EXHIBIT 2.7
Execution Copy
AMENDED AND RESTATED
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
February 23, 1998
AMONG
PROMETHEUS SENIOR QUARTERS LLC,
PROMETHEUS ACQUISITION CORP.
AND
KAPSON SENIOR QUARTERS CORP.
TABLE OF CONTENTS
Page
ARTICLE I THE OFFER.........................................................2
Section 1.1 The Offer......................................................2
Section 1.2 Company Actions................................................4
ARTICLE II THE MERGER.......................................................5
Section 2.1 The Merger.....................................................5
Section 2.2 Effective Time of the Merger...................................5
Section 2.3 Certificate of Incorporation...................................6
Section 2.4 By-laws........................................................6
Section 2.5 Board of Directors and Officers................................6
Section 2.6 Effects of Merger..............................................6
ARTICLE III CONVERSION OF SHARES............................................6
Section 3.1 Conversion of Shares...........................................6
Section 3.2 Exchange of Certificates.......................................7
Section 3.3 Dissenting Company Shares......................................9
Section 3.4 Merger Without Meeting of Stockholders.........................9
Section 3.5 No Further Ownership Rights in the Shares......................9
Section 3.6 Closing of Company Transfer Books.............................10
Section 3.7 Stock Options.................................................10
Section 3.8 Closing.......................................................10
Section 3.9 Transfer Taxes................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF INVESTOR......................10
Section 4.1 Organization, Standing and Power..............................10
Section 4.2 Authority; Non-Contravention..................................11
Section 4.3 Offer Documents and Proxy Statement...........................12
Section 4.4 Financing.....................................................12
Section 4.5 Brokers.......................................................12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................12
Section 5.1 Organization, Standing and Power..............................13
Section 5.2 Capital Structure.............................................13
Section 5.3 Subsidiaries..................................................14
Section 5.4 Authority; Non-Contravention..................................14
Section 5.5 SEC Documents.................................................15
Section 5.6 Offer Documents and Proxy Statement...........................16
Section 5.7 Absence of Certain Events.....................................17
Section 5.8 Litigation....................................................18
Section 5.9 Compliance with Law...........................................18
Section 5.10 Employee Plans...............................................21
Section 5.11 Employment Relations and Agreement...........................23
Section 5.12 Contracts....................................................24
Section 5.13 Environmental Laws and Regulations...........................27
Section 5.14 Property and Leases..........................................28
Section 5.15 Patents, Trademarks, Copyrights..............................31
Section 5.16 Insurance....................................................32
Section 5.17 Takeover Statutes............................................32
Section 5.18 Taxes........................................................32
Section 5.19 No Change of Control.........................................33
Section 5.20 Brokers......................................................33
Section 5.21 Disclosures..................................................33
Section 5.22 Company Disclosure Letter....................................33
ARTICLE VI REPRESENTATIONS AND WARRANTIES REGARDING SUB....................33
Section 6.1 Organization and Standing.....................................34
Section 6.2 Authority; Non-Contravention..................................34
ARTICLE VII COVENANTS RELATING TO CONDUCT OF BUSINESS......................34
Section 7.1 Conduct of Business by the Company Pending the Merger.........35
Section 7.2 Conduct of Business of Sub Pending the Merger.................38
ARTICLE VIII ADDITIONAL AGREEMENTS.........................................38
Section 8.1 Company Stockholder Approval; Proxy Statement.................38
Section 8.2 Indemnification...............................................39
Section 8.3 Additional Agreements.........................................40
Section 8.4 No Shop.......................................................41
Section 8.5 Advice of Changes; SEC Filings................................42
Section 8.6 Board Representation; Directors...............................42
ARTICLE IX CONDITIONS PRECEDENT............................................42
Section 9.1 Conditions to Each Party's Obligation to Effect the Merger....42
ARTICLE X TERMINATION, AMENDMENT AND WAIVER................................43
Section 10.1 Termination by Mutual Consent................................43
Section 10.2 Termination by Either Investor or the Company................43
Section 10.3 Termination by Investor......................................44
Section 10.4 Termination by the Company...................................44
Section 10.5 Effect of Termination and Abandonment........................45
ARTICLE XI MISCELLANEOUS...................................................46
Section 11.1 Non-Survival of Representations, Warranties and Agreements...46
Section 11.2 Notices......................................................47
Section 11.3 Fees and Expenses............................................48
Section 11.4 Publicity....................................................48
Section 11.5 Specific Performance.........................................48
Section 11.6 Assignment; Binding Effect...................................48
Section 11.7 Entire Agreement.............................................48
Section 11.8 Amendment....................................................49
Section 11.9 Governing Law................................................49
Section 11.10 Counterparts................................................49
Section 11.11 Headings and Table of Contents..............................49
Section 11.12 Interpretation..............................................49
Section 11.13 Waivers.....................................................49
Section 11.14 Incorporation of Exhibits...................................50
Section 11.15 Severability................................................50
Section 11.16 Subsidiaries................................................50
Exhibits
Exhibit A Conditions of the Offer
Exhibit B Operating Plan and Budget
Defined Terms Index
Agreement......................................................Preamble
Alternative Proposal...........................................Section 8.4
Blue Sky Laws..................................................Section 4.2
Budgets........................................................Exhibit A
Cap............................................................Section 8.3
Capital Expenditure Budget and Schedule........................Section 5.14
Certificates...................................................Section 3.1
Closing........................................................Section 3.8
Code...........................................................Section 5.10
Common Stock...................................................Recitals
Common Stock Cash Merger Price.................................Section 3.1
Common Stock Certificates......................................Section 3.1
Common Stock Merger Consideration..............................Section 3.1
Common Stock Offer Price.......................................Recitals
Company........................................................Preamble
Company Benefit Plan...........................................Section 5.10
Company Disclosure Letter......................................Section 5.2
Company Properties.............................................Section 5.14
Company Property...............................................Section 5.14
Company Reports................................................Section 5.5
Company SEC Documents..........................................Section 5.5
Contracts......................................................Section 5.12
Development Budget and Schedule................................Section 5.14
Development Properties.........................................Section 5.14
DGCL...........................................................Recitals
Dissenting Company Shares......................................Section 3.3
Effective Time.................................................Section 2.2
Employment Agreements..........................................Section 5.11
Environmental Claim............................................Section 5.13
Environmental Laws.............................................Section 5.13
ERISA..........................................................Section 5.10
Exchange Act...................................................Section 1.1
Exchange Fund..................................................Section 3.2
Exchangeable Preferred.........................................Recitals
Exchangeable Preferred Certificates............................Section 3.1
Exchangeable Preferred Merger Consideration....................Section 3.1
Exchangeable Preferred Offer Price.............................Recitals
Fairness Opinion...............................................Section 2.1
Financial Advisor..............................................Section 1.2
Governmental Entity............................................Section 4.2
Hazardous Materials............................................Section 5.13
Indemnified Parties............................................Section 8.2
Information Statement..........................................Section 4.3
Investor.......................................................Preamble
Knowledge......................................................Section 11.6
Leased Property................................................Section 5.14
LFREI..........................................................Guaranty
Liens..........................................................Section 5.14
Material Adverse Change........................................Section 4.2
Material Adverse Effect........................................Section 4.2
Medical Reimbursement Program..................................Section 5.9
Merger.........................................................Recitals
Merger Consideration...........................................Section 3.1
Minimum Condition..............................................Exhibit A
Multiemployer Plan.............................................Section 5.10
Offer..........................................................Recitals
Offer Documents................................................Section 1.1
OIG............................................................Section 5.9
Option.........................................................Section 3.7
Options........................................................Section 3.7
Owned Property.................................................Section 5.14
Paying Agent...................................................Section 3.2
PCBs...........................................................Section 5.13
Permits........................................................Section 5.9
Permitted Liens................................................Section 5.14
Plan...........................................................Section 5.10
Prior Agreement................................................Recitals
Projects.......................................................Section 5.14
Property.......................................................Section 5.13
Proxy Statement................................................Section 4.3
Schedule 14D-9.................................................Section 2.1
SEC............................................................Section 1.1
Section 9.3 Agreements.........................................Section 9.3
Securities Act.................................................Section 4.2
Shares.........................................................Recitals
Salomon Brothers Book..........................................Exhibit A
Stock Plan.....................................................Section 5.2
Stockholder Meeting............................................Section 8.1
Stockholders Agreement.........................................Recitals
Sub............................................................Preamble
Sub Share......................................................Section 3.1
Subsidiary.....................................................Section 11.6
Surviving Corporation..........................................Section 2.1
Tax; Taxes; Taxable............................................Section 5.18
Tax Return.....................................................Section 5.18
Termination Date...............................................Section 10.2
Termination Fee................................................Section 10.5
Title Policies.................................................Section 5.14
Transfer Taxes.................................................Section 3.9
UST............................................................Section 5.13
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement"), dated as of February 23, 1998, by and among Prometheus
Senior Quarters LLC, a Delaware limited liability company or an
affiliate thereof ("Investor"); Prometheus Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Investor
("Sub"); and Kapson Senior Quarters Corp., a Delaware corporation (the
"Company").
W I T N E S S E T H:
-------------------
WHEREAS, Investor, Sub and the Company previously entered into
that certain Agreement and Plan of Merger, dated as of September 30,
1997 (the "Prior Agreement"), and each now desires to amend and
restate the Prior Agreement in its entirety;
WHEREAS, the Board of Directors of the Company has approved the
acquisition of the Company by Investor pursuant to a tender offer
(such tender offer, as it may be amended or supplemented from time to
time as permitted under this Agreement, the "Offer") by Sub for (i)
all of the outstanding shares of Common Stock, par value $.01 per
share ("Common Stock"), of the Company at a price of $14.50 per share,
net to the seller in cash, without interest (the "Common Stock Offer
Price") and (ii) all of the outstanding shares of the $2.00
Convertible Exchangeable Preferred Stock of the Company (the
"Exchangeable Preferred") at a price per share of $27.93, net to the
seller in cash, without interest (the "Exchangeable Preferred Offer
Price") (the Exchangeable Preferred, together with the Common Stock,
the "Shares"), followed by a merger (the "Merger") of Sub with and
into the Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, concurrently with the execution of this Agreement and as
an inducement to Investor to enter into this Agreement, Investor and
certain stockholders of the Company are entering into an Amended and
Restated Stockholders Agreement (the "Stockholders Agreement")
pursuant to which such stockholders have, among other matters, agreed
to tender their shares of Common Stock in the Offer and have granted
to Investor an option to purchase the shares of Common Stock owned by
such stockholders, in each case, upon the terms and subject to the
conditions specified in the Stockholders Agreement;
WHEREAS, the Board of Directors of the Company has determined
that it is fair and in the best interests of its stockholders for Sub
to merge with and into the Company pursuant to Section 251 of the
Delaware General Corporation Law ("DGCL"), upon the terms and subject
to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has adopted
resolutions approving the Offer, the Merger, the Stockholders
Agreement, this Agreement and the transactions to which the Company is
a party contemplated hereby and thereby, and has agreed, upon the
terms and subject to the conditions set forth herein, to recommend
that the Company's stockholders accept the Offer and tender their
shares;
WHEREAS, pursuant to the Merger, each issued and outstanding
Share not owned directly or indirectly by Investor or the Company,
except Shares held by holders who comply with the provisions of the
DGCL regarding the right of stockholders to dissent from the Merger
and require appraisal of their Shares, will be converted into the
right to receive the per share consideration paid pursuant to the
Offer in respect of the Common Stock and the Exchangeable Preferred,
as the case may be; and
WHEREAS, Investor and the Company desire to make certain
representations, warranties, covenants and agreements in connection
with the Offer and the Merger and also to prescribe various conditions
to the Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties and agreements contained herein the
parties hereto agree as follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer. (a) Subject to the provisions of this
Agreement and as soon as practicable, but in any event within five
business days after the first public announcement of this Agreement,
Sub shall, and Investor shall cause Sub to, commence, within the
meaning of Rule 14d-2 under the Exchange Act (as hereinafter defined),
the Offer. The obligation of Sub to, and of Investor to cause Sub to,
commence the Offer and accept for payment, and pay for, any Shares
tendered pursuant to the Offer shall be subject to the conditions set
forth in Exhibit A and to the terms and conditions of this Agreement.
