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Exhibit 2.12
COMPOSITE COPY
ASSET PURCHASE AGREEMENT
BY
AND
BETWEEN
BLC ACQUISITIONS, INC.,
A DELAWARE CORPORATION,
AS "PURCHASER"
AND
THE ENTITIES SET FORTH UNDER THE HEADING
"SELLER" ON THE SIGNATURE PAGES HERETO,
COLLECTIVELY AS "SELLER"
DATED: JANUARY 11, 2006
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COMPOSITE COPY
ASSET PURCHASE AGREEMENT
(As amended to include the First Amendment to Asset Purchase
Agreement
dated
February 10, 2006, the Second Amendment to Asset Purchase
Agreement dated February 17, 2006, the Third Amendment to Asset
Purchaser Agreement dated February 21, 2006, the Fourth Amendment
to
Asset Purchase Agreement and Reinstatement Agreement dated
February
21, 2006, and the Fifth Amendment to Asset Purchase Agreement
dated
March 24, 2006)
THIS
ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this 11th
day
of January, 2006 (the "Effective Date"), is made and entered into
by and between
BLC ACQUISITIONS, INC., a Delaware corporation ("Purchaser"), and
the entities
set forth under the heading "Seller" on the signature pages
hereto
(collectively, "Seller").
RECITALS
A.
Seller owns, or has valid and enforceable rights to purchase
pursuant to
a purchase agreement, and Seller operates, certain assisted living
facilities
located in the States of Alabama, Florida, Georgia and Tennessee,
together with
the real property and all appurtenances thereto, all as more
particularly
described on Exhibit A-1 (collectively, the "Owned Facilities").
Each Owned
Facility is licensed, to the extent required, for the number of
assisted living
units as set forth on Exhibit A-1;
B.
Seller leases certain assisted living facilities located in the
States
of Alabama, Florida, Tennessee and Mississippi, together with the
real property
and all appurtenances thereto, all as more particularly described
on Exhibit B-1
(collectively, the "Leased Facilities"). Each Leased Facility is
licensed, to
the extent required, for the number of assisted living units as set
forth on
Exhibit B-1 (the Owned Facilities and the Leased Facilities are
sometimes
referred to herein individually as a "Facility" and collectively as
the
"Facilities");
C.
The parties hereto desire to enter into this Agreement pursuant to
which
Purchaser will purchase from Seller, and Seller will sell, convey,
transfer and
assign to Purchaser, the following, hereinafter collectively
referred to as the
"Assets":
(i) fee simple title in and to the real property on which the
Owned
Facilities are located (the "Owned Real Property"), and Seller's
leasehold
estates and all other rights, title and interest of Seller
(including without
limitation any options to purchase or rights of first refusal) in
and to the
real property on which the Leased Facilities are located (the
"Leased Real
Property", which together with the Owned Real Property, is
sometimes referred to
herein collectively as the "Real Property", all of which is more
particularly
described on Exhibit "C-1");
(ii) Seller's fee simple interest (with respect to the Owned
Real
Property) and Seller's leasehold estate (with respect to the Leased
Real
Property) in and to all buildings,
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structures, facilities, amenities, driveways, walkways, parking
lots and other
improvements located on the Real Property (collectively, the
"Improvements");
(iii) all right, title and interest of Seller in and to any
alleys,
strips or gores adjoining the Real Property, any easements, rights
of way or
other interests in, on, under or to, any land, highway, street,
road or right of
way, open or proposed, in, under, across, abutting or benefiting
the Real
Property, and any pending or future action for condemnation,
eminent domain or
similar proceeding, or for any damage to the Real Property by
reason of a change
of grade thereof, and all other accessions, appurtenant rights, and
privileges
of Seller in and to the Real Property and the Improvements
(collectively, the
"Appurtenances");
(iv) good and marketable title in and to Seller's fee ownership
or
leasehold interest in and to all furniture, fixtures, furnishings,
equipment,
computers, machinery, mechanical systems, security and alarm
systems, nurse call
systems, automobiles, vans, buses or other vehicles or equipment
located at the
Facilities or used in connection therewith (collectively, the
"FF&E"); provided,
however, that any FF&E that is subject to an Equipment Lease
(as defined in
Section 2.10 below) shall be included in the FF&E to be
conveyed at Closing (as
defined in Section 1.2(a) below) by the assignment to and
assumption by
Purchaser of the underlying Equipment Lease;
(v) good and marketable title in and to all supplies,
inventory,
consumables, perishable and nonperishable food products, and other
similar
tangible property used in the operation of the Real Property and
the Facilities
(collectively, the "Inventory");
(vi)
all Assumed Tenant Leases (as defined in Section 5.3 below) and
all Equipment Leases;
(vii) all Assumed Contracts (as defined in Section 5.3 below);
(viii) all Residency Agreements (as defined in Section 2.7(b)
below);
(ix) to
the extent Seller's interest is assignable without violating
any and all applicable laws, rules, regulations, statutes,
ordinances or
requirements or any judgments, decrees, writs, injunctions or
orders of any
Governmental Authority (as defined in Section 2.4 below)
(collectively,
"Applicable Laws") and to the extent Purchaser in its sole
discretion elects to
assume the same, all Licenses (as defined in Section 2.3 below)
relating to or
used in connection with the Facilities or the operation
thereof;
(x) all right, title and interest of Seller in and to any trade
marks,
trade names, service marks, trade dress and all variations thereof;
all
telephone and facsimile numbers relating to the Facilities
(including all "800"
numbers); all post office box addresses associated with the
Facilities; all
software or other computer programs used in the connection with the
operation of
the Facilities which are by their terms assignable; all security
deposits posted
with respect to any Assumed Tenant Leases, Assumed Contracts,
Assumed Equipment
Leases and the Facility Leases; and all prepaid rent, reservation
deposits,
move-in fees and other prepaid items and deposits (excluding
utilities deposits)
related to the Facilities paid by Residents (as defined in
subparagraph (xi)
below) to Seller; and
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(xi) all books, data and records (including electronic versions
thereof) related to the operation of the Facilities, including
financial and
accounting records, customer lists, referral source lists,
regulatory surveys
and reports, incident tracking reports, advertising and marketing
materials and
competitive analyses, all policy and procedure manuals, all records
and reports
(except for such records and reports where transfer is prohibited
by Applicable
Law) relating to all residents at the Facilities, but only to the
extent such
Residents remain Residents on the Closing Date for the Facility in
which they
reside (collectively, "Residents") (collectively, "Resident
Records"), all
Employee Records (as defined in Section 4.15), but only to the
extent such
Employee Records are for Employees who become "Transitioned
Employees" (as
defined in Section 5.6), all leads regarding prospective Residents,
all
blueprints, construction and architects' plans and drawings, and
all engineering
data and reports (collectively, "Books and Records"); and
(xii) Seller's interest in any and all other items of tangible
and
intangible personal property used in connection with the ownership,
use,
operation and maintenance of the Real Property or the Facilities
(collectively,
together with the FF&E, the Inventory and the items described
in clauses (ix),
(x) or (xi) above, the "Personal Property"), and all goodwill of
Seller
associated with the businesses operated at the Facilities (the
"Business").
AGREEMENT
NOW,
THEREFORE, in consideration of the premises, and of the mutual
agreements, representations, warranties, conditions and covenants
herein
contained, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1
Transfer of Assets. For and in consideration of the foregoing and
the
terms and conditions herein provided, the receipt and sufficiency
of which are
herein acknowledged, Seller, in accordance with the terms and
subject to the
conditions hereof, shall convey, transfer and assign to Purchaser
at Closing,
and Purchaser shall purchase from Seller at Closing, all right,
title and
interest in and to the Assets. Notwithstanding anything to the
contrary
contained herein, the Assets shall not include the following
items
(collectively, the "Excluded Assets"):
(a) All bank accounts, cash, cash equivalents and securities;
(b) All sums relating to Medicare or Medicaid rate adjustments
relating to periods prior to Closing;
(c) Seller's organizational documents, minute books and other
books
and records relating solely to the maintenance and operations of
Seller as a
legal entity;
(d) The trade names "Wellington", "Wellington Group," and any
other
trade names using the term "Wellington" (but not the name
"Wellington Place",
which Purchaser shall have the sole and exclusive right to use);
and
(e) Those additional items set forth on Schedule 1.1(d)
attached
hereto.
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1.2
Closing.
