ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement"), dated as of the 11th day
of February 2005, is made and entered into by and between FC PROPERTIES VI, LLC,
its assigns or designees, a Delaware limited liability company ("Purchaser"),
and PLAINFIELD MERIDIAN LIMITED PARTNERSHIP, CATON MANOR MERIDIAN LIMITED
PARTNERSHIP, FREDERICK MERIDIAN LIMITED PARTNERSHIP, HAMILTON MERIDIAN LIMITED
PARTNERSHIP, RANDALLSTOWN MERIDIAN LIMITED PARTNERSHIP, MOORESVILLE MERIDIAN
LIMITED PARTNERSHIP, and SPENCER MERIDIAN LIMITED PARTNERSHIP, all Maryland
limited partnerships (collectively "Seller"). MERIDIAN HEALTHCARE GROWTH AND
INCOME FUND, L.P. ("MHGIF"), a Maryland limited partnership, joins herein for
the limited purposes (and only for the limited purposes) set forth in Section
12.20 hereof.
RECITALS
A. Seller owns and operates certain skilled nursing facilities
("Facilities") located in the States of New Jersey, North Carolina, and Maryland
(collectively, the "States"), together with the real property and all
appurtenances thereto, all as more particularly described on Exhibit A-1.
B. The parties hereto desire to enter into this Agreement pursuant to which
Purchaser will purchase from each Seller all of its rights in the real property
on which the Facilities are located, as more particularly described on Exhibit
B-1 (the "Real Property"), and all of its interest in or rights to use of, if
any, the equipment, furniture, furnishings, fixtures, inventory, vehicles, if
any, patient records and reports, the contracts described on Section 1.3,
Schedules 2.8(a) and 2.8(b) and 2.11, the trade names, trademarks, software and
other intangible property described on the Schedules referred to in Section
2.19, all bank accounts, cash, cash equivalents, securities and accounts
receivable (including third party settlements), prepaid accounts, workers'
compensation receivables and dividends, real estate and insurance escrows, and
tangible personal property owned and/or leased by Seller and located at the Real
Property and/or used primarily in connection with the operation of the
Facilities, with the exception of certain "Excluded Assets", as hereinafter
defined (the "Personal Property").
C. Purchaser shall assume certain specified contractual obligations of
Seller upon the terms and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and of the mutual
agreements, representations, warranties, conditions and covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Transfer of Assets. For the consideration hereinafter provided,
Seller, in accordance with the terms and subject to the conditions hereof, shall
convey, transfer and assign to Purchaser at the Closing (as defined in Section
1.2 below), and Purchaser shall purchase from Seller, the Assets. For purposes
of this Agreement, the term "Assets" shall mean all of the Real Property and the
Personal Property, with the exception of the following items (the "Excluded
Assets"):
(a) Inventory disposed of in the ordinary course of business
prior to the Closing Date;
(b) Seller's business and financial records located at or used
in connection with the operation or management of the Facilities;
(c) Those additional items set forth on Schedule 1.1 attached
hereto;
(d) Any contracts other than the Contracts (as defined in
Section 1.3).
1.2 Closing.
(a) General. Subject to Section 1.2(b), unless this Agreement
shall have been terminated or abandoned pursuant to the provisions of Article XI
hereof, or unless otherwise agreed to in writing by the parties hereto, all
documents required from Seller ("Seller Documents") and from Purchaser
("Purchaser Documents") and the cash portion of the Purchase Price in order to
effectuate the consummation of a closing under this Agreement (the "Closing")
shall be delivered by the respective parties at 10:00 a.m., Eastern Standard
Time, on that date which is the last day of the calendar month in which the
Seller receives the Requisite Unitholder Approval described in Section 2.2(a)
hereof, but not later than December 31, 2005 (provided that if receipt of the
Requisite Unitholder Approval is less than ten (10) business days before the end
of the calendar month, then the Closing shall be on the last day of the next
calendar month), at the offices of Purchaser's counsel in Virginia Beach, VA,
effective as of such date, at 11:59:59 p.m., Eastern Standard Time, or at such
other date, time and place as the parties hereto may fix by mutual consent (the
"Closing Date"). Notwithstanding the foregoing, Seller may deliver all of Seller
Documents required hereunder with respect to any Closing to the escrow agent
Lawyer's Title Insurance Corporation and/or Purchaser's counsel on or before the
applicable Closing Date (to hold in escrow in accordance with customary
conveyancing practices subject to the consummation of such Closing) by mail or
overnight courier. In addition, in the event that the Seller's proceeds of the
Purchase Price are not delivered to Seller's account by 2:00 P.M. Eastern
Standard Time on the Closing Date, then the adjustments and prorations described
in Section 10.5 and otherwise herein shall be recalculated as of the next day
(or, if later, the first day on which Seller has such funds by 2:00 P.M. Eastern
Standard Time).
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1.3 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be Fifty Million Dollars ($50,000,000.00), subject to further
adjustments, if any, as provided for in this Agreement. Purchaser agrees that in
addition to the payment of Purchase Price, (a) the Purchaser's designee will
assume Seller's obligations from and after the Closing Date under (i) those
certain leases set forth on Schedule 2.9(g) and on Schedule 2.11 attached
hereto, and (ii) all contracts set forth on Schedule 2.8(a) and all Patient Care
Contracts described in Section 2.8(b) and set forth on Schedule 2.8(b); and (b)
Purchaser shall cause its designee to pay the Seller the Net Working Capital in
accordance with Section 10.5(a) (collectively "Purchaser Designee's
Obligations"). The contracts and leases listed on Schedule 2.8(a) and 2.8(b) and
Schedule 2.11 are collectively referred to as the "Contracts."
1.4 Earnest Money. Within three (3) business days of the execution and
delivery of this Agreement by all parties hereto, Purchaser shall deliver to
Lawyer's Title Insurance Corporation ("Escrow Agent") (pursuant to its standard
form escrow agreement reasonably acceptable to Purchaser and the Seller) an
earnest money deposit in the amount of One Million Dollars ($1,000,000) (the
"Deposit"). The Deposit shall be held in an interest bearing account. Any
accrued interest shall be transferred with the Deposit.
1.4.1 In the event the transactions contemplated under this Agreement shall
close as provided herein, the Deposit shall be applied against the Purchase
Price at Closing, as provided in Section 10.5(e) hereof.
1.4.2 In the event that the transactions contemplated under this Agreement
shall fail to close as provided herein due to a breach of this Agreement by the
Purchaser, or in the event of any other breach or default by Purchaser
hereunder, or any termination of this Agreement by Seller pursuant to Section
11.1(e), then the Escrow Agent shall pay the Deposit pursuant to Section 11.3 to
the Seller as liquidated damages.
1.4.3 In the event the Agreement is terminated as a result of (i) a breach
of this Agreement by the Seller (past any applicable notice and grace period),
(ii) the failure of any condition to closing contained in Article VIII or
Article IX to be satisfied (past any applicable notice and grace period, to the
extent that the failure of such condition relates to any breach or default of
Seller), unless such failure of condition results from any breach or default on
the part of Purchaser, or (iii) termination of the Agreement in accordance with
paragraph 11.1(a), (d) or (f), then the Escrow Agent shall pay the Deposit to
the Purchaser, and the parties shall have no further liability hereunder (except
as set forth in Section 12.3 or as may be expressly provided herein with respect
to liability of the parties following termination).
1.5 Payment of Purchase Price.
At Closing, Purchaser shall pay the remainder of the Purchase
Price to Seller, adjusted for any credits and additions to Purchaser or Seller
as specified in this Agreement, by wire transfer of immediately available
federal funds to accounts designated in writing by Seller.
1.6 Assumed Liabilities. At the Closing, Purchaser shall cause Purchaser's
designee to assume (i) the Contracts, (ii) the liabilities assumed by
Purchaser's designee as contemplated by the Net Working Capital calculation set
forth in Section 10.5(a), and (iii) the Purchaser
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Designee's Obligations, (iv) all other obligations of the Purchaser or its
designee under Section 10.5 hereof, and (v) all other obligations and
liabilities expressly set forth in this Agreement, which are expressly to be
assumed by Purchaser (collectively the "Assumed Liabilities"). Notwithstanding
the foregoing, neither Purchaser nor Purchaser's designee shall be obligated to
assume (i) certain so-called "deficit loans" to the Seller from an affiliate of
the Seller, Meridian Healthcare Investments, Inc., which shall be discharged and
extinguished as of Closing, and (ii) deferred management fees owed to the
Genesis Eldercare Network Services, Inc. ("Manager") under separate agreements
which will be paid from the Seller's proceeds of the Purchase Price paid at
Closing (the "Excluded Liabilities").
1.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets acquired under this Agreement as provided and as described on
Schedule 1.7 attached hereto. Seller and Purchaser each hereby covenant and
agree that neither will take a position on any income tax return, before any
governmental agency charged with the collection of any income tax, or in any
judicial proceeding that is any way inconsistent with the terms of this Section
1.7.
1.8 Due Diligence. Seller and Purchaser hereby acknowledge that, as of
the date of execution of this Agreement by the parties, Purchaser has not yet
completed its due diligence with respect to the Assets. Beginning on the date
hereof and continuing until 5:00 p.m. on that date which is forty-five (45) days
after full execution of this Agreement by Purchaser and Seller (the "Diligence
Period"), if Purchaser determines, in its sole and absolute discretion, that
Purchaser does not desire to purchase the Assets based on the results of
Purchaser's due diligence, Purchaser shall have the right to give written notice
to Seller electing to terminate this Agreement, provided such notice is
delivered to Seller prior to 5:00 p.m. on the last day of the Diligence Period.
