaries (which books and records are correct and complete
in all material respects), and (B) have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered
thereby, except as noted therein and for the fact that the Interim
Financial Statements may not include footnotes normally contained in
annual audited financial statements and are subject to normal year-end
adjustments.
(ii) Attached hereto as Schedule 3.1(c)(1)(ii)
are true and complete copies of the audited combined balance sheets of
MCC as of December 28, 2001 and December 29, 2000 and the related
combined statements of operations and cash flows for each of the three
fiscal years in the period ending December 28, 2001 (collectively, the
"MCC Financial Statements"). The MCC Financial Statements fairly
present in all material respects the financial condition, results of
operations and cash flows of MCC on a consolidated basis as of and for
the periods covered thereby.
(iii) The historical property level financial
information delivered to Buyer and listed on Schedule 3.1(c)(1)(iii) in
the aggregate presents fairly in all material respects the financial
matters set forth therein for the properties covered thereby taken as a
whole; it being understood that such information is unaudited and
subject to normal course adjustments, but such adjustments would not in
the aggregate be material to the Business.
(2) Absence of Certain Changes or Events. Since
December 28, 2001, except as set forth on Schedule 3.1(c)(2), there has not been
(i) any change, event, occurrence or circumstance which, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect, (ii) any change in accounting methods, principles or practices by the
Company or any Company Subsidiary, (iii) any declaration, setting aside or
payment of any distribution or capital return (other than a distribution in
cash) with respect to any capital stock of, or other Equity Interest in, the
Company or any of the Company Subsidiaries or (iv) significant damage to or
destruction or loss of any material property or other assets of the Company or
any Company Subsidiary, whether or not covered by insurance.
(3) No Undisclosed Liabilities. There exist no
material Liabilities (as defined below) of the Company or any of the Company
Subsidiaries, except (i) Liabilities reflected in the most recent balance sheet
included in the Financial Statements, (ii) current Liabilities taken into
account in determining Final Adjusted Working Capital, (iii) that are disclosed
in this Agreement or in matters set forth on the Schedules hereto, (iv) for
Taxes or (v) under Plans. "Liability" means any liability, whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due.
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(d) TAXES.
(1) Except as set forth on Schedule 3.1(d)(1),
(i) all material Tax Returns required to be filed by or on behalf of the Company
and the Company Subsidiaries have been duly and timely filed; (ii) all such Tax
Returns are complete and accurate in all material respects; (iii) all material
Taxes due and owing by the Company and the Company Subsidiaries (whether or not
shown to be payable on any Tax Returns) have been paid in full on a timely
basis, other than Taxes being contested in good faith; (iv) there are no
material Encumbrances other than Permitted Encumbrances with respect to any
Taxes upon any of the assets or properties of the Company or the Company
Subsidiaries, other than with respect to Taxes not yet due and payable; (v)
neither the Company nor any Company Subsidiary currently is the beneficiary of
any extension of time within which to file any Tax Return; (vi) no claim in
writing has been received from and, to Sellers' knowledge, no such claim has
ever been made by, an authority in a jurisdiction where any of the Company and
the Company Subsidiaries does not file Tax Returns that the Company or any
Company Subsidiary is or may be subject to taxation by that jurisdiction; and
(vii) neither the Company nor any Company Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(2) Each of the Company and Company Subsidiaries is
in material compliance with the requirements to withhold and pay all Taxes
required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
(3) Except as set forth on Schedule 3.1(d)(3), no
material issue relating to Taxes of the Company or any Company Subsidiary has
been raised in writing by any taxing authority in any audit or examination that
could result in a proposed adjustment or assessment by a Governmental Entity in
a taxable period (or portion thereof) ending on or before the Closing Date and,
to Sellers' knowledge, no taxing authority is expected to assess any material
additional Taxes for any period for which Tax Returns have been filed. Except as
set forth on Schedule 3.1(d)(3), no audit or other proceeding by any
Governmental Entity has formally commenced and no written notification has been
given to the Company or any Company Subsidiary that such an audit or other
proceeding is pending or threatened with respect to any Taxes due from the
Company or any Company Subsidiary or any Tax Return filed by or with respect to
the Company or any Company Subsidiary. Except as set forth on Schedule
3.1(d)(3), no assessment of Tax has been proposed in writing against the Company
or any Company Subsidiary or any of their assets or properties. Schedule
3.1(d)(3) lists all federal, state, local and foreign income Tax Returns filed
with respect to any of the Company or any Company Subsidiary for taxable periods
ended on or after December 31, 1998, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit.
(4) Neither the Company nor any Company Subsidiary
has filed a consent under Code Section 341(f) concerning collapsible
corporations. Neither the Company nor any Company Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any amount that will not be
fully deductible as a result of Code Section 162(m). Other than as set forth on
Schedule 3.1(d)(4), neither the Company nor any Company Subsidiary is a party to
or bound by any Tax allocation or sharing agreement. Except as set forth on
Schedule 3.1(d)(4), none of the Company or the Company Subsidiaries has been a
member of an Affiliated Group filing a consolidated federal income Tax Return
(other than a group of which Parent is or was the common parent) and no claim
for liability has been asserted against the Company or any Company Subsidiary
for the Taxes of any Person pursuant to Treasury Regulation Section 1.1502-6(a)
(or any similar provision of
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state, local, or foreign Law), as a transferee or successor, by contract or
otherwise, which claim has not been finally resolved as of the date hereof.
(5) Neither the Company nor any Company Subsidiary
has distributed the stock of another Person, or has had its stock distributed by
another Person, in a transaction qualifying or intended to qualify for tax-free
treatment under Section 355 of the Code in the two years prior to the date of
this Agreement.
(6) Neither the Company nor any Company Subsidiary
has submitted a request for a private letter ruling (or comparable procedure
under state or local law) to the IRS or any state or local taxing authority,
which request has not yet been issued or denied.
(e) MATERIAL CONTRACTS; PROPERTY WORKING CAPITAL; FF&E
RESERVES
(1) Schedule 3.1(e)(1)(a) contains a true and correct
list, as of the date hereof, of each of the following Contracts (each of which,
together with the Leases, the Management Agreements and the Land Contracts shall
be deemed a "Material Contract") to which the Company or any Company Subsidiary
is a party, or to which the Company, any Company Subsidiary or any of their
respective properties or assets is subject or by which any thereof is bound:
(i) all loan agreements, notes, bonds,
debentures, debt instruments, evidences of indebtedness, debt
securities or other Contracts relating to (A) any Indebtedness (as
defined herein) of the Company or any Company Subsidiary or (B) any
Indebtedness secured by any of the Facilities owned by the Company or
any Company Subsidiary;
(ii) all Contracts (A) relating to the
subordination of fees payable to the Company or any Company Subsidiary
(or any of the Company's Affiliates) to third parties (including
pursuant to debt arrangements or other obligations); or (B) that give
any third party (including any lender of Indebtedness secured by a
Facility) the right to terminate any Management Agreement or Lease or
foreclose upon any Facility owned by the Company or any Company
Subsidiary, or (C) that allow the Company or any Company Subsidiary the
right to continue managing a Facility notwithstanding the foreclosure
of any Encumbrance relating to a Facility or any lease relating to a
Facility;
(iii) all partnership, limited liability, joint
venture or other Contracts involving the sharing of profits or losses
to which the Company or any Company Subsidiary is a party;
(iv) all option, purchase and sale or lease
agreements for any material personal property of the Company, any
Company Subsidiary or any Facility owned by the Company or any Company
Subsidiary and all Land Contracts;
(v) all Contracts (other than the Medicare and
Medicaid provider agreements, Management Agreements and license
agreements related to Included Software) to which the Company or any
Company Subsidiary is a party which (A) provide for aggregate annual
payments or receipts by the Company or any Company Subsidiary of
$500,000 or more and (B) are not terminable by either the Company or
any Company Subsidiary without cause on sixty (60) days' notice or
less.
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(vi) all outstanding powers of attorney
empowering any Person to act on behalf of the Company or any Company
Subsidiary (other than powers of attorney included in Contracts the
principal purpose of which is not to grant a power of attorney and
powers of attorney relating to bank accounts);
(vii) all agreements (other than the Management
Agreements), orders, decrees or judgments preventing or restricting the
Company's or any Company Subsidiary's ability to compete or conduct
business in any manner or place;
(viii) all collective bargaining agreements by
which the Company or any Company Subsidiary is bound;
(ix) all agreements pursuant to which the Company
or any Company Subsidiary is obligated to acquire all of the
outstanding capital stock or Equity Interests or all or substantially
all of the assets of any business enterprise;
(x) all Contracts (other than Management
Agreements, Medicare and Medicaid provider agreements and license
agreements related to Included Software) under which the consequences
of a default or termination would reasonably be expected to have a
Material Adverse Effect;
(xi) all outstanding guarantees, reimbursement
agreements, credit enhancements and other similar agreements to which
the Company or any Company Subsidiary is a party; and
(xii) all management, consulting and employment
agreements (other than "at will" employment agreements) between the
Company and/or any Company Subsidiary and any of their respective
directors, managers, officers, employees or consultants in effect as of
the date of this Agreement and any change-in-control agreement or
arrangement with any such Person.
For purposes of this Section 3.1(e), "Indebtedness" shall mean
(v) indebtedness for borrowed money, whether secured or unsecured, (w)
obligations under conditional sale or other title retention agreements relating
to property purchased by such Person, (x) capitalized lease obligations, (y)
obligations under interest rate cap, swap, collar or similar transaction or
currency hedging transactions (valued at the termination value thereof) and (z)
guarantees of any such indebtedness of any other Person.
True and complete copies of the Material Contracts identified
on Schedule 3.1(e)(1)(a) and the Leases set forth on Schedule 3.1(f)(2),
including all amendments, waivers and modifications thereto, have been made
available to Buyer. Except as set forth on Schedule 3.1(e)(1)(b), each Material
Contract is valid and binding in accordance with its terms and in full force and
effect and neither the Company nor any Company Subsidiary is in breach or
default in any respect with respect to any Material Contract nor (to the
knowledge of Sellers) does any condition exist that with notice or lapse of time
or both would constitute a breach or default thereunder or permit any other
party thereto to accelerate, terminate, cancel or modify any such Material
Contract. To the knowledge of Sellers, no other party to any Material Contract
is in breach or default with respect to such Material Contract. Except as set
forth in Schedule 3.1(e)(1)(b), the consummation of the Stock Purchase Agreement
Transactions will not (x) accelerate, terminate, cancel or modify any
obligations of the Company or any Company Subsidiary or any rights of any other
party to any Material Contract or (y) require the approval or consent of any
party to any Material Contract.
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(2) Schedule 3.1(e)(2)(a) sets forth a true and
correct list of each Contract that provides for the management or operation of
any Facility by the Company or any Company Subsidiary (each a "Management
Agreement"), including the names of the Facility and the counterparty to such
Management Agreement. Except as set forth in Schedule 3.1(e)(2)(a), no party to
any Management Agreement currently has any right to terminate such Management
Agreement under any financial performance standards set forth in such Management
Agreement. Except as set forth in Schedule 3.1(e)(2)(b), (x) there are no
currently deferred or accrued distributions or other amounts currently owing or
due to any "owner" (or "tenant" or "lessee", as applicable) under any Management
Agreement (whether such currently deferred or accrued distribution or other
amounts currently owning or due are payable now or at some future date) except
those included in Final Adjusted Working Capital and (y) there are no currently
deferred or accrued fees or other amounts currently owing or due to the Company
or any Company Subsidiary under any Management Agreement (whether such currently
deferred or accrued fees or other amounts currently owing or due are payable now
or at some future date) except those included in Final Adjusted Working Capital.
To the knowledge of Sellers, Sellers have made available to Buyer all written
correspondence (other than e-mail correspondence) between any "owner" (or
"tenant" or "lessee", as applicable) and the Company or any Company Subsidiary
(other than the Owner 6 Correspondence which is addressed elsewhere in this
Agreement) that (x) relates to or alleges defaults or breaches, or potential
defaults or breaches, of a Management Agreement, or (y) relates to, requests or
threatens any termination or renegotiation of a Management Agreement.
(3) To the knowledge of Sellers, except as set forth
on Schedule 3.1(e)(3), there are no Contracts relating to the Business, to which
the Company or a Company Subsidiary is not a party, default under which gives
rise to a right to terminate a Management Contract (excluding any such Contract
which is subject to a subordination agreement, or any such Contract relating to
any property owned or leased by Owner 6 or its Affiliates).
(4) Schedule 3.1(e)(4) contains a list, as of a
recent date set forth on such Schedule, sorted by Facility (other than the
leased Facilities), of all Property Working Capital. The Property Working
Capital as of the Closing will be maintained by the Company and all balances
that make up the Property Working Capital as of the Closing will be held by the
Company on the Closing Date. The Property Working Capital for each Facility as
of the Closing will consist only of unrestricted cash, restricted or escrowed
cash of such Facility to the extent a corresponding offsetting liability of the
same amount exists as a liability on the balance sheet of such Facility with
respect to such restricted or escrowed cash, trade accounts receivable, trade
accounts payable and accrued expenses. As specifically provided in Schedule
3.1(e)(4), the working capital for certain facilities is not controlled by the
Company or any Company Subsidiary and this representation does not cover any
such working capital.
(5) Schedule 3.1(e)(5) contains a list, as of a
recent date set forth on such Schedule, sorted by Facility (other than the
Facilities subject to Leases), of all cash deposits or escrows comprising FF&E
Reserves (as defined in the Management Agreements) held or controlled by the
Company, Parent or any Affiliates of Parent or the Company on behalf of the
"owners" of the Facilities. The FF&E Reserves have been maintained in accordance
with and in the amounts required by the Management Agreements. The FF&E Reserves
as of the Closing will be maintained by the Company and all cash deposits or
escrows comprising the FF&E Reserves as of the Closing will be held by the
Company on the date of Closing.
(f) REAL AND PERSONAL PROPERTY; TITLE TO PROPERTY;
LEASES.
(1) Schedule 3.1(f)(1) lists each interest in real
property owned or leased by the Company and each Company Subsidiary, including
the location thereof. Schedule 3.1(f)(1) also lists each
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Senior Living Facility operated, managed or leased by the Company or any Company
Subsidiary (each a "Facility" and collectively, the "Facilities"), and indicates
whether such Facility is owned by the Company or any Company Subsidiary or is
owned by a third party (a "Third Party Owner"), and further indicates the
location thereof. Except as set forth on Schedule 3.1(f)(1), the Company and
each of the Company Subsidiaries have title to or other right to use, free of
Encumbrances other than Permitted Encumbrances the following (the "Property or
"Properties"): (a) all items of real property material to the Business,
including each of the Facilities owned by the Company or any Company Subsidiary
and any other fees, leaseholds, contractual rights or other interests in such
real property, and (b) such other tangible assets and properties that are
material to the Business, including all such tangible assets that they purport
to own or have the right to use as reflected in the Financial Statements (other
than assets and Properties not material to the Business that were disposed of
since September 6, 2002 in the ordinary course of business) or that were
thereafter acquired, except, in any such case, for matters described in Schedule
3.1(f)(1). The tangible Properties of the Company and each of the Company
Subsidiaries that are material to the Business are adequate to conduct the
Business in all material respects as currently conducted. The leasehold
properties held by the Company and the Company Subsidiaries as lessee or
sublessee are held under valid leases in full force and effect pursuant to their
terms, subject only to such exceptions as are not, individually or in the
aggregate, material to the Business. To the knowledge of Sellers and except as
set forth on Schedule 3.1(f)(1), the current operation and use of the Property
by the Company does not violate in any material respect any Law in effect as of
the date of this Agreement.
(2) All leases or subleases with respect to the real
property owned or leased by the Company or any Company Subsidiary, including all
amendments, waivers and modifications thereto, which currently pertain to the
Business are disclosed on Schedule 3.1(f)(2) (the "Leases").
(3) Except as set forth on Schedule 3.1(f)(3), each
Lease to which the Company or any Company Subsidiary is a party (a) is in full
force and effect and there exist no breaches or defaults by the Company or any
Company Subsidiary thereunder or, to the knowledge of Sellers, the lessor
thereunder and all rent due and owing has been paid under each Lease and (b)
none of the parties to a Lease has a right to terminate the Lease prior to the
expiration of the current term thereof (other than as a result of the breach
thereof occurring after Closing).
(4) Schedule 3.1(f)(4) contains a true and correct
list of each Contract to which the Company or a Company Subsidiary is a party
for the purchase or sale of real property (including options to purchase) by the
Company or a Company Subsidiary, as applicable, that is in effect as of the date
of this Agreement or pursuant to which the Company or any Company Subsidiary has
purchased or sold real property (other than a Facility) within 1 year prior to
the date of this Agreement, other than pursuant to the CNL Transaction (each a
"Land Contract").
(5) To the knowledge of Sellers, each Third Party
Owner has title to the real property on which any Facility owned by it is
located free of Encumbrances, other than Permitted Encumbrances and those set
forth on the schedules to the Management Agreements.
(6) To the knowledge of Sellers, all leases or
subleases with respect to the real property owned or leased by any Third Party
Owner (other than any space leases to third parties for gift shops or similar
concessions), including all amendments, waivers and modifications thereto, which
currently pertain to the Business (other than for those relating to properties
to be sold as part of the CNL Transaction or to properties relating to Owner 6
Facilities) are disclosed on Schedule 3.1(f)(6). To the knowledge of Sellers,
all rent due and owing with respect to any lease listed on Schedule 3.1(f)(6)
has been paid and there exist no defaults thereunder.
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(7) The capital expenditure plan delivered to Buyer
for the Business is Sellers' good faith best estimate of capital expenditures
requirements for the SMPRT Leased Properties for the period covered by such
plan. Buyer acknowledges it shall have no claims against Sellers in respect of
any capital expenditures for the Facilities, except for (i) a claim based upon a
breach of the representation and warranty set forth in this Section 3.1(f)(7),
(ii) a claim for which Buyer is entitled to indemnification under this Agreement
for breach prior to Closing of an existing capital expenditure commitment or
(iii) a claim for which Buyer is entitled to indemnification under Section
10.1(k) hereof.
(8) Schedule 3.1(f)(8) lists as of the date set forth
on such Schedule all of the material tangible assets and properties (other than
items of real property) of the Company and/or the Company Subsidiaries.
(g) INTELLECTUAL PROPERTY.
(1) Schedule 3.1(g)(1) identifies all patents,
registered copyrights, registered trademarks, service marks and trade names,
domain name registrations or any applications for registration of any of the
foregoing, and Included Software (other than off-the-shelf commercial or
shrinkwrap software) that are material and necessary to, and currently used in,
the Business. Except for the limited right to use the Parent Marks, as set forth
in Section 5.5 below, to Sellers' knowledge, as of the Closing Date the Company
will own or have adequate rights to use all patents, registered copyrights and
unregistered copyrights, registered trademarks, service marks and trade names,
unregistered trade names, trademarks and service marks, and trade dress,
together with the goodwill associated therewith, or any applications for
registration of any of the foregoing, Included Software (other than
off-the-shelf commercial or shrinkwrap software) for which consents to transfer
have been obtained, if necessary, trade secrets and know how, HTML pages
exclusively used on the internet website located at xxxxxxxxxxxxxxxxxxxx.xxx,
HTML pages exclusively used on the Company's intranet and software supporting
the Company's intranet that was developed by Sellers or the Company or the
Company Subsidiaries or by third parties on behalf of Sellers of the Company or
the Company Subsidiaries that are material and necessary to, and currently used
in, the Business (collectively, "Company Intellectual Property"). The portion of
the Company Intellectual Property that is owned by the Company is free of
Encumbrances.
(2) There are no pending or, to Sellers' knowledge,
threatened, claims against the Company alleging that the conduct of the Business
infringes the patent, copyright, trademark or trade secret rights of others. To
Sellers' knowledge, the Business as now conducted and as proposed to be
conducted does not infringe any third party's patent, copyright, trademark or
trade secret rights. To Sellers' knowledge, no third party is infringing upon
any Company Intellectual Property, and the Company has not notified any third
party that it believes such third party is interfering with, infringing, or
misappropriating any Company Intellectual Property or engaging in any act of
unfair competition.
(3) Upon assignment to the Company of the trademark
registrations and applications set forth on Schedule 5.6(a)(1) and the
intellectual property assignment in Section 5.6(a), the Company will have all
registered trademarks, service marks and trade names and pending applications
for registration owned by the Company and/or Sellers for marks that are material
and necessary to, and currently used in, the Business, other than the Parent
Marks or trademarks or trade names that contain the Parent Marks.
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(h) AUTHORIZATION; NO CONFLICTS; APPROVALS.
The execution, delivery and performance by each Seller of this
Agreement and the Related Agreements to which such Seller is a party, and the
consummation by such Seller of the transactions contemplated hereby and thereby,
have been duly and validly authorized by the respective boards of directors of
each Seller and by all other necessary corporate action on the part of each
Seller. This Agreement has been duly executed and delivered by each Seller and
each Related Agreement to which such Seller is a party, when executed and
delivered by such Seller, shall have been duly executed and delivered by such
Seller and, assuming the due authorization, execution and delivery hereof and
thereof by the other parties hereto or thereto, constitute, or will constitute,
legally valid and binding obligations of such Seller enforceable against such
Seller in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
applicability and equitable principles relating to or limiting creditors' rights
generally. Except as set forth on Schedule 3.1(h), the execution, delivery and
performance by each Seller of this Agreement and the Related Agreements to which
such Seller is a party, and the consummation by such Seller of the Stock
Purchase Agreement Transactions, do not and will not (i) violate, or constitute
a breach or default (whether upon notice, lapse of time and/or the occurrence of
any act or event or otherwise) under, the charter documents or by-laws or other
organizational documents of any Seller, the Company or any Company Subsidiary,
(ii) violate or cause or otherwise result in any termination or cancellation of
any Operating Licenses or other Permits, (iii) result in any breach of or
constitute a default under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of an
Encumbrance other than Permitted Encumbrances on any of the properties or assets
of the Company or any Company Subsidiary pursuant to, any Contract or Permit to
which the Company or any Company Subsidiary is a party or by which the Company
or any Company Subsidiary or any of its properties or assets is bound or
affected, or (iv) violate any Law, except in the case of clause (iv) for any
such violations, as would not, individually or in the aggregate, be reasonably
expected to be material or would not prevent or delay consummation of the
Purchase or any of the other Stock Purchase Agreement Transactions in any
material respect or otherwise prevent any Seller from performing its obligations
under this Agreement or any other Related Agreement to which it is a party in
any material respect and excluding any filings or approvals required under the
Xxxx-Xxxxx-Xxxxxx Act and any other governmental pre-merger filing requirements
applicable to the Stock Purchase Agreement Transactions. Except for (A) matters
identified in Schedule 3.1(h), and (B) any filings or approvals required under
the Xxxx-Xxxxx-Xxxxxx Act and any other governmental pre-merger filing
requirements applicable to the Stock Purchase Agreement Transactions, the
execution, delivery and performance by each Seller of this Agreement and the
Related Agreements to which such Person is a party and the consummation by such
Seller of the Stock Purchase Agreement Transactions do not and will not require
any Approvals or Permits to be obtained by Sellers or the Company or any Company
Subsidiary except for any such Approvals or Permits the failure of which to
receive would not individually or in the aggregate reasonably be expected to be
material or prevent or delay consummation of the Stock Purchase Agreement
Transactions in any material respect or otherwise prevent any Seller from
performing its obligations under this Agreement or any other Related Agreement
to which it is a party in any material respect.
(i) LEGAL PROCEEDINGS.
Except as set forth on Schedule 3.1(i), there is no Order or
Action pending or, to the knowledge of Sellers, threatened against or affecting
the Company, any Company Subsidiary or any of their respective assets or
properties, or the Facilities that (i) involves a claim or potential claim of
liability (not covered by insurance) in excess of $100,000 or claims or
potential claims of liability in excess of $500,000 in the aggregate, (ii)
enjoins or seeks to enjoin, prevent, alter or materially delay any significant
activity by the Company or any Company Subsidiary or (iii) individually or when
aggregated with one or
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more other Orders or Actions has had or would reasonably be expected to (a) have
a Material Adverse Effect or (b) prevent the consummation of the Stock Purchase
Agreement Transactions. There are no pending, or to the knowledge of Sellers
threatened, indemnity claims concerning the Company or any Company Subsidiary
between (x) Sellers, the Company or any Company Subsidiary and (y) any other
Person. There is no suit, action or proceeding pending or, to the knowledge of
Sellers, threatened against or affecting any Seller or any Affiliate of any
Seller which, if determined adversely to such Seller or such Affiliate, would
reasonably be expected to prevent the consummation of the Stock Purchase
Agreement Transactions.
(j) LABOR MATTERS.