The Offer shall initially expire 20 business days after the date of
its commencement (subject to the other provisions of this Section
1.1); provided, however, that unless this Agreement is terminated in
accordance with Article X, in which case the Offer (whether or not
previously extended in accordance with the terms hereof) shall expire
on such date of termination, at the request of the Company, Investor
and Sub shall extend the expiration date of the Offer from time to
time to the earlier of (i) the date on which Sub purchases or becomes
obligated to purchase that number of Shares that would satisfy the
Minimum Condition (as defined in Exhibit A) and (ii) the date 60
business days after the date of its commencement. Without the prior
written consent of the Company, Sub shall not (i) waive the Minimum
Condition, (ii) reduce the number of Shares subject to the Offer,
(iii) reduce the price per share of either class of the Shares to be
paid pursuant to the Offer, (iv) except as provided in the following
sentence, extend the Offer, if all of the conditions of the Offer are
satisfied or waived, or (v) change the form of consideration payable
in the Offer. Notwithstanding the foregoing, Sub may, without the
consent of the Company, extend the Offer at any time, and from time to
time: (i) if at the then scheduled expiration date of the Offer any of
the conditions to Sub's obligation to accept for payment and pay for
the Shares shall not have been satisfied or waived, until such time as
such conditions are satisfied or waived; (ii) for any period required
by any rule, regulation, interpretation or position of the SEC (as
hereinafter defined) or its staff applicable to the Offer; (iii) until
10 business days following the expiration of the 10 business day
period referred to in the condition in clause (f) of Exhibit A and if
such condition (f) shall not have been satisfied, for as long as
Investor and Sub shall determine until, in their sole discretion, all
conditions of the Offer are satisfied; and (iv) if all conditions of
the Offer are satisfied or waived but the number of Shares tendered is
less than 90% of the then outstanding number of shares of Common Stock
and less than 90% of the then outstanding shares of Exchangeable
Preferred, for an aggregate period of not more than 10 business days
(for all such extensions) beyond the latest expiration date that would
be permitted under clause (i), (ii) or (iii) of this sentence. Subject
to the terms and conditions of the Offer and this Agreement, Sub
shall, and Investor shall cause Sub to, pay for all of the Shares
validly tendered and not withdrawn pursuant to the Offer as soon as
practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Investor and Sub
shall file with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 with respect to the Offer,
which shall contain an offer to purchase and a related letter of
transmittal (such Schedule 14D-1 and the documents therein pursuant to
which the Offer will be made, together with any supplements or
amendments thereto, the "Offer Documents"). The Company and its
counsel shall be given an opportunity to review and comment upon the
Offer Documents prior to the filing thereof with the SEC. Investor and
Sub hereby covenant that the Offer Documents shall comply as to form
in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (including the rules and regulations
promulgated thereunder, the "Exchange Act"), and on the date filed
with the SEC and on the date first published, sent or given to the
Company's stockholders, the Offer Documents shall not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by
Investor or Sub with respect to information supplied by the Company
for inclusion in the Offer Documents. Each of Investor, Sub and the
Company agrees to correct promptly any information provided by it for
use in the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and
each of Investor, Sub and Company further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed
with the SEC and to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws.
Section 1.2 Company Actions. (a) The Company hereby approves of
and consents to the Offer and represents and warrants that the Board
of Directors of the Company at a meeting duly called and held has duly
adopted resolutions (i) approving this Agreement, the Stockholders
Agreement, the Offer and the Merger, (ii) determining that the Merger
is advisable and that the terms of the Offer and Merger are fair to,
and in the best interests of, the Company, and the holders of shares
of Common Stock and the holders of shares of Exchangeable Preferred
and (iii) recommending that the Company's stockholders accept the
Offer and tender their Shares and approve the Merger and this
Agreement. The Company hereby consents to the inclusion in the Offer
Documents of such recommendation of the Board of Directors of the
Company. The Company represents and warrants that its Board of
Directors has received the written opinions (the "Fairness Opinions")
of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇.▇. ▇▇▇▇▇▇ Securities Inc. (together, the
"Financial Advisors") that the proposed consideration to be received
by the holders of shares of Common Stock and the holders of shares of
Exchangeable Preferred pursuant to the Offer and the Merger is fair to
such holders from a financial point of view. The Company has been
authorized by the Financial Advisors to permit, subject to the prior
review and consent by the Financial Advisors (such consent not to be
unreasonably withheld), the inclusion of the Fairness Opinions (or a
reference thereto) in the Offer Documents, the Schedule 14D-9 (as
hereinafter defined) and the Proxy Statement (as hereinafter defined).
The Company represents and warrants that its Board of Directors has
taken all necessary steps to render Section 203 of the DGCL
inapplicable to the Offer, the Merger and the transactions
contemplated by this Agreement and the Stockholders Agreement.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule
14D-9, as amended from time to time, the "Schedule 14D-9") containing
the recommendations set forth in paragraph (a) above and shall mail
the Schedule 14D-9 to the stockholders of the Company as required by
Rule 14d-9 promulgated under the Exchange Act. To the extent
practicable, the Company shall cooperate with Investor in mailing or
otherwise disseminating the Schedule 14D-9 with the appropriate Offer
Documents to the Company's stockholders. Investor and its counsel
shall be given an opportunity to review and comment upon the Schedule
14D-9 prior to the filing thereof with the SEC. The Company hereby
covenants that the Schedule 14D-9 shall comply as to form in all
material respects with the requirements of the Exchange Act and, on
the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by
the Company with respect to information supplied by Investor or Sub
for inclusion in the Schedule 14D-9. Each of the Company, Investor and
Sub agrees to correct promptly any information provided by it for use
in the Schedule 14D-9 if and to the extent that such information shall
have become false or misleading in any material respect, and the
Company further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to the holders of Shares, in each case as and to the
extent required by applicable federal securities laws. The Company
agrees to provide Investor and Sub and their counsel in writing with
any comments the Company or its counsel may receive from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to promptly furnish Sub with a list of the holders of
Shares and mailing labels containing the names and addresses of the
record holders of Shares as of a recent date and of those persons
becoming record holders subsequent to such date, together with copies
of all lists of stockholders, security position listings (including
Shares held by depositories) and computer files and all other
information in the Company's possession or control regarding the
beneficial owners of Shares, and shall furnish to Sub such information
and assistance (including updated lists of stockholders, security
position listings and computer files) as Sub may reasonably request in
communicating the Offer to the Company's stockholders. The Company
acknowledges that Sub intends to commence the Offer by sending Offer
materials to the holders of the Shares and, therefore, the obligations
of the Company as set forth in this subparagraph are extremely
time-sensitive.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the DGCL, on the Effective
Time (as hereinafter defined), Sub shall be merged with and into the
Company and the separate existence of Sub shall thereupon cease, and
the Company, as the corporation surviving the Merger (the "Surviving
Corporation"), shall by virtue of the Merger continue its corporate
existence under the laws of the State of Delaware.
Section 2.2 Effective Time of the Merger. The Merger shall become
effective at the date and time (the "Effective Time") when a
Certificate of Merger meeting the requirements of Section 251 of the
DGCL shall have been duly executed and filed in accordance with such
Section, or at such other time as is specified in the Certificate of
Merger in accordance with the DGCL, which Certificate of Merger shall
be filed as soon as practicable following fulfillment of the
conditions set forth in Article IX hereof.
Section 2.3 Certificate of Incorporation. The Certificate of
Incorporation of the Company as in effect at the Effective Time shall
be the Certificate of Incorporation of the Surviving Corporation,
until further amended in accordance with its terms and as provided by
law and this Agreement.
Section 2.4 By-laws. The By-laws of the Company as in effect at
the Effective Time shall be the By-laws of the Surviving Corporation,
and thereafter may be amended in accordance with their terms and as
provided by law and this Agreement.
Section 2.5 Board of Directors and Officers. The directors of Sub
at the Effective Time and ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ shall, from
and after the Effective Time, be the initial directors of the
Surviving Corporation and the officers of the Company shall be the
officers of the Surviving Corporation, in each case until their
respective successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal, in
accordance with the Surviving Corporation's Articles of Incorporation
and By-laws.
Section 2.6 Effects of Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Conversion of Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of any
stockholder of the Company:
(a) All Shares that are held in the treasury of the Company and
any Shares owned by Investor, Sub or any other wholly owned Subsidiary
(as hereinafter defined) of Investor shall be canceled and no
consideration shall be delivered in exchange therefor.
(b) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares of Common Stock to be
canceled in accordance with Section 3.1(a) and other than Dissenting
Company Shares (as hereinafter defined)) shall be converted into the
right to receive from the Surviving Corporation in cash, without
interest, the Common Stock Offer Price, without interest (the "Common
Stock Merger Consideration"). All such shares of Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
canceled and retired and each holder of a certificate or certificates
(the "Common Stock Certificates") representing any such shares of
Common Stock shall cease to have any rights with respect thereto,
except the right to receive the Common Stock Merger Consideration.
(c) Each Share of Exchangeable Preferred issued and outstanding
immediately prior to the Effective Time (other than shares of
Exchangeable Preferred to be canceled in accordance with Section
3.1(a) and other than Dissenting Company Shares) shall be converted
into the right to receive from the Surviving Corporation in cash,
without interest, the Exchangeable Preferred Offer Price, without
interest (the "Exchangeable Preferred Merger Consideration" and,
together with the Common Stock Merger Consideration, the "Merger
Consideration"). All such shares of Exchangeable Preferred, when so
converted, shall no longer be outstanding and shall automatically be
canceled and retired and each holder of a certificate or certificates
(the "Exchangeable Preferred Certificates" and, together with the
Common Stock Certificates, the "Certificates") representing any such
shares shall cease to have any rights with respect thereto, except the
right to receive the Exchangeable Preferred Merger Consideration.
(d) Each share of common stock, par value $.01 per share (each a
"Sub Share"), of Sub, issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into and become at the
Effective Time one fully paid and nonassessable share of common stock,
par value $.01 per share, of the Surviving Corporation.
Section 3.2 Exchange of Certificates. (a) Paying Agent. Prior to
the Effective Time, Investor shall appoint IBJ ▇▇▇▇▇▇▇▇ Bank & Trust
Company or a commercial bank or trust company mutually agreeable to
Investor and the Company to act as paying agent hereunder (the "Paying
Agent") for the payment of the Merger Consideration upon surrender of
the Certificates. All of the fees and expenses of the Paying Agent
shall be borne by Investor.
(b) Surviving Corporation to Provide Funds. Investor shall take
all steps necessary to enable and cause the Surviving Corporation to
provide the Paying Agent with cash in amounts necessary to pay for all
of the Shares pursuant to Section 3.1 (determined as though there are
no Dissenting Company Shares), when and as such amounts are needed by
the Paying Agent (such amounts, the "Exchange Fund"). The Paying Agent
shall invest any cash included in the Exchange Fund, as directed by
the Investor, on a daily basis. Any interest and other income
resulting from such investments shall be paid to the Investor. To the
extent that there are losses with respect to such investments, or the
Exchange Fund diminishes for other reasons below the level required to
make prompt payments of the Merger Consideration as contemplated
hereby, Investor shall promptly replace or restore the portion of the
Exchange Fund lost through investments or other events so as to ensure
that the Exchange Fund is, at all times, maintained at a level
sufficient to make such payments. Any portion of the Exchange Fund
(including the proceeds of any interest and other income received by
the Paying Agent in respect of such funds) that remains undistributed
to the holders of Shares 180 days after the Effective Time of the
Merger shall be delivered to the Surviving Corporation at such time.
After six months following the Effective Time, holders of Shares shall
look only to the Surviving Corporation (subject to the terms of this
Agreement) as a general creditor for payment of the Merger
Consideration, without interest, upon the surrender of any
Certificates held by them.
(c) Exchange Procedures. As soon as practicable after the
Effective Time, the Paying Agent shall mail to each holder of record
of a Certificate, other than Investor and the Company, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon
actual delivery of the Certificates to the Paying Agent and shall be
in a form and have such other provisions as Investor may reasonably
specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate (or delivery of such customary affidavits
and indemnities with respect to a lost certificate which the Paying
Agent and/or the Company's transfer agent may reasonably require) for
cancellation to the Paying Agent or to such other agent or agents as
may be appointed by the Surviving Corporation, together with such
letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 3.1, and the
Certificates so surrendered shall forthwith be canceled. No interest
will be paid or will accrue on the cash payable upon the surrender of
any Certificate. If payment is to be made to a person other than the
person in whose name the Certificate so surrendered is registered, it
shall be a condition of payment that such Certificate shall be
properly endorsed or otherwise in proper form for transfer and that
the person requesting such payment shall pay any transfer or other
taxes required by reason of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid
or is not applicable. Until surrendered as contemplated by this
Section 3.2, each Certificate (other than Certificates representing
Dissenting Company Shares and Certificates representing any Shares
held in the treasury of the Company) shall be deemed at any time after
the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted
pursuant to Section 3.1. If any Certificate shall not have been
surrendered prior to three years after the Effective Time (or
immediately prior to such time on which any payment in respect hereof
would otherwise escheat or become the property of any governmental
unit or agency), the payment in respect of such Certificate shall, to
the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto. Notwithstanding the foregoing,
none of the Paying Agent, the Surviving Corporation or any party
hereto shall be liable to any former stockholder of the Company for
any cash or interest delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
Section 3.3 Dissenting Company Shares. Notwithstanding any
provision of this Agreement to the contrary, if required by the DGCL
but only to the extent required thereby, Shares which are issued and
outstanding immediately prior to the Effective Time and which are held
by holders of such Shares who have properly exercised appraisal rights
with respect thereto in accordance with Section 262 of the DGCL (the
"Dissenting Company Shares") will not be exchangeable for the right to
receive the Merger Consideration, and holders of such Shares will be
entitled to receive payment of the appraised value of such Shares in
accordance with the provisions of such Section 262 unless and until
such holders fail to perfect or effectively withdraw or lose their
rights to appraisal and payment under the DGCL. If, after the
Effective Time, any such holder fails to perfect or effectively
withdraws or loses such right, such Shares will thereupon be treated
as if they had been converted into and have become exchangeable for,
at the Effective Time, the right to receive the Merger Consideration,
without any interest thereon. Upon the Company's receipt of any notice
of election to dissent in accordance with the provisions of such
Section 262, the Company shall promptly provide Investor with a copy
of such notice of election to dissent. The Company shall not, except
with the prior written consent of Investor, make any payment with
respect to any such election to dissent or offer to settle or settle
any such election to dissent.
Section 3.4 Merger Without Meeting of Stockholders. In the event
that Sub, or any other direct or indirect Subsidiary of Investor,
shall acquire at least 90% of the outstanding shares of Common Stock
and at least 90% of the outstanding shares of the Exchangeable
Preferred, the parties hereto agree to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a meeting of
stockholders of the Company, in accordance with Section 253 of the
DGCL.
Section 3.5 No Further Ownership Rights in the Shares. From and
after the Effective Time, the holders of Shares which were outstanding
immediately prior to the Effective Time shall cease to have any rights
with respect to such Shares except as otherwise provided in this
Agreement or by applicable law. All cash paid upon the surrender of
Certificates in accordance with the terms hereof shall be deemed to
have been issued in full satisfaction of all rights pertaining to the
Shares.