If such notice of termination is so delivered on or before 5:00 p.m. on the last
day of the Diligence Period, then this Agreement shall be terminated, Purchaser
shall be entitled to the Deposit, and the parties shall thereafter be released
from all further obligations under this Agreement, except those expressly
provided to survive termination. If Purchaser does not terminate this Agreement,
by timely notice given according to the requirements of this Section 1.8, time
being of the essence with respect thereto, then the Purchaser's right to
terminate this Agreement pursuant to this Section 1.8 shall be automatically
waived and extinguished, and the Purchaser shall be obligated to proceed with
the transaction in accordance with all other provisions of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement, and to
consummate the transactions contemplated herein, Seller, as to itself,
represents and warrants the following:
2.1 Organization and Qualification. Sellers are limited partnerships duly
organized and validly existing and in good standing under the laws of each of
their respective States of organization, with full power and authority to carry
on their business as currently being conducted and to own or lease and operate
the Assets they own or lease as and in the places now owned, leased or operated.
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2.2 Authority; Binding Effect.
(a) Subject to the approval of the sale of the Assets as
contemplated by this Agreement by a majority vote of the unitholders of MHGIF
("Requisite Unitholder Approval"), Seller has, and at the Closing will have, the
full and unrestricted corporate right, power and authority to execute, deliver
and perform this Agreement and to consummate the transactions and perform all
obligations contemplated hereby and in all agreements, instruments and documents
being or to be executed and delivered by Seller in connection with such
transactions ("Related Documents").
(b) Subject to receipt of the Requisite Unitholder Approval,
the consummation of the transactions contemplated herein has been duly
authorized and approved by the requisite partnership action of MHGIF and of
Seller.
(c) To the Seller's knowledge, set forth on Schedule 2.2(c-1)
are all material permits, licenses, Medicaid, Medicare and other material
provider agreements and other authorizations issued by governmental authorities
in connection with the ownership, maintenance or operation of the Facilities,
including but not limited to each license issued by a State for operation of a
Facility as a skilled nursing facility (collectively the "Licenses"), and to
Seller's knowledge, except as set forth on Schedule 2.2(c-2), the Licenses are
in good standing and Seller has not received written notice that a Seller is in
violation of any restriction, rule or regulation affecting possession and use
thereof.
(d) This Agreement and each such other agreement, instrument
and document, upon due execution and delivery by Seller, will constitute the
legal, valid, and binding obligation of Seller, enforceable in accordance with
its respective terms.
2.3 [Reserved.]
2.4 Governmental Authorities. Except as set forth on Schedule 2.4
attached hereto, to Seller's knowledge, the Seller is not required to submit any
notice, report or other filing with any federal, state, municipal, foreign or
other governmental or regulatory authority in connection with its execution or
delivery of this Agreement or any of the Related Documents or the consummation
of the transactions contemplated hereby, and to Seller's knowledge, no consent,
approval or authorization of any governmental or regulatory authority is
required to be obtained by a Seller in connection with the execution, delivery
and performance of this Agreement.
2.5 Taxes. Except as set forth in Schedule 2.5 attached hereto, all
real property taxes and assessments, and all personal property taxes and
assessments, in connection with the Assets allocable to the period prior to
Closing have been paid or, by the time of Closing, will be paid or prorated
between the parties under Section 10.5 hereof. To the Seller's knowledge, (i)
all income, sales and franchise taxes due and payable by Seller, if any, and all
interest and penalties thereon, if any, have been paid in full, (ii) all tax
returns required to be filed by the Seller, if any, have been timely filed,
(iii) none of the partnerships constituting Seller is subject to a claim for
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deficiency or other action in connection with taxes, and (iv) no tax returns of
Seller have been or are being examined by the Internal Revenue Service or any
state or local taxing authority.
2.6 No Defaults. To the knowledge of the Seller, except as set forth on
Schedule 2.6 attached hereto, and subject to the Requisite Unitholder Approval,
the execution, delivery and performance of this Agreement and any of the Related
Documents by Seller does not and will not:
(a) Conflict with or result in any breach of the provisions
of, or constitute a default under Seller's limited partnership agreement, as
amended;
(b) Violate any restriction to which Seller is subject or,
with or without the giving of notice, the passage of time, or both, violate (or
give rise to any right of termination, cancellation or acceleration under) any
mortgage, deed of trust, material lease, indenture or other material agreement
or instrument to which Seller is a party, or by which it or its property is
bound, which will not be satisfied or terminated on or prior to the Closing as a
result of the transactions contemplated in this Agreement, or result in the
termination of any such instrument or termination of any provisions in such
instruments that will have a material adverse effect upon or result in the
creation or imposition of any lien, charge or encumbrance upon the Assets;
(c) Create any liens or other encumbrances on the Assets in
favor of third parties; or
(d) Result in the breach or violation of any of the warranties
and representations herein set forth by Seller.
2.7 Absence of Certain Changes or Events. From September 30, 2004, the
date of the most recent consolidated financial statements of Seller, to the date
of execution of this Agreement by the parties, Seller has not suffered any
Material Adverse Change (as defined herein) in the Facilities. For purposes of
this Section 2.7(a), "Material Adverse Change" shall be defined as either (i) a
decrease of 15% or more in the percentage of occupancy of any Facility, or (ii)
a decrease of 5% or more in the aggregate percentage of occupancy at all of the
Facilities.
2.8 Contracts.
(a) Schedule 2.8(a) attached hereto includes without
limitation a true and correct list as of the date of this Agreement of all
outstanding contracts or agreements to which a Seller is a party relating
primarily to the Facilities, and Seller have provided or made available to
Purchaser true and complete copies of each such written contract. To Seller's
knowledge, there is no material default existing or continuing by Seller, of any
other party, under the terms of any contracts listed on Schedule 2.8(a) hereto,
and to Seller's knowledge, each contract is in full force and effect and is
valid and enforceable by such Seller in accordance with its terms, assuming the
due authorization, execution and delivery thereof by each of the other parties
thereto.
(b) Included on Schedule 2.8(b) are specimen form patient
admission agreements and/or life care contracts with residents of the
Facilities, if any, or with any other
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persons or organizations ("Patient Care Contracts"). Except as set forth on
Schedule 2.8(b) attached hereto, to the knowledge of Seller, no Patient Care
Contract deviates in any substantial respect from such standard forms. To the
knowledge of Seller, all residents of the Facilities have executed Patient Care
Contracts.
2.9 Title to Property and Related Matters.
(a) Except for (i) the Assumed Liabilities, (ii) the matters set forth on
Schedule 2.9(a); (iii) statutory liens for taxes and other impositions which are
not yet delinquent; (iv) all matters disclosed in the Title Reports and the
Surveys and not timely objected to by Purchaser in writing, or timely objected
to by Purchaser in writing but thereafter cured or corrected, pursuant to
Section 4.12 hereof, (v) the other matters defined as "Permitted Liens" in
Section 4.12(b) hereof, and (vi) all zoning laws, subdivision laws, building
codes and other laws and regulations (collectively the "Allowed Liens"), to the
Seller's knowledge, Seller has received no written notice of (a) any material
violations of any covenants or restrictions recorded in the public land records
against the Real Property, or (b) any material violations of any zoning codes or
ordinances applicable to the Real Property. Seller has no knowledge of any
agreements, documents or instruments which are not recorded among the land
records but which materially and adversely affect the marketability of title to
any Facility.
(b) To Seller's knowledge, except for the Allowed Liens, and as set forth
on Schedule 2.9(b), the Personal Property is not subject to any (A) contract of
sale or lease, or (B) mortgage, security interests, encumbrance, lien or charge.
(c) To Seller's knowledge, Seller has not received any written notice of a
violation of any zoning ordinance or regulation with respect to any of the
Facilities.
(d) At the Closing, Seller shall not be indebted to any contractor,
laborer, mechanic, materialman, architect or engineer for work, labor or
services performed or rendered, or for materials supplied or furnished, in
connection with the Real Property for which any such person could lawfully claim
a lien against the Real Property, except for any Assumed Liabilities, and except
to the extent Purchaser is indemnified or otherwise protected by bonding or
title insurance with respect to such matters at the expense of Seller as
reasonably satisfactory to Purchaser.
(e) There are no condemnation or eminent domain proceedings pending, or, to
the knowledge of Seller, threatened or contemplated against the Real Property or
any part thereof, and Seller has not received any written notice of the desire
of any public authority or other entity to take or use the Real Property or any
part thereof. Between the date hereof and Closing, Seller will give Purchaser
prompt written notice of any actual or any threatened or contemplated
condemnation of any part of the Real Property of which it receives written
notice.
(f) To Seller's knowledge, there are no outstanding options or rights of
first refusal to purchase the Real Property, or any portion thereof or interest
therein, other than the rights of Manager under management agreements with
Seller which are to be extinguished simultaneously with the execution of this
Agreement.
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(g) To Seller's knowledge, there are no parties (other than Seller) in
possession of the Real Property, or any portion thereof, other than (i) parties
under the Contracts, (ii) tenants under any leases listed in Schedule 2.9(g)
hereto who are in possession of space to which they are entitled under such
leases, and (iii) patients pursuant to the Patient Care Contracts described in
Schedule 2.8(b).
