Exhibit 2.12
COMPOSITE COPY
ASSET PURCHASE AGREEMENT
BY
AND
BETWEEN
BLC ACQUISITIONS, INC.,
A DELAWARE CORPORATION,
AS "PURCHASER"
AND
THE ENTITIES SET FORTH UNDER THE HEADING
"SELLER" ON THE SIGNATURE PAGES HERETO,
COLLECTIVELY AS "SELLER"
DATED: JANUARY 11, 2006
COMPOSITE COPY
ASSET PURCHASE AGREEMENT
(As amended to include the First Amendment to Asset Purchase Agreement
dated February 10, 2006, the Second Amendment to Asset Purchase
Agreement dated February 17, 2006, the Third Amendment to Asset
Purchaser Agreement dated February 21, 2006, the Fourth Amendment to
Asset Purchase Agreement and Reinstatement Agreement dated February
21, 2006, and the Fifth Amendment to Asset Purchase Agreement dated
March 24, 2006)
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this 11th day
of January, 2006 (the "Effective Date"), is made and entered into by and between
BLC ACQUISITIONS, INC., a Delaware corporation ("Purchaser"), and the entities
set forth under the heading "Seller" on the signature pages hereto
(collectively, "Seller").
RECITALS
A. Seller owns, or has valid and enforceable rights to purchase pursuant to
a purchase agreement, and Seller operates, certain assisted living facilities
located in the States of Alabama, Florida, Georgia and Tennessee, together with
the real property and all appurtenances thereto, all as more particularly
described on Exhibit A-1 (collectively, the "Owned Facilities"). Each Owned
Facility is licensed, to the extent required, for the number of assisted living
units as set forth on Exhibit A-1;
B. Seller leases certain assisted living facilities located in the States
of Alabama, Florida, Tennessee and Mississippi, together with the real property
and all appurtenances thereto, all as more particularly described on Exhibit B-1
(collectively, the "Leased Facilities"). Each Leased Facility is licensed, to
the extent required, for the number of assisted living units as set forth on
Exhibit B-1 (the Owned Facilities and the Leased Facilities are sometimes
referred to herein individually as a "Facility" and collectively as the
"Facilities");
C. The parties hereto desire to enter into this Agreement pursuant to which
Purchaser will purchase from Seller, and Seller will sell, convey, transfer and
assign to Purchaser, the following, hereinafter collectively referred to as the
"Assets":
(i) fee simple title in and to the real property on which the Owned
Facilities are located (the "Owned Real Property"), and Seller's leasehold
estates and all other rights, title and interest of Seller (including without
limitation any options to purchase or rights of first refusal) in and to the
real property on which the Leased Facilities are located (the "Leased Real
Property", which together with the Owned Real Property, is sometimes referred to
herein collectively as the "Real Property", all of which is more particularly
described on Exhibit "C-1");
(ii) Seller's fee simple interest (with respect to the Owned Real
Property) and Seller's leasehold estate (with respect to the Leased Real
Property) in and to all buildings,
structures, facilities, amenities, driveways, walkways, parking lots and other
improvements located on the Real Property (collectively, the "Improvements");
(iii) all right, title and interest of Seller in and to any alleys,
strips or gores adjoining the Real Property, any easements, rights of way or
other interests in, on, under or to, any land, highway, street, road or right of
way, open or proposed, in, under, across, abutting or benefiting the Real
Property, and any pending or future action for condemnation, eminent domain or
similar proceeding, or for any damage to the Real Property by reason of a change
of grade thereof, and all other accessions, appurtenant rights, and privileges
of Seller in and to the Real Property and the Improvements (collectively, the
"Appurtenances");
(iv) good and marketable title in and to Seller's fee ownership or
leasehold interest in and to all furniture, fixtures, furnishings, equipment,
computers, machinery, mechanical systems, security and alarm systems, nurse call
systems, automobiles, vans, buses or other vehicles or equipment located at the
Facilities or used in connection therewith (collectively, the "FF&E"); provided,
however, that any FF&E that is subject to an Equipment Lease (as defined in
Section 2.10 below) shall be included in the FF&E to be conveyed at Closing (as
defined in Section 1.2(a) below) by the assignment to and assumption by
Purchaser of the underlying Equipment Lease;
(v) good and marketable title in and to all supplies, inventory,
consumables, perishable and nonperishable food products, and other similar
tangible property used in the operation of the Real Property and the Facilities
(collectively, the "Inventory");
(vi) all Assumed Tenant Leases (as defined in Section 5.3 below) and
all Equipment Leases;
(vii) all Assumed Contracts (as defined in Section 5.3 below);
(viii) all Residency Agreements (as defined in Section 2.7(b) below);
(ix) to the extent Seller's interest is assignable without violating
any and all applicable laws, rules, regulations, statutes, ordinances or
requirements or any judgments, decrees, writs, injunctions or orders of any
Governmental Authority (as defined in Section 2.4 below) (collectively,
"Applicable Laws") and to the extent Purchaser in its sole discretion elects to
assume the same, all Licenses (as defined in Section 2.3 below) relating to or
used in connection with the Facilities or the operation thereof;
(x) all right, title and interest of Seller in and to any trade marks,
trade names, service marks, trade dress and all variations thereof; all
telephone and facsimile numbers relating to the Facilities (including all "800"
numbers); all post office box addresses associated with the Facilities; all
software or other computer programs used in the connection with the operation of
the Facilities which are by their terms assignable; all security deposits posted
with respect to any Assumed Tenant Leases, Assumed Contracts, Assumed Equipment
Leases and the Facility Leases; and all prepaid rent, reservation deposits,
move-in fees and other prepaid items and deposits (excluding utilities deposits)
related to the Facilities paid by Residents (as defined in subparagraph (xi)
below) to Seller; and
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(xi) all books, data and records (including electronic versions
thereof) related to the operation of the Facilities, including financial and
accounting records, customer lists, referral source lists, regulatory surveys
and reports, incident tracking reports, advertising and marketing materials and
competitive analyses, all policy and procedure manuals, all records and reports
(except for such records and reports where transfer is prohibited by Applicable
Law) relating to all residents at the Facilities, but only to the extent such
Residents remain Residents on the Closing Date for the Facility in which they
reside (collectively, "Residents") (collectively, "Resident Records"), all
Employee Records (as defined in Section 4.15), but only to the extent such
Employee Records are for Employees who become "Transitioned Employees" (as
defined in Section 5.6), all leads regarding prospective Residents, all
blueprints, construction and architects' plans and drawings, and all engineering
data and reports (collectively, "Books and Records"); and
(xii) Seller's interest in any and all other items of tangible and
intangible personal property used in connection with the ownership, use,
operation and maintenance of the Real Property or the Facilities (collectively,
together with the FF&E, the Inventory and the items described in clauses (ix),
(x) or (xi) above, the "Personal Property"), and all goodwill of Seller
associated with the businesses operated at the Facilities (the "Business").
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and of the mutual
agreements, representations, warranties, conditions and covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Transfer of Assets. For and in consideration of the foregoing and the
terms and conditions herein provided, the receipt and sufficiency of which are
herein acknowledged, Seller, in accordance with the terms and subject to the
conditions hereof, shall convey, transfer and assign to Purchaser at Closing,
and Purchaser shall purchase from Seller at Closing, all right, title and
interest in and to the Assets. Notwithstanding anything to the contrary
contained herein, the Assets shall not include the following items
(collectively, the "Excluded Assets"):
(a) All bank accounts, cash, cash equivalents and securities;
(b) All sums relating to Medicare or Medicaid rate adjustments
relating to periods prior to Closing;
(c) Seller's organizational documents, minute books and other books
and records relating solely to the maintenance and operations of Seller as a
legal entity;
(d) The trade names "Wellington", "Wellington Group," and any other
trade names using the term "Wellington" (but not the name "Wellington Place",
which Purchaser shall have the sole and exclusive right to use); and
(e) Those additional items set forth on Schedule 1.1(d) attached
hereto.
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1.2 Closing.
(a) Unless this Agreement shall have been terminated pursuant to an
express right to terminate as herein provided, the closing hereunder shall occur
at 10:00 a.m. EST on March 31, 2006 (the "Original Closing Date"); provided,
however, the parties will use commercially reasonable efforts to close the
transaction as early as March 28, 2006; and provided further, however, Original
Closing Date hereunder may be deferred as to one (1) or more Facilities as
provided in Section 1.2(b) and (c) below.
(b) (i) In the event that on the Original Closing Date, Seller has not
obtained all of the Lessor Estoppels, Lease Consents and SNDAs (as each such
term is hereinafter defined) (collectively, the "HRT Consents") for the
assignment of all of the Facility Leases (as hereinafter defined) for the Leased
Facilities, then the Leased Facilities shall, at the option of Seller, become
Deferred Facilities subject to the provisions of subsection 1.2(b)(ii) below,
but Seller's obligation to sell the remainder of the Assets, and Purchaser's
obligation to purchase the remainder of the Assets, shall remain in full force
and effect and shall not be effected by the failure of Seller to obtain the HRT
Consents.
(ii) In the event that on the Original Closing Date the
conditions precedent under Article VIII of this Agreement (excluding the
obtaining of the HRT Consents) have not been satisfied or fulfilled for all or
any portion of the Assets (any such unsatisfied conditions precedent, a
"Delaying Event"), then Seller at Seller's option and election shall have the
right, upon notice to Purchaser given on or prior to the Original Closing Date
(a "Deferral Notice"), to extend the Original Closing Date as to all of the
Facilities or only as to the Facilities to which such Delaying Event relates
(the "Deferred Facilities") for a period of time, not to exceed sixty (60) days
from the Original Closing Date (the "Deferral Period"). Notwithstanding the
foregoing, the initial Closing on the Original Closing Date (or such later date
in the event of a Delaying Event) shall not occur unless there are at least
twelve (12) Facilities included as part of such initial Closing. In addition,
Purchaser and Seller shall use commercially reasonable efforts to close on all
Facilities on the Original Closing Date. In order to accommodate the
commercially reasonable efforts as described in the immediately preceding
sentence, if appropriate, Purchaser and Seller shall negotiate to permit
Purchaser or its nominee to operate under Seller's Licenses for any Assets if
necessary to enable such closings to occur by the Original Closing Date, but in
no event shall such "commercially reasonable efforts" be deemed or interpreted
to require Purchaser to operate under Seller's Licenses if operation under
Seller's Licenses fails to comply, or reasonably could be interpreted as
creating a risk of noncompliance, with all Applicable Laws. Notwithstanding the
foregoing, if the HRT Consents are not obtained prior to the Original Closing
Date and all other conditions precedent shall have been fulfilled or satisfied,
then Seller shall not be entitled to extend the Original Closing Date, and the
Closing for all of the Facilities other than the Leased Facilities shall proceed
on the Original Closing Date, but Seller shall have the right to give a Deferral
Notice to extend the Closing Date as to the Leased Facilities only for a period
of time not to exceed sixty (60) days from the Original Closing Date without
affecting Closing as to the other Facilities. In such event, the Leased
Facilities shall constitute Deferred Facilities and the failure to obtain the
HRT Consents shall constitute a Delaying Event as to the Leased Facilities only,
and the provisions of subsection 1.2(c) shall apply to the Leased Facilities
separate from the other facilities.
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(c) In the event of any Delaying Event resulting in any Deferred
Facilities, if Seller is entitled to defer Closing as to all of the Facilities
pursuant to the terms hereof but does not elect to defer Closing as to all of
the Facilities, then Purchaser and Seller shall proceed with the Closings for
all Facilities which are not Deferred Facilities, if any, on the Original
Closing Date (provided the requirement that not less than twelve (12) Facilities
shall be closed has been satisfied) and the Closing Date for all Deferred
Facilities shall be delayed, but in no event later than the last date of the
Deferral Period. Purchaser may at any time waive any Delaying Event based on a
condition contained in Article 8. If Seller is entitled to defer Closing
pursuant to the terms hereof and elects to defer the Closing Date as to some but
not all of the Facilities, Closing shall occur as to all Facilities that are not
Deferred Facilities on the Original Closing Date and Closing as to each Deferred
Facility shall occur on the fourteenth (14th) day after the Delaying Event
applicable to such Facility has been satisfied. If any Delaying Event has not
been satisfied or remedied or waived by Purchaser by the end of the Deferral
Period, any remaining Deposits shall be returned to Purchaser, this Agreement
shall terminate and neither party shall have any further rights hereunder except
as expressly survive. In the event that any Delaying Event is satisfied or
remedied within the final fourteen (14) day period of the Deferral Period, the
Closing Date for the Facilities affected by such Delaying Event shall be
automatically extended on a day to day basis for each day less than such
fourteen (14) days, so as to permit Seller and Purchaser to have a full fourteen
(14) day period to effect an orderly transition of such Facility.
Notwithstanding anything contained herein to the contrary, if Seller is entitled
to defer Closing pursuant to the terms hereof and elects to defer Closing as to
all Facilities and all Delaying Event(s) are not satisfied or waived by the end
of the Deferral Period, Seller shall have no obligation to sell any Facilities
to Purchaser.
(d) The closing for any Facility hereunder, whether on the Original
Closing Date or an extended Closing Date pursuant to Section 1.2(b) and (c), is
hereinafter referred to as the respective "Closing" for such Facility, and the
date on which such Closing occurs is hereinafter referred to as the respective
"Closing Date" for such Facility. The parties agree that there may be multiple
Closings and Closing Dates pursuant hereto, and in each case in which such
defined terms are used in this Agreement, such terms shall refer to the
respective Closing Date and Closing for the respective Assets and Facilities for
which the consummation of the transactions contemplated hereby are occurring.
All Closings hereunder shall be effective for accounting purposes as of 12:01:01
a.m. on the day after the respective Closing Date.
(e) In the event that there is more than one Closing Date pursuant
hereto, then the Purchase Price (as hereinafter defined) and the Deposits shall
be paid and applied in accordance with Sections 1.4 and 1.7 and Schedule 1.7 and
all pro rations and adjustments shall be applied only with respect to the
portion of the Assets to which they relate, and at Closing, the applicable
portion of the Purchase Price shall be wire transferred by Purchaser to the
Escrow Agent, as defined below, on the Closing Date.
(f) On each Closing Date, all executed documents required from Seller
under Section 10.1(a) (the "Seller Documents") and from Purchaser under Section
10.1(b) (the "Purchaser Documents") in order to effectuate the consummation of
the Closing with respect to the applicable Facility or Facilities shall be
delivered to the offices of Xxxxxx & Xxxxxx, Atlanta, Georgia, or at such other
date, time and place as Purchaser may reasonably require taking into
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account the relative location of the parties and any lenders. Notwithstanding
the foregoing, (i) Seller may deliver all of the Seller Documents required
hereunder with respect to the Closing to the Title Company, as escrow agent (the
"Escrow Agent") or Purchaser's counsel on or before the Closing Date (to hold in
escrow in accordance with customary conveyancing practices subject to the
consummation of the Closing) by overnight courier, and (ii) Purchaser may
deliver all of the Purchaser Documents required hereunder with respect to the
Closing to the Escrow Agent on or before the Closing Date (to hold in escrow in
accordance with customary conveyancing practices subject to the consummation of
such Closing) by overnight courier.
1.3 Purchase Price. The purchase price for the Assets shall be Seventy-Nine
Million Five Hundred Thousand Dollars ($79,500,000), subject to the prorations
and further adjustments as provided for in this Agreement. The Purchase Price
will be allocated among the Assets as provided for on Schedule 1.7 and to the
extent there are multiple Closing Dates pursuant hereto, the portion of the
Purchase Price payable at such Closing and the portion of the Deposits allocable
to such Closing. shall be determined in accordance with Section 1.4 and Schedule
1.7. In addition, in consideration for the Assets, Purchaser shall assume the
Assumed Liabilities (as defined in Section 1.6).
The parties acknowledge Purchaser's due diligence efforts have identified a
number of items requiring capital expenditures and Seller has agreed that a
portion of the Purchaser Price is to be made available to Purchaser to enable
Purchaser to repair and replace such items. Accordingly, at the Initial Closing
hereunder, Purchaser shall deposit into a separate deposit account held by
Purchaser or such third party as Purchaser in its sole discretion shall elect,
the sum of One Million Seven Hundred Seventeen Thousand Four Hundred Sixty-Seven
and No/100 Dollars ($1,717,467) (the "Purchase Price Holdback"), which amount
shall be a deduction from the Purchase Price, for the purpose of providing
Purchaser with a readily available source of funds to repair and replace such
capital items discovered by Purchaser in the course of its due diligence. The
funds deposited in the Purchase Price Holdback account shall belong solely and
exclusively to Purchaser, and Seller shall have no right to direct the release
of such funds, or object to disbursement of such funds, or to demand any portion
thereof, or any audit of the use of such funds, and Purchaser's access to and
use of such funds shall be unrestricted in all respects. In the event any
Facility is not included in the initial closing, then $100,000 per such Facility
shall not be part of the Purchase Price Holdback at the initial closing but such
$100,000 shall be held back and become part of the Purchase Price Holdback upon
the closing for such Facility.
1.4 Xxxxxxx Money. Purchaser and Seller acknowledge that Purchaser has
previously delivered to Escrow Agent an initial xxxxxxx money deposit in the
amount of One Million and No/100 Dollars ($1,000,000) (the "Initial Deposit")
and an additional xxxxxxx money deposit in the amount of Two Million Dollars
($2,000,000) (the "Due Diligence Deposit"). Purchaser and Seller hereby direct
Escrow Agent to refund Five Hundred Thousand Dollars ($500,000) of the foregoing
deposits to Purchaser immediately upon execution of the Fifth Amendment and
Purchaser and Seller hereby acknowledge that the remaining Two Million Five
Hundred Thousand Dollars ($2,500,000) and all interest accrued thereon are
hereinafter referred to both individually and collectively as the context may
require as the "Deposits". Escrow Agent shall hold the Deposits in one or more
interest bearing accounts mutually acceptable to Seller and Purchaser. The
Deposits are fully refundable during the Due Diligence Period. After the
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expiration of the Due Diligence Period without termination by Purchaser during
such period, the Deposits shall be non-refundable except as specifically set
forth in this Agreement.
(a) In the event Closing occurs, the allocable portion of the Deposits
shall be disbursed by Escrow Agent to Seller and applied against the allocable
portion of the Purchase Price payable at such Closing and Purchaser shall
receive a credit therefor, provided, however, that notwithstanding anything
contained herein to the contrary, if at the initial Closing hereunder, less than
all of the Facilities are then being closed, the amount of the Deposits that
will continue to be held by Escrow Agent shall be an amount not less than the
product of (i) the number of Deferred Facilities for which Closing has not yet
occurred multiplied by (ii) $250,000.00 per Deferred Facility as of such time.
(b) In the event Purchaser terminates this Agreement on or before the
expiration of the Due Diligence Period, then the Escrow Agent shall immediately
refund the Deposits to Purchaser irrespective of any alternative instructions
from Seller.
(c) In the event that after the expiration of the Due Diligence
Period, this Agreement is terminated by either Purchaser or Seller pursuant to
an express right to terminate, the Deposits shall be disbursed by Escrow Agent
pursuant to the express terms of this Agreement.
1.5 Payment of Purchase Price. At each Closing, Purchaser shall pay the
respective portion of the Purchase Price, adjusted for any prorations, credits
and additions for the benefit of Purchaser or Seller as specified in this
Agreement, less the allocable portion of the Deposits pursuant to Sections 1.4
and 1.7, by wire transfer of immediately available federal funds to the Escrow
Agent.
1.6 Assumed Liabilities. At each Closing, Purchaser shall NOT assume any
liabilities or obligations of Seller whatsoever, fixed or contingent, other than
liabilities and obligations assumed by Purchaser at Closing pursuant hereto with
respect only to the following, and then only to the extent such obligations and
liabilities relate to periods after Closing: (a) the Assumed Tenant Leases, the
Equipment Leases and the Assumed Contracts, if applicable, (b) all Residency
Agreements for all Facilities, and (c) the Assumed Facility Leases for all
Facilities, if applicable ((a) - (c) are sometimes collectively referred to
herein as the "Assumed Liabilities"). Seller shall retain and discharge in the
ordinary course all liabilities and obligations of Seller other than the Assumed
Liabilities.
