Proposal, the likelihood of obtaining necessary financing and the identity of the Person making such Takeover Proposal, and that, if consummated, would result in a transaction more favorable to the Company’s stockholders from a financial point of view than the transactions contemplated by this Agreement (after giving effect to any adjustments to the terms and provisions of this Agreement committed to in writing by Parent in response to such Takeover Proposal).
amounts imposed with respect thereto) imposed by any Governmental Entity, including those on or measured by or referred to as income, franchise, windfall or other profits, gross receipts, property, sales, use, net worth, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, excise, withholding, ad valorem, stamp, transfer, value-added and provider taxes.
Company Leased Health Care Facility, Company Other Owned Property, Company Other Leased Property or other material asset of the Company or Company Subsidiary is bound, except where such violation is subject to a cure within a reasonable period of time by the Company or Company Subsidiary, which cure is being undertaken by the Company or Company Subsidiary and such cure period has not expired and the cure is reasonably expected to be completed within such cure period (and, in the case of any violation existing on the date hereof, such item is disclosed in Section 4.6 of the Company Disclosure Schedule).
Section 4.7SEC Filings; Financial Statements.
Section 4.7.1 Company SEC Filings. The Company has timely filed all forms, reports and other documents required to be filed by it under the Securities Act or the Exchange Act, as the case may be, since January 1, 2003 (collectively, the “Company SEC Filings”). Each Company SEC Filing (i) as of its date, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not, at the time it was filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, no Company Subsidiary is subject to the periodic reporting requirements of the Exchange Act.
Section 4.7.2 Financial Statements. Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Filings was prepared in accordance with GAAP applied (except as may be indicated in the notes thereto and, in the case of unaudited quarterly financial statements, as permitted by Form 10-Q under the Exchange Act) on a consistent basis during the periods indicated (except as may be indicated in the notes thereto), and each presented fairly, in all material respects, the consolidated financial position of the Company as of the respective dates thereof and the consolidated results of operations and cash flows of the Company for the respective periods indicated therein (subject, in the case of unaudited statements, to normal adjustments which, individually or in the aggregate, are not reasonably expected to have a Company Material Adverse Effect).
28
Section 4.7.3 No Undisclosed Liabilities. None of the Company or any consolidated Company Subsidiary has any Significant liabilities or obligations, individually or in the aggregate, of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet or in notes thereto prepared in accordance with GAAP, except for liabilities or obligations (i) which are recorded or reserved for in compliance with GAAP on the balance sheet included in either the Company’s Annual Report on Form 10-K as of December 31, 2004, with any amendment thereto, or the Company’s Quarterly Report on Form 10-Q as of June 30, 2005, (ii) that were incurred or determined after June 30, 2005 in the ordinary course of business, consistent with past practice and not in violation of any of the covenants of the Company set forth in this Agreement or (iii) that were incurred under this Agreement or in connection with the transactions contemplated hereby.
Section 4.8Proxy Statement and SEC Filings. Subject to the last sentence of this Section 4.8, the Proxy Statement and any other document filed or to be filed with the SEC in connection with the transactions contemplated hereby will, at the time such documents, correspondence or supplements thereto, are first mailed to holders of shares of Company Common Stock or filed with the SEC and, as supplemented by any other such documents, at the time of the Company Stockholders’ Meeting, not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, and will comply as to form in all material respects with the provisions of the Securities Act and the Exchange Act. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any statements made or incorporated by reference in the Proxy Statement based on information supplied by Parent or Merger Sub for inclusion or incorporation by reference therein.
Section 4.9Absence of Certain Changes or Events. Since December 31, 2004, there has not been any Company Material Adverse Effect.
Section 4.10Benefit Plans; Employees and Employment Practices.
Section 4.10.1Section 4.10.1 of the Company Disclosure Schedule contains a true, correct and complete list of each material Company Benefit Plan maintained or contributed to by the Company or any Company Subsidiary. The Company has made available to Parent or its agents or representatives copies of (i) each material Company Benefit Plan, (ii) the most recent annual report (Form 5500), if any, filed with the U.S. Department of Labor with respect to each such Company Benefit Plan, and (iii) the summary plan description in effect on June 30, 2005 for each such Company Benefit Plan for which a summary plan description is required.
29
Section 4.10.2Except as provided in Section 4.10.2 of the Company Disclosure Schedule: (i) each Company Benefit Plan is in compliance, in all material respects, with any applicable provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the applicable provisions of the Code, and each Company Benefit Plan has been administered in compliance, in all material respects, with its terms; and (ii) the Company and each Company Subsidiary are in compliance, in all material respects, with the requirements of the applicable health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the applicable provisions of the Health Insurance Portability and Accountability Act of 1996. With respect to each Company Benefit Plan: (i) all contributions and insurance premiums required as of the Effective Time have been or will be paid, and to the Knowledge of the Company, there have been no prohibited transactions (within the meaning of ERISA §406 or Code §4975) with respect to any Company Benefit Plan; (ii) to the Knowledge of the Company, no fiduciary has any liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any Company Benefit Plan; (iii) there is no suit, claim, action, proceeding or investigation pending or, to the Knowledge of the Company, threatened with respect to the administration or the investment of the assets of any Company Benefit Plan (other than routine claims for benefits); (iv) each Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a determination letter from the IRS that it is so qualified, and, to the Company’s Knowledge, no fact or event has occurred since the date of such determination letter that could materially and adversely affect the qualified status of any such Company Benefit Plan; and (v) neither the Company nor any Company Subsidiary has been notified of any pending audit, investigation or review by any governmental or law enforcement agency, and to the Knowledge of the Company, no such audit, investigation or review has been proposed, with respect to any Company Benefit Plan.
30
Section 4.10.3Except as set forth in Section 4.10.3 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has any current or projected material liability in respect of post-employment or post-retirement health or medical or life insurance benefits for retired, former or current employees of Company or any Company Subsidiary, except as required to avoid excise tax under Section 4980B of the Code.
Section 4.10.4Except as provided in Section 4.10.4 of the Company Disclosure Schedule, neither the Company nor any trade or business that, together with the Company, would be deemed a single employer within the meaning of Section 4001 of ERISA (an “ERISA Affiliate”) maintains or contributes to any Multiemployer Plan or any “defined benefit plan” (as defined in Section 3(35) of ERISA) subject to Title IV of ERISA. Except as provided in Section 4.10.4 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has any obligation to contribute or pay any “withdrawal liability” to any Multiemployer Plan or can reasonably be expected to have any such obligation as a result of the Merger.
Section 4.10.5Except as provided in Section 4.10.5 of the Company Disclosure Schedule:
(a) (i) neither the Company nor any Company Subsidiary is a party to any collective bargaining or other labor union contracts and no collective bargaining agreement is being negotiated by the Company or any Company Subsidiary, (ii) neither the Company nor any Company Subsidiary is a party to any neutrality agreement with any labor organization, (iii) neither the Company nor any Company Subsidiary has joined other long-term care providers or any labor organization to form an alliance, (iv) to the Knowledge of the Company, there is no pending labor dispute, strike or significant work stoppage against the Company or any Company Subsidiary which may interfere with the respective business activities of the Company or the Company Subsidiaries, except where such dispute, strike or work stoppage, individually or in the aggregate, is not reasonably expected to have a Company Material Adverse Effect, (v) there is no pending charge or complaint against the Company or any Company Subsidiary by the National Labor Relations Board or any comparable state agency, except where such unfair labor practice, charge or complaint, individually or in the aggregate, is not reasonably expected to have a Company Material Adverse Effect, and (vi) there is no pending arbitration proceeding arising under any collective bargaining agreement, except where such arbitration proceeding, individually or in the aggregate, is not reasonably expected to have a Company Material Adverse Effect;
31
(b) The Company and the Company Subsidiaries are, and have, at all times during the last year, been in compliance in all material respects with all applicable Laws respecting immigration, employment and employment practices, and the terms and conditions of employment, including, without limitation, employment standards, equal employment opportunity, family and medical leave, wages, hours of work and occupational health and safety;
(c) During the six (6) month period prior to the date of this Agreement, the Company or any Company Subsidiary has not effectuated (i) a “plant closing” as defined in the Worker Adjustment and Retraining Notification Act of 1988 (“WARN”) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or any Company Subsidiary, (ii) a “mass layoff” as defined in WARN affecting any site of employment or facility of the Company or any Company Subsidiary, or (iii) a transaction or layoffs or employment terminations that triggered application of any similar applicable state or local law;
(d) The Company or a Company Subsidiary has provided or will provide Parent with copies of (i) all applications and petitions for immigration employment and visa benefits submitted on behalf of current foreign national employees of the Company to the U.S. Department of Labor, U.S. Immigration and Naturalization Service, and U.S. Department of State and (ii) all government notices regarding adjudications of such applications and petitions that the Company has in its possession or that it can reasonably obtain;
(e) The consummation of the transactions contemplated by this Agreement without the termination of any employee’s employment will not entitle any employee of the Company or any Company Subsidiary, whether under any individual agreement, Company Benefit Plan or other similar Company policy, to severance pay or accelerate the time of payment of compensation due to any employee of the Company or any Company Subsidiary;
(f) Except as provided in Sections 4.10.5 or 6.1(l) of this Agreement and the Company Disclosure Schedule, and other than in the ordinary course of business, subsequent to December 31, 2004, there has been no material increase in the compensation payable or to become payable to any of the Continuing Employees, and there have been no payments or provisions for any material awards, bonuses, loans, profit sharing, pension, retirement or welfare plans or similar or other disbursements or arrangements for or on behalf of such employees (or related parties thereof).
32
(g) Except for bonuses that may be due to employees of the Company or any Company Subsidiary for the current year, as set forth in Section 4.10.5 of the Company Disclosure Schedule hereto, all bonuses heretofore granted to employees of the Company or any Company Subsidiary have been paid in full to such employees or accrued on the balance sheets contained in the Financial Statements.
Section 4.11Contracts; Debt Instruments. Except as disclosed in Section 4.10.1, Section 4.11, Section 4.17.1(c), 4.17.1(e) and 4.17.1(h) or Section 4.21.6 of the Company Disclosure Schedule, none of the Company or any Company Subsidiary is a party to or bound by any Contract which (i) as of the date hereof, is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC) or (ii) (a) involves aggregate expenditures in excess of $1,000,000 based on the stated term of the agreement (without giving effect to any renewal provision), (b) involves annual expenditures in excess of $1,000,000 and is not cancelable within one year, (c) which would prohibit or materially delay the consummation of the Merger or (d) contains covenants limiting the ability of the Company or any Company Subsidiary to engage in any line of business or compete with any Person or operate at any location or (iii) is a Contract of any of the following types:
(a)Equipment Leases. Any agreement (or group of related agreements, including master lease agreements) for the lease of medical equipment, motor vehicles, computers and related devices, telecommunications equipment or other personal property to or from any Person providing for lease payments in excess of $50,000 per annum.
(b)National and Blanket Vendor Agreements. Any agreement (or group of related agreements) for the purchase or sale of medical, pharmaceutical or health care products or services, food, supplies, maintenance or other products or services the performance of which extends over a period of more than one (1) year, is not terminable without cause with 180 days or less written notice, and involves consideration in excess of $1,000,000.
33
(c)Joint Venture Agreements. Any agreement concerning a partnership, joint venture, limited liability company, corporation or other entity which is not a one hundred (100) percent owned Company Subsidiary, including stockholders, operating, joint venture and related management agreements.
(d)Management Agreements. Any agreement pursuant to which the Company or any Company Subsidiary manages or operates a Company Health Care Facility not owned or leased by the Company or a Company Subsidiary, or pursuant to which an unrelated Third Party manages a Company Health Care Facility which is owned or leased by the Company.
(e)Debt Agreements; Mortgages. Any agreement (or group of related agreements) under which the Company or any Company Subsidiary has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of $10,000 or under which there is granted an encumbrance on any of the assets of the Company or any Company Subsidiary, tangible or intangible.
(f)Agreement for the Provision of Services by the Company. Any agreement (or group of related agreements) for the provision by the Company or Company Subsidiaries of health care services to other health care operators, such as therapy, staffing, billing, software, hospice and training services, which involves consideration in excess of $250,000.
(g)Related Party Agreements. Any agreement between the Company or any Company Subsidiary on the one hand, and any of their directors, officers, executives, key employees or any Person affiliated with such individuals on the other.
(h)Employment Agreements. Any employment, executive, management, consulting or severance agreement with any employee of the Company or any Company Subsidiary involving compensation of more than $25,000 per annum or which would require any severance, bonus or other compensation to be paid in connection with a change in control of the Company.
(i)Union Agreements. Any collective bargaining or recognition agreement with any labor organization.
(j)Acquisition Agreements. Any agreements that are (i) either (a) dated within two years of the date hereof or (b) contain any material obligations that remain to be performed by any party thereto and (ii) that relate to (a) the acquisition by the Company of the
34
facilities, assets, real property, capital stock, business or leases of any Person, (b) the sale or divestiture of any Company Health Care Facility, real property, lease or business unit of the Company or any Company Subsidiary or the capital stock of any Company Subsidiary, or (c) any other sale of assets of the Company or any Company Subsidiary outside the ordinary course of business.
(k)Settlement Agreements. Any settlement, stipulation, conciliation or similar agreement, consent order or administrative order under which material obligations remain to be performed by any party thereto.
(l)Systems Agreements. Any license or maintenance agreements for computer software or hardware, telecommunications equipment or services or other technology infrastructure, other than with respect to off-the-shelf or shrink-wrap software that is material to the ongoing operation of the Company’s business.
(m)Health Care Operations Agreements. Any Governmental Agreement and Provider Agreement or evidence thereof, such as a provider number, or any managed care agreements.
(n)Lending/Guaranty Agreements. Any agreement under which the Company or any of the Company Subsidiaries has advanced or loaned any other Person or guaranteed obligations of any other Person, an amount individually or in the aggregate exceeding $10,000, including without limitation, advance deposits to vendors and that is either (i) dated within two years of the date hereof or (ii) contains any material obligations that remain to be performed by any party thereto.
(o)License/Franchise Agreements. Any license, franchise or other agreement relating to the use of patents, trademarks, copyrights, logos, brand names, business formats, or other intellectual property under to which the Company or any Company Subsidiary is a party, other than with respect to off-the-shelf or shrink-wrap software, that is material to the ongoing operation of the Company’s business.
35
(p)Agreements Relating to Securities. Any agreement with remaining obligations relating to the subscription for or issuance of, or repurchase or redemption of, or the registration or transfer of, shares of capital stock of the Company or any Company Subsidiary, or options, warrants or securities exercisable or convertible therefor.
(q)Risk Management Agreements. Any claims management or administration agreement, stop-loss agreement, risk management agreement, insurance, reinsurance, bonding, consulting or brokerage agreement or commitments for the placement of insurance, or agreements relating to captive or self-insurance programs.
(r)Special Contracts. All contracts, agreements, arrangements or other instruments relating to off-balance sheet arrangements, loss sharing or loss guarantee and contingent purchase transactions, special purpose entity transactions or other similar transactions of the Company or any Company Subsidiary, and all obligations assumed by the Company or any Company Subsidiary under interest rate or currency hedging or swap transactions or any other derivative transaction.
(s)Tax Agreements. All tax sharing agreements, tax indemnity agreements or any other contract or agreement of a similar nature to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is otherwise bound other than any such agreements other than tax indemnities in agreements relating to the acquisition or disposition of assets described in Section 4.11(k) or in any loan agreement, indenture, credit agreement or similar agreement relating to the borrowing of money listed in the Company Disclosure Schedule.
(t)Real Estate Leases. All Leases.
(u)Other Material Agreements. Any other material agreement (or group of related agreements), regardless of the amount of consideration, pursuant to which the consequences of a default or termination would result in a Company Material Adverse Change.