2.10 Hazardous Substances. For purposes of this Agreement,
"Environmental Laws" means the Resource Conservation and Recovery Act (RCRA), 42
U.S.C. Section 6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), 42 U.S.C. Sections 9601 et seq., the
Clean Water Act, 33 U.S.C. Section 1251 et seq., and all other applicable state,
county, municipal, administrative or other environmental, hazardous waste or
substance, health and/or safety laws, ordinances, rules, regulations and
requirements pertaining to the environmental or ecological conditions on, under
or about the Real Property. For purposes of this Agreement, "Hazardous
Substance" means any substance or material which gives rise to liability under
any of the Environmental Laws; but provided that the term "hazardous substances"
as used herein excludes Common Products as herein defined.
(a) To Seller's knowledge, the Real Property does not contain
any contamination, by spill, leakage, dumping or otherwise, of any Hazardous
Substance in violation of any Environmental Law, except for Hazardous Substances
typically used in, and in quantities necessary for the day-to-day operation of,
the Facilities and which are commonly used in other similar facilities,
including but not limited to cleaning fluids, insecticides, medical waste and
medicines (the "Common Products").
(b) To Seller's knowledge, Seller has not received any written
notice from any governmental authority that has determined that there is a
presence, release or threat of release or placement on, in or from the Real
Property, or otherwise relating to the generation, transportation, storage,
treatment, or disposal at the Real Property, of any Hazardous Substance. Seller
shall notify Purchaser promptly of its receipt of any such written notice.
(c) To Seller's knowledge, there are no ongoing or unresolved
actions, written communications or written agreements with any governmental
authority or agency (federal, state or local) or any private entity to which
Seller or, to Seller's knowledge, any prior owner of the Real Property, is a
party relating in any way to the presence, release, threat of release or
placement on, in or from the Real Property, or the generation, transportation,
storage, treatment or disposal at the Real Property, of any Hazardous Substance,
except as may be disclosed in the written reports delivered to Purchaser as
described in Section 2.10(e) below.
(d) To Seller's knowledge, there are no pending or threatened
investigations, proceedings or litigation with any person, entity or government
agency in which a party alleges the presence of, a release of or threat of any
Hazardous Substance.
(e) Seller has delivered to Purchaser copies of all reports
relating to the presence of Hazardous Substances (or lack thereof) at the
Facilities which are in the Seller's
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possession and prepared in connection with the Seller's financing of the
Facilities in the calendar year 2000.
2.11 Leases. Schedule 2.11 attached hereto contains a true and correct
list of all material leases of all real property, machinery, equipment and other
tangible property leased to Seller which relate primarily to the Facilities. To
Seller's knowledge, except as disclosed on Schedule 2.11, each lease described
thereon is in full force and effect; to Seller's knowledge, there has not been
and there is no ongoing issue or dispute as to past rental payments, and all
rents have been paid when and as due; in each case, such Seller, as lessee, has
been in peaceable possession since the commencement of the original term of such
lease and neither such Seller, nor, to the knowledge of Seller, any other party
to such lease is in default in any material respect thereunder; to Seller's
knowledge, there exists no occurrence, event, condition or act which, upon the
giving of notice or the lapse of time or both, would become a default by any
Seller (or, to the knowledge of Seller, any lessor) under any such lease; and to
Seller's knowledge, except as noted on Schedule 2.11, none of such leases by its
terms requires the consent of the lessor thereof to be obtained in order to
consummate its transfer to Purchaser as contemplated hereby without violation
thereof.
2.12 [Intentionally deleted.]
2.13 Transfer of Assets. On the Closing Date, all of the Assets,
except Excluded Assets, will be transferred to Purchaser pursuant to this
Agreement.
2.14 No Litigation. Except as set forth on Schedule 2.14 attached
hereto, to Seller's knowledge, there are no actions, suits, claims,
governmental investigations or other legal or administrative proceedings, or
any orders, decrees or judgments in progress, pending or in effect, or, to the
knowledge of Seller, threatened against or relating to Seller, the Facilities,
Seller's operation of the Facilities, any of the Assets or against or relating
to the transactions contemplated by this Agreement, that if asserted and
decided adversely would materially and adversely affect the Assets, Seller or
Seller's operation of the Facilities (including, but not limited to, class
action or third party suits concerning reimbursements), and there are none
pending in the state courts located in the States, or in any of the federal
courts in the States, or, to the knowledge of Seller, pending in other
jurisdictions or threatened in writing, at law or in equity, by or before any
federal, state or municipal court or other governmental agency, department,
commission, board, bureau or instrumentality.
2.15 Compliance with Medicare and Medicaid Law.
(a) Except as set forth on Schedule 2.15 attached hereto,
there is no material litigation, claim, proceeding or investigation currently
pending against a Seller or relating to the Facilities for any violation or
alleged violation of, and, to Seller's knowledge, Seller has received no written
notice of any threat of any suit, action, claim, dispute, investigation, agency
review or other proceeding pursuant to or involving, (i) the False Claims Act,
31 U.S.C. ss.ss.3729 et seq., (ii) the Civil Monetary Penalties Law, 42 U.S.C.
ss.1320a-7a, (iii) federal or state anti-kickback statutes, including but not
limited to 42 U.S.C. 1320a-7b, (iv) federal or state referral laws, including
but not limited to 42 U.S.C. ss.1395nn; (v) regulations promulgated pursuant to
any of
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the foregoing statutes, or (vi) any other federal or state law or
regulation of general applicability to health care fraud, governing or
regulating the management of health care providers, or governing or regulating
medical billing or reimbursement, including all applicable Medicare and Medicaid
statutes and regulations (collectively the "Medicare/Medicaid Laws").
(b) To Seller's knowledge, Seller, and each of the Facilities
have timely filed all material forms, applications, reports, statements, data
and other information required to be filed with federal, state or local entities
under federal or state laws or regulations in connection with the
Medicare/Medicaid Laws, including but not limited to cost reports required to be
filed with respect to the Facilities, as more fully set forth in Section 2.23(b)
hereof.
2.16 Surveys. To Seller's knowledge, true and complete copies of all
existing survey reports for Medicare/Medicaid purposes in the possession of
Seller with respect to the Facilities will be provided to Purchaser promptly
following execution of this Agreement.
2.17 No Employees. Seller currently has, and to Seller's
knowledge Seller has not ever had, any employees.
2.18 [Intentionally deleted.]
2.19 Intellectual Property. Other than rights to use certain names
associated with the Facilities, and any software or other computer programs used
in connection with the operation of the Facilities, Seller has no Intellectual
Property of any kind. For these purposes, "Intellectual Property" shall mean,
collectively, all: (i) United States or foreign patents, patent applications,
patent disclosures, and all renewals, reissues, divisions, continuations,
extensions or continuations-in-part thereof (collectively, "Patent Properties");
(ii) trademarks, service marks, trade dress, trade names, fictitious names,
corporate names, and registrations and applications for registration thereof
(collectively, "Trademark Properties"); and (iii) copyrights (registered or
unregistered), registrations and applications for registration thereof,
including all renewals, derivative works, enhancements, modifications, updates,
new releases or other revisions thereof (collectively, "Copyright Properties")
2.20 Capital Expenditures. Except as set forth in Schedule 2.20, and
except for routine expenditures for repairs and replacements in connection with
the ongoing maintenance and upkeep of the Facilities, which are covered in
Seller's annual budgets for the Facilities and which are to be assumed by
Purchaser, to Seller's knowledge, as of the date hereof, Seller does not have
any outstanding contracts for capital expenditures relating to the Facilities,
nor does it have any agreement, obligations or commitments for capital
expenditures relating to the Facilities, including, without limitation,
additions to property, plant, equipment or intangible capital assets.
2.21 Absence of Notices. Except as disclosed on Schedule 2.21, to
Seller's knowledge, Seller has not received any written notice that any customer
or supplier of a Seller intends to discontinue, substantially alter prices or
terms to, or significantly diminish its relationship with the Facilities as a
result of the transaction contemplated hereby or otherwise.
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2.22 Medicare and Medicaid Participation.
(a) For purposes of this provision, Medicare, Medicaid,
CHAMPUS, TRICARE and other federal, state or local governmental reimbursement
programs, or successor programs to any of the above, are referred to as
"Government Programs".
(b) To Seller's knowledge, except as disclosed on Schedule
2.22(b), and except for claims, actions and appeals in the ordinary course of
business, there are no material claims, actions or appeals pending or threatened
before any commission, board or agency, including any fiscal intermediary or
carrier, federal or state agency, with respect to any Government Program cost
reports or claims filed on behalf of Seller with respect to any Facility on or
before the date of this Agreement, or any disallowances by any commission, board
or agency in connection with any audit of such reports.
2.23 Third Party Payor Reimbursement. Seller has received no written
notice that any billing practices of Seller with respect to the Facilities to
all third party payors, including the Government Programs and private insurance
companies, have not been in compliance with any applicable laws, regulations and
policies of such third party payors and Government Programs in any material
respects or that Seller has billed or received any payment or reimbursement in
excess of amounts permitted by applicable law, except to the extent cured or
corrected.
2.24 Patient Records. Except as provided on Schedule 2.24, Seller has
received no written notice that patient records used or developed in connection
with the business conducted at the Facilities have not, prior to the date of
this Agreement, been maintained in accordance with any applicable federal, state
or local laws or regulations governing the preparation, maintenance of
confidentiality, transfer and/or destruction of such records.
2.25 Advance Payments and Patient Funds. The accounting for advance
payments and patient trust fund accounts provided to Purchaser by Seller
pursuant to the provisions of Section 10.4 hereof is accurate in all material
respects.
