8-K: Current report filing
Published on June 16, 2005
STOCK
PURCHASE AGREEMENT
BY
AND
AMONG
OHI
ASSET
(OH), LLC,
AS
PURCHASER, AND
OMEGA
HEALTHCARE INVESTORS, INC.,
AS PURCHASER PARENT
AND
HOLLIS
J.
GARFIELD, ALBERT M. WIGGINS, JR., A. DAVID WIGGINS, ESTATE OF EVELYN R.
GARFIELD, EVELYN R. GARFIELD REVOCABLE TRUST, SG TRUST B--HOLLIS TRUST,
EVELYN
GARFIELD FAMILY TRUST AND EVELYN GARFIELD REMAINDER TRUST, AS
SHAREHOLDERS
AND
BALDWIN
HEALTH CENTER, INC.,
COPLEY
HEALTH CENTER, INC.,
HANOVER
HOUSE, INC.,
HOUSE
OF
HANOVER, LTD.,
PAVILLION
NORTH, LLP, D/B/A WEXFORD HOUSE NURSING CENTER,
PAVILLION
NURSING CENTER NORTH, INC.,
PAVILLION
NORTH PARTNERS INC., AND
THE
SUBURBAN PAVILION, INC.,
AS
THE
COMPANIES
AND
OMG
MSTR
LSCO, LLC, AS THE NEW OPERATOR, AND
COMMUNICARE
HEALTH
SERVICES, INC., AS NEW OPERATOR PARENT
AND
EMERY
MEDICAL MANAGEMENT CO., AS A LIMITED PARTY
June
10,
2005
EXECUTION VERSION
ARTICLE
I DEFINITIONS
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1
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|
1.01. Certain
Defined Terms.
|
1
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|
1.02. Other
Defined Terms
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6
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|
1.03. Construction.
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8
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|
ARTICLE
II PURCHASE AND SALE OF COMPANY SHARES
|
8
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|
2.01. Purchase
and Sale
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9
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|
2.02. Purchase
Price; Allocation.
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9
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|
2.03. Working
Capital Adjustment Amount and Payment
|
9
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|
2.04. Working
Capital Adjustment Procedure.
|
10
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|
2.05. Accounts
Receivable Adjustment.
|
11
|
|
2.06. Closing.
|
13
|
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
|
16
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|
3.01. Organization
and Power.
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16
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|
3.02. Authorization;
No Violation
|
16
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|
3.03. Subsidiaries
|
17
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|
3.04. Financial
Statements
|
17
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|
3.05. Capitalization.
|
17
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|
3.06. Title
and Condition of Properties.
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18
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|
3.07. Licenses.
|
19
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|
3.08. Accounts
Receivable
|
19
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|
3.09. Inventories
|
19
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|
3.10. Tax
Matters.
|
19
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|
3.11. Contracts
and Commitments.
|
22
|
|
3.12. Accreditation;
Medicare and Medicaid; Third Party Payor Reimbursement.
|
23
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|
3.13. Intellectual
Property Rights.
|
26
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|
3.14. Litigation;
Proceedings
|
26
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|
3.15. Brokerage
|
27
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|
3.16. Governmental
Consent, etc.
|
27
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|
3.17. Employees
and Agents.
|
27
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|
3.18. Employee
Benefit Plans
|
27
|
|
3.19. Insurance
|
30
|
|
3.20. Affiliate
Transactions
|
30
|
|
3.21. Compliance
with Laws; Licenses; Certain Operations
|
31
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|
3.22. Environmental
Matters.
|
31
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|
3.23. Bank
Accounts
|
32
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|
3.24. FET
Lien
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33
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|
3.25. Rent
Roll; Bed Tax and Fees.
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33
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3.26. Resident
Trust Funds
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33
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3.27. Absence
of Certain Developments
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33
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3.28. Absence
of Undisclosed Liabilities
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35
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3.29. Proceedings
and Orders
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35
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|
3.30. Record
Retention Policies
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35
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3.31. Disclosure
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35
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ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
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35
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4.01. Authorization
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35
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4.02. No
Violation
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35
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|
4.03. Company
Shares
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36
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|
4.04. Governmental
Consents, etc.
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36
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4.05. Proceedings
and Orders
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36
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|
4.06. Sufficient
Funds
|
36
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ARTICLE
V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PURCHASER
PARENT
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36
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|
5.01. Company
Organization and Power
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36
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|
5.02. Authorization
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36
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5.03. No
Violation
|
37
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|
5.04. Governmental
Consent, etc.
|
37
|
|
5.05. Purchase
for Investment
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37
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|
5.06. Proceedings
and Orders
|
37
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|
5.07. Sufficient
Funds
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37
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ARTICLE
VI REPRESENTATIONS AND WARRANTIES OF THE NEW OPERATOR AND THE NEW
OPERATOR
PARENT
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37
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|
6.01. Corporate
Organization and Power
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37
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|
6.02. Authorization
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38
|
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6.03. No
Violation
|
38
|
|
6.04. Governmental
Consent, etc.
|
38
|
|
6.05. Proceedings
and Orders
|
38
|
|
6.06. Sufficient
Funds
|
38
|
|
ARTICLE
VII CERTAIN COVENANTS
|
38
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7.01. Access
and Investigation; Record Retention and Transfer.
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39
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7.02. Employment
Matters; Benefit Plans
|
40
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7.03. Cost
Reports.
|
42
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7.04. Survey
Reports
|
43
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|
7.05. Resident
Trust Accounts
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43
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|
7.06. Affirmative
Covenants
|
43
|
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7.07. Negative
Covenants
|
44
|
|
7.08. Shareholder
Covenant Not to Compete.
|
46
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|
7.09. Hired
Employees
|
46
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|
7.10. Cooperation
Regarding Licensing Matters
|
46
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|
7.11. Regulatory
and Other Authorizations; Consents.
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46
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|
7.12. Exclusivity
|
47
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7.13. Monthly
Financial Statements
|
47
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7.14. Transition
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47
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7.15. Proration
and Expenses.
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47
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7.16. [Intentionally
Omitted.]
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49
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7.17. Required
Approvals
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49
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|
7.18. Notification
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49
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|
7.19. Cooperation
After Closing
|
49
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|
7.20. Deposit
Account Authorization Documents.
|
49
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|
7.21. Assignment
of Contracts
|
50
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ARTICLE
VIII CONDITIONS TO THE PURCHASER’S OBLIGATION TO CLOSE
|
50
|
|
8.01. Conditions
to the Purchaser’s Obligation
|
50
|
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ARTICLE
IX CONDITIONS TO OBLIGATION OF THE SHAREHOLDERS TO CLOSE
|
51
|
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9.01. Conditions
to Obligation of the Shareholders to Close
|
51
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ARTICLE
X CONDITIONS TO OBLIGATION OF THE NEW OPERATOR TO CLOSE
|
52
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10.01. Conditions
to Obligation of the New Operator to Close
|
52
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ARTICLE
XI INDEMNIFICATION
|
53
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11.01. Survival
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53
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11.02. Right
to Indemnification Not Affected by Knowledge
|
54
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11.03. Indemnification
by the Shareholders.
|
54
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11.04. Indemnification
by the Purchaser and the Purchaser Parent.
|
56
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11.05. Indemnification
by the New Operator and the New Operator Parent.
|
57
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11.06. Method
of Asserting Claims
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57
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11.07. Adjustments
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59
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11.08. Payments
|
59
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11.09. Escrow
|
59
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11.10. Exclusive
Remedy
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59
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ARTICLE
XII TERMINATION
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59
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12.01. Termination
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59
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12.02. Effect
of Termination
|
60
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12.03. Release
of Deposit Amount
|
60
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12.04. Effect
of Closing
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60
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ARTICLE
XIII ADDITIONAL AGREEMENTS
|
60
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13.01. Cooperation
on Tax Matters.
|
60
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13.02. Press
Release and Announcements
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61
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13.03. Specific
Performance
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61
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13.04. Remittances
|
61
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13.05. Efforts
To Consummate Closing Transactions
|
61
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ARTICLE
XIV MISCELLANEOUS
|
62
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14.01. Amendment
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62
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14.02. Extension;
Waiver
|
62
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14.03. Entire
Agreement; No Third Party Beneficiaries
|
62
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14.04. Governing
Law; Venue; Waiver of Jury Trial.
|
62
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14.05. Notices
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62
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|
14.06. Counterparts
|
64
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|
14.07. Successors
and Assigns
|
64
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|
14.08. Shareholders’
Representative
|
64
|
|
14.09. Schedules
and Exhibits
|
64
|
EXECUTION VERSION
STOCK
PURCHASE AGREEMENT
This
Stock Purchase Agreement (this “Agreement”),
dated
as of June 10, 2005, is entered into by and among OHI Asset (OH), LLC, a
Delaware limited liability company (the “Purchaser”),
Omega
Healthcare Investors, Inc., a Maryland corporation (the “Purchaser
Parent”),
Hollis J. Garfield (“HJG”),
Albert M. Wiggins, Jr. (“AMW”),
A.
David Wiggins (“ADW”),
Estate of Evelyn R. Garfield (“Garfield
Estate”),
Evelyn R. Garfield Revocable Trust (“Revocable
Trust”),
SG
Trust B--Hollis Trust (“Hollis
Trust”),
Evelyn Garfield Family Trust (“Family
Trust”),
and
Evelyn Garfield Remainder Trust (“Remainder
Trust”)
(each
of HJG, AMW, ADW, Garfield Estate, Revocable Trust, Hollis Trust, Family
Trust
and Remainder Trust shall be referred to in this Agreement from time to time,
collectively, as the “Shareholders”
and
each, individually, as a “Shareholder”),
Baldwin Health Center, Inc. (“Baldwin”),
Copley Health Center, Inc. (“Copley”),
Hanover House, Inc. (“Hanover
I”),
House
of Hanover, Ltd. (“Hanover
II”),
Pavillion North, LLP, d/b/a Wexford House Nursing Center (“Wexford”),
Pavillion Nursing Center North, Inc. (“PNCN”),
Pavillion North Partners, Inc. (PNP”),
and
The Suburban Pavillion, Inc. (“Suburban”)
(each
of Baldwin, Copley, Hanover I, Hanover II, Wexford, PNCN, PNP and Suburban
shall
be referred to in this Agreement from time to time, collectively, as the
“Companies”
and
each, individually, as a “Company”),
OMG
MSTR LSCO, LLC an Ohio limited liability company (the “New Operator”),
CommuniCare Health Services, Inc., an Ohio corporation (the “New
Operator Parent”),
and
Emery Medical Management Co., an Ohio corporation (“EMM”),
as a
party only for the limited purposes explicitly set forth in this
Agreement.
BACKGROUND:
WHEREAS,
the Companies are engaged in the business (the “Business”)
of
operating the nursing home properties described on Exhibit
A
(the
“Facilities”).
WHEREAS,
the Shareholders own all of the issued and outstanding shares, membership
interests or partnership interests of each Company as disclosed on Schedule
3.05
(the
“Company
Shares”),
and,
accordingly, control the business and operations of each Company.
WHEREAS,
the Shareholders desire to sell to the Purchaser, and the Purchaser desires
to
purchase from the Shareholders, the Company Shares, all on the terms and
conditions hereinafter set forth.
WHEREAS,
the New Operator desires to operate the Business after the Closing, all on
the
terms and conditions hereinafter set forth.
NOW,
THEREFORE, in consideration of the mutual covenants of the Parties as
hereinafter set forth and other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, the Parties hereto hereby agree
as
follows.
Article
I
Definitions
1.01. Certain
Defined Terms.
(a) “Affiliate”
as
applied to any Person, means any other Person, directly or indirectly,
controlling, controlled by or under common control with that Person. The
term
“control” (including, with correlative meanings, the terms
“controlling,”“controlled by” and “under common control with”), as applied to
any Person, includes the possession, directly or indirectly, of ten percent
(10%) or more of the voting power (or in the case of a Person which is not
a
corporation, ten percent (10%) or more of the ownership interest, beneficial
or
otherwise) of such Person or the power otherwise to direct or cause the
direction of the management and policies of that Person, whether through
voting,
by contract or otherwise.
(b) “Assets”
means
all properties, assets, rights and interests of every kind and nature, whether
real or personal, tangible or intangible and wherever located and by whomever
possessed.
(c) “Ancillary
Documents”
means
any exhibits, schedules or certificates or other agreements or documents
delivered or to be delivered pursuant to the terms of this Agreement by a
Party
or otherwise incorporated in this Agreement.
(d) “Business
Days”
means
any day other than a Saturday, Sunday or day when banks are closed or authorized
to be closed in the State of Maryland.
(e) “Charter
Documents”
means,
as applicable, (i) the certificate or articles of incorporation of a corporation
and by-laws, together with all amendments thereto through the date hereof
or
(ii) the articles of organization and operating agreement of a limited liability
company, together with all amendments thereto through the date
hereof.
(f) “CHOW
Notice”
means
the change of ownership notice required by Ohio Administrative Code Section
5101:3 - 3-516.
(g) “COBRA”
means
the Consolidated Omnibus Budget Reconciliation Act of 1985, as reflected
in Code
Section 4980B, ERISA Sections 601 through 607 and their related regulations.
(h) “Code”
means
the Internal Revenue Code of 1986, as amended.
(i) “Collective
Bargaining Agreement”
means
the collective bargaining agreement disclosed on Schedule
3.17.
(j) “Contract”
means
any note, bond, mortgage, indenture, loan, contract, factoring arrangement,
License, agreement, lease or other instrument or obligation to which the
Party
in question is a party or by which it or any of its assets may be
bound.
(k) “Damages”
means
the amount of any loss, liability, claims, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys’ fees) or diminution of value, whether or not involving
a third-party claim.
(l) “ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
(m) “Exhibits”
means
the exhibits referenced in this Agreement.
(n) “FET
Lien”
means
the general federal and Ohio estate tax Liens attaching to those Company
Shares
includable in the federal gross estate of Evelyn Garfield.
(o) “GAAP”
means
United States generally accepted accounting principles as in effect as of
the
date hereof.
(p) “Governmental
Agency”
means
any foreign, domestic or local court, administrative agency, bureau, board,
commission, office, authority, department or other governmental
entity.
(q) “HIPAA”
means
the Health Insurance Portability and Accountability Act of 1996.
(r) “Indebtedness”
means,
with respect to any Person (without duplication) (i) all indebtedness for
borrowed money or for the deferred purchase price of property or services
(including reimbursement and all other obligations with respect to surety
bonds,
letters of credit and bankers’ acceptances, whether or not matured, but
excluding all accounts payable not outstanding for more than 180 days and
accruals), including the current portion of such indebtedness, (ii) all
obligations evidenced by notes, bonds, debentures or similar instruments,
(iii)
all capital lease obligations, (iv) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse, or sale with recourse by a Person of
the
obligation of another Person, and (v) obligations of any third party secured
by
any asset or right of any such Person.
(s) “Indebtedness
Liability”
means
an amount equal to, as of the Closing Date, the outstanding principal of,
accrued and unpaid interest on, any prepayment penalties or premiums on,
and any
other amounts payable with respect to, all Indebtedness of the Companies,
but
not including any Current Liabilities (as defined below).
(t) “Intellectual
Property”
means
(i) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all U.S. and non-U.S.
patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions,
and
reexaminations thereof; (ii) all U.S. and non-U.S. trademarks, service marks,
trade dress, logos, trade names, domain names and corporate names, together
with
all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; (iii) all copyrightable
works, all U.S. and non-U.S. copyrights, and all applications, registrations,
and renewals in connection therewith; (iv) all mask works and all applications,
registrations, and renewals in connection therewith; (v) all trade secrets
and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes
and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing
plans
and proposals); (vi) all Software; (vii) all other proprietary rights; and
(viii) all copies and tangible embodiments thereof (in whatever form or
medium).
(u) “IRS”
means
the Internal Revenue Service.
(v) “JCAHO”
means
the Joint Commission on Accreditation of Healthcare Organizations.
(w) “Knowledge”
shall mean, with respect to any Company, the knowledge after due inquiry
of AMW,
HJG, Rufus D. Heard, G. Leslie Atkinson, Judy Kaneen, and, with respect to
each
Facility, the applicable on-site Facility administrator.
(x) “Law”
means
any foreign, domestic or local law, statute, principle of common law,
regulation, rule, code, ordinance, order, consent decree, settlement agreement
or governmental requirement, and any judgment, decision, decree, writ,
injunction, award, ruling or order of any Governmental Agency (including
the
IRS).
(y) “Legal
Requirement”
any
federal, state, local, municipal, foreign, international, multinational,
or
other administrative order, constitution, Law or treaty.
(z) “Liability”
means
any liability, obligation, debt, claim, damage, loss or expense (whether
known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due).
(aa) “Licenses”
means
licenses, permits, registrations, certificates of authority, certificates
of
need, consents, approvals, authorizations, qualifications and certifications
which have been issued to a Person by any Governmental Agency in connection
with
the ownership of its Assets and the operation of its business.
(bb) “Lien”
means
any mortgage, pledge, lien, encumbrance, charge, security interest or other
claim against title.
(cc) “Loss”
or
“Losses”
means
all actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, orders, decrees, rulings, Damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities, obligations,
Taxes, Liens, losses, expenses and fees, including court costs.
(dd) “Material
Adverse Effect”
means,
with respect to any Person, a material adverse effect on the condition
(financial or otherwise), business (including continued operation thereof
in the
Ordinary Course of Business), operations, prospects, Assets or results of
operations of such Person.
(ee) “Medicaid”
means
the medical assistance program established by Title XIX of the Social Security
Act (42 U.S.C. Sections 1396 et seq.) and any statute succeeding
thereto.
(ff) “Medicaid
Obligations”
means
(i) any fees, fines, penalties or civil monetary penalties that have arisen
or
may arise in any manner from the Companies’ participation in Medicaid; (ii)
Medicaid overpayments or any other financial obligations arising from any
adjustments or reductions in Medicaid reimbursement that have arisen or may
arise in any manner from the Companies’ participation in Medicaid; or (iii) all
other monetary and non-monetary obligations, sanctions, remedies or liabilities
of any kind or nature whatsoever that have arisen or may arise in any manner
from the Companies’ participation in Medicaid.
(gg) “Medicare”
means
the health insurance program for the aged and disabled established by Title
XVIII of the Social Security Act (42 U.S.C. Sections 1395 et seq.) and any
statute succeeding thereto.
(hh) “Medicare
Obligations”
means
(i) any fees, fines, penalties or civil monetary penalties that have arisen
or
may arise in any manner from the Companies’ participation in Medicare; (ii)
Medicare overpayments or any other financial obligations arising from any
adjustments or reductions in Medicare reimbursement that have arisen or may
arise in any manner from the Companies’ participation in Medicare; or (iii) all
other monetary and non-monetary obligations, sanctions, remedies or liabilities
of any kind or nature whatsoever that have arisen or may arise in any manner
from the Companies’ participation in Medicare.
(ii) “OIG”
means
the Office of Inspector General for the Department of Health and Human
Services.
(jj) “Order”
means
any award, decision, injunction, judgment, order, ruling, subpoena or verdict
entered, issued, made or rendered by any court, administrative agency or
other
Governmental Agency or arbitrator.
(kk) “Ordinary
Course of Business”
means,
with respect to a Person, the ordinary course of business consistent with
such
Person’s past custom and practice (including with respect to quantity and
frequency).
(ll) “Party”
or
“Parties”
means
any or all Persons that are parties to this Agreement.
(mm) “Payoff
Letters”
means
the letters provided by the lenders or other holders of Indebtedness Liability
to one or more of the Companies in connection with the repayment of the
Indebtedness Liability as contemplated hereby, which shall be reasonably
satisfactory in form and substance to the Purchaser and its
counsel.
(nn) “Permitted
Liens”
means
(i) Tax Liens with respect to Taxes not yet due and payable or which are
being
contested by such Person in good faith by appropriate proceedings and for
which
appropriate reserves have been established by such Person in accordance with
GAAP; (ii) deposits or pledges made in connection with, or to secure payment
of,
utilities or similar services, workers’ compensation, unemployment insurance,
old age pensions or other social security obligations; (iii) mechanics’,
materialmen’s or contractors’ Liens incurred in the Ordinary Course of Business
for amounts not yet due and payable and which amounts (A) have been incurred
under Contracts disclosed on Schedule
3.11(a),
and (B)
have been reserved for and reflected in the Company Statements; and (iv)
those
Liens disclosed on Schedule 1.01(nn).
(oo) “Person”
means
an individual, a partnership, a corporation, an association, a limited liability
company, a trust, a joint venture, an unincorporated organization, a
Governmental Agency, or any other entity.
(pp) “Schedules”
means
the schedules referenced in this Agreement.
(qq) “Software”
means
all (i) computer programs, whether in source code or object code, (ii)
descriptions, flow charts and other work products used to design, plan or
develop any of the foregoing, and (iii) data and documentation relating to
any
of the foregoing.
(rr) “Subsidiary”
means
any Person with respect to which any Person (or a Subsidiary thereof) owns
a
majority of the common stock, units or other equity interests or has the
power
to vote or direct the voting of sufficient securities to elect a majority
of the
board of directors or comparable governing body.
(ss) “Tax”
means
any federal, state, local, or foreign income, provider, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, retailer’s occupation taxes and other taxes
commonly understood to be sales or use taxes, estimated, or other tax of
any
kind whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not and including any obligation to indemnify or otherwise assume
or
succeed to the Tax Liability of any other Person.
(tt) “Tax
Return”
means
any return, declaration, report, claim for refund, or information return
or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
(uu) “Title
Commitment”
means a
commitment for an owner’s title insurance policy issued by a nationally
recognized title company.
(vv) “Transaction
Fees”
means
an amount in cash equal to, as of the Closing Date, the sum of (i) the
outstanding fees and expenses of any counsel to any Company and accountant
to
any Company incurred by any Company on or prior to the Closing Date in
connection with the transactions contemplated by this Agreement, and (ii)
all
other outstanding fees and expenses incurred by any Company on or prior to
the
Closing Date in connection with the transactions contemplated by this
Agreement.
(ww) “WARN
Act”
means
the Worker Adjustment and Retraining Notification Act., 29 U.S.C. Section
2101 -
2109, and the regulations issued thereunder by the United States Department
of
Labor, 29 C.F.R. Section 639.
1.02. Other
Defined Terms.
The
following terms have the meanings defined for such terms in the Sections
set
forth below:
Definition
|
Section
|
Accounts
Receivable
|
2.05(a)
|
Advisors
|
7.01(a)
|
ADW
|
Introductory
Clause
|
Agreement
|
Introductory
Clause
|
AMW
|
Introductory
Clause
|
Baldwin
|
Introductory
Clause
|
Base
Balance Sheet
|
2.04(a)
|
Base
Net Working Capital
|
2.04(a)
|
Basket
|
11.03(b)
|
Benefit
Plans
|
3.18(a)
|
Business
|
Background
|
Closing
|
2.06(a)
|
Closing
Adjustment Amount
|
2.02(c)
|
Closing
Date Balance Sheet
|
2.04(b)
|
Closing
Date
|
2.06(a)
|
Closing
Net Working Capital
|
2.04(b)
|
Collection
Deadline
|
2.05(a)
|
Company
|
Introductory
Clause
|
Company
Latest Balance Sheet
|
3.04
|
Company
Shares
|
Background
|
Company
Statements
|
3.04
|
Contract
Termination Liability
|
7.21
|
Copley
|
Introductory
Clause
|
Current
Assets
|
2.04(a)
|
Current
Liabilities
|
2.04(a)
|
Customer
Contracts
|
3.11(c)
|
Deposit
Amount
|
2.02(b)
|
Deposit
Agreement
|
2.02(b)
|
Direct
Claim
|
11.06(b)
|
Document
Retention Period
|
7.01(c)
|
Effective
Time
|
2.06(a)
|
EMM
|
Introductory
Clause
|
Employees
|
3.17(c)
|
Employee
Termination Time
|
7.02(a)
|
Environmental
Laws
|
3.22(a)(i)
|
Environmental
Permits
|
3.22(c)
|
ERISA
Affiliate
|
3.18(a)
|
Escrow
Agent
|
2.02(c)
|
Escrow
Amount
|
2.02(c)
|
Escrow
Agreement
|
2.02(c)
|
Facilities
|
Background
|
Family
Trust
|
Introductory
Clause
|
Garfield
Estate
|
Introductory
Clause
|
Government
Programs
|
3.12(d)
|
Hanover
I
|
Introductory
Clause
|
Hanover
II
|
Introductory
Clause
|
Hazardous
Materials
|
3.22(a)(i)
|
Hired
Employees
|
7.02(b)
|
Healthcare
Fraud Laws
|
3.12(g)
|
HJG
|
Introductory
Clause
|
Hollis
Trust
|
Introductory
Clause
|
Independent
Accountants
|
2.04(d)
|
LandAmerica
|
2.02(b)
|
M&A
Qualified Beneficiaries
|
7.02(d)
|
Net
Working Capital
|
2.04(a)
|
New
Operator
|
Introductory
Clause
|
New
Operator Indemnified Party
|
11.03(a)
|
New
Operator Parent
|
Introductory
Clause
|
PBGC
|
3.18(g)
|
PCBs
|
3.22(d)
|
PNCN
|
Introductory
Clause
|
PNP
|
Introductory
Clause
|
Private
Programs
|
3.12(e)
|
Purchase
Price
|
2.02(a)
|
Purchaser
|
Introductory
Clause
|
Purchaser
Indemnified Party
|
11.03(a)
|
Purchaser
Parent
|
Introductory
Clause
|
Real
Property Tax Liability
|
7.15(d)
|
Real
Property
|
3.06(a)
|
Refund
Amount
|
2.04(e)(i)
|
Release
|
3.22(a)(iii)
|
Required
Consents
|
2.06(b)(xiv)
|
Remainder
Trust
|
Introductory
Clause
|
Rent
Rolls
|
3.25(a)
|
Revocable
Trust
|
Introductory
Clause
|
Shareholders
|
Introductory
Clause
|
Shareholder
Indemnified Party
|
11.04(a)
|
Shareholders’
Representative
|
14.08
|
Sick
Time Agreement
|
7.02(b)
|
Straddle
Tax Period
|
13.01(b)
|
Suburban
|
Introductory
Clause
|
Tail
Coverage
|
7.06(g)
|
Tangible
Property
|
3.06(b)
|
Terminated
Contracts
|
7.21
|
Title
Policies
|
2.06(b)(iv)
|
Third
Party Claim
|
11.06(a)(i)
|
Trust
Accounts
|
3.26
|
UCC
Searches
|
8.01(g)
|
VEBA
|
7.02(g)
|
Wexford
|
Introductory
Clause
|
Working
Capital Adjustment Amount
|
2.03
|
1.03. Construction.
(a) Unless
the context of this Agreement otherwise requires: (i) words of any gender
include each other gender; (ii) words using the singular or plural number
also
include the plural or singular number, respectively; (iii) the terms
“hereof,”“herein,”“hereby,” and derivative or similar words refer to this entire
Agreement; (iv) the terms “Article” or “Section” refer to the specified Article
or Section of this Agreement; (v) the word “including” shall mean “including,
without limitation;” and (vi) the word “or” shall be disjunctive but not
exclusive.