(a) Unless this Agreement shall have been terminated pursuant to
an
express right to terminate as herein provided, the closing
hereunder shall occur
at 10:00 a.m. EST on March 31, 2006 (the "Original Closing Date");
provided,
however, the parties will use commercially reasonable efforts to
close the
transaction as early as March 28, 2006; and provided further,
however, Original
Closing Date hereunder may be deferred as to one (1) or more
Facilities as
provided in Section 1.2(b) and (c) below.
(b) (i) In the event that on the Original Closing Date, Seller has
not
obtained all of the Lessor Estoppels, Lease Consents and SNDAs (as
each such
term is hereinafter defined) (collectively, the "HRT Consents") for
the
assignment of all of the Facility Leases (as hereinafter defined)
for the Leased
Facilities, then the Leased Facilities shall, at the option of
Seller, become
Deferred Facilities subject to the provisions of subsection
1.2(b)(ii) below,
but Seller's obligation to sell the remainder of the Assets, and
Purchaser's
obligation to purchase the remainder of the Assets, shall remain in
full force
and effect and shall not be effected by the failure of Seller to
obtain the HRT
Consents.
(ii) In the event that on the Original Closing Date the
conditions precedent under Article VIII of this Agreement
(excluding the
obtaining of the HRT Consents) have not been satisfied or fulfilled
for all or
any portion of the Assets (any such unsatisfied conditions
precedent, a
"Delaying Event"), then Seller at Seller's option and election
shall have the
right, upon notice to Purchaser given on or prior to the Original
Closing Date
(a "Deferral Notice"), to extend the Original Closing Date as to
all of the
Facilities or only as to the Facilities to which such Delaying
Event relates
(the "Deferred Facilities") for a period of time, not to exceed
sixty (60) days
from the Original Closing Date (the "Deferral Period").
Notwithstanding the
foregoing, the initial Closing on the Original Closing Date (or
such later date
in the event of a Delaying Event) shall not occur unless there are
at least
twelve (12) Facilities included as part of such initial Closing. In
addition,
Purchaser and Seller shall use commercially reasonable efforts to
close on all
Facilities on the Original Closing Date. In order to accommodate
the
commercially reasonable efforts as described in the immediately
preceding
sentence, if appropriate, Purchaser and Seller shall negotiate to
permit
Purchaser or its nominee to operate under Seller's Licenses for any
Assets if
necessary to enable such closings to occur by the Original Closing
Date, but in
no event shall such "commercially reasonable efforts" be deemed or
interpreted
to require Purchaser to operate under Seller's Licenses if
operation under
Seller's Licenses fails to comply, or reasonably could be
interpreted as
creating a risk of noncompliance, with all Applicable Laws.
Notwithstanding the
foregoing, if the HRT Consents are not obtained prior to the
Original Closing
Date and all other conditions precedent shall have been fulfilled
or satisfied,
then Seller shall not be entitled to extend the Original Closing
Date, and the
Closing for all of the Facilities other than the Leased Facilities
shall proceed
on the Original Closing Date, but Seller shall have the right to
give a Deferral
Notice to extend the Closing Date as to the Leased Facilities only
for a period
of time not to exceed sixty (60) days from the Original Closing
Date without
affecting Closing as to the other Facilities. In such event, the
Leased
Facilities shall constitute Deferred Facilities and the failure to
obtain the
HRT Consents shall constitute a Delaying Event as to the Leased
Facilities only,
and the provisions of subsection 1.2(c) shall apply to the Leased
Facilities
separate from the other facilities.
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(c) In the event of any Delaying Event resulting in any
Deferred
Facilities, if Seller is entitled to defer Closing as to all of the
Facilities
pursuant to the terms hereof but does not elect to defer Closing as
to all of
the Facilities, then Purchaser and Seller shall proceed with the
Closings for
all Facilities which are not Deferred Facilities, if any, on the
Original
Closing Date (provided the requirement that not less than twelve
(12) Facilities
shall be closed has been satisfied) and the Closing Date for all
Deferred
Facilities shall be delayed, but in no event later than the last
date of the
Deferral Period. Purchaser may at any time waive any Delaying Event
based on a
condition contained in Article 8. If Seller is entitled to defer
Closing
pursuant to the terms hereof and elects to defer the Closing Date
as to some but
not all of the Facilities, Closing shall occur as to all Facilities
that are not
Deferred Facilities on the Original Closing Date and Closing as to
each Deferred
Facility shall occur on the fourteenth (14th) day after the
Delaying Event
applicable to such Facility has been satisfied. If any Delaying
Event has not
been satisfied or remedied or waived by Purchaser by the end of the
Deferral
Period, any remaining Deposits shall be returned to Purchaser, this
Agreement
shall terminate and neither party shall have any further rights
hereunder except
as expressly survive. In the event that any Delaying Event is
satisfied or
remedied within the final fourteen (14) day period of the Deferral
Period, the
Closing Date for the Facilities affected by such Delaying Event
shall be
automatically extended on a day to day basis for each day less than
such
fourteen (14) days, so as to permit Seller and Purchaser to have a
full fourteen
(14) day period to effect an orderly transition of such
Facility.
Notwithstanding anything contained herein to the contrary, if
Seller is entitled
to defer Closing pursuant to the terms hereof and elects to defer
Closing as to
all Facilities and all Delaying Event(s) are not satisfied or
waived by the end
of the Deferral Period, Seller shall have no obligation to sell any
Facilities
to Purchaser.
(d) The closing for any Facility hereunder, whether on the
Original
Closing Date or an extended Closing Date pursuant to Section 1.2(b)
and (c), is
hereinafter referred to as the respective "Closing" for such
Facility, and the
date on which such Closing occurs is hereinafter referred to as the
respective
"Closing Date" for such Facility. The parties agree that there may
be multiple
Closings and Closing Dates pursuant hereto, and in each case in
which such
defined terms are used in this Agreement, such terms shall refer to
the
respective Closing Date and Closing for the respective Assets and
Facilities for
which the consummation of the transactions contemplated hereby are
occurring.
All Closings hereunder shall be effective for accounting purposes
as of 12:01:01
a.m. on the day after the respective Closing Date.
(e) In the event that there is more than one Closing Date
pursuant
hereto, then the Purchase Price (as hereinafter defined) and the
Deposits shall
be paid and applied in accordance with Sections 1.4 and 1.7 and
Schedule 1.7 and
all pro rations and adjustments shall be applied only with respect
to the
portion of the Assets to which they relate, and at Closing, the
applicable
portion of the Purchase Price shall be wire transferred by
Purchaser to the
Escrow Agent, as defined below, on the Closing Date.
(f) On each Closing Date, all executed documents required from
Seller
under Section 10.1(a) (the "Seller Documents") and from Purchaser
under Section
10.1(b) (the "Purchaser Documents") in order to effectuate the
consummation of
the Closing with respect to the applicable Facility or Facilities
shall be
delivered to the offices of Rogers & Hardin, Atlanta, Georgia,
or at such other
date, time and place as Purchaser may reasonably require taking
into
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account the relative location of the parties and any lenders.
Notwithstanding
the foregoing, (i) Seller may deliver all of the Seller Documents
required
hereunder with respect to the Closing to the Title Company, as
escrow agent (the
"Escrow Agent") or Purchaser's counsel on or before the Closing
Date (to hold in
escrow in accordance with customary conveyancing practices subject
to the
consummation of the Closing) by overnight courier, and (ii)
Purchaser may
deliver all of the Purchaser Documents required hereunder with
respect to the
Closing to the Escrow Agent on or before the Closing Date (to hold
in escrow in
accordance with customary conveyancing practices subject to the
consummation of
such Closing) by overnight courier.
1.3
Purchase Price. The purchase price for the Assets shall be
Seventy-Nine
Million Five Hundred Thousand Dollars ($79,500,000), subject to the
prorations
and further adjustments as provided for in this Agreement. The
Purchase Price
will be allocated among the Assets as provided for on Schedule 1.7
and to the
extent there are multiple Closing Dates pursuant hereto, the
portion of the
Purchase Price payable at such Closing and the portion of the
Deposits allocable
to such Closing. shall be determined in accordance with Section 1.4
and Schedule
1.7. In addition, in consideration for the Assets, Purchaser shall
assume the
Assumed Liabilities (as defined in Section 1.6).