2.26 [Intentionally deleted.]
2.27 [Intentionally deleted.]
2.28 Licensed Beds. To Seller's knowledge, the count of skilled
nursing and adult care beds at the Facilities is as set forth on Exhibit 2.28.
2.29 Financial Statements. Attached hereto as Exhibit 2.29 are the
following financial statements (collectively, the " Financial Statements"): (a)
audited consolidated financial statements of MHGIF for the year ended December
31, 2003; (b) schedules to such consolidated statements with respect to each
individual Facility (which are not audited) for the year ended December 31,
2003; and (c) unaudited financial statements and scheduled statements for each
Facility for the nine (9) months ended September 30, 2004. To Seller's
knowledge, (i) the Financial Statements (including the notes thereto) and such
additional Financial Statements as may be delivered by Seller to Purchaser prior
to Closing have been prepared in accordance with
11
GAAP applied on a consistent basis throughout the periods covered thereby,
(ii) present fairly the financial condition of each of the Seller and Facilities
as of such dates and the results of operations of each of the Seller and
Facilities for such periods, (iii) are correct and complete in all material
respects, and (iv) are consistent with the books and records of each of the
Facilities in all material respects.
2.30 Professional Liability Insurance. Seller has professional
liability insurance on a "claims made" basis for all the Facilities with
coverage limits of One Million Dollars ($1,000,000.00) per occurrence and Five
Million Dollars ($5,000,000.00) in the aggregate ("Professional Liability
Insurance"). Attached hereto as Schedule 2.30 is a description of all such
policies, copies of which shall be provided to Purchaser upon request.
Notwithstanding anything else to the contrary herein, any reference in
this Agreement to "knowledge," "actual knowledge" or "best of knowledge" of
Seller, or the receipt of notices or other communications by Seller, shall be
deemed to mean the actual knowledge of, or receipt of notice or communication
by, Robert Huether, the Seller's asset manager with respect to the Facilities.
All representations and warranties set forth above in this Article II
shall survive the Closing for the limited period of, and shall expire at the end
of, twelve (12) months following the Closing Date.
PURCHASER HEREBY ACKNOWLEDGES AND AGREES THAT EXCEPT WITH RESPECT TO
THE FOREGOING REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE II ABOVE,
OR THAT WHICH MAY BE EXPRESSLY SET FORTH ELSEWHERE IN THIS AGREEMENT (IF AT
ALL), THE ASSETS ARE TO BE CONVEYED BY SELLER TO PURCHASER IN "AS-IS, WHERE-IS"
CONDITION WITHOUT WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO ZONING,
PHYSICAL CONDITION, ENVIRONMENTAL CONDITION, SUITABILITY FOR A PARTICULAR
PURPOSE OR ANY OTHER MATTER WHATSOEVER.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Purchaser represents and
warrants the following, each of which warranties and representations is material
to and is relied upon by Seller:
3.1 Corporate Organization; Etc. Purchaser is a Delaware limited
liability company duly organized and validly existing under the laws of the
State of Delaware with full power and authority to own all of its properties and
assets and to carry on its business as it is now being conducted.
3.2 Authorization, Binding Effect. Purchaser has, and at the Closing
the Purchaser and any designee or affiliate taking any interest in any of the
Assets will have, the full and unrestricted right, power and authority to
execute, deliver and perform this Agreement and to
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consummate the transactions and perform all obligations contemplated hereby and
in all agreements, instruments and documents being or to be executed and
delivered by Purchaser in connection with such transactions. The consummation
of the transactions contemplated herein have been duly authorized and approved
by all necessary corporate action of Purchaser and, at Closing, of Purchaser
and any designee or affiliate taking any interest in any of the Assets. This
Agreement and each such other agreement, instrument and document, upon due
execution and delivery by Purchaser, will constitute the legal, valid, and
binding obligation of Purchaser, enforceable in accordance with its terms.
3.3 No Violation. Purchaser is not subject to or obligated under, and
this Agreement and the transactions contemplated herein, as well as all
documents and agreements to be delivered hereunder, do not and will not conflict
with or violate, any certificate of incorporation, bylaw, law, or rule or
regulation of any governmental authority, or any mortgage, contract, agreement
or instrument, or any license, franchise or permit, or any order, writ,
injunction or decree.
3.4 No Litigation. Purchaser is not a party to, or defending or subject
to, any investigation, litigation, arbitration or other legal proceeding, nor is
any such legal proceeding threatened, which would have a material adverse effect
on Purchaser's ability to execute, deliver and perform this Agreement and the
documents and transactions contemplated hereby.
3.5 Truth of Warranties, Representations, and Statements. Without in
any way affecting the obligation of Purchaser under this Agreement, Purchaser
shall have the obligation throughout the period from the date of this Agreement
through and including the Closing Date to give Seller prompt written notice of
the material inaccuracy or material change in any representation or warranty
made by Purchaser in this Article III or on any Schedule attached hereto which
is disclosed to Purchaser or brought to Purchaser's attention in writing after
the date hereof.
All representations and warranties set forth above in this Article III
shall survive the Closing for the limited period of, and shall expire at the end
of, twelve (12) months following the Closing Date.
ARTICLE IV
COVENANTS OF SELLER
From the date hereof and until the Closing, except as otherwise
consented to or approved by Purchaser in writing, Seller covenants and agrees as
to its own operations as follows:
4.1 Regular Course of Business. Seller shall (a) operate the Facilities
in a manner substantially consistent with applicable law and past practices
(with the understanding that the Seller shall not be required to make any
capital expenditures for extraordinary repairs or replacements); (b) maintain
the Assets so as to meet any regulatory standards of any governmental agencies
with regulatory jurisdiction over the Facilities; (c) timely pay all rents and
other payments due on or before the Closing under, and use its commercially
reasonable
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efforts to otherwise maintain (except for expiration due to lapse of
time), all leases and contracts described herein in effect without change except
as expressly provided herein; (d) comply in all material respects with the
provisions of all laws, regulations, ordinances and judicial decrees applicable
to the operation of the Facilities, including, without limitation, compliance
with requirements of all Government Programs; (e) not make any material changes
or modifications in any agreement listed on Schedules 2.8(a) and 2.11 hereof or
incur any further obligations or surrender any rights thereunder other than as
routinely occur in the ordinary course of business; (f) not enter into any
agreements or leases which would have had to be disclosed on Schedule 2.8(a) or
Schedule 2.11 hereof had such agreements or leases been entered into prior to
the date hereof, other than in the ordinary course of business or as terminable
without penalty upon advance notice of thirty days or less; (g) keep in full
force and effect present insurance policies through the Closing Date or other
comparable insurance coverage; and (h) use its commercially reasonable efforts
to maintain all licenses in good standing as necessary to operate the
Facilities.
4.2 Absence of Employees. Seller will not hire or otherwise
engage any new employees.
4.3 Borrowing. Seller shall not create or permit to become effective
any mortgage, pledge, lien, encumbrance or charge of any kind upon the Assets,
other than (i) Permitted Liens, and (ii) any mortgages or other liens which are
expressly to be assumed by Purchaser and credited against the Purchase Price
hereunder or to be repaid and discharged as of Closing.
4.4 Full Access and Disclosure.
(a) Seller shall, upon request and reasonable advance notice from Purchaser,
afford to Purchaser and its counsel, accountants and other authorized
representatives reasonable access during business hours to its properties,
computer systems, books and records, in any way relating to the Assets and/or
the Facilities, including, but not limited to, the roof, all equipment (fixed
and movable), heating and cooling systems, and any and all vehicles, financial
data and records, operating data and other information reasonably requested,
including the most recent financial statements, cost reports, inspection
reports, plans of correction (all with respect to the past three (3) years),
current room rates (including dates and amounts of increases), census data and
patient mix, payroll information, Medicaid reports, employment agreements,
personnel policies, occupancy agreements with patients, leases, and all
contracts, agreements, and other documents relating to outside contractors,
vendors, consultants, or other outside parties relating to the Facilities and to
which any one or more of the Facilities are now or may become a party in order
that Purchaser may have full opportunity to make such reasonable investigations
of the Assets and the Facilities as it shall desire to make. Seller shall
furnish such additional financial and operating data and other information as
Purchaser and/or its representatives shall from time to time reasonably request.
Notwithstanding the foregoing, Purchaser expresslyacknowledges and agrees
that Seller shall not be obligated to furnish, nor shall Purchaser be entitled
to review or have access to, any confidential or proprietary documents or
information connected with the Property, including but not limited to opinions,
appraisals, internal memoranda or other
14
documents, internal work product or other similar documents, which are in the
possession or control of Seller.
IN ADDITION, NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, PURCHASER ACKNOWLEDGES AND AGREES THAT PURCHASER
SHALL BE RESPONSIBLE FOR PURCHASER'S OWN DUE DILIGENCE WITH RESPECT TO ALL
DOCUMENTS AND INFORMATION PROVIDED BY SELLER TO PURCHASER, INCLUDING THAT WHICH
IS MADE AVAILABLE TO PURCHASER AS DESCRIBED ABOVE, AND ANY ANALYSIS OF SUCH
DOCUMENTS AND INFORMATION SHALL BE AT PURCHASER'S OWN RISK.