(b) References
to agreements and other documents shall be deemed to include all subsequent
amendments and other modifications thereto.
(c) References
to statutes shall include all regulations promulgated thereunder and references
to statutes or regulations shall be construed as including all statutory
and
regulatory provisions consolidating, amending or replacing the statute or
regulation.
(d) The
language used in this Agreement shall be deemed to be the language chosen
by the
parties to express their mutual intent, and no rule of strict construction
shall
be applied against any Party.
(e) The
disclosure Schedules and Exhibits to this Agreement shall be treated as if
fully
incorporated into the body of the Agreement.
(f) All
accounting terms used herein and not expressly defined herein shall have
the
meanings given to them under GAAP.
Article
II
Purchase
and Sale of Company Shares
2.01. Purchase
and Sale.
Upon
the terms and subject to the conditions contained in this Agreement, the
Shareholders agree to sell, assign, transfer, convey and deliver to the
Purchaser at the Closing all right, title and interest in and to all of the
Company Shares, free and clear of all Liens. The Purchaser, in reliance upon
the
representations and warranties of the Companies and the Shareholders contained
herein and on the terms and conditions herein set forth, hereby agrees to
purchase the Company Shares from Shareholders at the Closing on the terms
and
conditions set forth herein.
2.02. Purchase
Price; Allocation.
(a) The
aggregate purchase price for the Company Shares (the “Purchase
Price”)
shall
be an amount equal to (i) $62,699,469, plus
or
minus (ii) the Working Capital Adjustment Amount as provided in Section
2.03.
(b) LandAmerica
National Commercial Services (“LandAmerica”),
as
escrow agent, is holding $500,000 (the “Deposit
Amount”)
deposited by the Purchaser pursuant to the terms of the Deposit Escrow
Instructions dated May 5, 2005 attached hereto as Schedule 2.02(b)
(the
“Deposit
Agreement”).
Subject to the terms of the Deposit Agreement, at the Closing, the Deposit
Amount will be applied to the Purchase Price as provided in Section
2.02(c)
below.
(c) At
the
Closing, the Purchaser shall make the following payments on account of the
Purchase Price: (i) on behalf of the Companies, the Purchaser shall cause
the
Indebtedness Liability to be repaid in full to the party or parties entitled
thereto pursuant to the Payoff Letters; (ii) on behalf of the Companies,
the
Purchaser shall pay the unpaid Transaction Fees to the person or persons
entitled thereto in accordance with the instructions delivered by the
Shareholders’ Representative prior to the Closing Date; (iii) the Purchaser
shall deposit with Bank of America (the “Escrow
Agent”)
under
an escrow agreement to be agreed upon by the Shareholders’ Representative, the
Purchaser, the New Operator and the Escrow Agent (the “Escrow
Agreement”)
the
amount of $9,500,000, which agreement shall provide, among other things,
that
the funds held in escrow shall be released to the Shareholders on the third
anniversary of the Closing Date, subject to the resolution of any claims
made
during such three year period and any claims pending on such third anniversary;
(iv) the Purchaser shall direct LandAmerica to transfer the Deposit Amount
to
the Escrow Agent to be held pursuant to the Escrow Agreement (the aggregate
amount deposited with the Escrow Agent pursuant to subsections (iii) and
(iv) is
referred to as the “Escrow
Amount”);
and
(v) the Purchaser shall pay the remainder of the Purchase Price, less $3,000,000
or such other amount as the Purchaser and the Shareholders’ Representative may
agree upon in writing prior to the Closing (the “Closing
Adjustment Amount”)
and
without taking into account any Working Capital Adjustment Amount, to the
Shareholders by delivery of a wire transfer to such account as the Shareholders’
Representative shall designate in writing not later than three Business Days
before the Closing Date. The Purchaser shall pay one-half of all fees and
expenses of the Escrow Agent as set forth in the Escrow Agreement and the
Shareholders, collectively, shall pay the other one-half.
(d) The
Purchase Price shall be allocated among the Company Shares as of the Closing
Date, as disclosed on Schedule 2.02(d).
Any
subsequent adjustments to the Purchase Price shall be reflected in the
allocation as mutually agreed upon by the Purchaser and the Shareholders’
Representative in a manner consistent with the allocations disclosed on
Schedule
2.02(d).
2.03. Working
Capital Adjustment Amount and Payment.
The
“Working
Capital Adjustment Amount”
(which
may be a positive or negative number) will be equal to the amount determined
by
subtracting the Base Net Working Capital (as defined below) from the Closing
Net
Working Capital (as defined below). If the Working Capital Adjustment Amount
is
negative, the Purchase Price shall be reduced by such amount, subject to
the
provisions of Section
2.04(e).
If the
Working Capital Adjustment Amount is positive, then the Purchase Price shall
be
increased by such amount, subject to the provisions of Section
2.04(e).
After
the Closing, the Closing Net Working Capital and the Working Capital Adjustment
Amount shall be determined as provided in Section
2.04
and the
Purchase Price shall be adjusted as provided in Section
2.04(e).
2.04. Working
Capital Adjustment Procedure.
(a) “Net
Working Capital”
as of a
given date shall mean the amount calculated by subtracting the aggregate
Current
Liabilities of the Companies as of that date from the aggregate Current Assets
of the Companies as of that date. “Current
Assets”
means
the sum of cash, trade accounts receivable (including any unpaid Governmental
Agency payments or reimbursements relating to any time before the Closing
Date),
inventory, prepaid expenses and deposits (including any prepaid real estate
Taxes, personal property Taxes or bed Taxes relating to any time on or after
the
Closing Date), and all other current assets as determined according to GAAP
as
consistently applied by the Companies. “Current
Liabilities”
means
the sum of all liabilities including trade accounts payable, accrued expenses,
accrued employment-related liabilities and payroll taxes, deferred income
and
all other current liabilities, an accrual for all real property, personal
property and bed taxes relating to any time before the Closing (whether or
not
any such Taxes are due or owing before the Closing), and an accrual for the
contributions the Companies are required to make to any Benefit Plan pro
rated
through the Closing Date, but does not include Indebtedness Liability and
Transaction Fees. To the extent that the termination of any Benefit Plan
by any
Company pursuant to the terms of this Agreement terminates such Company’s
obligation to make a contribution to any Benefit Plan after the Closing Date,
then no accrual for such contribution will be required on the Closing Date
Balance Sheet. The aggregate Net Working Capital of the Companies as of March
31, 2005 was $13,899,469 (the “Base
Net Working Capital”),
as
reflected on the combined Company Latest Balance Sheets (as defined below).
The
principles, policies and practices used to prepare the Base Balance Sheet
and
the calculations used to determine the amount of the Base Net Working Capital
are described on Schedule
2.04(a).
(b) Promptly
after the Closing, the Shareholders shall prepare, or cause to be prepared,
a
consolidated balance sheet of the Companies as of the Closing Date on the
same
basis and applying the same accounting principles, policies and practices
that
were used in preparing the Company Latest Balance Sheets, including the
principles, policies and practices disclosed on Schedule
2.04(a)
(the
“Closing
Date Balance Sheet”).
The
Shareholders shall then determine the Net Working Capital as of the Closing
Date
(the “Closing
Net Working Capital”)
based
upon the Closing Date Balance Sheet and calculated on the same basis and
applying the same principles, policies and practices that were used in preparing
the Base Net Working Capital and as disclosed on Schedule
2.04(a),
except
as otherwise required by the provisions of Section
2.04(a)
The
Shareholders shall deliver the Closing Date Balance Sheet and their
determination of the Closing Net Working Capital to the Purchaser on or before
the 45th
day
after the Closing Date.
(c) If,
on or
before the 30th
day
after the Purchaser’s receipt of the Closing Date Balance Sheet and the Closing
Net Working Capital calculation from the Shareholders, the Purchaser has
not
given the Shareholders’ Representative written notice of its objection as to the
Closing Net Working Capital calculation (which notice shall specify the disputed
portions of the Closing Date Balance Sheet and shall state the basis of the
objection), then the Closing Net Working Capital as calculated by the
Shareholders shall be binding and conclusive on the Parties and be used in
computing the actual Working Capital Adjustment Amount. If the Purchaser
timely
gives the Shareholders’ Representative such notice of objection, then all items
on the Closing Date Balance Sheet which are not identified as disputed in
such
notice shall be deemed accepted by the Purchaser and shall not be subject
to
further adjustment.
(d) If
the
Purchaser timely gives the Shareholders’ Representative such notice of
objection, and if the Shareholders’ Representative and the Purchaser fail to
resolve the issues outstanding with respect to the Closing Date Balance Sheet
and the calculation of the Closing Net Working Capital on or before the
10th
day
after the Shareholders’ Representative’s receipt of the Purchaser’s objection
notice, the Shareholders’ Representative and the Purchaser shall submit the
issues remaining in dispute to KPMG, independent public accountants (the
“Independent
Accountants”),
for
resolution, applying the principles, policies and practices referred to in
Section
2.04(a).
If
issues are submitted to the Independent Accountants for resolution: (i) the
Shareholders’ Representative and the Purchaser shall furnish or cause to be
furnished to the Independent Accountants such work papers and other documents
and information relating to the disputed issues as the Independent Accountants
may request and are available to that Party or its agents and shall be afforded
the opportunity to present to the Independent Accountants any material relating
to the disputed issues and to discuss the issues with the Independent
Accountants; (ii) the determination by the Independent Accountants, as set
forth
in a notice to be delivered to both the Shareholders’ Representative and the
Purchaser on or before the 30th
day
after the submission to the Independent Accountants of the issues remaining
in
dispute, shall be final, binding and conclusive on the Parties and shall
be used
in the calculation of the Closing Net Working Capital; and (iii) the Purchaser
shall pay one-half of all fees and expenses of the Independent Accountants
for
such determination and the Shareholders, collectively, shall pay the other
one-half.
(e) After
the
final determination of the Working Capital Adjustment Amount, one of the
following payments shall be made.
(i) If
the
Working Capital Adjustment Amount is a negative number which is greater than
the
Closing Adjustment Amount, requiring a reduction of the Purchase Price, then
the
Shareholders shall, on or before the fifth Business Day after the final
determination of the Working Capital Adjustment Amount as provided in this
Section
2.04,
pay to
the Purchaser an amount equal to (A) the Working Capital Adjustment Amount,
less
(B) the Closing Adjustment Amount (such amount, the “Refund
Amount”),
and
the Shareholders shall have no further claim pursuant to this Article
II
to
receive any portion of the Closing Adjustment Amount. If the Shareholders
do not
timely pay the full Refund Amount to the Purchaser, the Purchaser may, in
its
sole discretion and at its option, direct the Escrow Agent to promptly deliver
to the Purchaser the unpaid portion of the Refund Amount. If the Purchaser
directs the Escrow Agent to deliver such amount to the Purchaser, then the
Purchaser shall retain the right to pursue payment from the Shareholders
as
required by the first sentence of this Section
2.04(e)(i),
which
payment would be deposited in the Escrow Account to replenish the funds paid
to
the Purchaser pursuant to this Section
2.04(e).
(ii) If
the
Working Capital Adjustment Amount is zero or is a negative number which is
less
than the Closing Adjustment Amount, requiring a reduction in the Purchase
Price,
then the Purchaser shall, on or before the fifth Business Day after the final
determination of the Working Capital Adjustment Amount as provided in this
Section
2.04,
pay to
the Shareholders’ Representative an amount equal to (A) the Closing Adjustment
Amount, less (B) the Working Capital Adjustment Amount, and the Purchaser
shall
retain the balance of the Closing Adjustment Amount.
(iii) If
the
Working Capital Adjustment Amount is a positive number, requiring an increase
in
the Purchase Price, then the Purchaser shall, on or before the fifth Business
Day after the final determination of the Working Capital Adjustment Amount
as
provided in this Section
2.04,
pay to
the Shareholders’ Representative an amount equal to (A) the Closing Adjustment
Amount, plus (B) the Working Capital Adjustment Amount.
2.05. Accounts
Receivable Adjustment.
(a) The
accounts receivable reflected on the Closing Date Balance Sheet, as finally
determined, are referred to in this Section
2.05
as the
“Accounts
Receivable.”
The
Parties acknowledge and expect that the Accounts Receivable will be stated
net
of reasonably estimated provisions for (i) bad debts, and (ii) refunds or
reimbursements the Shareholders expect the Companies to be required to make
arising from overpayments made to the Companies by Medicaid or Medicare in
respect of operations before the Closing Date.
(b) The
Purchaser shall appoint EMM as its agent to collect the Accounts Receivable
in
full on or before the 120th
day
after the Closing Date (the “Collection
Deadline”)
and
shall designate the bank account or accounts into which collections shall
be
deposited. EMM shall provide the Purchaser with bi-weekly reports of its
collection activities with such detail as the Purchaser may reasonably request.
During
the period beginning on the Closing Date and ending on the Collection Deadline,
the Purchaser and the New Operator shall cooperate with the reasonable requests
of EMM for assistance in billing and collecting the Accounts Receivable,
but
only to the extent that the Purchaser or the New Operator have information
relating to the Accounts Receivable or have employees otherwise engaged in
the
billing and collection of accounts receivable generally. After the Closing
Date,
EMM (i) shall coordinate its collection activities with the New Operator
with
respect to those Accounts Receivable which relate to individuals who are
residents of any Facility at the time such collection activities are underway,
(ii) shall not unreasonably interfere with the business relationship between
the
New Operator and any such individual for so long as the individual remains
a
resident of any Facility, and (iii) shall in no event initiate litigation
with
any such individual for so long as the individual remains a resident of any
Facility. The New Operator agrees that all collections from such individuals
shall be applied to the oldest account receivable from such individual and
each
such collection attributable to one of the Accounts Receivable shall be remitted
promptly to EMM.
(c) Any
amounts received by the Purchaser before the Collection Deadline from a debtor
on an Account Receivable will first be applied to the oldest Account Receivable
of that debtor. If the Purchaser does not receive, on or before the Collection
Deadline, the full amount of the Accounts Receivable, then, on or before
the
fifth Business Day after the Collection Deadline, the Purchaser shall assign
to
the Shareholders each individual Account Receivable which has not been paid
in
full and the Shareholders, jointly and severally, shall be obligated to pay
to
the Purchaser an amount equal to 103.5% of an amount equal to the difference
between (i) the Accounts Receivable, and (ii) the amount received by the
Purchaser pursuant to this Section
2.05,
not
including the amount of interest calculated pursuant to subsection (d) below.
If
the Purchaser receives collections in excess of an amount equal to (A) the
Accounts Receivable, plus (B) the amount of interest calculated pursuant
to
subsection (d) below, then the Purchaser shall transfer the entire amount
of
such excess to the Shareholders. The Shareholders’ Representative shall act as
the Shareholders’ agent for purpose of executing any and all applicable transfer
documents in connection with any such assignment. The Purchaser and the New
Operator shall thereafter cooperate with the Shareholders as may be reasonably
necessary to enable them to pursue collection of the Accounts Receivable
so
assigned, but only to the extent that the Purchaser and the New Operator
have
information relating to the Accounts Receivable which the Shareholders do
not
possess. If the Purchaser receives any funds from a debtor of an Account
Receivable after the Purchaser has assigned such Account Receivable to, and
the
Purchaser has received payment in full from, the Shareholders as set forth
in
this subsection (c), then the Purchaser promptly shall transfer all such
funds
to the Shareholders’ Representative. If the Purchaser receives any funds from a
debtor of an Account Receivable after the Collection Deadline with respect
to
any Account Receivable for which the Purchaser has not received payment in
full
from the Shareholders as set forth in this subsection (c), then the Purchaser
shall retain such funds and apply them to such Accounts Receivable.
(d) If
the
Purchaser receives payment of any portion of any individual Account Receivable
during the period beginning on the 31st
day
after the Closing Date and ending on the Collection Deadline, then the
Shareholders, jointly and severally, shall be obligated to pay to the Purchaser
an amount equal to the percentage of the payments so received by the Purchaser
during such period as set forth below.
Collection
Period
|
%
of the Payments Collected
During
the Period
|
31
to 60 days after the Closing Date
|
1.5%
|
61
to 90 days after the Closing Date
|
2.5%
|
91
to 120 days after the Closing Date
|
3.5%
|
Not
later
than 15 Business Days after the end of each of the collection periods set
forth
above, the Purchaser shall provide to the Shareholders’ Representative a written
report showing the amounts received by the Purchaser with respect to the
Accounts Receivable for the period then most recently ended. The Shareholders
shall be obligated to pay the amount required by this subsection (d) not
later
than 10 Business Days after the date the Shareholders’ Representative receives
such notice.
(e) The
Shareholders shall make such payments required by this Section
2.05
by wire
transfer of immediately available funds or by cashier’s check. If the
Shareholders do not timely make any payments required by this Section
2.05,
then
the Purchaser may, in its sole discretion and at its option, direct the Escrow
Agent to promptly deliver to the Purchaser the amount owed by the Shareholders
to the Purchaser pursuant to this Section
2.05.
If the
Purchaser directs the Escrow Agent to deliver such amount to the Purchaser,
then
the Purchaser shall retain the right to pursue payment from the Shareholders
as
required by this Section
2.05,
which
payment would be deposited in the Escrow Account to replenish the funds paid
to
the Purchaser pursuant to this Section
2.05.
2.06. Closing.
(a) Subject
to the terms and conditions of this Agreement, the sale and purchase of the
Company Shares contemplated hereby shall take place at a closing (the
“Closing”)
to be
held on June 28, 2005, at the Duquesne Club, 325 Sixth Avenue, Pittsburgh,
Pennsylvania 15222, or at such other time or on such other date or at such
other
place as the Shareholders, the Purchaser and the New Operator may mutually
agree
upon in writing (the day on which the Closing takes place being the
“Closing
Date”).
The
Closing shall be deemed to be effective at 12:01 am Pittsburg, Pennsylvania
time
on the Closing Date (the “Effective
Time”).
(b) At
the
Closing, the Shareholders and the Companies shall deliver or cause to be
delivered to the Purchaser and the New Operator (unless otherwise
indicated):
(i) to
the
Purchaser, certificates representing the Company Shares (if certificated),
duly
endorsed (or accompanied by duly executed stock powers or assignment documents)
for transfer to the Purchaser, or, if necessary, executed lost certificate
affidavits and indemnifications in a form satisfactory to the Purchaser and
its
counsel;
(ii) to
the
Purchaser, the Payoff Letters reflecting the Indebtedness Liability, including
the Indebtedness Liability disclosed on Schedule
2.06(b);
(iii) evidence
of the release of (A) all Liens on any of the Assets of any Company, other
than
Permitted Liens, and the termination of all UCC financing statements or other
filings, or written instructions authorizing the Purchaser to terminate all
financing statements or other filings, relating to such Liens and to any
other
financing statements filed with respect to any Company on in a form satisfactory
to the Purchaser and its counsel, including copies of terminations of any
security interest and quitclaims pertaining to all Intellectual Property,
and
(B) the FET Lien, including releases by the IRS and all applicable state
taxing
authorities;
(iv) to
the
Purchaser, owner’s title insurance policies without standard exceptions, but
with endorsements for, with respect to each parcel of Real Property located
in
the State of Ohio, zoning 3.1, access, contiguity, survey, tax parcel and
comprehensive, and, with respect to each parcel of Real Property located
in the
State of Pennsylvania, access, contiguity and tax parcel (the “Title
Policies”)
with
values equal to the fair market values of each parcel of Real Property as
provided herein based upon the Title Commitments disclosed on Schedule
2.06(b)
issued
by Certified Title Insurance Company and subject only to (A) Liens for Taxes
that are not yet due and payable, (B) the Liens disclosed on Schedule
1.01(nn),
and (C)
any Liens or other matters created by the Purchaser or arising out of the
wrongful acts or negligence of the Purchaser;
(v) to
the
Purchaser, invoices reflecting the unpaid Transaction Fees, if any, which
invoices shall include wire transfer instructions for payment;
(vi) a
certificate, dated as of the Closing Date, executed by an officer of each
Company and by the Shareholders’ Representative (on behalf of the Shareholders),
certifying the fulfillment of the conditions specified in paragraphs (a),
(b)
and (c) of Sections
8.01 and 10.01,
to the
extent they relate to the Shareholders or the Company;
(vii) the
Escrow Agreement
executed by the Shareholders;
(viii) evidence
that the Shareholders have obtained, at their sole cost and expense, the
Tail
Coverage;
(ix) the
certificate of incorporation or organization of each Company certified as
of the
most recent practicable date by the applicable state authority in the applicable
jurisdiction;
(x) a
certificate of the applicable state authority as to the good standing or
full
force and effect, as applicable, of each Company in its jurisdiction of
incorporation or organization as of the most recent practicable
date;
(xi) a
certificate of the Secretary of each Company, certifying as to the code of
regulations or bylaws or operating agreement, as applicable, of such Company
and
the resolutions of the board of directors or managers or partners, as
applicable, of each Company authorizing this Agreement and the transactions
contemplated hereby;
(xii) a
legal
opinion of Buckingham, Doolittle & Burroughs, LLP, counsel to the
Shareholders and the Companies, in the form to be agreed upon by the
Shareholders’ Representative, the Purchaser and the New Operator;
(xiii) written
resignations and releases from the directors, officers and managers of each
Company who are disclosed on Schedule
3.01
in the
form attached as Exhibit
B;
(xiv) all
consents and approvals contemplated by Section
3.16
and
Section 4.04
or such
customary assurances (which may be verbal) that such consents and approvals
will
be received after the Closing Date in the Ordinary Course of Business;
provided,
however,
that
the consents and approvals disclosed on Schedule
2.06(b)(xiv)
(the
“Required
Consents”)
shall
be delivered at the Closing in writing;
(xv) to
the
Purchaser, original corporate record books and stock record books of each
Company;
(xvi) to
the
New Operator, the payment required by Section
7.02(d);
(xvii) the
Sick
Time Agreement executed by the Shareholders.
(c) At
the
Closing, the Purchaser shall deliver or cause to be delivered to the
Shareholders and the New Operator (unless otherwise indicated):
(i) the
cash
payments on account of the Purchase Price due under the provisions of
Section
2.02(c);
(ii) a
certificate, dated as of the Closing Date, executed by an officer of Purchaser,
certifying the fulfillment of the conditions specified in paragraphs (a)
and (b)
of Sections
9.01 and 10.01,
to the
extent they relate to the Purchaser or the Purchaser Parent;
(iii) the
Escrow Agreement executed by the Purchaser;
(iv) the
certificate of incorporation of the Purchaser certified as of the most recent
practicable date by the State of Delaware;
(v) a
certificate of the State of Delaware as to the good standing of the Purchaser
in
such jurisdiction as of the most recent practicable date;
(vi) a
certificate of the Secretary of Purchaser, certifying as to the bylaws of
the
Purchaser and as to the resolutions of the board of directors of the Purchaser
authorizing this Agreement and the transactions contemplated hereby;
(vii) a
legal
opinion of Dykema Gossett PLLC, counsel to the Purchaser, in the form to
be
agreed upon by the Shareholders’ Representative, the Purchaser and the New
Operator; and
(viii) the
Sick
Time Agreement executed by the Purchaser.
(d) At
the
Closing, the New Operator shall deliver or cause to be delivered to the
Shareholders and the Purchaser:
(i) a
certificate, dated as of the Closing Date, executed by an officer of New
Operator, certifying the fulfillment of the conditions specified in paragraphs
(a) and (b) of Sections
8.01 and 9.01,
to the
extent they relate to the New Operator;
(ii) the
Escrow Agreement executed by the New Operator;
(iii) the
certificate of organization of the New Operator certified as of the most
recent
practicable date by the State of Ohio;
(iv) a
certificate of the State of Ohio as to the good standing of the New Operator
in
such jurisdiction as of the most recent practicable date;
(v) a
certificate of the Secretary of the New Operator, certifying as to the
resolutions of the managers or members of the New Operator authorizing this
Agreement and the transactions contemplated hereby;
(vi) a
legal
opinion of Benesch, Friedlander, Coplan & Aronoff LLP, counsel to the New
Operator, in the form to be agreed upon by the Shareholders’ Representative, the
Purchaser and the New Operator; and
(vii) the
Sick
Time Agreement executed by the New Operator.