1.7 Allocation of Purchase Price. The Purchase Price and the Deposits shall
be allocated among the Assets at Closing as provided and as described in Section
1.4 hereof and on Schedule 1.7 attached hereto. The parties shall negotiate in
good faith and use their commercially reasonable efforts to agree upon the form
of Schedule 1.7 within the Due Diligence Period; provided, however, in the event
the parties are unable to so agree, then (i) in the event that on the Original
Closing Date or any subsequent Closing Date less than all of the Facilities can
be closed due to a Delaying Event (other than the failure to obtain the HRT
Consents), then the Closing Date shall be extended until the Delaying Events
(other than the failure to obtain the HRT Consents) for all Facilities have been
satisfied or removed such that the entirety of the Deposits can be applied at
the Closing, and each party shall be free to allocate the
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Purchase Price in accordance with their own calculations and without regard to
the other party's allocation and (ii) in the event that on the Original Closing
Date or any subsequent Closing Date, closing on all Facilities other than the
Leased Facilities has occurred, the parties agree the Purchase Price for the
Assets (other than those relating to the Leased Facilities) shall be $79,500,000
and the amount of the Deposits allocable to the Leased Facilities shall continue
to be held by the Escrow Agent until the expiration of the Deferral Period. If
the parties are able to agree upon Schedule 1.7, then Seller and Purchaser each
hereby covenant and agree that neither will take a position on any income tax
return, before any governmental agency charged with the collection of any income
tax, in any judicial proceeding or otherwise with or before any Governmental
Authority that is any way inconsistent with the terms of this Section 1.7 and
Schedule 1.7, and at Closing Seller and Purchaser shall covenant to timely file
IRS Form 8594 using the allocations set forth on Schedule 1.7.
1.8 Due Diligence Period. Between the date of this Agreement and February
21, 2006 (the "Due Diligence Period"), Purchaser shall have the right to
terminate this Agreement as to all Facilities by written notice to Seller in the
event Purchaser, in Purchaser's sole discretion, is not satisfied with the
Assets for any reason, which reason need not be specified in such notice,
provided that such notice is delivered (in accordance with the provisions of
Section 12.3 hereof) to Seller on or prior to 7:00 p.m. EST on the last day of
the Due Diligence Period. The parties agree that Purchaser shall not request
further due diligence information from Seller after January 31, 2006 until
February 10, 2006, other than as required for completion for third party
reports, but Purchaser's rights of access to information after February 10,
2006, shall continue to be as set forth in Section 4.3. In no event shall there
be any partial termination under this Section 1.8(b). If such notice of
termination is so delivered on or before 5:00 p.m. on the last day of the Due
Diligence Period, then Purchaser shall be entitled to receive the Deposit from
Escrow Agent and the parties shall thereafter be released from all further
obligations under this Agreement, except those provisions that expressly survive
the termination of this Agreement. If Purchaser does not terminate this
Agreement as set forth in this Section 1.8 or as otherwise provided herein, then
this Agreement shall remain in full force and effect. The parties agree to
confirm in writing the expiration date of the Due Diligence Period upon request
of either Seller or Purchaser. The Deposits shall be nonrefundable after the
expiration of the Due Diligence Period except as specifically set forth in this
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated herein, Seller represents and warrants
the following, each of which warranties and representations is material to and
is relied upon by Purchaser:
2.1 Organization and Qualification. Each of the entities that comprise
Seller are duly organized and validly existing and in good standing under the
laws of each of their respective states of organization, each with full power
and authority to carry on its respective business as currently being conducted
and to own or lease and operate the Assets it owns or leases as and in the
places now owned, leased or operated, respectively.
2.2 Authority; Binding Effect.
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(a) Subject to the Required Consents, Seller has, and at each Closing
will have, the full and unrestricted right, power and authority to execute,
deliver and perform this Agreement and to consummate the transactions and
perform all obligations contemplated hereby and in all agreements, instruments
and documents being or to be executed and delivered by Seller in connection with
such transactions, including without limitation the Seller Documents
(collectively, "Related Documents").
(b) This Agreement and each Related Document, upon due execution and
delivery by Seller, will constitute the legal, valid, and binding obligation of
Seller, enforceable in accordance with its respective terms.
(c) Seller has obtained, or will obtain prior to the expiration of the
Due Diligence Period, any required corporate, partnership or limited liability
company approval required for the execution and consummation of this Agreement,
the Related Documents and all transactions contemplated hereby and thereby.
2.3 Licenses. Schedule 2.3 sets forth all permits, licenses, Medicaid,
Medicare and other provider agreements and other authorizations issued and
required by Governmental Authorities in connection with the ownership,
maintenance and operation of the Facilities, including, without limitation, such
licenses required for the operations of the Facilities as assisted living
facilities (collectively, the "Licenses"), and except as set forth on Schedule
2.3, the Licenses are in good standing and Seller has not received written
notice that Seller is in violation of any restriction, rule or regulation
affecting possession and use thereof. Except as set forth on Schedule 2.3,
Seller is the holder of all the Licenses and there is no other person or entity
who operates, manages or subleases the operations of the Facilities.
2.4 Governmental Authorities. Except as set forth on Schedule 2.4 attached
hereto, Seller is not required to submit any notice, report or other filing with
any federal, state, municipal, foreign or other governmental or regulatory
authority (collectively, "Governmental Authorities") in connection with Seller's
execution or delivery of this Agreement or any of the Related Documents or the
consummation of the transactions contemplated hereby and no consent, approval or
authorization of any Governmental Authority is required to be obtained by Seller
in connection with the execution, delivery and performance of this Agreement.
2.5 Taxes. Except as set forth in Schedule 2.5 attached hereto, all real
property taxes and assessments, and all personal property taxes and assessments,
in connection with the Assets allocable to the period prior to Closing have been
paid or, by the time of each Assets' respective Closing, will be paid or
prorated between the parties hereto. In addition, except with respect to items
to be paid at Closing, (i) all income, sales, bed and franchise taxes due and
payable by Seller, if any, and all interest and penalties thereon, if any, have
been paid in full; (ii) all tax returns required to be filed by Seller, if any
(including, without limitation, all sales, franchise and payroll tax returns and
reports), have been properly and timely filed, and correctly reflect the tax
position of Seller, and all taxes respectively due under such tax returns have
been paid thereby or will be paid in the ordinary course of Seller's business;
(iii) Seller is not subject to a claim for deficiency or other action in
connection with any taxes; and (iv) no tax returns of Seller have been or are
being examined by the Internal Revenue Service or any state or local
Governmental Authority.
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2.6 No Defaults. Except as set forth on Schedule 2.6, the execution,
delivery and performance of this Agreement and any of the Related Documents by
Seller does not and will not:
(a) Conflict with or result in any breach of the provisions of, or
constitute a default under the articles of incorporation, bylaws, articles of
organization, operating agreement or other governing organizational documents,
as the case may be, of any entity comprising Seller;
(b) Violate any restriction to which Seller is subject or, with or
without the giving of notice, the passage of time, or both, violate (or give
rise to any right of termination, cancellation or acceleration under) the
Facility Leases, the Conveyance Asset Leases (as defined in Section 2.8(b)) or
any mortgage, deed of trust, license, lease, indenture or other material
agreement or instrument, whether oral or written, to which Seller is a party, or
by which it or the Assets are bound, which will not be fully satisfied, assigned
or terminated on or prior to each Closing as a result of the transactions
contemplated in this Agreement, or result in the termination of any such
instrument or termination of any provisions in such instruments, or result in
the creation or imposition of any lien, charge or encumbrance upon the Assets;
(c) Create any liens or other encumbrances on the Assets in favor of
third parties;
(d) Constitute a violation of any Applicable Law of any Governmental
Authority; or
(e) Result in the breach or violation of any of the warranties and
representations herein set forth by Seller.
2.7 Contracts.
(a) Schedule 2.7(a) attached hereto includes a true and correct list
as of the Effective Date of all outstanding contracts or agreements, whether
written or oral, relating to the Assets, and Seller has provided to Purchaser
true and complete copies of each such Contract, excluding (i) service contracts
entered into in the ordinary course prior to the Effective Date which do not
effect more than one (1) Facility, do not involve annual payments in excess of
$6,000 per annum and are terminable upon not more than thirty (30) days' notice,
(ii) the Residency Agreements, (iii) the Equipment Leases, (iv) the Facility
Leases and (v) the Conveyance Asset Leases (such contracts and agreements
expressly including (i) but excluding (ii) - (v), collectively, the
"Contracts"). Seller has not received written notice of any default, and to the
knowledge of Seller, there is no default, existing or continuing by Seller or
any other party, under the terms of any Contracts, and, to Seller's knowledge,
each Contract is in full force and effect and is valid and enforceable by Seller
in accordance with its terms, assuming the due authorization, execution and
delivery thereof by each of the other parties thereto.
(b) Included on Schedule 2.7(b) are specimen residency agreements
("Residency Agreements") and a rent roll dated as of December 2, 2005 for each
Facility setting forth all such agreements in effect as of the Effective Date.
All Residency Agreements are terminable by the Resident therein named upon
thirty (30) days notice. Except set forth on
10
Schedule 2.7(b), all Residents of the Facilities have executed Residency
Agreements, and all Residency Agreements do not vary in any material respect
from the terms of the specimen agreements attached hereto, were entered into on
an arms' length basis and do not provide for payment of a single sum in exchange
for lifetime care or other prepaid services. True, correct and complete copies
of all Residency Agreements are located at the Facilities to which they relate
and access thereto will be provided to Purchaser as part of its due diligence
review.
2.8 Title to Property and Related Matters.
(a) Seller has received no written notice of and Seller has no
knowledge of (a) any violations of any covenants or restrictions encumbering the
Assets, or (b) any violations of any zoning codes, or ordinances or other
Applicable Laws of any Governmental Authorities applicable to the Assets. Seller
has no knowledge of any agreements, documents, or instruments which are not
recorded among the land records but which affect the title to any Facility.
Subject to Permitted Liens (as hereinafter defined) Seller has good and
marketable fee simple title to the Owned Facilities and all Assets associated
therewith, except for the Owned Facilities which are set forth on Schedule
2.8(a) (the "Conveyance Assets") that are currently leased by Seller pursuant to
the leases more particularly described thereon, including all documents and
instruments executed by Seller in connection therewith as set forth on such
schedule and including all amendments and modifications thereto (the "Conveyance
Asset Leases"). Seller hereby represents and warrants that Seller has a valid
and enforceable right to purchase the Conveyance Assets pursuant to valid
purchase agreements and which Seller is obligated to acquire fee simple title to
and to convey to Purchaser, or to cause Purchaser to acquire directly, pursuant
to Section 4.17. Seller has title to the Owned Assets other than the Conveyance
Assets free and clear of all mortgages, liens, pledges, charges or encumbrances
of any kind or character, except for (i) the indebtedness evidenced by recorded
mortgages of record, which Seller shall cause to be paid and released as of
Closing; (ii) statutory liens for taxes and other impositions which are not yet
delinquent; (iii) the matters defined as "Permitted Encumbrances" in
Section 4.10(b) hereof, and (iv) such encumbrances as will be cured or removed
by Seller as of the Closing for such portion of the Assets encumbered thereby
("Permitted Liens").
(b) Seller is the holder of valid and existing leasehold estates, as
lessee, of the Conveyance Assets and the Leased Facilities, for the terms set
forth in and pursuant to the terms of the Conveyance Asset Leases and the leases
for the Leased Facilities (collectively, the "Facility Leases"). True and
complete copies (including amendments, if any) of the Facility Leases have been
delivered to Purchaser and are listed on Schedule 2.8(b), which Schedule 2.8(b)
also contains a list of all documents and instruments delivered in connection
with the Facility Leases and the names of the lessors under the Facility Leases
(the "Facility Lessors"). Each of the Conveyance Asset Leases and the Facility
Leases are in full force and effect, Seller is not in default under and Seller
has not received written notice of, and Seller does not have any knowledge of,
any default or breach under any of the Conveyance Asset Leases or the Facility
Leases by any party thereto. To the knowledge of Seller, no event has occurred
which with the giving of notice or lapse of time, or both, would cause a breach
or a default by any party under the Conveyance Asset Leases and the Facility
Leases.
(c) Except for Personal Property leased pursuant to the Equipment
Leases and the Facility Leases, Seller owns good and marketable title to all
Personal Property.
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(d) All Facilities are supplied with such utilities as are necessary
for the operation of such Facilities as currently operated and for their
intended purposes.
(e) Each of the Facilities abuts on and has direct vehicular access to
a public road, or has access to a public road via a permanent irrevocable
easement benefiting the Real Property upon which such Facility is located, and
Seller has no knowledge of, and has received no notice that alleges any breach
or default under any instrument creating such easement or attempting to
terminate or revoke such easement.
(f) There are no pending rezoning or other pending land use actions
affecting the Assets and Seller has not received written notice of and has no
knowledge of any threatened or contemplated rezoning or other land use actions
affecting or which will affect the Assets. The current use of each Leased
Facility and Owned Facility is lawfully permitted either as a currently
conforming use or as a fully legally "grandfathered use", and there is no known
violation of any Applicable Laws relating to the zoning, land use, building
codes and other similar requirements of Governmental Authorities.
(g) At the Closing, Seller shall not be indebted to any contractor,
laborer, mechanic, materialman, architect or engineer for work, labor or
services performed or rendered, or for materials supplied or furnished, in
connection with the Assets for which any such person could lawfully claim a lien
against the Assets.
(h) There are no condemnation or eminent domain proceedings pending,
or, to the knowledge of Seller, threatened or contemplated against the Assets or
any part thereof, or access thereto, and Seller has not received notice, oral or
written, of the desire of any public authority or other entity to take or use
the Assets or any part thereof. Between the date hereof and the Closing, Seller
will give Purchaser prompt written notice of any actual or any threatened or
contemplated condemnation of any part of the Assets of which Seller receives
written notice or obtains knowledge.
(i) There are no parties other than Seller in possession of the
Assets, or any portion thereof, other than tenants under the Tenant Leases set
forth in Schedule 2.10 who are in possession of space to which they are entitled
and Residents pursuant to Residency Agreements, all of whom are set forth on the
rent rolls attached as part of Schedule 2.7(b).
(j) There are no outstanding options or rights of first refusal to
purchase the Assets or any portion thereof or interest therein, other than
rights running in favor of Seller, all of which are being assigned as part of
the Assets.
(k) The Assets constitute all of the asset necessary and sufficient to
conduct the operation of the Facilities in the manner that such operations have
been conducted by Seller.
2.9 Hazardous Substances. For purposes of this Agreement, "Environmental
Laws" means the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. Section
6901 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), 42 U.S.C. Sections 9601 et seq., the Clean Water Act, 33
U.S.C. Section 1251 et seq., the Toxic Substances Control Act (15 U.S.C. Section
2601 et. seq.), the Clear Air Act (42 U.S.C. Section 7401 et. seq.), the Safe
Water Drinking Act (42 U.S.C. Section 300(f) et. seq.), the Occupational Safety
and Health
12
Act, and all other applicable state, county, municipal, administrative or other
environmental, hazardous waste or substance, health and/or safety laws,
ordinances, rules, regulations, judgments, orders and requirements of any
Governmental Authority relating or pertaining to the (A) any aspect of the
environment, (B) preservation or reclamation of natural resources, (C) the
management, release and threatened release of Hazardous Substances, (D) response
actions and corrective actions regarding Hazardous Substances, (E) the
ownership, operation and maintenance of personal and real property which manages
or releases Hazardous Substances or at which Hazardous Substances are managed,
(F) common law torts, including so-called "toxic torts", and (G) environmental
or ecological conditions on, under or about the Assets, as any of the foregoing
may hereafter be amended, modified, reauthorized or reinterpreted, and all
amendments and regulations promulgated thereunder. For purposes of this
Agreement, "Hazardous Substance" shall mean any and all substances, wastes,
materials, pollutants, contaminants, compounds, chemicals or elements which are
defined or classified as a "hazardous substance", "hazardous material", "toxic
substance", "hazardous waste", "pollutant", "contaminant" or words of similar
import under any Environmental Law, including without limitation all
dibenzodioxins and dibenzofurans, polychlorinated biphenyls (PCBs), petroleum
hydrocarbon, including crude oil or any derivative thereof, any radioactive
material, raw materials used or stored in the Facility and building components
including, asbestos-containing materials in any form, radon gas and mold of a
type or in amounts that may present a health hazard.
(a) Except as set forth on Schedule 2.9, to Seller's knowledge, the
Assets do not contain any Hazardous Substance, except for Hazardous Substances
typically used in, and in quantities necessary for the day-to-day operation of,
the Facilities and which are commonly used in other similar facilities, such as
cleaning fluids, insecticides and medicines (the "Common Products"), which
Common Products have been used, transported, stored and disposed of by Seller in
compliance with all applicable Environmental Laws;
(b) Except as set forth on Schedule 2.9, there is no pending or
threatened litigation or proceeding before any Governmental Authority in which
any person or entity alleges the presence, release or threat of release of any
Hazardous Substance or violation of Environmental Laws at a Facility;
(c) Except as set forth on Schedule 2.9, Seller has not received any
notice of, and has no knowledge that, any Governmental Authority or employee or
agent thereof has determined, or threatens to determine, or is investigating,
that there is a presence, release or threat of release or placement on, in or
from the Assets, or the generation, transportation, storage, treatment, or
disposal at the Assets, of any Hazardous Substance. Seller shall notify
Purchaser promptly of its receipt of any such notice or knowledge after the
Effective Date;
(d) Except as set forth on Schedule 2.9 Seller has owned and operated
the Assets in compliance with all applicable Environmental Laws, has obtained
all necessary permits under the Environmental Laws for Seller's operations on
the Assets, and has not used any of the Assets for the generation, storage,
manufacture, use, transportation, disposal or treatment of Hazardous Substances
except for the use of de minimus quantities in the ordinary course of business
in compliance with applicable Environmental Laws;
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(e) Except as set forth on Schedule 2.9, there has been no discharge
of any Hazardous Substance on or from any of the Assets during the time of
Seller's ownership or occupancy thereof; and
(f) Seller has delivered to Purchaser copies of all reports or tests
in Seller's possession with respect to the compliance of the Facilities or the
Real Property with the Environmental Laws or the presence of Hazardous
Substances on the Facilities or the Real Property.
2.10 Leases. Schedule 2.10 attached hereto contains a true and correct list
of all leases (inclusive of all amendments) of all machinery, equipment and
other tangible property leased to Seller which are used at or relate primarily
to the Facilities (collectively, the "Equipment Leases") and all leases of space
in the Facilities by Seller to third party service providers, such as physical
therapists or beauty shop operators (collectively, the "Tenant Leases" and
sometimes collectively with the Equipment Leases, the "Leases"). Except as
disclosed on Schedule 2.10, each Lease is in full force and effect; all rents
due on or before the Effective Date under each Lease have been timely paid and
there has not been and there is no ongoing issue or dispute as to past rental
payments; in each case, neither Seller, nor, to the knowledge of Seller, any
other party to any such Lease is in default in any respect thereunder; and no
waiver, indulgence or postponement of Seller's obligations thereunder has been
granted by the lessor under any Equipment Lease or by Seller as the lessor under
the Tenant Leases, and Seller has no knowledge of and has not received written
notice that there exists any occurrence, event, condition or act which, upon the
giving of notice or the lapse of time or both, would become a default by Seller
(or, to the knowledge of Seller, any lessor or tenant) under any such Lease.