Each Contract of the type described in this Section 4.11 (except the Leases, which are addressed in Section 4.17.4 of this Agreement), whether or not set forth in Section 4.11 of the Company Disclosure Schedule, is referred to herein as a “Company Selected Contract.” Except as would not be Significant to the Company, individually or in the aggregate, the Company Selected Contracts are legal, valid and binding obligations of the Company or a Company Subsidiary, as applicable, in full force and effect and enforceable against the Company or a
36
Company Subsidiary in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors’ rights generally and subject to the effect of general principles of equity. Except as would not be Significant to the Company, individually or in the aggregate, the Company has not received written notice, and has no reason to believe, that any Company Selected Contracts are not legal, valid and binding obligations of the counterparty thereto, in full force and effect and enforceable against such counterparty in accordance with their terms. Except as would not be Significant to the Company, individually or in the aggregate, neither the Company nor any Company Subsidiary and, to the Company’s Knowledge, no counterparty, is in material breach or violation of, or default under, any Company Selected Contract. Except as would not be Significant to the Company, individually or in the aggregate, none of the Company or any Company Subsidiary has received any claim of default under any Company Selected Contract. Except as would not be Significant to the Company, individually or in the aggregate, to the Company’s Knowledge, no event has occurred which would result in a material breach or violation of, or a material default under, any Company Selected Contract (in each case, with or without notice or lapse of time or both).
Section 4.12Litigation. Except as set forth in Section 4.12 of the Company Disclosure Schedule, there is no suit, claim, action or proceeding pending or, to the Knowledge of the Company, threatened, against the Company or any Company Subsidiary and, to the Knowledge of the Company, there is no investigation by any Governmental Entity pending or threatened against the Company or any Company Subsidiary and none of the Company or any of the Company Subsidiaries is subject to any outstanding Order, in each case other than such suit, claim, action, proceeding, investigation or Order as would not result in the aggregate in a Significant liability to the Company or any Company Subsidiary. As of the date hereof, (i) there is no suit, claim, action, proceeding, arbitration or investigation pending or to the Knowledge of the Company, threatened, against the Company or any Company Subsidiary which (a) would be reasonably expected to have a Company Material Adverse Effect or (b) seeks to, or would reasonably be expected to, restrain, enjoin or delay the consummation of the Merger or any of the other transactions provided for herein or which seeks damages in connection therewith and (ii) no injunction has been entered or issued with respect to the transactions provided for herein.
37
Section 4.13Environmental Matters. Except as set forth in Section 4.13 of the Company Disclosure Schedule and except for matters, conditions and violations that, individually or in the aggregate, are not reasonably expected to result in costs, liabilities or damages Significant to either (a) the Company or (b) any Company Property:
Section 4.13.1 General. The Company and each Company Subsidiary is in compliance in all material respects with Environmental Law. The Company and each Company Subsidiary possesses and is in compliance in all material respects with all Other Company Permits issued pursuant to Environmental Law that are required to conduct the Company Health Care Businesses of the Company and each Company Subsidiary as currently conducted. To the Knowledge of the Company, neither the Company nor any Company Subsidiary has received any written claim or notice of violation from any Governmental Entity alleging that the Company or any Company Subsidiary is in violation of, or liable under, any Environmental Law which could reasonably be expected to result in a Significant liability to the Company or any Company Subsidiary, except for any such claims or violations that have been resolved.
Section 4.13.2 Environmental Conditions, Etc.
(i) The Company has not generated, manufactured, refined, treated, stored, handled, disposed, produced, or processed any Hazardous Material at the Company Health Care Properties or at any other location, except in compliance in all material respects with all applicable Environmental Laws.
(ii) No Lien has been imposed on the Company Health Care Facilities or any other Company Properties by any Governmental Entity in connection with the presence on Company Health Care Facilities of any Hazardous Materials or any violation of Environmental Laws.
(iii) Except for any Environmental Claims that have been resolved, the Company has not (A) entered into or been subject to any consent decree, compliance order, remedial, clean-up or administrative order under any Environmental Laws with respect to the Company Health Care Facilities; (B) received written notice under the citizen suit provision of any Environmental Law in connection with the Company Health Care Facilities; (C) received any written request for information, notice, demand letter, administrative inquiry, or formal or
38
informal complaint or claim relating to the Company Health Care Facilities pursuant to any Environmental Laws; or (D) been subject to any governmental, private or citizen enforcement action with respect to the Company Health Care Facilities under any Environmental Laws; and the Company has no Knowledge that any of the above (collectively, “Environmental Claims”) are pending.
(iv) The Company has provided, or otherwise made reasonably available, to Parent copies of (a) the Phase I Environmental Site Assessment reports prepared in June, July and August 2005 by EMG Corp. in connection with the transaction contemplated by this Agreement that are listed in Appendix A to Section 4.13 of the Company Disclosure Schedule and (b) any environmental reports, assessments or audits prepared during the three year period immediately preceding the date hereof to the extent in the possession of the Company or any Company Subsidiary.
(v) The Company and each Company Subsidiary are in compliance in all material respects with all Environmental Laws relating to the safe and secure storage and disposal of medical waste materials, including without limitation, infectious waste and radioactive materials, disposition of pharmaceuticals, drugs and controlled substances, at each Company Health Care Facility and in connection with the Company Health Care Business.
Section 4.14Intellectual Property. Except for matters expressly set forth in Section 4.14 of the Company Disclosure Schedule, (i) the Company and each Company Subsidiary own or possess valid rights to use all Intellectual Property necessary to conduct the business of the Company and the Company Subsidiaries as it is currently conducted, (ii) true and complete copies of all Selected Company Contracts whereby any rights in or to any Intellectual Property have been obtained from, granted to or licensed from or to any Third Party have been delivered to or made available for review by Parent, except to the extent that disclosure of such Selected Company Contracts is restricted by obligations of confidentiality, (iii) the execution, delivery and performance of this Agreement will not result in the loss or impairment of, or give rise to any right of any Third Party to terminate, the respective rights of the Company in any Intellectual Property licensed from a Third Party that is material to the business of the Company and the Company Subsidiaries, (iv) during the past two (2) years (or earlier, if not resolved) the Company has not received any written complaint, demand or notice alleging that the Company
39
or any Company Subsidiary has infringed upon or misappropriated any Intellectual Property right of any Third Party, and (v) to the Company’s Knowledge, no Third Party is currently infringing or misappropriating Intellectual Property owned by the Company or any Company Subsidiary.
Section 4.15Taxes.
Section 4.15.1All Tax Returns required to be filed by or with respect to the Company or any Company Subsidiary have been timely filed (taking into account any extension of time within which to file), except where the failure to so timely file such Tax Returns would not result in a Significant liability in the aggregate to the Company or any Company Subsidiary. All such Tax Returns are true, correct, and complete in all material respects.
Section 4.15.2All Significant Taxes of the Company and each Company Subsidiary due and payable have been timely paid, other than any amount which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP on the Company’s and the Company Subsidiaries’ financial statements. As of June 30, 2005, the accruals and reserves for Taxes (without regard to deferred tax assets and deferred tax liabilities associated with temporary differences) of the Company and each Company Subsidiary established in the Company SEC Filings were complete and adequate to cover any material liabilities for Taxes that are not yet due and payable.
Section 4.15.3As of the date of this Agreement, no deficiencies for Taxes have been proposed or assessed in writing against the Company or any Company Subsidiary by any taxing authority, and neither the Company nor any Company Subsidiary has received any written notice of any claim, proposal or assessment against the Company or any Company Subsidiary for any such deficiency for Significant Taxes. To the Knowledge of the Company, as of the date of this Agreement, none of the Tax Returns of the Company or any Company Subsidiary is currently being examined by the U.S. Internal Revenue Service (“IRS”) or relevant state, local or foreign taxing authorities. Neither the Company nor any Company Subsidiary has entered into a closing agreement pursuant to Section 7121 of the Code regarding the five (5) years immediately preceding the date of this Agreement.
40
Section 4.15.4The Company and each Company Subsidiary has duly and timely withheld, collected, paid and reported to the proper Governmental Entity all Significant Taxes required to have been withheld, collected, paid or reported.
Section 4.15.5There are no liens or other security interests upon any property or assets of the Company or any Company Subsidiary for Significant Taxes, except for liens for Taxes not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP on the Company’s and the Company Subsidiaries’ financial statements.
Section 4.15.6Neither the Company nor any Company Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the past two (2) years.
Section 4.15.7Since January 1, 1998, neither the Company nor any Company Subsidiary has been a member of an “affiliated group” as defined in Section 1504(a) of the Code, except for the affiliated group of which the Company is the common parent.
Section 4.15.8At no time has the Company or any Company Subsidiary been a party to a “listed transaction,” as such term is defined in Section 6707A(c)(1) of the Code.
Section 4.15.9Neither the Company nor any Company Subsidiary has extended any Statute of Limitations for the assessment of any Taxes except as set forth on Section 4.15.9 of the Company Disclosure Schedule.
Section 4.16Insurance.
Section 4.16.1Section 4.16.1 of the Company Disclosure Schedule sets forth a listing (including type of coverage, policy limits, carrier and deductibles), and the Company has made available to Parent accurate and complete copies of:
(a) all policies of insurance to which the Company or any Company Subsidiary is a party or under which the Company or any Company Subsidiary or the Company Health Care Facilities or other assets of the Company is currently covered and all material insurance policies to which the Company or any Company Subsidiary was a party or under which the Company or any Company Subsidiary has been covered at any time since January 1,
41
2003, including without limitation, all Professional Liability/General Liability (“PLGL”), director and officer liability, building, fire, property, flood, motor vehicle, workmen’s compensation and employer liability insurance;
(b) all pending applications by the Company or any Company Subsidiary for any such policies of insurance or renewals thereof; and
(c) any stop-loss, claims management and claims administration agreements.
Section 4.16.2Section 4.16.2 of the Company Disclosure Schedule describes any material self-insurance, captive insurance or reserve arrangement established by the Company or any Company Subsidiary, including, without limitation, with respect to professional and general liability, and any reserves established thereunder.
Section 4.16.3Except as set forth in Section 4.16.3 of the Company Disclosure Schedule:
(a) since January 1, 2003, neither the Company nor any Company Subsidiary has received (i) any written notice of cancellation that any Significant policy of insurance is no longer in full force or effect or that the issuer of any Significant policy of insurance is not willing or able to perform its obligations thereunder or (ii) any series of written notices of denial of coverage or reservation of rights that clearly demonstrates that a material insurer intends not to honor a Significant insurance coverage; and
(b) since January 1, 2003, the Company and the Company Subsidiaries have paid all premiums due, and have otherwise performed all of their respective obligations, under each Significant policy of insurance to which it is a party or that provides Significant coverage with respect to the Company, any Company Subsidiary, the Company Health Care Facilities or other assets used by the Company or any Company Subsidiary; and
(c) the Company and the Company Subsidiaries have regularly provided each insurer that has requested such, full loss listings and has provided additional claim specific notice when required by the terms of the applicable policy and Section 4.16.3(c) of the Company Disclosure Schedule sets forth a list of all material or open known claims that are reasonably expected to be covered under the policies listed under Section 4.16.1 of the Company Disclosure
42
Schedule and also including claims under the Company’s self insurance program for general and professional liability, auto liability, and workers’ compensation; and
(d) to the Knowledge of the Company, and except as listed in Section 4.16.3(d) of the Company Disclosure Schedule, each Significant policy of insurance is legal, valid, binding, enforceable, and in full force and effect.
Section 4.17Real Estate.
Section 4.17.1The following lists of real property scheduled for this Agreement are as follows:
(a) Section 4.17.1(a) of the Company Disclosure Schedule sets forth a comprehensive list of all real property owned, leased, licensed or occupied by the Company or the Company Subsidiaries (the “Company Properties”) and sets forth for each such property the following: (i) the facility number, (ii) the street address, town or city, and state jurisdiction in which such property is located, (iii) identification as a skilled nursing home facility, assisted living facility, office, hospice location, homecare location, or other use; (iv) identification of whether it is operated by the Company or a Company Subsidiary (v) identification as owned in fee, leased from Third Parties, or leased or subleased to a Third Party, (vi) the identification of the Company Subsidiary or Company Subsidiaries which own or lease each Company Property, (vii) identification of any minority interests, joint ventures, contracts of sale, options, management contracts or other agreements whereby the Company or the Company Subsidiaries do not have one hundred (100) percent ownership of the Company Property.
(b) Section 4.17.1(b) of the Company Disclosure Schedule lists the Company Health Care Facilities that are owned and operated by the Company or a Company Subsidiary (the “Company Owned Health Care Facilities”) and sets forth for each such property the following: (i) the facility number or other identification of each Company Owned Health Care Facility, (ii) the real property tax or parcel identification number(s) associated with each Company Owned Health Care Facility, (iii) identification as a skilled nursing home facility or assisted living facility (iv) the number of beds for which the Company Owned Health Care Facility is licensed, and (v) the licensed name.
43
(c) Section 4.17.1(c) of the Company Disclosure Schedule lists the Company Health Care Facilities that are leased and operated by the Company or a Company Subsidiary (the “Company Leased Health Care Facilities”) and sets forth for each such property the following: (i) the facility number or other identification of each Company Leased Health Care Facility, (ii) the real property tax or parcel identification number(s) associated with the Company Leased Health Care Facility, if any, (iii) identification as a skilled nursing home facility or assisted living facility, (iv) the number of beds for which the Company Leased Health Care Facility is licensed, and (v) the licensed name.
(d) Section 4.17.1(d) of the Company Disclosure Schedule lists all other real property that is owned and operated by the Company or a Company Subsidiary (the “Company Other Owned Property”) and sets forth for each such property the following: (i) the facility number or other identification of each such property, and (ii) the type of use for each such property.
(e) Section 4.17.1(e) of the Company Disclosure Schedule lists all other real property that is leased and operated by the Company or a Company Subsidiary (the “Company Other Leased Property”) and sets forth for each such property the following: (i) the facility number or other identification of each such property, and (ii) the type of use for each such property.
(f) The Company and the Company Subsidiaries do not (i) manage on behalf of any Third Party any skilled nursing facility, assisted living facility or other business or (ii) own less than 100% of any Company Owned Property or 100% of the leasehold interest in any Company Leased Property. The Company or the relevant Company Subsidiary own (A) an 11% fee interest in Facility Number 2225 (as listed in Section 4.17.1(a) of the Company Disclosure Schedule) and (B) a 60% land trust interest in Facility Number 2588 (as listed in Section 4.17.1(a) of the Company Disclosure Schedule), each as reflected in Section 4.17.1(a) of the Company Disclosure Schedule.
(g) Section 4.17.1(g) of the Company Disclosure Schedule lists all other real property that is owned, but not operated, by the Company or a Company Subsidiary (the “Company Owned But Not Operated Property”) and sets forth for each such property the
44
following: (i) the facility number or other identification of each such property, (ii) to the Knowledge of the Company, the type of use for each such property, (iii) the name of the tenant for such property, (iv) the expiration of the current term of the lease with such tenant, and (v) the annual rent for such property.
(h) Section 4.17.1(h) of the Company Disclosure Schedule lists all leased real property of the Company or a Company Subsidiary that is subleased to a Third Party (the “Company Subleased Property”) and sets forth for each such property the following: (i) the facility number or other identification of each such property, (ii) to the Knowledge of the Company, the type of use for each such property, and (iii) the name of the tenant for such property.
Section 4.17.2The Company Owned Healthcare Facilities, the Company Other Owned Properties and the Company Owned But Not Operated Properties are collectively referred to herein as the “Company Owned Properties.” The Company Leased Health Care Facilities, the Company Other Leased Properties, and the Company Subleased Properties are collectively referred to herein as the “Company Leased Properties.”
Section 4.17.3 All Company Properties. The Company Properties include all material interests in real property necessary to conduct the business and operations of the Company and the Company Subsidiaries in a manner substantially consistent with past practice. The Company or the respective Company Subsidiary owns fee simple title to each of the Company Owned Properties and has a valid leasehold interest in each of the Company Leased Properties free and clear of any rights of way, easements, covenants, conditions, restrictions, other encumbrances, written agreements or reservations of an interest in title (collectively, “Property Restrictions”), and other Liens, except for the following (collectively, the “Permitted Liens”): (i) zoning regulations, building codes and other land use laws regulating the use or occupancy of any of the Company Properties or the activities conducted thereon provided same are not violated by the existing improvements on or use of such Company Properties, (ii) Property Restrictions disclosed on the Schedule B title exceptions to the 2005 title reports identified in Section 4.17.1 of the Company Disclosure Schedule that cover the Company Properties (in either case copies of which title exceptions, and the available underlying title documents in connection therewith, reports and surveys have been delivered or made available to
45
Parent), (iii) mechanics’, carriers’, workmen’s, repairmen’s and similar Liens, incurred in the ordinary course of business;provided, that such Liens are either paid off, bonded or insured over by the Title Company on or before the Closing, (iv) Liens for Taxes that are not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings;provided, that such Liens for contested Taxes are paid off, satisfied, removed from record or insured over by the Title Company on or before the Closing, (v) in the case of the Company Subleased Properties, the subleases identified in Section 4.17.1(h) of the Company Disclosure Schedule, (vi) in the case of the Company Owned But Not Operated Properties, the leases identified in Section 4.17.1(g) of the Company Disclosure Schedule, (vii) in the case of any Company Leased Property, any lien or encumbrance against the fee, and (viii) any current Liens for indebtedness for borrowed money related to the Company Owned Properties set forth in Section 4.17.1 of the Company Disclosure Schedule,provided,that such indebtedness for borrowed money is paid off and such Liens are satisfied, removed from record or insured over by the Title Company on or before the Closing;provided,further, that no Lien or Property Restriction shall be a Permitted Lien if it is reasonably expected to have a Company Material Adverse Effect. Except as identified in Section 4.17.3 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has received any written notice nor has Knowledge to the effect that (i) any condemnation or rezoning proceedings are pending or threatened with respect to any of the Company Properties or (ii) any zoning, building or similar requirement of any Governmental Entity is or will be violated in any material respect for any property by the continued maintenance, operation or use of any buildings or other improvements on any of the Company Properties or by the continued maintenance, operation or use of the parking areas.
