EXHIBIT 2.1.1
CONFORMED COPY
STOCK PURCHASE AGREEMENT
dated as of June 18, 2004
among
FORTRESS BROOKDALE ACQUISITION LLC,
"Seller"
PROVIDENT SENIOR LIVING TRUST
"Acquiror"
and
BLC SENIOR HOLDINGS, INC.
"Indemnitor"
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms.......................................................................... 1
ARTICLE II
AGREEMENT TO PURCHASE THE SHARES; REAL PROPERTY
MATTERS AND DUE DILIGENCE
Section 2.01. Agreement to Purchase the Shares............................................................... 2
Section 2.02. Closing........................................................................................ 2
Section 2.03. Purchase Price................................................................................. 2
Section 2.04. Adjustments and Apportionments................................................................. 2
Section 2.05. Due Diligence Deposit.......................................................................... 4
Section 2.06. Transactions to be Effected; Closing and Other Deliveries...................................... 4
Section 2.07. Payments and Computations...................................................................... 5
Section 2.08. Property Due Diligence......................................................................... 5
Section 2.09. Capital Expenditure Reserves................................................................... 6
Section 2.10. New Title Policies; New Surveys................................................................ 8
Section 2.11. Real Property Matters to which Real Property May Be Subject.................................... 8
Section 2.12. No Other Representations....................................................................... 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INDEMNITOR AND SELLER
Section 3.01. Incorporation, Qualification and Authority of Seller and Indemnitor Parties.................... 9
Section 3.02. Incorporation, Qualification and Authority of the Company and the Company Subsidiaries......... 10
Section 3.03. Capital Structure of the Company and the Company Subsidiaries; Ownership and Transfer of
the Shares..................................................................................... 10
Section 3.04. No Conflict.................................................................................... 11
Section 3.05. Consents and Approvals......................................................................... 12
Section 3.06. Financial Statements; Absence of Undisclosed Liabilities....................................... 13
Section 3.07. Absence of Certain Changes..................................................................... 14
Section 3.08. Absence of Litigation.......................................................................... 14
Section 3.09. Compliance with Laws........................................................................... 14
Section 3.10. Governmental Licenses and Permits.............................................................. 15
Section 3.11. Environmental Matters.......................................................................... 15
Section 3.12. Material Contracts............................................................................. 16
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Section 3.13. Employee Benefits; Employees................................................................... 17
Section 3.14. Acquired Personal Property Assets.............................................................. 17
Section 3.15. Real Property Assets........................................................................... 18
Section 3.16. Ground Leased Assets........................................................................... 19
Section 3.17. Insurance...................................................................................... 19
Section 3.18. Acquired Real Property; Existing Mortgages..................................................... 20
Section 3.19. Taxes.......................................................................................... 20
Section 3.20. Brokers........................................................................................ 22
Section 3.21. Excluded Assets; Excluded Liabilities.......................................................... 22
Section 3.22. Regulatory Filings............................................................................. 22
Section 3.23. No Certificates of Need or Provider Agreements................................................. 23
Section 3.24. Operator Matters............................................................................... 23
Section 3.25. Books and Records.............................................................................. 25
Section 3.26. Information Supplied........................................................................... 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Section 4.01. Incorporation and Authority of Acquiror........................................................ 25
Section 4.02. Qualification of Acquiror...................................................................... 26
Section 4.03. No Conflict.................................................................................... 26
Section 4.04. Consents and Approvals......................................................................... 26
Section 4.05. Securities Matters............................................................................. 27
Section 4.06. Financial Ability.............................................................................. 27
Section 4.07. Investigation.................................................................................. 27
Section 4.08. Brokers........................................................................................ 27
Section 4.09. Information Supplied........................................................................... 27
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01. Conduct of Business Prior to the Closing....................................................... 28
Section 5.02. Access to Information.......................................................................... 30
Section 5.03. Books and Records.............................................................................. 32
Section 5.04. Confidentiality; Exclusivity................................................................... 32
Section 5.05. Regulatory and Other Authorizations; Reasonable Efforts........................................ 33
Section 5.06. Intercompany Obligations....................................................................... 34
Section 5.07. Intercompany Arrangements...................................................................... 34
Section 5.08. Excluded Assets; Excluded Liabilities.......................................................... 34
Section 5.09. Change of Name................................................................................. 34
Section 5.10. Existing Mortgage Lender Consents.............................................................. 34
Section 5.11. Private Placement.............................................................................. 35
Section 5.12. Registration Statement; Additional Financial Statements........................................ 35
Section 5.13. Certain Insurance Claims....................................................................... 36
Section 5.14. Notice of Certain Events....................................................................... 37
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Section 5.15. Further Action................................................................................. 37
ARTICLE VI
CONDITIONS TO CLOSING AND RELATED MATTERS
Section 6.01. Conditions to Obligations of Seller and Indemnitor............................................. 37
Section 6.02. Conditions to Obligations of Acquiror.......................................................... 38
ARTICLE VII
TERMINATION, WAIVER AND DEFAULT
Section 7.01. Termination.................................................................................... 40
Section 7.02. Notice of Termination.......................................................................... 41
Section 7.03. Effect of Termination.......................................................................... 41
Section 7.04. Extension; Waiver.............................................................................. 41
Section 7.05. Acquiror's Default............................................................................. 41
Section 7.06. Seller's Default............................................................................... 41
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification by Indemnitor.................................................................. 42
Section 8.02. Indemnification by Acquiror.................................................................... 43
Section 8.03. Notification of Third Party Claims............................................................. 44
Section 8.04. Payment; Interest on Payment................................................................... 46
Section 8.05. Exclusive Remedies............................................................................. 46
Section 8.06. Additional Indemnification Provisions.......................................................... 47
Section 8.07. Mitigation of Losses........................................................................... 48
Section 8.08. No Recourse to Seller and Parent Entities...................................................... 48
ARTICLE IX
CASUALTY AND CONDEMNATION OF THE REAL PROPERTY
Section 9.01. Casualty....................................................................................... 49
Section 9.02. Condemnation Pending Closing................................................................... 50
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Survival....................................................................................... 51
Section 10.02. Expenses; Transaction Costs.................................................................... 51
Section 10.03. Notices........................................................................................ 52
Section 10.04. Public Announcements........................................................................... 53
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Section 10.05. Severability................................................................................... 53
Section 10.06. Entire Agreement............................................................................... 53
Section 10.07. Assignment..................................................................................... 54
Section 10.08. No Third-Party Beneficiaries................................................................... 54
Section 10.09. Amendment...................................................................................... 54
Section 10.10. Disclosure Schedules........................................................................... 54
Section 10.11. Governing Law; Submission to Jurisdiction; Waivers............................................. 54
Section 10.12. Specific Performance........................................................................... 55
Section 10.13. Rules of Construction.......................................................................... 55
Section 10.14. Counterparts................................................................................... 55
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THIS STOCK PURCHASE AGREEMENT dated as of June 18, 2004 (this
"Agreement"), is made among FORTRESS BROOKDALE ACQUISITION LLC, a Delaware
limited liability company ("Seller"), PROVIDENT SENIOR LIVING TRUST, a Maryland
real estate investment trust ("Acquiror"), and BLC SENIOR HOLDINGS, INC., a
Delaware corporation ("Indemnitor").
PRELIMINARY STATEMENTS
A. Seller owns 1,000 shares of common stock, par value $0.01 per
share (the "Shares"), of Brookdale Living Communities, Inc., a Delaware
corporation (the "Company"), which Shares constitute all of the issued and
outstanding shares of capital stock of the Company;
B. The Company owns, directly or indirectly, all of the outstanding
Equity Shares (as that term is defined in Exhibit A) in each of the entities
listed on Schedule 1 (each a "Company Subsidiary," and collectively, the
"Company Subsidiaries");
C. Indemnitor is the direct or indirect holder of one-hundred
percent (100%) of the beneficial ownership interest in (1) Tenant Holding
Company and (2) Manager (as those terms are defined in Exhibit A), and
Indemnitor will derive significant benefits if the transactions contemplated
herein are consummated;
D. On or prior to the Closing Date (as that term is defined in
Exhibit A), (1) Seller shall cause the Company and the Company Subsidiaries to
convey, assign, transfer and deliver to Indemnitor all the Excluded Assets (as
that term is defined in Exhibit A), (2) Indemnitor shall assume the Excluded
Liabilities (as that term is defined in Exhibit A), and (3) the Company and
Indemnitor shall be renamed "Old Brookdale Inc." and "Brookdale Living
Communities, Inc.", respectively, all as more particularly described herein;
E. Seller desires to sell to Acquiror, and Acquiror desires to
purchase from Seller, the Shares upon the terms and subject to the conditions
set forth herein; and
F. Concurrent with the execution of this Agreement, the parties
hereto are entering into the Tax Matters Agreement (as that term is defined in
Exhibit A).
NOW, THEREFORE, the parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01.Certain Defined Terms. Capitalized terms used in this
Agreement have the meanings specified in Exhibit A, or elsewhere in this
Agreement.
ARTICLE II
AGREEMENT TO PURCHASE THE SHARES; REAL PROPERTY MATTERS AND
DUE DILIGENCE
Section 2.01. Agreement to Purchase the Shares. On the terms and
subject to the conditions set forth in this Agreement, at the Closing, Seller
will sell, convey, assign, transfer and deliver to Acquiror, free and clear of
all Liens, and Acquiror will purchase, acquire and accept from Seller, the
Shares, including all Seller's right, title and interest therein and thereto.
Section 2.02.Closing. The purchase and sale contemplated by this
Agreement will take place at a closing (the "Closing") at 10:00 a.m., New York
time, on the third Business Day following the date on which the last unfulfilled
or unwaived condition set forth in Article VI (other than any such condition to
be fulfilled at the Closing) shall be fulfilled or waived in accordance with the
terms of this Agreement, at the offices of Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other date or place as the
parties hereto may mutually agree in writing (the date on which the Closing
shall occur is hereinafter referred to as the "Closing Date"), subject to the
rights of the parties to terminate this Agreement pursuant to Article VII.
Section 2.03. Purchase Price. The aggregate purchase price for the
Shares payable by Acquiror to Seller shall be an amount in cash equal to the sum
of (i) $735,000,000 (the "Base Purchase Price"), plus (ii) in accordance with
Section 10.02, Transaction Costs not exceeding $7,350,000, minus (iii) the
outstanding principal balance of the Assumed Mortgage Debt allocable to the
Acquired Real Property Assets as of the Closing Date (the resulting amount, the
"Purchase Price"), as further increased or decreased in accordance with Sections
2.04(c), 2.09, 9.01 and 9.02 (the "Closing Adjustments"). The Purchase Price, as
adjusted, by the Closing Adjustments, is hereinafter referred to as the "Final
Purchase Price". Schedule 2.03 lists each of the Real Property Assets and sets
forth the portion of the Final Purchase Price that is allocable to each of the
Real Property Assets (each, an "Allocable Portion"); provided, that Acquiror
will revise Schedule 2.03 to reflect adjustments, if any, to the Allocable
Portions of the Acquired Real Property Assets pursuant to Sections 2.09(d) and
10.02. The Allocable Portions shall be the basis upon which the initial Lease
Basis (as defined in the form of Property Lease) is determined for each of the
Acquired Real Property Assets.
Section 2.04. Adjustments and Apportionments. (a) Seller and
Acquiror acknowledge and agree that, as of the Closing Date, certain costs and
expenses relating to the Acquired Real Property Assets owned by the Company or a
Company Subsidiary, including real estate Taxes, water meter and water charges,
sewer rents, and debt service under the Assumed Mortgage Debt (all such costs
and expenses, collectively, "Real Property Expenses"), (x) may have accrued
during the period prior to the Closing Date (the "Pre-Closing Period") but will
not be due and payable by the Company or a Company Subsidiary until after the
Closing Date (such accrued expenses, if any, that are unpaid as of the Closing
Date being hereinafter referred to as "Accrued Expenses") or (y) will not accrue
until the period on or after the Closing Date (the "Post-Closing Period") but
have been paid by the Company or a Company Subsidiary during the Pre-Closing
Period (such unaccrued expenses, if any, that have been prepaid as the Closing
Date being hereinafter referred to as "Prepaid Expenses"). The expenses
described in this Section
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2.04(a) shall be pro rated as of 12:01 am (New York time) on the
Closing Date and apportioned (on the basis of a 365-day year) to (i) Seller with
respect to the Pre-Closing Period and (ii) Acquiror with respect to the
Post-Closing Period (it being acknowledged and agreed by the parties hereto that
each of the Net Tenants shall, pursuant to the terms of the respective Property
Leases, be responsible for all Real Property Expenses relating to each of the
Acquired Real Property Assets leased by such Net Tenant with respect to the
Post-Closing Period, other than debt service relating to the Post-Closing Period
under the Assumed Mortgage Debt, as set forth in the respective Property
Leases).
(b) Not later than ten (10) Business Days prior to the Closing Date,
Seller shall prepare and deliver to Acquiror a written statement setting forth,
as of the anticipated Closing Date, a reasonably detailed good faith calculation
of the apportionments contemplated by Section 2.04(a) for each of the Acquired
Real Property Assets. Acquiror shall have the right to review such written
statement and shall notify Seller of any objection thereto within three (3)
Business Days after the receipt thereof. Seller and Acquiror shall negotiate in
good faith to attempt to resolve any such objection made by Acquiror, provided
that if such parties are unable to agree upon a reasonably detailed calculation
of such apportionments at least five (5) Business Days prior to the Closing
Date, such dispute shall be resolved by a nationally recognized accounting firm
reasonably acceptable to each of Seller and Acquiror. If Acquiror does not
notify Seller of any such objection within such three (3) Business Day period,
Acquiror shall be deemed to have agreed with the apportionments specified in
Seller's written statement. If, after the Closing, an error or omission in the
calculation of the apportionments set forth above is found by one of the
parties, such error or omission shall be promptly corrected and the party
receiving the over-payment shall pay the amount of the over-payment to the party
entitled thereto. The foregoing obligation to correct apportionments shall
survive the Closing for a period of one-hundred eighty (180) days.
(c) The Base Purchase Price shall be (i) reduced by the excess, if
any, of the aggregate amount of Accrued Expenses over the aggregate amount of
Prepaid Expenses and (ii) increased by the excess, if any, of the aggregate
amount of Prepaid Expenses over the aggregate amount of Accrued Expenses, as
such amounts are mutually agreed or finally resolved in accordance with Section
2.04(b), in each case, without duplication as to any amounts paid or payable by
the Net Tenants under the Property Leases.
(d) Upon the written request of Seller, Acquiror shall purchase the
Shares subject to the obligations set forth in Schedule 2.04(d) hereof (the
"Specified Liabilities"), which Specified Liabilities shall be paid at Closing
and shall not be deemed Excluded Liabilities. At least three (3) Business Days
prior to the Closing Date, Seller shall deliver to Acquiror payoff statements or
other evidence satisfactory to Acquiror as to the amount of the Specified
Liabilities at the Closing (the aggregate amount of such Specified Liabilities
being hereinafter referred to as the "Pay-off Amount") provided, that for
purposes of the last two sentences of Section 2.03, neither the Final Purchase
Price, the Allocable Portion nor the initial Lease Basis (as defined in the form
of Property Lease) shall be deemed reduced by any adjustments to the cash
portion of the Purchase Price made pursuant to this Section 2.04(d). Acquiror
shall cause the Company or a Company Subsidiary to pay the Specified Liabilities
at or immediately following the Closing.
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Section 2.05. Due Diligence Deposit. Prior to the date hereof,
Seller advanced to Acquiror a due diligence deposit in the amount of $375,000
(the "Due Diligence Deposit") to be used by Acquiror to pay any reasonable and
documented costs and expenses, including attorneys' fees and expenses, incurred
by Acquiror, its contractors and consultants in connection with Acquiror's due
diligence review of the Real Property Assets, the Company and the Company
Subsidiaries (the "Due Diligence Review"). If the transactions contemplated
herein are not consummated for any reason other than Seller's or Indemnitor's
failure to perform their respective obligations hereunder, then within ten (10)
Business Days after the termination of this Agreement, Acquiror shall repay to
Seller the Due Diligence Deposit, less any Transaction Costs incurred by
Acquiror in connection with the Due Diligence Review. If either Seller or
Indemnitor fails to perform its respective obligations hereunder, then Acquiror
shall not be obligated to return to Seller any portion of the Due Diligence
Deposit. If the transactions contemplated herein are consummated, then Seller
shall be entitled to set-off the Due Diligence Deposit against the Transaction
Costs for which Seller is responsible under this Agreement that have been
incurred by Acquiror.
Section 2.06. Transactions to be Effected; Closing and Other
Deliveries. At the Closing, upon the terms and subject to the conditions set
forth in this Agreement:
(a) Acquiror shall pay to Seller a net amount (the "Closing Amount")
equal to the Final Purchase Price less the Pay-off Amount by wire transfer of
immediately available funds to an account designated in writing by Seller at
least three (3) Business Days prior to the Closing Date;
(b) Seller shall deliver to Acquiror (A) one or more stock
certificates evidencing the Shares, duly endorsed in blank or accompanied by
powers duly executed in blank in proper form for transfer and (B) written
resignations of each of the directors and officers of the Company and each of
the Company Subsidiaries;
(c) To further document the transactions contemplated by this
Agreement, each of the Acquiror, Seller and the Indemnitor Parties, as
applicable, shall execute and deliver to each other each of the following
agreements to which it is a party: (i) the Property Leases; (ii) the Agreement
Regarding Leases; (iii) the Lease Guaranty; (iv) the Guaranty of Agreement
Regarding Leases; and (v) the Management Agreements (each of the agreements
referenced in clauses (i) through and including (v), together with this
Agreement and the Tax Matters Agreement, being hereinafter referred to
collectively as the "Transaction Agreements");
(d) Seller and Acquiror shall jointly prepare and deliver a final
closing statement (the "Closing Statement") setting forth the Final Purchase
Price and the Closing Amount, and including a reasonably detailed calculation of
each of (i) the components of the Purchase Price (other than the Base Purchase
Price), (ii) the Closing Adjustments, if any, all as determined in accordance
with the applicable provisions of this Agreement and (iii) the Specified
Liabilities; and
(e) Seller shall deliver, or shall cause to be delivered, to
Acquiror each of the following:
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(i) each (A) New Title Policy (or endorsements (including
non-imputation endorsements) to the existing owner's policies), if any,
together with any customary title affidavits required by a title company
in order to issue any New Title Policy, each executed by Seller and the
applicable Company or any of the Company Subsidiaries and in form and
substance acceptable to the applicable title company, and (B) New Survey,
if any, in each case, required to be delivered pursuant to Section 2.10;
(ii) an affidavit, in accordance with the Foreign Investment
in Real Property Tax Act, confirming that Seller is a "United States
Person" within the meaning of Section 1445 of the Code;
(iii) copies of the Transfer Notices, together with evidence
of their delivery to, and acceptance by, the applicable governmental and
quasi-governmental authorities, if applicable; and
(iv) such other documents and instruments as may reasonably be
required by Acquiror or the applicable title company in order to
consummate the transactions contemplated by this Agreement and to
otherwise effect the agreements of the parties pursuant to this Agreement.
(f) In addition to the foregoing, at or prior to the Closing, (i)
Seller and Indemnitor will deliver to Acquiror the certificate referred to in
Section 6.02(a)(iii), and (ii) Acquiror will deliver to Seller the certificate
referred to in Section 6.01(a)(iii).
Section 2.07. Payments and Computations. All payments to be made by
either party under this Agreement will be paid by wire transfer of immediately
available funds to the account or accounts designated by the party receiving
such payment. All computations of interest with respect to any amounts due from
or to either party pursuant to this Agreement will be made on the basis of a
year of 365 days, in each case for the actual number of days (excluding the
first day, but including the last day) occurring in the period for which such
interest is payable.
Section 2.08. Property Due Diligence. (a) Promptly following the
execution of this Agreement, Acquiror shall deliver to Seller a due diligence
document request and checklist (which may be supplemented from time to time
during the Review Period) identifying the materials requested to be reviewed by
Acquiror in connection with the Due Diligence Review. Not later than fifteen
(15) days after the date of this Agreement, Seller shall cause the Company and
the Company Subsidiaries to make available to Acquiror, its attorneys,
accountants and other professional and consultants, copies of all books,
records, documents, reports, analyses, assessments and other written material
relating to each of the Real Property Assets, including all title insurance
policies, surveys, engineering and environmental reports, operating and capital
statements, rent rolls and all other due diligence materials reasonably
requested by Acquiror in connection with the Due Diligence Review.
(b) Acquiror shall have a period (the "Review Period") of sixty (60)
days from the date of this Agreement (the expiration date of such period being
hereinafter referred to as the "Due Diligence Expiration Date") to complete the
Due Diligence Review (including
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obtaining and reviewing title commitments or title bring-downs and engineering
reports, environmental reports and surveys relating to the Real Property
Assets). If Acquiror, in its reasonable discretion, determines that any material
matter relating to any of the Real Property Assets (including leases, historical
and projected financial statements and information, operating and capital
statements, title, real estate tax information, ▇▇▇▇▇▇▇▇ and collections,
operating and real estate tax pass-through escalation calculations, survey,
engineering, fitness and quality, physical condition, environmental condition,
financial condition of one or more of the tenants, value and profitability,
current or potential uses, current or future zoning or suitability for
renovation or construction) is not acceptable to Acquiror and that it does not
wish to proceed with its acquisition of such Real Property Asset, then Acquiror
may, by written notice to Seller before 5:00 p.m. (New York time) on the Due
Diligence Expiration Date (time being of the essence), terminate this Agreement
in its entirety, whereupon this Agreement shall terminate and be of no further
force and effect as provided in Article VII. If Acquiror does not elect to
terminate this Agreement prior to the time set forth above, Acquiror's right to
terminate this Agreement pursuant to this Section 2.08(b) shall expire and be of
no further force and effect.
(c) Seller shall use reasonable commercial efforts during the Review
Period to permit Acquiror and its Representatives, upon prior reasonable notice
to Seller, and during normal business hours, to access each of the Real Property
Assets for the purpose of inspecting the Real Property Assets. Seller agrees
that any environmental investigation undertaken by Acquiror may include invasive
sampling of soil, groundwater, or parts of buildings or structures, on any Real
Property Asset occupied by or otherwise affiliated with the Company or any
Company Subsidiary without Seller's prior written consent; provided, however,
that Acquiror shall give Seller not less than twenty-four (24) hours' prior
notice thereof (which notice shall include the identity of the Representatives
of Acquiror that will perform such inspections and the proposed scope thereof)
and Seller, Indemnitor or their respective Representatives shall have the right
to be present during such inspections. Acquiror shall use reasonable commercial
efforts not to interfere in any material respect with Seller's use or operation
of the Real Property Assets during such inspections. If Acquiror takes, or
causes to be taken, any sample from a Real Property Asset in connection with the
foregoing, Acquiror shall, upon the request of Seller, provide to Seller a
portion of such sample to allow Seller, if it so chooses, to perform its own
testing. If Acquiror performs environmental sampling, Acquiror shall have
Acquiror's environmental consultant carry and maintain in force, at its expense,
at all times during the performance of such sampling, general liability
insurance in the minimum amount of $1 million combined single limit for injury
to or death of one or more persons per occurrence and for damage to property per
occurrence. Notwithstanding any provisions of this Agreement to the contrary,
Acquiror shall not, and shall cause its environmental consultant not to, contact
or communicate with any Governmental Authority regarding any Hazardous Materials
on any Real Property Asset, or the environmental condition of any Real Property
Asset, unless required by Law; provided, however, that such restriction shall
not apply following the Closing.