2.11 Patriot Act. Seller is in compliance with the requirements of
Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the "Order") and
other similar requirements contained in the rules and regulations of the Office
of Foreign Assets Control, Department of the Treasury ("OFAC") and in any
enabling legislation or other Executive Orders or regulations in respect thereof
(the Order and such other rules, regulations, legislation or orders are
collectively called the "Orders"). Neither Seller nor any of its affiliates (A)
is listed on the Specially Designated Nationals and Blocked Person List
maintained by OFAC pursuant to the Order and/or on any other list of terrorists
or terrorist organizations maintained pursuant to any of the rules and
regulations of OFAC or pursuant to any other applicable Orders (such lists are
collectively referred to as the "Lists"), (B) is a Person (as defined in the
Order) who has been determined by competent authority to be subject to the
prohibitions contained in the Orders; or (C) is owned or controlled by
(including without limitation by virtue of such Person being a director or
owning voting shares or interests), or acts for or on behalf of, any person on
the Lists or any other Person who had been determined by competent authority to
be subject to the prohibitions contained in the Orders.
2.12 Survey Reports, Etc.; Compliance with Law. Seller has or will pursuant
to Section 1.8 deliver to Purchaser true and complete copies of all survey
reports, waivers of deficiencies, plans of correction, and any other
investigation reports issued with respect to the Facilities (collectively,
"Licensing Surveys") for the last two (2) years. There are no material
deficiencies or violations noted in any Licensing Surveys, and except as set
forth on Schedule 2.12, Seller has remedied, discharged and complied with all
applicable plans of correction, such
14
that there are no current violations or deficiencies with respect to any of the
Licenses or will do so pursuant to Section 4.18. Except as disclosed on Schedule
2.12, Seller and the operation of the Facilities is in material compliance with
all Applicable Laws of all Governmental Authorities. There are no outstanding
bed taxes or other fees owing to state licensing authorities or any of the
Government Programs, there are no outstanding Life Safety Code deficiencies for
any of the Facilities, there are no outstanding waivers for any Life Safety Code
deficiencies, and there are no pending Medicare or Medicaid audits by any
Governmental Agency except as set forth on Schedule 2.12.
2.13 Capital Expenditures. Except as set forth in Schedule 2.13, and except
for routine expenditures for repairs and replacements in connection with the
ongoing maintenance and upkeep of the Facilities, which Seller has covenanted
and agreed pursuant to Section 4.1 hereof to undertake and complete in the
ordinary course consistent with past practices, Seller does not have any
outstanding contracts for capital expenditures relating to the Facilities, nor
does Seller have any agreement, obligations or commitments for capital
expenditures relating to the Facilities, including, without limitation,
additions to property, plant, equipment or intangible capital assets. Seller
will cause the items set forth on Schedule 2.13 to be completed in a good and
workmanlike manner prior to the Closing Date for the applicable Facility.
2.14 Absence of Notices. Except as disclosed on Schedule 2.14, Seller has
not received any written notice, and has no knowledge, that (a) any material
customer or supplier of Seller intends to discontinue, substantially alter
prices or terms to, or significantly diminish its relationship with the
Facilities, either as a result of the transaction contemplated hereby or
otherwise or (b) any federal, state, county, municipal or other Governmental
Authority is alleging any fire, health, safety, building, pollution,
environmental, zoning or other violation of Applicable Law, including, without
limitation, applicable health care licensure laws, in respect of any Facility or
any part thereof, which has not been corrected.
2.15 Resident Records. Except as provided on Schedule 2.15, Seller has
received no written notice, and has no knowledge (a) that Resident Records used
or developed in connection with the Business conducted at the Facilities have
not been maintained in accordance with any Applicable Laws governing the
preparation, maintenance of confidentiality, transfer and/or destruction of such
records, and (b) of any material deficiency in the Resident Records or any other
Books and Records of the Facilities.
2.16 Advance Payments and Patient Funds. The accounting for advance
payments and trust fund accounts provided to Purchaser by Seller pursuant to the
provisions of Section 10.2 hereof is complete and accurate in all material
respects.
2.17 Medicare and Medicaid Participation.
(a) No portion of the income from any Property is attributable to
Medicare, Medicaid or any other third party payor program, except as shown on
the Rent Roll attached as Schedule 2.7(b).
(b) Except as set forth on Schedule 2.17,
15
(i) if any Facility has historically received Medicare or
Medicaid reimbursement, it is eligible to receive payment without restriction
under Title XVIII ("Medicare") and Title XIX ("Medicaid") of the Social Security
Act, or both, and is a "provider" with valid and current provider agreements and
with one or more provider numbers with the federal Medicare and all applicable
state Medicaid and successor programs. For purposes of this provision, Medicare,
Medicaid, CHAMPUS, TRICARE and other federal, state or local governmental
reimbursement programs, or successor programs to any of the above, are referred
to as "Government Programs".
(ii) no Facility has historically received payments under CHAMPUS
or TRICARE directly nor, to Seller's knowledge, indirectly, nor was any Facility
or Seller ever a "provider" with provider agreements with one or more provider
numbers with CHAMPUS and/or TRICARE.
(iii) if any Facility historically participated or participates
in Government Programs, such Facility was and is in compliance with the
conditions of participation, if any, of the Government Programs in which it
participated or participates, in all respects.
(iv) Seller currently holds such necessary licenses, agreements
and certificates pertaining to Medicare and Medicaid provider agreements entered
into with the State of Florida, the United States, and any municipality or other
Governmental Authority body that authorizes Seller to conduct its business at
the Facilities as presently operated.
(c) All cost reports of Seller and the Facilities for the Government
Programs which are required to be filed on or prior to the Effective Date during
the past three (3) years have been properly filed and are complete and accurate
in all respects, and there are no outstanding overpayments, set offs or
adjustments to any Government Programs.
2.18 Third Party Payor Reimbursement. All billing practices of Seller with
respect to the Facilities to all third party payors, including the Government
Programs and private insurance companies, have been in material compliance with
all Applicable Laws and all regulations and policies of such third party payors
and Government Programs in all material respects. Seller has received no written
notice that Seller has billed or received any payment or reimbursement in excess
of amounts permitted by Applicable Law, except to the extent cured or corrected
and all penalties or interest discharged in connection with such cure or
correction.
2.19 Licensed Beds and Units. The number of licensed assisted living units
at the Facilities is as set forth on Schedule 2.19.
2.20 Intellectual Property. Other than as set forth on Schedule 2.20, the
Assets include all "Intellectual Property" used in connection with operating the
Facilities, and Seller owns or has the right to use pursuant to a valid and
assignable perpetual license of all such Intellectual Property. For these
purposes, "Intellectual Property" shall mean, collectively, all: (v) United
States or foreign patents, patent applications, patent disclosures, and all
renewals, reissues, divisions, continuations, extensions or
continuations-in-part thereof; (vi) trademarks, service marks, trade dress,
trade names, fictitious names, corporate names, and registrations and
16
applications for registration thereof; and (vii) copyrights (registered or
unregistered), registrations and applications for registration thereof,
including all renewals, derivative works, enhancements, modifications, updates,
new releases or other revisions thereof.
2.21 Financial Statements. Seller has delivered to Purchaser copies of the
financial statements listed on attached Schedule 2.21 certified by the chief
financial officer of Seller (collectively, the "Financial Statements") as
follows: (a) individual Facility income statements for the fiscal years ended
2002, 2003 and 2004; (b) individual Facility income statements and Seller's
consolidated and consolidating balance sheet and statements of income (the "Most
Recent Financial Statements") as of and for the eleven (11) month period ended
November 30, 2005 (the "Most Recent Fiscal Month End"); (c) a schedule of
capital improvements to the Facilities for the fiscal years ended 2002, 2003 and
2004; and (d) copies of Seller's consolidated, unaudited income statements for
the Facilities, for the periods ending December 31, 2002, 2003 and 2004. The
Financial Statements (including the notes thereto) have been prepared in
material accordance with generally accepted accounting principles ("GAAP") on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of Seller and Facilities as of such dates and the results of
operations of Seller and the Facilities for such periods.
2.22 No Litigation. Except as set forth on Schedule 2.22 attached hereto,
there are no actions, suits, claims, governmental investigations or other legal
or administrative proceedings, or any orders decrees or judgments in progress,
pending or in effect, or, to the knowledge of Seller, threatened against or
relating to Seller, the Facilities, Seller's operation of the Facilities, any of
the Assets, or against or relating to the transactions contemplated by this
Agreement, and there are none pending in state courts, or in any federal courts,
or, to the knowledge of Seller, pending in other jurisdictions or threatened in
writing, at law or in equity, by or before any federal, state or municipal court
or other Governmental Authority. The matters set forth on Schedule 2.22, if any,
if decided adversely will not materially and adversely affect the Assets,
Seller, or Seller's operation of the Facilities or the Business.
2.23 Compliance with Medicare and Medicaid Law.
(a) Except as set forth on Schedule 2.23 attached hereto, there is no
litigation, claim, proceeding or investigation currently pending against Seller
or relating to the Facilities for any violation or alleged violation of, and
Seller has received no written notice, and Seller has no knowledge, of any
threat of any suit, action, claim, dispute, investigation, agency review or
other proceeding pursuant to or involving, (i) the False Claims Act, 31 U.S.C.
Sections 3729 et seq., (ii) the Civil Monetary Penalties Law, 42 U.S.C. Section
1320a-7a, (iii) federal or state anti-kickback statutes, including but not
limited to 42 U.S.C. 1320a-7b, (iv) federal or state referral laws, including
but not limited to 00 X.X.X. Xxxxxxx 0000xx, (x) regulations promulgated
pursuant to any of the foregoing statutes, or (vi) any other federal or state
law or regulation of general applicability to health care fraud, governing or
regulating the management of health care providers, or governing or regulating
medical billing or reimbursement, including all applicable Medicare and Medicaid
statutes and regulations (collectively the "Medicare/Medicaid Laws").
(b) Seller, and each of the Facilities have timely filed all forms,
applications, reports, statements, data and other information required to be
filed with federal, state or local
17
entities under federal or state laws or regulations in connection with the
Medicare/Medicaid Laws, including but not limited to cost reports required to be
filed with respect to the Facilities, as more fully set forth in Section 2.17
hereof.
(c) The Facilities have the number of licensed and certified beds as
set forth in Schedule 2.19 and all billing to the Government Programs has been
consistent with these certification designations.
(d) All billing practices of Seller with respect to the Facilities are
in material compliance with all Applicable Laws and regulations of such
Government Programs. Except as set forth on Schedule 2.23, Seller has not billed
or received any payment or reimbursement in excess amounts permitted by
applicable law, except to the extent cured or corrected and all penalties or
interest discharged in connection with such cure or correction.
2.24 Absence of Certain Changes or Events. Since November 30, 2005, through
the Effective Date, the Facilities and all of the parties comprising Seller have
not:
(a) Suffered any Material Adverse Change in the financial condition,
assets, or liabilities of any Facility, or the operation of any Facility;
(b) Other than in the ordinary course of business, consistent with
past practices, granted any increase in the compensation payable or to become
payable by Seller to any of its officers or employees (collectively,
"Employees") employed at the Facilities (except compensation granted to new
Employees who were hired in the ordinary course of business on substantially
similar terms to existing Employees with comparable duties and experience);
(c) Sold, transferred or otherwise disposed of, or agreed to sell,
transfer or otherwise dispose of, any assets relating to or in connection with
the Facilities having a fair market value at the time of sale, transfer or
disposition of $25,000 or more in the aggregate, or cancelled, or agreed to
cancel, any debts or claims relating primarily to the Facilities in the amount
of $10,000 or more in the aggregate; or
(d) Made any change in any method of accounting or accounting practice
relating to the Facilities.
2.25 Condition of Assets. Except as set forth on Schedule 2.25, all of the
Assets are in Seller's possession or control and are located at or on the
Facilities and to Seller's knowledge all of the Assets are in good repair and
working order in all material respects, subject to normal wear and tear.
2.26 Employee and Labor Relations. Except as provided under Schedule 2.26:
(a) Compliance. Seller is in compliance with all federal, state or
other Applicable Laws of Governmental Authorities respecting employment and
employment practices concerning the Facilities (collectively, "Employment
Laws").
(b) No Claims. No legal claim in respect of application for
employment, employment, the terms or conditions of employment, the handling of
benefits or termination of
18
employment of any person has been asserted or threatened against Seller or any
of its affiliates in connection with the operation of the Facilities.
(c) No Labor Actions. No labor strike, picketing action, dispute,
slowdown or stoppage, or unfair labor practices are actually pending or, to the
knowledge of Seller, threatened against, or involving, Seller or any of the
Facilities.
(d) No Bargaining Agreements. Seller is not a party to any collective
bargaining agreement, and no collective bargaining agreement is currently being
negotiated by Seller. To Seller's knowledge no petitions for representation have
been filed against any of the Facilities nor have any demands been made for
recognition.
(e) PTO. Seller has complied with its policies with respect to leave
days earned by its employees.
(f) At-Will Employees. All Employees at the Facilities are employees
of Seller and are employees-at-will.
(g) WARN Compliance. Seller has taken (or will take prior to Closing),
as required by law, any and all actions necessary to comply with the Worker
Adjustment and Retraining Notification Act ("WARN"), or state statute of similar
import, with respect to any event of occurrence affecting the Facilities since
the effective date of WARN.
(h) List of Employees. Schedule 2.26(h) is a complete list of all
Employees employed at each Facility, which lists their respective salaries or
hourly pay rates, position and term of employment, and no such Employees are
parties to any written or oral employment agreements.
2.27 Employee Benefit Employee Benefit Plans.
(a) Except as disclosed on Schedule 2.27, Seller has never maintained
any defined benefit plan within the meaning of section 414(l) of the Internal
Revenue Code of 1986.
(b) Except as disclosed on Schedule 2.27, Seller has never been
obligated to contribute to any multi-employer plan within the meaning of ERISA
Section 3(37).
(c) Schedule 2.27 sets forth an accurate and complete list of all
Employee Benefit Plans (as defined hereinafter) and specifies which Seller
sponsors each of said Employee Benefit Plans. "Employee Benefit Plans" mean all
benefit plans and benefit arrangements in which Seller's employees at the
Facilities participate.
(d) Each Employee Benefit Plan has, at all times, been maintained and
operated in compliance, in all material respects, with its terms and
requirements of all applicable Employee Benefit Plans, including, without
limitation, ERISA, as amended, and the Internal Revenue Code of 1986, as amended
(the "Code").
2.28 Inventory and Supplies. As of the Effective Date and at each
Facility's respective Closing, the Inventories are and will be in sufficient
quantity and condition for the normal
19
operation of the Business at the Facilities, in compliance with past practices
and all requirements of Governmental Authorities and consistent with past
practices.
2.29 Insurance. Attached as Schedule 2.29 is a list of insurance policies
carried and insurance coverages maintained by Seller with respect to the
Facilities, and upon request by Purchaser, Seller shall make copies of any
policies and provide same to Purchaser. Seller's insurance policies and
coverages are in full force and effect.
2.30 Truth of Warranties, Representations, and Statements. All of the
statements, representations, and warranties made by Seller in this Agreement and
the statements and information set forth in the attached Schedules are true and
accurate in every material respect.
2.31 Materials Provided. All materials provided to Purchaser by Seller
either prior to the Effective Date or during the term hereof, including without
limitation all items on the Due Diligence Checklist attached hereto as Exhibit
D, are true, accurate and complete in all material respects.
Notwithstanding anything else to the contrary herein, any reference in this
Agreement to "knowledge," of Seller shall be deemed to mean the actual knowledge
of Xxxxxxx X. Xxxxx, Xx., and Xxxx X. Xxxx, provided, however, that such
individuals shall make due inquiry of any regional managers and executive
directors of the Facilities no later than ten (10) days after the Effective Date
to confirm the accuracy of the representations and warranties made hereunder (to
the extent relevant to such inquiry) and disclose any relevant items to
Purchaser. If Purchaser, during the term of this Agreement, gains actual
knowledge of any breach of any material representation or warranty made by
Seller hereunder and Purchaser fails to disclose such breach to Seller prior to
the Closing to which such breach relates (or the final Closing Date if the
breach is not related to a single Facility), then Purchaser may not pursue
damages for such breach against Seller after such Closing. Purchaser shall be
deemed to have actual knowledge of any information explicitly disclosed in any
Schedule or in Seller's response to any due diligence request made by Purchaser;
provided, however, that the substance of any information disclosed is such that
a reasonable person would discern from the information disclosed that a fact or
condition exists that would give rise to a breach.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated herein, Purchaser represents and warrants the
following, each of which warranties and representations is material to and is
relied upon by Seller:
3.1 Corporate Organization; Etc. Purchaser is a corporation duly organized
and validly existing under the laws of the State of Delaware with full power and
authority to own all of its properties and assets and to carry on its business
as it is now being conducted.
3.2 Authorization, Binding Effect. Purchaser has, and at each Closing will
have, the full and unrestricted right, power and authority to execute, deliver
and perform this Agreement and to consummate the transactions and perform all
obligations contemplated hereby and in all agreements, instruments and documents
being or to be executed and delivered by Purchaser in
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connection with such transactions. The consummation of the transactions
contemplated herein have been duly or will be prior to the expiration of the Due
Diligence Period authorized and approved by all necessary corporate action of
Purchaser. This Agreement and each such other agreement, instrument and
document, upon due execution and delivery by Purchaser, will constitute the
legal, valid, and binding obligation of Purchaser, enforceable in accordance
with its terms.
3.3 No Violation. Purchaser is not subject to or obligated under any
certificate of incorporation, bylaw, law, or rule or regulation of any
Governmental Authority, or any agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or decree which
would be in any material respect breached or violated by the execution, delivery
or performance of this Agreement.
3.4 No Litigation. Purchaser is not a party to, or defending or subject to,
any investigation, litigation, arbitration or other legal proceeding, nor is any
such legal proceeding threatened, which would, have a Material Adverse Change on
Purchaser's ability to execute, deliver and perform this Agreement and the
documents and transactions contemplated hereby.
3.5 Truth of Warranties, Representations, and Statements. All of the
statements, representations, and warranties made by Purchaser in this Agreement
are true and accurate in every material respect.
3.6 Patriot Act. Purchaser is in compliance with the requirements of
Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the "Order") and
other similar requirements contained in the rules and regulations of the Office
of Foreign Assets Control, Department of the Treasury ("OFAC") and in any
enabling legislation or other Executive Orders or regulations in respect thereof
(the Order and such other rules, regulations, legislation or orders are
collectively called the "Orders"). Neither Purchaser nor any of its affiliates
(A) is listed on the Specially Designated Nationals and Blocked Person List
maintained by OFAC pursuant to the Order and/or on any other list of terrorists
or terrorist organizations maintained pursuant to any of the rules and
regulations of OFAC or pursuant to any other applicable Orders (such lists are
collectively referred to as the "Lists"), (B) is a Person (as defined in the
Order) who has been determined by competent authority to be subject to the
prohibitions contained in the Orders; or (C) is owned or controlled by
(including without limitation by virtue of such Person being a director or
owning voting shares or interests), or acts for or on behalf of, any person on
the Lists or any other Person who had been determined by competent authority to
be subject to the prohibitions contained in the Orders.
ARTICLE 4
COVENANTS OF SELLER
Seller covenants and agrees as follows:
4.1 Regular Course of Business. Seller shall: (a) operate the Facilities in
a manner consistent with all Applicable Laws of all Governmental Authorities,
Seller's past practices and industry standards for operation of first class
assisted living facilities; (b) maintain the Assets in good order and repair,
reasonable wear and tear excepted and otherwise in sufficient repair,
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order, and condition to satisfy the representations and warranties as to the
condition and quantity of the Assets set forth in Article II; (c) comply with
all Applicable Laws with respect to the Assets and the operation thereof,
including without limitation all required regulatory standards of any
Governmental Authorities with regulatory jurisdiction over the Facilities and
compliance with all Governmental Programs; (d) timely pay all rents and other
payments due on or before the Closing under, and otherwise maintain and comply
in all material respects with, all Contracts, all Tenant Leases, all Equipment
Leases, all Facility Leases, all Conveyance Asset Leases, and all Residency
Agreements, each without change except as expressly provided herein; (e) not
make any changes or modifications in any Contracts, Tenant Leases, Equipment
Leases, Facility Leases, Conveyance Asset Leases, and Residency Agreements or
incur any further obligations or surrender any rights thereunder, except Seller
shall enter into new Residency Agreements with new Residents on substantially
the same terms and conditions as other Residency Agreements in effect prior to
the Effective Date for the same Facility and otherwise consistent with the
specimen Residency Agreement attached hereto on Schedule 2.7(b); (f) not enter
into any agreements or leases which would have had to be disclosed on any
schedule hereto had such agreements or leases been entered into prior to the
Effective Date; (g) keep in full force and effect present insurance policies
through the Closing Date; and (h) use its commercially reasonable efforts to
maintain in good standing all Licenses necessary to operate the Facilities and
to maintain all goodwill of Residents, Employees and vendors.