Except as set forth on Schedule 3.1(j), there is no material
organized labor strike, dispute, slowdown or stoppage, or collective bargaining
or unfair labor practice claim pending or, to the knowledge of Sellers,
threatened against or affecting the Company, any Company Subsidiary or the
Business and within the last two years there has not been any union organizing
activity, organized labor strike, dispute, slowdown or stoppage, or collective
bargaining or unfair labor practice claim. Except as set forth on Schedule
3.1(j), neither the Company nor any Company Subsidiary is a party to a
collective bargaining agreement.
(k) INSURANCE.
(1) The Company has in place general liability,
patient liability, umbrella/excess liability, employment practices liability,
property, casualty, workers' compensation and other liability insurance coverage
in an amount and on such terms as is reasonable and customary for businesses of
the type conducted by the Company and each Company Subsidiary. Since January 1,
2000, the Company and each Company Subsidiary has been covered by insurance in
scope and amount customary and reasonable for the business in which it has
engaged since such date. Each of such policies is in full force and effect with
respect to matters occurring or in the case of claims made policies, claims
being made during periods prior to the Closing Date and, upon consummation of
the Stock Purchase Agreement Transactions, will continue to be in full force and
effect on identical terms with respect to such matters arising from Pre-Closing
Claims (except as contemplated by Section 5.9 respecting Patient Injury Claims).
Neither the Company nor any Company Subsidiary is in breach or default with
respect to such insurance policies nor has any notice of cancellation been
received (including with respect to the payment of all premiums due and payable
and the giving of notices thereunder). Schedule 3.1(k) sets forth the following
information with respect to each insurance policy procured by Parent to which
any of Sellers (with respect to the Company or any Company Subsidiary), the
Company or any Company Subsidiary has been a named insured at any time since
January 1, 2000:
(i) the name of the insurer;
(ii) the policy number and policy period; and
(iii) limits and retentions.
(2) All such insurance coverage is on an occurrence
basis, except that Patient Injury Claims coverage and employment practice
liability coverage are written on a claims made basis.
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(l) PERMITS.
Schedule 3.1(l) contains a true and complete list of all
Operating Licenses and other material Permits held by the Company and each
Company Subsidiary (and, to the extent the Company or any Company Subsidiary is
required by the terms of a Management Agreement or by Law to obtain or maintain
Operating Licenses or Permits on behalf of Third Party Owners or Persons
providing services on behalf of the Facilities, such Third Party Owners or
Persons). Sellers have made available to Buyer true and complete copies of each
of the Permits listed on Schedule 3.1(l). The Company and each Company
Subsidiary (and, to the extent the Company or any Company Subsidiary is required
by the terms of a Management Agreement or by Law to obtain or maintain Operating
Licenses or Permits on behalf of Third Party Owners or Persons providing
services on behalf of the Facilities, such Third Party Owners or such Persons)
holds all Operating Licenses and other material Permits that are required by any
Governmental Entity to permit it to conduct the Business as conducted on the
date of this Agreement. All such Operating Licenses and other material Permits
are valid and in full force and effect, subject to the filings and Approvals
contemplated by Section 4.3. To the knowledge of Sellers, neither the Company,
any Company Subsidiary, nor any Third Party Owner is in violation of any
required material Permit (other than an Operating License) or any terms or
conditions thereof, except for such violations as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. To the
knowledge of Sellers, neither the Company, any Company Subsidiary, nor any Third
Party Owner is in violation in any material respect of any Operating License or
any terms or conditions thereof. There is no pending or, to the knowledge of
Sellers, threatened action, investigation or proceeding with respect to
revocation, cancellation, suspension or nonrenewal of any such Operating License
or other required material Permit of Company or any Company Subsidiaries or, to
the knowledge of Sellers, any Third Party Owner. None of Sellers, the Company,
the Company Subsidiaries or, to the knowledge of Sellers, any Third Party Owner,
have received written notice from any Governmental Entity asserting the
violation of the terms of any such Operating License or other required material
Permit, or threatening to revoke, cancel, suspend or not renew the terms of any
such Operating License or other required material Permit, other than any such
notifications of violations that are subject to a plan of correction, have been
cured or otherwise resolved.
(m) COMPLIANCE.
Except as set forth on Schedule 3.1(m), the Company and each
Company Subsidiary is operating the Business in compliance in all material
respects with all applicable Laws and each Facility is operated in compliance in
all material respects with all applicable Laws. To the knowledge of Sellers,
except as set forth on Schedule 3.1(m), neither the Company nor any Company
Subsidiary has received notice of any material violation (or of any
investigation, inspection, audit, or other proceeding by any Governmental Entity
involving allegations of any material violation) of any Laws applicable to the
Company or any Company Subsidiary. To the knowledge of Sellers, except as set
forth on Schedule 3.1(m), neither the Company nor any Company Subsidiary or
Facility is subject to any regulatory or supervisory cease and desist order,
agreement, directive, memorandum of understanding or letter of understanding,
and none of them has received any written communication requesting that they
enter into any of the foregoing. It is the intent of the Parties that this
representation and warranty is not applicable to matters relating to Taxes,
employee benefits matters or environmental matters, which are the subject of
Sections 3.1(d), 3.1(f)(1), 3.1(n) and 3.1(r), respectively.
(n) EMPLOYEE BENEFITS.
(1) Schedule 3.1(n)(1) lists as of the date hereof
each "employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA (an "Employee Pension Benefit Plan"), each
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"employee welfare benefit plan," as that term is defined in Section 3(1) of
ERISA (collectively, the "ERISA Plans"), each other retirement, pension,
profit-sharing, money purchase, deferred compensation, stock option, stock
purchase, severance pay, unemployment benefit, vacation pay, health, life or
other insurance, fringe benefit, or other employee benefit plan, program,
agreement or arrangement established, maintained or contributed to as of the
date hereof by the Company and the Company Subsidiaries or their respective
Affiliates in respect of or for the benefit of any employee of the Company or
any Company Subsidiary (an "Employee") (collectively, together with the ERISA
Plans, the "Plans").
(2) For each ERISA Plan, Parent has furnished to
Buyer true and complete copies of each of the following documents: (i) the
documents setting forth the terms of each Plan, including amendments thereto;
(ii) all related trust agreements or annuity agreements (and any other funding
document) for each Plan; (iii) for the most recent plan year, all annual reports
(Form 5500 series) on each Plan that have been filed with any governmental
agency; (iv) the current summary plan description and subsequent summaries of
material modifications for each Title I Plan; (v) all DOL opinions on any Plan
and all correspondence relating to the request for and receipt of each opinion;
(vi) all correspondence with the PBGC on any Plan; and (vii) all IRS rulings,
opinions or technical advice relating to any Plan. For all other Plans, Parent
has furnished to Buyer documents setting forth or describing the terms of the
Plan.
(3) No Plan, other than those Plans identified on
Schedule 3.1(n)(3), is a "multiemployer plan," as defined in Section 3(37) of
ERISA, is a "defined benefit plan," as defined in Section 3(35) of ERISA, is an
"employee stock ownership plan," as defined in Section 4975(e)(7) of the Code,
is a "qualified foreign plan," as such term is defined in Section 404A(e) of the
Code, or is subject to Section 302 of ERISA or Section 412 of the Code, and at
no time in the last five years has the Company or any Company Subsidiary or any
of their respective Affiliates established, maintained, or contributed to any
such Plan, except any such Plans as to which Buyer shall have no liability or
obligation by reason of Section 6.4(c).
(4) Except as set forth on Schedule 3.1(n)(4), with
respect to the ERISA Plans:
(i) each of the Company, the Company
Subsidiaries, their respective Affiliates, any ERISA Plans, any trust
created thereunder, and any trustee or administrator thereof, has not
engaged in any transaction or conduct as a result of which the Company,
the Company Subsidiaries, or any of their respective employees, would
reasonably be expected to be subject to any liability pursuant to
Section 409 of ERISA or to either a civil penalty, equitable relief,
damages, or other liability pursuant to Section 502 of ERISA, or a Tax;
(ii) within the last five years, no liability
under Title IV of ERISA has been incurred by the Company, the Company
Subsidiaries, or any of their respective Affiliates (other than
liability for premiums due to the PBGC) and no event has occurred that
would give rise to liability by the Company, any Company Subsidiaries
or Affiliates under Title IV of ERISA; and
(iii) each of the Company, the Company
Subsidiaries, their respective Affiliates, any ERISA Plans, any trust
created thereunder, and any trustee or administrator thereof, has not
engaged in any transaction or conduct that is a "prohibited
transaction," as such term is defined in Section 4975(c)(1) of the
Code, for which no exemption exists under Sections 4975(c)(2) and
4975(d) of the Code.
(5) Except as set forth on Schedule 3.1(n)(5), with
respect to ERISA Plans:
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(i) each of such ERISA Plans has been operated
and administered in substantial compliance with all provisions of the
governing documents and with all provisions of ERISA, the Code and all
other applicable Laws;
(ii) each of the ERISA Plans that is intended to
be "qualified" within the meaning of Section 401(a) of the Code has
been determined by the IRS to be so qualified; all statements made in
connection with such determinations were true and complete when made
and continue to be true and complete; and nothing has occurred since
the date of the most recent such determination (other than the
effective date of certain amendments to the Code the remedial amendment
period for which has not yet expired) that would adversely affect the
qualified status of any of such ERISA Plans;
(iii) each trust established under each
"qualified" plan within the meaning of Section 401(a) of the Code is
exempt from federal income taxes under Section 501(a) of the Code;
(iv) all ERISA Plans and the related trusts that
are subject to Section 4980B(f) of the Code and Sections 601 through
609 of ERISA comply in all respects with and have been administered in
substantial compliance with the health care continuation-coverage
requirements for tax-favored status under Section 4980B(f) of the Code,
Sections 601 through 609 of ERISA, and all U.S. Treasury regulations
under Section 4980B of the Code explaining those requirements; and
(v) all group health plans sponsored by the
Seller that Seller has determined are subject to the Health Insurance
Portability and Accountability Act of 1996, as amended, and the
regulations and other guidance issued thereunder have been administered
in compliance with the nondiscrimination, special enrollment period,
preexisting condition exclusion period, and creditable coverage
requirements of HIPAA.
(6) Parent, the Company and the Company Subsidiaries
have made all contributions and other payments required by and due under the
terms of each Plan and have taken no action (including, without limitation,
actions required by Law) relating to any Plan that will increase Buyer's, the
Company's or any Company Subsidiary's obligation under any Plan for any period
following the Closing.
(7) Except as set forth on Schedule 3.1(n)(7), no
amount required to be paid or payable to or with respect to any Employee or
other service provider of the Company or any Company Subsidiary in connection
with the transactions contemplated hereby (either solely as a result thereof or
as a result of such transactions in conjunction with any other event) will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(8) Parent, the Company and the Company Subsidiaries
have (i) filed or caused to be filed all returns and reports on the Plans that
they are required to file and (ii) paid or made adequate provision for all fees,
interest, penalties, assessments or deficiencies that have become due pursuant
to those returns or reports or pursuant to any assessment or adjustment that has
been made relating to those returns or reports.
(9) Schedule 3.1(n)(9) identifies all ERISA Plans
that are funded employee welfare benefit plans. The funding under each such
ERISA Plan does not exceed and has not exceeded the limitations under Sections
419A(b) and 419A(c) of the Code. The Company, the Company
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Subsidiaries and their respective Affiliates are not subject to taxation on the
income of any "welfare benefit fund," as such terms is defined in Section 419(e)
of the Code, under Section 419A(g) of the Code.
(10) All Plans that are Plans under Code Section 125
have complied with the requirements of the Code and ERISA.
(11) All individuals who are paid for services by
Sellers, the Company or any Company Subsidiary have been properly classified as
either employees or independent contractors in accordance with the Code and the
applicable tax Laws; and Parent, the Company and the Company Subsidiaries have
complied and are in compliance in all material respects with the provisions of
the Fair Labor Standards Act relating to the minimum wage, overtime, child labor
and record keeping.
(12) Within 10 days following the date of this
Agreement, Sellers will provide Buyer with a schedule that identifies each
employee of the Company or any Company Subsidiary who has made a referral
eligible for the Company family referral benefit plan and the month in which
such employee's family member will be entitled to receive the family referral
benefit.
(o) PAYMENTS TO SELLERS.
Except as set forth on Schedule 3.1(o) or as contemplated by
Section 4.4 or other provisions of this Agreement or any Related Agreement,
neither the execution and delivery of this Agreement nor any other Related
Agreement to which a Seller is a party, nor the consummation of the Stock
Purchase Agreement Transactions will (either alone, or upon the occurrence of
any act or event, or with or without notice, the lapse of time, or both) result
in any payment arising or becoming due from the Company or any Company
Subsidiary to Sellers or any other Affiliate of Sellers.
(p) NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker,
or other Person or firm engaged by or acting on behalf of Sellers, the Company
or any of their respective Affiliates in connection with the negotiation,
execution or performance of this Agreement or the Stock Purchase Agreement
Transactions, is or will be entitled to any broker's or finder's or similar fee
or other commission arising in connection with this Agreement or such
transactions except for Xxxxxxx Xxxxx & Co., as to which Sellers shall have full
responsibility and neither Buyer, the Company nor any Company Subsidiary shall
have any liability.
(q) OPERATION IN THE ORDINARY COURSE.
Except as set forth on Schedule 3.1(q) or with respect to the
transactions contemplated by this Agreement or any Related Agreement and the CNL
Transaction, since December 28, 2001, the Company and each Company Subsidiary
has operated the Business in the ordinary course and in all material respects in
accordance with past practice, other than general planning and discussions in
connection with the possible spin-off or sale of the Company (which has not had
a material adverse effect on the Business).
(r) ENVIRONMENTAL MATTERS.
(1) Except as set forth on Schedule 3.1(r)(1) or in
the reports listed on such Schedule, (i) neither the Company nor any Company
Subsidiary has assumed liability under Environmental Law from any other Person
by contract, operation of law, or otherwise; and (ii) to Sellers'
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knowledge, there are no facts, circumstances, or conditions existing, initiated
or occurring prior to the date of this Agreement, which could result in material
liability to the Company or any Company Subsidiary under Environmental Law.
(2) Except as set forth on Schedule 3.1(r)(2)(i) or
in the reports listed on Schedule 3.1(r)(1), the Company and the Company
Subsidiaries have obtained and maintained in full force and effect all
Environmental Permits and have timely filed applications for all Environmental
Permits except as would not reasonably be expected to result in a material
liability to the Company or any Company Subsidiary. A true and correct list of
all such Environmental Permits is set forth on Schedule 3.1(r)(2)(ii).
(3) Except as set forth on Schedule 3.1(r)(3) or in
the reports listed on Schedule 3.1(r)(1), to the knowledge of Sellers, none of
the Company or any Company Subsidiary (i) has received notice from any
Governmental Entity or any other Person that such entities or any of the
Facilities are not in compliance with the terms and conditions of all such
Environmental Permits or with all applicable Environmental Laws, (ii) has
received any Environmental Claim, or (iii) is aware of any actual or threatened
Environmental Claim, except for any of the foregoing as would not reasonably be
expected to result, individually or in the aggregate, in a material liability to
the Company or any Company Subsidiary.
(4) Except as set forth in Schedule 3.1(r)(4) or in
the reports listed on Schedule 3.1(r)(1) and except as would not reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect, Regulated Substances have not been generated, transported, treated,
stored, disposed of, arranged to be disposed of, Released or threatened to be
Released by the Company or any Company Subsidiary, or to Sellers' knowledge, any
third party, at, on, from or under any of the Facilities during the period of
the Company's or any Company Subsidiary's ownership, tenancy, operation or use
thereof, or during the period of the Company's or any Company Subsidiary's
ownership, tenancy, operation or use of any other properties or facilities
currently or formerly owned, leased, operated or otherwise used by the Company
or any Company Subsidiary.
(5) Except as set forth in Schedule 3.1(r)(5) or in
the reports listed on Schedule 3.1(r)(1), to Sellers' knowledge, (i) the real
property (including any improvements thereon) currently owned, operated, or
leased by the Company or any Company Subsidiary, including the Facilities,
contains no underground storage tanks, or underground piping associated with
such tanks, PCBs, asbestos, asbestos-containing materials, or lead paint, (ii)
no portion of such real property is or has been used as a dump or landfill or
consists of or contains filled in land or wetlands, and (iii) with respect to
any real property formerly owned, operated, or leased by the Company or any
Company Subsidiary, including the Facilities, during the period of such
ownership, operation or tenancy, no portion of such property was used as a dump
or landfill.
(6) Except as set forth in Schedule 3.1(r)(6)(i) or
in the reports listed on Schedule 3.1(r)(1), to Sellers' knowledge, no real
property owned, operated or leased by the Company or any Company Subsidiary,
including the Facilities, and no property to which Regulated Substances
generated in connection with the Business has been sent for treatment or
disposal, is listed or proposed to be listed on the National Priorities List or
CERCLIS or on any other governmental list of properties that may or do require
Remediation under Environmental Laws. Except as set forth in Schedule
3.1(r)(6)(ii), to Sellers' knowledge, none of the Company or any Company
Subsidiaries has arranged, by contract, agreement, or otherwise, for the
transportation, disposal or treatment of Regulated Substances at any location
that would reasonably be expected to result in liability to the Company or such
Company Subsidiary for Remediation of such location pursuant to Environmental
Laws that would result in material liability to the Company or any Company
Subsidiary.
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(7) The Company has made available to Buyer copies of
all environmental assessments, reports, audits and other documents in its
possession or under its control that relate to the present or past environmental
condition of real property currently or formerly owned, leased, operated, or
otherwise used by the Company or the Company Subsidiaries.
(8) To Sellers' knowledge, no Encumbrance (other than
Permitted Encumbrances) in favor of any Person relating to or in connection with
any Environmental Claim has been filed or has attached to any real property
owned, operated or leased by the Company or any Company Subsidiary, including
the Facilities, that has not been removed or released.
(s) AFFILIATE TRANSACTIONS.
Except as set forth on Schedule 3.1(s) or as expressly
contemplated by this Agreement or any Related Agreement, all Contracts and other
intercompany obligations between the Company or any Company Subsidiary on the
one hand and any Sellers or any of Sellers' other Affiliates on the other hand
("Intercompany Obligations") will be satisfied, repaid, eliminated or cancelled
at or prior to Closing. In addition, any obligations of the Company or any
Company Subsidiary to Avendra will be satisfied, repaid, eliminated or cancelled
on or prior to the Closing, except for those reflected in Adjusted Working
Capital. There is no contract between Avendra on the one hand and the Company or
any Company Subsidiary on the other hand or between Avendra and the counterparty
to any Management Agreement.
(t) INVESTMENT COMPANY ACT.
Neither the Company nor any Company Subsidiary is an
"investment company" as defined in the Investment Company Act of 1940, as
amended.
(u) BOOKS AND RECORDS.
Except with respect to matters set forth on Schedule
3.1(a)(2), during the period of their ownership by Parent or its Affiliates: (i)
the books of account, minutes books and stock record books of the Company and
the Company Subsidiaries are complete and correct in all material respects and
have been maintained in accordance with sound business practices; (ii) the
Company and each Company Subsidiary has made and kept books, records and
accounts which, in reasonable detail, accurately reflect, in all material
respects, its transactions and the disposition of its assets to permit
preparation of financial statements in conformity with GAAP; (iii) the stock
ledger (or equivalent partnership or limited liability company records) of each
of the Company and the Company Subsidiaries is complete and correct in all
material respects; and (iv) the minute books (or equivalent partnership or
limited liability company records) of each of the Company and the Company
Subsidiaries contain accurate and complete records in all material respects of
all meetings held of, and corporate (limited liability company or limited
partnership) action taken by the stockholders (members or partners) and the
Boards of Directors (or managers) of the respective companies. At the Closing,
the Company and each Company Subsidiary will have possession of their respective
books and records, except as set forth in Section 5.1.
(v) TRANSFER OF TITLE.
Upon payment for the shares of Stock to be purchased from such
Sellers pursuant to the terms of this Agreement, Buyer will acquire good, valid
and marketable title thereto, free and clear of all Encumbrances, other than
Encumbrances created by Buyer.
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(w) HEALTH REGULATORY COMPLIANCE.
(1) Except as set forth on Schedule 3.1(w)(1),
neither the Company nor any Company Subsidiary, nor to the knowledge of Sellers,
any other Person (i) who has a direct or indirect ownership interest (as those
terms are defined in 42 C.F.R. Section 1001.1001(a)(2)) in the Company or any
Company Subsidiary, or (ii) who has an ownership or control interest (as defined
in 42 C.F.R. Section 420.201) in the Company or any Company Subsidiary, or (iii)
who is an officer, director, manager, agent (as defined in 42 C.F.R. Section
1001.1001(a)(2)) or managing employee (as defined in 42 C.F.R. Section 420.201)
of the Company or any Company Subsidiary, or (iv) who has an indirect ownership
interest (as that term is defined in 42 C.F.R. Section 1001.1001(a)(2)) in the
Company or any Company Subsidiary, has knowingly engaged in any activities which
are prohibited, or are cause for civil penalties or mandatory or permissive
exclusion from Medicare, Medicaid, or any other State Health Care Program or
Federal Health Care Program (as those terms are defined in 42 C.F.R. Section
1001.2) under 42 U.S.C. Sections 1320a-7, 1320a-7a, 1320a-7b, or 1395nn, or the
regulations promulgated pursuant to such statutes, or related state or
local/municipal statutes or which are prohibited by any private accrediting
organization from which the Company seeks accreditation, including not having
engaged in or experienced any of the following:
(i) a civil monetary penalty assessed against it
under 42 U.S.C. Section 1320a-7a;
(ii) been excluded from participation under
Medicare, Medicaid or any other State Health Care Program or Federal
Health Care Program under 42 U.S.C. Sections 1320a-7 or 1320a-7a;
(iii) been convicted (as that term is defined in
42 C.F.R. Section 1001.2) of any of the offenses described in 42
U.S.C.Sections 1320a-7(a) and (b)(1), (2), (3) that could lead to a
mandatory or permissive exclusion from any State Health Care Program or
Federal Health Care Programs; or
(iv) been suspended, debarred, or excluded from
any federal program under 45 C.F.R. Part 76.
(2) Pursuant to the HIPAA Administrative
Simplification Compliance Act (Pub. L. No. 107-105), a properly completed and
valid extension plan for compliance with the HIPAA Electronic Health Care
Transactions and Code Sets Standards was submitted by or on behalf of each
Facility that performs electronic health care transactions to the Centers for
Medicare and Medicaid Services on or before October 15, 2002.
(x) INVENTORY
All inventory reflected on the most recent balance sheet in
the Financial Statements, and all inventory acquired since that date (other than
inventory disposed of in the ordinary course of business) is usable in the
ordinary course of business, subject to any reserves reflected in the Interim
Financial Statements or taken into account in determining the Final Adjusted
Working Capital.
3.2 REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers (and agrees with
Sellers for purposes of Section 3.2(g)) as follows:
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(a) ORGANIZATION AND RELATED MATTERS.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. Buyer has
the necessary corporate power and authority to execute, deliver and perform this
Agreement and the Related Agreements to which it is or will be a party. Buyer
has all necessary corporate power and authority to carry on its business as now
being conducted.
(b) AUTHORIZATION; NO CONFLICTS.
The execution, delivery and performance by Buyer of this
Agreement and the Related Agreements to which Buyer is a party and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly and validly authorized by the board of directors of Buyer and by all
other necessary corporate action on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer and each Related Agreement to which Buyer
is a party, when executed and delivered by Buyer, shall have been duly executed
and delivered by Buyer and, assuming the due authorization, execution and
delivery hereof and thereof by the other parties hereto and thereto, constitute,
or will constitute, legally valid and binding obligations of Buyer, enforceable
against Buyer in accordance with its terms except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability and equitable principles relating to or limiting
creditors' rights generally. Except as set forth on Schedule 3.2(b), the
execution, delivery and performance by Buyer of this Agreement and the Related
Agreements to which it is a party, and the consummation by Buyer of the Stock
Purchase Agreement Transactions do not and will not (i) violate or constitute a
breach or default (whether upon notice, lapse of time and/or the occurrence of
any act or event or otherwise) under the charter documents or by-laws of Buyer,
(ii) result in any breach of or constitute a default under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of an Encumbrance (other than Permitted Encumbrances) on any of
the properties or assets of Buyer pursuant to any Contract or Permit to which
Buyer is a party or by which Buyer or any of its properties or assets is bound
or affected, or (iii) violate any Law, except for any such violations, breaches,
defaults and impositions as would not reasonably be expected to prevent or delay
consummation of the Purchase or any of the other Stock Purchase Agreement
Transactions in any material respect, or otherwise prevent Buyer from performing
its obligations under this Agreement or any other Related Agreement to which it
is a party in any material respect and excluding any filings or Approvals
required under the Xxxx-Xxxxx-Xxxxxx Act. Except as set forth on Schedule 3.2(b)
and except for any filings or approvals required under the Xxxx-Xxxxx-Xxxxxx
Act, the execution, delivery and performance by Buyer of this Agreement and the
Related Agreements to which it is a party and the consummation by Buyer of the
Stock Purchase Agreement Transactions do not and will not require any Approvals
or Permits to be obtained by Buyer except for any such Approvals or Permits the
failure of which to receive would not in the aggregate have a material adverse
effect on the ability of Buyer to consummate the Stock Purchase Agreement
Transactions.