The
parties acknowledge Purchaser's due diligence efforts have
identified a
number of items requiring capital expenditures and Seller has
agreed that a
portion of the Purchaser Price is to be made available to Purchaser
to enable
Purchaser to repair and replace such items. Accordingly, at the
Initial Closing
hereunder, Purchaser shall deposit into a separate deposit account
held by
Purchaser or such third party as Purchaser in its sole discretion
shall elect,
the sum of One Million Seven Hundred Seventeen Thousand Four
Hundred Sixty-Seven
and No/100 Dollars ($1,717,467) (the "Purchase Price Holdback"),
which amount
shall be a deduction from the Purchase Price, for the purpose of
providing
Purchaser with a readily available source of funds to repair and
replace such
capital items discovered by Purchaser in the course of its due
diligence. The
funds deposited in the Purchase Price Holdback account shall belong
solely and
exclusively to Purchaser, and Seller shall have no right to direct
the release
of such funds, or object to disbursement of such funds, or to
demand any portion
thereof, or any audit of the use of such funds, and Purchaser's
access to and
use of such funds shall be unrestricted in all respects. In the
event any
Facility is not included in the initial closing, then $100,000 per
such Facility
shall not be part of the Purchase Price Holdback at the initial
closing but such
$100,000 shall be held back and become part of the Purchase Price
Holdback upon
the closing for such Facility.
1.4
Earnest Money. Purchaser and Seller acknowledge that Purchaser
has
previously delivered to Escrow Agent an initial earnest money
deposit in the
amount of One Million and No/100 Dollars ($1,000,000) (the "Initial
Deposit")
and an additional earnest money deposit in the amount of Two
Million Dollars
($2,000,000) (the "Due Diligence Deposit"). Purchaser and Seller
hereby direct
Escrow Agent to refund Five Hundred Thousand Dollars ($500,000) of
the foregoing
deposits to Purchaser immediately upon execution of the Fifth
Amendment and
Purchaser and Seller hereby acknowledge that the remaining Two
Million Five
Hundred Thousand Dollars ($2,500,000) and all interest accrued
thereon are
hereinafter referred to both individually and collectively as the
context may
require as the "Deposits". Escrow Agent shall hold the Deposits in
one or more
interest bearing accounts mutually acceptable to Seller and
Purchaser. The
Deposits are fully refundable during the Due Diligence Period.
After the
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expiration of the Due Diligence Period without termination by
Purchaser during
such period, the Deposits shall be non-refundable except as
specifically set
forth in this Agreement.
(a) In the event Closing occurs, the allocable portion of the
Deposits
shall be disbursed by Escrow Agent to Seller and applied against
the allocable
portion of the Purchase Price payable at such Closing and Purchaser
shall
receive a credit therefor, provided, however, that notwithstanding
anything
contained herein to the contrary, if at the initial Closing
hereunder, less than
all of the Facilities are then being closed, the amount of the
Deposits that
will continue to be held by Escrow Agent shall be an amount not
less than the
product of (i) the number of Deferred Facilities for which Closing
has not yet
occurred multiplied by (ii) $250,000.00 per Deferred Facility as of
such time.
(b) In the event
Purchaser terminates this Agreement on or before the
expiration of the Due Diligence Period, then the Escrow Agent shall
immediately
refund the Deposits to Purchaser irrespective of any alternative
instructions
from Seller.
(c) In the event that after the expiration of the Due Diligence
Period, this Agreement is terminated by either Purchaser or Seller
pursuant to
an express right to terminate, the Deposits shall be disbursed by
Escrow Agent
pursuant to the express terms of this Agreement.
1.5
Payment of Purchase Price. At each Closing, Purchaser shall pay
the
respective portion of the Purchase Price, adjusted for any
prorations, credits
and additions for the benefit of Purchaser or Seller as specified
in this
Agreement, less the allocable portion of the Deposits pursuant to
Sections 1.4
and 1.7, by wire transfer of immediately available federal funds to
the Escrow
Agent.
1.6
Assumed Liabilities. At each Closing, Purchaser shall NOT assume
any
liabilities or obligations of Seller whatsoever, fixed or
contingent, other than
liabilities and obligations assumed by Purchaser at Closing
pursuant hereto with
respect only to the following, and then only to the extent such
obligations and
liabilities relate to periods after Closing: (a) the Assumed Tenant
Leases, the
Equipment Leases and the Assumed Contracts, if applicable, (b) all
Residency
Agreements for all Facilities, and (c) the Assumed Facility Leases
for all
Facilities, if applicable ((a) - (c) are sometimes collectively
referred to
herein as the "Assumed Liabilities"). Seller shall retain and
discharge in the
ordinary course all liabilities and obligations of Seller other
than the Assumed
Liabilities.
1.7
Allocation of Purchase Price. The Purchase Price and the Deposits
shall
be allocated among the Assets at Closing as provided and as
described in Section
1.4 hereof and on Schedule 1.7 attached hereto. The parties shall
negotiate in
good faith and use their commercially reasonable efforts to agree
upon the form
of Schedule 1.7 within the Due Diligence Period; provided, however,
in the event
the parties are unable to so agree, then (i) in the event that on
the Original
Closing Date or any subsequent Closing Date less than all of the
Facilities can
be closed due to a Delaying Event (other than the failure to obtain
the HRT
Consents), then the Closing Date shall be extended until the
Delaying Events
(other than the failure to obtain the HRT Consents) for all
Facilities have been
satisfied or removed such that the entirety of the Deposits can be
applied at
the Closing, and each party shall be free to allocate the
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Purchase Price in accordance with their own calculations and
without regard to
the other party's allocation and (ii) in the event that on the
Original Closing
Date or any subsequent Closing Date, closing on all Facilities
other than the
Leased Facilities has occurred, the parties agree the Purchase
Price for the
Assets (other than those relating to the Leased Facilities) shall
be $79,500,000
and the amount of the Deposits allocable to the Leased Facilities
shall continue
to be held by the Escrow Agent until the expiration of the Deferral
Period. If
the parties are able to agree upon Schedule 1.7, then Seller and
Purchaser each
hereby covenant and agree that neither will take a position on any
income tax
return, before any governmental agency charged with the collection
of any income
tax, in any judicial proceeding or otherwise with or before any
Governmental
Authority that is any way inconsistent with the terms of this
Section 1.7 and
Schedule 1.7, and at Closing Seller and Purchaser shall covenant to
timely file
IRS Form 8594 using the allocations set forth on Schedule 1.7.
1.8
Due Diligence Period. Between the date of this Agreement and
February
21, 2006 (the "Due Diligence Period"), Purchaser shall have the
right to
terminate this Agreement as to all Facilities by written notice to
Seller in the
event Purchaser, in Purchaser's sole discretion, is not satisfied
with the
Assets for any reason, which reason need not be specified in such
notice,
provided that such notice is delivered (in accordance with the
provisions of
Section 12.3 hereof) to Seller on or prior to 7:00 p.m. EST on the
last day of
the Due Diligence Period. The parties agree that Purchaser shall
not request
further due diligence information from Seller after January 31,
2006 until
February 10, 2006, other than as required for completion for third
party
reports, but Purchaser's rights of access to information after
February 10,
2006, shall continue to be as set forth in Section 4.3. In no event
shall there
be any partial termination under this Section 1.8(b). If such
notice of
termination is so delivered on or before 5:00 p.m. on the last day
of the Due
Diligence Period, then Purchaser shall be entitled to receive the
Deposit from
Escrow Agent and the parties shall thereafter be released from all
further
obligations under this Agreement, except those provisions that
expressly survive
the termination of this Agreement. If Purchaser does not terminate
this
Agreement as set forth in this Section 1.8 or as otherwise provided
herein, then
this Agreement shall remain in full force and effect. The parties
agree to
confirm in writing the expiration date of the Due Diligence Period
upon request
of either Seller or Purchaser. The Deposits shall be nonrefundable
after the
expiration of the Due Diligence Period except as specifically set
forth in this
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
As
an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated herein, Seller represents
and warrants
the following, each of which warranties and representations is
material to and
is relied upon by Purchaser:
2.1
Organization and Qualification. Each of the entities that
comprise
Seller are duly organized and validly existing and in good standing
under the
laws of each of their respective states of organization, each with
full power
and authority to carry on its respective business as currently
being conducted
and to own or lease and operate the Assets it owns or leases as and
in the
places now owned, leased or operated, respectively.
2.2
Authority; Binding Effect.
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(a) Subject to the Required Consents, Seller has, and at each
Closing
will have, the full and unrestricted right, power and authority to
execute,
deliver and perform this Agreement and to consummate the
transactions and
perform all obligations contemplated hereby and in all agreements,
instruments
and documents being or to be executed and delivered by Seller in
connection with
such transactions, including without limitation the Seller
Documents
(collectively, "Related Documents").