4.2 Borrowing. Seller shall not create or permit to become effective any
mortgage, pledge, lien, encumbrance or charge of any kind upon the Assets other
than the Permitted Liens.
4.3 Full Access and Disclosure. Seller shall, upon reasonable prior notice
not to be less than two (2) days, afford to Purchaser and its counsel,
accountants, environmental consultants, engineers, appraisers and other
authorized representatives (collectively, "Purchaser's Representatives")
reasonable access during business hours to the Facilities, and all Books and
Records, including, but not limited to, the roof, all FF&E, heating and cooling
systems, and any and all vehicles, financial data and records, operating data
and other information reasonably requested, including the most recent Financial
Statements, cost reports, inspection reports, plans of correction with respect
to Licensing Surveys (all with respect to the past three (3) years), current
room rates (including dates and amounts of increases), census data and residency
mix, payroll information, Medicaid reports, employment agreements, personnel
policies, and all contracts, agreements, correspondence files and other
documents relating to the Facilities in order that Purchaser may have full
opportunity to make such reasonable investigations of the Assets and the
Facilities as Purchaser shall desire to make. Seller shall be entitled to have a
Seller representative present during Purchaser's scheduled visits and in any
meetings, calls or other contacts with Seller's personnel, and such access shall
include the right to meet with the residence directors, executive directors,
regional vice presidents, directors of nursing and personnel who are responsible
for maintenance at the Facilities prior to the expiration of the Due Diligence
Period and all personnel after the expiration of the Due Diligence Period,
subject to Purchaser's obligation to comply with the confidentiality provisions
set forth in this Agreement. Seller shall furnish such additional financial and
operating data and other information as Purchaser and Purchaser's
Representatives shall from time to time reasonably request, and Seller shall
supplement or amend any information, written or otherwise, previously delivered
or otherwise disclosed to Purchaser with respect to any matter hereafter arising
which, if existing or occurring at the Effective Date, would have been required
to be set forth or disclosed.
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4.4 Consents. Seller shall obtain, on or prior to Closing, all applicable
consents necessary for Seller to fulfill Seller's obligations to consummate the
transactions contemplated hereby, including without limitation any required
consents of any Governmental Authority and the consents of the Facility Lessors.
4.5 Compliance With Laws. Seller shall comply with all Applicable Laws of
all Governmental Authorities in conjunction with the execution, delivery and
performance of this Agreement, the transactions contemplated hereby and the
ownership, operation and maintenance of the Facilities prior to Closing.
4.6 Taxes. Seller shall properly and timely (including extensions pursuant
to properly and timely filed extension documents where permitted) file all
federal, state and local tax returns, and, to the extent applicable, estimates
and reports and timely pay all amounts then due, for all taxes for all periods
through and including the Closing Date to the extent due and payable at any time
prior to the Closing Date hereunder and otherwise to the extent necessary to
transfer the Assets to Purchaser in accordance with the terms of this Agreement.
4.7 No Disposition of Assets. Except for Inventory consumed in the ordinary
course or Assets replaced in the ordinary course, Seller shall not sell, lease
or otherwise dispose of or distribute any of the Assets or properties related
thereto or necessary for operation of the Facilities and, to the extent depleted
or replaced in the ordinary course, Seller shall restock and replenish any
portion of the Assets consumed or used during the term of this Agreement with
Assets of comparable quality in accordance with Seller's prior practices.
4.8 Further Documentation. Seller agrees that for a two (2) year period of
time following the final Closing hereunder, upon request by Purchaser, Seller
will do, execute, acknowledge, and deliver, or cause to be done, executed,
acknowledged, and delivered, all such further acts, deeds, assignments,
transfers, conveyances and assurances as may be reasonably required, in order to
more fully assign, grant, transfer, convey, assure and confirm to Purchaser, or
to its successors and assigns, or for aiding and assisting in collecting and
reducing to possession, any or all of the Assets to be sold to Purchaser
pursuant to this Agreement or transitioning the operations of the Facilities to
Purchaser.
4.9 Confidentiality. Seller will use its commercially reasonable efforts to
keep confidential all information relating to the terms of this Agreement and
all information relating to Purchaser (other than information that is a matter
of public knowledge or that has heretofore been or is hereafter published in any
publication for public distribution or filed as public information with any
Governmental Authority) and such information shall not at any time be used for
the advantage of Seller or its representatives or disclosed to third parties
(including Employees at the Facilities) by Seller or its representatives, other
than to the extent necessary to consummate the transactions contemplated hereby.
4.10 Title Insurance and Survey; Governmental Approvals.
(a) As part of its delivery of the items on the Preliminary Due
Diligence Checklist, Seller will provide to Purchaser a copy of all of Seller's
currently effective title insurance policies and plats and surveys in its
possession that relate to the Real Property.
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(b) Purchaser at Purchaser's option shall obtain: (i) updated real
property surveys for each of the Facilities (collectively, the "Surveys"), and
(ii) title commitments for each of the Facilities (collectively, the "Title
Commitments"), issued by a national title company selected by Purchaser ("Title
Company"), which Title Commitments shall contain commitments by the Title
Company to issue to Purchaser title insurance policies on extended coverage 1970
or 1992 ALTA Owners' Policy or Leasehold forms, in form and substance reasonably
acceptable to Purchaser (each a "Title Policy" and collectively the "Title
Policies") insuring the fee simple interest of Purchaser in the Owned Facilities
and valid leasehold estates in the Leased Facilities. Seller will cause all
standard exceptions to be deleted from the Title Policies at the Closing,
including without limitation, executing Seller's affidavits, gap indemnities and
the like, other than exceptions for (i) such itemized matters shown on the
Surveys to which Purchaser does not object pursuant to the provisions hereof and
(ii) taxes for the year in which the Closing occurs which are not yet due and
payable. Purchaser shall have through the expiration of the Due Diligence Period
to give notice to Seller approving or disapproving in writing the Title
Commitments and Surveys, with any such notice of disapproval specifying the
exceptions or other matters to which Purchaser objects. The failure of Purchaser
to disapprove any matter reflected in the Title Commitment or Survey with
respect to any Facility within the Due Diligence Period shall be deemed a waiver
by Purchaser of any right to object to any matter so shown; provided, however,
Seller shall be unconditionally obligated to pay any outstanding indebtedness
evidenced by, and cause the release of any lien, mortgage, deed of trust, deed
to secure debt, security agreement, judgment, FiFa or other encumbrance capable
of being released through or as a result of the payment of money (collectively,
"Monetary Encumbrances") irrespective of whether Purchaser objects to same.
Notwithstanding the foregoing, Purchaser shall not have the right to disapprove
any of the following, all of which shall be deemed to be "Permitted
Encumbrances" hereunder: (A) matters created or consented to in separate written
consent by Purchaser, (B) the Assumed Liabilities, and (C) Permitted Liens. If
Purchaser disapproves any encumbrance or other matter reflected in the Title
Commitment or Survey with respect to any Facility other than Permitted
Encumbrances and Purchaser shall notify Seller prior to the expiration of the
Due Diligence Period and Seller shall have ten (10) Business Days from the date
of notice of such disapproval in which to cure the same (which cure may be
effected by payment and discharge of the objectionable item or by causing the
Title Company to remove the same as an exception or affirmatively insure over
such item provided such affirmative insurance shall be reasonably satisfactory
to Purchaser and any lender of Purchaser and sufficient, in Purchaser's
reasonable judgment, to adequately address Purchaser's and any lender's concerns
with respect to such matter) and in the event Seller shall fail to effect such
cure within said ten (10) Business Day period, Purchaser shall have five (5)
Business Days thereafter in which to advise Seller in writing of Purchaser's
election (x) to make such payments as are necessary to effect releases of such
claims Seller is not prepared to cure, or (y) to extend the Closing Date for all
Facilities for a period not to exceed sixty (60) days after the Original Closing
Date to enable Purchaser or Seller to so cure. Notwithstanding the foregoing, in
the event of any title matters that cannot be cured to Purchaser's reasonable
satisfaction, Seller shall have the option to either (i) close on all unaffected
Facilities in which event the Purchase Price and the Deposits shall be allocated
and applied in accordance with Sections 1.4 and 1.7 or (ii) terminate this
Agreement as to all Facilities in which event the Deposits shall be returned to
Purchaser and the parties shall have no further obligations or liabilities
hereunder, provided that Seller shall reimburse Purchaser for Purchaser's Due
Diligence Costs (as defined in Section
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11.2) incurred through the date of termination not to exceed $300,000 in the
aggregate. In the event that any update to any Title Commitment prior to or on
the Closing Date for any Facility reveals any defect not previously shown or
disclosed on the initial Title Commitment for such Facility, then either Seller
shall cure such defect or, if such defect cannot be cured to Purchaser's
reasonable satisfaction, then, Seller shall have the option to either (i) close
on all unaffected Facilities in which event the Purchase Price and the Deposits
shall be allocated and applied in accordance with Sections 1.4 and 1.7 or (ii)
terminate this Agreement as to all Facilities in which event the Deposits shall
be returned to Purchaser and the parties shall have no further obligations or
liabilities hereunder, provided that Seller shall reimburse Purchaser for
Purchaser's Due Diligence Costs (as defined in Section 11.2) incurred through
the date of termination not to exceed $300,000 in the aggregate.
(c) Upon reasonable advance notice from Purchaser, Seller shall permit
Purchaser and its agents to conduct environmental assessments for each Facility
(collectively, the "Environmental Assessments"), and Seller shall provide copies
of any previously prepared Phase I environmental assessments or other
environmental assessments in Seller's possession conducted for any of the Assets
pursuant to the Preliminary Due Diligence Checklist. Purchaser shall have
through the expiration of the Due Diligence Period to approve or disapprove such
Environmental Assessments in writing delivered to Seller, with any such
disapproval specifying the matter(s) to which Purchaser objects. If any
Environmental Assessment recommends that a Phase II be ordered, then such Phase
II shall be obtained before Purchaser must approve or disapprove the
Environmental Assessment and before Purchaser is required to give the
Environmental Notice for such Facility (defined below). Should Purchaser
disapprove of any matter set forth in a Phase I or Phase II, Purchaser shall
notify Seller in writing of such disapproval and the reasons therefor at or
prior to the expiration of the Due Diligence Period (as such period may be
extended to permit completion of a Phase II report as contemplated above) (the
"Environmental Notice"). The failure of Purchaser to deliver an Environmental
Notice to Seller on or prior to the expiration of the Due Diligence Period shall
be deemed to be a waiver by Purchaser of any right to object to any matter
specifically set forth in such Phase I or Phase II, respectively. If Purchaser
delivers an Environmental Notice to Seller prior to the expiration of the Due
Diligence Period, Seller shall have ten (10) Business Days from the date of
Seller's receipt of such Environmental Notice in which to advise Purchaser
whether or not Seller will cure the same prior to Closing, and if Seller fails
to effect such cure within said ten (10) Business Day period, Purchaser shall
have five (5) Business Days thereafter in which to advise Seller in writing of
Purchaser's election (x) to waive the matters to which Purchaser objected and to
proceed to Closing or (y) to extend the Closing Date for a period not to exceed
sixty (60) days after the Original Closing Date to enable Purchaser or Seller to
so cure. Notwithstanding the foregoing, if such matters cannot be cured to
Purchaser's reasonable satisfaction, then Seller shall have the option to either
(i) close on all unaffected Facilities in which event the Purchase Price and the
Deposits shall be allocated and applied in accordance with Sections 1.4 and 1.7
or (ii) terminate this Agreement as to all Facilities in which event the
Deposits shall be returned to Purchaser and the parties shall have no further
obligations or liabilities hereunder, provided that Seller shall reimburse
Purchaser for Purchaser's Due Diligence Costs (as defined in Section 11.2)
incurred through the date of termination not to exceed $300,000 in the
aggregate.
4.11 Financial Information and Audit Assistance. During the term of this
Agreement, Seller shall deliver to Purchaser monthly individual Facility income
statements not later than the
25
end of the next succeeding calendar month and updated rent rolls not later than
the seventh (7th) day of the next succeeding calendar month. On not less than
five (5) Business Days prior written notice from Purchaser, Seller agrees to
provide Purchaser's auditors sufficient access to information and personnel to
obtain all of the information they reasonably require to prepare audited
financial statements of the Facilities for fiscal years 2002 through 2005 and
comparable unaudited interim financial statements from January 1, 2006 through
the Closing Date including without limitation access to Seller's corporate level
books and records. Seller also agrees to cause an executive officer of Seller
with knowledge concerning the financial affairs of the Facilities to execute and
deliver a representation letter to Purchaser's auditors with respect to all
financial information delivered to Purchaser and its auditors, in a form and
substance substantially similar to what would have been executed and delivered
to the auditors had Seller been preparing audited financial statements for such
time periods with respect to the Facilities. There has been no material
co-mingling of expenses or deductions by Seller among Facilities nor among the
various Seller entities.
4.12 PTO Pay. Seller shall credit to Purchaser on the Closing Statement (as
defined in Section 10.1(a)), as of each Closing Date, for all earned and accrued
vacation, sick or personal pay or other paid time off of all Transitioned
Employees (as defined in Section 5.6) for Facilities being conveyed on such
Closing Date (collectively, "PTO"). Seller shall deliver to Purchaser a schedule
of PTO of Transitioned Employees employed at a Facility within five (5) days
prior to the Closing for such Facility, which schedule shall include all PTO for
Transitioned Employees of the applicable Facilities (i) as of the most recent
pay period preceding the Closing Date, and (ii) projected PTO as of the Closing
Date, which shall assume no further vacation or sick days for all Transitioned
Employees except for known scheduled vacation. The schedule shall list all PTO
of all Transitioned Employees, including the method of calculation of the PTO
and the dollar value thereof to the Transitioned Employees to whom the amounts
are potentially owed. Purchaser shall thereafter be responsible for all such PTO
to all such Transitioned Employees to the extent of the credit received from
Seller at Closing, and the amount of such PTO shall be subject to the
post-closing reconciliation process described in Section 10.5 below.
4.13 No Solicitation. Seller agrees Seller shall not after the date hereof
and before the Closing Date (including without limitation any extended Closing
Date hereunder), directly or indirectly, through any officer, director,
employee, agent or otherwise, solicit, initiate or encourage submission of
proposals or offers from any person relating to any acquisition of all or any
portion of the Assets, or any assets of or equity interest in Seller or any
business combination involving Seller, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing.
4.14 Final Cost Report. Seller shall prepare and file any and all final
cost reports for each Facility as and to the extent required by any Governmental
Authority, Government Program or third party payor for the time period for which
Seller was the operator or licensee of such Facility within the time frame
required by law for each Facility for which such a report should be prepared,
but no later than one hundred and twenty (120) days after the Closing Date for
such Facility.
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4.15 Employment Records; Resident Records. Except as may be prohibited by
Applicable Law, Seller shall make available to Purchaser its Books and Records
relating to all Employees of Seller, including any and all records or written
documents relating to performance reviews, performance improvement plans,
statements of disciplinary actions taken, medical records and all other
information maintained in such Employee' personnel files (collectively,
"Employee Records"). At each Closing, except as may be prohibited by Applicable
Law, Seller shall transfer to Purchaser all Employee Records for the
Transitioned Employees at the respective Facilities. Following any Closing,
Seller shall have the obligation to (i) remove and retain all Employee Records
for all Employees who are not Transitioned Employees and (ii) remove and retain
all records relating to all prior residents of the Facilities for which Closing
is occurring who were not residing therein on the Closing Date therefor.
4.16 Lease Consents and Estoppels.
(a) Seller, at Seller's sole cost and expense, shall obtain lease
estoppels from the Facility Lessors, substantially in the form attached hereto
as Exhibit 4.16(a)(1), which shall include statements as to the current rental
rate and other amounts payable thereunder, the amounts of reserves or escrows
for taxes, insurance and CapEx and other reserves or escrows, the amount of
security deposits held, and certifying as to the absence of any defaults
thereunder and the absence of any events which, with the passage of time, giving
of notice, or both, could ripen into an event of default thereunder ("Lessor
Estoppels"), and Seller shall at Seller's sole cost and expense also obtain
written consent from the Facility Lessors to the assignment of the Facility
Leases, and to subleases of the same to, or management agreements with, one or
more affiliates of Purchaser, as necessary or appropriate to accommodate
Purchaser's licensing or operating structure or the requirements of any lenders,
including the applicable Facility Lessor's written confirmation that the
applicable Facility Lease is not cross-defaulted with or cross-collateralized by
any other lease, document or agreement (other than the other Facility Leases, if
and to the extent the Leased Facilities thereunder are actually acquired by
Purchaser) and shall include any consents required from any lenders holding
outstanding indebtedness secured by any Leased Facility or Real Property to the
extent necessary or appropriate substantially in the form of attached Exhibit
4.16(a)(2) ("Lease Consents"). Seller shall at Seller's sole cost and expense
also obtain for Purchaser's benefit subordination, nondisturbance and attornment
agreements from all lenders holding underlying indebtedness with respect to the
Leased Facilities substantially in the form of the attached Exhibit 4.16(a)(3)
("SNDAs"). The executed counterparts of all Lessor Estoppels, Lease Consents and
SNDAs from all lessors and underlying lenders shall be delivered to Purchaser at
least ten (10) days prior to the Closing Date for the Leased Facilities to which
they relate. Purchaser shall not be required to incur any fees or to provide
additional deposits (other than as set forth in the Facility Leases) in
connection with obtaining the Lessor Estoppels, Lease Consents or if applicable
SNDAs or the release of Seller and its affiliates from their obligations with
respect to the Facility Leases.
(b) Receipt of all Lessor Estoppels, Lease Consents and SNDAs are part
of the "Required Consents" that are conditions precedent to Closing hereunder
pursuant to the provisions of Sections 8.2. Notwithstanding any provision
contained herein to the contrary, if such items are not obtained in form and
substance reasonably satisfactory to Purchaser prior to the end of the Deferral
Period, (which Purchaser will confirm in writing one way or the other), then
this Agreement shall be terminated as to the Leased Facilities and the Deposits
shall be
27
allocated and refunded in accordance with Sections 1.4 and 1.7 and this
Agreement shall remain in effect with respect to the remainder of the Assets as
set forth in Section 1.2(b)(i).
4.17 Acquisition of Conveyance Assets. Seller shall timely and properly
exercise its right to acquire the Conveyance Assets and shall acquire good and
marketable fee simple title to the Conveyance Assets, free and clear of the
Conveyance Asset Leases, on or prior to the Closing Date with respect to the
Facility for which such Conveyance Asset Lease is in effect such that, on such
Closing Date, such Conveyance Asset is in fact owned by Seller, and is subject
only to the Permitted Encumbrances. If Seller acquires the Conveyance Assets
directly from the lessor for reconveyance to Purchaser, Seller shall pay all
costs and expenses in connection with its acquisition of the Conveyance Assets
and termination of the Conveyance Asset Leases, including without limitation,
any fees or expenses of the lessors thereunder or any underlying lenders, the
purchase price payable to such lessors, and all transaction costs and expenses
required to be paid to effect such conveyance and termination; provided,
however, at Seller's option, Seller shall cause the lessors under the Conveyance
Assets to convey such Conveyance Assets directly to Purchaser provided (i) title
to the Conveyance Assets is unimpaired and otherwise of the same condition and
quality as is required for the remainder of the Owned Facilities, (ii) the
representations and warranties Purchaser receives with respect to the Conveyance
Assets is not reduced or diminished thereby, (iii) all closing documents
delivered in connection therewith are in the same form as the Seller Documents
delivered at the closings for the other Owned Facilities and (iv) Seller is
responsible for and pays any and all costs associated with such direct
conveyance which are in addition to or in excess of the costs that would
otherwise have been borne by Purchaser pursuant to the express terms hereof. If
the Conveyance Assets are conveyed by the lessors thereof directly to Purchaser,
the expenses related to the transfer of title thereto shall be paid as set forth
in Section 10.4.
