EXHIBIT 2.6
ASSET PURCHASE AGREEMENT
DATED JULY 31 , 2007
(LAUREL HEALTHCARE)
.
.
.
TABLE OF CONTENTS
ARTICLE 1. THE TRANSACTIONS; CLOSING...................................... 1
1.1 PURCHASE AND SALE OF PURCHASED ASSETS............................ 1
1.2 EXCLUDED ASSETS.................................................. 3
1.3 PURCHASE PRICE................................................... 3
1.4 ASSUMPTION OF LIABILITIES........................................ 5
1.5 ALLOCATION....................................................... 6
1.6 TITLE EXAMINATION................................................ 7
1.7 RIGHT OF INSPECTION.............................................. 9
1.8 CLOSING.......................................................... 12
1.9 DELIVERIES BY THE SELLERS........................................ 12
1.10 DELIVERIES BY BUYER.............................................. 13
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................. 13
2.1 ORGANIZATION, POWER AND STANDING................................. 13
2.2 SUBSIDIARIES..................................................... 13
2.3 VALIDITY AND ENFORCEABILITY...................................... 13
2.4 FINANCIAL STATEMENTS............................................. 13
2.5 MATERIAL ADVERSE CHANGES......................................... 14
2.6 MATERIAL CONTRACTS............................................... 14
2.7 REAL PROPERTY.................................................... 15
2.8 DELIVERY OF TITLE DOCUMENTS...................................... 17
2.9 PERSONAL PROPERTY................................................ 17
2.10 INTELLECTUAL PROPERTY............................................ 17
2.11 INVENTORIES...................................................... 18
2.12 RESIDENTS AND SUPPLIERS.......................................... 18
2.13 THIRD-PARTY PAYORS............................................... 18
2.14 CERTAIN FINANCIAL RELATIONSHIPS.................................. 19
2.15 SELLERS' REQUIRED CONSENTS....................................... 19
2.16 REGULATORY AND LEGAL COMPLIANCE.................................. 19
2.17 COST REPORTS..................................................... 21
2.18 ABSENCE OF CERTAIN BUSINESS PRACTICES............................ 21
2.19 LICENSES AND PERMITS............................................. 22
2.20 LITIGATION....................................................... 22
2.21 EMPLOYEES AND COMPENSATION....................................... 22
2.22 ERISA; COMPENSATION AND BENEFIT PLANS............................ 23
2.23 ENVIRONMENTAL MATTERS............................................ 24
2.24 INSURANCE........................................................ 24
2.25 DEBT............................................................. 25
2.26 DISCLOSURE....................................................... 25
2.27 BROKERS.......................................................... 25
i
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BENEFICIAL OWNERS............ 25
3.1 AUTHORITY........................................................ 25
3.2 NO CONFLICT...................................................... 25
3.3 BROKERS.......................................................... 26
3.4 PERSONAL FINANCIAL STATEMENTS.................................... 26
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER........................ 26
4.1 ORGANIZATION..................................................... 26
4.2 AUTHORITY........................................................ 26
4.3 BUYER REQUIRED CONSENTS.......................................... 26
4.4 BROKERS.......................................................... 27
4.5 DISCLOSURE....................................................... 27
ARTICLE 5. COVENANTS OF THE SELLERS AND BENEFICIAL OWNERS................. 27
5.1 CONDUCT OF THE BUSINESS.......................................... 27
5.2 EFFORTS.......................................................... 28
5.3 EXCLUSIVITY...................................................... 28
5.4 NON-COMPETITION AND NON-SOLICITATION COVENANTS................... 29
5.5 INJUNCTIVE RELIEF; LIMITATION ON SCOPE........................... 29
5.6 DELIVERY OF FINANCIAL STATEMENTS................................. 30
5.7 USE OF NAME...................................................... 30
5.8 BROKER FEES...................................................... 30
5.9 ACCRUED PTO...................................................... 30
5.10 NO DISSOLUTION OF SELLERS........................................ 30
ARTICLE 6. COVENANTS OF BUYER............................................. 31
6.1 REPRESENTATIONS AND WARRANTIES................................... 31
6.2 EFFORTS.......................................................... 31
6.3 ADMINISTRATIVE FILINGS AND APPEALS............................... 31
6.4 EXPANSION OFFICE SPACE........................................... 31
ARTICLE 7. CONDITIONS TO CLOSING.......................................... 32
7.1 CONDITIONS PRECEDENT TO THE PARTIES' OBLIGATIONS................. 32
7.2 CONDITIONS TO OBLIGATIONS OF BUYER............................... 32
7.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS......................... 35
ARTICLE 8. TERMINATION.................................................... 37
8.1 TERMINATION...................................................... 37
8.2 EFFECT OF TERMINATION............................................ 38
ii
ARTICLE 9. SURVIVAL; INDEMNIFICATION...................................... 39
9.1 SURVIVAL......................................................... 39
9.2 INDEMNIFICATION BY THE SELLERS AND BENEFICIAL OWNERS............. 40
9.3 INDEMNIFICATION BY BUYER......................................... 41
9.4 CALCULATION OF LOSSES............................................ 41
9.5 DEFENSE OF CLAIMS................................................ 41
ARTICLE 10. MISCELLANEOUS................................................. 42
10.1 NOTICES.......................................................... 42
10.2 SEVERABILITY AND GOVERNING LAW................................... 43
10.3 AMENDMENTS, WAIVERS.............................................. 43
10.4 EXPENSES......................................................... 43
10.5 CONFIDENTIALITY.................................................. 43
10.6 SUCCESSORS AND ASSIGNS........................................... 44
10.7 ENTIRE AGREEMENT................................................. 44
10.8 COUNTERPARTS..................................................... 44
10.9 HEADINGS......................................................... 44
10.10 FURTHER ASSURANCES............................................... 44
10.11 THIRD PARTY BENEFICIARIES........................................ 45
10.12 NO STRICT CONSTRUCTION........................................... 45
10.13 SCHEDULES AND EXHIBITS........................................... 45
10.14 ATTORNEY FEES.................................................... 45
ARTICLE 11. DEFINITIONS................................................... 45
SCHEDULES:
[All schedules to be updated within 5 business days of the date of the
Agreement, in accordance with Article 2 of the Agreement.]
Schedule A Companies, Facilities and Addresses
Schedule 1.1(b) Facility Leases
Schedule 1.2 Excluded Assets
Schedule 1.5 Allocation of Purchase Price
Schedule 2 List of Executive Directors/Facility Administrator
Schedule 2.1 State of Organization of Sellers
Schedule 2.2 List of Subsidiaries
Schedule 2.5 Material Adverse Changes
Schedule 2.6 Material Contracts
Schedule 2.7(e) Real Property Licenses, Consents, Etc.
Schedule 2.10(b) List of Company Intellectual Property
Schedule 2.12 Average Daily Census per Facility
Schedule 2.13 Disclosure regarding Third Party Payors
iii
Schedule 2.15 Sellers' Required Consents
Schedule 2.16(a) Governmental Notices
Schedule 2.16(g) Provider Contracts with TRICARE or Dept. of Veterans Affairs
Schedule 2.16(i) Survey Violations
Schedule 2.18 Absence of Certain Business Practices
Schedule 2.19 Licenses and Permits
Schedule 2.20 Litigation
Schedule 2.21(c) Employees and Compensation (Unions)
Schedule 2.21(d) Employees and Compensation (Material Employees)
Schedule 2.22(a) ERISA; Compensation and Benefit Plans
Schedule 2.22(d) Obligations to Employees
Schedule 2.23 Environmental Matters
Schedule 2.24 Insurance Policies
Schedule 2.25 Debt
Schedule 4.3 Buyer Required Consents
Schedule 5.1(b) Changes in Business Operations
Schedule 7.2(i) Required Facility Lease Amendments
EXHIBITS:
Exhibit 1.3(c) Escrow Agent's General Provisions
Exhibit 1.3(d) Indemnification Escrow Agreement
Exhibit 7.2(c) Seller's Compliance Certificate
Exhibit 7.2(j)(i) Operations Transfer Agreement
Exhibit 7.2(j)(i)(A) Operations Transfer Agreement (Hospice)
iv
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "AGREEMENT") is entered into as of July
31, 2007 by and among Skilled Healthcare Group, Inc., a Delaware corporation,
(the "BUYER"); the limited liability companies listed on SCHEDULE A hereto (each
a "COMPANY" or "SELLER"and collectively, the "COMPANIES" or "SELLERS"). ▇▇▇▇▇
▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇"), and ▇▇▇▇ ▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇",
and together with ▇▇▇▇▇▇, the "BENEFICIAL OWNERS") join this Agreement only as
to ARTICLE 3, 9 and 10, and Sections 5.4 and 5.5. Subject to the provisions of
Section 10.6, the parties acknowledge that Buyer may assign any or all of its
rights hereunder to one or more of its Affiliates, and references herein to
"Buyer" shall include any such assignees. An index of defined terms used herein
is set forth in ARTICLE 11.
INTRODUCTION
The Beneficial Owners directly or indirectly own a majority of the
outstanding membership and equity interests (the "EQUITY INTERESTS") of the
Companies. The Sellers wish to sell, and Buyer wishes to buy, substantially all
of the assets of the Companies, including, without limitation, substantially all
of the assets of the Companies relating to those skilled nursing care facilities
listed on SCHEDULE A (the "ACQUIRED FACILITIES"), on the terms and conditions
set forth herein. The Beneficial Owners, as the direct and indirect owners of
the Companies, will derive substantial benefits from such sale and purchase and
wish to cause such sale and purchase to be consummated. Such sale and purchase
and each other related transaction referred to herein are sometimes collectively
referred to herein as the "TRANSACTIONS".
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE 1.
THE TRANSACTIONS; CLOSING
1.1 PURCHASE AND SALE OF PURCHASED ASSETS. In reliance upon the representations
and warranties contained herein, and subject to the terms and conditions hereof,
each of the Companies shall sell, convey, transfer, assign and deliver to Buyer
at the Closing (as hereinafter defined), free and clear of all liens, security
interests, deeds or indentures of trust, mortgages, encumbrances and
restrictions (other than Permitted Encumbrances, as hereinafter defined), all of
its assets and properties of every kind, nature and description of the Companies
except as otherwise provided below (all of such assets being referred to herein
as the "PURCHASED ASSETS"), including without limitation all of Sellers' right,
title and interest in and to the following assets of the Companies:
(a) the real properties owned by any Company, together with any buildings
or other improvements and fixtures thereon, easements and appurtances thereto
and other real property rights relating thereto (each an "OWNED REAL PROPERTY"
and collectively, the "OWNED REAL PROPERTIES");
1
(b) the real properties leased by any Company, together with any buildings
or other improvements or fixtures thereon, easements and appurtances thereto and
other real property rights relating thereto (each a "LEASED REAL PROPERTY" and
collectively, the "LEASED REAL PROPERTIES") pursuant to those leases described
on SCHEDULE 1.1(B) (each a "FACILITY LEASE," and collectively, the "FACILITY
LEASES"), as more particularly defined and described therein (each Owned Real
Property or Leased Real Property shall be referred to herein as a "REAL
PROPERTY" and collectively as the "REAL PROPERTIES");
(c) that certain Agreement Not to Compete dated March 1, 2006 (the "▇▇▇▇▇
NON-COMPETE") between A&J Ventures, LLC, Capistrano Investments, LLC, ▇▇▇▇▇▇▇▇
Investments, LLC, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇"), AT Health Ventures, LLC, Arbor
Springs, LLC, Arbor Brook, LLC, Arbor Creek, LLC, Sandia Staffing, LLC,
Healthcare Investors Of New Mexico - Springs, LLC, and AHC Advisors, LLC, but
excluding any liability of the Sellers or their Affiliates for amounts payable
by Sellers or their Affiliates to ▇▇▇▇▇ under the ▇▇▇▇▇ Non-Complete, whether
before or after the Closing, including, without limitation, the payment
obligations of Sellers or their Affiliates set forth in Section 8 of the ▇▇▇▇▇
Non-Compete (collectively, the "▇▇▇▇▇ NON-COMPETE LIABILITIES");
(d) that certain Agreement Not to Complete dated July 26, 2007 (the "▇▇▇▇▇▇
NON-COMPETE") between Hospice of the Sandias, LLC, and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
("▇▇▇▇▇▇"), but excluding any liability of the Sellers or their Affiliates for
amounts payable by Sellers or their Affiliates to ▇▇▇▇▇▇ under the ▇▇▇▇▇▇
Non-Complete, whether before or after the Closing, including, without
limitation, the payment obligations of Sellers or their Affiliates set forth in
Section 6 of the ▇▇▇▇▇▇ Non-Compete (collectively, the "▇▇▇▇▇▇ NON-COMPETE
LIABILITIES");
(e) all tangible assets, including without limitation machinery and
equipment, furniture, office equipment, leasehold improvements, fixtures and
other improvements, including, without limitation, those located on or within
any Real Property or otherwise related to the Acquired Facilities (collectively,
the "IMPROVEMENTS"), and all inventories and supplies, including without
limitation, those located at any Real Property or otherwise related to the
Acquired Facilities (including without limitation linens and purchased parts and
supplies);
(f) originals or duplicate copies of all financial, accounting and
operating data and records, including without limitation all books, records,
notes, sales and sales promotional data, advertising materials, credit
information, cost and pricing information, customer and supplier lists, business
plans, projections, reference catalogs, payroll and personnel records to the
extent allowed by law, and other similar property, rights and information;
(g) all Company Intellectual Property (as hereinafter defined) to the
extent assignable or transferable;
(h) all goodwill and corporate opportunities, including pending business
development opportunities at Santa Fe, New Mexico (including as reflected in the
draft ground lease between St. ▇▇▇▇▇▇▇ Hospital and Laurel Healthcare Providers,
LLC); Muleshoe, Texas; Espanola, New Mexico; and any new hospice locations
(collectively, the "DEVELOPMENT AREAS");
2
(i) the Family Member Severance Agreements (defined below), but excluding
any liability of the Sellers or their Affiliates for amounts payable by Sellers
or their Affiliates to the Family Members under the Family Member Severance
Agreements, whether before or after the Closing, including, without limitation,
the payment obligations of Sellers or their Affiliates set forth in the Family
Member Severance Agreements (collectively, the "FAMILY MEMBER SEVERANCE
LIABILITIES"); and
(j) all rights under the personal property leases, license agreements,
contracts, agreements, permits, sale orders, purchase orders, open bids and
other commitments listed on Schedule A of, and specifically assumed by Buyer
under, the Operations Transfer Agreement (together with the Facility Leases, the
"ASSUMED CONTRACTS").
1.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the Companies shall not
transfer to Buyer, and the Purchased Assets shall not include (i) the Sellers'
rights under this Agreement; (ii) cash, (iii) accounts receivables, (iv) any
contracts other than the Assumed Contracts, the Family Member Severance
Agreements, the ▇▇▇▇▇ Non-Compete, and the ▇▇▇▇▇▇ Non-Compete, and (v) any
assets set forth on SCHEDULE 1.2 (collectively, the "EXCLUDED ASSETS").
1.3 PURCHASE PRICE.
(a) The term "PURCHASE PRICE" means an aggregate of Fifty-One Million, Five
Hundred Thousand Dollars ($51,500,000), subject to adjustment as described in
Section 1.3(b).
(b) The Purchase Price will be increased, if at all, but in no event
decreased, as follows:
(i) If the Final Rebased 2007 Medicaid Rates are established on or
prior to the Closing Date, then the Purchase Price shall be increased on the
Closing Date by the excess, if any, of (A) the amount of the annualized
projected increase in revenues for the Acquired Facilities calculated by Sellers
and Buyer in good faith based upon the Medicaid Rate Increase for the Acquired
Facilities and the actual Medicaid census for the 12 month period ending one
month prior to the Closing Date over (B) $1,700,000 (such excess, if any, being
referred to herein as the "EXCESS ANNUAL REVENUE INCREASE").
(ii) If the Final Rebased 2007 Medicaid Rates are established after
the Closing Date and on or prior to February 28, 2008, then Buyer shall pay to
Sellers the Excess Annual Revenue Increase as an increase to the Purchase Price
within fifteen (15) days following the date of Sellers' written request for
payment of such Excess Annual Revenue Increase to Buyer. Buyer's obligations
under this Section 1.3(b)(ii) shall surviving the Closing.
(iii) If the Final Rebased 2007 Medicaid Rates are not established on
or prior to February 28, 2008 or Sellers fails to deliver to Buyer a written
request for payment of the Excess Annual Revenue Increase pursuant to clause
(ii) above on or before March 15, 2008, then Sellers shall not be entitled to
any increase in the Purchase Price under the terms of this Section 1.3(b).
(iv) As used in this Agreement, the following terms shall have the
following meanings:
3
(1) "FINAL REBASED 2007 MEDICAID RATES" means the rebased
Medicaid reimbursement rates payable for Medicaid beds at the Acquired
Facilities for 2007 that become final and determined by the State of New Mexico
and that are certain to be paid.
