EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 12, 2006
BY AND AMONG
BROOKDALE SENIOR LIVING INCORPORATED,
BETA MERGER SUB CORPORATION
AND
AMERICAN RETIREMENT CORPORATION
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TABLE OF CONTENTS
ARTICLE I. THE MERGER...................................................... 1
Section 1.01 The Merger............................................... 1
Section 1.02 Closing.................................................. 1
Section 1.03 Effective Time........................................... 2
Section 1.04 Effects of the Merger.................................... 2
Section 1.05 Charter; Bylaws.......................................... 2
Section 1.06 Directors................................................ 2
Section 1.07 Officers 2
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
ENTITIES; EXCHANGE OF CERTIFICATES; COMPANY STOCK OPTIONS............... 2
Section 2.01 Effect on Capital Stock.................................. 2
Section 2.02 Surrender and Payment.................................... 3
Section 2.03 Company Stock Options.................................... 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 7
Section 3.01 Organization, Standing and Corporate Power............... 7
Section 3.02 Subsidiaries............................................. 7
Section 3.03 Capital Structure........................................ 7
Section 3.04 Authority; Noncontravention.............................. 8
Section 3.05 Governmental Approvals................................... 10
Section 3.06 Company SEC Documents; No Undisclosed Liabilities........ 10
Section 3.07 Information Supplied..................................... 11
Section 3.08 Absence of Certain Changes or Events..................... 12
Section 3.09 Litigation............................................... 12
Section 3.10 Contracts................................................ 12
Section 3.11 Compliance with Laws..................................... 14
Section 3.12 Employee Benefit Plans................................... 15
Section 3.13 Taxes.................................................... 18
Section 3.14 Intellectual Property; Software.......................... 20
Section 3.15 Real Property............................................ 22
Section 3.16 Environmental Matters.................................... 26
Section 3.17 Transactions with Related Parties........................ 27
Section 3.18 Brokers and Other Advisors............................... 27
Section 3.19 Opinion of Financial Advisor............................. 27
Section 3.20 Residence Agreements..................................... 27
Section 3.21 Insurance................................................ 28
Section 3.22 Labor Matters............................................ 28
Section 3.23 Licensing Surveys........................................ 29
Section 3.24 Resident Records......................................... 29
Section 3.25 Third Party Payor Reimbursement.......................... 29
Section 3.26 State Takeover Statutes; Company Rights Plan............. 29
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ 30
Section 4.01 Organization, Standing and Corporate Power............... 30
Section 4.02 Capital Structure of Merger Sub.......................... 30
Section 4.03 Authority; Noncontravention.............................. 30
Section 4.04 Governmental Approvals................................... 31
Section 4.05 Information Supplied..................................... 31
Section 4.06 Litigation............................................... 32
Section 4.07 No Business Activities................................... 32
Section 4.08 Brokers and Other Advisors............................... 32
Section 4.09 Financing................................................ 32
ARTICLE V. COVENANTS RELATING TO CONDUCT OF BUSINESS....................... 32
Section 5.01 Conduct of Business...................................... 32
Section 5.02 No Solicitation by the Company........................... 36
ARTICLE VI. ADDITIONAL AGREEMENTS.......................................... 38
Section 6.01 Preparation of the Proxy Statement; Shareholder
Meetings.............................................. 38
Section 6.02 Access to Information; Confidentiality................... 39
Section 6.03 Reasonable Best Efforts.................................. 39
Section 6.04 Indemnification, Exculpation and Insurance............... 40
Section 6.05 Fees and Expenses........................................ 41
Section 6.06 Public Announcements..................................... 41
Section 6.07 Shareholder Litigation................................... 41
Section 6.08 Employee Matters......................................... 41
Section 6.09 Employment Agreements.................................... 42
Section 6.10 Standstill Agreements, Confidentiality Agreements,
Anti-takeover Provisions.............................. 42
Section 6.11 Cooperation.............................................. 43
Section 6.12 Financing................................................ 43
Section 6.13 Hedging Agreements....................................... 43
ARTICLE VII. CONDITIONS PRECEDENT.......................................... 43
Section 7.01 Conditions to Each Party's Obligation to Effect
the Merger............................................ 43
Section 7.02 Conditions to Obligations of Parent and Merger Sub....... 44
Section 7.03 Conditions to Obligation of the Company.................. 45
Section 7.04 Frustration of Closing Conditions........................ 45
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER............................ 45
Section 8.01 Termination.............................................. 45
Section 8.02 Termination Fee and Shareholder Termination Fee.......... 46
Section 8.03 Effect of Termination.................................... 48
Section 8.04 Amendment................................................ 48
Section 8.05 Extension; Waiver........................................ 48
Section 8.06 Procedure for Termination or Amendment................... 49
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ARTICLE IX. GENERAL PROVISIONS............................................. 49
Section 9.01 Nonsurvival of Representations and Warranties............ 49
Section 9.02 Notices.................................................. 49
Section 9.03 Definitions.............................................. 50
Section 9.04 Interpretation........................................... 50
Section 9.05 Counterparts............................................. 51
Section 9.06 Entire Agreement; No Third-Party Beneficiaries........... 51
Section 9.07 Governing Law............................................ 51
Section 9.08 Assignment............................................... 51
Section 9.09 Specific Enforcement; Consent to Jurisdiction............ 52
Section 9.10 Severability............................................. 52
EXHIBITS
Exhibits A-1 and A-2 - Forms of New Employment Agreements
Exhibit B - Closing Consents
Exhibits C-1, C-2 and C-3 - Forms of Optionee Investment Agreement With
Corresponding Grant
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TABLE OF DEFINED TERMS
Adverse Notice............................................................. 37
Affected Employees......................................................... 41
Affiliate.................................................................. 49
Agreement.................................................................. 1
Articles of Merger......................................................... 2
Certificate of Merger...................................................... 2
Certificates............................................................... 3
Closing.................................................................... 1
Closing Date............................................................... 1
COBRA...................................................................... 17
Code....................................................................... 5
Company.................................................................... 1
Company Adverse Recommendation Change...................................... 36
Company Board.............................................................. 7
Company Bylaws............................................................. 7
Company Charter............................................................ 7
Company Common Stock....................................................... 2
Company Disclosure Letter.................................................. 7
Company Facilities......................................................... 22
Company Intellectual Property.............................................. 20
Company Material Adverse Effect............................................ 9
Company Plans.............................................................. 15
Company Preferred Stock.................................................... 7
Company Rights............................................................. 3
Company Rights Plan........................................................ 3
Company SEC Documents...................................................... 10
Company Shareholder Approval............................................... 8
Company Shareholders Meeting............................................... 38
Company Stock Options...................................................... 6
Company Stock Plans........................................................ 6
Confidentiality Agreement.................................................. 38
Contract................................................................... 9
Copyrights................................................................. 20
Covered Employees.......................................................... 1
Delaware Secretary of State................................................ 2
DGCL....................................................................... 1
Dissenting Shares.......................................................... 5
Effective Time............................................................. 2
Employees.................................................................. 15
Environmental Laws......................................................... 26
Environmental Liabilities.................................................. 26
Equity Financing........................................................... 32
ERISA...................................................................... 15
Exchange Act............................................................... 10
Filed Company SEC Documents................................................ 11
Financing.................................................................. 42
Financing Commitment....................................................... 32
GAAP....................................................................... 11
Government Programs........................................................ 29
Governmental Authority..................................................... 10
Hazardous Material......................................................... 26
HSR Act.................................................................... 10
Indemnified Parties........................................................ 39
Intellectual Property...................................................... 20
IP Licenses................................................................ 20
IRS........................................................................ 18
Knowledge.................................................................. 49
Laws....................................................................... 14
Lease...................................................................... 22
Licensing Surveys.......................................................... 28
Liens...................................................................... 7
Medicaid................................................................... 29
Medicare................................................................... 29
Merger..................................................................... 1
Merger Consideration....................................................... 3
Merger Sub................................................................. 1
Merger Sub Interests....................................................... 30
Necessary Consents......................................................... 10
New Employment Agreements.................................................. 1
New Optionee Agreements.................................................... 6
NYSE....................................................................... 15
Owned Real Property........................................................ 24
Parent..................................................................... 1
Parent Articles............................................................ 30
Parent Board............................................................... 30
Parent Bylaws.............................................................. 30
Patents.................................................................... 20
Paying Agent............................................................... 3
Payment Fund............................................................... 3
Permits.................................................................... 14
Permitted Liens............................................................ 49
person..................................................................... 49
Policies................................................................... 27
Proxy Statement............................................................ 11
Release.................................................................... 26
Representatives............................................................ 35
Residence Agreement........................................................ 27
Resident................................................................... 27
Restraints................................................................. 43
RIC........................................................................ 32
▇▇▇▇▇▇▇▇-▇▇▇▇▇............................................................. 15
SEC........................................................................ 10
Securities Act............................................................. 10
Security Interest.......................................................... 23
SERP....................................................................... 41
Shareholder Termination Fee................................................ 46
Software................................................................... 20
Subsidiary................................................................. 49
Superior Proposal.......................................................... 36
Surviving Corporation...................................................... 1
Takeover Proposal.......................................................... 36
tax returns................................................................ 20
taxes...................................................................... 20
TBCA....................................................................... 1
Tennessee Secretary of State............................................... 2
Termination Date........................................................... 45
Termination Fee............................................................ 46
Trade Secrets.............................................................. 20
Trademarks................................................................. 20
WARN Act................................................................... 28
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 12,
2006, is by and among Brookdale Senior Living Incorporated, a Delaware
corporation ("Parent"), Beta Merger Sub Corporation, a Delaware corporation and
a direct wholly owned subsidiary of Parent ("Merger Sub"), and American
Retirement Corporation, a Tennessee corporation (the "Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, the Company and
Merger Sub have approved and declared advisable this Agreement and the merger of
Merger Sub with and into the Company (the "Merger"), upon the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, concurrently with the execution of this Agreement, Parent is
entering into (A) an employment agreement in the form attached as Exhibit A-1
hereto with the individual set forth on such Exhibit A-1 and (B) employment
agreements in the form attached as Exhibit A-2 hereto with the individuals set
forth on such Exhibit A-2 (such employment agreements referred to in clauses (A)
and (B), collectively, the "New Employment Agreements," and such individuals set
forth on Exhibit A-1 and Exhibit A-2 hereto, the "Covered Employees") in order
to provide for the continued service and employment of such persons.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I.
THE MERGER
Section 1.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement and in accordance with the Tennessee Business
Corporation Act (the "TBCA") and the General Corporation Law of the State of
Delaware (the "DGCL"), Merger Sub shall be merged with and into the Company at
the Effective Time. Following the Effective Time, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Merger Sub in accordance
with the TBCA and the DGCL.
Section 1.02 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., New York City time, on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article VII
(other than those conditions that by their terms are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions at such
time), at the offices
of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, unless another date or place is agreed to in writing by the parties
hereto.
Section 1.03 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall cause the Merger
to be consummated by filing articles of merger (the "Articles of Merger") with
the Secretary of State of the State of Tennessee (the "Tennessee Secretary of
State") and a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State"),
each executed in accordance with the relevant provisions of the TBCA and the
DGCL, respectively, and, as soon as practicable on or after the Closing Date,
shall make all other filings or recordings required under the TBCA and the DGCL.
The Merger shall become effective at such time as the Articles of Merger and
Certificate of Merger are duly filed with the Tennessee Secretary of State and
the Delaware Secretary of State, respectively, or at such other time as Parent
and the Company shall agree and shall specify in the Articles of Merger and the
Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
Section 1.04 Effects of the Merger. The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of the TBCA and the
DGCL.
Section 1.05 Charter; Bylaws.
(a) The Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, and as modified to the extent required
by the TBCA, shall be the Charter of the Surviving Corporation until thereafter
changed or amended as provided therein or by the TBCA or other applicable Law
(as defined herein).
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, and as modified to the extent required by the TBCA, shall be the
Bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable Law; provided, however, that the Bylaws of the
Surviving Corporation shall be amended as necessary to comply with the
obligations of the Surviving Corporation set forth in Section 6.04 hereof.
Section 1.06 Directors. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly designated, as the case may be.
Section 1.07 Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT ENTITIES; EXCHANGE
OF CERTIFICATES; COMPANY STOCK OPTIONS
Section 2.01 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
common stock, par value $0.01 per share, of the Company ("Company Common Stock")
or of any shares of common stock of Merger Sub:
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(a) Common Stock of Merger Sub. The issued and outstanding common
stock, par value $.01 per share, of Merger Sub shall remain outstanding and
shall constitute the only issued and outstanding capital stock of the Surviving
Corporation.
(b) Conversion of Company Common Stock. Subject to Section 2.02(e),
each issued and outstanding share of Company Common Stock (other than as
provided in Section 2.02(j) with respect to shares as to which appraisal rights
have been perfected), together with the rights (the "Company Rights") issued
pursuant to the Rights Agreement, dated as of November 18, 1998, between the
Company and American Stock Transfer and Trust Company, as rights agent (the
"Company Rights Plan"), shall be converted into the right to receive $33.00 in
cash (the "Merger Consideration") without interest.
Section 2.02 Surrender and Payment.
(a) Paying Agent. Prior to the Effective Time, Parent shall appoint a
bank or trust company reasonably acceptable to the Company to act as the paying
agent for the payment of the Merger Consideration to the holders of shares of
Company Common Stock entitled thereto (the "Paying Agent"). Immediately
following the Effective Time, Parent shall deposit, or cause to be deposited,
with the Paying Agent funds in an amount sufficient to make the payments
contemplated by Section 2.01(b) in accordance with the procedures set forth in
this Section 2.02 (such funds, the "Payment Fund"). In the event the Payment
Fund shall be insufficient to make all such payments, Parent shall promptly
deposit, or cause to be deposited, additional funds with the Paying Agent in an
amount which is equal to the deficiency in the amount of funds required to make
such payments. The Payment Fund shall be invested by the Paying Agent as
directed by Parent or the Surviving Corporation, in their sole discretion,
pending payment thereof by the Paying Agent to the holders of the shares of
Company Common Stock entitled thereto. Earnings from such investments shall be
the sole and exclusive property of Parent and the Surviving Corporation, and no
part of such earnings shall accrue to the benefit of the holders of the shares
of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Paying Agent to mail
to each holder of record of an outstanding share of Company Common Stock
immediately prior to the Effective Time (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates formerly representing shares of Company Common Stock immediately
prior to the Effective Time (the "Certificates") shall pass, only upon proper
delivery of such Certificates to the Paying Agent and which shall be in the form
and shall have such other provisions as the Surviving Corporation or Paying
Agent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the payment of the Merger
Consideration to be made to the holder thereof pursuant to Section 2.01. Upon
surrender of a Certificate for cancellation to the Paying Agent, together with a
letter of transmittal duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be reasonably required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive promptly in exchange therefor the Merger Consideration for each share
of Company Common Stock formerly represented by such Certificate and such
Certificate so surrendered shall be forthwith cancelled. The Paying Agent shall
accept such Certificates upon compliance with such reasonable terms and
conditions as the
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Paying Agent may impose to effect an orderly exchange thereof in accordance with
normal exchange practices. No interest shall be paid or accrued for the benefit
of holders of the shares of Company Common Stock or on the consideration payable
upon the surrender of the Certificate formerly representing such shares of
Company Common Stock.
(c) No Further Ownership Rights; Closing of the Company's Transfer
Books. All cash paid upon the surrender of a Certificate in accordance with the
terms of this Article II shall be deemed to have been paid in full satisfaction
of all rights pertaining to the shares of Company Common Stock formerly
represented by such Certificate. At the Effective Time, the stock transfer books
of the Company shall be closed and thereafter there shall be no further
registration of transfers of shares of Company Common Stock theretofore
outstanding on the records of the Company. If Certificates are presented to the
Company for transfer following the Effective Time, they shall be canceled
against delivery of the Merger Consideration for each share of Company Common
Stock formerly represented by such Certificate.