(b) This Agreement and each Related Document, upon due execution
and
delivery by Seller, will constitute the legal, valid, and binding
obligation of
Seller, enforceable in accordance with its respective terms.
(c) Seller has obtained, or will obtain prior to the expiration of
the
Due Diligence Period, any required corporate, partnership or
limited liability
company approval required for the execution and consummation of
this Agreement,
the Related Documents and all transactions contemplated hereby and
thereby.
2.3
Licenses. Schedule 2.3 sets forth all permits, licenses,
Medicaid,
Medicare and other provider agreements and other authorizations
issued and
required by Governmental Authorities in connection with the
ownership,
maintenance and operation of the Facilities, including, without
limitation, such
licenses required for the operations of the Facilities as assisted
living
facilities (collectively, the "Licenses"), and except as set forth
on Schedule
2.3, the Licenses are in good standing and Seller has not received
written
notice that Seller is in violation of any restriction, rule or
regulation
affecting possession and use thereof. Except as set forth on
Schedule 2.3,
Seller is the holder of all the Licenses and there is no other
person or entity
who operates, manages or subleases the operations of the
Facilities.
2.4
Governmental Authorities. Except as set forth on Schedule 2.4
attached
hereto, Seller is not required to submit any notice, report or
other filing with
any federal, state, municipal, foreign or other governmental or
regulatory
authority (collectively, "Governmental Authorities") in connection
with Seller's
execution or delivery of this Agreement or any of the Related
Documents or the
consummation of the transactions contemplated hereby and no
consent, approval or
authorization of any Governmental Authority is required to be
obtained by Seller
in connection with the execution, delivery and performance of this
Agreement.
2.5
Taxes. Except as set forth in Schedule 2.5 attached hereto, all
real
property taxes and assessments, and all personal property taxes and
assessments,
in connection with the Assets allocable to the period prior to
Closing have been
paid or, by the time of each Assets' respective Closing, will be
paid or
prorated between the parties hereto. In addition, except with
respect to items
to be paid at Closing, (i) all income, sales, bed and franchise
taxes due and
payable by Seller, if any, and all interest and penalties thereon,
if any, have
been paid in full; (ii) all tax returns required to be filed by
Seller, if any
(including, without limitation, all sales, franchise and payroll
tax returns and
reports), have been properly and timely filed, and correctly
reflect the tax
position of Seller, and all taxes respectively due under such tax
returns have
been paid thereby or will be paid in the ordinary course of
Seller's business;
(iii) Seller is not subject to a claim for deficiency or other
action in
connection with any taxes; and (iv) no tax returns of Seller have
been or are
being examined by the Internal Revenue Service or any state or
local
Governmental Authority.
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2.6
No Defaults. Except as set forth on Schedule 2.6, the
execution,
delivery and performance of this Agreement and any of the Related
Documents by
Seller does not and will not:
(a) Conflict with or result in any breach of the provisions of,
or
constitute a default under the articles of incorporation, bylaws,
articles of
organization, operating agreement or other governing organizational
documents,
as the case may be, of any entity comprising Seller;
(b) Violate any restriction to which Seller is subject or, with
or
without the giving of notice, the passage of time, or both, violate
(or give
rise to any right of termination, cancellation or acceleration
under) the
Facility Leases, the Conveyance Asset Leases (as defined in Section
2.8(b)) or
any mortgage, deed of trust, license, lease, indenture or other
material
agreement or instrument, whether oral or written, to which Seller
is a party, or
by which it or the Assets are bound, which will not be fully
satisfied, assigned
or terminated on or prior to each Closing as a result of the
transactions
contemplated in this Agreement, or result in the termination of any
such
instrument or termination of any provisions in such instruments, or
result in
the creation or imposition of any lien, charge or encumbrance upon
the Assets;
(c) Create any liens or other encumbrances on the Assets in favor
of
third parties;
(d) Constitute a violation of any Applicable Law of any
Governmental
Authority; or
(e) Result in the breach or violation of any of the warranties
and
representations herein set forth by Seller.
2.7
Contracts.
(a) Schedule 2.7(a) attached hereto includes a true and correct
list
as of the Effective Date of all outstanding contracts or
agreements, whether
written or oral, relating to the Assets, and Seller has provided to
Purchaser
true and complete copies of each such Contract, excluding (i)
service contracts
entered into in the ordinary course prior to the Effective Date
which do not
effect more than one (1) Facility, do not involve annual payments
in excess of
$6,000 per annum and are terminable upon not more than thirty (30)
days' notice,
(ii) the Residency Agreements, (iii) the Equipment Leases, (iv) the
Facility
Leases and (v) the Conveyance Asset Leases (such contracts and
agreements
expressly including (i) but excluding (ii) - (v), collectively,
the
"Contracts"). Seller has not received written notice of any
default, and to the
knowledge of Seller, there is no default, existing or continuing by
Seller or
any other party, under the terms of any Contracts, and, to Seller's
knowledge,
each Contract is in full force and effect and is valid and
enforceable by Seller
in accordance with its terms, assuming the due authorization,
execution and
delivery thereof by each of the other parties thereto.
(b) Included on Schedule 2.7(b) are specimen residency
agreements
("Residency Agreements") and a rent roll dated as of December 2,
2005 for each
Facility setting forth all such agreements in effect as of the
Effective Date.
All Residency Agreements are terminable by the Resident therein
named upon
thirty (30) days notice. Except set forth on
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Schedule 2.7(b), all Residents of the Facilities have executed
Residency
Agreements, and all Residency Agreements do not vary in any
material respect
from the terms of the specimen agreements attached hereto, were
entered into on
an arms' length basis and do not provide for payment of a single
sum in exchange
for lifetime care or other prepaid services. True, correct and
complete copies
of all Residency Agreements are located at the Facilities to which
they relate
and access thereto will be provided to Purchaser as part of its due
diligence
review.
2.8
Title to Property and Related Matters.
(a) Seller has received no written notice of and Seller has no
knowledge of (a) any violations of any covenants or restrictions
encumbering the
Assets, or (b) any violations of any zoning codes, or ordinances or
other
Applicable Laws of any Governmental Authorities applicable to the
Assets. Seller
has no knowledge of any agreements, documents, or instruments which
are not
recorded among the land records but which affect the title to any
Facility.
Subject to Permitted Liens (as hereinafter defined) Seller has good
and
marketable fee simple title to the Owned Facilities and all Assets
associated
therewith, except for the Owned Facilities which are set forth on
Schedule
2.8(a) (the "Conveyance Assets") that are currently leased by
Seller pursuant to
the leases more particularly described thereon, including all
documents and
instruments executed by Seller in connection therewith as set forth
on such
schedule and including all amendments and modifications thereto
(the "Conveyance
Asset Leases"). Seller hereby represents and warrants that Seller
has a valid
and enforceable right to purchase the Conveyance Assets pursuant to
valid
purchase agreements and which Seller is obligated to acquire fee
simple title to
and to convey to Purchaser, or to cause Purchaser to acquire
directly, pursuant
to Section 4.17. Seller has title to the Owned Assets other than
the Conveyance
Assets free and clear of all mortgages, liens, pledges, charges or
encumbrances
of any kind or character, except for (i) the indebtedness evidenced
by recorded
mortgages of record, which Seller shall cause to be paid and
released as of
Closing; (ii) statutory liens for taxes and other impositions which
are not yet
delinquent; (iii) the matters defined as "Permitted Encumbrances"
in
Section 4.10(b) hereof, and (iv) such encumbrances as will be cured
or removed
by Seller as of the Closing for such portion of the Assets
encumbered thereby
("Permitted Liens").
(b) Seller is the holder of valid and existing leasehold estates,
as
lessee, of the Conveyance Assets and the Leased Facilities, for the
terms set
forth in and pursuant to the terms of the Conveyance Asset Leases
and the leases
for the Leased Facilities (collectively, the "Facility Leases").
True and
complete copies (including amendments, if any) of the Facility
Leases have been
delivered to Purchaser and are listed on Schedule 2.8(b), which
Schedule 2.8(b)
also contains a list of all documents and instruments delivered in
connection
with the Facility Leases and the names of the lessors under the
Facility Leases
(the "Facility Lessors"). Each of the Conveyance Asset Leases and
the Facility
Leases are in full force and effect, Seller is not in default under
and Seller
has not received written notice of, and Seller does not have any
knowledge of,
any default or breach under any of the Conveyance Asset Leases or
the Facility
Leases by any party thereto. To the knowledge of Seller, no event
has occurred
which with the giving of notice or lapse of time, or both, would
cause a breach
or a default by any party under the Conveyance Asset Leases and the
Facility
Leases.