Article
III
Representations
and
Warranties Regarding the Companies
As
an
inducement to the Purchaser, the Purchaser Parent and the New Operator to
enter
into this Agreement, the Companies and the Shareholders, jointly and severally,
hereby represent and warrant to the Purchaser, the Purchaser Parent, the
New
Operator and the New Operator Parent as follows.
3.01. Organization
and Power.
(a) Each
Company is duly organized, validly existing and in good standing under the
Laws
of its state of incorporation or formation. Each Company has all Licenses
and
authorizations necessary to own its properties and to carry on its businesses
as
now being conducted and is duly qualified to do business as a foreign
corporation and is in good standing under the Laws of each state or other
jurisdiction, if any, except where the failure to obtain such Licenses or
authorizations or to qualify would not have a Material Adverse Effect on
such
Company. Each Company has provided the Purchaser with true and correct copies
of
its Charter Documents. No
Company has qualified to do business outside of its state of incorporation
or
organization.
(b) Schedule
3.01
contains
a complete and correct list of all of the officers and directors or manager
and
members of each Company, as applicable. The minute books of each Company
contain
complete and correct copies of the minutes of each meeting and each action
by
written consent of each of its board of directors (or comparable governing
body)
or shareholders or members, as applicable, and the stock or membership interest
ledger of each Company and contains a complete and correct record of all
issuances and transfers of capital stock or membership interests of each
Company.
3.02. Authorization;
No Violation.
The
execution, delivery and performance by each Company of this Agreement and
all
Ancillary Documents to which the Company is a party and the consummation
of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate, company or partnership action and
no
other corporate, company or partnership proceedings on the part of any Company
are necessary to authorize the execution, delivery or performance of this
Agreement and all Ancillary Documents to which it is a party. This Agreement
and
all Ancillary Documents to which a Company is a party constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar Laws relating to creditors’ rights generally, by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law) or by an implied covenant
of
good faith and fair dealing. Except for agreements relating to Indebtedness
which will be paid off on the Closing Date, the execution, delivery and
performance of this Agreement and all Ancillary Documents to which a Company
is
a party and the consummation of the transactions contemplated thereby do
not and
shall not conflict with or result in any breach of any of the provisions
of,
constitute a default under, result in a violation of, or cause the acceleration
of any obligation under, or require any authorization, consent, approval,
exemption or other action by or notice to any Governmental Agency under the
provisions of any Company’s Charter Documents or any Contract to which any
Company is bound or affected or any Law to which any Company is subject or
by
which any of the Assets of any Company is bound,
other
than any such matters which would not have a Material Adverse Effect on such
Company.
3.03. Subsidiaries.
Except
as disclosed on Schedule
3.03,
none of
the Companies has any Subsidiaries nor do any of the Companies own any shares
of
capital stock, membership interests, partnership interest, joint venture
interest or other security or interest in any Person. None of the Companies
has
any direct or indirect right to acquire any interest or investment in any
Person.
3.04. Financial
Statements.
Each of
the Companies and the Shareholders have furnished the Purchaser with (a)
unaudited balance sheets of each Company as of March 31, 2005 (the “Company
Latest Balance
Sheet”)
and
the related unaudited statements of income and cash flows for the period
ended
March 31, 2005, and (b) reviewed balance sheets of each Company as of December
31, 2004 and December 31, 2003, and the related reviewed statements of income
and cash flows for the years then ended (collectively with the Company Latest
Balance Sheet, the “Company
Statements”).
Each
of the Company Statements (including in all cases the notes thereof) has
been
based upon the information contained in the Companies’ books and records (which
are accurate and complete in all material respects), has been prepared in
accordance with GAAP consistently applied throughout the periods covered
thereby, contain proper accruals and adequate reserves, and presents fairly,
in
all material respects, the financial condition, results of operations,
shareholders’ equity and cash flows of each Company, as applicable, as of the
times and for the periods referred to therein, except that the Company
Statements described in clause (a) above are subject to year-end adjustments
(none of which would be material, individually or in the aggregate). Since
the
date of the Company Latest Balance Sheet through the date hereof, there has
been
no material adverse change in the financial condition, operating results,
assets, operations, prospects, employee relations, supplier relations or
customer relations of each Company and each Company has conducted the Business
only in the Ordinary Course of Business.
3.05. Capitalization.
(a) Schedule
3.05
sets
forth (i) the number and classes of the authorized capital stock or membership
interests of each Company, other than Wexford, and (ii) the total number
of
issued and outstanding shares of each class of the capital stock or membership
interests of each Company, other than Wexford, the certificate number of
each
certificate which represents such shares or units, and the name of the
Shareholder who holds each such certificate.
(b) All
of
the issued and outstanding shares of capital stock or membership interests
of
each Company are validly issued, and, to the extent applicable, fully paid
and
nonassessable and owned, beneficially and of record, by the Shareholders
in the
classes, amounts and percentages disclosed on Schedule
3.05,
and no
shares of capital stock or membership interests are subject to, or have been
issued in violation of, preemptive rights. All issuances, sales and repurchases
by each Company of its shares of capital stock or membership interests have
been
effected in compliance with all applicable Laws, including applicable federal
and state securities Laws.
(c) PNCN
and
PNP are the only partners of Wexford and hold 40% and 60%, respectively,
of the
partnership interests of Wexford. The Wexford partnership interests are not
certificated. Neither PNCN nor PNP owns any assets of any kind other than
their
respective partnership interests in Wexford and cash in a bank account and
neither conducts any business operations of any kind, other than the ownership
of the Wexford partnership interests.
(d) No
Company has outstanding (i) any stock, membership interests, partnership
interests or other securities convertible into or exchangeable for any such
equity interests, or (ii) any options, warrants or rights to subscribe for
or to
purchase its any stock, membership interests, partnership interests or any
stock, membership interests, partnership interests or securities convertible
into or exchangeable for any such equity interests. No Company is subject
to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its any stock, membership interests or partnership
interests or any warrants, options or other rights to acquire any such equity
interests. There are no voting agreements, voting trusts or other agreements
(including contractual or statutory preemptive rights or cumulative voting
rights), commitments or understandings with respect to the voting or transfer
of
the capital stock, membership interests or partnership interests of any
Company.
3.06. Title
and Condition of Properties.
(a) Schedule
3.06(a)
contains
a complete and accurate list of all real property, leaseholds or other interests
therein owned by each Company (the “Real
Property”).
The
Companies and the Shareholders have delivered or made available to the Purchaser
copies of the deeds and other instruments (as recorded) by which each Company
acquired such Real Property, and copies of all title insurance policies,
opinions, abstracts and surveys in the possession of the Shareholders or
each
Company relating to such Real Property.
(b) Schedule
3.06(b)
contains
a detailed list of all the tangible property grouped as to type, including
the
cost, accumulated depreciation and net book value, used in the operation
of the
Facilities (the “Tangible
Property”).
Each
Company has good and marketable fee simple title to the Tangible Property
free
and clear of all Liens other than the Permitted Liens and Liens relating
to
Indebtedness which will be paid off at Closing. Except as disclosed on
Schedule
3.06(b),
all of
the Tangible Property is located at the Real Property and the Companies have
the
full and unqualified right to require the immediate return of any of its
Tangible Property which is not located at the Real Property. To the knowledge
of
the Shareholders and the Companies, all Tangible Property is in good working
order and repair and is sufficient for the operation of the Facilities as
presently conducted. Except as disclosed on Schedule
3.06(b),
to the
knowledge of the Shareholders and the Companies, all contracts or agreements
pursuant to which the Companies may hold or use any interest owned or claimed
by
it in or to the Tangible Property are in full force and effect.
No
Company has received written notice claiming that any such contracts or
agreements are not in full force and effect.
(c) Each
Company owns good and marketable title, free and clear of all Liens, to all
of
the personal property and assets shown on the Company Latest Balance Sheet
or
acquired thereafter in the Ordinary Course of Business or located at any
of the
Facilities, except for Permitted Liens and Liens relating to Indebtedness
which
will be paid off at Closing.
(d) Except
as
disclosed on Schedule
3.06(d),
to the
knowledge of the Shareholders and the Companies, each Company’s buildings,
machinery, equipment and other tangible assets used in the operation of the
Facilities are in good operating condition and repair and are usable in the
Ordinary Course of Business as conducted on the date of this Agreement. Each
Company owns or leases under valid leases all buildings, machinery, equipment
and other tangible assets necessary for the conduct of the Business as conducted
on the date of this Agreement. All buildings, improvements or other property
owned or leased by each Company are adequately supplied with utilities and
other
services at customary charges necessary for the operation thereof (including
gas, electricity, water, telephone, sanitary and storm sewer and access to
public roads). Any tap fees, hook-up fees or other associated charges accrued
to
date with respect to the Facilities have been fully paid with respect to
all
potable and industrial water and all gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and other
similar
systems serving the Facilities and no such fees or charges remain outstanding.
The Tangible Property, buildings, plants, structures and equipment of each
Company are sufficient for the continued conduct of the Business of such
Company
after the Closing, in substantially the same manner as conducted prior to
the
Closing.
(e) There
is
no material violation of any applicable zoning, building, fire or other
ordinance or other Law relating to the operation of the Business on the Real
Property, including any applicable environmental protection or occupational
health and safety Laws. Final certificates of occupancy and/or use have been
duly issued for each Facility by the applicable Governmental Agency. Within
the
three years immediately preceding the date of this Agreement, neither any
Company nor any Shareholder has received notice of any such violation or
any
condemnation proceeding with respect to the Real Property.
3.07. Licenses.
(a) Each
of
the Companies possess all material Licenses from Governmental Agencies that
are
required by applicable Law in connection with the operation of the Facilities.
Schedule 3.07(a)
sets
forth a list of all material Licenses (including any pharmacy licenses or
other
ancillary licenses) issued to any Company. The Companies have provided true
and
correct copies of the Licenses to the Purchaser and the New
Operator.
(b) Except
as
disclosed on Schedule
3.07(a)
and
except as would not have a Material Adverse Effect on the Companies (i) each
of
the Companies has complied with, and is currently complying with, its
obligations under each of the Licenses and all such Licenses are in full
force
and effect, and (ii) no written notice from any Governmental Agency in respect
to the threatened, pending or possible revocation, termination, suspension
or
limitation of any of the Licenses has been given to any Shareholder or any
Company, nor has any Shareholder or Company received notice of any proposed
or
threatened issuance of any such notice. The Shareholders and Companies have
made
available to the Purchaser true, correct and complete copies of any state
licensing survey reports received by the Companies in the five years immediately
preceding the date of this Agreement as well as any statements of deficiencies
and plans of correction in connection with such reports. The Shareholders
and
the Companies have taken all reasonable steps to correct all deficiencies
referenced in this Section
3.07
and a
description of any uncorrected deficiency is disclosed on Schedule 3.07(b).
(c) Without
limiting the generality of the foregoing, except as disclosed on Schedule
3.07(c)
each
Company and its respective equipment and operations satisfy in all material
respects the applicable licensing and certification requirements to operate
the
Facilities in the state in which such Facilities are operated and the
requirements for participation in the Government Programs.
3.08. Accounts
Receivable.
All
accounts receivable of each Company that are reflected on the applicable
Company
Latest Balance Sheet, or on its books as of the Closing Date, represent or
will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business and are and shall be
subject to no valid counterclaims or setoffs in excess of any reserves
therefore.
3.09. Inventories.
All
inventory of food and miscellaneous supplies of each Company is reflected
on the
Company Latest Balance Sheet and, as of the Closing Date consistent with
past
practices, consisted and shall consist of inventory of a quality and quantity
usable and saleable in the Ordinary Course of Business.
3.10. Tax
Matters.
(a) Each
Company has duly filed all Tax Returns of any and every nature and description
required to be filed by it (all such Tax Returns being accurate and complete
in
all material respects) and has duly paid all Taxes and other governmental
charges (whether or not shown on any Tax Return) which have been incurred
or are
claimed in writing to be due from or imposed on such Company, or any of its
properties, assets, income, franchises, leases, Licenses, sales or use by
any
federal, state, local or foreign Tax authorities on or prior to the date
hereof
and the Closing Date, other than Taxes which are being contested in good
faith
and by appropriate proceedings and as to which such Company has set aside
on its
books adequate reserves or which may be attributable to the transactions
contemplated hereby. The amounts recorded as reserves for Taxes on a gross
or
net basis on the Company Latest Balance Sheet are sufficient in the aggregate
for payment by such Company of all unpaid Taxes (including any interest or
penalties thereon) for the period ended as of the date of the Company Latest
Balance Sheet or for any year or period prior thereto.
(b) Neither
the IRS nor any state, local or foreign Tax authority has ever examined any
income Tax Return of any Company, whether singly or as a member of an affiliated
group, except as otherwise specifically disclosed on Schedule
3.10,
which
sets forth the date or dates since December 31, 1997, through which any federal,
state, local, foreign or other Tax authority has examined or is in the process
of examining any Tax Returns of any Company. Except as disclosed on Schedule
3.10,
no
Company is the beneficiary of any extension of time within which to file
any Tax
Return. There are no Liens for Taxes (other than Taxes not yet due and payable)
upon any of the assets of any Company.
(c) Except
as
disclosed on Schedule
3.10,
neither
the IRS nor any federal, state, local or other Tax authority is in the process
of examining any Tax Return of any Company nor are any such exams pending,
and,
to the knowledge of the Shareholders and the Companies, no such exams are
threatened. There are no disputes pending, or claims asserted, for Taxes
upon
any Company and, to the knowledge of the Shareholders and the Companies,
no such
disputes or claims are threatened.
No
Company has received written notice of any such dispute or claim.
(d) No
Company has given any currently effective waivers extending the statutory
period
of limitation applicable to any federal, state or local Tax Return or for
any
period or agreed to an extension of time with respect to a Tax assessment
or
deficiency.
(e) No
Company has in effect any power of attorney or authorization to any other
Person
to represent it with respect to any Taxes.
(f) No
claim
has ever been made by an authority in a jurisdiction where any Company does
not
file Tax Returns that such Company is or may be subject to taxation by that
jurisdiction.
(g) No
Company has filed any consolidated federal income Tax Return with an “affiliated
group” (within the meaning of Section 1504 of the Code), where such Company was
not the common parent of the group.
(h) No
Company is, or has been, a party to any Tax allocation or sharing Contract
pursuant to which it has any contingent or outstanding Liability to
anyone.
(i) No
Company has any Liability for Taxes of any Person as a transferee, or successor
by contract, or otherwise.
(j) No
Company has filed a consent under Section 341(f) of the Code.
(k) The
Companies have provided the Purchaser with true and correct copies of each
Company’s federal, state and local income Tax Returns filed on or prior to the
date hereof and all examination reports, if any, relating to the audit of
such
Tax Returns by the IRS or other Tax authority for each taxable year beginning
on
or after January 1, 1998.
(l) All
monies required to be withheld from employees, managers, independent
contractors, equityholders or creditors of each Company for Taxes, or collected
from customers or others as Taxes, have, in all material respects, been withheld
as appropriate and collected and paid, when due, to the appropriate Governmental
Agency, or if such payment is not yet due, an adequate reserve has been
established for such Taxes.
(m) No
Company has made any payments, is obligated to make any payments, or is a
party
to any agreement that could obligate it to make any payments that will not
be
deductible under Code Section 280G.
(n) No
Company has been a United States real property holding corporation within
the
meaning of Code Section 897(c)(2) during the applicable period specified
in Code
Section 897(c)(1)(A)(ii). No Company has acquired any United States real
property interest, as defined in Code Section 897(c), from a foreign
Person
without complying with the withholding requirements contained in Code Section
1445.
(o) Each
Company has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662.
(p) No
Company has participated in a “reportable transaction” within the meaning of
Section 1.6011-4(b) of the Treasury Regulations.
(q) No
Company will be required to include any item of income in, or exclude any
item
of deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any:
(i) change
in
method of accounting for a taxable period ending on or prior to the Closing
Date;
(ii) “closing
agreement” as described in Code Section 7121 (or any corresponding or similar
provision of state, local or foreign income Tax Law) executed on or prior
to the
Closing Date;
(iii) installment
sale or open transaction disposition made on or prior to the Closing Date;
or
(iv) prepaid
amount received on or prior to the Closing Date.
(r) No
Company has distributed equity interest of another Person, or has had any
of its
equity interests distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by Code Section
355 or
Code Section 361.
(s) Except
as
disclosed on Schedule
3.10,
each of
Copley, Hanover I and Suburban (and any predecessor company) has been a validly
electing S corporation within the meaning of Code Sections 1361 and 1362
at all
times since its inception. Each of Copley, Hanover I and Suburban shall revoke
its S election effective prior to the Closing Date. Hanover II shall elect
to be
taxed as a C corporation prior to the Closing Date.
3.11. Contracts
and Commitments.
(a) Except
as
set forth in Schedule
3.11(a)
and
Schedule
3.18,
no
Company is a party to or bound by any written or oral:
(i) provider
agreement;
(ii) any
agreements or arrangements with physicians or sources of referrals to any
Facility;
(iii) bonus,
pension, profit sharing, retirement or deferred compensation plan or stock
purchase, stock option, hospitalization insurance or similar plan or practice,
whether formal or informal, or severance agreements or arrangements or contracts
requiring any Company to pay post-retirement medical benefits;
(iv) Contract
with any labor union or Contract for the employment of any officer, individual
employee or other person on a full-time, part-time or consulting
basis;
(v) Contract
relating to or evidencing any Indebtedness or relating to mortgaging, pledging
or otherwise placing a Lien on any of its Assets;
(vi) guarantee
of any Indebtedness, other than endorsements made for collection in the Ordinary
Course of Business;
(vii) Contract
with respect to the lending or investing of funds to or in other
Persons;
(viii) license
or royalty Contract;
(ix) Contract
under which it is lessee of or holds or operates any personal property owned
by
any other Person, including any resident funds;
(x) Contract
under which it is lessor of or permits any third Person to hold or operate
any
property, real or personal, owned or controlled by it;
(xi) Contract
or group of related Contracts with the same Person for the purchase or sale
of
products or services other than the Customer Contracts (defined
below);
(xii) Contract
with any Person continuing over a period of more than six months from the
date
or dates thereof, not terminable by it on 30 days’ or less notice without
penalties;
(xiii) Contract
which prohibits it from freely engaging in business or in any way restrains
its
business activities anywhere in the world;
(xiv) Contract
relating to the supply or the distribution of its products;
(xv) Contract
with any officer, director, employee, manager, partner, equityholder, employee
or other Affiliate; or
(xvi) Contract
requiring the consent of any party thereto upon a change in control of any
Company, containing any provision which would result in a modification of
any
rights or obligations of any party thereunder upon a change in control of
any
Company or which would provide any party any remedy (including rescission
or
liquidated damages) in the event of a change in control of any
Company.
(b) No
Contract has been breached in any material respect by any Company and no
Contract has been breached in any material respect or canceled by the other
party thereto. Each of the Contracts is valid, enforceable and in full force
and
effect in accordance with the terms thereof. No Contract has been amended,
modified, supplemented or otherwise altered orally, in writing or by course
of
conduct except as disclosed on Schedule
3.11.
Since
the date of the Company Latest Balance Sheet, no supplier or customer of
any
Company has notified such Company or any Shareholder that it shall stop or
decrease in any material respect the rate of business done with such Company.
To
the knowledge of the Shareholders and the Companies, no supplier or customer
of
any Company intends to stop or decrease in any material respect the amount
of
business done with such Company or that any such supplier or customer intends
to
stop doing business after the Closing on substantially the same terms (including
quantities) as prior to the Closing and no Company has received written notice
from any supplier or customer to such effect. Each Company has, in all material
respects, performed all the obligations required to be performed by it to
the
date of this Agreement and is not in receipt of any claim of default under
any
Contract, to which it is a party. No event has occurred which with the passage
of time or the giving of notice or both would result in a breach or default
under any Contract to which any Company is a party and, to the knowledge
of the
Shareholders and the Companies, no such event is threatened or
pending.
(c) The
Purchaser has been supplied with a true and correct copy of all written
Contracts which are referred to on Schedule
3.11
(the
“Customer
Contracts”),
together with all amendments, waivers or other changes thereto, and a written
description of all material terms of any such oral Contracts.
Other
than the Customer Contracts, there are no other material Contracts relating
to
the operation of the Business or the ownership of, or right to use, the
Assets.
(d) There
is
no pending or, to the knowledge of the Shareholders and the Companies,
threatened termination, cancellation, limitation, modification or change
in any
of the Companies business relationships with any customer or supplier or
group
of customers or suppliers related to the Business
that
might have a Material Adverse Effect on the Business.
3.12. Accreditation;
Medicare and Medicaid; Third Party Payor Reimbursement.
(a) Each
Facility is duly licensed by the appropriate authority and certified by Medicare
and Medicaid for the operation of nursing facility beds. Schedule
3.12(a)
sets
forth the authority by which each Facility is licensed and the number of
nursing
facility beds and other purposes for which each Facility is certified. All
such
licenses are unrestricted, unconditional, in good standing, in full force
and
effect and subject to no waiver or limitation.
(b) No
life
safety code waiver, vendor hold, decertification proceeding or licensure
revocation, termination or suspension proceeding affecting any Facility,
including any payment ban or admission ban, is currently pending or has been
issued or pursued during the two years immediately preceding the date of
this
Agreement. Except as disclosed on Schedule
3.12(b),
no
civil monetary penalty has been imposed or assessed on any Company during
the
two years immediately preceding the date of this Agreement. No Company or
Shareholder has knowledge, nor any reason to believe, that the good standing
of
any such license is in jeopardy. No Company or Shareholder has received notice
from any Governmental Agency requiring the correction of any condition with
respect to any Facility which has not been the subject of a plan of correction
for which compliance has been effected. There are no outstanding deficiencies
or
work orders for any Governmental Agency having jurisdiction over any Facility
requiring conformity to any applicable Laws, including the Laws of any state
or
federal health care programs. No Shareholder, Company or Facility has received
any notice of any claim, requirement or demand of any licensing or certifying
agency supervising or having authority over the Facility or otherwise to
rework
or redesign it or to provide additional furniture, fixtures, equipment or
inventory so as to conform to or comply with any existing Laws for which
no
waiver exists and which has not been fully satisfied prior to the date hereof
or
which shall not be satisfied prior to the Closing.
(c) Except
as
disclosed on Schedule 3.12(c),
each
Facility is currently accredited by the JCAHO. The Shareholders and Companies
have made available to the Purchaser true, complete and correct copies of
the
most recent JCAHO accreditation survey report for each Facility and a list
and
description of events in the five years immediately preceding the date of
this
Agreement at each of the Facilities that constitute a “Sentinel Event” as
defined by the JCAHO, if any. The Shareholders and the Companies have taken
all
reasonable steps to correct all material deficiencies referenced in this
Section
3.12.
(d) Except
as
disclosed on Schedule 3.12(d),
each
Facility is eligible to receive payment without restriction on Medicare and
Medicaid and each Facility is a “provider” with a valid and current provider
agreement and with one or more provider numbers with the federal Medicare
and
the applicable Medicaid programs of the states in which such Facility operates
(the “Government
Programs”).
Except as reimbursement payment is escrowed as a consequence of the CHOW
Notice,
each of the Facilities has received Medicare or Medicaid reimbursement and
is
eligible to receive payment without restriction under Medicare and Medicaid.
Except as disclosed on Schedule
3.12(d),
the
Facilities are in compliance in all material respects with the conditions
for
participation in the Government Programs and Private Programs and have received
all approvals or qualifications necessary for capital reimbursement on the
Real
Property. All billing practices of the Companies and the Facilities to third
party payors, including the Government Programs and the Private Programs,
have
been in compliance in all material respects with all applicable Laws,
regulations and policies of such third party payor and no Shareholder, Company
or Facility has knowingly billed or received any payment or reimbursement
in
excess of the amounts allowed by Law. Except as disclosed on Schedule
3.12(d),
neither
the Shareholders nor the Company have received written notice of any pending
or
threatened proceeding or investigation by the OIG or other Governmental Agency
or under the Government Programs involving the Companies, the Shareholders,
any
of the Facilities or the Real Property. No Shareholder, Company or Facility
(i)
currently operates under a Corporate Integrity Agreement entered by the OIG
or
other Governmental Agency, or (ii) has received any written complaints or
complaints through telephonic hotlines from the Employees, independent
contractors, vendors, physicians or any other Person that would indicate
a
violation of any Laws. The Shareholders have made available to the Purchaser
and
the New Operator true, correct and complete copies of the most recent Medicare
and Medicaid certification survey reports of each Facility, including any
statement of deficiencies and plans of correction, and such Facility’s
corrective action plans related thereto. The Shareholders and the Companies
have
taken all reasonable steps to correct all deficiencies referenced to this
Section
3.12(d)
and a
description of any uncorrected
deficiency is disclosed on Schedule
3.12(d).
(e) The
Facilities participate in those private, non-governmental programs (including
any private insurance program) disclosed on Schedule 3.12(e)
under
which it directly or indirectly is presently receiving payments in excess
of
$50,000 per annum (such private, non-governmental programs are referred to
collectively as “Private
Programs”).