(b) All such inspections and investigations by third party agents described
above shall be completed at Purchaser's risk without any liability to Seller,
regardless of cause. Purchaser hereby agrees to indemnify and holds harmless
Seller against any claims, damages, losses, liabilities, injuries and/or
expenses (including attorneys' fees and court costs) associated with or arising
in any connection with such inspections or investigations, or the entry onto the
Real Property by Purchaser or any of its employees, agents, consultants or
contractors. Purchaser further undertakes that any damage occasioned to the Real
Property, Personal Property or the Facilities caused by such inspections or
investigations shall be cured by Purchaser's restoring the Real Property,
Personal Property or portion of the Facilities disturbed or damaged back to its
pre-entry and pre-disturbed state. Purchaser agrees to indemnify and hold
harmless Seller from claims by third parties for monies due incidental to such
inspections or investigations. The foregoing indemnity and other covenants of
Purchaser shall survive Closing under (or any earlier termination of) this
Agreement for a period of one (1) year.
(c) Prior to entry onto any of the Real Property by Purchaser or any of its
employees, agents, consultants or contractors, Purchaser shall deliver to Seller
certificates evidencing that such parties' entry is covered by commercial
general liability insurance and other appropriate insurance, which insurance
shall be reasonably satisfactory to Seller.
4.5 [Intentionally deleted.]
4.6 Consents. Seller shall use its commercially reasonable efforts to
obtain, on or prior to the Closing, the Requisite Unitholder Approvals (which
efforts shall include an affirmative recommendation by Seller to the unitholders
for sale of the Assets as contemplated by this Agreement), as well as all
consents identified by the parties as necessary for Seller to fulfill their
obligations to consummate the transactions contemplated hereby ("Third Party
Consents").
4.7 Compliance With Laws. Seller shall comply in all material respects
with all applicable laws, and with all applicable rules and regulations of all
governmental authorities, in conjunction with the execution, delivery and
performance of this Agreement and the transactions contemplated hereby, with the
understanding that the Seller shall not be required to make any additional new
capital expenditures in connection therewith.
15
4.8 Taxes. Seller shall file federal, state, local, and, to the extent
applicable, estimates and reports and pay all amounts then due and applicable to
all periods through and including the Closing Date to the extent necessary to
transfer the Assets to Purchaser in accordance with the terms of this Agreement.
4.9 No Disposition of Assets. Seller shall not sell, lease or otherwise
dispose of or distribute any of the Assets or properties related thereto or
necessary for operation of the Facilities other than in the ordinary course of
business.
4.10 Further Documentation. Seller agrees that, for a reasonable period
of time following the Closing (not to exceed one year), upon request by
Purchaser, it will do, execute, acknowledge, and deliver, or cause to be done,
executed, acknowledged, and delivered, all such further acts, deeds,
assignments, transfers, conveyances and assurances as may be reasonably
required, without enlarging or extending any obligations or liability of Seller
under this Agreement in any manner and without requiring the expenditure of
funds by Seller, in order to more fully assign, grant, transfer, convey, assure
and confirm to Purchaser, or to its successors and assigns, or for aiding and
assisting in collecting and reducing to possession, any or all of the Assets to
be sold to Purchaser pursuant to this Agreement.
4.11 Confidentiality. Seller will use its commercially reasonable
efforts to keep confidential all information relating to the terms of this
Agreement and all information relating to Purchaser, its officers and directors
(other than information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any governmental authority).
Notwithstanding the foregoing, Seller shall be permitted to disclose the terms
of this Agreement, and information regarding the Purchaser and its designees and
affiliates, to (i) Seller's partners, investors, attorneys, accountants and
other third parties involved in the transaction on behalf of Seller, (ii) any
governmental agencies, any landlords or tenants under leases, any contract
parties, or any other third parties from whom consent is required or appropriate
for the transactions contemplated herein, and (iii) unitholders of MHGIF and to
the public to the extent necessary to obtain the approval of the unitholders to
this Agreement and to fulfill MHGIF's obligations as a publicly-reporting
company under the Securities and Exchange Act of 1934, as amended.
4.12 Title Insurance and Survey; Governmental Approval and Third
Party Consent.
(a) Seller has provided to Purchaser a copy of all currently
effective title insurance policies and commitments and plats and surveys in its
possession that relate to the Real Property.
(b) Purchaser may obtain at its expense, (i) current ALTA/ACSM
Land Title surveys for each of the Facilities (each a "Survey" and collectively
the "Surveys"), and (ii) preliminary reports on title for each of the
Facilities, issued by Lawyer's Title Insurance Corporation ("Title Company"),
which preliminary reports shall contain a commitment (each a "Title Report" and
collectively the "Title Reports") of the Title Company to issue to the Purchaser
title insurance policies on 1992 ALTA Owners Policy forms (each a "Title Policy"
and collectively the "Title Policies") insuring the fee simple interest of
Seller in such Facilities. The
16
Title Reports shall be delivered with legible copies of all recorded
exceptions to title referred to therein to the extent reasonably
available (the "Exception Documents"). Seller will use their commercially
reasonable efforts to cause all standard exceptions to be deleted
from the policies at Closing, including without limitation, executing Seller's
affidavits, gap indemnities and the like reasonably required therefor. Purchaser
shall have until ten (10) business days after its receipt of the Title Report,
the Exception Documents and the Survey, collectively, for each of the
Facilities, but not later than the expiration of the Diligence Period (the
"Title Review Period"), to approve or disapprove in writing the Title Reports
and Survey with respect to each Facility, with any such notice of disapproval
specifying the Exception Documents or other matters to which Purchaser objects.
The failure of Purchaser to disapprove any lien or other matter reflected in the
Title Reports or Survey with respect to any Facility within the Title Review
Period shall be deemed approval by Purchaser thereof. Notwithstanding the
foregoing, Purchaser shall not have the right to disapprove any of the
following, all of which shall be deemed to be "Permitted Liens" hereunder: (A)
matters created or consented to by Purchaser, (B) the Assumed Liabilities, and
(C) matters that are not reasonably likely to have a material adverse impact on
the value or marketability of, or Purchaser's operation of, the Facilities. If
Purchaser disapproves any lien or other matter reflected in the Title Reports or
Survey with respect to any Facility, Seller shall have ten (10) business days
from the date of such disapproval in which to advise Purchaser in writing
whether or not they are prepared to cure the same prior to Closing (which cure
may be effected by payment and discharge of the objectionable item or by causing
the Title Company to remove the same as an exception or affirmatively insure
over such item), and in the event Seller fail or refuse to do so within said ten
(10) business day period, Purchaser shall have five (5) business days thereafter
in which to advise Seller in writing of Purchaser's election (x) to waive the
matters to which Purchaser objected and which Seller are not prepared to cure
and to proceed to Closing without adjustment in the Purchase Price, or (y) to
terminate this Agreement with respect to all the Facilities and Assets in
accordance with Article XI.
(c) Seller shall, upon request and reasonable advance notice
from Purchaser, permit Purchaser and its agents to conduct Phase I environmental
assessments for each Facility (each a "Phase I" and collectively the "Phase
I's"). Purchaser shall not take any core samples, install any monitoring wells
or undertake any other invasive tests or studies, or communicate with any
government officials or agencies regarding Hazardous Substances, without the
Seller's prior written consent (which may be withheld by Seller in its sole
discretion). Purchaser shall use its commercially reasonable efforts to obtain
each Phase I within thirty (30) days after the date hereof. Purchaser shall have
until ten (10) business days after Purchaser's receipt of each Phase I, but not
later than the expiration of the Diligence Period (the "Environmental Review
Period"), to approve or disapprove such Phase I in writing delivered to Seller,
with any such disapproval specifying the matter(s) to which Purchaser objects.
If any Phase I recommends that a Phase II be ordered, then, subject to the
requirement of Seller's prior written approval (as described above), the
Environmental Review Period shall be extended for a reasonable period not to
exceed an additional fifteen (15) days in order for Purchaser to obtain such
Phase II, and Seller and Purchaser agree to divide evenly the cost of such Phase
II. Should Purchaser timely disapprove any Phase I and/or related Phase II,
Purchaser shall notify Seller in writing of such disapproval and the reasons
therefor at or prior to the expiration of the Environmental Review Period, as
such Period may be extended (the "Environmental Notice"). In the event that
Purchaser delivers to Seller an Environmental Notice due to the fact that a
Phase I or Phase II
17
indicates the need for remediation of an environmental condition at any
Facility, Seller shall communicate and negotiate in good faith
with Purchaser regarding such condition and its resolution, with the
understanding that such good faith obligation shall not create any other duties
or obligations on the part of Seller or modify the time periods for Seller's and
Purchaser's notices and responses set forth above and below in this paragraph.
The failure of Purchaser to deliver an Environmental Notice to Seller on or
prior to the expiration of the Environmental Review Period (as the same may be
extended in the case of a Phase II as described above) shall be deemed approval.
If Purchaser delivers an Environmental Notice to Seller within the Environmental
Review Period, Seller shall have ten (10) business days from the date of Seller'
receipt of such Environmental Notice in which to advise Purchaser whether or not
they are prepared to cure the same prior to Closing (which cure may be effected
by (i) Seller contracting with and paying for, before or at Closing, the
recommended remediation work to be done by an environmental consulting firm
reasonably acceptable to Purchaser as recommended in the applicable Phase I or
Phase II, or (ii) Seller contracting for the recommended remediation work with
an environmental consulting firm reasonably acceptable to Purchaser and placing
one hundred twenty-five percent (125%) of the estimated costs of the remediation
in escrow with the Escrow Agent to be disbursed for payment of all remediation
costs as and when payment therefor is due with the balance, if any, to be
released to the Seller promptly upon completion of and payment for all such
remediation as recommended in the applicable Phase I or Phase II), and in the
event Seller fail or refuse to do so within said ten (10) business day period,
Purchaser shall have five (5) business days thereafter in which to advise Seller
in writing of Purchaser's election (x) to waive the matters to which Purchaser
objected and which Seller are not prepared to cure and to proceed to Closing
without adjustment in the Purchase Price, or (y) to terminate this Agreement
with respect to all the Facilities and Assets in accordance with Article XI.