Section 2.09. Capital Expenditure Reserves. (a) The Base Purchase
Price was agreed upon between Seller and Acquiror on the assumption that none of
the Real Property Assets is in need of significant deferred maintenance
expenditures, and that the annual capital expenditure requirement of $450 per
unit, which will be set forth in and calculated pursuant to the Agreement
Regarding Leases, is sufficient to provide for anticipated future capital
expenditures to maintain each of the Real Property Assets in their current
condition. If, during
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the course of the Due Diligence Review in respect of any Real Property Asset,
Acquiror determines, pursuant to third party reports received by Acquiror (each,
an "Acquiror Cap Ex Report"), that the anticipated costs to perform deferred
maintenance and previously unidentified future capital expenditures reasonably
necessary to be performed during the twelve (12) month period following the
Closing Date will exceed the amount of the capital expenditure requirement for
such period as set forth in and calculated pursuant to the form of Agreement
Regarding Leases (the amount of such excess, with reference to any Real Property
Asset, being hereinafter referred to as the "Cap Ex Reserve Shortfall"), then
Acquiror shall provide to Seller not later than five (5) Business Days after the
Due Diligence Expiration Date a written statement specifying the Cap Ex Reserve
Shortfall, if any, for each of the Real Property Assets, including copies of all
Acquiror Cap Ex Reports supporting such determination. Acquiror shall provide
copies of each Acquiror Cap Ex Report as promptly as practicable after such
report shall have been received by Acquiror. If Acquiror does not timely notify
Seller of any Cap Ex Reserve Shortfall in respect of a Real Property Asset as
provided above, Acquiror shall be deemed to have agreed that the amount of the
Cap Ex Reserve Shortfall in respect of such Real Property Asset is zero.
(b) For a period of ten (10) Business Days after the receipt of the
statement delivered by Acquiror in accordance with Section 2.09(a), Seller shall
have the right to review the statement and to obtain its own third party reports
relating to any specified Cap Ex Reserve Shortfall (each such report, a "Seller
Cap Ex Report"). Seller shall provide copies of each Seller Cap Ex Report as
promptly as practicable after such report shall have been received by Seller. If
Seller objects to any Cap Ex Reserve Shortfall specified in Acquiror' statement
in respect of any Real Property Asset and determines, pursuant to a Seller Cap
Ex Report, that the amount of such Cap Ex Reserve Shortfall is overstated by
more than five percent (5%), then Seller shall provide to Acquiror not later
than five (5) Business Days after the expiration of such review period a written
statement specifying the amount of such overstatement for each of the Real
Property Assets, including copies of all Seller Cap Ex Reports supporting such
determination. If Seller does not notify Acquiror in writing of any objection
within such review period, Seller shall be deemed to have agreed to the amount
of each Cap Ex Reserve Shortfall specified in Acquiror's statement.
(c) Seller and Acquiror shall negotiate in good faith to attempt to
resolve any such objection that is timely made by Seller, provided that if such
parties are unable to agree upon the amount of the Cap Ex Reserve Shortfall for
any Real Property Asset within ten (10) Business Days after the date of the
written statement sent by Seller specifying an overstatement, Seller and
Acquiror shall cause the preparers of the applicable Acquiror Cap Ex Report and
the applicable Seller Cap Ex Report to select an independent third party to
provide a capital expenditure report for such Real Property Asset and the amount
of the Cap Ex Reserve Shortfall specified in such independent report shall be
final and binding on Acquiror and Seller for the purposes of this Section 2.09.
The fees and expenses of any such independent third party shall be a Transaction
Cost.
(d) Upon Seller and Acquiror having agreed or deemed to have agreed
upon the amount of the Cap Ex Reserve Shortfall (or such amount having been
determined in accordance with Section 2.09(c)), Seller may, at its sole option:
(i) decrease the Base Purchase Price by the amount of the Cap Ex Reserve
Shortfall so agreed or determined; (ii) deposit into
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escrow (with a third party mutually acceptable to Seller and Acquiror pursuant
to escrow instructions in form and substance reasonably acceptable to Seller and
Acquiror) on the Closing Date the amount of the Cap Ex Reserve Shortfall so
agreed or determined for disbursement to Acquiror (and its Affiliates) from time
to time after the Closing Date to pay for the deferred maintenance and capital
items specifically identified in the applicable third party reports; or (iii)
direct Acquiror to perform (or to cause third parties to perform) the deferred
maintenance work and the capital items specifically identified in the applicable
third party reports, in which case the Allocable Portions of the applicable
Acquired Real Property Assets shall be increased in the aggregate by the
aggregate amount of the Cap Ex Reserve Shortfall so agreed or determined (such
increase to be allocated by Acquiror among the applicable Acquired Real Property
Assets in such manner as Acquiror shall reasonably determine).
Section 2.10. New Title Policies; New Surveys. During the Review
Period, Acquiror shall have the opportunity to review the existing owner's title
insurance policies and surveys of the Real Property Assets. If, upon such
review, Acquiror shall reasonably determine that the existing owner's title
insurance policy for any Real Property Asset is insufficient to protect the
interests of Acquiror with respect to such Real Property Asset and Acquiror
delivers notice thereof to Seller on or before the Due Diligence Expiration Date
specifying the applicable Real Property Asset and identifying the interests of
Acquiror that are not protected, Seller shall, at its option and at its sole
cost and expense, cause either (a) the title insurance company that issued the
existing owner's title insurance policy for the applicable Real Property Asset
to issue to Acquiror, on the Closing Date, relevant endorsements to such
existing title insurance policies in order to adequately protect the interests
of Acquiror, including a non-imputation endorsement, or (b) a title insurance
company reasonably selected by Seller to provide to Acquiror on the Closing Date
an owner's title insurance policy (or in the case of a New York-style closing, a
marked title insurance commitment representing such title insurance policy)
covering title to the applicable Real Property Asset in an amount approximating
the fair market value thereof (in either case, a "New Title Policy"). Similarly,
if Acquiror shall reasonably determine that the existing survey for any Real
Property Asset is insufficient to protect the interests of Acquiror with respect
to such Real Property Asset and Acquiror delivers notice thereof to Seller on or
before the Due Diligence Expiration Date specifying the applicable Real Property
Asset and identifying the interests of Acquiror that are not protected, Seller
shall, at its sole cost and expense, deliver to Acquiror, on or before the
Closing Date, a survey of the applicable Real Property Asset performed by a
surveyor licensed in the state in which such asset is located and certified to
Acquiror as having been prepared in accordance with 1999 minimum standard
details for a land survey jointly adopted by ALTA/ACSM (a "New Survey"). If
Acquiror shall fail to deliver any written notice to Seller contemplated by this
Section 2.10 with respect to any Real Property Asset on or before the Due
Diligence Expiration Date, Acquiror shall be deemed to have waived its right to
request a New Title Policy or New Survey with respect to such Real Property
Asset.
Section 2.11. Real Property Matters to which Real Property May Be
Subject. At the Closing, except as set forth in Schedule 3.15, the Company and
the Company Subsidiaries shall own good and valid insurable fee title to the
Acquired Real Property Assets, free and clear of any and all Liens other than
Permitted Liens.
8
Section 2.12. No Other Representations. No representation, warranty
or covenant made by Seller or Indemnitor in this Agreement or any document
delivered pursuant to this Agreement shall survive the Closing except as
expressly provided in this Agreement. Acquiror has not relied upon, and neither
Seller nor Indemnitor is liable or bound in any manner by, any verbal or written
statements, representations, real estate brokers' "set-ups" or information
pertaining to the Real Property Assets furnished by any real estate broker,
agent, employee, servant to other Persons unless the same are expressly set
forth in this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INDEMNITOR AND SELLER
Seller hereby represents and warrants to Acquiror as to the matters
specified in Sections 3.01(a), 3.04(a), 3.05(a), 3.19(h), 3.25 and 3.26 and
Indemnitor hereby represents and warrants to Acquiror as to the matters
specified in Sections 3.01(b), 3.02, 3.03, 3.04(b), 3.05(b), 3.06 through 3.24
(other than Section 3.19(h)) and 3.26, as follows:
Section 3.01. Incorporation, Qualification and Authority of Seller
and Indemnitor Parties. (a) Seller is a limited liability company duly formed,
validly existing and in good standing under the Laws of the State of Delaware
and has all requisite limited liability company power to operate its business as
now conducted and is duly qualified as a foreign limited liability company to do
business, and is in good standing, in each jurisdiction where the character of
its owned, operated or leased properties or the nature of its activities makes
such qualification necessary, except for failures to so qualify or be in good
standing that, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect. Seller has all
requisite limited liability company power to enter into, and to consummate the
transactions contemplated by, and to carry out its obligations under, each of
the Transaction Agreements to which Seller is or will be a party. The execution
and delivery by Seller of each of the Transaction Agreements to which Seller is
or will be a party, and the consummation by Seller of the transactions
contemplated by, and the performance by Seller of its obligations under, each of
such Transaction Agreements have been duly authorized by all requisite limited
liability company action on the part of Seller and its members. This Agreement
and the Tax Matters Agreement have been, and at the Closing, each of the other
Transaction Agreements to which Seller is then a party will be, duly executed
and delivered by Seller, and (assuming due authorization, execution and delivery
by Acquiror) this Agreement and the Tax Matters Agreement constitute, and as of
the Closing each of the other Transaction Agreements to which Seller is then a
party will constitute, the legal, valid and binding obligations of Seller
enforceable against it in accordance with their respective terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or similar Laws relating to or affecting creditors' rights
generally and subject, as to enforceability, to the effect of general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) Each of the Indemnitor Parties is a corporation, limited
liability company or limited partnership duly formed, validly existing and in
good standing under the Laws of the State of Delaware or Illinois and has all
requisite corporate, limited partnership or limited liability company power to
operate its business as now conducted and is duly qualified as a
9
foreign corporation, limited liability company or limited partnership to do
business, and is in good standing, in each jurisdiction where the character of
its owned, operated or leased properties or the nature of its activities makes
such qualification necessary, except for failures to so qualify or be in good
standing that, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect. Each of the
Indemnitor Parties has all requisite corporate, limited liability company or
limited partnership power to enter into, and to consummate the transactions
contemplated by, and to carry out its obligations under, each of the Transaction
Agreements to which it is or will be a party. The execution and delivery by each
of the Indemnitor Parties of each of the Transaction Agreements to which such
Indemnitor Party is or will be a party, and, the consummation by each of the
Indemnitor Parties of the transactions contemplated by, and the performance by
each of the Indemnitor Parties of its obligations under, each of such
Transaction Agreements have been duly authorized by all requisite corporate,
limited liability company or limited partnership action, as applicable, on the
part of such Indemnitor Party and its stockholders, partners or members, as
applicable. This Agreement and the Tax Matters Agreement have been, and at the
Closing, each of the other Transaction Agreements to which any of the Indemnitor
Parties is then a party will be, duly executed and delivered by the applicable
Indemnitor Parties, and (assuming due authorization, execution and delivery by
Acquiror) this Agreement and the Tax Matters Agreement constitute, and as of the
Closing each of the other Transaction Agreements to which each of the Indemnitor
Parties is then a party will constitute, the legal, valid and binding
obligations of the applicable Indemnitor Party, enforceable against it in
accordance with their respective terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or
similar Laws relating to or affecting creditors' rights generally and subject,
as to enforceability, to the effect of general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
Section 3.02. Incorporation, Qualification and Authority of the
Company and the Company Subsidiaries. Each of the Company and the Company
Subsidiaries is a corporation, limited liability company or limited partnership
duly formed, validly existing and in good standing under the Laws of its
jurisdiction of incorporation, formation or organization and has the requisite
power and authority to operate its business as now conducted. Each of the
Company and the Company Subsidiaries is duly qualified as a foreign corporation,
limited liability company or limited partnership to do business and is in good
standing in each jurisdiction where the character of its owned, operated or
leased properties or the nature of its activities makes such qualification
necessary, except for failures to so qualify or be in good standing that,
individually or in the aggregate, do not have, and would not reasonably be
expected to have, a Material Adverse Effect. Each of the Company Subsidiaries
has been formed to acquire, hold, finance, lease and operate its respective Real
Property Assets, and, except for the acquisition, holding, financing, leasing
and operation of such Real Property Assets, has not conducted any other
business.
Section 3.03. Capital Structure of the Company and the Company
Subsidiaries; Ownership and Transfer of the Shares. (a) Schedule 3.03(a) sets
forth (i) all the authorized Capital Stock of the Company and of each of the
Company Subsidiaries and (ii) the number of Equity Shares of each class or
series of Capital Stock of the Company and of each of the Company Subsidiaries
that are issued and outstanding, together with the registered holder thereof.
Except as set forth in Schedule 3.03(a), there are no shares of Capital Stock or
other
10
Equity Shares of the Company or any of the Company Subsidiaries issued and
outstanding. All the outstanding Equity Shares of the Company and of each of the
Company Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and were not issued in violation of any preemptive or
subscription rights. There are no options, calls, warrants or convertible or
exchangeable securities, or conversion, preemptive, subscription or other
rights, or agreements, arrangements or commitments, in any such case, obligating
or which may obligate the Company or any of the Company Subsidiaries to issue,
sell, purchase, return or redeem any of their respective Equity Shares or
securities convertible into or exchangeable for any of their respective Equity
Shares, and there are no Equity Shares of the Company or any of the Company
Subsidiaries reserved for issuance for any purpose. There are no capital
appreciation rights, phantom stock plans, securities with participation rights
or features, or similar obligations and commitments of the Company or any of the
Company Subsidiaries. Seller directly and indirectly (through ownership of the
Company) owns all the outstanding Equity Shares of the Company and the Company
Subsidiaries, free and clear of all Liens. Seller has the limited liability
company power and authority to sell, convey, assign, transfer, and deliver the
Shares as provided in this Agreement, and the sale, conveyance, assignment,
transfer and delivery will convey to Acquiror good and marketable title to such
Shares, free and clear of any and all Liens. Immediately following the Closing,
Acquiror (and/or any one or more assignees duly designated by Acquiror pursuant
to Section 10.07), will directly and indirectly (through ownership of the
Company) own all the outstanding Equity Shares of the Company and the Company
Subsidiaries, free and clear of all Liens. Except for this Agreement, there are
no options, calls or warrants or other rights, agreements, arrangements or
commitments obligating (i) Seller to sell any of the Shares or (ii) the Company
or any Company Subsidiary to sell any of the Equity Shares of any Company
Subsidiary. Except for this Agreement or as set forth in Schedule 3.03(a), there
are no voting trusts, stockholder agreements, proxies or other rights or
agreements in effect with respect to the voting, transfer or dividend rights of
the Shares or of the Equity Shares of any Company Subsidiary. Except as set
forth in Schedule 3.03(a), on the Closing Date, the Company has no Subsidiaries
other than the Company Subsidiaries.
(b) Immediately following the Closing, neither Seller nor any of its
Affiliates will have any claims with respect to the Shares (except for any
claims for indemnification under Section 8.02 that may arise following the
Closing), or to any interest, dividends or other distributions in respect
thereof.
Section 3.04. No Conflict.
(a) Provided that all consents, approvals, authorizations and other
actions described in Section 3.05(a) have been obtained or taken, except as
otherwise provided in this Article III and except as may result from any facts
or circumstances solely relating to Acquiror or its Affiliates (as opposed to
any other third party), the execution, delivery and performance by Seller of,
and the consummation by Seller of the transactions contemplated by, this
Agreement, the Tax Matters Agreement and the other Transaction Agreements to
which Seller will be a party, do not and will not (a) violate or conflict with
the organizational documents of Seller, the Company or any of the Company
Subsidiaries, (b) conflict with or violate any Law or other Governmental Order
applicable to Seller, the Company or any of the Company Subsidiaries or by which
any of them or any of their respective properties or assets is bound or
affected, or (c) result in any breach of or loss of any contractual benefit
under, or constitute a default (or event
11
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to any Person any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Lien on the
Shares or any of the assets or properties of the Company or any of the Company
Subsidiaries pursuant to, or, except for the consents listed on Schedule 3.04(a)
(the "Seller Required Third Party Consents") or the consents listed on Schedule
5.10, require any consent or approval which has not been obtained with respect
to, or the payment of any penalty or liquidated damages under, any note, bond,
loan or credit agreement, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other material instrument to which Seller, the
Company or any of the Company Subsidiaries is a party or by which any of them or
any of their respective properties or assets is bound or affected, except, in
the case of clause (c), any such conflicts, violations, breaches, loss of
contractual benefits, defaults, rights or Liens, failure to obtain consents or
approvals, or payments that, individually or in the aggregate, do not have, and
would not reasonably be expected to have, a Material Adverse Effect.
(b) Provided that all consents, approvals, authorizations and other
actions described in Section 3.05(b) have been obtained or taken, except as
otherwise provided in this Article III and except as may result from any facts
or circumstances solely relating to Acquiror or its Affiliates (as opposed to
any other third party), the execution, delivery and performance by Indemnitor
of, and the consummation by it of the transactions contemplated by, this
Agreement, the Tax Matters Agreement and the other Transaction Agreements to
which it will be a party, do not and will not (a) violate or conflict with the
organizational documents of any of the Indemnitor Parties, the Company or any of
the Company Subsidiaries, (b) conflict with or violate any Law or other
Governmental Order applicable to any of the Indemnitor Parties, the Company or
any of the Company Subsidiaries or by which any of them or any of their
respective properties or assets is bound or affected or (c) result in any breach
of or loss of any contractual benefit under, or constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to any Person any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Lien on the
Shares or any of the assets or properties of the Company or any of the Company
Subsidiaries pursuant to, or, except for the consents listed on Schedule 3.04(b)
(the "Indemnitor Required Third Party Consents") or the consents listed on
Schedule 5.10, require any consent or approval which has not been obtained with
respect to, or the payment of any penalty or liquidated damages under, any note,
bond, loan or credit agreement, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other material instrument to which any of the
Indemnitor Parties, the Company or any of the Company Subsidiaries is a party or
by which any of them or any of their respective properties or assets is bound or
affected, except, in the case of clause (c), any such conflicts, violations,
breaches, loss of contractual benefits, defaults, rights or Liens, failure to
obtain consents or approvals, or payments that, individually or in the
aggregate, do not have, and would not reasonably be expected to have, a Material
Adverse Effect.
Section 3.05. Consents and Approvals.
(a) Except as may result from any facts or circumstances solely
relating to Acquiror or its Affiliates (as opposed to any other third party),
the execution and delivery by Seller of this Agreement and the Tax Matters
Agreement do not, and the execution and delivery by Seller at the Closing of the
other Transaction Agreements to which Seller will be a party will not, and the
performance by Seller of, and the consummation by Seller of the transactions
12
contemplated by, this Agreement, the Tax Matters Agreement and the other
Transaction Agreements to which Seller is or will be a party will not, except
for the consents listed on Schedule 3.05(a) (each, a "Seller Required
Governmental Approval"), require any consent, approval, license, permit, order,
qualification, authorization of, or registration or other action by, or any
filing with or notification to, any Governmental Authority, including under any
Environmental Property Transfer Law (each, a "Governmental Approval"), to be
obtained or made by any of Seller, the Company and the Company Subsidiaries that
is material or any Seller Required Governmental Approvals the failure to obtain
or make any or all of which could reasonably be expected to prevent or
materially delay the consummation by Seller of the transactions contemplated by,
or the performance by Seller of any of its obligations under, any of the
Transaction Agreements to which Seller is or will be a party.
(b) Except as may result from any facts or circumstances solely
relating to Acquiror or its Affiliates (as opposed to any other third party),
the execution and delivery by Indemnitor of this Agreement and the Tax Matters
Agreement do not, and the execution and delivery by each of the Indemnitor
Parties at the Closing of the other Transaction Agreements to which it will be a
party will not, and the performance by it of, and the consummation by it of the
transactions contemplated by, this Agreement, the Tax Matters Agreement and the
other Transaction Agreements to which it is or will be a party will not, except
for the consents listed on Schedule 3.05(b) (each, an "Indemnitor Required
Governmental Approval"), require any Governmental Approval to be obtained or
made by any of the Indemnitor Parties, the Company and the Company Subsidiaries
that is material or any Indemnitor Required Governmental Approvals the failure
to obtain or make any or all of which could reasonably be expected to prevent or
materially delay the consummation by any of the Indemnitor Parties of the
transactions contemplated by, or the performance by it of any of its obligations
under, any of the Transaction Agreements to which it is or will be a party.
Section 3.06. Financial Statements; Absence of Undisclosed
Liabilities. (a) Schedule 3.06(a) sets forth (i) the consolidated balance sheets
of the Company and the Company Subsidiaries as at each of December 31, 2003,
2002 and 2001, (ii) the consolidated statements of operations, stockholders'
equity and cash flows of the Company and the Company Subsidiaries for the fiscal
years ended December 31, 2003, 2002 and 2001, and (iii) the unaudited
consolidated balance sheet of the Company and the Company Subsidiaries as at
March 31, 2004, and the unaudited consolidated statements of operations and cash
flows of the Company and the Company Subsidiaries for the three-month period
ended March 31, 2004, together with, in the case of each of clauses (i), (ii)
and (iii) above, the exhibits, schedules and notes thereto (collectively, the
"Financial Statements"). The Financials Statements described in clauses (i) and
(ii) above have been audited by, and are accompanied with the report of, Ernst &
Young LLP. Each of the Financial Statements is complete and correct in all
material respects, has been prepared in accordance with GAAP and in conformity
with the practices consistently applied by the Company and the Company
Subsidiaries and, except as disclosed in Schedule 3.06(a), without modification
of the accounting principles used in the preparation thereof throughout the
periods involved and presents fairly, in all material respects, the financial
position and results of operations of the Company and the Company Subsidiaries
as at the indicated dates and for the periods indicated therein subject in the
case of the unaudited quarterly financial statements, to normal and customary
year-end adjustments that are not material in amount or significance.
