AGREEMENT AND PLAN OF MERGER
DATED AS OF
JANUARY 3, 2003
BY AND AMONG
PROMETHEUS ASSISTED LIVING LLC
XXXXX MERGER CORP.
AND
ARV ASSISTED LIVING, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1 The Merger...................................................2
SECTION 1.2 Conversion of Shares.........................................3
SECTION 1.3 Surrender and Payment........................................4
SECTION 1.4 Stock Options................................................6
SECTION 1.5 Adjustments..................................................7
SECTION 1.6 Withholding Taxes............................................7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 2.1 Organization and Good Standing; Organizational Documents.....7
SECTION 2.2 Capitalization...............................................8
SECTION 2.3 Company Subsidiaries.........................................9
SECTION 2.4 Authorization; Binding Agreement.............................9
SECTION 2.5 Governmental Approvals......................................11
SECTION 2.6 No Violations...............................................11
SECTION 2.7 Securities Filings..........................................12
SECTION 2.8 Litigation; Liabilities.....................................12
SECTION 2.9 Financial Statements........................................13
SECTION 2.10 Absence of Certain Changes..................................13
SECTION 2.11 Related Party Transactions..................................14
SECTION 2.12 Compliance with Laws........................................14
SECTION 2.13 Finders and Investment Bankers..............................17
SECTION 2.14 Material Contracts..........................................17
SECTION 2.15 Employee Benefit Plans......................................19
SECTION 2.16 Taxes and Returns...........................................22
SECTION 2.17 Takeover Statutes...........................................23
SECTION 2.18 Business Operations.........................................23
SECTION 2.19 Environmental Matters.......................................23
SECTION 2.20 Property....................................................25
SECTION 2.21 Intellectual Property.......................................29
SECTION 2.22 Labor Relations.............................................29
SECTION 2.23 Insurance...................................................30
SECTION 2.24 Conflicts of Interest.......................................31
SECTION 2.25 Fairness Opinion............................................31
SECTION 2.26 Accuracy of Information.....................................31
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
SECTION 3.1 Organization and Good Standing and Power....................32
SECTION 3.2 Authorization; Binding Agreement; Non-Contravention.........32
SECTION 3.3 Governmental Approvals......................................32
SECTION 3.4 No Violations...............................................33
SECTION 3.5 Accuracy of Information.....................................33
SECTION 3.6 Sufficient Funds............................................33
SECTION 3.7 Merger Sub..................................................34
ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.1 Conduct of Business.........................................34
SECTION 4.2 Access and Information......................................37
SECTION 4.3 Recommendation; Stockholder Approval........................37
SECTION 4.4 No Solicitation.............................................38
SECTION 4.5 Commission and Stockholder Filings; Other Reports...........40
SECTION 4.6 Takeover Statutes; Rights Plan..............................40
SECTION 4.7 Settlement Agreement........................................41
ARTICLE V
COVENANTS OF PURCHASER
SECTION 5.1 Director and Officer Liability..............................41
SECTION 5.2 Employee Benefits...........................................42
SECTION 5.3 Financing...................................................42
ARTICLE VI
COVENANTS OF THE PARTIES
SECTION 6.1 Proxy Statement; 13E-3 Transaction Statement................42
SECTION 6.2 Further Assurances..........................................43
SECTION 6.3 Press Release and Public Announcements......................44
SECTION 6.4 Reasonable Commercial Efforts...............................44
SECTION 6.5 Notification of Certain Matters.............................45
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to Each Party's Obligations......................46
SECTION 7.2 Conditions to Obligations of the Company....................46
SECTION 7.3 Conditions to Obligations of Purchaser and Merger Sub.......47
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination.................................................48
SECTION 8.2 Effect of Termination.......................................49
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Notices.....................................................52
SECTION 9.2 Non-Survival of Representations and Warranties..............53
SECTION 9.3 Amendments; No Waivers......................................53
SECTION 9.4 Expenses....................................................53
SECTION 9.5 Successors and Assigns......................................53
SECTION 9.6 Governing Law...............................................53
SECTION 9.7 Jurisdiction................................................53
SECTION 9.8 Waiver of Jury Trial........................................54
SECTION 9.9 Counterparts; Effectiveness.................................54
SECTION 9.10 Entire Agreement; No Third-Party Beneficiaries..............54
SECTION 9.11 Captions....................................................54
SECTION 9.12 Severability................................................54
SECTION 9.13 Specific Performance........................................55
SECTION 9.14 Rules of Construction.......................................55
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
January 3, 2003 by and among ARV ASSISTED LIVING, INC., a Delaware
corporation (the "Company"), PROMETHEUS ASSISTED LIVING LLC, a Delaware
limited liability company (the "Purchaser"), and XXXXX MERGER CORP., a
Delaware corporation and wholly-owned subsidiary of Purchaser ("Merger
Sub").
W I T N E S S E T H:
WHEREAS, as of the date hereof Purchaser owns 7,595,069 Common
Shares (as defined below);
WHEREAS, Purchaser desires that the Company become a wholly owned
subsidiary of Purchaser through a Merger of Merger Sub with and into the
Company, with the Company as the surviving corporation, on the terms and
subject to the conditions set forth in this Agreement and the Delaware
General Corporation Law;
WHEREAS, a committee consisting of independent members of the Board of
Directors of the Company (the "Special Committee") has (i) declared the
advisability of this Agreement, (ii) determined that the Merger is fair to
the holders of Common Shares (other than Purchaser and its affiliates),
(iii) received an opinion from Xxxxx & Steers Capital Advisors LLC that the
consideration to be paid in the Merger is fair to the holders of Common
Shares (other than Purchaser and its affiliates) from a financial point of
view and (iv) has determined that this Agreement, the Merger and the other
transactions contemplated by this Agreement are in the best interests of
the Company and its stockholders (other than Purchaser and its affiliates),
and (v) has recommended to the Board of Directors of the Company that the
Board of Directors declare the advisability of this Agreement and approve
and adopt this Agreement, the Merger and the other transactions
contemplated by this Agreement;
WHEREAS, based on the recommendation of the Special Committee, the
Board of Directors of the Company has adopted resolutions declaring the
advisability of this Agreement and has determined that this Agreement and
the Merger and the other transactions contemplated by this Agreement are in
the best interests of the Company and its stockholders (other than
Purchaser and its affiliates) and has approved and adopted this Agreement,
the Merger and the other transactions contemplated by this Agreement; and
WHEREAS, Purchaser, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with
the Merger and the other transactions contemplated by this Agreement and
also to prescribe various conditions to such transactions.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound, Purchaser,
Merger Sub and the Company agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
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(a) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law
(the "DGCL"), Merger Sub shall be merged with and into the Company at the
Effective Time (the "Merger"). From and after the Effective Time, the
separate corporate existence of Merger Sub shall cease and the Company
shall be the surviving corporation (the "Surviving Corporation"). The
Surviving Corporation shall continue to be governed by the laws of the
State of Delaware and the separate corporate existence of the Company with
all its rights, privileges, immunities, powers, franchises, restrictions,
disabilities and duties, shall continue unaffected by the Merger except as
set forth in this Agreement.
(b) The closing of the Merger (the "Closing") will take place at
10:00 a.m., local time, at a location to be agreed by the Company and
Purchaser on a date to be agreed upon by the parties (the "Closing Date"),
which shall be no later than the second business day after the first date
that all of the conditions set forth in Article VII (other than those
conditions that by their nature are to be fulfilled at the Closing, but
subject to the fulfillment or waiver of such conditions) have been
satisfied or waived, unless another place, time or date is agreed to by the
parties. Notwithstanding anything to the contrary contained in this
Agreement (but subject to the termination right set forth in Section 8.1(h)
and the provisions contained in Section 8.2(b)), if as of any date
determined or selected to be the Closing Date in accordance with this
Section 1.1 Purchaser does not have available sufficient cash funds to pay
the Merger Consideration payable in respect of each Common Share (for which
Merger Consideration is payable hereunder), Purchaser shall have the right
either (1) to elect not to consummate the Merger or (2) to elect to delay
the Closing Date and the End Date (as defined in Section 8.1(d) to dates
selected by Purchaser (but in no event to dates later than the Financing
End Date, in each case). Any elections pursuant to the prior sentence shall
be made by Purchaser by delivery of written notice to the Company.
"Financing End Date" shall mean the earlier of (a) the date that is 90 days
after the first date upon which all of the conditions set forth in Article
VII shall have been satisfied or waived (or, with respect to conditions
that by their nature are to be satisfied at Closing, shall be capable of
being satisfied at a Closing) and (b) July 1, 2003.
(c) Subject to the provisions of this Agreement, on the Closing
Date, the parties shall cause to be filed with the Secretary of State of
the State of Delaware (the "Delaware Secretary of State") a certificate of
merger (the "Certificate of Merger") in accordance with the DGCL and make
all other filings or recordings required under the DGCL as are necessary or
advisable to effect the Merger. The Merger shall become effective at the
time of the filing of the Certificate of Merger with the Delaware Secretary
of State in accordance with the DGCL or at such subsequent date or time as
Purchaser and the Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to
as the "Effective Time").
(d) The Merger shall have the effects specified in Section 259 of
the DGCL.
(e) As of the Effective Time, the certificate of incorporation of
the Company shall be amended as set forth on Exhibit A. From and after the
Effective Time, the certificate of incorporation (as amended pursuant to
the prior sentence as set forth on Exhibit A) and bylaws of the Company
shall be the certificate of incorporation and bylaws of the Surviving
Corporation until changed or amended as provided therein or in accordance
with applicable Law, and except that the certificate of incorporation and
bylaws of the Surviving Corporation shall at all times contain such
provisions as are necessary for Purchaser to comply with the provisions of
Section 5.1(a) of this Agreement.
(f) The directors of Merger Sub shall, from and after the
Effective Time, be the directors of the Surviving Corporation until their
successors have been duly elected, appointed or until their earlier death,
resignation or removal in accordance with the certificate of incorporation
or bylaws of the Surviving Corporation.
SECTION 1.2 Conversion of Shares.
--------------------
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of the Purchaser, the Company, Merger Sub or any
holder of Common Shares, each Common Share issued and outstanding
immediately prior to the Effective Time, including any shares of restricted
stock issued pursuant to the Stock Plans (other than (1) any Common Shares
held (i) by Purchaser (the "Purchaser Shares") or (ii) in the treasury of
the Company or by any wholly-owned Subsidiary of the Company, (2) any
Common Shares held by LFSRI II Assisted Living LLC ("LFSRI Shares") as a
result of the exercise of that certain warrant to purchase Common Shares
dated April 24, 2000 (the "LFSRI Warrant"), and (3) Dissenting Shares (as
defined below)), shall be cancelled and retired and shall be converted into
the right to receive pursuant to Section 1.3 $3.90 in cash per share,
without interest thereon (the "Merger Consideration"), payable to the
holder thereof upon surrender of the certificate formerly representing such
Common Share or any replacement certificates representing such Common
Shares as may be obtained from the transfer agent of the Company. At the
Effective Time, by virtue of the Merger and without any action on the part
of the Purchaser, the Company, Merger Sub or any holder of Common Shares,
(i) all of the LFSRI Shares and Common Shares held in the treasury of the
Company or by any wholly-owned Subsidiary of the Company shall be cancelled
and retired and no payment shall be made with respect thereto, (ii) all of
the Dissenting Shares shall be cancelled and retired and, so long as such
holders of Dissenting Shares comply with the provisions of Section 262 of
the DGCL, the Dissenting Shares shall be converted into the right to
receive such consideration as may be determined to be due with respect to
such Dissenting Shares pursuant to Section 262 of the DGCL, and (iii) all
of the Purchaser Shares outstanding immediately prior to the Effective Time
shall collectively represent at and after the Effective Time 1,000 shares
of common stock, par value $.01 per share, of the Surviving Corporation and
no payment of Merger Consideration shall be made in respect of any
Purchaser Share.
(b) At the Effective Time, each share of common stock of Merger
Sub issued and outstanding prior to the Effective Time shall be
automatically cancelled and no payment shall be made with respect thereto.
(c) For purposes of this Agreement, "Dissenting Shares" means any
Common Shares outstanding immediately prior to the Effective Time and held
by a holder who has not voted in favor of the Merger and who has timely
demanded and perfected the right for appraisal for such Common Shares in
accordance with Section 262 of the DGCL. Such Dissenting Shares shall not
be converted into the right to receive the Merger Consideration as provided
in Section 1.2(a) hereof, unless and until such holder fails to perfect or
effectively withdraws or otherwise loses such holder's right to appraisal
under the DGCL. Such holder of Dissenting Shares shall be entitled to
receive payment of the fair value of such Dissenting Shares in accordance
with the provisions of the DGCL, provided that such holder complies with
the provisions of Section 262 of the DGCL. If, after the Effective Time,
any such holder fails to perfect or effectively withdraws or otherwise
loses such holder's right to appraisal, such Dissenting Shares shall be
treated as if they had been converted as of the Effective Time into a right
to receive the Merger Consideration. Prior to the Effective Time, the
Company shall give Purchaser prompt notice of any demands received by the
Company for appraisal of Common Shares, and Purchaser shall have the right
to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of
Purchaser, make any payment prior to the Effective Time with respect to, or
settle or offer to settle, or otherwise negotiate, any such demands.
SECTION 1.3 Surrender and Payment.
---------------------
(a) Prior to the Effective Time, Purchaser shall designate a bank
or trust company reasonably acceptable to the Company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration in
respect of Certificates (as defined below) that, immediately prior to the
Effective Time, represent Common Shares entitled to payment of the Merger
Consideration pursuant to Section 1.2. Immediately prior to the Effective
Time, Purchaser shall deposit, or cause to be deposited, in trust with the
Paying Agent in cash the aggregate Merger Consideration into which Common
Shares shall have been converted pursuant to Section 1.2, such amount being
hereinafter referred to as the "Payment Fund."
(b) Promptly after the Effective Time, the Paying Agent shall
mail to each record holder of certificates that, immediately prior to the
Effective Time, represent Common Shares (the "Certificates") a form of
letter of transmittal which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Paying Agent and instructions for use
in surrendering such Certificates and receiving the Merger Consideration in
respect thereof. Upon the surrender of each such Certificate, together with
a duly executed letter of transmittal and any other required documents, the
Paying Agent shall, as soon as practicable, pay the holder of such
Certificate an amount equal to the product of (x) the Merger Consideration
multiplied by (y) the number of Common Shares formerly represented by such
Certificate, less any required withholding taxes, in consideration
therefor, and such Certificate shall be cancelled. Until so surrendered,
each such Certificate (other than Certificates representing Purchaser
Shares, Common Shares held in the treasury of the Company or by any
wholly-owned Subsidiary of the Company, LFSRI Shares or Dissenting Shares)
shall represent solely the right to receive the aggregate Merger
Consideration relating thereto. The Paying Agent shall invest the Payment
Fund as directed by Purchaser (so long as such directions do not impair the
rights of the holders of Common Shares) in direct obligations of, or money
market funds substantially all the assets of which are invested in direct
obligations of, the United States of America, or by any agency the
obligations of which are backed by the full faith and credit of the United
States of America is pledged to provide for the payment of principal and
interest. Any interest and other income resulting from such investments
shall be paid to Purchaser, and no interest or other income shall be paid
or accrued on the Merger Consideration to the holders of Common Shares.
Subject to Section 1.3(c), the Paying Agent shall, pursuant to irrevocable
instructions, pay the Merger Consideration as set forth in this Section 1.3
out of the Payment Fund. The Payment Fund shall not be used for any purpose
other than as provided herein. If the Merger Consideration (or any portion
thereof) is to be delivered to any individual, corporation, trust,
association, unincorporated association, estate, partnership, joint
venture, limited liability company, Governmental Authority or other legal
entity (each, a "Person"), other than the Person in whose name the
Certificate surrendered is registered, it shall be a condition to such
right to receive such Merger Consideration that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer, that the signatures on the Certificate shall be properly
guaranteed, and that the Person surrendering such Common Shares shall pay
to the Paying Agent any transfer or other taxes required by reason of the
payment of the Merger Consideration to a Person other than the registered
holder of the Certificate surrendered, or shall establish to the
satisfaction of the Paying Agent that such taxes have been paid or are not
applicable. In the event any Certificate shall have been lost, stolen or
destroyed, the Paying Agent shall be required to pay the full Merger
Consideration in respect of any Common Shares represented by such
Certificate; provided, however, that Purchaser may require the owner of
such lost, stolen or destroyed Certificate to execute and deliver to the
Paying Agent a form of affidavit claiming such Certificate to be lost,
stolen or destroyed in form and substance reasonably satisfactory to
Purchaser, and the posting by such owner of a bond in such amount as
Purchaser may determine is reasonably necessary as indemnity against any
claim that may be made against Purchaser or the Paying Agent.
(c) At any time following the date which is 135 days after the
Effective Time, Surviving Corporation may require that the Paying Agent
shall deliver to Surviving Corporation all cash, Certificates and other
documents in its possession relating to the transactions contemplated by
this Agreement. Thereafter, each holder of a Certificate (other than
Certificates representing Purchaser Shares, Common Shares held in the
treasury of the Company or by any wholly-owned Subsidiary of the Company,
LFSRI Shares or Dissenting Shares) may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property,
escheat and similar Laws) receive in consideration therefor the aggregate
Merger Consideration relating thereto, without any interest or other income
thereon. Notwithstanding the foregoing, none of Purchaser, Merger Sub, the
Surviving Corporation, the Company or the Paying Agent shall be liable to
any Person in respect of any cash properly delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law. If
any such Certificates shall not have been surrendered immediately prior to
such date on which any payment pursuant to this Section 1.3 would otherwise
escheat to or become the property of any Governmental Authority, the cash
payment in respect of such Certificate shall, to the extent permitted by
applicable Law, become the property of the Surviving Corporation, free and
clear of all claims or interests of any Person previously entitled thereto.
(d) Immediately prior to the Effective Time, the stock transfer
books of the Company shall be closed, and, after the Effective Time, there
shall be no transfers on the stock transfer books of the Surviving
Corporation of any Common Shares which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent, they shall be
surrendered and cancelled in return for the payment of the aggregate Merger
Consideration relating thereto, as provided in this Section 1.3.