4.18 Surveys; Relicensing Surveys and Cooperation. Seller shall provide to
Purchaser any Licensure Surveys including without limitation reports, waivers of
deficiency, plans of correction, and any other investigation reports issued with
respect to the Facilities between the Effective Date and the respective Closing
Date for each Facility. To the extent any Licensure Surveys reflect any
deficiencies or violations, Seller shall remedy and discharge such deficiencies
and violations, including filing and complying with any plans of correction or
other remedial action required by any Governmental Authority prior to the
Closing for any Facility to which such deficiencies or violations relate. Seller
shall be obligated to deliver to Purchaser upon Purchaser's request all
information and documentation within Seller's control to enable Purchaser to
make timely filings with the Governmental Authorities.
4.19 Absence of Certain Changes or Events. Seller will not cause or permit
any of the following with respect to the Employees at the Facilities: any new
bonus, percentage compensation, service award or other like benefit, or any
increase in the compensation payable or to become payable by Seller to any of
its Employees (except compensation granted to new Employees who are hired in the
ordinary course of business and then only upon terms consistent with other
Employees having comparable duties and experience and except for reasonable
raises in the ordinary course of business of which Seller shall notify Purchaser
prior to the implementation thereof); or any change in the method of calculating
any presently existing bonus, percentage compensation, service award or other
like benefit, granted, made or accrued to or to the credit of any of the
Employees of Seller, or any increase in any Employee welfare,
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insurance, pension, retirement or similar payment or arrangement made or agreed
to by Seller pursuant to existing welfare, pension and retirement Employee
Benefit Plans and arrangements, deferred compensation, or other Employee Benefit
Plans.
4.20 Continued Insurance. Seller shall continue to maintain its current
liability insurance coverages (including maintaining any funding in any captive
program) with respect to the Facilities for a period of two (2) years after the
final Closing hereunder at the same levels of coverage as existed on the
Effective Date.
4.21 Key Employees; Non-Solicitation. Seller shall not terminate the
employment of any of the Employees listed on Schedule 4.21(a) ("Key Employees")
without the prior consent of Purchaser. Seller shall promptly notify Purchaser
of any resignation of any such Key Employees and will consult with Purchaser
prior to replacing any such Key Employees. In addition, Seller for itself and on
behalf of its affiliates and principals set forth on Schedule 4.21(b) (the
"Restricted Parties") agrees that the Restricted Parties will not solicit for
employment any existing Employees at any of the Facilities between the Effective
Date and the Closing Date hereunder, and will not solicit for employment any
Transitioned Employees for a period of two (2) years after the Closing Date.
Seller shall cause all Restricted Parties to execute and deliver written
documentation evidencing such consent and agreement to be bound by the
provisions hereof simultaneously herewith in the forms attached hereto as
Exhibit 4.21(a) and Exhibit 8.7, respectively. In addition, Seller covenants and
agrees that upon the Closing Date hereunder, Seller will cause Xxxxxxx X. Xxxxx,
Xx. and Xxxx X. Xxxx to execute and deliver the Consulting Agreements in the
form attached hereto as Exhibit 4.21(b) (the "Consulting Agreements").
4.22 COBRA Compliance. Seller shall continue to be liable and responsible
for, and Purchaser shall incur no liability or responsibility with respect to,
any "Continuation Coverage" (as that term is defined by COBRA Section 4980B of
the Code and Section 601, et seq. of ERISA) for any Employee of Seller
terminated at any time prior to Closing, from and after the Closing. Except for
PTO for Transitioned Employees to the extent that a credit is received by
Purchaser at Closing in accordance with Section 4.12, Purchaser specifically
shall not assume, honor or accept any employee benefit plan of Seller or its
parent or affiliates, including but not limited to any "employee benefit plan"
within the meaning of Section 3(3) of ERISA and Seller shall be solely
responsible for satisfying all obligations (whether arising under federal, state
or local law or pursuant to contract) which may arise or which may have arisen
prior to the Closing Date in connection with the employment by Seller of
Seller's Employees or the creation, funding, operation or termination of any of
the employee benefit plans that cover any of Seller's Employees and Seller shall
give all WARN notices required by Applicable Law. Seller shall remain
responsible for maintaining or terminating all Employee Benefit Plans in
compliance with applicable law and Purchaser shall have no obligation with
respect to any of Seller's Employee Benefit Plans at any time.
4.23 Capital Expenditures. Seller shall complete all capital projects as
set forth on Schedule 2.13, and all capital projects as needed on an emergency
basis or as otherwise required to maintain the Facility or Facilities in good
operating condition in a good and workmanlike manner, using materials and labor,
all consistent with the remainder of the Facilities, all at Seller's sole cost
and expense.
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4.24 Changes in Representations and Warranties. Throughout the period from
the Effective Date through and including the Closing Date, Seller shall give
Purchaser prompt written notice of any representation and warranty made by
Seller in this Agreement which becomes materially inaccurate or incorrect, to
the extent Seller obtains knowledge of such inaccuracy or incorrectness. The
giving of such notice shall not limit or modify any rights of Purchaser
hereunder arising in the case of a breach of a representation or warranty by
Seller.
ARTICLE 5
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that:
5.1 Confidentiality; Indemnification.
(a) Prior to Closing, Purchaser will keep confidential all information
relating to the terms of this Agreement, all information relating to Seller, and
all financial statements, drawings, designs, customer and supplier lists
relating to Seller received by Purchaser (other than information which is a
matter of public knowledge or which has heretofore been or is hereafter
published in any publication for public distribution or filed as public
information with any governmental authority or disclosed pursuant to Applicable
Law, regulation, order, subpoena or demand of any Governmental Authority
(including any disclosure required of Purchaser's parent company pursuant to
applicable securities laws) or as is necessary to be disclosed to lessors,
lenders, Governmental Authorities, Purchaser and its Representatives and third
parties in order to consummate this transaction) and such information shall not
at any time be used for the advantage of Purchaser or its Representatives,
except as otherwise contemplated by this Agreement. Purchaser agrees, in
connection with the foregoing that during the Due Diligence Period, Purchaser
will instruct and advise Purchaser's Representatives visiting the Facilities not
to indicate to any of Seller's Employees that such investigations, tests, and
inspections are being done in connection with a proposed purchase of the
Facilities. After execution of this Agreement, Seller shall disclose to its
employees Purchaser's right to purchase the Assets. After the Due Diligence
Period expires without termination by Purchaser, Purchaser may make offers of
employment to such Employees, such employment to be effective as of the Closing
Date.
(b) Purchaser hereby agrees to indemnify and hold harmless Seller
against any physical damages to the Facilities or physical injuries associated
with or resulting from Purchaser's inspections or access to the Assets, which
undertaking shall survive the termination of this Agreement or the conveyance of
the Assets by Seller to Purchaser for the period of one (1) year. Purchaser
further undertakes that any damage occasioned to the Real Property, Personal
Property or the Facilities caused by such inspections or investigations shall be
cured by restoring the Real Property, Personal Property or portion of the
Facilities disturbed or damaged back to its pre-entry and pre-disturbed state.
The parties acknowledge that Purchaser's Basket (as defined in Section 7.2(b))
shall not apply to the foregoing indemnity since Purchaser's Basket only applies
to Seller Indemnified Losses pursuant to Section 7.2(a)(ii).
5.2 Compliance with Laws. Purchaser shall comply in all material respects
with all Applicable Laws of all Governmental Authorities, in conjunction with
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
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5.3 Assumption of Contracts, Equipment Leases, and Tenant Leases. Purchaser
shall review the Contracts, the Equipment Leases and the Tenant Leases during
the Due Diligence Period and, on or prior to the expiration of the Due Diligence
Period, shall give notice to Seller indicating which of the Contracts and the
Tenant Leases that Purchaser wishes not to assume at Closing. Thereafter, Seller
shall give notice to all parties under the Contracts and the Tenant Leases that
Purchaser has elected not to assume and Seller shall terminate such Contracts
and Tenant Leases on or prior to the Closing Date and Seller shall be
responsible for all costs and expenses of such termination, including any costs
or expenses that arise after the Closing Date in connection therewith. Purchaser
shall assume all Equipment Leases. Purchaser shall be deemed to have elected to
assume all Contracts and Tenant Leases other than those identified in
Purchaser's notice, which are herein collectively referred to, respectively, as
the "Assumed Contracts," and the "Assumed Tenant Leases" and at Closing,
Purchaser and Seller shall execute and enter into the form of assignment and
assumption agreement set forth herein in Exhibit 5.3 (the "Assignment and
Assumption Agreement") whereby Seller shall assign and Purchaser shall assume
the Assumed Contracts, the Equipment Leases and the Assumed Tenant Leases.
Seller shall bear any costs and expenses of obtaining any consents to such
assumption of the Assumed Contracts, the Equipment Leases and the Assumed Tenant
Leases. All amounts payable under the Assumed Contracts, Equipment Leases and
Assumed Tenant Leases and Facility Leases shall be prorated through the Closing
Date pursuant to Section 10.3 and Section 10.5.
5.4 Resident Records. Purchaser understands that all of the Seller's
Resident Records for Residents of the Facilities as of the Closing Date are
being transferred hereunder to Purchaser subject to the requirements of
Applicable Laws. Purchaser agrees to maintain all such Resident Records for the
requisite period prescribed by Applicable Law. In addition, if and to the extent
permitted by Applicable Law, Purchaser agrees to allow Seller, or Seller's
agents or representatives upon reasonable advance notice and at Seller's sole
cost and expense, to examine from time to time such Resident Records relating to
the period of Seller's operation of the Facilities, to promptly cooperate with
Seller, Seller's agents or representatives in their examination or review of
such Resident Records, and to permit Seller to obtain copies thereof, upon
request.
5.5 Cooperation. Purchaser shall cooperate with Seller and provide
reasonable access to the Books and Records in Purchaser's possession which are
required by Seller to respond to any litigation, government audit, and/or
third-party payor audit, upon reasonable advance notice and to the extent
permitted by Applicable Law. Seller shall be responsible for the cost and
expense of copying any records in Purchaser's possession or any costs of third
parties unrelated to Purchaser (e.g. record management companies) in making the
records available to Seller.
5.6 Employment. Purchaser agrees that prior to Closing and subject to
Purchaser's normal employment screening process (i.e., background check,
drug-testing, etc.), Purchaser will tender offers of employment to substantially
all of Seller's Employees at such Facility. Purchaser shall have no obligation
to tender offers of employment to any of Seller's employees whose position is
not related solely to a single Facility, such as those employees of Seller who
provide managerial oversight to more than one of Seller's Facilities, those
employees who are officed at Seller's headquarters buildings and perform
administrative functions, such as marketing, accounting, public relations, any
executive beyond the residence director or executive director level or any of
Seller's Employees who provide on-site accounting services at any
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Facility. Those persons who accept an offer of employment from Purchaser are
referred to herein as "Transitioned Employees."
5.7 Consents, etc.
(a) Subject to Seller's performance of its obligation to cooperate and
provide information as contemplated by Section 4.18 hereof, Purchaser shall make
all filings with Governmental Authorities, and use commercially reasonable
efforts to seek to obtain all permits, approvals, authorizations and consents of
all Governmental Authorities required to consummate the transactions
contemplated by this Agreement, including, without limitation, filing
applications to obtain all necessary or appropriate approvals for all licenses,
agreements, certificates and other consents from all Governmental Authorities,
third parties and Government Program agencies, including, without limitation,
Medicare and Medicaid provider agreements entered into with each applicable
Governmental Authority and the United States, if any, and any municipality, or
other governmental agency or administrative body that authorizes or regulates
the operations of the Facilities and the conduct of the Business at the
Facilities as presently operated (individually and collectively, "Governmental
Approvals"). Each party shall furnish promptly to each other all information
that is not otherwise available to the other party and that such party may
reasonably request in connection with any such filing.
(b) Purchaser shall cooperate with Seller, on a commercially
reasonable basis, to obtain the Lessor Consents, Lease Estoppels, releases of
Seller and its Affiliates and if applicable the SNDAs in connection with the
assignment by Seller to Purchaser of the Facility Leases, but Purchaser shall
have no obligation to post additional deposits (other than as set forth in the
Facility Leases). In connection therewith, Purchaser agrees to accept from the
lessor under the Facility Leases any form of Lease Estoppel that is commercially
reasonable.
(c) The Governmental Approvals described in Section 5.7(a) and the
Lessor Consents, Lease Estoppels and if applicable SNDAs shall be referred to as
"Required Consents."
5.8 Further Documentation. Purchaser agrees that, for the two (2) year
period following the Closing Date hereunder, upon request by Seller, it will do,
execute, acknowledge, and deliver, or cause to be done, executed, acknowledged,
and delivered, all such further acts, documents and assurances as may be
reasonably required, without enlarging or extending any obligations or liability
of Purchaser under this Agreement in any manner and without requiring the
expenditure of funds by Purchaser, as necessary to fully consummate the
transactions contemplated by this Agreement.
5.9 Changes in Representations and Warranties. Throughout the period from
the Effective Date through and including the Closing Date, Purchaser shall give
Seller prompt written notice of any representation and warranty made by
Purchaser in this Agreement which becomes materially inaccurate or incorrect, to
the extent Purchaser obtains knowledge of such inaccuracy or incorrectness. The
giving of such notice shall not limit or modify any rights of Seller hereunder
arising in the case of a breach of representation or warranty by Purchaser.
ARTICLE 6
OTHER COVENANTS
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6.1 Resident Rents; Accounts Receivable.
(a) Prior to Closing, Seller shall xxxx the Residents in the ordinary
course of business for amounts due under Residency Agreements, and Purchaser
shall assume responsibility for the billing of such amounts on and after the
Closing Date. Notwithstanding the foregoing, Seller shall be responsible for
billing amounts under Government Programs under Seller's provider number for
services rendered at any time prior to the Closing Date for the Facility where
such services were rendered and Purchaser shall obtain its own Government
Programs provider numbers and shall xxxx Government Programs for services
provided at any time after the respective Closing Date for such Facility. The
parties acknowledge that generally, private pay Residents are billed monthly by
Seller in advance on or about the 20th through 25th of each month, while
Government Programs are billed in arrears. Regardless of which party bills the
Residents or Government Programs, the portion of all Resident rents and service
fees allocable to the time period prior to the Closing Date shall be allocated
to Seller and the portion thereof allocable to the time period on or after the
Closing Date shall be allocable to Purchaser and will be accounted for as part
of the reconciliation process set forth in Section 10.5(b).
(b) Delinquent rents and service fees for the period prior to each
Closing Date will remain the property of Seller. Seller shall retain all rights
in and title to all pre-closing accounts receivable except to the extent any
portion relates in part to dates after the Closing Date. Seller agrees that it
will not evict any current Residents at any of the Facilities between the
Effective Date and the Closing Date without Purchaser's prior written consent.
(c) All rents and service fees received by either party after each
Closing Date from any Resident which do not specify the service dates for which
such payment relates will be applied as follows: (i) first, to rent and service
fees of that Resident then due and payable to Purchaser, (ii) second, to the
delinquent rents and service fees of that Resident attributable to the periods
prior to the Closing Date which if collected by Purchaser, shall be remitted to
Seller within twenty (20) days after receipt, and (iii) third, to future rent
and service fees of that Resident due and payable to Purchaser. All payments
received by either Purchaser or Seller from private pay Residents which specify
a date of service for such Residents shall be credited to the party who rendered
the services on the specified dates. In addition, Purchaser shall remit to
Seller within twenty (20) Business Days of its receipt thereof any payments
under Governmental Programs received by Purchaser that apply to a pre-Closing
account of the Resident for whom the payment is made in accordance with the
dates of service indicated on the remittance, together with a copy of the
remittance advice.
(d) At each Closing, Purchaser shall receive a prorated credit for the
residency fees for the month in which the Closing occurs equal to (i) the amount
of all prepaid residency fees actually received by Seller as of the date one (1)
Business day prior to the Closing Date. Seller shall also promptly remit to
Purchaser any amounts received by Seller after the Closing Date that relate to
the period after the Closing Date, and shall not act upon any automatic deposit
or debt mechanism for any Resident after the Closing Date. To the extent
necessary, any other residency fees shall be subject to the post-closing
reconciliation process described in Section 10.5 below.
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(e) Each party agrees that they will provide each other with any
information reasonably required to enable either party to complete its billing
to Residents and Governmental Programs.
6.2 Licensing Matters.
(a) If prior to the Closing or within one (1) year following any
Closing Date, there is a cost incurred to resolve any conditions relating to the
Facilities, Real Property or the Personal Property that existed as of the
Closing Date subject to and required by Governmental Authorities as a result of
a survey and/or re-licensing inspection by any Governmental Authority in
connection with Purchaser's attempts to obtain Governmental Approvals (a
"Licensing Survey"), Seller shall bear all such costs to the extent they are
based on Applicable Laws in effect as of the relevant Closing Date for the
applicable Facility and the condition of the relevant Facility(ies) as of
Closing. Seller shall have the right to promptly approve any third party whose
services are engaged to resolve any condition described above to the extent the
cost to resolve such condition exceeds $10,000, such approval not to be
unreasonably withheld.
(b) In connection with any Licensing Survey, Seller and Purchaser
agree to cooperate fully with each other in preparing, filing, prosecuting, and
taking any other actions with respect to any applications, requests, or actions
that are or may be reasonable and necessary to obtain the Governmental
Approvals.
(c) With respect to (i) any Licensing Survey, and (ii) any other
survey or other relicensing inspection by any Governmental Authority conducted
at any time after the applicable Closing Date for any Facility as a result of
Purchaser's application for Governmental Approvals, Seller agrees to be
responsible for all citations and/or deficiencies attributable to (i)
pre-closing activities that violate a healthcare statute, rule or regulation
(and which violation did not first occur after the Closing Date) and (ii)
pre-closing conditions, and Seller shall correct and/or pay for such citations
and/or deficiencies to the extent applicable. Seller's responsibility shall
include correcting all non-compliances and/or citations, paying any and all
fines, providing a Plan of Correction (prior to Closing), providing and bearing
the expense for all consultants, staff, materials, supplies and equipment
necessary to complete the Plan of Correction, and achieve full compliance. To
the extent that such corrections cannot be completed prior to Closing, then
Seller shall be required to place in escrow an amount equal to one hundred
percent (100%) of the reasonable estimated cost of the corrections required in
the Plan of Correction. Nothing herein shall limit Seller's right to contest any
matter described in this paragraph, provided such protest is timely and properly
pursued and does not delay any Closing hereunder.
6.3 Pre-Closing Access. During the two (2) week period prior to the Closing
Date, Seller shall permit Purchaser's employees and representatives to be
present at the Facilities at scheduled times to conduct meetings and training
with Employees, to commence installation of time clocks, computers, billing,
accounting and security systems, and to have access to residence directors,
executive directors and directors of nursing to permit training at Purchaser's
corporate or regional headquarters, and do such other things as may be
reasonably necessary to effect an orderly transition of such Facility.
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ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by Seller.