(2) "MEDICAID RATE INCREASE" means the increase in the Medicaid
rate, if any, payable for the Acquired Facility based upon the Final Rebased
2007 Medicaid Rates as compared to the Medicaid reimbursement rates in effect as
of the date of this Agreement after giving effect to any reduction to such
increase caused by the Transactions or by any change in ownership of the
applicable Medicaid provider or supplier agreements for the Acquired Facilities.
(c) DEPOSIT AT SIGNING. Upon the execution of this Agreement by all of the
parties, an ▇▇▇▇▇▇▇ money deposit in the amount of One Million Dollars
($1,000,000) (the "DEPOSIT") shall be delivered by Buyer to Chicago Title
Insurance Company (the "ESCROW AGENT"). Escrow Agent shall hold and dispose of
the Deposit in accordance with the terms of this Agreement. Sellers and Buyer
agree that the duties of the Escrow Agent hereunder are purely ministerial in
nature and shall be expressly limited to the safekeeping and disposition of the
Deposit in accordance with this Agreement. Escrow Agent shall incur no liability
in connection with the safekeeping or disposition of the Deposit for any reason
other than Escrow Agent's willful misconduct or gross negligence. If Escrow
Agent is in doubt as to its duties or obligations with regard to the Deposit, or
if Escrow Agent receives conflicting instructions from Buyer and the Sellers
with respect to the Deposit, then Escrow Agent shall not be required to disburse
the Deposit and may, at its option, continue to hold the Deposit until Buyer and
Sellers agree as to its disposition, or until a final judgment is entered by a
court of competent jurisdiction directing its disposition, or Escrow Agent may
interplead the Deposit in accordance with the laws of the state in which the
Acquired Facilities are located. Escrow Agent shall not be responsible for any
interest on the Deposit except as is actually earned, or for the loss of any
interest resulting from the withdrawal of the Deposit prior to the date interest
is posted thereon. Escrow Agent shall execute this Agreement solely for the
purpose of being bound by the provisions of Sections 1.3(c) and 8.2 hereof.
Escrow Agent's General Provisions are attached hereto as Exhibit 1.3(c) and made
a part hereof.
(d) PAYMENTS AT CLOSING. At the Closing, the Purchase Price shall be paid
as follows:
(i) Deposit. The Deposit and all accrued interest thereon shall be
released by Escrow Agent to Sellers.
(ii) Balance of Purchase Price. Buyer shall pay to the Companies by
wire transfer of immediately available funds, an amount equal to the Purchase
Price (subject to increase in accordance with the provisions of Section 1.3(b)
above), less the Deposit and all accrued interest thereon. The Indemnification
Escrow Amount owing by each Beneficial Owner pursuant to the provisions of
clause (iii) below shall be funded independently by Beneficial Owners directly
to the Indemnification Escrow Agent from the net proceeds of the Purchase Price
otherwise distributable to such Beneficial Owners from Sellers hereunder.
4
(iii) Transfer of Funds to Indemnification Escrow Agent. Each
Beneficial Owner shall deposit with Escrow Agent, or such other escrow agent or
holder designated by Buyer and approved by such Beneficial Owner (which approval
shall not be unreasonably withheld or delayed) (the "INDEMNIFICATION ESCROW
AGENT"), by wire transfer, cash in the amount of Five Hundred Thousand Dollars
($500,000) (the "INDEMNIFICATION ESCROW AMOUNT"). The Indemnification Escrow
Amount shall be held by the Indemnification Escrow Agent in trust in an
interest-bearing account pursuant to the terms of an Indemnification Escrow
Agreement among Buyer, such Beneficial Owner and the Indemnification Escrow
Agent, as escrow holder, in substantially the form attached as Exhibit 1.3(d)
hereto (the "INDEMNIFICATION ESCROW AGREEMENT") and shall be available to
compensate Buyer and its Affiliates for Losses under Section 9.2 of this
Agreement.
1.4 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall assume and agree to
pay when due, perform and discharge in accordance with the terms thereof, only
those liabilities and obligations of the Sellers which accrue for performance
subsequent to the Closing under the Assumed Contracts (the "ASSUMED
LIABILITIES"). Except with respect to the Assumed Liabilities, Buyer shall not
assume and shall not in any way be responsible for any of the debts,
liabilities, or obligations of any nature of the Sellers, except to the extent
caused by Buyer or any of Buyer's agents or employees in the course of its
onsite inspections conducted in accordance with Section 1.7. Without limiting
the generality of the foregoing, Buyer shall have no liability for the following
liabilities of any Seller (collectively, together with all other liabilities and
obligations of the Sellers other than the Assumed Liabilities, the "EXCLUDED
LIABILITIES"):
(a) the outstanding amount of all principal, interest, fees and expenses in
respect of borrowed money, letters of credit, capital leases and installment
purchases (except as may be provided in the Assumed Liabilities but only to the
extent that such obligation accrued for performance subsequent to the Closing);
(b) obligations relating to Taxes related to the period prior to Closing,
except to the extent that the Taxes are being prorated in accordance with the
Operations Transfer Agreement, including, but not limited to, Taxes owed by the
Sellers associated with the Closing, (for purposes hereof, "TAXES" means all
taxes, charges, fees, levies, penalties, additions or other assessments imposed
by any federal, state, or local taxing authority, including, but not limited to,
income, excise, property, sales, transfer, franchise, payroll, withholding,
value added, social security or other taxes, including any interest, penalties
or additions attributable thereto);
(c) obligations under this Agreement or any agreement entered into in
connection with the Transactions (other than the obligations of Buyer);
(d) any litigation, suit, proceeding, arbitration, audit or investigation,
filed or otherwise, with respect to the affairs of any Seller prior to the
Closing;
(e) any liability of any Seller resulting from repayments, recoupments or
adjustments after the Closing Date to any amounts paid or payable to any Company
for any cost report period ending on or before the Closing Date to or from
Medicare, Medicaid or any other Federal or New Mexico state or local county
healthcare program (collectively, "GOVERNMENT HEALTHCARE PROGRAMS") with respect
to any cost adjustment, patient trust adjustment or share of cost
5
adjustment for any cost report, but only for that portion of the cost report
period preceding the Closing Date, if applicable;
(f) any liability of any Seller relating to any rate adjustments,
repayments or recoupments after the Closing Date arising out of any uncured
failure by any such Company to comply with routine reporting and clinical
requirements occurring prior to the Closing Date;
(g) any regulatory or enforcement proceeding or action initiated by, or on
behalf of, any Government Healthcare Program or any other governmental or
regulatory official, body or authority, which relates to any alleged act or
failure to act undertaken by any Seller which occurs on or before the Closing
Date, regardless of when such proceeding or action is initiated;
(h) amounts related to workers compensation for periods prior to the
Closing, except to the extent that such amounts are being prorated in accordance
with the Operations Transfer Agreement, including without limitation unpaid
premiums for any workers compensation policy;
(i) liabilities or obligations to any Affiliate of any Seller;
(j) obligations related to any pension, profit sharing, retirement,
employee benefit or similar plan, benefit or arrangement, including without
limitation any and all obligations of the Sellers to employees in respect of
accrued paid time off, vacation or similar compensation or benefits ("ACCRUED
PTO");
(k) liabilities relating to the Family Member Severance Agreements, the
▇▇▇▇▇ Non-Compete, the ▇▇▇▇▇▇ Non-Compete, including, without limitation, the
Family Member Severance Liabilities, the ▇▇▇▇▇ Non-Compete Liabilities and the
▇▇▇▇▇▇ Non-Complete Liabilities
(l) liabilities relating to any contracts that are not Assumed Contracts;
(m) liabilities or obligations relating to the Excluded Assets, or not
related to the Purchased Assets; or
(n) the aggregate amount payable by the Sellers through the Closing Date,
or arising as a result of the Transactions, for (i) legal, accounting,
investment banking, broker and other fees and expenses, (ii) sales and use
taxes, documentary stamp, transfer, privilege, excise or other similar tax or
fee, if any, arising from the Transactions contemplated hereby, and (iii) all
other payments, costs and expenses incurred by the Sellers in connection with or
as a result of the Transactions contemplated hereby, including without
limitation amounts required to discharge the Companies' obligations under any
Benefit Plans.
1.5 ALLOCATION. The total amount of the Purchase Price shall be allocated among
the Purchased Assets and the Sellers as set forth on SCHEDULE 1.5; provided,
however, that any increase in the Purchase Price payable to the Sellers, either
at Closing pursuant to Section 1.3(b)(i) above or following the Closing pursuant
to Section 1.3(b)(ii) above, shall be allocated to the applicable Sellers of the
Acquired Facilities based upon the actual Medicaid census for each Acquired
Facility for the 12 month period ending immediately prior to the Closing. It is
agreed by the parties that such allocation was arrived at by arm's length
negotiation and in the
6
judgment of the parties properly reflects the fair market value of the Purchased
Assets transferred pursuant to this Agreement. It is agreed that the allocations
under this Section 1.5 will be binding on all parties for federal, state, local
and other tax purposes in connection with the purchase and sale of the Purchased
Assets and will be consistently reflected by each party on such party's tax
returns. Buyer and Seller shall jointly prepare and cooperate in completing IRS
Form 8594 within forty-five (45) days after Closing. SCHEDULE 1.5 shall be
subject to change upon the written request of Buyer and Sellers written consent
(which will not be unreasonably withheld), if Buyer elects to and obtains an
appraisal. To the extent that any amounts are allocated to the non-competition
covenants contained herein, such allocations shall not constitute a cap on
potential liability in the event such covenants are breached.
1.6 TITLE EXAMINATION.
(a) Following execution of this Agreement, Buyer shall have the right to
obtain and review (i) current title commitment for each Real Property issued by
Chicago Title Insurance Company (the "TITLE COMPANY"), to be obtained by Buyer
at Buyer's expense; (ii) copies of all documents referred to in the title
commitment (collectively items (i) and (ii) are referred to as the "TITLE
COMMITMENT"), (iii) a new or updated ALTA survey of such Real Property (the
"REAL ESTATE SURVEYS"), and (iv) copies of the most recent property tax bills
for such Real Property. Buyer shall bear the cost of the Real Estate Surveys, if
Buyer elects to obtain the same.
(b) Buyer shall notify Sellers in writing (the "TITLE NOTICE") prior to
August 20, 2007 (hereinafter referred to as the "TITLE INSPECTION PERIOD"),
which exceptions to title (including survey matters), if any, will not be
accepted by Buyer. If Buyer fails to notify Sellers in writing of any exceptions
to title by the expiration of the Title Inspection Period, then Buyer shall be
conclusively deemed to have approved the condition of title to the applicable
Real Property. If Buyer notifies Sellers in writing that Buyer objects to any
exceptions to title prior to the expiration of the Title Inspection Period, then
Sellers shall have five (5) business days after receipt of the Title Notice to
notify Buyer in writing (i) that Sellers will remove such objectionable
exceptions from title on or before the Closing; or (ii) that Sellers elect not
to cause such exceptions to be removed. If Sellers fail to notify Buyer in
writing of their election within said five (5) business day period, Sellers
shall be deemed to have elected not to cause such exception to be cured. The
procurement by Sellers of a commitment for the issuance of the Title Policy (as
defined in Section 1.6(e) hereof) or an endorsement thereto reasonably
satisfactory to Buyer and insuring Buyer against any title exception which was
disapproved pursuant to this Section 1.6(b) shall be deemed a cure by Sellers of
such disapproval. If Sellers give Buyer notice under clause (ii) above, then
Buyer shall have five (5) business days within which to notify the Sellers in
writing that Buyer will either nevertheless proceed with the purchase and take
title to the applicable Real Property subject to such exceptions, in which case
such exceptions shall be deemed Permitted Encumbrances for purposes of this
Agreement, or that Buyer will terminate this Agreement. If this Agreement is
terminated pursuant to the foregoing provisions of this paragraph, then neither
party shall have any further rights or obligations hereunder (except for any
indemnity obligations of either party pursuant to the other provisions of this
Agreement), the Deposit and all interest thereon shall be returned to Buyer and
each party shall bear its own costs incurred hereunder. If Buyer fails to notify
Sellers in writing of its election within said five (5) business day period,
then Buyer shall be deemed to have elected to proceed with the purchase and take
title to applicable Real Property subject to such exceptions,
7
in which case, such exceptions shall be deemed Permitted Exceptions for purposes
of this Agreement. Notwithstanding the foregoing, Buyer need not disapprove any
monetary lien representing monies owed, as Sellers hereby agree to cause all
such monetary liens (other than non-delinquent ad valorem real estate taxes and
assessments) to be removed at or prior to Closing and no such monetary liens
shall be deemed Permitted Encumbrances.
(c) PRE-CLOSING "GAP" TITLE DEFECTS. Buyer may, at or prior to Closing,
notify Sellers in writing (the "GAP NOTICE") of any objections to title (a)
raised by the Title Company with respect to changes in title between the
expiration of the Title Inspection Period and the Closing and (b) title defects
that are not of record and not disclosed by the Title Company or otherwise
disclosed to Buyer in writing prior to the expiration of the Title Inspection
Period (collectively, "NEW TITLE MATTERS"); provided, however, that in no event
shall Buyer have the right to deliver any Gap Notice or otherwise object to any
New Title Matter caused by or through Buyer's activities conducted pursuant to
Section 1.7. Buyer must deliver a Gap Notice to Sellers within three (3) days of
receiving written notice of the existence of such New Title Matters. If Buyer
delivers a Gap Notice to Sellers, then Buyer and Sellers shall have the same
rights and obligations with respect to such notice as apply to a Title Notice
under Section 1.6(b) hereof, except that the five (5) business day periods
granted to Buyer and Seller in Section 1.6(b) shall be reduced to three (3)
business days. If Buyer fails to deliver a Gap Notice to Seller within the above
three (3) day period, Buyer shall be deemed to have elected to waive its right
to deliver the Gap Notice with regard to such New Title Matter and such New
Title Matter shall constitute Permitted Encumbrances for purposes of this
Agreement.
(d) PERMITTED ENCUMBRANCES. Each Real Property shall be assigned and
conveyed to Buyer subject to the following matters, which are hereinafter
referred to as the "PERMITTED ENCUMBRANCES":
(i) the Facility Leases (but only with respect to the applicable
Leased Real Property);
(ii) those matters that either are not objected to in writing within
the time periods provided in Sections 1.6(b) or 1.6(c) hereof, or if objected to
in writing by Buyer, are those which Sellers have elected not to remove or cure,
or have been unable to remove or cure, and subject to which Buyer has elected or
is deemed to have elected to accept pursuant to Section 1.6 above;
(iii) the lien of all ad valorem real estate taxes and assessments not
yet due and payable as of the date of Closing, subject to adjustment as herein
provided or under the Operation Transfer Agreement;
(iv) local, state and federal laws, ordinances or governmental
regulations, including but not limited to building and zoning laws, ordinances
and regulations, now or hereafter in effect relating to such Real Property;
(v) items shown on any Real Estate Survey which are not objected to by
Buyer or are waived or deemed waived by Buyer in accordance with Section 1.6(b)
or 1.6(c) hereof; and
8
(vi) any other matters caused or created by the acts of Buyer or
Buyer's agents and employees during the course of its onsite inspections
conducted in accordance with Section 1.7.
(e) CONVEYANCE OF TITLE AND LEASEHOLD ESTATE. At Closing, Sellers shall (i)
convey and transfer to Buyer each Owned Real Property, by execution and delivery
of a notarized warranty deed(s) conveying such Owned Real Property (the "DEED")
to Buyer subject only to the Permitted Encumbrances and (ii) convey and assign
to Buyer, and Buyer shall assume, each Leased Real Property pursuant to the
applicable Facility Lease by execution and delivery of a duly executed and
notarized assignment and assumption agreement in form and substance satisfactory
to Buyer. For each Real Property, the Title Company shall deliver an ALTA
Standard Coverage Owner's or Leasehold Policy of Title Insurance, as applicable
and without a general exception for creditor's rights (the "TITLE POLICY"), in
the amount to be determined by the Buyer not to exceed the amount of the
Purchase Price allocated to such Real Property in SCHEDULE 1.5, subject only to
the Permitted Encumbrances and including such endorsements thereto as Buyer may
reasonably request; provided, however, that if Buyer has delivered to the Title
Company prior to the Closing a Real Estate Survey for such Real Property in
compliance with all applicable ALTA requirements, then the Title Policy required
hereunder shall be an ALTA Extended Coverage Owner's or Leasehold Policy of
Title Insurance, as applicable, in accordance with the terms of this Section
1.6(e) hereof. The cost for the Title Policy shall be allocated among the
Sellers and Buyer such that the Sellers shall pay the premium attributable to an
ALTA Standard Coverage Owner's Policy of Title Insurance and Buyer shall pay for
any expenses relating to such Title Policy that exceeds the cost of an ALTA
Standard Coverage Owner's Policy of Title Insurance (including the cost of any
endorsements requested by Buyer).
(f) The issuance of the Title Policy shall be in lieu of any express or
implied warranty of Seller concerning title to the Real Properties. Buyer agrees
that Buyer's only remedy for damages incurred by reason of any defect in title
to the Real Properties shall be against the Title Company.