13
(b) Except as set forth in the Financial Statements and except for
liabilities and obligations of a type required to be disclosed on a balance
sheet prepared in accordance with GAAP incurred in the ordinary course of
business consistent with past practice since the date of the Financial
Statements and not in violation of this Agreement or the Tax Matters Agreement,
and except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, to the Knowledge of the Selling
Parties, there are no liabilities or obligations of the Company or any of the
Company Subsidiaries of any nature (whether accrued, absolute, contingent or
otherwise), whether or not required to be reflected on a financial statement
prepared in accordance with GAAP.
(c) Attached as Schedule 3.06(c) are (i) pro forma consolidated
balance sheets of the Company and the Company Subsidiaries as at December 31,
2003 and March 31, 2004 and (ii) pro forma consolidated statements of operations
of the Company and the Company Subsidiaries for fiscal year ended December 31,
2003 and the three-month period ended March 31, 2004 (collectively, the "Pro
Forma Financial Statements"). The Pro Forma Financial Statements have been
presented assuming that the transactions contemplated by Sections 5.06, 5.07 and
5.08 had been completed as of (A) in case of the balance sheets, December 31,
2003 and March 31, 2004, respectively, and in the case of the statements of
operations, January 1, 2003, and January 1, 2004, respectively, and have been
prepared in accordance with GAAP and in conformity with the practices
consistently applied by the Company and the Company Subsidiaries in the
preparation of the Financial Statements, and present fairly, in all material
respects, the financial position and results of operations of the Company and
the Company Subsidiaries for the indicated periods assuming that the
transactions contemplated by Sections 5.06, 5.07 and 5.08 had been completed as
of the dates indicated in this sentence. Prior to the Closing Date, Seller shall
cause its accountants, Ernst & Young LLP or another nationally-recognized
accounting firm, to conduct a review of the Pro Forma Financial Statements and
deliver to Acquiror such reviewed financial statements substantially in form and
substance as Schedule 3.06(c), with any changes or deviations not material in
amount or significance, together with the report of such accountants regarding
such review.
Section 3.07. Absence of Certain Changes. The Company and the
Company Subsidiaries have conducted their respective businesses in the ordinary
course consistent with past practice, and there has not occurred any event or
events (a) that individually or in the aggregate, have had, or would reasonably
be expected to have, a Material Adverse Effect or (b) since December 31, 2003,
that had such event or events occurred after the date of this Agreement, would
have constituted a breach by Seller of clauses (i)-(viii), (x) or (xi) of
Section 5.01(d).
Section 3.08. Absence of Litigation. Except as set forth on Schedule
3.08 (the "Existing Litigation Matters"), there are no Actions pending or, to
the Knowledge of the Selling Parties, threatened against the Company, the
Company Subsidiaries and the Real Property Assets. None of the Existing
Litigation Matters, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect.
Section 3.09. Compliance with Laws. Excluding Environmental Laws and
Governmental Orders arising under Environmental Laws (which are covered in
Section 3.11) and Tax laws (which are covered in Section 3.19), neither the
Company nor any of the Company
14
Subsidiaries is in violation of any Laws or Governmental Orders applicable to it
or its assets, properties or businesses, except for violations that,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect. Neither the Company nor any Company
Subsidiary is a party to, or bound by, any Governmental Order that affects in
any material respect the ownership, use or operation of any of the Real Property
Assets.
Section 3.10. Governmental Licenses and Permits. (a) Excluding
Environmental Permits (which are covered in Section 3.11), each of the Company
and the Company Subsidiaries holds all material governmental qualifications,
registrations, filings, licenses, permits, orders, approvals or authorizations
necessary to conduct its respective business and to own or use its respective
assets and properties, as such businesses, assets and properties are conducted,
owned and used on the date hereof (collectively, the "Material Permits").
(b) All Material Permits are valid and in full force and effect in
all material respects. Except as set forth in Schedule 3.10(b) and excluding
Environmental Permits (which are covered in Section 3.11), none of the Company
and the Company Subsidiaries is in default or violation of any of the Material
Permits in any material respect. Except as set forth in Schedule 3.10(b), (i) no
Material Permit has been revoked, suspended, non-renewed, terminated or impaired
in any material respect, (ii) none of the Company and the Company Subsidiaries
currently is the subject of any pending or, to the Knowledge of the Selling
Parties, threatened Action seeking the revocation, suspension, non-renewal,
termination, modification or impairment of any Material Permit in any material
respect, and (iii) to the Knowledge of the Selling Parties, there is no existing
condition of the Company or any of the Company Subsidiaries, nor has the Company
or any of the Company Subsidiaries received any notice from any Governmental
Authority of any fact or condition, which, if left uncured, would result in the
revocation, limitation, suspension or non-renewal of any Material Permit, except
where such revocation, limitation, suspension or non-renewal, individually or in
the aggregate, would not reasonably be expected to have a material and adverse
effect on any Real Property Asset. None of the Company and the Company
Subsidiaries is operating under a Governmental Order or voluntary agreement with
any regulatory authorities of any jurisdiction in which it now holds a Material
Permit which restricts in any material respect its authority to do the business
authorized pursuant to such Material Permit or which would prohibit or
materially delay the consummation of the transactions contemplated hereby.
Subject to obtaining the consents set forth in Schedule 3.04(a), none of the
Material Permits will be subject to revocation, limitation, suspension,
non-renewal, withdrawal, termination or modification as a result of the
consummation of the transactions contemplated hereby, except where such
revocation, limitation, suspension, non-renewal, withdrawal, termination or
modification, individually or in the aggregate, would not reasonably be expected
to have a material and adverse effect on any Real Property Asset.
Section 3.11. Environmental Matters. (a) To the Knowledge of the
Selling Parties, all environmental reports obtained by each of the Company and
the Company Subsidiaries within the past three (3) years with respect to the
Real Property Assets have been delivered or made available to Acquiror; (b) none
of the Real Property Assets, the Company and the Company Subsidiaries is subject
to a written notice or written request for information or order from or
agreement with a Governmental Authority or third party respecting a Release or
threatened Release or the violation of any Environmental Law; (c) there has been
no Release on, at or under any real property formerly owned, leased or otherwise
used by any of the Company
15
and the Company Subsidiaries during the period that it was owned, leased or
otherwise used by the Company or a Company Subsidiary or, to the Knowledge of
the Selling Parties, the Real Property Assets, or arising out of the conduct by
the Company or the Company Subsidiaries of their respective businesses, that
would reasonably be expected to result in the imposition of any material
liability to any of the Company and the Company Subsidiaries under the
Environmental Laws; (d) to the Knowledge of the Selling Parties, there has been
no Release at any parcels of real property other than any real property referred
to in item (c) that would reasonably be expected to have a material and adverse
effect on any Real Property Asset, the Company or any Company Subsidiary; (e) to
the Knowledge of the Selling Parties, none of the Real Property Assets is
subject to any Lien in favor of any Governmental Authority for (i) material
liability under any Environmental Laws or (ii) material costs incurred by a
Governmental Authority in response to a Release or threatened Release; (f) with
respect to any of the Real Property Assets, the Company and the Company
Subsidiaries, there are no material Actions pending or, to the Knowledge of the
Selling Parties threatened, arising under or relating to an Environmental Law or
Hazardous Materials or the making of any claim based on an Environmental Law for
personal injury, wrongful death or property damage; (g) the Company and the
Company Subsidiaries have operated and are operating their respective businesses
in compliance in all material respects with applicable Environmental Laws; and
(h) to the knowledge of the Selling Parties, the Company and the Company
Subsidiaries have obtained all material Environmental Permits that are necessary
in connection with the operation of their respective businesses as conducted on
the date of this Agreement, all such permits are in good standing and the
Company and the Company Subsidiaries are in compliance in all material respects
with the terms and conditions of such permits.
Section 3.12. Material Contracts. (a) Schedule 3.12(a) lists each of
the Material Contracts as in effect on the date of this Agreement and, where
applicable, the applicable Real Property Asset to which they relate and, in the
case of each Material Contract evidencing indebtedness for borrowed money or an
intercompany obligation, the name of the lender thereunder, the maturity date
thereof (and any extension terms thereunder) and the outstanding principal
amount thereof as of the date hereof.
(b) Each Material Contract is a legal, valid and binding obligation
of the Company or any Company Subsidiary, as applicable, and, to the Knowledge
of the Selling Parties, each other party to such Material Contract, and is
enforceable against the Company or such applicable Company Subsidiary, as
applicable, and, to the Knowledge of the Selling Parties, each such other party,
in accordance with its terms (except in each case as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws now or hereafter in effect relating to or affecting creditors' rights
generally, including the effect of statutory and other Laws regarding fraudulent
conveyances and preferential transfers, and subject to the limitations imposed
by general equitable principles (whether or not such enforceability is
considered in a proceeding at law or in equity)), and none of the Company or any
Company Subsidiary or, to the Knowledge of the Selling Parties, any other party
to a Material Contract is in material default or material breach or has failed
to perform any material obligation under a Material Contract, and, to the
Knowledge of the Selling Parties, there does not exist any event, condition or
omission that would constitute such a material breach or material default
(whether by lapse of time or notice or both), or give to the other party thereto
any rights of termination,
16
amendment, acceleration or cancellation of, or result in the payment of any
penalty or liquidated damages under, a Material Contract.
Section 3.13. Employee Benefits; Employees. (a) Except as set forth
in Schedule 3.13(a), as of the Closing Date, none of the Company, the Company
Subsidiaries and their respective ERISA Affiliates has any (i) "employee benefit
plans", as defined in Section 3(3) of ERISA, or (ii) incentive, profit-sharing,
stock option, stock purchase, other equity-based, employment, consulting,
compensation, vacation or other leave, change in control, retention,
supplemental retirement, severance, health, medical, disability, life insurance,
deferred compensation and other employee compensation and benefit plans,
programs, policies, agreements, arrangements and practices, in each case
established or maintained by Seller or any of its ERISA Affiliates or to which
Seller or any of its ERISA Affiliates contributed or is obligated to contribute
thereunder, for the benefit of any of the current or former employees or
independent contractors of any of the Company, the Company Subsidiaries and
their respective ERISA Affiliates (collectively, the "Benefit Plans").
(b) As of the Closing Date, (i) none of the Company and the Company
Subsidiaries will have any employees, (ii) none of the Company and the Company
Subsidiaries will have any obligation or liability that will not have been
assumed by Indemnitor with respect to any of the former employees or independent
contractors of the Company, the Company Subsidiaries and their respective ERISA
Affiliates and (iii) each of the Company and the Company Subsidiaries is not
reasonably expected to incur any obligation or liability with respect to any of
the former employees or independent contractors of the Company, the Company
Subsidiaries and their respective ERISA Affiliates.
(c) None of the Company, the Company Subsidiaries and their
respective ERISA Affiliates has sponsored, maintained, contributed to or been
obligated to contribute to any Benefit Plan subject to Section 412 of the Code,
Section 302 of ERISA, or Title IV of ERISA within the five years prior to the
Closing Date. As of the Closing Date, none of the Company and the Company
Subsidiaries will have any obligation or liability with respect to any Benefit
Plan, and neither the Company nor any Company Subsidiary is reasonably expected
to incur any obligation or liability with respect to any Benefit Plan.
(d) Each of the Company, the Company Subsidiaries and their
respective ERISA Affiliates (i) is in compliance in all material respects with
all applicable Laws respecting employment, employment practices, terms and
conditions of employment and wages and hours, and (ii) has withheld all amounts
required by applicable Laws or by agreement to be withheld from the wages,
salaries and other payments to such current and former employees and independent
contractors.
(e) For purposes of this Agreement, "ERISA Affiliate" shall mean any
Person that would be treated as a single employer or under common control with
the Company under Section 4001 of ERISA or Section 414 of the Code.
Section 3.14. Acquired Personal Property Assets. (a) Schedule
3.14(a) sets forth a true and complete list of the carrying value of the
material assets located on the Real Property Assets as of December 31, 2003,
other than real property and fixtures appurtenant
17
thereto, beneficially owned by the Company and the Company Subsidiaries and used
in the conduct of their respective businesses. Prior to Closing, Seller shall
supplement Schedule 3.14(a) to include a true and complete list of the material
assets (whether or not required by GAAP to be reflected on a balance sheet),
other than real property and fixtures appurtenant thereto, beneficially owned by
the Company and the Company Subsidiaries and used in the conduct of their
respective businesses without values assigned to such personal property
(collectively, "Acquired Personal Property Assets").
(b) Except as set forth in Schedule 3.14(b) or in the Financial
Statements, the Company or a Company Subsidiary has good (and, in the case of
marketable securities, marketable) title to each of the Acquired Personal
Property Assets that it purports to own, free and clear of all Liens other than
Permitted Liens, and (ii) valid leasehold interests in or valid rights under
contract to use each of the Acquired Personal Property Assets that it purports
to lease or license. The acquisition by the Company and each Company Subsidiary
of its Acquired Personal Property Assets complied in all material respects with
all applicable Laws. The Company and the Company Subsidiaries are in possession
of all of the Acquired Personal Property Assets and, immediately after the
Closing, after giving effect to the transactions and terminations contemplated
by Sections 5.06, 5.07 and 5.08, such Acquired Personal Property Assets will be
substantially the same as the personal property of the Company and the Company
Subsidiaries that is located on the Real Property Assets and used in the conduct
of their respective businesses as of the date hereof.
Section 3.15. Real Property Assets. Schedule 3.15 sets forth a true
and complete list and a brief description of each of the Real Property Assets
showing the name of the applicable facility and common address and record title
holder. Seller has provided or made available to Acquiror for each Real Property
Asset, the legal description thereof, the location thereof, the improvements
thereto and the uses being made thereof. Except as set forth in Schedule 3.15,
the Company and the Company Subsidiaries owns good, marketable and insurable (at
ordinary rates) title in fee simple absolute to all of the Real Property Assets
(other than the Ground Leased Asset) and to all buildings, structures and other
improvements thereon, in each case subject only to the Permitted Liens. Except
as set forth on Schedule 3.15, the Company and the Company Subsidiaries have
fulfilled and performed in all material respects all of their respective
obligations, and all obligations binding upon any Real Property Asset, under
each of the agreements or encumbrances to which any Real Property Asset is
subject, and none of the Company and the Company Subsidiaries is in breach or
default under, or in violation of or noncompliance with, in any material
respect, any such agreements or encumbrances, and no event has occurred and no
condition or state of facts exists which, with the passage of time or the giving
of notice or both, would constitute such a breach, default, violation or
noncompliance. Subject to obtaining the Seller Required Third Party Consents,
the Indemnitor Required Third Party Consents and the consents listed on Schedule
5.10, the consummation of the transactions contemplated by this Agreement and
the Tax Matters Agreement will not result in any breach or violation of, default
under or noncompliance with, or any forfeiture or impairment of any rights
under, any agreement or encumbrance to which any of the Real Property Assets is
subject, or require any consent, approval or act of, or the making of any filing
with, any Person party to or benefited by or possessing the power or authority
to exercise rights or remedies under or with respect to any such agreement or
encumbrance. All public utilities, including water, sewer, gas, electric,
telephone and drainage facilities, give adequate service to the Real Property
Assets, and
18
each of the Real Property Assets has unlimited access to and from publicly
dedicated streets, the responsibility for maintenance of which has been accepted
by the appropriate Governmental Authority. Complete and correct copies of any
surveys in the Company's or any of the Company Subsidiaries' possession and any
policies of title insurance currently in force and in the possession of the
Company or any of the Company Subsidiaries with respect to each such parcel have
heretofore been delivered or made available to Acquiror. Subject to Article IX
and except as set forth in Schedule 3.15, neither the whole nor any part of any
Real Property Asset, including any Ground Leased Asset or any real property
leased, used or occupied by any of the Company or the Company Subsidiaries, is
subject to any pending suit for condemnation or other taking by any public
authority, and, to the Knowledge of the Selling Parties, no such condemnation or
other taking is threatened or contemplated. Subject to Article IX, neither the
whole nor any part of any Real Property Asset, including any Ground Leased Asset
or any real property leased, used, owned or occupied by any of the Company or
the Company Subsidiaries, is subject to any casualty or loss that has not been
repaired and restored (and for which all costs in connection therewith have been
paid in full).
Section 3.16. Ground Leased Assets. Schedule 3.16 sets forth a true
and complete list of each of the Real Property Assets that is a ground leased
property or partially ground leased property (each a "Ground Leased Asset"). No
default has occurred and is continuing under any ground lease or similar
agreement relating to any of the Ground Leased Assets. Schedule 3.16 also
contains a description of each of the ground leases and any amendments or
modifications thereto and the location and the legal description of the real
property covered thereby, under which (i) the Company or any of the Company
Subsidiaries is lessee of, or holds, uses or operates, any real property owned
by any third Person or (ii) any of the Company and the Company Subsidiaries is
lessor of any of the owned Real Property Assets and the terms of such lease is
greater than six (6) months (other than resident leases and occupancy agreements
and leases to license holders required for regulatory purposes). Except as set
forth in Schedule 3.16, the Company and the Company Subsidiaries, as the case
may be, has the right to quiet enjoyment of all the Ground Leased Assets
described in such Schedule for the full term of each such lease or similar
agreement (and any renewal option) relating thereto, and the leasehold or other
interest of the Company in such leased real property is not subject or
subordinate to any agreement or Lien other than Permitted Liens. Except as set
forth on Schedule 3.16, and except for Permitted Liens, there are no agreements
or other documents governing or affecting the occupancy or tenancy of any of the
Ground Leased Assets by the Company or any of the Company Subsidiaries. Complete
and correct copies of any surveys in Seller's, the Company's or the Company
Subsidiaries' possession and any policies of title insurance currently in force
and in the Company's or the Company Subsidiaries' possession with respect to
each such parcel of Ground Leased Assets have heretofore been delivered or made
available by Seller to Acquiror.
Section 3.17. Insurance. Schedule 3.17 sets forth a true and
complete list as of the date hereof of all current policies of property and
liability insurance covering the Company and the Company Subsidiaries. Except as
set forth on Schedule 3.17, none of the insurance policies covering the Company
and the Company Subsidiaries provides for claims to be made on an occurrence or
equivalent basis. Each of the Company and the Company Subsidiaries is, and at
all times has been, covered on an uninterrupted basis by valid and effective
insurance policies or binders which are in full force and effect (and all
premiums due and payable thereon have
19
been paid in full on a timely basis), and no written notice of cancellation,
termination, revocation or limitation or other indication that any insurance
policy is no longer in full force or effect or that the issuer of any policy is
not willing or able to perform its obligations thereunder has been received by
any of Seller, the Company or the Company Subsidiaries and, to the Knowledge of
the Selling Parties, none of the Company and the Company Subsidiaries is in
default of any provision thereof, except for such defaults that, individually or
in the aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect.
Section 3.18. Acquired Real Property; Existing Mortgages. As of the
Closing Date, none of the Company nor any of the Company Subsidiaries will own,
beneficially or of record, or have any interest in any real property other than
the Acquired Real Property Assets. Schedule 3.18 contains a true, correct and
complete statement of (i) the mortgages, deeds of trust, deeds to secure debt or
other liens securing payment of borrowed money, including related guarantees as
stated thereon, with respect to the Real Property Assets (collectively, the
"Existing Mortgages") to which any of the Company and the Company Subsidiaries
is a party as mortgagor, trustor or obligor and (ii) as of May 31, 2004, the
current principal balance of each of the Existing Mortgages.
Section 3.19. Taxes. Except as set forth in Schedule 3.19:
(a) (i) All income and other material Tax Returns required to be
filed by or on behalf of the Company and each of the Company Subsidiaries have
been duly and timely filed with the appropriate Tax Authority (after giving
effect to any valid extensions of time in which to make such filings); (ii) all
such Tax Returns are complete and accurate in all material respects as they
relate to the Company and the Company Subsidiaries (Schedule 3.19(a)(ii) sets
forth all pending tax contests for which a GAAP reserve has been established);
(iii) all amounts shown due on such Tax Returns and all income and other
material Taxes payable without the filing of a Tax Return, in both cases insofar
as they relate to the Company and the Company Subsidiaries or their assets, have
been fully and timely paid; (iv) neither the Company nor any Company Subsidiary
is currently the beneficiary of any extension of time within which to file any
income or other material Tax Return, (v) neither the Company nor any Company
Subsidiary has waived or been requested to waive any statute of limitations in
respect of income or other material Taxes which waiver is currently in effect,
and (vi) neither the Company nor any Company Subsidiary 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 Company Subsidiary
currently file federal income Tax Returns on a consolidated basis with the
"affiliated group" (as defined in Section 1504 of the Code) of which the Company
is the common parent. Schedule 3.19(a)(vi) lists each material income Tax Return
filed with respect to the Company and the Company Subsidiaries for taxable years
ended 2001, 2002 and 2003. True, correct and complete copies of each Tax Return
listed on Schedule 3.19(a)(vi) and each other material Tax Return filed with
respect to the Company and the Company Subsidiaries have been delivered or made
available to Acquiror.
(b) Each of the Company and the Company Subsidiaries has complied in
all material respects with all applicable Laws relating to the withholding of
Taxes and have duly and timely withheld from employee salaries, wages and other
compensation and have paid over to the appropriate Tax Authority all material
amounts required to be so withheld and paid over.
20
(c) All deficiencies asserted or assessments made in writing as a
result of any examinations by any Tax Authority of Tax Returns of or covering
the Company or any of the Company Subsidiaries insofar as they relate to the
Company and the Company Subsidiaries, have been fully paid, and no other audits
or investigations by any Tax Authority relating to any Tax Returns of or
covering the Company or any of the Company Subsidiaries insofar as such Tax
Returns relate to the Company and the Company Subsidiaries, are in progress with
respect to which (i) the Company or any of Company Subsidiaries has received
written notice thereof from a Tax Authority or (ii) the Company or the Company
Subsidiary, as applicable, or any of their respective officers or directors has
knowledge based upon personal contact with any agent of any such Tax Authority.
(d) Neither the Company nor any Company Subsidiary is a party to any
Tax sharing or similar Tax agreements pursuant to which it will have any
obligation to make any payments after the Closing Date.
(e) There are no Tax rulings, requests for rulings, or closing
agreements relating to the Company or any of the Company Subsidiaries which
could affect the Company's or any Company Subsidiary's liability for Taxes for
any period after the Closing Date.
(f) Neither the Company nor any Company Subsidiary is required to
make any adjustment for any Post-Closing Taxable Period pursuant to (i) Section
481(a) of the Code (or any corresponding provision of Law) as a result of a
change in accounting method, or (ii) a closing agreement under Section 7121 the
Code (or any corresponding provision of Law).
(g) Neither the Company nor any Company Subsidiary is a party to any
agreement, contract, arrangement, or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute payment"
within the meaning of Section 280G of the Code (or any corresponding provision
of state, local, or foreign Tax law).
(h) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(i) There are no Liens for Taxes upon any assets of any of the
Company and the Company Subsidiaries except for Permitted Liens.