(d) Termination of Payment Fund. Any portion of the Payment Fund and
any interest received with respect thereto that remains undistributed to the
holders of the Certificates for six (6) months after the Effective Time shall be
delivered to the Surviving Corporation. Any holders of Certificates who have not
complied with this Section 2.02 prior to the end of such six (6) month period
shall thereafter look, only as general creditors thereof, to the Surviving
Corporation (subject to Section 2.02 (e)) for payment of the Merger
Consideration with respect to the shares of Company Common Stock formerly
represented by such Certificates.
(e) No Liability. None of Parent, Merger Sub, the Surviving
Corporation, any of their respective Affiliates or the Paying Agent shall be
liable to any person in respect of any cash held in the Payment Fund delivered
to a public official pursuant to the requirements of any applicable abandoned
property, escheat or other similar Law. If any Certificate shall not have been
surrendered prior to three (3) years after the Effective Time (or immediately
prior to such earlier date on which any cash in respect of the shares of Company
Common Stock formerly represented by such Certificate would otherwise escheat to
or become the property of any Governmental Authority), any such cash in respect
of such shares shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(f) Transfer Taxes. If payment is to be made in respect of any
Certificate to a person other than the person in whose name the Certificate is
registered, it shall be a condition of such payment that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such payment shall pay to the Paying Agent any
transfer or other taxes required by reason of the payment of the applicable
consideration to a person other than the registered holder of the Certificate so
surrendered, or shall establish to the reasonable satisfaction of the Paying
Agent that such tax either has been paid or is not applicable.
(g) Withholding Rights. Each of the Surviving Corporation, Parent and
the Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of a Certificate or
Company Stock Option (as defined herein) such amounts as are required to be
deducted and withheld with respect to the making of
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such payment under the Internal Revenue Code of 1986, as amended (the "Code")
(including, without limitation, under Section 1445 of the Code), Treasury
Regulations promulgated under the Code or any provisions of applicable state,
local or foreign tax Law. To the extent that amounts are so deducted and
withheld by the Surviving Corporation, Parent or the Paying Agent, such deducted
and withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Certificate or Company Stock Option, as
applicable, in respect of which such deduction and withholding was made by the
Surviving Corporation, Parent or the Paying Agent.
(h) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to which the holder thereof is entitled
pursuant to this Agreement.
(i) Adjustments to Prevent Dilution. If prior to the Effective Time,
(i) solely as a result of a reclassification, stock split (including a reverse
stock split), stock dividend or stock distribution which in any such event is
made on a pro rata basis to all holders of Company Common Stock there is a
change in the number of shares of Company Common Stock outstanding or issuable
upon the conversion, exchange or exercise of securities or rights convertible or
exchangeable or exercisable for shares of Company Common Stock or (ii) the
Company makes a cash dividend on a pro rata basis to all holders of Company
Common Stock, then the Merger Consideration shall be correspondingly adjusted to
provide the holders of the applicable shares of Company Common Stock the same
economic effect contemplated by this Agreement prior to such event.
(j) Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, any shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and held by a shareholder who has
properly exercised such shareholder's appraisal rights available under the TBCA
(the "Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the Merger Consideration, unless and until such shareholder
shall have failed to perfect, or shall have effectively withdrawn or lost such
shareholder's right to appraisal under the TBCA. Dissenting Shares shall be
treated in accordance with the applicable provisions of the TBCA. If any such
holder shall have failed to perfect or shall have effectively withdrawn or lost
such right to appraisal, such shareholder's shares of Company Common Stock shall
thereupon be converted into and become exchangeable only for the right to
receive, as of the Effective Time, the Merger Consideration for each share of
Company Common Stock formerly represented by the Certificates held by such
shareholder without any interest thereon. The Company shall give Parent prompt
notice of any notices or demands for appraisal of any shares of Company Common
Stock, attempted withdrawals of such notices or demands and any other
instruments served pursuant to the TBCA and received by the Company relating to
rights to be paid the "fair value" of Dissenting Shares, as provided in the
TBCA, and Parent and Merger Sub shall have the right to direct all negotiations
and proceedings with respect to any such demands or notices. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to any notices or demands for
5
appraisals, offer to settle or settle any demands or approve any withdrawal of
any such notices or demands.
Section 2.03 Company Stock Options.
(a) All stock options (the "Company Stock Options") outstanding
immediately prior to the Effective Time granted under the Company's 2006 Stock
Incentive Plan, 1997 Stock Incentive Plan or Associate Stock Purchase Plan,
whether vested or unvested (collectively, the "Company Stock Plans"), shall, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or the holder thereof, be cancelled as of immediately prior to the
Effective Time and be converted into and become the right to receive a lump sum
payment in cash equal to the product of (1) the excess, if any, of (A) the
Merger Consideration over (B) the per share exercise price of such Company Stock
Option and (2) the number of shares of Company Common Stock for which such
Company Stock Option shall not have been previously exercised. Effective as of
the date of this Agreement, the Company shall amend the Company's Associate
Stock Purchase Plan to provide that (i) the "Option Period" (as defined in the
plan) which includes the date of this Agreement shall terminate at the earlier
of June 30, 2006 or the Effective Time, and (ii) no Option Period shall commence
during the period between the date of this Agreement and the earlier of the
Closing Date or the date on which this Agreement is terminated. Any payments to
be made pursuant to this Section 2.03(a) shall be reduced by any tax withholding
required by Law.
(b) Except as may be otherwise provided in this Section 2.03, the
Company shall cause all rights, stock options, warrants, conversion rights,
stock appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or sell any shares of capital stock or
other securities of the Company or any of its Subsidiaries, or any securities or
obligations convertible or exchangeable into or exercisable for, or giving any
person a right to subscribe for or acquire, any securities of the Company or any
of its Subsidiaries, to be cancelled prior to the Effective Time without any
payment being made therefor.
(c) Prior to the Effective Time, the Company shall use its reasonable
best efforts to cause all employee-holders of outstanding options under its 2006
Stock Incentive Plan, 1997 Stock Incentive Plan or Associate Stock Purchase Plan
who are not Covered Employees to enter into an optionee agreement in one of the
forms set forth on Exhibit C hereto (the "New Optionee Agreements"), and shall
take (or cause to be taken) all actions that are necessary or appropriate to
give effect to the transactions contemplated by Sections 2.03 (a) and (b) and to
give effect to relevant provisions of the New Employment Agreements and the New
Optionee Agreements. The form of New Optionee Agreement to be offered to each
such optionee shall be determined by Parent.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter (with specific reference to
the Section or Subsection of this Agreement to which the information stated in
such disclosure relates; provided
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that any fact or condition disclosed in any section of such disclosure letter in
such a way as to make its relevance to a representation or representations made
elsewhere in this Agreement or information called for by another section of such
disclosure letter reasonably apparent shall be deemed to be an exception to such
representation or representations or to be disclosed on such other section of
such disclosure letter notwithstanding the omission of a reference or cross
reference thereto) delivered by the Company to Parent prior to the execution of
this Agreement (the "Company Disclosure Letter"), the Company represents and
warrants to Parent and Merger Sub as follows:
Section 3.01 Organization, Standing and Corporate Power. The Company and
each of its Subsidiaries is an entity duly organized, validly existing and in
good standing under the Laws of the jurisdiction in which it is formed and has
all requisite power and authority to carry on its business as now being
conducted. The Company and each of its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed, individually or
in the aggregate, has not resulted in, and would not reasonably be expected to
result in, a Company Material Adverse Effect (as defined herein). The Company
has, prior to the date hereof, made available to Parent complete and correct
copies of its Charter (the "Company Charter") and Bylaws (the "Company Bylaws")
and the charter and bylaws (or comparable organizational documents) of each of
its Subsidiaries, in each case as amended to the date of this Agreement. The
Company has made available to Parent and its representatives correct and
complete copies of the minutes of all meetings of shareholders, the board of
directors of the Company (the "Company Board") and each committee of the Company
Board and the board of directors of each of its Subsidiaries held since December
31, 2001.
Section 3.02 Subsidiaries. Section 3.02 of the Company Disclosure Letter
lists all the Subsidiaries of the Company and, for each such Subsidiary, the
state of formation and each jurisdiction in which such Subsidiary is qualified
or licensed to do business. Except for Permitted Liens and as set forth on
Section 3.02 of the Company Disclosure Letter, all the outstanding shares of
capital stock of, or other equity interests in, each such Subsidiary have been
validly issued and are fully paid and nonassessable and are owned directly or
indirectly by the Company free and clear of all pledges, claims, liens, charges,
encumbrances or security interests of any kind or nature whatsoever
(collectively, "Liens"), and free of any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other equity interests. Except for
the capital stock or other equity or voting interests of its Subsidiaries and
those equity interests described on Section 3.02 of the Company Disclosure
Letter, the Company does not own, directly or indirectly, any capital stock or
other equity or voting interests in any person.
Section 3.03 Capital Structure.
(a) The authorized capital stock of the Company consists of
200,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, no par value ("Company Preferred Stock"), of which 2,000,000 shares are
reserved for issuance in accordance with the Company Rights Plan pursuant to the
terms thereof. At the close of business on May [11], 2006, (i) 35,317,405 shares
of Company Common Stock were issued and outstanding (none of which were owned by
the Company (as treasury stock or otherwise)), (ii) 3,352,896 shares of
7
Company Common Stock were reserved for issuance pursuant to the Company Stock
Plans (of which 1,905,461 shares of Company Common Stock were subject to
outstanding Company Stock Options) and (iii) no shares of Company Preferred
Stock were issued or outstanding.
(b) The Company has delivered to Parent a correct and complete list,
as of the close of business on May 11, 2006, of all outstanding Company Stock
Options and other rights to purchase or receive shares of Company Common Stock
granted under the Company Stock Plans or otherwise, the number of shares of
Company Common Stock subject thereto, whether or not a stock option is an
incentive stock option, expiration dates and exercise prices thereof, in each
case broken down as to each plan, agreement or other arrangement and as to each
individual holder. Except as set forth above in this Section 3.03, at the close
of business on May 11, 2006 no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding.
Except as set forth above in this Section 3.03, there are no outstanding stock
appreciation rights, rights to receive shares of Company Common Stock on a
deferred basis or other rights that are linked to the value of Company Common
Stock granted under the Company Stock Plans or otherwise. All outstanding shares
of capital stock of the Company are, and all shares which may be issued pursuant
to the Company Stock Plans will be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights.
(c) Except as set forth above in this Section 3.03, there are no
bonds, debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which shareholders of the Company may vote. Except as
set forth above in this Section 3.03, (i) there are not issued, reserved for
issuance or outstanding (A) any securities of the Company or any of its
Subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company or any of its Subsidiaries or
(B) any warrants, calls, options or other rights to acquire from the Company or
any of its Subsidiaries, or any obligation of the Company or any of its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock or voting
securities of the Company or any of its Subsidiaries and (ii) there are not any
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Neither the Company
nor any of its Subsidiaries is a party to any voting agreement with respect to
the voting of any such securities.
Section 3.04 Authority; Noncontravention.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to the adoption of this Agreement and the
Merger by the affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock (the "Company Shareholder Approval"), to
consummate the Merger and the other transactions contemplated by this Agreement.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the Merger and the other transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby,
8
subject, in the case of the Merger, to receipt of the Company Shareholder
Approval. This Agreement has been duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by each of the other
parties hereto, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms (subject
to applicable bankruptcy, solvency, fraudulent transfer, reorganization,
moratorium and other Laws affecting creditors' rights generally from time to
time in effect and by general principles of equity). As of the date hereof, the
Company Board, at a meeting duly called and held at which all the directors of
the Company were present in person or by telephone, duly and unanimously adopted
resolutions (i) declaring that this Agreement, the Merger and the other
transactions contemplated by this Agreement are advisable and in the best
interests of the Company and the Company's shareholders, (ii) approving and
adopting this Agreement, the Merger and the other transactions contemplated by
this Agreement, (iii) directing that the adoption of this Agreement be submitted
to a vote at a meeting of the shareholders of the Company and (iv) recommending
that the shareholders of the Company adopt this Agreement.
(b) The execution and delivery of this Agreement do not, and the
consummation of the Merger and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of the Company or any of its Subsidiaries under, (i)
the Company Charter or the Company Bylaws or the comparable organizational
documents of any of its Subsidiaries, (ii) except as set forth on Section
3.04(b) of the Company Disclosure Letter, any loan or credit agreement, bond,
debenture, note, mortgage, indenture, lease or other contract, agreement,
obligation, commitment, arrangement, understanding, instrument, permit or
license (each, a "Contract"), to which the Company or any of its Subsidiaries is
a party or any of their respective properties or other assets is subject or
(iii) subject to the governmental filings and other matters referred to in
Section 3.05, any Law applicable to the Company or any of its Subsidiaries or
their respective properties or other assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, breaches, defaults, rights,
losses or Liens that individually or in the aggregate (A) have not had and would
not reasonably be expected to have a Company Material Adverse Effect, (B) would
not reasonably be expected to impair in any material respect the ability of the
Company to perform its obligations hereunder and (C) would not reasonably be
expected to prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
(c) For purposes of this Agreement, "Company Material Adverse Effect"
shall mean any change, effect, event, circumstance, occurrence or state of facts
that is materially adverse to the business, condition (financial or otherwise),
assets, liabilities or results of operations of the Company and its
Subsidiaries, taken as a whole, other than any change, effect, event,
circumstance, occurrence or state of facts relating to (i) the U.S. economy or
financial markets in general, (ii) the industry in which the Company and its
Subsidiaries operate in general, (iii) the announcement of this Agreement or the
transactions contemplated hereby (provided that the exclusion set forth in this
clause (iii) shall not apply to Section 3.04(b) hereof); (iv) the failure of the
Company to meet its publicly announced earnings guidance for any period, in and
of itself (such failure to exclude the underlying causes thereof); (v) changes
in Laws, rules
9
or regulations; (vi) changes in accounting principles required by GAAP (as
defined herein); (vii) acts of war or terrorism; or (viii) outbreaks of
epidemics or pandemics; provided that with respect to clauses (i), (ii), (iv),
(v), (vii) and (viii), such change, effect, event, circumstance, occurrence or
state of facts (x) does not specifically relate to (or have the effect of
specifically relating to) the Company and its Subsidiaries and (y) is not more
materially adverse to the Company and its Subsidiaries than to other companies
operating in the industry in which the Company and its Subsidiaries operate.
Section 3.05 Governmental Approvals. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental self-regulatory agency, commission or authority (each, a
"Governmental Authority") is required by or with respect to the Company or any
of its Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the Merger or the
other transactions contemplated by this Agreement, except for those required
under or in relation to (a) the premerger notification and report form under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (b) the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), (c) the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), (d) the Certificate of Merger to be filed with the Secretary of
State of the State of Delaware and the Articles of Merger to be filed with the
Secretary of State of the State of Tennessee and appropriate documents to be
filed with the relevant authorities of other states in which the Company is
qualified to do business, (e) any Medicare or other required license-related
filings, and (f) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made individually or in the aggregate would not reasonably be expected to (x)
have a Company Material Adverse Effect, (y) impair in any material respect the
ability of the Company to perform its obligations hereunder or (z) prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement. The consents, approvals, orders, authorizations, registrations,
declarations and filings set forth in (a) through (f) above or listed in Section
3.05 of the Company Disclosure Letter are referred to herein as "Necessary
Consents."
Section 3.06 Company SEC Documents; No Undisclosed Liabilities.