Section 4.17.4 Company Leased Properties.The Company Leased Properties are leased or licensed to, or occupied by, the Company or a Company Subsidiary pursuant to written leases, subleases, licenses or occupancy agreements, true, correct and complete copies, including all amendments thereto, and all overleases in the case of the Company Subleased Properties, of which have been made available to Parent (each a “Lease” and collectively the “Leases”). Except as otherwise set forth in Section 4.17.4 of the Company Disclosure Schedule, with respect to each of the Leases for the Company Leased Health Care Facilities, and each of
46
the material Leases for the Company Other Leased Properties and the Company Subleased Properties, (i) each such Lease is valid, binding, enforceable and in full force and effect except as limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws of general application referring to or affecting enforcement of creditors’ rights, or by general equitable principles (regardless of whether enforcement is sought in a proceeding at law or in equity); (ii) to the Knowledge of the Company, the Company’s or the Company Subsidiary’s possession and quiet enjoyment of the leased premises under each such Lease (the “Leased Premises”) has not been disturbed and there are no disputes with respect to each such Lease; (iii) neither the Company nor any Company Subsidiary has subleased, licensed or otherwise granted any Person the right to use or occupy the Leased Premises or any portion thereof, other than residency by the Company’s or any Company Subsidiaries’ respective patients or residents in such capacity only and in the ordinary course of business; (iv) neither the Company nor any Company Subsidiary has granted or entered into any so called “life care agreements” that are currently in effect; (v) neither the Company nor any Company Subsidiary has mortgaged, collaterally assigned or granted any other security interest in any Lease or any interest therein; (vi) all rent due and owing by the Company or any Company Subsidiary under each Lease has been paid in full; and (vii) neither the Company nor any Company Subsidiary has received any written notice to the effect that any such Lease will not be renewed at the termination of the term thereof or that any such Lease will be renewed only at a substantially higher rent. Section 4.17.4(viii) of the Company Disclosure Schedule sets forth the amount of each security deposit that was deposited with the relevant landlord under each material Lease and the status thereof.
Section 4.17.5 Provisions Affecting all Company Properties. With respect to this Section 4.17.5, except as would not result in a Company Material Adverse Effect: (i) all structural, mechanical and other physical systems, including but not limited to heating, ventilating, air conditioning, plumbing, electrical, mechanical, parking, sewer and drainage systems at each Company Property are in working condition or are undergoing repair or renovation in the ordinary course of business; (ii) neither the Company nor any Company Subsidiary has received written notice from any Governmental Entity or other entity having jurisdiction over any Company Property or any portion thereof describing the violation of any
47
Laws relating to Other Company Permits or any Property Restrictions or other Liens affecting any Company Property, which violation has not been resolved; (iii) the Company has obtained, or caused the Company Subsidiaries to obtain, all Other Company Permits necessary for the operation of the Company Properties, all of which are in full force and effect, and neither the Company nor any Company Subsidiary has received any written notice from any Governmental Entity or other entity having jurisdiction over any Company Property or any portion thereof describing a violation of or threatening a suspension, revocation, modification or cancellation of any Other Company Permits; (iv) there are no pending, or to the Company’s Knowledge, threatened, condemnation, fire, health, safety, building, zoning, land use, assessment, or similar proceedings relating to the Company Property; (v) except for Permitted Liens, there are no parties other than the Company or a Company Subsidiary in possession of any Company Property and there are no sublease, concession, occupancy, license or similar arrangements affecting any Company Property (except for residency at any Company Property by current residents or patients in such capacity only and in the ordinary course of business); and (vi) no portion of the Company Property or any improvements or buildings thereon has suffered any material damage by fire, earthquake, flood or other casualty which has not heretofore been, or is not in the process of being, repaired and restored to operational use and in accordance with applicable Legal Requirements and the requirements of any Lease.
Section 4.18Board Approval. On or prior to the date of this Agreement, the Company Board has (i) received from each of Lehman Brothers, Inc., J.P. Morgan Securities, Inc. and CIBC World Markets Corp. (the “Company Financial Advisors”) its opinion to the effect that, as of the date of such opinion, the Merger Consideration is fair from a financial point of view to the holders of Company Common Stock, (ii) determined that this Agreement and the transactions provided for herein, including the Merger, are fair to and in the best interest of the Company and the holders of Company Common Stock, and (iii) adopted resolutions (a) approving this Agreement, (b) declaring this Agreement and the Merger advisable and (c) recommending to the holders of Company Common Stock that they vote in favor of adopting this Agreement in accordance with the terms hereof (the “Company Recommendation”). The Company Board has adopted the resolution contemplated by Section 1.3(ii)(z) of the Company Rights Agreement to
48
the effect that Parent, Merger Sub and their respective Affiliates and Associates shall not be, or be deemed to be, the “beneficial owners” of any Company Common Stock as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.
Section 4.19Brokers. No broker, finder, financial advisor, investment banker or other Person (other than the Company Financial Advisors, the fees and expenses of which will be paid by the Company) is entitled to any brokerage, finder’s, financial advisor’s or other similar fee or commission in connection with the Merger based upon arrangements made by or on behalf of the Company or any Company Subsidiary.
Section 4.20Indebtedness. Except for indebtedness for borrowed money set forth in Section 4.20 of the Company Disclosure Schedule (“Permitted Debt”), all indebtedness for borrowed money of the Company and the Company Subsidiaries, and Liens securing such indebtedness, may be prepaid, extinguished and released at or prior to the Closing.
Section 4.21Identifying Health Care Businesses; Licenses and Permits; Compliance with Applicable Law; Health Care Regulation.
Section 4.21.1Section 4.21.1 of the Company Disclosure Schedule sets forth a complete list of all Company Health Care Businesses and (i) the facility number or other identification of the Company Health Care Business, (ii) the street address, city, county and state of the Company Health Care Business, (iii) identification of the type of provider or supplier, (iv) identification of ownership structure, whether owned, leased or subleased to a Third Party, (v) identification of the Company Subsidiary which owns, leases or manages the Company Health Care Business, and which holds the Company Health Care Permits therefor, (vi) identification of any minority interests, joint ventures, contracts of sale, options, management contracts or other agreements whereby the Company or the Company Subsidiaries do not have one hundred (100) percent ownership and operation of the Company Health Care Business, and (vii) all intercompany agreements for provision of administrative services of any nature.
Section 4.21.2 Health Care Regulatory Compliance. The Company, each Company Subsidiary and each Company Health Care Business is being operated in compliance
49
in all material respects with all Legal Requirements applicable to the operation of such Company Health Care Businesses, including, but not limited to, Titles XVIII and XIX of the Social Security Act, the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the Stark Law (42 U.S.C. § 1395nn), the civil False Claims Act (31 U.S.C. §§ 3729et seq.), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320det seq.), the exclusion laws (42 U.S.C. 1320a-7), or the regulations promulgated pursuant to such laws, and comparable state laws, accreditation standards and all other state and federal laws and regulations relating to the operation of such Company Health Care Businesses. Except as is otherwise described in Section 4.12, Section 4.21.4 or Section 4.21.9 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has received notice from a Governmental Entity that it is a target of, or subject to any action, proceeding, suit, investigation or sanction by or on behalf of any Governmental Entity or any other person brought pursuant to any Legal Requirement, nor, to the Knowledge of the Company, has any such action, proceeding, suit, investigation or sanction been threatened.
Section 4.21.3The Company and each Company Subsidiary are operating the Company Health Care Businesses to comply in all material respects with all applicable contractual obligations, billing policies, procedures, limitations and restrictions of any Company Health Care Program. All cost reports and other required claims and filings with Governmental Entities with respect to Medicare and each state Medicaid program in which the Company or any Company Subsidiary participates that are required to be filed by or on behalf of the Company or any Company Subsidiary prior to the Effective Time have been or will have been timely prepared and filed.
Section 4.21.4All Reimbursement Source Obligations of the Company and the Company Subsidiaries have been recorded and, if required, reserved, on the Company’s books and records and on the Company’s financial statements. Set forth in Section 4.21.4 of the Company Disclosure Schedule is a listing of each open Medicare and Medicaid cost report, and all cost reporting appeals pending before the Medicare or Medicaid program as of June 30, 2005, and all proceedings of any nature with any Company Health Care Program regarding payment issues, and all anticipated Significant aggregate “periodic interim payment adjustments” from the
50
date hereof through the Closing. The Company has made provision to pay or otherwise liquidate in the ordinary course, any liability on all as filed or settled cost reports based on Notices of Program Reimbursement, or similar documents, received from Medicare or Medicaid for the cost-reporting periods ended prior to June 30, 2005. In the ordinary course under the periodic interim payment methodology and post-payment medical review applicable to certain Company Health Care Businesses, some Company Health Care Programs may make adjustments to reimbursement which may result in Reimbursement Source Obligations.
Section 4.21.5Except as listed in Section 4.21.5 of the Company Disclosure Schedule, neither the Company or any Company Subsidiary, nor any current director or employee of the Company or any Company Subsidiary, nor any Covered Contractor, as defined in the corporate integrity agreement, nor to the Knowledge of the Company, any other individual that although not a covered person under the corporate integrity agreement, nonetheless participated in billings or related submissions by the Company to federal health care programs, has been debarred, disqualified, suspended or excluded from any Medicare, Medicaid or any other Company Health Care Program, including, without limitation, under 42 U.S.C. 1320a-7, or from being a health care provider, owner, operator or licensee.
Section 4.21.6The Company and each Company Subsidiary are in compliance in all material respects with all corporate integrity agreements, monitoring agreements, consent and settlement orders, and similar agreements with or imposed by any Governmental Entity (collectively, “Governmental Agreements”), all of which are set forth in Section 4.21.6 of the Company Disclosure Schedule.
Section 4.21.7Section 4.21.7 of the Company Disclosure Schedule sets forth a complete list of each Company Health Care Permit applicable to each Company Health Care Business operated by the Company and the Company Subsidiaries, each of which is in full force and effect. Each Company Health Care Business satisfies the applicable Company Health Care Permit requirements of the state in which such Company Health Care Business is located.
Section 4.21.8Section 4.21.8 of the Company Disclosure Schedule sets forth the list of the Provider Numbers assigned under Provider Agreements applicable to the Company Health Care Businesses operated by the Company and the Company Subsidiaries and under
51
which they are presently receiving payments. The Company and all Company Subsidiaries that operate the Company Health Care Businesses are, to the extent required to conduct such businesses, certified for participation and reimbursement under these Provider Agreements and any applicable managed care agreements.
Section 4.21.9The Company Health Care Businesses may be subject to survey by Governmental Entities which determine compliance with state and federal law and determine eligibility for Company Health Care Permits and some Provider Agreements. Except as disclosed in Section 4.21.9 of the Company Disclosure Schedule, as of August 9, 2005, and as of the Closing Date, no skilled nursing facility had any material deficiencies at level G or above on its most recent survey (standard or complaint), or has been cited with any Immediate Jeopardy or substandard quality of care deficiencies (as that term is defined in Part 488 of 42 C.F.R. and implementing policies and procedures) and no other Company Health Care Business has been cited for any deficiency that would result in a denial of payment for new admissions, civil monetary penalty, termination, loss of Health Care Permits or Provider Agreements, decertification or debarment, with no opportunity to correct prior to termination, for which an acceptable plan of correction has not been timely submitted.
Section 4.21.10The Company and each Company Subsidiary have maintained patient deposit funds in escrow or trust accounts in material compliance with all Legal Requirements.
Section 4.22Restricted Payments. The Company has not made, offered or agreed to offer anything of value to any governmental official, political party or candidate for government office, nor has it otherwise taken any action that would cause the Company to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar effect. Neither the Company nor any Company Subsidiary, nor, to the Knowledge of the Company, any director, officer, agent, employee of the Company or any Company Subsidiary acting for or on behalf of the Company or any Subsidiary, has paid or caused to be paid, directly or indirectly, in connection with the business of the Company or any of the Company Subsidiaries: (i) any bribe, kickback, direct or indirect unlawful payment or other similar payment to any Governmental Entity or any supplier or agent of any supplier, or (ii) any contribution, payment, gift or entertainment to any political party or candidate (other than from personal funds of directors, officers or employees not reimbursed by their respective employers or other than in compliance with applicable Legal Requirements).
52
Section 4.23OSHA. Except as set forth in Section 4.23 of the Company Disclosure Schedule, the Company and the Facilities are in compliance, in all material respects, with the Occupational Health and Safety Act (“OSHA”) and the Company is not subject to any Significant Order or “Cooperative Compliance Plan” with respect to OSHA.
Article 5
Representations and Warranties of Parent and Merger Sub
Subject to such exceptions as are disclosed in the disclosure schedule (the “Parent Disclosure Schedule”) delivered by Parent to the Company concurrently with the execution and delivery of this Agreement (it being understood that the disclosure of any matter or item in the Parent Disclosure Schedule shall not be deemed to constitute an acknowledgement that such matter or item is required to be disclosed therein or is material to a representation or warranty set forth in this Agreement and shall not be used as a basis for interpreting the terms “material,” “materially” or “materiality” or any word or phrase of similar import), Parent and Merger Sub jointly and severally represent and warrant to the Company as follows:
Section 5.1Organization and Qualification. Each of Parent and Merger Sub is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of Parent and Merger Sub has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted. Each of Parent and Merger Sub is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing or good standing necessary. Parent has heretofore made available to the Company complete and correct copies of the certificate of incorporation and by-laws of Parent and Merger Sub, together with all amendments thereto, as currently in effect.
Section 5.2Authority. Each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions provided for herein. The execution and delivery of this Agreement,
53
by each of Parent and Merger Sub, and the consummation by Parent and Merger Sub of the transactions provided for herein have been duly and validly authorized by all necessary corporate action on the part of Parent and Merger Sub, and no other corporate proceedings on the part of Parent or Merger Sub and no vote of Parent’s stockholders are necessary to authorize this Agreement or to consummate the transactions provided for herein. This Agreement has been duly authorized and validly executed and delivered by Parent and Merger Sub and, assuming this Agreement is a valid and binding obligation of the Company and the other Parties, this Agreement constitutes a legal, valid and binding obligation of Parent and Merger Sub, enforceable against each of them in accordance with its terms, subject to the Bankruptcy and Equity Exception.
Section 5.3No Conflict; Required Filings and Consents.
Section 5.3.1The execution, delivery and performance by Parent and Merger Sub of this Agreement do not (i) conflict with or violate any provision of the certificate of incorporation or by-laws of Parent or Merger Sub, (ii) assuming that all consents, approvals, authorizations and Company Health Care Permits described in Section 5.5 will have been obtained prior to the Effective Time and all filings and notifications described in Section 5.5 will have been made and any waiting periods thereunder will have terminated or expired prior to the Effective Time, conflict with or violate, in any material respect, any Law applicable to any member of the Parent Group or by which any material property or asset of any member of the Parent Group is bound or affected or (iii) result in any material breach of, any loss of any material benefit under, constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any material property or asset of Parent or Merger Sub pursuant to any Contract.