4.13 [Intentionally deleted.]
4.14 Delivery of Inventories and Supplies at Closing. At Closing, Seller
shall deliver to Purchaser by leaving at each of the Facilities the following:
all of the inventories of perishable food, nonperishable food, central supplies
linen, housekeeping and other supplies in the condition and quantity then
existing at such Facility.
4.15 [Intentionally deleted.]
4.16 [Intentionally deleted.]
4.17 No Solicitation. Seller agrees, it shall not, after the date hereof
and before the Closing Date, enter into any binding contract, option or other
agreement relating to any acquisition of all or a substantial portion of the
assets of, or any equity interest in a Seller or any business combination
involving a Seller. Following the end of the Diligence Period, Seller agrees it
shall not initiate or request submission of proposals or offers from any person
relating to any acquisition of all or a substantial portion of the assets of, or
an equity interest in, a Seller or any business combination involving a Seller
(with the understanding that Seller may respond to communications initiated by
third parties regarding the Assets, including inquiries from unitholders, so
long as Seller does not enter into a binding contract, option or other
agreement).
18
4.18 Changes in Representations and Warranties. Without in any way
expanding the obligations or liabilities of Seller under Article II hereof,
Seller shall have the obligation throughout the period from the date of this
Agreement through and including the Closing Date to give Purchaser prompt
written notice of any representation or warranty, made by Seller in Article II,
which becomes materially inaccurate or incorrect, to the extent such inaccuracy
or incorrectness is brought to the knowledge and attention of Seller (with the
understanding that for these purposes, knowledge of the Seller shall be as
defined in the same manner as set forth in Article II hereof for purposes of the
Seller's representations and warranties).
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that:
5.1 Confidentiality. Purchaser will keep confidential all information
relating to the terms of this Agreement, all information relating to Seller,
their officers and directors, and all financial statements, drawings, designs,
customer and supplier lists relating to Seller received by it, and all documents
and information relating to the Assets (other than information which is a matter
of or filed as public information with any governmental authority, published, or
disclosed pursuant to an order, subpoena or demand of any governmental authority
or as is necessary to be disclosed to lenders, governmental authorities,
representatives and third parties in order to consummate this transaction) and
shall not at any time be used for the advantage of, or disclosed to third
parties (including employees at the Facilities) by Purchaser or its
representatives to the detriment of Seller or its officers and directors.
Purchaser shall be permitted to disclose information as necessary to partners,
investors and lenders (and their representatives), as well as brokers,
attorneys, accountants and other third parties engaged by Purchaser in
connection with the transaction, provided that Purchaser requires in writing all
such parties to observe the foregoing covenant regarding confidentiality.
Purchaser hereby indemnifies and holds harmless Seller from and against any and
all liabilities, losses, damages, suits, claims and costs and expenses
(including attorneys' fees and court costs) arising in any connection with any
breach of the confidentiality of this transaction, the documents and information
and other matters described above by any party. The provisions of this section
shall survive any termination of this Agreement prior to Closing.
5.2 Compliance with Laws. Purchaser shall comply in all material
respects with all applicable laws, and with all applicable rules and regulations
of all governmental authorities, in conjunction with the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
5.3 Assumption of and Compliance with the Contracts. Purchaser's
designee shall assume and be solely responsible for the performance of Seller's
obligations under the Contracts that Purchaser's designee is assuming, including
those set forth in Schedule 2.8(a) and Schedule 2.11, that are to be performed
after the Closing Date in accordance with the form of assignment and assumption
agreement set forth in Exhibit 5.3 ("Assignment and Assumption Agreement").
Contract payments shall be prorated through the Closing Date.
19
5.4 Patients; Patient Records. From and after Closing, Purchaser's
designee shall be solely responsible for caring for the patients of the
Facilities in accordance with their contractual rights and in accordance with
law. Purchaser's designee shall indemnify and hold Seller harmless from and in
respect of all acts and omissions which affect such patients from and after
Closing. Purchaser's designee shall preserve the existence and maintain the
confidentiality of the patient records transferred to Purchaser's designee
pursuant to this Agreement in accordance with federal and state law. The
foregoing covenants and indemnity shall survive Closing.
5.5 [Intentionally deleted.]
5.6 Consents, etc. As promptly as practicable after the date hereof,
Purchaser's designee shall, at its own cost and expense, make all filings with
governmental bodies and other regulatory authorities, and use all reasonable
efforts to obtain all permits, approvals, authorizations and consents of all
third parties required to consummate the transactions contemplated by this
Agreement. Without limitation, promptly after the date hereof, Purchaser's
designee shall file applications to obtain the transfer of the Licenses (or
issuance of new licenses in replacement thereof) to operate each of the
Facilities. Each party shall furnish promptly to each other all information that
is not otherwise available to the other party and that such party may reasonably
request in connection with any such filing. If there is a cost that must be
incurred prior to Closing to resolve any conditions relating to the Real
Property or the Personal Property that is required by governmental authorities
as a result of a change of ownership survey and/or re-licensing based upon an
inspection by a governmental authority, then Purchaser shall cause Purchaser's
designee to pay the cost of same.
5.7 Further Documentation. Purchaser agrees that, for a reasonable
period of time following the Closing (not to exceed one year), upon request by
Seller, it will do, execute, acknowledge, and deliver, or cause to be done,
executed, acknowledged, and delivered, all such further acts, documents and
assurances as may be reasonably required, without enlarging or extending any
obligations or liability of Purchaser under this Agreement in any manner and
without requiring the expenditure of funds by Purchaser, as necessary to fully
consummate the transactions contemplated in this Agreement.
5.8 Changes in Representations and Warranties. Without in any way
expanding the obligations or liabilities of Purchaser under Article III hereof,
Purchaser shall have the obligation throughout the period from the date of this
Agreement through and including the Closing Date to give Seller prompt written
notice of any representation or warranty, made by Purchaser in Article III,
which becomes materially inaccurate or incorrect, to the extent such inaccuracy
or incorrectness is brought to the knowledge and attention of Purchaser.
ARTICLE VI
OTHER COVENANTS
6.1 HSR Filing. Either party to this Agreement may, at its own expense,
request an informal opinion from the Federal Trade commission confirming that
this transaction is exempt from the Hart Scott Rodino Act ("HSR Act") reporting
requirements.
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6.2 Licensing Matters.
(a) From and after the Closing, in the event there is a cost
incurred to resolve any conditions relating to the Real Property or the Personal
Property subject to and required by governmental authorities as a result of
change of ownership survey and/or re-licensing inspection by a governmental
authority arising from this transaction (a "First Post-Closing Survey"),
Purchaser shall bear all such costs and shall indemnify and hold harmless Seller
therefrom. Such covenant and indemnity shall survive Closing.
(b) In connection with survey and re-licensing matters, Seller
and the Purchaser agree to cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions with respect to any applications,
requests, or actions that are or may be reasonable and necessary to obtain the
consent of any governmental instrumentality.
6.3 Management Agreements. Seller acknowledges that Purchaser shall
communicate and negotiate with the Manager for the purpose of entering into
contracts pursuant to which Manager will manage the Facilities for Purchaser
following Closing.
ARTICLE VII
INDEMNIFICATION
7.1 Agreement to Defend. In the event any action, suit, proceeding or
investigation of the nature specified in Section 7.2, Section 7.3, or Section
7.4 hereof is commenced, whether before or after the Closing, all of the parties
hereto agree that the party which is obligated to indemnify shall cooperate and
use its commercially reasonable best efforts to defend against and respond
thereto.
7.2 Indemnification by Seller.
(a) Subject to the limitations set forth in this Article VII,
and the other provisions of this Agreement, Seller, shall, jointly and
severally, indemnify, exculpate and hold Purchaser and its partners, directors,
officers, employees and agents (collectively, "Purchaser Indemnified Parties")
harmless from and against, and agree promptly to defend Purchaser Indemnified
Parties from and reimburse Purchaser Indemnified Parties for, any and all
losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including, without limitation, costs of investigation, reasonable
attorneys' fees and other legal costs and expenses) ("Purchaser Indemnified
Losses") which Purchaser Indemnified Parties may at any time suffer or incur, or
become subject to, as a result of or in connection with:
(i) Any and all financial obligations of Seller with
respect to the period before the Closing Date and relating to the Real
Property, the Personal Property, the Facilities or the operation thereof,
subject to the limitations on payment set forth in Section 10.5 (including but
not limited to Section 10.5(f) hereof), and except as may be expressly assumed
by Purchaser or Purchaser's designee herein;
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(ii) Any accidents, incidents or other events
occurring at the Real Property or the
Facilities prior to the Closing Date; and
(iii) Any material breach or inaccuracy of any of the
representations or warranties
made by a Seller in or pursuant to this Agreement or in any instrument,
certificate or affidavit delivered by a Seller at the Closing, with the
indemnification set forth in this clause being subject to the survival and other
limitations set forth in Article II and other provisions of this Agreement, as
well as the provisions for Purchaser's waiver of matters known to Purchaser
prior to Closing as described in Section 12.3 hereof.