(c) Except for Personal Property leased pursuant to the
Equipment
Leases and the Facility Leases, Seller owns good and marketable
title to all
Personal Property.
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(d) All Facilities are supplied with such utilities as are
necessary
for the operation of such Facilities as currently operated and for
their
intended purposes.
(e) Each of the Facilities abuts on and has direct vehicular access
to
a public road, or has access to a public road via a permanent
irrevocable
easement benefiting the Real Property upon which such Facility is
located, and
Seller has no knowledge of, and has received no notice that alleges
any breach
or default under any instrument creating such easement or
attempting to
terminate or revoke such easement.
(f) There are no pending rezoning or other pending land use
actions
affecting the Assets and Seller has not received written notice of
and has no
knowledge of any threatened or contemplated rezoning or other land
use actions
affecting or which will affect the Assets. The current use of each
Leased
Facility and Owned Facility is lawfully permitted either as a
currently
conforming use or as a fully legally "grandfathered use", and there
is no known
violation of any Applicable Laws relating to the zoning, land use,
building
codes and other similar requirements of Governmental
Authorities.
(g) At the Closing, Seller shall not be indebted to any
contractor,
laborer, mechanic, materialman, architect or engineer for work,
labor or
services performed or rendered, or for materials supplied or
furnished, in
connection with the Assets for which any such person could lawfully
claim a lien
against the Assets.
(h) There are no condemnation or eminent domain proceedings
pending,
or, to the knowledge of Seller, threatened or contemplated against
the Assets or
any part thereof, or access thereto, and Seller has not received
notice, oral or
written, of the desire of any public authority or other entity to
take or use
the Assets or any part thereof. Between the date hereof and the
Closing, Seller
will give Purchaser prompt written notice of any actual or any
threatened or
contemplated condemnation of any part of the Assets of which Seller
receives
written notice or obtains knowledge.
(i) There are no parties other than Seller in possession of the
Assets, or any portion thereof, other than tenants under the Tenant
Leases set
forth in Schedule 2.10 who are in possession of space to which they
are entitled
and Residents pursuant to Residency Agreements, all of whom are set
forth on the
rent rolls attached as part of Schedule 2.7(b).
(j) There are no outstanding options or rights of first refusal
to
purchase the Assets or any portion thereof or interest therein,
other than
rights running in favor of Seller, all of which are being assigned
as part of
the Assets.
(k) The Assets constitute all of the asset necessary and sufficient
to
conduct the operation of the Facilities in the manner that such
operations have
been conducted by Seller.
2.9
Hazardous Substances. For purposes of this Agreement,
"Environmental
Laws" means the Resource Conservation and Recovery Act (RCRA), 42
U.S.C. Section
6901 et seq., the Comprehensive Environmental Response,
Compensation and
Liability Act (CERCLA), 42 U.S.C. Sections 9601 et seq., the Clean
Water Act, 33
U.S.C. Section 1251 et seq., the Toxic Substances Control Act (15
U.S.C. Section
2601 et. seq.), the Clear Air Act (42 U.S.C. Section 7401 et.
seq.), the Safe
Water Drinking Act (42 U.S.C. Section 300(f) et. seq.), the
Occupational Safety
and Health
12
<PAGE>
Act, and all other applicable state, county, municipal,
administrative or other
environmental, hazardous waste or substance, health and/or safety
laws,
ordinances, rules, regulations, judgments, orders and requirements
of any
Governmental Authority relating or pertaining to the (A) any aspect
of the
environment, (B) preservation or reclamation of natural resources,
(C) the
management, release and threatened release of Hazardous Substances,
(D) response
actions and corrective actions regarding Hazardous Substances, (E)
the
ownership, operation and maintenance of personal and real property
which manages
or releases Hazardous Substances or at which Hazardous Substances
are managed,
(F) common law torts, including so-called "toxic torts", and (G)
environmental
or ecological conditions on, under or about the Assets, as any of
the foregoing
may hereafter be amended, modified, reauthorized or reinterpreted,
and all
amendments and regulations promulgated thereunder. For purposes of
this
Agreement, "Hazardous Substance" shall mean any and all substances,
wastes,
materials, pollutants, contaminants, compounds, chemicals or
elements which are
defined or classified as a "hazardous substance", "hazardous
material", "toxic
substance", "hazardous waste", "pollutant", "contaminant" or words
of similar
import under any Environmental Law, including without limitation
all
dibenzodioxins and dibenzofurans, polychlorinated biphenyls (PCBs),
petroleum
hydrocarbon, including crude oil or any derivative thereof, any
radioactive
material, raw materials used or stored in the Facility and building
components
including, asbestos-containing materials in any form, radon gas and
mold of a
type or in amounts that may present a health hazard.
(a) Except as set forth on Schedule 2.9, to Seller's knowledge,
the
Assets do not contain any Hazardous Substance, except for Hazardous
Substances
typically used in, and in quantities necessary for the day-to-day
operation of,
the Facilities and which are commonly used in other similar
facilities, such as
cleaning fluids, insecticides and medicines (the "Common
Products"), which
Common Products have been used, transported, stored and disposed of
by Seller in
compliance with all applicable Environmental Laws;
(b) Except as set forth on Schedule 2.9, there is no pending or
threatened litigation or proceeding before any Governmental
Authority in which
any person or entity alleges the presence, release or threat of
release of any
Hazardous Substance or violation of Environmental Laws at a
Facility;
(c) Except as set forth on Schedule 2.9, Seller has not received
any
notice of, and has no knowledge that, any Governmental Authority or
employee or
agent thereof has determined, or threatens to determine, or is
investigating,
that there is a presence, release or threat of release or placement
on, in or
from the Assets, or the generation, transportation, storage,
treatment, or
disposal at the Assets, of any Hazardous Substance. Seller shall
notify
Purchaser promptly of its receipt of any such notice or knowledge
after the
Effective Date;
(d) Except as set forth on Schedule 2.9 Seller has owned and
operated
the Assets in compliance with all applicable Environmental Laws,
has obtained
all necessary permits under the Environmental Laws for Seller's
operations on
the Assets, and has not used any of the Assets for the generation,
storage,
manufacture, use, transportation, disposal or treatment of
Hazardous Substances
except for the use of de minimus quantities in the ordinary course
of business
in compliance with applicable Environmental Laws;
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<PAGE>
(e) Except as set forth on Schedule 2.9, there has been no
discharge
of any Hazardous Substance on or from any of the Assets during the
time of
Seller's ownership or occupancy thereof; and
(f) Seller has delivered to Purchaser copies of all reports or
tests
in Seller's possession with respect to the compliance of the
Facilities or the
Real Property with the Environmental Laws or the presence of
Hazardous
Substances on the Facilities or the Real Property.
2.10
Leases. Schedule 2.10 attached hereto contains a true and correct
list
of all leases (inclusive of all amendments) of all machinery,
equipment and
other tangible property leased to Seller which are used at or
relate primarily
to the Facilities (collectively, the "Equipment Leases") and all
leases of space
in the Facilities by Seller to third party service providers, such
as physical
therapists or beauty shop operators (collectively, the "Tenant
Leases" and
sometimes collectively with the Equipment Leases, the "Leases").
Except as
disclosed on Schedule 2.10, each Lease is in full force and effect;
all rents
due on or before the Effective Date under each Lease have been
timely paid and
there has not been and there is no ongoing issue or dispute as to
past rental
payments; in each case, neither Seller, nor, to the knowledge of
Seller, any
other party to any such Lease is in default in any respect
thereunder; and no
waiver, indulgence or postponement of Seller's obligations
thereunder has been
granted by the lessor under any Equipment Lease or by Seller as the
lessor under
the Tenant Leases, and Seller has no knowledge of and has not
received written
notice that there exists any occurrence, event, condition or act
which, upon the
giving of notice or the lapse of time or both, would become a
default by Seller
(or, to the knowledge of Seller, any lessor or tenant) under any
such Lease.