Section 3.6 Closing of Company Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed and no
transfer of Shares shall thereafter be made. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged as provided in this Article III.
Section 3.7 Stock Options. All options (individually, an "Option"
and collectively, the "Options") outstanding immediately prior to the
Effective Time under any Company stock option plan, whether or not
then exercisable, shall be canceled and each holder of an Option will
be entitled to receive from the Surviving Corporation, for each share
of Common Stock subject to an Option, an amount in cash equal to the
excess, if any, of the Common Stock Merger Consideration over the per
share exercise price of such Option, without interest. All amounts
payable pursuant to this Section 3.7 shall be subject to all
applicable withholding of taxes and shall be paid as soon as
practicable following the Effective Time. The Company shall take all
action necessary to effectuate the foregoing, including obtaining all
necessary consents of the holders of Options. Notwithstanding the
foregoing, the Company will use reasonable efforts to cause the
holders of the Options to exercise such Options on or prior to the
Effective Time.
Section 3.8 Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 9:00 a.m. local time on the day which is no
later than two business days after the day on which the last of the
conditions set forth in Article IX (other than those that can only be
fulfilled at the Effective Time) is fulfilled or waived or at such
other time and place as Investor and the Company shall agree in
writing.
Section 3.9 Transfer Taxes. Investor and the Company shall
cooperate in the preparation, execution and filing of all returns,
applications or other documents regarding any real property transfer,
stamp, recording, documentary or other taxes and any other fees and
similar taxes which become payable in connection with the Merger
(collectively, "Transfer Taxes"). The Company will pay all of the
Transfer Taxes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company as follows:
Section 4.1 Organization, Standing and Power. Investor is a
limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
power and authority to carry on its business as now being conducted.
Section 4.2 Authority; Non-Contravention. Investor has all
requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Investor and the consummation by
Investor of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of Investor. This
Agreement has been duly executed and delivered by Investor and
(assuming the valid authorization, execution and delivery of this
Agreement by the Company) constitutes a valid and binding obligation
of Investor enforceable against Investor in accordance with its terms.
The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit
under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Investor
or any of its Subsidiaries (as hereinafter defined) under, any
provision of (i) the organizational documents of Investor and any of
its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Investor or any of its
Subsidiaries or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Investor or any of its
Subsidiaries or any of their respective properties or assets, other
than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect (as hereinafter defined) on Investor,
materially impair the ability of Investor to perform its obligations
hereunder or prevent the consummation of any of the transactions
contemplated hereby. No filing or registration with, or authorization,
consent or approval of, any domestic (federal and state), foreign or
supranational court, commission, governmental body, regulatory or
administrative agency, authority or tribunal (a "Governmental Entity")
is required by or with respect to Investor or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by
Investor or is necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement, except for (i) in
compliance with the Exchange Act, (ii) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (iii) compliance with
any applicable requirement of the Securities Act of 1933, as amended
(the "Securities Act"), (iv) compliance with any applicable foreign or
state securities or blue sky laws (collectively, "Blue Sky Laws") and
(v) such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made
would not, individually or in the aggregate, have a Material Adverse
Effect on Investor, materially impair the ability of Investor to
perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby. For purposes of this
Agreement "Material Adverse Change" or "Material Adverse Effect"
means, when used with respect to Investor, Sub or the Company, as the
case may be, any change or effect, either individually or in the
aggregate, that is or is reasonably likely to be materially adverse to
the business, assets, prospects, liabilities, properties, or financial
condition (i) with respect to Investor, Investor and its Subsidiaries
taken as a whole, and (ii) with respect to the Company, the Company
and its Subsidiaries taken as a whole.
Section 4.3 Offer Documents and Proxy Statement. None of the
information to be supplied by Investor or Sub for inclusion or
incorporation by reference in the Schedule 14D-9, the information
statement, if any, filed by the Company in connection with the Offer
or the Merger pursuant to Regulation 14C or Rule 14f-1 promulgated
under the Exchange Act or otherwise (together with any amendments or
supplements thereto, the "Information Statement"), or, if applicable,
the proxy statement (together with any amendments or supplements
thereto, the "Proxy Statement") relating to the Stockholder Meeting
(as hereinafter defined) (i) in the case of the Schedule 14D-9, at the
time the Schedule 14D-9 is filed with the SEC or first published, sent
or given to the Company's stockholders, or (ii) in the case of the
Proxy Statement or the Information Statement, as applicable, at the
time of the mailing of the Proxy Statement or Information Statement
and at the time of the Stockholder Meeting or the taking of the action
contemplated by the Information Statement (as applicable), will
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they are made, not misleading.
Section 4.4 Financing. Investor has available and will make
available to Sub sufficient funds to enable it to consummate the Offer
and the Merger on the terms contemplated by this Agreement.
Section 4.5 Brokers. No broker, investment banker or other
person, other than Lazard Freres & Co. LLC, the fees and expenses of
which will be paid by the Investor, is entitled to any broker's,
finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Investor or Sub.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor and Sub as
follows:
Section 5.1 Organization, Standing and Power. The Company and
each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite power and authority to
carry on their respective businesses as now being conducted. The
Company and each of its Subsidiaries is duly qualified to do business,
and is in good standing, in each jurisdiction where the character of
its respective properties owned or held under lease or the nature of
its respective activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 5.2 Capital Structure. The authorized capital stock of
the Company consists of 30,000,000 shares of Common Stock, par value
$.01 per share, and 10,000,000 shares of preferred stock, par value
$.01 per share, issuable in one or more series, of which 2,400,000
shares of Exchangeable Preferred have been designated. At the close of
business on February 20, 1998, (i) 7,750,000 shares of Common Stock
were issued and outstanding and (ii) 5,222,496 shares of Common Stock
were reserved for issuance upon the exercise of outstanding options,
options available for grant, convertible securities and stock rights
in the Company. At the close of business on February 20, 1998,
2,400,000 shares of Exchangeable Preferred were issued and
outstanding. All outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable and not subject to
preemptive rights. As of February 20, 1998, the Company had
outstanding options to acquire an aggregate of 142,100 shares of
Common Stock at $9.625 to $10.00 per share, pursuant to the Company's
1996 Stock Incentive Plan (the "Stock Plan"). Except as otherwise set
forth in this Section 5.2 or in the Company Disclosure Letter (the
"Company Disclosure Letter"), there are no options, warrants, rights,
commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which it is bound obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of
the Company or any of its Subsidiaries, including any securities
pursuant to which rights to acquire capital stock became exercisable
only after a change of control of the Company or any of its
Subsidiaries or upon the acquisition of a specified amount of the
Common Stock or voting powers of the Company or any of its
Subsidiaries. Since February 20, 1998, no shares of the capital stock
of the Company or any of its Subsidiaries have been issued other than
pursuant to the exercise of Company stock options and warrants already
in existence and outstanding on such date, or conversion of
Exchangeable Preferred, and neither the Company nor any of its
Subsidiaries has granted any stock options, warrants or other rights
to acquire any capital stock of the Company or any of its
Subsidiaries. Except as specified in the Company Disclosure Letter,
there are no securities issued by the Company or agreements,
arrangements or other understandings to which the Company is a party
giving any person any right to acquire equity securities of the
Surviving Corporation at or following the Effective Time and all
securities, agreements, arrangements and understandings relating to
the right to acquire equity securities of the Company (whether
pursuant to the exercise of options, warrants or otherwise) provide
that, at and following the Effective Time, such right shall entitle
the holder thereof to receive the consideration he would have received
in the Merger had he exercised his right immediately before the
Effective Time.
Section 5.3 Subsidiaries. Except as set forth in the Company
Disclosure Letter, (i) the Company owns, directly or indirectly
through a Subsidiary, all of the outstanding shares of capital stock
(or other ownership interests having by their terms ordinary voting
power to elect directors or others performing similar functions with
respect to such Subsidiary) of each of the Company's Subsidiaries and
(ii) each of the outstanding shares of capital stock of each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable, and is owned, directly or indirectly, by the
Company free and clear of all liens, pledges, security interests,
claims or other encumbrances. The Company Disclosure Letter sets forth
for each Subsidiary of the Company: (i) its name and jurisdiction of
incorporation or organization; (ii) its authorized capital stock or
share capital; (iii) the number of issued and outstanding shares of
capital stock or share capital; and (iv) the holder or holders of such
shares. Except for interests in the Company's Subsidiaries or as set
forth in the Disclosure Letter, neither the Company nor any of its
Subsidiaries owns directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint
venture, business, trust or other entity.
Section 5.4 Authority; Non-Contravention. The Board of Directors
of the Company has declared the Merger advisable, fair and in the best
interests of the Company and each of the holders of Common Stock and
Exchangeable Preferred, and the Company has all requisite corporate
power and authority to enter into this Agreement and, subject to
approval of the Merger by the stockholders of the Company, to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the
part of the Company, subject to approval of the Merger by the
stockholders of the Company. The only votes of the holders of any
class or series of Company capital stock necessary to approve the
Merger are the affirmative votes of the holders of a majority of the
outstanding shares of Common Stock, voting separately as a class. This
Agreement has been duly executed and delivered by the Company and
(assuming the valid authorization, execution and delivery of this
Agreement by Investor and Sub, as applicable) constitutes a valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be
limited by creditors' rights generally or by general principles of
equity. Except as set forth in the Company Disclosure Letter, the
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit
under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any provision of (i) the
Certificate of Incorporation, By-laws or other organizational
documents of the Company or any of its Subsidiaries (true and complete
copies of which as of the date hereof have been delivered to
Investor), or (ii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other
than, in the case of clause (ii), any such conflicts, violations,
defaults, rights, liens, security interests, charges or encumbrances
that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of the
Company and its Subsidiaries to perform its material obligations
hereunder or prevent the consummation of any of the material
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is
required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby, except for (i) compliance with the provisions of
the Exchange Act, (ii) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the
Company is qualified to do business, (iii) compliance with any
applicable requirements of the Securities Act, (iv) compliance with
any applicable Blue Sky Laws, (v) those matters including but not
limited to, regulatory consents, approvals and waivers, set forth in
the Company Disclosure Letter, and (vi) such other consents, orders,
authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, materially
impair the ability of the Company and its Subsidiaries to perform its
obligations hereunder or prevent the consummation of any of the
material transactions contemplated hereby; it being understood and
agreed that the Company is not making any representation or warranty
with respect to third party consents, waivers or amendments required
to be obtained by the Company to consummate the transactions
contemplated hereby.
Section 5.5 SEC Documents. (a) Except as set forth in the Company
Disclosure Letter, since September 1, 1996, the Company has filed all
documents with the SEC required to be filed by the Company under the
Securities Act or the Exchange Act (the "Company SEC Documents"). As
of their respective dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and none of the Company SEC
Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no
representation is made by the Company with respect to information
supplied by Investor, Sub or their respective Subsidiaries for
inclusion in the Company SEC Documents. The Company has delivered to
Investor each registration statement, report, proxy statement or
information statement prepared by it and filed with the SEC, in the
form, including any exhibits or amendments thereto, filed with the SEC
(collectively, the "Company Reports"). The Company has delivered to
Investor the preliminary proxy materials relating to the Merger, as
filed with the SEC prior to the date hereof, and the comment letters
of the SEC received by the Company with respect thereto. The financial
statements of the Company included in the Company SEC Documents and
the Company Reports comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except
as may be indicated therein or in the notes thereto) and fairly
present in all material respects the financial position of the Company
as at the dates thereof and the results of its operations and changes
in financial position for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to
any other adjustments set forth therein).
(b) Except as set forth in the Company Disclosure Letter, the
Company SEC Documents, the Company Reports or the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has any
liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), except for liabilities and obligations
incurred in the ordinary course of business consistent with past
practice since September 30, 1997 which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. Except
as set forth in the Company Disclosure Letter, neither the Company nor
any of its Subsidiaries has any obligation in respect of any rate swap
transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option
with respect to any of the foregoing transactions) or any combination
of the foregoing transactions.
(c) The Company has heretofore made available or promptly shall
make to Investor a complete and correct copy of any amendments or
modifications, which have not yet filed with the SEC, to agreements,
documents or other instruments which previously have been filed with
the SEC pursuant to the Exchange Act.
Section 5.6 Offer Documents and Proxy Statement. None of (a) the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Offer Documents at the time such
documents are filed with the SEC or first published, sent or given to
the Company's stockholders or (b) the Proxy Statement or the
Information Statement (as applicable) at the time of the mailing of
the Proxy Statement or the Information Statement and at the time of
the Stockholder Meeting or the taking of the action contemplated by
the Information Statement (as applicable), will contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation is made by the
Company with respect to information supplied by Investor, Sub or their
respective Subsidiaries for inclusion in any of such documents. If at
any time prior to the Effective Time any event with respect to the
Company, its officers and directors should occur which is required to
be set forth in an amendment of, or a supplement to, the Proxy
Statement or the Information Statement (as the case may be), such
event shall be so set forth, and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to
the stockholders of the Company. The Proxy Statement and the
Information Statement shall comply as to form in all material respects
with the requirements of the Exchange Act.