(a) Seller shall, jointly and severally, indemnify, protect, defend,
exculpate and hold Purchaser, Purchaser's Permitted Assignees and their
partners, directors, members, shareholders, officers, employees and agents
(collectively, "Purchaser Indemnified Parties") harmless from and against, and
agree promptly to defend Purchaser Indemnified Parties from and reimburse
Purchaser Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
costs of investigation, reasonable attorneys' fees and other legal costs and
expenses) ("Purchaser Indemnified Losses") which Purchaser Indemnified Parties
may at any time suffer or incur, or become subject to, as a result of or in
connection with:
(b) Any and all obligations of Seller (or Seller's affiliates and
agents) of any nature whatsoever, including without limitation, all liabilities
and obligations with respect to claims, damages, or injury, related to or
arising out of the ownership or operation of the Real Property, the Personal
Property, the Facilities or any other Assets prior to the respective Closing
Date therefor, whether such obligation accrues or is asserted before or after
such Closing Date, except the Assumed Liabilities related to such Assets
conveyed on such Closing Date and other such obligations as may be expressly
assumed by Purchaser herein;
(c) Any breach or inaccuracy in any of the representations or
warranties made by Seller in or pursuant to this Agreement or in any instrument,
certificate or affidavit delivered by Seller at any Closing, or from any
misrepresentation in or omission from this Agreement or any Exhibit, Schedule,
certificate, or other executed document furnished or to be furnished to
Purchaser hereunder;
(d) Any breach of any covenant, agreement or undertaking made by
Seller under this Agreement or as set forth in any instrument, certificate or
affidavit delivered by or on behalf of Seller at any Closing;
(e) Any and all liability or loss arising out of or relating to any
failure in connection with the transactions contemplated herein to comply with
the requirements of any laws or regulations relating to bulk sales or transfers;
and
(f) Any and all claims relating to PTO made against Purchaser by a
Transitioned Employee for those amounts in excess of the PTO benefit which
Seller transferred to Purchaser at any Closing.
(g) Except as provided otherwise herein, (i) in determining the amount
of a Purchaser Indemnified Loss, any materiality qualifier (including, without
limitation, any qualification or reference as to material, materiality or
Material Adverse Change) in a representation or warranty shall be ignored, and
(ii) Seller shall be liable for Purchaser Indemnified Losses pursuant to Section
7.01(a)(ii) only if the aggregate amount of such Purchaser Indemnified Losses
exceeds an amount of One Hundred Thousand Dollars ($100,000.00) ("Seller's
Basket"), but once such Seller Basket is reached, the full amount of
35
such Purchaser Indemnified Losses shall be due and payable by Seller and
collectable by Purchaser Indemnified Parties hereunder.
(h) Without in any way limiting Purchaser's rights under the
indemnification set forth in this Section 7.1, if Seller does not pay Purchaser
an amount claimed for a Purchaser Indemnified Loss within thirty (30) days
following Purchaser's demand therefor, then such claim shall be payable out of
an "Escrow Holdback" to be established as hereinafter set forth. At the first
Closing hereunder, Purchaser shall deposit with Title Company, as escrow agent,
out of the Purchase Price the sum of Two Million Five Hundred Fifty Thousand
Dollars ($2,550,000.00) (the "Escrow Holdback"). Title Company shall hold the
Escrow Holdback and distribute the Escrow Holdback in accordance with the terms
of an Escrow Holdback Agreement to be entered into between the parties at
Closing, in the form attached hereto as Exhibit 7.1(h) (the "Escrow Holdback
Agreement"). The purpose of the Escrow Holdback Agreement shall be to provide
readily available funds for satisfaction of a claim for a Purchaser Indemnified
Loss made within eighteen (18) months after the last Closing Date. Nine (9)
months after the final Closing Date, the balance of the Escrow Holdback shall be
reduced to the sum of (i) $850,000 and (ii) the aggregate amount of any claims
against one or more Purchaser Indemnified Parties for any Purchaser Indemnified
Losses to the extent that such claims are threatened, pending or unresolved as
of such date. The difference between $2,550,000 and such sum shall be returned
to Seller; provided that if the aggregate amount of such claims against the
Purchaser Indemnified Parties is $2,000,000 or greater, no amount shall be
returned to Seller. Upon (i) the settlement or resolution of each such claim
against the relevant Purchaser Indemnified Parties and the payment of the
amounts for which such claim is settled or resolved or (ii) the release of the
relevant Purchaser Indemnified Parties as a party to such claims, the remainder
of the Escrow Holdback less the sum of (i) $850,000 and (ii) the aggregate
amount of any such remaining claims against one or more Purchaser Indemnified
Parties, shall be immediately returned to Seller. At the end of the eighteen
(18) month escrow period, the balance of the Escrow Holdback, less the aggregate
amount of any claims against one or more Purchaser Indemnified Parties for any
Purchaser Indemnified Loss that is threatened, pending or unresolved as of such
date, shall be refunded to Seller. Thereafter, (i) upon the settlement or
resolution of any such claim against the relevant Purchaser Indemnified Parties
and the payment of the amount for which such claim is settled or resolved, or
(ii) the release of the relevant Purchaser Indemnified Parties as a party with
respect to such claim, the remainder of the Escrow Holdback less the aggregate
amount of any such remaining claims against Purchaser Indemnified Parties, shall
be immediately returned to Seller.
(i) Claims for Purchaser Indemnified Losses by Purchaser Indemnified
Parties may only be brought by such Purchaser Indemnified Party if the Purchaser
(or Purchaser's Permitted Assignees, if applicable) joins in making such claim,
it being the parties intent that Purchaser Indemnified Parties other than
Purchaser (or Purchaser's Permitted Assignees, if applicable) not have a
separate and independent right to assert an indemnification claim pursuant to
this Agreement unless Purchaser (or Purchaser's Permitted Assignees, if
applicable) joins in making such claim.
7.2 Indemnification by Purchaser.
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(a) Purchaser shall indemnify, protect, defend, exculpate and hold
Seller, and their respective members, governors, managers, officers, employees
and agents (collectively, "Seller Indemnified Parties") harmless from and
against, and agree promptly to defend Seller Indemnified Parties from and
reimburse Seller Indemnified Parties for, any and all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including, without
limitation, costs of investigation, reasonable attorneys' fees and other legal
costs and expenses) ("Seller Indemnified Losses") which Seller Indemnified
Parties may at any time suffer or incur, or become subject to, as a result of or
in connection with:
(b) Any and all obligations of Purchaser (or Purchaser's affiliates
and agents) of any nature whatsoever, including without limitation, all
liabilities and obligations with respect to claims, damages, or injury related
to or arising out of the ownership or operation of the Real Property, the
Personal Property, the Facilities or any other Assets after the respective
Closing Date therefor, except such obligations as may be expressly assumed or
retained by Seller hereunder;
(c) Any breach or inaccuracy of any of the representations or
warranties made by Purchaser in this Agreement or in any instrument, certificate
or affidavit delivered by Purchaser at any Closing, or from any
misrepresentation in or omission from this Agreement or any Exhibit, Schedule,
certificate, or other executed document furnished or to be furnished to Seller
hereunder;
(d) Any breach of any covenant, agreement or undertaking made by
Purchaser under this Agreement or as set forth in any instrument, certificate or
affidavit delivered by or on behalf of Purchaser at any Closing; and
(e) Any and all PTO claims made against Seller by a Transitioned
Employee as to whom Purchaser received a credit against the Purchase Price for
PTO pursuant to Section 10.3 hereof, but only to the extent that Purchaser
failed to provide the corresponding PTO benefit which it received from Seller
hereunder to such Transitioned Employee.
(f) Except as otherwise provided herein, (i) in determining the amount
of a Seller Indemnified Loss, any materiality qualifier (including, without
limitation, any qualification or reference as to material, materiality or
Material Adverse Change) in a representation or warranty shall be ignored, and
(ii) Purchaser shall be liable for Seller Indemnified Losses pursuant to Section
7.2(a)(ii) only if the aggregate amount of such Seller Indemnified Losses exceed
an amount of One Hundred Thousand Dollars ($100,000.00) ("Purchaser's Basket"),
but once such Purchaser Basket is reached, the full amount of such Seller
Indemnified Losses shall be due and payable by Purchaser and collectable by
Seller Indemnified Parties hereunder. Notwithstanding the foregoing, Purchaser's
Basket shall not apply to Purchaser's obligations as to PTO assumed by Purchaser
or amounts received by Purchaser from or with respect to Residents as to which
Purchaser is obligated to remit such amounts to Seller or the breach by
Purchaser of its confidentiality obligations hereunder, as the Purchaser's
Basket only applies to Seller Indemnified Losses pursuant to Section 7.2(a)(ii).
(g) Claims for Seller Indemnified Losses by Seller Indemnified Parties
may only be brought by such Seller Indemnified Party if the Seller joins in or
consents to making
37
such claim, it being the parties intent that Seller Indemnified Parties other
than Seller not have a separate and independent right to assert an
indemnification claim pursuant to this Agreement unless Seller joins in making
such claim.
7.3 Notification of Claims.
(a) A party entitled to be indemnified pursuant to Section 7.1 or 7.2
(the "Indemnified Party") shall notify the party liable for such indemnification
(the "Indemnifying Party") in writing of any claim or demand which the
Indemnified Party has determined gives rise or will likely give rise to a right
of indemnification under this Agreement, as soon as possible after the
Indemnified Party becomes aware of such claim or demand and has made such
determination; provided, however, that the Indemnified Party's failure to give
such notice to the Indemnifying Party in a timely fashion shall not result in
the loss of the Indemnified Party's rights with respect thereto except to the
extent any party to this Agreement is prejudiced by the delay, and then only to
the extent of such prejudice. Subject to the Indemnifying Party's right to
defend in good faith third party claims as hereinafter provided, the
Indemnifying Party shall satisfy its obligations under this Article VII within
thirty (30) days after the receipt of written notice thereon from the
Indemnified Party, it being agreed that the Indemnifying Party need not satisfy
such obligations during any period in which the Indemnifying Party is defending
in good faith the applicable third party claim in the manner described
hereinbelow.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any claim or demand pursuant to Section 7.3(a), and if such claim or demand
relates to a claim or demand asserted by a third party against the Indemnified
Party which the Indemnifying Party acknowledges is a claim or demand for which
it must indemnify or hold harmless the Indemnified Party under Sections 7.1 or
7.2, the Indemnifying Party shall have the right to either (i) pay such claim or
demand or (ii) employ counsel reasonably acceptable to the Indemnified Party to
defend any such claim or demand asserted against the Indemnified Party. The
Indemnified Party shall have the right to participate in the defense of any such
claim or demand. The Indemnifying Party shall notify the Indemnified Party in
writing, as promptly as possible (but in any case reasonably in advance of the
due date for the answer or response to a claim) after the date of the notice of
claim given by the Indemnified Party to the Indemnifying Party under Section
7.3(a) of its election to defend in good faith any such third party claim or
demand. So long as the Indemnifying Party is defending in good faith any such
claim or demand asserted by a third party against the Indemnified Party and is
able to demonstrate to the Indemnified Party its financial wherewithal to fully
perform its indemnification obligation in the event such contested claim is
resolved adversely to the Indemnified Party, the Indemnified Party shall not
settle or compromise such claim or demand. In no event shall any such claim or
demand be settled in a commercially unreasonable manner. The Indemnified Party
shall make available to such counsel all records and other materials in the
Indemnified Party's possession reasonably required by it for its use in
contesting any third party claim or demand. Whether or not the Indemnifying
Party elects to defend any such claim or demand, the Indemnified Party shall
have no obligations to do so.
(c) An Indemnifying Party may not, without the prior written consent
of the Indemnified Party, settle or compromise any claim against an Indemnified
Party or consent to the entry of any judgment with respect to which
indemnification is being sought hereunder unless
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such settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's affiliates.
7.4 Survival of Representations, Warranties and Covenants; Claims Period.
All of the representations and warranties of the parties contained in this
Agreement shall survive all Closings and continue in full force and effect for a
period of two (2) years following the final Closing hereunder. All of the other
covenants of the parties contained in this Agreement to be performed after
Closing shall survive the final Closing hereunder until such covenants are fully
satisfied or performed (including continuing performance during a post-Closing
time period specified herein with respect to such covenant). For purposes of
this Agreement, a "Claims Period" shall be the period after the final Closing
Date during which a claim for indemnification may be asserted under this
Agreement by an indemnified party. The Claims Periods under this Agreement shall
commence on the final Closing Date and shall terminate as follows:
(a) with respect to Purchaser Indemnified Losses arising under Section
7.1(a)(ii) with respect to any breach or inaccuracy of any representation or
warranty by Seller, the Claims Period shall terminate on the date that is two
(2) years thereafter;
(b) with respect to Seller Indemnified Losses arising under Section
7.2(a)(ii) with respect to any breach or inaccuracy of any representation or
warranty of Purchaser, the Claims Period shall terminate on the date that is two
(2) years thereafter; and
(c) with respect to all other Purchaser Indemnified Losses or Seller
Indemnified Losses arising under this Agreement, the Claims Period shall
terminate on the date that is three (3) years thereafter.
Notwithstanding the foregoing, if prior to the close of business on the last day
of the applicable Claims Period, an Indemnifying Party shall have been properly
notified as provided hereunder of a claim for indemnity hereunder and such claim
shall not have been finally resolved or disposed of at such date, such claim
shall continue to survive and shall remain a basis for indemnity hereunder until
such claim is finally resolved or disposed of in accordance with the terms
hereof. If any act, omission, disclosure or failure to disclosure shall form the
basis for a claim for breach of more than one representation or warranty, and
such claims have different periods of survival hereunder, the termination of the
survival period of one claim shall not affect a party's right to make a claim
based on the breach of representation or warranty still surviving.
7.5 Controversies. Except as otherwise provided in this Agreement, in the
event of any dispute, controversy, or claim between Seller and Purchaser arising
out of, relating or with respect to the subject matter of this Agreement, the
parties shall use commercially reasonable efforts to attempt to resolve such
dispute amicably first by resort to good faith negotiations and then by
mediation in accordance with the Rules of Practice and Procedure for Judicial
Arbitration and Mediation Services ("JAMS"). If the parties are unable to
resolve such dispute within a reasonable time period using such procedures, then
either party may seek relief in a court having jurisdiction over the subject
matter.
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7.6 Certain Repairs. At the initial Closing hereunder, Purchaser shall
deposit with Title Company, as escrow agent, as a deduction from the Purchase
Price, the sum of Six Hundred Seventy Five Thousand and No/100 Dollars
($675,000.00) (the "Repair Escrow") for the purpose of providing for payment for
the designated repairs of the Facilities as estimated on Exhibit A (the
"Repairs") up to an amount equal to the Repair Escrow in the aggregate. Seller
shall promptly solicit not less than three (3) bids per item from contractors
reasonably acceptable to Purchaser (including consideration of experience,
insurance, quality and timeliness of work, and other relevant criteria) and,
following Purchaser's selection from among such bids, Purchaser shall engage
selected contractors to complete the Repairs. Upon completion of individual
projects within the list of Repairs, or otherwise in accordance with the terms
of approved contracts for Repairs, Purchaser shall submit paid invoices to Title
Company from the contractors and upon receipt of same, the Title Company shall
distribute to Purchaser from the Repair Escrow reimbursements for such paid
Repairs. Upon completion of all Repairs in accordance with this paragraph, the
balance of the Repair Escrow, if any, shall be returned to Seller. If the Repair
Escrow is exhausted prior to completion of Repairs, the balance, if any, of the
remaining cost of such Repairs shall be the responsibility of Purchaser. The
parties agree to use commercially reasonable efforts to facilitate the prompt
completion of the Repairs and Purchaser agrees not to unreasonably withhold its
approval where called for. In the event any Facility referenced on Exhibit A is
not included in the initial Closing, then the amount allocated for Repairs for
such Facility shall be deposited with the Title Company upon the Closing of the
purchase of such Facility.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
Each and every obligation of Purchaser under this Agreement, except for the
obligations of Purchaser to be fulfilled prior to the Closing and obligations
that survive termination of this Agreement, shall be subject to the
satisfaction, on or before the Closing, of each of the following conditions set
forth in this Article VIII, unless waived in writing by Purchaser. The following
constitute material conditions to Purchaser's performance hereunder:
8.1 Representations and Warranties; Performance.
(a) The representations and warranties made by Seller herein and in
the Related Documents, shall be true and correct in all material respects as of
the Effective Date and at and as of the Closing, with the same effect as though
made on such date. Seller shall have delivered to Purchaser a certificate of
Seller dated as of the Closing Date, in the form of attached Exhibit 8.1
certifying to such compliance and completion.
(b) Seller shall have performed and complied with each of its
covenants pursuant to this Agreement or any Related Documents in all material
respects through the Closing.
8.2 Required Consents and Approvals; No Facility Lease Defaults; Conveyance
of Conveyance Assets; Authorization.
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(a) Purchaser or its designee shall have obtained all Required
Consents (provided that failure to obtain the HRT Consents relating to the
assumption of the Facility Leases shall not be a failure of a condition
precedent as to the Assets other than the Leased Facilities).
(b) There shall be no default, or event which with the passage of time
or giving of notice or both would constitute a default under any of the Facility
Leases.
(c) Seller shall have received good and marketable fee simple title to
the Conveyance Assets (or caused same to be delivered to Purchaser pursuant to
the provisions of Section 4.17) and Seller shall have obtained the termination
of the Conveyance Asset Leases as required under Section 4.17.
(d) Purchaser shall have received certified copies of resolutions duly
adopted by the members of Seller and other required parties, as appropriate,
approving the transactions contemplated by this Agreement, and any resolutions
required by the Title Company in connection with the conveyances of the
Conveyance Assets by the lessors under the Conveyance Asset Leases.
8.3 No Destruction or Condemnation of Property. The Facilities shall not
have suffered "material damage, destruction or loss." If after the Effective
Date one or more Facilities incur damage, destruction or loss which is not
material damage, destruction or loss, the amount required to repair any such
damage, destruction or loss (in all instances to restore such Facility to full
functional status consistent with prior operations) as set forth in a reasonable
written estimate, shall be deducted from the Purchase Price and there shall be
no delay of the Closing Date. For the purposes of this Section, "material
damage, destruction or loss," shall mean (i) any condemnation or threat thereof,
to any one or more Facilities irrespective of the cost to repair, or the portion
of the Facility impacted thereby, and (ii) any damage to any one or more of the
Facilities, the costs of repair for which exceed $200,000 as to any particular
Facility or $500,000 in the aggregate as to all Facilities or which materially
interferes with the operation of the Facility or renders such Facility less than
a functional structure to continue to operate the Business therein. At any
Closing for a Facility which has incurred damage, destruction or loss (both
material or immaterial), Purchaser shall receive an assignment of rights to
insurance proceeds or condemnation awards and a credit for any such proceeds or
awards previously disbursed, plus the amount of any deductible or uninsured
loss.
8.4 No Proceeding or Litigation. No injunction, judgment, order, decree,
ruling, or charge shall be in effect under any action, suit or proceeding before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator that (i) prevents
consummation of any of the transactions contemplated by this Agreement or (ii)
would cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, provided that Purchaser has not solicited or
encouraged any such action, suit or proceeding.
8.5 Title Insurance. Title to the Real Property shall be as required by
Section 4.10 above and Purchaser shall have received the Title Policies in the
forms therein described.
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8.6 Material Adverse Change. There shall have been no "Material Adverse
Change." For purposes hereof, the term "Material Adverse Change" shall mean any
change or event or effect subsequent to November 30, 2005 that is materially
adverse to the business or financial condition of the Facilities.
8.7 Non-Competition Agreement. Seller, the Restricted Parties and Purchaser
shall execute and deliver at Closing a non-competition agreement substantially
in the form of Exhibit 8.7 ("Non-Competition Agreement") containing the
following terms: from and after the Closing Date and for the period ending two
(2) years after the Closing, that Seller and the Restricted Parties shall not,
directly or indirectly, within a ten (10) mile radius of each of the Facilities
in such Closing, own, operate or lease any skilled nursing facility, assisted
living facility, independent living facility, continuing care retirement
community, adult or senior day care facility, or other facility or service
catering primarily to senior citizens, the elderly or those suffering from
Alzheimer's, dementia or other similar conditions; provided, however, that
nothing herein shall prohibit the Restricted Parties from (i) developing and
constructing "senior duplexes" consisting of purely residential homes for senior
citizens or the elderly in planned communities that do not involve the providing
of any health care services of any type or nature or (ii) continuing to own,
operate and lease the Leased Facilities in the event that Closing does not occur
as to the Leased Facilities for any reason. Purchaser shall be entitled to
injunctive relief to enforce these restrictions, as Seller recognizes that these
restrictions are reasonable as to territorial application and duration, that
they are necessary to protect Purchaser's investment contemplated hereby, and
that Purchaser will not have an adequate remedy at law in the event either of
these restrictions is violated. To the extent any court of competent
jurisdiction adjudicating the enforceability of this Section may deem any
restriction set forth herein to be unreasonable, whether as to territory,
duration, or otherwise, said restriction shall be given effect, and it is the
intent of the parties hereto that said restriction shall be given effect, to the
extent such court deems it to be reasonable.