(a) Except as set forth on Section 3.06(a) of the Company Disclosure
Letter, the Company has timely filed all reports, schedules, forms, statements
and other documents (including exhibits and other information incorporated
therein) with the Securities and Exchange Commission (the "SEC") required to be
filed by the Company since December 31, 2002 (such documents, the "Company SEC
Documents"). No Subsidiary of the Company is required to file, or files, any
form, report or other document with the SEC. As of their respective dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act, or the Exchange Act, as the case may be, applicable to such
Company SEC Documents, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, unless
such information contained in any Company SEC Document has been
10
corrected by a later-filed Company SEC Document that was filed prior to the date
hereof. The financial statements of the Company included in the Company SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles ("GAAP") (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present in
all material respects the financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to the absence of footnote disclosure and to normal and
recurring year-end audit adjustments not material in amount).
(b) Except (i) as set forth in the financial statements included in
the Company's Annual Report on Form 10-K filed prior to the date hereof for the
year ended December 31, 2005 and the Company's Quarterly Report on Form 10-Q
filed prior to the date hereof for the quarterly period ended March 31, 2006 or
on Section 3.09 of the Company Disclosure Letter or (ii) as incurred in the
ordinary course of business since March 31, 2006, neither the Company nor any of
its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that, individually or in the
aggregate, have had or would reasonably be expected to have a Company Material
Adverse Effect. Section 3.06(b) of the Company Disclosure Letter sets forth a
description of the aggregate indebtedness (including guarantees of indebtedness
of any other person) of the Company and its Subsidiaries outstanding as of March
31, 2006. Neither the Company nor any of its Subsidiaries has incurred any
indebtedness or entered into any guarantee or capital lease that is not
reflected on Section 3.06(b) of the Company Disclosure Letter, or, since March
31, 2006, modified the terms of any contract or agreement relating to any
indebtedness, guarantee or capital lease described on Section 3.06(b) of the
Company Disclosure Letter.
Section 3.07 Information Supplied. None of the information supplied or to
be supplied by the Company specifically for inclusion or incorporation by
reference in the proxy statement relating to the Company Shareholders Meeting
(together with any amendments thereof or supplements thereto, in each case in
the form or forms mailed to the Company's shareholders, the "Proxy Statement")
will, at the date the Proxy Statement is first mailed to the shareholders of the
Company and, as may be supplemented or amended, at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act. Notwithstanding the
foregoing, no representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Proxy Statement based on
information supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement.
Section 3.08 Absence of Certain Changes or Events. Since the date of the
most recent audited and interim financial statements included in the Company SEC
Documents filed by the Company and publicly available prior to the date of this
Agreement (the "Filed Company SEC Documents"), except (a) for liabilities
incurred in connection with this Agreement or the
11
transactions contemplated hereby to Parent, Merger Sub and the Company's
financial and legal advisors or (b) as disclosed in the Filed Company SEC
Documents, (x) there has not been any change, effect, event, circumstance,
occurrence or state of facts that individually or in the aggregate has had or
would reasonably be expected to have a Company Material Adverse Effect, and (y)
neither the Company nor any of its Subsidiaries has taken any action that would
violate the provisions of Section 5.01 had such provisions been applicable to
the Company and its Subsidiaries as of such date.
Section 3.09 Litigation. Except as set forth on Section 3.09 of the Company
Disclosure Letter, there is no suit, action, claim, proceeding or investigation
pending or, to the Knowledge of the Company, threatened, against the Company or
any of its Subsidiaries that (x) individually involves an amount in controversy
in excess of $500,000, or (y) in the aggregate has had or would reasonably be
expected to have a Company Material Adverse Effect or prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
Governmental Authority or arbitrator outstanding against, or, to the Knowledge
of the Company, investigation by any Governmental Authority involving the
Company or any of its Subsidiaries that individually or in the aggregate has had
or would reasonably be expected to have a Company Material Adverse Effect or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
Section 3.10 Contracts.
(a) Neither the Company nor any of its Subsidiaries is a party to, and
none of their respective properties or other assets is subject to, any Contract
that is of a nature required to be filed as an exhibit to a report or filing
under the Securities Act or the Exchange Act, other than any Contract that is
filed as an exhibit to the Filed Company SEC Documents.
(b) Section 3.10(b) of the Company Disclosure Letter sets forth a
correct and complete list as of the date of this Agreement, and the Company has,
prior to the date hereof, made available to Parent correct and complete copies
(including all amendments, modifications, extensions, renewals or guaranties)
of:
(i) all Contracts of the Company or any of its Subsidiaries (A)
involving payments by or to the Company or any of its Subsidiaries of more than
$750,000 on an annual basis or (B) involving payments by or to the Company or
any of its Subsidiaries of more than $100,000 on an annual basis and which may
not be terminated by the Company without cause within one year without penalty;
(ii) all Contracts to which the Company or any of its
Subsidiaries is a party, or by which the Company, any of its Subsidiaries or any
of its Affiliates is bound, that contain a covenant restricting the ability of
the Company or any of its Subsidiaries (or which, following the consummation of
the Merger, would restrict the ability of Parent or any of its Subsidiaries,
including the Surviving Corporation and its Subsidiaries) to compete in any
business or with any person or in any geographic area or which prohibits the
Company or any of its Subsidiaries from soliciting suppliers anywhere in the
world;
12
(iii) all Contracts of the Company or any of its Subsidiaries
with any Affiliate of the Company (other than any of its Subsidiaries) in which
the amount involved exceeds $60,000 on an annual basis;
(iv) any (A) Contract to which the Company or any of its
Subsidiaries is a party granting any license to Intellectual Property, and (B)
other license (other than real estate) involving payments by the Company or any
of its Subsidiaries of more than $750,000 on an annual basis;
(v) all confidentiality agreements (other than in the ordinary
course of business), agreements by the Company not to acquire assets or
securities of a third party or agreements by a third party not to acquire assets
or securities of the Company;
(vi) any Contract involving payments by or to the Company or any
of its Subsidiaries, of more than $750,000 on an annual basis that requires
consent of or notice to a third party in the event of or with respect to the
Merger, including in order to avoid a breach or termination of or loss of
benefit under any such Contract;
(vii) all joint venture, partnership or other similar agreements
involving co-investment with a third party to which the Company or any of its
Subsidiaries is a party;
(viii) any Contract with a Governmental Authority;
(ix) all material outsourcing Contracts;
(x) all Contracts with investment bankers, financial advisors,
attorneys, accountants or other advisors retained by the Company or any of its
Subsidiaries involving payments by or to the Company or any of its Subsidiaries
of more than $750,000 on an annual basis;
(xi) all Contracts providing for the indemnification by the
Company or any of its Subsidiaries of any person, except for any such Contract
that (i) is not material to the Company or any of its Subsidiaries and (ii) was
entered into in the ordinary course of business;
(xii) all Contracts pursuant to which any indebtedness of the
Company or any of its Subsidiaries is outstanding or may be incurred and all
guarantees of or by the Company or any of its Subsidiaries of any indebtedness
of any other person (other than the Company or any of its Subsidiaries) (except
for such indebtedness or guarantees the aggregate principal amount of which does
not exceed $750,000 on an annual basis and excluding trade payables arising in
the ordinary course of business); and
(xiii) all Contracts listed on Section 3.21 of the Company
Disclosure Letter.
(c) (i) None of the Company or any of its Subsidiaries (x) is, or has
received written notice or has Knowledge that any other party to any of its
Contracts is, in violation or breach of or default (with or without notice or
lapse of time or both) under, or (y) has waived or failed to enforce any rights
or benefits under any Contract to which it is a party or any of its
13
properties or other assets is subject, and (ii) to the Knowledge of the Company,
there has occurred no event giving to others any right of termination, amendment
or cancellation of (with or without notice or lapse of time or both) any such
Contract except for violations, breaches, defaults, waivers or failures to
enforce rights or benefits covered by clauses (i) or (ii) above that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
Section 3.11 Compliance with Laws.
(a) Except as set forth on Section 3.11 of the Company Disclosure
Letter, the Company and each of its Subsidiaries has been since December 31,
2003 and is in compliance in all material respects with all statutes, laws,
ordinances, rules, regulations, judgments, orders and decrees of any
Governmental Authority (collectively, "Laws") applicable to it, its properties
or other assets or its business or operations. Except as set forth on Section
3.11 of the Company Disclosure Letter, none of the Company or any of its
Subsidiaries has received, since December 31, 2003, a written notice or other
written communication alleging or relating to a possible material violation of
any Laws applicable to its businesses or operations. The Company and its
Subsidiaries have in effect all material permits, licenses, registrations,
variances, exemptions, authorizations, operating certificates, franchises,
orders, approvals, and similar rights issued by or obtained from all
Governmental Authorities (collectively, "Permits") necessary to carry on their
businesses as now conducted, and there has occurred no material violation of,
material default (with or without notice or lapse of time or both) under, or
event giving to others any right of termination, amendment or cancellation of,
with or without notice or lapse of time or both, any Permit. There is no event
which has occurred that, to the Knowledge of the Company, would reasonably be
expected to result in the revocation, cancellation, non-renewal or adverse
modification of any such Permit that individually or in the aggregate would
reasonably be expected to have a Company Material Adverse Effect. Assuming all
Closing Consents listed on Exhibit B hereto are made or obtained, the Merger, in
and of itself, would not cause the revocation or cancellation of any such
Permit.
(b) Since December 31, 2003, (i) neither the Company nor any of its
Subsidiaries nor, to the Knowledge of the Company, any third party service
provider acting on behalf of the Company or any of its Subsidiaries, has
received, nor otherwise has any Knowledge of, any written notice from any
Governmental Authority that (x) alleges any material noncompliance (or that the
Company or any of its Subsidiaries or any such third party service provider is
under investigation or the subject of an inquiry by any such Governmental
Authority for such alleged material noncompliance) with any applicable material
Law, or (y) would be reasonably likely to result in a material fine, assessment
or cease and desist order, or the suspension, revocation or material limitation
or restriction of any Permit; and (ii) neither the Company nor any of its
Subsidiaries has entered into any agreement or settlement with any Governmental
Authority with respect to its non-compliance with, or violation of, any
applicable Law.
(c) Except as set forth on Section 3.06(a) of the Company Disclosure
Letter, since December 31, 2003, the Company and each of its Subsidiaries has
timely filed all material regulatory reports, schedules, statements, documents,
filings, submissions, forms, registrations and other documents, together with
any amendments required to be made with respect thereto,
14
that each was required to file with any Governmental Authority, including state
health and regulatory authorities and any applicable Federal regulatory
authorities, and have timely paid all taxes, fees and assessments due and
payable in connection therewith, except where the failure to make such payments
would not be material to the Company or any of its Subsidiaries.
(d) The Company and its Subsidiaries have implemented policies,
procedures and/or programs designed to assure that its agents and employees are
in material compliance with all applicable Laws, including laws, regulations,
directives and opinions of Governmental Authorities relating to advertising,
licensing and sales practices.
(e) The Company and each of its officers and directors are in
compliance with, and have complied in all material respects with (i) the
applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the related rules
and regulations promulgated under such act ("▇▇▇▇▇▇▇▇-▇▇▇▇▇") or the Exchange
Act and (ii) the applicable listing and corporate governance rules and
regulations of the New York Stock Exchange (the "NYSE"). The Company has
previously disclosed to Parent all of the information required to be disclosed
by the Company and its officers and employees, including the Company's chief
executive officer and chief financial officer, to the Company Board or any
committee thereof pursuant to the certification requirements relating to Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q. The Company and each of
its Subsidiaries maintains a system of internal accounting controls sufficient
to comply with all legal and accounting requirements applicable to the Company,
including compliance with the SEC rules promulgated under Section 404 of
▇▇▇▇▇▇▇▇-▇▇▇▇▇.
(f) The Company and its Subsidiaries have complied, in all material
respects, with all applicable security and privacy standards regarding protected
health information under the Health Insurance Portability and Accountability Act
of 1996 and all applicable state privacy laws, and with all applicable
regulations promulgated under any such legislation.
Section 3.12 Employee Benefit Plans.
(a) Section 3.12(a) of the Company Disclosure Letter sets forth a
correct and complete list of: all "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all other employee benefit plans, programs, agreements,
policies, arrangements or payroll practices, including bonus plans, employment,
consulting or other compensation agreements, collective bargaining agreements,
Company Stock Plans, individual stock option agreements to which the Company is
a party granting stock options to acquire Company Common Stock that have not
been granted under a Company Stock Plan, incentive and other equity or
equity-based compensation, or deferred compensation arrangements, change in
control, termination or severance plans or arrangements, stock purchase,
severance pay, sick leave, vacation pay, salary continuation for disability,
hospitalization, medical insurance, life insurance and scholarship plans and
programs maintained by the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries contributed or is obligated to contribute
thereunder for current or former employees of the Company or any of its
Subsidiaries (the "Employees") or directors or former directors thereof
(collectively, the "Company Plans").
15
(b) Correct and complete copies of the following documents, with
respect to each of the Company Plans (other than a Multiemployer Plan), have
prior to the date hereof, been delivered or made available to Parent by the
Company, to the extent applicable: (i) any plans, all amendments and attachments
thereto and related trust documents, insurance contracts or other funding
arrangements, and amendments thereto; (ii) the most recent Forms 5500 and all
schedules thereto and the most recent actuarial report, if any; (iii) the most
recent IRS determination letter; (iv) summary plan descriptions; and (v)
material written communications to employees generally.
(c) The Company Plans have been maintained in all material respects in
accordance with their terms and with all provisions of ERISA, the Code and other
applicable Laws, and neither the Company (or any of its Subsidiaries) nor any
"party in interest" or "disqualified person" with respect to the Company Plans
has engaged in a non-exempt "prohibited transaction" within the meaning of
Section 4975 of the Code or Section 406 of ERISA that would cause the Company or
any of its Subsidiaries to incur any liability for any material amount. No
fiduciary has any liability for breach of fiduciary duty or any other failure to
act or comply with applicable Law in connection with the administration or
investment of the assets of any Company Plan.
(d) The Company Plans intended to qualify under Section 401 of the
Code are so qualified and any trusts intended to be exempt from Federal income
taxation under Section 501 of the Code are so exempt.
(e) None of the Company, its Subsidiaries or any trade or business
(whether or not incorporated) that is treated as a single employer, with any of
them under Section 414(b), (c), (m) or (o) of the Code (or would have been so
treated at any time during the six years immediately prior to the date of this
Agreement) has any current or contingent liability with respect to (i) a plan
subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code
or (ii) any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA).
(f) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Company Plans (including workers compensation) or by Law (without regard to
any waivers granted under Section 412 of the Code), to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof (including any valid extension), except where failure to do so has not
resulted and would not reasonably be expected to result in any material
liability to the Company or any of its Subsidiaries.
(g) There are no pending actions, claims or lawsuits that have been
asserted or instituted against the Company Plans, the assets of any of the
trusts under the Company Plans or the sponsor or administrator of any of the
Company Plans, or against any fiduciary of the Company Plans with respect to the
operation of any of the Company Plans (other than routine benefit claims), nor
does the Company have any Knowledge of facts that could form the basis for any
such action, claim or lawsuit, other than such actions, claims or lawsuits that
individually or in the aggregate have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
16
(h) None of the Company Plans provides for post-employment life or
health insurance, benefits or coverage for any participant or any beneficiary of
a participant, except as may be required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), or applicable state law, or
which is provided at the expense of the participant or the participant's
beneficiary. Each of the Company and any ERISA Affiliate which maintains a
"group health plan" within the meaning of Section 5000(b)(1) of the Code has
complied with the notice and continuation requirements of Section 4980B of the
Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder, except where the failure to comply individually or in the aggregate
has not had and would not reasonably be expected to have a Company Material
Adverse Effect.