(j) Through the Closing Date and for the last six (6) taxable years
ending December 31, 2003, no written claim has been made by a Tax Authority in a
jurisdiction where the Company or any Company Subsidiary has never paid Taxes or
filed Tax Returns asserting that the Company or such Company Subsidiary, as the
case may be, is or may be subject to Taxes assessed by such jurisdiction.
(k) None of the Company and the Company Subsidiaries has distributed
stock of another Person, or has had its stock distributed by another Person, in
a transaction that was purported or intended to be governed in whole or in part
by Section 355 or 361 of the Code.
(l) As of December 31, 2003, the Company's and the Company
Subsidiaries' total net operating losses available for federal income tax
purposes were approximately $93 million ("NOLs"). As of the Closing Date, after
giving effect to the divestiture of the Excluded
21
Assets, the Company's and the Company Subsidiaries' total NOLs available for
federal income tax purposes will be approximately $92 million. As of December
31, 2003, the Company has no general business credits available for federal
income tax purposes. As of the Closing Date, after giving effect to the
divestiture of the Excluded Assets, the Company's will have no general business
credits available for federal income tax purposes. As of December 31, 2003, the
Company's and the Company Subsidiaries' total tax basis in their assets for
federal income tax purposes was approximately $514 million. As of the Closing
Date, after giving effect to the divestiture of the Excluded Assets, the Company
and the Company Subsidiaries' total tax basis in their assets for federal income
tax purposes will be approximately $440 million.
(m) As of the end of the Company's taxable year ending on the
Closing Date, none of the Company and the Company Subsidiaries will have any
accumulated earnings and profits for federal income tax purposes.
Section 3.20. Brokers. Neither Seller, Indemnitor nor any of their
respective Affiliates has employed any broker or finder or incurred any
liability for any investment banking fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by the
Transaction Agreements for which any of the Company, the Company Subsidiaries,
Acquiror or its Affiliates has or could have any liability.
Section 3.21. Excluded Assets; Excluded Liabilities. Prior to the
Closing Date, (i) each of the Company and the Company Subsidiaries will have
sold, transferred, assigned or otherwise distributed all of the Excluded Assets
to Indemnitor or one of its wholly owned subsidiaries and (ii) Indemnitor or one
of its wholly owned subsidiaries will have assumed all of the Excluded
Liabilities. Immediately prior to the Closing, the only assets and liabilities
of the Company and the Company Subsidiaries will be (i) the Acquired Real
Property Assets (subject to any Permitted Liens), (ii) the Acquired Personal
Property Assets, (iii) the Assumed Mortgage Debt, (iv) the Specified Liabilities
and (v) any Excluded Liabilities which Indemnitor shall have assumed pursuant to
Section 5.08.
Section 3.22. Regulatory Filings. Seller has made available for
inspection by Acquiror (i) each annual statement filed with or submitted to any
regulatory authorities by each of the Company and the Company Subsidiaries since
January 1, 1999, and (ii) any reports of examination (including, without
limitation, financial, market conduct and similar examinations) of each of the
Company and the Company Subsidiaries issued by any regulatory authority, in any
case, since January 1, 1999. Except as set forth in Schedule 3.22, all material
deficiencies or violations noted in the examination reports described in clause
(ii) above have been resolved to the material satisfaction of the regulatory
department that noted such deficiencies or violations. Each of the Company and
the Company Subsidiaries has filed all material reports, statements, documents,
registrations, filings or submissions required to be filed with any Governmental
Authority since January 1, 1999. All such registrations, reports, statements,
documents, filings and submissions were in material compliance with applicable
Laws when filed, and no material deficiencies have been asserted by any such
Governmental Authority or other regulatory body with respect to such
registrations, filings or submissions that have not been or are not in the
process of being satisfied. The representations and warranties contained in this
Section 3.22 shall not apply to Taxes and Tax Returns, which are addressed in
Section 3.19.
22
Section 3.23. No Certificates of Need or Provider Agreements. No
Certificates of Need (hereinafter defined) or Provider Agreements (hereinafter
defined) are used or required in connection with the ownership, operation and
maintenance of any of the Real Property Assets. For purposes of this Agreement,
the term "Provider Agreements" shall mean any provider agreements held by or
issued to Seller or any Real Property Asset under which the applicable Real
Property Asset is eligible to receive payment under Title XIX ("Medicaid") or
any other governmental or quasi-governmental third party payor programs or any
private or quasi-private healthcare reimbursement or private payor programs
(including so-called "HMO" and "PPO" programs) ("Third Party Payor Programs") as
well as any other agreement, arrangement, program or understanding with any
federal, state or local governmental agency or organization or private
organization pursuant to which the applicable Real Property Asset qualifies for
payment or reimbursement for medical or therapeutic care or other goods or
services rendered or supplied to any resident. For purposes of this Agreement,
the term "Certificate of Need" shall mean a certificate of need or similar
permit or approval (not including conventional building permits or health care
licenses) from a Governmental Authority related to the construction and/or
operation of any Real Property Asset for the use of a specified number of beds
in a nursing facility, assisted living facility and/or rehabilitation hospital,
or alteration of the applicable Real Property Asset or modification of services
provided at the applicable Real Property Asset.
Section 3.24. Operator Matters.
(a) Each of Seller, the Company and the Company Subsidiaries has
been issued and is in good standing with respect to any and all material
permits, licenses, regulatory approvals, approvals, accreditations and
comparable authorizations from all applicable Governmental Authorities
(including, but not limited to any Health Department (hereinafter defined)) that
are necessary for the use, operation and maintenance of each of the Real
Property Assets and the conduct of its business thereon (collectively, "Operator
Licenses"). Except as set forth in Schedule 3.24(a), none of Seller, the
Company, the Company Subsidiaries and the Real Property Assets is the subject of
any proceeding, examination or to Knowledge of the Selling Parties,
investigation, by any Health Department or other Governmental Authority
concerning an actual or alleged material violation of any laws, ordinances,
rules or regulations or any Operator Licenses. The Operator Licenses (i) have
not been and will not be transferred to any location other than the applicable
Real Property Asset; and (ii) are not and will not be pledged as collateral for
any loan or indebtedness that will not be released at Closing or assumed by
Acquiror. As used herein, "Health Departments" shall mean departments of health
and/or any Governmental Authorities of the state where the applicable Real
Property Asset is located which have jurisdiction over the licensing, ownership
and/or operations of the applicable parcel of Real Property Asset as a Living
Facility.
(b) No Litigation Relating to Licensing Matters. None of Seller, the
Company, the Company Subsidiaries and, to Knowledge of the Selling Parties,
Manager is involved in any litigation, proceeding, or investigation (by or with
any Person, resident, Health Department or Governmental Authority) which, if
determined or resolved adversely, would have a material adverse impact on the
conduct by any of Seller, the Company and the Company Subsidiaries of its
business or any Real Property Asset.
23
(c) Operator Reporting. Seller has made available to Acquiror copies
of all of the census information concerning the number of licensed beds and/or
units occupied by bona fide residents, rents rolls, monthly financial statements
and other reports, materials and information concerning Seller's business
operations and compliance with Laws, Operator Licenses and Material Permits for
each of the Real Property Assets (the "Operator Reports") for the periods set
forth therein which are true and correct in all material respects. All materials
reports, documents and notices, required to be filed, maintained or furnished by
any of Seller, the Company and the Company Subsidiaries to any Governmental
Authority with respect to each of the Real Property Assets have been so filed,
maintained or furnished. There are no defects or deficiencies to or with respect
to any Real Property Asset cited in any survey or inspection report provided,
submitted or made by or to any Governmental Authority under any Law that remains
uncured.
(d) No Violations. To the Knowledge of the Selling Parties, none of
Seller, the Company, the Company Subsidiaries and the Real Property Assets is
the subject of any proceeding by any Governmental Authority, and no notice of
any violation has been issued, or, to the Knowledge of the Selling Parties, will
be issued, by a Governmental Authority that would, directly or indirectly, or
with the passage of time, (i) impact Acquiror's (or its designees) ability to
accept and/or retain residents at any Real Property Asset, (ii) have a material
and adverse effect on any of Seller's, the Company's, the Company Subsidiaries'
or Manager's ability to accept and/or retain residents or operate any Real
Property Asset or result in the imposition of a material fine or for services
rendered to eligible residents, or (iii) modify, limit or annul or result in the
transfer, suspension, or revocation or imposition of probationary use of the
Operator Licenses.
(e) No Facility Violations. Except as set forth in Schedule 3.24(e),
no statement of charges or deficiencies has been made or penalty enforcement
action has been undertaken against any of Seller, the Company, the Company
Subsidiaries and the Real Property Assets or against any officer or director of
any of Seller, the Company or the Company Subsidiaries by any Governmental
Authority since January 1, 2003 which remains uncured.
(f) No Recoupment Efforts. None of Seller, the Company, the Company
Subsidiaries and Manager is a participant in any governmental program whereby
any Governmental Authority may have the right to recover funds by reason of the
advance of governmental funds.
(g) Admissions Hold. There is no suspension, ban or limitation upon
the admission of residents to the any Real Property Asset (i) by any
Governmental Authority having jurisdiction over the licensure or certification
of such Real Property Asset or (ii) pursuant to any applicable Law.
(h) Substantial Compliance; No Adverse Regulatory Actions. No
Governmental Authority with jurisdiction over any Real Property Asset has: (i)
made a determination that any Real Property Asset is not in compliance in all
material respects with any applicable regulatory requirements which has not been
cured; or (ii) taken adverse regulatory action with respect to any Real Property
Asset that is material in significance and has not been
24
cured, including, without limitation, the imposition of any civil money
penalties in excess of $50,000 that have not been paid.
Section 3.25. Books and Records. Seller has delivered or made
available to Acquiror copies of each of the following: (i) copies of corporate
tax documents and real estate transfer tax forms and returns relating to the
Real Property Assets (where applicable); (ii) all Material Contracts, and
material licenses, and material permits (including any operator licenses)
relating to any of the Company, the Company Subsidiaries and the Real Property
Assets, together with copies of all material correspondence relating to any of
the Company, the Company Subsidiaries and the Real Property Assets; (iii) an
updated list of security deposits, if any, with respect to the Real Property
Assets held by any of Seller, the Company and the Company Subsidiaries; (iv) all
plans and specifications related to all Improvements located at the Real
Property Assets, to the extent in Seller's possession or reasonable control or
otherwise available to Seller; (v) copies of currently valid certificates of
occupancy (or comparable permits or licenses) with respect to Improvements
located at each of the Real Property Assets; (vi) copies of currently valid
material permits and licenses relating to the operation of each of the Real
Property Assets as senior independent and/or assisted living facilities; and
(vii) a consolidated tax balance sheet for the Company and the Company
Subsidiaries for the years ending December 31, 2002 and December 31, 2003. At
the Closing, keys to all locks located on the Acquired Real Property Assets
shall be in the possession of the Company, one of the Company Subsidiaries or
Manager.
Section 3.26. Information Supplied. None of the information supplied
by Seller or Indemnitor specifically for inclusion in the Offering Memorandum,
as set forth in Schedule 3.26, contains, as of the date hereof, any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. None
of the information supplied or to be supplied by Indemnitor specifically for
inclusion in the Registration Statement will contain, at the time the
Registration Statement becomes effective under the Securities Act, any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to Seller and Indemnitor as
follows:
Section 4.01. Incorporation and Authority of Acquiror. Acquiror is a
real estate investment trust duly formed, validly existing and in good standing
under the Laws of the State of Maryland and has all requisite trust power to
enter into, and to consummate the transactions contemplated by, and to carry out
its obligations under, each of the Transaction Agreements to which Acquiror is
or will be a party. The execution and delivery by Acquiror of each of the
Transaction Agreements to which Acquiror is or will be a party, and the
consummation of the transactions contemplated by, and the performance by
Acquiror of its obligations under, each of such Transaction Agreements have been
duly authorized by all requisite action on the part of Acquiror and its
shareholders. This Agreement and the Tax Matters Agreement have been, and
25
at the Closing each of the Transaction Agreements to which Acquiror is then a
party will be, duly executed and delivered by Acquiror, and (assuming due
authorization, execution and delivery by Seller) this Agreement and the Tax
Matters Agreement constitute, and as of the Closing each of the other
Transaction Agreements to which Acquiror is then a party will constitute, the
legal, valid and binding obligations of Acquiror enforceable against Acquiror in
accordance with their respective terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or
similar Laws relating to or affecting creditors' rights generally and subject,
as to enforceability, to the effect of general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
Section 4.02. Qualification of Acquiror. Acquiror has all requisite
power and authority to operate its business as now conducted and is duly
qualified to do business and, to the extent legally applicable, is in good
standing in each jurisdiction where the character of its owned, operated or
leased properties or the nature of its activities makes such qualification
necessary, except for such failures as would not materially impair or delay the
ability of Acquiror to consummate the transactions contemplated by, or perform
its material obligations under, the Transaction Agreements to which Acquiror is
or will be a party.
Section 4.03. No Conflict. Provided that all consents, approvals,
authorizations and other actions described in Section 4.04 have been obtained or
taken, except as otherwise provided in this Article IV and except as may result
from any facts or circumstances relating to Seller, Indemnitor, the Company or
the Company Subsidiaries (as opposed to any other third party), the execution,
delivery and performance by Acquiror of, and the consummation by Acquiror of the
transactions contemplated by, this Agreement, the Tax Matters Agreement and each
of the other Transaction Agreements to which Acquiror will be a party, do not
and will not (a) violate or conflict with the organizational documents of
Acquiror, (b) conflict with or violate any Law or other Governmental Order
applicable to Acquiror or (c) result in any breach of, or constitute a default
(or event which with the giving of notice or lapse of time, or both, would
become a default) under, or give to any Person any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Lien on any of the assets or properties of Acquiror pursuant to, any note, bond,
loan or credit agreement, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other material instrument to which Acquiror or any
of its Affiliates is a party or by which any of them or any of their respective
assets or properties is bound or affected, except, in the case of clause (c),
any such conflicts, violations, breaches, loss of contractual benefits,
defaults, rights or Liens as would not materially impair or delay the ability of
Acquiror to consummate the transactions contemplated by, or perform its material
obligations under, any of the Transaction Agreements to which Acquiror is or
will be a party.
Section 4.04. Consents and Approvals. Except as set forth in
Schedule 4.04, or as may result from any facts or circumstances solely relating
to Seller or its Affiliates (as opposed to any other third party), the execution
and delivery by Acquiror of this Agreement and the Tax Matters Agreement do not,
and the execution and delivery by Acquiror at the Closing of the other
Transaction Agreements to which Acquiror will be a party will not, and the
performance by Acquiror of, and the consummation by Acquiror of the transactions
contemplated by, each of the Transaction Agreements to which Acquiror is or will
be a party will not, require any Governmental Approval, except where the failure
to obtain such Governmental
26
Approval, could reasonably be expected to prevent or materially delay Acquiror
from consummating the transactions contemplated by or performing any of its
material obligations under any of the Transaction Agreements to which Acquiror
is or will be a party.
Section 4.05. Securities Matters. The Shares are being acquired by
Acquiror for its own account and without a view to the public distribution or
sale of the Shares or any interest in them. Acquiror has sufficient knowledge
and experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the Shares, and Acquiror is
capable of bearing the economic risks of such investment, including a complete
loss of its investment in the Shares.
Section 4.06. Financial Ability. Acquiror presently intends to
finance the Final Purchase Price, in part, by issuing stock in Acquiror pursuant
to a private placement transaction (the "Private Placement"). Subject to receipt
of offering proceeds of at least $535,000,000 upon the consummation of the
Private Placement, Acquiror will have, at the Closing, the financial ability to
consummate the transactions contemplated by this Agreement.
Section 4.07. Investigation. Acquiror acknowledges and agrees that
it has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning, the Real Property Assets, the
Company, the Company Subsidiaries and their respective businesses. Acquiror
further acknowledges and agrees that the only representations, warranties,
covenants and agreements made by Seller and Indemnitor are the representations,
warranties, covenants, and agreements expressly set forth in this Agreement and
the Tax Matters Agreement and Seller and Indemnitor make and have made no other
express or implied representation or warranty with respect to the Real Property
Assets (including with respect to title, physical condition, environmental
condition, fitness and quality, income and expenses of operation, value and
profitability, current or potential uses, current or future zoning or
suitability for renovation or construction), the Company, the Company
Subsidiaries or their respective businesses or otherwise or with respect to any
other information provided by Seller and Indemnitor or any of their Affiliates
or Representatives. Acquiror has not relied upon any other representations or
other information made or supplied by or on behalf of each of Seller or
Indemnitor or by any Affiliate or Representative of each of Seller or
Indemnitor. No officer of Acquiror has actual knowledge that the representations
and warranties of Seller or Indemnitor set forth in Article III are inaccurate
or have been breached except for inaccuracies and breaches relating to matters
that, individually or in the aggregate, have not had, or would not be reasonably
expected to have, a Material Adverse Effect.
Section 4.08. Brokers. Neither Acquiror nor any of its Affiliates
has employed any broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders' fees in connection with
the transactions contemplated by this Agreement and the Tax Matters Agreement
for which Seller or any of its Affiliates has or could have any liability.
Section 4.09. Information Supplied. None of the information supplied
or to be supplied by or on behalf of Acquiror specifically for inclusion in the
Offering Memorandum or the Registration Statement will contain, at any time the
Offering Memorandum is distributed to prospective investors or the Registration
Statement becomes effective under the Securities Act,
27
as applicable, any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that no representation or warranty is made by
Acquiror with respect to the information supplied by Seller or Indemnitor
specifically for inclusion in the Offering Memorandum and as set forth in
Schedule 3.26. The Offering Memorandum and the Registration Statement will
comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act, and the rules and regulations thereunder
("Applicable Securities Rules").
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01. Conduct of Business Prior to the Closing. Except as
otherwise contemplated by or necessary to effectuate the transactions
contemplated by this Agreement (including the matters expressly contemplated by
Sections 5.08 and 5.09), from the date of this Agreement through the Closing,
unless Acquiror otherwise consents in advance (and the consent of Acquiror to
any request for any such consent shall not be unreasonably withheld or delayed,
it being agreed that if Acquiror fails to respond to Seller's written request
for consent for a period of ten (10) Business Days after Acquiror's receipt
thereof, then such requested consent shall be deemed given), Seller will cause
the Company and the Company Subsidiaries to: (a) conduct their businesses in the
ordinary course consistent with past practice; (b) use reasonable commercial
efforts to preserve intact their business organizations, to keep available the
services of consultants and agents of their businesses and to maintain the
current significant business relationships and goodwill with customers,
suppliers and service providers of the Company and the Company Subsidiaries; (c)
maintain replacement cost casualty insurance; and (d) not take any of the
following actions:
(i) repurchase, redeem, repay or otherwise acquire any
outstanding Equity Shares or other securities of the Company or any of the
Company Subsidiaries;
(ii) transfer, issue, sell or dispose of any Equity Shares or
other securities of the Company or any of the Company Subsidiaries or
grant options, warrants, calls or other rights to purchase or otherwise
acquire Equity Shares or other securities of the Company or any of the
Company Subsidiaries;
(iii) effect any recapitalization, reclassification, stock
split or like change in the capitalization of the Company or any of the
Company Subsidiaries;
(iv) amend the certificate of incorporation or by-laws (or
other comparable organizational documents) of the Company or any of the
Company Subsidiaries;
(v) make any material change in the policies, practices or
principles of the Company or any of the Company Subsidiaries in effect on
the date hereof with respect to accounting, preparation and filing of Tax
Returns (other than any change required by applicable Laws or GAAP);
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(vi) sell, lease, exchange, or otherwise dispose of any
property or assets (other than transactions occurring in the ordinary
course of business consistent with past practices), for which the
aggregate consideration paid or payable in any individual transaction is
in excess of $500,000 or in the aggregate in excess of $1,000,000;
(vii) incur any financial indebtedness for borrowed money from
third party lending sources (other than current trade accounts payable
incurred in respect of property or services purchased in the ordinary
course of business consistent with past practices) or assume, grant,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any Person, or make any loans or advances (other
than, in each case, in the ordinary course of business consistent with
past practices or which will otherwise be repaid prior to the Closing or
which constitutes an Excluded Liability);
(viii) except in the ordinary course of business and
consistent with past practice, enter into or amend (in any material
respect) or, other than pursuant to its current terms, terminate, renew or
extend any Material Contract relating to an Acquired Personal Property
Asset or an Acquired Real Property Asset;
(ix) enter into any new line of business or introduce any new
product or service that is unrelated to the operation of senior living
facilities;
(x) enter into, amend or, other than pursuant to its current
terms, terminate, renew or extend any contract, agreement, lease, license,
commitment, instrument, arrangement, relationship or understanding with
any Affiliate of the Company or any of the Company Subsidiaries including
any stockholder, member, director or officer of the Company or any of the
Company Subsidiaries (or any of their respective family members or
Affiliates);
(xi) settle or compromise any Action or threatened Action,
except in each case for claims under policies and certificates of
insurance within applicable policy limits and claims not in excess of
$1,000,000 so long as any such claims will not adversely affect any of the
Acquired Real Property Assets and Acquired Personal Property Assets;
(xii) pay, discharge or satisfy any liabilities or
obligations, other than payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities or obligations that (A) are reflected on
the Financial Statements, (B) are identified in amounts that are
reasonably determinable prior to Closing, and for which Indemnitor is
responsible under the Transaction Agreements, or (C) were incurred since
the date of the Financial Statements in the ordinary course of business
consistent with past practice;
(xiii) enter into any agreement relating to the ownership and
operation of the Acquired Real Property Assets, unless such agreement
shall be fully cancelable or terminable without penalty prior to the
Closing Date;
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(xiv) allow any Acquired Real Property Asset or any material
Acquired Personal Property Asset to become subject to any Lien other than
a Permitted Lien;
(xv) directly or indirectly offer to sell, or solicit any
offers to purchase or negotiate for the sale or disposal of any Acquired
Real Property Asset or any material Acquired Personal Property Asset with
any Person other than Acquiror;
(xvi) create any severance obligation for Acquiror, the
Company or any Company Subsidiary with respect to any employee, except for
obligations that are Excluded Liabilities;
(xvii) enter into any lease or other binding agreement, or
amend, modify, extend or terminate any existing lease or other binding
agreement, with respect to the Acquired Real Property Assets, other than
leases and other agreements with residential tenants of the Acquired Real
Property Assets that are entered, amended, modified, extended or
terminated in the ordinary course of business consistent with past
practice;
(xviii) enter into any agreement, or amend, modify, extend or
terminate any existing agreement, relating to the construction,
demolition, or alteration of any of the Acquired Real Property Assets,
other than capital repairs (a) required by Law or any Governmental
Authority or (b) identified in the third party reports referenced in
Section 2.09 not in excess of $250,000 with respect to each Real Property
Asset; or
(xix) announce or enter into any legally binding commitment
with respect to any of the foregoing.