(c) LEGAL PROCEEDINGS.
There is no Order or Action pending or, to the knowledge of
Buyer, threatened against Buyer or to which Buyer's assets or properties are
subject, that individually or when aggregated with one or more other Orders or
Actions has had or would reasonably be expected to have a material adverse
effect on Buyer's ability to consummate the transactions contemplated by the
Agreement and except for any Actions existing on the date of this Agreement or
arising after the date of this Agreement filed against any Seller, the Company
or any Company Subsidiary in which Buyer or any Subsidiary of Buyer is named
therein or becomes a party thereto after the date of this Agreement.
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(d) NO BROKERS OR FINDERS.
No agent, broker, finder or investment or commercial banker,
or other Person or firms engaged by or acting on behalf of Buyer or its
Affiliates in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is or will be
entitled to any broker's or finder's or similar fees or other commissions
arising in connection with this Agreement or such transactions except for Bank
of America Securities LLC, as to which Buyer shall have full responsibility and
neither Sellers, the Company nor any Company Subsidiary shall have any
liability.
(e) FINANCING.
Buyer currently has immediately available funds in cash or
cash equivalents or under existing financing facilities and/or commitments for
financing facilities and will at the Closing have immediately available funds in
cash, which are sufficient to pay the Purchase Price and to pay the Purchase
Price adjustment (if any) contemplated in Section 2.3.
(f) INVESTMENT REPRESENTATION.
Buyer is aware that the Stock is not registered under the
Securities Act. Buyer is an "accredited investor" as defined under the
Securities Act and possesses such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of its
investments hereunder. Buyer is acquiring the Stock from Sellers for its own
account, for investment purposes only and not with a view to the distribution
thereof. Buyer agrees that the Stock will not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration under
the Securities Act, except pursuant to a valid exemption from registration under
the Securities Act.
(g) INVESTIGATION; ACKNOWLEDGMENT.
Buyer has conducted a review and analysis of the business,
operations, assets, liabilities, results of operations, financial condition,
software and technology and prospects of the Company and the Company
Subsidiaries and acknowledges that Buyer has been provided adequate access to
the personnel, properties, premises and records of the Company and its
Subsidiaries for such review and analysis. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT, BUYER ACKNOWLEDGES THAT NEITHER SELLERS
NOR ANY OF THEIR AFFILIATES NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR
IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE STOCK, THE COMPANY OR ANY
OF ITS SUBSIDIARIES, THE BUSINESS OR ASSETS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR OTHERWISE OR WITH RESPECT TO ANY OTHER INFORMATION PROVIDED TO
BUYER.
ARTICLE IV
COVENANTS WITH RESPECT TO THE PERIOD PRIOR TO CLOSING
4.1 ACCESS.
(a) Subject to Section 5.2, the confidentiality agreement
dated August 23, 2002, between Buyer and Parent (the "Confidentiality
Agreement"), applicable Laws and as reasonably necessary to preserve
attorney-client privilege, Sellers shall cause the Company and each Company
Subsidiary to authorize and permit Buyer and its representatives (which term
shall be deemed to include its independent accountants and counsel) to have
reasonable access during normal business hours, upon
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reasonable notice and in such manner as will not unreasonably interfere with the
conduct of the Business, to (i) its properties, books, records, Contracts,
operating instructions and procedures and all other information with respect to
the Business as Buyer may from time to time reasonably request and (ii) its
officers and employees, among other things, to coordinate and plan for an
orderly transition and integration with Buyer.
(b) Sellers and Buyer shall cooperate to develop a plan
to contact the "owner" (or "tenant" or "lessee", as applicable) of each Facility
within twenty (20) days after the date of this Agreement, regarding (i) the
substitution, following the Closing, of the name and xxxx Xxxxxxxx Senior Living
Services, Inc.", the Marriott Word Xxxx, the name and xxxx "Marriott
International, Inc.", and "M" logo and any and all stylizations used in
connection with conducting the Business at such Facility, following the Closing
with the name and marks designated by Buyer, and (ii) the coordination of an
orderly transition of management.
4.2 CONDUCT OF BUSINESS.
(a) During the period from the date of this Agreement to
the Closing Date, Sellers shall cause the Company and each Company Subsidiary to
(except as contemplated by the Transition Services Agreement):
(1) carry on its business only in the ordinary course
and consistent with past practice, except as otherwise expressly required or
permitted hereby;
(2) use Commercially Reasonable Efforts to preserve
intact its business organization, assets, properties, goodwill and ongoing
business and keep available the services of its officers, employees and
consultants;
(3) maintain its books and records in accordance with
GAAP;
(4) duly and timely file all material reports, Tax
Returns and other documents required to be filed with federal, state, local and
other authorities, subject to extensions permitted by law;
(5) use Commercially Reasonable Efforts to maintain
in force any and all applications and registrations for Company Intellectual
Property and make any governmental filings necessary in connection therewith;
and
(6) promptly notify Buyer of any circumstance,
occurrence, development or event having or reasonably expected to have a
Material Adverse Effect since the date hereof.
(b) During the period from the date of this Agreement to
the Closing Date, except as set forth on Schedule 4.2 or in connection with the
Acquisition Transactions, and except to the extent expressly contemplated by the
Transition Services Agreement or in Sections 4.4, 4.9, 4.10, 4.11, 4.12, 4.13,
5.7, 5.8 or 5.16, 5.17 and 5.18, Sellers agree that neither the Company nor any
Company Subsidiary shall, without the prior consent of Buyer, which may not be
unreasonably withheld or delayed:
(1) declare, set aside or pay any dividend on, or
make any other distribution in respect of, outstanding Equity Interests (other
than any of the foregoing payable in cash) it being acknowledged by Buyer that
Sellers intend to cause the Company and Company Subsidiaries to distribute cash
to Sellers on or prior to Closing;
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(2) (i) redeem, repurchase or otherwise reacquire any
Equity Interests; (ii) effect any reorganization or recapitalization; or (iii)
split, subdivide, combine or reclassify any Equity Interests;
(3) issue, pledge, deliver, award, grant or sell, or
authorize the issuance, pledge, delivery, award, grant or sale of, any Equity
Interests, including the grant of any Encumbrances on an Equity Interest;
(4) (i) acquire or agree to acquire, by merging or
consolidating with, by purchasing an Equity Interest in or a portion of the
assets of, or by any other manner, any Person, except for the acquisition of
assets in the ordinary course of the Business consistent with past practice or
otherwise acquire or agree to acquire the assets of any other Person or (ii)
make or commit to make any investments other than short-term liquid investments,
investments that will be liquidated prior to Closing, or other investments that
do not exceed $500,000 in the aggregate for all such other investments that
occur from the date hereof;
(5) change or amend its charter documents, bylaws or
other organizational documents;
(6) except as required by its terms, amend, modify or
terminate any Material Contract or enter into any Material Contract;
(7) terminate or fail to use Commercially Reasonable
Efforts to renew or preserve any necessary Permits;
(8) incur or agree to incur any obligation for
borrowed money that individually calls for payment by the Company or any Company
Subsidiary of more than $500,000, or, in the aggregate, calls for payments by
the Company and the Company Subsidiaries of more than $1,000,000 and any such
obligation incurred shall be included in determining Adjusted Working Capital;
(9) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than in the ordinary course of business
consistent with past practice or, in the case of liabilities reflected in the
most recent Financial Statements in accordance with their terms;
(10) make any loan, guaranty or other extension of
credit (other than a plan loan under and in accordance with the terms of a Plan
or receivables created in the ordinary course of business), or enter into any
commitment to make any such loan, guaranty or other extension of credit in
excess of $500,000 individually, or $1,000,000 in the aggregate, except for (i)
loans, guarantees, extensions of credit or commitments therefor made between the
Company and any Company Subsidiary or between any Company Subsidiaries or (ii)
subject to Section 4.2(b)(11) loan, guarantees, extensions of credit or
commitments therefore made to employees for moving, relocation and travel
expenses not in excess of $25,000 individually, or $100,000 in the aggregate;
(11) except in the ordinary course of business
consistent with previously budgeted amounts (as set forth in budgets provided to
Buyer) and, as to corporate employees, regional staff and general managers and
assistant general managers, with advance notice to Buyer, (i) grant any increase
in salary or benefits of any officer, director, manager, or employee or pay any
special bonus to any person, (ii) enter into or modify any employment offer,
employment status or severance agreement or grant any severance or termination
pay (other than pursuant to severance arrangements or policies as in effect on
the date of this Agreement), (iii) establish, adopt, enter into, amend or
terminate any Plan or any
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plan, agreement, program, policy, trust, fund or other arrangement that would be
a Plan if it were in existence as of the date of this Agreement except as
required by applicable law, but only to the extent that any such action would
affect Employees, or (iv) make any loan or advance to, or enter into any written
contract, lease, or commitment with, any director, manager, officer, employee or
consultant of the Company, or any Company Subsidiary;
(12) sell, transfer, lease, exchange, pledge,
license, mortgage, encumber or otherwise dispose of any material assets, rights
or liabilities, except (i) for dispositions in the ordinary course of business
and consistent with past practice which do not exceed $500,000 individually or
$1,000,000 in the aggregate, or (ii) for sales of inventory or obsolete
equipment in the ordinary course of business and consistent with past practice
and dispositions of assets held for sale as of the date hereof;
(13) make any capital expenditures or commitments
except in the ordinary course of business consistent with the Company's 2003
capital expenditure plan which is attached hereto as part of Schedule 4.2;
(14) make any investment in any other Person, except
for investments by the Company in any Company Subsidiary;
(15) change any material accounting policy, except as
required by GAAP;
(16) forgive, cancel or compromise any Indebtedness
that is material to the Company or a Company Subsidiary owing to such entity or
any claims which such entity may have possessed, or waive any right of
substantial value or discharge or satisfy any material noncurrent Liability;
(17) fail to comply in all material respects with all
applicable Laws and with all Orders of any Governmental Entity;
(18) enter into any new line of business or acquire
any business organization or division thereof, or enter into any joint venture,
partnership or similar arrangement;
(19) delay or postpone the payment of accounts
payable and other liabilities outside the ordinary course of business consistent
with past practice;
(20) enter into or otherwise incur any Intercompany
Obligations, except in the ordinary course of business consistent with past
practice; or
(21) authorize, agree to or make any commitment to
take any actions prohibited by this Section 4.2(b).
Notwithstanding the foregoing, nothing contained in this Agreement shall give
Buyer, directly or indirectly, the right to control or direct the Company's or
any Company Subsidiary's operations prior to the Closing Date.
Buyer hereby designates the two officers of Buyer or its
Affiliates listed on Schedule 4.2(b), or such other officers as Buyer may
designate upon written notice to Sellers (the "Buyer's Representatives"), to be
responsible for determining whether consent to any action prohibited by this
Section 4.2 shall be given by Buyer. Sellers hereby designate the two officers
of Sellers or their Affiliates listed on Schedule 4.2(b) or such other officers
as Sellers may designate upon written notice to Buyer (the
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"Sellers' Representatives"), to contact Buyer's Representatives with any
requests for consent to any action prohibited by this Section 4.2. Buyer's
Representatives shall respond promptly in writing to any request for consent to
the taking of any action under this Section 4.2. If Buyer's Representatives do
not respond to any request within four Business Days of its receipt, such
consent will be deemed to have been given. Sellers may rely on any consent given
in writing by either of Buyer's Representatives. The time periods within which
Buyer's Representatives must respond shall commence on the date on which either
of Buyer's Representatives receives a written request for consent.
4.3 COMMERCIALLY REASONABLE EFFORTS; NO INCONSISTENT
ACTION.
(a) Subject to the terms and conditions hereof, the
Parties shall use Commercially Reasonable Efforts (i) to cooperate with one
another in timely making all filings and timely seeking all such Approvals and
Permits required to be made or obtained prior to the Closing Date from any
Governmental Entities (including through compliance with the Xxxx-Xxxxx-Xxxxxx
Act); (ii) to obtain in writing any Approvals required from other Persons to
consummate the Purchase; and (iii) to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement and to cause the conditions to each other's obligation to close
the transactions contemplated hereby as set forth in Article VIII to be
satisfied. Buyer and Sellers shall use Commercially Reasonable Efforts to
cooperate with each other in connection with the foregoing. In addition, to the
extent permitted by applicable Law, each of Buyer and Sellers will be given
notice of and a reasonable opportunity to participate in material contacts with
any Governmental Entity regarding antitrust or merger control matters. In the
event that any Approvals and Permits required to be made or obtained prior to
the Closing Date from any Governmental Entities are not made or obtained at such
time, but all other conditions set forth in Article VIII are satisfied (other
than (i) conditions which, by their nature, are to be satisfied on the Closing
Date and (ii) Section 8.1(b), except with respect to the termination or
expiration of the applicable waiting period under the Xxxx-Xxxxx-Xxxxxx Act),
the Parties shall cooperate with each other in formulating and implementing
mutually acceptable alternatives that permit the consummation of the
transactions contemplated by this Agreement in the absence of such Approvals or
Permits and, if such alternatives are available and may be implemented in a
timely manner without any material burden on Buyer, the condition set forth in
Section 8.1(b) shall be deemed satisfied with respect to such Approvals and
Permits.
(b) In furtherance and not in limitation of the
foregoing, Buyer and Sellers shall use their Commercially Reasonable Efforts to
file Notification and Report Forms under the Xxxx-Xxxxx-Xxxxxx Act as promptly
as practicable following the date hereof and in any event no later than January
15, 2003. Buyer and Sellers shall cooperate and use their Commercially
Reasonable Efforts to respond to any requests for information from a
Governmental Entity, and to diligently contest and resist any Action and to have
vacated, lifted, reversed or overturned any Order (whether temporary,
preliminary or permanent) that delays, prevents, prohibits or otherwise
restricts the consummation of the transactions contemplated by this Agreement;
provided, however, that neither Buyer nor any of its Affiliates shall be
obligated to agree (i) to divest a material amount of any of their respective
assets or any material portion of assets being acquired under this Agreement or
(ii) to any condition imposed by any Governmental Entity that would materially
adversely impact the respective businesses of Buyer or any of its Affiliates or
that would otherwise materially reduce the benefits to Buyer or any of its
Affiliates resulting from the consummation of the transactions contemplated by
this Agreement. To the extent permitted by applicable Law, Buyer and Sellers
shall provide the other the opportunity to make copies of all material
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or its representatives, on the one hand,
and any Governmental Entity, on the other hand, with respect to this Agreement
or the transactions contemplated by this Agreement, except for documents filed
pursuant to Item 4(c) of the Xxxx-Xxxxx-Xxxxxx Notification and Report Form or
communications regarding the same
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or documents or information submitted in response to any request for additional
information or documents pursuant to the Xxxx-Xxxxx-Xxxxxx Act which reveal
Sellers' or Buyer's negotiating objectives or strategies or purchase price
expectations. Buyer and Sellers acknowledge that all such information provided
pursuant to the foregoing sentence shall be subject to the terms of the
Confidentiality Agreement.
(c) Buyer and Sellers shall promptly notify, consult with
and keep the other advised as to (i) the status of the matters referred to in
this Section 4.3, including with respect to any material communication from the
Federal Trade Commission, the United States Department of Justice or any other
Governmental Entity regarding any of the transactions contemplated hereby and
(ii) any Action pending and known to such party or, to its knowledge,
threatened, which challenges the transactions contemplated hereby. Buyer and
Sellers shall not take any action or omit to take any action that is
inconsistent with their respective obligations under this Agreement.
(d) Sellers (in consultation with Buyer) shall send
written notice to the relevant software vendor requesting such vendor to consent
to the assignment to the Company of that Included Software identified on
Schedule 3.1(g)(1) as such and as requiring consent for such assignment and
shall send to the relevant software vendor a written notice of assignment to the
Company of that Included Software identified on Schedule 3.1(g)(1) as such and
as requiring notice of such assignment; and the Parties agree to use
Commercially Reasonable Efforts to cooperate to follow-up on such notice once
sent and obtain any necessary consent to the assignment to the Company of any
Included Software. Buyer acknowledges that Sellers make no representation or
warranty regarding which Included Software requires the receipt of the consent
of (or notice to) applicable software vendor and that such information on
Schedule 3.1(g)(1) is provided for information purposes only.
4.4 ELIMINATION OF CERTAIN INTERCOMPANY OBLIGATIONS.
Except as expressly contemplated by this Agreement or any
Related Agreement, Sellers shall cause all Intercompany Obligations to be
satisfied, cancelled, eliminated or repaid prior to Closing.
4.5 ACCURACY OF INFORMATION.
All documents required to be filed by any of the Parties or
any of their respective Subsidiaries with any Governmental Entity in connection
with this Agreement or the transactions contemplated by this Agreement will
comply in all material respects with the provisions of applicable Law.
4.6 NOTICE OF CERTAIN MATTERS.
Sellers shall give prompt written notice to Buyer, and Buyer
shall give prompt written notice to Sellers, of (a) the occurrence or
non-occurrence of any event which would be likely to cause (i) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in all material
respects and (b) any failure of Sellers or of Buyer, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder in any material respect; provided that the delivery
of any notice pursuant to this Section shall not, and shall not be deemed to,
modify, amend or supplement the representations, warranties, covenants or
agreements of the Parties or the conditions to the obligations of the Parties
under this Agreement or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
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4.7 NO SOLICITATION.
Except for the Acquisition Transactions, unless and until this
Agreement shall have been terminated in accordance with its terms, each Seller
shall not, and shall use Commercially Reasonable Efforts to cause each officer,
director, manager, employee, agent, investment banker, financial advisor,
attorney, accountant, broker, finder, consultant or other agent or
representative of itself, the Company or any of the Company Subsidiaries not to,
directly or indirectly, invite, initiate, solicit, entertain, engage in,
encourage or facilitate any inquiries, proposals, discussions, or negotiations
or the making of any proposal or offer (including any proposal or offer to its
equity holders) with respect to any (a) merger, consolidation, equity exchange,
business combination, reorganization, recapitalization, liquidation, dissolution
or similar transaction, or (b) sale, lease, exchange, mortgage, pledge, transfer
or other disposition of all or substantially all of the assets or equity
interests of the Company or any of the Company Subsidiaries (any such proposal
or offer being hereinafter referred to as an "Alternative Proposal"), or engage
in any discussion or negotiations with or provide any confidential or non-public
information or data to, or afford access to the properties, books or records to,
any Person relating to, or that may reasonably be expected to lead to, an
Alternative Proposal, or enter into any letter of intent, agreement in principle
or agreement relating to an Alternative Proposal, or propose publicly to agree
to do any of the foregoing, or otherwise facilitate or cooperate in any effort
or attempt to make or implement an Alternative Proposal.
4.8 PUBLIC ANNOUNCEMENTS.
Prior to the Closing, Sellers, on the one hand, and Buyer on
the other hand, shall coordinate all publicity relating to the Purchase or the
other transactions contemplated by this Agreement and no Party shall issue any
press release, publicity statement or other public notice or announcement
relating to this Agreement, or the transactions contemplated by this Agreement,
without the prior written consent of the other Party except to the extent, based
upon advice of counsel, required by applicable Law, pursuant to court process or
the requirements of any national securities exchange, in which event the party
required to issue the release, statement, notice or announcement shall use
Commercially Reasonable Efforts to allow the other Party reasonable time, in
light of the circumstances, to comment on such release, statement, notice or
announcement in advance of such issuance.
4.9 RESTRUCTURING.
Prior to the Closing, Sellers will effect the Restructuring
substantially in accordance with the terms set forth on Schedule 4.9 hereto.
4.10 CNL TRANSACTION.
The Parties are entering into this Agreement with the
understanding that the CNL Transaction will be consummated prior to the Closing
and that Buyer not acquire the CNL Assets or receive or retain the proceeds of
the CNL Transaction. As such, the representations, warranties, covenants and
conditions set forth in this Agreement are not intended to, and shall be deemed
not to, cover or relate to the CNL Assets. In connection with the CNL
Transaction, the Parties acknowledge that:
(i) prior to the Closing, the proceeds of the sales of
assets to CNL and its Affiliates by MCC shall be loaned by MCC to the Company
(as opposed to dividended or distributed to the Company) in accordance with
applicable law;
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(ii) prior to the Closing, the proceeds of the sales of
assets to CNL and its Affiliates contemplated by the CNL Transaction, and the
proceeds of the loan from MCC to the Company in accordance with clause (i)
above, will be distributed to Sellers without adjustment to the Purchase Price;
in accordance with applicable law; and
(iii) the Adjusted Working Capital of the Company will be
calculated as though the CNL Transaction was consummated on the day prior to
Closing (if not consummated prior thereto).
4.11 BURNING TREE OPTION.
Prior to the Closing, the purchase of the shares pursuant to
the Burning Tree Option shall have been consummated or the Burning Tree Option
shall have been extended (and shall remain in full force and effect) to a date
beyond the Closing Date. In the event the Company or any Company Subsidiary
shall consummate the purchase of the shares pursuant to the Burning Tree Option,
the Purchase Price shall be increased by an amount equal to the aggregate amount
of the purchase price payable in connection with the Burning Tree Option plus
the costs and expenses incurred in connection with the consummation of such
share purchase (excluding internal costs and expenses). For purposes hereof the
purchase price payable in connection with the Burning Tree Option shall not
include any credits granted for amounts previously paid or deposited in respect
of such option and any amounts paid in connection with the recordation of deed
restrictions other than any such amounts paid or deposited after the date
hereof.
4.12 TRANSFER OF JOINT VENTURE INTEREST.
Buyer consents to any sale of the joint venture interest of
the Company and the Company Subsidiaries in Senior Living of Denver, LLC prior
to Closing. If such sale occurs prior to Closing, the Purchase Price shall be
reduced by $900,000 and the representations and warranties in Section 3.1 shall
be deemed modified as required to reflect the consummation of the transactions
set forth in this Section 4.12.
4.13 PROPERTY 2 MANAGEMENT AGREEMENT.
Buyer consents to the negotiation and execution of a
replacement Management Agreement for the Property 2 Facility so long as such
Management Agreement is on substantially the same terms as the existing
Management Agreement for such Facility with such changes as would not be adverse
to the Company or any Company Subsidiary.
4.14 BUYER LETTER OF CREDIT.
Within three (3) Business Days of the date hereof, Buyer shall
either (i) deliver to Parent the L/C in the form of Exhibit A-1 hereto, in a
face amount of $14,500,000 issued by an Approved Bank, or (ii) deposit into
escrow with an Approved Bank $14,500,000 (the "Escrow Fund") in accordance with
an escrow agreement in the form of Exhibit A-2. If Buyer makes the escrow
deposit contemplated by clause (ii), it may replace such escrow deposit at any
time with the L/C issued by an Approved Bank.
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ARTICLE V
CONTINUING COVENANTS
5.1 RECORDS; COOPERATION; LEGAL PRIVILEGES.
(a) After the Closing Date, upon Sellers' reasonable
request (at Sellers' expense) and without necessity of subpoena, Buyer will
cause the Company and the Company Subsidiaries and their representatives and
counsel to use Commercially Reasonable Efforts to cooperate with Sellers and
their representatives and counsel for purposes of permitting Sellers to address
and respond to any matters involving Sellers that arise as a result of or
otherwise related to Sellers' prior ownership of the Company, whether or not
related to this Agreement, including any assets, liabilities or other matters
related to the Company or any Company Subsidiary that are retained by Sellers
and any claims made by or against Sellers or any of their Affiliates, whether
involving any Governmental Entity or other Person.
(b) After the Closing Date, upon Buyer's reasonable
request (at Buyer's expense) and without necessity of subpoena, Sellers and
their Affiliates and their representatives and counsel will use Commercially
Reasonable Efforts to cooperate with Buyer and the Company and the Company
Subsidiaries and their respective representatives and counsel for purposes of
permitting Buyer, the Company or any Company Subsidiary to address and respond
to any matters that involve Buyer, the Company or any Company Subsidiary that
arise as a result of or otherwise related to Sellers' or their Affiliates' prior
affiliation with the Company and Company Subsidiaries, whether or not related to
this Agreement, including any claims made by or against the Company or any
Company Subsidiary or any other Seller Affiliate, or Buyer or any of its
Affiliates, whether involving any Governmental Entity or other Person.