(i) Except as set forth on Section 3.12(i) of the Company Disclosure
Letter (to the extent applicable, in each case broken down as to each item, and
the individual and amount involved), neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby,
including the Company Shareholder Approval or the Merger (either by themselves
or when combined with any other event), will (i) result in any payment becoming
due to any Employee, (ii) increase any benefits otherwise payable under any
Company Plan, (iii) result in the acceleration of the time of payment or vesting
of any such benefits under any Company Plan or (iv) result in any obligation to
fund any trust or other arrangement with respect to compensation or benefits
under a Company Plan. Except as set forth in Section 3.12(i) of the Company
Disclosure Letter, since January 1, 2004, the Company, including, for purposes
of this sentence, the Company Board, any committee thereof, any committee
administering a Company Plan and any officer of the Company, has not taken any
action to increase the compensation or benefits payable after the date hereof to
any officer having the title of senior vice president or higher of the Company,
which increase may be directly or indirectly, partially or wholly, related to
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(j) Neither the Company nor any of its Subsidiaries has a contract,
plan or commitment, whether legally binding or not, to create any additional
Company Plan or to modify any existing Company Plan, except as required by
applicable Law or tax qualification requirement.
(k) Any individual who performs services for the Company or any of its
Subsidiaries (other than through a contract with an organization other than such
individual) and who is not treated as an employee of the Company or any of its
Subsidiaries for Federal income tax purposes by the Company or any of its
Subsidiaries is not an employee for such purposes, except as individually or in
the aggregate, together with any breach or breaches of Section 3.12(c) hereof
(without regard to any materiality or Company Material Adverse Effect qualifiers
therein), has not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(l) Except as set forth in Section 3.12(i) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to any
contract, agreement or other arrangement providing for the payment of any amount
which would not be deductible by reason of Section 162(m) or Section 280G of the
Code.
17
Section 3.13 Taxes.
(a) The Company and each of its Subsidiaries has timely filed, or has
caused to be timely filed on its behalf (taking into account any valid extension
of time within which to file), all income, franchise and other material tax
returns required to be filed by it, and all such filed tax returns are correct
and complete in all material respects. All taxes shown to be due on such tax
returns, and all material taxes otherwise required to be paid by the Company or
any of its Subsidiaries, have been timely paid. Section 3.13(a) of the Company
Disclosure Letter lists each material income or franchise tax return filed with
respect to the Company and its Subsidiaries for the preceding three taxable
years.
(b) All taxes due and payable by the Company and its Subsidiaries have
been adequately provided for in the financial statements of the Company and its
Subsidiaries (in accordance with GAAP) for all periods ending through the date
hereof. No material deficiency with respect to taxes has been proposed, asserted
or assessed against the Company or any of its Subsidiaries that has not been
paid in full or fully resolved in favor of the taxpayer. No reductions have been
made to the December 31, 2005 current tax reserve or valuation allowance
previously reported to Parent.
(c) The United States federal income tax returns of the Company and
each of its Subsidiaries have been examined by and settled with (or received a
"no change" letter from) the Internal Revenue Service (the "IRS") (or, to the
Knowledge of the Company, the applicable statute of limitations has expired) for
all years through 2001. All material assessments for taxes due with respect to
such completed and settled examinations or any concluded litigation have been
fully paid.
(d) Neither the Company nor any of its Subsidiaries is a party to, is
bound by, or has any obligation under any tax allocation or tax sharing
agreement or arrangement with any person pursuant to which it may have any
obligation to make any payments after the Closing.
(e) Neither the Company nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code since the
effective date of Section 355(e) of the Code.
(f) Since January 1, 1999, neither the Company nor any of its
Subsidiaries has been a member of any consolidated, combined or unitary group
other than each such group of which it is a member on the date hereof, and the
Company and each of its Subsidiaries currently file Federal income tax returns
on a consolidated basis with the "affiliated group" (within the meaning of
Section 1504 of the Code) of which the Company is the common parent. Neither the
Company nor any of its Subsidiaries has any liability for the taxes of any other
person (other than the Company or any of its Subsidiaries) under any state,
local or foreign Law, as a transferee or successor, by contract, or otherwise.
(g) Except as set forth on Section 3.13(g) of the Company Disclosure
Letter, no audit or other administrative or court proceedings are pending with
any taxing authority or court with respect to any Federal, state or local
income, franchise or other material taxes of the
18
Company or any of its Subsidiaries, and no written notice thereof has been
received by the Company or any of its Subsidiaries. No issue has been raised by
any taxing authority in any presently pending tax audit that could be material
to the Company or any of its Subsidiaries for any period after the Effective
Time. Neither the Company nor any of its Subsidiaries has any outstanding
agreements, waivers or arrangements extending the statutory period of
limitations applicable to any claim for, or the period for the collection or
assessment of, any Federal, state or local income, franchise or other material
taxes.
(h) No written claim that could give rise to material taxes has been
made within the previous five years by a taxing authority in a jurisdiction
where the Company or any of its Subsidiaries does not file tax returns that the
Company or any of its Subsidiaries is or may be subject to taxation in that
jurisdiction.
(i) The Company has, prior to the date hereof, made available to
Parent correct and complete copies of (i) all income, franchise and other
material tax returns of the Company and its Subsidiaries for the preceding three
taxable years and (ii) any audit reports issued within the last three years (or
otherwise with respect to any audit or proceeding in progress) relating to
income, franchise or other material taxes of the Company or any of its
Subsidiaries.
(j) No Liens for taxes exist with respect to any properties or other
assets of the Company or any of its Subsidiaries, except for Liens for taxes not
yet due.
(k) All material taxes required to be withheld by the Company or any
of its Subsidiaries have been withheld, have been or will be duly and timely
paid to the proper taxing authority, and have been or will be reported pursuant
to applicable tax information reporting Laws.
(l) With respect to any taxable years ending on or before the Closing
Date, neither the Company nor any of its Subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method, and the IRS has not proposed any such
adjustment or change in accounting method.
(m) There is no power of attorney given by or binding upon the Company
or any of its Subsidiaries with respect to taxes for any period for which the
applicable statute of limitations (including any waivers and extensions) has not
expired as of the date hereof.
(n) Neither the Company nor any of its Subsidiaries is or has been a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(ii) of
the Code.
(o) Neither the Company nor any of its Subsidiaries has applied for,
received, or has pending any request for a ruling or determination with respect
to taxes or commenced negotiations or entered into a closing agreement or other
similar agreement relating to taxes with any Governmental Authority.
(p) Neither the Company nor any of its Subsidiaries has participated
in, or otherwise made a filing with respect to, any "reportable transaction"
within the meaning of
19
Treasury Regulations Section 1.6011-4(b). Neither the Company nor any of its
Subsidiaries is a direct or indirect beneficiary of a guarantee of tax benefits
or any other arrangement that has the economic effect of providing a guarantee
of tax benefits (including a tax indemnity from a seller or lessee of property,
or insurance protection with respect to tax treatment) with respect to any
transaction, or tax opinion relating to the Company or any of its Subsidiaries.
(q) For purposes of this Agreement, (i) "taxes" shall mean taxes of
any kind (including those measured by or referred to as income, franchise, gross
receipts, sales, use, ad valorem, profits, license, withholding, payroll,
employment, excise, escheat, severance, stamp, occupation, premium, value added,
property, windfall profits, customs, duties or similar fees, assessments or
charges of any kind whatsoever) together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto, domestic or foreign, and shall include any transferee or
successor liability in respect of taxes (whether by contract or otherwise) and
any several liability in respect of any tax as a result of being a member of any
affiliated, consolidated, combined, unitary or similar group and (ii) "tax
returns" shall mean any return, report, claim for refund, estimate, information
return or statement or other similar document relating to, filed or required to
be filed with any taxing authority with respect to taxes, including any schedule
or attachment thereto, and including any amendment thereof.
Section 3.14 Intellectual Property; Software.
(a) As used herein: (i) "Intellectual Property" means all U.S. and
foreign (a) trademarks, service marks, trade names, Internet domain names,
designs, logos, slogans and other distinctive indicia of origin, together with
goodwill, registrations and applications relating to the foregoing
("Trademarks"); (b) patents and pending patent applications, invention
disclosure statements, and any and all divisions, continuations,
continuations-in-part, reissues, reexaminations, and any extensions thereof, any
counterparts claiming priority therefrom and like statutory rights ("Patents");
(c) registered and unregistered copyrights (including those in Software), rights
of publicity and all registrations and applications to register the same
("Copyrights"); and (d) confidential technology, know-how, inventions,
processes, formulae, algorithms, models and methodologies ("Trade Secrets");
(ii) "IP Licenses" means all Contracts (excluding "click-wrap" or "shrink-wrap"
agreements or agreements contained in "off-the-shelf" Software or the terms of
use or service for any Web site) pursuant to which the Company and its
Subsidiaries have acquired rights in (including usage rights) to any
Intellectual Property, or licenses and agreements pursuant to which the Company
and its Subsidiaries have licensed or transferred the right to use any
Intellectual Property, including license agreements, settlement agreements and
covenants not to ▇▇▇; (iii) "Software" means all computer programs, including
any and all software implementations of algorithms, models and methodologies
whether in source code or object code form, databases and compilations,
including any and all electronic data and electronic collections of data, all
documentation, including user manuals and training materials, related to any of
the foregoing and the content and information contained on any Web site; and
(iv) "Company Intellectual Property" means the Intellectual Property and
Software held for use or used in the business of the Company or its Subsidiaries
as presently conducted.
(b) Section 3.14(b) of the Company Disclosure Letter sets forth, for
the Intellectual Property owned by the Company and its Subsidiaries, a complete
and accurate list of
20
all U.S., state and foreign: (i) Patents issued or pending; (ii) Trademark
registrations and applications for registration (including Internet domain name
registrations) and material unregistered trademarks and service marks; and (iii)
material Copyrights, applications and registrations.
(c) Section 3.14(c) of the Company Disclosure Letter lists all (i)
material Software that is owned by the Company or its Subsidiaries and (ii)
material IP Licenses.
(d) The Company, or one of its Subsidiaries, owns or possesses all
licenses or other legal rights to use, sell or license all material Company
Intellectual Property, free and clear of all Liens, except as would not
reasonably be expected to result in, in the aggregate, material direct or
indirect costs or liabilities to, or other material direct or indirect negative
impact on, the Company and its Subsidiaries, taken as a whole.
(e) All Trademark registrations and applications for registration,
Patents issued or pending and Copyright registrations and applications for
registration owned by the Company and its Subsidiaries are valid and subsisting,
in full force and effect and have not lapsed, expired or been abandoned, and, to
the Knowledge of the Company or its Subsidiaries, are not the subject of any
opposition filed with the United States Patent and Trademark Office or any other
intellectual property registry.
(f) Except as set forth on Section 3.14(f) of the Company Disclosure
Letter:
(i) to the Knowledge of the Company, no unresolved claims or
threat of claims within the three (3) years prior to the date of this Agreement,
have been asserted in writing by any third party against the Company or any of
its Subsidiaries related to the use in the conduct of the businesses of the
Company and its Subsidiaries that the Company Intellectual Property or the
conduct of the business of the Company infringes, misappropriates or dilutes any
Intellectual Property rights of any third party;
(ii) to the Knowledge of the Company, the conduct of the
businesses of the Company and its Subsidiaries does not infringe, misappropriate
or dilute any Intellectual Property rights of any third party, except as would
not reasonably be expected to result in, in the aggregate, material direct or
indirect costs or liabilities to, or other material direct or indirect negative
impact on, the Company and its Subsidiaries, taken as a whole;
(iii) to the Knowledge of the Company, no third party is
infringing, misappropriating or diluting any Company Intellectual Property,
except as would not reasonably be expected to result in, in the aggregate,
material direct or indirect costs or liabilities to, or other material direct or
indirect negative impact on, the Company and its Subsidiaries, taken as a whole;
(iv) no settlement agreements, consents, judgments, orders,
forbearances to ▇▇▇ or similar obligations limit or restrict the Company's or
any Subsidiary's rights in and to any Company Intellectual Property, except as
would not reasonably be expected to result in, in the aggregate, material direct
or indirect costs or liabilities to, or other material direct or indirect
negative impact on, the Company and its Subsidiaries, taken as a whole;
21
(v) the Company and its Subsidiaries have not licensed or
sublicensed their rights in any Company Intellectual Property, or received or
been granted any such rights (except pursuant to "click wrap" or "shrink wrap"
agreements or agreements contained in "off the shelf" Software or the terms of
use or service for any Web site) other than pursuant to the IP Licenses;
(vi) to the Knowledge of the Company, there is no default under
any of the IP Licenses by the Company or any of its Subsidiaries or, by the
other party thereto, except as would not reasonably be expected to result in, in
the aggregate, material direct or indirect costs or liabilities to, or other
material direct or indirect negative impact on, the Company and its
Subsidiaries, taken as a whole;
(vii) the Company and its Subsidiaries have taken reasonable
measures to protect the confidentiality of their Trade Secrets; and
(viii) the consummation of the transactions contemplated hereby
will not result in the loss or impairment of the Company's and its Subsidiaries'
rights to own or use any of the Company Intellectual Property or obligate them
to pay any royalties or other amounts to any third party in excess of the
amounts payable by them prior to the Closing, nor will such consummation require
the consent of any third party in respect of any Company Intellectual Property,
except as would not reasonably be expected to result in, in the aggregate,
material direct or indirect costs or liabilities to, or other material direct or
indirect negative impact on, the Company and its Subsidiaries, taken as a whole.
Section 3.15 Real Property. Section 3.15(i) of the Company Disclosure
Letter lists: (a) each of the senior living facilities owned, leased or operated
by the Company and its Subsidiaries (the "Company Facilities"), (b) the street
address and the licensed capacity of each such Company Facility, (c) the
landlord and owner of each such Company Facility, (d) the term of each lease
pursuant to which the Company or any of its Subsidiaries lease all or part of a
Company Facility (each a "Lease"), and (e) any extension and expansion or
purchase options with respect thereto. The Company has, prior to the date
hereof, made available to Parent complete and accurate copies of the Leases
(including all amendments, modifications and supplements thereto) along with, to
the extent in the Company's possession and control: any title insurance
policies; surveys; environmental assessment and similar reports, and any
subleases, licenses or agreements (including any amendments or modifications
thereto) providing for payments in excess of $250,000 on an annual basis and
granting to any other party the right of use or occupancy of any portion of the
real property and improvements that are the subject of such Lease. Except as set
forth in Section 3.15 of the Company Disclosure Letter, neither the Company nor
any of its Subsidiaries, pursuant to any agreement or other arrangement under
which payments exceed $250,000 on an annual basis, leases, subleases or
otherwise permits the occupancy by any third party (other than the Residents) of
all or any portion of any of the Company Facilities. With respect to each Lease,
except as set forth in Section 3.15 of the Company Disclosure Letter or except
as would not reasonably be expected to result in, in the aggregate, material
costs or liabilities to, or other material negative impact on, the Company and
its Subsidiaries, taken as a whole:
22
(a) such Lease is legal, valid, binding, enforceable and in full force
and effect, subject to bankruptcy, insolvency, reorganization, moratoriums or
similar laws now or hereafter in effect relating to creditor's rights generally
or to general principles of equity;
(b) neither the Company nor any Subsidiary nor, to the Knowledge of
the Company, any other party, is in material breach or violation of, or material
default under, any such Lease, and no event has occurred, is pending or, to the
Knowledge of the Company, is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a material breach or default by
the Company or any Subsidiary or, to the Knowledge of the Company, any other
party under such Lease;
(c) all Company Facilities are supplied with utilities and other
services adequate for the operation of said Company Facilities and are in good
repair and working order sufficient for normal operation of the Company's
business, subject to normal wear and tear, and adequate and suitable for the
purposes for which they are presently being used; and
(d) to the Knowledge of the Company, each of the Company Facilities
has unlimited access to and from publicly dedicated streets, the responsibility
for maintenance of which has been accepted by the appropriate Governmental
Authority;
(e) to the Knowledge of the Company, no mortgage, pledge, security
interest, encumbrance, charge or other lien (whether arising by contract or by
operation of law) (collectively, "Security Interest"), easement, covenant or
other restriction or title matter applicable to the real property subject to any
such lease, other than Permitted Liens, would reasonably be expected to
materially impair the current uses or the occupancy by the Company or a
Subsidiary of the property subject thereto;
(f) there are no material disputes, oral agreements or forbearance
programs in effect as to such Lease;
(g) there are no outstanding options or rights of any party to
terminate such Lease prior to the expiration of the term thereof (except for
termination rights following a casualty, condemnation, default or similar
event);
(h) to the Knowledge of the Company, all material components of all
improvements located on or included with any real property subject to such
Lease, including, without limitation, the roofs and structural elements thereof
and the heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, waste water, storm water, paving and parking equipment,
systems and facilities included therein, are, in all material respects, in good
working condition and order (ordinary wear and tear excepted) and free from
material structural or other material defects, adequate for the operation of
such buildings and improvements for the purposes for which they are presently
being used and the Company has maintained or cause to be maintained the same
substantially in accordance with the terms of the Lease;
(i) no portion of any real property or improvements located thereon
that is the subject of such Lease has suffered any damage by fire or other
casualty loss which has not heretofore been completely repaired and restored in
accordance with the terms of such Lease
23
except as would not, individually or in the aggregate, reasonably be expected to
materially interfere with the use of such leased Company Facility as a senior
living facility; and
(j) there are no (i) pending or, to the Knowledge of the Company,
threatened condemnation proceedings relating to the real property that is the
subject of such Lease, or (ii) pending or, to the Knowledge of the Company,
threatened litigation, claims, actions, suits, proceedings, investigations or
administrative actions relating to such Lease or the real property and/or
improvements that are the subject thereof.