Section 5.3.2The execution, delivery and performance by Parent and Merger Sub of this Agreement do not require any consent, approval, authorization or permit of, or material filing with or notification to, any Governmental Entity or other Person, except (i) under the Exchange Act, any applicable Blue Sky Laws, the rules and regulations of the NYSE, the HSR Act or any other antitrust, competition, trade or other regulatory Laws, (ii) the filing and recordation of the Certificate of Merger as required by the DGCL, (iii) under any Company
54
Health Care Program or as required to transfer or continue operation under a Company Health Care Permit, or (iv) with respect to matters other than those referred to in the previous clauses (i), (ii) and (iii), where failure to obtain such consents, approvals, authorizations or to make such filings or notifications would not (a) prevent or materially delay the consummation of the Merger, (b) otherwise prevent or materially delay performance by Parent or Merger Sub of any of its material obligations under the Agreement, (c) prohibit the ability to obtain Government Consents with respect to any Company Health Care Program or Company Health Care Facilities or transfer of any Company Health Care Permit or (d) result in a material violation of any Legal Requirement.
Section 5.4Compliance With Laws.
Section 5.4.1 General. No member of the Parent Group has been debarred, disqualified, suspended or excluded from any Medicare, Medicaid or any other health care program, including, without limitation, under Section 42 USC 1320a-7, or from being a health care provider, owner, operator or licensee.
Section 5.4.2 Adverse Actions. There are no claims, actions, litigations, inquiries, proceedings, notices of noncompliance, demand letters, audits or investigations pending or, to the Knowledge of Parent, threatened with respect to a violation by any member of the Parent Group of any Legal Requirement which would materially impair or delay the ability of Parent to satisfy the condition set forth in Section 7.1.3(ii).
Section 5.5Health Care Licensing. To the Knowledge of the Parent Group, there is no fact, event or circumstance relating to any member of the Parent Group that would reasonably be expected to prevent Parent or the Company from obtaining or maintaining all Company Health Care Permits necessary for the lawful conduct of the business of the Surviving Corporation or ownership of the Surviving Corporation’s assets and properties (excluding, however, any conditions, facts, events or circumstances relating to the Company or any Company Subsidiary prior to the Effective Time).
Section 5.6Litigation. There is no suit, claim, action, proceeding or investigation pending or, to the Knowledge of Parent, threatened against Parent or Merger Sub and neither Parent nor Merger Sub is subject to any outstanding Order. As of the date hereof, (i) there is no
55
suit, claim, action, proceeding, arbitration or investigation pending or to the Knowledge of Parent, threatened against Parent or Merger Sub which seeks to, or would reasonably be expected to, restrain, enjoin or delay the consummation of the Merger or any of the other transactions provided for herein or which seeks damages in connection therewith and (ii) no injunction has been entered or issued with respect to the transactions provided for herein.
Section 5.7Ownership of Merger Sub; No Prior Activities. Parent owns one hundred (100) percent of the issued and outstanding capital stock of Merger Sub. Each of Parent and Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. Except for obligations or liabilities incurred in connection with its formation and the transactions contemplated by this Agreement, Merger Sub has not and will not have incurred, directly or indirectly, through any Company Subsidiary or Affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
Section 5.8Financing. Parent has delivered to the Company true, complete and correct signed counterparts of (i) debt commitment letters by and between SBEV and Wachovia Bank, National Association on the one hand, and SBEV and CapitalSource Finance LLC, on the other, pursuant to which the lenders party thereto have agreed, subject to the terms and conditions set forth therein, to provide or cause to be provided, debt financing in connection with the transactions provided for herein (together with the updates thereto, as contemplated herein, the “Debt Commitment Letters”) and (ii) the equity commitment letter, dated as of the date hereof, by and between SBEV and Rubin Schron, pursuant to which Mr. Schron has agreed, subject to the terms and conditions set forth therein, to provide, equity financing in connection with the transactions provided for herein to SBEV (together with the updates thereto, as contemplated herein, the “Equity Commitment Letter” and, together with the Debt Commitment Letters, the “Commitments”). Subject to such amendments to which the Company provides its prior written consent or for which such consent is not required pursuant to Section 6.14, such consent not to be unreasonably withheld, the Commitments have not been amended and are (solely to the Knowledge of Parent and Merger Sub, in the case of the Debt Commitment letters) in full force and effect. The Commitments are subject to no contingencies or conditions other than those set forth in the copies thereof delivered to the Company. No event has occurred which, with or without notice, lapse of time or both, would constitute a default or breach on the part of SBEV,
56
Parent or Merger Sub under any term or condition of the Commitments. Parent has no reason to believe that it or SBEV will be unable to satisfy on a timely basis any term or condition of closing to be satisfied by it or SBEV contained in the Commitments. Parent or SBEV has fully paid any and all commitment fees and other fees required by the Commitments to be paid as of the date hereof. Subject to the terms and conditions of the Commitments and this Agreement, the Commitments would provide Parent and SBEV with financing at the Effective Time sufficient to (i) consummate the Merger upon the terms contemplated by this Agreement, (ii) effect any other repayment or refinancing of debt contemplated in connection with the Merger or the Commitments, and (iii) pay all related fees and expenses.
Section 5.9Vote Required. No vote of the holders of any class or series of capital stock or other Equity Interests of Parent or Merger Sub is necessary to approve the Merger (other than in the case of Merger Sub, any required vote by Parent as the holder of one hundred (100) percent of Merger Sub’s Equity Interests).
Section 5.10Brokers. No broker, finder, financial advisor, investment banker or other Person (other than Wachovia Securities and MetCap Securities LLC, the fees and expenses of which will be paid by Parent) is entitled to any brokerage, finder’s, financial advisor’s or other similar fee or commission in connection with the Merger based upon arrangements made by or on behalf of Parent or Merger Sub.
Section 5.11Ownership of Company Common Stock. Neither Parent nor Merger Sub is, nor at any time during the last three (3) years has been, an “interested stockholder” of the Company as defined in Section 203 of the DGCL.
Section 5.12Solvency of the Surviving Corporation. Immediately after giving effect to the transactions contemplated by this Agreement and actions taken in connection with the financing of these transactions, and assuming the accuracy in all material respects as of the Closing Date of the representations and warranties contained in Article 4, (i) each of the Surviving Corporation and its Subsidiaries will not have incurred debts beyond its ability to pay such debts as they mature or become due, (ii) the then present fair salable value of the assets of each of the Surviving Corporation and its Subsidiaries will exceed the amount that will be required to pay their probable liabilities (including the amount necessary to provide for
57
contingent liabilities) and their respective debts as they become absolute and mature, (iii) the assets of each of the Surviving Corporation and its Subsidiaries, in each case at a fair valuation, will exceed their respective debts (including the amount necessary to provide for contingent liabilities) and (iv) each of the Surviving Corporation and its Subsidiaries will not have unreasonably small capital to carry on their respective business, either (a) as presently conducted or (b) as intended by Parent to be conducted. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud any present or future creditors of the Surviving Corporation and its Subsidiaries.
Article 6
Covenants
Section 6.1Conduct of Business by the Company Pending the Closing. The Company agrees that, between the date of this Agreement and the Effective Time, except as set forth in Section 6.1 of the Company Disclosure Schedule, as otherwise contemplated by this Agreement, as required by applicable Law, a pre-existing contractual obligation disclosed in the Company Disclosure Schedule, or as consented to in writing by Parent (such consent not to be unreasonably withheld or delayed), the Company will, and will cause each Company Subsidiary to, in all material respects (it being understood that in no event shall the Company’s participation in the negotiation (including activities related to due diligence), execution, delivery or public announcement (in accordance with this Agreement) or the pendency of this Agreement or the transactions contemplated hereby or any actions taken in good faith compliance herewith or the consequences thereof on the respective businesses of the Company and the Company Subsidiaries, be considered a breach of any of the provisions of this Section 6.1), (i) conduct its business substantially in the ordinary course consistent with past practice and (ii) use commercially reasonable best efforts to keep available the services of the current officers, key employees and consultants of the Company and each Company Subsidiary and to preserve the current relationships of the Company and each Company Subsidiary with such of the customers, suppliers and other Persons with which the Company or any Company Subsidiary has significant business relations as is reasonably necessary to preserve substantially intact its business organization. Without limiting the foregoing, and as an extension thereof, except as set forth in
58
Section 6.1 of the Company Disclosure Schedule, as otherwise contemplated by this Agreement, as required by applicable Law or a pre-existing contractual obligation disclosed in the Company Disclosure Schedule, or as consented to in writing by Parent (such consent not to be unreasonably withheld or delayed), the Company shall not, and shall not permit any Company Subsidiary to, between the date of this Agreement and the Effective Time, directly or indirectly, do, or agree to do, any of the following:
(a) amend or otherwise change the Company Certificate, the Company By-laws or equivalent organizational documents;
(b) issue, deliver, sell, pledge or encumber, or authorize, propose or agree to the issuance, delivery, sale, pledge or encumbrance of, any shares of its capital stock, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of any class or series of its capital stock (other than pursuant to the exercise of options, warrants, conversion rights and other contractual rights existing on the date hereof);
(c) declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital stock (other than dividends paid by a wholly-owned Company Subsidiary to the Company or to any other wholly-owned Company Subsidiary) or enter into any agreement with respect to the voting of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock or other Equity Interests, except pursuant to the exercise of options, warrants, conversion rights, employee severance, retention, termination, change of control and other contractual rights existing on the date hereof;
(e) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets), outside of the ordinary course of business, any interest in any Person or any division thereof or any assets, other than any acquisitions that are in progress on the date hereof and identified by the letters of intent or expressions of interest listed in Section 6.1(e) of the Company Disclosure Schedule;
59
(f) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any Person (other than a wholly-owned Company Subsidiary) for borrowed money, except for (i) indebtedness for borrowed money incurred in the ordinary course of business, pursuant to existing credit lines disclosed in Section 6.1(f) of the Company Disclosure Schedule, (ii) indebtedness for borrowed money (other than indebtedness for borrowed money owing by any wholly-owned Company Subsidiary to the Company or any other wholly-owned Company Subsidiary) with a maturity of not more than one year in a principal amount not, in the aggregate, in excess of $25,000,000 for the Company and the Company Subsidiaries taken as a whole, in each case which can be prepaid without premium or penalty, and all Liens securing such indebtedness for borrowed money released, at or prior to the Closing, (iii) indebtedness for borrowed money owing by any wholly-owned Company Subsidiary to the Company or any other wholly-owned Company Subsidiary and (iv) indebtedness for borrowed money incurred with respect to actions permitted pursuant to Section 6.1 of the Company Disclosure;
(g) grant any Lien in any of its material assets to secure any indebtedness for borrowed money, except in connection with such indebtedness permitted under the preceding clause (f);
(h) issue any debt securities or assume, endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, except in the ordinary course of business and consistent with past practice;
(i) except to the extent the amount is reflected in the 2005 and 2006 capital expenditure budgets provided to Parent, authorize, or make any commitment with respect to, any single capital expenditure which is in excess of $5,000,000 or capital expenditures which are, in the aggregate, in excess of $15,000,000 for the Company and the Company Subsidiaries taken as a whole other than emergency repairs and repairs compelled by (i) legal or safety requirements, (ii) existing leases or consent requirements thereof, or (iii) up to $15,000,000 to remedy exceptions of title necessary to meet any condition contained in Article 7 hereof, and the Company shall consult with Parent on all such items in excess of budget;
60
(j) enter into any new line of business outside of its existing business segments;
(k) make investments in persons other than wholly-owned Company Subsidiaries, other than ordinary course cash management investments in accordance with the Company’s existing investment policy;
(l) adopt or amend any material Company Benefit Plan, increase in any material manner the compensation or fringe benefits of any director, officer or employee of the Company or pay any material benefit not provided for by any existing Company Benefit Plan, in each case except (i) as set forth in Section 6.1(l) of the Company Disclosure Schedule, (ii) as reasonably necessary to comply with applicable Law, (iii) in the ordinary course of business (including without limitation to address the requirements of written agreements or contracts the Company and each Company Subsidiary has entered into as of the date hereof), (iv) in connection with entering into, with respect to newly hired employees, or extending with respect to existing employees, any employment or other compensatory agreements with individuals (other than the named executive officers (as such term is used in Item 402 of Regulation S-K promulgated under the Exchange Act) or directors of the Company or any Company Subsidiary) in the ordinary course of business, consistent with the Company’s 2005 and 2006 budgets provided to Parent and past practice, and comparable to compensatory amounts for individuals of similar responsibility in the Company (v) in connection with entering into any retention agreements or programs determined by the Board of Directors of the Company as being reasonably necessary in order to maintain its business operations prior to, and extending through, the Effective Time,provided, that any retention payments thereunder shall not be made payable to any Company employee with a title of Vice President or higher nor exceed $5,000,000 in the aggregate, subject in each case to Parent’s approval, such approval not to be unreasonably withheld, (vi) general compensation increases in the ordinary course of business consistent with past practice or (vii) the termination or amendment of any Company Benefit Plan that may be subject to Code Section 409A consistent with Code Section 409A and any guidance issued thereunder,provided, that such amendment does not result in an increase in benefits payable under the applicable Company Benefit Plan;
61
(m) pay, discharge, settle or satisfy any material claims, liabilities or obligations (absolute, accrued, contingent or otherwise), other than (i) performance of contractual obligations in accordance with their terms, (ii) payment, discharge, settlement or satisfaction in the ordinary course of business or (iii) payment, discharge, settlement or satisfaction in accordance with their terms, of claims, liabilities or obligations (x) disclosed or reserved in the most recent financial statements (or the notes thereto) of the Company included in the Company SEC Filings filed prior to the date hereof or contemplated by documents made available to Parent prior to the date hereof or (y) incurred since the date of such financial statements in the ordinary course of business;provided, however,that any such amounts paid pursuant to clause (ii) or (iii), individually or in the aggregate, in excess of $15,000,000 above the amounts so disclosed or reserved or, shall require the consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed);
(n) except as otherwise contemplated by this Agreement, including Sections 6.1(e) and 6.4, or as otherwise required by Law or Governmental Entity, adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any Company Subsidiary (other than the Merger);
(o) file any Tax Return taking a position inconsistent with the Company’s or any Company Subsidiaries’ past practice, except as required by Law; or
(p) knowingly commit or agree to take any of the foregoing actions or any action which would result in any representation or warranty of the Company contained in this Agreement which is qualified as to materiality becoming untrue as of the Effective Time or any representation not so qualified becoming untrue in any material respect as of the Effective Time.
Section 6.2Proxy Statement; Company Stockholders’ Meeting.
Section 6.2.1 Proxy Statement. Subject to the prior performance by Parent of its obligations under Section 6.18 to (A) make the Subsequent BIF Deposit or deliver the Letter of Credit, and (B) provide the updated Equity Commitment Letter, the Company shall, as promptly as practicable after the execution of this Agreement but in no event later than the later of (x) 50 days after the date of this Agreement and (y) ten (10) days after receipt of both (1) the Subsequent BIF Deposit or Letter of Credit and (2) updated Debt Commitment Letters with any due diligence conditions deleted, the Company shall, with the
62
assistance and approval (not to be unreasonably withheld or delayed) of Parent, prepare and file with the SEC a proxy statement relating to the Company Stockholders’ Meeting (together with any amendments thereof or supplements thereto, the “Proxy Statement”);provided, that the Company shall not be responsible for any delay in the filing date due to any review by Parent. Parent and the Company will cooperate with each other in the preparation of the Proxy Statement. The Company, after consultation with Parent, will use commercially reasonable best efforts to respond to any comments made by the SEC with respect to the Proxy Statement. Without limiting the generality of the foregoing: (i) the Company will provide Parent with a reasonable opportunity to review and comment on the Proxy Statement, any comments made by the SEC with respect to the Proxy Statement and any proposed amendments to the Proxy Statement, and (ii) Parent and Merger Sub shall furnish all information as the Company may reasonably request in connection with such actions and the preparation of the Proxy Statement. As promptly as practicable after the clearance of the Proxy Statement by the SEC, the Company shall mail the Proxy Statement to the holders of shares of Company Common Stock. Subject to Section 6.4.2, the Proxy Statement shall include the Company Recommendation. The Company will advise Parent, promptly after it receives notice thereof, of any request by the SEC for amendment of the Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional information. If at any time prior to the Company Stockholders Meeting, any event or circumstance relating to Parent or Merger Sub, or their respective officers or directors, should be discovered by Parent which should be set forth in an amendment or a supplement to the Proxy Statement, Parent shall promptly inform the Company. If at any time prior to the Company Stockholders Meeting, any event or circumstance relating to the Company or any Company Subsidiary, or their respective officers or directors, should be discovered by the Company which should be set forth in an amendment or a supplement to the Proxy Statement, the Company shall promptly inform Parent. All documents that the Company is responsible for filing in connection with the transactions contemplated herein will comply as to form and substance in all material respects with the applicable requirements of the Exchange Act and other applicable Laws.