2.11
Patriot Act. Seller is in compliance with the requirements of
Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the
"Order") and
other similar requirements contained in the rules and regulations
of the Office
of Foreign Assets Control, Department of the Treasury ("OFAC") and
in any
enabling legislation or other Executive Orders or regulations in
respect thereof
(the Order and such other rules, regulations, legislation or orders
are
collectively called the "Orders"). Neither Seller nor any of its
affiliates (A)
is listed on the Specially Designated Nationals and Blocked Person
List
maintained by OFAC pursuant to the Order and/or on any other list
of terrorists
or terrorist organizations maintained pursuant to any of the rules
and
regulations of OFAC or pursuant to any other applicable Orders
(such lists are
collectively referred to as the "Lists"), (B) is a Person (as
defined in the
Order) who has been determined by competent authority to be subject
to the
prohibitions contained in the Orders; or (C) is owned or controlled
by
(including without limitation by virtue of such Person being a
director or
owning voting shares or interests), or acts for or on behalf of,
any person on
the Lists or any other Person who had been determined by competent
authority to
be subject to the prohibitions contained in the Orders.
2.12
Survey Reports, Etc.; Compliance with Law. Seller has or will
pursuant
to Section 1.8 deliver to Purchaser true and complete copies of all
survey
reports, waivers of deficiencies, plans of correction, and any
other
investigation reports issued with respect to the Facilities
(collectively,
"Licensing Surveys") for the last two (2) years. There are no
material
deficiencies or violations noted in any Licensing Surveys, and
except as set
forth on Schedule 2.12, Seller has remedied, discharged and
complied with all
applicable plans of correction, such
14
<PAGE>
that there are no current violations or deficiencies with respect
to any of the
Licenses or will do so pursuant to Section 4.18. Except as
disclosed on Schedule
2.12, Seller and the operation of the Facilities is in material
compliance with
all Applicable Laws of all Governmental Authorities. There are no
outstanding
bed taxes or other fees owing to state licensing authorities or any
of the
Government Programs, there are no outstanding Life Safety Code
deficiencies for
any of the Facilities, there are no outstanding waivers for any
Life Safety Code
deficiencies, and there are no pending Medicare or Medicaid audits
by any
Governmental Agency except as set forth on Schedule 2.12.
2.13
Capital Expenditures. Except as set forth in Schedule 2.13, and
except
for routine expenditures for repairs and replacements in connection
with the
ongoing maintenance and upkeep of the Facilities, which Seller has
covenanted
and agreed pursuant to Section 4.1 hereof to undertake and complete
in the
ordinary course consistent with past practices, Seller does not
have any
outstanding contracts for capital expenditures relating to the
Facilities, nor
does Seller have any agreement, obligations or commitments for
capital
expenditures relating to the Facilities, including, without
limitation,
additions to property, plant, equipment or intangible capital
assets. Seller
will cause the items set forth on Schedule 2.13 to be completed in
a good and
workmanlike manner prior to the Closing Date for the applicable
Facility.
2.14
Absence of Notices. Except as disclosed on Schedule 2.14, Seller
has
not received any written notice, and has no knowledge, that (a) any
material
customer or supplier of Seller intends to discontinue,
substantially alter
prices or terms to, or significantly diminish its relationship with
the
Facilities, either as a result of the transaction contemplated
hereby or
otherwise or (b) any federal, state, county, municipal or other
Governmental
Authority is alleging any fire, health, safety, building,
pollution,
environmental, zoning or other violation of Applicable Law,
including, without
limitation, applicable health care licensure laws, in respect of
any Facility or
any part thereof, which has not been corrected.
2.15
Resident Records. Except as provided on Schedule 2.15, Seller
has
received no written notice, and has no knowledge (a) that Resident
Records used
or developed in connection with the Business conducted at the
Facilities have
not been maintained in accordance with any Applicable Laws
governing the
preparation, maintenance of confidentiality, transfer and/or
destruction of such
records, and (b) of any material deficiency in the Resident Records
or any other
Books and Records of the Facilities.
2.16
Advance Payments and Patient Funds. The accounting for advance
payments and trust fund accounts provided to Purchaser by Seller
pursuant to the
provisions of Section 10.2 hereof is complete and accurate in all
material
respects.
2.17
Medicare and Medicaid Participation.
(a) No portion of the income from any Property is attributable
to
Medicare, Medicaid or any other third party payor program, except
as shown on
the Rent Roll attached as Schedule 2.7(b).
(b) Except as set forth on Schedule 2.17,
15
<PAGE>
(i) if any Facility has historically received Medicare or
Medicaid reimbursement, it is eligible to receive payment without
restriction
under Title XVIII ("Medicare") and Title XIX ("Medicaid") of the
Social Security
Act, or both, and is a "provider" with valid and current provider
agreements and
with one or more provider numbers with the federal Medicare and all
applicable
state Medicaid and successor programs. For purposes of this
provision, Medicare,
Medicaid, CHAMPUS, TRICARE and other federal, state or local
governmental
reimbursement programs, or successor programs to any of the above,
are referred
to as "Government Programs".
(ii) no Facility has historically received payments under
CHAMPUS
or TRICARE directly nor, to Seller's knowledge, indirectly, nor was
any Facility
or Seller ever a "provider" with provider agreements with one or
more provider
numbers with CHAMPUS and/or TRICARE.
(iii) if any Facility historically participated or participates
in Government Programs, such Facility was and is in compliance with
the
conditions of participation, if any, of the Government Programs in
which it
participated or participates, in all respects.
(iv) Seller currently holds such necessary licenses, agreements
and certificates pertaining to Medicare and Medicaid provider
agreements entered
into with the State of Florida, the United States, and any
municipality or other
Governmental Authority body that authorizes Seller to conduct its
business at
the Facilities as presently operated.
(c) All cost reports of Seller and the Facilities for the
Government
Programs which are required to be filed on or prior to the
Effective Date during
the past three (3) years have been properly filed and are complete
and accurate
in all respects, and there are no outstanding overpayments, set
offs or
adjustments to any Government Programs.
2.18
Third Party Payor Reimbursement. All billing practices of Seller
with
respect to the Facilities to all third party payors, including the
Government
Programs and private insurance companies, have been in material
compliance with
all Applicable Laws and all regulations and policies of such third
party payors
and Government Programs in all material respects. Seller has
received no written
notice that Seller has billed or received any payment or
reimbursement in excess
of amounts permitted by Applicable Law, except to the extent cured
or corrected
and all penalties or interest discharged in connection with such
cure or
correction.
2.19
Licensed Beds and Units. The number of licensed assisted living
units
at the Facilities is as set forth on Schedule 2.19.
2.20
Intellectual Property. Other than as set forth on Schedule 2.20,
the
Assets include all "Intellectual Property" used in connection with
operating the
Facilities, and Seller owns or has the right to use pursuant to a
valid and
assignable perpetual license of all such Intellectual Property. For
these
purposes, "Intellectual Property" shall mean, collectively, all:
(v) United
States or foreign patents, patent applications, patent disclosures,
and all
renewals, reissues, divisions, continuations, extensions or
continuations-in-part thereof; (vi) trademarks, service marks,
trade dress,
trade names, fictitious names, corporate names, and registrations
and
16
<PAGE>
applications for registration thereof; and (vii) copyrights
(registered or
unregistered), registrations and applications for registration
thereof,
including all renewals, derivative works, enhancements,
modifications, updates,
new releases or other revisions thereof.
2.21
Financial Statements. Seller has delivered to Purchaser copies of
the
financial statements listed on attached Schedule 2.21 certified by
the chief
financial officer of Seller (collectively, the "Financial
Statements") as
follows: (a) individual Facility income statements for the fiscal
years ended
2002, 2003 and 2004; (b) individual Facility income statements and
Seller's
consolidated and consolidating balance sheet and statements of
income (the "Most
Recent Financial Statements") as of and for the eleven (11) month
period ended
November 30, 2005 (the "Most Recent Fiscal Month End"); (c) a
schedule of
capital improvements to the Facilities for the fiscal years ended
2002, 2003 and
2004; and (d) copies of Seller's consolidated, unaudited income
statements for
the Facilities, for the periods ending December 31, 2002, 2003 and
2004. The
Financial Statements (including the notes thereto) have been
prepared in
material accordance with generally accepted accounting principles
("GAAP") on a
consistent basis throughout the periods covered thereby, present
fairly the
financial condition of Seller and Facilities as of such dates and
the results of
operations of Seller and the Facilities for such periods.
2.22
No Litigation. Except as set forth on Schedule 2.22 attached
hereto,
there are no actions, suits, claims, governmental investigations or
other legal
or administrative proceedings, or any orders decrees or judgments
in progress,
pending or in effect, or, to the knowledge of Seller, threatened
against or
relating to Seller, the Facilities, Seller's operation of the
Facilities, any of
the Assets, or against or relating to the transactions contemplated
by this
Agreement, and there are none pending in state courts, or in any
federal courts,
or, to the knowledge of Seller, pending in other jurisdictions or
threatened in
writing, at law or in equity, by or before any federal, state or
municipal court
or other Governmental Authority. The matters set forth on Schedule
2.22, if any,
if decided adversely will not materially and adversely affect the
Assets,
Seller, or Seller's operation of the Facilities or the
Business.