With respect to each parcel of real property owned by the Company and
its Subsidiaries (each, an "Owned Real Property"), except as set forth on
Section 3.15(ii) of the Company Disclosure Letter or except as would not
reasonably be expected to result in, in the aggregate, material costs or
liabilities to, or other material negative impact on, the Company and its
Subsidiaries, taken as a whole:
(a) the Company or the Subsidiary that is the record owner thereof has
good and clear record and marketable title to such Owned Real Property, free and
clear of any Security Interest, easement, covenant or other restriction or title
matter applicable to such Owned Real Property, other than Permitted Liens, which
would reasonably be expected to materially impair the current uses or the
occupancy by the Company or a Subsidiary of the property subject thereto;
(b) all Company Facilities are supplied with utilities and other
services adequate for the operation of said Company Facilities and are in good
repair and working order sufficient for normal operation of the Company's
business, subject to normal wear and tear, and adequate and suitable for the
purposes for which they are presently being used;
(c) to the Knowledge of the Company, each of the Company Facilities
has unlimited access to and from publicly dedicated streets, the responsibility
for maintenance of which has been accepted by the appropriate Governmental
Authority;
(d) there are no (i) pending or, to the Knowledge of the Company,
threatened condemnation proceedings relating to such Owned Real Property or (ii)
pending or, to the Knowledge of the Company, threatened litigation, claims,
actions, suits, proceedings, investigations or administrative actions relating
to such Owned Real Property;
(e) except as would not reasonably be expected to, individually or in
the aggregate, materially and adversely affect the use or operation of the Owned
Real Property or the business conducted or proposed to be conducted at the Owned
Real Property, the existing buildings and improvements located on such Owned
Real Property are located entirely within the boundary lines of such Owned Real
Property or on permanent easements on adjoining land benefiting such Owned Real
Property and may lawfully be used under applicable zoning and land use laws
(either as of right, by special permit or variance, or as a grandfathered use)
for the purposes for which they are presently being used, and such Owned Real
Property is not located within any flood plain or subject to any similar type
restriction for which any permits or licenses, if any, necessary to the use
thereof have not been obtained;
24
(f) there are no outstanding options or rights of first refusal to
purchase such Owned Real Property, or any portion thereof or interest therein;
(g) neither the Company nor any Subsidiary has received written notice
of any, and to the Knowledge of the Company there is no, proposed or pending
proceeding to change or redefine the zoning classification of all or any portion
of such Owned Real Property;
(h) to the Knowledge of the Company, the material improvements and
mechanical and utility systems, including, without limitation, the roofs and
structural elements of any buildings or structures and the heating, ventilation,
air conditioning, plumbing, electrical, mechanical, sewer, waste water, storm
water and parking systems and facilities serving the buildings and other
improvements located on such Owned Real Property, are, in all material respects,
in good working condition and order (ordinary wear and tear excepted) and free
from material structural or other material defects adequate for the operation of
such buildings and improvements for the purposes for which they are presently
being used;
(i) such Owned Real Property is assessed by local property assessors
as a tax parcel or parcels separate from all other tax parcels;
(j) no portion of such Owned Real Property has suffered any damage by
fire or other casualty loss which has not heretofore been completely repaired
and restored to its original condition (ordinary wear and tear excepted), except
as would not, individually or in the aggregate, reasonably be expected to
materially interfere with the use of such Owned Real Property as a senior living
facility;
(k) such Owned Real Property is in material compliance with the terms
and provisions of any restrictive covenants, easements, or agreements affecting
such Owned Real Property; and
(l) the Company has made available to Parent complete and accurate
copies of all of the following materials relating to such Owned Real Property,
to the extent in the Company's possession or control: title insurance policies;
deeds; surveys; environmental assessment and similar reports, and leases,
subleases, licenses or agreements (including any amendments or modifications
thereto) granting to any other party the right of use or occupancy of any
portion of such Owned Real Property and providing for payments in excess of
$250,000 on an annual basis.
Section 3.16 Environmental Matters. Except as would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect in the case of clauses (b), (c) and (d) below (it being agreed that
clause (a) below shall not be qualified by a Company Material Adverse Effect),
(a) no material written notice, notification, demand, request for information,
citation, summons, complaint or order has been received by, and no material
action, claim, suit, proceeding or review or investigation is pending or, to the
Knowledge of the Company or any of its Subsidiaries, threatened by any person
against, the Company, any of its Subsidiaries or any person whose liability the
Company or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law with respect to any matters relating to or
arising out of any Environmental Law; (b) the Company and its Subsidiaries have
25
been and are in compliance with all Environmental Laws, including possessing all
permits, authorizations, licenses, exemptions and other governmental
authorizations required for its operations under applicable Environmental Laws;
(c) the Company and its Subsidiaries do not have any Environmental Liabilities
and, to the Knowledge of the Company or any of its Subsidiaries, no facts,
circumstances or conditions relating to, arising from, associated with or
attributable to (i) any real property currently or formerly owned, operated or
leased by the Company or its Subsidiaries or operations thereon or (ii) any
person whose liability the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law would reasonably
be expected to result in Environmental Liabilities; and (d) to the Knowledge of
the Company or any of its Subsidiaries, with respect to any real property
currently or formerly owned or leased, as the case may be, by the Company or its
Subsidiaries, there have been no Releases of Hazardous Materials that have or
are reasonably likely to result in a claim against the Company or its
Subsidiaries.
As used in this Agreement, the term "Environmental Laws" means Federal,
state, local and foreign statutes, Laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, codes, injunctions, permits and
governmental agreements relating to the protection of human health as it relates
to Hazardous Materials exposure or the environment, including Hazardous
Materials.
As used in this Agreement, the term "Environmental Liabilities" with
respect to any person means any and all liabilities of or relating to such
person or any of its Subsidiaries (including any entity which is, in whole or in
part, a predecessor of such person or any of such Subsidiaries), whether vested
or unvested, contingent or fixed, including contractual, which (i) arise under
applicable Environmental Laws or with respect to Hazardous Materials and (ii)
relate to actions occurring or conditions existing on or prior to the Closing
Date.
As used in this Agreement, the term "Hazardous Material" means all
substances or materials regulated as hazardous, toxic, explosive, dangerous,
flammable or radioactive under any Environmental Law including (i) petroleum,
asbestos or polychlorinated biphenyls and (ii) in the United States, all
substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in
the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
Section 300.5.
As used in this Agreement, the term "Release" means any release, spill,
emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal,
leaching or migration into the indoor or outdoor environment (including ambient
air, surface water, groundwater, and surface or subsurface strata) or into or
out of any property, including the movement of Hazardous Materials through or in
the air, soil, surface water, groundwater or property.
Section 3.17 Transactions with Related Parties. Except as disclosed in the
Filed Company SEC Documents, since January 1, 2005, there has been no
transaction, or series of similar transactions, agreements, arrangements or
understandings, nor are there any currently proposed transactions, or series of
similar transactions, agreements, arrangements or understandings to which the
Company or any of its Subsidiaries was or is to be a party, that would be
required to be disclosed under Item 404 of Regulation S-K promulgated under the
Securities Act.
26
Section 3.18 Brokers and Other Advisors. No broker, investment banker,
financial advisor or other person, other than ▇▇▇▇▇ & Steers Capital Advisors,
LLC, the fees and expenses of which will be paid by the Company in accordance
with the Company's agreements with such firm (a complete copy of which has
heretofore been made available to Parent), is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission, or the
reimbursement of expenses, in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company or
its Subsidiaries.
Section 3.19 Opinion of Financial Advisor. The Company has received the
opinion of ▇▇▇▇▇ & Steers Capital Advisors, LLC dated the date hereof to the
effect that, as of such date, the Merger Consideration is fair from a financial
point of view to the holders of shares of Company Common Stock, a complete copy
of which opinion will be made available to Parent as soon as practicable after
the date of this Agreement.
Section 3.20 Residence Agreements. Except as set forth on Section 3.20 of
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
is in default under, nor to the Company's Knowledge is any Resident in default,
or is there any dispute under or with respect to, any agreement (each such
agreement, a "Residence Agreement") between any person currently residing at a
Company Facility (each, a "Resident") and the owner, lessee or operator of such
Company Facility, except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. True and
complete copies of representative forms of Residence Agreements currently used
in each of the Company Facilities have been made available to Parent prior to
the date hereof. Except as set forth on Section 3.20 of the Company Disclosure
Letter or as otherwise would not reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect, all Residents of the
Company Facilities have executed Residence Agreements and all Residence
Agreements do not vary in any material respect from the forms of the applicable
specimen agreements made available to Parent, and were entered into on an arms'
length basis.
Section 3.21 Insurance. Section 3.21 of the Company Disclosure Letter lists
each insurance policy (including policies providing casualty, liability, medical
and workers compensation coverage) to which the Company or any Subsidiary is
currently a party (the "Policies"). Except as set forth on Section 3.21 of the
Company Disclosure Letter, correct and complete copies of all Policies have been
provided to Parent prior to the date hereof. All Policies are in full force and
effect, and, to the Knowledge of the Company, have been issued by licensed
insurers, all premiums with respect thereto covering all periods up to and
including the Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any Policies, except for such
cancellations or terminations which would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
Section 3.22 Labor Matters. No labor strike, work slowdown, work stoppage,
lockout or other concerted labor action or dispute involving the employees of
the Company or any of its Subsidiaries is pending, or to the Knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
and, since December 31, 2001, there has not been any such action. Except as set
forth on Section 3.22 of the Company Disclosure Letter, neither the Company nor
any of its Subsidiaries is party to or bound by any collective bargaining or
similar agreement with any labor organization or any work rules or practices
agreed to with any labor
27
organization applicable to employees of the Company or any of its Subsidiaries,
and no collective bargaining or similar agreement is currently being negotiated
by the Company or any of its Subsidiaries. No representation election petition
or application for certification of a labor organization as the exclusive
collective bargaining representative of any employees of the Company or any of
its Subsidiaries has been served on the Company or any of its Subsidiaries
within the past three years, nor, to the Knowledge of the Company, is such a
petition or application pending with the National Labor Relations Board or any
other Governmental Authority, and no labor organization is currently engaged in
or, to the Knowledge of the Company, threatening organizational efforts with
respect to any employees of the Company or any of its Subsidiaries. Except as
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, each of the Company and its Subsidiaries (i)
is, and has been since December 31, 2001, in compliance with all applicable Laws
respecting employment and employment practices, terms and conditions of
employment, health and safety and wages and hours, and (ii) is not liable for
any material payment to any trust or other fund or to any Governmental
Authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for employees (other than routine payments to
be made in the ordinary course of business consistent with past practice). The
Company and its Subsidiaries have not, at any time prior to the date that is 90
days before the Closing Date, without fully complying with the notice and other
requirements of the Worker Adjustment Retraining Notification Act of 1988, as
amended (the "WARN Act"), effectuated (i) a "plant closing" (as defined in the
WARN Act), affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Company or any
of its Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of the Company or any of its
Subsidiaries; or any similar action under applicable state or local Law
requiring notice to employees in the event of a plant closing or mass layoff.
Section 3.23 Licensing Surveys. The Company is periodically subject to
monitoring, inspections or survey reports, waivers of deficiencies, plans of
correction, and other investigation reports or certifications by Governmental
Authorities (collectively, "Licensing Surveys"). Except as set forth on Section
3.23 of the Company Disclosure Letter or except as otherwise would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, there are no deficiencies or violations noted in any
Licensing Surveys, and the Company or its Subsidiaries have remedied, discharged
and complied in all material respects (or are in the process of so complying)
with all applicable plans of correction, such that there are no violations or
deficiencies with respect to any of the licenses issued and required by
Governmental Authorities in connection with the ownership, maintenance and
operation of the Company Facilities or the operation of the business of the
Company and the Subsidiaries.
Section 3.24 Resident Records. Except as set forth on Section 3.24 of the
Company Disclosure Letter or except as otherwise would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, none of Company or any of the Subsidiaries has received written notice:
(a) that Resident records used or developed in connection with the business
conducted at the Company Facilities have not been maintained in accordance with
any applicable federal, state or local laws or regulations governing the
preparation, maintenance of confidentiality, transfer and/or destruction of such
records, and
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(b) of any deficiency in the Resident records used or developed in connection
with the operation of the business conducted at the Company Facilities.
Section 3.25 Third Party Payor Reimbursement. All billing practices of the
Company and its Subsidiaries with respect to the Company Facilities, including
the Government Programs (as defined below) and private insurance companies, have
been in compliance with all applicable laws, regulations and policies of such
third party payors and Government Programs, except where any failure to be in
compliance has not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Except as
set forth on Section 3.25 of the Company Disclosure Letter, since December 31,
2001, none of the Company or any of its Subsidiaries has received written notice
that the Company or any of its Subsidiaries has billed or received any payment
or reimbursement in excess of amounts permitted by applicable Law, except to the
extent cured or corrected and all penalties or interest discharged in connection
with such cure or correction. For purposes of this Agreement, "Government
Programs" shall refer to Title XVIII ("Medicare") and Title XIX ("Medicaid") of
the Social Security Act, CHAMPUS, TRICARE and other federal, state or local
governmental reimbursement programs, or successor programs to any of the above.