Section 5.7 Absence of Certain Events. Except as set forth in the
Company Disclosure Letter, since September 30, 1997, the Company and
each of its Subsidiaries has operated its respective business only in
the ordinary course consistent with past practice and, except as set
forth in the Company Disclosure Letter, there has not occurred (i) as
of the date hereof any event, occurrence or condition which,
individually or in the aggregate, has, or is reasonably likely to
have, a Material Adverse Effect on the Company; (ii) any entry into
any commitment or transaction that, individually or in the aggregate,
has or is reasonably likely to have, a Material Adverse Effect on the
Company; (iii) any material change by the Company or any of its
Subsidiaries in its accounting methods, principles or practices; (iv)
any amendments or changes in the Certificate of Incorporation, By-laws
or other organizational documents of the Company or any of its
Subsidiaries; (v) any revaluation by the Company or any of its
Subsidiaries of any of its respective assets, including, without
limitation, write-offs of accounts receivable, other than in the
ordinary course of business consistent with past practices; (vi) any
damage, destruction or loss which resulted in or is reasonably likely
to result in a Material Adverse Effect on the Company; (vii) except
with respect to ordinary dividends paid with respect to the
Exchangeable Preferred, any declaration, setting aside or payment of
any dividend or other distribution with respect to any shares of
capital stock of the Company or any of its Subsidiaries, or any
repurchase, redemption or other acquisition by the Company or any of
its Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any of
its Subsidiaries; (viii) any grant of any severance or termination pay
to any director or executive officer of the Company or any of its
Subsidiaries; (ix) any entry into any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any director or executive officer of the
Company or any of its Subsidiaries; (x) any increase in benefits
payable under any existing severance or termination pay policies or
employment agreements with any director or executive officer of the
Company or any of its Subsidiaries; or (xi) any increase in
compensation, bonus or other benefits payable to directors or
executive officers of the Company or any of its Subsidiaries.
Section 5.8 Litigation. Except as set forth in the Company
Disclosure Letter, there are no actions, suits or proceedings pending
against the Company or any of its Subsidiaries or, to the knowledge of
the Company or any of its Subsidiaries, threatened against the Company
or any of its Subsidiaries, at law or in equity, or before or by any
federal or state commission, board, bureau, agency, regulatory or
administrative instrumentality or other Governmental Entity or any
arbitrator or arbitration tribunal, that are reasonably likely to have
a Material Adverse Effect on the Company, and, to the knowledge of the
Company or any of its Subsidiaries, no development has occurred with
respect to any pending or threatened action, suit or proceeding that
is reasonably likely to result in a Material Adverse Effect on the
Company or would prevent or delay the consummation of the transactions
contemplated hereby.
Section 5.9 Compliance with Law. (a) Except as set forth in the
Company Disclosure Letter, to the knowledge of the Company, (i)
neither the Company nor any of its Subsidiaries is the subject of any
investigation, nor (ii) has any investigation or prosecution or other
action been threatened by any Governmental Entity or any private
entity or person regarding non-compliance with any law and (iii) no
basis exists for any such investigation or prosecution which is
reasonably likely to have a Material Adverse Effect on the Company.
None of the Company or any of the Subsidiaries may reasonably be
expected to have criminal culpability or to be excluded from
participation in the Medicare and Medicaid programs and any other
health care program operated by or financed in whole or in part by any
Governmental Entity (a "Medical Reimbursement Program") for its
corporate actions or failure to act. To the knowledge of the Company,
there is no executive officer of the Company or any Subsidiary
continuing to be employed by the Company or any of the Subsidiaries
who is reasonably likely to have individual culpability for matters
under investigation by the Office of the Inspector General of the
United States Department of Health and Human Services ("OIG") or other
Governmental Entity.
(b) Current billing policies, arrangements, protocols and
instructions of the Company and its Subsidiaries related to services
covered by Medical Reimbursement Programs comply in all material
respects with applicable requirements of Medical Reimbursement
Programs. The Company and each of its Subsidiaries has complied with
all applicable third party payor billing policies, procedures,
limitations and restrictions, and there is no pending or, to the
knowledge of the Company, threatened recoupment or penalty action or
proceedings against the Company or any of its Subsidiaries under any
other third party payor, except for such non-compliance, actions or
proceedings that individually or in the aggregate would not have a
Material Adverse Effect on the Company. The current operations of the
Company and its Subsidiaries do not require compliance with Medicare,
Blue Cross/Blue Shield or CHAMPUS policies, procedures, limitations or
restrictions.
(c) Except as set forth in the Company Disclosure Letter, the
Company and each of its Subsidiaries has obtained, and maintains in
force, all licenses, permits, franchises, certificates of authority,
orders and waivers required from any Governmental Entity ("Permits")
to operate their respective businesses in the manner in which they are
currently operated and to occupy, operate and use any buildings,
improvements, fixtures and equipment owned or leased in connection
with the operation of assisted living facilities to provide the
services currently provided by the Company and its Subsidiaries at all
locations of the Company and its Subsidiaries, and all such Permits
are valid and in full force and effect with only such exceptions that
would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Except as specified in the Company Disclosure
Letter, all of the Permits referenced in the foregoing sentence have
been issued in the name of the Company or the applicable Subsidiary
having an ownership, leasehold, management or operational interest in
the facilities referenced therein. Except as set forth in the Company
Disclosure Letter, no Permits of the Company or any Subsidiary have
been suspended, canceled or terminated and, to the knowledge of the
Company and its Subsidiaries, no suspension, cancellation or
termination of any such Permits is threatened or imminent. To the
knowledge of the Company, each employee of the Company and each of its
Subsidiaries (including, but not limited to, each facility
administrator) has obtained, and maintains in force, all licenses,
permits or similar authorizations required to authorize such employee
to perform his or her duties on behalf of the Company and its
Subsidiaries with only such exceptions that, individually and in the
aggregate, would not have a Material Adverse Effect on the Company.
(d) Neither the Company nor any of its Subsidiaries, nor, to the
knowledge of the Company, any director, officer or employee of the
Company or any of its Subsidiaries acting for or on behalf of the
Company or any of its Subsidiaries, has paid or caused to be paid,
directly or indirectly, in connection with the business of the Company
or any of its Subsidiaries: (i) any bribe, kickback or other similar
payment to any Governmental Entity or any agent of any supplier or
customer; or (ii) any contribution to any political party or candidate
(other than from personal funds of directors, officers or employees
not reimbursed by their respective employers or in compliance with
applicable law).
(e) The Company and its Subsidiaries do not provide services that
are covered by the Medicare program and do not participate in the
Medicare program. The Company and each of its Subsidiaries has filed
or will timely file all material claims or other reports required to
be filed with respect to the purchase of services by third-party
payors, including, but not limited to, the Medical Reimbursement
Programs. All such claims or reports are or will be complete and
accurate in all material respects. The Company and each of its
Subsidiaries has paid or has properly recorded on the Company's
financial statements all actually known and undisputed refunds,
discounts or adjustments which have become due pursuant to such
claims, and neither the Company nor any of its Subsidiaries has any
material liability to any payor with respect thereto, except as has
been fully reserved for in the Company's financial statements. Neither
the Company nor any of its Subsidiaries, nor, to the knowledge of the
Company, any of their respective directors or officers has been
convicted of, or plead guilty or nolo contendere to, patient abuse or
neglect, or any other Medicare program-related offense.
(f) The Company, each of its Subsidiaries, and their respective
directors, officers and employees and the other persons and entities
providing professional services for the Company and its Subsidiaries,
have not engaged in any activities which are in violation of Sections
1128A, 1128B, 1128C or 1877 of the Social Security Act (42 U.S.C.
▇▇.▇▇. 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), the False Claims Act
(31 U.S.C. ss. 3729 et seq.), the False Statements Acts (18 U.S.C. ss.
2002), the Program Fraud Civil Penalties Act (31 U.S.C. ss. 3801 et
seq.), or related regulations or other federal or state laws and
regulations, including, but not limited to, the following:
(i) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any
application for any benefit or payment;
(ii) knowingly and willfully making or causing to be made a
false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(iii) failure to disclose knowledge by a Medicare or Medicaid
claimant or a claimant under any Medical Reimbursement Program of
the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of
another, with intent to fraudulently secure such benefit or
payment;
(iv) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or
kind (i) in return for referring an individual to a person for
the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole in or part by any
Medical Reimbursement Program or (ii) in return for purchasing,
leasing, or ordering, or arranging, or arranging for or
recommending purchasing, leasing, or ordering any good, facility,
service, or item for which payment may be made in whole or in
part by any Medical Reimbursement Program; or
(v) referring or billing a patient for designated health
services (as defined in 42 U.S.C. ss. 1395nn) or providing
designated health services to a patient upon a referral from an
entity or person with which the physician or an immediate family
member has a financial relationship, and to which no exception
under 42 U.S.C. ss. 1395nn applies.
Section 5.10 Employee Plans. (a) The Company and each of its
Subsidiaries has complied with and performed all contractual
obligations and all obligations under applicable federal, state and
local laws, rules and regulations (domestic and foreign) required to
be performed by it under or with respect to any of the Company Benefit
Plans (as hereinafter defined) or any related trust agreement or
insurance contract, other than where the failure to so comply or
perform does not have, nor is reasonably likely to have, a Material
Adverse Effect on the Company. All contributions and other payments
required to be made by the Company or any of its Subsidiaries to any
Company Benefit Plan or Multiemployer Plan (as hereinafter defined)
prior to the date hereof have been made, other than where the failure
to so contribute or make payments will not have, nor is reasonably
likely to have, a Material Adverse Effect on the Company, and all
material accruals required to be made with respect to any Company
Benefit Plan or Multiemployer Plan have been made. There is no claim,
dispute, grievance, charge, complaint, restraining or injunctive
order, litigation or proceeding pending, or, to the knowledge of the
Company, threatened (other than routine claims for benefits) against
or relating to any Company Benefit Plan or against the assets of any
Company Benefit Plan, which is reasonably likely to have a Material
Adverse Effect on the Company. The Company and each of its
Subsidiaries has not made any promises or commitments to employees or
specifically to any employee regarding any future increase of benefit
levels (or future creations of new benefits) with respect to any
Company Benefit Plan beyond those reflected in the Company Benefit
Plans, which benefit increases or creations, either individually or in
the aggregate, will have or are reasonably likely to have, a Material
Adverse Effect on the Company. The Company and each of its
Subsidiaries does not presently sponsor, maintain, contribute to, nor
is the Company required to contribute to, nor has the Company or any
of its Subsidiaries ever sponsored, maintained, contributed to, or
been required to contribute to, any employee pension benefit plan
within the meaning of section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any multiemployer plan
within the meaning of section 3(37) or 4001(a)(3) of ERISA, other than
those plans set forth in the Company Disclosure Letter.
(b) Except as set forth in the Company Disclosure Letter, each
Company Benefit Plan can be terminated or otherwise discontinued
without material liability to the Company or any of its Subsidiaries.
With respect to each Company Benefit Plan subject to Title IV of
ERISA, (i) no termination of any Company Benefit Plan has occurred
pursuant to which all liabilities have not been satisfied in full, and
no event has occurred and no condition exists that could reasonably be
expected to result in the Company or any of its Subsidiaries incurring
a liability under Title IV of ERISA or could constitute grounds for
terminating any Plan (as hereinafter defined); (ii) each such Company
Benefit Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code"), has been maintained in compliance with the minimum
funding standards of ERISA and the Code and no such Company Benefit
Plan has incurred any "accumulated funding deficiency," as defined in
Section 412 of the Code and Section 302 of ERISA, whether or not
waived; (iii) neither the Company nor any of its Subsidiaries has
sought or received a waiver of its funding requirements with respect
to any Company Benefit Plan and all contributions payable with respect
to each Plan have been timely made; (iv) no reportable event, within
the meaning of Section 4043 of ERISA, and no event set forth in
Section 4062 or 4063 of ERISA, has occurred with respect to any
Company Benefit Plan; and (v) the aggregate accumulated benefit
obligations of each Company Benefit Plan subject to Title IV of ERISA
(as of the date of the most recent actuarial valuation prepared for
such Company Benefit Plan) do not exceed the fair market value of the
assets of such Company Benefit Plan (as of the date of such
valuation).
(c) Neither the Company nor any of its Subsidiaries has incurred,
nor has any event occurred which has imposed or is reasonably likely
to impose upon the Company or any of its Subsidiaries, any withdrawal
liability (partial or complete) in respect of any multiemployer plan
(within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a
"Multiemployer Plan"), which withdrawal liability has not been
satisfied or discharged in full or which, either individually or in
the aggregate, will cause, or is reasonably likely to cause, a
Material Adverse Effect on the Company.
(d) Except as set forth in the Company Disclosure Letter, the
execution, delivery and performance of this Agreement and the
transactions contemplated hereby will not result in the imposition of
any federal excise tax under Section 4975 of the Code with respect to
any Company Benefit Plan.
(e) Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries maintains or contributes to
(or has maintained or contributed to) any Company Benefit Plan which
provides, or has a liability to provide, life insurance, medical,
severance, or other employee welfare benefit to any employee upon his
retirement or termination of employment, except as may be required by
Section 4980B of the Code.
(f) (i) "Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, accident, disability,
workers' compensation or other insurance, severance, separation or
other employee benefit plan, practice, policy or arrangement of any
kind, including, but not limited to, any "employee benefit plan"
within the meaning of section 3(3) of ERISA and (ii) "Company Benefit
Plan" means any employee pension benefit plan and any Plan, other than
a Multiemployer Plan, established by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries
contributes or has contributed (including any such Plans not now
maintained by the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries does not now contribute, but with
respect to which the Company or any of its Subsidiaries has or may
have any liability). Copies of all Plans (and, if applicable, related
trust agreements) and all amendments thereto and written
interpretations thereof and the two most recent Forms 5500 required to
be filed with respect thereto shall be promptly furnished to Investor
after the date of this Agreement. The Company Disclosure Letter sets
forth each Plan with respect to which benefits will be accelerated,
vested, increased or paid as a result of the transactions contemplated
by this Agreement.