(c) Such cooperation under Section 5.1(a) and 5.1(b)
shall include (i) reasonable access during normal business hours and upon
reasonable notice to the appropriate Party's and its Affiliates' officers,
directors, employees, auditors, counsel, representatives, properties, books,
records and operating instructions and procedures, (ii) assisting the other
Party in connection with any Actions, including preparation for any Actions such
as discovery, depositions and similar activities, and (iii) the right to make
and retain copies of all pertinent documents and records relating to any such
matters; it being understood that nothing herein shall require any Party to
waive any attorney-client or work product privilege that may exist. Each Party's
obligations under this Section 5.1 are in addition to such Party's other
obligations contained in this Agreement. Buyer hereby acknowledges that Sellers
shall retain originals of any and all records of the Company or any Company
Subsidiaries related to any Action or potential Action or Liability which is
retained by Sellers, or for which Sellers have agreed to indemnify Buyer with
respect to, under this Agreement or otherwise. Subject to clause (d) below,
Buyer shall have access to the originals of such records and Sellers shall make
one set of copies (at their expense) if requested by Buyer.
(d) Sellers and Buyer acknowledge and agree that all
attorney-client, work product and other legal privileges that may exist with
respect to the Company shall, from and after the Closing Date, be deemed to be
joint privileges of Sellers and Buyer with respect to or relating only to claims
or matters for which Sellers have agreed to indemnify Buyer under this Agreement
or otherwise (but excluding any work product or communications prepared or made
by counsel for Buyer, Company or any Company Subsidiary in connection with any
claim for indemnification by Buyer Indemnified Parties hereunder). Both Sellers
and Buyer shall use all Commercially Reasonable Efforts after the Closing Date
to preserve all such privileges and neither Sellers nor Buyer shall knowingly
waive any such privilege without the prior written consent of the other party
(which consent shall not be unreasonably withheld or delayed).
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(e) Parent shall timely prepare (but no later than March
15, 2003) and furnish to Buyer (at Sellers' expense) copies of audited
consolidated financial statements of the Company and audited combined financial
statements of MCC for any annual period, ending after the date of this Agreement
but before the Closing Date. After the Closing Date, upon Buyer's request (and
at Buyer's expense), Parent shall reasonably cooperate with Buyer and the
Company in the preparation of any audited consolidated financial statements of
the Company and audited combined MCC financial statements for any annual period,
and unaudited consolidated financial statements of the Company and unaudited
combined financial statements of MCC for any interim period, ending on or after
the Closing Date but including any annual or interim periods commencing before
the Closing Date.
5.2 NONDISCLOSURE OF COMPANY PROPRIETARY INFORMATION.
(a) After the Closing, except as required by applicable
Law or as otherwise permitted under this Agreement, neither Sellers nor any of
their respective Affiliates or their respective, directors, officers, employees,
agents or representatives, including attorneys, accountants, consultants and
financial advisors ("Representatives") shall, at any time, make use of, divulge
or otherwise disclose, directly or indirectly, any Company Proprietary
Information, unless such Company Proprietary Information: (i) is or becomes
generally available to the public, without restriction on use or disclosure
other than as a result of unauthorized disclosure by Sellers or any of their
Affiliates or their respective Representatives or by persons to whom Sellers or
any of their Affiliates or their respective Representatives have made such
information available; (ii) is received by Sellers or any of their Affiliates or
their respective Representatives on a non-confidential basis from a Person not
otherwise bound by the terms of any confidentiality agreement or provision or
other applicable restriction prohibiting use or disclosure with respect thereto;
(iii) is independently developed by or for Sellers or any of their Affiliates
without reference to or use of Company Proprietary Information; (iv) is the
subject of prior written approval of use or disclosure thereof by Buyer (to the
extent of such written approval only); or (v) is disclosed or made available
after the Closing Date by Buyer to any Person, without restriction on use or
disclosure.
(b) Buyer acknowledges and agrees that all Company
Proprietary Information received by it from Sellers or any of their respective
Affiliates or their respective Representatives in connection with the
transactions contemplated under this Agreement shall be deemed received pursuant
to the Confidentiality Agreement and Buyer shall, and shall cause its
Representatives to, comply with the provisions of the Confidentiality Agreement
with respect to such Company Proprietary Information, and the provisions of the
Confidentiality Agreement are hereby incorporated herein by reference with the
same effect as if fully set forth herein. The foregoing notwithstanding, Buyer's
obligations of confidentiality as set forth in the Confidentiality Agreement
shall survive and continue until the Closing Date and terminate upon
consummation of the Closing and, if the Closing does not occur, such obligations
shall survive and continue in accordance with the terms and conditions of such
Confidentiality Agreement.
5.3 [INTENTIONALLY OMITTED].
5.4 TAX MATTERS.
The Tax Sharing Agreement includes all terms, conditions and
provisions relating to Tax matters between the Parties, other than certain
provisions expressly incorporated by reference therein. The general
representations, warranties, covenants, conditions, termination rights and
indemnification provisions in this Agreement (other than any representation or
warranty, covenant, condition, termination right or indemnification that
specifically refers to the Tax Sharing Agreement or that is expressly
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incorporated by reference in the Tax Sharing Agreement) shall not be deemed to
refer or relate to any matter or subject included within the subject matter of
the Tax Sharing Agreement and no such representation or warranty, covenant,
condition, termination right or indemnification shall be interpreted to cover in
any way any such matter or subject.
5.5 USE OF CERTAIN PARENT TRADEMARKS.
(a) Buyer acknowledges and agrees that, other than as
provided for in this Section 5.5, Buyer, the Company and the Company
Subsidiaries are not obtaining any rights or licenses with respect to any name,
xxxx, logo, trade dress or design owned by Parent or its Affiliates, including
the name and xxxx "Marriott Senior Living Services, Inc.", the word xxxx
"Marriott" (the "Marriott Word Xxxx"), the name and xxxx "Marriott
International, Inc.", the "M" logo (a copy of which is attached hereto as
Schedule 5.5(a)) or any composite or other name or xxxx containing "Marriott",
or any name, xxxx, logo or design that is similar to any of the foregoing in
appearance, sound or commercial impression (the "Parent Marks"). Buyer shall
cease and shall cause the Company and the Company Subsidiaries to cease any and
all use of the Parent Marks as soon as practicable after the Closing Date, but
not more later than 60 days after the Closing Date; provided, however, that with
respect to stationery, contracts, purchase orders, agreements and other business
forms and writings which could result after the Closing Date in a legal
commitment of Parent or any of its Subsidiaries, the Company and the Company
Subsidiaries will cease within 10 Business Days after the Closing Date any use
of the Parent Marks, except to the extent that applicable Law requires such
Person to continue such use until such name change is effected, in which case
until such time, but in no event later than 60 days following the Closing Date.
Within 10 Business Days after the Closing Date, Buyer shall notify, to the
extent it has sufficient knowledge of such business relationships, or cause the
Company and the Company Subsidiaries to notify, in writing, all residents at
Facilities and all customers, suppliers and financial institutions having
current business relationships with the Company and the Company Subsidiaries
that the Company and the Company Subsidiaries have been acquired from Sellers by
Buyer. Notwithstanding the foregoing, at the option of Parent, Parent may grant
a royalty free license to the Company and the Company Subsidiaries for the use
of the Parent Marks as currently used in the Business (or any portion thereof)
on such terms as may be mutually acceptable to the Parties.
(b) The Company and the Company Subsidiaries may use the
Parent Marks for the time period provided in Section 5.5(a) solely in connection
with the Business as operated by the Company and the Company Subsidiaries
immediately prior to the Closing Date and any such use shall be in accordance
with all applicable Laws in the applicable jurisdictions, conform to at least
the standards of quality prevailing in the Business as of the date hereof, and
not be offensive, disparaging or misleading as to the quality of the services
provided in the Business. Any such use shall also be subject to Parent's
trademark quality control and usage guidelines then in effect, provided that
Parent has provided such guidelines to Buyer prior to the contemplated use. In
no event may Buyer, the Company or the Company Subsidiaries use the Parent
Marks, directly or indirectly, in any way that would jeopardize, dilute or
otherwise adversely affect the Parent Marks and Buyer, the Company and the
Company Subsidiaries shall not attack, dispute or challenge (nor aid or
encourage others to do so) Parent's exclusive right, title and interest in and
to the Parent Marks, or the validity of the Parent Marks.
(c) As soon as reasonably practicable, but in any event
not later than 60 days after the Closing Date, Buyer shall cause the Company and
the Company Subsidiaries to change each of their corporate, partnership,
popular, fictitious business, and trade and domain names and any similar
designations to new names that do not include any Parent Xxxx and thereafter
that are not similar in appearance, sound or commercial impression to any Parent
Xxxx; provided that this provision shall not limit the Company's right to obtain
the benefit of use of certain domain names granted to the Company
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pursuant to the Transition Services Agreement. Except as expressly provided in
this Section 5.5, after the Closing Date, Buyer shall not use and shall cause
the Company and the Company Subsidiaries not to use or include any of the Parent
Marks, or any other name that is similar in appearance, sound or commercial
impression to any Parent Xxxx, as or in their corporate, partnership, popular,
fictitious business, trade and domain names or in any similar designation;
provided that this provision shall not limit the Company's right to obtain the
benefit of use of certain domain names granted to the Company pursuant to the
Transition Services Agreement.
(d) Subject to the provisions of Sections 5.5(a) and (b)
above, Buyer agrees, on behalf of itself, the Company and the Company
Subsidiaries, not to use or seek to register any trade name, service xxxx,
trademark or domain name that contains or is similar in appearance, sound or
commercial impression to any Parent Xxxx. Buyer agrees, on behalf of itself, the
Company and the Company Subsidiaries, that it will never directly or indirectly
challenge, contest or call into question or raise any questions concerning the
validity or ownership by Sellers of any Parent Xxxx, any registration or
application for registration of any Parent Xxxx or any domain name application
or registration containing any Parent Xxxx. Buyer agrees that nothing herein
shall give Buyer, the Company or the Company Subsidiaries any right to or
interest in any Parent Xxxx except the right to use the same in accordance with
the terms of this Agreement, and that all and any uses of the Parent Marks by
Buyer, the Company or the Company Subsidiaries shall inure to the benefit of
Sellers.
(e) Sellers acknowledge that Buyer's occasional use of
the "Marriott" name or Marriott Word Xxxx in a neutral, non-trademark sense to
identify its past affiliation with Sellers in the ordinary course shall not
violate this Section 5.5.
(f) Buyer shall cause Sellers to be named as an
"additional insured" on all liability policies covering the Company and the
Company Subsidiaries, so long as any Parent Xxxx is used in the Business.
5.6 INTELLECTUAL PROPERTY.
(a) As of the Closing Date, Sellers or their Affiliates
shall execute assignments, substantially in the form attached as Exhibit D,
assigning to the Company those registered trademarks, service marks and
trademark and service xxxx applications listed in Schedule 5.6(a)(1). The
Company shall record the assignment documents at the United States Patent and
Trademark Office. To the extent that Sellers or their Affiliates own any rights
in and to the Company Intellectual Property that is listed on Schedule
5.6(a)(2), Sellers and their Affiliates hereby assign to the Company all their
right, title and interest in and to that Company Intellectual Property,
provided, however, that nothing herein shall give Buyer, the Company or the
Company Subsidiaries any right to or interest in (i) any Parent Xxxx included or
featured in or on any such Company Intellectual Property, which shall be
governed by Section 5.5 above, or (ii) any information or material that was not
used exclusively in or developed exclusively for the Business, and from which
any Company Intellectual Property listed in Schedule 5.6(a)(2) may have been
derived. To the extent that Sellers or their Affiliates own any rights in and to
software included in the Company Intellectual Property that is used exclusively
in or that was developed exclusively for the Business, Sellers and their
Affiliates hereby grant to the Company a non-exclusive, perpetual license to use
such software for the Company's continued internal use in the Business.
(b) As of the Closing Date, Sellers or their Affiliates
shall execute documents, substantially in the form attached as Exhibit E,
surrendering the trademark and service xxxx registrations of marks that
incorporate any of the Parent Marks that are listed on Schedule 5.6(b). Within
60 Business
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Days after the Closing Date, Sellers or their Affiliates, as applicable, shall
record the surrender documents at the United States Patent and Trademark Office.
(c) Buyer acknowledges and agrees that, other than
Included Software that is owned by the Company or licensed to the Company or
Company Subsidiaries for which consent of the licensor is not required (or has
been obtained) in connection with the consummation of the transactions
contemplated by this Agreement or for which consent has been obtained from the
applicable vendor to assign such software to the Company, if necessary, the
Company is not obtaining any rights or licenses with respect to any software
used by the Company.
5.7 FINANCIAL SUPPORT ARRANGEMENTS; LIFECARE AGREEMENTS
OF UNDERTAKING.
(a) From and after the Closing Date, in accordance with
the terms of the Assumption and Reimbursement Agreement, Buyer shall perform all
of the obligations to be performed by Parent or any of its Affiliates under each
guaranty, indemnity, and other obligation or credit enhancement arrangement in
respect of the Business listed on Schedule 5.7(a)(1) (each an "Assumed Financial
Support Arrangement") and each Lifecare Agreement of Undertaking set forth on
Schedule 5.7(a)(2). Buyer shall, at the request of any Seller, promptly enter
into a financial support arrangement on substantially the same terms as the
applicable Assumed Financial Support Arrangement (a "Substitute Support
Arrangement") for the purpose of releasing Parent from the obligations
thereunder if Parent is able to arrange such release. Notwithstanding anything
to the contrary herein, Buyer's obligation to enter into Substitute Support
Arrangements shall continue so long as Parent or any of its Affiliates have any
liability under any Assumed Financial Support Arrangement.
(b) Buyer and the Company shall not, and Buyer shall not
cause or permit the Company to (i) directly or indirectly assign or otherwise
transfer (other than to an Affiliate of Buyer) any of its rights or obligations
under any Contract with respect to which Parent or any Affiliate thereof has
continuing liability under any Assumed Financial Support Arrangement or Lifecare
Agreement of Undertaking (each such Contract, an "Underlying Obligation"), (ii)
cause or permit the term of any Underlying Obligation to be extended beyond the
term as in effect on the Closing Date, or (iii) enter into or agree to any
amendment or modification of the terms of any Underlying Obligation if the
effect of such modification or amendment would be to increase in any respect the
contingent obligations of Parent or its Affiliates in respect thereof, unless,
in any such case, prior to the effectiveness thereof, Parent and its Affiliates
shall be unconditionally released, in a manner reasonably satisfactory to
Sellers, from all obligations under the applicable Assumed Financial Support
Arrangement or Lifecare Agreements of Undertaking; provided that the Company or
Buyer may assign or otherwise (directly or indirectly) transfer any Underlying
Obligation so long as (x) prior to such assignment or transfer, the Company or
Buyer shall notify Parent thereof specifying the Underlying Obligation
transferred and the name of the transferee and certifying that the other
conditions set forth below have been satisfied (if applicable), (y) the
transferee shall be at least as creditworthy as Buyer and (z) the transferee
shall have delivered a letter agreement to Parent pursuant to which it agrees to
be bound by the restrictions set forth in this Section 5.7(b) and the terms of
the next sentence for the benefit of Parent. Notwithstanding the foregoing, in
the case of any transfer or assignment of the Underlying Obligations supported
under the Lifecare Agreements of Undertaking or any Lease transferred pursuant
to Section 5.18, the condition in clause (y) of the immediately preceding
sentence shall not apply. Buyer shall cause the Company to give any notice
required under any such Contract (including any Lease listed on Schedule 5.7(b)
hereto) to ensure that the term thereof is not automatically extended beyond the
term as in effect on the Closing Date, unless, prior to the effectiveness of
such extension Parent and its Affiliates shall be unconditionally released, in a
manner reasonably satisfactory to Sellers, from all obligations under the
applicable Assumed Financial Support Arrangement or Lifecare Agreement of
Undertaking.
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(c) Schedule 5.7(c) sets forth a list of all guaranty,
indemnity, and other credit enhancement arrangements in respect of the Business
to which Parent and/or one or more of its Affiliates (other than the Company and
its Subsidiaries) will be a party after the Closing (each a "Retained Support
Arrangement"). Sellers acknowledge and agree that no Retained Support
Arrangement shall constitute an Assumed Support Arrangement, and Buyer shall
have no obligation under this Section 5.7 or the Assumption and Reimbursement
Agreement in respect of any Retained Support Arrangement. Sellers hereby waive
any rights of subrogation or reimbursement that they may have in respect of any
payment under or in respect of any Retained Support Arrangement.
(d) Buyer acknowledges that the obligations set forth on
Schedule 5.7(d) ("Owner 2 Subordinated Facility Obligations") will remain
outstanding following the Closing and shall remain payable in accordance with
their terms, on the following conditions: (i) the note captioned "Owner 2 -
Illinois Term Note" shall be assigned to Parent on or prior to Closing or, if
not assignable, shall be held by the Company, pursuant to a participation or
other arrangement satisfactory to Sellers and Buyer, for the exclusive benefit
of Parent; (ii) all remaining obligations of Marriott International Credit
Corporation ("MICC") under the agreement captioned "Owner 2 - Texas Subordinated
Loan Agreement" (together with the related revolving credit notes) shall,
subject to receipt of all necessary approvals, be assigned to the Company and
MICC shall be unconditionally released from such obligations; or, if the
necessary consents are not obtained, the Company shall assume (or acquire a 100%
participation in) all such remaining obligations (and the related revolving
credit notes); (iii) the note captioned "Owner 2 - Cherry Hill Term Note" shall
be assigned to Parent on or prior to Closing, or if not assignable, shall be
held by the Company, pursuant to a participation or other arrangement
satisfactory to Sellers and Buyer for the exclusive benefit of Parent; and (iv)
at Closing, Parent, MICC and the Company shall enter into Intercreditor
Agreements in the form attached hereto as Exhibit F in respect of the
obligations identified as "Owner 2 Term Notes" and "Owner 2 Revolving Credit
Notes" on Schedule 5.7(d). Buyer agrees to perform all obligations under the
Owner 2 Subordinated Facility Obligations assigned or participated to it
hereunder.
(e) Parent and Buyer agree to cooperate and use
Commercially Reasonable Efforts to arrange a Substitute Support Arrangement for
the Threshold Guaranty by Parent and the Company in favor of HRA Management
Corporation dated as of May 16, 2002 (the "CNL-5 Credit Support"), and have
Parent released from all obligations in respect of the CNL-5 Credit Support by
Closing. In the event Buyer enters into a Substitute Support Arrangement
effective as of the Closing with respect to the CNL-5 Credit Support and Parent
is released from its obligations in respect thereof on or prior to Closing,
Buyer shall be entitled to a Purchase Price adjustment in an amount equal to the
then unfunded commitments under the CNL-5 Credit Support. If such Substitute
Support Arrangement is not entered into by Closing, Parent shall fund all the
unfunded obligations under the CNL-5 Credit Support to the applicable tenant and
no Purchase Price adjustment shall be made under this Section 5.7(e).
5.8 NHI LEASES.
Sellers will use Commercially Reasonable Efforts to terminate
the NHI Leases as soon as practical. Buyer will cooperate with Sellers (at the
expense of Sellers) in the transition of such Contracts following their
termination.
5.9 INSURANCE MATTERS.
(a) Sellers and their Affiliates shall keep, or cause to
be kept, all material property/casualty insurance policies (including policies
respecting workers' compensation and Employment-Related Claims) presently
maintained relating to the Company and the Company
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Subsidiaries and their properties, or suitable replacements therefor, in full
force and effect through the close of business on the Closing Date, including
Patient Injury Claim insurance through National Union Fire Insurance Co. of
Pittsburgh, PA and XL Insurance (Bermuda) Ltd. The Patient Injury Claim
insurance through National Union Fire Insurance Company of Pittsburgh, PA and XL
Insurance (Bermuda) Ltd. will be assigned to Buyer upon acceptance by the
insurers retroactive to the policy inception date of October 1, 2002 (with a
retroactive date of October 2001).
(b) Buyer acknowledges and agrees that, as of the Closing
Date, none of Buyer, the Company, the Company Subsidiaries, the assets and
operations of the Company and the Company Subsidiaries, or the directors,
officers, and employees of the Company and the Company Subsidiaries (including
the Employees) will be covered under any property/casualty insurance policies
(including workers' compensation and employment practices liability policies)
maintained by Parent or its Affiliates.
(c) Buyer will provide insurance coverage for all
property/casualty (including workers' compensation) insurance liabilities for
the Company and the Company Subsidiaries commencing immediately after the
Closing Date. Except for the Patient Injury Claims (discussed in 5.9(e) below)
and except as otherwise provided in this Section 5.9, including in clauses (k),
(l), (m) and (q), Parent agrees that effective as of the Closing Date Buyer and
its Affiliates shall have no liability or obligation with respect to any
property/casualty liabilities (including workers' compensation) which occurred
prior to the Closing Date.
(d) To the extent an occurrence (including an occurrence
giving rise to a Patient Injury Claim in accordance with the last sentence of
clause (e) below) takes place prior to the Closing Date in connection with the
operation of the Business, and results in a loss of a type which is or may be
covered under its insurance policies, Parent shall report such occurrences, in a
manner consistent with Parent's past practices. to the respective carrier(s) in
accordance with the requirements of such policies, and use its Commercially
Reasonable Efforts to obtain coverage for such claims in accordance with the
terms and conditions thereof.
(e) Notwithstanding anything to the contrary herein,
liability for Patient Injury Claims shall be the exclusive responsibility of (i)
Buyer, if the event giving rise to the claim "occurs" or "occurred" (in
accordance with the last sentence hereof) on or after October 1, 2001 and is
reported on or after October 1, 2002 (any such claim, a "Buyer Patient Injury
Claim"), and (ii) Sellers, with respect to all claims arising at or prior to the
Closing other than those set forth in clause (i) (any such claim, a "Seller
Patient Injury Claim"). For purposes of this clause (e), a Patient Injury Claim
that involves continuing behavior or a series of events, accidents or
occurrences shall be deemed to "occur" on the first day of any alleged event,
circumstance, or omission ("EC&O"), so long as any subsequent alleged EC&O is
substantially similar in nature and/or directly related to or an unambiguous
result of the first EC&O. Any other EC&O shall constitute a new EC&O.
(f) During the period from the date hereof through the
Closing Date, Sellers shall, in a manner consistent with past practices of
Sellers, administer and, if appropriate, settle all Buyer Patient Injury Claims
of which Seller receives notice no later than 10 days prior to the Closing Date.
Sellers and Buyer shall cooperate prior to the Closing in preparation for, and
shall use all Commercially Reasonable Efforts to effect, a transition of the
administration of outstanding Buyer Patient Injury Claims as of the Closing
Date.
(g) As soon as practicable (and in all events within 10
Business Days) after the Closing, Sellers shall transfer to, or at the direction
of, Buyer all material records (or copies thereof) in the
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possession of Sellers relating to any Buyer Patient Injury Claim (including
those that have theretofore been settled).
(h) Not less than two (2) Business Days prior to the
Closing Date, Sellers will give to Buyer a good faith estimate (the "Estimated
Insurance Adjustment") of the amount of, and setting forth in reasonable detail
the calculation of: (i) the aggregate amount of premiums collected on or before
the Closing Date for Patient Injury Claims coverage in respect of each Facility
relating to the insurance year commencing on October 1, 2002 through the Closing
Date (the "Premiums") and (ii) the sum of (w) the aggregate amount paid in
accordance with the terms hereof by Sellers in settlement of Buyer Patient
Injury Claims, (x) the actual insurance premiums paid by Parent to third party
insurers, fronting costs, taxes, assessments, collateral fees and broker fees
for the insurance year commencing on October 1, 2002, (y) the reasonable costs
and expenses of Sellers incurred in the administration of Buyer Patient Injury
Claims, and (z) the reasonable costs and expenses of Parent incurred in the
administration of the Buyer Patient Injury insurance program (collectively, the
"Sellers' Costs"). If the Estimated Insurance Adjustment indicates that the
Premiums exceeds the Sellers' Costs, at the Closing Sellers shall remit to
Buyer, in immediately available funds, an amount equal to the excess of the
Premiums over the Sellers' Costs. If the Estimated Insurance Adjustment
indicates that the Sellers' Costs exceeds the Premiums, at the Closing Buyer
shall remit to Parent, in immediately available funds, an amount equal to the
excess of the Sellers' Costs over the Premiums. Promptly following the Closing,
but in any event no later than 30 days after the Closing, Sellers shall deliver
to Buyer a statement of the amount of, and setting forth in reasonable detail
the calculation of the actual Premiums and Sellers' Costs (the "Final Insurance
Adjustment"). If the Final Insurance Adjustment differs from the Estimated
Insurance Adjustment, then an amount equal to the difference shall promptly be
paid by Buyer to Sellers or by Sellers to Buyer, as the case may be, so that the
net amounts paid pursuant to this Section 5.9(h) reflect the amount that would
have been paid by Buyer or Sellers, as applicable, had the Final Insurance
Adjustment been known as of the Closing.
(i) The parties acknowledge and agree that the aggregate
projected loss for Patient Injury Claims arising from occurrences during the
insurance year commencing on October 1, 2002 (the "2003 Insurance Year") is
$24,180,000. Sellers will compute monthly premiums for the 2003 Insurance Year
on the basis of such projected amount (such premiums to be charged during the
calendar year commencing on January 1, 2003, through the Closing).