Section 3.26 State Takeover Statutes; Company Rights Plan. Assuming that
neither Parent nor Merger Sub is an "interested shareholder" within the meaning
of the TBCA, the Company has taken all necessary action so that no "investor
protection act," "business combination," "control share acquisition" or other
anti-takeover statute or regulation, in each case under the TBCA, nor any
takeover provision in the Company Charter or the Company Bylaws would (i)
prohibit or restrict the Company's ability to perform its obligations under this
Agreement, the Articles of Merger or the Certificate of Merger or its ability to
consummate the transactions contemplated hereby and thereby, (ii) have the
effect of invalidating or voiding this Agreement, the Articles of Merger or the
Certificate of Merger, or any provision hereof or thereof, or (iii) subject
Parent to any impediment or condition in connection with the exercise of any of
its rights under this Agreement, the Articles of Merger or the Certificate of
Merger. The Company has taken all actions necessary to render the Company Rights
inapplicable to this Agreement and the transactions contemplated hereby and to
cause the Company Rights Plan to terminate as of the Effective Time.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
Section 4.01 Organization, Standing and Corporate Power. Each of Parent,
its Subsidiaries and Merger Sub is an entity duly organized, validly existing
and in good standing under the Laws of the jurisdiction in which it is formed
and has all requisite power and authority to carry on its business as now being
conducted. Each of Parent, its Subsidiaries and Merger Sub is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed individually or
in the aggregate has not resulted in, and would not reasonably be expected to
result in, material direct or indirect costs or liabilities to Parent and its
29
Subsidiaries. Parent has, prior to the date hereof, made available to the
Company complete and correct copies of its Articles of Incorporation (the
"Parent Articles") and Bylaws (the "Parent Bylaws") and the articles of
incorporation and by-laws or comparable organizational documents) of each of its
Subsidiaries and Merger Sub, in each case as amended to the date of this
Agreement.
Section 4.02 Capital Structure of Merger Sub. The authorized capital stock
of Merger Sub consists of 1,000 shares of common stock, par value $0.01 per
share ("Merger Sub Interests"). All of the issued and outstanding Merger Sub
Interests are owned by Parent. Merger Sub does not have issued or outstanding
any options, warrants, subscriptions, calls, rights, convertible securities or
other agreements or commitments obligating Merger Sub to issue, transfer or sell
any Merger Sub Interests to any person, other than Parent.
Section 4.03 Authority; Noncontravention.
(a) Each of Parent and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of Parent and
Merger Sub and no other corporate proceedings on the part of Parent or Merger
Sub are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the other party hereto, constitutes a legal, valid and binding
obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub
in accordance with its terms (subject to applicable bankruptcy, solvency,
fraudulent transfer, reorganization, moratorium and other Laws affecting
creditors' rights generally from time to time in effect and by general
principles of equity). As of the date hereof, the board of directors of Parent
(the "Parent Board"), at a meeting duly called and held, duly adopted
resolutions, approving this Agreement, the Merger and the other transactions
contemplated by this Agreement.
(b) The execution and delivery of this Agreement do not, and the
consummation of the Merger and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of Parent, any of its Subsidiaries or Merger Sub
under (i) the Parent Articles or Parent By-laws or the comparable organizational
documents of any of its Subsidiaries or Merger Sub, (ii) any Contract to which
Parent, any of its Subsidiaries or Merger Sub is a party or any of their
respective properties or other assets is subject or (iii) subject to the
governmental filings and other matters referred to in Section 4.04 hereof, any
Law applicable to Parent, any of its Subsidiaries or Merger Sub or their
respective properties or other assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, breaches, defaults, rights, losses or
Liens that individually or in the aggregate (A) would not reasonably be expected
to impair in any material respect the ability of Parent or Merger Sub to perform
its obligations under this Agreement and
30
(B) would not reasonably be expected to prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
Section 4.04 Governmental Approvals. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Governmental Authority is required by or with respect to
Parent, any of its Subsidiaries or Merger Sub in connection with the execution
and delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the Merger or the other transactions contemplated by
this Agreement, except for (a) Necessary Consents and (b) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made individually or in the aggregate would
not reasonably be expected to (x) impair in any material respect the ability of
Parent or Merger Sub to perform its obligations under this Agreement or (y)
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
Section 4.05 Information Supplied. None of the information supplied or to
be supplied by Parent or Merger Sub specifically for inclusion or incorporation
by reference in the Proxy Statement will, at the date it is first mailed to the
shareholders of the Company and at the time of the Company Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Notwithstanding the foregoing, no representation or warranty is made
by Parent or Merger Sub with respect to statements made or incorporated by
reference in the Proxy Statement based on information supplied by the Company
specifically for inclusion or incorporation by reference in the Proxy Statement.
Section 4.06 Litigation. There is no suit, action, claim, proceeding or
investigation pending or, to the Knowledge of Parent, threatened against Parent
or any of its Subsidiaries that individually or in the aggregate has had or
would reasonably be expected to prevent or materially delay the consummation of
any of the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Authority or
arbitrator outstanding against, or, to the Knowledge of Parent, investigation by
any Governmental Authority involving, Parent or any of its Subsidiaries that
individually or in the aggregate has had or would reasonably be expected to
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
Section 4.07 No Business Activities. Merger Sub has not conducted any
activities other than in connection with the organization of Merger Sub, the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby.
Section 4.08 Brokers and Other Advisors. No broker, investment banker,
financial advisor or other person other than ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., the fees and
expenses of which will be paid by Parent in accordance with Parent's agreements
with such firm, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission, or the reimbursement of expenses in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Merger Sub.
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Section 4.09 Financing. Parent has delivered to the Company a true and
complete copy of the investment agreement as in effect on the date hereof, dated
as of the date hereof (the "Financing Commitment"), between Parent and RIC
Coinvestment Fund LP ("RIC") pursuant to which RIC has committed to provide
equity financing in the aggregate amount of $1,300,000,000, which constitutes
sufficient funds for Parent to consummate the transactions contemplated hereby
(the "Equity Financing"). Except as set forth therein, there are no conditions
precedent or other contingencies (other than the consummation of the Merger) and
all necessary approvals and consents have been obtained related to the funding
of the full amount of the Equity Financing. Parent will comply with all of the
terms and provisions of the Financing Commitment.
ARTICLE V.
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.01 Conduct of Business.
(a) Conduct of Business by the Company. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall cause
each of its Subsidiaries to, carry on its business in the ordinary course
consistent with past practice and comply with all applicable Laws in all
material respects, and, to the extent consistent therewith, use its reasonable
efforts to preserve intact its current business organizations, keep available
the services of its current officers, employees and consultants and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it with the intention that its goodwill and
ongoing business shall not be materially impaired at the Effective Time. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, except as provided on Section 5.01(a) of
the Company Disclosure Letter and except as expressly contemplated by this
Agreement or required by applicable Laws, the Company shall not, and shall not
permit any of its Subsidiaries to, without Parent's prior written consent:
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of, any of
its capital stock, other than dividends or distributions by a direct or indirect
wholly owned Subsidiary of the Company to its parent, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (C) purchase, redeem or otherwise acquire any shares of its
capital stock or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities, or any
"phantom" stock, "phantom" stock rights, stock appreciation rights or stock
based performance units (other than the issuance of shares of Company Common
Stock upon the exercise of Company Stock Options outstanding on the date hereof
in accordance with their terms on the date hereof);
(iii) amend the Company Charter or the Company Bylaws or the
comparable charter or organizational documents of any of its Subsidiaries or
adopt another
32
shareholders' rights plan (i.e., "poison pill");
(iv) except in the ordinary course of business consistent with
past practice, directly or indirectly acquire (A) by merging or consolidating
with, or by purchasing all of or a substantial equity interest in, or by any
other manner, any division, business or equity interest of any person or (B) any
assets forming part of such a division or business; provided, however, that in
no event shall the Company and its Subsidiaries be permitted to acquire any such
assets that have a purchase price in excess of $20,000,000 in the aggregate;
(v) sell, lease, license, mortgage, sell and leaseback or
otherwise encumber or subject to any Lien (other than Permitted Liens) or
otherwise dispose of any of its properties or other assets with a fair market
value in excess of $1,000,000 individually or $2,000,000 in the aggregate to a
third party, except for Residence Agreements, leases or subleases entered into
in the ordinary course of business consistent with past practices;
(vi) make any capital expenditure or expenditures which (1)
involves the purchase of any real property or (2) are not in accordance with the
Company's capital expenditure budget for the balance of fiscal year 2006
provided to Parent prior to the date hereof;
(vii) (A) repurchase or prepay any indebtedness for borrowed
money except as required by the terms of such indebtedness, (B) incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
person or issue or sell any debt securities or options, warrants, calls or other
rights to acquire any debt securities of the Company or any of its Subsidiaries,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the foregoing
or (C) make any loans, advances or capital contributions to, or investments in,
any other person in excess of $750,000 in the aggregate, other than in the
Company or in or to any direct or indirect wholly-owned Subsidiary of the
Company;
(viii) (A) pay, discharge, settle or satisfy any claims
(including claims of shareholders), liabilities or obligations (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) (1) in
excess of $1,000,000 individually and $2,000,000 in the aggregate, other than in
the ordinary course of business consistent with past practice or (2) involving
any material limitation on the conduct of the business of the Company or its
Subsidiaries or (B) waive or release any right of the Company or any of its
Subsidiaries with a value in excess of $250,000;
(ix) except in the ordinary course of business consistent with
past practice, modify, amend or terminate any Contract (i) that by its terms is
required to be disclosed on Section 3.10(b) of the Company Disclosure Letter, or
(ii) that would be required, as so amended or modified, to be disclosed on
Section 3.10(b) of the Company Disclosure Letter, or enter into any Contract
which if in effect on the date hereof would be required to be disclosed on
Section 3.10(b) of the Company Disclosure Letter; provided that the Company
shall not, without the prior written consent of Parent, enter into any Contract
which if in effect on the date hereof
33
would be required to be disclosed on Section 3.10(b) of the Company Disclosure
Letter pursuant to Section 3.10(b)(ii) or which would require consent of or
notice to a third party in the event of or with respect to the Merger;
(x) terminate, amend or otherwise modify any agreement entered
into by the Company, at the request of Parent after the date hereof, with any
individual party to a New Employment Agreement;
(xi) except in the ordinary course of business consistent with
past practice, and except as required to comply with applicable Law or any
Contract disclosed in Section 3.12 of the Company Disclosure Letter, (A)
increase in any manner the compensation or fringe benefits of, or pay any bonus
(other than the bonus payments described in Section 6.11(a) of the Company
Disclosure Letter) to, any current or former director, officer, employee or
consultant of the Company or any of its Subsidiaries, (B) pay to any current or
former director, officer, employee or consultant of the Company or any of its
Subsidiaries any benefit not provided for under any Contract or Company Plan
other than the payment of cash compensation in the ordinary course of business
consistent with past practice, (C) grant any awards under any Company Plan
(including the grant of stock options, stock appreciation rights, stock based or
stock related awards, performance units, or restricted stock or the removal of
existing restrictions in any Contract or Company Plan or awards made
thereunder), (D) take any action to fund or in any other way secure the payment
of compensation or benefits under any Contract or Company Plan, (E) exercise any
discretion to accelerate the vesting or payment of any compensation or benefit
under any Contract or Company Plan, (F) materially change any actuarial or other
assumption used to calculate funding obligations with respect to any Company
Plan or change the manner in which contributions to any Company Plan are made or
the basis on which such contributions are determined or (G) adopt any new
employee benefit plan or arrangement or amend, modify or terminate any existing
Company Plan, in each case for the benefit of any current or former director,
officer, employee or consultant of the Company or any of its Subsidiaries, other
than required by applicable Law or tax qualification requirement; provided,
however, that with the prior consent of Parent, such consent not to be
unreasonably withheld, the Company may offer and make payments to current
employees for retention purposes;
(xii) adopt or enter into any collective bargaining agreement or
other labor union contract applicable to the employees of the Company or any of
its Subsidiaries;
(xiii) fail to use reasonable efforts to maintain existing
insurance policies or comparable replacement policies to the extent available
for a reasonable cost;
(xiv) change its fiscal year, revalue any of its material assets,
or make any changes in financial, actuarial, reserving, statutory or tax
accounting methods, principles or practices, except in each case as required by
GAAP or applicable Law;
(xv) make any material tax election or settle or compromise any
material tax liability, or agree to an extension of a statute of limitations
with respect to material taxes; or
(xvi) authorize any of, or commit, propose or agree to take any
of, the foregoing actions.
34
(b) Other Actions. Except as otherwise contemplated or permitted by
this Agreement, the Company and Parent shall not, and shall not permit any of
their respective Subsidiaries to, take any action that would reasonably be
expected to result in (i) any of the representations and warranties of such
party set forth in this Agreement that are qualified by materiality or Company
Material Adverse Effect as the case may be, becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the Merger set forth in
Article VII not being satisfied.
(c) Advice of Changes; Filings. Each of the Company and Parent shall
as promptly as practicable advise the other party orally and in writing upon
obtaining Knowledge of (i) any representation or warranty made by it (and, in
the case of Parent, made by Merger Sub) contained in this Agreement that is
qualified as to materiality or Company Material Adverse Effect, as the case may
be, becoming untrue or inaccurate in any respect or any representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect or (ii) the failure of it (and, in the case of Parent, of Merger Sub) to
comply with or satisfy in any respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however that no
such notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement. The Company and Parent
shall promptly provide the other copies of all filings made by such party with
any Governmental Authority in connection with this Agreement and the
transactions contemplated hereby.
Section 5.02 No Solicitation by the Company.
(a) The Company shall not, nor shall it authorize or permit any of its
Subsidiaries, any of its or their respective directors, officers, employees or
any investment banker, financial advisor, attorney, accountant or other advisor,
agent or representative retained by the Company or any Subsidiary in connection
with the transactions contemplated by this Agreement (collectively,
"Representatives") to, directly or indirectly through another person, (i)
solicit, initiate, cause, knowingly encourage, or knowingly facilitate, any
inquiries or the making of any proposal that constitutes or is reasonably likely
to lead to a Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal, or furnish to any person any
information in connection with or in furtherance of any Takeover Proposal.
Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding sentence by any Representative of the
Company or any of its Subsidiaries shall be a breach of this Section 5.02(a) by
the Company. The Company shall, and shall cause its Subsidiaries and instruct
its Representatives to, immediately cease and cause to be terminated all
existing discussions or negotiations with any person conducted heretofore with
respect to any Takeover Proposal and request the prompt return or destruction of
all confidential information previously furnished. Notwithstanding the
foregoing, at any time prior to obtaining the Company Shareholder Approval (and
in no event after obtaining such Company Shareholder Approval), in response to
an unsolicited bona fide written Takeover Proposal made after the date hereof
that the Company Board determines in good faith (after receiving advice of a
financial advisor of nationally recognized reputation, which may be ▇▇▇▇▇ &
Steers Capital Advisors, LLC, and of its outside counsel) constitutes or is
reasonably likely to constitute a Superior Proposal, the Company may, if the
Company Board determines in good faith (after receiving advice of its outside
counsel) that it is necessary to do so in order to comply with its fiduciary
duties to the
35
shareholders of the Company under applicable Law, and subject to compliance with
Section 5.02(c) and after giving Parent two business days written notice of such
determination, (A) furnish information with respect to the Company and its
Subsidiaries to the person making such Takeover Proposal (and its
Representatives) pursuant to a customary confidentiality agreement not less
restrictive of such person than the Confidentiality Agreement, provided that all
such oral or written information (to the extent that such information has not
been previously provided to Parent) is provided or made available to Parent, as
the case may be, prior to or substantially concurrent with the time it is
provided or made available to such person, as the case may be, and (B)
participate in discussions or negotiations with the person making such Takeover
Proposal (and its Representatives) regarding such Takeover Proposal.
For purposes of this Agreement, "Takeover Proposal" shall mean any inquiry,
proposal or offer, whether or not conditional and whether or not withdrawn, (a)
for a merger, consolidation, dissolution, recapitalization or other business
combination involving the Company, (b) for the issuance of 20% or more of the
equity securities of the Company as consideration for the assets or securities
of another person or (c) to acquire in any manner, directly or indirectly, 20%
or more of the equity securities of the Company or assets (including equity
securities of any Subsidiary of the Company) that represent 20% or more of the
total consolidated assets of the Company, other than the transactions
contemplated by this Agreement.