Section 5.11 Employment Relations and Agreement. (a) Except as
set forth in the Company Disclosure Letter, and except as would not
constitute a Material Adverse Effect on the Company, (i) the Company
and each of its Subsidiaries is, and at all times has been, in
compliance in all material respects with all federal, state or other
applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and has not and is
not engaged in any unfair labor practice; (ii) no unfair labor
practice complaint against the Company or any of its Subsidiaries is
pending before the National Labor Relations Board; (iii) there is no
labor strike, dispute, slowdown or stoppage actually pending or, to
the knowledge of the Company, threatened against or involving the
Company or any of its Subsidiaries; (iv) no representation question
exists and there has been no effort to organize unorganized employees
of the Company or any of its Subsidiaries; (v) neither the Company nor
any of its Subsidiaries is a party to any collective bargaining
agreement; (vi) no collective bargaining agreement is currently being
negotiated by the Company or any of its Subsidiaries; and (vii)
neither the Company nor any of its Subsidiaries has experienced any
material labor difficulty during the last three years. Except as set
forth in the Company Disclosure Letter, as of the date of this
Agreement, to the knowledge of the Company, there has not been any
change in relations with employees of the Company and its Subsidiaries
as a result of the transactions contemplated by this Agreement which
could have a Material Adverse Effect on the Company.
(b) Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries has any written, or to the
knowledge of the Company, any binding oral employment agreement
("Employment Agreements") which is not terminable by the Company and
its Subsidiaries with payment or penalty of less than $20,000. Copies
of all Employment Agreements and all amendments thereto were furnished
to Investor prior to the date hereof.
Section 5.12 Contracts. (a) Neither the Company nor any of its
Subsidiaries is in default under or in violation of any provision of
any Contract (as hereinafter defined), except for such defaults or
violations which would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the
Company.
(b) Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries is a party to or bound by any:
(i) employment agreement or employment contract that has
an aggregate future liability in excess of $500,000 and is not
terminable by the Company or a Subsidiary by notice of not more
than 60 days for a cost of less than $100,000;
(ii) employee collective bargaining agreement or other
contract with any labor union;
(iii) covenant of the Company or a Subsidiary not to
compete;
(iv) agreement, contract or other arrangement with any
current or former officer, director, or affiliate or relative
thereof, of the Company or any Subsidiary (other than employment
agreements covered by clause (i) above);
(v) lease, sublease or similar agreement involving annual
payments in excess of $100,000 with any person (other than the
Company or a Subsidiary) under which the Company or a Subsidiary
is a lessor or sublessor of, or makes available for use to any
person (other than the Company or a Subsidiary), (A) any Company
Property (as hereinafter defined) or (B) any portion of any
premises otherwise occupied by the Company or a Subsidiary;
(vi) lease or similar agreement with any person (other
than the Company or a Subsidiary) under which (A) the Company or
a Subsidiary is lessee of, or holds or uses, any machinery,
equipment, vehicle or other tangible personal property owned by
any person or (B) the Company or a Subsidiary is a lessor or
sublessor of, or makes available for use any person, any tangible
personal property owned or leased by the Company or a Subsidiary,
in any such case which has an aggregate annual future liability
or receivable, as the case may be, in excess of $100,000 and is
not terminable by the Company or a Subsidiary by notice of not
more than 60 days for a cost of less than $100,000;
(vii) (A) continuing contract for the future purchase of
materials, supplies or equipment (other than purchase contracts
and orders for inventory in the ordinary course of business
consistent with past practice) in excess of $100,000 annually,
(B) management, service, consulting or other similar type of
contract or (C) advertising agreement or arrangement, in any such
case which has an aggregate future liability to any person (other
than the Company or a Subsidiary) in excess of $100,000 and is
not terminable by the Company or a Subsidiary by notice of not
more than 60 days for a cost of less than $100,000;
(viii) material license, option or other agreement
relating in whole or in part to intellectual property (including
any license or other agreement under which the Company or a
Subsidiary is licensee or licensor of any such intellectual
property);
(ix) agreement, contract or other instrument under which
the Company or a Subsidiary has borrowed any money from, or
issued any note, bond, debenture or other evidence of
indebtedness to, any person (other than the Company or a
Subsidiary) or any other note, bond, debenture or other evidence
of indebtedness issued to any person (other than the Company or a
Subsidiary);
(x) agreement, contract or other instrument (including
so-called take-or-pay or keepwell agreements) under which (A) any
person (including the Company or a Subsidiary) has directly or
indirectly guaranteed indebtedness, liabilities or obligations of
the Company or a Subsidiary or (B) the Company or a Subsidiary
has directly or indirectly guaranteed indebtedness, liabilities
or obligations of any person (in each case other than
endorsements for the purpose of collection in the ordinary course
of business);
(xi) other than inter-company guarantees, agreement,
contract or other instrument under which the Company or a
Subsidiary has, directly or indirectly, made any advance, loan,
extension of credit or capital contribution in excess of $100,000
to, or other investment in, any person (other than the Company or
a Subsidiary);
(xii) mortgage, pledge, security agreement, deed of trust
or other instrument granting a lien or other encumbrance upon any
Company Property;
(xiii) agreement or instrument providing for
indemnification of any person with respect to liabilities
relating to any current or former business of the Company, a
Subsidiary or any predecessor person exclusive of
indemnifications included in other documents listed in the
Company Disclosure Letter or granted to sellers of real property
owned or leased by the Company or its affiliates; or
(xiv) any other material agreement, contract, management
contract, lease, license, commitment or instrument to which the
Company or any Subsidiary is a party or by or to which it or any
of its assets or business is bound or subject, not covered by any
of the categories specified in clauses (i) through (xiii) above.
Except as set forth in the Company Disclosure Letter, all
agreements, contracts, leases, licenses, commitments or instruments of
the Company or any Subsidiary listed in the Company Disclosure Letter
(collectively, the "Contracts") are valid, binding and in full force
and effect and are enforceable by the Company or the relevant
Subsidiary in accordance with its terms. Except as set forth in the
Company Disclosure Letter, the Company and the Subsidiaries have
performed all material obligations required to be performed by them to
date under the Contracts and they are not (with or without the lapse
of time or the giving of notice, or both) in breach or default in any
material respect thereunder and, to the knowledge of the Company and
its Subsidiaries, no other party to any of the Contracts is (with or
without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder. Except as set forth in
the Company Disclosure Letter there are no change of control or
similar provisions or any obligations arising under any Contract which
are created, accelerated or triggered by the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby or thereby.
Section 5.13 Environmental Laws and Regulations. (a) Except as
disclosed in the Company Disclosure Letter, (i) the Company and each
of its Subsidiaries is in compliance with all applicable federal,
state and local laws, statutes, ordinances, rules and regulations, and
all amendments thereto relating to pollution or protection of human
health or safety, health or safety of employees, sanitation, or the
environment, emissions, discharges, disseminations, releases or
threatened releases, of Hazardous Materials (as hereinafter defined)
into the air (indoor and outdoor), surface water, groundwater, soil,
land surface or subsurface, buildings, facilities, real or personal
property or fixtures or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, handling, release or threatened release of Hazardous
Materials (collectively, "Environmental Laws"), which compliance
includes, but is not limited to, the possession by the Company and its
Subsidiaries of all permits, licenses, registrations, consents and
other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions
thereof; except for non-compliance that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company,
(ii) neither the Company nor any of its Subsidiaries has received
written notice of, or, to the knowledge of the Company or any of its
Subsidiaries, is the subject of, any action, claim, investigation,
demand or notice by any person or entity alleging liability under or
non-compliance with any Environmental Law (an "Environmental Claim")
that, individually or in the aggregate, would have a Material Adverse
Effect on the Company; (iii) neither the Company nor any of its
Subsidiaries has received any written notice or other communication
that it is or may be a potentially responsible person or otherwise
liable in connection with any waste disposal site allegedly containing
any Hazardous Materials, or other location used for the disposal of
any Hazardous Materials; and (iv) to the knowledge of the Company and
its Subsidiaries, there are no circumstances that are reasonably
likely to prevent or interfere with the continued compliance of the
Company and its Subsidiaries with all Environmental Laws, or could
form the basis of an Environmental Claim, except for such
circumstances which, individually or in the aggregate, would not have
a Material Adverse Effect on the Company.
(b) Except as disclosed in the Company Disclosure Letter, there
are no Environmental Claims which, individually or in the aggregate,
would have a Material Adverse Effect on the Company that are pending
or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries or, to the knowledge of the Company or any of
its Subsidiaries, against any person or entity whose liability for an
Environmental Claim the Company or any of its Subsidiaries has or may
have retained or assumed either contractually or by operation of law.
(c) Except as disclosed in the Company Disclosure Letter, there
has been no spill, discharge, leak, emission, injection, disposal,
escape, dumping or release of any kind on, beneath, above or into the
real property owned, leased, operated, used or in which any other
interest is maintained by the Company or any of its Subsidiaries or
any predecessor entity of the Company or any of its Subsidiaries, or
previously owned by, used by, operated by or leased to the Company or
any of its Subsidiaries or any predecessor entity of the Company or
any of its Subsidiaries (collectively, the "Property"), at any time
and by any person or entity, of any pollutants, contaminants,
hazardous substances, hazardous chemicals, toxic substances, hazardous
wastes, infectious agents or wastes, radioactive materials,
pesticides, explosives, flammables, corrosives, petroleum (including
any by-product or any fraction thereof), asbestos, polychlorinated
byphenyls ("PCBs") or solid wastes, including but not limited to those
defined in any Environmental Law (collectively, "Hazardous
Materials"), except such of the foregoing occurrences as will not have
a Material Adverse Effect on the Company.
(d) Except as disclosed in the Company Disclosure Letter, (i)
There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement,
transportation, production or treatment of any Hazardous Materials at,
upon or from the Property except such Hazardous Materials that are
used and maintained in the ordinary course of the Companies and its
Subsidiaries business and are used and maintained in compliance with
applicable Environmental Laws; (ii) no asbestos or asbestos-containing
materials or PCBs are on any Property; and (iii) there are no
underground storage tanks ("UST"), incinerators or surface
impoundments on the Property, nor has any UST been removed during the
past 5 years.
Section 5.14 Property and Leases. (a) The Company Disclosure
Letter sets forth a complete and accurate list and the address of all
real property and interests in real property owned in fee by the
Company and the Subsidiaries (individually, an "Owned Property"). The
Company Disclosure Letter sets forth a complete list of all real
property and interests in real property leased by the Company and the
Subsidiaries (individually, a "Leased Property"). The Company or a
Subsidiary has (i) good and insurable fee title to all Owned Property
and (ii) good and valid title to the leasehold estates in all Leased
Property (an Owned Property or Leased Property being sometimes
referred to herein, individually, as a "Company Property" and,
collectively, as "Company Properties"), in each case free and clear of
all mortgages, liens, security interests, encumbrances, leases,
assignments, subleases, easements, covenants, rights-of-way and other
similar restrictions of any nature whatsoever, except (A) such as are
set forth in the Company Disclosure Letter, (B) exceptions specified
in the Title Policies (as hereinafter defined), (C) Permitted Liens
(as hereinafter defined), (D) financing statements, easements,
covenants, rights-of-way and other similar restrictions of record and
(E) (I) zoning, building and other similar restrictions, (II)
mortgages, liens, security interests, encumbrances, easements,
covenants, rights-of-way and other similar restrictions that have been
placed by any developer, landlord or other third party on property
over which the Company or any Subsidiary has easement rights or on any
Leased Property and subordination or similar agreements relating
thereto, and (III) unrecorded easements, covenants, rights-of-way and
other similar restrictions, none of which items set forth in clauses
(I), (II) and (III), individually or in the aggregate, materially
impair the continued use and operation of the property to which they
related in the business of the Company and the Subsidiaries, taken as
a whole, as presently conducted. Except as set forth on the Company
Disclosure Letter, to the knowledge of the Company and its
Subsidiaries, the current use by the Company and the Subsidiaries of
the offices and other facilities located on Company Property does not
violate any local zoning or similar land use or government regulations
in any material respect. Except as set forth in the Company Disclosure
Letter, title insurance policies (or marked title insurance
commitments having the same force and effect as title insurance
policies) have been issued by national title insurance companies
insuring the fee simple title of the Company or its Subsidiaries, as
applicable, to each of the Owned Properties, subject only to the
matters set forth therein (the "Title Policies"), and, to the
knowledge of the Company and its Subsidiaries, the Title Policies are
valid and in full force and effect and no claim has been made under
any such policy. As used in this Agreement, the term "Liens" shall
mean all liens, mortgages, deeds of trust, deeds to secure debt,
security interests, pledges, claims, charges, easements and other
encumbrances of any nature whatsoever. As used in this Agreement, the
term "Permitted Liens" shall mean (i) Liens for taxes or other
assessments or charges of Governmental Entities that are not yet
delinquent or that are being contested in good faith by appropriate
proceedings, in each case, with respect to which adequate reserves are
being maintained by the Company or its Subsidiaries to the extent
required by GAAP, (ii) statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law
and created in the ordinary course of business for amounts not yet
overdue or which are being contested in good faith by appropriate
proceedings, in each case, with respect to which adequate reserves or
other appropriate reserves are being maintained by the Company or its
Subsidiaries to the extent required by GAAP, (iii) easements,
rights-of-way, covenants and restrictions which do not (x) interfere
materially with the ordinary conduct of any Company Property or the
business of the Company and its Subsidiaries as a whole or (y) detract
materially from the value or usefulness of the Company Properties to
which they apply and (iv) the other Liens, if any, specified in the
Company Disclosure Letter.