(f) The
Companies have timely filed, or caused to be filed, all cost reports required
by
third party payors, including Government Programs and Private Programs, or
with
any Governmental Agency, and, except as disclosed on Schedule 3.12(f),
all
such reports are complete and accurate in all material respects. Except as
disclosed on Schedule
3.12(f),
the
Companies have been in compliance in all material respects with filing
requirements with respect to cost reports of each Facility, and such reports
do
not claim that any Facility has received payment or reimbursement materially
in
excess of the amount provided or allowed by applicable Law or any applicable
agreement, except where reimbursement was noted on the cost report. The
Companies have provided the Purchaser and the New Operator with true and
correct
copies of all such reports for the three most recent fiscal years of each
Facility. No Shareholder or Company has received written notice of a material
dispute between any Facility and the applicable government agency, including
any
fiscal intermediary or carrier, federal, state or local government body or
entity, or the Administrator of the Center for Medicare and Medicaid Services,
with respect to any Government Program cost reports or claims filed on behalf
of
the Companies, on or before the date of this Agreement.
(g) No
Company is a party to, and neither any Company nor any Shareholder has received
written notice of the commencement of, any investigation or debarment
proceedings or any governmental investigation or action (including any civil
investigation demand or subpoena) under the False Claims Act (31 U.S.C. Section
3729 et seq.), the Anti-Kickback Act of 1986 (41 U.S.C. Section 51 et seq.),
the
Federal Health Care Programs Anti-Kickback statute (42 U.S.C. Section
1320a-7a(b)), the Ethics in Patient Referrals Act of 1989, as amended (Stark
Law) (42 U.S.C. 1395nn), the Civil Money Penalties Law (42 U.S.C. Section
1320a-7a), or the Truth in Negotiations (10 U.S.C. Section 2304 et seq.),
Health
Care Fraud (18 U.S.C. 1347), Wire Fraud (18 U.S.C. 1343), Theft or Embezzlement
(18 U.S.C. 669), False Statements (18 U.S.C. 1001), False Statements (18
U.S.C.
1035) and Patient Inducement Statute and equivalent state statutes or any
rule
or regulation promulgated by a Governmental Agency with respect to any of
the
foregoing (the “Healthcare
Fraud Laws”)
affecting the Shareholders or the Companies with respect to the Companies
and
the Business. For the five years immediately preceding the date of this
Agreement, each Company has been in full compliance with all applicable
Healthcare Fraud Laws.
(h) For
the
five years immediately preceding the date of this Agreement, no Company has
been
investigated or charged with any violation involving false, fraudulent or
abusive practices relating to its participation in a Government Program,
nor has
any Shareholder or any Company (i) knowingly and willfully made or caused
to be
made a false statement or representation of a material fact in any applications
for any benefit or payment under any Governmental Program, (ii) knowingly
and
willfully made or caused to be made any false statement or representation
of a
material fact for use in determining rights to any benefit or payment under
any
Governmental Program, (iii) knowingly and willfully failed to disclose any
event
affecting the initial or continued right to any benefit or payment under
any
Governmental Program on their own behalf or on behalf of another, with intent
to
secure such payment or benefit fraudulently, (iv) knowingly and willfully
solicited, paid or received any remuneration (including kickback, bribe or
rebate), directly or indirectly, in violation with any applicable Law, (v)
presented or caused to be presented a claim for reimbursement for services
that
is for an item or service that was known or should have been known to be
(A) not
provided as claimed or (B) false or fraudulent, or (vi) knowingly and willfully
made or caused to be made or induced or sought to induce the making of any
material false statement or representation (or omitted to state a material
fact
required to be stated therein or necessary to make the statements contained
therein not materially misleading) of a material fact with respect to (A)
a
Facility in order that the Facility may qualify for a Governmental Agency
certification or (B) information to be provide under 42 U.S.C. Section
1320a-3.
(i) The
Companies are in compliance in all material respects with the Standards for
Privacy of Individually Identifiable Health Information and the Transaction
and
Code Set Standards which were promulgated pursuant to HIPAA.
(j) Attached
as Schedule 3.12(j)
is a
copy of the Facilities’ standard resident agreement form(s). There are no
agreements with residents of any Facility or with any other Person or
organization which deviate significantly from the attached standard resident
form(s).
3.13. Intellectual
Property Rights.
(a) Schedule
3.13
contains
a complete and accurate list of all (i) patented or registered Intellectual
Property owned or licensed by each Company or used in the Business, (ii)
pending
patent applications and applications for registrations of other Intellectual
Property filed by any Company, and (iii) material unregistered Intellectual
Property owned or licensed by any Company (other than commercially available
Software with an annual license fee or purchase price of less than $1,000).
Schedule
3.13
also
contains a complete and accurate list of all licenses and other Contract
rights
granted by any Company to any third party with respect to any Intellectual
Property and all licenses and other Contract rights granted by any third
party
to any Company with respect to any Intellectual Property, in each case
identifying the subject Intellectual Property. Each Company owns, and the
Assets
of such Company includes, all right, title and interest to, free and clear
of
all Liens, or such Company has the right to use pursuant to a valid and
enforceable written license or other Contract, all Intellectual Property
necessary for or used in the operation of the Business as presently conducted,
including all Intellectual Property identified on Schedule
3.13.
The
loss or expiration of any Intellectual Property or related group of Intellectual
Property owned or used by each Company would not reasonably be expected to
have
a Material Adverse Effect on any Company, and no such loss or expiration
is
pending or, to the knowledge of the Shareholders and the Companies,
threatened.
(b) There
have been no claims made by any third party asserting the invalidity, misuse
or
unenforceability of any Intellectual Property owned or used by any Company
and
there are no valid grounds for the same. No Company has received any charge,
complaint, claim, demand or notices of, and no Shareholder is aware of any
facts
that indicate a likelihood of, any infringement or misappropriation by, or
conflict or interference with, any third party with respect to such Intellectual
Property (including any written demand or request that any Company license
any
rights from a third party). To the knowledge of the Shareholders and the
Companies, the conduct of the Business has not infringed, misappropriated
or
conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property of any other Person. To the knowledge of the Shareholders
and the Companies, the Intellectual Property owned by or licensed to each
Company has not been infringed, misappropriated or conflicted by any other
Person. No Company has received written notice claiming that the conduct
of the
Business or the Intellectual Property owned or licensed by such Company has
infringed, misappropriated or conflicted with any Intellectual Property of
any
other Person. The Intellectual Property disclosed on Schedule
3.13
shall be
owned or otherwise available for use by each Company on substantially identical
terms and conditions immediately after the Closing.
3.14. Litigation;
Proceedings.
Except
as disclosed on Schedule
3.14,
there
are no actions, suits, proceedings, orders or investigations pending or,
to the
knowledge of the Shareholders and the Companies, threatened, against or
affecting any Company or the Company Shares at law or in equity, or before
or by
any Governmental Agency and there is no basis for any of the foregoing. No
shareholder, officer, director, manager, member, partner, employee or agent
of
any Company has been or is authorized to make or receive, and no Shareholder
knows of any such Person making or receiving, any bribe, kickback or other
illegal payment at any time. Within the three years immediately preceding
the
date of this Agreement, no Company nor any Shareholder has received any opinion
or legal advice in writing to the effect that any Company is exposed from
a
legal standpoint to any Liability or disadvantage which may be material to
the
Business as previously or presently conducted.
3.15. Brokerage.
No
broker, finder or financial advisor or other person is entitled to any brokerage
fees, commissions, finders’ fees or financial advisory fees in connection with
the transactions contemplated hereby by reason of any action taken by any
of the
Shareholders or the Companies or any of their respective directors, officers,
members, managers, partners, employees, representatives or agents.
3.16. Governmental
Consent, etc.
No
permit, consent, approval or authorization of, or declaration to or filing
with,
any Governmental Agency is required of any Company in connection with the
execution, delivery or performance of this Agreement, or the consummation
by
each Company of any of the transactions contemplated hereby, except as disclosed
on Schedule
3.16.
3.17. Employees
and Agents.
(a) Each
Company has complied in all material respects with all applicable Laws relating
to the employment of labor and independent contractors, including provisions
thereof relating to wages, hours, equal opportunity, immigration, collective
bargaining, disabilities, family leave and the payment of social security
and
other Taxes.
(b) Except
as
disclosed on Schedule
3.17
(i) no
Company has any existing relationships with, or is a party to any collective
bargaining agreement with, any union or employee representative, (ii) to
the
knowledge of the Shareholders and the Companies, there has been no union
organization efforts by any employee of any Company, and (iii) no Company
has
received written notice that any such union organization efforts are threatened
or pending. Except as disclosed on Schedule
3.17,
no
Company has made any proposals regarding the terms of any Collective Bargaining
Agreement. Except as disclosed on Schedule
3.17,
no
Shareholder or Company has any knowledge of any facts that could give rise
to
any charge or claim of discrimination, unfair labor practices, or any other
illegal activity with regard to any Employee.
(c) No
employee of any Company is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar Contracts relating to,
affecting or in conflict with the Business and related activities thereto.
No
Company nor any Shareholder has received any notice alleging that any violation
of any such Contracts has occurred. Schedule
3.17
also
contains a true, complete and correct list setting forth (i) the names,
position, hiring date, current compensation rate and other compensation of
all
individuals currently employed by each Company on a salaried basis, (ii)
the
names and current compensation rate of all individuals currently employed
by
each Company on an hourly or piecework basis, and (iii) the names and total
annual compensation for all independent contractors who render services on
a
regular basis to each Company and whose current annual compensation is in
excess
of $10,000 (collectively, the “Employees”).
Schedule
3.17
contains
a correct and complete list of all employees and consultants of each Company
who
have executed and delivered to such Company any Contract providing for the
nondisclosure by such Person of any confidential information of such Company.
Within the 90 days immediately preceding the Closing Date, no employee of
any
Company has suffered, or will have suffered, an “employment loss” with such
Company, as the term “employment loss” is defined under the WARN Act, except as
contemplated by Section
7.02(a).
Except
as disclosed on Schedule
3.17,
all of
the Employees are employees-at-will or otherwise employed such that the
Shareholders or the Companies may terminate their employment as of the Closing
Date without creating any meritorious cause of action against the Shareholders,
the Companies, the Purchaser or the Purchaser Parent or otherwise giving
rise to
any liability for wrongful discharge, breach of contract, tort or any other
cause at law or in equity.
3.18. Employee
Benefit Plans.
For
purpose of this Section
3.18
and any
indemnification obligations of the Shareholders related to this Section
3.18,
EMM is
deemed to be a “Company.”
(a) Schedule
3.18(a)
contains
a list of all employee benefit plans, within the meaning of Section 3(3)
of
ERISA, which each Company and/or any ERISA Affiliate maintains or maintained
at
any time during the five year period ending on the Closing Date or to which
such
Company contributes or contributed to at any time during the five year period
ending on the Closing Date, or under which any employee or former employee,
officer or former officer, director or former director, manager or former
manager of such Company is covered or has benefit rights, and each other
arrangement, program or plan pursuant to which any benefit is or shall be
provided to an employee, former employee or retired employee whether formal
or
informal, including those providing any form of medical, health and dental
insurance, pension or retirement benefits, fringe benefits, severance pay
and
benefits continuation, relocation assistance, vacation pay, tuition aid,
voluntary employee benefit association benefits and matching gifts for
charitable contributions to educational or cultural institutions (collectively,
the “Benefit
Plans”).
Each
Company has provided the Purchaser and the New Operator with true and correct
copies of the following items with respect to each of the Benefit Plans:
(i)
plan and trust documents and all other insurance contracts and other funding
arrangements, including all amendments thereto; (ii) the most recent
determination letter received from the Internal Revenue Service with respect
to
each Benefit Plan that is intended to be qualified under Section 401 of the
Code, and with respect to each welfare Benefit Plan Trust that is intended
to be
exempt federal income tax under Section 501(a) of the Code; (iii) the most
recent three years’ Forms 5500 for each Benefit Plan which is required to file
such reports, except as disclosed on Schedule
3.18;
and
(iv) the most recent summary annual report and summary plan description.
For
purposes hereof, an “ERISA
Affiliate”
is any
trade or business whether or not incorporated that together with any Company
would be deemed a “single employer” within the meaning of ERISA Section 4001 or
affiliated with such Company within the meaning of Code Section 414(b), (c),
(m)
or (o).
(b) Except
as
disclosed on Schedule
3.18(b),
no
Company maintains or has entered into any Benefit Plan or other document,
plan
or agreement that contains any change in control provisions which would cause
an
increase or acceleration of benefits or vesting, or contains any benefit
entitlements (including severance pay, unemployment compensation, or any
other
type of payment) to employees or former employees of such Company or other
provisions, which would cause an increase in liability of such Company or
to the
Purchaser as a result of the transactions contemplated by this Agreement
or any
related action thereafter.
(c) Each
of
such Benefit Plans that is an employee pension Benefit Plan within the meaning
of ERISA Section 3(2) and that is intended to be a qualified plan under Code
Section 401(a): (i) has been amended to comply with current Law as required
on
the date hereof and will comply with current Law on the Closing Date; (ii)
is,
and has been, subject to a favorable determination letter issued by the Internal
Revenue Service with respect to plan qualification or an application has
been
filed within the applicable remedial amendment period; and (iii) to the
knowledge of the Shareholders and the Companies, nothing has occurred with
respect to the operation of any such Benefit Plan that could cause the loss
of
such qualification of exemption or the imposition of any liability, penalty
or
tax under Law.
(d) Any
trust
maintained in connection with a Benefit Plan (and from its establishment)
has
been exempt from federal income taxation under Code Section 501 and has not,
at
any time, had any “unrelated business taxable income” (as defined under the Code
Section 512) and, to the knowledge of the Shareholders and the Companies,
nothing has occurred with respect to the operation of any such Benefit Plan
that
could cause the loss of such qualification of exemption or the imposition
of any
liability, penalty or tax under Law.
(e) Except
as
disclosed on Schedule
3.18(e):
(i) all
accrued contributions and other payments required to be made by each Company
or
any ERISA Affiliate to any Benefit Plan through the date of the Company Latest
Balance Sheet have been made or reserves adequate for such purposes as of
the
date of the Company Latest Balance Sheet have been set aside therefore and
reflected on the Company Latest Balance Sheet; (ii) no Company nor any ERISA
Affiliate is in default in any material respect in performing any of its
contractual obligations under any of the Benefit Plans or any related trust
agreement or insurance contract, and there are no outstanding Liabilities
of any
Benefit Plan other than Liabilities for benefits to be paid to participants
in
such Benefit Plan; and (iii) all such contributions are fully deductible
under
the Code as employer contributions and there is no actual or potential liability
for the ten percent (10%) excise tax under Code Section 4972 on nondeductible
contributions to Benefit Plans.
(f) There
is
no pending or, to the knowledge of the Shareholders and the Companies,
threatened litigation or claim (other than routine benefit claims) by or
on
behalf of or against any of the Benefit Plans (or with respect to the
administration of any of the Benefit Plans) now or heretofore maintained
by any
Company which allege violations of applicable Law, nor, to the knowledge
of the
Shareholders and the Companies, are there any facts which could form the
basis
for any such claim or lawsuit.
(g) Except
as
disclosed on Schedule
3.18(g),
each
Benefit Plan is and has been in compliance in all material respects with,
and
each such Benefit Plan is and has been operated in all material respects
in
accordance with, its terms and the applicable Laws governing such Benefit
Plan,
including the rules and regulations promulgated by the Department of Labor,
the
Pension Benefit Guaranty Corporation (the “PBGC”)
and
the IRS under ERISA, the Code, HIPAA, COBRA or any other applicable
Law.
(h) Except
as
disclosed on Schedule
3.18(h),
no
Company nor any ERISA Affiliate maintains or has ever maintained, contributes
or
has ever contributed to or is or has ever been obligated to contribute to,
any
Benefit Plan subject to the funding standards of Code Section 412 or ERISA
Title
I, Subtitle B, Part 3, or to ERISA Title IV. No condition exists that presents
a
material risk to any Company or any ERISA Affiliate of incurring a Liability
under Title IV of ERISA with respect to any Benefit Plan. The PBGC has not
instituted proceedings to terminate any Benefit Plan and no condition exists
that presents a material risk that such proceedings shall be instituted.
Except
as disclosed on Schedule
3.18(h),
all
reporting and disclosure requirements of ERISA and the Code have been satisfied
in all material respects with respect to each of the Benefit Plans. Except
as
disclosed on Schedule
3.18(h),
no
Company nor any ERISA Affiliate is required to contribute to, or has contributed
or been obligated to contribute to, any Benefit Plan that is a “multiemployer
plan” within the meaning of Section 3(37) of ERISA nor is there any withdrawal
liability with respect to any such multiemployer plan.
(i) No
prohibited transaction has occurred with respect to any Benefit Plan that
would
result, directly or indirectly, in the imposition of any excise Tax under
Section 4975 of the Code nor has any reportable event under Section 4043
of
ERISA occurred with respect to any Benefit Plan.
(j) All
taxes, penalties, interest charges and other financial obligations to federal,
state and local governments and to participant or beneficiaries under any
Benefit Plans (i) have been or shall be met in full by the Closing Date to
the
extent due on or before the Closing Date, and (ii) shall be accrued in full
on
the Closing Date Balance Sheet, as finally determined, to the extent due
after
the Closing Date.
(k) To
the
knowledge of the Shareholders and the Companies, with respect to each Benefit
Plan, no change has occurred with respect to the matters covered by the last
Form 5500 series since its filing date.
(l) No
Company nor any ERISA Affiliate maintains, contributes to or has ever
contributed to or is or has been obligated to contribute to any Benefit Plan
that is an “employee welfare benefit plan” (as defined in ERISA Section 3(1))
that provides benefits to or on behalf of any person following retirement
or
other termination of employment (except to the extent required by Code Section
4980B).
(m) Except
as
disclosed on Schedule
3.18(m),
each
Benefit Plan that is a “group health plan” (as defined in Code Section
5000(b)(1)) has complied and will comply at all times in all material respects
with the requirements of applicable Law, including COBRA obligations under
ERISA
§601 through 607, Code §162(k) (through December 31, 1988) and Code §4980B
(commencing on January 1, 1989), and the Health Insurance Portability and
Accountability Act of 1996 (including the portability, non-discrimination
and
administrative simplification requirements of HIPAA).
(n) Schedule
3.18(n)
contains
a true and correct list of the name and address of each individual (including
a
covered employee, covered spouse or covered dependent-child) who is currently
receiving or entitled to elect to receive COBRA continuation coverage under
any
and all of the Companies’ group health plans, except for group health plans
maintained by EMM solely for the benefit of its management or administrative
employees, and a copy of any COBRA notice and election forms related to these
individuals. For each person identified on Schedule
3.18(n),
the
Companies shall provide the Purchaser and the New Operator with the following
information: (i) indication as to whether the individual is currently receiving
COBRA coverage or instead has the right to elect (but has not yet elected)
COBRA
coverage (in which case, identify the last day of the 60-day election period);
(ii) the legal name and a description of the type (e.g. medical, dental,
vision,
etc) of group health plan involved; (iii) the identity of the Company that
employed the covered employee; (iv) a description of the qualifying event
(and
any second qualifying event) (as defined under Treas. Reg. 54.4980B-4 and
54.4980B-7); (v) the date on which such qualifying event (and any second
qualifying event) occurred; and (v) the last day of the maximum 18, 29 or
36-month COBRA period; provided,
however,
that
the Shareholders and the Companies shall provide all information set forth
in
this subsection in a manner which complies with HIPAA.
(o) Schedule
3.18(o)
contains
a true and correct list of the name and address of each covered employee
of any
Company (other than EMM) who is receiving group health plan coverage under
any
of the Companies’ group health plans. Schedule
3.18(o)
shall
include the following information for each such covered employee: (i) the
name,
age and relationship of any dependents covered under the applicable group
health
plan, (ii) the legal name and description of the type of group health plan
involved, and (iii) the identity of the Company that employs the covered
employee; provided,
however,
that
the Shareholders and the Companies shall provide all information set forth
in
this subsection in a manner which complies with HIPAA.
3.19. Insurance.
Schedule
3.19
lists
and briefly describes each insurance policy maintained by each Company with
respect to its Facilities. The Shareholders have delivered to the Purchaser
complete and correct copies of all such policies together with all riders
and
amendments thereto. All of such insurance policies are in full force and
effect,
and no Company is or has ever been in default with respect to its obligations
under any of such insurance policies. During the three years immediately
preceding the date of this Agreement, no Company has ever been refused any
insurance coverage for which it has applied or had any insurance policy
canceled. Each Company is insured in commercially reasonable amounts with
respect to each of the matters disclosed on Schedule
3.19,
except
for any applicable deductions.
3.20. Affiliate
Transactions.
Except
as disclosed on Schedule
3.20:
(a) no
equityholder, employee, manager, officer or director of any Company nor
Affiliate of any equityholder, employee, manager, officer or director of
any
Company, and no member of the immediate family of any employee, manager,
officer
or director of any Company is indebted to any Company;
(b) no
Company is indebted, and is committed to make loans or extend or guarantee
credit, to any employee, manager, officer or director of any Company or any
Affiliate of any employee, manager, officer or director of any Company, or
any
member of the immediate family of any employee, manager, officer or director
of
any Company; and
(c) no
Affiliate of any Company, manager, officer or director and no member of the
immediate family of any Affiliate of any Company, manager, officer or director
is interested, directly or indirectly, in any material Contract with any
Company
except for employment agreements entered into in the Ordinary Course of Business
and approved by the Board of Directors (or comparable governing body) of
such
Company. No employee and no member of the immediate family of any employee
is
interested, directly or indirectly, in any material Contract with any Company.
3.21. Compliance
with Laws; Licenses; Certain Operations.
Except
as disclosed on Schedule
3.21,
each
Company has complied with and is in compliance in all material respects with
all
applicable Laws which affect the Business or the Assets of such Company or
to
which such Company may otherwise be subject, and no claims have been filed
or
asserted against such Company within the three years immediately preceding
the
date of this Agreement alleging any violation of any such Law; provided,
however,
that
the terms of this section shall not limit or modify in any way the
representations and warranties contained in Section
3.12.
3.22. Environmental
Matters.
(a) As
used
in this Section
3.22,
the
following terms shall have the following meanings:
(i) “Hazardous
Materials”
mean
any dangerous, toxic, hazardous or radioactive pollutant, contaminant, chemical,
waste, material or substance as defined in or governed by any federal, state
or
local Law or other requirement relating to such substance or otherwise relating
to the environment or human health or safety including any waste, material,
substance, pollutant or contaminant that might cause any injury to human
health
or safety or to the environment or might subject any Company to any imposition
of costs or liability under any Environmental Law.
(ii) “Environmental
Laws”
mean
all applicable federal, state and local laws, rules, regulations, codes,
ordinances, orders, decrees, directives, Licenses and judgments relating
to
pollution, contamination or protection of the environment (including all
applicable federal, state and local laws, rules, regulations, codes, ordinances,
orders, decrees, directives, Licenses and judgments relating to Hazardous
Materials in effect as of the date of this Agreement).
(iii) “Release”
shall
mean the spilling, leaking, disposing, discharging, emitting, depositing,
ejecting, leaching, escaping or any other release or threatened release,
however
defined, whether intentional or unintentional, of any Hazardous
Material.
(b) Except
as
would not have a Material Adverse Effect, each Company’s operation of the
Business at or from all real estate owned, leased or operated by such Company
at
any time complied and complies and its operation of its Assets comply with
all
applicable Environmental Laws. All real estate owned, leased or operated
by each
Company, whether occupied by such Company or third parties or vacant, complies
with all applicable Environmental Laws, except for any such noncompliance
that
would not require the Purchaser or any Company to incur any material cost
or
expense to remedy.
(c) Each
Company has obtained and maintained in full force and effect all environmental
Licenses, certificates of compliance, approvals and other authorizations
necessary to own or operate their respective Assets (collectively, the
“Environmental
Permits”)
all of
which are disclosed on Schedule
3.22.
Each
Company has filed all reports and notifications required to be filed under
and
pursuant to all applicable Environmental Laws with respect to the operation
of
the Business and the operation of their respective Assets, the Real Property
and
any other property owned, operated, or leased by any Company at any
time.
(d) No
Hazardous Materials have been generated, stored, treated, contained, handled,
located, used, manufactured, processed, buried, incinerated, deposited, or
released by any Company on, under or about any part of any real property
now or
ever owned, leased or operated by any Company in violation of any Environmental
Law where such violation would have a Material Adverse Effect on such Company.
No real property now or ever owned, leased or operated by any Company or
any of
their respective other Assets contain any asbestos, urea, formaldehyde, radon,
polychlorinated biphenyls (“PCBs”)
or
pesticides at levels or amounts, or in a condition, that violate any
Environmental Law or that otherwise would give any third party a cause of
action
against such Company.
(e) No
Company nor any Shareholder has received any notice alleging in any manner
that
any Company is, or might be potentially, responsible for any Release of
Hazardous Materials, or any costs arising under or in violation of Environmental
Laws with respect to its Assets, the Real Property, the operation of the
Business or otherwise.
(f) None
of
the real estate now or ever owned, leased or operated by any Company is or
has
been listed on the United States Environmental Protection Agency National
Priorities List of Hazardous Waste Sites, or any other list, schedule, Law,
inventory or record of hazardous or solid waste sites maintained by any
Governmental Agency.
(g) To
the
knowledge of the Shareholders and the Companies, no condition exists at any
property which any Company owns, operates or leases, or any property which
any
Company formerly owned, operated, or leased or where any wastes generated
at any
time by any Company may have been stored, treated, or disposed, which
constitutes or which, with the passage of time, may constitute a violation
of or
give rise to Liability under any Environmental Law. No Company has received
any
notice alleging that any such condition exists.
(h) The
Shareholders have disclosed and delivered to the Purchaser all environmental
reports and investigations which any Company has obtained or ordered with
respect to its Assets (including the Real Property) or the
Business.
(i) No
Lien
has been attached or filed against any Company with respect to their respective
Assets (including the Real Property) in favor of any Governmental Agency
or
private entity for (i) any Liability or imposition of costs under or in
violation of any applicable Environmental Law; or (ii) any Release of Hazardous
Materials.