(e) From and after the Effective Time, all holders of
Certificates evidencing ownership of Common Shares outstanding immediately
prior to the Effective Time (other than the Certificates representing
Purchaser Shares) shall cease to have any rights with respect to such
Common Shares except (i) holders of Common Shares that are not Dissenting
Shares may surrender such Certificates in exchange for the Merger
Consideration pursuant to this Agreement, (ii) holders of Dissenting Shares
may perfect any rights of appraisal as a holder of Dissenting Shares that
such holders may have pursuant to Section 262 of the DGCL and (iii) holders
of Dissenting Shares who fail to perfect or withdraw or otherwise lose the
right to appraisal may surrender such Certificates in exchange for the
Merger Consideration pursuant to this Agreement.
SECTION 1.4 Stock Options.
-------------
All options (the "Stock Options") to acquire Common Shares
outstanding immediately prior to the Effective Time under any stock option
or similar plan or agreement of the Company (such stock option or similar
plans or agreements being collectively referred to herein as the "Stock
Plans"), whether or not then exercisable, shall (by all necessary and
appropriate action which shall be taken by the Board of Directors of the
Company or such appropriate committee or committees thereof) be canceled at
the Effective Time and (i) Purchaser shall use commercially reasonable
efforts so that each holder of a Stock Option shall at the Effective Time,
but in any event not more than two business days after the Effective Time,
receive from the Surviving Corporation (and if necessary Purchaser will
provide funds to the Surviving Corporation so that it is able to make such
payment), for each Common Share subject to a Stock Option, an amount in
cash equal to the excess, if any, of the Merger Consideration over the per
share exercise price of such Stock Option, without interest, in full
settlement of the Company's (and the Surviving Corporation's) obligations
under each such Stock Option, or (ii) to the extent that the per share
exercise price of any Stock Option equals or exceeds the Merger
Consideration, at the Effective Time such Stock Option shall be canceled
and the holder of such Stock Option shall not receive or be entitled to
receive any consideration from Purchaser, Merger Sub or the Surviving
Corporation in respect of such Stock Option. The Company shall deliver to
Purchaser a list of the holders of Stock Options, indicating the number of
Stock Options held by each holder of Stock Options and the exercise price,
expiration date and exerciseability of such Stock Options, at least ten
days prior to the Closing Date. Notwithstanding the foregoing, the amounts
payable pursuant to this Section 1.4 shall be subject to all applicable
withholding taxes. The Company shall use commercially reasonable efforts to
approve the disposition of the Stock Options in accordance with the
foregoing to the extent necessary to exempt such dispositions under Rule
16b-3 of the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"). The term
Stock Options shall not include the LFSRI Warrant.
SECTION 1.5 Adjustments.
-----------
If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
capital stock of the Company shall occur by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any similar transaction, or any stock dividend thereon with a
record date during such period, the Merger Consideration shall be
appropriately adjusted to provide the holders of shares of Common Stock the
same economic effect as contemplated by this Agreement prior to such event.
SECTION 1.6 Withholding Taxes.
-----------------
Each of the Paying Agent and the Surviving Corporation shall be
entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder or former holder of Common
Shares such amounts as may be required to be deducted or withheld therefrom
under the Internal Revenue Code of 1986, as amended (the "Code"), or any
provision of state, local or foreign Tax Law or under any other applicable
Law. To the extent that such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having
been paid to the Person to whom such amounts otherwise would have been
paid.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company's disclosure schedule, which
has been delivered by the Company to Purchaser simultaneously with the
execution of this Agreement (the "Company Disclosure Schedule"), the
Company hereby represents and warrants to Purchaser and Merger Sub as
follows:
SECTION 2.1 Organization and Good Standing; Organizational Documents.
--------------------------------------------------------
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Company
is qualified or licensed to do business as a foreign corporation or other
business entity, as applicable, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified or licensed could not,
individually or in the aggregate, have a Company Material Adverse Effect.
As used in this Agreement, the term "Company Material Adverse Effect" means
any change, effect, circumstance or event that is or is reasonably likely
to (i) be materially adverse to the business, results of operations, assets
or liabilities, condition (financial or otherwise) or prospects of the
Company and the Company Subsidiaries taken as a whole or (ii) materially
adversely affect the ability of the Company to perform its obligations
under this Agreement or consummate the Merger and the other transactions
contemplated by this Agreement, provided that the effect of the following
shall not be considered in determining whether a "Company Material Adverse
Effect" has occurred or would be reasonably likely to occur: (A) (x)
changes in Laws of general applicability or interpretations thereof by
courts or governmental authorities, (y) changes in general economic
conditions nationally or regionally, and (z) changes affecting the assisted
living industry generally, except for any changes referred to in sub
clauses (x), (y) or (z) of this clause (A) which, individually or in the
aggregate, disproportionately affect the business, results of operations,
assets, liabilities, condition (financial or otherwise) or prospects of the
Company and the Company Subsidiaries, taken as a whole, as compared with
the Other Industry Participants generally, (B) actions and omissions of
Company (or any of its Subsidiaries) taken or omitted upon the written
request of Purchaser after the date of this Agreement or with the consent
of Purchaser pursuant to Section 6.4, (C) any effects resulting from the
public announcement of this Agreement or the transactions contemplated
hereby. The "Other Industry Participants" means Alterra Healthcare Corp.,
American Retirement Corp., Capital Senior Living Corp., Emeritus Corp.,
Greenbriar Corp., and Sunrise Assisted Living, Inc. Each of the Company and
the Company Subsidiaries has all requisite corporate or similar
organizational power and all governmental licenses, authorizations,
consents and approvals required to carry on its business as it is now being
conducted and necessary to own, operate and lease its properties and
assets, except those licenses, authorizations, consents and approvals, the
failure of which to possess could not, individually or in the aggregate,
have a Company Material Adverse Effect.
(b) The Company has furnished or otherwise made available to
Purchaser a complete and correct copy of the Company's Certificate of
Incorporation and all amendments thereto, as currently in effect (the
"Certificate of Incorporation") and Bylaws and all amendments thereto, as
currently in effect (the "Bylaws"). The Company is not in violation of the
Certificate of Incorporation or Bylaws.
SECTION 2.2 Capitalization.
--------------
The authorized capital stock of the Company consists of
100,000,000 shares of common stock, par value $0.01 per share, of the
Company (the "Common Shares") of which 17,459,689 Common Shares, together
with the rights associated therewith under the Rights Agreement, dated as
of May 14, 1998, between the Company and Continental Stock Transfer & Trust
Company, as amended as of October 21, 1998, April 24, 2000 and October 1,
2002 (the "Rights Agreement"), were issued and outstanding as of the close
of business on January 2, 2003, and 10,000,000 shares of preferred stock,
par value $0.01 per share, of the Company (the "Preferred Stock") of which
no shares are issued or outstanding. Since the close of business on January
2, 2003, the Company has not issued any Common Shares, other than upon the
exercise of Stock Options in accordance with the terms thereof. Of the
authorized Common Shares, 4,637,938 shares have been reserved for issuance
under the Stock Plans or upon exercise of outstanding Stock Options. Of the
authorized shares of Preferred Stock, 400,000 shares have been designated
as Series D Junior Participating Preferred Stock, of which no shares are
issued or outstanding, but of which all have been reserved for issuance
pursuant to the Rights Agreement. No Common Shares or Preferred Stock are
issued and held in the treasury of the Company and no other capital stock
of the Company is issued or outstanding. All issued and outstanding Common
Shares are duly authorized, validly issued and outstanding, fully paid and
nonassessable and were issued free of preemptive rights in compliance with
applicable Law. There are no outstanding rights (including stock
appreciation rights, subscriptions, warrants, puts, calls, preemptive
rights and options), obligations to redeem or repurchase, or other
agreements of any kind, relating to, or the value of which is tied to the
value of, any of the outstanding, authorized but not issued, unauthorized
or treasury shares of the capital stock or any other security of the
Company, except for the LFSRI Warrant and the Stock Options and the rights
issued pursuant to the Rights Agreement and the Company's convertible
subordinated notes due April 1, 2006 with interest at 6.75% which are
convertible into 390,576 Common Shares, in the aggregate (the "Convertible
Notes"). Schedule 2.2 of the Company Disclosure Schedule sets forth a
complete list of all Persons granted outstanding Stock Options, indicating
the number of Common Shares underlying each Stock Option granted to each
such Person, the exercisability of each Stock Option and the exercise price
of each Stock Option. Except for the LFSRI Warrant, Stock Options, the
rights issued pursuant to the Rights Agreement and $7,253,000 of
Convertible Notes, there is no authorized or outstanding security of any
kind convertible into or exchangeable for any such capital stock or other
security, and the Company does not have outstanding any bonds, debentures,
notes or other obligations, the holders of which have the right to vote
with the stockholders of the Company on any matter.
SECTION 2.3 Company Subsidiaries.
--------------------
Each of the outstanding shares of capital stock or other
ownership interests of each Subsidiary, including the Company Public
Subsidiaries (as defined below), of the Company (collectively, the "Company
Subsidiaries") is duly authorized, validly issued and outstanding, fully
paid and nonassessable and owned by the Company or a direct or indirect
wholly-owned Company Subsidiary, in each case free and clear of any lien,
pledge, security interest, claim or other encumbrance. A true and complete
list of the Company Subsidiaries is set forth in Schedule 2.3 of the
Company Disclosure Schedule. As of the date of this Agreement, there are no
outstanding rights (including stock appreciation rights, subscriptions,
warrants, puts, calls, preemptive rights and options), obligations to
repurchase or redeem, or other agreements of any kind, relating to, or the
value of which is tied to the value of, any of the outstanding, authorized
but not issued, unauthorized or treasury shares of the capital stock or any
other security of any of the Company Subsidiaries and there is no
authorized or outstanding security of any kind convertible into or
exchangeable for any such capital stock or other security. The Company
Subsidiaries do not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote with the
stockholders of the Company or Company Subsidiaries on any matter. Neither
the Company nor any of the Company Subsidiaries owns any capital stock or
other ownership interests of any Person other than the Company Subsidiaries
and cash equivalents. The Company Subsidiaries do not own any Common
Shares. As used in this Agreement, the term "Subsidiary" means any entity,
whether incorporated or unincorporated, (i) in which a party owns, directly
or indirectly, more than fifty percent of the securities or other ownership
interests having by their terms ordinary voting power to elect more than
fifty percent of the directors or other persons performing similar
functions, (ii) in which a party is a general partner, managing member or
has similar authority or (iii) the management and policies of which a party
otherwise has the power to direct.
SECTION 2.4 Authorization; Binding Agreement.
--------------------------------
(a) The Company has all requisite corporate power and corporate
authority to execute, deliver and perform its obligations under this
Agreement and, subject to the approval and adoption of this Agreement by
the stockholders of the Company, to consummate the Merger.
(b) The Special Committee, at a meeting duly called and held, has
(i) declared the advisability of this Agreement, (ii) determined that this
Agreement, the Merger and the other transactions contemplated by this
Agreement, including Sections 2.4(f) and 4.7, are fair to and in the best
interests of the Company, (iii) recommended that the Board of Directors of
the Company approve and adopt this Agreement, the Merger and the other
transactions contemplated by this Agreement, including Sections 2.4(f) and
4.7, and (iv) recommended that the Company's stockholders approve and adopt
this Agreement, the Merger and the other transactions contemplated by this
Agreement.
(c) The Board of Directors of the Company, at a meeting duly
called and held, has (i) declared the advisability of this Agreement, (ii)
determined that this Agreement, the Merger and the other transactions
contemplated by this Agreement, including Sections 2.4(f) and 4.7, are fair
to and in the best interests of the Company and has approved this
Agreement, including Sections 2.4(f) and 4.7, the Merger and the other
transactions contemplated by this Agreement, (iii) recommended that the
Company's stockholders approve and adopt this Agreement, the Merger and the
other transactions contemplated by this Agreement and (iv) duly and validly
authorized this Agreement, the execution and delivery of this Agreement,
the performance by the Company of its obligations hereunder and, subject to
the approval and adoption of this Agreement by the stockholders of the
Company, the consummation of the Merger.
(d) No other corporate proceedings on the part of the Company are
necessary to authorize the execution, delivery or performance of this
Agreement or to consummate the Merger and the other transactions
contemplated by this Agreement (other than, with respect to the
consummation of the Merger, the approval and adoption of this Agreement by
the stockholders of the Company in accordance with the DGCL, the
Certificate of Incorporation and the Bylaws and the filing of the
Certificate of Merger in accordance with the DGCL). This Agreement has been
duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery of this Agreement by Purchaser
and Merger Sub, constitutes the legal, valid and binding agreements of the
Company, enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by creditors' rights
generally or by general principles of equity.
(e) The affirmative vote of the holders of a majority of the
Common Shares entitled to vote at a duly called meeting of stockholders at
which a quorum is present is the only vote of the holders of any class or
series of capital stock of the Company required to approve and adopt this
Agreement, the Merger and the other transactions contemplated hereby. Other
than the vote of stockholders of the Company contemplated by the prior
sentence of this Section 2.4(e) and the actions of the Special Committee
and the Board of Directors of the Company set forth in Sections 2.4(b) and
(c), no vote of the stockholders or directors of the Company is required by
Law, the Certificate of Incorporation or Bylaws or otherwise in order for
the Company to consummate the Merger and the other transactions
contemplated by this Agreement.
(f) The Company has taken all necessary action so that (a) none
of the execution or delivery of this Agreement, or the performance by the
parties of their respective obligations under this Agreement, including the
consummation of the Merger and the other transactions contemplated by this
Agreement, give rise to or will give rise to a "Distribution Date," a
"Shares Acquisition Date" or a "Trigger Event," or result in Purchaser,
Merger Sub or any of their affiliates or associates becoming an "Acquiring
Person" (each as defined in the Rights Agreement), under the Rights
Agreement and (b) the rights, if any, issued pursuant to the Rights
Agreement shall terminate upon the Effective Time.
SECTION 2.5 Governmental Approvals.
----------------------
No consent, approval, waiver or authorization of, notice to or
declaration or filing (collectively, a "Consent") with any government, any
state or other political subdivision thereof, any person, authority or body
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government including any governmental or
regulatory authority, agency, department, board, commission or
instrumentality, any court, tribunal or arbitrator and any self-regulatory
organization (each a "Governmental Authority") on the part of the Company
or any Company Subsidiary is required in connection with the execution,
delivery or performance by the Company of this Agreement or the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement other than (i) the filing of the Certificate
of Merger with the Delaware Secretary of State in accordance with the DGCL,
(ii) filings with the U.S. Securities and Exchange Commission (the
"Commission") and the American Stock Exchange (the "AMEX"), (iii) Consents
from or with Governmental Authorities set forth in Schedule 2.5 of the
Company Disclosure Schedule ("Company Regulatory Consents"), and (iv) any
filings required or approvals necessary pursuant to any state securities or
"blue sky" Laws.
SECTION 2.6 No Violations.
-------------
The execution, delivery and performance by the Company of this
Agreement, the consummation by the Company of the Merger and the other
transactions contemplated by this Agreement and compliance by the Company
with any of the provisions of this Agreement will not (i) conflict with or
result in any breach of any provision of the Certificate of Incorporation
or the Bylaws or the organizational documents of any Company Subsidiary,
(ii) require any Consent under or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration of
the performance required thereunder) under any of the terms, conditions or
provisions of any contract, agreement or any other obligation to which the
Company or the Company Subsidiaries are a party or by which they or any of
their properties or assets may be bound, (iii) result in the creation or
imposition of any Lien upon any of the assets or properties of the Company
or Company Subsidiaries, or (iv) assuming compliance with the matters
referred to in Section 2.5 and subject to the receipt of the Company
Stockholder Approval, conflict with or violate any applicable provision of
any constitution, treaty, statute, law, code, rule, regulation, ordinance,
policy or order of any Governmental Authority or other matters having the
force of law including those related to healthcare, health benefit and
housing, and any orders, decisions, injunctions, judgments, awards and
decrees of or agreements with any court or other Governmental Authority
("Law") currently in effect to which the Company, Company Subsidiaries or
their respective properties and assets are subject, except in the case of
clauses (ii), (iii) and (iv) above, for any conflict, breach, violation or
default which could not, individually or in the aggregate, have a Company
Material Adverse Effect. As used in this Agreement, the term "Lien" means,
with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.
SECTION 2.7 Securities Filings.
------------------
As of their respective dates, or as of the date of the last
amendment thereof, if amended after filing, none of the Securities Filings
(including all schedules and exhibits thereto and documents incorporated by
reference therein) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. Each of the Securities Filings was filed in
a timely manner and at the time of filing or as of the date of the last
amendment thereof, if amended after filing, complied in all material
respects with the Exchange Act, the Securities Act of 1933 or any other
applicable Law. As used in this Agreement, the term "Securities Filings"
means: (i) the Company's Annual Reports on Form 10-K, as amended, for the
year ended December 31, 2001, as filed with the Commission; (ii) the
Company's proxy statements relating to all of the meetings of stockholders
(whether annual or special) of the Company since January 1, 2002, as filed
with the Commission; (iii) the Annual Reports of American Retirement Villas
Properties II and American Retirement Villas Properties III, L.P.
(together, the "Company Public Subsidiaries") on Form 10-K, as amended, for
the year ended December 31, 2001, as filed with the Commission; (iv) all
other reports, statements, registration statements and amendments thereto
(including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
as amended) and certifications filed by the Company or the Company Public
Subsidiaries with the Commission since January 1, 2002; and (v) any
certifications or other documents required to be filed by the Company, any
Company Public Subsidiary or their respective officers with the Commission
pursuant to the Xxxxxxxx-Xxxxx Act of 2002 and the rules promulgated
thereunder, together with those reports or other documents of the type
described in clauses (i) through (v) above, filed or required to be filed
with the Commission after the date of this Agreement.
SECTION 2.8 Litigation; Liabilities.
-----------------------
(a) There is no action, cause of action, claim, demand, suit,
proceeding, citation, summons, subpoena, inquiry or investigation of any
nature, civil, criminal, regulatory or otherwise, in law or in equity, by
or before any court, tribunal, arbitrator or other Governmental Authority
("Litigation") pending or, to the Knowledge of the Company, threatened
against the Company or the Company Subsidiaries, any officer, director,
employee or agent thereof, in his or her capacity as such, or as a
fiduciary with respect to any Benefit Plan of the Company or otherwise
relating to the Company or any Company Subsidiary or the securities,
properties or rights of the Company or any Company Subsidiary or any
Benefit Plan of the Company, except as could not, individually or in the
aggregate, have a Company Material Adverse Effect. "Knowledge" (or words of
similar import) as used with respect to the Company means those facts that
are actually known by any of the following persons, in each case after due
inquiry: Xxxxxxx Xxxxxxxx, Xxxx Xxxxxx, Xxxxxxx Xxxxxxxxx, Xxxxx Xxxx,
Xxxxxxx Xxxxxxx-Xxxxxx or, with respect to this Sections 2.8 and Sections
2.12, 2.14(b)(iii), 2.15 and 2.22 only, Xxxxxxxxx Xxxxxxxxxxx.