(b) The Company Disclosure Letter sets forth a complete and
accurate list of all material commitments, letters of intent or
similar written understandings made or entered into by the Company or
any of its Subsidiaries as of the date hereof (x) to sell, mortgage,
pledge or hypothecate any Owned Properties, which, individually or in
the aggregate, are material, or to otherwise enter into a material
transaction in respect of the ownership or financing of any Company
Property or (y) to purchase or to acquire an option, right of first
refusal or similar right in respect of any real property, which,
individually or in the aggregate, are material. The Company has
delivered to Investor a true and complete copy of each such
commitment, letter of intent or other understanding. The Company
Disclosure Letter also sets forth a complete and accurate list of all
agreements to purchase real property to which the Company or any
Subsidiary is a party.
(c) Except as set forth in the Company Disclosure Letter, none of
the Company Properties is subject to any outstanding purchase options
nor has the Company or any of its Subsidiaries entered into any
outstanding contracts with others for the sale, mortgage, pledge,
hypothecation, assignment, sublease, lease or other transfer of all or
any part of any Company Property, and no person has any right or
option to acquire, or right of first refusal with respect to, the
Company's or any of its Subsidiaries' interest in any Company Property
or any part thereof. Except as set forth in the Company Disclosure
Letter, none of the Company or any of its Subsidiaries has any
outstanding options or rights of first refusal or has entered into any
outstanding contracts with others for the purchase of any real
property.
(d) The Company has made available to Investor a capital
expenditure budget and schedule for each Company Property, which
describes the capital expenditures which the Company or any Subsidiary
has budgeted for such Company Property for the period ending December
31, 1997 (the "Capital Expenditure Budget and Schedule"). Except as
set forth in the Capital Expenditure Budget and Schedule there are no
capital expenditure budgets or projections for periods after December
31, 1996 except for the Company's financial projections for 1998 and
1999 which have heretofore been furnished to Investor. The costs and
time schedules set forth in the Capital Expenditure Budget and
Schedule are reasonable estimates and projections. Except as set forth
in the Company Disclosure Letter, there are no outstanding or, to the
knowledge of the Company, threatened requirements by any insurance
company which has issued an insurance policy covering any Company
Property, or by any board of fire underwriters or other body
exercising similar functions, requiring any repairs or alterations to
be made to any Company Property that would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect on the Company.
(e) The Company has made available to Investor a list of each
Company Property which consists of or includes undeveloped land or
which is in the process of being developed or redeveloped
(collectively, the "Development Properties") and a brief description
of the development or redevelopment intended by the Company or any
Subsidiary to be carried out or completed thereon (collectively, the
"Projects"), including any budget and development schedule therefor
prepared by or for the Company or any Subsidiary (collectively, the
"Development Budget and Schedule"). The Company Disclosure Letter sets
forth all agreements, permits, licenses, consents and authorizations
which have been entered into or obtained with respect to each
Development Property. To the knowledge of the Company and its
Subsidiaries, there are no material impediments to or constraints on
the development or redevelopment of any Project in all material
respects within the time frame and for the cost set forth in the
Development Budget and Schedule applicable thereto. In the case of
each Project the development of which has commenced, to the knowledge
of the Company and its Subsidiaries, the costs and expenses incurred
or to be incurred in connection with such Project and the progress
thereof are consistent and in compliance in all material respects with
the Development Budget and Schedule applicable thereto. The Company
has made available to Investor all feasibility studies, soil tests,
due diligence reports and other studies, tests or reports performed by
or for the Company at any time since the Company's initial public
offering, which relate to the Development Properties or the Projects.
(f) The Company and each of its Subsidiaries have good and
sufficient title to all the personal and non-real properties and
assets reflected in their books and records as being owned by them,
free and clear of all Liens, except for Permitted Liens which are not,
individually or in the aggregate, reasonably expected to have a
Material Adverse Effect on the Company.
Section 5.15 Patents, Trademarks, Copyrights. (a) All patents and
patent applications owned by or licensed to or used by the Company or
any of its Subsidiaries that are listed in the Company Disclosure
Letter have been duly filed in or issued by the United States Patent
and Trademark Office or the corresponding offices of other countries
or other jurisdictions to the extent set forth in the Company
Disclosure Letter, and have been properly maintained in accordance
with all applicable provisions of law and administrative regulations
in the United States and each such country or other jurisdictions.
Except as set forth in the Company Disclosure Letter: (i) the use of
such patents by the Company and its Subsidiaries does not require the
consent of any third party; (ii) such patents are freely transferable
and are owned exclusively by the Company and its Subsidiaries free and
clear of any attachments, liens, royalties, encumbrances, adverse
claims, licenses or any other ownership or other interest of any other
person whatsoever; (iii) no person has a license from the Company or
any of its Subsidiaries to use any of such patents or any claim which
may arise from the existence of such patent applications; (iv) no
outstanding order, decree, judgment or stipulation, and no proceeding
charging the Company or any of its Subsidiaries with infringement of
any adversely held patent has been served upon the Company or any of
its Subsidiaries at any time during the five-year period prior to and
ending on the date hereof or, to the best of the knowledge of the
Company and its Subsidiaries, is threatened to be filed; (v) the
conduct of the business of the Company and its Subsidiaries as now
conducted or proposed to be conducted will not result in the
infringement of any of such patents; and (vi) to the best of the
knowledge of the Company and its Subsidiaries, no person is infringing
upon any of such patents.
(b) The Company and its Subsidiaries own or possess all other
adequate licenses or other valid rights to use all other material
patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, know-how and other proprietary
information used or held for use in connection with the business of
the Company and its Subsidiaries as currently being conducted and is
unaware of any assertions or claims challenging the validity of any of
the foregoing. The conduct of the business of the Company and its
Subsidiaries as now conducted does not conflict with any patents,
patent rights, licenses, trademarks, trademark rights, trade names,
trade name rights or copyrights of others in any material way, which
is reasonably likely to have a Material Adverse Effect on the Company.
No material infringement of any proprietary right owned by or licensed
by or to the Company or any of its Subsidiaries is known to the
Company or any of its Subsidiaries.
Section 5.16 Insurance. The Company and each of its Subsidiaries
has been and is insured by financially sound and reputable insurers
unaffiliated with the Company or any of its Subsidiaries with respect
to its property and the conduct of its business in such amounts and
against such risks as are reasonably adequate to protect its
properties and business, including, without limitation, comprehensive
general liability (including, without limitation, automotive, public
risk, property and directors' and officers' liability) and products
liability insurance.
Section 5.17 Takeover Statutes. The Board of Directors of the
Company has taken all appropriate action so that neither Investor nor
Sub will be an "interested stockholder" within the meaning of Section
203 of the Act, by virtue of the Investor's or Sub's entry into this
Agreement and the Stockholders Agreement and the consummation of the
transactions contemplated hereunder and thereunder.
Section 5.18 Taxes. Except as set forth in the Company Disclosure
Letter, (i) the Company and each of its Subsidiaries has filed all
material Tax Returns (as hereinafter defined) required to have been
filed, which returns are true and complete in all material respects;
(ii) the Company and each of its Subsidiaries has duly paid or made
provision on its books for the payment of all material Taxes (as
hereinafter defined) (including material estimated Taxes and any
interest or penalties) which are due and payable (whether or not shown
on any such Tax Returns), and the Company has and each of its
Subsidiaries has withheld or collected and paid over pursuant to
applicable law all material Taxes they are required to withhold and
collect, (iii) neither the Company nor any of its Subsidiaries has
waived any statute of limitations in respect of material Taxes of the
Company or any of its Subsidiaries; (iv) no issues that have been
raised in writing by the relevant taxing authority in connection with
the examination of the Tax Returns referred to in clause (i) are
currently pending; and (v) all deficiencies asserted or assessments
made as a result of any examination of the Tax Returns referred to in
clause (i) by a taxing authority have been paid in full. For purposes
of this Agreement (a) "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means any federal, state, local or foreign income,
gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any
governmental authority, and (b) "Tax Return" means any return, report
or similar statement required to be filed with respect to any Tax
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of
estimated Tax.
Section 5.19 No Change of Control. Except as set forth in the
Company Disclosure Letter, the consummation of the Merger and the
transactions contemplated by this Agreement will not constitute a
"change of control" or similar event under any contract or agreement
of the Company giving use to a right to terminate or accelerate or
resulting in an event of default thereunder or an increase in the
Company's obligations thereunder. Copies of any such contracts or
agreements and all amendments thereto will be promptly furnished to
Investor after the date of this Agreement.
Section 5.20 Brokers. No broker, investment banker or other
person, other than the Financial Advisors, the fees and expenses of
which will be paid by the Company, is entitled to any broker's,
finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. A copy of the engagement letters
between each of the Financial Advisors and the Company setting forth
the fees and expenses to be paid by the Company in connection with the
transactions contemplated by this Agreement has been provided to
Investor.
Section 5.21 Disclosures. This Agreement and the Company
Disclosure Letter, taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
contained herein, in light of the circumstances under which they were
made, not misleading.
Section 5.22 Company Disclosure Letter. All of the provisions of
any agreement, document or other item listed on The Company Disclosure
Letter are deemed set forth in the Company Disclosure Letter.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Investor and Sub jointly and severally represent and warrant to
the Company as follows:
Section 6.1 Organization and Standing. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Sub is wholly owned by Investor and was organized
solely for the purpose of acquiring the Company and engaging in the
transactions contemplated by this Agreement and has not engaged in any
business since it was incorporated which is not in connection with the
acquisition of the Company and this Agreement.
Section 6.2 Authority; Non-Contravention. Sub has the requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement, the performance by Sub of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and Investor as its sole
stockholder, and, except for the corporate filings required by state
law, no other corporate proceedings on the part of Sub are necessary
to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Sub
and (assuming the due authorization, execution and delivery hereof by
the Company) constitutes a valid and binding obligation of Sub
enforceable against Sub in accordance with its terms, except as the
enforceability thereof may be limited by creditors' rights generally
or by general principles of equity. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Sub under, any provision of (i) the Articles
of Incorporation or By-Laws of Sub, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to Sub or (iii)
any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Sub or any of its properties or assets, other
than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect on Sub, materially impair the ability of Sub
to perform its obligations hereunder or prevent the consummation of
any of the transactions contemplated hereby.
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 7.1 Conduct of Business by the Company Pending the
Merger. Except as otherwise expressly contemplated by this Agreement
or as set forth in the Company Disclosure Letter and except as
contemplated by the Current Operating Plan and Budget of the Company
and its Subsidiaries, attached hereto as Exhibit B (including the
right to substitute projects of substantially similar
characteristics), during the period from the date of this Agreement
through the Effective Time, the Company shall, and shall cause each of
its Subsidiaries to, in all material respects carry on its business
in, and not enter into any material transaction other than in
accordance with, the regular and ordinary course and, to the extent
consistent therewith, use its reasonable best efforts to preserve
intact its current business organization, keep available the services
of its current officers and employees and preserve its relationships
with customers, suppliers and others having business dealings with it.
Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement or as set forth in
the Company Disclosure Letter, and except as contemplated by the
Current Operating Plan and Budget of the Company and its Subsidiaries,
attached hereto as Exhibit B, and subject to the provisions of
Sections 8.4 and 10.4, the Company shall not, and shall cause each of
its Subsidiaries not to, without the prior written consent of
Investor:
(a) other than in connection with (i) the conversion of
Exchangeable Preferred into Common Stock in accordance with their
current terms, (ii) the exercise of options outstanding prior to the
date hereof in accordance with their current terms and (iii) the
payment of dividends on the Exchangeable Preferred in accordance with
its current terms, (x) declare, set aside or pay any dividends on, or
make any other actual, constructive or deemed distributions in respect
of, any of its capital stock, or otherwise make any payments to its
stockholders in their capacity as such, other than dividends declared
prior to the date of this Agreement, (y) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (z) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
Subsidiaries or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or equity equivalent (other than
as specified in clauses (i) through (iii) of paragraph (a) above);
(c) amend its Certificate of Incorporation or By-Laws;
(d) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets that in the aggregate
have a value in excess of 1% of the Company's assets;
(e) sell, lease or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any of its assets that in the aggregate have
an excess of 1% of the Company's assets;
(f) amend or otherwise modify, or terminate, any material
Contract, or enter into any joint venture, lease or management
agreement or other material agreement of the Company or any of its
Subsidiaries;
(g) incur any additional indebtedness (including for this purpose
any indebtedness evidenced by notes, debentures, bonds, leases or
other similar instruments, or secured by any lien on any property,
conditional sale obligations, obligations under any title retention
agreement and obligations under letters of credit or similar credit
transaction) in a single transaction or a group of related
transactions, enter into a guaranty, or engage in any other financing
arrangements having a value in excess of 1% of the Company's assets,
or make any loans, advances or capital contributions to, or
investments in, any other person;
(h) alter through merger, liquidation, reorganization,
restructuring or in any other fashion its corporate structure or
ownership;
(i) except as may be required as a result of a change in law or
in generally accepted accounting principles, change any of the
accounting principles or practices used by it;
(j) revalue any of its assets, including, without limitation,
writing down the value of its inventory or writing off notes or
accounts receivable, other than in the ordinary course of business;
(k) make any tax election, change any annual tax accounting
period, amend any tax return, settle or compromise any income tax
liability, enter into any closing agreement, settle any tax claim or
assessment, surrender any right to claim a tax refund or fail to make
the payments or consent to any extension or waiver of the limitations
period applicable to any tax claim or assessment;
(l) except in the ordinary course of business, settle or
compromise any pending or threatened suit, action or claim relating to
the transactions contemplated hereby with a cost of $250,000 or more;
(m) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved
against in, or contemplated by, the financial statements (or the notes
thereto) of the Company or incurred in the ordinary course of business
consistent with past practice;
(n) increase in any manner the compensation or fringe benefits of
any of its directors, officers and other key employees or pay any
pension or retirement allowance not required by any existing plan or
agreement to any such employees, or become a party to, amend or commit
itself to any pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for the benefit of
any employee, other than increases in the compensation of employees
who are not officers or directors of the Company or any of its
Subsidiaries made in the ordinary course of business consistent with
past practice, or, except to the extent required by law, voluntarily
accelerate the vesting of any compensation or benefit;
(o) waive, amend or allow to lapse any term or condition of any
confidentiality, "standstill", consulting, advisory or employment
agreement to which the Company is a party;
(p) approve any annual operating budgets for the Company and its
Subsidiaries;
(q) change the Company's dividend policy;
(r) enter into any transaction with affiliates;
(s) enter into any business other than the ownership, management,
operation and development of assisted living facilities and business
related thereto;
(t) pursuant to or within the meaning of any bankruptcy law, (i)
commence a voluntary case, (ii) consent to the entry of an order for
relief against it in an involuntary case, (iii) consent to the
appointment of a custodian of it or for all or substantially all of
its property or (iv) make a general assignment for the benefit of its
creditors;
(u) purchase or lease or enter into a binding agreement to
purchase or lease any real property;
(v) enter into any employment agreement with any officer or
employee;
(w) enter into any development agreement, option relating to new
development or any other obligation relating to new development which
in the aggregate would have a cost to the Company in excess of 1% of
the Company's assets;
(x) take, or agree in writing or otherwise to take, any of the
foregoing actions.