For purposes of this Agreement, "Superior Proposal" shall mean any bona
fide written offer made by a third party, that if consummated would result in
such person (or its shareholders) owning, directly or indirectly, 75% of the
shares of Company Common Stock then outstanding (or of the surviving entity in a
merger or the direct or indirect parent of the surviving entity in a merger) or
all or substantially all of the total consolidated assets of the Company (i) on
terms which the Company Board determines in good faith (after receiving advice
of a financial advisor of nationally recognized reputation and of its outside
counsel and in light of all relevant circumstances, including, without
limitation, all the terms and conditions of such proposal and this Agreement) to
be more favorable to the shareholders of the Company from a financial point of
view than the transactions contemplated by this Agreement, (ii) which is
reasonably likely to be completed, taking into account any financing and
approval requirements and all other financial, legal, regulatory and other
aspects of such proposal, and (iii) which does not have a financing contingency.
(b) Neither the Company Board nor any committee thereof shall (i) (A)
withdraw (or modify in a manner adverse to Parent), or propose to withdraw (or
modify in a manner adverse to Parent), the approval, recommendation or
declaration of advisability by such Company Board or any such committee thereof
of this Agreement or the Merger (it being understood that taking a neutral
position or no position with respect to a Takeover Proposal shall be considered
an adverse modification) or (B) recommend, adopt or approve, or propose publicly
to recommend, adopt or approve, any Takeover Proposal (any action described in
this clause (i) being referred to as a "Company Adverse Recommendation Change")
or (ii) approve or recommend, or propose to approve or recommend, or allow the
Company or any of its Subsidiaries to execute or enter into, any letter of
intent, memorandum of understanding, agreement in principle, merger agreement,
acquisition agreement, option agreement, joint venture agreement, partnership
agreement or other similar agreement constituting or related to, any Takeover
Proposal (other than a confidentiality agreement pursuant to Section 5.02(a)).
36
Notwithstanding the foregoing, the Company Board may, if the Company Board
determines in good faith (after receiving advice of its outside counsel) that it
is necessary to do so in order to comply with its fiduciary duties to the
shareholders of the Company under applicable Law, effect a Company Adverse
Recommendation Change or terminate this Agreement solely in order to
concurrently enter into an agreement with respect to a Superior Proposal, but,
in each case, only at a time that is after the fifth business day following
Parent's receipt of written notice from the Company (an "Adverse Notice")
advising Parent that the Company Board has determined that a Takeover Proposal
is a Superior Proposal, that the Company Board intends to make such Company
Adverse Recommendation Change or to terminate this Agreement and containing all
information required by Section 5.02(c), together with copies of any written
offer or proposal in respect of such Superior Proposal (it being understood and
agreed that any amendment to the financial terms or other material terms of such
Superior Proposal shall require a new Adverse Notice and a new five business day
period). In determining whether to make a Company Adverse Recommendation Change
or to terminate this Agreement in response to a Superior Proposal, the Company
Board shall take into account any changes to the terms of this Agreement
proposed by Parent (in response to an Adverse Notice or otherwise) in
determining whether such third party Takeover Proposal still constitutes a
Superior Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.02, the Company shall promptly advise
Parent orally and in writing of any request for information or other inquiry
that the Company reasonably believes could lead to any Takeover Proposal, the
terms and conditions of any such request, Takeover Proposal or inquiry
(including any changes thereto) and the identity of the person making any such
request, Takeover Proposal or inquiry. The Company shall promptly keep Parent
fully informed of the status and details (including any change to the terms
thereof) of any such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 5.02 shall prohibit the Company
or the Company Board from (i) complying with the Company's obligations required
under Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or (ii) making
any required disclosure to the shareholders of the Company if, in the good faith
judgment of the Company Board (after consultation with outside counsel), failure
to so disclose would constitute a violation of applicable Law; provided,
however, that any such disclosure relating to a Takeover Proposal shall be
deemed a Company Adverse Recommendation Change unless the Company Board
reaffirms its recommendation and declaration of advisability of this Agreement
and the Merger.
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.01 Preparation of the Proxy Statement; Shareholder Meetings.
(a) As soon as practicable following the date of this Agreement (but
in no event later than 20 days after the date hereof), the Company shall prepare
and file with the SEC the Proxy Statement. The Company will respond promptly to
any comments from the SEC or the staff of the SEC on the Proxy Statement. The
Company shall use its reasonable efforts to cause the Proxy Statement to be
mailed to the shareholders of the Company as promptly as practicable following
the date of this Agreement. No filing of, or amendment or supplement to,
37
the Proxy Statement will made by the Company, without providing Parent and its
counsel a reasonable opportunity to review and comment thereon. If at any time
prior to the Effective Time any information relating to the Company or Parent,
or any of their respective Affiliates, directors or officers, should be
discovered by the Company or Parent which should be set forth in an amendment or
supplement to the Proxy Statement, so that such document would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by Law, disseminated to the shareholders of the Company. The
parties shall notify each other promptly of the receipt of any comments from the
SEC or the staff of the SEC and of any request by the SEC or the staff of the
SEC for amendments or supplements to the Proxy Statement or for additional
information and shall supply each other with copies of all correspondence
between it or any of its Representatives, on the one hand, and the SEC or the
staff of the SEC, on the other hand, with respect to the Proxy Statement or the
Merger.
(b) The Company shall, as soon as practicable following the date of
this Agreement, establish a record date for and promptly take any and all
actions in connection therewith, and as soon as practicable after the date of
this Agreement, duly call, give notice of, convene and hold, a meeting of its
shareholders (the "Company Shareholders Meeting") solely for the purpose of
obtaining the Company Shareholder Approval. Subject to Section 5.02(b), the
Company shall, through the Company Board, recommend to its shareholders adoption
of this Agreement, the Merger and the other transactions contemplated by this
Agreement.
Section 6.02 Access to Information; Confidentiality. The Company shall
afford to Parent and its Representatives reasonable access during normal
business hours during the period prior to the Effective Time or the termination
of this Agreement to all of its and its Subsidiaries' properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed by such party during such period
pursuant to the requirements of Federal or state securities Laws and (b)
consistent with its legal obligations all other information concerning the
Company and its Subsidiaries' business, properties and personnel as Parent or
any of its Representatives may reasonably request; provided, however, that the
Company may restrict the foregoing access to the extent that any law, treaty,
rule or regulation of any Governmental Authority applicable to the Company
requires the Company to restrict access to any properties or information. Except
for disclosures expressly permitted by the terms of the confidentiality
agreement, dated as of April 25, 2006, between Parent and the Company (as it may
be amended from time to time, the "Confidentiality Agreement"), Parent shall
hold, and shall cause its Representatives to hold, all information received from
the Company, directly or indirectly, in confidence in accordance with the
Confidentiality Agreement. No investigation pursuant to this Section 6.02 or
information provided, made available or delivered to Parent pursuant to this
Agreement will affect any of the representations or warranties of the Company
contained in this Agreement or the conditions hereunder to the obligations of
the parties hereto.
38
Section 6.03 Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including using reasonable best
efforts to accomplish the following: (a) the taking of all acts necessary to
cause the conditions to Closing to be satisfied as promptly as practicable, (b)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Authorities and the making of all necessary
registrations and filings (including filings with Governmental Authorities, if
any) and the taking of all steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by any Governmental Authority,
(c) the obtaining of all necessary consents, approvals or waivers from third
parties and (d) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. In connection with and without limiting the
first sentence of this Section 6.03, each of the Company and the Company Board
and Parent and the Parent Board shall (i) take no action to cause any state
takeover statute or similar statute or regulation to become applicable to this
Agreement, the Merger or any of the other transactions contemplated by this
Agreement and (ii) if any state takeover statute or similar statute is or
becomes applicable to this Agreement, the Merger or any of the other
transactions contemplated by this Agreement, take all action reasonably
necessary to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on this Agreement, the Merger and the other transactions
contemplated by this Agreement. Notwithstanding the foregoing or anything else
to the contrary in this Agreement, nothing shall be deemed to require Parent to
(A) agree to, or proffer to, divest or hold separate any assets or any portion
of any business of Parent or any of its Subsidiaries or, assuming the
consummation of the Merger, the Company or any of its Subsidiaries, (B) not
compete in any geographic area or line of business, (C) restrict the manner in
which, or whether, Parent, the Company, the Surviving Corporation or any of
their respective Affiliates may carry on business in any part of the world or
(D) agree to any terms or conditions that would impose any obligations on Parent
or any of its Subsidiaries or, assuming the consummation of the Merger, the
Company or any of its Subsidiaries, to maintain facilities, operations, places
of business, employment levels, products or businesses.
Section 6.04 Indemnification, Exculpation and Insurance.
(a) All rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time now existing in
favor of the current or former directors and officers of the Company and its
Subsidiaries (the "Indemnified Parties") as provided in the Company Charter or
the Company Bylaws (in each case, as in effect on the date hereof) shall be
assumed by the Surviving Corporation in the Merger, without further action, as
of the Effective Time and shall survive the Merger and shall continue in full
force and effect in accordance with their terms for six years after the
Effective Time.
(b) For six years after the Effective Time, Parent shall maintain in
effect the Company's current directors' and officers' liability insurance in
respect of acts or omissions
39
occurring at or prior to the Effective Time (including for acts or omissions
occurring in connection with the approval of this Agreement and the consummation
of the transactions contemplated hereby), covering the Indemnified Parties
currently covered by the Company's directors' and officers' liability insurance
policy (a correct and complete copy of which has been heretofore made available
to Parent), on terms with respect to such coverage and amount no less favorable
than those of such policy in effect on the date hereof; provided, however, that
Parent may substitute therefor a tail policy or policies of Parent containing
terms with respect to coverage and amount no less favorable to such Indemnified
Parties; provided, further, however, that in satisfying its obligation under
this Section 6.04(b) Parent shall not be obligated to pay aggregate premiums in
excess of 250% of the amount paid by the Company in its last full fiscal year
(which premiums are hereby represented and warranted by the Company to be
approximately $465,000), it being understood and agreed that Parent shall
nevertheless be obligated to provide such coverage as may be obtained for such
250% amount.
(c) The covenants contained in this Section 6.04 are intended to be
for the benefit of, and shall be enforceable by, each of the Indemnified Parties
and their respective heirs and legal representatives, and shall not be deemed
exclusive of any other rights to which an Indemnified Party is entitled, whether
pursuant to Law, contract or otherwise.
Section 6.05 Fees and Expenses. All fees and expenses incurred in
connection with this Agreement, the Merger and the other transactions
contemplated by this Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated, except that each of the
Company and Parent shall bear and pay one-half of (a) the costs and expenses
incurred in connection with filing, printing and mailing the Proxy Statement and
(b) the filing fees for the premerger notification and report forms under the
HSR Act.
Section 6.06 Public Announcements. Parent and the Company shall consult
with each other before issuing, and give each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or national securities quotation system. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.
Section 6.07 Shareholder Litigation. The Company shall promptly advise
Parent orally and in writing of any shareholder litigation against the Company
and/or its directors relating to this Agreement, the Merger and/or the
transactions contemplated by this Agreement and shall keep Parent fully informed
regarding any such shareholder litigation. The Company shall give Parent the
opportunity to consult with the Company regarding the defense or settlement of
any such shareholder litigation, shall give due consideration to Parent's advice
with respect to such shareholder litigation and shall not settle any such
litigation prior to such consultation and consideration; provided, however, that
the Company further will not, without Parent's prior written consent, settle any
shareholder litigation (a) for an amount greater than $2,000,000 individually,
and $3,000,000 in the aggregate or (b) that involves or has the effect of
imposing
40
any remedy or restriction upon the Company or any of its Subsidiaries other than
monetary damages.
Section 6.08 Employee Matters.
(a) Following the Effective Time, Parent shall cause to be provided to
individuals who are employed by the Company and its Subsidiaries immediately
prior to the Effective Time and who are employed thereafter by the Surviving
Corporation, Parent or any of Parent's Subsidiaries (the "Affected Employees"),
compensation and employee benefits no less favorable in the aggregate than those
provided to other similarly situated employees of Parent and its Subsidiaries.
(b) For purposes of eligibility and vesting, with respect to any
benefit plan, program or arrangement (including any "employee benefit plan" (as
defined in Section 3(3) of ERISA), Parent shall, and shall cause the Surviving
Corporation to, recognize the service of the Affected Employees with the Company
and its Subsidiaries prior to the Effective Time to the same extent as such
service was taken into account under the corresponding Company Plan for those
purposes; provided, however, that such recognition shall not result in a
duplication of benefits. Parent agrees to honor, or cause the Surviving
Corporation to honor, all vacation accrued by Affected Employees as of the
Effective Time.
(c) With respect to any welfare plan in which employees of the Company
and its Subsidiaries are eligible to participate after the Effective Time,
Parent shall, and shall cause the Surviving Corporation to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to such employees
to the extent such conditions were satisfied under the welfare plans of the
Company and its Subsidiaries prior to the Effective Time, and (ii) provide each
such employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any analogous deductible or out-of-pocket
requirements.
(d) Prior to the Effective Time, the Company shall amend (or cause
duly authorized persons to amend) its Supplemental Executive Retirement Plan
(the "SERP") to ensure that (i) after the date hereof, no "rabbi trust" shall be
established by the Company and no corporate owned life insurance shall be
purchased to create a reserve for payments under the plan in connection with the
transactions contemplated herein, and (ii) if a "rabbi trust" or a
corporate-owned-life-insurance reserve has previously been established by the
Company, no contributions shall be made to any such trust and no additional
insurance coverage shall be purchased by the Company in connection with the
transactions contemplated herein.
(e) Prior to the Effective Time, the Company shall amend (or cause
duly authorized persons to amend) its Deferred Compensation Plan to ensure that
(i) after the date hereof no "rabbi trust" shall be established by the Company
in connection with the transactions contemplated herein, and (ii) if a "rabbi
trust" has previously been established by the Company, no contributions shall be
made to such trust by the Company in connection with the transactions
contemplated herein.
41
(f) Nothing contained herein, express or implied, is intended to
confer upon any Affected Employee any right to continued employment for any
period by reason of this Agreement.
Section 6.09 Employment Agreements. Notwithstanding anything to the
contrary in this Agreement, the Company shall use its reasonable best efforts to
cause each of the Covered Employees not to repudiate or otherwise breach the New
Employment Agreement to which such Covered Employee is a party.
Section 6.10 Standstill Agreements, Confidentiality Agreements,
Anti-takeover Provisions. During the period from the date of this Agreement
through the Effective Time, the Company will not terminate, amend, modify or
waive any provision of any agreement required to be disclosed pursuant to
Section 3.10(b)(v) hereof to which it or any of its Subsidiaries is a party,
other than the Confidentiality Agreement pursuant to its terms or by written
agreement of the parties thereto. During such period, the Company shall enforce,
to the fullest extent permitted under applicable Law, the provisions of any such
agreement, including by obtaining injunctions to prevent any material breaches
of such agreements and to enforce specifically the material terms and provisions
thereof in any court of the United States of America or of any state having
jurisdiction. In addition, except as provided in Section 5.02, the Company will
not approve a Takeover Proposal or Superior Proposal for purposes of Section
▇▇-▇▇▇-▇▇▇ of the TBCA.
Section 6.11 Cooperation. Each of the Company and its Subsidiaries will,
and will cause each of its Representatives to, use its reasonable efforts,
subject to applicable Laws, to cooperate with and assist Parent and Merger Sub
in connection with planning the integration of the Company and its Subsidiaries
and their respective employees with the business operations of Parent and its
Subsidiaries.