(g) The provisions of this Section 1.6 shall not apply to the leasehold
estate of the applicable Company in and to that certain office space commonly
known as Suite 410, located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇.▇., ▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ (the "OFFICE SPACE") pursuant to that certain Office Building Lease dated
September 26, 2005 (the "ORIGINAL OFFICE LEASE") between Laurel Healthcare
Providers, LLC and Albuquerque Centre Ltd. Co, as amended by that certain First
Amendment to Lease dated March 27, 2006. (the "FIRST AMENDMENT TO OFFICE LEASE,"
and together with the Original Office Lease, the "OFFICE LEASE"). The First
Amendment to Office Lease covers certain "Expansion Premises" (as defined
herein") comprising part of the Office Space and shall be referred to herein as
the "EXPANSION OFFICE SPACE."
1.7 RIGHT OF INSPECTION.
(a) INSPECTION RIGHTS. During the period beginning on the date hereof and
continuing through the earlier of the Closing or the sooner termination of this
Agreement in accordance with the terms hereof, Buyer shall have the right to:
9
(i) Perform, or hire consultants to perform a physical inspection and
an appraisal of the Purchased Assets.
(ii) Inspect, or hire consultants to inspect, the environmental
condition of each Real Property pursuant to the terms and conditions of this
Agreement, and to obtain and review, at Buyer's sole election and cost, soils,
geology, structural and environmental and any other engineering reports.
(iii) Obtain and examine a search report showing liens against the
personal property included in the Purchased Assets or located on any Real
Property which have been perfected by filings under the Uniform Commercial Code.
(iv) Examine at the Real Properties, the applicable Company's office,
or the property manager's office, or through physical delivery to Buyer, as the
case may be, all books, records, reports, and files related to the ownership,
leasing, maintenance and operation of the Real Properties, which are to be
provided by Sellers to the extent available, permitted by law, and in the actual
possession of Sellers. Such documents include, without limitation, (i) Sellers'
current files for the Real Properties, including copies of all Assumed
Contracts, the Family Member Severance Agreements, the ▇▇▇▇▇ Non-Compete, and
the ▇▇▇▇▇▇ Non-Compete, (ii) as-built plans and specifications for the
Improvements, (iii) prior soils, geology, structural and engineering reports,
(iv) recorded and unrecorded parking agreements, (v) common area maintenance
agreements or other agreements affecting any Real Property, (vi) certificates of
occupancy pertaining to the Improvements, (vii) pertinent correspondence with
governmental agencies and current tenants concerning any Real Property, and
(viii) evidence that each Real Property is zoned for the purpose to which Buyer
intends to use it.
(v) To have access to employees, advisors, consultants, other
personnel, customers or suppliers of, third party payors, health department and
other agency officials, or others having material business relations with, the
Companies (collectively "PROPERTY CONTACTS").
(vi) To examine the condition and take inventory of any of the other
Purchased Assets.
(b) CONDITIONS TO ON-SITE INSPECTIONS. Prior to the Closing, any on-site
inspections of any Real Property and communications with any Property Contacts:
(i) shall be conducted so as not to interfere unreasonably with the use of such
Real Property by Sellers or its occupants and tenants, and (ii) shall be subject
to the consent of the Sellers with respect to the date, time and manner of the
inspection, which consent shall not be unreasonably withheld or unreasonably
restrictive. Sellers may have a representative present during any such
inspections. Prior to the Closing, Buyer shall not have the right to do any
invasive testing at any Real Property, without first obtaining the applicable
Seller's prior written consent thereto, which consent shall not be unreasonably
withheld or delayed; provided, however, that any so-called "Phase II"
environmental testing shall be permitted only if and to the extent recommended
by and consistent with the findings contained in a so-called "Phase I"
environmental report. Buyer agrees to protect, indemnify, defend and hold the
applicable Seller harmless from and against any claim for liabilities, losses,
costs, expenses (including reasonable attorneys' fees), damages or injuries
10
arising out of or resulting from the exercise of Buyer's rights under this
Section 1.7, including, without limitation, the inspection of any Real Property
by Buyer or its agents or consultants, and such obligation to indemnify and hold
harmless such Seller shall survive the Closing or any termination of this
Agreement, provided, however, that the foregoing indemnity shall not extend to
any losses, costs or expenses resulting from the gross negligence or willful
misconduct of Seller. Notwithstanding anything to the contrary contained in this
Agreement, Sellers acknowledge and agree that Buyer shall not have any liability
pursuant to the terms of this Agreement for any discovery by Buyer of an adverse
environmental or other condition during the course of its tests, studies,
inspections or examinations of any Real Property, unless such conditions are
caused by or otherwise exacerbated by Buyer or Buyer's agent's and/or
consultants. Prior to the Closing, Buyer shall keep the Real Properties free and
clear of any mechanic's liens or materialmen's liens arising out of Buyer's
inspection of any Real Property.
(c) CONDITION OF REAL PROPERTIES AND ACQUIRED FACILITIES. Except for the
express representations, warranties, covenants, indemnification obligations and
agreements of Sellers, Beneficial Owners, ▇▇▇▇▇ or ▇▇▇▇▇▇ provided for in this
Agreement, any Operations Transfer Agreement, and the other schedules, exhibits,
certificates and other contracts or agreements delivered in accordance with the
terms of this Agreement, Buyer hereby agrees as follows:
(i) Sellers and Beneficial Owns have not made and are not making any
other representations, warranties, promises, covenants, agreements or guarantees
of any kind or character whatsoever, whether express or implied, oral or
written, past, present or future, with respect to the Real Properties, the
Acquired Facilities or any part or component thereof, including without
limitation, warranties or representations as to matters of title, zoning, tax
consequences, physical or environmental condition, operating history or
projections, valuation, governmental approvals, governmental regulations or any
other matter or thing relating to or affecting the Real Properties or the
Acquired Facilities;
(ii) Buyer has not relied upon and will not rely upon, either directly
or indirectly, any oral or written statement by Sellers, Beneficial Owners or
any employees, agents, brokers, or independent contractors of any of them;
(iii) Buyer will conduct such inspections and investigations of the
Real Properties and the Acquired Facilities as Buyer deems necessary or
appropriate for Buyer's intended uses of the Real Properties and the Acquired
Facilities, including without limitation, the physical and environmental
condition thereof and will rely upon the same;
(iv) upon Closing, Sellers shall convey to Buyer, and Buyer shall
accept the Real Properties and the Acquired Facilities, "AS IS," "WHERE IS,"
"WITH ALL FAULTS," including all observable and non-observable defects (latent
or patent) and deficiencies therein;
(v) Subject to Section 1.7(d) below, Buyer, from and after the
Closing, hereby waives, releases, remises, acquits and forever discharges the
Sellers, Beneficial Owners, and any other current or prior owners or members of
the Sellers of and from any and all Losses (as hereinafter defined), which
concern or in any way relate to the Purchased Assets, including, without
limitation, that in any way concern or in any way relate to (i) title, legal,
physical, or environmental condition of the Real Properties or the Acquired
Facilities, whether existing prior
11
to, at or after the Closing, including, without limitation, matters relating to
zoning and all other legal compliance of the Real Properties or the Acquired
Facilities, (ii) the physical or environmental condition of any Improvements
located thereon or any portion thereof, including, or the use, generation,
release or threatened release, the transportation, and disposal of hazardous
substances and medical wastes, (iii) Seller compliance with laws, statutes,
policies, regulations, Authorizations, policies, or other requirements,
including, without limitation, those of any Government Healthcare Programs,
Insurance Policies and Material Contracts, (iii) ownership of any Intellectual
Property, and (iv) the condition or amount of any furniture, fixtures,
equipment, and inventory in and for the Acquired Facilities. In connection with
the foregoing release, Buyer expressly agrees to waive any and all rights which
said party may have under Section 1542 of the California Civil Code which
provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.".
(d) Notwithstanding anything to the contrary contained in this Agreement,
the provisions of Section 1.7(c) above shall not be deemed to be a waiver,
release or discharge of any of Buyer's rights or remedies against (i) Sellers or
Beneficial Owners that in any way concern or in any way relate to (A) any Losses
resulting from any breach by Sellers or Beneficial Owners of any express
representations, warranties, covenants, indemnification obligations and/or
agreements of Sellers and/or Beneficial Owners provided for in this Agreement
(including, without limitation, as expressly set forth in Articles 2, 3, 5 and 9
hereof), any Operations Transfer Agreement, or in the other schedules, exhibits,
certificates and other contracts or agreements delivered in accordance with the
terms of this Agreement, or (B) any Losses based upon the fraud or intentional
misrepresentation of Sellers or Beneficial Owners or (ii) (A) ▇▇▇▇▇ as a result
of a breach or default by ▇▇▇▇▇ under the ▇▇▇▇▇ Non-Compete, (B) ▇▇▇▇▇▇ as a
result of a breach or default by ▇▇▇▇▇▇ under the ▇▇▇▇▇▇ Non-Compete or (C) any
Family Member as a result of a breach or default by such Family Member under a
Family Severance Agreement.
(e) The provisions of this Section 1.7 shall expressly survive the Closing
and not merge therein.
1.8 CLOSING. The purchase and sale of the Purchased Assets hereunder shall take
place at a closing (the "CLOSING") to be held on September 1, 2007, or on the
first (1st) day of the calendar month immediately following the satisfaction or
waiver of the conditions set forth in ARTICLE 7, or on such other date as agreed
to in writing by the Sellers and Buyer (the "CLOSING DATE").
1.9 DELIVERIES BY THE SELLERS. At the Closing, and upon satisfaction or waiver
of the conditions set forth in ARTICLE 6 herein, the Sellers will deliver or
cause to be delivered to Buyer the instruments, consents, opinions, certificates
and other documents required of them by ARTICLE 7.
12
1.10 DELIVERIES BY BUYER. At the Closing, and upon satisfaction or waiver of the
conditions set forth in ARTICLE 7 herein, Buyer will deliver or cause to be
delivered to the Sellers the instruments, opinions, certificates and other
documents required of it by ARTICLE 7.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
The Sellers hereby represent and warrant to Buyer that each of the
statements contained in this ARTICLE 2 is true and correct and will be true and
correct as of the Closing Date. For purposes of this Agreement, the word
"KNOWLEDGE" with respect to the Sellers or "TO THE KNOWLEDGE OF SELLERS" or
words of similar import means the knowledge after due inquiry of each Beneficial
Owner, ▇▇▇▇▇, each of the executive directors or facility administrators for
each Facility listed on SCHEDULE 2 (each, an "ED/FA"); provided, however, that
Sellers are entitled to update the disclosure schedules through five (5)
business days after signing with respect to any representation or warranty in
this ARTICLE 2. For clarification, ▇▇▇▇▇ and each ED/FA are not parties to this
Agreement and shall have no personal liability or obligations hereunder;
provided, however, that the foregoing clarification shall not relieve ▇▇▇▇▇ of
his obligations under the ▇▇▇▇▇ Non-Compete.
2.1 ORGANIZATION, POWER AND STANDING. Each of the Companies is a limited
liability company duly formed, validly existing and in good standing under the
laws of the state or jurisdiction in which it is organized, as set forth on
SCHEDULE 2.1. Each of the Companies has all requisite power and authority to
own, lease and operate its properties and to carry on the Business. As used
herein, "BUSINESS" means, with respect to each Company, the business described
on SCHEDULE A corresponding to such Company, and, with respect to all of the
Companies, all of their Businesses collectively along with the business of
providing management, staffing, recruitment and therapy (including physical,
occupational and speech) contracting services to long term care facilities as
such activities are currently conducted by the Companies. All of the assets,
properties and rights owned, leased or licensed by Sellers necessary to conduct
the Business are located at the Real Properties.
2.2 SUBSIDIARIES. Except as set forth on SCHEDULE 2.2, no Company directly or
indirectly owns or has the right to acquire any equity interest in any other
corporation, partnership, limited liability company, joint venture, or other
business organization.
2.3 VALIDITY AND ENFORCEABILITY. The execution, delivery and performance of each
of the agreements, documents and instruments contemplated hereby to which any
Seller is a party, has been duly authorized by such Seller. Each such agreement,
document and instrument shall when executed be the valid and binding obligations
of such Company and of each Seller, enforceable in accordance with its terms.
2.4 FINANCIAL STATEMENTS. Sellers have made available to Buyer a true and
complete copy of (i) the audited consolidated balance sheet of each Company and
it subsidiaries as of December 31, 2004, 2005 and 2006, (ii) the audited
consolidated statements of income and members' equity for each Company and its
subsidiaries for each of the three years in the period ended December 31, 2006,
(iii) the unaudited consolidated balance sheet of each Company and it
13
subsidiaries as of May 31, 2007 (the "BALANCE SHEET DATE"), and (iv) the
unaudited consolidated statements of income and members' equity for each Company
and its subsidiaries for each of the full month that has elapsed in 2007 (the
"FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
accordance with means United States generally accepted accounting principles,
consistently applied, and fairly present, in all material respects, the
financial position of each respective Company and its subsidiaries as of the
dates thereof and their results of operations and members' equity for the
periods then ended. Each audited Financial Statement is accompanied by the
related notes thereto and unqualified audit opinions issued by nationally
recognized certified public accountants.
2.5 MATERIAL ADVERSE CHANGES. Since the Balance Sheet Date, other than as set
forth on SCHEDULE 2.5, each Company has operated only in the usual and ordinary
course, and there has been no (a) acquisition or disposition of assets or
securities, or commitment therefor by such Company, except for the acquisition
or disposition of assets in the ordinary course of its Business, (b) liens,
security interests, restrictions, or encumbrances placed upon any of the assets
of such Company, except in the ordinary course of its Business or as may be
disclosed in the Title Commitment or the Real Estate Survey, (c) increase in the
compensation or commission rates payable by such Company to any officer,
director, employee, consultant or sales agent, except in accordance with past
practice, or (d) event or condition relating specifically to such Company
(rather than to general economic conditions or generally to the industries in
which they operate) which, individually or collectively with all other such
events, has had or could reasonably be expected to have a material adverse
effect on its Business or the affairs, assets, condition (financial or
otherwise) or prospects of such Company.
2.6 MATERIAL CONTRACTS. SCHEDULE 2.6 sets forth a complete and accurate list, in
each case whether written or unwritten, of all of the following (including all
amendments or modifications thereof):
(a) agreements, contracts or other arrangements with respect to which any
one or more of the Companies has any liability or obligation involving more than
$10,000 contingent or otherwise, or which may extend for a term of more than one
year after the Closing;
(b) licenses, leases, contracts, agreements and other arrangements with
respect to any material property (including medical equipment, but excluding
real property) of any Company, including without limitation, all licenses or
agreements relating to Intellectual Property, and sales and supply contracts;
(c) agreements, contracts or arrangements of any Company with officers,
directors, managers, members or Affiliates of any Company or any of their
respective relatives or Affiliates (as used herein, "AFFILIATE" shall mean any
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person specified);
(d) material agreements or arrangements with physicians, physical
therapists, occupational therapists, nutritionists and other individual and
institutional health care providers, private third party payors and other health
care facilities, including without limitation nursing
14
homes, visiting nurse associations, home health agencies, durable medical
equipment suppliers, pharmacies, hospitals, hospices, retirement homes and life
care communities;
(e) provider or supplier agreements with any Government Healthcare Program;
(f) employment, collective bargaining, severance, consulting (except for
agreements covered in Section 2.6(d) above), deferred compensation, benefit and
similar plans, agreements, arrangements or contracts involving any Company;
(g) utility, trust and other bonds (the "BONDS") and deposits, excluding
patient accounts and deposits to be transferred in accordance with the
Operations Transfer Agreement (the "COMPANY DEPOSITS"), maintained or required
to be maintained by any Company and guarantees thereof by any Seller; and
(h) other material agreements, contracts, instruments, commitments, plans
or arrangements of any Company.
All the foregoing (whether written or unwritten) are referred to as
"MATERIAL CONTRACTS." To the Knowledge of Sellers, Sellers have furnished to
Buyer complete copies of all Material Contracts (or written descriptions
thereof, in the case of oral contracts), except for redactions made to conceal
the purchase price in any contracts relating to the redemption, purchase or sale
of equity interests in any Company. Each Material Contract (or description) sets
forth the entire agreement and understanding between a Company and the other
parties thereto. Each Assumed Contract is valid, binding and in full force and
effect, and to the Knowledge of Sellers, there is no event or condition which
has occurred or exists, which (i) constitutes or could constitute (with or
without notice, the happening of any event and/or the passage of time) a default
or breach under any such Assumed Contract by any Company or, any other party
thereto, or (ii) could cause the acceleration of any obligation of any party
thereto or give rise to any right of termination or cancellation thereof.
2.7 REAL PROPERTY.
(a) [Intentionally Omitted].
(b) The Real Properties constitute all the real property (or interest in
real property) currently used in the conduct of the Businesses. Other than the
Leased Real Properties, there are no interests in real property leased by any
Seller in connection with the Businesses or by any Company.