During the period from the date of this Agreement through the
Effective Time, (i) as requested by Investor, the Company shall confer
on a regular basis with one or more representatives of Investor with
respect to material operational matters; (ii) the Company shall,
within 30 days following each fiscal month, deliver to Investor
financial statements, including an income statement and balance sheet
for such month; and (iii) upon the knowledge of the Company or any of
its Subsidiaries of any Material Adverse Change to the Company, any
material litigation or material governmental complaints,
investigations or hearings (or communications indicating that the same
may be contemplated), or the breach in any material respect of any
representation or warranty contained herein, the Company shall
promptly notify Investor thereof.
Notwithstanding any provision contained in this Agreement, action
taken by the Company and its Subsidiaries which is permitted under
this Section 7.1 shall not constitute a misrepresentation or breach of
warranty or covenant. The Company shall have the right to update the
Company Disclosure Letter, as it relates to Section 5.12, between the
date hereof and the Effective Time to reflect actions taken by the
Company and its Subsidiaries which are permitted to be taken pursuant
to this Section 7.1.
Section 7.2 Conduct of Business of Sub Pending the Merger. During
the period from the date of this Agreement through the Effective Time,
Sub shall not engage in any activities of any nature except as
provided in or contemplated by this Agreement.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Company Stockholder Approval; Proxy Statement. (a) If
approval or action in respect of the Merger by the stockholders of the
Company is required by applicable law, the Company shall, if
appropriate, call a meeting of its stockholders (the "Stockholder
Meeting") for the purpose of voting upon the Merger and shall use its
reasonable best efforts to obtain stockholder approval of the Merger.
The Stockholder Meeting shall be held as soon as practicable following
the purchase of Shares pursuant to the Offer and the Company shall,
through its Board of Directors but subject to the fiduciary duties of
its Board of Directors under applicable law as determined by the Board
of Directors in good faith after consultation with the Company's
outside counsel, recommend to its stockholders the approval of the
Merger and not rescind its declaration that the Merger is advisable.
The record date for the Stockholder Meeting shall be a date subsequent
to the date Investor or Sub becomes a record holder of Shares
purchased pursuant to the Offer.
(b) If required by applicable law, the Company shall, as soon as
practicable following the expiration of the Offer, prepare and file a
preliminary Proxy Statement or, if applicable, an Information
Statement, with the SEC and shall use its reasonable best efforts to
respond to any comments of the SEC or its staff and to cause the Proxy
Statement or the Information Statement to be cleared by the SEC. The
Company shall notify Investor of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement, or the Information
Statement or for additional information and shall supply Investor with
copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Proxy Statement, the Information
Statement or the Merger. The Company shall give Investor and its
counsel the opportunity to review the Proxy Statement or, if
applicable, the Information Statement, prior to its being filed with
the SEC and shall give Investor and its counsel the opportunity to
review all amendments and supplements to the Proxy Statement or, if
applicable, the Information Statement, and all responses to requests
for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company and
Investor agrees to use its reasonable best efforts, after consultation
with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC. As promptly as practicable after
the Proxy Statement or, if applicable, the Information Statement, has
been cleared by the SEC, the Company shall mail the Proxy Statement
or, if applicable, the Information Statement, to the stockholders of
the Company.
(c) The Company shall use its reasonable best efforts to obtain
any necessary approvals by its stockholders of the Merger, this
Agreement and the transactions contemplated hereby.
(d) Investor agrees, subject to applicable law, to cause all
Shares purchased pursuant to the Offer and all other Shares owned by
Sub or any other Subsidiary of Investor to be voted in favor of the
approval of the Merger.
Section 8.2 Indemnification. (a) Investor shall cause the
Surviving Corporation to keep in effect provisions in its Certificate
of Incorporation and Bylaws providing for exculpation of director and
officer liability and indemnification of each person who is now or has
at any time prior to the date hereof been entitled to the benefit of
the indemnification provisions set forth in the Company's Certificate
of Incorporation and Bylaws (the "Indemnified Parties"), to the
fullest extent now or hereafter permitted under the Act, which
provisions shall not be amended except as required by applicable law
or except to make changes permitted by law that would enlarge the
Indemnified Parties' right of indemnification.
(b) The Surviving Corporation shall pay all expenses, including
attorneys' fees, that may be incurred by any Indemnified Parties in
enforcing the indemnity obligations provided for in this Section 8.2.
(c) The rights of each Indemnified Party hereunder shall be in
addition to any other rights such Indemnified Party may have under the
Certificate of Incorporation or Bylaws of the Company, under the DGCL
or otherwise. The provisions of this Section shall survive the
consummation of the Merger and are expressly intended to benefit each
of the Indemnified Parties.
(d) The Surviving Corporation shall maintain in effect for not
less than three years after the Effective Time the current policies of
directors, and officers' liability insurance maintained by the Company
with respect to matters occurring on or prior to the Effective Time;
provided, however, that the Surviving Corporation may substitute
therefor policies of at least the same coverage (with carriers
comparable to the Company's existing carriers) containing terms and
conditions which are no less advantageous to the Indemnified Parties;
provided, however, that the Surviving Corporation shall not be
required in order to maintain or procure such coverage to pay an
annual premium in excess of 150% of the current annual premium paid by
the Company for its coverage (the "Cap"); and provided, further, that
if equivalent coverage cannot be obtained, or can be obtained only by
paying an annual premium in excess of the Cap, the Surviving
Corporation shall only be required to obtain as much coverage as can
be obtained by paying an annual premium equal to the Cap.
(e) For the period from the time when Sub first purchases Shares
pursuant to the Offer through the Effective Time, Investor shall not
permit the Company to amend the provisions in its Certificate of
Incorporation and Bylaws providing for exculpation of director and
officer liability and indemnification of the Indemnified Parties.
Section 8.3 Additional Agreements. (a) Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use
all commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement,
including using all commercially reasonable efforts to obtain all
necessary waivers, consents and approvals, to effect all necessary
registrations and filings and to lift any injunction to the Merger
(and, in such case, to proceed with the Merger as expeditiously as
possible).
(b) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and/or directors of Investor, the
Company and the Surviving Corporation shall take all such necessary
action.
(c) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated by
this Agreement is commenced, whether before or after the Effective
Time, the parties hereto agree to cooperate and use their respective
reasonable efforts to vigorously defend against and respond thereto.
Section 8.4 No Shop. The Company agrees (a) that neither it nor
any of its Subsidiaries shall, nor shall its or any of its
Subsidiaries' officers, directors, employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its Subsidiaries)
initiate, solicit or encourage, directly or indirectly, any inquiries
or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the
assets or equity securities of, the Company or any of its Subsidiaries
(any such proposal or offer being hereinafter referred to as an
"Alternative Proposal"), or except as may be required in the exercise
of the fiduciary duties of the Company's directors to the Company or
its shareholders after receiving advice from outside counsel, engage
in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person
relating to an Alternative Proposal, or release any third party from
any obligations under any existing standstill agreement or
arrangement, or otherwise facilitate any effort or attempt to make or
implement an Alternative Proposal; (b) that it will immediately cease
and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
of the foregoing, and it will take the necessary steps to inform the
individuals or entities referred to above of the obligations
undertaken in this Section 8.5; provided, however, that nothing
contained in this Section 8.5 shall prohibit the Company or its Board
of Directors from taking and disclosing to the Company's stockholders
a position with respect to a tender offer by a third party pursuant to
Rule 14d-9 and 14e-2(a) promulgated under the Exchange Act or from
making such disclosure to the Company's stockholders which, in the
judgment of the Board of Directors of the Company after receiving
advice of outside counsel, may be required under applicable law. From
and after the execution of this Agreement, the Company shall
immediately advise Investor in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations, or proposals
relating to an Alternative Proposal (including the specific terms
thereof and the identity of the other party or parties involved) and
furnish to Investor within 24 hours of such receipt an accurate
description of all material terms (including any changes or
adjustments to such terms as a result of negotiations or otherwise) of
any such written proposal in addition to any information provided to
any third party relating thereto. In addition, the Company shall
immediately advise Investor, in writing, if the Board of Directors of
the Company shall make any determination as to any Alternative
Proposal.
Section 8.5 Advice of Changes; SEC Filings. The Company shall
confer on a regular basis with Investor on operational matters and
provide Investor with data with respect to the Investor and its
Subsidiaries and access to the personnel of the Company and its
Subsidiaries, in each case, as Investor shall reasonably request.
Investor and the Company shall promptly advise each other orally and
in writing of any change or event that has had, or could reasonably be
expected to have, a Material Adverse Effect on Investor or the
Company, as the case may be. The Company and Investor shall promptly
provide each other (or their respective counsel) copies of all filings
made by such party with the SEC or any other Governmental Entity in
connection with this Agreement and the transactions contemplated
hereby.
Section 8.6 Board Representation; Directors. Promptly upon the
purchase of shares of Common Stock pursuant to the Offer, Investor
shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as
will give Investor, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board of Directors equal to the
product of (a) the total number of directors on the Board of Directors
and (b) the percentage that the number of shares of Common Stock
purchased by Investor bears to the number of shares of Common Stock
outstanding, and the Company shall, upon request by Investor, promptly
increase the size of the Board of Directors and/or exercise its
reasonable best efforts to secure the resignations of such number of
directors as is necessary to enable Investor's designees to be elected
to the Board of Directors and shall cause Investor's designees to be
so elected. The Company shall take, at its expense, all action
required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder in order to fulfill its obligations under this Section 8.8
and shall include in the Schedule 14D-9 or otherwise timely mail to
its stockholders such information with respect to the Company and its
officers and directors as is required by such Section 14(f) and Rule
14f-1 in order to fulfill its obligations under this Section 8.8.
Investor shall supply to the Company in writing and be solely
responsible for any information with respect to itself and its
nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1. At the Effective Time, the Company will obtain a
resignation of each director not specified in Schedule 2.5.
ARTICLE IX
CONDITIONS PRECEDENT
Section 9.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time
of the following conditions:
(a) Common Stockholder Approval. If approval of the Merger by the
holders of the Common Stock is required by applicable law, the Merger
shall have been approved by the requisite vote of such holders.
(b) No Order. No preliminary or permanent injunction or other
order by any federal or state court in the United States of competent
jurisdiction which prevents the consummation of the Merger shall have
been issued and remain in effect (each party agreeing to use all
commercially reasonable efforts to have any such injunction lifted).
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, before or after any approval by the stockholders of
the Company, by the mutual consent of Investor and the Company prior
to the purchase of the Shares pursuant to the Offer.
Section 10.2 Termination by Either Investor or the Company. This
Agreement may be terminated and the Merger may be abandoned by action
of the Board of Directors of the Company or by the Investor if:
(a) the Merger shall not have been consummated by December 31,
1998 (the "Termination Date"); provided, however, that the right to
terminate this Agreement pursuant to this clause shall not be
available (i) to Investor, if Sub or any affiliate of Sub acquires
Shares pursuant to the Offer, or (ii) to any party whose failure to
fulfill any obligation of this Agreement has been the cause of, or
resulted in, the failure of the Merger to have occurred on or prior to
the aforesaid date; or
(b) upon a vote at a duly held meeting or upon any adjournment
thereof, the stockholders of the Company shall have failed to give any
approval required by applicable law; or
(c) a United States federal or state court of competent
jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an
order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to this clause (c)
shall have used all commercially reasonable efforts to remove such
injunction, order or decree; or
(d) pursuant to the provisions of Section 1.1 or as the result of
the failure of any of the conditions set forth in Exhibit A hereto,
the Offer shall have terminated or expired in accordance with its
terms without Sub having purchased any Shares pursuant to the Offer;
provided, however, that the right to terminate this Agreement pursuant
to this clause (d) shall not be available to any party whose failure
to fulfill any of its obligations under this Agreement results in the
failure of any such condition; or
(e) Investor shall have reasonably determined that any Offer
condition (other than the Minimum Condition) is not capable of being
satisfied at any time in the future and Investor has not purchased
Shares pursuant to the Offer; provided, however, that the right to
terminate this Agreement pursuant to this clause (e) shall not be
available to any party whose failure to fulfill any obligation of this
Agreement has been the cause of, or resulted in, such Offer condition
being incapable of satisfaction.