(b) Notwithstanding anything to the contrary herein, (i) the
aggregate liability of the Seller for Purchaser Indemnified Losses under this
Article VII and any other obligations or liabilities of the Seller to survive
Closing hereunder (except that arising under Section 10.5 hereof) shall not
exceed an amount of Five Hundred Thousand Dollars ($500,000.00), and (ii) the
Seller shall be liable only if the aggregate Purchaser Indemnified Losses and
other obligations and liabilities exceed an amount of Fifty Thousand Dollars
($50,000.00). Furthermore, the indemnifications set forth in Section 7.2(a)
above shall not apply to any physical damage to, or condition of, the Assets,
including but not limited to the structural integrity, environmental condition
or general condition of such Assets.
(c) Seller agrees to deposit Five Hundred Thousand Dollars
($500,000.00) with the Escrow Agent in accordance with the terms of the Escrow
Agreement attached hereto as Exhibit 7.2(c) in order to secure Seller's
obligations under this Section 7.2.
7.3 Indemnification by Purchaser. Subject to the limitations set forth
in this Article VII, and the other provisions of this Agreement, Purchaser shall
indemnify, exculpate and hold Seller, and their respective stockholders,
partners, directors, officers, employees and agents (collectively, "Seller
Indemnified Parties") harmless from and against, and agree promptly to defend
Seller Indemnified Parties from and reimburse Seller Indemnified Parties for,
any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including, without limitation, costs of investigation,
reasonable attorneys' fees and other legal costs and expenses) ("Seller
Indemnified Losses") which Seller Indemnified Parties may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(a) Any and all financial obligations relating to the Real
Property, the Personal Property, the Facilities or the operation thereof arising
or accruing after the Closing Date;
(b) Any breach or inaccuracy of any of the representations or
warranties made by Purchaser in or pursuant to this Agreement or in any
instrument, certificate or affidavit delivered by Purchaser at the Closing, or
from any misrepresentation in or omission from this Agreement or any Exhibit,
Schedule, certificate, or other executed document furnished or to be furnished
to Seller hereunder, with the indemnification set forth in this clause being
subject to the survival limitation set forth in Article III of this Agreement;
and
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(c) Any duties, obligations or liabilities, any claims, suits,
arbitrations, investigations or other legal proceedings, any losses or damages
(whether direct, actual, incidental, consequential or otherwise), and/or any
costs or expenses (including attorneys' fees and court costs) arising in any
connection with the Facilities, the Assets, the Contracts, the Licenses and/or
the residents, patients and other occupants of the Facilities during or with
respect to the period from and after Closing hereunder.
Notwithstanding anything to the contrary herein, (i) liability
of the Purchaser for Seller Indemnified Losses arising under Section 7.3(b)
above shall be subject to a monetary limit of Five Hundred Thousand Dollars
($500,000.00), and (ii) Purchaser shall be liable for Seller Indemnified Losses
arising under Section 7.3(b) above only if the aggregate of such Purchaser
Indemnified Losses arising under such Section 7.3(b) exceed an amount of Fifty
Thousand Dollars ($50,000.00).
7.4 Notification of Claims.
(a) A party entitled to be indemnified pursuant to Section 7.2
or 7.3 (the "Indemnified Party") shall notify the party liable for such
indemnification (the "Indemnifying Party") in writing of any claim or demand
which the Indemnified Party has determined, has given or could give rise to a
right of indemnification under this Agreement, as soon as possible after the
Indemnified Party becomes aware of such claim or demand; provided, however, that
the Indemnified Party's failure to give such notice to the Indemnifying Party in
a timely fashion shall not result in the loss of the Indemnified Party's rights
with respect thereto except to the extent the Indemnified Party is prejudiced by
the delay. Notwithstanding the foregoing, any such notice relating to Seller's
indemnification under Section 7.2(a)(ii) above based on a violation of a
representation or warranty in Article II must be delivered, if at all, prior to
the end of any survival period set forth in Article II, failing which Seller's
indemnification obligations under Section 7.2(a)(ii) above shall be extinguished
and terminated. Subject to the Indemnifying Party's right to defend in good
faith third party claims as hereinafter provided, the Indemnifying Party shall
satisfy its obligations under this Article VII within thirty (30) days after the
receipt of written notice thereon from the Indemnified Party, it being agreed
that the Indemnifying Party need not satisfy such obligations during any period
in which the Indemnifying Party is defending in good faith the applicable third
party claim in the manner described hereinbelow.
(b) If the Indemnified Party shall notify the Indemnifying
Party of any claim or demand pursuant to Section 7.4(a), and if such claim or
demand relates to a claim or demand asserted by a third party against the
Indemnified Party which the Indemnifying Party acknowledges is a claim or demand
for which it must indemnify or hold harmless the Indemnified Party under
Sections 7.2 or 7.3, the Indemnifying Party shall have the right to either (i)
pay such claim or demand or (ii) employ counsel reasonably acceptable to the
Indemnified Party to defend any such claim or demand asserted against the
Indemnified Party. The Indemnified Party shall have the right to participate in
the defense of any such claim or demand at its own expense. The Indemnifying
Party shall notify the Indemnified Party in writing, as promptly as possible
(but in any case before the due date for the answer or response to a claim)
after the date of the notice of claim given by the Indemnified Party to the
Indemnifying Party under Section 7.4(a) of its election to defend in good faith
any such third party claim or demand.
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So long as the Indemnifying Party is defending in good faith any such claim or
demand asserted by a third party against the Indemnified Party, the
Indemnified Party shall not settle or compromise such claim or demand.
The Indemnified Party shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party claim or
demand. Whether or not the Indemnifying Party elects to defend any such claim
or demand, the Indemnified Party shall have no obligations to do so.
(c) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of the Indemnifying
Party, unless (i) the Indemnifying Party fails to assume and maintain the
defense of such claim pursuant to Section 7.4(b) or (ii) such settlement,
compromise or consent includes an unconditional release of the Indemnifying
Party from all liability arising out of such claim and does not contain any
equitable order, judgment or term which in any manner affects, restrains or
interferes with the business of the Indemnified Party or any Affiliate of the
Indemnified Party. An Indemnifying Party may not, without the prior written
consent of the Indemnified Party, settle or compromise any claim or consent to
the entry of any judgment with respect to which indemnification is being sought
hereunder unless such settlement, compromise or consent includes an
unconditional release of the Indemnified Party from all liability arising out of
such claim and does not contain any equitable order, judgment or term which in
any manner affects, restrains or interferes with the business of the Indemnified
Party or any of the Indemnified Party's Affiliates.
7.5 Survival. The provisions set forth in this Article VII shall
survive Closing.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
Each and every obligation of Purchaser under this Agreement, except
for the obligations of Purchaser to be fulfilled prior to the Closing and
obligations of Purchaser that survive termination of this Agreement, shall be
subject to the satisfaction, on or before the Closing, of each of the following
conditions unless waived in writing by Purchaser or as otherwise provided
herein:
8.1 Representations, Warranties; Performance. The representations,
warranties and covenants made by Seller herein and in the Related Documents,
shall be true and correct in all material respects at and as of the Closing,
with the same effect as though made on such date except to the extent the same
specifically relate to the date hereof or another specified date (including,
without limitation, the representations set forth in Section 2.7 hereof, which
shall remain true as of the date of this Agreement and not as of the date of
Closing, as provided in such Section 2.7), and except for changes as permitted
or contemplated by this Agreement. Seller shall have performed and complied in
all material respects with all covenants required by this Agreement and the
Related Documents to be performed and complied with by Seller prior to the
Closing. Notwithstanding the foregoing, the conditions to Closing described
above shall not be deemed unsatisfied, and Seller shall not be deemed to have
failed to perform or comply with,
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or to be in breach or default of, any representation, warranty or covenant
in this Agreement, unless and until the condition remains unsatisfied, or the
breach or default remains uncured, for a period of ten (10) days following
written notice of such unsatisfied condition, breach or default (as the case
may be).
8.2 Consents and Approvals.
(a) Purchaser or its designee shall have obtained approvals
for the transfer of the Licenses to Purchaser or its designee (with the
understanding that this condition shall be deemed satisfied in the event of any
breach by Purchaser of its covenant regarding the transfer of Licenses set forth
in Section 5.6 hereof). Seller shall cooperate to furnish all requested
documentation needed for Purchaser to obtain such approvals.
(b) From and after the Closing, in the event there is a cost incurred to
resolve any conditions relating to the Real Property or the Personal Property,
subject to and required by governmental authorities as a result of a change of
ownership survey and/or re-licensing arising from this transaction, Purchaser
shall bear and indemnify and hold harmless the Seller from all such costs (which
indemnification shall survive Closing). In connection with survey and
re-licensing matters, Seller and Purchaser agree to cooperate fully with each
other in preparing, filing, prosecuting, and taking any other actions with
respect to any applications, requests, or actions that are or maybe reasonable
and necessary to obtain the consent of any governmental instrumentality.
8.3 Resolutions. Purchaser shall have received copies of resolutions
duly adopted by the general partners of Seller, as appropriate, approving the
transactions contemplated by this Agreement ("Board Approval").
8.4 No Destruction of Property. None of the Facilities shall have
suffered substantial damage, destruction or loss after the date hereof. In the
event that one or more Facilities incur damage, destruction or loss which is not
substantial (as defined below) after the date hereof, Purchaser shall be
obligated to proceed to Closing and purchase the Facilities pursuant to this
Agreement without adjustment in the Purchase Price, and Seller shall assign to
Purchaser at Closing any insurance proceeds issued on account of such damage,
destruction or loss and pay to Purchaser at Closing any deductible under the
insurance policy applicable to such damage, destruction or loss. For the
purposes of this Section, "substantial damage, destruction or loss" shall be
damage, destruction or loss that costs, according to estimates of third party
contractors or insurance adjusters, more than 5% of the Purchase Price to
repair.