(b) Schedule 2.8(b) of the Company Disclosure Schedule lists all
liabilities of the Company and Company Subsidiaries with respect to any
"off balance sheet," "grey box," loss sharing or loss guarantee and
contingent purchase agreements or other similar arrangements. Except for
those liabilities disclosed in the financial statements contained in the
Securities Filings (or incorporated therein by reference filed prior to the
date of this Agreement) or set forth in Schedule 2.8(b) of the Company
Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has, or is otherwise subject to, any liabilities (absolute,
accrued, contingent or otherwise), except for liabilities or obligations
incurred after the date of the most recent balance sheet of the Company
included in the Securities Filing filed prior to the date of this Agreement
in the ordinary course of business consistent with past practice and which
could not, individually or in the aggregate, have a Company Material
Adverse Effect.
SECTION 2.9 Financial Statements.
--------------------
Each of the consolidated balance sheets of the Company and the
Company Public Subsidiaries (including all related notes) included in the
financial statements contained in the Securities Filings present fairly in
all material respects the consolidated financial position of the Company as
of the dates indicated, and each of the consolidated statements of
operations, consolidated statements of cash flows and consolidated
statements of shareholders equity (including all related notes) included in
such financial statements present fairly, in all material respects, the
consolidated results of operations and cash flows of the Company for the
respective periods indicated. Each of such balance sheets, statements of
operations, consolidated statements of cash flows and consolidated
statements of shareholders equity (including all related notes) were
prepared in conformity with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the
notes thereto) and complied in all material respects with the applicable
published rules and regulations of the Commission, except that unaudited
interim financial statements are subject to normal and recurring year-end
adjustments and any other adjustments described therein and do not include
certain notes and other information which may be required by GAAP but which
are not required by Form 10-Q under the Exchange Act.
SECTION 2.10 Absence of Certain Changes.
--------------------------
Since June 30, 2002, and except as disclosed in the Company's
Quarterly Reports on Form 10-Q for the quarterly periods ended June 30,
2002 and September 30, 2002, there has not been: (i) any event, occurrence,
fact, condition, change, development or effect (an "Event"), except for
Events that have not had and would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect; (ii)
any declaration, payment or setting aside for payment of any dividend or
other distribution by the Company or any Company Subsidiary (except to the
Company) or any redemption, purchase or other acquisition by the Company or
any Company Subsidiary of any shares of capital stock or securities of the
Company or any Company Subsidiary; (iii) any Significant Transaction by the
Company or any Company Subsidiary of any contract or agreement entered into
in respect thereof; (iv) any material change by the Company to its
accounting policies, practices, or methods; (v) any issuance or grant by
the Company or any Company Subsidiary of any rights (including stock
appreciation rights, subscriptions, warrants, puts, calls, preemptive
rights and options), obligation to repurchase or redeem, or any other
rights, or other agreements of any kind, relating to, or the value of which
is tied to the value of, any of the outstanding, authorized but not issued,
unauthorized or treasury shares of the capital stock or any other security
of the Company or any Company Subsidiary; (vi) any employment agreement
entered into (or amended or supplemented) by the Company or any Company
Subsidiary with any employee, or the grant of any increase in compensation
(including employee benefits) of any employee of the Company or any Company
Subsidiary, except for increases (A) in salary in the ordinary course of
business and consistent with past practice, or (B) as required by any
employment or other agreement, policy or plan in effect as of December 31,
2001; (vii) any indebtedness incurred by the Company or any Company
Subsidiary for borrowed money, or any loans made or agreed to be made by or
to the Company or any Company Subsidiary, other than in the ordinary course
of business and consistent with past practice; (viii) any acquisition of
any capital stock or other ownership interest in any other Person; (ix) any
loan made by the Company or any Company Subsidiary to any officer or
director of the Company or any Company Subsidiary; or (x) any Significant
Contract entered into or, other than in the ordinary course of business
consistent with past practice and not material to the Company or any
Company Subsidiaries, any amendment, waiver or other modification of any of
the terms, conditions or provisions of any Significant Contract.
SECTION 2.11 Related Party Transactions.
--------------------------
The Company has not (i) since December 31, 2001, entered into any
relationship or transaction of a sort that would be required to be
disclosed by the Company pursuant to Item 404 of Regulation S-K of the
Commission, except for those matters that have been disclosed in Securities
Filings filed prior to the date of this Agreement, or (ii) since the
effective date of the Xxxxxxxx-Xxxxx Act of 2002, taken any action
prohibited by Section 402 of the Xxxxxxxx-Xxxxx Act of 2002 and the adopted
rules promulgated thereunder.
SECTION 2.12 Compliance with Laws.
--------------------
(a) The Company and the Company Subsidiaries are not in conflict
with, or in default or violation of, any Law in any jurisdiction, foreign
or domestic, applicable to the Company or the Company Subsidiaries or by
which their assets or properties is bound or affected, except for such
conflicts, defaults or violations which would not be reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect.
(b) Neither the Company nor any Company Subsidiary is the subject
of any investigation, nor to the Knowledge of the Company or any Company
Subsidiary has any investigation or prosecution or other action been
threatened by any Governmental Entity or any private entity or person
regarding non-compliance with any Law and no basis exists for any such
investigation or prosecution, except as would not be reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect.
(c) Current billing policies, arrangements, protocols and
instructions of the Company and the Company Subsidiaries related to
services covered by Medical Reimbursement Programs comply in all material
respects with applicable requirements of Medical Reimbursement Programs.
The Company and each Company Subsidiary have complied with all applicable
billing policies, procedures, limitations and restrictions of third-party
payors, including Medical Reimbursement Programs, and there is no pending
or, to the Knowledge of the Company, threatened recoupment or penalty
action or proceedings against the Company or any Company Subsidiaries under
any other third party payor, except for such non-compliance, actions or
proceedings that would not be reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect.
(d) The Company and each Company Subsidiary has obtained, and
maintains in force, all licenses, permits, franchises, certificates of
authority, orders and waivers required from any Governmental Entity
("Company Permits") to operate their respective businesses in the manner in
which they are currently operated (and currently proposed to be operated)
and to occupy, operate and use any buildings, improvements, fixtures and
equipment owned or leased in connection with the operation of assisted
living facilities to provide the services currently provided by the Company
and the Company Subsidiaries at all locations of the Company and the
Company Subsidiaries and all such Company Permits are valid and in full
force and effect, with only such exceptions that would not be reasonably
likely to have, individually or in the aggregate, a Company Material
Adverse Effect. All Company Permits have been issued in the name of the
Company or the applicable Company Subsidiary having an ownership,
leasehold, management or operational interest in the facilities referenced
therein. No Company Permits have been suspended, canceled or terminated
and, to the Knowledge of the Company, no suspension, cancellation or
termination of any such Company Permits is threatened or imminent. Each
employee of the Company and each Company Subsidiary (including each
facility administrator) has obtained, and maintains in force, all licenses,
permits or similar authorizations required to authorize such employee to
perform his or her duties on behalf of the Company and the Company
Subsidiaries with only such exceptions that would not be reasonably likely
to have, individually and in the aggregate, a Company Material Adverse
Effect.
(e) Neither the Company nor any Company Subsidiary, nor, to the
Knowledge of the Company, any director, officer, agent, employee of the
Company or any Company Subsidiary acting for or on behalf of the Company or
any Company Subsidiary, has paid or caused to be paid, directly or
indirectly, in connection with the business of the Company or any of the
Company Subsidiaries: (i) any bribe, kickback, direct or indirect unlawful
payment or other similar payment to any Governmental Entity or any agent of
any supplier or customer, or (ii) any contribution, payment, gift or
entertainment to any political party or candidate (other than from personal
funds of directors, officers or employees not reimbursed by their
respective employers or other than in compliance with applicable Law).
(f) To the extent required, the Company and each Company
Subsidiary is qualified for the conduct of their business in the ordinary
and regular course, for participation in the Medicare program and is a
party to provider agreements for such programs which are in full force and
effect with no events of default having occurred thereunder, except as
would not be reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. The Company and each of the Company
Subsidiaries has filed all claims or other reports required to be filed
with respect to the purchase of services by third-party payors, including
the Medical Reimbursement Programs, except as would not be reasonably
likely to have a Company Material Adverse Effect. All such claims or
reports are complete and accurate in all material respects. The Company and
each of the Company Subsidiaries has paid or has properly recorded on the
Company's financial statements all actually known and undisputed refunds,
discounts or adjustments which have become due pursuant to such claims, and
neither the Company nor any Company Subsidiary has any material liability
to any payor with respect thereto, except, as has been fully reserved for
in the Company's financial statements. Neither the Company nor any Company
Subsidiary has received any written notice or, to the Knowledge of the
Company, any oral notice of any pending appeals, overpayment
determinations, adjustments, challenges, audits, litigation, or notices of
intent to reopen Medicare claims determinations or other reports required
to be filed by the Company or any Company Subsidiary in order to be paid by
a payor for services rendered. None of the Company nor any of the Company
Subsidiaries, nor, to the Knowledge of the Company, any of their respective
directors, officers or employees, consultants, or partners (other than
limited partners in the Company Public Subsidiaries or stockholders of the
Company) has been convicted of, or pled guilty or nolo contendere to,
patient abuse or neglect, or any other Medicare program-related offense.
Neither the Company nor any of the Company Subsidiaries, nor to the
Knowledge of the Company, any of their respective directors, officers,
current employees, consultants or partners (other than limited partners in
the Company Public Subsidiaries or stockholders of the Company), has
committed any offense which would be reasonably likely to serve as the
basis for suspension or exclusion from the Medicare program, including
defrauding a government program, loss of a license to provide health care
services, and failure to provide quality care.
(g) None of the Company, any Company Subsidiary, nor, to the
Knowledge of the Company, any of their respective directors, officers,
employees or other Persons providing professional services for the Company
and the Company Subsidiaries, has engaged in any activities which are in
violation of Sections 1128A, 1128B, 1128C or 1877 of the Social Security
Act (42 U.S.C. xx.xx. 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), the False
Claims Act (31 U.S.C. ss. 3729 et seq.), the False Statements Acts (18
U.S.C. ss. 2002), the Program Fraud Civil Penalties Act (31 U.S.C. ss. 3801
et seq.), or related regulations or other federal or state Laws, including
the following:
(i) making or causing to be made a false statement or
representation of a material fact in any application for any benefit
or payment;
(ii) making or causing to be made a false statement or
representation of a material fact for use in determining rights to
any benefit or payment;
(iii) failing to disclose knowledge by a Medicare or Medicaid
claimant or a claimant under any Medical Reimbursement Program of
the occurrence of any event affecting the initial or continued right
to any benefit or payment on its own behalf or on behalf of another;
(iv) offering, paying, soliciting or receiving any
remuneration (including any kickback, bribe, or rebate), directly or
indirectly, overtly or covertly, in cash or kind (i) in return for
referring an individual to a person for the furnishing or arranging
for the furnishing of any item or service for which payment may be
made in whole in or part by any Medical Reimbursement Program or
(ii) in return for purchasing, leasing, or ordering, or arranging,
or arranging for or recommending purchasing, leasing, or ordering
any good, facility, service, or item for which payment may be made
in whole or in part by any Medical Reimbursement Program; or
(v) referring or billing a patient for designated health
services (as defined in 42 U.S.C. ss. 1395nn) or providing
designated health services to a patient upon a referral from an
entity or person with which the physician or an immediate family
member has a financial relationship, and to which no exception under
42 U.S.C. ss. 1395nn applies.
(h) For purposes of this Agreement the following terms shall have
the meanings indicated:
"CHAMPUS" means the United States Department of Defense Civilian
Health and Medical Program of the Uniformed Services.
"Medical Reimbursement Programs" means the Medicare, Medicaid,
Blue Cross/Blue Shield and CHAMPUS programs and any other health care
program operated by or financed in whole or in part by any Governmental
Entity.
"Medicaid" means that means-tested entitlement program under
Title XIX of the Social Security Act that provides federal grants to states
for medical assistance based on specific eligibility criteria. (Social
Security Act of 1965, Title XIX, P.L. 89-97, as amended; 42 U.S.C. 1396 et
seq.).
"Medicare" means that government-sponsored entitlement program
under Title XVIII of the Social Security Act that provides for a health
insurance system for eligible elderly and disabled individuals. (Social
Security Act of 1965, Title XVIII, P.L. 89-97, as amended, 42 U.S.C. 1395
et seq.).
(i) The Company has entered into and consummated the settlement
agreement attached as Schedule 2.12(i) of the Company Disclosure Schedule
(the "Gericare Settlement").
SECTION 2.13 Finders and Investment Bankers.
------------------------------
Neither the Company nor any Company Subsidiary nor any of their
respective officers or directors has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the Merger or the other transactions contemplated by
this Agreement other than pursuant to the agreements with Xxxxx & Steers
Capital Advisors LLC, accurate and complete copies of which have been
provided to Purchaser.
SECTION 2.14 Material Contracts.
------------------
(a) Neither the Company nor any Company Subsidiary is a party or
is subject to any note, bond, mortgage, indenture, contract, lease,
license, agreement, understanding, instrument, bid or proposal that is
required to be described in or filed as an exhibit to an Annual Report on
Form 10-K (each a "Material Contract") that has not been described in or
filed by the Company in a Securities Filing filed prior to the date of this
Agreement, except for a Material Contract entered into after the date of
this Agreement in accordance with Section 4.1 of this Agreement.
(b) Schedule 2.14(b) of the Company Disclosure Schedule sets
forth a true and complete list of the following in effect as of the date of
this Agreement or executed prior to the date of this Agreement with an
effective date after the date of this Agreement, true and complete copies
of which have been made available to Purchaser:
(i) all contracts or agreements involving payments in excess
of $100,000 in any calendar year to which the Company or any Company
Subsidiaries is a party (other than purchase orders in the ordinary
course of business);
(ii) all contracts, agreements or other instruments related
to (x) any pending Significant Transaction of the Company or any
Company Subsidiary or (y) any Significant Transaction of the Company
or any Company Subsidiary consummated prior to the date of this
Agreement, if the Company or any Company Subsidiary has any
continuing material obligations under any such contract, agreement
or other instrument. For purposes of this Agreement, "Significant
Transaction" shall mean any acquisition or disposition (by merger,
consolidation, acquisition of stock or assets or otherwise) of any
business, limited liability company, association or other business
organization or division thereof or any material partnership
interest or material joint venture interest or any material assets
or properties;
(iii) each employment contract, consulting agreement,
agreement or other instrument to which the Company or any Company
Subsidiary is a party or by which the Company or any Company
Subsidiary otherwise is bound with any employee of the Company, or,
if such contract, agreement or other instrument involves aggregate
annual payments in excess of $100,000, to any consultant of the
Company;
(iv) all material contracts, agreements, arrangements or
other instruments relating to "off-balance sheet," "grey box," loss
sharing or loss guarantee and contingent purchase transactions or
other similar transactions of the Company or any Company Subsidiary;
(v) all contracts, agreements or arrangements containing
non-competition, exclusivity or similar provisions;
(vi) all contracts, agreements or other instruments entered
into by the Company or any Company Subsidiary relating to
indebtedness for borrowed money;
(vii) all obligations assumed by the Company or any Company
Subsidiary under interest rate or currency hedging or swap
transactions or any other derivative transaction;
(viii) all material indemnification agreements to which the
Company or any Company Subsidiary is a party;
(ix) all tax sharing agreements, tax indemnity agreements or
any other contract or agreement of a similar nature to which the
Company or any Company Subsidiary is a party or by which the Company
or any Company Subsidiary is otherwise bound;
(x) all leases relating to the Leased Properties; and
(xi) all organizational documents and partnership, operating,
limited liability or similar agreements relating to any partnership
or limited liability company or similar entity in which the Company
or a Company Subsidiary is a partner or member and any stockholder
or similar agreement to which the Company or any Company Subsidiary
is a party.
The contracts, agreements, arrangements, instruments or documents
of the type set forth in clauses (i) through (xi) above and the Material
Contracts are referred to herein as "Significant Contracts."
(c) (i) Each Significant Contract is in full force and effect and
constitutes a legal, valid, binding and enforceable obligation of the
Company or the applicable Company Subsidiary to the extent any such entity
is a party thereto and, to the Knowledge of the Company, each other party
thereto, except as the enforceability thereof (with respect to each other
party thereto) may be limited by bankruptcy, insolvency, moratorium and
other similar laws relating to or affecting creditors' rights generally or
by general equitable principles.
(ii) Schedule 2.14(c)(ii) of the Company Disclosure Schedule
sets forth a complete list of the Consents needed in order that each
such Significant Contract shall continue in full force and effect in
accordance with its terms without penalty, acceleration of rights or
early termination by reason of this Agreement, the consummation of
the Merger or the other transactions contemplated by this Agreement,
except for Consents the absence of which would not be reasonably
likely to, individually or in the aggregate, (x) have a Company
Material Adverse Effect or (y) result in the termination, or
increase in amounts payable by the Company or any Company Subsidiary
under, any lease with respect to any Leased Property that is an
assisted living facility or a skilled nursing facility.
(iii) Neither the Company nor any Company Subsidiary is in
violation or breach of or default under (nor does there exist any
condition which upon the passage of time or the giving of notice
would cause such violation or default under) any Significant
Contract nor, to the Company's Knowledge, is any other party to such
Significant Contract in violation or breach of or default under (nor
does there exist any condition which upon the passage of time or the
giving of notice would cause such violation or default under) any
such Significant Contract, in each case, except where such violation
or breach would not be reasonably likely to, individually or in the
aggregate, (x) have a Company Material Adverse Effect or (y) result
in the termination of, or increase in amounts payable by the Company
or any Company Subsidiary under, any lease with respect to any
Leased Property that is an assisted living facility or a skilled
nursing facility.
SECTION 2.15 Employee Benefit Plans.