3.23. Bank
Accounts.
Schedule
3.23
hereto
contains a complete and correct list setting forth the names of each bank
or
other financial institution in which each Company has an account or safe
deposit
or lock box, the account or box number, as the case may be, and the name
of
every Person authorized to draw thereon or having access thereto.
3.24. FET
Lien.
The
Revocable Trust, the Remainder Trust, the Family Trust and the Garfield Estate,
in the aggregate, have on the date of this Agreement, and will have on the
Closing Date, sufficient assets available to them (including the proceeds
of the
sale of the Company Shares held by each) to pay any and all Tax liability,
claims and other liabilities of the Garfield Estate and will have sufficient
assets when such Taxes become due and payable to pay any and all such
liabilities without any of the Company Shares being subject to any claim
or
judgment by any Governmental Agency after such Company Shares have been
transferred to the Purchaser pursuant to this terms of this
Agreement.
3.25. Rent
Roll; Bed Tax and Fees.
(a) Schedule 3.25(a)
contains
a complete and correct “rent roll” for each Company, including a list of current
residents, the term of resident agreement for each such resident and current
occupancy rates (the “Rent
Rolls”).
The
Rent Rolls shall be updated as of the Closing Date.
(b) With
respect to each Facility, except as disclosed on Schedule 3.25(b),
no
Company or Shareholder has any Liability for any bed taxes or provider franchise
fees. All such Liabilities will be paid in full prior to the Closing to the
extent due on or before the Closing Date and, to the extent due after the
Closing Date, all such liabilities will be accrued on the Closing Date Balance
Sheet, as finally determined, to the extent they relate to any time before
the
Closing Date.
3.26. Resident
Trust Funds.
Each
Company and Facility has complied in all material respects with all Laws
relating to resident deposits in the possession of such Company made by or
on
behalf of residents of each Facility or other privately funded accounts for
residents’ personal use (the “Trust
Accounts”).
3.27. Absence
of Certain Developments.
Except
as set forth on Schedule
3.27
or as
otherwise contemplated by this Agreement, since the date of the Company Latest
Balance Sheet, no Company has:
(a) incurred
any Indebtedness or agreed to incur any Indebtedness or incurred or become
subject to any other material Liabilities, except current Liabilities incurred
in the Ordinary Course of Business, and Liabilities under Contracts entered
into
in the Ordinary Course of Business;
(b) discharged
or satisfied, or agreed to discharge or satisfy, any material Lien or paid
any
material Liability, other than current Liabilities paid in the Ordinary Course
of Business;
(c) subjected
to any Lien any portion of its Assets, except for Permitted Liens;
(d) sold,
assigned or transferred any of its Assets, or agreed to do so, except in
the
Ordinary Course of Business, or canceled without fair consideration any material
debts or claims owing to or held by it;
(e) sold,
assigned, licensed, transferred, abandoned or permitted to lapse any material
Intellectual Property or disclosed any material proprietary confidential
information to any Person;
(f) made
or
granted, or agreed to make or grant, any bonus or any wage or salary increase
to
any employee or group of employees or made or granted any increase in any
Benefit Plan or arrangement, or amended or terminated, or agreed to terminate
or
amend, any existing Benefit Plan or arrangement or adopted any new Benefit
Plan
or arrangement;
(g) sold,
leased, transferred or otherwise disposed of capital assets, real, personal,
or
mixed, which have an aggregate book value in excess of $10,000, mortgaged
or
encumbered any properties or assets, whether real or personal, which have
an
aggregate book value in excess of $10,000, or made or agreed to make any
capital
expenditures or capital commitments that aggregate in excess of $10,000,
other
than equipment replacements made in the ordinary course of
business.
(h) made,
or
agreed to make, any loans or advances to, or guarantees for the benefit of,
any
Persons;
(i) suffered
any extraordinary losses or waived any rights of material value with respect
to
its Assets or its Liabilities, whether or not in the Ordinary Course of Business
or consistent with past practice;
(j) entered
into, or agreed to enter into, any other transaction other than any transactions
in the Ordinary Course of Business that do not involve the payment by any
Company of more than $10,000;
(k) suffered
any damage, destruction or casualty loss to its Assets, whether or not covered
by insurance, other than normal wear and tear;
(l) made
any
material purchase commitment of services or goods which were in excess of
the
then current market price therefore or made any purchase commitment of services
or goods upon terms and conditions materially more onerous than those usual
and
customary in the industry;
(m) made,
or
agreed to make, any declaration or payment to its shareholders of any dividend
or other distribution in respect of its stock;
(n) issued
or
sold or caused to be issued or sold, any shares of its capital stock, or
any
securities or equity interests convertible into or exchangeable for any such
shares of its capital stock, or repurchased, redeemed or otherwise acquired
any
outstanding shares of its capital stock or other equity interests of any
Company, or agreed to take any such action;
(o) made
any
change in any method of accounting or accounting policies (for book or Tax
purposes), other than those required by GAAP which have been disclosed in
writing to the Purchaser;
(p) made
or
changed any election, changed an annual accounting period, adopted or changed
any accounting method, filed any amended Tax Return, entered into any closing
agreement, settled any Tax claim or assessment relating to any Company,
surrendered any right to claim a refund of Taxes, consented to any extension
or
waiver of the limitation period applicable to any Tax claim or assessment
relating to such Company, or taken any other similar action relating to the
filing of any Tax Return or the payment of any Tax, if such election, adoption,
change, amendment, agreement, settlement, surrender, consent or other action
would have the effect of increasing the Tax Liability of any Company for
any
period ending after the Closing Date or decreasing any Tax attribute of any
Company;
(q) delayed
or postponed the payment of accounts payable or other Liabilities outside
of the
Ordinary Course of Business; or
(r) changed
or authorized any change in its Charter Documents.
3.28. Absence
of Undisclosed Liabilities.
Except
as disclosed on Schedule
3.28,
none of
the Companies has any material liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent, or otherwise)
except
for liabilities or obligations reflected or reserved against in the Company
Statements and current liabilities incurred in the Ordinary Course of Business
since the dates of the Company Statements and any accrued income tax liabilities
reflected on the Company Statements.
3.29. Proceedings
and Orders.
There
are no actions or proceedings pending or, to the knowledge of the Companies,
threatened, against the Companies that challenge the Companies’ ability to
consummate any of the transactions contemplated by this Agreement, and the
Companies are not in default of any Order.
3.30. Record
Retention Policies.
The
Companies do not have written retention policies regarding residents’ or
employees’ health records, personnel files or other documentation relating to
the Business. The practices of each Company regarding retention of such records
comply with applicable Laws in all material respects.
3.31. Disclosure.
No
representation or warranty by any Shareholder contained in this Agreement
nor
any of the schedules, attachments or exhibits hereto contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in
which
they were made, not misleading.
Article IV
Representations
and
Warranties of the Shareholders
As
an
inducement to the Purchaser, the Purchaser Parent, the New Operator and the
New
Operator Parent to enter into this Agreement, each Shareholder, jointly and
severally, represents and warrants to the Purchaser, the Purchaser Parent,
the
New Operator and the New Operator Parent as follows.
4.01. Authorization.
Each
Shareholder has the requisite power and authority to execute, deliver and
carry
out this Agreement and the Ancillary Documents to which such Shareholder
is a
party. This Agreement and the Ancillary Documents to which such Shareholder
is a
party have been duly executed and delivered by such Shareholder and this
Agreement and the Ancillary Documents to which such Shareholder is a party
constitute valid and binding obligations of such Shareholder, enforceable
against such Shareholder in accordance with their respective terms, subject
to
bankruptcy, insolvency, reorganization, moratorium and other similar Laws
relating to creditors’ rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a proceeding
in
equity or at law) or by an implied covenant of good faith and fair
dealing.
4.02. No
Violation.
The
execution, delivery and performance of this Agreement and the Ancillary
Documents to which such Shareholder is a party and the consummation of the
transactions contemplated hereby and thereby do not and shall not, in any
material respect (a) conflict with or result in any breach of any of the
provisions of, (b) constitute a default under, result in a violation of,
or
cause the acceleration of any obligation under, (c) result in the creation
of
any Lien upon any of the Assets of any Company or such Shareholder under,
or (d)
require any authorization, consent, approval, exemption or other action by
or
notice to any court or other Governmental Agency under the provisions of
any
Company’s or any Shareholder’s Charter Documents or any Contract to which such
Shareholder or any Company is bound or affected or any Law to which such
Shareholder or any Company is subject or by which any of the Assets of any
Company or such Shareholder is bound, except for agreements relating to
Indebtedness that will be paid off on the Closing Date and provider agreements
that are affected by the change of ownership of the Companies and the
Business.
4.03. Company
Shares.
Each
Shareholder is the sole record and beneficial owner of the Company Shares
set
forth opposite such Shareholder’s name on Schedule
3.05
and has,
except as disclosed on Schedule
4.03,
good
and marketable title to such Company Shares, free and clear of any Liens,
other
than transfer restrictions under federal and state securities Laws. Except
as
disclosed on Schedule
4.03,
upon
consummation of the transactions provided for in this Agreement in accordance
with the terms hereof, such Shareholder will deliver to the Purchaser good
and
marketable title to the Company Shares owned by him, free and clear of any
Liens, other than transfer restrictions under federal and state securities
Laws.
The
Company Shares are not subject to any contract restricting or otherwise relating
to the voting or dividend rights or disposition of such shares. Other than
the
Company Shares, no Shareholder has any other equity interests or rights to
acquire equity interests in any of the Companies.
4.04. Governmental
Consents, etc.
Except
as disclosed on Schedule
4.04,
no
permit, consent, approval or authorization of, or declaration to or filing
with,
any Governmental Agency is required of such Shareholder in connection with
the
execution, delivery or performance of this Agreement or any Ancillary Documents
to which such Shareholder is a party, or the consummation by such Shareholder
of
any of the transactions contemplated hereby and thereby.
4.05. Proceedings
and Orders.
There
are no actions or proceedings pending or, to the knowledge of the Shareholders,
threatened, against the Shareholders or the Companies that challenge the
Shareholders’ or the Companies’ ability to consummate any of the transactions
contemplated by this Agreement, and neither the Shareholders nor the Companies
are in default of any Order.
4.06. Sufficient
Funds.
On the
Closing Date and thereafter, the Shareholders will have sufficient assets,
in
immediately available funds, to pay any amounts that they are obligated to
pay
hereunder.
Article
V
Representations
and Warranties of the Purchaser and the Purchaser Parent
As
an
inducement to the Shareholders, the New Operator and the New Operator Parent
to
enter into this Agreement, the Purchaser and the Purchaser Parent, jointly
and
severally, represent and warrant to the Shareholders, the New Operator and
the
New Operator Parent as follows.
5.01. Company
Organization and Power.
The
Purchaser and the Purchaser Parent are, respectively, a limited liability
company and corporation, and each are duly organized, validly existing and
in
good standing under the Laws of the State of Delaware. Each of the Purchaser
and
the Purchaser Parent has all Licenses and authorizations necessary to own
its
properties and to carry on its businesses as now being conducted and is duly
qualified to do business as a foreign company or corporation, as applicable,
and
is in good standing under the Laws of each state or country, if any, in which
failure to obtain such Licenses or authorizations or to qualify would have
a
Material Adverse Effect on the Purchaser or the Purchaser Parent. Each of
the
Purchaser and the Purchaser Parent has provided the Shareholders with true
and
correct copies of its Charter Documents.
5.02. Authorization.
The
execution, delivery and performance by the Purchaser and the Purchaser Parent
of
this Agreement and the Ancillary Documents to which the Purchaser or the
Purchaser Parent is a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
all
requisite company or corporate action, as applicable, and no other company
or
corporate proceedings on the part of the Purchaser or the Purchaser Parent,
as
applicable, are necessary to authorize the execution, delivery or performance
of
this Agreement or the Ancillary Documents to which it is a party. This Agreement
and the Ancillary Documents to which the Purchaser or the Purchaser Parent
is a
party constitute the valid and binding obligations of the Purchaser and the
Purchaser Parent enforceable against the Purchaser and the Purchaser Parent
in
accordance with their respective terms,
subject
to bankruptcy, insolvency, reorganization, moratorium and other similar Laws
relating to creditors’ rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a proceeding
in
equity or at law) or by an implied covenant of good faith and fair
dealing.
5.03. No
Violation.
The
execution, delivery and performance of this Agreement and the Ancillary
Documents to which the Purchaser or the Purchaser Parent is a party and the
consummation of the transactions contemplated hereby and thereby do not and
shall not, in any material respect (a) conflict with or result in any breach
of
any of the provisions of, (b) constitute a default under, result in a violation
of, or cause the acceleration of any obligation under, or (c) require any
authorization, consent, approval, exemption or other action by or notice
to any
Governmental Agency under the provisions of the Purchaser’s or the Purchaser
Parent’s Charter Documents or any Contract to which the Purchaser or the
Purchaser Parent is bound or affected or any Law to which the Purchaser or
the
Purchaser Parent is subject or by which any of the Assets of the Purchaser
or
the Purchaser Parent is bound.
5.04. Governmental
Consent, etc.
No
permit, consent, approval or authorization of, or declaration to or filing
with,
any Governmental Agency is required of the Purchaser or the Purchaser Parent
in
connection with the execution, delivery or performance of this Agreement
or any
Ancillary Documents to which the Purchaser or the Purchaser Parent is a party,
or the consummation by the Purchaser or the Purchaser Parent of any of the
transactions contemplated hereby and thereby, except as disclosed on the
Schedule
5.04.
5.05. Purchase
for Investment.
The
Purchaser is purchasing the Company Shares for its own account for investment
and not for resale or distribution in any transaction that would be in violation
of the securities Laws of the United States of America or any state thereof.
The
Purchaser is an “accredited investor” as defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended.
5.06. Proceedings
and Orders.
There
are no actions or proceedings pending or, to the knowledge of the Purchaser
or
the Purchaser Parent, threatened, against the Purchaser or the Purchaser
Parent
that challenge its ability to consummate any of the transactions contemplated
by
this Agreement, and the Purchaser and the Purchaser Parent are not in default
of
any Order.
5.07. Sufficient
Funds.
On the
Closing Date and thereafter, the Purchaser will have sufficient assets, in
immediately available funds, to pay the Purchase Price and any additional
amounts that it is obligated to pay hereunder.
Article
VI
Representations
and Warranties of the New Operator and the New Operator
Parent
As
an
inducement to the Shareholders, the Companies, the Purchaser, and the Purchaser
Parent to enter into this Agreement, the New Operator and the New Operator
Parent, jointly and severally, hereby represent and warrant to the Shareholders,
the Companies, the Purchaser, and the Purchaser Parent as follows.
6.01. Corporate
Organization and Power.
The New
Operator and the New Operator Parent are, respectively, a limited liability
company and a corporation duly organized, validly existing and in good standing
under the Laws of the State of Ohio. Each of the New Operator and the New
Operator Parent has all Licenses and authorizations necessary to own its
properties and to carry on its businesses as now being conducted and is duly
qualified to do business as a foreign company or corporation, as applicable,
and
is in good standing under the Laws of each state or country, if any, in which
failure to obtain such Licenses or authorizations or to qualify would have
a
Material Adverse Effect on the New Operator or New Operator Parent. Each
of the
New Operator and the New Operator Parent has provided the Shareholders with
true
and correct copies of its Charter Documents.
6.02. Authorization.
The
execution, delivery and performance by the New Operator and the New Operator
of
this Agreement and the Ancillary Documents to which the New Operator or the
New
Operator Parent is a party and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all requisite
company action, and no other company proceedings on the part of the New Operator
and the New Operator Parent, as applicable, are necessary to authorize the
execution, delivery or performance of this Agreement or the Ancillary Documents
to which it is a party. This Agreement and the Ancillary Documents to which
the
New Operator or the New Operator Parent is a party constitute the valid and
binding obligations of the New Operator and the New Operator Parent enforceable
against the New Operator and the New Operator Parent in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other similar Laws relating to creditors’ rights generally, by general
equitable principles (regardless of whether such enforceability is considered
in
a proceeding in equity or at law) or by an implied covenant of good faith
and
fair dealing.
6.03. No
Violation.
The
execution, delivery and performance of this Agreement and the Ancillary
Documents to which the New Operator or the New Operator Parent is a party
and
the consummation of the transactions contemplated hereby and thereby do not
and
shall not, in any material respect (a) conflict with or result in any breach
of
any of the provisions of, (b) constitute a default under, result in a violation
of, or cause the acceleration of any obligation under, or (c) require any
authorization, consent, approval, exemption or other action by or notice
to any
Governmental Agency under the provisions of the New Operator’s or the New
Operator Parent’s Charter Documents or any Contract to which the New Operator or
the New Operator Parent is bound or affected or any Law to which the New
Operator or the New Operator Parent is subject or by which any of the Assets
of
the New Operator or the New Operator Parent is bound.
6.04. Governmental
Consent, etc.
No
permit, consent, approval or authorization of, or declaration to or filing
with,
any Governmental Agency is required of the New Operator or the New Operator
Parent in connection with the execution, delivery or performance of this
Agreement or any Ancillary Documents to which the New Operator or the New
Operator Parent is a party, or the consummation by the New Operator or the
New
Operator Parent of any of the transactions contemplated hereby and thereby,
except as disclosed on the Schedule
6.04.
6.05. Proceedings
and Orders.
There
are no actions or proceedings pending or, to the knowledge of the New Operator
or the New Operator Parent, threatened, against the New Operator or the New
Operator Parent that challenge its ability to consummate any of the transactions
contemplated by this Agreement, and the New Operator and the New Operator
Parent
are not in default of any Order.
6.06. Sufficient
Funds.
On the
Closing Date and thereafter, the New Operator and the New Operator Parent
will
have sufficient assets, in immediately available funds, to pay any amounts
that
either is obligated to pay hereunder.
Article
VII
Certain
Covenants
7.01. Access
and Investigation; Record Retention and Transfer.
(a) Between
the date of this Agreement and the Closing Date, the Shareholders and the
Companies will, and will cause their representatives, to (i) afford the
Purchaser and the New Operator and their respective representatives
(collectively, the “Advisors”),
each
of whom has been advised of or agreed to the terms of the Confidentiality
Agreement dated May 4, 2005, by and among the Purchaser Parent, the New Operator
Parent and EMM, full and free access to the Real Property (including subsurface
testing), the Facilities and each Company’s personnel, contracts, books and
records and other documents and data, (ii) furnish the Purchaser, the New
Operator and their respective Advisors copies of all such contracts, books
and
records, and other existing documents and data as the Purchaser or the New
Operator may reasonably request, and (iii) furnish the Purchaser, the New
Operator and their respective Advisors with such additional financial, operating
and other data and information as the Purchaser, the New Operator or their
respective Advisors may reasonably request.
(b) After
the
Closing Date, but subject to Section
7.03,
if
there is a legitimate purpose (including the preparation of Tax Returns and
preparation of the Closing Date Balance Sheet) or if there is an audit by
the
IRS, other Governmental Authority inquiry, or litigation or prospective
litigation to which any Party is, or may become, a party, making necessary
a
Party’s access to the records of any other Party related to the Companies or the
Business or making necessary a Party’s access to records of any other Party,
then each Party shall allow representatives of the other Party access to
such
records at such Party’s place of business for the sole purpose of obtaining
information for use described in this Agreement.
(c) The
Parties shall preserve all records relating to the Companies and the Business
until the later of (i) the third anniversary of the Closing Date, or (ii)
the
expiration of the applicable retention period for each such class of records
under applicable Law or, if there is no such required retention period, the
expiration of the internal document retention policy period of the Party
holding
such records (the “Document
Retention Period”).
After
the end of the Document Retention Period, the Party holding such records
may
dispose of such records in its sole discretion after providing the other
Parties
with sixty days advance written notice of its intention to do so. The Party
holding such records shall make such records available to any other Party
which,
before the end of the Document Retention Period, notifies the holding Party
that
it desires to take possession of such records. If more than one Party timely
provides such notice, then the Party holding the records shall make such
records
available to all Parties who provide such notice and such Parties shall be
evenly share the cost of copying such records, if necessary. The Party holding
the records shall make records available at a location designated by the
holding
Party and shall not be responsible for any transportation, copying, storage
or
other costs or expenses of any kind relating to such records. Notwithstanding
anything to the contrary in this section, the Party holding the records shall
have the right in its sole discretion to dispose of all such records on the
30th
day
after the end of the Document Retention Period if the records are not removed
from the designated location by another Party.
(d) The
Shareholders shall be responsible at their sole cost and expense for responding
to requests from any third party for records relating to any time period
before
the Closing Date. The Shareholders shall store any records which are retained
by
the Shareholders in an commercially reasonable manner at the warehouse
maintained by Suburban as of the date of this Agreement in segregated space
to
be designated in such warehouse or such other location as the Purchaser,
the New
Operator, and the Shareholders’ Representative may agree. The New Operator shall
cause such segregated space to be secured such that only the Shareholders’
Representative shall have access to it. The Shareholders shall not move any
records from such location without the prior written consent of the Purchaser
and the New Operator, which consent shall not be unreasonably withheld or
delayed.
7.02. Employment
Matters; Benefit Plans.
For
purpose of this Section
7.02
and any
indemnification obligations of the Shareholders related to this Section
7.02,
EMM is
deemed to be a “Company.”
(a) Effective
at 11:59:59 pm Cleveland, Ohio time on the day before the Closing Date (the
“Employee
Termination Time”),
the
Shareholders shall cause the Companies to terminate the employment of all
of the
Employees, with the Shareholders and the Companies remaining responsible
for the
payment of all obligations to the Employees accrued through the Employee
Termination Time, other than any WARN Act Liabilities arising out of the
consummation of the transactions contemplated by this Agreement and the COBRA
obligations to the M&A Qualified Beneficiaries as set forth in Section
7.02(f).
(b) The
New
Operator shall make employment offers to not less than 67% of the Employees
as
of the Effective Time, and to all of the Employees covered by the Collective
Bargaining Agreement. All Employees who accept employment with the New Operator
are referred to in this Agreement as the “Hired
Employees”.
Other
than as set forth in this Agreement, the New Operator may establish the wages,
rates, and terms and conditions of employment for the Hired Employees. The
Shareholders and the Companies shall not advise or represent to the Employees
what wage rates and terms and conditions of employment that the New Operator
will be offering them; provided,
however,
that
the New Operator may advise the Employees that if the New Operator hires
them,
the New Operator will honor any paid vacation time off and sick day benefits
which are earned but unused as of the Closing Date. The Companies shall pay,
on
or before the 10th
Business
Day after the Closing Date, to the New Operator an amount equal to the aggregate
accrued, unused paid vacation time for Hired Employees and the portion of
paid
vacation time that the Hired Employees have by the Closing Date accumulated
toward their next annual allotment of paid vacation time (such aggregate
amount,
the “Paid
Time Off Liability”).
The
Paid Time Off Liability shall be reflected on the Closing Date Balance Sheet
as
finally determined to the extent not paid directly by the Companies to the
New
Operator on or before the Closing Date. If, for any reason during the period
beginning on the Closing Date and ending on the 18 month “anniversary” of the
Closing Date, the New Operator does not actually incur any portion of the
Paid
Time Off Liability, then the New Operator shall refund the full amount of
such
portion to the applicable Company on or before the 15th Business Day after
the
date of such 18 month “anniversary.” The applicable Company shall then refund
the full amount of such portion to the Shareholders on or before the 15th
Business Day after receipt of such funds from the New Operator. The Companies
shall cooperate with the New Operator’s reasonable requests to obtain copies of
the Employees’ personnel files and to meet with the Employees; provided,
however,
that
under no circumstances shall any Company have any obligation to provide the
New
Operator with medical records of, or any other information the distribution
of
which is restricted by Law relating to, any Employee without the prior written
consent of the applicable Employee. On the Closing Date, the Shareholders
shall
deliver to the Purchaser and the New Operator a schedule showing the earned
but
unused paid vacation time off and sick day benefit for each Employee as of
the
Closing Date, and the amount of paid vacation time off benefit each such
employee would earn if the Employee were to be employed by the applicable
Company as of the Employee’s next hiring date anniversary. Such schedule shall
be attached to this Agreement as Schedule
7.02(b).
On or
before the Closing Date, the Companies, the New Operator and the Purchaser
shall
execute and deliver an agreement, on terms acceptable to each in their
reasonable discretion, which shall address how the amount of Liabilities
relating to sick time which have been earned but not used before the Closing
Date by Hired Employees shall be calculated (the “Sick
Time Agreement”).
The
Sick Time Agreement shall provide, among other things, that the Liability
for
sick time, as finally determined, shall be included with Paid Time Off
Liabilities on and after the Closing Date for purposes of this subsection
(b).
(c) Upon
the
termination of the Employees, each Company shall make provision for paying
all
accrued compensation due to its respective Employees, including the Hired
Employees through but not including the Closing Date. Other than as set forth
in
this Agreement and as shall be accrued on the Closing Date Balance Sheet,
as
finally determined, neither the Purchaser nor the New Operator nor, after
the
Closing Date, any Company shall be responsible for any compensation or benefits
owed to any Employees for periods prior to the Closing Date.
(d) At
the
Closing, the Shareholders and Companies shall pay the New Operator $165,000
in
respect of the amount of the excess insurance premium charged to the New
Operator for covering the “M&A Qualified Beneficiaries” (as that term is
defined in Treas. Reg. 54.4980B-9; Q-A: 4 and 5).