Section 6.2.2 Information Supplied by Parent. None of the written information supplied or to be supplied by Parent or any of its Affiliates, directors, officers, employees, agents
63
or Representatives expressly for inclusion or incorporation by reference in the Proxy Statement or any other documents filed or to be filed with the SEC in connection with the transactions contemplated hereby, will, as of the time such documents (or any amendment thereof or supplement thereto) are mailed to the holders of shares of Company Common Stock and at the time of the Company Stockholders’ Meeting, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All documents that Parent or Merger Sub is responsible for filing with the SEC in connection with the Merger will comply as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act and will not contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
Section 6.2.3 Stockholders’ Meeting. Subject to Section 6.4 and (i) Parent’s prior performance of its obligation under Section 6.18 to make the Subsequent BIF Deposit or deliver the Letter of Credit and deliver the updated Equity Commitment Letter and (ii) to receipt of the updated Debt Commitment Letters described in Section 6.2.1, and whether or not the Company’s Board has made, modified or withdrawn a Company Recommendation or a Company Adverse Recommendation Change, the Company shall call and hold a meeting of its stockholders (the “Company Stockholders’ Meeting”) as promptly as practicable following the date on which the Proxy Statement is cleared by the SEC for the purpose of obtaining the Stockholder Approval.
Section 6.2.4 No Restriction. Nothing in this Section 6.2 shall be deemed to prevent the Company or the Company Board from taking any action they are permitted or required to take under, and in compliance with, Section 6.4 or are required to take under applicable Law. Nothing contained in this Agreement shall give Parent or Merger Sub, directly or indirectly, the right to control or direct the Company’s or Company Subsidiaries’ operations prior to the Effective Time.
Section 6.3Access to Information; Confidentiality.
Section 6.3.1 Access to Information. From the date of this Agreement to the Effective Time, the Company shall, and shall cause each Company Subsidiary and each of its and their respective directors, officers, employees, accountants, consultants, legal counsel,
64
advisors, and agents and other representatives (collectively, “Company Representatives”) to: (i) provide to Parent and Merger Sub and each of their respective officers, directors, employees, accountants, consultants, legal counsel, advisors, agents and other representatives (collectively, “Parent Representatives”) access at reasonable times during normal business hours, upon prior notice to a Company Representative designated in Section 6.3.1 of the Company Disclosure Schedule, to the officers, employees, agents, properties, offices and other facilities of the Company or such Company Subsidiary and to the books and records thereof and (ii) furnish or cause to be furnished such reasonably available information concerning the business, properties, Contracts, assets, liabilities, personnel and other aspects of the Company and the Company Subsidiaries as Parent, Merger Sub or the Parent Representatives may reasonably request. From the date of this Agreement to the Effective Time, Parent shall, and shall cause Merger Sub and the Parent Representatives to, (i) provide the Company and the Company Representatives access at reasonable times during normal business hours, upon prior notice, to the officers, employees, agents, properties, offices and other facilities of Parent and Merger Sub and to the books and records thereof and (ii) furnish or cause to be furnished such reasonably available information concerning the business, properties, Contracts, assets, liabilities, personnel and other aspects of Parent and Merger Sub as the Company or the Company Representatives may reasonably request, including for the purpose of confirming that Parent is in compliance with its obligations under Section 6.5 and confirming satisfaction of the condition contained in Section 7.3.2.
Section 6.3.2 Confidentiality and Restrictions. With respect to the information disclosed pursuant to Section 6.3.1, the Parties shall comply with, and shall cause their respective Representatives to comply with, all of their respective obligations under the confidentiality agreement, dated as of March 23, 2005, between the Company and Parent (as such agreement may be amended from time to time, the “Confidentiality Agreement”) or any similar agreement entered into between the Company and any Person to whom the Company, any Company Subsidiary or any Company Representative provides information pursuant to this Section 6.3, it being understood and agreed by the Parties that, notwithstanding Section 6.3.1, (i) the Company, the Company Subsidiaries and the Company Representatives shall have no obligation to furnish, or provide any access to, any information to any Person not a party to the Confidentiality Agreement or any similar agreement with respect to such information, (ii) Section 6.3.1 shall not
65
require the Company to take or allow actions that would unreasonably interfere with the Company’s or any Company Subsidiary’s operation of its business and (iii) the Company shall not be required to provide access to or furnish any information if to do so would contravene any agreement to which the Company or any Company Subsidiary is party as of the date hereof or violate any Law, or where such access to information may involve the waiver of a disclosure of privilege or be otherwise adverse to the interests of the Company or any Company Subsidiary.
Section 6.4No Solicitation of Transactions.
Section 6.4.1The Company shall, and shall cause each Company Subsidiary, and shall direct, and shall use commercially reasonable best efforts to cause, the Company Representatives to, immediately cease and cause to be terminated any discussions or negotiations with any parties (other than Parent, Merger Sub and the Parent Representatives) that may be ongoing with respect to a Takeover Proposal. The Company shall not, and shall cause each Company Subsidiary not to, and shall direct, and shall use commercially reasonable best efforts to cause, the Company Representatives not to, (i) directly or indirectly solicit, initiate, knowingly encourage or knowingly facilitate any inquiries regarding the making, submission or reaffirmation of any Takeover Proposal, (ii) approve, recommend to the Company’s Stockholders, or enter into any agreement, understanding, arrangement, agreement in principle, term sheet or letter of intent with respect to a Takeover Proposal or (iii) participate in any way in any negotiations or discussions regarding, or furnish or disclose any information, or provide access to its properties, books or records, to any Third Party relating to any Takeover Proposal;provided,however, that at any time prior to obtaining the Stockholder Approval, in response to a bona fide written Takeover Proposal that was not solicited after the date hereof by the Company, a Company Subsidiary, or a Company Representative on its behalf, if the Company Board determines in good faith, after consultation with its outside legal counsel, that such action is necessary in order for the Company Board to comply with its fiduciary duties to the holders of Company Common Stock under applicable law and, after consultation with the Company Board’s outside legal counsel and the Company’s financial advisors, that such Takeover Proposal constitutes, or is reasonably likely to result in, a Superior Proposal, the Company may, subject to compliance with Section 6.4.2 in the circumstances set forth therein, (i) furnish information and/or draft agreements with respect to the Company and the Company Subsidiaries
66
to the Person making such Takeover Proposal (and its officers, directors, employees, accountants, consultants, legal counsel, advisors, agents and other representatives) pursuant to a customary confidentiality agreement not less favorable to the Company than the Confidentiality Agreement;provided, that all such information and the material terms of any such draft agreements have previously been made available to Parent or is made available to Parent prior to, or concurrently with, the time it is provided to such Person and (ii) participate in discussions or negotiations with the Person making such Takeover Proposal (and its officers, directors, employees, accountants, consultants, legal counsel, advisors, agents and other representatives) regarding such Takeover Proposal.
Section 6.4.2Notwithstanding any provision of this Section 6.4 to the contrary, provided that the Company has complied in all material respects with its obligations under this Section 6.4, the Company Board may (i) withdraw or modify in a manner adverse to Parent (or not continue to make) the Company Recommendation, and/or (ii) approve or recommend a Takeover Proposal (any action described in clause (i) or this clause (ii), a “Company Adverse Recommendation Change”), if (x) the Company Board has determined in good faith after consultation with its financial advisors and outside legal counsel, that, to the extent such action relates to a Takeover Proposal, any Takeover Proposal constitutes a Superior Proposal and, after consultation with the Company Board’s outside legal counsel, that taking such action is necessary for the members of the Company Board to comply with their fiduciary duties to the holders of shares of Company Common Stock under applicable Law, and (y) the Company has given Parent five (5) Business Days prior written notice of its intention to take such action and the Company Board shall have considered in good faith any proposed changes to this Agreement proposed in writing by Parent (provided,however, that Parent shall not relinquish any rights or be relieved of any obligations arising under this Agreement as a result of submitting any proposed changes to this Agreement;provided,further, that nothing herein shall preclude Parent from terminating this Agreement to the extent entitled to do so pursuant to Section 8.1 hereof) and, after negotiating in good faith with Parent concerning any such proposed changes during such five (5) Business Day period and after consultation with its outside legal counsel and financial advisors, shall have determined, other than in the case of an action described in clause (i) that does not relate to a Takeover Proposal, that the Takeover Proposal would still constitute a
67
Superior Proposal even if such changes were to be given effect. Notwithstanding the foregoing, if the Company shall deliver the written notice specified in clause (y) of the preceding sentence on or before August 18, 2005, the five (5) Business Day period described therein shall be deemed to expire at noon New York City time on August 23, 2005. Any Takeover Proposals, bids, offers or other proposals already received by the Company, any Company Subsidiary or any Company Representatives prior to the date of this Agreement and/or during the bid process shall be deemed not to be Superior Proposals or reasonably likely to constitute a Superior Proposal. Subject to Parent’s prior performance of its obligation under Section 6.18 to make the Subsequent BIF Deposit or deliver the Letter of Credit, unless this Agreement has previously been terminated pursuant to Section 8.1, whether or not the Company’s Board has made a Company Adverse Recommendation Change, or has withdrawn, modified or changed in any manner adverse to the interests of Parent, the Company Recommendation, or the Company Board has made a Company Adverse Recommendation Change with respect to the Merger, this Agreement or the transactions contemplated by this Agreement, the Company shall take all steps necessary (including, without limitation, the preparation (as promptly hereafter as practicable) to file with the SEC of a Proxy Statement and to duly call, give notice of, convene and hold a Company Stockholders Meeting to approve the Merger in accordance with this Agreement.
Notwithstanding any provision of this Section 6.4 to the contrary, if the Company Board has made a Company Adverse Recommendation Change in compliance with this Section 6.4.2, and if the Company Stockholders’ Meeting has been held, a vote has been taken on this Agreement and the Merger, and Stockholder Approval has not been obtained, the Company Board may terminate this Agreement in accordance with the provisions of Section 8.1(c)(ii) in order to enter into a binding written agreement regarding a Takeover Proposal if the Company pays Parent the Termination Fee in accordance with Section 8.4 as and to the extent payment of such Termination Fee is required thereunder.
Section 6.4.3The Company shall promptly advise Parent orally and in writing of the Company’s receipt of any request for information or any Takeover Proposal and the material terms and conditions of such request or Takeover Proposal and the identity of the Person making such Takeover Proposal. Promptly upon determination by the Company Board that a Takeover Proposal constitutes a Superior Proposal, the Company shall deliver to Parent a written notice advising it that the Company Board has made such determination, specifying the material terms and conditions of such Superior Proposal and the identity of the Person making such Superior Proposal.
68
Section 6.4.4Nothing contained in this Section 6.4 shall prohibit the Company or the Company Board from (i) taking and disclosing to the stockholders of the Company a position contemplated by Rule 14e-2 promulgated under the Exchange Act or (ii) making any disclosure to the stockholders of the Company if, in the good faith judgment of the Company Board, such disclosure would be necessary under applicable Law (including Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act);provided,however, that in no event shall this Section 6.4.4 affect the obligations of the Company specified in Section 6.4.2.
Section 6.4.5To the extent it has not already done so, the Company shall, promptly following the execution of this Agreement, request each Person which has heretofore executed a confidentiality agreement with the Company during the twelve (12) months prior to the date of this Agreement in connection with such Person’s consideration of a possible Takeover Proposal to return or destroy all confidential information heretofore furnished to such Person by or on behalf of the Company and, at Parent’s request, the Company shall take reasonable steps to enforce its rights under such confidentiality agreements.
Section 6.5Commercially Reasonable Best Efforts.
Section 6.5.1Subject to the terms and conditions of this Agreement, including Section 6.4, each of the Parties shall use its commercially reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable under applicable Laws to consummate and make effective, in the most expeditious manner practicable, the transactions provided for in this Agreement, including (i) preparing and filing, as soon as practicable, all forms, registrations and notices required to be filed to consummate the transactions contemplated by this Agreement and the taking of all such actions as are necessary to obtain any requisite approvals, consents, orders, exemptions or waivers by, or to avoid an action or proceeding by, any Third Party or Governmental Entity, including filings pursuant to the HSR Act, with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice (and the preparation and filing, as soon as practicable, of any form or report required by any other Governmental Entity, relating to antitrust, competition, trade or other regulatory matters), (ii) causing the satisfaction of all conditions set forth in Article 7 (including the prompt termination of any waiting period under the HSR Act (including any
69
extension of the initial thirty (30) day waiting period thereunder)), (iii) defending all lawsuits or other legal, regulatory or other proceedings to which it is a party that challenge or affect this Agreement or the consummation of the transactions contemplated by this Agreement and (iv) having lifted or rescinded any injunction or restraining order or other Order which may adversely affect the ability of the Parties to consummate the transactions contemplated by this Agreement. Notwithstanding any provision of this Agreement to the contrary, neither the Company nor any Company Subsidiary shall be required to make any payment to any Person, or agree to the modification of any Lease or other agreement, in connection with obtaining any consent contemplated by Section 7.2.9 unless such payment or modification is contingent upon the occurrence of the Merger.
Section 6.5.2Parent and Merger Sub shall, and shall cause each other member of the Parent Group, if applicable, to, use commercially reasonable best efforts to obtain, as promptly as practicable following the date hereof, all licenses, certifications, Company Health Care Permits, approvals, provider numbers and authorizations (“Government Consents”), if any, from all applicable Governmental Entities in connection with the Merger and as may be required to authorize Parent, the Surviving Corporation and the other members of the Parent Group, if applicable, to operate or to continue to operate, as may be applicable, the Company Health Care Businesses as they are currently operated. Within 45 days following the execution of this Agreement, Parent shall, and shall cause each other member of the Parent Group, if applicable, to, submit all applications or other materials, if any, required to commence the process of obtaining such Government Consents, including payment of all required fees related thereto. Parent shall, and shall cause the other members of the Parent Group, if applicable, to, promptly respond to any request by any relevant Governmental Entity for supplemental information. Parent shall, and shall cause the other members of the Parent Group, if applicable, to, take all reasonable measures to shorten the time periods required under applicable Law for notice, licensure or other similar regulatory requirement in connection with receipt of Government Consents as described in this Section 6.5.2;provided, that the Parties acknowledge and agree that the mere fact that the Closing Date occurs later than January 1, 2006, shall not be deemed to constitute a breach of this or any associated obligation of Parent hereunder. Parent shall, and shall cause the other members of the Parent Group, if applicable, to, pay timely all fees and
70
expenses required in connection with the matters described in this Section 6.5.2. Parent and Merger Sub shall not be responsible for any delay, or failure, to obtain Government Consents in connection with the Merger, if such delay or failure is due to any condition, event, fact or circumstance relating to the Company, any Company Subsidiary, Company Health Care Program or the Company Health Care Facilities and not due in any part to any event, fact or circumstance relating to the Parent Group. If after fully complying with this Section 6.5.2, Parent shall have obtained Government Consents necessary to operate at least ninety-five (95) percent, but less than one hundred (100) percent, of the Company Health Care Facilities as currently operated by and through the Company Subsidiaries, then Parent shall, and shall cause the other members of the Parent Group, and the Company shall and shall cause the Company Subsidiaries, if applicable, to use their respective commercially reasonable best efforts to, implement, subject to the occurrence of the Effective Time, an “Alternative Structure.” The term “Alternative Structure” shall mean a structure (including a management agreement, identity of interest transaction, a liquidating trust for the benefit of the Company’s Shareholders, an informal or preliminary approval contemplating final approval retroactive to the Effective Time, or other structure) devised in consultation with the applicable Governmental Entities to obtain the requisite Government Consents to satisfy the condition set forth in Section 7.1.3 or such that closing in the absence of such Government Consents will not result in a violation of Law.
Section 6.5.3The Company and Parent shall have the right to review in advance, and to the extent reasonably practicable each will consult the other on, all the information relating to the other and each of their respective Subsidiaries and Affiliates, if applicable, that appears in any filing made with, or written materials submitted to, any Third Party or any Governmental Entity in connection with the Merger,provided, however,that Parent shall not be responsible for any delay in the filing dates required by Section 6.5.2 due to any review by the Company.