(c) There is no pending or, to the Knowledge of the Sellers, any threatened
condemnation, eminent domain or similar proceeding with respect to any Real
Property.
(d) To the Knowledge of Sellers, each Real Property is in compliance in all
material respects with all building, zoning, subdivision, health, safety and
other applicable federal, state and local laws and regulations.
(e) Except as noted in SCHEDULE 2.7(E), Sellers hold all consents, permits,
licenses, approvals and authorizations from governmental authorities or other
third parties which are
15
necessary to permit (i) Sellers to convey each Owned Real Property in accordance
with the provisions of this Agreement, (ii) Sellers to lease each Leased Real
Property and assign their interests in the applicable Facility Lease in
accordance with the provisions of the applicable Facility Lease, and (iii) the
use of each Real Property for its current use and the current conduct of the
corresponding Business by the Sellers, all of which are in full force and
effect. To the Knowledge of Sellers, each Real Property is in compliance with
the Permitted Encumbrances.
(f) With respect to each Facility Lease:
(i) Sellers have provided to Buyer a complete copy of the Facility
Lease;
(ii) The Facility Lease has been duly executed and delivered by, and
are binding and enforceable against the applicable Seller and, to the Knowledge
of Sellers, the current landlord thereunder (the "LANDLORD").
(iii) The Facility Lease is in full force and effect in accordance
with the terms set forth therein, and have not been modified, amended, or
altered, in writing or otherwise, except as described on SCHEDULE 1.1(B);
(iv) The applicable Seller is the sole and exclusive lessee to the
applicable Acquired Facility and Facility Lease;
(v) All obligations of such Seller, as lessee, under the Facility
Lease that accrue to the date of Closing have been performed, and the Landlord
thereunder has unconditionally accepted such Seller's performance of such
obligations;
(vi) To the Knowledge of Sellers, neither such Seller nor Landlord
under the Facility Lease is in breach or default under or is in arrears in the
payment of any sums due or in the performance of any obligations required of
Seller or Landlord under the Facility Lease.
(g) No Person holds any rights to purchase or otherwise acquire all or any
portion of the Purchased Assets (or interest therein), including pursuant to any
purchase agreement, option, right of first offer, right of first refusal, gift
or other agreement.
(h) To the Knowledge of Sellers, no event has occurred, nor does any
circumstance exist that with notice and/or the passage of time would constitute
an event of default under any of mortgages or loans currently outstanding
pertaining to the Purchased Assets.
(i) Buyer is not required to withhold taxes from the payment of sale
proceeds to Sellers under the Code or any applicable state, commonwealth or
local tax laws;
(j) No Seller is a foreign Person for purposes of Section 1445 of the Code
(k) Sellers are in compliance with the requirements of Executive Order No.
13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the "ORDER") and other similar
requirements contained in the rules and regulations of the Office of Foreign
Assets Control, Department of Treasury ("OFAC") and in any enabling legislation
or other Executive Orders or regulations in respect thereof (the Order and such
other rules, regulations, legislation or orders collecting called the
16
"ORDERS"). Neither the Seller nor any of its affiliates (A) is listed on the
Specially Designated Nationals and Blocked Person List maintained by OFAC
pursuant to the Order and/or on any other list of terrorists or terrorist
organizations maintained pursuant to any of the rules and regulations of OFAC or
pursuant to any other applicable Orders (such lists are collectively referred to
as the "LISTS"), (B) is a Person (as defined in the Order) who has been
determined by competent authority to be subject to the prohibitions contained in
the Orders; or (C) is owned or controlled by (including without limitation by
virtue of such Person being a director or owning voting shares or interests), or
acts for or on behalf of, any Person on the Lists or any other Person who has
been determined by competent authority to be subject to the prohibitions
contained in the Orders.
2.8 DELIVERY OF TITLE DOCUMENTS. Sellers have delivered to Buyer (a) copies of
the most recent property tax bills for each Real Property; and (b) a copy of
Sellers' most recent title insurance policy and/or survey for each Real
Property.
2.9 PERSONAL PROPERTY. Each Company, as appropriate, has good title to or a
valid leasehold or license interest in each item of personal property included
in the Purchased Assets, free and clear of any security interests, liens,
restrictions and encumbrances of every kind, nature and description, except such
liens and encumbrances as will be released at Closing. The Purchased Assets
include all assets currently used or useful in the conduct of the Business,
except for the Excluded Assets.
2.10 INTELLECTUAL PROPERTY.
(a) As used herein "INTELLECTUAL PROPERTY" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names (in each case, whether
registered or unregistered) and registrations and applications for registration
thereof together, to the extent applicable, with all of the goodwill associated
therewith, (iii) copyrights (registered or unregistered) and registrations and
applications for registration thereof, (iv) computer software, data, data bases
and documentation thereof, (v) trade secrets and other confidential information
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (vi) World Wide Web addresses and domain
name registrations and (vii) works of authorship including, without limitation,
computer programs, source code and executable code, whether embodied in
software, firmware or otherwise, documentation, designs, files, records, data
and mask works and any rights in semiconductor masks, layouts, architectures or
topography. As used herein "COMPANY INTELLECTUAL PROPERTY" means Intellectual
Property owned or used by any Company, but excluding the intellectual property
listed on SCHEDULE 1.2 (Excluded Assets).
(b) SCHEDULE 2.10(B) hereto contains (1) a complete and accurate list of
all Company Intellectual Property included in clauses (i) - (iii) and (vi) of
the definition of Intellectual Property, and (2) a complete and accurate list of
all licenses and other rights granted by any Company to any natural person,
corporation, limited liability company, partnership, trust or other entity (each
a "PERSON") with respect to any Company Intellectual Property and all licenses
and
17
other rights granted by any Person to any Company with respect to any Company
Intellectual Property (excluding "off-the-shelf" programs or products or other
"shrink wrap" software licensed in the ordinary course of such Company's
Business) identifying the subject Company Intellectual Property and describing
the material terms of such licenses or other rights. Except as set forth on
SCHEDULE 2.10(B), to the Knowledge of Sellers, there is no threatened or
reasonably foreseeable loss or expiration of any Company Intellectual Property.
(c) Each Company owns or possesses sufficient legal rights to all
Intellectual Property necessary for or used or useful in the Business and to the
Knowledge of Sellers, without any infringement of the rights of others.
2.11 INVENTORIES. As of the Closing, the inventory of each Company will be
reasonable in kind and amount in light of the normal needs of the Business.
2.12 RESIDENTS AND SUPPLIERS. SCHEDULE 2.12 sets forth the average daily census
for each Acquired Facility for 2005, 2006 and each of the months in 2007 ending
prior to the execution of this Agreement. SCHEDULE 2.12 hereto also sets forth a
list of (a) each hospital, health maintenance organization, physician or
physician group that (i) accounted for more than 5% of the patient referrals to
any Company during 2006, (ii) accounted for more than 5% of the aggregate
patient referrals to all of the Companies ▇▇▇▇▇▇ ▇▇▇▇, (▇▇▇) is expected by the
Sellers to account for more than 5% of the patient referrals to any Company
during 2007, or (iv) is expected by Sellers to account for more than 5% of the
aggregate patient referrals to all of the Companies during 2007, and (b) each
customer that (i) purchased more than 5% of the services of any Company during
2006, (i) purchased more than 5% of the aggregate services of all of the
Companies ▇▇▇▇▇▇ ▇▇▇▇, (▇▇▇) is expected by the Sellers to purchase more than 5%
of the services provided by any Company during 2007, or (iv) is expected by the
Sellers to purchase more than 5% of the aggregate services provided by all of
the Companies during 2007 (such referral sources and customers are referred to
collectively as the "MATERIAL CUSTOMERS"). To the Knowledge of the Sellers, no
Material Customer plans to discontinue or materially reduce resident referrals
to or the services purchased from any Company. Except as set forth on SCHEDULE
2.12, during the previous 18 months no Material Customer has terminated, or to
the Knowledge of the Sellers, threatened to terminate, its relationship with any
Company, or has decreased materially or, to the Knowledge of the Sellers,
threatened to decrease or limit materially the residents referred to or the
service purchased from any Company, and, to the Knowledge of the Sellers, no
Company will lose or suffer material diminution in its relationship with any
Material Customer as a result of the Transactions. To the Knowledge of the
Sellers, all suppliers material to any Company will continue to sell to such
Company the products and services currently sold by each of them. To the
Knowledge of Sellers, each Company maintains good commercial working
relationships with each of its residents, Material Customers, referral sources
and suppliers.
2.13 THIRD-PARTY PAYORS. Except as set forth on SCHEDULE 2.13 hereto, during the
previous 18 months no Company has lost any private third-party payor contract or
the right to participate in any Government Healthcare Program or suffered any
material diminution in its relationship with any third-party payor or Government
Healthcare Programs, since such date, to the Knowledge of the Sellers, no such
action is threatened against any Company, and, to the Knowledge of the Sellers,
no Company may reasonably be expected to lose or suffer a material
18
diminution in its relationship with any material private third party payor or
any Government Healthcare Program as a result of the Transactions. Except as set
forth on SCHEDULE 2.13 hereto, (1) no notice of any offsets against future
reimbursement has been received by any Company and (2) there are no pending
appeals, adjustments, challenges, audits, notices of intent to reopen or open
completed payments with respect to any Government Healthcare Program payments
received by any Company.
2.14 CERTAIN FINANCIAL RELATIONSHIPS. All financial relationships (whether or
not memorialized in a writing) that any Company has or had with a physician or
an immediate family member of a physician since January 1, 1998 either (1)
satisfy the requirements of an exception to 42 U.S.C. Section 1395nn or (2) do
not involve the referral of residents to any Company by a physician with whom
any Company has a "financial relationship" within the meaning set forth in 42
U.S.C. Section 1395nn.
2.15 SELLERS' REQUIRED CONSENTS. Except as specified on SCHEDULE 2.15, no
consent, order, authorization, approval, declaration or filing, including,
without limitation, any consent, approval or authorization of or declaration or
filing with any governmental or non-governmental authority or any party to a
Material Contract is required on the part of any of the Sellers for or in
connection with the execution, delivery or performance of this Agreement and the
agreements, documents and instruments contemplated hereby (the "SELLERS'
REQUIRED CONSENTS"). Subject to obtaining the Sellers' Required Consents
specified on SCHEDULE 2.15, the execution, delivery and performance of this
Agreement and the other instruments, documents and agreements contemplated
hereby by the Sellers will not result in any violation of, be in conflict with
or constitute a default under, any law, statute, regulation, ordinance,
agreement, contract, instrument, Authorization, judgment, decree or order to
which any Company is a party or by which any Company is bound.
2.16 REGULATORY AND LEGAL COMPLIANCE.
(a) Each Company is in compliance in all material respects with all
federal, state and local statutes, laws, ordinances, judgments, decrees, orders
or governmental rules, regulations, policies and guidelines applicable to it.
Except as set forth on SCHEDULE 2.16(A), to Sellers' Knowledge no Company has
received any notice from any governmental or regulatory authority or otherwise
of any alleged violation or noncompliance that has not been cured or addressed
by a plan of corrective action.
(b) No Company has received written notice that any action has been taken
or recommended by any governmental or regulatory official, body or authority,
either to revoke, withdraw or suspend any Authorization to operate any Company
or to terminate or decertify any participation of any Company in any Government
Healthcare Programs, nor to the Knowledge of the Sellers, is there any decision
not to renew any Medicare or Medicaid provider or supplier agreement related to
any Company. No Company or any of their respective directors, officers or, to
the Knowledge of Sellers, employees is or has been excluded or debarred from
participation in any Government Healthcare Program.
(c) To the Knowledge of Sellers, the operations of each Company are in
compliance with and do not otherwise violate the federal Medicare and Medicaid
statutes regarding health
19
professional self-referrals, 42 U.S.C. Section 1395nn and 42 U.S.C. Section
1396b, or the regulations promulgated pursuant to such statute, or similar state
or local statutes or regulations.
(d) No Company nor its respective, partners, officers, members, managers
and directors, nor to the Knowledge of the Sellers, any Persons who provide
professional services under agreements with such Company have, in connection
with their activities directly or indirectly related to such Company, engaged in
any activities which are prohibited under federal Medicare and Medicaid
statutes, 32 U.S.C. Section 3729 et seq., 42 U.S.C. Sections 1320a-7, 1320a-7a
and 1320a-7b, or the regulations promulgated pursuant to such statutes or
related state or local statutes or regulations or which are prohibited by rules
of professional conduct, including but not limited to the following:
(i) making or causing to be made a false statement or representation
of a material fact in any application for any benefit or payment;
(ii) making or causing to be made any false statement or
representation of a material fact for use in determining rights to any benefit
or payment;
(iii) presenting or causing to be presented a claim for reimbursement
for services under any Government Healthcare Program that is for an item or
service that is known or should be known to be (A) not provided as claimed, or
(B) false or fraudulent;
(iv) failing to disclose knowledge by a claimant 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;
(v) offering, paying, soliciting or receiving any remuneration
(including, without limitation, any kickback, bribe, or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (A) 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 or in part by any
Government Healthcare Program, or (B) in return for purchasing, leasing, or
ordering any good, facility, service, or item for which payment may be made in
whole or in part by any Government Healthcare Program; or
(vi) making or causing to be made or inducing or seeking to induce the
making of any false statement or representation (or omitting to state a fact
required to be stated therein or necessary to make the statements contained
therein not misleading) of a material fact with respect to (A) the conditions or
operations of a facility in order that the facility may qualify for any
Government Healthcare Program certification, or (B) information required to be
provided under Section 1124A of the Social Security Act (42 U.S.C. Section
1320a-3). Without limiting the foregoing clause (vi), each Seller represents and
warrants that it has supplied the Secretary of Health and Human Services or the
appropriate state agency with full and complete information as to the identity
of each Person with an "ownership or control interest", as defined under Section
1124A of the Social Security Act (42 U.S.C. Section 1320a-3), in such Seller.
(e) To the Knowledge of Sellers, the operations of each Company are in
compliance with and do not violate any federal, state or other statutes or
regulations governing the lawfulness
20
and fairness of its business practices or its responsibilities to uphold and
protect the rights of residents and other individuals treated by each Company.
(f) Each Company, or portion thereof, or Company group health plan which
has been determined to be a Covered Entity pursuant to the Health Insurance
Portability and Accountability Act of 1996 and any regulations promulgated
thereunder ("HIPAA") (i) is executing transactions in compliance with, or
capable of submitting transactions in compliance with (in the event that
insurers or payers are not yet accepting standard transactions), the standard
transaction requirements established by HIPAA for "Covered Entities", (ii) is
operating in compliance in all material respects with the HIPAA privacy
regulations and comparable state statutes and regulations for "Covered
Entities", including without limitation executing all necessary business
associates agreements as required by HIPAA, and (iii) has developed and
implemented appropriate safeguards to comply with the final HIPAA security
regulations and comparable state statutes and regulations.
(g) Except as set forth on SCHEDULE 2.16(G), none of the Companies has
provider contracts with TRICARE or the Department of Veterans Affairs.
(h) Each Company maintains in one or more separate trust accounts all
Company Deposits required by applicable law to be held for the benefit of
residents. The Companies are in compliance with applicable law with respect to
all such Company Deposits.
(i) The Sellers have furnished Buyer with complete copies of all surveys,
inspection reports and similar examination reports relating to any inspections
or examinations by any federal, state or local regulatory agency or
administration or accrediting body having jurisdiction over the Companies during
the year ended December 31, 2005 and 2006 and through the date of this Agreement
(collectively, the "SURVEYS"). Except as set forth on SCHEDULE 2.16(I), such
Surveys do not contain any material violations of federal, state and local
statutes, laws, ordinances, judgments, decrees, orders or governmental rules,
regulations, policies and guidelines applicable to it except as have been cured
or addressed by a plan of corrective action.
2.17 COST REPORTS. The Sellers have furnished Buyer with copies of all cost
reports filed by the Companies with the appropriate New Mexico state agency, the
appropriate Medicare and Medicaid agencies and/or contractors designated by such
agencies in respect of the operation of the Acquired Facilities for the years
ended December 31, 2004, 2005 and 2006, if applicable, and any interim periods
during the years then ended and during 2007. Such cost reports did not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading. Such
cost reports were filed no later than the date on which such final cost reports
were required to be filed by law under the terms of the applicable Government
Healthcare Program, and the Companies have provided the appropriate agencies
and/or contractors designated by such agencies with any information needed to
support claims for reimbursement made by the Companies either in said final cost
reports or in any cost reports filed for prior cost reporting periods.
2.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Except as set forth on SCHEDULE
2.18, no Seller nor any partner, officer, director, owner, manager, employee or
agent of any Seller, nor any other Person acting on behalf of any Seller, acting
alone or together, has (a) received, directly or
21
indirectly, any rebates, payments, commissions, promotional allowances or any
other economic benefits, regardless of their nature or type, from any customer,
governmental employee or other Person with whom or which such Seller has done
business, or (b) directly or indirectly, given or agreed to give any gift or
similar benefit to any hospital, physician, health maintenance organization or
other Person which refers patients to such Seller or any facility of such Seller
which, in the case of either clause (a) or clause (b) above, could reasonably be
expected to subject such Seller to any damage or penalty in any civil, criminal
or governmental litigation or proceeding.