----------------------
(a) For the purposes of this Agreement, the term "Benefit Plan"
or "Benefit Plans" means all "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), bonus, pension, profit sharing, deferred compensation,
incentive compensation, excess benefit, vacation, stock, stock option,
stock purchase, severance, termination pay, change in control or other
material employee benefit plans, programs, policies, arrangements or
agreements currently maintained, or contributed to, or required to be
maintained or contributed to, by the Company or any Company Subsidiary for
the benefit of any current or former employees, officers, directors or
independent contractors of the Company or the Company Subsidiaries (or any
beneficiary or dependent thereof) or with respect to which the Company or
the Company Subsidiaries have any liability. Schedule 2.15 of the Company
Disclosure Schedule sets forth a complete list of all material Benefit
Plans; provided, however, that all unscheduled Benefit Plans shall not be
in the aggregate material.
(b) With respect to each Benefit Plan, the Company has delivered
or made available to Purchaser a true, correct and complete copy of: (i)
all plan documents and trust agreements; (ii) the most recent Annual Report
(Form 5500 Series) and accompanying schedule, if any; (iii) the current
summary plan description, if any; (iv) the most recent annual financial
report, if any; (v) the most recent actuarial report, if any; and (vi) the
most recent determination letter from the IRS, if any. Except as
specifically provided in the foregoing documents, or in other documents,
delivered or made available to Purchaser, there are no amendments to any
Benefit Plan that have been adopted or approved nor has the Company or any
Company Subsidiary committed to make any such amendments or to adopt or
approve any new Benefit Plan that would materially increase the liability
of the Company and the Company Subsidiaries taken as a whole.
(c) Each Benefit Plan has been administered in accordance with
its terms and in compliance with the applicable provisions of ERISA
(including the making of all contributions and payments), the Code, and
other applicable law, except where the failure to so administer or comply
would not be reasonably likely to, individually or in the aggregate, have a
Company Material Adverse Effect. All Benefit Plans intended to be qualified
under Section 401(a) of the Code have been the subject of favorable
determination letters from the Internal Revenue Service (the "IRS"), and,
to the Knowledge of the Company, all such Benefits Plans are qualified
under Section 401(a) of the Code and no circumstances exist that reasonably
could result in the loss of such qualified status. Except as would not be
reasonably likely to, individually or in the aggregate, have a Company
Material Adverse Effect: (i) none of the Company, and Company Subsidiary
nor any other person, including any fiduciary, has engaged in any
"prohibited transaction" (as defined in Section 4975 of the Code or Section
406 of ERISA), which could subject any of the Benefit Plans or their
related trusts, the Company, any Company Subsidiary or any Person that the
Company or any Company Subsidiary has an obligation to indemnify, to any
tax or penalty imposed under Section 4975 of the Code or Section 502 of
ERISA; (ii) there are no pending or, to the Company's Knowledge, threatened
claims (other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Benefit
Plans, any fiduciaries thereof with respect to their duties to the Benefit
Plans or the assets of any of the trusts under any of the Benefit Plans
which could reasonably be expected to result in liability of the Company or
any Company Subsidiary in excess of $100,000, in the aggregate, to the
Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor, any Benefit Plan or any participant in a Benefit Plan.
(d) Neither the Company, nor any current or former Company ERISA
Affiliate, has incurred any liability under Title IV of ERISA or Section
412 of the Code, except as has not had and would not be reasonably likely
to have, individually or in the aggregate, a Company Material Adverse
Effect, nor is any such liability reasonably expected to be incurred. For
purposes of this Agreement, a "Company ERISA Affiliate" is any entity that
is (i) a member of a "controlled group of corporations," under "common
control" or a member of an "affiliated service group" within the meaning of
Sections 414(b), (c) or (m) of the Code with the Company or any of Company
Subsidiary, (ii) required to be aggregated under Section 414(o) of the Code
with the Company or any of Company Subsidiary, or (iii) under "common
control" with the Company or any Company Subsidiary, within the meaning of
Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed
under any of the foregoing Sections. No Benefit Plan is subject to Title IV
of ERISA or Section 412 of the Code, and no Benefit Plan is a
"multi-employer plan" (as defined in Section 3(37) of ERISA).
(e) No Benefit Plan provides, or has any liability to provide,
life insurance, medical, severance or other employee welfare benefits to
any employee upon his or her retirement or termination of employment,
except as may be required by Section 4980B of the Code. Each Benefit Plan
can be amended, terminated or otherwise discontinued without material
liability to the Company, any of Company Subsidiary or any Company ERISA
Affiliate, other than with respect to benefits accrued through the date of
such action.
(f) There is no pending or, to the Company's Knowledge,
threatened litigation relating to employment, termination of employment,
compensation or employee benefits involving the Company which, if
determined adversely to the Company, would not be reasonably likely to,
individually or in the aggregate, have a Company Material Adverse Effect.
(g) In the event that any individual is classified by the Company
or any Company Subsidiary as a non-employee (such as an independent
contractor, leased employee, consultant or special consultant) and is later
reclassified as an employee upon governmental or judicial review,
notwithstanding such reclassification, the aggregate increase in liability
of the Company and Company Subsidiaries under the Benefit Plans due to such
reclassification shall not have a Company Material Adverse Effect.
(h) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event
under any Benefit Plan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any employee of the Company or any Company Subsidiary, or
(ii) result in the triggering or imposition of any restrictions or
limitations on the right of the Company or Purchaser to cause any such
Benefit Plan to be amended or terminated (or which would result in any
materially adverse consequence for so doing). No payment or benefit that
will or may be made by the Company, Purchaser, or any of their respective
subsidiaries or affiliates with respect to any employee of the Company
under any Benefit Plan in connection with the transactions contemplated by
this Agreement will be characterized as an "excess parachute payment,"
within the meaning of Section 280G(b)(1) of the Code or will not be
deductible by reason of Section 162(m) of the Code.
SECTION 2.16 Taxes and Returns.
-----------------
(a) (i) All Tax Returns (as defined below) required to be filed
by or on behalf of the Company or any Company Subsidiary or by or on behalf
of any affiliated, combined, consolidated or unitary group of which the
Company or any Company Subsidiary is or has been a member (a "Company
Group") have been timely filed in the manner prescribed by law, and all
such Tax Returns are true, complete and accurate except to the extent any
failures to file or failures to be true, correct or accurate would not be
reasonably likely to, individually or in the aggregate, have a Company
Material Adverse Effect; (ii) all Taxes (as defined below) due and owing by
the Company, any Company Subsidiary or any member of the Company Group
(whether or not shown on a Tax Return) have been timely paid, or adequately
reserved for in accordance with GAAP, except to the extent any failure to
pay or reserve would not be reasonably likely to, individually or in the
aggregate, have a Company Material Adverse Effect; (iii) there are no
claims or assessments presently pending against the Company, any Company
Subsidiary or any member of the Company Group, for any alleged Tax
deficiency, and the Company has no Knowledge of any threatened claims or
assessments against the Company, any Company Subsidiary or any member of
the Company Group for any alleged Tax deficiency, which in either case if
upheld could, individually or in the aggregate, have a Company Material
Adverse Effect; (iv) to the Knowledge of the Company, no issues have been
raised in any audit or tax examination of the Company, any Company
Subsidiary or any member of the Company Group which, if determined
adversely, would be reasonably likely to, individually or in the aggregate,
have a Company Material Adverse Effect; (v) there are no Liens for Taxes on
any asset of the Company, except for Liens for Taxes not yet due and
payable and Liens for Taxes that would not be reasonably likely to,
individually or in the aggregate, have a Company Material Adverse Effect;
and (vi) the Company, each Company Subsidiary and each member of the
Company Group has complied in all respects with all rules and regulations
relating to the withholding of Taxes (including employee-related Taxes),
except for failures to comply that would not be reasonably likely to,
individually or in the aggregate, have a Company Material Adverse Effect
(vii) the Company is the common parent of an affiliated group of
corporations filing consolidated federal income tax returns; and (viii)
neither the Company nor any Company Subsidiary has, or at the Effective
Time will have, in effect a consent under Section 341(f) of the Code.
(b) (i) to the Company's Knowledge, no taxing authority in any
jurisdiction where the Company does not file Tax Returns has made a claim,
assertion, or threat that the Company, any Company Subsidiary or any member
of the Company Group is or may be subject to Tax in such jurisdiction and
(ii) neither the Company, any Company Subsidiary, nor any member of the
Company Group has agreed to any adjustment under Section 481(a) of the Code
(or analogous provisions of state, local or foreign law), as a result of a
change of accounting method or otherwise, or has disposed of any assets
under the installment method pursuant to Section 453 of the Code, if such
adjustment or disposition would require the inclusion of a material amount
in income after the Effective Time.
(c) The statutes of limitations for the federal income Tax
Returns of the Company, any Company Subsidiary and any member of the
Company Group have expired or otherwise have been closed for all taxable
periods ending on or before December 31, 1998.
For purposes of this Agreement, (i) "Tax" or "Taxes" means all
taxes, levies or other like assessments, charges or fees (including
estimated taxes, charges and fees), including income, corporation, advance
corporation, gross receipts, transfer, excise, property, sales, use,
value-added, license, payroll, withholding, social security and franchise
or other governmental taxes or charges, imposed by the United States or any
state, county, local or foreign government or subdivision or agency
thereof, any liability for taxes, levies or other like assessments, charges
or fees of another person pursuant to Treasury Regulation Section 1.1502-6
or any similar or analogous provision of applicable law or otherwise
(including as a transferee or under a tax sharing or other agreement) and
such term shall include any interest, penalties or additions to tax
attributable to such taxes, levies or other like assessments, charges or
fees and (ii) "Tax Return" means any report, return, statement, declaration
or other written information required to be supplied to a taxing or other
Governmental Authority in connection with Taxes.
SECTION 2.17 Takeover Statutes.
-----------------
The Board of Directors of the Company and the Special Committee
of the Board of Directors have taken all appropriate and necessary action
to render any anti-takeover statute or regulation, including Section 203 of
the DGCL (each, a "Takeover Statute") inapplicable to this Agreement, the
Merger and the other transactions contemplated by this Agreement.
SECTION 2.18 Business Operations.
-------------------
Schedule 2.18 of the Company Disclosure Schedule sets forth a
true and complete list of all assisted living and skilled nursing
facilities operated by the Company and the Company Subsidiaries. Neither
the Company nor any Company Subsidiary operates any facilities other than
those facilities listed on Schedule 2.18 of the Company Disclosure
Schedule.
SECTION 2.19 Environmental Matters.
---------------------
(a) Except as would not be reasonably likely to, individually or
in the aggregate, have a Company Material Adverse Effect:
(i) Each of the Company and the Company Subsidiaries (y) is,
and at all times has been, in compliance with all applicable
Environmental Laws, and (z) has obtained, and is in compliance with,
all permits, licenses, authorizations, registrations and other
governmental consents required by applicable Environmental Laws
("Environmental Permits"), and has made all appropriate filings for
issuance or renewal of such Environmental Permits.
(ii) There is no contamination of, and there have been no
releases or, to the Knowledge of the Company, threatened releases of
Hazardous Materials at the Facilities or any real property formerly
owned, leased or operated by the Company or the Company Subsidiaries
(or any of their respective predecessors).
(iii) There are no past or present conditions, events,
circumstances, facts, activities, practices, incidents, actions,
omissions or plans that are reasonably likely to (y) interfere with
or prevent continued compliance by the Company or the Company's
Subsidiaries with Environmental Laws and the requirements of
Environmental Permits or (z) to the Company's Knowledge, give rise
to any liability or other obligation under any Environmental Laws.
(iv) Neither the Facilities, nor any property formerly owned,
leased, or operated by the Company or the Company Subsidiaries, nor
to the Company's Knowledge, any site at or to which the Company or
the Company Subsidiaries have disposed of, transported, or arranged
for the transportation of, any Hazardous Materials, has been listed
on, or, to the Company's Knowledge, proposed for listing on, the
National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System list, or any
comparable state list of properties to be investigated and/or
remediated, nor has such disposal, transportation or arrangement
been conducted in violation of Environmental Law.
(b) There are no written, or, to the Knowledge of the Company,
oral, claims or notices (including, in each case, claims or notices that
the Company, the Company Subsidiaries or any of their respective
predecessors or any person whose liability has been retained or assumed
contractually by the Company are or may be a potentially responsible person
or otherwise liable in connection with any site or other location
containing Hazardous Materials or used for the storage, handling,
treatment, processing, disposal, generation or transportation of Hazardous
Materials), civil, criminal or administrative actions, suits, hearings,
investigations, inquiries or proceedings pending or, to the Knowledge of
the Company, threatened that are based on or related to any Environmental
Matters relating to the business of the Company or the Company
Subsidiaries.
(c) The Company has delivered to Purchaser true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by the Company or any Company Subsidiary pertaining
to Environmental Matters.
(d) For the purposes of this Agreement, the following terms shall
have the meanings indicated:
"Environmental Laws" means any foreign, federal, state or local
law, statute, ordinance, rule or regulation governing Environmental
Matters, as the same have been or may be amended from time to time,
including any common law cause of action providing any right or remedy
relating to Environmental Matters, all indemnity agreements and other
contractual obligations (including leases, asset purchase and merger
agreements) relating to Environmental Matters, and all applicable judicial
and administrative decisions, orders, and decrees relating to Environmental
Matters.
"Environmental Matter" means any matter arising out of, relating
to, or resulting from pollution, contamination, protection of the
environment, human health or safety, health or safety of employees,
sanitation, and any matters relating to emissions, discharges,
disseminations, releases or threatened releases, of Hazardous Materials
into the air (indoor and outdoor), surface water, groundwater, soil, land
surface or subsurface, buildings, facilities, real or personal property or
fixtures or otherwise arising out of, relating to, or resulting from the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, handling, release or threatened release of Hazardous Materials.
"Facilities" means all real property owned, leased, or operated
by the Company or any Company Subsidiary and any buildings, facilities,
leasehold and other improvements, fixtures, and structures located on, in,
under, or above the real property of the Company or any Company Subsidiary.
"Hazardous Materials" means any pollutants, contaminants, toxic
or hazardous or extremely hazardous substances, materials, wastes, natural
or man-made elements or forces (including petroleum or any by-products or
fractions thereof, any form of natural gas, lead, asbestos and
asbestos-containing materials, polychlorinated biphenyls ("PCBs") and
PCB-containing equipment, radon and other radioactive elements, pesticides,
defoliants, explosives, flammables, corrosives and urea formaldehyde foam
insulation) that are regulated by, or may form the basis of liability
under, any Environmental Laws.
SECTION 2.20 Property.
--------
(a) The Company or the Company Subsidiaries have good and
marketable title to all of the assets and properties (other than real
property) which they purport to own (including those reflected in the
financial statements contained in the Securities Filings (or incorporated
therein by reference), except for assets and properties sold, consumed or
otherwise disposed of in the ordinary course of business since the date of
such financial statements), in each case, free and clear of all Liens other
than (i) chattel mortgages, capital leases and similar purchase money liens
imposed in the ordinary course of business of the Company consistent with
past practice, (ii) Liens granted pursuant to mortgages and deeds of trust
of record encumbering the Owned Properties which mortgages and deeds of
trusts (x) are Permitted Encumbrances with respect to such Owned Properties
and (y) do not individually or in the aggregate, prevent, materially
restrict or otherwise materially adversely affect the use of such assets
and property as is necessary for the conduct of the businesses of the
Company or the Company Subsidiaries, as applicable, as they have been or
presently are proposed to be conducted, and (iii) Liens granted pursuant to
the Leased Property Leases (as defined below) to the respective lessors
thereunder.
(b) Schedule 2.20(b) of the Company Disclosure Schedule sets
forth a list of all real property owned, leased, or occupied by the Company
and the Company Subsidiaries as of the date hereof.
(c) As to the parcels of real property purported to be owned in
fee by the Company or any Company Subsidiary (the "Owned Properties").
(i) The Company and the Company Subsidiaries have good and
marketable fee title to the Owned Properties, subject only to
Permitted Encumbrances, which Permitted Encumbrances do not,
individually or in the aggregate, prevent, materially restrict or
otherwise materially adversely affect the use of the Owned
Properties as is necessary for the conduct of the businesses of the
Company or the Company Subsidiaries, as applicable, as they have
been or presently are proposed to be conducted.
(ii) There are no options, rights of first refusal or first
offer or contracts of sale affecting the Owned Properties.
(iii) The Owned Properties are not in violation of applicable
Laws that could materially adversely affect the use of the Owned
Properties nor has the Company or any Company Subsidiary received
any written notice of a violation of any Law relating to the Owned
Properties.
(iv) There is no pending or, to the Knowledge of the Company,
threatened condemnation of all or any portion of the Owned
Properties.
(v) All existing utilities required for the use, operation
and maintenance of the Owned Properties are adequate, in all
material respects, for such current use, operation and maintenance.
(vi) The Company or a Company Subsidiary is in possession of
the Owned Properties and there are no leases, tenancies or other
occupancies affecting the Owned Properties other than the Resident
Leases (as defined below) and Permitted Commercial Leases (as
defined below).
(vii) To the Knowledge of the Company, there are no material
latent defects or material adverse physical conditions affecting the
improvements located on the Owned Properties.
(viii) The Company or a Company Subsidiary has rights of
egress and access to the Owned Properties reasonably necessary for
the conduct of the business thereon.
(ix) American Land Title Association policies of title
insurance (or marked title insurance commitments having the same
force and effect as title insurance policies) have been issued by
national title insurance companies insuring the fee simple title of
the Company or the Company Subsidiaries, as applicable, to each of
the Owned Properties in the matters set forth therein (the "Owned
Title Policies"), and, to the Knowledge of the Company, such Owned
Title Policies are valid and in full force and effect and no claim
has been made under any such policy. The Company has delivered to
Purchaser true and complete copies of all Owned Title Policies and
of the most recent surveys of the Owned Properties, and true and
complete copies of all material exceptions referenced in such
policies and the most recent title reports for and surveys of each
of the Owned Properties.
(d) As to the real property leased by the Company or the Company
Subsidiaries, as lessee (the "Leased Properties"):
(i) The Company and the Company Subsidiaries have valid and
subsisting leasehold estates in the Leased Properties pursuant to
the Leased Property Leases.
(ii) There is no notice of termination or notice of default
that has been received from the lessor in writing under any of the
Leased Property Leases, and, to the Knowledge of the Company, no
event has occurred which, with notice and lapse of time, would
constitute a default under any of the Leased Property Leases.