8.8 Census Requirement.
(a) Definitions.
(i) "Rent Roll Census" shall mean the number of all Residents of
the Facilities pursuant to Residency Agreements as of December 2, 2005 ("Census
Determination Date") as shown on the Rent Roll attached hereto as Schedule
2.7(b).
(ii) "Closing Census" shall mean the number of all Residents of
all of the Facilities for which the Closing is occurring, determined as of ten
(10) days, or if such day is not a Business Day, then the next most recent
Business Day, before Closing. No Residents shall be included for purposes of
calculation of the Closing Census to the extent the Residency Agreements for
such Residents contain terms that are materially different than the term set
forth on the specimen agreements attached hereto as Schedule 2.7(b) or to the
extent the rental and other sums payable thereunder are less than the average
rental and other sums payable under Residency Agreements in effect at the
applicable Facility during the three (3) months preceding the Effective Date.
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(b) Requirement. On the date of the initial Closing hereunder, the
Closing Census for all of the Facilities being closed on such date shall not
have decreased by two and one-half percent (2.5%) or more when compared with the
Rent Roll Census for such Facilities. On any subsequent Closing Date for any
Deferred Facilities, the Closing Census for the Deferred Facilities then being
closed shall be determined as of such Deferred Facilities' actual Closing Date,
and such Closing Census shall be added to the Closing Census of all Facilities
closed on the initial or any prior Closing Dates hereunder as of the date of
such earlier Facilities' respective Closing Dates, and the sum of all such
Closing Census shall not, in the aggregate, have decreased by more than two and
one-half percent (2.5%) when compared to the Rent Roll Census for all Facilities
either previously closed or being closed at the time of such calculation.
8.9 Other Agreements. Seller shall have delivered into the Closing escrow
its countersigned copies of the Seller Documents.
ARTICLE 9
CONDITIONS TO THE OBLIGATIONS OF SELLER
Each and every obligation of Seller under this Agreement, except for the
obligations to be fulfilled prior to the Closing and obligations that survive
termination of this Agreement, shall be subject to the satisfaction, on or
before the Closing, of each of the following conditions unless waived in writing
by Seller:
9.1 Representations and Warranties; Performance.
(a) The representations and warranties made by Purchaser herein and in
the Related Documents, shall be true and correct in all material respects on and
as of the Effective Date and at and as of the Closing, with the same effect as
though made on such date.
(b) Purchaser shall have performed and complied with all covenants
required by this Agreement to be performed and complied in all material respects
with by Purchaser prior to the Closing. Purchaser shall have delivered to Seller
a certificate of Purchaser executed by its President (and if Purchaser's nominee
is a limited liability company, executed by its manager), dated such Closing
Date, substantially in the form of attached Exhibit 9.1 certifying to such
compliance and completion.
9.2 Other Agreements. Purchaser shall have delivered into the Closing
escrow its countersigned copies of the Purchaser Documents.
9.3 Release of Guarantees or Indemnification for Facility Leases. Seller
and its affiliates (including any personal guarantors) shall have either
received an agreement to be released from personal liability for any obligations
arising on or after the Closing Date with respect to the Leased Facilities under
any existing guaranty of such Facility Lease as set forth in Section 3 of the
Lessor Estoppel or a separate indemnity agreement in the form attached hereto as
Exhibit 9.3 shall be executed by Purchaser (and its public ultimate parent
company) for any claim, liability, loss, expense, etc. incurred by Seller or any
Guarantor or affiliate arising from any matter occurring and arising on or after
the Closing Date related to the Facility Lease; provided, however, if Closing
does not occur as to the Leased Facilities, then this Section 9.3
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shall be inapplicable and deemed deleted herefrom and Purchaser (and its public
ultimate parent company) shall have no obligations hereunder.
ARTICLE 10
CLOSING
10.1 Possession and Closing Documents.
(a) Possession. Possession of all Assets sold hereunder shall be
delivered to Purchaser on the Closing Date for the portion of the Assets
conveyed, and Seller shall provide notices, in form provided by Purchaser and
reasonably acceptable to Seller, to Residents of such change in ownership if
requested by Purchaser or if required by Applicable Law.
(b) Closing Documents. Seller shall deliver to Purchaser on each
Closing Date, as applicable to the Facilities being conveyed on such Closing
Date, the following:
(i) duly executed Assignment and Assumption Agreement in the form
attached hereto as Exhibit 5.3;
(ii) duly executed Special Warranty Deeds for each Owned
Facility, in recordable form and otherwise sufficient to convey such Facility to
Purchaser pursuant to laws of the State in which each Facility is located, as
reasonably approved by Purchaser and Title Company;
(iii) Assignment of the Facility Lease for each Leased Facility,
in the form attached hereto as Exhibit 10.1(a)(iii) and Termination Agreements
for each Conveyance Asset Leases in form reasonably satisfactory to Purchaser
and Title Company, but only on the Closing Date for the Leased Facilities.
(iv) duly executed Bills of Sale, in the form attached hereto as
Exhibit 10.1(a)(iv).
(v) such additional bills of sale and other appropriate
instruments of assignment and conveyance, in form mutually but reasonably
satisfactory to Purchaser and Seller, dated as of the Closing, conveying all
title to the Assets, including the Personal Property, free and clear of all
liens, liabilities, security interests or encumbrances except as otherwise
permitted herein;
(vi) an assignment of all intangible property necessary for the
operation of the Facilities including, without limitation, documents, chattel
paper, instruments, contract rights, deposit accounts, good will, going concern
value, general intangibles, the right to use the trade names and lists of phone
numbers, arising from or in connection with Seller's operation or use of any
part of the property, including without limitation the items set forth in
subparagraphs (vi) - (xi) in the definition of "Assets" on page two hereto, but
excluding all Excluded Assets;
(vii) Non-Competition Agreements in the form attached hereto as
Exhibit 8.7 and the Consulting Agreements in the form attached hereto as Exhibit
4.21(b);
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(viii) Lessor Consents, Lessor Estoppels and SNDAs for each
Leased Facility to the extent not previously delivered, but only as to the
Closing of the Leased Facilities;
(ix) a then current rent roll certified by Seller as of such
Closing Date as true, complete and accurate in all material respects, which
shall include such information for the Residents as provided in Schedule 2.7(b);
(x) to the extent not already delivered by Seller, and to the
extent available, originals of all of the Facility Leases (but only as to the
Closing of the Leased Facilities), Assumed Contracts, Residency Agreements,
Assumed Equipment Leases, and Assumed Tenant Leases and Licenses;
(xi) evidence of the authority of Seller to execute and deliver
the applicable Seller Documents in order to effectuate the applicable Closing;
(xii) an affidavit in form satisfactory to obtain the Title
Insurance contemplated by Section 4.10 above, without exception for mechanic's,
materialman's or other statutory liens;
(xiii) subject to Section 4.15, employee records relating to
Transitioned Employees shall remain at the respective Facility;
(xiv) a closing statement setting forth in reasonable detail the
financial transactions contemplated by this Agreement, including, without
limitation the Purchase Price, all prorations, and the allocation of costs
specified herein ("Closing Statement"), duly executed by Seller;
(xv) a bring-down certificate reaffirming that the
representations and warranties are true and correct as of the Closing Date as
modified by Section 8.1;
(xvi) any other documents reasonably required by the Title
Insurance Company; and
(xvii) certificate and affidavit of non-foreign status in the
form attached hereto as Exhibit 10.1(a)(xvii).
(c) Purchaser shall deliver to Seller or cause to be delivered to
Seller on each Closing Date as applicable to the Facilities being conveyed on
such Closing Date, in addition to the allocable portion of the Purchase Price
and the Deposits, the following:
(i) duly executed Assignment and Assumption Agreement in the form
attached as Exhibit 5.3;
(ii) Assignment of Lease for each Leased Facility, executed by
Purchaser, in the form attached hereto as Exhibit 10.1(a)(iii), but only as to
the Closing of the Leased Facilities;
45
(iii) a bring-down certificate reaffirming that the
representations and warranties are true and correct as of the Closing Date;
(iv) the Closing Statement duly executed by Purchaser; and
(v) any other documents reasonably required by the Title
Insurance Company;
(vi) the Consulting Agreements executed by Purchaser; and
(vii) certified copies of resolutions duly adopted by the Board
of Directors of Purchaser approving the transactions contemplated by this
Agreement.
10.2 Resident Funds. Seller shall refund to all Residents on or before the
Closing all funds belonging to Residents at the Facilities which are held by
Seller in a custodial capacity and all security deposits held by Seller
(collectively, "Resident Funds") unless such refunds are prohibited by
Applicable Law or Purchaser is required to maintain such custodial accounts or
security deposits by Applicable Law. If Purchaser is so required, then at
Closing Seller shall provide Purchaser with an accounting of all Resident Funds
at least fifteen (15) days prior to Closing for any Facilities where such
accounts are required, subject to adjustment within fifteen (15) days following
the Closing for such Facilities. Such accounting will set forth the names of the
Residents for whom such Resident Funds are held, the amounts held on behalf of
each Residents, and Seller's warranties that the accounting is true, correct,
and complete as of the Closing Date subject to adjustment during the fifteen
(15) day period referenced above.
At Closing, subject to adjustment as aforesaid, Seller shall transfer such
Resident Funds to a bank account designated by Purchaser and Purchaser shall, in
writing, acknowledge receipt of and expressly assume all of Seller's financial
and custodial obligations with respect thereto, it being the intent and purpose
of this provision that, at Closing, Seller will be relieved of all fiduciary and
custodial obligation with respect to such Resident Funds and that Purchaser will
assume all such obligations and be directly accountable to the Residents with
respect to all Resident Funds actually received by Purchaser.
Notwithstanding the foregoing, Seller will indemnify and hold Purchaser
Indemnified Parties harmless from all liabilities, claims, and demands, in the
event the amount of such Resident Funds, if any, transferred to Purchaser's bank
account does not represent the full amount due to the Resident as of Closing.
10.3 Closing Adjustments.
(a) PTO. In accordance with Section 4.12, Seller shall credit all
estimated PTO to Purchaser for all Transitioned Employees, which amount shall
subject to reconciliation pursuant to Section 10.5 below.
(b) Real Estate and Personal Property Taxes; Prorations. Real and
personal property taxes and assessments shall be prorated as of the Closing Date
for the Facility to which they relate. Said prorations shall be based on the tax
year of the municipality in which the Real Property and the Personal Property
are located and shall be based on the most recent available
46
xxxx. Said prorations shall be made on an accrual basis with reference to the
most recent available tax information with a post-closing reproration being made
within thirty (30) days after either party's receipt of the actual final tax
bills for the applicable years. If such amounts are not paid by Seller to
Purchaser, or by Purchaser to Seller, as the case may be, within thirty (30)
days, then the amount owed shall accrue interest thereafter at the rate of 1.5%
per month; provided, however, that in no event will interest be charged in
excess of the amount permitted by Applicable Law.
(c) Other Prorations. Charges for water, fuel, gas, oil, heat,
electricity and other utilities, operating charges and prepaid amounts under
Assumed Contracts, Assumed Equipment Leases, Assumed Tenant Leases and the
Facility Leases shall be prorated as of the Closing Date for the Facility to
which they relate but such amounts will not be paid pursuant to the Closing
Statement but shall instead be part of the post-closing reconciliation process
described in Section 10.5 below.
(d) Estimated Costs. All payables, including accounts payable for
Inventory, utilities, payroll, services, supplies and materials, which accrue
prior to 11:59:59 p.m. on the day before the Closing Date shall be Seller's
responsibility through the Closing Date and shall be subject to the
reconciliation process described in Section 10.5 below. All payables, including
accounts payable for Inventory, supplies, payroll, services and materials, which
accrue after 12:00:00 a.m. on the Closing Date shall be paid by Purchaser.
(e) Closing Statement Accounting. All calculations and prorations
under this Section 10.3 shall be made on the accrual basis of accounting.
10.4 Closing Costs.
(a) At or before Closing, Seller shall pay all sales tax, documentary,
stamp tax, transfer taxes or recording fees on the transfer of the Real Property
or the Assets in the States of Florida and Georgia, and Seller shall also pay
fifty percent (50%) of the following amounts in connection with such Closing:
(i) any escrow or closing charges of the Title Company; (ii) the premium for the
owner's title policy issued to Purchaser including the cost of all customary
endorsements for similar commercial transactions remove the standard title
exceptions, but excluding any other special endorsements; and (iii) the costs of
preparing the Surveys.
(b) At or before Closing, Purchaser shall pay any and all sales tax,
documentary, stamp tax, transfer taxes or recording fees on the transfer of the
Real Property or the Assets in the States of Alabama and Tennessee, and
Purchaser shall also pay fifty percent (50%) of the following amounts in
connection with such Closing: (i) any escrow or closing charges of the Title
Company; (ii) the premium for the owner's title policy issued to Purchaser
including the cost of all customary endorsements for similar commercial
transactions to remove the Standard Title Exceptions, but excluding any other
special endorsements; and (iii) the cost of preparing the Surveys with respect
to the Facilities. In addition, Purchaser shall pay the cost of any title
insurance issued in favor of any lender of Purchaser, and the costs associated
with the inspections and investigations conducted by Purchaser or its agents or
representatives during the Due Diligence Period.
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10.5 Post-Closing Purchase Price Reconciliation. Within sixty (60) days
after the Closing Date, representatives of Purchaser shall prepare and deliver
to Seller a proposed initial statement of reconciliation itemizing the
following: (i) all costs, charges and expenses paid by one party with respect to
the Facilities that are properly allocable to the other party; and (ii) all
resident rents and service fees actually collected by either party with respect
to the Facilities (the "Initial Reconciliation") and to whom such fees should be
property allocated. The Initial Reconciliation shall include appropriate detail
to identify the items being adjusted. A final reconciliation of all expenses,
costs, charges, service fees and resident rents shall be prepared by Purchaser
and delivered to Seller within ninety (90) days after the Closing Date (the
"Final Reconciliation"). Throughout the period leading up to the Initial
Reconciliation and the Final Reconciliation, each party shall provide to the
other party any information it may receive regarding the revenue and expense
items described in subparagraphs (i) and (ii) of this Section. The Final
Reconciliation shall appropriately reflect the net amount owed to Purchaser or
to Seller as a result of such reconciliation. After approval by both parties of
the Final Reconciliation, the party determined to owe cash as a result of such
Final Reconciliation shall promptly pay such cash to the other party.
ARTICLE 11
DEFAULT; REMEDIES
11.1 Purchaser's Default. If at any time Purchaser is in default of any
representation, warranty or covenant under this Agreement in any material
respect, and Seller elects to give notice of such default to Purchaser
("Seller's Notice") then Purchaser will have a period ("Purchaser's Cure
Period") expiring on the tenth (10th) day after the date of Seller's Notice, to
(i) correct or cure Purchaser's default or (ii) if the Due Diligence Period has
not expired, to terminate this Agreement by notice to Seller, whereupon the
Deposits shall be returned to Purchaser and neither party shall have any further
rights, duties or obligations hereunder except as expressly survive the
termination hereof.
(a) Default Cured. If Purchaser does not elect to terminate during the
Due Diligence Period, and Purchaser's default is corrected or cured within
Purchaser's Cure Period, the parties shall proceed to close as herein provided,
with the respective Closing Date being extended by not more than fourteen (14)
days to accommodate any delay resulting from such default.
(b) Default Not Cured. If Purchaser does not elect to terminate during
the Due Diligence Period, and Purchaser does not cure its default within the
Purchaser's Cure Period, then, provided no default by Seller then exists and
provided that Seller has not elected to waive such default, this Agreement shall
terminate and the parties shall be released and discharged of and from all
further obligations and liabilities under this Agreement, and the Title Company
shall deliver the Deposit to Seller as Seller's sole and exclusive liquidated
damages and in full and complete settlement and liquidation of all damages
sustained by Seller, it being acknowledged by Seller and Purchaser that the
amount of damages incurred by Seller as a result of Purchaser's default would be
substantial but difficult, if not impossible, to ascertain and that such
liquidated damages represent the parties' best estimate of the damages Seller
will incur as a result of such default. Seller shall not be entitled to exercise
any other rights, powers and remedies at law or in equity, other than its right
to receive the Deposits pursuant hereto, and
48
Seller hereby expressly and irrevocably waives all such other rights, powers or
remedies and hereby covenants not to xxx.
11.2 Seller's Default. If Seller is in default of any representation,
warranty or covenant under this Agreement in any material respect and Purchaser
elects to give notice of such default to Seller ("Purchaser's Notice"), then
Seller will have a period ("Seller's Cure Period") expiring on the tenth (10th)
day after the date of Purchaser's Notice, to correct or cure Seller's default.
(a) Default Cured. If Seller's default is corrected or cured within
Seller's Cure Period, the parties shall proceed to Closing as herein provided,
with the respective Closing Date being extended by not more than fourteen (14)
days to accommodate any delay resulting from such default.
(b) Default Not Cured. If Seller does not cure its default within the
Seller's Cure Period, then Purchaser may elect effective upon notice thereof to
Seller after the expiration of Seller's Cure Period to either waive Seller's
default and proceed to Closing as to all of the Assets, which shall include the
right to maintain an equitable action against Seller for specific performance of
its obligation to sell the Assets and to perform hereunder and the right to
pursue the limited damages described below to which such default relates, or
terminate this Agreement as to all of the Assets. If Purchaser elects to close
over Seller's default and pursue damages or to terminate this Agreement as to
all of the Assets, Purchaser shall be entitled to pursue an action for damages
against Seller; provided, however Purchaser's damages shall be limited to the
amount of damages actually incurred as a direct result of the breach if closing
occurs as to all Facilities, and if not, reimbursement for the amount of all
reasonable, documented costs and expenses incurred by Purchaser in connection
with the negotiation and execution of this Agreement and conduct of its due
diligence efforts pursuant hereto, including without limitation reasonable,
documented attorneys fees and expenses, costs of engineering, surveying, title
and environmental examinations and tests, appraisals, regulatory and licensure
applications, commitment, break up and other fees and expenses of Purchaser's
lenders, including fees of lender's counsel and outside consultants, travel,
postage, and other out-of-pocket fees and expenses, but expressly excluding any
allocation of Purchaser's corporate overhead or executive salaries plus
attorneys fees pursuant to Section 12.5 hereof (collectively, "Purchaser's Due
Diligence Costs"). If Closing occurs as to some but not all Facilities, Seller's
responsibility to pay Purchaser's Due Diligence Costs in connection with a
breach by Seller shall be limited to a pro rata portion of such costs based on
the ratio that the number of Facilities not closed bears to the number of
Facilities closed. In addition, if Purchaser elects to terminate this Agreement,
then the Deposits (or relevant portion thereof pursuant to Schedule 1.7 as to a
partial termination) shall be forthwith returned to Purchaser by Escrow Agent.
Notwithstanding anything contained therein to the contrary, if Seller sells a
material portion of the Facilities to an unrelated third party within six (6)
months after the termination of this Agreement by Purchaser as the result of a
breach of this Agreement by Seller, Seller shall pay to Purchaser $1,000,000
upon the closing of such sale as additional damages.
ARTICLE 12
MISCELLANEOUS PROVISIONS
49
12.1 Amendment and Modification. This Agreement may be amended, modified
and supplemented only by written agreement of all the parties hereto with
respect to any of the terms contained herein.
12.2 Waiver of Compliance; Consent. Any failure of Seller on the one hand,
or Purchaser, on the other hand, to comply with any obligation, covenant
agreement or condition herein may be waived in writing by the other party, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 12.2.