2.23
Compliance with Medicare and Medicaid Law.
(a) Except as set forth on Schedule 2.23 attached hereto, there is
no
litigation, claim, proceeding or investigation currently pending
against Seller
or relating to the Facilities for any violation or alleged
violation of, and
Seller has received no written notice, and Seller has no knowledge,
of any
threat of any suit, action, claim, dispute, investigation, agency
review or
other proceeding pursuant to or involving, (i) the False Claims
Act, 31 U.S.C.
Sections 3729 et seq., (ii) the Civil Monetary Penalties Law, 42
U.S.C. Section
1320a-7a, (iii) federal or state anti-kickback statutes, including
but not
limited to 42 U.S.C. 1320a-7b, (iv) federal or state referral laws,
including
but not limited to 42 U.S.C. Section 1395nn, (v) regulations
promulgated
pursuant to any of the foregoing statutes, or (vi) any other
federal or state
law or regulation of general applicability to health care fraud,
governing or
regulating the management of health care providers, or governing or
regulating
medical billing or reimbursement, including all applicable Medicare
and Medicaid
statutes and regulations (collectively the "Medicare/Medicaid
Laws").
(b) Seller, and each of the Facilities have timely filed all
forms,
applications, reports, statements, data and other information
required to be
filed with federal, state or local
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entities under federal or state laws or regulations in connection
with the
Medicare/Medicaid Laws, including but not limited to cost reports
required to be
filed with respect to the Facilities, as more fully set forth in
Section 2.17
hereof.
(c) The Facilities have the number of licensed and certified beds
as
set forth in Schedule 2.19 and all billing to the Government
Programs has been
consistent with these certification designations.
(d) All billing practices of Seller with respect to the Facilities
are
in material compliance with all Applicable Laws and regulations of
such
Government Programs. Except as set forth on Schedule 2.23, Seller
has not billed
or received any payment or reimbursement in excess amounts
permitted by
applicable law, except to the extent cured or corrected and all
penalties or
interest discharged in connection with such cure or correction.
2.24
Absence of Certain Changes or Events. Since November 30, 2005,
through
the Effective Date, the Facilities and all of the parties
comprising Seller have
not:
(a) Suffered any Material Adverse Change in the financial
condition,
assets, or liabilities of any Facility, or the operation of any
Facility;
(b) Other than in the ordinary course of business, consistent
with
past practices, granted any increase in the compensation payable or
to become
payable by Seller to any of its officers or employees
(collectively,
"Employees") employed at the Facilities (except compensation
granted to new
Employees who were hired in the ordinary course of business on
substantially
similar terms to existing Employees with comparable duties and
experience);
(c) Sold, transferred or otherwise disposed of, or agreed to
sell,
transfer or otherwise dispose of, any assets relating to or in
connection with
the Facilities having a fair market value at the time of sale,
transfer or
disposition of $25,000 or more in the aggregate, or cancelled, or
agreed to
cancel, any debts or claims relating primarily to the Facilities in
the amount
of $10,000 or more in the aggregate; or
(d) Made any change in any method of accounting or accounting
practice
relating to the Facilities.
2.25
Condition of Assets. Except as set forth on Schedule 2.25, all of
the
Assets are in Seller's possession or control and are located at or
on the
Facilities and to Seller's knowledge all of the Assets are in good
repair and
working order in all material respects, subject to normal wear and
tear.
2.26
Employee and Labor Relations. Except as provided under Schedule
2.26:
(a) Compliance. Seller is in compliance with all federal, state
or
other Applicable Laws of Governmental Authorities respecting
employment and
employment practices concerning the Facilities (collectively,
"Employment
Laws").
(b) No Claims. No legal claim in respect of application for
employment, employment, the terms or conditions of employment, the
handling of
benefits or termination of
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employment of any person has been asserted or threatened against
Seller or any
of its affiliates in connection with the operation of the
Facilities.
(c) No Labor Actions. No labor strike, picketing action,
dispute,
slowdown or stoppage, or unfair labor practices are actually
pending or, to the
knowledge of Seller, threatened against, or involving, Seller or
any of the
Facilities.
(d) No Bargaining Agreements. Seller is not a party to any
collective
bargaining agreement, and no collective bargaining agreement is
currently being
negotiated by Seller. To Seller's knowledge no petitions for
representation have
been filed against any of the Facilities nor have any demands been
made for
recognition.
(e) PTO. Seller has complied with its policies with respect to
leave
days earned by its employees.
(f) At-Will Employees. All Employees at the Facilities are
employees
of Seller and are employees-at-will.
(g) WARN Compliance. Seller has taken (or will take prior to
Closing),
as required by law, any and all actions necessary to comply with
the Worker
Adjustment and Retraining Notification Act ("WARN"), or state
statute of similar
import, with respect to any event of occurrence affecting the
Facilities since
the effective date of WARN.
(h) List of Employees. Schedule 2.26(h) is a complete list of
all
Employees employed at each Facility, which lists their respective
salaries or
hourly pay rates, position and term of employment, and no such
Employees are
parties to any written or oral employment agreements.
2.27
Employee Benefit Employee Benefit Plans.
(a) Except as disclosed on Schedule 2.27, Seller has never
maintained
any defined benefit plan within the meaning of section 414(l) of
the Internal
Revenue Code of 1986.
(b) Except as disclosed on Schedule 2.27, Seller has never been
obligated to contribute to any multi-employer plan within the
meaning of ERISA
Section 3(37).
(c)
Schedule 2.27 sets forth an accurate and complete list of all
Employee Benefit Plans (as defined hereinafter) and specifies which
Seller
sponsors each of said Employee Benefit Plans. "Employee Benefit
Plans" mean all
benefit plans and benefit arrangements in which Seller's employees
at the
Facilities participate.
(d) Each Employee Benefit Plan has, at all times, been maintained
and
operated in compliance, in all material respects, with its terms
and
requirements of all applicable Employee Benefit Plans, including,
without
limitation, ERISA, as amended, and the Internal Revenue Code of
1986, as amended
(the "Code").
2.28
Inventory and Supplies. As of the Effective Date and at each
Facility's respective Closing, the Inventories are and will be in
sufficient
quantity and condition for the normal
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operation of the Business at the Facilities, in compliance with
past practices
and all requirements of Governmental Authorities and consistent
with past
practices.
2.29
Insurance. Attached as Schedule 2.29 is a list of insurance
policies
carried and insurance coverages maintained by Seller with respect
to the
Facilities, and upon request by Purchaser, Seller shall make copies
of any
policies and provide same to Purchaser. Seller's insurance policies
and
coverages are in full force and effect.
2.30
Truth of Warranties, Representations, and Statements. All of
the
statements, representations, and warranties made by Seller in this
Agreement and
the statements and information set forth in the attached Schedules
are true and
accurate in every material respect.
2.31
Materials Provided. All materials provided to Purchaser by
Seller
either prior to the Effective Date or during the term hereof,
including without
limitation all items on the Due Diligence Checklist attached hereto
as Exhibit
D, are true, accurate and complete in all material respects.
Notwithstanding anything else to the contrary herein, any reference
in this
Agreement to "knowledge," of Seller shall be deemed to mean the
actual knowledge
of William J. Stout, Jr., and Mark D. West, provided, however, that
such
individuals shall make due inquiry of any regional managers and
executive
directors of the Facilities no later than ten (10) days after the
Effective Date
to confirm the accuracy of the representations and warranties made
hereunder (to
the extent relevant to such inquiry) and disclose any relevant
items to
Purchaser. If Purchaser, during the term of this Agreement, gains
actual
knowledge of any breach of any material representation or warranty
made by
Seller hereunder and Purchaser fails to disclose such breach to
Seller prior to
the Closing to which such breach relates (or the final Closing Date
if the
breach is not related to a single Facility), then Purchaser may not
pursue
damages for such breach against Seller after such Closing.
Purchaser shall be
deemed to have actual knowledge of any information explicitly
disclosed in any
Schedule or in Seller's response to any due diligence request made
by Purchaser;
provided, however, that the substance of any information disclosed
is such that
a reasonable person would discern from the information disclosed
that a fact or
condition exists that would give rise to a breach.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As
an inducement to Seller to enter into this Agreement and to
consummate
the transactions contemplated herein, Purchaser represents and
warrants the
following, each of which warranties and representations is material
to and is
relied upon by Seller:
3.1
Corporate Organization; Etc. Purchaser is a corporation duly
organized
and validly existing under the laws of the State of Delaware with
full power and
authority to own all of its properties and assets and to carry on
its business
as it is now being conducted.