(iii) Neither the Company nor any Company Subsidiary has
assigned, transferred, conveyed, mortgaged or encumbered any
interest in the Leased Properties or any of the Leased Property
Leases.
(iv) The Leased Properties have all Company Permits required
in connection with the operation and maintenance thereof and have
been operated and maintained in all material respects in accordance
with applicable Laws.
(v) The Leased Properties are supplied with utilities and
other services reasonably necessary in all material respects for the
operation and maintenance thereof.
(vi) There are rights of access for egress and ingress to
each of the Leased Properties reasonably necessary for the conduct
of business of the Company or the Company Subsidiaries, as
applicable, as presently conducted.
(vii) The Company or a Company Subsidiary is in possession of
each of the Leased Properties.
(viii) To the Knowledge of the Company, there are no material
latent defects or material adverse physical conditions affecting the
improvements located on the Leased Properties.
(ix) The Leased Properties are not in violation of applicable
Laws that could materially adversely affect the use of a Leased
Property nor has the Company or any Company Subsidiary received any
written notice of a violation of any Law relating to the Leased
Properties.
(x) American Land Title Association policies of title
insurance (or marked title insurance commitments having the same
force and effect as title insurance policies) have been issued by
national title insurance companies insuring the leasehold estate of
the Company or the Company Subsidiaries, as applicable, to each of
the Leased Properties in the matters set forth therein (the "Leased
Title Policies"), and, to the Company's Knowledge, the Title
Policies are valid and in full force and effect and no claim has
been made under any such policy. The Company has delivered to
Purchaser true and complete copies of all Leased Title Policies and
of the most recent surveys of the Leased Properties, and true and
complete copies of all material exceptions referenced in such
policies and the most recent title reports for and surveys of each
of the Leased Properties.
(e) All property and assets owned or utilized by the Company or
the Company Subsidiaries, as applicable, are in satisfactory operating
condition and repair (except for ordinary wear and tear), free from any
defects (except such minor defects as do not interfere with the use thereof
in the conduct of the normal operations), have been maintained consistent
with the standards generally followed in the industry and are sufficient to
carry on the business of the Company or the Company Subsidiaries, as
applicable, as presently conducted. All buildings, plants and other
structures owned or otherwise utilized by the Company are in good condition
and repair (except for ordinary wear and tear).
(f) As used herein, the following terms shall have the following
meanings:
(i) "Permitted Encumbrances" means the following types of
Liens (excluding any such Lien imposed pursuant to Section
401(a)(29) or 412(n) of the Code or by ERISA, any such Lien relating
to or imposed in connection with any Environmental Claim):
(A) Liens for taxes, assessments or other similar governmental
charges not yet due and payable;
(B) Liens of record as of the date of this Agreement in the
official records of the state and county of the location of the real
property in question;
(C) statutory Liens of mechanics and materialmen incurred in
the ordinary course of business (a) for amounts not yet due and
payable or (b) for amounts that are past due provided that (x) the
same are being contested by appropriate proceedings in good faith
and in compliance with the requirements of any applicable lenders or
other creditors, (y) such reserves or other appropriate provision,
if any, for any such contested amounts as shall be required by GAAP
shall have been reflected on the most recent consolidated balance
sheet of the Company included in the Securities Filings filed prior
to the date of this Agreement and (z) such Liens do not have and are
not reasonably likely to have, individually or in the aggregate, a
material adverse affect on the ownership, operation, maintenance,
repair or leasing of the property in question by the Company or the
applicable Company Subsidiary or the conduct of business thereon or
therefrom by the Company or the applicable Company Subsidiary;
(D) any zoning or similar law or right reserved to or vested in
any governmental office or agency to control or regulate the use of
any real property;
(E) (y) leases or subleases granted to residents of the senior
living facility operated on the property in question in the ordinary
conduct of the business of Company or the applicable Company
Subsidiary (the "Resident Leases") and (z) leases or subleases
listed on Schedule 2.20(f)(i)(E)(z) of the Company Disclosure
Schedule, all of which leases and subleases are for commercial space
at the property in question, have been entered into in the ordinary
course of business on arm's length terms and conditions and are
ancillary or incidental to the operation of the property in question
as a senior residence facility ("Permitted Commercial Leases");
(F) Liens in favor of the Purchaser; and
(G) Liens existing upon property acquired after the date
hereof by the Company or any Company Subsidiary, which Liens are
expressly approved in writing by Purchaser.
(ii) "Leased Property Leases" means the leases and related
agreements and instruments listed on Schedule 2.20(f)(ii) of the
Company Disclosure Schedule pursuant to which the Company or a
Company Subsidiary, as applicable, holds a leasehold estate in the
applicable Leased Property identified on such Schedule. The Company
hereby represents and warrants that such Schedule is a true,
accurate and complete list of all of the leases and related
agreements and instruments pursuant to which the Company or a
Company Subsidiary, as applicable, holds a leasehold estate in the
Leased Properties and that there exist no such leases, related
agreements or instruments relating to any Leased Property which are
not listed on such Schedule.
SECTION 2.21 Intellectual Property.
---------------------
Schedule 2.21 of the Company Disclosure Schedule lists all
material applications and registrations for patents, trademarks and
copyrights owned by the Company or any Company Subsidiary, and all material
licenses or other agreements concerning Intellectual Property to which the
Company is a party. Except as would not be reasonably likely, individually
or in the aggregate, to have a Company Material Adverse Effect, (i) the
Company or a Company Subsidiary owns or has the right to use all
Intellectual Property necessary to conduct its business as presently
conducted, free and clear of all Liens, (ii) the Company's and the Company
Subsidiaries' owned Intellectual Property or use of any Intellectual
Property does not, to the Company's Knowledge, infringe the Intellectual
Property of any third party, (iii) there are no pending, or to the
Company's Knowledge, threatened actions or litigation against the Company
or any Company Subsidiary challenging its ownership or use of any
Intellectual Property owned or used by the Company or any Company
Subsidiary, and (iv) to the Knowledge of the Company, no Intellectual
Property owned by the Company or any Company Subsidiary is being used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of registrations for such Intellectual Property. As used
in this Agreement, the term "Intellectual Property" means (a) all
trademarks, service marks, trade dress, logos, trade 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, (b)
all copyrightable works, all copyrights, all rights to database
information, and all applications, registrations, and renewals in
connection therewith, (c) all mask works and all applications,
registrations, and renewals in connection therewith and (d) all trade
secrets and proprietary business information. Notwithstanding any other
provision of this Agreement to the contrary, this Section 2.21 sets forth
the Company's only representations with respect to the Company's
Intellectual Property.
SECTION 2.22 Labor Relations.
---------------
(a) To the Knowledge of the Company, there is no charge pending
or threatened against the Company or any Company Subsidiary alleging, with
respect to any employee or employees of the Company or any Company
Subsidiary, any violation of any statute or regulation relating to
employment and employment practices, or any violation of any collective
bargaining agreement, any unlawful discrimination in employment practices
or any unfair labor practices before any court, agency or other judicial or
arbitral body, except for any such violations that would not be reasonably
likely to, individually or in the aggregate, have a Company Material
Adverse Effect.
(b) There are no labor strikes and, to the Knowledge of the
Company, there are no pending or threatened union organizing efforts, labor
strikes, disputes, slow-downs or work stoppages actually pending or
threatened against the Company or any Company Subsidiary.
(c) No employees of the Company or any Company Subsidiary are
covered by any collective bargaining agreement with respect to their
employment with the Company or any Company Subsidiary, and no collective
bargaining agreement or other labor union agreement for employees of the
Company or any Company Subsidiary with respect to their employment with the
Company or any Company Subsidiary is currently being negotiated or pending
negotiation by the Company or any Company Subsidiaries.
(d) There has been no concerted work stoppage with respect to the
business activities of the Company or any Company Subsidiary during the
last three years.
(e) To the Knowledge of the Company, there is no complaint
against the Company or any Company Subsidiary issued by or pending before
the National Labor Relations Board, except for any such complaints that
would not be reasonably likely to, individually or in the aggregate, have a
Company Material Adverse Effect.
SECTION 2.23 Insurance.
---------
The Company and the Company Subsidiaries maintain in force
insurance policies and bonds in such amounts and against such liabilities
and hazards as are consistent with industry practice. Schedule 2.23 of the
Company Disclosure Schedule sets forth a complete list of all material
insurance policies maintained by the Company or the Company Subsidiaries,
including the names of the carriers of such insurance policies and the
expiration dates and retention terms thereof. To the Knowledge of the
Company, neither the Company nor any Company Subsidiary is liable or has
received notice that it will become liable for any retroactive premium
adjustment not reflected in the financial statements contained in the
Securities Filings or otherwise provided for as set forth on Schedule 2.23
of the Company Disclosure Schedule. All policies maintained by the Company
or the Company Subsidiaries are valid and enforceable and in full force and
effect (except as the enforceability of any such policy may be limited by
the insurer's bankruptcy, insolvency, moratorium and other similar laws
relating to or affecting creditors' rights generally or by general
equitable principles), all premiums owing in respect thereof have been
timely paid, and neither the Company nor any Company Subsidiary has
received any notice of premium increase or cancellation with respect to any
of its insurance policies or bonds. There are no claims pending with
respect to insurance policies maintained by the Company or the Company
Subsidiaries as to which the insurer has denied liability or is reserving
its rights, and all claims have been timely and properly filed. Schedule
2.23 of the Company Disclosure Schedule sets forth a complete list of all
claims pending under the insurance policies maintained by the Company or
the Company Subsidiaries as of the date hereof. Within the last three
years, neither the Company nor any Company Subsidiary has been refused any
insurance coverage sought or applied for, and the Company has no reason to
believe that its or the Company Subsidiaries' existing insurance coverage
cannot be renewed as and when the same shall expire, upon terms and
conditions standard in the market at the time renewal is sought. There are
no pending or, to the Knowledge of the Company, threatened terminations or
premium increases for the current policy period with respect to any of such
policies or bonds. To the Knowledge of the Company, there is no condition
or circumstance applicable to the Company which could result in such
termination or increase, and the Company is in compliance with all
conditions contained in such policies or bonds.
SECTION 2.24 Conflicts of Interest.
---------------------
No officer, director, or, to the Knowledge of the Company, any
employee of the Company has or, to the Knowledge of the Company, claims to
have (i) any direct or indirect ownership or leasehold interest (other than
through ownership of Company Shares, Stock Options or securities registered
under Section 12 of the Exchange Act or in respect of which filings are
made with the Commission pursuant to Section 15(d) of the Exchange Act) in
the property, real or personal, tangible or intangible, owned or used by
the Company or any Company Subsidiary or (ii) any contract, commitment or
arrangement with the Company not generally available to all employees
except for employment agreements, Stock Option agreements or Benefit Plans.
SECTION 2.25 Fairness Opinion.
----------------
The Special Committee has received from Xxxxx & Steers Capital
Advisors LLC an opinion to the effect that the Merger Consideration is fair
to the holders of the Common Shares (other than Purchaser and its
affiliates) from a financial point of view, a copy of which has been
delivered to Purchaser for informational purposes. Xxxxx & Steers Capital
Advisors LLC has agreed to the inclusion of, and reference to, such opinion
in all filings made with the Commission and all materials to be submitted
to stockholders of the Company in connection with the Merger and the other
transactions contemplated by this Agreement, subject only to their consent
to any description of their opinion contained in such filings or materials,
which consent shall not to be unreasonably withheld or delayed.
SECTION 2.26 Accuracy of Information.
-----------------------
(a) No representation or warranty of the Company contained in
this Agreement nor any statement made in the Company Disclosure Schedule
contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they are
made, not materially false or misleading.
(b) All documents that the Company or any Company Subsidiary or
any officer or director thereof is responsible for filing with any
Governmental Authority in connection with the transactions contemplated
hereby will comply in all material respects with the provisions of
applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
The Purchaser hereby represents and warrants to the Company as
follows:
SECTION 3.1 Organization and Good Standing and Power.
----------------------------------------
Purchaser is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Purchaser and
Merger Sub is qualified or licensed to do business as a foreign corporation
or foreign limited liability company, as applicable, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or licensed would
not, individually or in the aggregate, have a Purchaser Material Adverse
Effect. As used in this Agreement, the term "Purchaser Material Adverse
Effect" means any change, effect, circumstance or event that is or is
reasonably likely to materially adversely affect the ability of Purchaser
to perform its obligations under this Agreement or timely consummate the
Merger or the other transactions contemplated by this Agreement. Purchaser
has, prior to the date of this Agreement, furnished or otherwise made
available to the Company complete and correct copies of the charter and
bylaws of Merger Sub, each as amended and in full force and effect as of
the date of this Agreement. Since the date of its formation, Merger Sub has
not carried on any business or conducted any operations other than the
execution of this Agreement, the performance of its obligations hereunder
and matters ancillary thereto.
SECTION 3.2 Authorization; Binding Agreement; Non-Contravention.
---------------------------------------------------
Purchaser and Merger Sub have all requisite limited liability
company or corporate, as applicable, power and limited liability company or
corporate, as applicable, authority to execute and deliver this Agreement
and to consummate the Merger and the other transactions contemplated by
this Agreement. This Agreement, the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement have been duly and validly authorized by the
necessary limited liability company or corporate actions and no other
proceedings on behalf of Purchaser or Merger Sub are necessary to authorize
the execution and delivery of this Agreement or to consummate the Merger
and the other transactions contemplated by this Agreement other than the
filing of the Certificate of Merger in accordance with the DGCL. This
Agreement has been duly and validly executed and delivered by Purchaser and
Merger Sub and, assuming the due authorization, execution and delivery of
this Agreement by the Company and the other parties hereto, constitutes the
legal, valid and binding agreement of Purchaser and Merger Sub, enforceable
against Purchaser and Merger Sub in accordance with its terms except as
enforceability thereof may be limited by creditors rights generally or by
general principals of equity.
SECTION 3.3 Governmental Approvals.
----------------------
No Consent from or with any Governmental Authority on the part of
Purchaser or any of its Subsidiaries or Merger Sub is required in
connection with the execution, delivery or performance by each of Purchaser
or Merger Sub of this Agreement or the consummation of the Merger and the
other transactions contemplated by this Agreement other than (i) the filing
of the Certificate of Merger with the Delaware Secretary of State in
accordance with the DGCL, (ii) filings with the Commission, the AMEX and
state securities laws administrators, (iii) Consents from or with
Governmental Authorities set forth in Schedule 2.5 of the Company
Disclosure Schedule ("Purchaser Regulatory Consents") and (iv) those other
Consents that, if not obtained or made, would not have a Purchaser Material
Adverse Effect.
SECTION 3.4 No Violations.
-------------
The execution, delivery and performance by Purchaser and Merger
Sub of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement by Purchaser and Merger Sub and
compliance by Purchaser and Merger Sub with any of the provisions hereof
will not (i) conflict with or result in any breach of any provision of the
organizational documents of Purchaser or Merger Sub, (ii) require any
Consent under, result in a violation or breach of any material obligation
to which Purchaser or Merger Sub is a party constitute or result in a
default under, or result in the creation of any Lien on any asset of
Purchaser under, any contract of Purchaser, where such default or Lien, or
any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Purchaser Material Adverse Effect, or,
(iii) assuming compliance with the matters referred to in Section 3.3 and
subject to the receipt of the Company Stockholder Approval, conflict with
or violate any applicable provision of any Law currently in effect to which
Purchaser or Merger Sub is subject that would have a Purchaser Material
Adverse Effect.
SECTION 3.5 Accuracy of Information.
-----------------------
(a) No representation or warranty of Purchaser or Merger Sub
contained in this Agreement contains an untrue statement of a material fact
or omits to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which made, not materially false or misleading.
(b) All documents that Purchaser or any officer or director
thereof is responsible for filing with any Governmental Authority in
connection with the transactions contemplated hereby will comply in all
material respects with the provisions of applicable Law.
SECTION 3.6 Sufficient Funds.
----------------
As of the date hereof, Purchaser and/or an affiliate thereof has
received, and has delivered to the Company a true, complete and correct
copy of, an executed commitment letter from certain lenders committing such
lenders to provide financing and/or an executed loan agreement (together,
the "Funding Documents"), pursuant to which sufficient cash funds will be
available to pay the Merger Consideration payable in respect of each Common
Share (for which Merger Consideration is payable hereunder), subject to the
terms and conditions set forth therein. As of the date of this Agreement,
the Funding Documents are in full force and effect and have not been
withdrawn or terminated and, to the Knowledge of Purchaser, there is no
fact, occurrence or condition that has occurred prior to or as of the date
hereof that would cause the Funding Documents to be terminated or
ineffective or that is otherwise reasonably likely to result in the
financing thereunder being unavailable. The parties acknowledge and agree
that, subject to Purchaser's right in Section 1.1(b) of this Agreement to
elect not to consummate the Merger under the circumstances and subject to
the provisions contained in such Section 1.1(b), the obligations of
Purchaser and Merger Sub to consummate the Merger and pay the Merger
Consideration are not conditioned upon Purchaser's or Merger Sub's ability
to obtain financing pursuant to the Funding Documents or otherwise, it
being understood and agreed that the only conditions to such obligations of
Purchaser and Merger Sub are those expressly set forth in Section 7.1 and
Section 7.3 of this Agreement; provided, however, that the sole right and
remedy available to the Company in the event that Purchaser and Merger Sub
do not obtain such financing and/or sufficient cash funds are unavailable
to pay the Merger Consideration payable in respect of each Common Share
(for which Merger Consideration is payable hereunder) is the right of the
Company to terminate this Agreement under the circumstances set forth in
Section 8.1(h) and to be paid the Company Expenses and two times the amount
of the Termination Fee under the circumstances set forth in Section 8.2.
"Knowledge" (or words of similar import) as used with respect to Purchaser
means those facts that are actually known by Xxxx X. Xxxxx, Xxxxxx X.
Xxxxxx or Xxxxxxxx X. Xxxxxxxxxx after due inquiry.
SECTION 3.7 Merger Sub.
----------
All of the outstanding shares of capital stock of Merger Sub are
duly authorized, validly issued and outstanding, fully paid and
nonassessable and owned by Purchaser.
ARTICLE IV
COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
SECTION 4.1 Conduct of Business.