2.19 LICENSES AND PERMITS. SCHEDULE 2.19 sets forth all material licenses,
permits, authorizations, accreditations, certificates of need and certifications
of governmental or regulatory bodies or authorities, accrediting bodies, and
third parties held by any Company, including without limitation all licenses,
franchises, permits, accreditations and provider or supplier agreements as may
be required under Title XVIII and XIX of the Social Security Act and other
applicable laws for reimbursement of services rendered or goods sold, necessary
or advisable under applicable law for the conduct of its Business (collectively,
the "AUTHORIZATIONS"). Each Company is in material compliance with all such
Authorizations, including, without limitation, the conditions of participation
in all applicable Government Healthcare Programs, all of which are and will be
in full force and effect and not subject to any adverse restrictions up to the
Closing. To the Knowledge of Sellers, there are no other such licenses, permits,
authorizations or certifications required for the operation of the Business by
any Company which such Company has not obtained or which, in good industry
practice, such Company should hold for the conduct of the Business. To the
Knowledge of the Sellers, there has been no threatened suspension, revocation or
invalidation of any Authorization, nor is there any basis therefor.
2.20 LITIGATION. Except as set forth on SCHEDULE 2.20 there is no action, suit,
proceeding, audit or investigation before any court, arbitrator or governmental
authority, pending or, to the Knowledge of the Sellers, threatened against any
Company or, to the Knowledge of the Sellers, against any member, officer,
director or employee of any Company in relation to the affairs of any Company.
No Company is currently planning to initiate any action, suit, or proceeding
relating to the Purchased Assets or its Business before any court, arbitrator or
governmental authority. No Company (1) is a party to any corporate integrity
agreements, or (2) has any reporting obligations pursuant to a settlement
agreement, plan of correction, or other remedial measure entered into with any
governmental or regulatory bodies or authorities.
2.21 EMPLOYEES AND COMPENSATION.
(a) Each Company is in compliance in all material respects with the Age
Discrimination in Employment Act of 1967, as amended, the Americans with
Disabilities Act of 1990, as amended, ERISA, and state fair employment
practices, laws and regulations and other laws prohibiting employment
discrimination.
(b) Each Company is in compliance in all material respects with all
applicable federal, state and local laws and regulations respecting employment
and employment practices in the jurisdictions within which they operate. Each
Company is in compliance with all applicable
22
laws and regulations governing minimum wage, including without limitation any
other laws (such as Medicaid) that impose or establish wage requirements based
upon minimum wage laws.
(c) Except as set forth on SCHEDULE 2.21(C), no employees of any Company
are represented by a union, and there is no labor strike, dispute, arbitration,
grievance, slowdown, stoppage, organizational effort, dispute or proceeding by
or with any employee or former employee of any Company or any labor union
pending or to the Knowledge of Sellers threatened against any Company.
(d) SCHEDULE 2.21(D) sets forth a complete list of all employees of and
consultants to any Company, with annual compensation in excess of $50,000,
showing date of hire, hourly rate or salary or other basis of compensation,
other benefits accrued as of a recent date and job function. To the Knowledge of
Sellers, no employee listed on SCHEDULE 2.21(D) has been convicted of or pleaded
guilty or nolo contendre to (i) any felony or (ii) any other criminal violation
applicable to the Business or any similar business.
(e) There are no Company employees or, to the Knowledge of the Sellers, no
Company has entered into consulting contracts or other arrangements with
individuals or entities that have been excluded or debarred from participation
in any Government Healthcare Program. No Company has identified, reassigned or
terminated within the past two years, any officer, director, employee,
consultant, independent contractor or vendor/supplier who has been the subject
of an exclusion or debarment action.
2.22 ERISA; COMPENSATION AND BENEFIT PLANS.
(a) SCHEDULE 2.22(A) sets forth all employee compensation and benefit
plans, agreements, commitments, practices or arrangements of any type
(including, but not limited to, plans described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) offered,
maintained or contributed to by any Company for the benefit of current or former
employees or directors of any Company, or with respect to which any Company has
or may have any liability, whether direct or indirect, actual or contingent
(including, but not limited to, liabilities arising from affiliation under
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended
(together with applicable regulations, the "CODE") or Section 4001 of ERISA)
(collectively, the "BENEFIT PLANS"), and includes a written description of all
oral Benefit Plans. There are no material compensation or benefit plans,
agreements, commitments, practices or arrangements of any type providing
benefits to employees or directors of any Company, or with respect to which any
Company may have any liability, other than the Benefit Plans.
(b) With respect to each Benefit Plan, each Company has delivered to Buyer
complete copies of: (i) any and all plan texts and agreements (including, but
not limited to, trust agreements and insurance contracts); (ii) any and all
material employee communications (including all summary plan descriptions);
(iii) the most recent annual report (Form 5500), if applicable; and (iv) the
most recent annual and periodic accounting of plan assets, if applicable.
(c) With respect to each Benefit Plan: (i) such plan has been administered
and enforced in accordance with its terms and all applicable laws, regulations
and rulings in all
23
material respects; (ii) no material disputes nor any audits or investigations by
any governmental authority are pending or, to the Knowledge of the Sellers,
threatened; (iii) all contributions, premiums, and other payment obligations
have been accrued on the Balance Sheet in accordance with generally accepted
accounting principles, and, to the extent due, have been made on a timely basis,
in all material respects; (iv) each Company has expressly reserved in itself the
right to amend, modify or terminate such plan, or any portion of it, at any time
without liability to itself; (v) no such plan requires any Company to continue
to employ any employee or director; (vi) no such plan is, or has ever been,
subject to Title IV of ERISA; (vii) no such plan provides medical or death
benefits with respect to current or former employees or directors of any Company
beyond their termination of employment, other than coverage mandated by Sections
601-608 of ERISA and 4980B(f) of the Code.
(d) Except as set forth on SCHEDULE 2.22(D), the consummation of the
Transactions contemplated by this Agreement will not (i) entitle any Person to
severance pay, (ii) accelerate the time of payment or vesting under any Benefit
Plan, or (iii) increase the amount of compensation or benefits due to any
Person. SCHEDULE 2.22(D) lists all estimated Accrued PTO obligations to current
employees, including Accrued PTO obligations that will be owed to current
employees as a result of the consummation of the Transactions.
2.23 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of Sellers, the leasing, ownership and use of the
Acquired Facility and the Purchased Assets, the occupancy and operation thereof,
and the conduct of the Business of each Company, are in compliance in all
material respects with all applicable federal, state and local laws, ordinances,
regulations, standards and requirements relating to pollution, environmental
protection, hazardous substances and related matters. To the Knowledge of
Sellers and except as noted on SCHEDULE 2.23, there is no liability attaching to
any Company, any Acquired Facility or any Purchased Assets or the ownership or
operation thereof, as a result of actions of the Sellers or any other Person,
for any hazardous substance that may have been discharged on or released from
such premises, or disposed of on-site or off-site, or any other circumstance
occurring prior to the Closing or existing as of the Closing. For purposes of
this Agreement, "hazardous substance" shall mean oil, mold or any other
substance which is included within the definition of a "hazardous substance",
"pollutant", "toxic substance", "toxic waste", "hazardous waste", "contaminant"
or other words of similar import in any federal, state or local environmental
law, ordinance or regulation.
(b) No Company is in violation of, or to the Knowledge of Sellers, is the
subject of any investigation, inquiry or enforcement action by any governmental
authority under the Medical Waste Tracking Act, 42 U.S.C. Section 6992 et seq.,
or any applicable state or local governmental statute, ordinance or regulation
dealing with the disposal of medical wastes ("MEDICAL WASTE LAWS"). Each Company
has obtained and is in compliance in all material respects with any permits
related to medical waste disposal required by the Medical Waste Laws, and has
taken reasonable steps to determine, and has determined, that all disposal of
medical waste by it has been in compliance with the Medical Waste Laws.
2.24 INSURANCE. SCHEDULE 2.24 sets forth all insurance policies under which any
Company is insured, the name of the insurer of each policy, the type of policy
provided by such insurer, the
24
amount, scope and period covered thereby and a description of any material
claims made thereunder (collectively, the "INSURANCE POLICIES"). Such Insurance
Policies are valid and in full force and effect and in the good faith estimate
of Sellers, are adequate to insure against all liabilities, claims and risks
against which it is customary for companies similarly situated as the Companies
to insure. All premiums due to date under such Insurance Policies have been
paid, no default exists thereunder and, with respect to any material claims made
under such policies, no insurer has made any "reservation of rights" or refused
to cover all or any portion of such claims. No Company has received any notice
of any proposed material increase in the premiums payable for coverage, or
proposed reduction in the scope (or discontinuation) of coverage, under any of
such Insurance Policies. All liabilities and expenses relating to the Insurance
Policies have been properly accrued on the Balance Sheet.
2.25 DEBT. Other than as listed on SCHEDULE 2.25, at the Closing Sellers will
not have any principal, interest or expenses in respect of borrowed money,
capital leases, letters of credit and installment purchases incurred by the
Companies prior to the Closing that creates a lien or encumbrance on any
Purchased Asset.
2.26 DISCLOSURE. To the Knowledge of Sellers, the representations, warranties
and other statements of the Sellers contained in this Agreement and the other
documents, certificates and written statements furnished to Buyer by or on
behalf of the Sellers pursuant thereto, taken as a whole, do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained herein and therein not misleading.
2.27 BROKERS. Except for ▇▇▇▇▇, no finder, broker, agent, financial advisor or
other intermediary has acted on behalf of any Seller in connection with this
Agreement or any of the Transactions, and except for ▇▇▇▇▇, no such Person is
entitled to any fee, payment, commission or other consideration in connection
therewith as a result of any arrangement made by such Seller. Each Seller hereby
agrees to indemnify, defend and hold Buyer harmless from and against any claim,
loss, damage, cost or liability for any broker's commission or finder's fee
asserted as a result of a breach of the foregoing representation and warranty.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF BENEFICIAL OWNERS
Each Beneficial Owner represents and warrants to the Buyer that each of the
statements contained in this ARTICLE 3 pertaining to such Beneficial Owner are
true and correct and will be true and correct as of the Closing Date:
3.1 AUTHORITY. Such Beneficial Owner has all requisite power and authority to
enter into this Agreement and perform such Beneficial Owner's obligations
hereunder, and this Agreement has been duly authorized by such Beneficial Owner
and constitutes a valid and binding obligation of such Beneficial Owner
enforceable against such Beneficial Owner in accordance with its terms.
3.2 NO CONFLICT. The execution, delivery and performance of this Agreement and
the other instruments and agreements contemplated hereby by such Beneficial
Owner will not result in any violation of, be in conflict with or constitute a
default under, any law, statute, regulation
25
ordinance, material contract or agreement, instrument, judgment, decree or order
to which such Beneficial Owner is a party or by which such Beneficial Owner is
bound.
3.3 BROKERS. Except for ▇▇▇▇▇, no finder, broker, agent, financial advisor or
other intermediary has acted on behalf of any Beneficial Owner in connection
with this Agreement or any of the Transactions, and except for ▇▇▇▇▇, no such
Person is entitled to any fee, payment, commission or other consideration in
connection therewith as a result of any arrangement made by such Beneficial
Owner. Each Beneficial Owner hereby agrees to indemnify, defend and hold Buyer
harmless from and against any claim, loss, damage, cost or liability for any
broker's commission or finder's fee asserted as a result of a breach of the
foregoing representation and warranty.
3.4 PERSONAL FINANCIAL STATEMENTS. Each Beneficial Owner has made available to
Buyer a true and complete copy of his personal financial statements as of June
30, 2007. Such personal financial statements fairly present, in all material
respects, the financial position of such Beneficial Owner as of June 30, 2007.
Since June 30, 2007, there has been no material adverse change in the financial
condition of any Beneficial Owner from that disclosed in his personal financial
statements.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to the Sellers that each of the statements
contained in this 3.3 is true and correct and will be true and correct as of the
Closing Date:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware.
4.2 AUTHORITY. Buyer has all requisite corporate power and authority to enter
into this Agreement and perform such Buyer's obligations hereunder, and this
Agreement has been duly authorized by Buyer and constitutes a valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms.
4.3 BUYER REQUIRED CONSENTS. Except as specified on SCHEDULE 4.3, no consent,
order, authorization, approval, declaration or filing is required on the part of
Buyer for or in connection with the execution, delivery or performance of this
Agreement and the agreements, documents and instruments contemplated hereby, or
the conduct of any Business by Buyer after the Closing (the "BUYER REQUIRED
CONSENTS"). Without limiting the generality of the foregoing, Buyer Required
Consents shall include (a) any and all local, state and federal licenses
necessary to enable Buyer to operate the Acquired Facilities and Businesses from
and after the Closing and (b) the required certification by the appropriate
Government Healthcare Programs and/or contractors designated by such Government
Healthcare Programs necessary to enable Buyer to ▇▇▇▇ and receive payment under
applicable Government Healthcare Programs. Buyer has no reason to believe that
all of Buyer Required Consents will not be obtained. Subject to obtaining Buyer
Required Consents specified on SCHEDULE 4.3, the execution, delivery and
performance of this Agreement and the other instruments, documents and
agreements contemplated hereby by
26
the Sellers will not result in any violation of, be in conflict with or
constitute a default under, any law, statute, regulation, ordinance, agreement,
contract, instrument, license, permit, authorization, judgment, decree or order
to which Buyer is a party or by which Buyer is bound.
4.4 BROKERS. No finder, broker, agent, financial advisor or other intermediary
has acted on behalf of Buyer in connection with this Agreement or any of the
Transactions, and no such Person is entitled to any fee, payment, commission or
other consideration in connection therewith as a result of any arrangement made
by Buyer. Buyer hereby agrees to indemnify, defend and hold Sellers and the
Beneficial Owners, harmless from and against any claim, loss, damage, cost or
liability for any broker's commission or finder's fee asserted as a result of a
breach of the foregoing representation and warranty.
4.5 DISCLOSURE. The representations, warranties and other statements of Buyer
contained in this Agreement and the other documents, certificates and written
statements furnished to Buyer by or on behalf of Buyer pursuant thereto, taken
as a whole, do not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained herein or
therein not misleading
ARTICLE 5.
COVENANTS OF THE SELLERS AND BENEFICIAL OWNERS
5.1 CONDUCT OF THE BUSINESS.
(a) The Sellers will cause each Company to, prior to the Closing:
(i) maintain its corporate or limited liability company existence;
(ii) other than as contemplated in the Transactions, use all
reasonable efforts to preserve its Business and its business organization
intact, retain its Authorizations, preserve the existing contracts and goodwill
of its customers, suppliers, personnel and others having business relations with
it;
(iii) conduct its Business only in the ordinary course (including
without limitation the maintenance of inventory levels, supply levels and
operational standards, consistent with past practice);
(iv) use all reasonable efforts to operate in such a manner that the
representations and warranties of the Sellers set forth in this Agreement on the
date hereof will be true and correct as of the Closing Date with the same force
and effect as if such representations and warranties had been made on and as of
the Closing Date; and
(v) perform in a timely manner all of its obligations under each
Facility Lease.
(b) Except as set forth on SCHEDULE 5.1(B), the Sellers will cause each
Company not to, prior to the Closing, without Buyer's prior written consent
(such consent not to be unreasonably withheld or delayed):
(i) change its method of management or operations in any material
respect;
27
(ii) dispose of or acquire any material assets or properties or make
any commitment to do so, other than inventory in the ordinary course of its
Business;
(iii) incur, create or become obligated with respect to any material
liabilities or material obligations to purchase or supply goods or services,
other than in the ordinary course of business;
(iv) subject any of its properties or assets to any lien, security
interest, mortgage or encumbrance, in each case other than in the ordinary
course of its Business;
(v) modify, amend, cancel or terminate any Material Contract or
Authorization;
(vi) make any change in the compensation paid or payable to any
officer, director, employee, agent, representative or consultant as shown or
required to be shown on a schedule hereto, or pay or agree to pay any bonus or
similar payment (other than bonus payments or other amounts to which such
Company is committed and which are expressly disclosed in this Agreement or a
schedule hereto);
(vii) promote, change the job title of, or otherwise alter in any
material respect the responsibilities or duties of, any management employee or
officer of such Company;
(viii) enter into any lease, contract or agreement that if in
existence on the date hereof would have constituted a Material Contract;
(ix) make any change in its accounting practices or procedures;
(x) change its customer pricing, rebates or discounts, other than in
the ordinary course of its Business;
(xi) take any other action which could have a material adverse effect
on the Business or the affairs, assets, condition (financial or otherwise) or
prospects of any Company, or could adversely affect or detract from the value of
any Company, its assets or the Business;
(xii) amend, renew, expand or assign any Facility Lease or enter into
any new leases; or
(xiii) commit to do any of the foregoing referred to in clauses (i) -
(xii).