Section 6.12 Financing. The Company shall, if reasonably requested by
Parent in connection with Parent's efforts to obtain financing in respect of its
obligations under this Agreement (the "Financing"), cooperate in good faith with
Parent, form or cause its Subsidiaries to form, on or prior to the Closing, new
wholly-owned Subsidiaries, and, at the Closing execute any documents, agreements
and instruments and take such other actions as may be reasonably requested by
Parent in connection with the Financing, all in such order, form and substance
as reasonably requested by Parent; provided that such cooperation shall not
unreasonably interfere with the ongoing business operations of the Company,
require the expenditure of any material amount of money by the Company or any of
its Subsidiaries, violate any contract to which the Company or any of its
Subsidiaries is a party, or violate any Law.
Section 6.13 Hedging Agreements. During the period of time from the date of
this Agreement and through the Effective Time, if requested by Parent, the
Company shall enter into fixed-rate interest rate swap agreements or similar
arrangements, in form and substance reasonably satisfactory to Parent, with
respect to all or a portion of its currently outstanding floating-rate
indebtedness; provided that the Company shall not be required to enter into such
hedging arrangements to the extent that, individually or in the aggregate, such
hedging arrangements involve a notional amount in excess of $80,000,000.
42
ARTICLE VII.
CONDITIONS PRECEDENT
Section 7.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Shareholder Approval. The Company Shareholder Approval
shall have been obtained.
(b) Antitrust. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act or any other applicable competition,
merger control, antitrust or similar Law shall have been terminated or shall
have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other judgment, order or decree issued by
any court of competent jurisdiction or other statute, law, rule, legal restraint
or prohibition (collectively, "Restraints") shall be in effect preventing the
consummation of the Merger.
Section 7.02 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are further subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement (other than the representations and
warranties of the Company set forth in Section 3.03) shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
the Closing Date (without regard to materiality or Company Material Adverse
Effect qualifiers contained therein), except to the extent such representations
and warranties expressly relate to an earlier date, in which case as of such
earlier date, except where the failure of the representations and warranties to
be true and correct individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect. The
representations and warranties of the Company set forth in Section 3.03 shall be
true and correct in all respects (subject to de minimis exceptions for breaches
involving discrepancies of no more than 30,000 shares of Company Common Stock or
stock options in the aggregate covering no more than 30,000 shares of Company
Common Stock) as of the date of this Agreement and as of the Closing Date as
though made on the Closing Date. Parent shall have received a certificate signed
on behalf of the Company by the chief executive officer and the chief financial
officer of the Company to the effect of the foregoing two sentences.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(c) No Litigation. There shall not be pending or overtly threatened in
writing any suit, action or proceeding by any Governmental Authority (i)
challenging the acquisition by
43
Parent or Merger Sub of any shares of Company Common Stock, seeking to restrain
or prohibit the consummation of the Merger, seeking to place limitations on the
ownership of shares of Company Common Stock (or shares of capital stock of the
Surviving Corporation) by Parent or Merger Sub, or (ii) seeking to (A) prohibit
or limit the ownership or operation by the Company or any of its Subsidiaries or
by Parent or any of its Subsidiaries of any portion of any business or of any
assets of the Company and its Subsidiaries or Parent and its Subsidiaries, (B)
compel the Company or any of its Subsidiaries or Parent or any of its
Subsidiaries to divest or hold separate any portion of any business or of any
assets of the Company and its Subsidiaries or Parent and its Subsidiaries, as a
result of the Merger or (C) impose any obligations on Parent or any of its
Subsidiaries or the Company or any of its Subsidiaries to maintain facilities,
operations, places of business, employment levels, products or businesses.
(d) Restraint. No Restraint that would reasonably be expected to
result, directly or indirectly, in any of the effects referred to in Section
7.02(c) shall be in effect.
(e) Permits. Parent shall have obtained such customary assurances as
are customarily obtained under local custom and practice (if any) to allow a
reasonable person, acting in good faith, to conclude that all material Permits
necessary for the lawful conduct of the business of the Company and its
Subsidiaries following consummation of the Merger will be issued in the ordinary
course and effective as of Closing. Notwithstanding the foregoing, the forgoing
provision shall be inapplicable to the extent that (i) such customary assurances
are unavailable solely as a result of the negative operating history or
qualifications of the Parent, or solely as a result of the negative background
of any director(s) or officer(s) of the Parent, or (ii) the failure to obtain
any such Permits would not, individually or in the aggregate result, or be
reasonably likely to result, in a material adverse effect of Parent.
(f) Closing Consents. The consents, authorizations, orders, permits
and approvals listed on Exhibit B hereto shall have been obtained and shall be
in full force and effect.
Section 7.03 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is further subject to the satisfaction or waiver on
or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
the Closing Date (without regard to materiality qualifiers contained therein),
except to the extent such representations and warranties expressly relate to an
earlier date, in which case as of such earlier date, except where the failure of
the representations and warranties to be true and correct individually or in the
aggregate, has not had and would not reasonably be expected to have a material
adverse effect on Parent's ability to consummate the transactions contemplated
hereby. The Company shall have received a certificate signed on behalf of Parent
by an executive officer of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Parent and
Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of
Parent by an executive officer of Parent to such effect.
Section 7.04 Frustration of Closing Conditions. None of the Company, Parent
or Merger Sub may rely on the failure of any condition set forth in Sections
7.01, 7.02 or 7.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use its reasonable best efforts to consummate
the Merger and the other transactions contemplated by this Agreement, as
required by and subject to Section 6.03.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of the Company
Shareholder Approval:
44
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated on or before
the nine month anniversary of the date of this Agreement (the "Termination
Date"); provided, however, that the right to terminate this Agreement under this
Section 8.01(b)(i) shall not be available to any party whose action or failure
to act has been a principal cause of or resulted in the failure of the Merger to
be consummated on or before such date;
(ii) if any Restraint having the effect of permanently
restraining, enjoining, or otherwise prohibiting the Merger and the transactions
contemplated by this Agreement shall be in effect and shall have become final
and nonappealable;
(iii) if the Company Shareholder Approval shall not have been
obtained at the Company Shareholders Meeting duly convened therefor or at any
adjournment or postponement thereof;
(c) by Parent, if the Company shall have breached or failed to perform
any of its representations, warranties, covenants or agreements set forth in
this Agreement, which breach or failure to perform (A) would give rise to the
failure of a condition set forth in Section 7.02(a) or (b) and (B) is incapable
of being cured, or is not cured, by the Company within 30 calendar days
following receipt of written notice from Parent of such breach or failure to
perform;
(d) by the Company, if Parent or Merger Sub shall have breached or
failed to perform any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach or failure to perform (i)
would give rise to the failure of a condition set forth in Section 7.03(a) or
(b) and (ii) is incapable of being cured, or is not cured, by Parent or Merger
Sub, as the case may be, within 30 calendar days following receipt of written
notice from the Company of such breach or failure to perform;
(e) by Parent, if (i) a Company Adverse Recommendation Change shall
have occurred or (ii) within ten (10) business days of the date any Takeover
Proposal shall have been made or communicated to the Company, the Company Board
or any committee thereof shall have failed to publicly confirm its
recommendation and declaration of advisability of this Agreement and the Merger;
or
(f) by the Company, if the Company Board shall have exercised its
termination rights set forth in Section 5.02(b); provided that in order for the
termination of this Agreement pursuant to this Section 8.01(f) to be deemed
effective, the Company shall have complied with all provisions of Section 5.02,
including the notice provisions therein and paid the amounts required by Section
8.02.
Section 8.02 Termination Fee and Shareholder Termination Fee.
(a) In the event that:
45
(i) this Agreement is terminated by either Parent or the Company
pursuant to Section 8.01(b)(i), and after the date of this Agreement a Takeover
Proposal shall have been made or communicated to the Company or shall have been
made directly to the shareholders of the Company generally and (B) within twelve
(12) months after such termination the Company shall have reached a definitive
agreement to consummate, or shall have consummated a Takeover Proposal; provided
that for purposes of this Clause (B) all references in the definition of
Takeover Proposal to 20% shall instead refer to 50%;
(ii) this Agreement is terminated by the Company pursuant to
Section 8.01(f);
(iii) this Agreement is terminated by Parent pursuant to Section
8.01(c) and (A) after the date of this Agreement a Takeover Proposal shall have
been made or communicated to the Company or shall have been made directly to the
shareholders of the Company generally and (B) within twelve (12) months after
such termination the Company shall have reached a definitive agreement to
consummate, or shall have consummated a Takeover Proposal; provided that for
purposes of this Clause (B) all references in the definition of Takeover
Proposal to 20% shall instead refer to 50%; or
(iv) this Agreement is terminated by Parent pursuant to Section
8.01(e),
then the Company shall (1) in the case of a Termination Fee payable pursuant to
clauses (i) or (iii) of this Section 8.02(a), upon the earlier of the date of
such definitive agreement and such consummation of a Takeover Proposal, (2) in
the case of a Termination Fee payable pursuant to clause (ii) of this Section
8.02(a), on the date of such termination, or (3) in the case of a Termination
Fee payable pursuant to clause (iv) of this Section 8.02(a), on the date that is
two business days after the date of such termination, pay Parent a fee equal to
$45,000,000 (the "Termination Fee") by wire transfer of same-day funds.
Notwithstanding the foregoing sentence, in the event that the Company proposes
to terminate this Agreement at a time when the Termination Fee is payable, the
Company shall pay Parent the Termination Fee as described above prior to such
termination by the Company. In case of the termination of this Agreement by the
Company or Parent pursuant to Section 8.01(b)(iii), then the Company shall
reimburse Parent for all reasonable out of pocket expenses (including, without
limitation, all fees and expenses of financing sources, counsel, accountants,
investment bankers, experts and consultants) incurred prior to the date of such
termination by Parent or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby, promptly upon the Company's
receipt of reasonable documentation of such expenses; provided, however, that
notwithstanding any provision herein to the contrary, the liability of the
Company pursuant to this provision shall not exceed $5,000,000 (the "Shareholder
Termination Fee"). In the case of a Termination Fee payable pursuant to clause
(iii) of this Section 8.02(a), the parties hereby agree that the Termination Fee
(including the right to receive such fee or the payment of such fee) shall not
limit in any respect any rights or remedies available to Parent and Merger Sub
relating to any willful breach or failure to perform any representation,
warranty, covenant or agreement set forth in this Agreement resulting, directly
or indirectly, in the right to receive the Termination Fee. In the event that
either party terminates this Agreement pursuant to Section 8.01(b)(iii) and (i)
after the date of this Agreement a Takeover Proposal shall have been made or
communicated to the
46
Company or shall have been made directly to the shareholders of the Company
generally and (ii) within twelve (12) months after such termination the Company
shall have reached a definitive agreement to consummate, or shall have
consummated a Takeover Proposal, then the Company shall, upon the earlier of the
date of such definitive agreement and such consummation of a Takeover Proposal,
pay Parent the Termination Fee, less any portion of the Shareholder Termination
Fee previously paid by the Company to Parent pursuant to this Section 8.02, by
wire transfer of same-day funds; provided that for purposes of clause (ii) of
this sentence, all references in the definition of Takeover Proposal to 20%
shall instead refer to 50%. Notwithstanding anything to the contrary contained
in this Agreement, the Company in no event shall be obligated to pay more than
one such Termination Fee with respect to all such agreements and occurrences and
such termination.
(b) The Company acknowledges and agrees that the agreements contained
in Section 8.02(a) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement. If the Company fails promptly to pay the amount due pursuant to
Section 8.02(a), and, in order to obtain such payment, Parent commences a suit
that results in a judgment against the Company for the Termination Fee, the
Company shall pay to Parent its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) incurred in connection with such suit,
together with interest on the amount of the Termination Fee from the date such
payment was required to be made until the date of payment at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
Section 8.03 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Merger Sub or the Company, other than the
provisions of the penultimate sentence of Section 6.02(a), Sections 6.05 and
8.02, this Section 8.03 and Article IX, which provisions shall survive such
termination; provided that nothing herein shall relieve any party from any
liability for any material breach hereof.
Section 8.04 Amendment. This Agreement may be amended by the parties hereto
at any time before or after receipt of the Company Shareholder Approval;
provided, however, that after such approval has been obtained, there shall be
made no amendment that by Law requires further approval by the shareholders of
the Company without such approval having been obtained. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 8.05 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso to the first sentence of Section
8.04, waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.
47
Section 8.06 Procedure for Termination or Amendment. A termination of this
Agreement pursuant to Section 8.01 or an amendment of this Agreement pursuant to
Section 8.04 shall, in order to be effective, require, in the case of Parent or
the Company, action by the Parent Board or the Company Board, as applicable, or,
with respect to any amendment of this Agreement pursuant to Section 8.04, the
Parent Board or the Company Board, as applicable, or the duly authorized
committee or other designee of the Parent Board or the Company Board, as
applicable, to the extent permitted by Law.
ARTICLE IX.
GENERAL PROVISIONS
Section 9.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
Section 9.02 Notices. Except for notices that are specifically required by
the terms of this Agreement to be delivered orally, all notices, requests,
claims, demands and other communications hereunder shall be in writing and shall
be deemed given if delivered personally, facsimiled (which is confirmed) or sent
by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
if to Parent or Merger Sub, to:
Brookdale Senior Living Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Coco
if to the Company, to:
American Retirement Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
48
with a copy to:
Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: T. ▇▇▇▇▇▇ ▇▇▇▇▇
Section 9.03 Definitions. For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Knowledge" of any person that is not an individual means, with
respect to the Company regarding any matter in question, the actual knowledge of
the individuals listed in Section 9.03(b) of the Company Disclosure Letter;
(c) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(d) "Permitted Liens" means (i) any liens for taxes not yet delinquent
or which are being contested in good faith by appropriate proceedings, (ii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
similar liens, (iii) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation, (iv)
easements, rights-of-way, restrictions and other similar encumbrances incurred
in the ordinary course of business that, in the aggregate, are not material in
amount and that do not, in any case, materially detract from the use or value of
the property subject thereto, and (v) any liens described in, set forth in, or
securing the Leases or the Contracts described in Section 3.10(b) of the Company
Disclosure Letter;
(e) a "Subsidiary" of any person means another person, an amount of
the voting securities, other voting rights or voting partnership interests of
which is sufficient to elect at least a majority of its board of directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
Section 9.04 Interpretation. When a reference is made in this Agreement to
an Article, a Section, Exhibit or Schedule, such reference shall be to an
Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined
49
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein or
in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns. The
parties have participated jointly in the negotiating and drafting of this
Agreement. In the event of an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
Section 9.05 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.06 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the Company Disclosure Letter, the Exhibits hereto and the
Confidentiality Agreement constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and the Confidentiality
Agreement and are not intended to confer upon any person other than the parties
any rights, benefits or remedies.
Section 9.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware, regardless of
the Laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 9.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties without the prior written
consent of the other parties and any attempt to make any such assignment without
such consent shall be null and void, except that Merger Sub may assign, in its
sole discretion any of or all its rights, interests and obligations under this
Agreement to any direct or indirect, wholly owned Subsidiary of Parent, but no
such assignment shall relieve Merger Sub of any of its obligations hereunder
(except in the case of any such request). Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
Section 9.09 Specific Enforcement; Consent to Jurisdiction. The parties
agree that irreparable damage would occur and that the parties would not have
any adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Federal
court located in the State
50
of Delaware or in any state court in the State of Delaware, without proof of
actual damages, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or of any state court located in the State of
Delaware in the event any dispute arises out of this Agreement or the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a Federal court located in the State of Delaware or a state
court located in the State of Delaware.
Section 9.10 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
51
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
BROOKDALE SENIOR LIVING INCORPORATED
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BETA MERGER SUB CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
AMERICAN RETIREMENT CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
52