(e) Effective
on the Closing Date, the New Operator shall recognize the union that is party
to
the Collective Bargaining Agreement and shall assume the obligations of Company
that is party to the Collective Bargaining Agreement, including the hiring
of
all Employees covered under the Collective Bargaining Agreement. The union
that
is party to the Collective Bargaining Agreement shall not have any rights
as a
third party beneficiary of the obligations of the New Operator pursuant to
this
subsection.
(f) Effective
on the Closing Date, the New Operator (and not the Purchaser, the Companies,
the
Shareholders or the “selling group” (as that term is defined in Treas. Reg.
54.4980B-9, Q-A:2)) shall assume and be fully responsible and liable to provide
COBRA coverage to all M&A Qualified Beneficiaries under a group health plan
maintained or established by the New Operator. In this regard, the New Operator,
after the Closing Date, shall comply with all COBRA requirements under Law
with
respect to these M&A Qualified Beneficiaries (including Code Section 4980B,
ERISA Section 601 through 607, Treas. Reg. 4980B and Labor Reg. 2590.606).
The
New Operator’s assumption of COBRA liability on and after the Closing Date under
this subsection shall not relieve the Shareholders from their representations
and warranties that the Companies and any ERISA Affiliates have, prior to
Closing and prior to the termination of employment of the Employees as
contemplated by Section
7.02(a),
fully
complied in all material respects with the COBRA provisions under applicable
Law, and shall only cover or include those individuals who are or were directly
employed by one of the Companies (other than EMM or any other ERISA
Affiliate).
(g) The
Companies shall establish on the Closing Date Balance Sheet such reserves
as, in
combination with any funds being held as of the Closing Date under the Emery
Medical Management Company VEBA (the “VEBA”),
shall
be sufficient to pay any and all claims under any Benefit Plan (other than
COBRA
obligations arising out of the termination of the employment of the Employees
as
contemplated by Section
7.02(a)),
arising out of or attributable to periods prior to the Closing and for the
costs
of administering such claims (“Benefit
Plan Claims”).
The
amount of such reserves shall be determined by the Companies’ regular actuarial
firm as set forth in the preceding sentence. The Shareholders shall at all
times
only permit distributions from the VEBA in a manner that will not jeopardize
the
tax-exempt status of the VEBA under the Code, and shall otherwise cause the
VEBA
to be maintained and administered in accordance with all applicable Laws
until
the earlier of the date (whether prior to or after the Closing) on which
no
funds remain in the VEBA, or the date on which all Benefit Plan Claims have
been
paid (to the extent payable from the VEBA), at which time the Shareholders
will
cause the VEBA to be terminated. In the event the VEBA continues in existence
after the Closing, no Company shall make, and shall not be required to make,
any
contributions to the VEBA in excess of the amount accrued on the Closing
Date
Balance Sheet, as finally determined.
If the
aggregate amount of Benefit Plan Claims exceeds the amount of funds in the
VEBA
and the reserves contemplated by this subsection (g), then the Shareholders
shall be responsible for the amount of such excess, subject to the limitations
on the maximum amount of indemnification obligations as set forth in
Section
11.03(b).
(h) Between
the date of this Agreement and the Closing Date, the Shareholders shall,
except
as otherwise required pursuant to the terms of this Agreement, cause the
Companies and any ERISA Affiliate to maintain the Benefit Plans in accordance
with all applicable Laws.
(i) Prior
to
the Closing (or at least one day before Closing in the case of plan that
is a
pension plan (as defined in ERISA Section 3(2)), the Shareholders shall cause
each Company (other than EMM) to cease its sponsorship of, participation
in,
obligation to contribute to and, in any other manner, acceptance of or continued
responsibility for the administration or funding of any and all Benefit Plans.
To the extent necessary, if one or more of the Companies is the sole sponsor
of
any such Benefit Plans, the Shareholders shall cause such Benefit Plan to
be
terminated by the Companies (other than EMM) effective not later than the
Closing Date (or, if the plan is a pension plan, one day before the Closing
Date). If one or more of the Companies is a sponsor but is not the sole sponsor
of any such Benefit Plans, then the Shareholders shall cause the Companies
to
take such action as may be necessary to completely sever the Companies’ (other
than EMM) sponsorship or participation of such Benefit Plan, effective not
later
than the Closing Date (or, if the plan is a pension plan, one day before
the
Closing Date). If the plan is a plan subject to ERISA Section 204(h), the
Shareholders shall cause the Companies to take all further actions that may
be
required for the Companies (other than EMM) to cease permanently the accrual
of
any further benefits under the Benefit Plan including the timely issuance
of any
notices in advance of such cessation. In addition, the Shareholders shall
cause
to be taken all further actions as may be necessary to implement the Benefit
Plan terminations and/or the discontinuance of sponsorship by the Companies
of
any Benefit Plan as required under this subsection in a manner that complies
with all applicable Laws, including the preparation, submission and
dissemination of annual reports (including Forms 5500), the providing of
notices
to participants, trustees and administrators, and the processing of benefit
payments due there under.
(j) Anything
to the contrary notwithstanding, this Agreement shall not be deemed to create
or
grant to any of the Employees any third party beneficiary rights or claims
or
any cause of action of any kind or nature.
7.03. Cost
Reports.
(a) The
Shareholders shall prepare, or cause to be prepared, and file, or cause to
be
filed timely, all third party payor cost reports for the Facilities for periods
prior to the Closing Date, and shall deliver copies of such reports to the
Purchaser and the New Operator in form and content suitable in all material
respects for filing with the appropriate governmental agency, not later than
10
Business Days prior to the deadline for any such report to be filed. The
Shareholders shall be responsible for including in such cost reports all
refunds
or reimbursements payable to any Person or Governmental Agency with respect
to
payments made to the Companies before the Closing Date.
(b) After
the
Closing Date, the Purchaser shall grant the Shareholders sufficient authority
to
execute all such cost reports on behalf of the Companies; provided,
however,
that in
no event shall the Shareholders cause any such cost reports to be filed until
after the 10th
Business
Day after the Shareholders submit such cost report to the Purchaser for its
review. The Purchaser, the New Operator and, after the Closing Date, the
Companies shall cooperate with the Shareholders’ reasonable requests for
assistance in connection with the Shareholders’ obligation to timely file or
cause to be filed all such cost reports with the appropriate Governmental
Agencies, including each Company’s final cost report for each Facility.
(c) Subject
to Section
11.03(e),
the
Shareholders shall pay, or cause to be paid, from its own funds and not from
the
Escrow Account all overpayments, recoupments, adjustments and/or recaptures
which are or which become due pursuant to any such cost report for any period
prior to the Closing Date concurrently with the filing of such final cost
report
to the extent the amount of any such overpayments, recoupments, adjustments
and/or recaptures are not accrued on the Closing Date Balance Sheet, as finally
determined. The Shareholders shall promptly and fully respond to any and
all
inquires or audits relating to such cost reports and the Purchaser and the
New
Operator shall permit the Shareholders access to the books and records of
the
Facilities for such purpose in accordance with the provisions of this Agreement.
(d) In
the
event that, after the Closing Date (i) any Governmental Agency or any other
third party payor, with respect to any time prior to the Closing Date, withholds
amounts from reimbursement checks of the New Operator arising from any purported
(A) overpayment, recoupment, adjustment and/or recapture with respect to
a
Company attributable to amounts paid to the Companies prior to the Closing
Date,
(B) failure of a Company to pay assessment taxes, license fees/taxes or any
other amounts due prior to the Closing Date, or (C) otherwise “clawsback” from
the New Operator any insurance proceeds, rebates or other monies attributable
to
amounts paid to the Companies prior to the Closing Date, (ii) any civil monetary
penalties are assessed against any of the Facilities with respect to any
time
prior to the Closing Date, or (iii) the New Operator incurs any Liability
for
any Taxes arising out of the ownership of the Assets or the operation of
the
Business before the Closing Date which are not accrued on the Closing Date
Balance Sheet, as finally determined, then the Shareholders shall pay such
amount to the New Operator on or before the tenth day after the New Operator’s
demand; provided,
however,
that
the New Operator shall be required to satisfy its rights under this section
from
the Escrow Account, to the extent funds remain in the Escrow Account, before
proceeding against any Shareholder.
7.04. Survey
Reports.
Complete copies of any and all survey reports, and waivers of deficiencies,
plans of correction and any other governmental investigation reports issued
with
respect to the Facilities during the three years immediately preceding the
Closing Date have been provided to the Purchaser and the New Operator. The
Shareholders and the Companies shall provide the Purchaser and the New Operator
with any survey reports, waivers of deficiencies, plans of correction and
any
other governmental investigation reports issued with respect to the Facilities
from and after the date of this Agreement through the Closing Date on or
before
the fifth Business Day after the receipt thereof by the Shareholders and
the
Companies.
7.05. Resident
Trust Accounts.
The
Shareholders and the Companies shall maintain the Trust Accounts in compliance
with residents’ rights and all applicable Laws. At the Closing, the Shareholders
and the Companies shall deliver to the Purchaser and the New Operator a
certified schedule of the Trust Account for each Facility.
7.06. Affirmative
Covenants.
Prior
to the Closing, the Shareholders will, except as otherwise required by the
provisions of this Agreement, cause each Company to:
(a) conduct
the Business only in the Ordinary Course of Business;
(b) keep
in
full force and effect its corporate existence and all rights, franchises
and
Intellectual Property relating to or pertaining to the Business;
(c) use
its
commercially reasonable efforts to retain its employees and agents and preserve
its present business relationships, and continue to compensate its employees
and
agents in accordance with past custom and practice;
(d) maintain
its Assets in reasonable and customary repair, order and condition and maintain
insurance comparable to that in effect on the date of this Agreement; replace
in
accordance with past practice its inoperable, worn out and obsolete Assets
with
Assets of comparable quality; in the event of any casualty, loss or damage
to
any of its Assets prior to Closing, either repair or replace such Assets
with
Assets of comparable quality or, if Purchaser agrees in writing, transfer
to
Purchaser at Closing the proceeds of any insurance recovery with respect
thereto;
(e) maintain
its books, accounts and records in accordance with past custom and practice
as
used in the preparation of the Company Statements, file with the appropriate
Tax
authorities any and all Tax Returns required to be filed by it for the periods
covered thereby and pay all Taxes required to be paid by it;
(f) terminate
or cause to be terminated the management agreements and leases except as
disclosed on Schedule
7.06(f);
(g) maintain
and keep in full force and effect the insurance policies disclosed on
Schedule
3.19.
The
Shareholders shall obtain a “tail” insurance endorsement for the benefit of the
Companies with respect to those insurance policies disclosed on Schedule
7.06(g)
for acts
or events occurring prior to the Closing Date, which endorsement shall extend
until the third anniversary of the Closing Date the coverage of such policies
as
in effect on the date of this Agreement (the “Tail
Coverage”);
(h) terminate
or cause to be terminated all Contracts disclosed on Schedule
7.06(h);
any
Damages incurred by the New Operator or the Purchaser in connection with
the
termination of the Contracts listed on Schedule
7.06(h)
shall be
promptly paid by the Companies to the New Operator or Purchaser, as applicable,
on or before the Closing Date; provided,
however,
that,
to the extent such Damages are not paid by the Companies to the New Operator
or
Purchaser on or before the Closing Date, the Damages shall be reflected on
the
Closing Date Balance Sheet, as finally determined, as a liability of the
Companies incurred in full prior to the Closing Date; and
(i) use
its
commercially reasonable efforts to obtain all consents and approvals necessary
or desirable to consummate the transactions contemplated hereby, including
with
respect to each Contract that contains a change of control provision, a consent
to the change of control of each Company contemplated hereby, to the Purchaser,
and to cause the other conditions to the Purchaser’s obligation to close to be
satisfied.
7.07. Negative
Covenants.
Prior
to the Closing, without the prior written consent of the Purchaser and the
New
Operator or as expressly required by this Article
VII,
no
Company shall and no Shareholder shall permit any Company to:
(a) take
any
action that would require any supplement or amendment to the disclosure
Schedules;
(b) intentionally
or negligently take or omit to take any action, or permit its Affiliates
to take
or omit to take any action, which would reasonably be anticipated to have
a
Material Adverse Effect upon the Business or the Assets of each Company,
other
than as a result of any change of ownership notice required to be made to
any
Governmental Agency as a result of the transactions contemplated by this
Agreement;
(c) (i)
issue
or sell any shares of its capital stock or membership interests or any
partnership interests, (ii) issue or sell any securities convertible into,
or
options with respect to, warrants to purchase or rights to subscribe for
any
shares of its capital stock or membership interests or any partnership
interests, (iii) effect any recapitalization, reclassification, stock dividend,
stock split or like change in its capitalization, (iv) amend its Charter
Documents or (v) make any redemption or purchase of any shares of its capital
stock or membership interests or any partnership interests;
(d) invest
in
or otherwise purchase any interest in any third Person or create any
Subsidiaries;
(e) create,
incur, assume or guarantee any indebtedness for borrowed money (including
obligations in respect of capital leases), other than Indebtedness Liability
in
the Ordinary Course of Business;
(f) enter
into any lease, tenancy, easement, encumbrance, contract or other commitment
affecting any of the Real Property;
(g) increase
the rate of compensation or benefits of, or pay or agree to pay any benefit
to
(including severance or termination pay), present or former managers, directors,
officers or employees or enter into any employment or severance agreement,
or
amendments thereto, with any director, officer or senior manager of the Company,
except as may be required by an existing Benefit Plan, agreement or arrangement
disclosed to the Purchaser in the schedules to this Agreement;
(h) enter
into, adopt, terminate, amend or contribute to any Benefit Plan, employment
or
severance agreement or any plan, agreement, program, policy, trust, fund
or
other arrangement that would be a Benefit Plan if it were in existence as
of the
date of this Agreement, except as required by applicable Laws or the provisions
of this Agreement;
(i) waive
or
release any rights of a material value, or cancel, compromise, release or
assign
any material Indebtedness owed to it or any material claims held by
it;
(j) cancel,
terminate or permit to lapse any material insurance policy or coverage naming
it
as a beneficiary or a loss payable payee without obtaining comparable substitute
insurance coverage;
(k) effectuate
a “plant closing” or “mass layoff”(as those terms are defined under the WARN
Act) affecting in whole or in part any site of employment, facility, operating
unit or employees of any Company;
(l) fail
to
maintain the books, accounts and records relating to any Company in the usual
regular and ordinary manner consistent with past practices or change any
of
material accounting principles, methods or practices;
(m) fail
to
comply with all applicable Laws and contractual provisions in all material
respects, including with respect to the Collective Bargaining
Agreement;
(n) operate
the Business of the Companies other than in the usual regular ordinary manner,
consistent with current practices, including practices relating to the
collection of accounts receivable and payment of accounts payable and fail
to
use commercially reasonable efforts to preserve intact the present business
organization of each Company, keep available the services of the present
employees of each Company and preserve such Company’s present relationships with
Persons having business dealings with any Company; or
(o) take
any
affirmative action, or fail to take any commercially reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section
3.24
is
likely to occur.
7.08. Shareholder
Covenant Not to Compete.
(a) Except
as
provided below, each Shareholder agrees that for a period commencing on the
Closing Date and ending on the second anniversary of the Closing Date, he,
she
or it will not engage, directly or indirectly, in the business of operating
nursing home properties either directly or as a partner, owner, shareholder,
member, operator or consultant of any Person in any location within a 50
mile
radius of any Facility without the prior written consent of the Purchaser,
which
consent the Purchaser may withhold in its sole discretion.
(b) Notwithstanding
anything to the contrary in this Section
7.08,
nothing
in this Agreement shall prohibit the Shareholders either directly or indirectly,
separately or in association with others from owning 5% or less of the issued
and outstanding securities of any Person which is engaged in the business
of
operating nursing home properties whose securities are listed on a national
securities exchange or listed on The Nasdaq National Market System.
7.09. Hired
Employees.
Prior
to the Closing Date, the New Operator shall deliver to the Purchaser and
the
Shareholders’ Representative a schedule of Hired Employees. In offering
employment to the Hired Employees, neither the Purchaser nor the New Operator
shall become liable for any employment-related Liabilities attributable to
periods through the Employee Termination Time other than WARN Act Liabilities
arising out of the consummation of the transactions contemplated by this
Agreement and the COBRA obligations to the M&A Qualified Beneficiaries as
set forth in Section
7.02(f).
7.10. Cooperation
Regarding Licensing Matters.
The
Shareholders, the Companies and the Purchaser agree to cooperate fully with
each
other and use their commercially reasonable efforts in preparing, filing,
prosecuting and taking any other actions with respect to applications, requests
or other actions that are or may be reasonable, necessary, proper or advisable
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement, including, (i) the obtaining
of
all necessary waivers, consents or approvals of any Governmental Agency in
connection with any licensing or License approval, and the making of all
necessary registrations and filings; and (ii) the obtaining of all necessary
consents, approvals or waivers from any Person other than Governmental
Agencies.
7.11. Regulatory
and Other Authorizations; Consents.
(a) Each
of
the Parties shall use its commercially reasonable efforts to (i) take, or
cause
to be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under any Law or otherwise to consummate and
make
effective the transactions contemplated by this Agreement, (ii) obtain any
consents, Licenses, certifications, waivers, approvals, authorizations or
orders
required to be made in connection with the authorization, execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby,
and (iii) make all filings and give notice, and thereafter make any other
submissions either required or reasonably deemed appropriate by each of the
parties, with respect to this Agreement, and the transactions contemplated
hereby required under any Law, including any applicable securities or antitrust
Law.
(b) In
furtherance and not in limitation of the foregoing, each Party shall use
its
commercially reasonable efforts to resolve such objections, if any, as may
be
asserted with respect to the transactions contemplated by this Agreement
under
any Law of any Governmental Agency.
(c) The
Shareholders shall cooperate with the Purchaser, before and after the Closing,
in regards to the assignment of Medicare and Medicaid provider numbers and
agreements, or in respect to any application by the Purchaser for participation
in the Medicare and Medicaid programs or in respect to the licensure of the
Business.
7.12. Exclusivity.
From
the date hereof through the Closing or the earlier termination of this
Agreement, each Shareholder, each Company, and each of their respective
directors, officers, managers, partners, employees, advisors, representatives,
agents or affiliates, shall not engage in, solicit or initiate any discussions
or negotiations with, or provide any information to (except to confirm that
this
Agreement exists or as may be required by Law or court order), or negotiate
or
enter into any agreement or agreement in principle with, any other person
with
respect to a sale of any Company, the assets of any Company (except as permitted
by Section
7.06),
the
equity interests of any Company or any similar business combination transaction.
The Shareholders shall notify the Purchaser promptly if any unsolicited proposal
or offer, or any inquiry or contact with any person with respect thereto,
is
made, such notice to include the identity of the person making such proposal,
offer, inquiry or contact, and the terms of such offer.
7.13. Monthly
Financial Statements.
Until
the Closing Date, each Company shall deliver to the Purchaser on or before
the
30th
day
after the end of each month a copy of the unaudited consolidating balance
sheet
of such Company and related unaudited consolidating statements of income
and
cash flows for such month prepared in a manner and containing information
consistent with such Company’s current practices.
7.14. Transition.
The
Shareholders and the Companies will not take any action that is designed
or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of any Company from maintaining the
same
business relationships with such Company after the Closing as it maintained
with
such Company prior to the Closing.
7.15. Proration
and Expenses.
(a) Subject
to Section
7.15(b),
all
recording fees arising out of or relating to the transactions contemplated
by
this Agreement (excluding transfer tax type fees), if any, shall be paid
by the
Shareholders. The Shareholders shall pay (i) any transfer taxes or fees due
in
connection with the transfer of the Company Shares, and (ii) one-half of
any
real estate transfer taxes incurred if the Purchaser assigns or transfers
any
parcel of Real Property to an Affiliate on or before the 45th
day
after the Closing Date. The Shareholders shall cause the Companies to pay
(A)
the cost of either new Title Policies or updates to existing title insurance
policies for the Real Properties in an amount equal to the value of the specific
Real Property as disclosed on Schedule
7.15
(whichever are applicable to the specific Real Property), and (B) if the
Closing
does not occur, the costs of the updated surveys and environmental site
assessments procured by the Companies or the Shareholders for the Purchaser.
The
Shareholders shall cause all such environmental site assessments also to
be
certified in favor of the New Operator.
(b) The
Purchaser shall pay for (i) the costs of endorsements to the Title Policies,
appraisals, property inspection reports and other costs of its due diligence,
(ii) if the Closing occurs, the costs of the updated surveys and environmental
site assessments procured by the Companies or the Shareholders for the
Purchaser’s specific benefit, and (iii) all real estate transfer taxes incurred
with respect to the assignment or transfer of any parcel of Real Property
after
the Closing Date, other than as set forth in Section
7.15(a)(ii),
and
recording fees incurred in connection with such assignment or transfer.
(c) Regardless
of whether the transactions contemplated by this Agreement and the Ancillary
Documents are consummated, each Party shall pay its or their own legal,
accounting, consulting, and other professional fees, incurred in connection
with
the negotiation, preparation, investigation, and performance by such Party
of
this Agreement and the transactions contemplated hereby.
(d) The
Closing Date Balance Sheet shall reflect a Liability for real estate Taxes
attributable to the Facilities for any time prior to the Closing Date (the
“Real
Property Tax Liability”).
The
Real Property Tax Liability shall be computed on an accrual basis, using
actual
final tax bills to the extent available. If the final tax bills are not
available as of the Closing Date, then the proration to determine the Real
Property Tax Liability for any time prior to the Closing Date shall be based
on
105% of the most recent currently available tax bills attributable to the
portion of the calendar year in question. If the aggregate Real Property
Tax
Liability, as finally determined after any appeal undertaken as has been
elected
or otherwise directed as set forth in this subsection (d), is greater than
the
amount reflected on the Closing Date Balance Sheet, then the Shareholders
shall
pay to the Purchaser the amount of the difference on or before the tenth
day
after the Shareholders’ Representative receives written notice of such final
determination, which notice shall include reasonable documentation of the
amount
of such final determination. If the Shareholders do not timely pay the amount
of
such excess to the Purchaser, then the Purchaser may, in its sole discretion
and
at its option, direct the Escrow Agent to promptly deliver to the Purchaser
the
unpaid portion of such excess. If the aggregate Real Property Tax Liability,
as
finally determined after any appeal undertaken as has been elected or otherwise
directed as set forth in this subsection (d), is less than the amount reflected
on the Closing Date Balance Sheet, then the Purchaser shall pay the Shareholders
the amount of the difference on or before the tenth day after such final
determination. The Purchaser shall provide, on or before the tenth Business
Day
after receipt, to the Shareholders’ Representative copies of all tax bills for
any Real Property Tax Liability attributable to any time prior to the Closing
Date which the Purchaser or any Company receives after the Closing Date.
If the
Purchaser, the applicable Company and the New Operator elect, in the sole
discretion of each, not to contest the amount of such tax bills, then the
Shareholders’ Representative may direct the applicable Company to contest the
amount of such tax bills at the Shareholders’ sole cost and expense.
(e) With
respect to any tax bill for any Real Property Tax Liability attributable
to any
time prior to the Closing Date which the Purchaser or any Company receives
after
the Closing Date, the Purchaser, on or before the tenth Business Day after
the
day the Purchaser or any Company receives such tax bill, shall cause the
Companies to pay to the New Operator the full amount of each such tax bill;
provided,
however,
that if
the amount of any such tax bill subsequently is reduced, then the New Operator
shall refund to the applicable Company an amount equal to (i) the amount
paid by
the applicable Company to the New Operator with respect to such tax bill,
less
(ii) the amount of such tax bill, as finally determined. The New Operator
shall
pay such refund promptly after receiving notice from the Purchaser that the
amount of such tax bill has been finally determined, which notice shall be
accompanied by reasonable evidence of such final determination.
(f) With
respect to any bill from any Governmental Agency for any bed taxes or provider
franchise fees attributable to any time prior to the Closing Date which either
(i) are unpaid as of the Closing Date, or (ii) the Purchaser or any Company
receives after the Closing Date, the Purchaser, on or before the tenth Business
Day after (A) the Closing Date, with respect to bills referred to in clause
(i),
or (B) the day the Purchaser or any Company receives such tax bill with respect
to bills referred to in clause (ii), shall cause the Companies to pay to
the New
Operator the full amount of each such bill; provided,
however,
that if
the amount of any such bill subsequently is reduced, then the New Operator
shall
refund to the applicable Company an amount equal to (x) the amount paid by
the
applicable Company to the New Operator with respect to such bill, less (y)
the
amount of such bill, as finally determined. The New Operator shall pay such
refund promptly after receiving notice from the Purchaser that the amount
of
such bill has been finally determined, which notice shall be accompanied
by
reasonable evidence of such final determination.
7.16. [Intentionally
Omitted.]
7.17. Required
Approvals.
As
promptly as practicable after the date of this Agreement, the Shareholders
will,
and will cause each Company to, make all filings required by Legal Requirements
to be made by them in order to consummate the transactions contemplated by
this
Agreement. Between the date of this Agreement and the Closing Date, the
Companies and the Shareholders will (a) cooperate with the Purchaser and
the New
Operator with respect to all filings that the Purchaser or the New Operator
elects to make or is required to make by Legal Requirements in connection
with
the transactions contemplated by this Agreement, and (b) cooperate with the
Purchaser and the New Operator in obtaining all consents identified on
Schedule
3.16.
7.18. Notification.
Between
the date of this Agreement and the Closing Date, the Shareholders and the
Companies will promptly notify the Purchaser in writing if any Shareholder
or
Company becomes aware of any fact or condition that causes or constitutes
a
breach of any of the Shareholders’ or Companies’ representations and warranties
as of the date of this Agreement, or if such Shareholder or Company becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement)
cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition.