Section 5.02. Access to Information. (a) From the date of this
Agreement until the Closing Date, upon reasonable prior written notice, and
except as determined in good faith to be appropriate to ensure compliance with
any applicable Laws and subject to any applicable privileges (including the
attorney-client privilege), contractual confidentiality obligations and privacy
rights of residents, Seller shall, and shall cause the Company and each of the
Company Subsidiaries and each such Person's respective Representatives to: (i)
afford the Representatives of Acquiror reasonable access to the offices,
properties, books and records of the Company and the Company Subsidiaries; (ii)
furnish to the Representatives of Acquiror such additional financial and
operating data and other information regarding the Company's and the Company
Subsidiaries' businesses conducted by them as Acquiror may from time to time
reasonably request; and (iii) afford the Representatives of Acquiror and its
Affiliates reasonable access to the employees of Seller and their Affiliates in
respect of the Company and the Company Subsidiaries (and the businesses
conducted by the Company and the Company Subsidiaries) and use their reasonable
commercial efforts (without any requirement of Seller, the Company and the
Company Subsidiaries or any of their respective Representatives to incur any
expense to a third party) to make available to the Representatives of Acquiror
and its Affiliates the employees of third party outsourcing companies who
provide services to, and are located on the premises of, the Company and the
Company Subsidiaries, in each case, whose assistance and expertise is necessary
to assist Acquiror in connection with Acquiror's preparation to integrate the
Company and the Company Subsidiaries and their businesses and personnel into
Acquiror's organization following the Closing; provided, however, that such
investigation shall be on a basis and follow
30
procedures that the parties shall mutually agree, and shall not unreasonably
interfere with any of the businesses or operations of Seller, the Company, the
Company Subsidiaries or any of their respective Affiliates; and provided,
further, that the auditors and accountants of Seller, the Company, the Company
Subsidiaries or any of their respective Affiliates shall not be obligated to
make any work papers available to any Person unless and until such Person has
signed a customary agreement relating to such access to work papers in form and
substance reasonably acceptable to such auditors or accountants. If so
reasonably requested by Seller, Indemnitor, the Company or any of the Company
Subsidiaries, Acquiror shall enter into a customary joint defense agreement with
any one or more of Seller, the Company and the Company Subsidiaries with respect
to any information to be provided to Acquiror pursuant to this Section 5.02(a).
(b) In addition to the provisions of Section 5.03, from and after
the Closing Date, in connection with any reasonable business purpose, including
the preparation of Tax Returns and the determination of any matter relating to
the rights or obligations of Seller, Indemnitor or any of their respective
Affiliates under this Agreement, upon reasonable prior written notice, and
except as determined in good faith to be appropriate to ensure compliance with
any applicable Laws (including any rights of any current or former employee of
the Company or any Company Subsidiary with respect to privacy or confidentiality
of such employee's personnel, medical and other records and information) and
subject to any applicable privileges (including the attorney-client privilege),
contractual confidentiality obligations and privacy rights of residents,
Acquiror shall, and shall cause the Company and the Company Subsidiaries and
their respective Affiliates and Representatives to: (i) afford the
Representatives of Seller, Indemnitor and their Affiliates reasonable access,
during normal business hours, to the offices, properties, books and records of
the Company and the Company Subsidiaries and the businesses conducted by them;
(ii) furnish to Seller, Indemnitor and their respective Affiliates and
Representatives such additional financial and other information regarding the
Company and the Company Subsidiaries and the businesses conducted by them as
Seller, Indemnitor or their respective Representatives may from time to time
reasonably request; and (iii) make available to the Representatives of Seller,
Indemnitor and their Affiliates the employees of Acquiror and its Affiliates in
respect of the Company and the Company Subsidiaries and the businesses conducted
by them whose assistance, expertise, testimony, notes and recollections or
presence is necessary to assist Seller, Indemnitor or any of the respective
Affiliates in connection with Seller's or Indemnitor's inquiries for any of the
purposes referred to above, including, at Seller's sole cost and expense,
reimbursement to Acquiror or such Affiliates; provided, that the requesting
party will reimburse Acquiror for the reasonable value of the time and any out -
of - pocket expenses of such Persons who appear as witnesses in hearings or
trials at the request of Seller or Indemnitor, as applicable; provided, however,
that such investigation shall be on a basis and follow procedures that the
parties shall mutually agree, and that such investigation shall not unreasonably
interfere with the business or operations of Acquiror or any of its Affiliates;
provided, further, that the auditors and accountants of Acquiror or its
Affiliates shall not be obligated to make any work papers available to any
Person unless and until such Person has signed a customary agreement relating to
such access to work papers in form and substance reasonably acceptable to such
auditors or accountants. If so reasonably requested by Acquiror, Seller,
Indemnitor or the applicable Affiliate thereof shall enter into a customary
joint defense agreement with Acquiror and its Affiliates (including the Company
and the Company Subsidiaries) with respect to any information to be provided to
Seller pursuant to this Section 5.02(b).
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Section 5.03. Books and Records. Subject to Section 5.04(a), Seller
and its Affiliates shall have the right to retain copies of all books and
records of the Company and each of the Company Subsidiaries and their respective
businesses relating to periods ending on or prior to the Closing Date subject to
compliance with all applicable privacy Laws relating to information (including
employment and medical records) regarding current or former employees of the
Company or any Company Subsidiary. Acquiror agrees that, with respect to all
original books and records of the Company and each of the Company Subsidiaries
existing as of the Closing Date, it will (and will cause each of the Company
Subsidiaries to) (a) comply in all material respects with all applicable Laws
relating to the preservation and retention of records and (b) apply preservation
and retention policies to such books and records that are no less stringent than
those generally applied by Acquiror in respect of its other books and records.
Following the Closing, Seller shall promptly deliver to Acquiror all original
books and records of the Company and the Company Subsidiaries in the possession
of Seller or any of its Affiliates (other than the Company and the Company
Subsidiaries).
Section 5.04. Confidentiality; Exclusivity.
(a) From and for a period of twelve (12) months following the
Closing, Seller, Indemnitor and their Affiliates, on the one hand, and Acquiror
and its Affiliates (including the Company and the Company Subsidiaries), on the
other hand, shall, and shall cause their respective Representatives to maintain
in confidence and not use to the detriment of the other party (including for the
purposes of competing with the other party or its Affiliates), any written, oral
or other information relating to and obtained from the other party or its
Affiliates, except that the foregoing requirements of this Section 5.04(a) shall
not apply to a party to the extent that (i) any such information is or becomes
generally available to the public other than (A) in the case of Acquiror, as a
result of disclosure by Seller, its Affiliates or any of its respective
Representatives and (B) in the case of Seller, as a result of disclosure by
Acquiror, the Company or any Company Subsidiary (after the Closing Date) or any
of their respective Affiliates, or any of their respective Representatives, (ii)
any such information is required by applicable Law, Governmental Order or a
Governmental Authority to be disclosed after prior notice that has been given to
Acquiror or Seller, as applicable, (iii) any such information is to be disclosed
in connection with any Action, or (iv) any such information was or becomes
available to such party on a non-confidential basis and from a source (other
than a party to this Agreement or any Affiliate or Representative of such party)
that is not bound by a confidentiality agreement. Each of the parties hereto
shall instruct its Affiliates and Representatives having access to such
information of such obligation of confidentiality.
(b) The parties hereto agree to deal with one another on an
exclusive basis during the term of this Agreement with respect to the
transactions contemplated herein, and Seller shall not solicit or entertain
offers for, or enter into any discussions relating to, any similar transactions
with respect to the sale of the Company, the Company Subsidiaries or any of the
Acquired Real Property Assets.
(c) Notwithstanding anything to the contrary in this Agreement,
Seller and Indemnitor may provide information at any time, whether written or
oral (including, without limitation, copies of documents), relating to this
Agreement and the transactions contemplated hereby in connection with the
matters, and to the Persons, set forth in Schedule 5.04(c).
32
Section 5.05. Regulatory and Other Authorizations; Reasonable
Efforts. (a) Subject to the terms and conditions of this Section 5.05, the
parties hereto agree to use their reasonable best efforts to take, or cause to
be taken, all actions and to do, or to cause to be done, all things necessary,
proper, advisable or appropriate to consummate and make effective the
transactions contemplated by the Transaction Agreements as soon as practicable,
including to cooperate in good faith to facilitate the Closing and to refrain
from taking any action that could reasonably be expected to cause a condition to
the Closing to not be satisfied or otherwise materially impair, delay or impede
the Closing. In furtherance of the foregoing, the parties hereto shall promptly
make all filings and notifications with, and shall use their reasonable best
efforts to promptly obtain all authorizations, consents, orders and approvals
of, all Governmental Authorities that may be or become necessary for their
respective execution and delivery of, and the performance of their respective
obligations pursuant to, and the consummation of the transactions contemplated
by, this Agreement and comply at the earliest practicable date with a request
for information, documents or other materials by any such Governmental
Authorities to obtain such authorizations, consents, orders and approvals;
provided, however, that in no event shall Acquiror or any of its Affiliates be
required to agree to (i) the divestiture of any business or entity or (ii) any
requirement imposed by a Governmental Authority that would reasonably be
expected to have a (A) Material Adverse Effect taken as a whole, or (B) material
and adverse effect on the aggregate economic value and business benefits that
would reasonably be expected to be obtained by Acquiror and its Affiliates from
the transactions contemplated by this Agreement. The parties will cooperate with
the reasonable requests of each other in promptly seeking to obtain all such
authorizations, consents, orders and approvals (including by making available,
upon reasonable notice, appropriate Representatives of the Company and the
Company Subsidiaries for participation in meetings with Governmental
Authorities).
(b) Prior to the Closing, each of Seller and Acquiror shall promptly
notify one another of any communication it receives from any Governmental
Authority relating to the matters that are the subject of this Agreement and
permit the other party to review in advance any proposed material written
communication by such party to any Governmental Authority and shall provide each
other with copies of all correspondence, filings or communications between such
party or any of its Representatives, on the one hand, and any Governmental
Authority or members of its staff, on the other hand; provided, however, that
Acquiror or Seller, as applicable, may redact from such correspondence, filings
and communications any confidential competitive information of Acquiror, Seller
or their respective Affiliates, as the case may be. Prior to the Closing,
neither Seller nor Acquiror shall agree to participate in any meeting with any
Governmental Authority in respect of any such filings, investigation or other
inquiry unless it consults with the other party in advance.
(c) The parties hereto shall use their reasonable best efforts to
obtain any other consents and approvals (including from any ground lessors and
from the holders of the Existing Mortgages) and to make any other notifications
that may be required in connection with the transactions contemplated by this
Agreement; provided, however, that, except for Transaction Costs, none of
Seller, Indemnitor, the Company Subsidiaries or Acquiror shall be required to
compensate any third party, commence or participate in litigation or offer or
grant any accommodation (financial or otherwise) to any third party to obtain
any such consent or approval. Notwithstanding the foregoing, Seller and
Indemnitor shall obtain each of the Seller Required Third Party Consents and the
Indemnitor Required Third Party Consents prior to the
33
Outside Date or, if the Outside Date shall have been extended in accordance with
Section 7.01(b), the Extended Outside Date.
Section 5.06. Intercompany Obligations. Seller shall, and shall
cause its Affiliates to, take such action and make such payments as may be
necessary so that, prior to or concurrently with the Closing, the Company and
the Company Subsidiaries, on the one hand, and Seller and its Affiliates (other
than the Company and the Company Subsidiaries), on the other, shall settle,
discharge, offset, pay or repay in full all intercompany loans, notes and
advances (regardless of their maturity) and all intercompany receivables and
payables (including amounts relating to intercompany Tax sharing agreements,
whether written or oral), for the amount due, including any accrued and unpaid
interest, but excluding any penalty, termination or similar amounts; provided,
however, that if each such item is not paid in full in cash, the method of
discharge must be reasonably satisfactory to Acquiror.
Section 5.07. Intercompany Arrangements. Except as otherwise agreed
in writing by Seller and Acquiror or as expressly provided in the Transaction
Agreements, Seller shall, and shall cause its Affiliates to, take such actions
as may be necessary to terminate prior to or concurrently with the Closing Date,
without any penalty to or premium payable by the Company or the Company
Subsidiaries, all contracts, agreements, leases, licenses, commitments and other
instruments, arrangements, relationships and understandings between the Company
and the Company Subsidiaries, on the one hand, and Seller and its Affiliates
(other than the Company and the Company Subsidiaries), on the other.
Section 5.08. Excluded Assets; Excluded Liabilities. Prior to the
Closing, (i) Seller will cause the Company and the Company Subsidiaries, as
applicable, to transfer, convey assign or otherwise distribute to Indemnitor or
one of Indemnitor's wholly owned subsidiaries all of the Company's or any
Company Subsidiary's right, title and interest in and to all the Excluded
Assets, and (ii) Indemnitor shall, or shall cause, one of its wholly owned
subsidiaries to assume all the Excluded Liabilities. The distribution of the
Excluded Assets and the assumption of the Excluded Liabilities shall be effected
pursuant to written instruments of transfer and assumption, as applicable,
reasonably satisfactory to Acquiror, and may include a transfer or assumption of
some or all of such Excluded Assets or Excluded Liabilities, as applicable, to a
direct or indirect Subsidiary of the Company followed by a distribution of the
Capital Stock of such Subsidiary.
Section 5.09. Change of Name. Prior to the Closing Date, Seller
shall cause the Company to be renamed "Old Brookdale Inc." and Indemnitor to be
renamed "Brookdale Living Communities, Inc.".
Section 5.10. Existing Mortgage Lender Consents. (a) The purchase
and sale of the Shares and the assumption of the debt outstanding under the
Existing Mortgages may require certain consents and agreements of the Existing
Mortgage Lenders set forth in Schedule 5.10. Seller and Acquiror shall use their
reasonable best efforts in accordance with Section 5.05(c) to secure all such
consents and agreements. Seller, on the one hand, and Acquiror, on the other
hand, will promptly notify the other if it reasonably believes that,
notwithstanding the parties' reasonable best efforts pursuant to Section
5.05(c), it will be unable to obtain one or more of the consents of the Existing
Mortgage Lenders prior to the Extended Outside Date. Following the delivery of
any such notification, the parties hereto shall negotiate in good faith the
terms on
34
which such parties would be willing to cause each Real Property Asset subject to
an Existing Mortgage with any such non-consenting Existing Mortgage Lender to be
treated as an Excluded Real Property Asset; provided, however, that, if the
parties are unable to agree on reasonable terms, then either Seller or Acquiror
may elect to terminate this Agreement in its entirety, in which event (i) this
Agreement shall be of no further force or effect as provided in Article VII and
(ii) Acquiror shall promptly pay to Seller the Due Diligence Deposit, less any
Transaction Costs incurred by Acquiror.
(b) Notwithstanding anything to the contrary contained in the forms
of Property Leases or Agreement Regarding Leases, the parties hereto agree that
they will use their reasonable best efforts in accordance with Section 5.05(c)
to obtain consents and agreements, as applicable, from each of the Existing
Mortgage Lenders to the effect that (i) each Property Lease shall be
cross-defaulted with the other Property Leases under the Agreement Regarding
Leases, but to the extent such Existing Mortgage Lenders do not agree to the
same, the same shall not be a condition to Closing, and only the leases
appurtenant to the properties where such consent is obtained shall be
cross-defaulted, and (ii) such Existing Mortgage Lender agree to recognize the
tenants under each Property Lease and shall not disturb the leasehold interest
of the applicable tenant if an Event of Default (as such term is defined in a
Property Lease) has not occurred and is not continuing under such Property
Lease, but to the extent such lenders do not agree to the same. the same shall
not be a condition to Closing.
Section 5.11. Private Placement. As promptly as practicable
following the date hereof, Acquiror shall complete its preparation of an
appropriate offering memorandum (together with any amendment thereof or
supplement thereto, the "Offering Memorandum") in connection with the Private
Placement. Seller and its counsel shall be given a reasonable opportunity to
review and comment on the Offering Memorandum but only to the extent statements
included therein are based on information supplied by Seller or Indemnitor
specifically for inclusion or incorporation by reference therein. If requested
by Seller, Acquiror shall include in the Offering Memorandum a notice to the
effect that Seller does not accept and shall not have any responsibility or
liability for the content of the Offering Memorandum (except as to information
supplied by Seller or Indemnitor specifically for inclusion or incorporation by
reference therein). Acquiror shall use its reasonable best efforts to consummate
the Private Placement prior to August 15, 2004.
Section 5.12. Registration Statement; Additional Financial
Statements. (a) Acquiror expects to file with the Securities and Exchange
Commission (the "SEC") a registration statement covering shares of common stock
of Acquiror pursuant to various agreements with the initial purchasers of such
shares sold in the Private Placement (together with any amendment thereof or
supplement thereto, the "Registration Statement"). Acquiror shall provide
Indemnitor and its counsel with a reasonable opportunity to review and comment
on the Registration Statement, each response to any correspondence from the SEC
or the staff of the SEC (or any other Governmental Authority) relating thereto,
and all other documentation prepared in connection with the listing of the
shares covered thereby on any securities exchange, but only to the extent
statements included therein are based on information supplied by Indemnitor
specifically for inclusion or incorporation by reference therein. If requested
by Indemnitor, Acquiror shall include in the Registration Statement, a notice to
the effect that Indemnitor does not accept and shall not have any responsibility
or liability for the content of the Registration
35
Statement (except as to information supplied by it specifically for inclusion or
incorporation by reference therein).
(b) If Acquiror (i) shall be obligated to provide financial
statements of the Company or any of the Company Subsidiaries, including as part
of the presentation of any required pro forma financial statements, for any
period in any filing to be made pursuant to Applicable Securities Rules
(including the Registration Statement) or (ii) shall be advised by the
underwriters or initial purchasers in connection with any offering of its
securities, including the Private Placement, that such financial statements are
advisable in order to assure a successful marketing of such offering, then
Indemnitor shall use its reasonable commercial efforts to engage Indemnitor's
accountants, Ernst & Young LLP, so long as they are independent for purposes of
the Securities Act, or another nationally recognized accounting firm reasonably
acceptable to Acquiror, to conduct an audit of, or if no audit is required, to
perform the procedures specified by the American Institute of Certified Public
Accountants for a review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim Financial Information, with
respect to, such required or advisable financial statements and, to the extent
required by the SEC or deemed advisable by the underwriters or initial
purchasers, the comparable period in the prior year and shall use reasonable
commercial efforts to facilitate any such audit or review. Indemnitor will also
reasonably cooperate with Acquiror, in connection with any such audit or review
and shall use reasonable commercial efforts to cause any accounting firm
referred to above to provide such reasonable cooperation as well. All costs
incurred by Indemnitor pursuant to this Section 5.12(b) (including any audit or
review by Ernst & Young LLP and consultants) shall be paid by Acquiror.
Section 5.13. Certain Insurance Claims. From and after the Closing
Date, the Company and the Company Subsidiaries shall cease to be insured by
Seller's or its Affiliates' (other than the Company or any Company Subsidiary,
as the case may be) insurance policies or by any of their self-insured programs
to the extent such insurance policies or programs cover the Company or the
Company Subsidiaries; provided, however, that Seller shall use its reasonable
commercial efforts, subject to the terms of the occurrence-based third party
liability insurance policies and any workers' compensation insurance policies
and/or comparable workers' compensation self-insurance programs sponsored by
Seller and/or its Affiliates and that apply to the locations at which the
businesses of the Company and the Company Subsidiaries operate (the "Occurrence
Policies"), (i) to retain and extend the right to make or submit claims and
receive recoveries for the benefit of the Company and the Company Subsidiaries
under the Occurrence Policies with respect to any Losses arising out of actions,
omissions, events or facts relating to the assets (including the Acquired
Personal Property Assets), properties (including the Acquired Real Property
Assets) or business of the Company and the Company Subsidiaries occurring on or
prior to the Closing Date (each, an "Insured Claim"), (ii) to submit, and to
cause its Affiliates to cooperate with the Company and the Company Subsidiaries
in submitting, as soon as practicable good faith Insured Claims on behalf of the
Company and the Company Subsidiaries under the Occurrence Policies (without any
obligation on the part of Acquiror, the Company or any of the Company
Subsidiaries to reimburse Seller for any increased costs incurred by Seller as a
result of such claims or to make claims under insurance policies sponsored by
Acquiror and/or its Affiliates) and (iii) to pay promptly over to the Company
any and all amounts received by Seller or its Affiliates under the Occurrence
Policies with respect to Insured Claims.
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Section 5.14. Notice of Certain Events. Each party hereto shall
promptly notify the other parties hereto of any of the following events: (a) the
occurrence or non-occurrence of any event which would be likely to cause (i) any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect (including if such party receives a
notice of violation relating to any Hazardous Material, becomes aware that it is
not in compliance with all Environmental Laws in all material respects, receives
written notice from any tenant that such party is in default under any lease or
becomes aware of any material default by a tenant under any lease) or (ii) any
covenant, condition or agreement of such party contained in this Agreement not
to be complied with or satisfied (including if such party reasonably believes
that it will be unable to obtain one or more of the consents of the Existing
Mortgage Lenders prior to the Outside Date); and (b) any failure of such party
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, that the delivery of any notice
pursuant to this Section 5.14 shall not limit or otherwise affect the remedies
available to the party receiving such notice. In addition, Seller and Indemnitor
will promptly inform Acquiror of the happening of any event which would render
any information supplied by Seller or Indemnitor specifically for inclusion in
the Offering Memorandum or in any Registration Statement incorrect in any
material respect or would require the amendment of the Offering Memorandum or
any such Registration Statement.
Section 5.15. Further Action. From and after the Closing Date, the
parties hereto shall execute and deliver, or shall cause to be executed and
delivered, such documents and other papers and shall take, or shall cause to be
taken, such further actions as may be reasonably required to carry out the
provisions of this Agreement and give effect to the transactions contemplated by
this Agreement, including the transfer of the Excluded Assets and assumption of
the Excluded Liabilities.
ARTICLE VI
CONDITIONS TO CLOSING AND RELATED MATTERS
Section 6.01. Conditions to Obligations of Seller and Indemnitor.
The obligations of Seller and Indemnitor to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or waiver by
Seller and Indemnitor, at or prior to the Closing, of each of the following
conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of Acquiror contained in this Agreement are true
and correct (without giving effect to any limitations as to materiality) as of
the Closing as if made on the Closing Date (other than representations and
warranties made as of another date, which representations and warranties were
true and correct as of such date), except to the extent that any breaches of
such representations and warranties, individually or in the aggregate, have not
had, or would not reasonably be expected to have, a Material Adverse Effect;
(ii) the covenants contained in this Agreement to be complied with by Acquiror
on or before the Closing have been complied with in all material respects; and
(iii) Seller and Indemnitor have received a certificate dated the Closing Date
of Acquiror to such effect signed by a duly authorized senior executive officer
of Acquiror.
