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