7.19. Cooperation
After Closing.
If,
after the Closing Date, a Party shall require the participation of any other
Party or such other Party’s officers, managers or employees to aid in the
defense or settlement of litigation or claims by third parties or any other
matter or transaction contemplated by this Agreement, and so long as there
exists no conflict of interest between the Parties, then the Parties shall
use
their commercially reasonable efforts to make such officers, managers or
employees available to participate in such defense, provided that the Party
requiring the participation of such officers, managers or employees shall
pay
all reasonable out-of-pocket costs, charges and expenses arising from such
participation. Whenever the Shareholders are required by the provisions of
this
Agreement to take an action in the name of or on behalf of a Company, including
the filing of cost reports and tax returns, the Purchaser shall cause such
Company to grant to the person or persons designated by the Shareholder's
Representative such authority as is necessary to enable such person or persons
to take the required action.
7.20. Deposit
Account Authorization Documents.
(a) The
Companies shall cooperate with the requests of the Purchaser to execute and
deliver, not later than the Business Day immediately preceding the Closing
Date,
appropriate signature cards and any other authorization documents required
by
the applicable financial institutions so that as of the Closing Date the
Purchaser’s designated employees have the right to direct disbursements out of
all deposit or other bank accounts of each Company, other than accounts which
only hold resident funds. On the Closing Date, the Shareholders shall cooperate
with the Purchaser’s requests to transfer by wire transfer of immediately
available funds from such accounts to an account(s) designated by the Purchaser,
which cooperation shall include, if requested (i) information regarding the
appropriate contact personnel at the applicable financial institutions, and
(ii)
confirmation to such personnel that the Purchaser’s designated employees have
authority to transfer funds from such accounts.
(b) The
Companies shall cooperate with the requests of the New Operator to execute
and
deliver, not later than the Business Day immediately preceding the Closing
Date,
appropriate signature cards and any other authorization documents required
by
the applicable financial institutions so that as of the Closing Date the
New
Operator’s designated employees have the right to direct disbursements out of
all deposit or other bank accounts of each Company which only hold resident
funds. On the Closing Date, the Shareholders shall cooperate with the New
Operator’s requests to transfer by wire transfer of immediately available funds
from such accounts to an account(s) designated by the New Operator, which
cooperation shall include, if requested (i) information regarding the
appropriate contact personnel at the applicable financial institutions, and
(ii)
confirmation to such personnel that the New Operator’s designated employees have
authority to transfer funds from such accounts.
7.21. Assignment
of Contracts.
On the
Closing Date, the Companies shall assign to the New Operator all of the
Contracts other than those listed on Schedule
7.06(h)
and the
New Operator shall assume all such Contracts. Schedule
7.21
contains
a list of Contracts for which termination notices will be sent by the Companies
on the Closing Date (the "Terminated
Contracts").
Any
Damages incurred by the New Operator or the Purchaser in connection with
the
termination of the Terminated Contracts (the "Contract
Termination Liability")
shall
be promptly paid by the Companies to the New Operator or the Purchaser, as
applicable, on or before the Closing Date. To the extent the Contract
Termination Liability is not paid to the New Operator or the Purchaser on
or
before the Closing Date, the Contract Termination Liability shall be reflected
on the Closing Date Balance Sheet, as finally determined, as a liability
of the
Companies incurred in full prior to the Closing Date. The parties acknowledge
that Schedule 7.21 contains a list of Contracts to be terminated
which
are, by their terms, not terminable upon less than 60 days notice.
Article
VIII
Conditions
to the Purchaser’s Obligation to Close
8.01. Conditions
to the Purchaser’s Obligation.
The
obligation of the Purchaser to consummate the transactions contemplated by
this
Agreement is subject to the satisfaction of the following conditions on or
before the Closing Date:
(a) the
representations and warranties made by each Company, the Shareholders, the
New
Operator and the New Operator Parent in this Agreement (other than those
made as
of a specified date earlier than the Closing Date) shall be true and correct
in
all material respects on and as of the Closing Date, and any representation
or
warranty made as of a specified date earlier than the Closing Date shall
have
been true and correct in all material respects on and as of such earlier
date;
(b) each
of
the Shareholders, the Companies, the New Operator and the New Operator Parent
shall have performed and complied with, in all material respects, each agreement
and covenant required by the provisions of this Agreement to be performed
or
complied with by them or it at or before the Closing;
(c) there
shall have been (i) no change in the operations, financial condition, operating
results, business prospects or Assets of the Business since the date of the
Company Latest Balance Sheet, except as required by the provisions of this
Agreement, and (ii) no casualty loss or damage to the Assets of any Company,
whether or not covered by insurance, which, in either case would have a Material
Adverse Effect on the Business;
(d) all
necessary certificates and other approvals necessary to enable the Purchaser
to
acquire the Company Shares shall have been delivered to the Purchaser;
(e) all
Required Consents, Licenses, and all other consents by third Persons or such
customary assurances (which may be verbal) that such consents, Licenses and
approvals will be received after the Closing Date in the Ordinary Course
of
Business that are required for the consummation of the transactions contemplated
hereby or that are required to prevent a breach of, or a default under or
a
termination or modification of, any Contract (except for those Contracts
for
which the failure to obtain a consent would not have a Material Adverse Effect
on the Business) or License to which any Company is a party or to which any
of
the Assets of any Company is subject, and releases of all Liens on or with
respect to the Assets of any Company (other than Permitted Liens) shall have
been obtained on terms and conditions satisfactory to the Purchaser in its
sole
discretion;
(f) no
action
or proceeding before any Governmental Agency shall be pending or threatened
which, in the judgment of the Purchaser, made in good faith and upon the
reasonable advice of counsel, makes it inadvisable to consummate the
transactions contemplated hereby by reason of the probability that the action
or
proceeding shall result in a judgment, decree or order which would prevent
the
carrying out of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or affect the value or use of the Company Shares,
the Assets of any Company or the Business;
(g) prior
to
the Closing Date, the Shareholders shall have provided to the Purchaser,
at
Shareholders’ own expense, customary UCC search reports (“UCC
Searches”)
of
each Company and each Shareholder disclosing no Liens against the Company
Shares
or the Assets of each Company, other than the Permitted Liens against such
Assets;
(h) all
certificates, opinions, instruments and other documents required to be delivered
to the Purchaser pursuant to Section
2.06(b)
or
2.06(d)
shall be
reasonably satisfactory in form and substance to the Purchaser and its counsel,
executed by the applicable Parties and delivered to the Purchaser on the
Closing
Date; and
(i) the
Purchaser is satisfied, in its sole discretion, with the contents of the
disclosure Schedules relating to this Agreement, other than Schedules
5.04 and 7.06(g).
Any
conditions specified in this Section
8.01
may be
waived by the Purchaser; provided that no such waiver shall be effective
unless
it is set forth in a writing executed by the Purchaser.
Article
IX
Conditions
to Obligation of the Shareholders to Close
9.01. Conditions
to Obligation of the Shareholders to Close.
The
obligation of the Shareholders to consummate the transactions contemplated
by
this Agreement is subject to the satisfaction of the following conditions
on or
before the Closing Date:
(a) the
representations and warranties made by the Purchaser, the Purchaser Parent,
the
New Operator and the New Operator Parent in this Agreement (other than those
made as of a specified date earlier than the Closing Date) shall be true
and
correct in all material respects on and as of the Closing Date as though
such
representation of warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects on and as
of such
earlier date;
(b) the
Purchaser and the New Operator shall have performed and complied with, in
all
material respects, each agreement and covenant required by the provisions
of
this Agreement to be performed or complied with by it at or before the
Closing;
(c) all
certificates, opinions, instruments and other documents required to be delivered
to Shareholders pursuant to Section
2.06(c)
shall be
reasonably satisfactory in form and substance to the Shareholders and their
counsel, executed by the applicable Parties and delivered to the Shareholders
on
the Closing Date;
(d) no
action
or proceeding before any Governmental Agency which regulates any Facility
shall
be pending or threatened which, in the judgment of the Shareholder’s
Representative, made in good faith and upon the reasonable advice of counsel,
makes it inadvisable to consummate the transactions contemplated hereby by
reason of the probability that the action or proceeding shall result in a
judgment, decree or order which would prevent the carrying out of this Agreement
or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or affect the value or use of the Assets of any Company or the
Business;
(e) the
Purchaser shall pay the Purchase Price as set forth in Section
2.02(c);
and
(f) the
Shareholders’ Representative is satisfied, in its sole discretion, with the
contents of Schedules
5.04, 6.04, 7.06(f), 7.06(g), and 7.06(h).
Any
condition specified in this Section
9.01
may be
waived by the Shareholders’ Representative; provided that no such waiver shall
be effective against the Shareholders unless it is set forth in a writing
executed by the Shareholders’ Representative.
Article
X
Conditions
to Obligation of the New Operator to Close
10.01. Conditions
to Obligation of the New Operator to Close.
The
obligation of the New Operator to consummate the transactions contemplated
by
this Agreement is subject to the satisfaction of the following conditions
on or
before the Closing Date:
(a) the
representations and warranties made by the Purchaser, the Purchaser Parent,
the
Shareholders, and the Companies in this Agreement (other than those made
as of a
specified date earlier than the Closing Date) shall be true and correct in
all
material respects on and as of the Closing Date as though such representation
of
warranty was made on and as of the Closing Date, and any representation or
warranty made as of a specified date earlier than the Closing Date shall
have
been true and correct in all material respects on and as of such earlier
date;
(b) the
Purchaser, the Shareholders, and the Companies shall have performed and complied
with, in all material respects, each agreement and covenant required by the
provisions of this Agreement to be performed or complied with by it at or
before
the Closing;
(c) there
shall have been (i) no change in the operations, financial condition, operating
results, business prospects or Assets of the Business since the date of the
Company Latest Balance Sheet except as required by the provisions of this
Agreement, and (ii) there shall have been no casualty loss or damage to the
Assets of any Company, whether or not covered by insurance, which, in either
case would have a Material Adverse Effect on the Business;
(d) all
Required Consents and all other consents by third Persons or such customary
assurances (which may be verbal) that such consents and approvals will be
received after the Closing Date in the Ordinary Course of Business that are
required for the consummation of the transactions contemplated hereby or
that
are required to prevent a breach of, or a default under or a termination
or
modification of, any Contract (except for those Contracts for which the failure
to obtain a consent would not have a Material Adverse Effect on the Business)
or
License to which any Company is a party or to which any of the Assets of
any
Company is subject, and releases of all Liens on or with respect to the Assets
of any Company (other than Permitted Liens) shall have been obtained on terms
and conditions satisfactory to the New Operator in its sole
discretion;
(e) all
approvals from Governmental Agencies necessary to consummate the transactions
contemplated herein and for the New Operator’s operation of the Facilities as
duly licensed and Medicare and Medicaid certified nursing facilities shall
have
been granted;
(f) no
action
or proceeding before any Governmental Agency shall be pending or threatened
which, in the judgment of the New Operator, made in good faith and upon the
reasonable advice of counsel, makes it inadvisable to consummate the
transactions contemplated hereby by reason of the probability that the action
or
proceeding shall result in a judgment, decree or order which would prevent
the
carrying out of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or affect the value or use of the Assets of
any
Company or the Business;
(g) at
the
Closing (i) the Shareholders shall provide the New Operator with an accounting
of all funds belonging to residents at any Facility which are held by any
Company in a custodial or any other capacity and an accounting of all advance
payments received by it pertaining to residents at the Facilities, (ii) such
accounting shall set forth the names of the residents for whom such funds
are
held, the Company which holds such funds, the amounts held on behalf of each
resident (including the account number and name of the financial institution
at
which the account is maintained), and shall be true, correct and complete
as of
the Closing Date, (iii) the Companies shall cooperate with the New Operator’s
requests to transfer such funds as provided in Section
7.20(b),
and
(iv) the New Operator shall provide the Purchaser with a copy of such accounting
if the Purchaser so requests;
(h) the
New
Operator is satisfied, in its sole discretion, with the contents of the
disclosure Schedules relating to this Agreement, other than Schedules
6.04, 7.06(f), 7.06(g), and 7.06(h).
Any
condition specified in this Section
10.01
may be
waived by the New Operator; provided that no such waiver shall be effective
against the New Operator unless it is set forth in a writing executed by
the New
Operator.
Article
XI
Indemnification
11.01. Survival.
Except
for the representations and warranties of the Companies, the representations,
warranties and covenants in this Agreement and in any Ancillary Document
shall
survive the Closing Date, but only to the extent specified below.
(a) All
covenants and agreements contained in this Agreement and the Ancillary Documents
that contemplate performance thereof following the Closing Date will survive
the
Closing Date in accordance with their terms.
(b) The
representations and warranties set forth in this Agreement and the Ancillary
Documents shall survive the Closing Date until the 18 month “anniversary” of the
Closing Date; provided,
however,
that
(i) the representations and warranties contained in Sections 3.05,
3.15,
3.24
and
4.03,
shall
survive the Closing Date indefinitely, (ii) the representations and warranties
contained in Sections 3.10,
3.12,
3.18,
and
3.22
shall
survive the Closing Date until the expiration of the statute of limitations
applicable to the underlying claims (as it may be extended from time to time).
For purposes of this subsection (b), the monthly “anniversary” shall be the day
of the month on which the Closing occurs. Therefore, by way of illustration
only, if the Closing Date is June 29, 2005, then the 18 month “anniversary” will
be December 29, 2006.
11.02. Right
to Indemnification Not Affected by Knowledge.
The
right to indemnification, payment of Losses or other remedy based on such
representations, warranties, covenants and obligations will not be affected
by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty, covenant
or obligation. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment
of
Losses, or other remedy based on such representations, warranties, covenants,
and obligations.
11.03. Indemnification
by the Shareholders.
(a) The
Shareholders, jointly and severally, agree to and shall indemnify the Purchaser,
the Purchaser Parent, and the Companies (and their respective officers,
directors, employees, agents, shareholders, Subsidiaries, Affiliates,
representatives, successors, and assigns) (each individually, a “Purchaser
Indemnified Party”
and
collectively, the “Purchaser
Indemnified Parties”)
and
the New Operator and the New Operator Parent (and their respective officers,
directors, managers, members, employees, agents, shareholders, Subsidiaries,
Affiliates, representatives, successors, and assigns) (each individually,
a
“New
Operator Indemnified Party”
and
collectively, the “New
Operator Indemnified Parties”)
and
defend and hold the Purchaser Indemnified Parties and the New Operator
Indemnified Parties harmless against any Losses that the Purchaser Indemnified
Parties and the New Operator Indemnified Parties suffer, sustain or become
subject to as a result of (i) any misrepresentation in any of the
representations or breach of any of the warranties of the Shareholders or
the
Companies contained in this Agreement, (ii) any breach of, or failure to
perform, any covenant of any Company or Shareholder contained in this Agreement,
(iii) any claim for refund or reimbursement of any payment made to any Company
by any Person who was a customer of the Business on or prior to the Closing
Date
based on preference or priority as asserted by any receiver or trustee in
bankruptcy or bankruptcy court, or (iv) any claim for refund or reimbursement
of
any payment made to any Company by any Person or Governmental Agency before
the
Closing Date.
The
Shareholders acknowledge that neither the Purchaser Indemnified Parties nor
the
New Operator Indemnified Parties shall have any obligation to seek recovery
or
reimbursement for any Losses from any applicable insurance coverage before
seeking recovery from the Shareholders pursuant to this Article
XI,
except
that, with respect to Losses which are covered by the Tail Coverage, the
Purchaser Indemnified Parties and the New Operator Indemnified Parties first
must seek recovery or reimbursement under the Tail Coverage.
(b) The
Shareholders shall not be liable for any Losses pursuant to this Section
11.03
(for
indemnification or otherwise) to any Purchaser Indemnified Party or any New
Operator Indemnified Party for any Losses to the extent that the aggregate
of
such Losses exceeds an amount equal to (i) the Purchase Price, less (ii)
aggregate amount of the Indebtedness Liability, and, further, shall not be
liable (for indemnification or otherwise) unless and until the aggregate
Losses
suffered by the Purchaser Indemnified Parties or by the New Operator Indemnified
Parties shall exceed $100,000 (the “Basket”)
and
then only to the extent such Losses exceed the Basket; provided,
however,
that
the limitations set forth in this Section
11.03(b)
shall
not apply to claims based upon (A) fraud or willful misconduct by any
Shareholder or any Company, or (B) Sections
3.01(a),
3.02,
3.05,
3.10,
3.14,
3.15,
3.16,
3.18,
3.22, 3.24,
4.01,
4.02, 4.03,
4.04,
7.15(d)
or
11.03(a)(iv).
(c) Subject
to the terms of Section
11.03(b),
the
Shareholders, jointly and severally, agree to indemnify any Purchaser
Indemnified Party and any New Operator Indemnified Party and defend and hold
the
Purchaser Indemnified Parties and the New Operator Indemnified Parties harmless
against any Liabilities that the Purchaser Indemnified Parties or the New
Operator Indemnified Parties suffer, sustain or become subject to as a result
of
any of the following Liabilities, regardless of whether any such Liabilities
result from the (i) breach of a representation or warranty of any Company
or
Shareholder as set forth in this Agreement, or (ii) breach of, or failure
to
perform, any covenant of any Company or Shareholder as set forth in this
Agreement:
(i) any
Liabilities arising out of or relating to the failure to obtain a release
of the
FET Lien;
(ii) any
Liabilities (including any Liability related to any Benefit Plan) for any
and
all claims by or on behalf of the Employees or any Governmental Agency
(including the Department of Labor, the IRS and the PBGC) that accrued, arose
or
relates to any act or omission prior to the Closing, other than (A) those
Liabilities related to the COBRA obligations to the M&A Qualified
Beneficiaries as set forth in Section
7.02(f),
and (B)
those other Liabilities not related to a Benefit Plan that arise out of or
relate to the termination of the Employees as contemplated by Section
7.02(a)
or the
hiring of any Employees by the New Operator;
(iii) any
Liabilities arising from or due to any Collective Bargaining Agreement to
which
any of the Companies is a party and which arise before the Closing Date or
which
relate to events which occurred before the Closing Date, other than those
liabilities solely arising out of or relating to actions taken by the New
Operator or the Purchaser;
(iv) any
Liabilities arising from or due to any Taxes incurred by any Shareholder
at any
time or by any Company before the Closing Date or which relate to events
which
occurred before the Closing Date;
(v) any
Liabilities accruing, arising out of or relating to any federal, state or
local
investigation, claim or action against the Companies or the Shareholders
or any
of the Employees with respect to acts or omissions before the Closing; Date,
other than those liabilities solely arising out of or relating to actions
taken
by the New Operator or the Purchaser;
(vi) any
civil
or criminal Liabilities occurring, arising out of or relating to any acts
or
omissions of the Companies or the Shareholder, or their respective officers,
directors, managers. members, employees, agents or representatives, with
respect
to actions or omissions which occur or fail to occur prior to the Closing
Date
and that violate any constitutional provision, statute, ordinance, Law,
interpretation, standard, policy or order of any Governmental Agency, including
any Liabilities arising out of or related to litigation or claims pending
against any Company as of the Closing Date; and
(vii) any
Liabilities not otherwise referred to above in this subsection (c) incurred
by
any Company, any Shareholder or any Facility accrued prior to the Closing
Date,
or which relates to events which occurred before the Closing Date or to any
condition that exists at, on or under any Facility as of the Closing Date,
other
than for those Liabilities (A) which are included on the Closing Date Balance
Sheet, as finally determined, (B) which are assumed by the New Operator pursuant
to the terms of this Agreement, (C) arising out of or relating to actions
required to be taken by the Shareholders or the Companies pursuant to the
terms
of this Agreement, or (D) arising out of or relating to actions taken by
the New
Operator or the Purchaser.
The
Shareholders indemnification obligations under this subsection (c) shall
survive
the Closing Date indefinitely.
(d) The
Purchaser Indemnified Parties and the Operator Indemnified Parties will not
be
permitted to each assert indemnification claims against the Shareholders
under
this Article
XI
with
respect to Losses for which the Purchaser or the Purchaser Parent indemnifies
a
New Operator Indemnified Party or the New Operator or the New Operator Parent
indemnifies a Purchaser Indemnified Party; provided,
however,
that if
the Purchaser or the Purchaser Parent indemnifies a New Operator Indemnified
Party or the New Operator or the New Operator Parent indemnifies a Purchaser
Indemnified Party as contemplated by this subsection, then the Party making
such
indemnity shall be entitled to seek indemnification from the Shareholders
pursuant to this Article
XI
for the
full amount of such indemnity and all other Losses incurred in connection
with
claim. If the Purchaser or the Purchaser Parent indemnifies a New Operator
Indemnified Party with respect to a claim made by a New Operator Indemnified
Party for which the New Operator Indemnified Party previously has received
an
indemnification payment from the Shareholders, then the Purchaser and the
Purchaser Parent shall not be permitted to make a claim against the Shareholders
to the extent of the duplicable indemnification payment if the Shareholders’
Representative provided written notice to the Purchaser and the Purchaser
Parent
that the Shareholders made such indemnification payment before the Purchaser
or
the Purchaser Parent makes such duplicative payment. If the New Operator
or the
New Operator Parent indemnifies a Purchaser Indemnified Party with respect
to a
claim made by a Purchaser Indemnified Party for which the Purchaser Indemnified
Party previously has received an indemnification payment from the Shareholders,
then the New Operator and the New Operator Parent shall not be permitted
to make
a claim against the Shareholders to the extent of the duplicable indemnification
payment if the Shareholders’ Representative provided written notice to the New
Operator that the Shareholders made such indemnification payment before the
New
Operator or the New Operator Parent makes such duplicative payment.
(e) If
the
aggregate Losses incurred by the Purchaser Indemnified Parties with respect
to
any indemnification claims made pursuant to Section
11.03(a)(iv)
become
greater than $1,500,000 and if the Shareholders do not timely make any payments
required by this Article
XI,
then
the Purchaser may, in its sole discretion and at its option, direct the Escrow
Agent to promptly deliver to the Purchaser the amount owed by the Shareholders
to the Purchaser pursuant to this Article
XI.
If the
Purchaser directs the Escrow Agent to deliver such amount to the Purchaser,
then
the Purchaser shall retain the right to pursue payment from the Shareholders
as
required by this Article
XI,
which
payment would be deposited in the Escrow Account to replenish the funds paid
to
the Purchaser with respect to any indemnification claims made pursuant to
Section
11.03(a)(iv)
in
excess of $1,500,000.
11.04. Indemnification
by the Purchaser and the Purchaser Parent.
(a) The
Purchaser and the Purchaser Parent, jointly and severally, agree to indemnify
the Shareholders (each individually, a “Shareholder
Indemnified Party”
collectively, the “Shareholder
Indemnified Parties”)
and
the New Operator Indemnified Parties and to defend and hold them harmless
against any Losses which any of the Shareholder Indemnified Parties or the
New
Operator Indemnified Parties suffer, sustain or become subject to as a result
of
(i) any misrepresentation in any of the representations or breaches of any
of
the warranties of the Purchaser or the Purchaser Parent contained in this
Agreement, or (ii) any breach of, or failure to perform, any covenant of
the
Purchaser or the Purchaser Parent contained in this Agreement.
(b) Notwithstanding
anything to the contrary contained herein, neither the Purchaser nor the
Purchaser Parent shall be liable for any Losses pursuant to this Section
11.04
(for
indemnification or otherwise) to any Shareholder Indemnified Party or any
New
Operator Indemnified Party for any Losses to the extent that the aggregate
of
such Losses exceed the Purchase Price and, further, shall not be liable (for
indemnification or otherwise) unless and until the aggregate Losses suffered
by
the Shareholder Indemnified Parties or by the New Operator Indemnified Parties
shall exceed the Basket, and then only to the extent such Losses exceed the
Basket; provided,
however,
that
the limitations set forth in this Section
11.04
shall
not apply to claims based upon (i) fraud or willful misconduct by the Purchaser
or the Purchaser Parent, or (ii) Sections
5.01,
5.02, 5.03
or
5.04.
11.05. Indemnification
by the New Operator and the New Operator Parent.
(a) The
New
Operator and the New Operator Parent, jointly and severally, agree to indemnify
the Shareholders Indemnified Parties and the Purchaser Indemnified Parties
and
defend and hold them harmless against any Losses which any of the Shareholder
Indemnified Parties or the Purchaser Indemnified Parties suffer, sustain
or
become subject to as a result of (i) any misrepresentation in any of the
representations or breaches of any of the warranties of the New Operator
or the
New Operator Parent contained in this Agreement, or (ii) any breach of, or
failure to perform, any covenant of the New Operator contained in this
Agreement.
(b) Notwithstanding
anything to the contrary contained herein, other than as set forth in
Section
11.05(c),
the New
Operator shall not be liable for any Losses pursuant to this Section
11.05
(for
indemnification or otherwise) to any Shareholder Indemnified Party or any
Purchaser Indemnified Party for any Losses to the extent that the aggregate
of
such Losses exceed the Purchase Price and, further, shall not be liable (for
indemnification or otherwise) unless and until the aggregate Losses suffered
by
the Shareholder Indemnified Parties or by the Purchaser Indemnified Parties
shall exceed the Basket, and then only to the extent such Losses exceed the
Basket; provided,
however,
that
the limitations set forth in this Section
11.04
shall
not apply to claims based upon (i) fraud or willful misconduct by the New
Operator or the New Operator Parent, or (ii) Sections
6.01, 6.02, 6.03 or 6.04.