5.2 EFFORTS. The Sellers will use all commercially reasonable efforts (a) to
cause the conditions specified in ARTICLE 7 to be satisfied as soon as
practicable, and (b) to assist Buyer in its due diligence efforts, including but
not limited to the actions described in Section 1.7.
5.3 EXCLUSIVITY. Until the termination of this Agreement by either party in
accordance with Section 8.1, Sellers will not, and will cause each Company's
equity owners, members, managers, officers, directors, employees and agents not
to solicit or enter into any discussions or negotiations with, or furnish or
cause to be furnished any information concerning any Company to any Person
(other than Buyer and its officers, managers, employees and agents) in
connection
28
with any proposed acquisition of all or a portion of any Company, whether by
merger, purchase of equity interests, sale of the assets (not in the ordinary
course of its Business) or other acquisition or business combination involving
any Company. Each Seller agrees to promptly disclose to Buyer all such
unsolicited offers or indications of interest and the terms thereof.
5.4 NON-COMPETITION AND NON-SOLICITATION COVENANTS.
(a) For a period of five years after the Closing, each Seller and
Beneficial Owner shall not, and shall cause each of its Affiliates, Family
Members, officers and managers to not, directly or indirectly, or as a
stockholder, partner, member, manager, employee, consultant or other owner or
participant in any Person other than Buyer, engage in or assist any other Person
to engage in any Business in which any Company is engaged or in which any
Company is planning to engage or is considering engaging on the date hereof,
anywhere within 30 miles from any Acquired Facility or Development Area without
the prior written consent of Buyer. Nothing contained in this Section 5.4(a)
shall prohibit the Family Members from accepting employment at any location and
with any Person, including any competitor of Buyer or of any Company.
(b) For a period of five years after the Closing, each Seller and
Beneficial Owner shall not, and shall cause each of its Affiliates, Family
Members, officers and managers to not, directly or indirectly, solicit, endeavor
to entice away from Buyer or any of its Affiliates, or offer employment or a
consulting or other position to, or otherwise interfere with the business
relationship of Buyer or any of its Affiliates with any other Person who is or
was within the one-year period prior thereto, a customer or employee of,
consultant or supplier to, referral source for or other Person having a material
business relationship with, Buyer or any of its Affiliates.
(c) In conjunction with the termination of employment of each Family Member
by Sellers prior to Closing, Sellers shall enter into a severance agreement with
each such Family Member in form and substance reasonably acceptable to Buyer and
containing the restrictions contained in 5.4(a) and (b) for the benefit of Buyer
and its Affiliates (the "FAMILY MEMBER SEVERANCE AGREEMENTS"). Each such Family
Member Severance Agreement shall be delivered to Buyer at or prior to Closing
(d) "FAMILY MEMBER" shall mean each of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇.
5.5 INJUNCTIVE RELIEF; LIMITATION ON SCOPE. Each of the Sellers and Beneficial
Owners acknowledges that any breach or threatened breach of the provisions of
Sections 5.3 or 5.4 of this Agreement will cause irreparable injury to Buyer for
which an adequate monetary remedy does not exist. Accordingly, in the event of
any such breach or threatened breach, Buyer shall be entitled, in addition to
the exercise of other remedies, to seek and (subject to court approval) obtain
injunctive relief, without necessity of posting a bond, restraining the Sellers
and/or Beneficial Owners from committing such breach or threatened breach. The
right provided under this Section 5.5 shall be in addition to, and not in lieu
of, any other rights and remedies available to Buyer. The Sellers and Beneficial
Owners further acknowledge that the provisions of Section 5.4 of this Agreement
are made as a material inducement to Buyer and its Affiliates to consummate the
Transactions contemplated by this Agreement, which Transactions are of
substantial benefit to the Sellers and Beneficial Owners, and that such
provisions are reasonable in geographic scope, duration, activity and subject.
29
5.6 DELIVERY OF FINANCIAL STATEMENTS. From the date hereof until the Closing,
the Sellers will deliver to Buyer, not later than 30 days after the end of each
month, an unaudited, consolidated balance sheet as of the end of such month and
unaudited, consolidated statements of income and members' equity for each
Company for such month. The Sellers covenant and agree that such financial
statements and the notes thereto, if any, shall be complete and accurate in all
material respects and fairly present the financial condition of such Company at
the respective dates thereof and the results of its operations for the
respective months then ended, and shall be prepared in accordance with the books
and records of the Companies in conformity with generally accepted accounting
principles, consistently applied with the financial statements referred to in
Section 2.4, except for the omission of footnotes and normal, immaterial
year-end adjustments. Sellers agree to cooperate, and cause its accountants to
cooperate, in providing (i) historical financial information to Buyer in a
manner and within the time period required for Buyer to satisfy its filing
obligations with the Securities and Exchange Commission and (ii) any other
information reasonably requested by Buyer in order to comply with the
requirements of Rule 3 05 of Regulation S-X of the Securities Act of 1933.
5.7 USE OF NAME. Following the Closing, Buyer shall have the exclusive right to
use the "Sandia" name and any derivations thereof, in connection with the
operation of the Business; provided, however, that Sellers shall not be
obligated to change the existing names of any of their corporations or other
entities.
5.8 BROKER FEES. The Sellers shall be jointly and severally responsible for
paying any and all broker fees, expenses or other payments incurred by the
Sellers in connection with the Transactions, if any.
5.9 ACCRUED PTO. As soon as reasonably practicable following the Closing,
Sellers shall pay all Accrued PTO obligations of the Companies relating to a
period prior to the Closing.
5.10 NO DISSOLUTION OF SELLERS. Each Seller hereby covenants and agrees that:
(i) for a period of four years after the Closing Date, it shall not dissolve or
wind up its affairs; (ii) for a period of four years after the Closing Date, it
shall undertake such actions consistent with good commercial practice to
maintain its limited liability company existence; (iii) as of the Closing Date,
it shall establish sufficient reserves necessary to satisfy all operating
expenses, accounts payable and other similar claims and obligations known to
such Seller as of the Closing Date; (iv) as of the Closing Date, it shall
establish reserves as will be reasonably likely to be sufficient to satisfy any
claim against such Seller which is the subject of a pending action, suit or
proceeding to which such Seller is a party as of the Closing Date; and (v) as of
the Closing Date, it shall, collectively with all other Sellers, establish
reserves and insurance for the Recommended Amount as determined prior to the
Closing by Sellers' current third party insurance broker, AON, through an
actuarial analysis based upon Sellers' historical loss reports. The "RECOMMENDED
AMOUNT" for the Sellers shall be the sum of the aggregate projected costs of
deductibles, professional and general liability losses, insurance premiums and
other costs which the Seller are likely to incur on account of any pending,
contingent or estimated incurred but not reported claims. A copy of such all
calculations, reports and other written materials relating to the calculation of
the Recommended Amount to the extent available to Sellers shall be delivered by
Sellers to Buyer prior to the Closing.
30
ARTICLE 6.
COVENANTS OF BUYER
6.1 REPRESENTATIONS AND WARRANTIES. Until the Closing Date, Buyer will not take
any action that would cause any of the representations and warranties made by
Buyer in this Agreement not to be true and correct in all material respects on
and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date.
6.2 EFFORTS. Buyer will use all commercially reasonable efforts to cause the
conditions specified in ARTICLE 7 to be satisfied as soon as practicable.
6.3 ADMINISTRATIVE FILINGS AND APPEALS. Buyer shall be solely responsible at
Buyer's sole cost and expense for preparation of all applications for
governmental approvals required as a condition to Closing as set forth herein,
and of any filings and applications made pursuant thereto, including but not
limited to the preparation of any application or statement to be made to any
governmental body. Sellers shall reasonably cooperate in the preparation of such
applications and filings and, if necessary, join in any such applications,
provided that in no event shall Sellers be required to incur any cost or
liability in connection with such applications or filings. Without limiting the
foregoing, Sellers shall reasonably cooperate with Buyer in the preparation and
shall execute or join in the execution of filings or other documents as are
necessary for Buyer to obtain (i) any and all local, state and federal licenses
necessary to enable Buyer to operate the Acquired Facilities and Businesses from
and after the Closing and (ii) the required certification by the appropriate
Government Healthcare Programs and/or contractors designated by such Government
Healthcare Programs necessary to enable Buyer to ▇▇▇▇ and receive payment under
such Government Healthcare Programs, including, but not limited to, completing,
prior to the Closing, Centers for Medicare and Medicaid Services Form 855.
6.4 EXPANSION OFFICE SPACE. To the extent permitted under the terms of the
Office Lease, Buyer, as lessee, will sublease to Sellers without the payment of
any monthly rental charge thereunder, the Expansion Office Space for a period of
up to 6 months following the Closing pursuant to a sublease agreement in
customary form and otherwise reasonably acceptable to Buyer and Sellers (the
"Expansion Space Sublease"); provided, however, that the Expansion Space
Sublease shall grant to Buyer, as sublessor, the right to terminate the
Expansion Space Sublease at any time during the term upon not less than 30 days
written notice in the event of either (i) the sublease of the entire Office
Space by Buyer to a third party sublessee or (ii) a termination of the Office
Lease by the Landlord thereunder and/or Buyer, for any reason, including,
without limitation, the mutual agreement of Buyer and such Landlord to so
terminate the Office Lease. In the event of such early termination by Buyer of
the Expansion Space Sublease, Buyer shall reasonably cooperate with Sellers to
provide space in one of the Acquired Facilities for Seller's use in connection
with the winding-up of Seller's affairs and businesses for the remainder of the
otherwise stated term of and on substantially the same terms and conditions of
the Expansion Space Subleaset. The Expansion Space Sublease shall further
provide Sellers with the right during the term of the Expansion Space Sublease
to use six (6) so-called LAN line phones; provided, that the phone charges
incurred in connection therewith with be shall be paid by Sellers. In addition,
during the term of the Expansion Space Sublease, Sellers shall be provided with
access to the Expansion Office Space twenty-four (24) hours per day, seven (7)
31
days per week. Buyer and Sellers shall reasonably cooperate with each other in
obtaining any consent required under the Office Lease for such sublease of the
Expansion Space by Buyer to Sellers.
ARTICLE 7.
CONDITIONS TO CLOSING
7.1 CONDITIONS PRECEDENT TO THE PARTIES' OBLIGATIONS. The obligation of the
parties to consummate the transactions contemplated hereby shall be subject to
the fulfillment to the satisfaction of, or waiver by, the parties of each of the
following conditions on or prior to the Closing:
(a) NO TERMINATION. This Agreement shall not have been terminated pursuant
to ARTICLE 8.
(b) NO ADVERSE PROCEEDINGS. On the Closing Date, no action or proceeding
shall be pending before any governmental authority to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the transactions
contemplated hereby or to recover any damages or obtain other relief as a result
of the transactions proposed hereby.
(c) NO VIOLATIONS. The consummation of the Transactions shall not violate
any governmental rule which could have a material adverse effect on the Business
or the affairs, assets, condition (financial or otherwise) or prospects of any
Company, and which is incapable of being cured.
(d) ASSUMPTION OF CONTRACTS. Buyer and Sellers shall have delivered to the
other party such executed documents and instruments to evidence the assignment
by Sellers and assumption by Buyer of all of Sellers' rights and obligations
under the Assumed Contracts arising after the Closing in a form reasonably
acceptable to Buyer and Sellers.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER. Unless waived in writing by Buyer, the
obligation of Buyer hereunder to consummate the Transactions is subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties
of the Sellers contained in ARTICLE 2 shall be true and accurate in all material
respects (except that the representations and warranties in Sections 2.1 and
2.2, and each other representation or warranty to the extent qualified by
materiality, shall be true and correct in all respects) on and as of the Closing
Date with the same effect as though made on and as of such date.
(b) COVENANTS PERFORMED. Each of the Sellers shall have performed and
complied in all material respects with the covenants, agreements and conditions
required to be performed or complied with by them hereunder on or prior to the
Closing Date.
(c) COMPLIANCE CERTIFICATE. Buyer shall have received a certificate of the
Sellers certifying as to the matters set forth in Sections 7.2(a) and 7.2(b)
above, substantially in the form of Exhibit 7.2(c).
32
(d) CERTIFICATES; DOCUMENTS. Buyer shall have received copies of each of
the following for each of the Companies, certified to its satisfaction by an
officer of each such Company: (i) the Company's Certificate of Formation, as
amended, certified by the Secretary of State of the state of its organization as
of a recent date; (ii) LLC Operating Agreement for each Company; (iii)
resolutions from each Company's Board of Managers, members or similar Persons,
as required, authorizing the execution of this Agreement and all actions
necessary to consummate the Transactions, and (iv) a certificate of the
Secretary of State of its state of organization dated within 10 days hereof as
to the legal existence and good standing of the Company. Buyer shall also have
received such other certificates, documents and materials as it shall reasonably
request.
(e) SELLER REQUIRED CONSENTS, CERTIFICATION AND LICENSES RECEIVED. The
Sellers shall have obtained and delivered to Buyer copies of (i) all Sellers'
Required Consents listed on or required to be listed on SCHEDULE 2.15, and (ii)
all other consents, licenses, approvals, permits or authorizations which are
identified in writing by Buyer and are required to be obtained for the
Transactions and as to which the failure to obtain the same could have a
material adverse effect on the Business or the affairs, assets, condition
(financial or otherwise) or prospects of any Company, or interfere with Buyer's
right or ability to consummate the Transactions.
(f) INSTRUMENTS OF TRANSFER. Each Company shall have delivered to Buyer
such deeds, bills of sale, leases, assignments and other instruments of transfer
as Buyer may reasonably require to transfer to it good and marketable title to
the Purchased Assets, free and clear of all liens, security interests,
mortgages, encumbrances and restrictions of every kind.
(g) NO INJUNCTION. The consummation of the Transactions contemplated hereby
shall not violate any order, decree or judgment of any court or governmental
body having competent jurisdiction.
(h) TITLE. Buyer shall have received unconditional commitments from a title
company to issue the Title Policies.
(i) FACILITY LEASES. With respect to each Facility Lease, Buyer shall have:
(i) obtained from each Landlord, in form and substance reasonably
acceptable to Buyer, a written (i) consent to Sellers' assignment of the
Facility Lease and Buyer's or Buyer's Affiliate's assumption thereof with
respect to those duties, covenants and obligations of the lessee under the
Facility Lease first arising or accruing from and after the Closing, (ii)
estoppel certificate (or similar effect), (iii) amendment to each Facility Lease
providing, in substance, for an amendment to the insurance requirements under
such Facility Lease as provided on SCHEDULE 7.2(I) and (iv) to the extent
required for issuance of any Title Policy or as may be otherwise reasonably
requested by Buyer, a memorandum of such Facility Lease in recordable form
evidencing the leasehold estate created thereby and Buyer's or its Affiliate's
interest thereunder; and
(ii) to the extent required by the holder of any note secured by any
Leased Real Property under the corresponding Facility Lease under the terms of
any deed of trust, mortgage, or similar agreement, obtained the written consent
of such note holder to Sellers'
33
assignment of the Facility Lease and Buyer's or Buyer's Affiliate's assumption
thereof with respect to those duties, covenants and obligations of the lessee
under the Facility Lease first arising or accruing from and after the Closing;
(j) OPERATIONS TRANSFER AGREEMENT. Each of the Companies that operates an
Acquired Facility or Business and Buyer (or Buyer's Affiliate) shall have
entered into an operations transfer agreement substantially in the form attached
hereto as Exhibit 7.2(j)(i) (the "OPERATIONS TRANSFER AGREEMENT"); provided,
however, that with respect to the Company operating the "hospice" Business, the
Operations Transfer Agreement shall be in the form of Exhibit 7.2(j)(i)(A)
attached hereto
(k) ADVERSE CHANGE OR CONDITION. Since the Balance Sheet Date, there shall
have been no event, individually or collectively with all other such events,
which has had or could have a material adverse effect on the Business or the
affairs, assets or prospects of any Company.
(l) INSURANCE COVERAGE. The Sellers shall have provided evidence reasonably
satisfactory to Buyer that the Sellers have arranged for insurance coverage
adequate to insure, or assets (including any trust account established for this
purpose) sufficient to self insure, against all liabilities, claims and risks
against which it is customary for companies similarly situated as the Companies
to insure, to remain in full force and effect to cover claims brought after the
Closing where the events giving rise to such claims occurred prior to the
Closing.
(m) ACTIONS AND PROCEEDINGS. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated hereby or incident
hereto and all other legal matters required for such transactions shall have
been reasonably satisfactory to counsel for Buyer.
(n) NO BAN ON NEW ADMISSIONS. None of the Acquired Facilities shall be
operating under a ban on new admissions or an order of denial of payment for new
admissions.
(o) MDS FORMS AND CERTIFICATIONS. The Sellers shall have delivered a
certificate stating that there are current, complete and signed MDS forms and
physician certifications in the medical record of each patient included in the
patient census for all Acquired Facilities.
(p) LIST OF SERVICE PROVIDERS. Sellers shall have provided to Buyer a
schedule setting forth a complete list of all of the physicians, physical
therapists, occupational therapists, nutritionists and other health care
providers who provide medical or other services to residents of the Companies on
an independent contractor basis, and the material terms of such arrangements.