(j) Buyer and Seller shall cooperate in the preparation
of a mutually acceptable written notice to each owner or tenant that is party to
a Management Agreement advising them that the Buyer's insurance program is
replacing Sellers' insurance program, or in the case of Patient Injury Claims
insurance is being assigned from Seller to Buyer. Such notice may be separate or
part of additional communications to each owner or tenant related to the Stock
Purchase Agreement Transactions. Buyer shall deliver such notice promptly
following the Closing.
(k) With respect to all property/casualty liability
coverage policies (including workers' compensation, Employment-Related Claims
based liability coverage and Patient Injury Claims coverage) or self-insured
arrangements which covered occurrences prior to the Closing Date (other than
Buyer Patient Injury Claims) (the "Subject Policies"), Sellers will deliver to
Buyer quarterly written statements ("Insurance Statements") setting forth in
reasonable detail Sellers' computation of the amounts ("Additional Cost
Amounts") described in subsections 5.9 (l)(1) through (5). To the extent
permitted under any applicable Management Agreement, Buyer shall (or shall cause
the Company and Company Subsidiaries to) include all such Additional Cost
Amounts in the insurance premiums to be charged thereunder, or shall otherwise
allocate such Additional Cost Amounts to the owner, tenant or lessee, as
applicable, and shall, promptly upon receipt by Buyer, Company or any Company
Subsidiary of revenues
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allocable to payment of costs of insurance, remit such Additional Cost Amounts
to Parent in immediately available funds. In the event that the Company or a
Company Subsidiary is the tenant or lessee in respect of any applicable
Facility, and there is no applicable Management Agreement, such Additional Cost
Amounts shall be for the account of the Company or such Company Subsidiary, and
Buyer (or the Company or a Company Subsidiary) shall promptly remit such
Additional Cost Amounts in full to Sellers. In the event that an owner, tenant
or lessee disputes any such Additional Cost Amounts (or any shortfall or excess
amount determined in accordance with clause (m) below), Sellers and Buyer shall
cooperate and use Commercially Reasonable Efforts to resolve such dispute, and,
if applicable, Buyer shall hold the disputed amount in escrow pending resolution
of the dispute; provided that if such dispute (other than a dispute with Company
or a Company Subsidiary in the capacity of owner, tenant or lessee) results in
an Action by such owner, tenant or lessee, Sellers shall indemnify, defend and
hold harmless Buyer, the Company and the Company Subsidiaries, and each of their
respective directors, managers, officers, employees, Affiliates, agents and
assigns from and against any and all Indemnifiable Losses relating to, resulting
from or arising out of such Action.
(l) For purposes of Section 5.9(k), Insurance Statements
will include:
(1) Actual incurred losses and changes in
reserves on actual incurred losses (including "Allocated Loss Adjustment
Expenses") up to the per claim deductible limit of $25,000 (or $50,000 for
Patient Injury Claims in Florida and Texas) and within a two year responsibility
period defined as follows:
(i) For claims relating to the policy period
October 1, 2001 through September 30, 2002, the responsibility period
will terminate at close of business on September 30, 2003;
(ii) For claims relating to the policy period
October 1, 2002 through the Closing Date, the responsibility period
will terminate at close of business on September 30, 2004;
(2) Unallocated charges for Parent's Casualty
Insurance program resulting from differences between the insurance year and the
calendar year (approximately 3 months);
(3) Outstanding state workers' compensation
self-insurance assessments, collateral fees and surety bonds supporting
self-insured programs, and broker and consultant fees;
(4) Claims administration costs related to open
claims; and
(5) Parent's Risk Management operating expenses
related to services necessary to deliver items (1) through (4) in this Section
5.9(l).
For purposes of this Section 5.9(l), Sellers shall continue
using the same methodology regarding allocation of risk management operating
expenses and costs as Sellers have been using for the insurance year commencing
on October 1, 2002.
(m) In addition to the foregoing, Parent shall deliver to
Buyer an annual written statement setting forth Sellers' projection of the
amount, if any, by which the portions of the premiums paid to and retained by
Sellers in respect of Subject Policies that relate to the casualty insurance
loss projections for policy periods beginning October 1, 2001 through the
Closing Date are expected to exceed or be less than, as the case may be, the
aggregate ultimate loss. Promptly following delivery of such statement, Buyer
shall promptly collect from the owners and tenants, and remit to Parent, an
amount
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equal to any projected shortfall; and Sellers shall promptly remit to Buyer (for
the benefit of owners/tenants) an amount equal to the projected excess, if any.
On the eighth anniversary of the Closing Date, Parent shall deliver to Buyer a
written statement setting forth final adjustments based on the sum of actual
claims paid and outstanding reserves based on the immediately preceding year end
valuation date. Parent shall promptly remit to Buyer (for the benefit of the
owners/tenants) any excess, and Buyer shall promptly collect from the applicable
owners/tenants any shortfall and remit the same to Parent.
(n) Buyer shall have the right to conduct periodic audits
regarding Parent's claims administration and post-Closing pass-through of
pre-Closing loss occurrences and related costs to owners/tenants permitted under
this Section 5.9 as may be reasonably requested by Buyer for purposes of
verifying Insurance Statements, and Sellers shall provide Buyer's
representatives reasonable access to the information necessary to permit Buyer
to verify the information included on Insurance Statements.
(o) In the event an "owner" (or "tenant" or "lessee", as
applicable) terminates a Management Agreement prior to January 1, 2004 and the
Patient Injury Claims and related insurance costs owed for the three months
prior to the date of termination are uncollectible, Sellers will indemnify Buyer
pursuant to Article X for such uncollectible amounts.
(p) On or prior to the Closing Date, Sellers shall
deliver to Buyer a schedule setting forth the following information with respect
to each Buyer Injury Claim of which Parent has notice not less than 31 days
prior to the Closing Date:
(i) the occurrence date;
(ii) date reported; and
(iii) current reserve for the claim.
(q) Upon the assignment to Buyer of the patient liability
insurance policies as contemplated by Section 5.9(a), and for a period of six
(6) years thereafter, Buyer will (i) cause Parent and its Affiliates to be
Additional Insureds under such policies, and (ii) arrange for an insurer to
front all deductibles under such patient liability policies.
5.10 SUPPLEMENTAL DISCLOSURE.
Sellers shall have the right from time to time prior to the
Closing to supplement the Disclosure Schedules referenced in Section 3.1
prepared by them with respect to any matter which, if existing or known as of
the date of this Agreement, would have been required to be set forth or
described in such Schedules. Any such supplemental disclosure of a fact,
circumstance or condition that has not had, and that would not reasonably be
expected to have, a Material Adverse Effect will be deemed to have been
disclosed as of the date of this Agreement for purposes of determining whether
or not the conditions set forth in Section 8.2 hereof have been satisfied, but
will not be deemed to have cured any breach of any representation or warranty
made in this Agreement for purposes of Section 10.1(a).
5.11 TRANSITION SERVICES.
On or prior to the date hereof, Parent and Buyer shall have
entered into the Transition Services Agreement, pursuant to which Parent and its
Affiliates shall provide certain services to the Company and the Company
Subsidiaries on the terms and conditions therein set forth.
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5.12 NONCOMPETITION.
(a) As a necessary inducement for Buyer to enter into
this Agreement and consummate the transactions contemplated hereby, Parent
agrees that for a period of three years commencing on the Closing Date (the
"Noncompete Period"), Parent shall not, and shall not cause or permit any of its
Subsidiaries or any other entity under their control to, engage directly or
indirectly, in any capacity, in any activities that Compete with the Senior
Living Services Business within the United States. If Parent is acquired by, or
merges or consolidates with, any Person, the restriction in this Section 5.12
shall not apply to any activities of the acquiror or its Subsidiaries (other
than Parent and its Subsidiaries).
(b) The provisions of this Section 5.12 shall not
restrict the ability of Parent or any of its Subsidiaries from engaging in the
following activities:
(1) the ownership of capital stock or other
equity interests of a Competing SLS Business if (a) such capital stock or other
equity interests are traded on a national or regional stock exchange or are
traded on the Nasdaq National Market, and (b) Parent, directly or indirectly, is
the beneficial owner of not more than five percent (5%) of such Person's
outstanding capital stock or other equity interests, so long as Parent does not
otherwise control such Person; or
(2) the acquisition of any Person which
conducts, participates or engages in, or owns or has an interest in a Competing
SLS Business, if the gross sales of such Person from the Competing SLS
Activities for the prior fiscal year preceding the date on which the acquisition
is consummated and in any fiscal year during the Noncompete Period, do not
represent (a) more than twenty percent (20%) of the gross sales (including sales
from the Competing SLS Activities) of such Person (including its Subsidiaries)
or (b) more than $50 million; or
(3) the acquisition of any Person which
conducts, participates or engages in, or owns or has an interest in a Competing
SLS Business, if the gross sales of such Person (including its Subsidiaries)
from the Competing SLS Activities for the prior fiscal year preceding the date
on which the acquisition is consummated, represent (a) twenty percent (20%) or
more of the gross sales (including sales from the Competing SLS Activities) of
such Person and (b) more than $50 million, provided, that within one year after
such acquisition, revenues derived from the Competing SLS Activities represent
less than twenty percent (20%) of the gross sales (including sales from the
Competing SLS Activities) of such Person (without giving effect to transfers of
assets of such Person to or from Buyer or any of its Subsidiaries during such
period) or constitute less than $50 million.
(c) If a court of competent jurisdiction declares that
any term or provision of this Section 5.12 is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity of
unenforceability shall have the power to reduce the scope, duration or area of
the term or provision, to delete specific words or phrases or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision and this Agreement shall be
enforceable as so modified.
(d) Parent acknowledges that Buyer would not have an
adequate remedy at law in the event of a breach or violation of this Section
5.12 by Parent or any of its Affiliates and hereby consents to the granting by
any court of competent jurisdiction of an injunction or other equitable relief,
without the necessity of posting a bond, cash or otherwise, and without the
necessity of actual monetary loss being proved or Buyer's establishing the
inadequacy of any remedy at Law, and order that the breach or threatened breach
of such provisions may be effectively restrained.
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5.13 FURTHER ASSURANCES.
Each of Buyer and Sellers will use Commercially Reasonable
Efforts to cause all conditions to its and the other Party's obligations
hereunder to be timely satisfied and to perform and fulfill all obligations on
its part to be performed and fulfilled under this Agreement, to the end that the
transactions contemplated by this Agreement shall be effected substantially in
accordance with its terms as soon as reasonably practicable. Each of Buyer and
Sellers shall execute and deliver both before and after the Closing such further
certificates, agreements and other documents and take such other actions as the
other Party may reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters. With respect to the
securing of any requisite Approvals or Permits (consistent with Section 4.3)
after Closing, the Parties shall timely and promptly make all filings which may
be required for the securing of such Approvals or Permits (consistent with
Section 4.3). In furtherance and not in limitation of the foregoing, each of
Buyer and Sellers shall use Commercially Reasonable Efforts to file notification
and report forms and similar applications with any applicable Governmental
Entity whose Approval may be required following the Closing Date. Buyer and
Sellers shall cooperate and use their respective Commercially Reasonable Efforts
to respond to any requests for information by any Governmental Entity in
connection with any such post-Closing Approvals.
5.14 THIRD PARTY INDEMNIFICATION.
To the extent that the Company or any Company Subsidiary does
not have direct contractual indemnification rights against a third party under
the Predecessor Acquisition Agreements (as defined herein), Sellers will pursue
any and all such indemnification rights on behalf of Buyer at the written
request of Buyer; provided that Buyer shall, upon request of Sellers and as a
condition to Sellers pursuing such indemnification rights, enter into a written
agreement with Sellers, in form and substance satisfactory to Sellers, pursuant
to which Buyer shall agree to advance to Sellers any costs or expenses incurred
by or on behalf of Sellers in pursuing such indemnification claims. "Predecessor
Acquisition Agreements" means, collectively, the agreements entered into by
Sellers or any Affiliates of Sellers pursuant to which Sellers, directly or
indirectly through any Affiliates, acquired the capital stock or other Equity
Interests or assets of the Company, the Company Subsidiaries or their
predecessors, as the case may be, and any annexes, exhibits and disclosure
schedules related thereto.
5.15 SECTION 338(h)(10) ELECTION.
Pursuant to Section 3.06 of the Tax Sharing Agreement, Buyer
will make, and Sellers will join with Buyer in making, an election under Section
338(h)(10) of the Code (and any comparable election under state or local Tax
law, including any election similar to the election available under Code
Section 338(g)) with respect to the Purchase.
5.16 SUBORDINATION OF OWNER 10 MANAGEMENT FEES.
(a) Sellers have informed Buyer that the Company and the
owners of the Owner 10 Facilities are negotiating amendments to the Owner 10
Management Agreements pursuant to the terms of a memorandum, a copy of which is
attached hereto as Exhibit G (the "Owner 10 Memorandum"), for the sole purpose
of modifying certain terms and conditions of the Owner 10 Management Agreement,
including the terms on which certain fees payable under the Owner 10 Management
Agreements are subordinate to owner's priorities relating to the Owner 10
Properties as set forth in the Owner 10 Memorandum (the "Owner 10 Management
Agreement Amendments"). Buyer hereby consents to the continued negotiation by
Sellers of the Owner 10 Management Agreement Amendments and the execution and
delivery by the Company of the Owner 10 Management Agreement Amendments
(together
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with any other changes to the Owner 10 Management Agreements agreed upon by
Sellers and the owner of the Owner 10 Facilities provided such changes are
reasonably acceptable to Buyer, which consent shall not be unreasonably
withheld) prior to the Closing. To the extent any such amendments are not
entered into prior to the Closing, Buyer hereby consents to the continued
negotiation by Seller, during the two year period commencing on the Closing
Date, of the Owner 10 Agreement Amendments, and agrees to cause the Company to
execute and deliver any of the Owner 10 Agreement Amendments (together with any
other changes agreed upon by Sellers and the owner of the Owner 10 Facilities
so long as such changes are reasonably acceptable to Buyer, which consent shall
not be unreasonably withheld or delayed), that are agreed upon by Sellers and
the owner of the Owner 10 Facilities during such two-year period.
(b) In the event that the Owner 10 Agreement Amendments
are not executed and delivered with respect to an Owner 10 Management Agreement
or a new management agreement entered into by Buyer or any Affiliate of Buyer,
including the Company or any Company Subsidiary, with respect to the same Owner
10 Facility (each, an "Owner 10 New Management Agreement"), prior to the end of
the two-year period commencing on the Closing Date, Sellers shall be entitled to
a post-Closing adjustment to the Purchase Price in accordance with this Section
5.16. Buyer may assign any Owner 10 Management Agreement or Owner 10 New
Management Agreement, in whole or in part at any time during the two-year period
commencing on the Closing Date; provided that any such assignment shall not
relieve Buyer of its payment obligations under this Section 5.16.
(c) For each Owner 10 Management Agreement or Owner 10
New Management Agreement, the amount of the adjustment under this Section 5.16
(the "Section 5.16 Adjustment Amount") shall be equal to the product of (x) the
difference between (A) the average base fee percentage (i.e., the base fee
calculated as a percentage of gross property revenues) for the remaining number
of 12-month periods under the term of such Owner 10 New Management Agreement or
Owner 10 New Management Agreement, as the case may be, including any possible
extensions of the term thereof (not subject to any conditions, other than the
delivery of notice of such extension, that have not been satisfied as of the of
the calculation under this Section 5.16(c) or are within the reasonable control
of the operator or manager) at the operator's or manager's option without the
consent of the "owner" (or "tenant" or "lessee", as applicable), calculated from
the Closing Date (for Owner 10 Management Agreements) or the effective date (for
Owner 10 New Management Agreements), as the case may be, minus (B) 3.5%,
multiplied by (y) the gross property revenues derived from the operation of the
Owner 10 Facility to which such Owner 10 Management Agreement or Owner 10 New
Management Agreement relates during the immediately preceding 12-month period
(i.e., in the case of a Owner 10 Management Agreement, the 12-month period
ending on the second anniversary of the Closing Date and, in the case of a Owner
10 New Management Agreement, the twelve month period ending on the effective
date of the Owner 10 New Management Agreement) (each, a "Section 5.16
Measurement Period"), multiplied by (z) a number equal to the lesser of (A) the
remaining number of 12-month periods under the term of such Owner 10 Management
Agreement or Owner 10 New Management Agreement, as the case may be, including
any possible extensions of the term thereof (not subject to any conditions,
other than the delivery of notice of such extension, that have not been
satisfied as of the of the calculation under this Section 5.16(c) or are within
the reasonable control of the operator or manager) at the operator's or
manager's option without the consent of the "owner" (or "tenant" or "lessee", as
applicable), calculated from the Closing Date (for Owner 10 Management
Agreements) or the effective date (for Owner 10 New Management Agreements), as
the case may be (including, for any partial year, the actual number of days
remaining under the term of such Owner 10 Management Agreement or Owner 10 New
Management Agreement, as the case may be, including any possible extensions of
the term thereof (not subject to any conditions, other than the delivery of
notice of such extension, that have not been satisfied as of the of the
calculation under this Section 5.16(c) or are within the reasonable control of
the operator or manager) at the operator's or
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manager's option without the consent of the "owner" (or "tenant" or "lessee", as
applicable), calculated from the Closing Date (for Owner 10 Management
Agreements) or the effective date (for Owner 10 New Management Agreements), as
the case may be divided by 360 or if the remaining term of the Owner 10
Management Agreement or Owner 10 New Management Agreement, as the case may be,
is cancelable by the "owner" (or "tenant" or "lessee", as applicable) without
cause or a default by the Company during such period, the number of days prior
notice required to be given by the "owner" (or "tenant" or "lessee", as
applicable) prior to termination of the Management Agreement divided by 360);
and (B) five. Notwithstanding anything to the contrary in this Section 5.16,
Sellers shall not be entitled to more than one adjustment with respect to any
Owner 10 Facility.
(d) Within 90 days following the second anniversary of
the Closing Date, Buyer shall prepare and submit to Parent (on behalf of Parent
and the other Sellers) a statement (the "Section 5.16 Adjustment Statement")
setting forth, in reasonable detail, the Section 5.16 Adjustment Amount. Within
90 days following the effective date of any Owner 10 New Management Agreement,
Buyer shall prepare and submit to Parent (on behalf of Parent and the other
Sellers) a Section 5.16 Adjustment Statement setting forth, in reasonable
detail, the calculation of the Section 5.16 Adjustment Amount with respect to
such Owner 10 New Management Agreement. In the event that Sellers have any
objections with respect to a Section 5.16 Adjustment Statement, Parent (on
behalf of Parent and the other Sellers) shall notify Buyer in writing of their
objections within 30 days after receipt of the Section 5.16 Adjustment
Statement, which notification shall set forth, in reasonable detail, the reasons
for Sellers' objections. If Sellers fail to deliver a notice of objection within
30 days after receipt of a Section 5.16 Adjustment Statement, Sellers shall be
deemed to have accepted the Section 5.16 Adjustment Statement and Buyer's
calculations therein shall not be considered in dispute. In the event Sellers
fail to deliver a notice of objection within 30 days after receipt of a Section
5.16 Adjustment Statement (the "Section 5.16 Objection Notice Period"), Buyer
shall pay an amount equal to the aggregate Section 5.16 Adjustment Amount within
five Business Days after the end of the Section 5.16 Objection Notice Period.
(e) If Sellers timely deliver a notice of objection,
Sellers and Buyer shall endeavor in good faith to resolve all of Sellers'
objections within 30 days after receipt of Sellers' notice of objections. If
Sellers and Buyer are unable to resolve the disputed matters with respect to a
Section 5.16 Adjustment Statement within 30 days after receipt of Sellers'
notice of objections, Sellers and Buyer shall refer the matter to the
Independent Accountants to resolve the matters in dispute (in a manner
consistent with this Section 5.16 and with any matters not in dispute), and the
determination of the Independent Accountants in respect of the correctness of
each matter remaining in dispute shall be final, binding and conclusive on
Sellers and Buyer. The determination of the Independent Accountants shall be
based solely on presentations by Sellers and Buyer and shall not be by
independent review. Subject to any applicable privileges (including the
attorney-client privilege), Buyer shall make available to Sellers and, upon
request, to the Independent Accountants, the books, records, documents and work
papers underlying the preparation of the Section 5.16 Adjustment Statement.
Subject to any applicable privileges (including the attorney-client privilege),
Sellers shall make available to Buyer and, upon request, to the Independent
Accountants, the books, records, documents and work papers created or prepared
by or for Sellers in connection with the review of the Section 5.16 Adjustment
Statement. The fees and expenses, if any, of the Independent Accountants shall
be paid one-half by Sellers and one-half by Buyer. Buyer shall pay the Section
5.16 Adjustment Amount, as determined following resolution of all disputed
matters pursuant to this Section 5.16(e), within 10 days after the final
resolution of such disputed matters.
(f) Any payment under this Section 5.16 shall be made in
immediately available funds by wire transfer to a bank account designated in
advance in writing by Parent.
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5.17 PERFORMANCE TERMINATION AVOIDANCE PAYMENT.
If a payment is required to be made by the Company during
calendar year 2005 pursuant to the terms of a Management Agreement with respect
to any of the Facilities set forth on Schedule 5.17 in order to avoid the
termination of such Management Agreement based on the economic performance of
the applicable Facility during calendar year 2004, and the Company or any
Company Subsidiary shall make such payment, then it shall provide written notice
of such payment to Parent, along with supporting documentation calculating the
amount of such payment and evidencing the making of such payment. Promptly after
receipt of the notice required by the preceding sentence Parent shall reimburse
Buyer for the amount of such payment; provided that Parent's obligations to
reimburse Buyer under this Section 5.17 shall not exceed $2,900,000 in the
aggregate. If the aggregate payments under this Section 5.17 are less than
$2,900,000 Parent shall pay the difference to increase the non-refundable
reserve fund established in Section 5.18 hereof.
5.18 CERTAIN LEASEHOLD TRANSFERS.
At Closing, at the request of Buyer, Parent shall (i) cause
the Company or the applicable Company Subsidiary to transfer the Leases listed
on Schedule 5.18 to a tenant designated by Buyer and CNL and (ii) provide Buyer
or such tenant a non-refundable reserve fund of $6,000,000, provided any such
tenant shall accept assignment of the Leases specified above and the
restrictions and obligations (the "Contract Restrictions") contemplated by
Section 5.7(b), and Parent will not have any equity interest or other claim
against such tenant except in respect of the Contract Restrictions. The Parties
shall cooperate to effect the transactions described in this Section 5.18.
5.19 STATUS OF ONGOING PROCEEDINGS
From and after the date of this Agreement, Sellers shall keep
Buyer fully informed regarding the progress and status of the proceedings
described on Schedule 5.19 and provide promptly to Buyer copies of all written
correspondence, pleadings and other documents related thereto, except those
materials and documents that are subject to the attorney-client privilege or
other similar privilege, until the final resolution thereof.
ARTICLE VI
EMPLOYEES AND EMPLOYEE MATTERS
6.1 NON-EXECUTIVE EMPLOYEES
(a) The names of each corporate-level and regional-level
employee, other than employees described in Section 6.3, of the Company and the
Company Subsidiaries, together with their date of hire, rates of annual
compensation and pay grade, as of the date of this Agreement will be set forth
on a schedule and supplied to Buyer within 10 days after the date of this
Agreement. Buyer shall cause the Company and each Company Subsidiary, as
applicable, to continue to employ substantially all of such corporate-level and
regional-level non-executive Active Employees (as defined below) for a period of
at least 90 days following the Closing; provided, however, that nothing herein
shall be interpreted or construed in a manner that would prevent the Company or
any Company Subsidiary that employs such person (i) to terminate such person's
employment at any time after the Closing for cause or in connection with a
reduction in staff resulting from the termination of one or more Management
Agreements or (ii) to continue to employ facility-level employees for any period
of time. The Company and the Company Subsidiaries, as applicable, shall provide
separation pay in accordance with the policies set forth in Schedule 6.1(a) to
those corporate-level and regional-level Company and Company Subsidiary
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employees, other than employees described in Section 6.3, who are not offered a
continuing position with the Company or a Company Subsidiary without a
significant reduction in cash compensation after the 90 day period following the
Closing Date in accordance with the policies set forth in Schedule 6.1(a). The
receipt of such separation pay shall be conditioned upon the execution and
delivery of a standard company release by each such employee.
(b) Buyer, the Company and the Company Subsidiaries shall
have no obligation to employ anyone who is employed by Parent or its Affiliates
(other than the Company and the Company Subsidiaries) after the Closing, except
as otherwise expressly agreed in writing by Buyer and such employees. The term
"Active Employees" shall include all full-time employees, employees on workers'
compensation, military leave, maternity leave, leave under the Family and
Medical Leave Act of 1993, on layoff with recall rights, and employees on other
approved leaves of absence with a legal or contractual right to reinstatement.