(c) Notwithstanding
the limitations contained in Section
11.03(b),
the New
Operator and the New Operator Parent, jointly and severally, agree to indemnify
any Shareholder Indemnified Party or Purchaser Indemnified Party and defend
and
hold the Shareholder Indemnified Parties and the Purchaser Indemnified Parties
harmless against any Losses that the Shareholder Indemnified Parties or the
Purchaser Indemnified Parties suffer, sustain or become subject to as a result
of any Liabilities to former employees of the Companies or arising out of
or
relating to (i) the termination of the Employees as contemplated by Section
7.02(a),
(ii)
the selection and employment of the Hired Employees by the New Operator,
(iii)
all obligations for COBRA and the WARN Act assumed by New Operator under
this
Agreement, or (iv) any liability relating to, or arising out of the operating
of
the facilities by the New Operator on or after the Closing Date.
(d) Notwithstanding
the limitations contained in Section
11.03(b),
the New
Operator and the New Operator Parent, jointly and severally, agree to indemnify
any Shareholder Indemnified Party or Purchaser Indemnified Party and defend
and
hold the Shareholder Indemnified Parties and the Purchaser Indemnified Parties
harmless against any Losses that the Shareholder Indemnified Parties or the
Purchaser Indemnified Parties suffer, sustain or become subject to as a result
of any Liabilities to former employees of the Companies under COBRA or the
WARN
Act arising out of or related to events occurring on or after the Effective
Time.
11.06. Method
of Asserting Claims.
As used
herein, an “Indemnified
Party”
shall refer to a “Purchaser Indemnified
Party,”“Shareholder
Indemnified Party” or “New Operator Indemnified Party,” as applicable,
“Indemnified Parties” shall refer to “Purchaser Indemnified
Parties,”“Shareholder Indemnified Parties” or New Operator Indemnified Parties,”
as applicable, and the “Indemnifying Party”
shall refer to the Party obligated to indemnify such Indemnified
Parties.
(a) Third
Party Claims.
(i) In
the
event that any of the Indemnified Parties is made a defendant in or party
to any
action or proceeding, judicial or administrative, instituted by any third
party
for the liability or the costs or expenses of which are Shareholder Losses
or
Purchaser Losses, as the case may be (any such third party action or proceeding
being referred to as a “Third
Party Claim”),
the
Indemnified Party shall give the Indemnifying Party prompt notice thereof.
The
failure to give such notice shall not affect the Indemnified Party’s ability to
seek reimbursement except to the extent such failure has materially and
adversely affected the Indemnifying Party’s ability to defend successfully such
Third Party Claim. The Indemnifying Party shall be entitled to contest and
defend such Third Party Claim; provided,
however,
that
the Indemnifying Party (A) has a reasonable basis for concluding that such
defense may be successful, (B) consults with the Indemnified Party with respect
to the handling of such Third Party Claim, (C) diligently contests and defends
such Third Party Claim, and (D) unconditionally acknowledge that such Third
Party Claim constitutes a Loss of the Indemnified Party for which such
Indemnified Party is entitled to indemnification under this Article
XI.
Notice
of the intention to contest and defend the Third Party Claim shall be given
by
the Indemnifying Party to the Indemnified Party on or before the 20th
Business
Day after the Indemnified Party gives notice to the Indemnifying Party of
such
Third Party Claim (but, in all events, at least five Business Days prior
to the
date that an answer to such Third Party Claim is due to be filed). Such contest
and defense shall be conducted by reputable attorneys employed by the
Indemnifying Party that are reasonably acceptable to the Indemnified Party.
The
Indemnified Party shall be entitled at any time, at its own cost and expense
(which cost and expense shall not constitute a Loss unless such expense is
incurred at the request of the Indemnifying Party, the Indemnified Party
reasonably determines that the Indemnifying Party is not adequately representing
or, because of a conflict of interest, may not adequately represent, any
interests of the Indemnified Party), to participate in such contest and defense
and to be represented by attorneys of its or their own choosing. If the
Indemnified Party elects to participate in such defense, the Indemnified
Party
shall cooperate with the Indemnifying Party in the conduct of such defense.
Neither the Indemnified Party nor the Indemnifying Party may concede, settle
or
compromise any Third Party Claim without the consent of the other Party,
which
consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, in the event the Indemnifying Party fails or is not entitled to
contest and defend a Third Party Claim, the Indemnified Party shall be entitled
to contest, defend and settle such Third Party Claim, and pursue its
indemnification rights hereunder and whatever other legal remedies may be
available to enforce its rights under this Article
XI
at the
cost and expense of the Indemnifying Party.
(ii) If
(A) a
Third Party Claim relates primarily to a criminal proceeding, action or
indictment, (B) the Indemnified Party reasonably believes an adverse
determination with respect to the Third Party Claim or other claim giving
rise
to such Third Party Claim is likely and such adverse determination would
materially adversely affect the Indemnified Party’s reputation or future
business prospects, (C) the Third Party Claim seeks an injunction or equitable
relief against the Indemnified Party, or (D) the Indemnified Party
reasonably determines that the Indemnifying Party cannot adequately represent
the interests of the Indemnified Party because of a conflict of interest,
then
in any such case the Indemnified Party shall have the sole right to defend
such
Third Party Claim, and to pursue its indemnification rights hereunder and
whatever other legal remedies may be available to enforce its rights under
this
Article
XI,
at the
cost and expense of the Indemnifying Party. The Indemnified Party may not
concede, settle or compromise any such Third Party Claim without the consent
of
the Indemnifying Party, which consent shall not be unreasonably withheld
or
delayed. If the Indemnified Party elects to assume and control the defense
of
such a Third Party Claim, it will provide notice thereof to the Indemnifying
Party on or before the 30th
day
after the Indemnified Party has obtained notice of such Third Party
Claim.
(iii) If
there
shall be a settlement to which the Indemnifying Party consents or a final
judgment for the plaintiff in any Third Party Claim, the defense of which
the
Indemnifying Party has elected to assume, the Indemnifying Party shall indemnify
the Indemnified Party with respect to such settlement or judgment.
(b) Direct
Claims.
In the
event any Indemnified Party has a claim (“Direct
Claim”)
against any Indemnifying Party that does not involve a Third Party Claim,
the
Indemnified Party shall deliver a notice of such Direct Claim with reasonable
promptness to the Indemnifying Party. If the Indemnifying Party notifies
the
Indemnified Party that it does not dispute the Direct Claim described in
such
notice or fails to notify the Indemnified Party on or before the 30th
day
after delivery of such notice by the Indemnified Party, the Loss in the amount
specified in the Indemnified Party’s notice shall be conclusively deemed a
liability of the Indemnifying Party and the Indemnifying Party shall pay
the
amount of such Loss to the Indemnified Party on demand in accordance with
the
terms hereof. If the Indemnifying Party gives notice to the Indemnified Party
that it disputes the Direct Claim within such 30 day period, the Indemnified
Party may pursue its indemnification rights hereunder and whatever other
legal
remedies may be available to enforce its rights under this Article
XI.
11.07. Adjustments.
Any
indemnification payments paid under this Article
XI
will be
considered an adjustment to the Purchase Price.
11.08. Payments.
Any
payment pursuant to a claim for indemnification under this Article
XI
shall be
made not later than ten days after receipt by the Indemnifying Party of written
notice from the Indemnified Party stating the amount of the claim, unless
the
claim is subject to defense as provided in Section
11.06
above,
in which case payment shall be made not later than five days after the amount
of
the claim is finally determined by written agreement between the Indemnifying
Party and the Indemnified Party or a non-appealable judgment of a court of
competent jurisdiction. In addition, such Party shall reimburse the other
Party
for any and all costs or expenses of any nature or kind whatsoever (including
all reasonable attorneys’ fees) incurred in seeking to collect any such Losses
to which it is entitled. Any payment required under this Section
11.08
which is
not made
when due
shall bear interest at seven percent (7%) per annum from the date due until
paid
or, if less, the maximum rate permitted by applicable usury Laws. Interest
on
any such unpaid amount shall be compounded monthly, computed on the basis
of a
365-day year and shall be payable on demand.
11.09. Escrow.
Except
as otherwise set forth in this Agreement, subject to the limitations contained
in this Article
XI,
the
Purchaser or the New Operator shall give notice of a claim in the amount
of any
Losses and shall be required to satisfy such Losses from the Escrow Account,
to
the extent funds remain in the Escrow Account, before proceeding against
any
Shareholder for indemnification hereunder.
11.10. Exclusive
Remedy.
The
Parties acknowledge and agree that the foregoing indemnification provisions
in
this Article
XI
shall be
the exclusive remedy after the Closing Date of the Parties with respect to
the
transactions contemplated by this Agreement, other than for fraud.
Article
XII
Termination
12.01. Termination.
This
Agreement may be terminated at any time by notice given prior to or at the
Closing:
(a) by
mutual
written consent of the Purchaser, the Shareholders’ Representative, and the New
Operator;
(b) by
either
the Purchaser, the Shareholders’ Representative or the New Operator if there has
been a misrepresentation or breach of a representation or warranty or breach
of
a covenant on the part of the other Party(ies) under this Agreement and any
such
misrepresentation or breach, if capable of cure, is not cured on or before
the
15th
day
after written notice thereof to such other Party(ies) or if events have occurred
which have made it impossible to satisfy a condition precedent to the
terminating Party’s(ies’) obligations to consummate the transactions
contemplated hereby (other than as a result of any willful act or omission
by
the terminating Party(ies)), except where such misrepresentation or breach
would
not have Material Adverse Effect;
(c) by
either
the Purchaser, the Shareholders’ Representative or the New Operator if the
transactions contemplated hereby have not been consummated for any reason
by
June 29, 2005; provided,
however,
that
neither the Purchaser, the Shareholders nor the New Operator shall be entitled
to terminate this Agreement pursuant to this subsection (c) if such
Party’s(ies’) willful breach or obstruction of the consummation of this
Agreement, respectively, has prevented the consummation of the transactions
contemplated hereby;
(d) by
Purchaser or the New Operator in its sole discretion if the Shareholders
shall
have supplemented or amended any of the Schedules to this Agreement after
the
date hereof and the changes made by such supplement or amendment, together
with
any previous supplement or amendment of such schedules, are material;
or
(e) by
either
the Purchaser, the Shareholders’ Representative or the New Operator, if a court
of competent jurisdiction shall have issued an order permanently restraining
or
prohibiting the transactions contemplated by this Agreement.
12.02. Effect
of Termination.
In the
event of termination of this Agreement as provided above, this Agreement
shall
become void, and there shall be no liability on the part of any Party, except
for breaches of this Agreement prior to the time of such termination and
except
for the provisions contained in this Section
12.02,
Section
12.03
and
Article
XIV.
12.03. Release
of Deposit Amount.
In the
event of termination of this Agreement as provided above, the Purchaser shall
give written notice of the termination to LandAmerica and the Shareholders’
Representative and LandAmerica shall promptly deliver to the Purchaser the
Deposit Amount; provided,
however,
in the
event that the Shareholders terminate this Agreement pursuant to Section
11.03(b)
due to a
misrepresentation or breach of a representation or warranty or breach of
a
covenant on the part of the Purchaser or the Purchaser Parent, then the
Shareholders shall give written notice of the termination to LandAmerica
and the
Purchaser and LandAmerica shall promptly deliver to the Shareholders’
Representative the Deposit Amount.
12.04. Effect
of Closing.
The
Parties shall be deemed to have waived their respective rights to terminate
this
Agreement upon the completion of the Closing. No such waiver shall constitute
a
waiver of any other rights arising from the non-fulfillment of any condition
precedent set forth in Article
VIII,
Article
IX
or
Article
X
unless
such waiver is made in writing.
Article
XIII
Additional
Agreements
13.01. Cooperation
on Tax Matters.
(a) After
the
Closing, the Parties shall furnish or cause to be furnished to each other,
upon
request, in a timely manner, such information (including access to books
and
records) and assistance relating to the transactions contemplated hereby
and for
any Company, as is reasonably necessary for the filing of any tax return,
and
for the preparation of any audit, and for the prosecution or defense of any
proceeding relating to any proposed tax adjustment. The Parties shall cooperate
with each other in the conduct of any tax audit or the proceeding regarding
any
of the foregoing and will adopt consistent positions for tax
purposes.
(b) The
Shareholders are responsible for the preparation and filing of any Tax Return
required to be filed after the Closing Date for a Company that pertains to
a
period or tax year ending before the Closing Date. Any Tax Return for a Company
that pertains to a period or tax year that includes the Closing Date
(“Straddle
Tax Period”)
and
includes a Tax that affects the Working Capital Adjustment Amount must be
prepared by the Purchaser and submitted to the Shareholders’ Representative
(together with schedules, statements and, to the extent required by the
Shareholders’ Representative, supporting documentation) at least 40 days prior
to the due date (including extensions) of such Tax Return. If the Shareholders’
Representative objects to any item on such a Tax Return, the Shareholders’
Representative must, on or before the 10th
day
after delivery of such Tax Return, notify the Purchaser in writing that it
so
objects, specifying with particularity any such item and stating the specific
factual or legal basis for such objection. If a notice of objection is timely
delivered and the Purchaser and the Shareholders’ Representative are unable to
resolve such objection on or before the 10th
day
after receipt by the Purchaser of such notice, the disputed items must be
submitted for resolution to the Independent Accountants. The Independent
Accountants will resolve any disputed item on or before the 20th
day
after having the item referred to them pursuant to such procedures as they
may
establish. The Purchaser and the Shareholders’ Representative will act timely
and promptly to implement the decision of the Independent Accountants. The
Purchaser shall pay one-half of all fees and expenses of the Independent
Accountants for purpose of this Section
13.01(b)
and the
Shareholders, collectively, shall pay the other one-half. In the case of
any
Taxes that are payable for a Straddle Tax Period, for purposes of preparing
the
Tax accrual on the Company balance sheets, the taxable year of the Company
which
includes the Closing Date will be treated as closing immediately prior to
the
Closing Date. Without the prior written consent of the Shareholders’
Representative, the Purchaser will not permit a Company to file any amended
Tax
Return for a Straddle Tax Period or for a period that ended before the Closing
Date.
13.02. Press
Release and Announcements.
No
Party shall, prior to the Closing, issue any press release, make any public
announcement relating to the subject matter of this Agreement or other
announcements to the employees, customers or suppliers of any Company without
the prior written approval of the other Parties; provided, that, notwithstanding
the foregoing, any Party, upon prior notice to the other Parties, and upon
granting the other Parties a reasonable opportunity to discuss its contents,
may
make any public disclosure such Party believes in good faith is required
or
permitted by applicable Law.
13.03. Specific
Performance.
Each
Shareholder acknowledges that the Business and the Company Shares are unique
and
recognize and affirm that, in the event of a breach of this Agreement by
any
Shareholder, money damages would be inadequate and Purchaser would have no
adequate remedy at law. Accordingly, each Shareholder agrees that Purchaser
shall have the right, in addition to any other rights and remedies existing
in
its favor, to enforce its rights and each Shareholder’s obligations hereunder by
an action or actions for specific performance, injunction and/or other equitable
relief, without posting any bond or security.
13.04. Remittances.
All
remittances, mail and other communications relating to any Company received
by
any Shareholder at any time after the Closing Date shall be promptly turned
over
to Purchaser by such Shareholder.
13.05. Efforts
To Consummate Closing Transactions.
On the
terms and subject to the conditions contained in this Agreement, each Party
shall use his, her or its respective commercially reasonable efforts to take,
or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate, as soon
as
reasonably practicable, the Closing, including the satisfaction of all
conditions thereto set forth herein.
Article
XIV
Miscellaneous
14.01. Amendment.
This
Agreement and the exhibits and schedules to this Agreement may not be amended
except by an instrument in writing signed on behalf of each of the
Parties.
14.02. Extension;
Waiver.
At any
time prior to the Closing Date, the Parties may (a) extend the time for the
performance of any of the obligations or other acts of the other Party, (b)
waive any inaccuracies in the representations and warranties of the other
Party
contained in this Agreement or in any document delivered pursuant to this
Agreement, and (c) waive compliance by the other Party with any of the
agreements or conditions contained in this Agreement. Any agreement on the
part
of a Party to any such extension or waiver shall be valid if set forth in
an
instrument in writing signed on behalf of such Party.
14.03. Entire
Agreement; No Third Party Beneficiaries.
This
Agreement, together with the exhibits, schedules and other agreements referred
to in this Agreement (a) constitutes the entire agreement between the Parties
pertaining to the subject matter of this Agreement and supersedes all prior
and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties, and (b) is not intended to confer
upon
any Person other than the Parties any rights or remedies under this Agreement,
other than as expressly set forth in this Agreement.
14.04. Governing
Law; Venue; Waiver of Jury Trial.
(a) This
Agreement will be governed by and interpreted and construed in accordance
with
the internal Laws of the State of Maryland, without giving effect to its
conflicts of law principles. Any action brought in connection with this
Agreement or the transactions contemplated by this Agreement must be brought
in
a court of competent jurisdiction sitting in the State of Maryland. The Parties
agree that jurisdiction and venue in such courts is proper and waive any
defense
of lack of personal jurisdiction or inappropriate or inconvenient
venue.
(b) The
Parties hereby waive any right to trial by jury in any proceeding arising
out of
or relating to this Agreement or the Ancillary Documents or the transactions
contemplated thereby, whether now existing or arising after the date of this
Agreement, and whether sounding in contract, tort or otherwise. The Parties
agree that any of them may file a copy of this subsection with any court
as
written evidence of the knowing, voluntary and bargained-for agreement among
the
Parties irrevocably to waive trial by jury and that any proceeding whatsoever
between them relating to the this Agreement or the Ancillary Documents or
any of
the transactions contemplated by the Transaction Documents shall instead
be
tried in a court by a judge sitting without a jury.
14.05. Notices.
All
notices and other communications under this Agreement shall be in writing
and
shall be deemed given on the (a) date delivered to the appropriate address
by
hand (or the first business day after delivery if delivered other than on
a
business day), (b) the first business day after being sent by a nationally
recognized overnight courier service (next-day delivery and costs prepaid),
(c)
date received if sent by facsimile with confirmation of transmission by the
transmitting equipment (or the first business day after receipt if received
other than on a business day), or (d) the date received or rejected by the
addressee, if sent by certified mail, postage prepaid, return receipt requested,
in each case to the following addresses and facsimile numbers and marked
to the
attention of the person (by name or title) designated below with such mailed
notice to be effective on the date such receipt is acknowledged:
If
to the
Purchaser or the Purchaser Parent, addressed to:
Omega
Healthcare Investors, Inc.
9690
Deereco Road, Suite 100
Timonium,
Maryland 21093
Attention:
Daniel J. Booth
Facsimile:
(410) 427-8824
With
a
copy to:
Dykema
Gossett PLLC
39577
Woodward Avenue, Suite 300
Bloomfield
Hills, Michigan 48304
Attn:
Kyle R. Hauberg
Facsimile:
(248) 203-0763
With
a
copy to:
Buckingham,
Doolittle & Burroughs, LLP
191
West
Nationwide Blvd., Suite 300
Columbus,
Ohio 43215
Attention:
Thomas W. Hess
Facsimile:
(614) 221-8590
If
to the
New Operator or the New Operator Parent, addressed to:
CommuniCare
Health Services, Inc.
4700
Ashwood Drive, Suite 200
Cincinnati,
Ohio 45241
Attention:
Charles R. Stoltz, Chief Executive Officer
Facsimile:
(513) 530-1359
With
a
copy to:
Benesch,
Friedlander, Coplan & Aronoff LLP
2300
BP
Tower
200
Public Square
Cleveland,
Ohio 44114
Attention:
Harry M. Brown
Facsimile:
(216) 363-4588
or
to
such other place and with such other copies as either Party may designate
as to
itself by written notice to the other Parties. Prior to the Closing Date,
all
notices to the Companies shall be sent to the Shareholders’ Representative.
After to the Closing Date, all notices to the Companies shall be sent to
the
Purchaser.
14.06. Counterparts.
This
Agreement may be executed in one or more counterparts (including by facsimile
or
electronically transmitted copies), each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
14.07. Successors
and Assigns. No
Party
may assign, directly or indirectly, its rights or obligations hereunder without
the prior written consent of the other Parties. This Agreement shall be binding
upon and inure to the benefit of the successors, heirs, administrators,
executors and permitted assigns of the Parties hereto.
14.08. Shareholders’
Representative.
Each
Shareholder hereby irrevocably appoints Albert M. Wiggins, Jr. (the
“Shareholders’
Representative”)
as the
agent of such Shareholder for all purposes relating to or in connection with
any
transaction contemplated by or relating to this Agreement and to be carried
out
prior to, at or after the Closing including (i) approving any modifications
or
amendments to this Agreement, (ii) making decision with respect to the
determination of the Net Working Capital Adjustment Amount, (iii) the
appointment of the Escrow Agent and execution and delivery of the Escrow
Agreement, (iv) entering into any settlement or submitting the dispute to
the
Independent Accountant, (v) taking any action that may be necessary or
desirable, as determined by the Shareholders’ Representative, in its sole
discretion, in connection with the termination of this Agreement as provided
in
Article
XII,
(vi)
delivering or causing to be delivered to the Purchaser at the Closing
certificates representing the Company Shares, (vii) executing and delivering,
on
behalf of the Shareholders and the Companies any and all notices, documents
or
certificates to be executed by the Shareholders or the Companies in connection
with this Agreement and the transactions contemplated hereby; (viii) making
any
payments or paying any expenses under or in connection with this Agreement,
(ix)
granting any consent or approval on behalf of the Shareholders or the Companies
under this Agreement; and (x) resolving disputes with the Purchaser that
arise
under this Agreement including disputes regarding indemnification claims
by any
Party. Each Shareholder herby appoints the Shareholders’ Representative as such
Shareholder’s true and lawful attorney-in-fact and agent, with full powers of
substitution and resubstitution, in such Shareholder’s name, place and stead, in
any and all capacities, in connection with the transactions contemplated
by this
Agreement, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection with the sale of such Shareholder’s shares as fully to
all intents and purposes as such Shareholder might or could do in person.
Each
Shareholder hereby authorizes the Purchaser and its Affiliates to rely upon
the
agency created hereby and releases the Purchaser and its Affiliates from
any and
all liability to such Shareholder of whatever nature arising out of or relating
to such agency, to the same extent as though any act committed or omitted
by the
Shareholders’ Representative pursuant to such agency had been committed or
omitted by such Shareholder.
14.09. Schedules
and Exhibits.
Nothing
in any schedule attached hereto shall be adequate to disclose an exception
to a
representation or warranty made in this Agreement unless such schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other
item
shall not be adequate to disclose an exception to a representation or warranty
made in this Agreement, unless the representation or warranty has to do with
the
existence of the document or other item itself. No exceptions to any
representations or warranties disclosed on one schedule shall constitute
an
exception to any other representations or warranties made in this
Agreement.
EXECUTION VERSION
IN
WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement
as of the date first written above.
PURCHASER
OHI
Asset (OH), LLC
By:
/s/
Daniel J. Booth
Name:
Daniel J. Booth
Title:
Chief
Operating Officer
PARENT
Omega
Healthcare Investors, Inc.
By:
/s/
Daniel J. Booth
Name:
Daniel J. Booth
Title:
Chief
Operating Officer
SHAREHOLDERS
/s/
Hollis J. Garfield
Hollis
J. Garfield
/s/
Albert M. Wiggins, Jr.
Albert
M. Wiggins, Jr.
/s/
A.
David Wiggins
A.
David Wiggins
Estate
of Evelyn R. Garfield
By:
/s/
A.M. Wiggins, Jr.
A.M.
Wiggins, Jr.
Co-Executor
Evelyn
R. Garfield Revocable Trust
By:
/s/
Hollis G. Wiggins
Hollis
G.
Wiggins
Co-Trustee
SG
Trust B-Hollis Trust
By:
/s/
Hollis G. Wiggins
Hollis
G.
Wiggins
Trustee
Evelyn
Garfield Family Trust
By:
/s/
Hollis G. Wiggins
Hollis
G.
Wiggins
Co-Trustee
Evelyn
Garfield Remainder Trust
By:
/s/
Hollis G. Wiggins
Hollis
G.
Wiggins
Co-Trustee
COMPANIES
Baldwin
Health Center, Inc.
By:
/s/
Hollis J. Garfield
Hollis
J.
Garfield
President
Copley
Health Center, Inc.
By:
/s/
Hollis J. Garfield
Hollis
J.
Garfield
President
Hanover
House, Inc.
By:
/s/
Hollis J. Garfield
Hollis
J.
Garfield
President
House
of Hanover, Ltd.
By:
/s/
Hollis J. Garfield
Hollis
J.
Garfield
President
Pavillion
North, LLP, d/b/a Wexford
House
Nursing Center
By Pavillion
Nursing Center North, Inc.
General
Partner
By:
/s/
Hollis J. Garfield
Hollis
J.
Garfield
President
EXECUTION
VERSION
Pavillion
Nursing Center, North, Inc.
By:
/s/
Hollis J. Garfield
Hollis
J.
Garfield
President
Pavillion
North Partners, Inc.
By:
/s/
Hollis J. Garfield
Hollis
J.
Garfield
President
The
Suburban Pavilion, Inc.
By:
/s/
Hollis J. Garfield
Hollis
J.
Garfield
President
NEW
OPERATOR
OMG
MSTR LSCO, LLC
By:
/s/Stephen L. Rosedale
Name:
Stephen
L. Rosedale
Title: Chief Executive Officer
NEW
OPERATOR PARENT
CommuniCare
Health Services, Inc.
By:
/s/
Stephen L. Rosedale
Name:
Stephen L. Rosedale
Title: Chief
Executive Officer
LIMITED
PARTY
Emery
Medical Management Co.
By:
/s/
Hollis J. Garfield
Hollis
J.
Garfield
President