-------------------
Except as expressly provided in this Agreement or as set forth in
the Company Disclosure Schedule, unless the prior written consent of
Purchaser has been obtained, which consent shall be deemed given if
Purchaser has not provided notice of objection within five (5) business
days of receipt by the Purchaser of the Company's consent request in
writing, during the period from the date of this Agreement to the earlier
of the Effective Time or termination of this Agreement, the Company shall
in all material respects conduct its businesses in the ordinary and usual
course and consistent with past practice, subject to the limitations
contained in this Agreement and the Company shall use commercially
reasonable efforts to preserve intact its business organizations, to keep
available the services of its officers, agents and employees and to
maintain satisfactory relationships with all persons with whom it does
business. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or disclosed in the Company
Disclosure Schedule, from the date of this Agreement until the earlier of
the Effective Time or termination of this Agreement, unless required by
applicable Law, the Company will not, nor will it permit or authorize any
Company Subsidiary to:
(i) amend or propose to amend the Certificate of
Incorporation, or Bylaws or the organizational documents of the
Company Subsidiaries;
(ii) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of
any shares of, or any options, warrants, commitments, subscriptions
or rights of any kind to acquire or sell any shares of, the capital
stock or other securities of the Company or the Company Subsidiaries
including any securities convertible into or exchangeable for shares
of capital stock of any class of the Company or the Company
Subsidiaries, except for the issuance of Common Shares pursuant to
the exercise of the LFSRI Warrant or the exercise of the Stock
Options outstanding on the date of this Agreement as disclosed in
Schedule 2.15 of the Company Disclosure Schedule in accordance with
the present terms of the Benefit Plans relating to such Stock
Options;
(iii) split, combine or reclassify any shares of its capital
stock or other securities or declare, pay or set aside any dividend
or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock or other
securities, other than dividends or distributions to the Company, or
redeem, purchase or otherwise acquire or offer to acquire any shares
of its capital stock or other securities;
(iv) (a) create, incur, or assume any Indebtedness other than
loans by the Company to a wholly-owned Company Subsidiary or by a
wholly-owned Company Subsidiary to the Company; (b) assume,
guarantee, endorse or otherwise become liable or responsible
(whether directly, indirectly, contingently or otherwise) for the
obligations of any Person; (c) make any capital expenditures, other
than in accordance with its capital expenditures budget set forth in
Schedule 4.1(iv) of the Company Disclosure Schedule (provided that
the aggregate capital expenditures made and agreed or committed to
be made by the Company and the Company Subsidiaries after the date
hereof shall not at any time exceed $610,000 times the number of
calendar months then elapsed since the date hereof) or make any
loans, advances or capital contributions to, or investments in, any
other Person (other than for customary travel, relocation or
businesses advances or loans to employees in each case in accordance
with applicable Law and in the ordinary course of business
consistent with past practice); (d) acquire or agree to acquire by
merging or consolidating with, or by purchasing, or by any other
manner, (i) any business or any corporation, limited liability
company, partnership, joint venture, association or other business
organization or division thereof, or (ii) any assets, except in the
ordinary and usual course of business consistent with past practice;
provided that such assets acquired in the ordinary and usual course
of business would not, individually or in the aggregate, be material
to the Company and the Company Subsidiaries taken as a whole; or (e)
divest, sell, transfer, mortgage, pledge or otherwise dispose of, or
encumber, or agree to divest, sell, transfer, mortgage, pledge or
otherwise dispose of or encumber, any assets, businesses or
properties, of assets other than transfers of assets in the ordinary
and usual course of business consistent with past practice; provided
that, such assets transferred in the ordinary and usual course of
business are not, individually or in the aggregate, material to the
Company and the Company Subsidiaries taken as a whole. For purposes
of this Agreement, "Indebtedness" means (A) all obligations for
borrowed money, or with respect to deposits or advances of any kind
(other than nonrefundable customer deposits), (B) all obligations
evidenced by bonds, debentures, notes or similar instruments, (C)
all obligations under conditional sale or other title retention
agreements (D) all obligations issued or assumed as the deferred
purchase price of property or services (excluding obligations to
creditors for raw materials, inventory, services and supplies
incurred in the ordinary course of business), (E) all capitalized
lease obligations, (F) all obligations under interest rate or
currency hedging or swap transactions (valued at the termination
value thereof), (G) all performance bonds or letters of credit, (H)
all guarantees and arrangements having the economic effect of a
guarantee of any Indebtedness of any other person, (I) all operating
leases, and (J) all performance guarantees;
(v) except as required by law or contract in effect as of the
date of this Agreement and listed on Schedule 2.15 of the Company
Disclosure Schedule, increase in any respect the salary,
compensation or benefits of any of its officers or employees (other
than increases in salary in the ordinary course of business
consistent with past practice to any officer or employee with an
annual salary that does not exceed $125,000) or enter into,
establish, grant, award, amend, accelerate or terminate any
employment, consulting, retention, management continuity, change in
control, collective bargaining, bonus or other incentive
compensation, profit sharing, health or other welfare, stock option
or other equity, pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy,
agreement, trust, fund or arrangement (or awards thereunder) with,
for or in respect of, any stockholder, officer, director, other
employee, agent, consultant or affiliate;
(vi) enter into any material lease, or amend any material
lease, of real property, other than leases with residents of the
assisted or independent living facilities or skilled nursing
facilities operated by the Company or any of the Company
Subsidiaries in the ordinary course of business consistent with past
practice;
(vii) make or rescind any express or deemed election relating
to Taxes;
(viii) settle or compromise any material Tax liability or
agree to an extension of a statute of limitations with respect to
the assessment or determination of Taxes;
(ix) file or cause to be filed any amended Tax Return with
respect to the Company or file or cause to be filed any claim for
refund of Taxes paid by or on behalf of the Company;
(x) prepare or file any Tax Return inconsistent with past
practice in preparing or filing similar Tax Returns in prior periods
or, on any such Tax Return, take any position, make any election, or
adopt any method that is inconsistent with positions taken,
elections made or methods used in preparing or filing similar Tax
Returns in prior periods;
(xi) make any material change to its accounting methods,
principles or practices, except as may be required by GAAP;
(xii) pay, discharge, or satisfy any material (on a
consolidated basis for the Company taken as a whole) claim,
liability, or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise);
(xiii) adopt any plan, enter into any agreement or take any
action that would have the effect of impairing or delaying the
completion of the Merger and the other transactions contemplated by
this Agreement;
(xiv) enter into any settlement agreement or consent to any
judgment with respect to any Litigation or claim (whether pending or
threatened) if such settlement or judgment involves payment or
receipt of amounts, or delivery of value, exceeding $100,000; or
(xv) enter into, modify or amend in any material respect, or
terminate, any Significant Contract;
(xvi) amend the Rights Agreement, redeem the rights
thereunder or exempt any person or entity from, the Rights
Agreement; or
(xvii) authorize, or commit or agree to take (or fail to
take), any of the foregoing actions with respect to itself or the
Company Subsidiaries.
SECTION 4.2 Access and Information.
----------------------
Between the date of this Agreement and the Effective Time, the
Company shall give (and shall direct its financial advisors, accountants
and legal counsel to give, upon reasonable notice) Purchaser, its lenders,
financial advisors, accountants and legal counsel and its respective
authorized representatives at reasonable times with reasonable notice
access to all offices and other facilities (including to conduct reasonable
inspections) and to all contracts, agreements, commitments, Tax Returns
(and supporting schedules), books and records of or pertaining to the
Company and the Company Subsidiaries will cause its officers promptly to
furnish Purchaser with (a) such financial and operating data and other
information with respect to the business and properties of the Company and
the Company Subsidiaries as Purchaser may from time to time reasonably
request and (b) a copy of each material report, schedule and other document
filed or received by the Company and the Company Subsidiaries in accordance
with the rules and regulations of the Commission, other applicable Law or
the requirements of the AMEX. In the event that the foregoing access is
subject to restrictions contained in confidentiality agreements to which
the Company is a party, the Company shall use commercially reasonable
efforts to obtain waivers of such restrictions. To the extent reasonably
requested by Purchaser, the Company shall, and shall cause its officers to
cooperate with Purchaser in connection with any due diligence investigation
or preparation of any syndication materials by Purchaser's financing
sources in connection with the obtaining of financing for the payment of
the Merger Consideration and the completion of the Merger and the other
transactions contemplated by this Agreement.
SECTION 4.3 Recommendation; Stockholder Approval.
------------------------------------
The Board of Directors of the Company and the Special Committee
(i) shall recommend to the stockholders of the Company that such
stockholders approve this Agreement, the Merger and the other transactions
contemplated by this Agreement and (ii) shall use their respective
commercially reasonable efforts to solicit and obtain approval and adoption
of this Agreement and the Merger by holders of a majority of the
outstanding Common Shares (the "Company Stockholder Approval") of this
Agreement, the Merger and the other transactions contemplated by this
Agreement; provided that, subject to Section 4.4 of this Agreement, the
Board of Directors of the Company or the Special Committee may withdraw,
modify or change such recommendation of this Agreement, the Merger and the
other transactions contemplated by this Agreement if and only if they have
determined in good faith, based on such matters as they deem relevant and
after receiving advice from outside legal counsel, that the failure to
withdraw, modify or change their recommendation of this Agreement, the
Merger and the other transactions contemplated by this Agreement would be
reasonably likely to result in a breach of their fiduciary duties under
applicable Law. Unless this Agreement shall have been terminated prior to
the Company Stockholders Meeting in accordance with Section 8.1 hereof,
whether or not the Special Committee or the Board of Directors of the
Company has withdrawn, modified or changed their recommendations of this
Agreement or the transactions contemplated by this Agreement, the Company
shall take all steps necessary to duly call, give notice of, convene and
hold a meeting of its stockholders (the "Company Stockholders Meeting") as
soon as practicable after the date hereof for the purpose of approving and
adopting this Agreement and the Merger and the transactions contemplated by
this Agreement and for such other purposes as may be consented to by
Purchaser and the Company in connection with effectuating the Merger and
the other transactions contemplated by this Agreement.
SECTION 4.4 No Solicitation.
---------------
(a) Neither the Company, any Company Subsidiary nor any of their
respective officers, directors, accountants, counsel, investment bankers or
financial advisors (collectively, "Representatives") shall, nor shall the
Company or any Company Subsidiary authorize any of its Representatives,
agents, or affiliates, or authorize or encourage any of its employees, to
(i) directly or indirectly, initiate, solicit or encourage, or take any
action to facilitate the making of, any Takeover Proposal, or (ii) directly
or indirectly engage in any discussions or negotiations with, or provide
any information or data to, or afford any access to the properties, books
or records of the Company or any Company Subsidiary to, or otherwise
assist, facilitate or encourage, any person (other than Purchaser or any
affiliate or associate thereof) relating to any Takeover Proposal, or (iii)
approve or enter into any letter of intent, agreement in principle,
acquisition agreement or similar agreement relating to any Takeover
Proposal; provided, however, that at any time prior to the Company
Stockholders Meeting, the Company may, in response to a bona fide written
Takeover Proposal that is reasonably likely to result in a Superior
Proposal and which was not solicited in violation of this Section 4.4(a),
and subject to providing Purchaser reasonable advance written notice of its
decision to take such action (x) furnish information with respect to the
Company to any person making such Takeover Proposal pursuant to a customary
confidentiality agreement and (y) participate in discussions and
negotiations regarding such Takeover Proposal but, in each case, only if
the Special Committee determines, after receiving the advice of its outside
counsel, that failure to furnish such information or to participate in such
discussions or negotiations is reasonably likely to result in a breach of
the fiduciary duties of the Special Committee or the Board of Directors of
the Company under applicable Law.
(b) The Company and its Representatives shall immediately cease
and cause to be terminated all existing discussions and negotiations, if
any, with any other Persons conducted heretofore with respect to any
Takeover Proposal, provided, however, that such discussions may be
reinstated if the criteria under Section 4.4(a) are met.
For purposes of this Agreement, a "Takeover Proposal" means any
inquiry, proposal or offer from any Person (other than Purchaser) relating
to (i) any direct or indirect acquisition or purchase of a business that
constitutes twenty percent (20%) or more of the net revenues or assets of
the Company, taken as a whole, or any direct or indirect acquisition or
purchase of Common Shares that would result in a Person or group owning ten
percent (10%) or more of the Common Shares or voting power (or of
securities or rights convertible into or exercisable for such Common Shares
or voting power) of the Company, (ii) any tender offer or exchange offer or
other acquisition or series of acquisitions of Common Shares that if
consummated would result in any Person or group beneficially owning ten
percent (10%) or more of the Common Shares or voting power (or of
securities or rights convertible into or exercisable for such Common Shares
or voting power) of the Company, or (iii) any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of the Company Subsidiaries that
constitutes twenty percent (20%) or more of the net revenues or assets of
the Company and the Company Subsidiaries taken as a whole, in each case
other than the transactions contemplated by this Agreement. Each of the
transactions referred to in clauses (i), (ii) and (iii) of the foregoing
definition of Takeover Proposal, other than the Merger proposed by this
Agreement, is referred to herein as an "Acquisition Transaction."
For purposes of this Agreement, a "Superior Proposal" means any
bona fide written offer made by a third party to enter into an Acquisition
Transaction (substituting eighty percent (80%) for the reference to twenty
percent (20%) in clause (i) of the immediately preceding paragraph, one
hundred percent (100%) for the reference to twenty percent (20%) in clause
(iii) of the immediately preceding paragraph and one hundred percent (100%)
for each reference to ten percent (10%) in the immediately preceding
paragraph), pursuant to which all holders of Common Shares would be given
the opportunity to receive the same consideration for their Common Shares,
that the Special Committee determines in its good faith judgment (based on
the advice of its financial advisors), (x) after considering any proposed
modifications to this Agreement made by Purchaser, is more favorable to the
Company's stockholders (other than the Purchaser) from a financial point of
view than those terms contained herein (as such terms may be proposed to be
modified by the Purchaser) and (y) is reasonably likely to be consummated
on a timely basis.
(c) Prior to the Special Committee, the Board of Directors or the
Company accepting a Superior Proposal or, in connection with a Takeover
Proposal, to withdrawing, modifying, or changing in a manner adverse to
Purchaser or Merger Sub, the Special Committee or Board of Directors'
approval or recommendation of the Merger and this Agreement, the Company
shall give Purchaser five business days notice of the Special Committee,
Board of Directors or the Company's intention to accept a Superior Proposal
or to withdraw, modify or change its approval or recommendation, which
notice shall include the identity of the person making such Superior
Proposal or Takeover Proposal, as applicable, and the material terms of
such Superior Proposal or Takeover Proposal, and the Company shall provide
Purchaser during such five business day period the opportunity to propose
modifications to the terms of this Agreement.
(d) Nothing contained in this Agreement shall prohibit the Board
of Directors of the Company or the Special Committee from taking and
disclosing to its stockholders a position contemplated by Rules 14d-9 and
14e-2 under the Exchange Act or from making any other disclosure to its
stockholders if, in the good faith judgment of the Board of Directors of
the Company or the Special Committee, after consultation with counsel,
failure to so disclose would be reasonably likely to be inconsistent with
their respective obligations under applicable Law.
SECTION 4.5 Commission and Stockholder Filings; Other Reports.
-------------------------------------------------
The Company shall send to Purchaser a copy of all public reports
and materials as and when it sends the same to its stockholders, the
Commission, the AMEX or any securities exchange or any state or foreign
securities commission. The Company shall send to Purchaser a copy of all
communications with banks, trustees under any indentures or other debt
instruments and rating agencies as and when it sends such communications to
such parties.
SECTION 4.6 Takeover Statutes; Rights Plan.
------------------------------
(a) If any Takeover Statute is or may become applicable to the
Merger or the other transactions contemplated by this Agreement (or to a
subsequent business combination between the Purchaser, the Surviving
Corporation or their respective affiliates, on the one hand, and any
Company Public Subsidiary, on the other hand), the Company, the Special
Committee, the Purchaser and Merger Sub and their respective Boards of
Directors, subject to compliance with its Board of Directors' fiduciary
duties, will grant (or the Company will ensure that the governing body of
such Company Public Subsidiary, as applicable, will grant subject to
compliance with its fiduciary duties) such approvals and will take such
other actions as are necessary so that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated hereby (or any such subsequent
business combination) and, subject to compliance with such Board of
Directors' fiduciary duties, will otherwise act to eliminate or minimize
the effects of any Takeover Statute on the Merger and the other
transactions contemplated by this Agreement (or any such subsequent
business combination).
(b) The Company shall take all action necessary to amend the
Rights Agreement, effective no later than five business days after the date
hereof, to provide that, from the date of such amendment until the
termination of this Agreement, for purposes of determining whether a
"Distribution Date," a "Shares Acquisition Date" or a "Trigger Event" has
occurred or whether Purchaser, any of its affiliates or associates or any
of the directors, officers or employees of the Company or the Company
Subsidiaries is an "Acquiring Person," without otherwise limiting the terms
of the Rights Agreement, neither the Purchaser nor any of its affiliates or
associates shall be deemed to beneficially own the Common Shares
beneficially owned by any of the officers, directors or employees of the
Company or the Company Subsidiaries (by virtue of any equity or employment
agreements, arrangements or understandings involving such parties and
relating to the periods after the Closing or any other agreement,
arrangement or understanding approved by the Board of Directors or Special
Committee), and such officers, and directors and employee shall not be
deemed to beneficially own the Common Shares beneficially owned by any
other officer, director or employee of the Company or any Company
Subsidiary or by Purchaser or any of its affiliates or associates (by
virtue of any equity or employment agreements, arrangements or
understandings involving such parties and relating to the periods after the
Closing or any other agreement, arrangement or understanding approved by
the Board of Directors or Special Committee).
SECTION 4.7 Settlement Agreement.
--------------------
The Company hereby acknowledges and agrees that Section 3.01 of
the Settlement Agreement, dated as of September 29, 1999, among the
Company, Purchaser and certain other parties thereto (the "Settlement
Agreement") shall not be applicable to either the execution or delivery of
this Agreement, the performance by the parties of their respective
obligations under this Agreement or the consummation of the Merger and the
other transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees as follows:
SECTION 5.1 Director and Officer Liability.