Section 6.5.4Each Party shall, and, if applicable, Parent shall cause the other members of the Parent Group to, promptly inform the others of any communication from any Governmental Entity regarding any of the transactions contemplated by this Agreement and keep the others informed of the status of the proceedings related to obtaining any approvals of any Governmental Entity or Third Party (including with respect to the termination or expiration of
71
any waiting period). To the greatest extent practicable, each Party shall, and, if applicable, Parent shall cause the other members of the Parent Group to, consult with the others in advance of any meeting or conference with a Governmental Entity or, in connection with any proceeding by a Third Party, with any other Person, relating to this Agreement and the transactions contemplated hereby and, to the extent permitted by such applicable Governmental Entity or other Person, give the other Parties the opportunity to attend and participate in such meetings and conferences. If any Party or, if applicable, the other members of the Parent Group, receives a request for additional information or documentary material from any such Governmental Entity or other Person with respect to the transactions provided for in this Agreement, then such Party will, or, in the case of a member of the Parent Group, Parent will cause such member of the Parent Group to, endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other Party, an appropriate response in compliance with such request.
Section 6.5.5Without limiting the generality of Section 6.5.1 hereof, the Parties shall, as promptly as practicable, prepare and file any notifications required under the HSR Act with respect to the transactions contemplated hereby. The Parties shall respond as promptly as practicable to (i) any inquiries or requests received from the Federal Trade Commission or the Department of Justice for additional information or documentation and (ii) any inquiries or requests received from any state attorney general, foreign antitrust authority or other Governmental Entity in connection with antitrust or related matters. Each Party shall (1) give the other Party prompt notice of the commencement or threat of commencement of any legal proceeding by or before any court or Governmental Entity with respect to the Merger or any of the other transactions contemplated by this Agreement, (2) keep the other Party reasonably informed as to the status of any such legal proceeding or threat, and (3) promptly inform the other Party of any communication to or from the Federal Trade Commission, the Department of Justice or any other Governmental Entity regarding the Merger. Except as may be prohibited by any Governmental Entity or by any Legal Requirement, Parent, on the one hand, and the Company, on the other, will consult and cooperate with one another, and will consider in good faith the views of one another, in connection with any analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted in connection with any
72
legal proceeding under or relating to the HSR Act. Parent, on the one hand, and the Company, on the other, will permit authorized representatives of the other Party to be present at each meeting or conference relating to any such legal proceeding and to have access to and be consulted in connection with any document, opinion or proposal made or submitted to any Governmental Entity in connection with any such legal proceeding. Nothing herein shall be deemed to require Parent or Merger Sub to agree to divest, sell, dispose of, hold separate or otherwise take or commit to take any action that limits its freedom of action with respect to it or any of its Affiliates’ ability to retain, any of its businesses, properties or assets. Furthermore, neither the Company nor any Company Subsidiary shall agree to divest, sell, dispose of, hold separate or otherwise take or commit to take any action that limits its freedom of action with respect to it or any of its Affiliates’ ability to retain, any of its businesses, property or assets, without the prior written consent of Parent.
Section 6.6Certain Notices. From and after the date of this Agreement until the Effective Time, each Party hereto shall promptly notify the other Party of (i) the occurrence, or non-occurrence, of any event that would be likely to cause any condition to the obligations of any Party to effect the Merger and the other transactions provided for in this Agreement not to be satisfied or (ii) the failure of the Company, Merger Sub or Parent, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it pursuant to this Agreement which would reasonably be expected to result in any condition to the obligations of any Party to effect the Merger and the other transactions provided for in this Agreement not to be satisfied;provided,however, that the delivery of any notice pursuant to this Section 6.6 shall not cure any breach of any representation or warranty requiring disclosure of such matter at or prior to the execution of this Agreement or otherwise limit or affect the remedies available hereunder to the Party receiving such notice.
Section 6.7Public Announcements. None of the Parties shall (and each of the Parties shall cause its Representatives and, in the case of Parent, the other members of the Parent Group, if applicable, not to) issue any press release or make any public announcement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of (i) the Company, in the event the disclosing party is Parent, Merger Sub, any other member of the Parent Group, if applicable, or any of their respective Representatives, or (ii) Parent, in the
73
event the disclosing party is the Company or any of its Representatives, such consent not to be unreasonably withheld or delayed;provided,however, that if a Party determines, based upon advice of counsel, that disclosure is otherwise required by applicable Law or the rules or regulations of any stock exchange upon which the securities of such Party is listed, such Party may make such disclosure to the extent so required;provided,further, that such disclosure is made in consultation with the other Parties to this Agreement.
Section 6.8Employee Matters.
Section 6.8.1Section 6.8.1 of the Company Disclosure Schedule sets forth the actions (in addition to those actions set forth in Section 6.1(l) of the Company Disclosure Schedule and Section 3.5 of this Agreement) with respect to Company Benefit Plans that the Company will implement in connection with the change of control contemplated by this Agreement, effective concurrent with the Effective Time, including acceleration of vesting, partial or full funding, amendment, termination or other similar actions.
Section 6.8.2 Obligations with Respect to Continuing Employees. Parent hereby agrees that, for the period immediately following the Effective Time through and including the later of (x) December 31, 2006 and (y) the one-year anniversary of the Effective Time (such date, the “Employment Benefit Plan Extension Date”), it shall, or it shall cause the Surviving Corporation and its Subsidiaries to, (i) provide each Continuing Employee (other than a Continuing Employee whose terms and conditions of employment are established through collective bargaining with a labor organization) with at least the same level of base salary and wages and on substantially the same terms and conditions as was provided to the Continuing Employee immediately prior to the Effective Time, and (ii) except with respect to Continuing Employees whose terms and conditions of employment are established through collective bargaining with a labor organization, maintain Surviving Corporation Benefit Plans (except to the extent any such plan provides equity-based compensation or traditional non-qualified deferred compensation benefits) that are substantially equivalent in the aggregate to those provided to the Continuing Employees immediately prior to the Effective Time and disclosed in Section 4.10.1 of the Company Disclosure Schedule (determined without regard to any modifications to such plans made pursuant to this Agreement);provided, however,that in the event the cost of health and welfare benefits incurred by the Surviving Corporation and its
74
Subsidiaries (taken as a whole) increases, or can reasonably be expected to increase, by more than fifteen (15) percent in one year (a “Material Benefit Cost Increase”), the Surviving Corporation may take such action as may be reasonably necessary (such as increasing co-payment obligations or deductible thresholds) to limit the year-to-year increase in the cost of health and welfare benefits to a level that does not constitute a Material Benefit Cost Increase;provided,further, that the foregoing shall not obligate Parent or the Surviving Corporation to employ one or more of the Continuing Employees. Subject to the Company’s compliance with Section 6.1, from and after the Effective Time, Parent shall, or it shall cause the Surviving Corporation and its Subsidiaries to, honor in accordance with their terms (including, without limitation, terms which provide for amendment or termination) all contracts, agreements, arrangements, programs, policies, plans and commitments of the Company and the Company Subsidiaries, as in effect immediately prior to the Effective Time (and prior to any modifications made pursuant to this Agreement) and disclosed in Section 4.10.1 of the Company Disclosure Schedule that are applicable to any current or former employees or directors of the Company or any Company Subsidiary, including without limitation the severance plans and policies adopted by the Company Board, except for any payments or modifications set forth in this Agreement;provided,however,that except for contractual obligations which survive beyond the Employee Benefit Plan Extension Date, obligations of Parent set forth in this sentence shall terminate on the Employee Benefit Plan Extension Date. Nothing herein shall be deemed to be a guarantee of employment for any Continuing Employee, or to restrict the right of the Surviving Corporation or its Subsidiaries to terminate any Continuing Employee.
Section 6.8.3 Credit for Service. Continuing Employees shall receive credit for all purposes (including for purposes of eligibility to participate, vesting, benefit accrual and eligibility to receive benefits) under any Surviving Corporation Benefit Plan under which each Continuing Employee may be eligible to participate on or after the Effective Time to the same extent recognized by the Company or any of the Company Subsidiaries under comparable Company Benefit Plans immediately prior to the Effective Time;provided,however, that such crediting of service shall not operate to duplicate any benefit or the funding of any such benefit.
Section 6.8.4 Welfare Plans. With respect to any Surviving Corporation Benefit Plan that is a welfare benefit plan, program or arrangement (a “Purchaser Welfare Benefit Plan”)
75
and in which a Continuing Employee may be eligible to participate on or after the Effective Time, Parent shall, or it shall cause the Surviving Corporation and its Subsidiaries to, (i) waive, or use commercially reasonable efforts to cause its insurance carrier to waive, all limitations as to pre-existing, waiting period or actively-at-work conditions, if any, with respect to participation and coverage requirements applicable to each Continuing Employee under such Purchaser Welfare Benefit Plan to the same extent waived under a comparable Company Benefit Plan, and (ii) provide credit to each Continuing Employee (and his/her beneficiaries) for any co-payments, deductibles and out-of-pocket expenses paid by such Continuing Employee (and his/her beneficiaries) under the comparable Company Benefit Plan during the relevant plan year, up to and including the Effective Time.
Section 6.8.5 Change in Control, Severance, Retention and Employment Agreements.At least fifteen (15) days prior to the Company Stockholders’ Meeting, Parent shall expressly identify to the Company in writing any employee of the Company or any Company Subsidiary at the level of pay band “B” or above as to whom Parent intends as of the Closing or within twelve (12) months after the Effective Time to either (i) not retain by reason of the consummation of the Merger or (ii)(a) materially reduce or diminish the duties, responsibilities or authority of such employee subsequent to the Merger, (b) reduce the employee’s compensation or benefits, or (c) require as a condition to continued employment with the Surviving Corporation that the employee’s employment be based at a location other than its location at the Effective Time. At least five (5) days prior to the Company Stockholders’ Meeting, the Company shall use its commercially reasonable efforts to cause any employee who is party to any change in control, severance, retention and/or employment agreements with the Company and who intends to terminate his or her employment for “Good Reason” (as defined in an applicable individual agreement) immediately following the consummation of the Merger, pursuant to a right to so terminate expressly set forth in such agreement, to notify the Company of such in writing. Any employee who is identified in (i) above or who notifies the Company as set forth above that the employee intends to terminate his or her employment for “Good Reason” immediately following the consummation of this Merger, shall receive, at the Effective Time, all payments specified in any written change of control, severance, retention and/or employment agreements or arrangements with the Company or any Company Subsidiary and which are set
76
forth in Section 6.8.5 of the Company Disclosure Schedule. Prior to receiving any such payments, an employee may rescind his or her notice to terminate employment for “Good Reason” by providing written notice to the Company. Notwithstanding the foregoing, from and after the Effective Time, Parent shall cause Surviving Corporation and its Subsidiaries to honor, in accordance with their terms, all change in control, severance, retention and employment agreements or arrangements (including an employee’s right to terminate employment for “Good Reason”), in each case with the current and former employees of the Company and the Company Subsidiaries as set forth in Section 6.8.5 of the Company Disclosure Schedule. The Company shall cooperate reasonably with Parent and Merger Sub in accelerating to the earlier of the Closing Date or December 31, 2005, with respect to those individuals and specific awards or payments identified by Parent, any one or more of the following: (i) outstanding bonus awards under the 1998 Annual Incentive Program Plan; (ii) 2003 Cash Bonus Awards (at target) under the 2003 Long-Term Program; (iii) 1997 LTIP Performance Bonus Awards (at target); (iv) benefits under the Enhanced Supplemental Executive Retirement Plan; (v) benefits under the Supplemental Executive Retirement Plan; and (vi) benefits under the Executive Deferred Compensation Plan (including the Retirement Enhancement Program);provided,however, that in the case of any unfunded obligations requested to be accelerated by Parent, the Company shall be entitled to advance funds, or provide other adequate security upon terms and conditions satisfactory to the Company and Parent, from Parent as the Company determines may be necessary to make such accelerated payments
Section 6.9Indemnification of Directors and Officers.
Section 6.9.1From and after the Effective Time until six (6) years from the Effective Time, unless otherwise required by Law, the certificate of incorporation and by-laws of the Surviving Corporation and the comparable organizational documents of its Subsidiaries shall contain provisions no less favorable with respect to the elimination of liability of directors and indemnification of directors, officers, employees and agents than are set forth in the Company Certificate and the Company By-laws (or the equivalent documents of the relevant Company Subsidiary) as in effect on the date hereof;provided,however, that in the event any claim or claims are asserted against any individual entitled to the protections of such provisions within
77
such six (6) year period, such provisions shall not be modified until the final disposition of any such claims.
Section 6.9.2From and after the Effective Time, Parent and the Surviving Corporation, jointly and severally, shall indemnify, defend and hold harmless, to the fullest extent permitted under applicable Law and, without limiting the foregoing, as required pursuant to any indemnity agreements of the Company or any Company Subsidiary, each present and former director and officer of the Company and each Company Subsidiary (collectively, the “Indemnified Parties”) against any costs or expenses (including attorneys’ fees and expenses), judgments, fines, losses, claims, settlements, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to (i) any and all matters pending, existing or occurring at or prior to the Effective Time; and (ii) any and all representations and warranties made by Parent and/or Merger Sub under Article 5 hereof, including any matter arising under any claim that the transactions contemplated herein, and any actions taken by Parent and/or Merger Sub with respect thereto (including any disposition of assets of the Surviving Corporation or any of its Subsidiaries which is alleged to have rendered the Surviving Corporation and/or any of its Subsidiaries insolvent). Without limiting the foregoing, Parent and the Surviving Corporation, jointly and severally, shall also advance costs and expenses (including attorneys’ fees) as incurred by any Indemnified Party within twenty (20) days after receipt by Parent of a written request for such advance,provided, that the Person to whom expenses are advanced provides an undertaking in customary form, consistent with the practices of the Company prior to the Effective Time, to repay such advances if it is ultimately determined that such Person is not entitled to indemnification (it being understood that Parent and the Surviving Corporation shall not require any security for such undertaking).
Section 6.9.3For a period of six (6) years after the Effective Time, Parent shall or shall cause the Surviving Corporation to maintain in effect the Company’s current directors’ and officers’ liability insurance (the “D&O Insurance”) in respect of acts or omissions occurring at or prior to the Effective Time, covering each Person currently covered by the D&O Insurance (a complete and accurate copy of which has been heretofore made available to Parent), on terms with respect to the coverage, deductible and amounts no less favorable than those of the D&O
78
Insurance in effect on the date of this Agreement;provided,however, that (i) in satisfying its obligations under this Section 6.9.3, neither Parent nor the Surviving Corporation shall be obligated to pay annual premiums in excess of three hundred (300) percent of the amount currently paid by the Company (which premiums are set forth in Section 6.9.3 of the Company Disclosure Schedule), it being understood and agreed that Parent or the Surviving Corporation shall nevertheless be obligated to provide the maximum amount of such coverage as may be obtained for such annual three hundred (300) percent amount and (ii) in the event of the application of clause (i), any present or former officer or director, upon reasonable written notice thereof (which notice shall be provided no later than thirty (30) days prior to the Effective Time and shall set forth in reasonable detail for each Person to be covered the policy coverage, premiums, deductibles, limitations and other pertinent information), who desires to obtain additional coverage such that, when combined with the coverage obtained by Parent or the Surviving Corporation in accordance with clause (i), it provides insurance coverage equivalent to the D&O Insurance in effect on the date hereof, may so elect and Parent shall or shall cause the Surviving Corporation to acquire such additional coverage on behalf of such Person;provided,further, that in the event any present or former officer or director makes such an election, such former officer or director shall pay the portion of the premium of such D&O Insurance in excess of the amount which Parent or the Surviving Corporation is obligated to pay pursuant to this Section 6.9. The insurance purchased pursuant to this Section 6.9 shall be prepaid in full at the Effective Time (or at such time as it is actually obtained) and shall be non-cancelable. At the request of the Company, Parent shall arrange for such insurance prior to the Effective Time to be effective only at and after the Effective Time;provided, that Parent shall pay in full for such insurance coverage no later than the Effective Time. The Company may acquire a six (6) year tail policy for Persons currently covered by D&O Insurance that is consistent with the first sentence of this Section 6.9.3 so long as the one time premium payment for such tail policy is not more than three hundred (300) percent of the amount currently paid by the Company on an annual basis and as set forth in Section 6.9.3 of the Company Disclosure Schedule. Such policy shall be prepaid at the Effective Time and shall be non-cancelable. If the Company acquires such a tail policy, Parent’s obligations pursuant to the first sentence of this Section 6.9.3 shall be deemed completely satisfied. The obligation to maintain insurance provided in this Section 6.9.3
79
shall continue in full force and effect for a period of not less than six (6) years from and after the Effective Time;provided, that in the event any claim or claims are asserted or made within such six (6) year period, Parent or the Surviving Corporation shall ensure that such insurance remains in full force and effect with respect to such claims until final disposition thereof.