(q) EMPLOYEES. The employees listed on SCHEDULE 2.21(D) shall have agreed
to initially accept employment with Buyer.
(r) FIRPTA CERTIFICATE AND EQUIVALENT CERTIFICATES. Seller shall have
provided to Escrow Agent a FIRPTA certificate and any state of local law
equivalent thereof in form and substance satisfactory to Escrow Agent.
(s) FINAL REBASED 2007 MEDICAID RATES. If the Final Rebased 2007 Medicaid
Rates have not been determined by the Closing, Buyer and Sellers shall have
obtained reasonable
34
documentary evidence, including a written report from the State of New Mexico or
its audit agent, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, that sets forth an estimate of the Medicaid
Rate Increase which would result in an Excess Annual Revenue Increase of more
than $0.01.
(t) TAIL POLICIES AND ESCROW RESERVES. Sellers shall have purchased one or
more "tail policies" (each, a "TAIL POLICY") covering the Acquired Facilities
and Business of each Company that (i) names Buyer (or Buyer's applicable
Affiliates who own, operate and/or lease such Acquired Facility or Business) as
an "additional insureds," (ii) covers so-called "incurred but not reported
claims" under Sellers' current commercial general liability Insurance Policies
and current medical professional liability Insurance Policies, (iii) covers the
period from the Closing Date through the third (3rd) anniversary of the Closing
Date (the "TAIL PERIOD"), and (iv) has the following coverages for both general
liability and medical professional liability insurance: One Million Dollars
($1,000,000) per claim; and Five Million Dollars ($5,000,000) in the aggregate
for all Facilities and Businesses, of which a maximum of Three Million Dollars
($3,000,000) can be applied to any single Acquired Facility; provided however,
that with respect to the hospice Business of the applicable Seller, such
coverage shall be in the amount of One Million Dollars ($1,000,000) per claim;
and Three Million Dollars ($3,000,000) in the aggregate. The foregoing
requirement may be satisfied either through the extension of Sellers existing
Insurance Policies to cover the Tail Period or the purchase of a new policy to
cover the Tail Period. Prior to Closing, Sellers' shall provide to Buyer a
certificate of each Tail Policy along with a complete copy of such Tail Policy.
(u) NON-COMPETES. Sellers shall have delivered to Buyer such executed
documents and instruments to evidence the assignment by Sellers and their
Affiliates to Buyer or its designated Affiliate of all of Sellers' and Sellers'
Affiliates' rights (but none of their obligations) under the Family Member
Severance Agreements, the ▇▇▇▇▇ Non-Compete and the ▇▇▇▇▇▇ Non-Compete in form
and substance reasonably acceptable to Buyer. On or prior to Closing, Sellers
shall have (i) paid all Family Member Severance Liabilities, all ▇▇▇▇▇
Non-Compete Liabilities and all ▇▇▇▇▇▇ Non-Compete Liabilities and (ii)
delivered to Buyer original estoppel certificates in form and substance
reasonably acceptable to Buyer signed by each of the Family Members, ▇▇▇▇▇ and
▇▇▇▇▇▇ acknowledging such payments in full and consenting to the assignment of
the benefits of the Family Member Severance Agreements, the ▇▇▇▇▇ Non-Compete
and the ▇▇▇▇▇▇ Non-Compete, as applicable, from Sellers and their Affiliates to
Buyer or its designated Affiliate.
(v) INDEMNIFICATION ESCROW AGREEMENT. Each Beneficial Owner shall have
delivered to Buyer an Indemnification Escrow Agreement duly executed by such
Beneficial Owner and the Indemnification Escrow Agent and, at Closing, shall
have caused the Indemnification Escrow Amount to be funded thereunder in
accordance with Section 1.3(d)(iii).
7.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS. Unless waived in writing by the
Sellers, the obligation of the Sellers hereunder to consummate the Transactions
is subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) DEPOSIT OF FUNDS. Seller shall have deposited with Escrow Agent all
funds required to be deposited pursuant to Section 1.3, above.
35
(b) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties
contained in 3.3 shall be true and accurate in all material respects (except
that each representation or warranty to the extent qualified by materiality,
shall be true and correct in all respects) on and as of the Closing Date with
the same effect as though made on and as of such date.
(c) COVENANTS PERFORMED. Buyer shall have performed and complied in all
material respects with the covenants, agreements and conditions required to be
performed or complied with by it hereunder on or prior to the Closing Date.
(d) COMPLIANCE CERTIFICATE. The Sellers shall have received a certificate
of Buyer certifying as to the matters set forth in Sections 7.3 (b) and (c)
above.
(e) BUYER REQUIRED CONSENTS, CERTIFICATION AND LICENSES RECEIVED. Buyer
shall have obtained and delivered to the Sellers copies of all Buyer Required
Consents listed on SCHEDULE 4.3 and no such Buyer Required Consents shall have
been withdrawn or suspended. Without limiting the generality of the foregoing,
Buyers' Required Consents shall include (a) any and all local, state and federal
licenses necessary to enable Buyer to operate the Acquired Facilities from and
after the Closing, (b) the required certification by the appropriate Government
Healthcare Programs and/or contractors designated by such Government Healthcare
Programs necessary to enable Buyer to ▇▇▇▇ and receive payment under such
Government Healthcare Programs, and (c) the approval of Buyer's Board of
Directors to consummate the Transaction.
(f) NO INJUNCTION. The consummation of the Transactions contemplated hereby
shall not violate any order, decree or judgment of any court or governmental
body having competent jurisdiction.
(g) CERTIFICATES; DOCUMENTS. The Sellers shall have received copies of each
of the following for Buyer, certified to its satisfaction by an officer of
Buyer: (i) Buyer's Certificate of Incorporation, as amended, certified by the
Secretary of State of Delaware as of a recent date; (ii) a form of bylaws
applicable to Buyer (together with a certification that the actual bylaws for
Buyer are substantially in the form of the documents provided); (iii) if
applicable, resolutions and votes from Buyer's Board of Directors and/or
shareholders authorizing Buyer to sign this Agreement and take all actions
necessary to consummate the transactions contemplated hereby, and (iv) a
certificate of the Secretary of State of its state of organization as of a
recent date as to the legal existence and good standing of Buyer. The Sellers
shall have used commercially reasonable efforts, and cooperated with Buyer, in
an effort to obtain a certificate of good standing for Buyer from the Secretary
of State of the State of Delaware. Buyer shall also have received such other
certificates, documents and materials as it shall reasonably request.
(h) ACTIONS AND PROCEEDINGS. All actions, proceedings, instruments and
documents required to carry out the Transactions contemplated hereby or incident
hereto and all other legal matters required for such Transactions shall have
been reasonably satisfactory to counsel for the Sellers.
36
(i) OPERATIONS TRANSFER AGREEMENT. Buyer (or Buyer's Affiliate) shall have
entered into an Operations Transfer Agreement with each of the Companies that
operates an Acquired Facility or Business.
(j) INDEMNIFICATION ESCROW AGREEMENT. Buyer shall have delivered to each
Beneficial Owner an Indemnification Escrow Agreement duly executed by Buyer.
ARTICLE 8.
TERMINATION
8.1 TERMINATION. This Agreement and the Transactions contemplated hereby may be
terminated at any time prior to the Closing (except as otherwise noted below):
(a) by mutual written consent of Buyer and the Sellers;
(b) by Buyer, if any Seller shall have breached or failed to perform in any
material respect any of such Seller's obligations, covenants or agreements under
this Agreement, or if any of the representations and warranties of any Seller
set forth in this Agreement shall not be true and correct to the extent set
forth in Section 7.2(a), and such breach, failure or misrepresentation is not
cured to Buyer's reasonable satisfaction within 15 days after Buyer gives the
Sellers written notice identifying such breach, failure or misrepresentation;
(c) by the Sellers, if Buyer shall have breached or failed to perform in
any material respect any of its obligations, covenants or agreements under this
Agreement, or any of the representations and warranties of Buyer set forth in
this Agreement shall not be true and correct to the extent set forth in Section
7.3(b), and such breach, failure or misrepresentation is not cured to the
Sellers' reasonable satisfaction within 15 days after the Sellers give Buyer
written notice identifying such breach, failure or misrepresentation;
(d) by either party, if the conditions set forth in Section 7.1 become
incapable of satisfaction;
(e) by Buyer, if the conditions set forth in Section 7.2 become incapable
of satisfaction;
(f) by Buyer, in accordance with Section 1.6 or 1.7;
(g) by the Sellers, if the conditions set forth in Section 7.3 become
incapable of satisfaction;
(h) by Buyer or the Sellers, if the Closing shall not have occurred on or
before October 1, 2007 or such other date, if any, as Buyer and the Sellers may
agree in writing;
(i) by Buyer prior Closing, if Buyer is not satisfied with its due
diligence review or any other aspect of the Purchased Assets and the Business in
any respect, as determined by Buyer in its sole discretion; and
37
(j) by Buyer, if (i) Seller updates any disclosure schedule to this
Agreement in accordance with the first paragraph of Article 2, (ii) such update
occurs after the date of this Agreement, and (iii) such update has an material
adverse effect on such disclosure;
(k) except that this Agreement may not be terminated under this Section
(other than under Sections 8.1(a), 8.1(f), 8.1(i) and 8.1(j)) by or on behalf of
any party that is in breach of any representation or warranty or in violation of
any covenant or agreement contained herein.
8.2 EFFECT OF TERMINATION.
(a) IF, AND ONLY IF, (I) THIS AGREEMENT IS TERMINATED BY THE SELLERS IN
ACCORDANCE WITH SECTION 8.1 DUE TO THE DEFAULT OF BUYER (HEREIN, A "BUYER
DEFAULT TERMINATION") AND (II) NONE OF THE SELLERS OR BENEFICIAL OWNERS IS IN
MATERIAL BREACH OF ANY REPRESENTATION OR WARRANTY CONTAINED HEREIN, OR IN
MATERIAL VIOLATION OF ANY COVENANT OR AGREEMENT CONTAINED HEREIN, THAN SELLERS
SHALL BE RELEASED FROM ALL OF THEIR OBLIGATIONS UNDER THIS AGREEMENT AND, AS
SELLERS' SOLE AND EXCLUSIVE REMEDY, SELLERS SHALL BE ENTITLED TO OBTAIN AND KEEP
AS LIQUIDATED DAMAGES THE DEPOSIT. EXCEPT AS PROVIDED IN SECTION 8.2(B) BELOW,
SELLERS WAIVE ALL OTHER RIGHTS OR REMEDIES IN THE EVENT OF SUCH BUYER DEFAULT
TERMINATION. IN SUCH EVENT, SELLERS AND BUYER SHALL IMMEDIATELY INSTRUCT THE
ESCROW AGENT TO DELIVER THE DEPOSIT, TOGETHER WITH ANY INTEREST THEREON,
IMMEDIATELY TO SELLERS. THE PARTIES ACKNOWLEDGE THAT SELLERS' ACTUAL DAMAGES IN
THE EVENT OF A BUYER DEFAULT TERMINATION WILL BE DIFFICULT TO ASCERTAIN, AND
THAT SUCH LIQUIDATED DAMAGES REPRESENT THE PARTIES' BEST ESTIMATE OF SUCH
DAMAGES. SUCH RETENTION OF THE DEPOSIT BY SELLERS IS INTENDED TO CONSTITUTE
LIQUIDATED DAMAGES TO SELLERS PURSUANT TO SECTIONS 1671, 1676 AND 1677 OF THE
CALIFORNIA CIVIL CODE, AND SHALL NOT BE DEEMED TO CONSTITUTE A FORFEITURE OR
PENALTY WITHIN THE MEANING OF SECTION 3275 OR SECTION 3369 OF THE CALIFORNIA
CIVIL CODE OR ANY SIMILAR PROVISION.
/s/ AZ MSA /s/ RR
------------------------------------- ----------------------------------------
Sellers' Initials Buyer's Initials
(b) In no event shall Section 8.2(a) have any application to or limit
Sellers' rights against Buyer in connection with: (i) Section 1.7 (Buyer's entry
onto any of the Real Properties), (ii) Section 8.2(e) (Cancellation Costs),
(iii) Section 4.4 (Broker Warranty) or (iv) Section 10.14 (Attorneys' Fees).
(c) If this Agreement is terminated in any manner, or under any
circumstance (other than a termination of this Agreement by a party in
accordance with Section 8.1 due to the default of the other party), including
but not limited to the circumstances contemplated under Section 1.6, then the
Sellers and Buyer shall immediately instruct the Escrow Agent to deliver the
Deposit, together with any interest thereon, immediately to Buyer, and Buyer and
its affiliates
38
shall have no further liability or obligation to the Sellers hereunder, or with
respect to the Transactions contemplated hereby.
(d) If, and only if, (i) this Agreement is terminated by the Buyer in
accordance with Section 8.1 due to the default of Sellers and (ii) Buyer is not
in material breach of any representation or warranty contained herein, or in
material violation of any covenant or agreement contained herein, then, subject
to the provisions of Section 9.2 below, Buyer's sole and exclusive remedy, at
law or in equity, shall be to obtain a refund of the Deposit and pursue Sellers
for an action to recover Buyer's actual Losses incurred in connection with this
Agreement; provided, however, that in no event shall Buyer be entitled to
recover any Losses on account of loss of profits or other consequential,
punitive, special or other similar damages. In such event, Sellers and Buyer
shall immediately instruct the Escrow Agent to deliver the Deposit, together
with any interest thereon, immediately to Buyer. Notwithstanding the foregoing,
in lieu of terminating this Agreement in accordance with Section 8.1 due to the
default of Sellers, Buyer may instead compel specific performance of Sellers'
obligation to convey the Purchased Assets to Buyer in accordance with the terms
of this Agreement. Except as provided in this Section 8.2(d), and subject to the
provisions of Section 9.2 below, Buyer hereby expressly waives its rights to
seek any other form of damages or remedies in the event of Sellers' default
hereunder. In the event of a default by Sellers under this Agreement, Buyer
shall be deemed to have elected to terminate this Agreement, receive the Deposit
back and pursue Sellers for an action to recover Buyer's actual Losses incurred
in connection with this Agreement if Buyer fails to file suit for specific
performance against Seller on or before forty-five (45) days following the
scheduled Closing Date, in which case, Escrow Agent shall, without further
instructions or notification from Buyer, refund the Deposit to Buyer.
(e) If this Agreement is terminated by a party in accordance with Section
8.1 due to the default of the other party, then the defaulting party shall be
responsible for all termination charges charged by Escrow Agent; otherwise, the
parties shall share equally in the payment of any such termination charges.
(f) Notwithstanding anything to the contrary in this Agreement, upon any
termination of this Agreement, the obligations of Buyer and Seller under Section
10.5 shall survive such termination for a period of one year.
ARTICLE 9.
SURVIVAL; INDEMNIFICATION
9.1 SURVIVAL. The representations, warranties, covenants and agreements
contained herein shall survive the Closing as specified in this Section 9.1. No
action for a breach of the representations, warranties, covenants, or agreements
contained herein (other than Sections 5.4, 5.7 and 5.11) nor any demand for
indemnification shall be brought more than twelve (12) months following the
Closing Date (or in the case of Sections 2.3, 2.14, 2.16, 2.22, or 2.23 (the
"SPECIFIED REPRESENTATIONS"), more than four years following the Closing Date).
Any claim made pursuant to this Section 9.1 shall be preserved for three (3)
months after the expiration of such twelve (12) month period (or in the case of
the Specified Representations, such four (4) year period) by Buyer upon
notification of such claim to Sellers and Beneficial Owners, of by Sellers upon
notification of such claim to Buyer, provided that such notice describes the
nature
39
of such claim with reasonable specificity. Any claim made pursuant to this
Section 9.1 shall be made by the filing of claim thereon in the Orange County
Superior Court or other court of competent jurisdiction. Time is of the essence.
If no such claim is duly filed within the foregoing twelve (12) month (or in the
case of the Specified Representations, four (4) year) period, or the foregoing
three (3) month period in the event such claim is preserved, then all claims
based on any representations, warranties, covenants and/or agreements arising
under this Agreement shall be forever waived and barred.
9.2 INDEMNIFICATION BY THE SELLERS AND BENEFICIAL OWNERS.
(a) GENERAL. Subject to any applicable limitations set forth below in this
Section 9.2, the Sellers and Beneficial Owners shall, jointly and severally,
indemnify and hold Buyer and its Affiliates harmless from and against all
claims, liabilities, obligations, costs, damages, losses and expenses (including
reasonable attorneys fees) of any nature (collectively, "LOSSES") arising out of
or relating to (i) any breach or violation of the representations, warranties,
covenants or agreements of the Sellers or the Beneficial Owners set forth in
this Agreement, in the Operations Transfer Agreements, or in any other
schedules, exhibits, certificates or other contracts or agreements delivered by
the Sellers or Beneficial Owners pursuant to this Agreement, (ii) any lien,
security interest, mortgage, restriction or encumbrance (other than Permitted
Encumbrances) on the Purchased Assets after the Closing as a result of matters
existing or relating to any period prior to the Closing, or (iii) any Excluded
Liability (regardless of whether information with respect thereto is set forth
on a Schedule hereto).