------------------------------
(a) The Company and the Surviving Corporation agree that all
rights to indemnification and all limitations on liability existing in
favor of any individual, who on or at any time prior to the Effective Time
was an officer, director, employee, or agent of the Company (an
"Indemnified Person") in respect of acts or omissions of such Indemnified
Person on or prior to the Effective Time, as provided in the Certificate of
Incorporation or Bylaws or an agreement between an Indemnified Person and
the Company in effect as of the date of this Agreement, shall continue in
full force and effect in accordance with its terms, and shall not be
amended, repealed or otherwise modified after the Effective Time in any
manner that would adversely affect the rights thereunder of the individuals
who on or at any time prior to the Effective Time was a director, officer,
employee, or agent of the Company, and the Surviving Corporation shall
honor all such indemnification provisions. Subject to receipt of necessary
third-party consents, which Purchaser will use commercially reasonable
efforts to obtain, Purchaser hereby unconditionally and irrevocably
guarantees for the benefit of the Indemnified Parties the obligations of
the Surviving Corporation under the foregoing indemnification arrangements,
including any such existing indemnification by agreements to which the
Company is a party.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such
case, Purchaser shall cause proper provision to be made so that the
successors and assigns of the Surviving Corporation assume the obligations
set forth in this Section 5.1.
(c) For six years after the Effective Time, the Surviving
Corporation shall maintain in effect the Company's current directors' and
officers' liability insurance (or substantially similar liability
insurance) covering acts or omissions occurring prior to the Effective Time
covering each person currently covered by the Company's directors' and
officers' liability insurance policy on terms with respect to such coverage
and amounts no less favorable than those of each such policy in effect on
the date hereof; provided that to procure such coverage for any year, the
Surviving Corporation shall not be required to pay an amount in excess of
200% of the amount of the Company's current annual premium for its existing
coverage or to procure such coverage for the entire six-year period
following the Effective Time, the Surviving Corporation shall not be
required to pay an amount in excess of the amount set forth on Schedule
5.1(c) of the Company Disclosure Schedule.
(d) The provisions of this Section 5.1 are intended to be for the
benefit of, and will be enforceable by, each Indemnified Person, his or her
heirs and his or her representatives and are in addition to, and not in
substitution for, any other rights to indemnification or contribution that
any such person may have by contract or otherwise.
SECTION 5.2 Employee Benefits.
-----------------
For a period of 12 months following the Effective Time, Purchaser
shall provide, or shall cause to be provided, to individuals who are
employees of the Company immediately before the Effective Time and who
continue to be employed by the Surviving Corporation after the Effective
Time (the "Company Employees") employee benefits (other than equity-based
benefits) that are, in the aggregate, not less favorable than those
employee benefits (other than equity-based benefits) provided immediately
prior to the Effective Time. Each Company Employee shall be credited with
his or her years of service with the Company before the Effective Time, to
the same extent as such Company Employee was entitled, before the Effective
Time, to credit for such service under any similar Benefit Plans, except to
the extent such credit would result in a duplicate creation of benefits.
The foregoing shall not be construed to prevent the termination of
employment of any Company Employee or the amendment or termination of any
particular Benefit Plan of the Company to the extent permitted by its terms
as in effect immediately before the Effective Time.
SECTION 5.3 Financing.
---------
Purchaser will use its commercially reasonable efforts to obtain
financing to consummate the Merger and to pay the Merger Consideration
payable in respect of each Common Share for which Merger Consideration is
payable hereunder.
ARTICLE VI
COVENANTS OF THE PARTIES
Purchaser and the Company covenants and agree as follows:
SECTION 6.1 Proxy Statement; 13E-3 Transaction Statement.
--------------------------------------------
(a) The Company shall use commercially reasonable efforts to
promptly prepare and file with the Commission pursuant to the terms of this
Agreement the Company's proxy statement, including any necessary amendments
and supplements thereto, with respect to the Company Stockholders Meeting
(the "Company Proxy Statement"). Purchaser shall be given reasonable
opportunity to review and comment on the Company Proxy Statement, including
all amendments and supplements thereto prior to the filing thereof with the
Commission.
(b) Each of Purchaser and the Company shall cooperate, use
commercially reasonable efforts to promptly prepare (and shall cause their
respective officers and/or employees to cooperate and use commercially
reasonable efforts to promptly prepare) and file with the Commission a
Transaction Statement on Schedule 13E-3, including all exhibits thereto
(together with all amendments and supplements thereto, the "Schedule 13E-3"
) with respect to the transactions contemplated herein.
(c) Each of the Company and Purchaser agrees, as to itself and
their respective Subsidiaries, that none of the information supplied or to
be supplied by it or its Subsidiaries for inclusion or incorporation by
reference in the Company Proxy Statement or the Schedule 13E-3, including
any amendment or supplement, will, at the date of filing thereof with the
Commission, mailing of the Company Proxy Statement to stockholders and at
the time of the Company Stockholder Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at any
time prior to the date of the consummation of the transactions contemplated
herein any information relating to the Company or Purchaser, or any of
their respective affiliates, officers or directors, should be discovered by
the Company or Purchaser which should be set forth in an amendment and/or a
supplement to the Company Proxy Statement or the Schedule 13E-3, so that
the Company Proxy Statement or the Schedule 13E-3, as applicable, would
not, at the date of mailing of the Company Proxy Statement to stockholders
and at the time of the Company Stockholder Meeting, include any
misstatement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, the
party which discovers this information shall promptly notify the other
party and, to the extent required by Law, an appropriate amendment or
supplement describing that information shall be promptly filed with the
Commission or any other applicable Governmental Authority and, to the
extent required by Law, disseminated to the Company's stockholders. Each of
the Company and Purchaser agrees to provide the other and the other's
counsel in writing any comments it or its counsel may receive from the
Commission or its staff with respect to the Company Proxy Statement or the
Schedule 13E-3 promptly after receipt of such comments. Each of the Company
and Purchaser shall use commercially reasonable efforts to respond to such
comments promptly and shall provide the other with copies of any written
responses and telephonic notification of any verbal responses by it or its
counsel.
(d) Notwithstanding anything herein to the contrary, neither the
Company nor Purchaser shall file the Company Proxy Statement or the
Schedule 13E-3 (or any amendment or supplement) or respond to any comment
or question raised by the Commission or its staff with respect to the
Company Proxy Statement or the Schedule 13E-3 (or any amendment or
supplement), the Agreement, the Merger or the other transactions
contemplated hereby without the approval of the other party (which approval
shall not to be unreasonably withheld or delayed).
SECTION 6.2 Further Assurances.
------------------
In addition to complying with all of the other covenants set
forth in this Agreement, each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further
acts and execute such documents as may be reasonably required to effect the
transactions contemplated by this Agreement.
SECTION 6.3 Press Release and Public Announcements.
--------------------------------------
The parties shall cooperate in preparing and promptly issuing a
press release announcing the execution of this Agreement. Thereafter, so
long as this Agreement is in effect, (i) the Company shall not, and shall
cause its affiliates (other than Purchaser and its affiliates) not to,
issue or cause the publication of any press release or any other
announcement, or submit any public filings, with respect to the Company
Stockholders Meeting or the transactions contemplated by this Agreement
without the consent of Purchaser (which approval shall not be unreasonably
withheld or delayed), except when such release, announcement or filing is
required by the rules and regulations of the Commission, other applicable
Law or the rules or regulations of the AMEX, in which case the Company,
prior to making such announcement, issuing or publishing such press release
or making any public filing, shall notify and afford Purchaser the
opportunity to comment thereon. The Purchaser may issue or cause the
publication of any press release or any other announcement, and may submit
any public filing, required by the rules and regulations of the Commission
or other applicable Law.
SECTION 6.4 Reasonable Commercial Efforts.
-----------------------------
The parties shall use (and shall cause their respective
Subsidiaries to use) commercially reasonable efforts to promptly (i) take
or cause to be taken all necessary actions, and do or cause to be done all
things, necessary, proper or advisable under this Agreement and applicable
Law to consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including preparing
and filing promptly and fully all documentation to effect all necessary
filings, notices, petitions, statements, registrations, submissions of
information, applications and other documents; provided that neither the
Company nor any Company Subsidiary shall agree in connection with the
foregoing to the sale, transfer, divestiture or other disposition of any
assets, properties or businesses of the Company or any Company Subsidiary
without the prior written consent of Purchaser; (ii) obtain all Consents
(including Consents from any Governmental Authority) required to be
obtained from any third party necessary, proper or advisable to consummate
the Merger and the other transactions contemplated by this Agreement;
provided that neither the Company nor any Company Subsidiary shall in
connection with the foregoing make any payments (other than governmental or
regulatory filing or similar fees), amend or modify any agreement or agree
to the foregoing without the prior written consent of Purchaser not to be
unreasonably withheld or delayed; provided, further, that no such consent
shall be required if the making of any such payment or any such amendment
or modification would be permitted under Section 4.1 without the consent of
Purchaser; and (iii) defend any Litigation challenging this Agreement or
the consummation of the Merger and the other transactions contemplated by
this Agreement, including seeking to have any stay or temporary restraining
order entered by any court or Governmental Authority vacated or reversed;
provided that the Company shall keep Purchaser reasonably apprised of any
such Litigation against the Company or any of its Subsidiaries, Purchaser
may at its option participate in the defense of any such Litigation against
the Company or any of its Subsidiaries, and the Company shall not enter
into any settlement or consent to any judgment without the prior written
consent of Purchaser. The Company and Purchaser shall each use (and shall
cause their respective officers and employees to use) reasonable commercial
efforts to promptly make all necessary filings required to be made with the
Commission pursuant to the Exchange Act. Subject to applicable Law relating
to the exchange of information, the Company and Purchaser shall have the
right to review in advance, and to the extent practicable each will consult
the other on, all the information relating to the Company and the Company
Subsidiaries or Purchaser and its affiliates, as the case may be, that
appears in any filing made with, or written materials submitted to, any
third party and/or any Governmental Authority in connection with the Merger
and the other transactions contemplated by this Agreement.
This Section 6.4 shall not be interpreted as requiring Purchaser
to take any action that, individually or in the aggregate, would be
reasonably likely to have a Company Material Adverse Effect prior to, on or
after the Effective Time.
SECTION 6.5 Notification of Certain Matters.
-------------------------------
Each of the Company or Purchaser shall give prompt notice to the
other if any of the following occurs after the date of this Agreement
(provided Purchaser need not give notice with respect to the events
described in clauses (i) or (v)): (i) any written notice, or other written
communication that the Company or any Company Subsidiary receives, of which
the Company obtains Knowledge, relating to a material default or Event
which, with notice or lapse of time or both, would be reasonably likely to
become a material default under any Significant Contract; (ii) any receipt
by it or any of its Subsidiaries of any written notice or other written
communication from any Person of which the Company or Purchaser, as
applicable, obtains Knowledge alleging that the Consent of such Person is
or may be required in connection with the Merger and the other transactions
contemplated by this Agreement if such Consent is not disclosed in the
Company Disclosure Schedule; (iii) receipt by it or any of its Subsidiaries
of any material notice or other communication from any Governmental
Authority (including the AMEX or any other securities exchange) in
connection with the Merger and the other transactions contemplated by this
Agreement of which the Company or Purchaser, as applicable, obtains
Knowledge; (iv) the occurrence of any Event or Events which, individually
or in the aggregate, would be reasonably likely to have a Company Material
Adverse Effect (in the case of the Company) or a Purchaser Material Adverse
Effect (in the case of Purchaser); (v) the commencement or written threat
of any Litigation involving or affecting the Company, the Company
Subsidiaries or any of their respective properties or assets, or any
employee, agent, director or officer of the Company, in his or her capacity
as such or as a fiduciary under a Benefit Plan, which, if pending on the
date hereof, would have been required to have been disclosed in or pursuant
to this Agreement, or any material adverse development in connection with
any Litigation disclosed by the Company in or pursuant to this Agreement or
the Securities Filings; (vi) the commencement or written threat against it
or any of its Subsidiaries of any Litigation relating to the Merger; (vii)
the occurrence of any Event that causes or is reasonably likely to cause a
material breach by it of any provision of this Agreement; (viii) the
receipt by it or any of its Subsidiaries of an administrative or other
order or notification of which the Company or Purchaser, as applicable,
obtains Knowledge relating to any violation or claimed violation by it or
its Subsidiaries of the rules and regulations of any Governmental Authority
that could adversely affect its ability to consummate the Merger and the
other transactions contemplated by this Agreement; or (ix) if it obtains
Knowledge of any change in Law that is reasonably likely to cause a
Governmental Authority to withhold a Company Regulatory Consent (in the
case of the Company) or a Purchaser Regulatory Consent (in the case of
Purchaser).
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to Each Party's Obligations.
--------------------------------------
The respective obligations of each party to effect the Merger
shall be subject to the fulfillment or waiver on or prior to the Closing
Date of the following conditions:
(a) Company Stockholder Approval. The Agreement, the Merger and
the other transactions contemplated by this Agreement shall have been
approved by holders of a majority of the outstanding Common Shares.
(b) No Law, Injunction or Action. No order, statute, rule,
regulation, executive order, stay, decree, judgment, Law, or injunction of
any court or other Governmental Authority that prohibits or prevents the
consummation of the Merger or the other transactions contemplated by this
Agreement shall have been enacted, entered, promulgated or enforced.
SECTION 7.2 Conditions to Obligations of the Company.
----------------------------------------
The obligation of the Company to effect the Merger shall be
subject to the fulfillment on or prior to the Closing Date of the following
additional conditions, any one or more of which may be waived in whole or
in part by the Company:
(a) Purchaser Representation and Warranties. The representations
and warranties of Purchaser contained in this Agreement shall be true and
correct (disregarding for these purposes any materiality, Purchaser
Material Adverse Effect or corollary qualifications contained therein) when
made, and as of the Closing Date as if made on and as of such date
(provided that such representations and warranties which are expressly made
as of a specific date need be so true and correct only as of such specific
date), except to the extent that any failures of such representations and
warranties to be so true and correct, would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
(b) Performance by Purchaser. Purchaser and Merger Sub shall have
performed and complied in all material respects with all of the material
covenants and agreements required by this Agreement to be performed or
complied with by Purchaser and Merger Sub on or prior to the Closing Date.
(c) Certificates and Other Deliveries. Purchaser and Merger Sub
shall have delivered to the Company an officer's certificate to the effect
that the conditions set forth in Sections 7.2(a) and (b) have been
satisfied.
SECTION 7.3 Conditions to Obligations of Purchaser and Merger Sub.
-----------------------------------------------------
The obligations of Purchaser and Merger Sub to effect the Merger
shall be subject to the fulfillment on or prior to the Closing Date of the
following additional conditions, any one or more of which may be waived in
whole or in part by Purchaser:
(a) Company Representations and Warranties. The representations
and warranties of the Company contained in this Agreement shall be true and
correct (disregarding for these purposes any materiality, Company Material
Adverse Effect or corollary qualifications contained therein), when made
and as of the Closing Date as if made on and as of such date (provided that
such representations and warranties which are by their express provisions
made as of a specific date need be so true and correct only as of such
specific date), except to the extent that any failures of such
representations and warranties to be so true and correct, would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(b) Performance by the Company. The Company shall have performed
and complied in all material respects with all covenants and agreements
required by this Agreement to be performed or complied with by the Company
on or prior to the Closing Date.
(c) No Company Material Adverse Effect. There shall not have
occurred after the date of this Agreement any Event or Events that would be
reasonably likely to, individually or in the aggregate, have a Company
Material Adverse Effect.
(d) No Loss of Units. There shall not have occurred after the
date of this Agreement any Event or Events that has or have, individually
or in the aggregate, resulted or would reasonably be expected, as a
consequence of the completion of the Merger and the other transactions
contemplated by this Agreement, to result in the loss of Surviving
Corporation's and the Company Subsidiaries' ability to operate more than
10% of the assisted living and skilled nursing facility Units currently
operated by the Company and the Company Subsidiaries (other than Units
operated at the facilities listed on Schedule 7.3(d) of the Company
Disclosure Schedule). A "Unit" means each individually rentable space at an
assisted living or skilled nursing facility.
(e) Governmental Approvals; No Challenge. All waivers, consents,
approvals, orders and authorizations of, and notices, reports and filings
with, Governmental Authorities necessary for the consummation of the Merger
and the other transactions contemplated by this Agreement (including,
without limitation, all Company Regulatory Consents and Purchaser
Regulatory Consents) shall have been obtained or made and shall be in full
force and effect without the imposition of any terms, conditions,
restrictions or limitations, except for the imposition of any terms,
conditions, restrictions and limitations in respect of such waivers,
consents, approvals, orders, authorizations, notices, reports or filings,
or failures to have obtained or made, or to be in full force and effect, of
such waivers, consents, approvals, orders, authorizations, notices, reports
or filings (other than Company Regulatory Consents and Purchaser Regulatory
Consents, all of which shall have been obtained and made and be in full
force effect) which would not, individually or in the aggregate, be
material to the business, operations, assets, liability, condition
(financial or otherwise) or prospects of the Company and the Company
Subsidiaries taken as a whole. There shall not be pending any action,
proceeding or investigation by any Governmental Entity or any action or
proceeding by any other Person challenging, seeking to prohibit, prevent or
delay, or seeking material damages in connection with the Merger or any
other transaction contemplated by this Agreement.
(f) Material Market Disruption. There shall not have occurred
after the date of this Agreement and be continuing (i) a general suspension
of trading in, or material disruption in the trading markets for, debt
securities, including bank loans (or participations therein), or equity
securities in the United States, (ii) a declaration of a banking moratorium
or a suspension of payments in respect of lending institutions in the
United States, (iii) a limitation by any Governmental Authority on, or any
other event (except a commencement or escalation of a war or armed
hostilities or other significant national or international calamity
involving the United States), which materially and adversely affects, the
extension of credit by lending institutions or the availability of equity
financing generally or to the assisted living industry, or (iv) in the case
of any of the foregoing existing as of the date of this Agreement, a
material acceleration or worsening thereof, in each case which materially
impairs Purchaser's ability to obtain financing sufficient to pay the
Merger Consideration payable in respect of each Common Share for which
Merger Consideration is payable hereunder; provided, however, this
condition need be satisfied or waived only during the period prior to 5:00
p.m. EST on February 17, 2003, after which time the requirements of this
Section 7.3(f) shall no longer be a condition to the obligations of
Purchaser and Merger Sub to effect the Merger;
(g) Gericare Settlement. The Gericare Settlement shall not have
been modified or amended and shall be valid and binding on all parties
thereto and in full force and effect.
(h) Certificates and Other Deliveries. The Company shall have
delivered, or caused to be delivered, to Purchaser an officer's certificate
to the effect that the conditions set forth in Sections 7.3(a),(b),(c),(d)
and (g) have been satisfied.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination.