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(b) Approvals of Governmental Authorities. Each of the Seller
Required Governmental Approvals, the Indemnitor Required Governmental Approvals
and the Governmental Approvals set forth in Schedule 4.04 has been received or
deemed received and is in full force and effect.
(c) No Governmental Order or Proceeding. As of the Closing, there is
no Governmental Order in existence that prohibits or restrains the consummation
of the transactions contemplated by this Agreement and no suit, action or
proceeding or investigation by any Governmental Authority has been commenced
(and be pending) seeking to prohibit or restrain the consummation of the
transactions contemplated by this Agreement.
(d) Approvals of Existing Mortgage Lenders. Subject to Section 5.10,
each of the written consents and approvals of the Existing Mortgage Lenders in
Schedule 5.10 has been received or deemed received and is in full force and
effect.
(e) Other Documents. The Acquiror has executed and delivered to the
Seller and/or the applicable Indemnitor Parties each of the Transaction
Agreements to which it is a party.
(f) Consummation of Private Placement. The Private Placement has
been consummated and has resulted in net proceeds to Acquiror of at least
$535,000,000.
(g) Required Consents. Each of the Seller Required Third Party
Consents and the Indemnitor Required Third Party Consents has been received or
deemed received and is in full force and effect.
Section 6.02. Conditions to Obligations of Acquiror. The obligation
of Acquiror to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment or waiver by Acquiror, at or prior to the Closing,
of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of Seller and Indemnitor contained in this
Agreement are true and correct (without giving effect to any limitations as to
materiality) as of the Closing as if made on the Closing Date (other than
representations and warranties made as of another date, which representations
and warranties were true and correct as of such date), except to the extent that
any breaches of such representations and warranties, individually or in the
aggregate, have not had, or would not reasonably be expected to have, a Material
Adverse Effect; (ii) the covenants contained in this Agreement to be complied
with by Seller and Indemnitor on or before the Closing have been complied with
in all material respects; and (iii) Acquiror has received a certificate dated
the Closing Date of Seller and Indemnitor to such effect signed by a duly
authorized senior executive officer of each of Seller and Indemnitor.
(b) Approvals of Governmental Authorities. Each of the Seller
Required Governmental Approvals, the Indemnitor Required Governmental Approvals
and the Governmental Approvals set forth in Schedule 4.04 has been received or
deemed received, and is in full force and effect, and, subject to Section
5.05(a), do not contain any restrictions or limitations not reasonably
acceptable to Acquiror.
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(c) Approvals of Existing Mortgage Lenders. Subject to Section 5.10,
each of the written consents and approvals of the Existing Mortgage Lenders in
Schedule 5.10 has been received or deemed received, is in full force and effect,
and is in form and substance reasonably satisfactory to Acquiror.
(d) Approvals of Ground Lessors. Each of the written consents and
approvals of the ground lessors under each Ground Leased Asset, if any, has been
received or deemed received, is in full force and effect, and, subject to
Section 5.05(c), is in form and substance reasonably satisfactory to Acquiror.
(e) No Governmental Order or Proceeding. As of the Closing, there is
no Governmental Order in existence that prohibits or restrains the consummation
of the transactions contemplated by this Agreement and no suit, action or
proceeding or investigation by any Governmental Authority has been commenced
(and be pending) seeking to prohibit or restrain the consummation of the
transactions contemplated by this Agreement.
(f) No Material Adverse Effect. There has not occurred any event or
events that, individually or in the aggregate, have had or would reasonably be
expected to have a Material Adverse Effect.
(g) No Excluded Assets or Excluded Liabilities. Each of the Company
and the Company Subsidiaries has sold, transferred and assigned all of the
Excluded Assets and Seller or Indemnitor has assumed the Excluded Liabilities,
and the only assets and liabilities of the Company and the Company Subsidiaries
immediately prior to the Closing are, subject to any Permitted Liens, (i) the
Acquired Real Property Assets, (ii) the Acquired Personal Property Assets, (iii)
the Assumed Mortgage Debt, (iv) the Specified Liabilities and (v) any Excluded
Liabilities which Indemnitor shall have assumed as provided in Section 5.08.
Seller shall have delivered to Acquiror duly executed copies of the instruments
of assignment and assumption contemplated by Section 5.08.
(h) Consummation of Private Placement. The Private Placement has
been consummated and resulted in net proceeds to Acquiror of at least
$535,000,000.
(i) Required Consents. Each of the Seller Required Third Party
Consents and the Indemnitor Required Third Party Consents has been received or
deemed received and is in full force and effect, and is in form and substance
reasonably satisfactory to Acquiror.
(j) Other Documents. Each of the Seller and the Indemnitor Parties
has executed and delivered to the Acquiror each of the Transaction Agreements to
which Seller or such Indemnitor Party is a party, including as follows:
(i) Property Leases. Each of the Property Owners and the Net
Tenants has executed and delivered a Property Lease, with respect to each
of the Acquired Real Property Assets.
(ii) Agreement Regarding Leases. Each of the Tenant Holding
Company and the Property Owners Holding Company has executed and delivered
the Agreement Regarding Leases.
39
(iii) Guaranty Agreements. The Tenant Holding Company has
executed and delivered a Lease Guaranty, with respect to each of the
Property Leases, and the Indemnitor has executed and delivered the
Guaranty of Agreement Regarding Leases.
(iv) Management Agreement. Each of the Manager and the Net
Tenants has executed and delivered a Management Agreement containing
termination provisions reasonably satisfactory to Acquiror with respect to
each of the Acquired Real Property Assets.
(v) Other Deliveries. Each of the documents and other
deliveries contemplated by Section 2.06(e).
(k) Organizational Documents of Indemnitor, Tenant Holding Company
and Each Net Tenant. Each of Indemnitor, Tenant Holding Company and the Net
Tenants has been formed, and Acquiror has reasonably approved the organizational
documents of each of such entities.
ARTICLE VII
TERMINATION, WAIVER AND DEFAULT
Section 7.01. Termination. This Agreement may be terminated prior to
the Closing:
(a) by the mutual written consent of Seller and Acquiror;
(b) by either Seller or Acquiror if the Closing shall not have
occurred on or before September 30, 2004 (the "Outside Date"); provided,
however, that if, on or prior to the Outside Date, the conditions specified in
Sections 6.01(b), 6.01(c), 6.01(d), 6.02(b), 6.02(c), 6.02(d) and 6.02(e) have
not been satisfied or if, for reasons outside the reasonable control of Seller,
Indemnitor and Acquiror, any of the other conditions specified in Article VI has
not been satisfied, then either Seller or Acquiror may by written notice given
to the other party, extend the Outside Date to November 30, 2004 (the "Extended
Outside Date"); provided, further, that the right to terminate this Agreement
under this Section 7.01(b) shall not be available to any party whose failure to
take any action required to fulfill any of such party's obligations under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing to occur prior to such date;
(c) by either Seller or Acquiror in the event of the issuance of a
final, non-appealable Governmental Order restraining or prohibiting the
consummation of the transactions contemplated by this Agreement;
(d) by Acquiror in accordance with Section 2.08(b), 5.10, 7.06, or
8.01(b)(i); or
(e) by Seller in accordance with Section 5.10 or 7.05, or if the
Private Placement shall not have been consummated on or before August 15, 2004.
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Section 7.02. Notice of Termination. Any party desiring to terminate
this Agreement pursuant to Section 7.01 shall give written notice of such
termination to the other party or parties, as the case may be, to this
Agreement.
Section 7.03. Effect of Termination. If this Agreement is terminated
as provided in Section 7.01, except as set forth in Section 5.04 and this
Article VII, this Agreement shall forthwith become void and there shall be no
liability on the part of any party to this Agreement; provided, however, that
nothing in this Agreement shall relieve any party hereto from liability for any
willful breach of the representations and warranties contained in this Agreement
or any failure to perform their respective obligations under this Agreement.
Section 7.04. Extension; Waiver. At any time prior to the Closing,
the parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party (it being understood that time is
"of the essence" with respect to the Outside Date and the Extended Outside
Date), (b) waive any inaccuracies in the representations and warranties of the
other party contained in this Agreement or in any certificate, instrument,
schedule or other document delivered pursuant to this Agreement or (c) waive
compliance with any of the agreements or conditions contained in this Agreement.
Any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party granting such extension or waiver.
Section 7.05. Acquiror's Default. If Acquiror shall fail to purchase
the Shares on the Closing Date and each of Seller and Indemnitor has each
performed and Seller is ready, willing and able to convey the Shares hereunder,
in each case in accordance with the terms hereof, then Seller and Indemnitor
shall have the right to treat this Agreement as having been breached by
Acquiror, in which event Seller's and Indemnitor's sole and exclusive remedies
on account of such breach shall be (i) the right to terminate this Agreement by
written notice to Acquiror or Acquiror's attorney and, if the Private Placement
shall have been consummated, to be reimbursed for all reasonable and documented
out-of-pocket costs and expenses incurred by Seller and its Affiliates
(including the Company and the Company Subsidiaries) or (ii) the right to ▇▇▇
Acquiror for damages and/or specific performance of this Agreement. Upon such
termination, Acquiror shall forfeit all rights and claims with respect to the
Shares pursuant to this Agreement. In the event of such termination, Acquiror
shall (i) immediately return to Seller or destroy all due diligence materials,
reports and studies delivered to Acquiror by Seller (without Acquiror retaining
copies thereof) and copies of any reports or studies conducted by or at the
direction of Acquiror and in its possession and (ii) promptly pay to Seller the
Due Diligence Deposit, less any Transaction Costs incurred by Acquiror in
connection with the Due Diligence Review.
Section 7.06. Seller's Default. If Seller shall fail to convey the
Shares on the Closing Date and Acquiror is ready, willing and able to purchase
the Shares hereunder, in each case in accordance with the terms hereof, then
Acquiror shall have the right to treat this Agreement as having been breached by
Seller and Indemnitor, in which event, Acquiror's sole and exclusive remedies on
account of such breach shall be (i) the right to terminate this Agreement by
written notice to Seller, Indemnitor or Seller's attorney and to be reimbursed
for all reasonable and documented out-of-pocket costs and expenses incurred by
Acquiror and its
41
Affiliates or (ii) the right to ▇▇▇ Seller and Indemnitor for damages and/or
specific performance of this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification by Indemnitor. (a) Subject to the Tax
Matters Agreement, and Sections 8.01(b), 8.03, 8.04, 8.06, 8.07 and 10.01,
Indemnitor shall indemnify, defend and hold harmless Acquiror and its Affiliates
(including, without limitation, the Company and the Company Subsidiaries) and
Representatives (collectively, the "Acquiror Indemnified Parties") against, and
reimburse each Acquiror Indemnified Party for, all Losses that such Acquiror
Indemnified Party may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any inaccuracy or breach of any representation or warranty
made by Seller or Indemnitor in this Agreement or in the certificate
referred to in Section 6.02(a)(iii) (other than any inaccuracy of any
representation or warranty made by Indemnitor in Section 3.19, which is
covered by the Tax Matters Agreement);
(ii) any failure by Seller or Indemnitor to perform or comply
with any of its covenants or agreements contained in this Agreement;
(iii) any Environmental Claim relating to the Acquired Real
Property Assets or the Acquired Personal Property Assets arising out of
actions, omissions, events or facts occurring on or prior to the Closing
Date or to the treatment, storage, recycling or Release at any property to
which Hazardous Material was transported from any Acquired Real Property
Asset on or prior to the Closing Date;
(iv) any Third Party Claim arising out of actions, omissions,
events or facts occurring on or prior to the Closing Date relating to the
assets (including the Acquired Personal Property Assets), properties
(including the Acquired Real Property Assets) or business of the Company
and the Company Subsidiaries, including the Actions and matters described
in Schedules 3.08 and 3.24(e);
(v) any Excluded Assets and any Excluded Liabilities; and
(vi) any fees and expenses payable to attorneys, consultants
or accountants retained or hired by or on behalf of Seller, Indemnitor,
the Company, the Company Subsidiaries and their respective Affiliates and
Representatives in connection with the transactions contemplated by the
Transaction Agreements.
(b) Notwithstanding any other provision to the contrary, Indemnitor
shall not be required to indemnify, defend or hold harmless any Acquiror
Indemnified Party against, or reimburse any Acquiror Indemnified Party for:
(i) any Losses pursuant to Section 8.01(a)(i) (other than
Losses arising solely as a result of or in connection with the inaccuracy
or breach of any representation
42
or warranty made by Seller or Indemnitor in Sections 3.01, 3.02, 3.03 or
3.21, as to which this Section 8.01(b) shall not apply) with respect to
any claim for inaccuracy or breach of representation if (1) any officer of
Acquiror obtained actual knowledge on or before the date hereof that such
representation was not true and correct, or (2) any officer of Acquiror
obtained actual knowledge (whether during the Due Diligence Review, by
notice from Seller or otherwise) that such representation was not true and
correct after the date hereof but before the Closing Date, unless on or
before the Closing Date (x) Acquiror shall have notified Seller or
Indemnitor in writing, providing reasonable detail, of such inaccuracy or
breach and (y) Seller and Indemnitor shall have agreed prior to the
Closing that Acquiror shall not be obligated to close the transactions
contemplated by this Agreement (it being understood that if Acquiror
thereafter elects not to so close, this Agreement shall automatically
terminate and no party hereto shall have the right to ▇▇▇ any other party
hereto or any Releasee for damages or specific performance of this
Agreement); provided, that Indemnitor shall have the burden of proof with
respect to clauses (1) and (2) above;
(ii) with respect to any claim (or series of related claims
arising from the same underlying facts, events or circumstances), (A)
unless such claim (or series of related claims arising from the same
underlying facts, events or circumstances) involves Losses in excess of
$100,000 and (B) until the aggregate amount of all Losses of the Acquiror
Indemnified Parties exceeds $2,000,000, after which Indemnitor shall be
liable for all Losses of the Acquiror Indemnified Parties, including such
$2,000,000; provided, however, that this clause (ii) shall not apply to
any Third Party Claim relating to or arising out of the operation of the
senior living business conducted by Seller, Indemnitor and their
respective Affiliates and including, prior to the Closing Date, by the
Company and the Company Subsidiaries (the "Seller Operations");
(c) The cumulative aggregate indemnification obligation of the
Indemnitor under Sections 8.01(a)(i), 8.01(a)(iii) and 8.01(a)(iv) shall in no
event exceed $75,000,000 in the aggregate; provided, however, that the foregoing
limitation shall not apply to any Third Party Claim relating to or arising out
of the Seller Operations.
(d) For purposes of this Article VIII and for purposes of
determining whether Acquiror Indemnified Parties are entitled to indemnification
from Indemnitor pursuant to Sections 8.01(a)(i) and 8.01(b) hereof, any breach
of or inaccuracy in any representation or warranty (other than any
representation or warranty contained in Sections 3.06, 3.07 and 3.18 and the
first sentence of Section 3.14, as to which this Section 8.01(d) shall not
apply) of Indemnitor or Seller shall be determined without regard to any
materiality qualifications set forth in such representation or warranty, and all
references to the terms "material," "materially," "materiality," "Material
Adverse Effect" or any similar terms shall be ignored for purposes of
determining whether such representation or warranty was true and correct when
made or deemed made.
Section 8.02. Indemnification by Acquiror. (a) Subject to Sections
8.02(b), 8.03, 8.04, 8.06, 8.07 and 10.01, Acquiror shall indemnify, defend and
hold harmless Seller and their respective Affiliates (including the Indemnitor,
but not the Company or the Company Subsidiaries) and Representatives
(collectively, the "Seller Indemnified Parties") against, and
43
reimburse each Seller Indemnified Party for, all Losses that such Seller
Indemnified Party may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any inaccuracy of any representation or warranty made by
Acquiror in this Agreement or in the certificate referred to in Section
6.01(a)(iii);
(ii) any failure by Acquiror to perform or comply with any of
its covenants or agreements contained in this Agreement; and
(iii) any Third Party Claim to the extent relating to or
arising out of any injury or death of any person or any property damage
inflicted by any Representatives of Acquiror during any entry on or
inspection of the Real Property Assets, including any invasive testing,
performed by or on behalf of Acquiror pursuant to Section 2.08(c), but
excluding any claims arising from (i) property damage arising from
discovery of an existing condition during such inspection or testing and
(ii) the presence of groundwater monitoring ▇▇▇▇▇, which at Seller's
option, Acquiror will either cause to be filled and abandoned in
accordance with applicable Law or left intact and functional.
(b) Notwithstanding any other provision to the contrary, Acquiror
shall not be required to indemnify, defend or hold harmless any Seller
Indemnified Party against, or reimburse any Seller Indemnified Party for, any
Losses pursuant to Section 8.02(a)(i) (other than Losses arising out of,
resulting from, relating to or in connection with the inaccuracy or breach of
any representation or warranty made by Seller in Section 4.01, 4.02, or 4.08, as
to which this Section 8.02(b) shall not apply) (i) with respect to any claim (or
series of related claims arising from the same underlying facts, events or
circumstances), unless such claim (or series of related claims arising from the
same underlying facts, events or circumstances) involves Losses in excess of
$75,000 and (ii) until the aggregate amount of all Losses of the Seller
Indemnified Parties exceeds $2,000,000, after which Acquiror shall be liable for
all Losses of the Seller Indemnified Parties, including such $2,000,000. The
cumulative aggregate indemnification obligation of the Acquiror under Sections
8.02(a)(i) and 8.02(a)(iii) shall in no event exceed $75,000,000 in the
aggregate.
(c) For purposes of this Article VIII and for purposes of
determining whether Seller Indemnified Parties are entitled to indemnification
from Acquiror pursuant to Sections 8.02(a)(i) and 8.02(b), any breach of or
inaccuracy in any representation or warranty (other than any representations or
warranty contained in the last sentence of Section 4.07 as to which this Section
8.02(c) shall not apply) of Acquiror shall be determined without regard to any
materiality qualifications set forth in such representation or warranty, and all
references to the terms "material," "materially," "materiality," or any similar
terms shall be ignored for purposes of determining whether such representation
or warranty was true and correct when made or deemed made.
Section 8.03. Notification of Third Party Claims. (a) A Person that
may be entitled to be indemnified under this Agreement (the "Indemnified
Party"), shall promptly notify the party or parties liable for such
indemnification (the "Indemnifying Party") in writing of any pending or
threatened claim or demand by a third party that the Indemnified Party has
determined has given or could reasonably give rise to a right of indemnification
under this
44
Agreement (including a pending or threatened claim or demand asserted by a third
party against the Indemnified Party, such claim being a "Third Party Claim"),
describing in reasonable detail the facts and circumstances with respect to the
subject matter of such claim or demand; provided, however, that the failure to
provide such notice shall not release the Indemnifying Party from any of its
obligations under this Article VIII except to the extent the Indemnifying Party
is actually prejudiced by such failure, it being understood that (i) notices for
claims in respect of an inaccuracy or breach of a representation or warranty
must be delivered prior to the expiration of any applicable survival period
specified in Section 10.01 for such representation or warranty and (ii) notices
for claims in respect of a breach or failure to perform any covenant or
agreement must be delivered prior to the date that is six months after the last
day of the effective period of such covenant or agreement; provided, further,
that if, prior to such applicable date, a party hereto shall have notified the
other party hereto in writing of a claim for indemnification under this Article
VIII (whether or not formal legal action shall have been commenced based upon
such claim), such claim shall continue to be subject to indemnification in
accordance with this Article VIII notwithstanding the passing of such applicable
date.
(b) Upon receipt of a notice of a claim for indemnity from an
Indemnified Party pursuant to Section 8.03(a), and subject to Section 8.03(e),
the Indemnifying Party may, by notice to the Indemnified Party delivered within
ten (10) Business Days of the receipt of notice of such claim, assume the
defense and control of any Third Party Claim but shall allow the Indemnified
Party a reasonable opportunity to participate in the defense of such Third Party
Claim with its own counsel and at its own expense. The Indemnified Party may
take any actions reasonably necessary to defend such Third Party Claim prior to
the time that it receives a notice from the Indemnifying Party as contemplated
by the preceding sentence. The Indemnifying Party shall select counsel,
contractors and consultants of recognized standing and competence. To the extent
the principal remedy sought in any Third Party Claim is equitable relief, the
Indemnifying Party shall consult with the Indemnified Party as to the selection
of counsel to defend such Third Party Claim. Each Indemnified Party, shall, and
shall cause each of its Affiliates and Representatives to, cooperate in good
faith with the Indemnifying Party in the defense of any Third Party Claim. The
Indemnifying Party shall not be authorized to consent to a settlement of, or the
entry of any judgment arising from, any Third Party Claim, without the consent
of any Indemnified Party, provided that the Indemnified Party shall not withhold
its consent if such settlement or judgment involves solely the payment of money
without any finding or admission of any violation of Law or admission of any
wrongdoing and the Indemnifying Party shall (i) pay or cause to be paid all
amounts arising out of such settlement or judgment concurrently with the
effectiveness of such settlement and (ii) obtain, as a condition of any
settlement or judgment, a complete and unconditional release of each relevant
Indemnified Party from any and all liability in respect of such Third Party
Claim.
(c) If any Indemnifying Party receives a notice of a claim for
indemnity from an Indemnified Party pursuant to Section 8.03(a) that does not
involve a Third Party Claim, the Indemnifying Party shall notify the Indemnified
Party within thirty (30) days following its receipt of such notice, whether the
Indemnifying Party disputes its liability to the Indemnified Party under this
Article VIII. If the Indemnifying Party does not so notify the Indemnified Party
that it disputes such liability, the claim specified by the Indemnified Party in
such notice shall be conclusively deemed to be a liability of the Indemnifying
Party under this Article VIII, and the Indemnifying Party shall pay, subject to
the limitations set forth in Section 8.01(b) or 8.02(b), if
45
applicable, the amount of such liability to the Indemnified Party on demand or,
in the case of any notice in which the amount of the claim (or any portion of
the claim) is estimated, on such later date when the amount of such claim (or
such portion of such claim) becomes finally determined. If the Indemnifying
Party has timely disputed its liability with respect to such claim as provided
above, the Indemnifying Party and the Indemnified Party shall resolve such
dispute in accordance with Section 10.11.
(d) If an Indemnified Party determines in good faith that it is
reasonably likely that a Third Party Claim would materially adversely affect it
other than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement (including with respect to remediation of
any environmental matters), the Indemnified Party may, by notice to the
Indemnifying Party, assume the exclusive right to defend, compromise or settle
such Third Party Claim with its own counsel and at its own expense, provided,
however, that the Indemnifying Party will not be bound by any determination of a
Third Party Claim so defended or any compromise or settlement effected without
its written consent.
(e) Notwithstanding the foregoing, no Indemnifying Party shall have
any liability under this Article VIII for any Losses arising out of or relating
to any Third Party Claim that is settled or compromised by an Indemnified Party
without the consent of such Indemnifying Party (which consent shall not be
unreasonably withheld or delayed).