(b) BENEFICIAL OWNER'S LIABILITY CAP. If the Closing occurs, no Beneficial
Owner shall individually have any liability pursuant to this Agreement in excess
of $2,575,000 (with respect to each Beneficial Owner, the "LIABILITY Cap");
provided, however, that indemnification claims arising out of any breach or
violation of the representations and warranties by any Seller or Beneficial
Owner contained in Sections 2.3 or 3.1 shall not be subject to the foregoing
limitations and shall not be included in the determination of whether the
Liability Cap has been reached. Notwithstanding anything to the contrary in this
Agreement, any Operations Transfer Agreement or in any other schedules,
exhibits, certificates and other contracts or agreements delivered in connection
herewith, with respect to the Liability Cap, the following shall also apply:
(i) The Liability Cap shall not inure to the benefit of any Seller,
and each Seller shall be liable pursuant to Section 9.2(a) above up to the full
amount of the Losses incurred or sustained by Buyer or its Affiliate;
(ii) Each Beneficial Owner shall be liable up to the entire Liability
Cap, notwithstanding that the Indemnification Escrow Amount for each Beneficial
Owner has been funded in an amount less than the Liability Cap; and
(iii) TO THE FULLEST EXTENT PERMITTED BY LAW, EACH BENEFICIAL OWNER
HEREBY WAIVES AND RELEASES THE BENEFITS AND PROTECTIONS OF ANY LOCAL, STATE OR
FEDERAL LAWS, ORDINANCES OR GOVERNMENTAL REGULATIONS THAT PROTECT OR WOULD
PROTECT THE ASSETS OF SUCH BENEFICIAL OWNER FIRST ACQUIRED ON OR AFTER THE
40
CLOSING DATE FROM A CLAIM BROUGHT BY OR JUDGMENT IN FAVOR OF BUYER OR ITS
AFFILIATES FOR ANY LOSSES, INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH IN
N.M. STAT. ▇▇▇. Sections 42-10-1 THROUGH 42-10-13 AND 46A-5-501 THROUGH
46A-5-504.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------- ----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
(c) THRESHOLD. No Seller or Beneficial Owner shall have any liability
pursuant to Section 9.2(a) until the aggregate Losses suffered or incurred by
Buyer for which Buyer is entitled to indemnification hereunder exceeds Fifty
Thousand Dollars ($50,000) (the "THRESHOLD"); provided, however, that
indemnification claims arising out of any breach of the Operations Transfer
Agreements shall not be subject to the foregoing Threshold. The parties
acknowledge and agree that once the Threshold is exceeded, Sellers and the
Beneficial Owners shall have liability hereunder for all Losses, including
Losses below the Threshold.
(d) PROFESSIONAL LIABILITIES AND PERSONAL INJURY CLAIMS. No Seller or
Beneficial Owner shall have any liability pursuant to Section 9.2(a) for Losses
to the extent arising out of or relating to professional liability or personal
injury claims, except to the extent such Losses (i) relate to a breach of the
representations and warranties contained in ARTICLE 2, or (ii) are insured
losses under the Tail Policy, the Insurance Policies, or any other insurance
policies of any Seller, Beneficial Owner, or their Affiliates.
(e) FRAUD; INTENTIONAL MISREPRESENTATION. The limitations set forth in
Sections 9.2(b), (c) and (d) shall not apply to conduct of any Seller or
Beneficial Owner constituting fraud or intentional misrepresentation.
9.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold the Sellers and the
Beneficial Owners harmless from and against all Losses arising out of or
relating to any breach or violation of the representations, warranties,
covenants or agreements of Buyer set forth in this Agreement, in the Operations
Transfer Agreements, or in any other schedules, exhibits, certificates and other
contracts or agreements delivered by Buyer or its Affiliates pursuant to this
Agreement.
9.4 CALCULATION OF LOSSES. The amount of Losses incurred by a party seeking
indemnification hereunder shall be calculated after taking into account
insurance proceeds and other third party recoveries by, and tax costs and
benefits to, such party.
9.5 DEFENSE OF CLAIMS. Upon acknowledgement in writing to the indemnified party
that the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, the indemnifying party
shall be entitled, if it so elects at its own cost, risk and expense, (i) to
take control of the defense and investigation of such lawsuit or action, (ii) to
employ and engage attorneys of its own choice to handle and defend the same
unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal defenses
available to such indemnified party that are different from or
41
additional to those available to the indemnifying party, in which event the
indemnified party shall be entitled, at the indemnified party's cost, risk and
expense, to separate counsel of its own choosing, and (iii) to compromise or
settle such claim, which compromise or settlement shall be made only with the
written consent of the indemnified party, such consent not to be unreasonably
withheld.
ARTICLE 10.
MISCELLANEOUS
10.1 NOTICES. All notices, demands or other communications hereunder (each, a
"NOTICE") shall be writing and may be served personally or by U.S. Mail. If
served by U.S. Mail, it shall be addressed as:
(a) if to the Sellers, to:
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Stiepel LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Stiepel LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) if to Buyer, to:
Skilled Healthcare Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return receipt
requested, postage prepaid and addressed as provided above, on the date of
receipt, refusal or non-delivery indicated on the return receipt. In lieu of
42
notice by U.S. Mail, either party may send notices by a nationally recognized
overnight courier service which provides written proof of delivery (such as
U.P.S. or Federal Express). Any notice sent by a nationally recognized overnight
courier shall be effective on the date of delivery to the party at its address
specified above as set forth in the courier's delivery receipt. Any party may,
by notice to the others from time to time in the manner herein provided, specify
a different address for notice purposes.
10.2 SEVERABILITY AND GOVERNING LAW. This Agreement shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
hereof shall be prohibited or invalid under any such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating or nullifying the remainder of such provision or any other
provisions of this Agreement. If any one or more of the provisions contained in
this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provisions shall be
construed by limiting and reducing it so as to be enforceable to the maximum
extent permitted by applicable law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
without regard to its conflicts of laws principles.
10.3 AMENDMENTS, WAIVERS. This Agreement may be amended or modified only with
the written consent of Buyer and the Sellers. No waiver of any term or provision
hereof shall be effective unless in writing signed by the party waiving such
term or provision. No failure to exercise or delay in exercising any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The rights provided hereunder are cumulative and not exclusive of any
rights, powers or remedies provided by law.
10.4 EXPENSES. Whether or not the Transactions contemplated hereby are
consummated, (a) the legal, accounting, financing and due diligence expenses
incurred by Buyer in connection with the Transactions will be borne by Buyer and
(b) the legal and other costs and expenses incurred by the Sellers or any
Company in connection with the Transactions contemplated hereby will be borne by
the Sellers and shall be Excluded Liabilities.
10.5 CONFIDENTIALITY.
(a) Buyer. Until the Closing, all proprietary information obtained by Buyer
from or on behalf of any Company will be kept confidential and will not be
disclosed by Buyer other than to its partners, members, managers, directors,
officers, employees, and advisors, as necessary; provided that the foregoing
restriction shall not apply to information which (a) is lawfully and
independently obtained by Buyer from a third party without restriction as to
disclosure by Buyer, (b) was known by Buyer prior to its disclosure by or on
behalf of any Company, (c) is in the public domain or enters into the public
domain through no fault of Buyer, (d) is independently developed by Buyer
without reference to information provided by or on behalf of any Company or (e)
Buyer is required by law or legal process to disclose. If this Agreement is
terminated, Buyer will cause to be delivered to the Sellers all materials
obtained by Buyer from or on behalf of any Company, whether obtained before or
after the date of this Agreement.
43
(b) Seller. Following the Closing, each Seller shall not, directly or
indirectly, disclose, divulge or make use of any trade secrets or other
information of a business, financial, marketing, technical or other nature
pertaining to any Company or the Business, including information of others that
any Company has agreed to keep confidential, except to the extent that such
information shall have become public knowledge other than by breach of this
Agreement by any of the Sellers and except to the extent that disclosure of such
information is required by law.
(c) Public Announcements. Buyer and Sellers agree to communicate with each
other and cooperate with each other prior to any public disclosure of the
Transactions. Buyer and Sellers agree that no public release or announcement
concerning the terms of the Transactions shall be issued by any party without
the prior consent of Buyer and Sellers, except (i) as such release or
announcement, upon the advice of outside counsel, may be required by law or the
rules and regulations of any stock exchange upon which the securities of Sellers
or Buyer are listed, in which case the party required to make the release or
announcement, to the extent practicable, shall allow the other party reasonable
time to comment on such release or announcement in advance of such issuance and
(ii) Buyer may disclose any information concerning the Transactions that it
deems appropriate in its respective reasonable judgment, in light of its status
as a publicly owned company, including, without limitation, to securities
analysts and institutional investors, in press interviews and governmental
filings.
10.6 SUCCESSORS AND ASSIGNS. This Agreement, and all provisions hereof, shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto, provided that this Agreement may not be assigned by any
party without the prior written consent of the other parties hereto except that
(a) the indemnification and other rights hereunder of a party may be assigned to
any bank or other financial institution which is or becomes a lender to Buyer or
any of its successors and assigns and (b) this Agreement may be assigned by
Buyer to any of its Affiliates or, to any Person acquiring a material portion of
the assets, business or securities of Buyer, whether by merger, consolidation,
sale of assets or securities or otherwise.
10.7 ENTIRE AGREEMENT. This Agreement, the attached exhibits and schedules, and
the other agreements, documents and instruments contemplated hereby contain the
entire understanding of the parties, and there are no further or other
agreements or understanding, written or oral, in effect between the parties
relating to the subject matter hereof unless expressly referred to herein.
10.8 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
and with counterpart facsimile signature pages, each of which shall be an
original, but all of which when taken together shall constitute one and the same
Agreement.
10.9 HEADINGS. The headings of Articles and Sections herein are inserted for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
10.10 FURTHER ASSURANCES. Following the Closing, the Sellers will execute and
deliver to Buyer such documents and take such other actions as Buyer may
reasonably request in order to fully consummate the Transactions.
44
10.11 THIRD PARTY BENEFICIARIES. Nothing in the Agreement shall be construed to
confer any right, benefit or remedy upon any Person that is not a party hereto
or a permitted assignee of a party hereto.
10.12 NO STRICT CONSTRUCTION. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement and the other agreements and
documents contemplated herein. In the event an ambiguity or question of intent
or interpretation arises under any provision of this Agreement or any other
agreement or documents contemplated herein, this Agreement and such other
agreements or documents shall be construed as if drafted jointly by the parties
thereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authoring any of the provisions of this
Agreement or any other agreements or documents contemplated herein.
10.13 SCHEDULES AND EXHIBITS. All schedules (as the same may be updated as
provided herein) and exhibits to this Agreement are an integral part of this
Agreement and are incorporated herein by reference. All Schedules delivered with
this Agreement shall be arranged to correspond with the numbered and lettered
Sections and Subsections contained in this Agreement, and the disclosures in
such Schedules shall qualify only the corresponding Sections and Subsections
contained in this Agreement, unless otherwise expressly provided herein.
10.14 ATTORNEY FEES. In any litigation, arbitration, or other proceeding by
which one party either seeks to enforce its rights under this Agreement or seeks
a declaration of any rights or obligations under this Agreement, the prevailing
party shall be awarded its reasonable attorney fees, costs, and expenses
incurred.
ARTICLE 11.
DEFINITIONS
The following terms, as used in this Agreement, have the meanings given to
them where indicated below:
TERM SECTION OR PLACE WHERE DEFINED
---- ------------------------------
Accrued PTO Section 1.4
Acquired Facilities Section 2.1
Affiliate Section 2.6
Agreement Preamble
Assumed Liabilities Section 1.4
Assumed Contracts Section 1.1
Authorizations Section 2.19
▇▇▇▇▇▇ Preamble
Balance Sheet Section 2.4
Balance Sheet Date Section 2.4
Beneficial Owners Preamble
Benefit Plans Section 2.22
Bonds Section 2.6
Business Section 2.1
Buyer Preamble
45
TERM SECTION OR PLACE WHERE DEFINED
---- ------------------------------
Buyer Default Termination Section 8.2
Buyer Required Consents Section 4.3
Closing Section 1.8
Closing Date Section 1.8
Code Section 2.22
Company or Companies Preamble
Company Deposits Section 2.6
Company Intellectual Property Section 2.10
Deed Section 1.6(e)
Deposit Section 1.3(c)
Development Areas Section 1.1
ED/FA Article 2
Equity Interests Introduction
ERISA Section 2.22
Excess Annual Revenue Increase Section 1.3
Escrow Agent Section 1.3(c)
Escrow Fund Exhibit 1.3(c)
Excluded Assets Section 1.2
Excluded Liabilities Section 1.4
Expansion Office Space Section 1.6
Expansion Space Sublease Agreement
Facility Lease or Facility Leases Section 1.1(b)
Family Member Section 5.4(c)
Family Member Severance Liabilities Section 5.4(c)
Family Member Severance Liabilities Section 1.1
Final Rebased 2007 Medicaid Rates Section 1.3
First Amendment to Office Lease Section 1.6
Gap Notice Section 1.6(c)
Government Healthcare Programs Section 1.4(e)
HIPAA Section 2.16
Improvements Section 1.1
Indemnification Escrow Agent Section 1.3
Indemnification Escrow Agreement Section 1.3
Insurance Policies Section 2.24
Intellectual Property Section 2.10
Knowledge of Sellers Preamble to Article 2
Landlord Section 2.7
Lease Obligors Section 7.3(h)
Leased Real Property Section 1.1
Liability Cap Section 9.2(b)
Lists Section 2.7
Losses Section 9.2
Material Contracts Section 2.6
Material Customers Section 2.12
46
TERM SECTION OR PLACE WHERE DEFINED
---- ------------------------------
Medicaid Rate Increase Section 1.3
Medical Waste Laws Section 2.23
New Title Matters Section 1.6
OFAC Section 2.7
Office Lease Section 1.6
Office Space Section 1.6
Original Office Lease Section 1.6
Operations Transfer Agreement Section 7.2
Order or Orders Section 2.7
Owned Real Property Section 1.1
Permitted Encumbrances Section 1.6(d)
Permitted Investments Exhibit 1.3(c)
Person Section 2.10
Purchased Assets Section 1.1
Purchase Price Section 1.3
Real Estate Survey Section 1.6
Recommended Amount Section 5.10
Seller or Sellers Preamble
Sellers' Required Consents Section 2.15
Specified Representations Section 9.1
Surveys Section 2.16
Tail Period Section 7.2
Tail Policy Section 7.2
▇▇▇▇▇ Section 1.1
▇▇▇▇▇ Non-Compete Section 1.1
▇▇▇▇▇ Non-Compete Liabilities Section 1.1
Taxes Section 1.4
Threshold Section 9.2
Title Inspection Period Section 1.6
Title Notice Section 1.6
Title Policy Section 1.6(e)
Title Commitment Section 1.6
Transactions Introduction
▇▇▇▇▇▇ Section 1.1
▇▇▇▇▇▇ Non-Compete Section 1.1
▇▇▇▇▇▇ Non-Compete Liabilities Section 1.1
▇▇▇▇▇▇▇ Preamble
[Signature Pages follow]
47
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as a sealed instrument as of the date first above written.
BUYER:
SKILLED HEALTHCARE GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: CAO
[Signature Page to the Asset Purchase Agreement]
S-1
SELLERS: LAUREL HEALTHCARE, LLC,
a New Mexico limited liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
HEALTHCARE INVESTORS OF NEW MEXICO, LLC,
a Delaware limited liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
LAUREL SKIES, LLC, a Delaware limited
liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
LAUREL CANYON, LLC, a Delaware limited
liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
HEALTHCARE INVESTORS OF NEW MEXICO II,
LLC, a Delaware limited liability
company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
[Signature Page to the Asset Purchase Agreement]
S-2
SELLERS: (cont'd) ARBOR CREEK, LLC, a Delaware limited
liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
ARBOR SPRINGS, LLC, a Delaware limited
liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
ARBOR BROOK, LLC, a Delaware limited
liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLC, a Delaware limited
liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
LAUREL HEALTHCARE OF CLOVIS, LLC, a New
Mexico limited liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
[Signature Page to the Asset Purchase Agreement]
S-3
SELLERS: (cont'd) HOSPICE OF THE SANDIAS, LLC, a Delaware
limited liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
SANDIA STAFFING, LLC, a Delaware limited
liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
HEALTHCARE INVESTORS OF NEW MEXICO -
SPRINGS, LLC, a Delaware limited
liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
AT HEALTH VENTURES, LLC, a Delaware
limited liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
LAUREL HEALTHCARE PROVIDERS, LLC, a
Delaware limited liability company
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Manager
[Signature Page to the Asset Purchase Agreement]
S-4
BENEFICIAL OWNERS: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
[Signature Page to the Asset Purchase Agreement]
S-5