The names of each employee on workers' compensation, military leave, maternity
leave, leave under the Family and Medical Leave Act of 1993, on layoff with
recall rights, and on other approved leaves of absence with a legal or
contractual right to reinstatement, as of the date of this Agreement will be set
forth on a schedule and supplied to Buyer within 10 days of the date of this
Agreement.
6.2 EMPLOYEE BONUSES.
Parent shall determine and cause to be paid the bonuses for
corporate, regional and community based eligible employees under and in
accordance with the Company's or any Company Subsidiary's bonus policies or
plans in effect on the date of this Agreement for the year ending January 3,
2003. For the period commencing January 4, 2003 until the Closing, the Company
and any Company Subsidiary shall accrue bonus expense in accordance with the
Company's or the Company Subsidiary's bonus policies or plans for purposes of
Adjusted Working Capital.
6.3 EXECUTIVE SEVERANCE AGREEMENTS.
The Company and the Company Subsidiaries, as applicable, shall
be solely responsible for and provide separation pay for the executives listed
in Schedule 6.3(a)(1), in accordance with the provisions listed on Schedule
6.3(a)(2) and subject to Section 6.5. Parent shall be solely responsible for and
provide separation pay for the executives listed in Schedule 6.3(a)(3), in
accordance with the provisions listed on Schedule 6.3(a)(4). The receipt of such
separation pay by any executive listed in Schedule 6.3(a)(1) or Schedule
6.3(a)(3) shall be conditioned upon the execution and delivery of a standard
company release by each such executive.
6.4 EMPLOYEE BENEFIT AND HEALTH PLAN MATTERS.
(a) Immediately following the Closing Date, Company and
Company Subsidiary employees, during such time as their employment with Buyer
and its Affiliates is continued, shall be eligible to participate in Buyer's
employee benefit plans that provide health, dental, vision, disability, life
insurance and 401(k) benefits ("Buyer's Benefit Plans") on the same terms and
conditions as similarly situated employees of Buyer are eligible to participate
therein, subject to the terms and conditions of such plans, provided, however,
that any Company or Company Subsidiary employee who is hospitalized or is
disabled pursuant to the terms of the Marriott International, Inc. Long-Term
Disability Plan, the Marriott International, Inc. Short-Term Disability Plan or
the Marriott International, Inc. Disability Plus Plan ("Parent's Disability
Plans") on the Closing Date shall not be eligible to participate in the Buyer's
health, dental, vision plans, or eligible for any benefits thereunder until such
Company or Company Subsidiary employee has returned to work or is no longer
disabled pursuant to the Parent's Disability Plans.
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Moreover, Buyer will provide under its comprehensive major medical and dental
plans for the integration of current year co-payments and payments made under a
deductible for Sellers' indemnity plans. Buyer shall cause Buyer's Benefit Plans
to recognize prior service of a Company or Company Subsidiary employee with
Parent and its Affiliates to the extent recognized under the corresponding
employee benefit plans of Parent ("Parent's Benefit Plans") prior to the Closing
as service with Buyer and its Affiliates solely for purposes of (i) any Buyer
Benefit Plan that is not an Employee Pension Benefit Plan for purposes of any
waiting period and eligibility requirements and (ii) any Buyer Benefit Plan that
is an Employee Pension Benefit Plan, for purposes of eligibility (including
eligibility for early retirement benefits) and vesting (but not benefit accrual)
thereunder. Except as provided above, the benefit coverage which Buyer will
provide to Company and Company Subsidiary employees under Buyer's Benefit Plans
shall commence immediately following the Closing. Parent shall continue to
provide benefit coverage to all Company and Company Subsidiary employees under
Parent's Benefit Plans until the Closing and to all former employees who are
eligible for any post-termination of services benefits under Parent's Benefit
Plans. Notwithstanding the foregoing, Parent shall retain all liability,
responsibility and obligation under the Parent's Benefit Plans with respect to
the Company and the Company Subsidiaries employees for the provision of any
benefits under such plans, including comprehensive health, dental or drug
welfare benefits payable with respect to any covered health, dental, and/or
other covered services and/or materials and/or supplies and/or expenses, which
were provided to or were incurred prior to the Closing, regardless of whether
the payment therefore is due before or after the Closing Date; provided,
however, that nothing herein shall require Parent to adopt any new plans or
benefits. Nothing in this Agreement shall cause duplicate benefits to be paid or
provided to Company or Company Subsidiary employees.
(b) Immediately following the Closing Date, Company and
Company Subsidiary employees, during such time as their employment with Buyer
and its Affiliates is continued, shall be eligible to participate in Buyer's
short-term and long-term disability employee benefit plans ("Buyer's Disability
Plans") on the same terms and conditions as similarly situated employees of
Buyer are eligible to participate therein, subject to the terms and conditions
of such plans; provided, however, that any Company or Company Subsidiary
employee who is disabled pursuant to the terms of the Parent's Disability Plans
on the Closing Date shall not be eligible to participate in the Buyer's
Disability Plans or eligible for any benefits thereunder until such Company or
Company Subsidiary employee is no longer disabled pursuant to the Parent's
Disability Plans. Buyer shall cause the Buyer's Disability Plans to recognize
prior service of a Company or Company Subsidiary employee with Parent and its
Affiliates to the extent recognized under the Parent's Disability Plans prior to
the Closing as service with Buyer and its Affiliates solely for purposes of any
waiting period and eligibility requirements thereunder. Except as provided
above, the benefit coverage which Buyer will provide to Company and Company
Subsidiary employees under Buyer's Disability Plans shall commence immediately
following the Closing. Parent shall continue to provide benefit coverage to all
Company and Company Subsidiary employees under the Parent's Disability Plans
until the Closing and will continue to provide benefit coverage under the
Parent's Disability Plans to those Company and Company Subsidiary employees who
are disabled pursuant to the Parent's Disability Plans on the Closing Date until
such employees cease to be disabled pursuant to the Parent's Disability Plans.
Notwithstanding the foregoing, Parent shall retain all liability, responsibility
and obligation under the Parent's Disability Plans with respect to the Company
and the Company Subsidiaries employees for the provision of any benefits under
such plans that were provided to or were incurred prior to the Closing,
regardless of whether the payment therefore is due before or after the Closing.
(c) Except as otherwise provided in this Agreement,
Parent agrees that effective as of the Closing Date, Buyer and its Affiliates
shall have no liability or obligation with respect to any Parent's Benefit Plan
or any benefits or other amounts payable or provided under any Parent's Benefit
Plan or any contract relating to employment or termination of employment between
Parent or any of its
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Affiliates and any of their employees or former employees. Effective as of the
Closing Date, the active participation of all Company and Company Subsidiary
employees and their beneficiaries in the Parent's Benefit Plans will terminate
and no further benefits shall accrue under the Parent's Benefit Plans with
respect to any Company and Company Subsidiary employees or any beneficiary
thereof, except to the extent provided in this Agreement. Parent shall take all
necessary or appropriate actions to cause the Company and the Company
Subsidiaries to cease their participation and the participation of their
employees in the Parent's Benefit Plans as of the Closing Date.
(d) Prior to the Closing, Parent shall take all necessary
or appropriate actions to complete the merger of and transfer of all assets and
liabilities of The Forum Group 401(k) Savings Plan with and into the Marriott
International, Inc. Employees' Profit Sharing Retirement and Savings Plan and
Trust.
(e) The terms of Buyer's 401(k) plan shall provide that
Company and Company Subsidiary employees have the right to make individual
rollover contributions to Buyer's 401(k) plan of any "eligible rollover
distributions," as such term is defined in the Parent's 401(k) plan, distributed
by Parent's 401(k) plan; provided, however, that an eligible rollover
distribution shall not include shares of Parent's common stock.
(f) Matching contributions shall be made to Parent's
401(k) plan on behalf of Company or Company Subsidiary employees at the same
time as matching contributions are made to Parent's 401(k) plan with respect to
other employees of Parent participating in such 401(k) plan.
(g) Thirty days prior to Closing, Parent shall notify
Buyer in writing of the amount of each Company and Company Subsidiary employee's
positive account balances (net of any outstanding reimbursement checks) under
the Marriott International, Inc. Health Care Spending Account Plan and the
Marriott International, Inc. Dependent Care Assistance Plan (the "Parent's Flex
Plans") (net of any outstanding reimbursement checks) as of such date and
deliver to Buyer information on participant elections, year-to-date
contributions and year-to-date claims paid under the Parent's Flex Plans for the
respective plan years of the Parent's Flex Plans that include the Closing Date.
As soon as practicable after the Closing Date, Parent shall cause to be
delivered to Buyer: (i) the information described in the preceding sentence
updated to reflect the positive account balances (net of outstanding
reimbursement checks) of all Company and Company Subsidiary employees as of the
Closing, (ii) all claims payments and contributions made under each Parent's
Flex Plan with respect to each Company and Company Subsidiary employee through
the Closing Date; and (iii) a cash payment equal to the aggregate positive
account balances (net of outstanding reimbursement checks) of the Company and
Company Subsidiary employees under the Parent's Flex Plans as of the Closing.
Buyer shall cause the appropriate Buyer flexible spending account plan (the
"Buyer's Flex Plan") to credit the account balances of the Company and Company
Subsidiary employees under the Buyer's Flex Plan with amounts equal to their
respective account balances under the Parent's Flex Plans (net of outstanding
reimbursement checks) as of the Closing. Parent shall provide Buyer with such
information and assistance as Buyer may reasonably request to allow Buyer to
fulfill its obligations under this Section 6.4(g).
(h) Buyer will assume the liability to make deferred
compensation payments under the Marriott International, Inc. Executive Deferred
Compensation Plan solely with respect to those Company and Company Subsidiary
Active Employees who are participants in the Marriott International, Inc.
Executive Deferred Compensation Plan upon the Closing Date. On or promptly after
the Closing Date, Parent shall transfer assets to Buyer equal to the benefits
that have accrued under such plan on behalf of such employees as of the Closing
Date.
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(i) On and after the Closing Date, neither the Company
nor the Company Subsidiaries shall be bound by any retirement agreements entered
into initially by the Forum Group, Inc. Prior to the Closing, Parent shall take
all necessary or appropriate actions to either satisfy all obligations under the
terms of such agreements or transfer all legal obligations under such agreements
to either Parent or an Affiliate of Parent.
(j) Parent agrees to transfer to Buyer any records
relating to withholding and payment of income, disability, unemployment, FICA,
and similar taxes ("Payroll Taxes") with respect to wages paid by the Parent
during the 2003 calendar year to the employees of the Company and the Company
Subsidiaries as of the Closing Date.
6.5 EQUITY-BASED COMPENSATION.
Buyer shall not assume or be obligated to replace any vested
or unvested equity-based awards granted to the employees of the Company or the
Company Subsidiaries under the Marriott International, Inc. Employee Stock
Purchase Plan, the Marriott International, Inc. 2002 Comprehensive Stock and
Cash Incentive Plan or any other equity-based compensation plan, program or
policy, notwithstanding any policies or provisions of any severance plan, policy
or arrangement or separation plan, policy or arrangement to the contrary.
6.6 VACATION, PERSONAL AND SICK LEAVE.
On the Closing Date, Buyer shall cause the Company and the
Company Subsidiaries to: (i) assume all liabilities of Parent or any Affiliate
of Parent with respect to any accrued but unused vacation time, personal time
and sick leave of the employees of the Company and the Company Subsidiaries; and
(ii) allow such employees to receive paid time off on or after the Closing Date
for any unused vacation time, personal time or sick leave accrued prior to the
Closing Date. On and after the Closing Date, Company and Company Subsidiary
employees shall accrue vacation time, personal time and sick leave under the
Buyer's policies or practices as then in effect. The full amount of the vacation
time and personal time shall be a current liability as of the Closing Date for
purposes of Adjusted Working Capital.
6.7 EMPLOYEE RIGHTS.
(a) Nothing herein expressly stated or implied shall
confer upon any employee of Parent or its Affiliates or the Company or the
Company Subsidiaries, or Buyer or its Affiliates, or upon any legal
representative of any such employee, or upon any collective bargaining agent,
any rights or remedies, including any right to employment or continued
employment for any specified period, of any nature or kind whatsoever under or
by reason of this Agreement.
(b) Nothing in this Agreement shall be deemed to confer
upon any person (or any beneficiary thereof) any rights under or with respect to
any plan, program, or arrangement described in or contemplated by this
Agreement, and each person (and any beneficiary thereof) shall be entitled to
look only to the express terms of any such plan, program, or arrangement for his
or her rights thereunder.
(c) Nothing in this Agreement shall cause Buyer or its
Affiliates or the Company or Company Subsidiaries, or Parent or its Affiliates
to have any obligation to provide employment or any employee benefits to any
individual who is not a Company or Company Subsidiary employee or, except as
otherwise provided in this Agreement, to continue to employ any Company or
Company Subsidiary employee for any period of time following the Closing Date.
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6.8 WARN ACT REQUIREMENTS.
The Company shall not, and shall cause the Company
Subsidiaries each not to, at any time within the 90-day period prior to the
Closing Date, effectuate a "plant closing" or "mass layoff" as those terms are
defined in the Worker Adjustment Retraining and Notification Act of 1988, as
amended ("WARN Act"), or any similar Law, affecting in whole or in part any site
of employment, facility, operating unit or employee of the Company or the
Company Subsidiaries, without notifying Buyer in advance and without complying
with the notice requirements and all other provisions of the WARN Act and any
similar Law.
6.9 EMPLOYMENT-RELATED CLAIMS.
Sellers shall continue to be responsible for and shall,
jointly and severally, indemnify, defend and hold harmless Buyer, the Company,
each of the Company Subsidiaries, each owner of a managed or leased Facility and
each of their respective directors, officers, employees, managers, Affiliates,
agents, successors and assigns from and against any and all liability relating
to, resulting from or arising out of any Employment-Related Claims to the extent
relating to, resulting from or arising out of any action, inaction, event,
condition, Liability or obligation occurring or existing on or prior to the
Closing Date and relating to Sellers, the Company, any Company Subsidiary or any
of their respective Affiliates (except to the extent such Liability was
reflected in the Financial Statements). As used herein, "Employment-Related
Claim" means a claim or cause of action arising under or relating to ERISA, the
National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Fair Labor Standards Act, the WARN Act,
the Americans with Disabilities Act, the Occupational Safety and Health Act,
state or federal unemployment laws and all other Laws, including state and local
Laws, pertaining to employees. Buyer shall cooperate with Sellers (at Sellers'
expense) including by providing any information, documents and personnel
reasonably requested by Sellers relating to such Employment-Related Claim and
taking such action in connection with contesting such Employment-Related Claim
as Sellers shall reasonably request and indemnification for such Employment
Related Claim shall be subject to the terms of Article X including Section 10.3;
and provided further, that nothing herein is intended to or shall (i) relieve
"owners" (or "tenants" or lessees", as applicable) from liability that such
persons would have under the applicable Management Agreements and practices in
effect as of the Closing Date or (ii) relieve Buyer of its obligations under
Section 5.9. Buyer shall have the right to directly participate and to have
counsel selected by Buyer participate in all proceedings relating to
Employment-Related Claims at Buyer's expense.
ARTICLE VII
[INTENTIONALLY OMITTED]
ARTICLE VIII
CONDITIONS OF PURCHASE
8.1 GENERAL CONDITIONS.
The obligations of Buyer and Sellers to effect the Closing
shall be subject to the following conditions, unless waived in writing by all
Parties on or prior to the Closing Date:
(a) NO ORDERS; LEGAL PROCEEDINGS. No Action shall be
pending by any Governmental Entity, and no Governmental Entity shall have issued
or entered any injunction (whether temporary, preliminary, permanent or by
stipulation), judgment or order, which shall remain in effect, that would (i)
prevent consummation of the Acquisition Transactions, (ii) prohibit or limit in
any material
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respect Buyer's ability to exercise ownership of the Stock or (iii) materially
adversely affect Buyer's right to own the assets or operate the Business.
(b) APPROVALS. All Approvals and Permits required by
applicable Law to be obtained from any Governmental Entity to consummate the
transactions contemplated hereby which are identified on Schedule 8.1(b) shall
have been received or obtained on or prior to the Closing Date and any
applicable waiting period (and any extension thereof) under the
Xxxx-Xxxxx-Xxxxxx Act shall have expired or been terminated; provided (x) if the
alternative discussed in the last sentence of Section 4.3(a) is available and
may be implemented in a timely manner this condition be deemed satisfied to the
extent provided in the last sentence of Section 4.3(a) and (y) an Approval or
Permit shall be deemed to have been "received" or "obtained" if Buyer shall have
been informed (verbally or in writing) by the applicable Governmental Entity
that such Approval or Permit will be transferred, issued or reissued without the
imposition of any materially burdensome conditions.
(c) CNL TRANSACTION. The CNL Transaction shall have been
consummated.
8.2 CONDITIONS TO OBLIGATION OF BUYER.
The obligation of Buyer to effect the Closing shall be further
subject to the following conditions, except to the extent waived in writing by
Buyer on or prior to the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES OF SELLERS. The
representations and warranties of Sellers contained herein shall be true and
correct on the date of this Agreement and on the Closing Date as though made on
the Closing Date (without giving effect to any supplements or amendments to the
Disclosure Schedules delivered pursuant to Section 5.10) (unless such
representations and warranties by their terms speak as of an earlier date, in
which case they shall be true and correct, as of such date), except to the
extent that the failure of such representations and warranties to be true and
correct, has not had or would not reasonably be expected, in any individual case
or in the aggregate, to have a Material Adverse Effect, but excluding any fact,
circumstance or condition for which a Purchase Price adjustment (or related
indemnification) is available under this Agreement or any Related Agreement. For
purposes of this Section 8.2(a), the representations and warranties of Sellers
contained in this Agreement shall be deemed to have been made without any
qualification as to materiality and accordingly, all references in such
representations and warranties to "material," "Material Adverse Effect," "in all
material respects," and similar terms and phrases shall be deemed deleted
therefrom (except, however, that concepts of materiality and correlative
meanings will be given effect (and not deleted) to the extent provided in the
last sentence of Section 10.1(a)).
(b) COVENANTS OF SELLERS. Sellers shall have performed
all obligations and complied with all covenants set forth in this Agreement
which are required to be performed or complied with by them at or prior to the
Closing except where the failure to perform would not reasonably be expected to
have a Material Adverse Effect, but excluding any non-performance for which a
Purchase Price adjustment (or related indemnification) is available under this
Agreement or any Related Agreement.
(c) OFFICER'S CERTIFICATE. Buyer shall have received a
certificate of Sellers, in form and substance reasonably satisfactory to Buyer,
signed by an authorized executive officer of each Seller to the effect that the
conditions in Sections 8.2(a) and 8.2(b) have been satisfied.
(d) RESIGNATION OF DIRECTORS AND CERTAIN OFFICERS. The
officers of the Company and the Company Subsidiaries who will remain employed by
Sellers or one of its Affiliates after the Closing Date and all directors of the
Company and the Company Subsidiaries shall have submitted their
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resignations in writing to the Company and/or the relevant Company Subsidiaries,
as applicable. Such resignations of officers and directors (in such capacity)
shall be effective as of the Closing.
(e) FIRPTA CERTIFICATE. Buyer shall have received a
non-foreign status certificate, duly executed, that would exempt the
transactions contemplated by this Agreement from withholding pursuant to the
provisions of the Foreign Investment in Real Property Tax Act.
(f) SELLERS' STOCK CERTIFICATES. Buyer shall have
received certificates representing the Stock, duly endorsed in blank or with
duly executed stock powers, as contemplated in Section 2.1.
(g) INTELLECTUAL PROPERTY ASSIGNMENTS. In accordance with
Section 5.6, Buyer shall have received from Sellers or their Affiliates
assignments to the Company and the Company Subsidiaries, in substantially the
form attached hereto as Exhibit D, of those registered trademarks and service
marks and trademark and service xxxx applications listed on Schedule 5.6(a)(1),
and Sellers and their Affiliates shall have executed documents, in substantially
the form attached hereto as Exhibit E, surrendering the trademark and service
xxxx registrations listed on Schedule 5.6(b).
(h) OPINION OF SELLERS' COUNSEL. Buyer shall have
received from O'Melveny & Xxxxx LLP and Xxxxxxxx, Xxxxxx & Finger legal opinions
dated as of the Closing Date addressing the matters set forth on Exhibit H
hereto.
(i) TAX SHARING AGREEMENT. Sellers shall have executed
and delivered the Tax Sharing Agreement.
(j) FINANCIAL SUPPORT ARRANGEMENTS. Parent shall have
entered into the Intercreditor Agreements in the form of Exhibit F with respect
to the documents identified on Schedule 5.7(a)(1) as the "Owner 2 Revolving
Credit Facilities".
(k) [RESERVED].
(l) SUBLEASE. Parent shall have executed and delivered
the Sublease.
(m) FINANCIAL SUPPORT ARRANGEMENTS AND LIFECARE
AGREEMENTS OF UNDERTAKING. Parent shall have executed and delivered the
Assumption and Reimbursement Agreement and any other documentation required to
effectuate the provisions of Section 5.7.
8.3 CONDITIONS TO OBLIGATION OF SELLERS.
The obligation of Sellers to effect the Closing shall be
further subject to the following conditions, except to the extent waived in
writing by Sellers on or prior to the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES OF BUYER. The
representations and warranties of Buyer contained herein shall be true and
correct on the date of this Agreement and on the Closing Date as though made on
the Closing Date, unless such representations and warranties by their terms
speak as of an earlier date, in which case they shall be true and correct as of
such date, except to the extent that the failure of such representations and
warranties to be true and correct (without giving effect to any limitation as to
"materiality or "Material Adverse Effect"), would not reasonably be expected, in
any individual case or in the aggregate, to have a material adverse effect on
Buyer's ability to perform this Agreement.
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(b) COVENANTS OF BUYER. Buyer shall have in all material
respects performed all obligations and complied with all covenants set forth in
this Agreement which are required to be performed or complied with by it at or
prior to the Closing.
(c) OFFICER'S CERTIFICATE. Sellers shall have received a
certificate of Buyer, in form and substance reasonably satisfactory to Sellers,
signed by an authorized executive officer of Buyer to the effect that the
conditions in Sections 8.3(a) and 8.3(b) have been satisfied.
(d) FINANCIAL SUPPORT ARRANGEMENTS AND LIFECARE
AGREEMENTS OF UNDERTAKING. Buyer shall have executed and delivered the
Assumption and Reimbursement Agreement and any other documentation reasonably
requested by Sellers to effectuate the provisions of Section 5.7(e).
(e) OPINION OF BUYER'S COUNSEL. Sellers shall have
received from Xxxxx & Xxxxxxx L.L.P. and Xxxxxxxx, Xxxxxx & Finger legal
opinions dated as of the Closing Date addressing the matters set forth on
Exhibit I hereto.
(f) TAX SHARING AGREEMENT. The Company shall have
executed and delivered the Tax Sharing Agreement.
(g) SUBLEASE. Buyer shall have executed and delivered the
Sublease.
ARTICLE IX
TERMINATION OF OBLIGATIONS
9.1 TERMINATION OF AGREEMENT.
Anything herein to the contrary notwithstanding, this
Agreement may be terminated at any time before the Closing as follows and in no
other manner:
(a) MUTUAL CONSENT. By mutual consent in writing of Buyer
and Sellers.
(b) CLOSING NOT CONSUMMATED BY EARLIER DATE. By Sellers
or Buyer at any time after May 31, 2003, if the Closing shall not have occurred
by such date, unless extended by mutual consent in writing of Buyer and Sellers;
provided, that the right to terminate this Agreement under this Section 9.1(b)
shall not be available to any Party whose breach of a representation or warranty
or failure to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing to occur by such date.
(c) CONDITIONS TO BUYER'S PERFORMANCE NOT MET. By Buyer
upon written notice to Sellers if any Seller breaches or fails to perform in any
material respect any of its representations, warranties or covenants contained
in this Agreement, which breach of failure to perform (i) would give rise to the
failure of a condition set forth in Article VIII, and (ii) if capable of being
cured, has not been cured within 30 days after the giving of written notice to
Sellers of such breach; provided that Buyer is not then in material breach of
its representations, warranties or covenants contained in this Agreement.
(d) CONDITIONS TO SELLERS' PERFORMANCE NOT MET. By
Sellers upon written notice to Buyer if Buyer (x) breaches of fails to perform
in any material respect any of its representations, warranties or covenants
contained in this Agreement (other than Section 4.14 which is addressed in
clause (y) below), which breach of failure to perform (i) would give rise to the
failure of a condition set forth in Article VIII, and (ii) if capable of being
cured, has not been cured within 30 days after the giving of
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written notice to Buyer of such breach or (y) breaches or fails to perform its
obligation under Section 4.14; provided that no Seller is then in material
breach of its representations, warranties or covenants contained in this
Agreement.