12.3 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be personally
delivered, or sent by email transmission (provided a copy is thereafter promptly
mailed as hereinafter provided), or sent by overnight commercial delivery
service (provided a receipt is available with respect to such delivery), or
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid (and shall be effective when received, if sent by personal
delivery or by overnight delivery service, or on the third (3rd) day after
mailing, if mailed):
If to Seller, to:
c/o The Wellington Group, LLC
0000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxx and Xxxxx Xxxxx
electronic address: xxxxx@Xxxxxxxxxx-xxxxx.xxx
and xxxxxx@xxxxxxxxxx-xxxxx.xxx
with copies to (which shall not constitute notice):
Xxxxxxxxx, Xxxxxx & Xxxxxxx, P.C.
0000 Xxxxxx Xxxxxxxx
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: E. Xxxxxxx Xxxx, Esquire
electronic address: xxxxx@xxxxxxxxxx.xxx
If to Purchaser, to:
BLC Acquisitions, Inc.
c/o Brookdale Senior Living, Inc.
000 X. Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xx. Xxxx Xxxxxxx, SVP and
Chief Investment Officer
electronic address: xxxxxxxx@xxxxxxxxxxxxxxx.xxx
50
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxx, Esq.
electronic address: xxxxx@xx-xxx.xxx
or to such other person or address as any party hereto shall furnish to the
other parties hereto in writing pursuant to this Section 12.3. Notwithstanding
the foregoing, Purchaser shall be permitted in connection with the exercise of
its rights to terminate this Agreement on or before the expiration of the Due
Diligence Period to send any such termination notice via electronic mail which
shall constitute effective delivery for purposes hereof.
12.4 Brokers and Finders; Expenses. Except for Seller's retention of
Xxxxxxxxx, Black Xxxxxx & Xxxx whose compensation shall be the sole obligation
and responsibility of Seller, the parties hereto represent and warrant to each
other that none of them has retained any broker or finder in connection with
this transaction. Seller on the one hand, and Purchaser, on the other, each
agrees to indemnify the other for any losses incurred with respect to a breach
of this Section 12.4. Except as otherwise provided herein, each party hereto
shall bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
12.5 Attorney's Fees. In the event any proceeding or suit is brought to
enforce this Agreement, the prevailing party shall be entitled to all reasonable
costs and expenses (including reasonable attorneys' fees) incurred by such party
in connection with any action, suit or proceeding to enforce the other's
obligations under this Agreement.
12.6 Assignment. This Agreement and all the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors and permitted assigns. Purchaser may assign the Agreement
and/or its right to acquire any one or more Facilities (or any portion of the
Assets) to one or more affiliates that control Purchaser or are controlled by
Purchaser or are under common control with Purchaser, including joint venture
entities in which Purchaser or its affiliates share control with third parties,
without the prior written consent of Seller (each such assignee a "Purchaser's
Permitted Assignee"). Other than the foregoing, neither Purchaser nor Seller may
assign this Agreement without first obtaining the other party's written consent,
which may be withheld in such other party's sole discretion. Upon an assignment
by Purchaser of its rights under the Agreement in accordance with this Section
12.6, Purchaser's Permitted Assignee(s) shall be deemed to be the Purchaser
hereunder (as it relates to the Facilities subject to such assignment) and shall
be the beneficiary of all of Seller's warranties, representations and covenants
in favor of Purchaser under this Agreement.
12.7 Governing Law. This Agreement shall be governed by the laws of the
State of Illinois as to, including, but not limited to, matters of validity,
construction, effect and performance but exclusive of its conflicts of laws
provisions.
51
12.8 Business Day. If the date for giving of notice or performance of any
duty or obligation hereunder falls on a day that is not a Business Day
hereunder, such date shall be automatically extended to the next Business Day
hereunder. As used herein, a "Business Day" means any day other than a Saturday,
Sunday or any other day on which banks are authorized to be closed in the State
of Illinois.
12.9 Counterparts; Facsimile Signature. This Agreement may be executed by
facsimile signature and in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
12.10 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.11 Entire Agreement. This Agreement, which term as used throughout
includes the Exhibits and Schedules hereto, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to such subject matters contained herein.
12.12 Warranty of Authority. Each of the parties warrants that the persons
signing on their behalf have the right and power to enter into this Agreement
and to bind them to the terms of this Agreement.
12.13 Schedules. Nothing in any Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
applicable Schedule identifies the exception and the specific representation to
which it relates with reasonable particularity and describes the relevant facts
in reasonable detail. The Schedules are arranged in paragraphs corresponding to
the numbered and lettered paragraphs of the Agreement to which such Schedule
relates. Any fact or item disclosed on any Schedule hereto shall not be deemed
by reason only of such inclusion, to be material and shall not be employed as a
point of reference in determining any standard of materiality under this
Agreement.
12.14 Compliance with Bulk Sales Law. Subject to the indemnification of
Purchaser by Seller hereunder, Purchaser hereby waives compliance by Seller with
any applicable bulk sales law and any other similar laws with respect to the
transactions contemplated by this Agreement.
12.15 Reliance. The parties hereto in executing, and in carrying out the
provisions of, this Agreement are relying solely on the representations,
warranties and agreements contained in this Agreement or in any writing
delivered pursuant to provisions of this Agreement or at the Closing of the
transactions herein provided for and not upon any representation, warranty,
agreement, promise or information, written or oral, made by any person other
than as specifically set forth herein or therein.
12.16 Publicity. All pre-Closing publicity concerning the transactions
contemplated by this Agreement and all notices respecting publicity shall be
jointly planned, coordinated and released by and between Purchaser and Seller.
Provided, however, that nothing herein shall
52
prohibit Seller or Purchaser from making any press release or disclosure as may
be required to comply with law, regulation or stock market rule (including
securities laws and regulations applicable to Purchaser's parent company)
provided, that the releasing or disclosing party provides notice to the other of
the substance of such release or disclosure in advance thereof. Seller
acknowledges and agrees that Purchaser shall file a Current Report on Form 8-K
with the Securities and Exchange Commission announcing the transactions
contemplated hereby, and that Purchaser shall file this Agreement with such
Current Report on Form 8-K or with a Quarterly Report on Form 10-Q. The parties
acknowledge and agree that Purchaser's disclosure in Purchaser's Current Report
on Form 8-K with respect to the announcement of this transaction will be as set
forth on Schedule 12.16.
12.17 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION BROUGHT ON OR WITH RESPECT TO
THIS AGREEMENT, INCLUDING TO ENFORCE OR DEFEND ANY RIGHTS HEREUNDER, AND AGREES
THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
[Signature pages follow]
IN WITNESS WHEREOF, the parties hereto have executed or have caused their
duly authorized officers to execute this Agreement as of the date first written
above.
BLC ACQUISITIONS, INC.,
a Delaware corporation
By: /s/ R. Xxxxxxx Xxxxx
------------------------------------
Name: R. Xxxxxxx Xxxxx
Title: Vice President
Date: January 11, 2006
[SELLER'S SIGNATURE PAGES TO FOLLOW]
53
IN WITNESS WHEREOF, the parties hereto have executed or have caused their
duly authorized officers to execute this Agreement as of the date first written
above.
HEALTH CARE PROPERTIES I, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES IV, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES VII, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES VIII, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES IX, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES X, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
54
HEALTH CARE PROPERTIES XI, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XII, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XIII, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XV, LTD.
By: The Wellington Group, LLC,
its General Partner
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XVI, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XVII, LTD.
By: The Wellington Group, LLC,
its General Partner
By: /s/ Xxxxx Xxxxx
------------------------------------
55
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XVIII, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XX, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XXIII, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XXIV, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XXV, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
HEALTH CARE PROPERTIES XXVII, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
56
CLEVELAND HEALTH CARE INVESTORS, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
WELLINGTON SPE, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Manager
57
COMPOSITE COPY
EXHIBIT "A"
WELLINGTON ESCROW FUND ESTIMATES
XXXXXXX CITY
Fire Dampers 40 150 each 6,000
Ceiling (1) hour 7,350 7.07 sq ft 52,000
Seal smoke/fire walls in attic 3,000
ATHENS
Seal smoke/fire walls in attic 3,000
MARYVILLE - (13R)
NFPA 13 Sprinkler 120,000
Seal smoke/fire walls in attic 3,000
KINGSTON
Seal smoke/fire walls in attic 3,000
NEWPORT
Seal smoke/fire walls in attic 3,000
Fire Dampers 40 150 each 6,000
Ceiling (1) hour 7,350 7.07 sq ft 52,000
GREENVILLE
Seal smoke/fire walls in attic 3,000
COLONIAL HEIGHTS - (13R)
Seal smoke/fire walls in attic 3,000
Fire Dampers 40 150 each 6,000
Ceiling (1) hour 7,800 6.92 sq ft 54,000
Fire alarm panel 7,000
SEVIERVILLE
Seal smoke/fire walls in attic 3,000
CLEVELAND - (EX. PARK)(13R)
Seal smoke/fire walls in attic 3,000
NFPA 13 Sprinkler 125,000 1 each 125,000
Install attic smoke barriers 10,000 10,000
XXXXXX (13R)
Seal smoke/fire walls in attic 3,000
NFPA 13 Sprinkler 90,000 1 each 90,000
CLEVELAND - (MT. XXXXXX)(13R)
Seal smoke/fire walls in attic 5,000
NFPA 13 Sprinkler 90,000 1 each 90,000
Install attic smoke barriers 10,000
HAMPTON COVE
Install security fence memory care 6,000
NEWPORT TENN.
Install security fence memory care 6,000
TOTAL COST 675,000
2
EXHIBIT A-1
OWNED WELLINGTON FACILITY ADDRESSES
NUMBER OF UNITS AND LICENSED BEDS
FACILITY LICENSED BEDS* UNITS**
-------- -------------- -------
Wellington Place at Hampton Cove 50 47
6379 Highway 000 Xxxxx
Xxxxxxx Xxxx, XX 00000
(000) 000-0000
Wellington Place by the Sea 68 45
0000 Xxxxx Xxxxx Xxxxxxxxx
Xxxxxx Xxxxx, XX 00000
(000) 000-0000
Wellington Place of Kennesaw 55 52
0000 Xxxxx Xxxx
Xxxxxxxx, XX 00000
(000) 000-0000
Wellington Place of Athens 60 42
000 Xxxxx Xxxx
Xxxxxx, XX 00000
(423) 744-7272
Wellington Place of Colonial Heights 60 44
000 Xxxxxxxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
(000) 000-0000
Wellington Place of Xxxxxx 50 47
0000 Xxxxxx Xxxx
Xxxxxx, XX 00000
(000) 000-0000
Xxxxxxxxxx Xxxxx xx Xxxxxxxx 00 47
0000 Xxxxxxxx Xxx
Xxxxxxxx, XX 00000
(000) 000-0000
FACILITY LICENSED BEDS* UNITS**
-------- -------------- -------
Wellington Place of Sevierville 50 54
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxxxxx, XX 00000
(000) 000-0000
Xxxxxxxxxx Xxxxx xx Xxxxxxxxx 00 40
0000 Xxxxxxxxx Xxxx, XX
Xxxxxxxxx, XX 00000
(000) 000-0000
Xxxxxxxxxx Xxxxx xx Xxxxxxxxxxx 00 53
000 Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
(423) 798-0404
Wellington Place of Xxxxxxx City 60 50
0000 Xxxxxx Xxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
(000) 000-0000
Wellington Place of Maryville 52 52
0000 Xxxxx Xxxx
Xxxxxxxxx, XX
(865 984-3030
The Gardens of Wellington 40 30
0000 Xx. Xxxxxx Xxxxx, XX
Xxxxxxxxx, XX 00000
(000) 000-0000
* and ** As reflected consistently throughout Wellington's financials, the
Company defines revenue by 'units' and not by number of State licensed beds.
Although a unit or room typically includes one bed, sometimes there are two beds
in one unit/room.
EXHIBIT B-1
FOUR LEASED FACILITY ADDRESSES
NUMBER OF UNITS AND LICENSED BEDS
FACILITY LICENSED BEDS* UNITS**
-------- -------------- -------
Wellington Place of the Shoals 53 53
0000 Xxxxx Xxxxxx Xxx Xxxx
Xxxxxx Xxxxxx, XX 00000
(000) 000-0000
Xxxxxxxxxx Xxxxx xx Xxxx Xxxxxx Xxxxx 00 53
000 Xxxxxx Xxxxx
Xxxx Xxxxxx Xxxxx, XX 00000
(000) 000-0000
Wellington Place of Greenville 55 52
0000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
(000) 000-0000
Xxxxxxxxxx Xxxxx xx Xxxxxxx 00 00
000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
(000) 000-0000
* and ** As reflected consistently throughout Wellington's financials, the
Company defines revenue by 'units' and not by number of State licensed beds.
Although a unit or room typically includes one bed, sometimes there are two beds
in one unit/room.
EXHIBIT "C"
(SEE ATTACHED LEGAL DESCRIPTIONS)
EXHIBIT "D"
DUE DILIGENCE CHECK LIST
PART I ITEMS
1. Section 1. Building & Zoning
a) Final Occupancy Certificates
b) Any letters or documentation regarding Code Violations & Citations
c) Floor plan of all buildings
d) "As built" drawings
2. Section 2. ALTA Survey and Title Endorsements
a) ALTA/ACSM Land Title Survey, including Table A Requirements, Items
1-4, 6-7(b), 8-11,13.
3. Section 3. Operating Information
a) Business and/or Operating Licenses and Permits
b) Copy of each type of resident agreements/leases
c) Copy of all commercial leases not terminable within 30 days
d) Insurance summary, including limits, deductibles, certificates for
each policy
e) Insurance loss history for the previous 3 years (for all insurance
policies)
f) Property Tax Bills with Valuations (past 3 yrs.)
g) Current Rent Roll including service type, unit square footage, lease
commencement and expiration dates, and current street/market rates
h) List and Copies of Existing Service Contracts, Leases and Vendor
Agreements
i) List of all Employees with the following for each employee:
i) Job Titles / Descriptions/Date of Hire
ii) Current Salaries/wages, including residence-based employees who
participate in bonus programs and amount of prior year's bonus,
and pay dates
iii) Hours worked - Typical Week & Total for prior calendar year and
trailing 12 mos.
iv) For Sales and Marketing Staff, residence directors and DONs,
include resumes, length of employment, compensation and bonus
plans, most recent performance reviews.
v) special pay considerations (differentials, bonuses)
vi) any garnishment actions
j) Most recent payroll register
k) Staffing Plans, including responsibilities of each position
l) Results of the Facility inspection reports performed by the applicable
governmental regulatory agency for the past 3 yrs.
m) Copies of any notices and/or documents relating to any open or pending
employee disciplinary issues, issues, grievances and any EEOC claims
or lawsuits filed in the past 5 years alleging discrimination or
unfair treatment.
n) All data related to past and on-going negotiations with any Labor
Organizations (if applicable).
o) Copies of all electric, gas, water, sewer, TV, cable bills.
p) Personal Property Schedule (FF&E)
4. Section 4. Financial Information
a) Monthly Detailed Operating Statements (Trailing 24 Months)
b) Year-End Detailed Operating Statements (Past 3 Years)
c) Annual Avg. Historical Occupancy (Past 3 Years)
d) Monthly Historical Occupancy (Prior 2 Calendar years & Trailing 24
Mos.)
5. Section 5. Architectural/Engineering/Environmental
a) Copies of past Termite reports / Pest Inspections / Certifications (if
available)
b) Copies of past Property Condition Reports
c) Copies of any reports on Mold or Mold Remediation
d) Copies of past Phase I & II Environmental Reports
6. Intentionally Omitted
7. Section 7. Collateral Materials
a) All Floor Plans, and Materials
b) Copy of Current Lease Forms
8. Section 8. Assisted Living, Skilled Nursing, Dementia Licensing (if
applicable or available)
a) Copies of all licenses (assisted living, home care, dementia care,
Medicaid waivers, Medicare/Medicaid certification)
b) Copies of initial survey reports and subsequent surveys, if any
c) Copies of any complaint reports (or State activity against facility)
d) Copies of Plans of Correction (POC) addressing previous survey results
e) Staffing patterns (current FTEs)
f) Assisted Living Collateral Materials (price sheet and service
descriptions)
g) Copy of Administrator's License
h) Copy of Disaster Plan and Evacuation Routes
i) Information on on-site outside providers (i.e., Home Care Agencies, if
applicable)
9. Section 9. Property Financing
a) Summary of all forms of property financings, including bonds, mortgage
loans, 2nd mortgages, and leases. Information should include current
balance, monthly payment, assignability and prepayment options, loan
terms (interest rate, amortization, maturity, etc.).
b) Copies of all loan documents.
c) Copies of all lease documents.
10. Section 10. Payors
a) Three years of audited cost reports
b) Status of any open cost reports/audits
c) Medicaid rate computation worksheet
d) All pay rates and days (private, Medicare RUGs, Medicaid, managed
care, etc.)
e) Historical (last 3 yrs.) and current census by payor type
f) Listing of all external managed care contracts
g) Accounts receivable reports
h) Copies of pharmacy and rehab.
11. Section 11. Contracts/Legal
a) All non-cancelable commitments that can not be cancelled within 30
days
b) All current and pending and probable litigation situations
c) List of any outstanding claims
12. Section 8. Assisted Living, Skilled Nursing, Dementia Licensing (if
applicable or available)
a) Copy of Administrator's Resume (credentials)
b) Inservice training plans/records
c) Copy of Activity Calendars
d) Records of Staff Orientation
e) Record of Administrator/Direct Care Staff Criminal Background Checks,
if applicable
f) Record of fingerprinting for Administrator and other applicable staff,
if required
g) Record of health clearance for Administrator and other applicable
staff, if required
EXHIBIT "D"
PART II ITEMS
1. Section 1. Building & Zoning
a) Original Building Permits, if available
2. Intentionally Omitted
3. Section 3. Operating Information
a) Workers Compensation Program Type
b) List of residents currently receiving personal care assistance
services through facility and/or outside vendor
c) List of residents that are temporary - in respite program, short-term
stay program, modified lease arrangement, etc.
d) Personal Property Schedule (FF&E)
e) Employee handbook and/or information regarding benefit eligibility,
life insurance coverage, short and long term disability insurance,
medical, prescription, dental, and vision coverage including premiums,
vacation, sick time, personal time, holidays, employee assistance
program, tuition reimbursement program, service recognition program,
employee bonus programs, including paid from corporate accounts.
f) All warranties (including, without limitation, the roof warranty),
indemnities and other contractual rights in connection with the
ownership, operation and management of the Property, including any
such items in respect of Yr. 2000 matters.
4. Section 4. Financial Information
a) Current Year (2005) Budgets
b) Historical Capital Expenditures (Past 3 Years)
c) Historical Monthly Turnover Schedule (Prior 2 Calendar years &
Trailing 24 Mos.). Include number of and reason for move outs by
month.
d) Sample menus
5. Section 5. Architectural/Engineering/Environmental
a) Copies of past Geotechnical and Seismic Reports (if available).
b) Copies "As-built" Architectural, Structural and MEP (on-site
availability is acceptable)
c) Number of Parking Spaces.
6. Section 6. Market Analysis
a) Profile of current residents - age, gender mix, previous location,
marital status, marketing source, influencer involvement, and average
length of residency. At a minimum, list of previous addresses (street,
city, state and zip code) for current residents and their influencers.
b) Copies of marketing plans and budgets (Past 2 Years)
c) List of top 20 referral sources
d) Marketing and sales reports used for tracking marketing events,
advertising, closing ratios, tours, deposits, etc.
e) Profile of current active lead bank - size/number of leads, any
profile information - age, gender mix, previous location, marital
status, marketing source, current location f) Procedures/forms used
for tracking leads
g) Copies of any 3rd party market feasibility reports (if available)
7. Section 7. Collateral Materials
a) Current Credit Check Forms
b) Copies of current yellow page advertisements for all directories and
corresponding directory order information
c) Current Advertising Program
d) List of Member Associations & Schedule of Advertising