Section 10.3 Termination by Investor. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, by the Investor, if the Board of Directors of the
Company shall have failed to recommend, or shall have withdrawn,
modified or amended in any material respect its approval or
recommendations of the Offer or the Merger or shall have resolved to
do any of the foregoing, or shall have recommended an Alternative
Proposal to the Company's stockholders.
Section 10.4 Termination by the Company. This Agreement may be
terminated and the Merger abandoned by the Company at any time prior
to the approval of the Merger by the stockholders of the Company in
accordance with applicable law, if there is an Alternative Proposal
which the Board of Directors of the Company in good faith determines
represents a superior transaction for the stockholders of the Company
as compared to the Merger, and the Board of Directors of the Company
determines, after consultation with counsel, that failure to terminate
this Agreement would be inconsistent with the compliance by the Board
of Directors of the Company with its fiduciary duties to stockholders
imposed by law; provided, however, that the right to terminate this
Agreement pursuant to this Section 10.4(a) shall not be available (i)
if the Company has breached in any material respect its obligations
under Section 8.4 or (ii) if the Alternative Proposal is subject to a
financing condition, unless the Board of Directors of the Company is
of the opinion, after receiving a written opinion from a nationally
recognized investment banking firm, that the Alternative Proposal is
financeable. The Company will provide Investor with two days' written
notice of its intention to so terminate the Agreement.
Section 10.5 Effect of Termination and Abandonment. (a) In the
event that (w) this Agreement is terminated by either party pursuant
to Section 10.2(b), (x) the Board of Directors of the Company shall
have withdrawn or modified in a manner adverse to Investor its
approval or recommendation of the Offer or the Merger or shall have
recommended an Alternative Proposal to the Company's stockholders and
Investor shall have terminated this Agreement pursuant to Section
10.3, (y) this Agreement shall have been terminated by the Company
pursuant to Section 10.4 or (z) any person shall have made an
Alternative Proposal at $14.50 per share of Common Stock or more for
75% or more of the Common Stock and thereafter this Agreement is
terminated for any reason other than those set forth in clauses (w),
(x) or (y) above and within 6 months thereafter the Company shall have
entered into an agreement with respect to an Alternative Proposal at
$14.50 per share of Common Stock or more for 75% or more of the Common
Stock, then the Company shall promptly, but in no event later than two
days after such termination, pay Investor a fee of $6,000,000 (a
"Termination Fee"). In the event this Agreement is terminated as a
result of the failure of the conditions specified in Exhibit A then
the Company shall promptly reimburse Investor for all out-of-pocket
costs and expenses incurred by Investor in connection with the Offer,
this Agreement and the transactions contemplated hereby, including,
without limitation, costs and expenses of accountants, attorneys and
financial advisors in an amount not to exceed $1,000,000. The Company
acknowledges that the agreements contained in this Section 10.5(a) are
an integral part of the transactions contemplated in this Agreement,
and that, without these agreements, Investor and Sub would not enter
into this Agreement; accordingly, if the Company fails to promptly pay
the termination fee pursuant to this Section 10.5(a), and, in order to
obtain such payment, Investor or Sub commences a suit which results in
a judgment against the Company for the fee and expenses set forth in
this Section 10.5(a), the Company shall pay to Investor its costs and
expenses (including attorneys' fees) in connection with such suit,
together with interest on the amount of such fee and expenses at the
rate of 10% per annum compounded quarterly (but in no event at a rate
in excess of the rate permitted by Delaware law). In addition, in the
event of termination of this Agreement and the abandonment of the
Merger for any reason, the parties will cooperate to cause the prompt
withdrawal of any applications for licenses, permits or other consents
or approvals submitted by the Company in anticipation of effectuating
the Merger. The sole rights and remedies of Investor and Sub for any
misrepresentation or breach of warranty or covenant arising under this
Agreement shall be limited to the specific rights and remedies set
forth in this Section 10.5.
(b) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article X, all obligations
of the parties hereto shall terminate, except the obligations of the
parties pursuant to this Section 10.5 and Section 11.3.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Non-Survival of Representations, Warranties and
Agreements. All representations and warranties set forth in this
Agreement shall terminate at the Effective Time.
Section 11.2 Notices. All notices or other communications under
this Agreement shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
cable, telegram, telex or other standard form of telecommunications,
or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Investor:
Prometheus Senior Quarters LLC
c/o Lazard Freres Real Estate Investors L.L.C.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. Mechanic, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
▇▇▇▇▇ ▇▇▇▇▇▇
Kapson Senior Quarters Corp.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may have furnished to the
other parties in writing in accordance with this Section.
Section 11.3 Fees and Expenses. Whether or not the Merger, the
Offer or the other transactions contemplated hereby are consummated,
except as provided in Section 10.5, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
Section 11.4 Publicity. So long as this Agreement is in effect,
Investor, Sub and the Company agree to consult with each other in
issuing any press release or otherwise making any public statement
with respect to the transactions contemplated by this Agreement, and
none of them shall issue any press release or make any public
statement prior to such consultation, except as may be required by law
or by obligations pursuant to any listing agreement with any national
securities exchange.
Section 11.5 Specific Performance. The parties hereto 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 hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
Section 11.6 Assignment; Binding Effect. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties;
provided, however, that Investor shall have the right to assign any of
its rights or obligations hereunder to any affiliate of Investor so
long as Investor shall not be released from any of its obligations
hereunder. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this
Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement; provided that the Indemnified Parties shall
be third-party beneficiaries of Investor's agreement contained in
Section 8.2 hereof.
Section 11.7 Entire Agreement. This Agreement, the Exhibits
hereto, the Company Disclosure Letter, the Confidentiality Agreement
dated September 12, 1997, between the Company and Investor and any
documents delivered by the parties in connection herewith and
therewith constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto,
(including, without limitation, the Prior Agreement). No addition to
or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties
hereto.
Section 11.8 Amendment. This Agreement may be amended by the
parties hereto at any time before or after approval of matters
presented in connection with the Merger by the stockholders of the
Company, but after any such stockholder approval, no amendment shall
be made which by law requires the further approval of stockholders
without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 11.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO ITS RULES OF CONFLICT OF LAWS.
Section 11.10 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof each signed by
less than all, but together signed by all of the parties hereto.
Section 11.11 Headings and Table of Contents. Headings of the
Articles and Sections of this Agreement and the Table of Contents are
for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 11.12 Interpretation. In this Agreement, unless the
context otherwise requires, words describing the singular number shall
include the plural and vice versa, and words denoting any gender shall
include all genders and words denoting natural persons shall include
corporations and partnerships and vice versa.
Section 11.13 Waivers. Subject to applicable law, the parties
hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or
in any documents delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed
on behalf of such party. Except as provided in this Agreement, no
action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto
of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or
any other provision hereunder.
Section 11.14 Incorporation of Exhibits. The Company Disclosure
Letter and all Exhibits attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
Section 11.15 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall,
as to that jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
Section 11.16 Subsidiaries. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, of
which such party directly or indirectly owns or controls at least a
majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation
or other organization, or any organization of which such party is a
general partner. It being understood and agreed that each of Senior
Quarters at Forsgate L.L.C. and Senior Quarters at ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
shall be deemed Subsidiaries of the Company for the purpose of this
Agreement. As used in this Agreement, the term "knowledge," with
respect to the Company and its Subsidiaries, shall mean the actual
knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇.
IN WITNESS WHEREOF, Investor, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunder
duly authorized all as of the date first written above.
PROMETHEUS SENIOR QUARTERS LLC
By: LF STRATEGIC REALTY
INVESTORS II L.P., its Sole Member
By: LAZARD FRERES REAL ESTATE INVESTORS
L.L.C., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Principal
PROMETHEUS ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
KAPSON SENIOR QUARTERS CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Chairman and Chief Executive Officer
Lazard Freres Real Estate Investors L.L.C. ("LFREI") hereby
irrevocably, unconditionally and completely guarantees and ensures the
full and timely payment and performance of all of Investor's and Sub's
obligations and liabilities under this Agreement and any agreements,
documents or instruments executed or to be executed by either of them
in connection herewith. The obligations and liabilities under this
guaranty constitute primary obligations and liabilities of LFREI and
shall not be affected by the absence of an action to enforce
obligations of, or any proceedings first against, Investor or Sub, any
defense, offset, claim, or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of
LFREI as a surety or guarantor. LFREI represents and warrants that it
is the sole member of Investor.
LAZARD FRERES REAL ESTATE
INVESTORS L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Principal
EXHIBIT A
---------
CONDITIONS OF THE OFFER
-----------------------
Notwithstanding any other term of the Offer or this Agreement,
Sub shall not be required to accept for payment or pay for, subject to
any applicable rules and regulations of the SEC, including Rule
14e-1(c) of the Exchange Act, any Shares not theretofore accepted for
payment or paid for and may terminate or amend the Offer as to such
Shares unless there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer that number of Shares which would
represent at least a majority of the sum of all outstanding shares of
Common Stock on a fully-diluted basis including shares issuable upon
(i) the exercise of options (other than options the holders of which
have executed agreements which provide that, for so long as the
Agreement shall be in effect, such holders will not exercise such
options prior to the Effective Time, which agreements are in full
force and effect at the time of the expiration of the Offer), warrants
or other rights to acquire shares (whether or not currently
exercisable or vested) having an exercise price equal to or less than
the Common Stock Offer Price and (ii) the conversion of outstanding
Shares of Exchangeable Preferred (it being understood and agreed that
for purposes of satisfying the Minimum Condition (as hereinafter
defined), each share of Exchangeable Preferred tendered in the Offer
shall be deemed to account for 1.92604 shares of Common Stock)(the
"Minimum Condition"). Furthermore, notwithstanding any other term of
the Offer or this Agreement, Sub shall not be required to accept for
payment or, subject as aforesaid, to pay for any Shares not
theretofore accepted for payment or paid for, and may terminate or
amend the Offer if at any time on or after the date of this Agreement
and before the acceptance of such Shares for payment or the payment
therefor, any of the following conditions exist or shall occur and
remain in effect:
(a) there shall have been instituted, pending or
threatened any action or proceeding by any governmental,
regulatory or administrative agency or authority, which (i)
seeks to challenge the acquisition by Investor of Shares
pursuant to the Offer, restrain, prohibit or delay the making or
consummation of the Offer or the Merger, or obtain any material
damages in connection therewith, (ii) seeks to make the purchase
of or payment for some or all of the Shares pursuant to the
Offer or the Merger illegal, (iii) seeks to impose limitations
on the ability of Investor (or any of its affiliates)
effectively to acquire or hold, or to require Investor or the
Company or any of their respective affiliates to dispose of or
hold separate, any portion of the assets or the business of
Investor and its affiliates taken as a whole or the Company, or
(iv) seeks to impose material limitations on the ability of
Investor (or any of its affiliates) to exercise full rights of
ownership of the Shares purchased by it, including, without
limitation, the right to vote the Shares purchased by it on all
matters properly presented to the stockholders of the Company;
or
(b) there shall have been promulgated, enacted, entered,
enforced or deemed applicable to the Offer or the Merger, by any
state, federal or foreign government or governmental authority
or by any court, domestic or foreign, any statute, rule,
regulation, judgment, decree, order or injunction that could
reasonably be expected to, in the judgment of Investor, directly
or indirectly, result in any of the consequences referred to in
clauses (i) through (iv) of subsection (a) above; or
(c) there shall have occurred (i) any general suspension
of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market
in the United States or (ii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in
the United States;or
(d) the Company and Investor shall have reached an
agreement or understanding that the Offer or this Agreement be
terminated or this Agreement shall have been terminated in
accordance with its terms; or
(e) the Company's Board of Directors shall have modified
or amended its recommendation of the Offer in any manner adverse
to Investor or shall have withdrawn its recommendation of the
Offer, or shall have recommended acceptance of any Alternative
Proposal or shall have resolved to do any of the foregoing, or
shall have failed to reject any Alternative Proposal within 10
business days after receipt by the Company or public
announcement thereof; or
(f) (i) any corporation, entity or "group" (as defined in
Section 13(d)(3) of the Exchange Act) ("person"), other than
Investor, one or more of its affiliates or any beneficial owner
of Shares on the date hereof, shall have acquired beneficial
ownership of 30% or more of the outstanding shares of Common
Stock or shall have been granted any options or rights,
conditional or otherwise, to acquire a total of 30% or more of
the outstanding shares of Common Stock; (ii) any new group shall
have been formed which beneficially owns 30% or more of the
outstanding shares of Common Stock; (iii) any person (other than
Investor, one or more of its affiliates or any beneficial owner
of Shares on the date hereof) shall have entered into an
agreement in principle or definitive agreement with the Company
with respect to a tender or exchange offer for any Shares or a
merger, consolidation or other business combination with or
involving the Company; or (iv) any person (other than Investor,
one or more of its affiliates or any beneficial owner of Shares
on the date hereof) shall have offered to tender or exchange for
30% or more of the outstanding shares of Common Stock, or
offered to merge, consolidate or effect some other business
combination with or involving the Company.
The foregoing conditions are for the sole benefit of Investor and
may be asserted by Investor regardless of the circumstances giving
rise to any such condition, unless the failure of the satisfaction of
any such condition has been caused by or resulted from the failure by
Investor to fulfill any of its obligations under this Agreement, and
any such condition may be waived by Investor, in whole or in part, at
any time and from time to time, in the sole discretion of Investor.
The failure by Investor at any time to exercise any of the foregoing
rights will not be deemed a waiver of any right, the waiver of such
right with respect to any particular facts or circumstances shall not
be deemed a waiver with respect to any other facts or circumstances,
and each right will be deemed an ongoing right which may be asserted
at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing
provisions, all tendered Shares not theretofore accepted for payment
shall forthwith be returned by the Paying Agent to the tendering
stockholders.