Section 6.9.4If Parent or the Surviving Corporation or any of its successors or assigns shall (i) consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of Parent or the Surviving Corporation (or acquiror of such assets), as the case may be, shall assume all of the obligations of Parent or the Surviving Corporation set forth in this Section 6.9.
Section 6.9.5The rights of each Indemnified Party under this Section 6.9 shall be in addition to any right such Person might have under the Company Certificate and the Company By-laws, the certificate of incorporation and the by-laws of the Surviving Corporation or any comparable organizational documents of their Subsidiaries, or under any agreement of any Indemnified Party with the Company, the Surviving Corporation or any of their respective Subsidiaries.
Section 6.9.6The provisions of this Section 6.9 shall survive the consummation of the Merger and are intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their respective heirs and representatives.
Section 6.10State Takeover Statutes. Parent, the Company and their respective Boards of Directors shall (i) take all reasonable action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to this Agreement or the transactions provided for in this Agreement and (ii) if any state takeover statute or similar statute becomes applicable to this Agreement or the transactions contemplated by this Agreement, take all reasonable action necessary to ensure that the transactions provided for in this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation on this Agreement or the transactions provided for in this Agreement.
80
Section 6.11Section 16 Matters. Prior to the Effective Time, the Company shall take all such steps as may reasonably be necessary and permitted to cause the transactions contemplated by this Agreement, including any dispositions of shares of Company Common Stock (including derivative securities with respect to such Shares of Company Common Stock) by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 6.12Confidentiality Agreement. The Confidentiality Agreement shall continue in full force and effect in accordance with its terms until the earlier of (i) the Effective Time or (ii) the expiration of the Confidentiality Agreement according to its terms.
Section 6.13Solvency of the Surviving Corporation. Not later than 30 days following the execution of this Agreement, Parent shall cause to be delivered to the Company an opinion from Houlihan, Lokey, Howard & Zukin, or such other nationally recognized accounting or investment banking firm as the Company may reasonably approve, valuing the Company as a going-concern (including goodwill), on a pro forma basis, immediately after and giving effect to the transactions contemplated hereby and by the Commitments, and opining that, assuming, in each case, the transactions contemplated hereby and by the Commitments had been consummated as proposed, immediately after and giving effect to such transactions on a pro forma basis, (i) the fair value and present fair saleable value to the Company’s assets would exceed the Company’s stated liabilities and identified contingent liabilities; (ii) the Company should be able to pay its debts as they become absolute and mature; and (iii) the capital remaining in the Company after the transactions contemplated hereby would not be unreasonably small for the business in which the Company is engaged, as management has indicated it is now conducted and is proposed to be conducted by Parent following the consummation of such transactions, and otherwise in form and substance reasonably satisfactory to the Company, addressed to the Company Board, supporting the conclusion that, after giving effect to all of the transactions contemplated by this Agreement, each of Parent and the Surviving Corporation will be solvent (or the equivalent thereof, as determined in the reasonable discretion of the Company) (such opinion, the “Solvency Opinion”). Parent shall obtain a “bring down” of the Solvency Opinion dated as of the Closing Date, which opinion shall be in form and substance no less favorable to the Company than the Solvency Opinion,provided, that any assumptions contained
81
in the Solvency Opinion as to which facts have been ascertained between the date of the original Solvency Opinion and the Closing Date shall be eliminated. Each of Parent and the Company shall, in connection therewith, use their commercially reasonable best efforts to (i) make available their respective officers, agents and other Representatives on a customary basis and upon reasonable notice and (ii) provide or make available such information concerning the business, properties, contracts, assets and liabilities of the Company as may reasonably be requested in connection with delivering such a “bring down” of the Solvency Opinion. Following the Effective Time and until the earlier to occur of six (6) years thereafter or the expiration of the applicable statute of limitations, Parent shall not take or fail to take any action that if such action had been deemed to have been taken or such failure to act had been deemed to have occurred immediately prior to the Effective Time would have caused the representations and warranties set forth in Section 5.12 hereof to be untrue as of the date hereof or as of the Effective Time. The provisions of this Section 6.13 are intended to be for the benefit of, and will be enforceable by, each officer and director of the Company, each holder of Company Common Stock and each of their respective successors, heirs and personal representatives.
Section 6.14Financing. Each of Parent and Merger Sub shall use its commercially reasonable best efforts to complete the transactions contemplated by the Debt Commitment Letters in accordance with the terms of the Debt Commitment Letters (including obtaining rating agency approvals, maintaining in effect the Commitments, satisfying on a timely basis all conditions applicable to SBEV, Parent and Merger Sub to obtaining the financing contemplated by the Commitments (including by consummating the financing contemplated by the Equity Commitment Letter(s)), negotiating definitive agreements with respect thereto on terms and conditions contained therein, satisfying all conditions applicable to SBEV, Parent and Merger Sub in such definitive agreements that are within its control and, if necessary, borrowing pursuant to the Debt Commitment Letters in the event the “flex” provisions are exercised), with such changes as Parent may desire, in order to have available to it the Merger Consideration and other transaction costs at or prior to the Closing;provided, however,that in no event will Parent make any changes that would be reasonably expected to have a material adverse effect on the solvency of the Company upon the consummation of the Merger;provided,further, that, except as expressly provided in the following sentence, such changes must be approved in writing by
82
the Company (such approval not to be unreasonably withheld). Parent shall keep the Company informed on a reasonably current basis in reasonable detail of the status of its efforts to comply with the terms of, and satisfy the conditions contemplated by, the financing contemplated by the Commitments in accordance with this Section 6.14 and shall not permit any amendment or modification to be made to, or any waiver of any provision or remedy under, the Commitments without obtaining the prior written consent of the Company (such consent not to be unreasonably withheld, provided the consent of the Company shall not be required in the event that any such amendment or modification of the Debt Commitment Letters (A) does not have and could not reasonably be expected to have any adverse effect on the “bring down” of the Solvency Opinion or Parent’s ability to deliver such “bring down” to the Company and the Company Board as required by Section 6.13 hereof, and (B) involves solely one or more of the following: (1) a change in the participant Institutional Lenders, provided that any such substituted participant shall be a bank or private lender with assets exceeding $1 billion; (2) the removal or limitation of contingencies or conditions to the obligations of the Institutional Lenders thereunder; (3) the shifting between or among Institutional Lenders of their respective lending obligations to Parent and its affiliates participating directly or indirectly in the contribution of Merger Consideration; and (4) increases in the overall indebtedness by no more than $100,000,000 in the aggregate. Parent shall give the Company prompt notice of any material breach by any party of the Commitments or any termination of any of the Commitments. Parent and Merger Sub shall use their respective commercially reasonable best efforts to cause the updated Debt Commitment Letters referred to in Section 6.2.1 hereof to be delivered as promptly as is reasonably practicable. For the avoidance of doubt, if the financing provided for by the Commitments has not been or cannot be obtained, Parent and Merger Sub shall continue to be obligated to consummate the Merger on the terms contemplated by this Agreement and subject only to the satisfaction or waiver of the conditions set forth in Sections 7.1 and 7.2 of this Agreement and to Parent’s rights under Section 8.1, regardless of whether Parent and Merger Sub have complied with all of their other obligations under this Agreement (including their obligations under this Section 6.14).
Section 6.15Cooperation in Securing Financing. From the date of this Agreement until the Closing Date, the Company shall, and shall cause each Company Subsidiary to, provide all cooperation reasonably requested by Parent (provided, that such requested cooperation does not unreasonably interfere with the ongoing operations of the Company and the Company Subsidiaries) in connection with obtaining the financing contemplated by the Debt Commitment
83
Letters, in (i) supplying to the Institutional Lender or Lenders and equity participants all agreements, documents, instruments, reports, financial information and statements, and other information regarding the Company and the Company Subsidiaries, the Company Properties, the Company Health Care Businesses and the other activities of or related to any of the foregoing in each case as reasonably requested by them, (ii) attempting to respond to reasonable questions raised by Institutional Lenders and equity participants, and (iii) permitting reasonable access to the Company Properties during normal business hours and with reasonable notice;provided, that the provision of information to Institutional Lenders and equity participants shall be subject to the confidentiality requirements of Section 6.12 above;provided,further, that notwithstanding the foregoing, no officer or director of the Company shall be required to execute any documents, including, without limitation, any registration statement to be filed with the SEC, any pledge or security documents or other definitive financing documents and none of the Company or any Company Subsidiary shall be required to pay any commitment or other similar fee or incur any other liability in connection with the financing contemplated by the Commitments prior to the Effective Time. Parent shall, promptly upon request by the Company, reimburse the Company for all reasonable out-of-pocket costs incurred by the Company or the Company Subsidiaries in connection with such cooperation. Parent and Merger Sub shall, on a joint and several basis, indemnify and hold harmless the Company, the Company Subsidiaries and the Company Representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with the arrangement of the financing contemplated by the Commitments and any information utilized in connection therewith. Notwithstanding anything to the contrary, the condition set forth in Section 7.2.2 of this Agreement, as it applies to the Company’s obligations under this Section 6.15, shall be deemed satisfied unless the financing contemplated by the Debt Commitment Letters has not been obtained as a result of the Company’s willful and material breach of its obligations under this Section 6.15. All non-public or otherwise confidential information regarding the Company and the Company Subsidiaries obtained by Parent or the Parent Representatives pursuant to this Section 6.15 shall be kept confidential by Parent in accordance with the Confidentiality Agreement.
84
Section 6.16Further Assurances.
Section 6.16.1Subject to Section 6.15, Parent and the Company shall execute and deliver such certificates and other documents and take such other actions as may reasonably be requested by the other Party in order to consummate or implement the transactions contemplated hereby;provided, however,that nothing in this Section 6.16 shall require any Party hereto to waive any condition set forth in Article VII.
Section 6.16.2The Company shall, to the extent compatible with fulfilling the conditions to the consummation of this Agreement, and its other obligations under this Agreement, use its commercially reasonable best efforts to cooperate, and cause the Company Subsidiaries to cooperate, with Parent in the provision of due diligence information with respect to transactions with respect to the Company Properties, operations, businesses or assets of the Company or the Company Subsidiaries and the Company Health Care Businesses which Parent may desire to implement on or after the Effective Time (“Subsequent Transactions”), including, without limitation, using its commercially reasonable best efforts to provide assistance in obtaining regulatory approvals from Governmental Entities, resolving zoning issues, consents, access agreements, lien waivers, estoppel certificates, subordination, non-disturbance, attornment, and similar agreements from Third Parties;provided, however,that no Subsequent Transaction or the closing thereof shall be a condition to the obligations of Parent, Merger Sub or the Company under Article VII of this Agreement or otherwise delay the Closing; and,provided,further,however, that for purposes of this Section 6.16, the Company and the Company Subsidiaries shall not be required, in connection with such cooperation, to (i) breach any agreement to which it is a party or otherwise subject, (ii) incur any costs or expenses to Third Parties unless Parent shall advance any costs or expenses therefor or (iii) enter into any agreement or undertake any obligation with respect thereto unless such agreement or obligation is subject to the Closing and does not become effective until on or after the Effective Time. The provision of due diligence and other information regarding the Company to counterparties to Subsequent Transactions shall be subject to the confidentiality requirements of Section 6.12 above. Further, while Parent may file and pursue applications for consents and approvals with Governmental Entities, including with respect to Licenses, in connection with Subsequent Transactions, Parent will not take any such actions that could impair any Company Health Care
85
Permits held by the Company or the Company Subsidiaries, result in any delay of Closing or result in any change of ownership status prior to the Effective Time with respect to any Licenses held by the Company or the Company Subsidiaries. Parent and the Company shall use commercially reasonable best efforts to cooperate in the provision of such information as may be reasonably requested by the issuer of the Solvency Opinion in connection with the preparation and rendering of the Bring Down Opinion (as defined below).
Section 6.16.3The Company shall use its commercially reasonable best efforts to cooperate, and cause the Company Subsidiaries to cooperate with Parent, in the negotiation, documentation and closing of the satisfaction, payoff, defeasance, refinancing or restructuring of any debt obligations of the Company or the Company Subsidiaries which Parent may desire to implement on or after the Effective Time and the removal of Liens in connection therewith (collectively, “Debt Satisfaction”),provided, however,that the Company shall not be required to enter into any agreement, or amend or modify any existing agreement, or incur any obligation, to effectuate such Debt Satisfaction unless such agreement, amendment, modification or obligation is subject to the Closing and does not become effective until on or after the Effective Time, and shall not be required to pay (other than contemporaneously with the Effective Time in amounts and with funding arranged and provided by Parent) any amounts to holders of debt obligations of the Company or the Company Subsidiaries to effectuate such Debt Satisfaction.
Section 6.16.4The Company shall use commercially reasonable efforts to cooperate, and cause the Company Subsidiaries to use commercially reasonable efforts to cooperate with the Parent, in the exercise and implementation of all purchase options for real property relating to the Leases (“Underlying Company Properties”), whether set forth in such Leases or negotiated by Parent, such that the Underlying Company Properties can be acquired by Parent’s designee at the Effective Time (collectively, the “Purchase Options”),provided, however,that (a) neither the acquisition of any Underlying Company Property, nor the obtaining of additional financing with respect thereto shall constitute a condition to or otherwise delay the Closing and (b) the Company shall not be required to enter into any agreement, or amend or modify any existing agreement, or incur any obligation, to effectuate the exercise or implementation of any Purchase Option unless such agreement, amendment, modification or obligation is subject to the Closing and does not become effective until on or after the Effective
86
Time, and shall not be required to pay (other than contemporaneously with the Effective Time in amounts and with funding arranged and provided by the Parent) any amounts to the landlords of Leases to effectuate such Purchase Options and acquisition of Underlying Company Properties.
Section 6.17Existing Obligations.
Section 6.17.1The Company and Parent shall use commercially reasonable best efforts to cooperate with one another to give notice to the holders of the Company’s 7 7/8% Senior Subordinated Notes due 2014 (the “7 7/8% Notes”), and to the trustee under the Indenture for the 7 7/8% Notes (the “7 7/8% Notes Indenture”), that is required in order to exercise on the Closing Date the Company’s right to redeem the 7 7/8% Notes under Section 3.07 of the 7 7/8% Notes Indenture and to satisfy and discharge the 7 7/8% Notes Indenture pursuant to Section 11.01 thereof. Any notice so provided shall be subject to the review and approval of Parent, which approval shall not be unreasonably withheld;provided, that, at the option of the Company, such notice of redemption may be conditioned on the occurrence of the Effective Time. Immediately prior to the Effective Time, Parent shall deposit or cause to be deposited with the Trustee under the 7 7/8% Notes Indenture funds sufficient to satisfy and discharge the 7 7/8% Notes Indenture pursuant to Section 11.01 thereof. The Company and Parent shall cooperate in good faith with one another in order to satisfy the conditions set forth in Section 11.01 of the 7 7/8% Notes Indenture as of the Effective Time.
Section 6.17.2The Company and Parent shall cooperate with one another to determine a date upon which the Company shall give notice to the holders of the Company’s 2.75% Convertible Subordinated Notes due 2033 (the “Convertible Notes”) and to the Trustee under the Indenture for the Convertible Notes, that the Company has entered into this Agreement and that, if the Merger occurs, the Common Stock of the Company then outstanding shall be converted into the right to receive the Merger Consideration. The Company will make available to holders of the Convertible Notes procedures reasonably satisfactory to Parent allowing the holders of the Convertible Notes to surrender Convertible Notes for conversion into Common Stock conditioned upon the satisfaction or waiver of all conditions to the Merger, with appropriate assurance that the Convertible Notes will be returned to the holders, or to Persons designated by such holders, in the event that this Agreement is terminated or the Merger has not occurred by the Termination Date, as it may be extended.
87
Section 6.17.3The Company shall take, or shall cause its applicable Affiliates to take, the vendor-related actions described in Section 6.17.3 of the Company Disclosure Schedule.