9.2 EFFECT OF TERMINATION.
(a) In the event that this Agreement shall be terminated
pursuant to Section 9.1, all future obligations of the Parties under this
Agreement shall terminate without further liability of any Party to another;
provided that the obligations of the Parties contained in this Section 9.2 and
Article XI and the Confidentiality Agreement shall survive any such termination
in accordance with their terms. A termination under Section 9.1 shall not
relieve any Party of any liability for a willful breach of any covenant or
agreement under this Agreement, or be deemed to constitute a waiver of any
available remedy (including specific performance if available) for any such
breach. If this Agreement is terminated for any reason, for a period of one year
after this Agreement is terminated Buyer will not without the prior written
consent of Parent, directly or indirectly, solicit for employment or employ any
current employee of Parent or any current employee of the Company or the
Business, so long as such employee both remains in the employ of Parent, the
Company or any Subsidiary of either, and holds a position of responsibility of
general manager or higher; provided, however, that this sentence shall not
restrict or preclude Buyer from making generalized searches for employees by use
of advertisements in the media (including without limitation trade media and the
internet) or by engaging search firms which are not targeted or focused on
employees of Parent, the Company, or either of their Affiliates or Subsidiaries,
and hiring an employee as a result of such searches.
(b) Buyer acknowledges and agrees that, notwithstanding
anything in this Agreement to the contrary, if (i) the conditions to Closing in
Sections 8.1 and 8.2 have been satisfied and this Agreement has not been
terminated in accordance with its terms prior to such satisfaction and (ii)
Sellers have notified Buyer of their intention to consummate the transaction
contemplated under this Agreement, and if the Closing does not then occur due to
the refusal of Buyer to consummate the transactions contemplated under this
Agreement, then at Seller's election (x) Parent will be entitled to draw the
entire amount of the L/C or Escrow Fund (as applicable) as liquidated damages
(and not as a penalty), which the Parties agree is a reasonable estimate of the
damages that would be sustained by Sellers in the event that the Closing does
not occur or (y) Sellers will be entitled to pursue any remedies available to
Sellers at law or in equity, subject any express limitations set forth in this
Agreement.
(c) Sellers acknowledge and agree that, notwithstanding
anything in this Agreement to the contrary, if (i) the conditions to Closing in
Sections 8.1 and 8.3 have been satisfied and this Agreement has not been
terminated in accordance with its terms prior to such satisfaction and (ii)
Buyer has notified Sellers of its intention to consummate the transaction
contemplated under this Agreement, and if the Closing does not then occur due to
the refusal of Sellers to consummate the transactions contemplated under this
Agreement, then Buyer shall be entitled to any remedies available to Buyer at
law or in equity, subject to any express limitations set forth in this
Agreement, including the right to specifically enforce the terms of this
Agreement in a court of competent jurisdiction.
ARTICLE X
INDEMNIFICATION; SURVIVAL
10.1 OBLIGATIONS OF SELLERS.
Effective as of the Closing, Sellers shall, jointly and
severally, indemnify, defend and hold harmless Buyer, the Company and the
Company Subsidiaries, and each of their respective directors,
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managers, officers, employees, Affiliates, agents and assigns from and against
any and all Indemnifiable Losses relating to, resulting from or arising out of:
(a) any breach of any of the representations and
warranties made by Sellers as of the date hereof or as of the Closing Date in or
pursuant to this Agreement, other than those relating to Taxes (which are
governed by the Tax Sharing Agreement);
(b) any material breach or nonperformance of any of the
covenants of Sellers contained in this Agreement or the Related Agreements,
including any matter as to which Sellers in other provisions of this Agreement
or the Tax Sharing Agreement have expressly agreed to indemnify Buyer or
(subsequent to Closing) the Company or any Company Subsidiary;
(c) any matter as to which Sellers in other provisions of
this Agreement have agreed to retain liabilities or obligations of the Company
or any Company Subsidiary (other than as covered by clause (e) of this Section
10.1);
(d) any Pre-Closing Claim relating to: (i) any litigation
or disputes pending as of the Closing Date (including the matters described on
Schedule 3.1(i)); (ii) employment-related claims and related matters as to which
Sellers have agreed to indemnify Buyer pursuant to Section 6.9; (iii) Medicare,
Medicaid or any other State or Federal HealthCare Programs; or (iv) any claims
and related matters as to which Sellers have agreed to indemnify Buyer or retain
liability pursuant to Section 5.9; but in each case only to the extent such
Indemnifiable Loss arises out of, relates to or results from any action,
inaction, event, condition, Liability, facts or circumstances that occurred or
existed at or prior to the Closing;
(e) any Pre-Closing Claim not described in clause (d)
above, but only to the extent such Indemnifiable Loss arises out of, relates to
or results from any action, inaction, event, condition, Liability, facts or
circumstances that occurred or existed at or prior to the Closing;
(f) any failure by Parent to perform its obligations
under any Retained Support Arrangement that is identified on Schedule 5.7(c) as
an "Owner 10 Support Arrangement" or identified on Schedule 5.7(c) as an "Owner
1 Support Arrangement," provided that Sellers shall have no obligation under
this clause (f) to the extent that the applicable obligation of Parent to make a
payment or otherwise perform under any such Retained Support Arrangement results
from the gross negligence or willful misconduct of the Company, Buyer or any of
their Affiliates (it being understood that any operating performance shortfalls
by the Company or any of its Affiliates shall not constitute gross negligence or
willful misconduct under this Section 10.1(f));
(g) any termination of, or claims arising out of,
relating to or resulting from, the Applicable Owner 9 Operating Agreement based
on a failure to obtain a consent in connection with the consummation of the
Stock Purchase Agreement Transactions;
(h) any Environmental Claim to the extent relating to any
action, inaction, event, condition, facts or circumstances that occurred during
the period that the applicable Facility was owned or operated by Sellers or any
of their Affiliates;
(i) any claims by any Person that such Person has an
option, right of first refusal or other right to acquire the Facility set forth
on Schedule 10.1(i) hereto as a result of actions taken on or prior to the
Closing Date;
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(j) the termination or failure to terminate or any other
claim under the Management Agreement for the Xxxxx Xxxx facility;
(k) any claims relating to the NHI Leases or the
Facilities that are the subject of the NHI Leases, including any claim that the
Company has breached one or more of the NHI Leases, any claim that the Company
is obligated to purchase the Facilities that are the subject of the NHI Leases
and any Indemnifiable Losses incurred by the Company in operating the Facilities
that are the subject of the NHI Leases;
(l) any termination of a Management Agreement for a
Facility set forth on Schedule 10.1(l) but under this Section 10.1(l) only to
the extent (x) such termination results from ceasing to use the Parent Marks in
connection with conducting the Business at such Facility and the termination
occurs, or a dispute arises with the "owner" (or "lessee" or "tenant," as
applicable) with respect to termination of the Management Agreement (as a result
of matters subject to indemnification under this clause (l)), prior to the
expiration of the applicable statute of limitations with respect to claims
alleged as the basis for such termination, or (y) any other claims arising out
of, relating to or resulting from, ceasing to use the Parent Marks in connection
with conducting the Business at such Facility; provided that Indemnifiable
Losses due to the loss of the value of a Management Agreement pertaining to any
of the Facilities listed on Schedule 10.1(l) shall be limited to an amount
calculated as set forth on such Schedule with respect to such Facility. For
purposes of this Section 10.1(l), termination of a Management Agreement shall be
deemed to occur when, following notice of termination, the Company or the
applicable Company Subsidiary ceases receiving the management fees in respect of
such Management Agreement; or
(m) any claims arising out of, relating to or resulting
from the failure to make available to Buyer the charter or organizational
documents identified on Schedule 3.1(a)(2) hereto.
The amount and extent of Indemnifiable Losses for claims under Section
10.1(a) shall be calculated without giving effect to any concept of materiality
(or correlative meaning) qualifications included in the representations and
warranties of Sellers (or portions thereof) referred to above and, for purposes
of calculating the amount and extent of Indemnifiable Losses only, each of such
representations and warranties is deemed given as though there were no such
materiality qualification. Notwithstanding the foregoing, materiality (or
correlative meaning) qualifications shall be given effect for purposes of
Section 10.1(a) with respect to representations and warranties (1) that relate
to Financial Statements and any other financial information provided to Buyer
hereunder, (2) that are set forth in Section 3.1(c)(1), clause (iv) of
3.1(c)(2), clause (x) of Section 3.1(e) or under Section 3.1(f)(8) and (3) to
the extent contained in the definition or application of "GAAP," "Material
Contract" or "Permitted Encumbrance."
10.2 OBLIGATIONS OF BUYER.
Effective as of the Closing, Buyer shall indemnify, defend and
hold harmless Sellers and their directors, officers, employees, Affiliates,
agents and assigns from and against any and all Indemnifiable Losses relating
to, resulting from or arising out of:
(a) any breach of any of the representations and
warranties made by Buyer on the Closing Date in or pursuant to this Agreement;
(b) any material breach or nonperformance of any of the
covenants of Buyer contained in this Agreement or the Related Agreements,
including any matter as to which Buyer in other provisions of this Agreement
(including Section 5.9), the Assumption and Reimbursement Agreement or the Tax
Sharing Agreement has expressly agreed to indemnify Sellers;
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(c) any obligations of Buyer, the Company or any Company
Subsidiary (or any of their assignees or transferees of an Underlying
Obligation) arising or claims made under or in respect of any Assumed Financial
Support Arrangement, Lifecare Agreement of Undertaking or Underlying Obligation
after the Closing;
(d) the conduct of the Business after the Closing,
provided that Indemnifiable Losses under this clause (d) shall not include any
damages based on harm to the reputation of Sellers; or
(e) any obligations arising or claims made under or in
respect of license agreements covering any Included Software that is assigned to
the Company, to the extent based on actions or inactions of Buyer or any of its
Affiliates (including the Company or any Company Subsidiary) after the Closing.
10.3 PROCEDURE.
Except with respect to Tax matters, which are governed by the
Tax Sharing Agreement, the following procedures shall apply with respect to
indemnification claims:
(a) NOTICE OF THIRD PARTY CLAIMS. Any Party seeking
indemnification of any Indemnifiable Loss or potential Indemnifiable Loss
arising from a claim asserted by any Person that is not a party to this
Agreement or an Affiliate of a party to this Agreement ("Third Party Claim")
shall give written notice to the Indemnifying Party. Written notice to the
Indemnifying Party of the existence of a Third Party Claim shall be given by the
Indemnified Party promptly after its receipt of an assertion of liability from
the third party, and in any event within twenty (20) days of such assertion.
Failure to provide such notice shall not act as a waiver of the Indemnified
Party's rights with respect to indemnification hereunder (i) so long as such
notice is delivered in accordance with Section 10.4 hereof prior to the
expiration of the applicable survival period for such claim specified in Section
10.4 hereof or (ii) unless, and to the extent that, such failure prejudices the
Indemnifying Party's ability to defend against, reduce or eliminate the
Indemnifiable Loss arising out of such Third Party Claim.
(b) DEFENSE OF THIRD PARTY CLAIMS. In the case of a Third
Party Claim, the Indemnifying Party may, at its option, assume and control the
defense of an Indemnifiable Claim with counsel reasonably satisfactory to the
Indemnified Party, which approval shall not be unreasonably withheld or delayed,
provided that any Indemnifiable Losses that may be incurred or suffered by the
Indemnified Party in connection with such Indemnifiable Claim shall constitute
Indemnifiable Losses for which the Indemnified Party shall be entitled to
indemnification under this Article X. Notwithstanding the foregoing, the
Indemnified Party shall have the right to retain counsel of its choice at its
own expense and participate in the defense of the Indemnifiable Claim. If the
Indemnifying Party does not assume such defense or the Indemnifying Party
notifies the Indemnified Party within ten (10) days after receipt of notice
thereof that the Indemnifying Party will not assume such defense, the
Indemnified Party may control the defense of such claim and may settle the claim
on behalf of and for the account and risk of the Indemnifying Party, who shall
be bound by the result. In all cases, the party without the right to control the
defense of the Indemnifiable Claim may participate in the defense at its own
expense, provided, that if the Indemnifying Party assumes control of such
defense and the Indemnified Party reasonably concludes that the Indemnifying
Party and the Indemnified Party have a conflict of interest or different
defenses available with respect to such Indemnifiable Claim, the reasonable fees
and expenses of counsel of Indemnified Party will be considered "Indemnifiable
Losses" for purposes of this Agreement. If the Indemnifying Party assumes the
defense of such Indemnifiable Claim in accordance with this Section 10.3(b), (i)
as long as the Indemnifying Party diligently conducts such defense, the
Indemnifying Party shall have no liability for any legal or other expenses
subsequently incurred by the Indemnified Party in
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connection with such Indemnifiable Claim (other than as expressly contemplated
in the immediately preceding sentence and the reasonable out-of-pocket costs and
attorneys' fees of investigation and cooperation by the Indemnified Party that
may be requested by the Indemnifying Party in such defense) but the Indemnifying
Party shall thereafter indemnify and hold the Indemnified Party harmless from
and against all Indemnifiable Losses with respect to such Indemnifiable Claim in
accordance with the terms of this Agreement; and (ii) the Indemnifying Party
shall present any defense reasonably suggested by the Indemnified Party or its
counsel.
(c) TAX ADJUSTMENTS. Any amounts payable by the
Indemnifying Party to or on behalf of an Indemnified Party pursuant to this
Agreement shall be paid without reduction for any Tax benefits available to the
Indemnified Party. However, to the extent that the Indemnified Party recognizes
Tax benefits as a result of any Indemnifiable Losses, the Indemnified Party
shall pay the amount of such Tax benefits (but not in excess of the
indemnification payments or payments actually received from the Indemnifying
Party with respect to such Indemnifiable Losses) to the Indemnifying Party as
such Tax benefits are actually recognized by the Indemnified Party. All payments
made pursuant to this Article X shall be treated as adjustments to the purchase
price for the Stock.
(d) SETTLEMENT LIMITATIONS. Notwithstanding anything in
this Section 10.3 to the contrary, except as set forth in Section 10.3(b),
neither the Indemnifying Party nor the Indemnified Party shall, without the
written consent of the other party, not to be unreasonably withheld, settle or
compromise an Indemnifiable Claim. Notwithstanding the preceding sentence, if a
settlement offer solely for money damages is made by the applicable third party
claimant, and the Indemnifying Party notifies the Indemnified Party in writing
of the Indemnifying Party's willingness to accept the settlement offer and pay
the amount called for by such offer without reservation of any rights or
defenses against the Indemnified Party, the Indemnified Party may continue to
contest such claim, free of any participation by the Indemnifying Party, and the
amount of any ultimate liability with respect to such Indemnifiable Claim that
the Indemnifying Party has an obligation to pay hereunder shall be limited to
the lesser of (A) the amount of the settlement offer that the Indemnified Party
declined to accept plus the Indemnifiable Losses of the Indemnified Party
relating to such Indemnifiable Claim through the date of its rejection of the
settlement offer or (B) the aggregate Indemnifiable Losses of the Indemnified
Party with respect to such claim. If the Indemnifying Party makes any payment on
any claim, the Indemnifying Party shall be subrogated, to the extent of such
payment and at no risk or liability to the Indemnified Party, to all rights and
remedies of the Indemnified Party to any insurance benefits or other claims of
the Indemnified Party with respect to such claim.
(e) DIRECT CLAIMS. In the event of any claim for
indemnification under this Article X other than a Third Party Claim under
Section 10.3(a), the Indemnified Party shall give written notice thereof (a
"Direct Claim Notice") to the Indemnifying Party within thirty (30) days after
obtaining actual knowledge thereof, stating the nature and basis of such claim
and the amount thereof, in reasonable detail. Failure to provide such Direct
Claim Notice within such thirty (30) day period shall not act as a waiver of the
Indemnified Party's rights with respect to such claim (i) except as provided in
Section 10.4 or (ii) unless, and only to the extent that, such failure
materially adversely affects the Indemnifying Party's ability to defend against,
reduce or eliminate Indemnifiable Losses arising out of such claim. After
delivery of the Direct Claim Notice, the Parties shall then meet in an attempt
to agree upon a resolution of such Indemnifiable Claim. If the Parties have not
resolved any such Indemnifiable Claim within forty-five (45) days after the date
that the Direct Claim Notice is delivered, then either Party shall have the
right, subject to any express limitations in this Agreement, to pursue any and
all remedies available at law or in equity with respect to such Indemnifiable
Claim. Notwithstanding the foregoing (including the failure of the Parties to
agree on a course of action), each Party shall use Commercially Reasonable
Efforts to address any claims or liabilities that may provide a basis for an
Indemnifiable Claim as if
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indemnification did not exist for such claim such that each Party shall respond
to any claims or liabilities in the same manner it would respond to such claims
or liabilities in the absence of the indemnification provisions of this
Agreement.
10.4 SURVIVAL.
The representations and warranties contained in or made
pursuant to this Agreement and the Related Agreements shall survive for a period
of 18 months after the Closing, except that the representations and warranties
contained in Section 3.1(b) shall remain in full force and effect indefinitely
and the representations and warranties contained in Sections 3.1(d) and 3.1(r),
the first two sentences of Section 3.1(h) and those addressing Medicare,
Medicaid and other State or Federal Healthcare programs shall remain in full
force and effect until the expiration of the applicable statute of limitations.
This Article X shall survive the Closing and shall remain in effect (a) with
respect to Sections 10.1(a) and 10.2(a), so long as the relevant representations
and warranties survive, and (b) with respect to Sections 10.1(b) and 10.2(b) to
the extent those Sections relate to the covenants requiring performance prior to
the Closing ("Pre-Closing Covenants"), for 18 months after the Closing, (c) with
respect to Sections 10.1(b) and 10.2(b) to the extent those Sections relate to
covenants requiring performance after the Closing, so long as the applicable
covenant survives and (d) with respect to Sections 10.1(c), 10.1(d), 10.1(e),
10.1(f), 10.1(g), 10.1(h), 10.1(i), 10.1(j), 10.1(k), 10.1(l) and 10.1(m),
10.2(c), 10.2(d), and 10.2(e) indefinitely. Any matter as to which a claim has
been asserted by written notice setting forth in reasonable detail the nature of
such claim to the other Party that is pending and unresolved at the end of any
applicable limitation period shall continue to be covered by this Article X
notwithstanding any applicable limitation period (which the Parties hereby
waive) until such matter is finally terminated or otherwise resolved by the
Parties under this Agreement or by a court of competent jurisdiction and any
amounts payable hereunder are finally determined and paid.
10.5 LIMITATIONS ON INDEMNIFICATION.
Sellers shall not be required to indemnify any Person under
Section 10.1(a), Section 10.1(b) (solely with respect to Pre-Closing Covenants)
or 10.1(e), (i) unless the amount for which indemnity would otherwise be payable
by Sellers with respect to any given claim exceeds $25,000 ("Included Claims")
and (ii) unless the cumulative amount of all Included Claims exceeds $500,000,
and in such event, Sellers shall be responsible for only the amount in excess of
such $500,000.
10.6 REMEDIES EXCLUSIVE.
The remedies provided for in this Article X shall, except for
the post-Closing Purchase Price adjustments under Sections 2.4, 2.5 and 2.7,
constitute the sole and exclusive remedy for any post-Closing claims with
respect to any breach or inaccuracy of any representation or warranty or
pre-Closing covenants in this Agreement, except with respect to claims based on
fraud or with respect to the ability of the Parties to seek injunctive relief or
other appropriate equitable remedies. To the extent permitted by law, each Party
hereby waives any provision of Law to the extent that it would limit or restrict
the agreement contained in this Section 10.6.
10.7 NO DUPLICATION OF CLAIMS
Any liability for indemnification under this Article X or for
any Purchase Price adjustment under Article II hereof shall be determined
without duplication for recovery by reason of the state of facts giving rise to
such liability constituting a breach of more than one representation, warranty,
covenant or agreement hereunder or any purchase price adjustment under Article
II hereof. Without
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limitation of the foregoing, Buyer shall not be entitled to
any indemnification for any liability or loss to the extent taken into account
in determining Final Adjusted Working Capital.
10.8 NO SET-OFF
Each Party hereby waives any right it may have to set-off any
amounts payable under this Agreement or any Related Agreement against amounts
payable to any other party under this Agreement or any Related Agreement unless
expressly consented to in writing by the affected parties.
10.9 CLAIMS AGAINST THIRD PARTIES; PRE-CLOSING LITIGATION
(a) To the extent Buyer, the Company or any Company
Subsidiary has any rights against third parties in connection with any claim for
indemnification, or for a Purchase Price adjustment under Sections 2.4, 2.5 or
2.7, including any rights to contest the termination of a Management Agreement
or to obtain reimbursement under any Management Agreement for amounts properly
charged to an "owner" (or "tenant" or "lessee", as applicable) thereunder, Buyer
shall or shall cause Company or the applicable Company Subsidiary, if requested
by Sellers, use Commercially Reasonable Efforts to cooperate with Sellers in
diligently asserting such rights (at the expense of Sellers) with counsel
reasonably acceptable to Sellers. The foregoing shall not limit the rights of
Sellers as Indemnifying Party under Section 10.3 in connection with any Third
Party Claim.
(b) To the extent the Company or any Company Subsidiary
obtains any monetary judgment or settlement in respect of any Action commenced
prior to the Closing, Buyer shall cause the Company or the applicable Company
Subsidiary to turn over such monetary award or settlement to Sellers provided
that Sellers cover the costs and expenses of such Action.
10.10 CERTAIN RIGHTS IN CONNECTION WITH PURCHASE PRICE
ADJUSTMENTS
If Buyer receives any notice from the "owner" (or "tenant" or
"lessee", as applicable) regarding termination of any Management Agreement and
Buyer delivers notice thereof in accordance with Section 2.4(a), 2.5(a) or
2.7(a), as the case may be, then (i) if such notice involves a Third Party claim
by the "owner" (or "tenant" or "lessee", as applicable), Sellers shall be
entitled to assume the control of the defense of such claim in accordance with
Section 10.3(b), (c) and (d), as though Buyer were seeking indemnification for
such claim as part of a Third Party Claim under Article X and (ii) if such
notice purports to threaten to terminate the applicable Management Agreement but
does not involve any Third Party Claim by the "owner" ("tenant" or "lessee", as
applicable), Sellers shall have the rights specified in Section 10.9 above, as
though Buyer were seeking indemnification for the termination of such Management
Agreement. The foregoing provisions of this Section 10.10 shall not alter the
rights of the parties in connection with any claim for indemnification under
this Article X.
10.11 EFFECT OF KNOWLEDGE ON INDEMNIFICATION
The right to indemnification, reimbursement or other remedy
based upon any representations, warranties, covenants and obligations set forth
in this Agreement shall not be affected by any investigation (including any
environmental investigation or assessment) conducted with respect to, or any
knowledge acquired (or capable of being acquired ) at any time, whether before
or after the execution and delivery of this Agreement, with respect to the
accuracy or in-accuracy of or compliance with any such representation, warranty,
covenant or obligation. The waiver of any condition based upon the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or
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obligation, will not affect the right to indemnification, reimbursement or other
remedy based upon such representations, warranties, covenants or obligations.
ARTICLE XI
GENERAL
11.1 USAGE.
All terms defined herein have the meanings assigned to them
herein for all purposes, and such meanings are equally applicable to both the
singular and plural forms of the terms defined. "Include," "includes" and
"including" shall be deemed to be followed by "without limitation" whether or
not they are in fact followed by such words or words of like import. "Writing,"
"written" and comparable terms refer to printing, typing, lithography and other
means of reproducing words in a visible form. Any instrument or Law defined or
referred to herein means such instrument or Law as from time to time amended,
modified or supplemented, including (in the case of instruments) by waiver or
consent and (in the case of any Law) by succession of comparable successor Laws
and includes (in the case of instruments) references to all attachments thereto
and instruments incorporated therein. References to a Person are, unless the
context otherwise requires, also to its successors and assigns. Any term defined
herein by reference to any instrument or Law has such meaning whether or not
such instrument or Law is in effect. "Shall" and "will" have equal force and
effect. "Hereof," "herein," "hereunder" and comparable terms refer to the entire
instrument in which such terms are used and not to any particular article,
section or other subdivision thereof or attachment thereto. References to "the
date of this Agreement," "the date hereof' or words of like import shall mean
December 30, 2002. References in an instrument to "Article," "Section" or
another subdivision or to an attachment are, unless the context otherwise
requires, to an article, section or subdivision of or an attachment to such
instrument. References to any gender include, unless the context otherwise
requires, references to all genders, and references to the singular include,
unless the context otherwise requires, references to the plural and vice versa.
All funds payable hereunder shall be payable in U.S. Dollars. Where this
Agreement provides that a Party shall cause another Person to take or refrain
from taking any action, such provision shall be construed to require only that
such Party take all lawful action within its control to cause such other Person
to take such action or refrain from taking such action, as applicable.