Section 8.04. Payment; Interest on Payment. In the event an Action
for indemnification under this Article VIII shall have been finally determined,
the amount of such final determination shall be paid to the Indemnified Party,
on demand in immediately available funds. An Action and the liability for and
amount of Losses, shall be deemed to be "finally determined" for purposes of
this Article VIII when the parties to such Action have so determined by mutual
agreement or, if disputed, when a final non-appealable Governmental Order with
respect thereto shall have been entered. Any amounts not paid when due pursuant
to this Article VIII shall bear interest from the date thereof until the date
paid at a rate equal to the rate publicly announced from time to time by
Citibank, N.A. as its prime or base rate. Nothing in this Section 8.04 shall
operate to bar an Indemnified Party from seeking and (where appropriate)
obtaining interest on any claim to the extent ordered by a court adjudicating
any Action brought by the Indemnified Party against an Indemnifying Party.
Section 8.05. Exclusive Remedies. Each of the parties hereto
acknowledges and agrees that, (a) prior to the Closing, other than in the case
of actual fraud by the other parties hereto, the sole and exclusive remedy of
such party hereto for any inaccuracy of any representation or warranty contained
in this Agreement shall be refusal to close the purchase and sale of the Shares
hereunder and (b) following the Closing, other than in the case of actual fraud
by the other parties hereto or any of their respective Affiliates or
Representatives, the indemnification provisions of this Article VIII and, with
respect to Taxes, the Tax Matters Agreement, shall be the sole and exclusive
remedies for any inaccuracy of the representations or warranties contained in
this Agreement and for any failure to perform or comply with any covenants or
agreements that, by their terms, were to have been performed or complied with
prior to the Closing. Notwithstanding anything in this Agreement to the
contrary, no Indemnifying Party shall have any liability under this Agreement
for Losses related to Taxes, which Losses shall be governed exclusively by the
Tax Matters Agreement.
46
Section 8.06. Additional Indemnification Provisions. (a) The parties
hereto agree, for themselves and on behalf of their respective Affiliates and
Representatives, that, with respect to each indemnification obligation in this
Agreement, (i) all Losses shall be net of any Eligible Insurance Proceeds (as
set forth in subsection (e) below) and (ii) in no event shall the Indemnifying
Party have liability to the Indemnified Party for any punitive, incidental,
special, indirect or consequential damages, except to the extent that the
Indemnified Party pays punitive, incidental, special, indirect or consequential
damages to a third party in respect of a Third Party Claim.
(b) Any amount payable by an Indemnifying Party pursuant to this
Article VIII shall be paid promptly and payment shall not be delayed pending any
determination of Eligible Insurance Proceeds or Retained Insurance Proceeds. In
any case where an Indemnified Party recovers from a third Person, any amount in
respect of any Loss for which such Indemnified Party has actually been
reimbursed by an Indemnifying Party pursuant to this Article VIII (other than
Retained Insurance Proceeds), such Indemnified Party shall promptly pay over to
the Indemnifying Party the amount so recovered (after deducting therefrom the
amount of expenses incurred by it in procuring such recovery), but not in excess
of the sum of (i) any amount previously paid by the Indemnifying Party to or on
behalf of the Indemnified Party in respect of such Loss and (ii) any amount
expended by the Indemnifying Party in pursuing or defending any claim arising
out of such matter.
(c) The parties hereto shall, for all tax and financial accounting
purposes, to the extent permitted by Law, treat the assumption and payment of
liabilities hereunder by Indemnitor as a distribution by Indemnitor to the
Company occurring prior to the Closing, and, accordingly, as not includible in
the taxable income of Acquiror. Correspondingly, the parties hereto shall, for
all tax and financial accounting purposes, to the extent permitted by Law, treat
any payment from Acquiror to Indemnitor pursuant to this Article VIII as a
capital contribution by the Company to Indemnitor occurring prior to the
Closing, and, accordingly, as not includible in the taxable income of
Indemnitor.
(d) All payments required to be made by an Indemnifying Party under
this Article VIII to any Indemnified Party shall be without set-off,
counterclaim or deduction of any kind.
(e) If any portion of Losses to be reimbursed by the Indemnifying
Party may be covered, in whole or in part, by third-party insurance coverage
(each, an "Insurance Policy"), the Indemnified Party shall promptly give notice
thereof to the Indemnifying Party (a "Notice of Insurance"). If the Indemnifying
Party so requests within 30 days after receipt of a Notice of Insurance, the
Indemnified Party shall use its commercially reasonable efforts to collect the
maximum amount of insurance proceeds thereunder, in which event (i) all such
proceeds actually received, net of costs reasonably incurred by the Indemnified
Party in seeking such collection, shall be considered "Eligible Insurance
Proceeds" and (ii) the Indemnifying Party shall reimburse the Indemnified Party
for all reasonable costs incurred in connection with such collection and the
amount of any prospective or retroactive increase in premiums actually paid by
the Indemnified Party under the Insurance Policy (as such increased premiums are
incurred) directly related to the payment of Eligible Insurance Proceeds for
such Loss for three years following the next renewal of such Insurance Policy.
If the Indemnifying Party does not request
47
that the Indemnified Party seek coverage of any portion of such Loss under the
Insurance Policy within 30 days after receipt of a Notice of Insurance, (i) any
proceeds that the Indemnified Party may receive thereunder shall be considered
"Retained Insurance Proceeds" and (ii) the Indemnifying Party shall have no
liability for any premium increases thereunder relating to the collection of
such Retained Insurance Proceeds.
(f) If the indemnification provided for in Subsections 8.01(a)(i)
and 8.02(a)(i) with respect to Losses relating to any inaccuracy of any
representation or warranty contained in Sections 3.26 and 4.09 is unavailable or
insufficient to hold harmless an Indemnified Party, then each Indemnifying Party
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Acquiror Indemnified Parties, on the one hand,
and the Seller Indemnified Parties, on the other hand, from the sale of the
shares of common stock of Acquiror in the Private Placement and the use of the
proceeds of the Private Placement or (ii) if the allocation provided by clause
(i) above is not permitted by applicable Law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of Acquiror Indemnified Parties, on the one
hand, and the Seller Indemnified Parties, on the other hand, in connection with
the statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Company, Indemnitor, Seller or Acquiror and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission.
(g) Notwithstanding anything to the contrary in this Article VIII,
to the extent that the Indemnified Party or an Affiliate realizes an actual Tax
benefit as a result of the event giving rise to the indemnity payment hereunder
(such as, by way of example but not limitation, a Tax savings resulting from the
payment of an indemnified amount that is deductible by the Indemnified Party, in
a case in which the indemnity payment itself does not give rise to gross income
for Tax purposes), the Indemnified Party shall promptly rebate to the
Indemnifying Party the amount of such Tax benefit.
Section 8.07. Mitigation of Losses. Each of the parties agrees to
take all reasonable steps to mitigate their respective Losses upon and after
becoming aware of any event or condition which would reasonably be expected to
give rise to any Losses that are indemnifiable hereunder. The Indemnifying Party
shall not be liable for Losses hereunder to the extent that such Losses resulted
solely from the Indemnified Party's failure to mitigate its Losses in accordance
with the preceding sentence.
Section 8.08. No Recourse to Seller and Parent Entities. Each of
Acquiror and Indemnitor and their respective existing and future Affiliates
(collectively, the "Releasing Parties") does hereby absolutely release and
discharge, effective as of the Closing, each of (i) Seller, Capital Z Financial
Services Fund II L.P., their respective existing and future Affiliates (other
than Indemnitor and its Subsidiaries) and their respective existing and future
officers and directors and (ii) the existing and future officers and directors
of Indemnitor and its Subsidiaries (collectively, the "Releasees") from any and
all Losses which any of the Releasing Parties ever had or now has or have or
hereafter can, shall or may have, for, upon or by reason of any matter,
48
cause or thing whatsoever to the extent arising from, in connection with,
related to or as a result of (a) the matters addressed in this Agreement and the
other Transaction Agreements, (b) the Private Placement and (c) any action or
inaction of any of the Releasees relating to or associated with the foregoing,
in each case, relating to any period from the beginning of the world to the end
of time, regardless of when brought; provided, however, such release and
discharge shall not release or discharge (i) any Releasee from any Losses to the
extent arising from, in connection with, related to or as a result of any fraud,
gross negligence or willful misconduct by or on behalf of such Releasee, (ii)
Seller from its agreements set forth in Sections 5.04, 5.14, 8.02(b), 8.03,
8.05, 8.06 and 8.07 and Article X, or (iii) Indemnitor and its successors and
assignees from any of its obligations under the Transaction Agreements,
including the obligations of Indemnitor pursuant to this Article VIII in respect
of representations, warranties, covenants and agreements of Seller and
Indemnitor.
ARTICLE IX
CASUALTY AND CONDEMNATION OF THE REAL PROPERTY
Section 9.01. Casualty. (a) If, on or prior to the date of the
Closing, all or a "material part" (as defined below) of any Real Property Asset
shall be damaged or destroyed by fire or other casualty (a "casualty event"),
then, in any such event, Acquiror may, at its option, either (i) elect to
exclude such Real Property Asset from the transactions contemplated by this
Agreement, whereupon such Real Property Asset shall be deemed to be an Excluded
Real Property Asset, the Purchase Price shall be reduced by the Allocable
Portion relating to such Excluded Real Property Asset and the parties hereto
shall be released of all obligations and liabilities of whatsoever nature in
connection with such Excluded Real Property Asset (other than Seller's
obligation to cause such asset to be transferred or distributed in accordance
with Section 5.08 and Indemnitor's indemnification obligations hereunder in
respect of such Excluded Real Property Asset), or (ii) proceed to close the
transactions contemplated by this Agreement, in which event all of the
provisions of Subsections 9.01(b)(i) and 9.01(b)(ii) below shall apply. If a
Real Property Asset is elected to be treated as an Excluded Real Property Asset
pursuant to clause (i) of this Section 9.01(a), then Seller shall use all
reasonable commercial efforts to cause such Excluded Real Property Asset to be
transferred from the Company or the related Company Subsidiary prior to the
Closing Date. If Acquiror shall fail to make an election pursuant to this
Section 9.01(a) prior to the earlier of (A) thirty (30) days after Acquiror's
receipt of written notice of the applicable casualty event from Seller and (B)
the Closing Date, then Acquiror shall be deemed to have made an election
pursuant to clause (ii) of this Section 9.01(a).
(b) If, on or prior to the Closing Date, less than a material part
of any Real Property Asset shall be damaged or destroyed by a casualty event,
Acquiror shall nevertheless consummate the transactions contemplated herein
pursuant to all the terms and conditions of this Agreement (without any
adjustment to the Purchase Price except as otherwise set forth herein) with
respect to such damaged Real Property Asset, subject to the following: (i)
Seller shall not (x) adjust and settle any insurance claims with respect to such
damaged Real Property Asset, or (y) enter into any construction or other
contract for the repair or restoration of such damaged Real Property Asset, in
each case, without Acquiror's prior written consent (except no such consent
shall be necessary to repair or restore any emergency or hazardous condition at
such damaged Real Property Asset), which consent shall not be unreasonably
withheld or delayed,
49
and (ii) at the Closing, Seller shall (1) pay over to Acquiror the amount of any
insurance proceeds, to the extent collected by Seller in connection with such
casualty event, less the amount of the actual and reasonable unreimbursed
expenses incurred by Seller in connection with collecting such proceeds and
making any repairs to the applicable Real Property Asset occasioned by such
casualty event pursuant to any contract (provided that such contract was
reasonably approved by Acquiror as required by this Section) and (2) assign to
Acquiror in form reasonably satisfactory to Acquiror all of Seller's right,
title and interest in and to any insurance proceeds that are uncollected at the
time of the Closing and that may be paid in respect of such casualty event.
Seller shall reasonably cooperate with Acquiror in the collection of such
proceeds, which obligation shall survive the Closing. To the extent that
insurance proceeds are paid over to Acquiror with respect to any damage to an
Acquired Real Property Asset pursuant to clause (ii) of this Section 9.01(b),
Acquiror shall use reasonable commercial efforts to cause such damage to be
repaired; provided, however, that the foregoing shall not require Acquiror to
expend any funds in excess of such insurance proceeds actually received by
Acquiror in respect of such damage pursuant to clause (ii) of this Section
9.01(b).
For the purpose of this Section, the phrase a "material part" of a
Real Property Asset shall mean a portion of such Real Property Asset the cost of
repair or restoration of such portion is estimated by a reputable contractor
selected by Seller and reasonably satisfactory to Acquiror, to be in excess of
five percent (5%) of the Allocable Portion relating to such Real Property Asset.
(c) If, prior to the Closing Date, any Real Property Asset or any
portion thereof shall be damaged or destroyed by a casualty event, Seller shall
promptly give Acquiror written notice of such event, including information in
reasonable detail regarding the extent of the damage to such Real Property Asset
or portion thereof.
Section 9.02. Condemnation Pending Closing. If, prior to the Closing
Date, condemnation or eminent domain proceedings shall be commenced by any
competent public authority against any Real Property Asset or any portion
thereof, Seller shall promptly give Acquiror written notice thereof. After
notice of the commencement of any such proceedings (from Seller or otherwise)
and in the event that the taking of such Real Property Asset pursuant to such
proceedings would constitute a "Material Taking" (hereinafter defined), Acquiror
shall have the right (i) to accept title to such Real Property Asset subject to
such proceedings, whereupon any award payable to Seller shall be paid to
Acquiror and Seller shall deliver to Acquiror at the Closing all assignments and
other documents reasonably requested by Acquiror to vest such award in Acquiror,
or (ii) elect to exclude such Real Property Asset from the transactions
contemplated by this Agreement, whereupon such Real Property Asset shall be
deemed to be an Excluded Real Property Asset, the Purchase Price shall be
reduced by the Allocable Portion relating to such Excluded Real Property Asset
and the parties hereto shall be released of all obligations and liabilities of
whatsoever nature in connection with such Excluded Real Property Asset (other
than Seller's obligation to cause such asset to be transferred or distributed in
accordance with Section 5.08 and Indemnitor's indemnification obligations
hereunder in respect of such Excluded Real Property Asset). For the purposes of
Section 9.01(a), a taking shall be deemed to be a "Material Taking" with respect
to any Real Property Asset if such taking materially and adversely affects
access to such Real Property Asset, or leaves a remaining balance of such Real
Property Asset which may not be economically operated for the
50
purpose for which the Real Property Asset was operated prior to such taking, or
if in the reasonable estimation of an appraiser selected by Seller, subject to
Acquiror's reasonable approval, the taking would result in a claim for
condemnation proceeds equal to or in excess of five percent (5%) of the
Allocable Portion of the Purchase Price. If a Real Property Asset is elected to
be treated as an Excluded Real Property Asset pursuant to clause (ii) of Section
9.01(a), then Seller shall use all reasonable commercial efforts to cause such
Excluded Real Property Asset to be transferred from the Company or the related
Company Subsidiary prior to the Closing Date. If Acquiror shall fail to make an
election pursuant to this Section 9.02 prior to the earlier of (A) thirty (30)
days after Acquiror's receipt of written notice of the applicable proceedings
from Seller and (B) the Closing Date or if a taking of any Real Property Asset
in any proceedings would not constitute a Material Taking, then Acquiror shall
be deemed to have made an election pursuant to clause (i) of this Section 9.02.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Survival. Notwithstanding the Closing hereunder, (x)
the representations and warranties of Seller, Indemnitor and Acquiror contained
in or made pursuant to this Agreement or in any certificate furnished pursuant
to this Agreement shall survive in full force and effect until the date that is
eighteen (18) months after the Closing Date, at which time such representations
and warranties shall terminate and expire (and no claims shall be made for
indemnification under Sections 8.01 or 8.02 after such termination and
expiration); provided, however, that (i) the representations and warranties made
in the sixth sentence of Section 3.03(a) shall survive the Closing indefinitely,
(ii) the representations and warranties made in Sections 3.01, 3.02, 3.03 (other
than the sixth sentence of Section 3.03(a)), 3.13, 3.19, 3.20, 4.01 and 4.02
shall survive until the expiration of the applicable statute of limitations and
(y) the covenants and agreements of Seller, Indemnitor and Acquiror contained in
or made pursuant to this Agreement shall survive for the period provided in such
covenants and agreements, if any, or until fully performed.
Section 10.02. Expenses; Transaction Costs. Except as may be
otherwise specified in this Agreement, all Transaction Costs shall be paid by
Seller, except that all cost and expenses incurred by the Company or any Company
Subsidiary and payable to a third party (x) in connection with obtaining any
third-party consent or approval required to be obtained as a condition to any
party's obligations under this Agreement or (y) consisting of legal, accounting,
consulting, actuarial or other professional fees or disbursements, shall be
reimbursed by Seller to the Company or such Company Subsidiary, as applicable,
prior to the Closing. No later than three (3) Business Days prior to the Closing
Date, Seller shall prepare and deliver to Acquiror a written notice setting
forth the amount of Transaction Costs to be included in the Purchase Price
pursuant to Section 2.03, which amount shall increase the Allocable Portions,
and be added to the Lease Basis (as defined in the form of the Property Lease)
under the Property Leases, in the manner and amounts designated by Acquiror;
provided, however, that the aggregate amount to be included in the Purchase
Price and added to the Lease Basis (as defined in the form of the Property
Lease) under this Section 10.02 shall in no event exceed $7,350,000.
51
Section 10.03. Notices. All notices, requests, claims, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be given or made (and shall be deemed to have been duly given
or made upon receipt) by delivery in person, by overnight courier service, by
facsimile with receipt confirmed (followed by delivery of an original via
overnight courier service) or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 10.03):
(i) if to Seller:
Fortress Brookdale Acquisition LLC
c/o Fortress Investment Group LLC
1251 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ Slate ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Coco, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to Acquiror:
Provident Senior Living Trust
c/o Fortress Investment Group LLC
1251 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) if to Indemnitor:
BLC Senior Holdings, Inc.
c/o Brookdale Living Communities, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Winston & ▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Head, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.04. Public Announcements. Except as may be required by
Law or Applicable Securities Rules, none of the parties to this Agreement, nor
any of their respective Affiliates or Representatives, shall make any public
announcements in respect of this Agreement or the transactions contemplated by
this Agreement without the prior consent of the other parties, and prior to any
announcement the parties shall cooperate as to the timing and contents of any
such announcement. Prior to the Closing, neither of the parties to this
Agreement, nor any of their respective Affiliates or Representatives, shall make
any disclosure concerning plans or intentions relating to the customers, agents
or employees of, or other Persons with significant business relationships with,
the Company or any of the Company Subsidiaries without first obtaining the prior
written approval of the other party, which approval will not be unreasonably
withheld. Notwithstanding the foregoing, Seller and Indemnitor acknowledge that
Acquiror is a newly-formed real estate investment trust which is in the process
of preparing to implement the Private Placement and may, subject to Sections
5.04(a), 5.11 and 5.12, disclose the transactions contemplated hereunder in its
offering materials or governmental filings in connection with any securities
offerings or as required under Applicable Securities Rules ("REIT Disclosure")
and any such REIT Disclosure shall be permitted to be made by Acquiror and its
Representatives regardless of the provisions of this Section 10.04.
Section 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced under any Law or as
a matter of public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties to this Agreement shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to the
greatest extent possible.
Section 10.06. Entire Agreement. Except as otherwise expressly
provided in the this Agreement, or as otherwise expressly agreed in writing by
the parties, this Agreement constitutes the entire agreement of the parties
hereto and supersedes all prior agreements and undertakings, both written and
oral, between or on behalf of Seller and/or its Affiliates, on the
53
one hand, and Acquiror and/or its Affiliates, on the other hand, with respect to
the subject matter of this Agreement.
Section 10.07. Assignment. This Agreement shall not be assigned by
any party hereto, except that Acquiror may assign any or all of its rights (but
not its obligations) hereunder to one or more Affiliates of Acquiror designated
in a written notice delivered by Acquiror to Seller at least three (3) Business
Days prior to the Closing; provided, however, that no such assignment by
Acquiror shall (x) release Acquiror from any liability or obligation under this
Agreement or (y) be permissible if it could reasonably be expected to delay,
hinder or jeopardize the consummation of any transactions contemplated by this
Agreement. This Agreement shall be binding upon, shall inure to the benefit of,
and shall be enforceable by the parties hereto and their permitted successors
and assigns.
Section 10.08. No Third-Party Beneficiaries. Except as provided in
Article VIII with respect to Seller Indemnified Parties, Acquiror Indemnified
Parties and the Releasees, this Agreement is for the sole benefit of the parties
to this Agreement and their successors and permitted assigns and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
Section 10.09. Amendment. No provision of this Agreement may be
amended, waived or modified except by a written instrument signed by all the
parties to such agreement.
Section 10.10. Disclosure Schedules. Any disclosure with respect to
a Schedule shall be deemed to be disclosed for other Sections of this Agreement
to the extent that such disclosure sets forth facts in sufficient detail so that
the relevance of such disclosure would be reasonably apparent to a reader of
such disclosure; provided, however, that no representation or warranty contained
in this Agreement shall be deemed to be modified or qualified by any disclosure
set forth in the Schedules, if, by its terms, such representation or
qualification is incapable of being modified or qualified by any disclosure set
forth in the Schedules. No reference to or disclosure of any item or other
matter in any Section or Schedule of this Agreement shall be construed as an
admission or indication that such item or other matter is material or that such
item or other matter is required to be referred to or disclosed in this
Agreement.
Section 10.11. Governing Law; Submission to Jurisdiction; Waivers.
THIS AGREEMENT AND EACH OTHER TRANSACTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW PRINCIPLES OF SUCH STATE THAT
MIGHT REFER THE GOVERNANCE, CONSTRUCTION OR INTERPRETATION OF SUCH AGREEMENTS TO
THE LAWS OF ANOTHER JURISDICTION. EACH OF THE PARTIES HERETO AGREES IRREVOCABLY
AND UNCONDITIONALLY TO:
(a) submit for itself and its property in any Action relating to
this Agreement, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive jurisdiction of the Courts of the State of New York
sitting in the County of New York, the court
54
of the United States of America for the Southern District of New York, and
appellate courts having jurisdiction of appeals from any of the foregoing, and
agrees that all claims in respect of any such Action shall be heard and
determined in such New York State court or, to the extent permitted by Law, in
such federal court;
(b) consent that any such Action may and shall be brought in such
courts and waives any objection that it may now or hereafter have to the venue
or jurisdiction of any such Action in any such court or that such Action was
brought in an inconvenient court and agrees not to plead or claim the same;
(c) WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THIS
AGREEMENT, OR ITS PERFORMANCE UNDER OR THE ENFORCEMENT OF THIS AGREEMENT;
(d) agree that service of process in any such Action may be effected
by mailing a copy of such process by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such party at its
address as provided in Section 10.03; and
(e) agree that nothing in this Agreement shall affect the right to
effect service of process in any other manner permitted by the Laws of the State
of New York.