-----------
This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this Agreement, the
Merger and the other transactions contemplated by this Agreement by the
stockholders of the Company:
(a) by mutual written consent of the Company, Purchaser and
Merger Sub;
(b) (i) by the Company, if there has been a breach by Purchaser
of any of its representations, warranties, covenants or agreements
contained in this Agreement that would cause the condition set forth in
Section 7.2(a) or Section 7.2(b) not to be satisfied and, in either such
case, such breach or condition is not curable or, if curable, has not been
promptly cured within 30 days following receipt by Purchaser of written
notice of such breach; (ii) by Purchaser, if there has been a breach by the
Company of (x) any of the covenants or agreements set forth in Sections 4.3
or 4.4 or (y) any of its representations, warranties, covenants or
agreements (other than those set forth in Sections 4.3 or 4.4) contained in
this Agreement that would cause the condition set forth in Section 7.3(a)
or Section 7.3(b) not to be satisfied and, in the case of a breach
described in clause (x) or (y), such breach or condition is not curable or,
or if curable, has not been promptly cured within 3 days (in the case of a
breach described in clause (x)) or 30 days (in the case of a breach
described in clause (y)) following receipt by the Company of written notice
of such breach;
(c) by either Purchaser or the Company if any decree, permanent
injunction, judgment or order of any Governmental Authority preventing or
prohibiting consummation of the Merger shall have become final and
nonappealable;
(d) by either Purchaser or the Company if the transactions
contemplated by this Agreement shall not have been consummated before the
End Date (as defined below); provided, however, that the right to terminate
this Agreement under this Section 8.1(d) shall not be available to any
party whose breach of any provision of this Agreement was a significant
cause of the failure of the Merger to occur on or before the End Date; "End
Date" means May 1, 2003, subject to extension pursuant to Section 1.1(b);
provided, however, that if (disregarding the condition set forth in Section
7.3(f)) all of the conditions set forth in Article VII (other than the
condition set forth in Section 7.3(e)) shall have been satisfied or waived
as of April 30, 2003 (or, with respect to conditions that by their nature
are to be satisfied at Closing, shall then be capable of being satisfied at
a Closing), the "End Date" shall be June 1, 2003, subject to extension
pursuant to Section 1.1(b);
(e) by either Purchaser or the Company if the Merger and the
other transactions contemplated by this Agreement shall fail to receive the
Company Stockholder Approval at the Company Stockholders Meeting (or any
adjournment or postponement thereof);
(f) by Purchaser, if the Special Committee or the Company's Board
of Directors shall have withdrawn, or modified or changed, in a manner
adverse to Purchaser, their approval or recommendation of the Merger and
the other transactions contemplated by this Agreement or shall have
recommended any Takeover Proposal (other than the Merger) or resolved to do
the same;
(g) by the Company (prior to the Company Stockholders Meeting),
in connection with a Superior Proposal, if and only if (x) the Company has
complied with the covenants and agreements set forth in Sections 4.3 and
4.4 and (y) upon such termination of this Agreement the Company immediately
(i) enters into a definitive agreement for an Acquisition Transaction with
respect to such Superior Proposal and (ii) pays the Termination Fee and
Purchaser Expenses to Purchaser as set forth in Section 8.2 of this
Agreement; and
(h) by the Purchaser or the Company, simultaneously with or at
any time after an election is made by Purchaser pursuant to Section 1.1(b)
not to consummate the Merger.
SECTION 8.2 Effect of Termination.
---------------------
In the event of the termination of this Agreement by either the
Company or Purchaser pursuant to Section 8.1:
(a) This Agreement (other than Section 6.3, Section 8.2 and
Article IX hereof) shall become null and void and of no force and effect
and there shall be no liability under this Agreement on the part of
Purchaser or the Company (other than with respect to the provisions of
Section 6.3, Section 8.2 and Article IX), except to the extent that such
termination results from a willful breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement; provided that the payment of a Termination Fee, Company Expenses
or Purchaser Expenses, as applicable, shall not affect or reduce a party's
liability for any willful breach by such party.
(b) The Company shall pay to Purchaser an aggregate amount equal
to $2,224,064 (the "Termination Fee"), plus the Purchaser Expenses (without
duplication for Purchaser Expenses otherwise paid pursuant to Section
8.2(c)), as follows: (1) if the Company shall terminate this Agreement
pursuant to Section 8.1(d) and at any time after the date of this Agreement
and prior to the date of such termination a Takeover Proposal shall have
been made or reaffirmed to the Company or publicly announced and, within 9
months of the termination of this Agreement, the Company enters into a
definitive agreement with respect to any Acquisition Transaction, (2) if
the Company or Purchaser shall terminate this Agreement pursuant to Section
8.1(e) and at any time after the date of this Agreement and on or prior to
the date of the Company Stockholders Meeting a Takeover Proposal shall have
been made or reaffirmed to the Company or publicly announced and, within 9
months of the termination of this Agreement, the Company enters into a
definitive agreement with respect to any Acquisition Transaction, (3) if
Purchaser shall terminate this Agreement pursuant to Sections 8.1(b)(ii)(y)
or 8.1(f) and at any time after the date of this Agreement and on or prior
to the date of such termination a Takeover Proposal shall have been made or
reaffirmed to the Company or publicly announced and, within 9 months of the
termination of this Agreement, the Company enters into a definitive
agreement with respect to an Acquisition Transaction, (4) if Purchaser
shall terminate this Agreement pursuant to Section 8.1(b)(ii)(x), or (5) if
the Company shall terminate this Agreement pursuant to Section 8.1(g). The
Purchaser shall pay to the Company an aggregate amount equal to the Company
Expenses (without duplication for Company Expenses otherwise paid pursuant
to Section 8.2(c)) plus two times the Termination Fee, if the Company or
Purchaser shall terminate this Agreement pursuant to Section 8.1(h) and, at
the time of such termination, all of the conditions set forth in Sections
7.1 and 7.3 (disregarding the condition set forth in Section 7.3(f) if the
termination occurs after 5:00 p.m. EST on February 17, 2003) shall have
been satisfied or waived (or with respect to conditions that by their
nature are to be fulfilled at the Closing, shall then be capable of being
satisfied at a Closing).
(c) The Company shall pay to Purchaser an amount equal to the
Purchaser Expenses if Purchaser shall terminate this Agreement pursuant to
Section 8.1(b)(ii). The Purchaser shall pay to the Company an amount equal
to the Company Expenses if the Company shall terminate this Agreement
pursuant to Section 8.1(b)(i). The Purchaser Expenses and the Company
Expenses to be paid pursuant to this Section 8.2(c) shall be paid
concurrently with notice of termination of this Agreement by the Company or
by Purchaser, as applicable.
(d) One-half of the Termination Fee and all of Purchaser Expenses
required to be paid pursuant to Sections 8.2(b)(1), (2) or (3) shall be
paid at the time the Company enters into a definitive agreement with
respect to an Acquisition Transaction and the remaining unpaid portion of
the Termination Fee required to be paid pursuant to Sections 8.2(b)(1), (2)
or (3) shall be paid at the time the Company consummates an Acquisition
Transaction. The Termination Fee and Purchaser Expenses required to be paid
pursuant to Sections 8.2(b)(4) or (5) shall be paid concurrently with
notice of termination of this Agreement by the Company or by Purchaser, as
applicable. The Company Expenses and the amount equal to two times the
Termination Fee required to be paid pursuant to the last sentence of
Section 8.2(b) or pursuant to Section 8.2(e) shall be paid concurrently
with notice of termination of this Agreement by the Company or Purchaser,
as applicable.
(e) Notwithstanding anything to the contrary contained herein, in
the event that the Agreement is terminated pursuant to Section 8.1(e) and
(a) Purchaser shall have voted against the approval and adoption of this
Agreement, the Merger and the other transactions contemplated by this
Agreement at the Company Stockholders Meeting (or any adjournment or
postponement thereof) and (b) with Purchaser's vote in favor of such
approval and adoption at the Company Stockholders Meeting (or any
adjournment or postponement thereof), the Company Stockholder Approval
would have been obtained at the Company Stockholders Meeting (or any
adjournment or postponement thereof), the Company shall not be obligated to
pay the Termination Fee or Purchaser Expenses to Purchaser and Purchaser
shall pay to the Company the Company Expenses and two times the Termination
Fee.
(f) The term "Purchaser Expenses" shall mean all out-of-pocket
expenses reasonably incurred by Purchaser, Merger Sub and their respective
affiliates (other than the Company and its Subsidiaries) in connection with
this Agreement and the transactions contemplated hereby, including fees and
expenses of accountants, attorneys, financial advisors and lenders up to
but not exceeding $1,500,000. The term "Company Expenses" shall mean all
out-of-pocket expenses reasonably incurred by the Company, its Subsidiaries
and its affiliates (other than the Purchaser, Merger Sub and their
respective affiliates) in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of
accountants, attorneys, financial advisors and lenders up to but not
exceeding $1,500,000.
(g) All payments under this Section 8.2 shall be made by wire
transfer of immediately available funds to an account designated by
Purchaser or the Company, as applicable.
(h) The Company and Purchaser acknowledge that the agreements
contained in this Section 8.2 are an integral part of the transactions
contemplated by this Agreement, and that, without such agreements, the
Company and the Purchaser would not enter into this Agreement. Accordingly,
if the Company or the Purchaser fails to promptly pay any amounts owing
pursuant to this Section 8.2 when due, the Company or the Purchaser, as
applicable, shall in addition thereto pay to Purchaser and its affiliates,
or the Company and its affiliates, as applicable, all costs and expenses
(including fees and disbursements of counsel) incurred in collecting such
amounts, together with interest on such amounts (or any unpaid portion
thereof) from the date such payment was required to be made until the date
such payment is received by the Purchaser and its affiliates, or the
Company, as applicable, at the prime rate of Citibank, N.A. as in effect
from time to time during such period plus two percent.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Notices.
-------
All notices, requests and other communications to any party
hereunder shall be in writing (including facsimile or similar writing) and
shall be given,
if to Purchaser, Merger Sub or the Surviving Corporation, to:
Prometheus Assisted Living LLC
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxxxxx, Esq.
Facsimile No.: 212.332.1793
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxxxxxx, Esq.
Xxx X. Xxxxx, Esq.
Facsimile No.: 212.859.4000
if to the Company, to:
ARV Assisted Living, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx X-0
Xxxxx Xxxx, XX 00000
Attention : Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxxxxx, Esq.
Facsimile No. 714.708.3537
with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile No.: 949.823.6994
or such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the other parties. Each such notice,
request or other communication shall be effective (a) if given by
facsimile, when such facsimile is transmitted to the facsimile number
specified in this Section 9.1 and the appropriate facsimile confirmation is
received or (b) if given by any other means, when delivered at the address
specified in this Section 9.1.
SECTION 9.2 Non-Survival of Representations and Warranties.
----------------------------------------------
The representations and warranties contained herein or in any
instrument delivered pursuant to this Agreement shall terminate at the
Effective Time.
SECTION 9.3 Amendments; No Waivers.
----------------------
(a) Any provision of this Agreement (including the Appendices and
Schedules hereto) may be amended or waived prior to the Effective Time at
any time prior to or after the receipt of the Company Stockholder Approval,
if, and only if, such amendment or waiver is in writing and signed, in the
case of an amendment, by the Company, Purchaser, or in the case of a
waiver, by the party against whom the waiver is to be effective; provided
that after the receipt of the Company Stockholder Approval, if any such
amendment or waiver shall by law or in accordance with the rules and
regulations of any relevant securities exchange require further approval of
stockholders, the effectiveness of such amendment or waiver shall be
subject to the necessary stockholder approval.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 9.4 Expenses.
--------
Except as otherwise specified in Section 8.2 or as otherwise
agreed to in writing by the parties, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such cost or expense.
SECTION 9.5 Successors and Assigns.
----------------------
The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the consent
of the other parties hereto.
SECTION 9.6 Governing Law.
-------------
This Agreement shall be construed in accordance with and governed
by the law of the State of Delaware applicable to agreements made and to be
wholly performed in such state without giving effect to the provisions
thereof relating to conflicts of law.
SECTION 9.7 Jurisdiction.
------------
Any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby may be brought in any
federal or state court located in the State of Delaware, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such
suit, action or proceeding which is brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within
or without the jurisdiction of any such court.
SECTION 9.8 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.9 Counterparts; Effectiveness.
---------------------------
This Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
SECTION 9.10 Entire Agreement; No Third-Party Beneficiaries.
----------------------------------------------
This Agreement (including the Company Disclosure Schedule and the
Purchaser's disclosure schedule) constitutes the entire agreement between
the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof. Except as
provided in Section 5.1, no provision of this Agreement or any other
agreement contemplated hereby is intended to confer on any Person other
than the parties hereto any rights or remedies.
SECTION 9.11 Captions.
--------
The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
SECTION 9.12 Severability.
------------
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated so long as
the economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to
the fullest extent possible.
SECTION 9.13 Specific Performance.
--------------------
Each party acknowledges and agrees that the other party could be
irreparably damaged in the event that its obligations contained in this
Agreement are not performed in accordance with their specific terms or are
otherwise breached in each case on or prior to the Effective Time.
Accordingly, each party agrees that the other party will be entitled to an
injunction or injunctions to enforce specifically any covenants in any
action in any court having personal and subject matter jurisdiction, in
addition to any other remedy to which that party may be entitled at law or
in equity.
SECTION 9.14 Rules of Construction.
---------------------
References in this Agreement to any gender include references to
all genders, and references to the singular include references to the
plural and vice versa. The words "include," "includes," and "including"
when used in this Agreement shall be deemed to be followed by the phrase
"without limitation." Unless the context otherwise requires, references in
this Agreement to Articles, Sections and Schedules shall be deemed
references to Articles and Sections of and Schedules to, this Agreement.
Unless the context otherwise requires, the words "hereof," "hereby" and
"herein" and words of similar meaning when used in this Agreement refer to
this Agreement in its entirety and not to any particular Article, Section
or provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day
and year first above written.
PROMETHEUS ASSISTED LIVING LLC
By: LF Strategic Realty Investors II L.P.,
its managing member
By: Lazard Freres Real Estate Investors L.L.C.,
its general partner
By: /s/ Xxxx X. Xxxxx
----------------------------
Name: Xxxx X. Xxxxx
Title: Managing Principal and
Chief Financial Officer
XXXXX MERGER CORP.
By: /s/ Xxxx X. Xxxxx
----------------------------
Name: Xxxx X. Xxxxx
Title: Vice President and
Chief Financial Officer
ARV ASSISTED LIVING, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
Index of Defined Terms
ACMs...............................................25
Acquisition Transaction............................39
Agreement...........................................1
AMEX...............................................11
Benefit Plan.......................................19
Benefit Plans......................................19
Bylaws..............................................8
Certificate of Incorporation........................8
Certificate of Merger...............................2
Certificates........................................4
CHAMPUS............................................17
Closing.............................................2
Closing Date........................................2
Code................................................7
Commission.........................................11
Common Shares.......................................8
Company.............................................1
Company Disclosure Schedule.........................7
Company Employees..................................42
Company ERISA Affiliate............................21
Company Expenses...................................51
Company Group......................................22
Company Material Adverse Effect.....................7
Company Permits....................................15
Company Proxy Statement............................42
Company Public Subsidiaries........................12
Company Regulatory Consents........................11
Company Stockholder Approval.......................37
Company Stockholders Meeting.......................37
Company Subsidiaries................................9
Consent............................................11
Convertible Notes...................................9
Delaware Secretary of State.........................2
DGCL................................................2
Dissenting Shares...................................4
Effective Time......................................2
End Date...........................................48
Environmental Laws.................................24
Environmental Matter...............................24
Environmental Permits..............................23
ERISA..............................................19
Event..............................................13
Exchange Act........................................6
Facilities.........................................25
Financing End Date..................................2
Funding Documents..................................33
GAAP...............................................13
Gericare Settlement................................17
Governmental Authority.............................11
Hazardous Materials................................25
Indebtedness.......................................35
Indemnified Person.................................41
Intellectual Property..............................29
IRS................................................20
Knowledge......................................12, 33
Law................................................11
Leased Properties..................................26
Leased Property Leases.............................28
Leased Title Policies..............................27
LFSRI Shares........................................3
LFSRI Warrant.......................................3
Lien...............................................12
Litigation.........................................12
Material Contract..................................17
Medicaid...........................................17
Medical Reimbursement Programs.....................17
Medicare...........................................17
Merger..............................................2
Merger Consideration................................3
Merger Sub..........................................1
Merger Sub Common Stock.............................3
Other Industry Participants.........................8
Owned Properties...................................25
Owned Title Policies...............................26
Paying Agent........................................4
Payment Fund........................................4
PCBs...............................................25
Permitted Commercial Leases........................28
Permitted Encumbrances.............................28
Person..............................................5
Preferred Stock.....................................8
Purchaser...........................................1
Purchaser Expenses.................................50
Purchaser Material Adverse Effect..................32
Purchaser Regulatory Consents......................33
Purchaser Shares....................................3
Representatives....................................38
Resident Leases....................................28
Rights Agreement....................................8
Schedule 13E-3.....................................42
Securities Filings.................................12
Settlement Agreement...............................40
Significant Contracts..............................19
Significant Transaction............................18
Special Committee...................................1
Stock Options.......................................6
Stock Plans.........................................6
Subsidiary..........................................9
Superior Proposal..................................39
Surviving Corporation...............................2
Takeover Proposal..................................38
Takeover Statute...................................23
Tax................................................23
Tax Return.........................................23
Taxes..............................................23
Termination Fee....................................49
Unit...............................................47
Exhibit A
---------
The certificate of incorporation of the Company shall be amended as
follows:
1. Article Fourth shall be amended to read in its entirety as follows:
"The total number of shares which the Corporation shall have the authority
to issue is 2,000 shares of Common Stock, par value $.01 per share."
2. Article Sixth shall be amended to read in its entirety as follows:
"The number of directors of the Corporation shall be not less than three
and not more than five. The exact number of directors shall be fixed within
those specified limits by the Board of Directors."
3. Articles Eighth, Ninth and Tenth shall be deleted in their
entirety.
4. Articles Eleventh, Twelfth, Thirteenth and Fourteenth shall be
renumbered to be Articles Eighth, Ninth, Tenth, and Eleventh, respectively.