3.2
Authorization, Binding Effect. Purchaser has, and at each Closing
will
have, the full and unrestricted right, power and authority to
execute, deliver
and perform this Agreement and to consummate the transactions and
perform all
obligations contemplated hereby and in all agreements, instruments
and documents
being or to be executed and delivered by Purchaser in
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connection with such transactions. The consummation of the
transactions
contemplated herein have been duly or will be prior to the
expiration of the Due
Diligence Period authorized and approved by all necessary corporate
action of
Purchaser. This Agreement and each such other agreement, instrument
and
document, upon due execution and delivery by Purchaser, will
constitute the
legal, valid, and binding obligation of Purchaser, enforceable in
accordance
with its terms.
3.3 No Violation.
Purchaser is not subject to or obligated under any
certificate of incorporation, bylaw, law, or rule or regulation of
any
Governmental Authority, or any agreement or instrument, or any
license,
franchise or permit, or subject to any order, writ, injunction or
decree which
would be in any material respect breached or violated by the
execution, delivery
or performance of this Agreement.
3.4
No Litigation. Purchaser is not a party to, or defending or subject
to,
any investigation, litigation, arbitration or other legal
proceeding, nor is any
such legal proceeding threatened, which would, have a Material
Adverse Change on
Purchaser's ability to execute, deliver and perform this Agreement
and the
documents and transactions contemplated hereby.
3.5
Truth of Warranties, Representations, and Statements. All of
the
statements, representations, and warranties made by Purchaser in
this Agreement
are true and accurate in every material respect.
3.6
Patriot Act. Purchaser is in compliance with the requirements
of
Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the
"Order") and
other similar requirements contained in the rules and regulations
of the Office
of Foreign Assets Control, Department of the Treasury ("OFAC") and
in any
enabling legislation or other Executive Orders or regulations in
respect thereof
(the Order and such other rules, regulations, legislation or orders
are
collectively called the "Orders"). Neither Purchaser nor any of its
affiliates
(A) is listed on the Specially Designated Nationals and Blocked
Person List
maintained by OFAC pursuant to the Order and/or on any other list
of terrorists
or terrorist organizations maintained pursuant to any of the rules
and
regulations of OFAC or pursuant to any other applicable Orders
(such lists are
collectively referred to as the "Lists"), (B) is a Person (as
defined in the
Order) who has been determined by competent authority to be subject
to the
prohibitions contained in the Orders; or (C) is owned or controlled
by
(including without limitation by virtue of such Person being a
director or
owning voting shares or interests), or acts for or on behalf of,
any person on
the Lists or any other Person who had been determined by competent
authority to
be subject to the prohibitions contained in the Orders.
ARTICLE 4
COVENANTS OF SELLER
Seller covenants and agrees as follows:
4.1
Regular Course of Business. Seller shall: (a) operate the
Facilities in
a manner consistent with all Applicable Laws of all Governmental
Authorities,
Seller's past practices and industry standards for operation of
first class
assisted living facilities; (b) maintain the Assets in good order
and repair,
reasonable wear and tear excepted and otherwise in sufficient
repair,
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order, and condition to satisfy the representations and warranties
as to the
condition and quantity of the Assets set forth in Article II; (c)
comply with
all Applicable Laws with respect to the Assets and the operation
thereof,
including without limitation all required regulatory standards of
any
Governmental Authorities with regulatory jurisdiction over the
Facilities and
compliance with all Governmental Programs; (d) timely pay all rents
and other
payments due on or before the Closing under, and otherwise maintain
and comply
in all material respects with, all Contracts, all Tenant Leases,
all Equipment
Leases, all Facility Leases, all Conveyance Asset Leases, and all
Residency
Agreements, each without change except as expressly provided
herein; (e) not
make any changes or modifications in any Contracts, Tenant Leases,
Equipment
Leases, Facility Leases, Conveyance Asset Leases, and Residency
Agreements or
incur any further obligations or surrender any rights thereunder,
except Seller
shall enter into new Residency Agreements with new Residents on
substantially
the same terms and conditions as other Residency Agreements in
effect prior to
the Effective Date for the same Facility and otherwise consistent
with the
specimen Residency Agreement attached hereto on Schedule 2.7(b);
(f) not enter
into any agreements or leases which would have had to be disclosed
on any
schedule hereto had such agreements or leases been entered into
prior to the
Effective Date; (g) keep in full force and effect present insurance
policies
through the Closing Date; and (h) use its commercially reasonable
efforts to
maintain in good standing all Licenses necessary to operate the
Facilities and
to maintain all goodwill of Residents, Employees and vendors.
4.2
Borrowing. Seller shall not create or permit to become effective
any
mortgage, pledge, lien, encumbrance or charge of any kind upon the
Assets other
than the Permitted Liens.
4.3
Full Access and Disclosure. Seller shall, upon reasonable prior
notice
not to be less than two (2) days, afford to Purchaser and its
counsel,
accountants, environmental consultants, engineers, appraisers and
other
authorized representatives (collectively, "Purchaser's
Representatives")
reasonable access during business hours to the Facilities, and all
Books and
Records, including, but not limited to, the roof, all FF&E,
heating and cooling
systems, and any and all vehicles, financial data and records,
operating data
and other information reasonably requested, including the most
recent Financial
Statements, cost reports, inspection reports, plans of correction
with respect
to Licensing Surveys (all with respect to the past three (3)
years), current
room rates (including dates and amounts of increases), census data
and residency
mix, payroll information, Medicaid reports, employment agreements,
personnel
policies, and all contracts, agreements, correspondence files and
other
documents relating to the Facilities in order that Purchaser may
have full
opportunity to make such reasonable investigations of the Assets
and the
Facilities as Purchaser shall desire to make. Seller shall be
entitled to have a
Seller representative present during Purchaser's scheduled visits
and in any
meetings, calls or other contacts with Seller's personnel, and such
access shall
include the right to meet with the residence directors, executive
directors,
regional vice presidents, directors of nursing and personnel who
are responsible
for maintenance at the Facilities prior to the expiration of the
Due Diligence
Period and all personnel after the expiration of the Due Diligence
Period,
subject to Purchaser's obligation to comply with the
confidentiality provisions
set forth in this Agreement. Seller shall furnish such additional
financial and
operating data and other information as Purchaser and
Purchaser's
Representatives shall from time to time reasonably request, and
Seller shall
supplement or amend any information, written or otherwise,
previously delivered
or otherwise disclosed to Purchaser with respect to any matter
hereafter arising
which, if existing or occurring at the Effective Date, would have
been required
to be set forth or disclosed.
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4.4
Consents. Seller shall obtain, on or prior to Closing, all
applicable
consents necessary for Seller to fulfill Seller's obligations to
consummate the
transactions contemplated hereby, including without limitation any
required
consents of any Governmental Authority and the consents of the
Facility Lessors.
4.5
Compliance With Laws. Seller shall comply with all Applicable Laws
of
all Governmental Authorities in conjunction with the execution,
delivery and
performance of this Agreement, the transactions contemplated hereby
and the
ownership, operation and maintenance of the Facilities prior to
Closing.
4.6
Taxes. Seller shall properly and timely (including extensions
pursuant
to properly and timely filed extension documents where permitted)
file all
federal, state and local tax returns, and, to the extent
applicable, estimates
and reports and timely pay all amounts then due, for all taxes for
all periods
through and including the Closing Date to the extent due and
payable at any time
prior to the Closing Date hereunder and otherwise to the extent
necessary to
transfer the Assets to Purchaser in accordance with the terms of
this Agreement.
4.7
No Disposition of Assets. Except for Inventory consumed in the
ordinary
course or Assets replaced in the ordinary course, Seller shall not
sell, lease
or otherwise dispose of or distribute any of the Assets or
properties related
thereto or necessary for operation of the Facilities and, to the
extent depleted
or replaced in the ordinary course, Seller shall restock and
replenish any
portion of the Assets consumed or used during the term of this
Agreement with
Assets of comparable quality in accordance with Seller's prior
practices.
4.8
Further Documentation. Seller agrees that for a two (2) year period
of
time following the final Closing hereunder, upon request by
Purchaser, Seller
will do, execute, acknowledge, and deliver, or cause to be done,
executed,
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