11.2 AMENDMENTS; EXTENSION AND WAIVER.
This Agreement and any Schedule or Exhibit attached hereto may
be modified or amended only by agreement in writing of all Parties. At any time
prior to the Closing, Buyer, on the one hand, and Sellers, on the other hand,
may (a) extend the time for the performance of any of the obligations or other
acts of the other Party or Parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other Party or Parties contained herein or
in any document delivered by such other Party pursuant hereto or (c) waive
compliance with any of the agreements of such other Party or conditions to its
own obligations contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the Party to be bound
thereby. Waiver of any term or condition of this Agreement by a Party shall not
be construed as a waiver of any subsequent breach or waiver of the same term or
condition by such Party, or a waiver of any other term or condition of this
Agreement by such Party. The failure of any Party to assert any of its rights
hereunder shall not constitute a waiver of any such rights.
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11.3 SCHEDULES; EXHIBITS.
Each Schedule and Exhibit delivered pursuant to the terms of
this Agreement shall be in writing and shall constitute a part of this
Agreement, although the Disclosure Schedules need not be attached to each copy
of this Agreement. The mere inclusion of an item in a Schedule as an exception
to a representation or warranty shall not be deemed an admission by Sellers that
such item represents an exception or material fact, event or circumstance or
that such item is reasonably likely to have a Material Adverse Effect. Further,
any fact or item which is clearly disclosed on any Schedule to this Agreement or
in the Financial Statements in such a way as to make its relevance or
applicability to information called for by another Schedule or other Schedules
to this Agreement readily apparent shall be deemed to be disclosed on such other
Schedule or Schedules, as the case may be, notwithstanding the omission of a
reference or cross-reference thereto; provided that the foregoing "deemed"
disclosure shall not apply to Schedule 3.1(b), 3.1(c)(2), 3.1(h) (to the extent
relating to Approvals), 3.1(i), 3.1(l), 5.7(a), 5.7(b), 8.1(b) or 8.2(l). The
Schedules will be deemed modified to the extent required to reflect the
consummation of the transactions contemplated by Sections 4.10, 4.11, 4.12,
4.14, 5.7(d), 5.8, 5.16, 5 and 5.18.
11.4 GOVERNING LAW.
This Agreement and the legal relations between the Parties
shall be governed by and construed in accordance with the laws of the State of
Delaware applicable to contracts made and performed in such State and without
regard to conflicts of law principles.
11.5 HEADINGS.
The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
11.6 COUNTERPARTS.
This Agreement and any amendment hereto or any other agreement
(or document) delivered pursuant hereto may be executed and delivered in one or
more counterparts and by different Parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement (or other document) and
shall become effective (unless otherwise provided therein) when one or more
counterparts have been signed by each Party and delivered to the other Parties
thereto.
11.7 PARTIES IN INTEREST.
This Agreement shall be binding upon and inure to the benefit
of each Party and their respective permitted successors and assigns, and (except
for the rights expressly created in favor of Company and Company Subsidiaries
under Section 5.5) nothing in this Agreement, express or implied, is intended to
confer upon or give any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement. No third party is entitled to
rely on any of the representations, warranties and agreements contained in this
Agreement, and Sellers and Buyer assume no liability to any third Person because
of any reliance on the representations, warranties and agreements of Sellers or
Buyer contained in this Agreement, other than the rights of the Indemnified
Parties set forth in Article X (which are intended to be for the benefit of the
Persons covered thereby and may be enforced by such Persons). Nothing in this
Agreement is intended to relieve or discharge the obligation of any third Person
to any Party to this Agreement.
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11.8 PERFORMANCE BY SUBSIDIARIES.
Each Party agrees to cause its Subsidiaries to comply with any
obligations hereunder relating to such Subsidiaries and to cause its
Subsidiaries to take any other action which may be necessary or reasonably
requested by the other Party in order to consummate the transactions
contemplated by this Agreement.
11.9 SEVERABILITY.
If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any Governmental Entity, the remaining
provisions of this Agreement to the extent permitted by Law shall remain in full
force and effect provided that the essential terms and conditions of this
Agreement for both Parties remain valid, binding and enforceable and provided
that the economic and legal substance of the transactions contemplated by this
Agreement is not affected in any manner materially adverse to any Party. In the
event of any such determination, the Parties agree to negotiate in good faith to
modify this Agreement to fulfill as closely as possible the original intents and
purposes hereof.
11.10 NO CONSEQUENTIAL OR PUNITIVE DAMAGES.
Notwithstanding anything to the contrary elsewhere in this
Agreement, no Party (or its Affiliates) shall, in any event, be liable to the
other Party (or its Affiliates) for any consequential, special, exemplary or
punitive damages, including loss of future revenue or income, or loss of
business reputation or opportunity relating to the breach or alleged breach or
nonperformance or alleged nonperformance of this Agreement.
11.11 KNOWLEDGE CONVENTION.
Whenever any statement herein or in any Schedule, Exhibit,
certificate or other document delivered to any party pursuant to this Agreement
is made "to [its] knowledge" or words of similar intent or effect of any party
or its representative, the Person making such statement shall be deemed to be
making such statements "to [its] best knowledge" and shall be accountable only
for facts and other information, which as of the date the representation is
given, are actually known to the Person making such statement, which with
respect to Sellers, means the actual knowledge of Xxxxxxx Xxxxxxx or Xxxx
XxXxxxxx solely after inquiry of the persons identified on Schedule 11.11 hereto
regarding their actual knowledge, without any further inquiry or investigation,
and with respect to any other Persons that are corporations, means the actual
knowledge of its executive officers. Without limiting the generality of the
foregoing, Buyer acknowledges for purposes of the representations in clauses (5)
and (6) of Section 3.1(f) that the foregoing personnel of Sellers have not made
any inquiry into title to properties owned by Third Party Owners or the status
of payments on third party leases and shall not be deemed to have constructive
knowledge of any matters of record affecting such properties.
11.12 NOTICES.
Any notice or other communication hereunder must be given in
writing and (a) delivered in person, (b) transmitted by telefax or
telecommunications mechanism, provided that any notice so given is also mailed
as provided in clause (c), (c) mailed by certified or registered mail (postage
prepaid), receipt requested, or (d) sent by Express Mail, Federal Express or
other express delivery service, receipt requested, to the Parties and at the
addresses specified herein or to such other address or to such other person as
either Party shall have last designated by such notice to the other Parties.
Each such notice or other communication shall be effective (i) if given by
telecopy, when transmitted (if sent during normal
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business hours on a Business Day of the recipient, or one Business Day after the
date sent, if not sent during normal business hours on a Business Day of the
recipient) to the applicable number so specified herein and an appropriate
confirmation of transmission is received, (ii) if given by mail, three days
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (iii) if given by any other means, when
actually received at such address. Any notice or other communication hereunder
shall be delivered as follows:
If to Buyer, addressed to:
Sunrise Assisted Living, Inc.
0000 Xxxxxxxx Xxxxx
XxXxxx, XX 00000
Attention: General Counsel
Telecopier No.: (000) 000-0000
With a copy to (which shall not constitute notice):
Xxxxx & Xxxxxxx LLP
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
If to Sellers:
Marriott International, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: General Counsel
Telecopier No.: (000) 000-0000
With a copy to (which shall not constitute notice):
O'Melveny & Xxxxx LLP
0000 Xxxxxx Xxxxxxxxx
Xxxxx 0000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxxx
Telecopier No.: (000) 000-0000
11.13 INTEGRATION.
This Agreement, the Confidentiality Agreement and the Related
Agreements, together with the Schedules and Exhibits thereto, (a) constitute the
entire agreement among the Parties pertaining to the subject matter hereof and
(b) supersede all prior agreements and understandings of the Parties with
respect to the subject matter hereof, written or oral, except for the
Confidentiality Agreement, which remains in full force and effect.
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11.14 EXPENSES.
Whether or not the Purchase is consummated, subject to Article
X Sellers and Buyer shall each pay their own expenses incident to the evaluation
of the Acquisition Transactions and the negotiation, preparation and performance
of this Agreement and the transactions contemplated hereby, including the fees,
expenses and disbursements of their respective investment bankers, accountants
and counsel; provided that the Parties acknowledge that Buyer and Sellers have
retained Arent Fox Xxxxxxx Xxxxxxx & Xxxx as special counsel in connection with
the receipt of Permits and Approvals from Governmental Entities for the
Acquisition Transactions pursuant to a conflict waiver agreement and the fees
and expenses of Arent Fox Xxxxxxx Xxxxxxx & Xxxx in connection with the receipt
of Permits and Approvals from Governmental Entities, including the preparation
of filings, conversations with Governmental Entities and research in connection
with the determination of the Permits and Approvals required to be obtained for
the Acquisition Transactions, shall be paid one-half by Sellers and one-half by
Buyer. All fees and expenses of Delaware counsel in rendering opinions in
connection herewith shall be paid one-half by Buyer and one-half by Sellers.
11.15 NO ASSIGNMENT; SUCCESSORS.
Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned or delegated, in whole or in
part, by any of the Parties without the prior written consent of the other
Parties; provided, however, that Buyer may assign its rights hereunder to any
direct or indirect wholly-owned subsidiary of Buyer; it being understood that
Buyer shall remain liable to Sellers for the payment of the consideration set
forth herein and other obligations of Buyer hereunder notwithstanding a
permitted assignment. Subject to the preceding sentence and except as otherwise
provided in this Agreement, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by and against, the Parties and their respective
successors and assigns. Notwithstanding any provision of this Agreement, nothing
contained in this Section 11.15 or in any other provision of this Agreement
shall prevent Buyer or Parent from effectuating, or participating with another
Person or Persons in, or shall require the consent of any other Parties, for
Buyer or Parent to effectuate, or participate with another Person or Persons in,
a merger, consolidation, sale of all or substantially all of Buyer's or Parent's
assets, or a sale or issuance of any of Buyer's or Parent's capital stock.
11.16 REPRESENTATION BY COUNSEL; INTERPRETATION.
The Parties each acknowledge that each Party has been
represented by counsel in connection with this Agreement and the transactions
contemplated hereby. Accordingly, any rule of Law or any legal decision that
would require interpretation of any claimed ambiguities in any portions of this
Agreement against the Party that drafted it has no application and is expressly
waived. If any provision of this Agreement is, in the judgment of the trier of
fact, ambiguous or unclear, that provision shall be interpreted in a reasonable
manner to effect the intent of the Parties.
11.17 ENFORCEMENT.
The Parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any action instituted in any court
of the United States or any state thereof having jurisdiction over the Parties
and the matter, this being in addition to any other remedy to which they are
entitled at law or in equity.
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11.18 SELLERS' JOINT AND SEVERAL LIABILITY.
Sellers affirm that they shall be jointly and severally liable
with respect to all their obligations pursuant to this Agreement.
11.19 REFERENCE OF DISPUTES TO SENIOR OFFICERS OF SELLERS
AND BUYER.
Except as otherwise provided in this Agreement, including
Section 10.3(e), any dispute between Sellers and Buyer arising out of or in
connection with this Agreement or the Related Agreements or any alleged breach
hereof or thereof may, at the option of either Sellers or Buyer, be submitted
for discussion and possible resolution by senior officers of Parent and Buyer,
as designated by their respective chief executive officers, for a period of 30
days (or such longer period as the Parties may in particular cases so decide)
before initiating any Litigation pursuant to Section 11.20 hereof.
11.20 RESOLUTION OF DISPUTES.
All actions, suits or proceedings relating to or arising under
or in connection with this Agreement or any of the Related Agreements or any
agreements entered into in connection herewith or therewith (collectively, the
"Litigation") shall be brought only in the federal or state courts located in
the State of Delaware, which shall have exclusive jurisdiction to resolve any
Litigation, with each Party irrevocably consenting to the jurisdiction thereof
for any Litigation. THE PARTIES IRREVOCABLY WAIVE TRIAL BY JURY IN ANY
LITIGATION INCLUDING ANY COUNTERCLAIM WITH RESPECT THERETO. To the extent that
any Party has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, such Party hereby irrevocably waives such
immunity in respect of its obligations under this Agreement. Each Party
irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to the laying
of venue of any Litigation in any Delaware court. Each Party hereby irrevocably
waives, to the fullest extent permitted by applicable Law, the defense of an
inconvenient forum to the maintenance of such Litigation in any such court. The
provisions of this Section 11.20 shall not apply to any arbitration proceedings
relating to any dispute where arbitration of such dispute is expressly
contemplated hereunder.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed and delivered by its duly authorized officers as of the
day and year first above written.
BUYER:
SUNRISE ASSISTED LIVING, INC.
By: /s/ Xxxx X. Xxxxxxxx
--------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Executive Officer
SELLERS:
MARRIOTT SENIOR HOLDING CO.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
MARRIOTT INTERNATIONAL, INC.
By: /s/Xxxxxxx Xxxxxxx
--------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President
MARRIOTT MAGENTA HOLDING COMPANY, INC.
By: /s/ Xxxxxxx Xxxxxxx
--------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President
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STOCK PURCHASE AGREEMENT
dated as of
December 30, 2002
by and among
MARRIOTT INTERNATIONAL, INC.,
MARRIOTT SENIOR HOLDING CO.,
MARRIOTT MAGENTA HOLDING COMPANY, INC.
and
SUNRISE ASSISTED LIVING, INC.
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Schedules
---------
SCHEDULE 1.1(a) CNL Transaction
SCHEDULE 1.1(b) Title Reports
SCHEDULE 1.1(c) Facilities and Management Agreements
SCHEDULE 2.3(c) Exclusions and Adjustments to Determination of Closing Date
Statement
SCHEDULE 2.4 Owner 6 Adjustment
SCHEDULE 2.5 Certain Owner 2 and Other Managed Facility Management
Agreements
SCHEDULE 2.5(c)(i) Section 2.5 Adjustment
SCHEDULE 2.5(c)(ii) Aggregate Management Fees Under Owner 2 and Other Managed
Facility Management Agreements
SCHEDULE 2.7(b) Section 2.7 Adjustment Amount
SCHEDULE 3.1(a)(1) Organization and Related Matters
SCHEDULE 3.1(a)(2) Organizational Documents
SCHEDULE 3.1(b)(2) Equity Interests
SCHEDULE 3.1(b)(3) Rights to Acquire Equity Securities
SCHEDULE 3.1(b)(4) Repurchase and Other Rights
SCHEDULE 3.1(c)(1)(i) Financial Statements
SCHEDULE 3.1(c)(1)(ii) Historical Property Level Financial Information
SCHEDULE 3.1(c)(2) Certain Changes
SCHEDULE 3.1(d)(1) Tax Returns
SCHEDULE 3.1(d)(3) Taxes
SCHEDULE 3.1(d)(4) Tax Allocations; Affiliated Groups
SCHEDULE 3.1(e)(1)(a) Material Contracts
SCHEDULE 3.1(e)(1)(b) Breaches or Defaults
SCHEDULE 3.1(e)(2) Management Agreements
SCHEDULE 3.1(e)(3) Certain Contracts
SCHEDULE 3.1(e)(4) Property Working Capital
SCHEDULE 3.1(e)(5) FF&E Reserves
SCHEDULE 3.1(f)(1) Real and Personal Property; Title to Property; Leases
SCHEDULE 3.1(f)(2) Leases
SCHEDULE 3.1(f)(3) Defaults or Terminations under Leases
SCHEDULE 3.1(f)(4) Land Contracts
SCHEDULE 3.1(f)(6) Third Party Leases
SCHEDULE 3.1(f)(8) Tangible Assets and Properties
SCHEDULE 3.1(g)(1) Intellectual Property
SCHEDULE 3.1(h) Authorization; No Conflicts; Approvals
SCHEDULE 3.1(i) Legal Proceedings
SCHEDULE 3.1(j) Labor Matters
SCHEDULE 3.1(k) Insurance
SCHEDULE 3.1(l) Permits
SCHEDULE 3.1(m) Compliance
SCHEDULE 3.1(n)(1) Benefit Plans and Other Employee Programs, Agreements or
Arrangements
SCHEDULE 3.1(n)(3) Certain Plan Types
SCHEDULE 3.1(n)(4) Plan Liabilities
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SCHEDULE 3.1(n)(5) Compliance by ERISA Plans
SCHEDULE 3.1(n)(7) Parachute Payments
SCHEDULE 3.1(n)(9) Funded Welfare Plans
SCHEDULE 3.1(o) Payments to Seller
SCHEDULE 3.1(q) Operation in the Ordinary Course
SCHEDULE 3.1(r)(1) Liability Under Environmental Laws; Environmental Reports
SCHEDULE 3.1(r)(2)(i) Failure to Obtain and Maintain Environmental Permits
SCHEDULE 3.1(r)(2)(ii) Environmental Permits
SCHEDULE 3.1(r)(3) Notice of Environmental Claims
SCHEDULE 3.1(r)(4) Regulated Substances
SCHEDULE 3.1(r)(5) No Underground Improvements or Landfills
SCHEDULE 3.1(r)(6)(i) Governmental Lists; Remediation
SCHEDULE 3.1(r)(6)(ii) Regulated Substances; Remediation
SCHEDULE 3.1(s) Affiliate Transactions
SCHEDULE 3.1(w)(i) Health Regulatory Compliance
SCHEDULE 3.2(b) Authorization; No Conflicts; Approvals
SCHEDULE 4.2 Conduct of Business; Capital Expenditure Plan
SCHEDULE 4.2(b) Representatives
SCHEDULE 4.9 Restructuring
SCHEDULE 5.5(a) "M" logo
SCHEDULE 5.6(a)(1) Registered Trademarks, Service Marks and Trademark and
Service Xxxx Applications
SCHEDULE 5.6(b) Trademark and Service Xxxx Registrations to be Surrendered.
SCHEDULE 5.7(a)(1) Assumed Financial Support Arrangements
SCHEDULE 5.7(a)(2) Lifecare Agreements of Undertaking
SCHEDULE 5.7(c) Retained Support Arrangements
SCHEDULE 5.7(d) Care Institute Subordinated Facility Obligations
SCHEDULE 5.17 Certain Facilities
SCHEDULE 5.18 Certain Leasehold Transfers
SCHEDULE 5.19 Status of Ongoing Proceedings
SCHEDULE 5.7(b) Guaranteed Leases
SCHEDULE 6.1(a) Separation Pay Policies
SCHEDULE 6.3(a)(1) Company Severance Executives
SCHEDULE 6.3(a)(2) Company Severance Program for Executives
SCHEDULE 6.3(a)(3) Parent Severance Executives
SCHEDULE 6.3(a)(4) Parent Severance Program
SCHEDULE 8.1(b) Approvals
SCHEDULE 10.1(l) Subject Facilities
SCHEDULE 11.11 Knowledge Convention
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Exhibits
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EXHIBIT A-1 Letter of Credit
EXHIBIT A-2 Escrow Agreement
EXHIBIT B Assumption and Reimbursement Agreement
EXHIBIT C Tax Sharing Agreement
EXHIBIT D Trademark and Service Xxxx Assignment Documents
EXHIBIT E Trademark and Service Xxxx Surrender Documents
EXHIBIT F Intercreditor Agreements
EXHIBIT G Owner 10 Memorandum
EXHIBIT H Substance of Opinion of Sellers' Counsel
EXHIBIT I Substance of Opinion of Buyer's Counsel
EXHIBIT J Sublease
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ARTICLE I
DEFINITIONS
1.1 Definitions............................................................ 2
ARTICLE II
PURCHASE AND SALE/CLOSING
2.1 Purchase and Sale...................................................... 13
2.2 Purchase Price......................................................... 13
2.3 Working Capital Adjustment............................................. 13
2.4 Owner 6 Facilities Adjustment.......................................... 15
2.5 Other Managed Facilities Adjustment.................................... 17
2.6 Owner 1 Facilities Adjustment.......................................... 20
2.7 Property 2 Management Agreement Adjustment............................. 22
2.8 The Closing............................................................ 24
2.9 Actions of Sellers at Closing.......................................... 24
2.10 Actions of Buyer at Closing............................................ 25
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sellers.............................. 25
3.2 Representations and Warranties of Buyer................................ 42
ARTICLE IV
COVENANTS WITH RESPECT TO THE PERIOD PRIOR TO CLOSING
4.1 Access................................................................. 44
4.2 Conduct of Business.................................................... 45
4.3 Commercially Reasonable Efforts; No Inconsistent Action................ 48
4.4 Elimination of Certain Intercompany Obligations........................ 49
4.5 Accuracy of Information................................................ 49
4.6 Notice of Certain Matters.............................................. 49
4.7 No Solicitation........................................................ 50
4.8 Public Announcements................................................... 50
4.9 Restructuring.......................................................... 50
4.10 CNL Transaction........................................................ 50
4.11 Burning Tree Option.................................................... 51
4.12 Transfer of Joint Venture Interest..................................... 51
4.13 Property 2 Management Agreement........................................ 51
4.14 Buyer Letter of Credit................................................. 51
ARTICLE V
CONTINUING COVENANTS
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5.1 Records; Cooperation; Legal Privileges................................. 52
5.2 Nondisclosure of Company Proprietary Information....................... 53
5.3 [Intentionally Omitted]................................................ 53
5.4 Tax Matters............................................................ 53
5.5 Use of Certain Parent Trademarks....................................... 54
5.6 Intellectual Property.................................................. 55
5.7 Financial Support Arrangements; Lifecare Agreements of Undertaking..... 56
5.8 NHI Leases............................................................. 57
5.9 Insurance Matters...................................................... 57
5.10 Supplemental Disclosure................................................ 61
5.11 Transition Services.................................................... 61
5.12 Noncompetition......................................................... 62
5.13 Further Assurances..................................................... 63
5.14 Third Party Indemnification............................................ 63
5.15 Section 338(h)(10) Election............................................ 63
5.16 Subordination of Owner 10 Management Fees.............................. 63
5.17 Performance Termination Avoidance Payment.............................. 66
5.18 Certain Leasehold Transfers............................................ 66
5.19 Status of Ongoing Proceedings.......................................... 66
ARTICLE VI
EMPLOYEES AND EMPLOYEE MATTERS
6.1 Non-Executive Employees................................................ 66
6.2 Employee Bonuses....................................................... 67
6.3 Executive Severance Agreements......................................... 67
6.4 Employee Benefit and Health Plan Matters............................... 67
6.5 Equity-based Compensation.............................................. 70
6.6 Vacation, Personal and Sick Leave...................................... 70
6.7 Employee Rights........................................................ 70
6.8 WARN Act Requirements.................................................. 71
6.9 Employment-Related Claims.............................................. 71
[INTENTIONALLY OMITTED]
ARTICLE VIII
CONDITIONS OF PURCHASE
8.1 General Conditions..................................................... 71
8.2 Conditions to Obligation of Buyer...................................... 72
8.3 Conditions to Obligation of Sellers.................................... 73
ARTICLE IX
TERMINATION OF OBLIGATIONS
9.1 Termination of Agreement............................................... 74
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9.2 Effect of Termination.................................................. 75
ARTICLE X
INDEMNIFICATION; SURVIVAL
10.1 Obligations of Sellers................................................. 75
10.2 Obligations of Buyer................................................... 77
10.3 Procedure.............................................................. 78
10.4 Survival............................................................... 80
10.5 Limitations on Indemnification......................................... 80
10.6 Remedies Exclusive..................................................... 80
10.7 No Duplication of Claims............................................... 80
10.8 No Set-Off............................................................. 81
10.9 Claims Against Third Parties; Pre-Closing Litigation................... 81
10.10 Certain Rights in Connection with Purchase Price Adjustments........... 81
10.11 Effect of Knowledge on Indemnification................................. 81
ARTICLE XI
GENERAL
11.1 Usage.................................................................. 82
11.2 Amendments; Extension and Waiver....................................... 82
11.3 Schedules; Exhibits.................................................... 82
11.4 Governing Law.......................................................... 83
11.5 Headings............................................................... 83
11.6 Counterparts........................................................... 83
11.7 Parties in Interest.................................................... 83
11.8 Performance by Subsidiaries............................................ 83
11.9 Severability........................................................... 84
11.10 No Consequential or Punitive Damages................................... 84
11.11 Knowledge Convention................................................... 84
11.12 Notices................................................................ 84
11.13 Integration............................................................ 85
11.14 Expenses............................................................... 85
11.15 No Assignment; Successors.............................................. 86
11.16 Representation By Counsel; Interpretation.............................. 86
11.17 Enforcement............................................................ 86
11.18 Sellers' Joint and Several Liability................................... 86
11.19 Reference of Disputes to Senior Officers of Sellers and Buyer.......... 87
11.20 Resolution of Disputes................................................. 87
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[THE SCHEDULES AND EXHIBITS LISTED ON PAGES i THROUGH iii HAVE BEEN
INTENTIONALLY OMITTED. SUNRISE ASSISTED LIVING, INC. AGREES TO FURNISH
SUPPLEMENTALLY A COPY OF ANY OMITTED SCHEDULE OR EXHIBIT UPON REQUEST OF THE
SECURITIES AND EXCHANGE COMMISSION.]
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