Section 10.12. Specific Performance. Seller and Indemnitor
acknowledge that, in view of the uniqueness of the transactions contemplated by
this Agreement, Acquiror would not have an adequate remedy at law for money
damages in the event that transactions contemplated by this Agreement shall not
have been performed in accordance with its terms, and therefore agree that
Acquiror shall be entitled to specific performance of the terms hereof and any
other similar equitable remedy to which Acquiror may be entitled.
Section 10.13. Rules of Construction. Interpretation of this
Agreement shall be governed by the following rules of construction: (a) words in
the singular shall be held to include the plural and vice versa, and words of
one gender shall be held to include the other gender as the context requires;
(b) references to the terms Article, Section, paragraph, Exhibit and Schedule
are references to the Articles, Sections, paragraphs, Exhibits and Schedules to
this Agreement unless otherwise specified; (c) references to "$" shall mean U.S.
dollars; (d) the word "including" and words of similar import when used in this
Agreement shall mean "including without limitation," unless otherwise specified;
(e) the word "or" shall not be exclusive; (f) references to "insurance policy"
shall include all related riders and amendments; (g) provisions shall apply,
when appropriate, to successive events and transactions; (h) the headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement; and (i) this
Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any
instrument to be drafted.
Section 10.14. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties to each such agreement in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall
55
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile shall be as effective as delivery
of a manually executed counterpart of this Agreement.
[SIGNATURE PAGE FOLLOWS]
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the date first written above by their respective duly authorized
officers.
FORTRESS BROOKDALE ACQUISITION LLC,
a Delaware limited liability company
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Secretary
BLC SENIOR HOLDINGS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, Chief Executive Officer
PROVIDENT SENIOR LIVING TRUST,
a Maryland real estate investment trust
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Chief Executive Officer
TABLE OF EXHIBITS
Exhibit A Definitions
Exhibit B Form of Property Lease
Exhibit C Form of Agreement Regarding Leases
Exhibit D Form of Lease Guaranty
Exhibit E Form of Guaranty of Agreement Regarding Leases
i
TABLE OF SCHEDULES
Schedule A Excluded Assets
Schedule 1 Company Subsidiaries
Schedule 2.03 Real Property Assets; Allocable Portion
Schedule 2.04(d) Specified Liabilities
Schedule 3.03(a) Authorized Capital Stock of Company and Company
Subsidiaries
Schedule 3.04(a) Seller Required Third Party Consents
Schedule 3.04(b) Indemnitor Required Third Party Consents
Schedule 3.05(a) Seller Required Governmental Approvals
Schedule 3.05(b) Indemnitor Required Governmental Approvals
Schedule 3.06(a) Financial Statements
Schedule 3.06(c) Pro Forma Financial Statements
Schedule 3.08 Existing Litigation Matters
Schedule 3.10(b) Material Permits
Schedule 3.12(a) Material Contracts
Schedule 3.13(a) Employee Benefit Plans
Schedule 3.14(a) Acquired Personal Property Assets
Schedule 3.14(b) Liens on Acquired Personal Property Assets
Schedule 3.15 Real Property Assets
Schedule 3.16 Ground Leased Assets
Schedule 3.17 Insurance
Schedule 3.18 Existing Mortgages
Schedule 3.19 Taxes
Schedule 3.19(a)(ii) Pending Tax Contests
Schedule 3.19(a)(vi) Tax Returns
i
Schedule 3.22 Regulatory Filings
Schedule 3.24(a) Operator Licenses
Schedule 3.24(e) Facility Violations
Schedule 3.26 Offering Memorandum
Schedule 4.04 Consents and Approvals
Schedule 5.04(c) Confidentiality
Schedule 5.10 Existing Mortgage Lender Consents
ii
EXHIBIT A
DEFINITIONS
"Accrued Expenses" shall have the meaning set forth in Section
2.04(a).
"Acquired Personal Property Assets" shall have the meaning set forth
in Section 3.14(a).
"Acquired Real Property Assets" means the Real Property Assets other
than any Excluded Real Property Assets.
"Acquiror" shall have the meaning set forth in the introductory
paragraph.
"Acquiror Cap Ex Report" shall have the meaning set forth in Section
2.09(a).
"Acquiror Indemnified Parties" shall have the meaning set forth in
Section 8.01(a).
"Action" means any civil, criminal or administrative action, suit,
demand, claim, arbitration, hearing, litigation, dispute or other proceeding or
investigation by or before any Governmental Authority or arbitrator.
"Affiliate" means, with respect to any specified Person, any other
Person that, at the time of determination, directly or indirectly through one or
more intermediaries, Controls, is Controlled by or is under common Control with
such specified Person; provided, however, that for the purposes of this
Agreement, Seller shall not be deemed an Affiliate of Acquiror nor, after the
Closing, of the Company or any of the Company Subsidiaries.
"Agreement" means this Stock Purchase Agreement, dated as of the
date first set forth above, by and among Seller, Acquiror and Indemnitor,
including the Schedules and the Exhibits, and all amendments to such agreement
made in accordance with Section 10.09.
"Agreement Regarding Leases" means the Agreement Regarding Leases
among Property Owners Holding Company, Tenant Holding Company, Manager and
Acquiror, and is substantially in the form of Exhibit C.
"Allocable Portion" shall have the meaning set forth in Section
2.03.
"Applicable Securities Rules" shall have the meaning set forth in
Section 4.09.
"Assumed Mortgage Debt" means the Existing Mortgages listed on
Schedule 3.18 relating to the Acquired Real Property Assets.
"Base Purchase Price" shall have the meaning set forth in Section
2.03.
"Benefit Plans" shall have the meaning set forth in Section 3.13(a).
i
"Business Day" means any day that is not a Saturday, a Sunday or any
other day on which commercial banks in the City of New York, New York are
required or authorized by Law to be closed.
"Cap Ex Reserve Shortfall" shall have the meaning set forth in
Section 2.09(a).
"Capital Stock" means capital stock of or other type of ownership
interest in, as applicable, a Person, whether preferred, common or otherwise and
whether or not carrying any voting rights.
"casualty event" shall have the meaning set forth in Section
9.01(a).
"Certificate of Need" shall have the meaning set forth in Section
3.23.
"Closing" shall have the meaning set forth in Section 2.02.
"Closing Adjustments" shall have the meaning set forth in Section
2.03.
"Closing Amount" shall have the meaning set forth in Section
2.06(a).
"Closing Date" shall have the meaning set forth in Section 2.02.
"Closing Statement" shall have the meaning set forth in Section
2.06(d).
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Company" shall have the meaning set forth in the recitals hereof.
"Company Subsidiary" or "Company Subsidiaries" shall have the
meaning set forth in the recitals hereof.
"Control" means, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. The terms "Controlled
by", "under common Control with" and "Controlling" shall have correlative
meanings.
"Due Diligence Deposit" shall have the meaning set forth in Section
2.05.
"Due Diligence Expiration Date" shall have the meaning set forth in
Section 2.08(b).
"Due Diligence Review" shall have the meaning set forth in Section
2.05.
"Eligible Insurance Proceeds" shall have the meaning set forth in
Section 8.06(e).
"Environmental Claim" means any Action or Governmental Order,
including any Third Party Claim or any Action required pursuant to any
Environmental Law, arising (i) pursuant to, or in connection with, any actual or
alleged requirement or violation of any Environmental Law, (ii) in connection
with any Hazardous Material or actual or alleged activity
ii
associated with any Hazardous Material, (iii) from any abatement, removal,
cleanup, corrective or other response action in connection with any Hazardous
Material, Environmental Law or other directive of any Governmental Authority, or
(iv) from any actual or alleged damage, loss, injury, threat or harm to the
environment.
"Environmental Law" means any Law relating to pollution or
protection of the indoor or outdoor environment, including a Release or the use,
handling, transportation, treatment or storage of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under or issued pursuant to any
Environmental Law.
"Environmental Property Transfer Law" means any Law that requires
any notification or disclosure to any Person of environmental conditions in
connection with the sale of stock, or the transfer, sale, lease or closure of
any property or the transfer of any ownership interest in any Person which owns
property.
"Equity Shares" means shares of or other ownership interests in
Capital Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
3.13(e).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Excluded Assets" means all of the assets and properties of the
Company and the Company Subsidiaries, including those assets set forth in
Schedule A, other than (i) the Acquired Real Property Assets and (ii) the
Acquired Personal Property Assets.
"Excluded Liabilities" means (a) all of the liabilities and
obligations (whether absolute, contingent or otherwise) of the Company and the
Company Subsidiaries with respect to the Seller Operations and the Excluded
Assets (including any Excluded Real Property Assets), whether or not of type
required to be reflected or reserved on a balance sheet prepared in accordance
with GAAP and (b) all of the liabilities and obligations (whether absolute,
contingent or otherwise) of the Company and the Company Subsidiaries with
respect to the Acquired Real Property Assets that are of type required to be
reflected or reserved on a balance sheet prepared in accordance with GAAP, other
than (i) the Assumed Mortgage Debt, (ii) the Permitted Liens and (iii) the
Specified Liabilities.
"Excluded Real Property Assets " means any Real Property Assets
excluded from the transaction contemplated herein in accordance with Article IX.
"Existing Litigation Matters" shall have the meaning set forth in
Section 3.08.
"Existing Mortgages" shall have the meaning set forth in Section
3.18.
iii
"Existing Mortgage Lenders" shall mean the holders from time to time
of the Existing Mortgages.
"Extended Outside Date" shall have the meaning set forth in Section
7.01(b).
"Final Purchase Price" shall have the meaning set forth in Section
2.03.
"Financial Statements" shall have the meaning set forth in Section
3.06(a).
"GAAP" means generally accepted accounting principles consistently
applied in the United States.
"Governmental Approval" shall have the meaning set forth in Section
3.05(a).
"Governmental Authority" means any United States federal, state or
local or any supra-national or non-U.S. government, political subdivision,
governmental, regulatory or administrative authority, instrumentality, agency,
body or commission, self-regulatory organization or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Ground Leased Asset" shall have the meaning set forth in Section
3.16.
"Guaranty of Agreement Regarding Leases" shall mean that certain
Guaranty of Agreement Regarding Leases by Indemnitor in favor of Property Owners
Holding Company with respect to Tenant Holding Company's obligations under the
Agreement Regarding Leases, and is substantially in the form of Exhibit E.
"Hazardous Materials" means any substance that (i) is or will
foreseeably be regulated by or defined by any Environmental Law, including any
substance which is defined as a "hazardous waste", "hazardous material",
"hazardous substance", "extremely hazardous waste", "restricted hazardous
waste", "contaminant", "toxic waste" or "toxic substance" under any provision of
Environmental Law, and including petroleum, petroleum products, asbestos,
asbestos-containing material, radioactive materials and polychlorinated
biphenyls or (ii) is any indoor air contaminant the exposure to which could
reasonably be expected to result in injury to humans.
"Health Departments" shall have the meaning set forth in Section
3.24(a).
"Improvement" shall mean all the buildings, structures and
improvements of every nature whatsoever now or hereafter located at the real
property described on Schedule 2.03, including, but not limited to, all gas and
electric fixtures, radiators, heaters, docks and docking facilities, engines and
machinery, boilers, ranges, elevators and motors, plumbing, heating and air
conditioning fixtures, carpeting and other floor coverings, water heaters and
cleaning apparatus which are or shall be attached to the land.
"Indemnified Party" shall have the meaning set forth in Section
8.03(a).
iv
"Indemnifying Party" shall have the meaning set forth in Section
8.03(a).
"Indemnitor" shall have the meaning set forth in the introductory
paragraph.
"Indemnitor Parties" means, collectively, Indemnitor, Tenant Holding
Company, Manager, each of the Net Tenants, and each of their respective
Affiliates (other than Seller) that is or at the Closing will be a party to any
Transaction Agreement.
"Indemnitor Required Governmental Approval" shall have the meaning
set forth in Section 3.05(b).
"Indemnitor Required Third Party Consents" shall have the meaning
set forth in Section 3.04(b).
"Insured Claim" has the meaning set forth in Section 6.13.
"Insurance Policy" shall have the meaning set forth in Section
8.06(e).
"IRS" means the Internal Revenue Service.
"Knowledge of the Selling Parties" means the actual knowledge of the
officers of Indemnitor and the Company with respect to the Real Property Assets
and each of the Company Subsidiaries.
"Law" means any U.S. federal, state, local or non-U.S. statute, law,
ordinance, regulation, rule, code, order or other requirement or rule of law.
"Lease Guaranty" shall mean each of the guaranty agreements by
Tenant Holding Company in favor of the applicable Property Owner with respect to
the applicable Net Tenant's obligations under a Property Lease, and is
substantially in the form of Exhibit D.
"Lien" means any mortgage, pledge, lien, lease, easement,
encumbrance, claim, right of first offer or refusal, charge, option, agreement
or security interest of any kind or nature.
"Living Facility" shall mean the independent and/or assisted living
facility being operated or proposed to be operated on the property leased
pursuant to the Property Leases.
"Losses" means, without duplication, all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including any Action
brought by any Governmental Authority or Person), including reasonable
attorneys' fees and costs of investigation.
"Management Agreement" shall mean the Management Agreement between
the Manager and a Net Tenant with respect to an Acquired Real Property Asset.
"Manager" shall mean Brookdale Provident Management, LLC, a Delaware
limited liability company.
v
"Material Adverse Effect" means a material adverse effect (a) on the
ability of Seller or any of the Indemnitor Parties to perform their respective
obligations under the Transaction Agreements to which it is or will be a party
or (b) on the assets, liabilities or businesses of the Company and the Company
Subsidiaries, taken as a whole, but shall not include any adverse effect to the
extent attributable to (i) the announcement of the transactions contemplated by
this Agreement, (ii) any adverse change in general economic conditions affecting
the industry in which the Company and the Company Subsidiaries participate or
the U.S. economy as a whole, or (iii) any adverse change in regulatory
conditions in the industry in which the Company and the Company Subsidiaries
participate.
"Material Contract" means any written or, to the Knowledge of the
Selling Parties, oral contract, agreement, lease, license, instrument or other
legally binding and enforceable commitment to which the Company or any of the
Company Subsidiaries is a party or is otherwise subject which requires an annual
payment in excess of $100,000.
"Material Permits" shall have the meaning set forth in Section
3.10(a).
"Material Taking" shall have the meaning set forth in Section 9.02.
"Medicaid" shall have the meaning set forth in Section 3.23.
"Net Tenants" shall mean each of the Delaware limited liability
companies that is 100% owned by Tenant Holding Company and is the lessee under a
Property Lease.
"New Survey" shall have the meaning set forth in Section 2.10.
"New Title Policy" shall have the meaning set forth in Section 2.10.
"NOLs" shall have the meaning set forth in Section 3.19(l).
"Notice of Insurance" shall have the meaning set forth in Section
8.06(e).
"Occurrence Policies" shall have the meaning set forth in Section
5.13.
"Offering Memorandum" shall have the meaning set forth in Section
5.11.
"Operator Licenses" shall have the meaning set forth in Section
3.24(a).
"Operator Reports" shall have the meaning set forth in Section
3.24(c).
"Outside Date" shall have the meaning set forth in Section 7.01(b).
"Pay-off Amount" shall have the meaning set forth in Section
2.04(d).
"Permitted Liens" means the following Liens: (a) Liens for Taxes,
assessments or other governmental charges or levies that are not yet due or
payable or that are being contested in good faith by appropriate proceedings;
(b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen, repairmen and other Liens imposed by Law and on a basis consistent
with past practice for amounts not yet due or that are being contested in good
vi
faith by appropriate proceedings; (c) Liens incurred or deposits made in the
ordinary course of business and on a basis consistent with past practice in
connection with workers' compensation, unemployment insurance or other types of
social security; (d) zoning, building, land use and other similar restrictions
imposed by Law or imposed by a Governmental Authority; (e) defects of title,
easements, rights-of-way, restrictions and other similar charges or encumbrances
not materially detracting from the value of the asset subject to the Lien or
materially interfering with the ordinary conduct of business; (f) any set of
facts an accurate up-to-date survey would show; provided, however, such facts do
not materially interfere with the present use, enjoyment and occupation of the
Real Property Asset; (g) the Assumed Mortgage Debt; (h) any matters shown on the
existing owner's title insurance policies and surveys delivered to Acquiror
pursuant to Section 2.08(a) (unless such matters are not shown on any New Title
Policies and New Surveys delivered pursuant to Section 2.10) but not mortgages,
deeds of trusts and other similar documents evidencing debt unrelated to the
Assumed Mortgage Debt; (i) Real Property Expenses accrued or unaccrued, fixed or
not fixed, becoming due and payable after the Closing Date to the extent
reflected in a final statement of apportionment prepared and delivered in
accordance with Section 2.04; (j) the Property Leases; and (k) with respect to
the Acquired Personal Property Assets, the Liens disclosed in Schedule 3.14(b).
"Person" means any natural person, general or limited partnership,
corporation, limited liability company, limited liability partnership, firm,
association or organization or other legal entity.
"Post-Closing Period" shall have the meaning set forth in Section
2.04(a).
"Post-Closing Taxable Period" means a taxable period, excluding a
partial taxable period, that, to the extent it relates to the Company or a
Company Subsidiary, begins after the Closing Date.
"Pre-Closing Period" shall have the meaning set forth in Section
2.04(a).
"Pre-Closing Taxable Period" means a taxable period, excluding a
partial taxable period, that, to the extent it relates to the Company or a
Company Subsidiary, ends on or before the Closing Date.
"Prepaid Expenses" shall have the meaning set forth in Section
2.04(a).
"Private Placement" shall have the meaning set forth in Section
4.06.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 3.06(c).
"Property Lease" shall mean each lease between a Property Owner, as
lessor, and a Net Tenant, as lessee, which lease demises a Real Property Asset,
and is substantially in the form of Exhibit B.
"Property Owners" shall mean the indirect subsidiaries of Acquiror
that following the Closing will own the applicable Acquired Real Property Assets
and are the lessors under the Property Leases.
vii
"Property Owners Holding Company" shall mean the Delaware limited
liability company that owns 100% of the equity of each of the Property Owners.
"Provider Agreements" shall have the meaning set forth in Section
3.23.
"Purchase Price" shall have the meaning set forth in Section 2.03.
"Real Property Assets" means those parcels of real property,
together with the improvements thereon, listed on Schedule 2.03.
"Real Property Expenses" shall have the meaning set forth in Section
2.04(a).
"Registration Statement" shall have the meaning set forth in Section
5.12(a).
"REIT Disclosure" shall have the meaning set forth in Section 10.04.
"Release" means the presence, release, spill, emission, leaking,
emitting, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration of Hazardous Materials in or into the indoor or outdoor
environment, including the movement of Hazardous Materials through or in the
air, soil, surface water or groundwater.
"Releasees" shall have the meaning set forth in Section 8.08.
"Releasing Parties" shall have the meaning set forth in Section
8.08.
"Representative" of a Person means the directors, officers,
stockholders, partners, members, employees, trustees, counsel, controlling
persons (if any), representatives and agents of such Person, and each of the
heirs, executors, successors and permitted assigns of any of the foregoing.
"Retained Insurance Proceeds" shall have the meaning set forth in
Section 8.06(e).
"Review Period" shall have the meaning set forth in Section 2.08(b).
"SEC" shall have the meaning set forth in Section 5.12(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the introductory
paragraph hereof.
"Seller Cap Ex Report" shall have the meaning set forth in Section
2.09(b).
"Seller Indemnified Parties" shall have the meaning set forth in
Section 8.02(a).
"Seller Operations" shall have the meaning set forth in Section
8.01(b).
"Seller Required Governmental Approval" shall have the meaning set
forth in Section 3.05(a).
viii
"Seller Required Third Party Consents" shall have the meaning set
forth in Section 3.04(a).
"Shares" shall have the meaning set forth in the recitals hereof.
"Specified Liabilities" shall have the meaning set forth in Section
2.04(d).
"Subsidiary" of any Person means any corporation, general or limited
partnership, joint venture, limited liability company, limited liability
partnership or other Person that is a legal entity, trust or estate of which (or
in which) (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors (or a majority of another
body performing similar functions) of such corporation or other Person
(irrespective of whether at the time capital stock of any other class or classes
of such corporation or other Person shall or might have voting power upon the
occurrence of any contingency), (b) more than 50% of the interest in the capital
or profits of such partnership, joint venture or limited liability company or
(c) more than 50% of the beneficial interest in such trust or estate, is at the
time of determination directly or indirectly owned or Controlled by such Person.
"Tax" or "Taxes" means (i) any federal, state, local or foreign net
income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer
(including real estate transfer taxes), stamp, or environmental tax (including
taxes under Code Section 59A), or any other tax, custom, duty, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
Governmental Authority; and (ii) any liability of the Company or any Company
Subsidiary for the payment of amounts with respect to payments of a type
described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or as a result of any obligation of the
Company or any Company Subsidiary under any Tax sharing arrangement or Tax
indemnity arrangement.
"Tax Authority" means any Governmental Authority having jurisdiction
over the assessment, determination, collection or imposition of any Tax.
"Tax Matters Agreement" shall mean that certain Tax Matters
Agreement, dated as of the date hereof, by and among Seller, Indemnitor and
Acquiror.
"Tax Returns" means all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax Authority relating to Taxes.
"Tenant Holding Company" shall mean Brookdale Provident Properties,
LLC, a Delaware limited liability company that is 100% owned by Indemnitor and
as of the Closing will be a party to the Agreement Regarding Leases.
"Third Party Claim" shall have the meaning set forth in Section
8.03(a).
"Third Party Payor Programs" shall have the meaning set forth in
Section 3.23.
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"Transaction Agreements" shall have the meaning set forth in Section
2.06(c).
"Transaction Costs" means all reasonable and documented
out-of-pocket costs and expenses incurred by Seller, Acquiror, the Company and
the Company Subsidiaries in connection with the negotiation and documentation of
the Transaction Agreements, the purchase and sale of the Shares, the
investigation and of the Real Property Assets, including any title insurance
premiums, surveys costs, transfer, documentary, sales, use, stamp, registration
or similar Taxes, recording costs, engineering reports, environmental
assessments, fees and disbursements of counsel, accountants, contractors and
consultants and any financing costs (incurred with respect to existing
indebtedness) or assumption or consent fees paid to Existing Mortgage Lenders,
but excluding any costs or expenses relating to (A) the organization of Acquiror
and any so-called operating partnership being formed by Acquiror, (B) any
post-Closing reorganization of the Company and the Company Subsidiaries,
including any change in the ownership structure, type of entity or the manner in
which their assets are held, (C) any financing transactions undertaken by
Acquiror unrelated to the assumption of the Existing Mortgages, and (D) the
raising of capital by Acquiror, including any costs relating to the Private
Placement, the Offering Memorandum and any Registration Statement.
"Transfer Notices" shall mean all notices required to be given to
any Governmental Authority in connection with the transactions contemplated by
this Agreement.
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