Section 6.18Deposit and Letter of Credit. In consideration for the Company entering into, and as an inducement and condition to the willingness of the Company to enter into, this Agreement, Parent has transferred to the Company $7,000,000 in immediately available funds as a good faith deposit (the “Initial BIF Deposit”);provided, that the Company shall return the Initial BIF Deposit and any accrued interest or earnings thereon to Parent in the event Parent terminates this Agreement pursuant to Section 8.1(d)(iv). No later than 5:00 P.M. New York City time on the 30th day following the date hereof, Parent shall (A) either (i) make an additional $53,000,000 good faith deposit (the “Subsequent BIF Deposit” and, together with the Initial BIF Deposit, the “BIF Deposit”) by wire transfer of immediately available funds to an account specified in writing by the Company or (ii) deliver to the Company an irrevocable letter of credit duly executed by HSBC USA, N.A., or another financial institution reasonably acceptable to the Company, in the form of Exhibit B hereto (including any substitute letter of credit as provided below, the “Letter of Credit”), and (B) provide an updated firm Equity Commitment Letter, which (i) shall provide that (x) the funding obligations thereunder are subject only to the conditions set forth herein and in the Debt Commitment Letters, and (y) that upon the delivery of the updated Debt Commitment Letters referred to in Section 6.2.1, such funding obligations shall be subject only to the conditions set forth herein and in such updated Debt Commitment Letters, and (ii) shall otherwise be in form and substance reasonably satisfactory to the Company. The Company will retain the BIF Deposit in a separate account as security for the payment of the Business Interruption Fee pursuant to Section 8.5 and shall not withdraw the BIF Deposit from such account prior to the termination of this Agreement under circumstances where the Business Interruption Fee is payable to the Company. The BIF Deposit shall be invested in United States treasury securities. Unless previously returned pursuant to the first sentence of this Section 6.18, the Company agrees to return the BIF Deposit (and any accrued interest or earnings thereon) and any Letter of Credit to Parent (or its designee) or if requested by Parent, deposit the BIF Deposit with the Exchange Agent, upon the earlier to occur of (i) the receipt of the Merger Consideration by the Exchange Agent or, if later, the Effective Time or (ii) the termination of this Agreement under circumstances where the Company is not entitled to the Business Interruption Fee pursuant to Section 8.5 (a “Return Event”). The Company and Parent further agree that if Parent fails to (i) make the Subsequent BIF Deposit or deliver the Letter of Credit or (ii) deliver the updated firm Equity Commitment Letter described above in form and substance reasonably satisfactory to the Company, in each case on or before 5:00 P.M. New York City time on the 30th day following the date hereof, Parent and Merger Sub shall thereupon be deemed in material breach of this Agreement unless and until Parent makes the Subsequent BIF Deposit or delivers the
88
Letter of Credit, and the Company shall have the right to retain the Initial BIF Deposit as the Business Interruption Fee and withdraw it from the separate account described above. In the event Parent delivers a Letter of Credit, Parent shall cause such Letter of Credit (or a substitute therefor in the form of Exhibit F hereto from a financial institution reasonably satisfactory to the Company) to remain in full force and effect until a Return Event has occurred and the Letter of Credit has been returned to Parent as here and above provided. In the event the Letter of Credit or any substitute therefor is scheduled to terminate within ten (10) Business Days and Parent has not provided the Company with a substitute Letter of Credit with a term of at least 90 additional days, the Company shall have the right to draw the full amount of the Letter of Credit and hold such funds as the Subsequent BIF Deposit.
Section 6.19Title Matters. Without Parent’s prior written consent, such consent not to be unreasonably withheld, the Company shall not knowingly take, knowingly fail to take or knowingly permit any action to be taken which shall as of the Closing Date change in any adverse manner (other than with respect to the creation or maintenance of any Permitted Encumbrance) the status of title to the Company Owned Properties or the Company Leased Health Care Facilities as represented by Section 4.17, except for any action taken in the ordinary course of business.
Article 7
Closing Conditions
Section 7.1Conditions to Obligations of Each Party Under This Agreement. The respective obligations of each Party to effect the Merger and the other transactions contemplated herein shall be subject to the satisfaction, or waiver, at or prior to the Closing Date of the following conditions:
Section 7.1.1 Stockholder Approval. The Stockholder Approval shall have been obtained.
Section 7.1.2 HSR Act, Government Consents and Approvals. All filing and waiting periods applicable (including any extensions thereof) to the consummation of the Merger under the HSR Act shall have expired or been terminated.
89
Section 7.1.3 Consents and Approvals.(i) There shall be no statute, rule, regulation or executive or any other order or similar action of any Governmental Entity, which would render the Parties unable to consummate the Merger or make the Merger illegal or prohibit, restrict or delay consummation of the Merger (other than a de minimus civil violation of any Law that does not affect the ability of the Surviving Corporation, Parent or their Affiliates to obtain and maintain licenses, certifications, Company Health Care Permits, approvals, provider numbers and authorizations for the ownership and operation of Company Health Care Businesses or participation in any Company Health Care Program) and (ii) Parent shall have obtained the Government Consents necessary to operate one hundred (100) percent of the Company Health Care Facilities, as currently operated by and through the Company Subsidiaries, or, if Parent has obtained at least ninety-five (95) percent but less than one hundred (100) percent, the Company and Parent shall have been able to implement an Alternative Structure in compliance with all Legal Requirements as to those Company Health Care Facilities for which Parent did not obtain Government Consents.
Section 7.1.4 No Injunctions or Restraints. No Law or Order issued by any court of competent jurisdiction or other Governmental Entity or other legal restraint or prohibition prohibiting the consummation of the Merger shall be in effect;provided,however, that each of the Parties shall have used its commercially reasonable best efforts to resist, resolve or lift, as applicable, any such Law or Order and shall have complied in all material respects with its obligations under Section 6.5;provided,further, that the right to assert this condition shall not be available to any Party whose breach of any provision of this Agreement results in the imposition of any such Order or the failure of such Order to be resisted, resolved or lifted, as applicable.
Section 7.2Additional Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger and the other transactions contemplated herein are also subject to the following conditions, any one or more of which may be waived in writing by Parent.
Section 7.2.1 Representations and Warranties. The representations and warranties of the Company set forth in this Agreement shall be true and correct as of the Effective Time as if made at and as of the Effective Time (except for those representations and warranties which address matters only as of an earlier date which shall have been true and
90
correct as of such earlier date), disregarding for these purposes any exception in such representations and warranties relating to Significance, materiality or a Company Material Adverse Effect, except for such failures to be true and correct which, individually or in the aggregate, do not result in a Company Material Adverse Effect;provided, however,that this exception does not limit the requirement that the other conditions in this Section 7.2 be satisfied or waived.
Section 7.2.2 Agreements and Covenants. The Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time.
Section 7.2.3 Officer’s Certificate. Parent shall have received a certificate of an executive officer of the Company to the effect set forth in Sections 7.2.1 and 7.2.2.
Section 7.2.4That none of the following events have occurred:
(i) any one or more of the Property Restrictions or other Liens (other than any Permitted Encumbrances) that materially impairs the use or occupancy of any one or more of the Company Properties causes one or more of the Institutional Lenders to reduce one or more of their loan amounts or require reserves or funding holdbacks, individually or in the aggregate, in an amount equal to or greater than $75,000,000;
(ii) any one or more violations of any Land Use Requirement or Environmental Laws with respect to any one or more of the Company Properties that causes one or more of the Institutional Lenders to reduce one or more of their loan amounts or require reserves or funding holdbacks, individually or in the aggregate (together with any reduction, reserve or holdback determined under Section 7.2.4(i)) in an amount equal to or greater than $125,000,000; the term “Land Use Requirement” shall mean zoning, building code and other land use Law regulating the use or occupancy of any real property or the activities conducted thereon that are imposed by any Governmental Entity having jurisdiction over such real property but shall exclude any amounts attributable to deferred maintenance or capital expenditures unless the subject thereof, if not remediated, would constitute a violation of any Land Use Requirement or Environmental Law; or
91
(iii) if Purchaser has complied with its obligations arising pursuant to Section 6.5.2, failure to obtain any necessary License required in order to make consummation of the Merger not in violation of any applicable Laws or, as applicable, failure to implement, in compliance with Laws, an Alternative Structure, in each case primarily as a result of (x) an action or omission by the Company or any Company Subsidiary in connection with an application for any such required License, or (y) a current practice of the Company or any Company Subsidiary not in compliance with Legal Requirements.
Section 7.2.5The holders of no more than ten (10) percent of the Shares (other than Shares beneficially owned, directly or indirectly by Parent or any Person acting in concert with Parent) shall have perfected appraisal rights under Section 262 of the GCL.
Section 7.2.6Except as set forth in Section 7.2.6 of the Company Disclosure Schedule, no Company Health Care Permit necessary to the operation of the Company, the Company Subsidiaries or the Company Health Care Businesses, shall have been suspended, revoked or terminated and neither the Company nor any Company Subsidiary shall have been excluded, debarred or disqualified from participation in any Company Health Care Program.
Section 7.2.7The Company shall have given a redemption notice to the holders of the 77/8% Notes and the Trustee under the 77/8% Notes Indenture prior to the Effective Time as contemplated by section 6.17.1 and any Liens securing such notes shall have been released;provided,that Parent has provided the funds to implement the satisfaction and discharge thereof. The other indebtedness for borrowed money of the Company and Liens securing such indebtedness shall be paid off and released at the Effective Time, other than Permitted Debt,provided, that the Parent has arranged for provision of funds to implement such redemption, pay-off and release.
Section 7.2.8Subject to the baskets provided in Sections 7.2.4(i) and (ii), with respect to each of the Company Owned Properties and the Company Leased Health Care Facilities, Land America Title Insurance Company located at 1050 Wilshire Drive, Suite 310, Troy, Michigan, 48084,Attention: Carol Ann Martinelli and such co-insurers or re-insurers as reasonably required by Parent and/or any institutional lender similar to Wachovia Bank, National Association, Capital Source Finance LLC and Credit Suisse First Boston LLC (the “Title
92
Company”), shall issue owner, leasehold owner and mortgagee title insurance policies effective as of Closing, in each case at reasonable rates for the respective states, subject only to the Permitted Encumbrances with such endorsements and affirmative coverages reasonably requested by such an institutional lender and available for issuance by the Title Company.
Section 7.2.9 Leasehold Consents. All of the consents and approvals specified in Section 7.2.9 of the Company Disclosure Schedule shall have been obtained, except for such consents which, if not so obtained, would, upon the consummation of the transactions contemplated by this Agreement, not reasonably be expected to have a Company Material Adverse Effect.
Section 7.3Additional Conditions to Obligations of the Company. The obligation of the Company to effect the Merger and the other transactions contemplated herein are also subject to the following conditions, any one of which may be waived in writing by the Company.
Section 7.3.1 Representations and Warranties. The representations and warranties of Parent and Merger Sub set forth in this Agreement shall be true and correct as of the Effective Time as if made at and as of the Effective Time (except for those representations and warranties which address matters only as of an earlier date which shall have been true and correct as of such earlier date), disregarding for these purposes any exception in such representations and warranties relating to materiality, except for such failures to be true and correct which, individually or in the aggregate, do not have a material adverse effect on the ability of Parent or Merger Sub to perform its obligations hereunder or which would prevent or materially impede, interfere with, hinder or delay the consummation of the Merger;provided, however,that this exception does not limit the requirement that the other conditions in this Section 7.3 be satisfied or waived.
Section 7.3.2 Agreements and Covenants. Parent and Merger Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by Parent and/or Merger Sub on or prior to the Effective Time.
Section 7.3.3 Officer’s Certificate. The Company shall have received a certificate of an executive officer of Parent to the effect set forth in Sections 7.3.1 and 7.3.2.
93
Section 7.3.4 Solvency Opinion. The Company shall have received (i) the Solvency Opinion addressed to the Company and the Board on or before the date and in the form required by Section 6.13, and (ii) the “bring down” of the Solvency Opinion addressed to the Company Board as contemplated by Section 6.13.
Section 7.4Frustration of Closing Conditions. None of the Company, Parent or Merger Sub may rely on the failure of any condition set forth in Article 7 to be satisfied if such failure was caused by such Party’s failure to act in good faith to comply with this Agreement and consummate the transactions provided for herein.
Article 8
Termination, Amendment and Waiver
Section 8.1Termination. This Agreement may be terminated, and the Merger contemplated hereby may be abandoned, at any time prior to the Effective Time, by action taken or authorized by the Board of Directors of the terminating Party or Parties, whether before or after the Stockholder Approval:
(a) By mutual written consent of Parent and the Company;
(b) by either Parent or the Company (if, in the case of the Company, it complied with Section 6.4 in all material respects):
(i) if the Stockholder Approval is not obtained at the Company Stockholders’ Meeting or any adjournment thereof at which this Agreement has been voted upon;
(ii) if the Merger shall not have been consummated by March 1, 2006 (the “Termination Date”);provided,however, that the right to terminate this Agreement under this Section 8.1(b)(ii) shall not be available to any Party whose breach of any provision of this Agreement has been the cause of, or resulted in, the failure of the Merger to occur on or before the Termination Date;provided,further, that notwithstanding the previous limitation, the Termination Date shall not be extended in perpetuity until such breach is cured, but the non-breaching Party shall be obligated to elect either: (i) to close over such breach following a reasonable period of time necessary to cure such breach, or (ii) to terminate this Agreement on a
94
termination, the Company shall pay Parent the lesser of (x) the BIF Deposit at the time of such termination (including funds available under the Letter of Credit) and (y) $60,000,000. Any amount paid pursuant to this Section 8.4.1, whether characterized as Parent Expenses or otherwise, the “Termination Fee”. The Termination Fee (including any Parent Expenses) shall be paid by wire transfer of immediately available funds to an account designated in writing to the Company by Parent. For the avoidance of doubt, in no event shall the Company be obligated to pay, or cause to paid, the Termination Fee (including any Parent Expenses) on more than one occasion.
(i) pursuant to Section 8.1(b)(ii), and on the date of such termination the conditions set forth in Sections 7.1.1, 7.1.2, 7.1.4, 7.2.1 and 7.2.2 have been satisfied or, in the case of any such conditions required to be satisfied on the Closing Date or as of the Effective Time, would be reasonably capable of being satisfied on the date of termination;
(ii) pursuant to Section 8.1(c)(i) and on the date of such termination the conditions set forth in Sections 7.1.2, 7.1.4, 7.2.1 and 7.2.2 have been satisfied or, in the case of any such conditions required to be satisfied on the Closing Date or as of the Effective Time, would be reasonably capable of being satisfied on the date of termination;
interest and/or use other means (including, without limitation, letters of credit, surety bonds and other similar arrangements) to ensure the payment of such amounts as may become necessary to effect indemnification pursuant to such contracts or otherwise.
SECTION 6. AMENDMENT OR REPEAL. Any repeal or modification of the foregoing provisions of this Article V shall not adversely affect any right or protection of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President or a Vice President, and the Chief Financial Officer or the Treasurer or an Assistant Treasurer or Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the corporation. Any or all the signatures may be facsimiles.
SECTION 2. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall not be required to, issue fractions of a share. If the Corporation does not issue fractions of a share, the Board of Directors shall determine how to compensate those entitled to such fractions of a share.
SECTION 3. LOST CERTIFICATES. A new certificate of stock may be issued in the place of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of the certificate or the issuance of the new certificate.
SECTION 4. TRANSFER OF SHARES. The shares of stock of the corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon transfer the old certificates shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be canceled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer.
exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of the meeting, nor more than sixty (60) days before any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 6. DIVIDENDS. Subject to the provisions of the corporation’s certificate of incorporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the directors shall deem conducive to the interests of the corporation.
SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall be determined by resolution of the Board of Directors.
SECTION 8. CHECKS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers or agent or agents of the corporation, and in such manner, as shall be determined from time to time by resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required by these by-laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of the mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by statute.
Whenever any notice whatsoever is required to be given under the provisions of any law, or under the provisions of the corporation’s certificate of incorporation or these by-laws, a waiver thereof in writing, signed by the person or persons entitled to that notice, whether before or after the time stated therein, shall be deemed equivalent to that notice.
These by-laws may be altered or repealed and by-laws may be made at any annual meeting of the stockholders or at any special meeting thereof if notice of the proposed alteration or repeal of the by-law or by-laws to be made be contained in the notice of that special meeting, by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat or by action without a meeting of stockholders pursuant to Section 7 of Article II of these