8.5 No Proceeding or Litigation. No injunction, judgment, order,
decree, ruling, or charge shall be in effect under any action, suit or
proceeding before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator that (i)
prevents consummation of the transactions contemplated by this Agreement, or
(ii) would cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, provided that Purchaser has not solicited or
encouraged any such action, suit or proceeding.
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8.6 Marketable Title. Title to the Real Property shall be marketable,
free of liens and encumbrances except for the Allowed Liens (including but not
limited to the Permitted Liens).
8.7 Material Adverse Change. There shall not have occurred a Material
Adverse Change (as defined in Section 2.7 hereof) at the Facilities between the
date on which the Diligence Period expires (with regard to the percentages of
occupancy existing on such date) and the Closing Date hereunder (with regard to
the percentages of occupancy existing as of Closing).
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SELLER
Each and every obligation of Seller under this Agreement, except for
the obligations to be fulfilled prior to the Closing and obligations of Seller
that survive termination of this Agreement, shall be subject to the
satisfaction, on or before the Closing, of each of the following conditions
unless waived in writing by Seller:
9.1 Representations and Warranties; Performance. The representations,
warranties and covenants made by Purchaser herein, as supplemented by Purchaser
prior to the Closing, shall be true and correct in all material respects on and
as of the date of this Agreement and at and as of the Closing, with the same
effect as though made on such date, except to the extent the same specifically
relate to the date hereof or another specified date, and except for changes as
permitted or contemplated by this Agreement. Purchaser shall have performed and
complied with all covenants required by this Agreement and the Related Documents
to be performed and complied with by Purchaser prior to the Closing.
9.2 Resolutions. Seller shall have received copies of resolutions duly
adopted by the Board of Directors of Purchaser approving the transactions
contemplated by this Agreement.
9.3 Transfer of Licenses. The Licenses shall have been transferred (or
approved for transfer) to Purchaser or its designee.
9.4 Requisite Unitholder Consent. The sale of the Assets as
contemplated by this Agreement shall have received the Requisite Unitholder
Approval.
9.5 Manager's Waiver. Manager shall have waived all rights with
respect to purchase of the Assets whether arising under management agreements
with the Seller or otherwise.
ARTICLE X
CLOSING
10.1 Possession. Possession of all assets sold hereunder shall be
delivered to Purchaser on the Closing Date, and Seller shall provide notices, in
form provided by Purchaser and reasonably acceptable to Seller, to tenants and
residents of such possession change if requested by Purchaser.
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10.2 Transfer Documents.
(a) Seller shall deliver to Purchaser on the Closing Date:
(i) duly executed Special Warranty Deed and Bill of Sale, in the form
attached hereto as Exhibit 10.2(a)(i);
(ii) such additional bills of sale and other appropriate instruments of
assignment and conveyance, as to the Personal Property, in form mutually but
reasonably satisfactory to Purchaser and Seller, dated as of the Closing,
conveying all title to the Assets, including the Personal Property, free and
clear of all liens, liabilities, security interests or encumbrances except as
otherwise permitted herein;
(iii) an assignment of all intangible property necessary for the operation
of the Facilities, in form mutually but reasonably satisfactory to Purchaser and
Seller, and including, without limitation, documents, chattel paper,
instruments, contract rights, deposit accounts, good will, going concern value,
general intangibles, the right to use trade names, and lists of phone numbers,
arising from or in connection with each Seller' operation or use of any part of
the property, and excluding all Excluded Assets;
(iv) a then current rent roll certified by each Seller to its knowledge as
of the Closing Date as true, complete and accurate in all material respects,
which shall conform to the form of rent rolls customarily maintained by Seller
in connection with the Facilities (the "Rent Roll");
(v) to the extent not already delivered by Seller, and to the extent
available, originals of all of the Contracts, leases and other agreements with
residents, Licenses and other applicable contracts, leases and permits;
(vi) evidence of the authority of Seller to execute and deliver the
applicable Seller Documents in order to effectuate the applicable Closing;
(vii) an affidavit in form satisfactory to obtain the Title Insurance
contemplated by Section 4.12 above, without exception for mechanic's,
materialmen's or other statutory liens;
(viii) the Assignment and Assumption Agreement described in Section 5.3
hereof and, to the extent not covered therein, an assignment and assumption
agreement providing for the assignment by Seller to Purchaser, and the
assumption by Purchaser from Seller, of all Contracts, Licenses and other
contracts, agreements and instruments related to the Assets;.
(ix) a closing statement setting forth in reasonable detail the financial
transactions contemplated by this Agreement, including, without limitation the
Purchase Price, all prorations, and the allocation of costs specified herein;
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(x) [Intentionally deleted.]
(xi) a bring-down certificate reaffirming that the representations and
warranties are true and correct as of the Closing Date as modified by Section
8.1;
(xii) any other documents reasonably required by the title insurance
company; and
(xiii) certificate of non-foreign status in the form attached hereto as
Exhibit 10.2(a)(xiii).
(b) Purchaser shall deliver to Seller on the Closing Date, in
addition to the items set forth in Section 1.4 hereof, the following:
(ii) a bring-down certificate reaffirming that the representations and
warranties are true and correct as of the Closing Date as modified by Section
9.1;
(iii) a closing statement setting forth in reasonable detail the financial
transactions contemplated by this Agreement, including, without limitation, the
Purchase Price, all prorations, and the allocation of costs specified herein;
(iv) the assignment and assumption agreement providing for the assignment
by Seller to Purchaser, and the assumption by Purchaser from Seller, of all
Contracts, Licenses and other contracts, agreements and instruments related to
the Assets; and
(v) any other documents reasonably required by the title insurance company
or the Seller in order to effectuate the transactions contemplated herein.
10.4 Patient Funds; Advance Payments. At the Closing, subject to
adjustment within fifteen (15) days following the Closing, Seller shall provide
Purchaser's designee with an accounting of all funds, if any, belonging to
patients at the Facilities which are held by Seller in a custodial capacity and
an accounting of all advance payments received by it pertaining to patients at
the Facilities. Such accounting will set forth the names of the patients for
whom such funds are held and the amounts held on behalf of each patient.
At the Closing, subject to adjustment within fifteen (15) days
following the Closing, Seller shall transfer such funds to a bank account
designated by Purchaser and Purchaser shall, in writing, acknowledge receipt of
and expressly assume all of Seller' financial and custodial obligations with
respect thereto, it being the intent and purpose of this provision that, at
Closing, Seller will be relieved of all fiduciary and custodial obligation with
respect to such funds and that Purchaser will assume all such obligations and be
directly accountable to the patients with respect thereto.
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Subject to the Seller's representation in Section 2.25 hereof,
following transfer of all patient funds to Purchaser's designee, Purchaser and
Purchaser's designee shall indemnify and hold Seller harmless from all
liabilities, claims, expenses and demands (including attorneys' fees) arising in
connection with such funds.
This Section 10.4 shall survive Closing.
10.5 Closing Adjustments.
(a) Net Working Capital. In addition to the Purchase Price,
Purchaser shall cause Purchaser's designee shall pay to Seller an amount equal
to the Net Working Capital calculated as follows:
The Sum of:
(i) Cash and cash equivalents transferred to Purchaser or
its designee;
(ii) Accounts receivable transferred to Purchaser
or its designee, net of reserves for bad
debt loss in accordance with Seller's
historic methodology;
(iii) Deposits or escrows transferred to Purchaser
or its designee;
(iv) Prepaid expenses and other current assets
transferred to Purchaser or its designee, if
any (e.g., prepaid insurance premiums); and
(v) Any funds expended after the date of this
Agreement by Seller for creation of a
dialysis unit at the Facility owned by
Randallstown Meridian Limited Partnership,
not to exceed Two Hundred Thousand Dollars
($200,000.00).
Less the following items:
(i) Accounts payable transferred to Purchaser's
designee;
(ii) As of the Closing Date, all employee pay and
benefits, which are vested or accrued based
on employment prior to Closing, but unpaid
as of Closing, to the extent relating to
employees of Manager and customarily charged
as an expense of the Facilities under
Seller's management agreements with Manager;
(iii) Other accrued but unpaid expenses or
liabilities assumed by Purchaser or
Purchaser's designee; and
(iv) Prepaid revenues (to the extent not prorated
under Section 10.5(d) below).
(b) Real Estate and Personal Property Taxes; Prorations. Real
and personal property taxes and assessments shall be prorated as of the Closing
Date. Said prorations shall be based on the tax year of the municipality in
which the Real Property and the Personal Property are located and shall be based
on the most recent available bill (with subsequent adjustment between the
parties when actual bills become available, subject to the limitations on
reprorations and payment set forth in Section 10.5(f) below).
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(c) Other Prorations. Charges for water, fuel, gas, oil, heat,
electricity and other utilities, operating charges and prepaid service
contracts, and all other costs and expenses related to ownership and operation
of the Assets, including but not limited to that arising under the Contracts,
shall be prorated as of the Closing Date (to the extent not included in the
calculation of Net Working Capital in Section 10.5(a) above).
(d) Revenues; Medicare/Medicaid Reimbursements. All revenues
and income, including but not limited to patient rentals, as well as all
Medicare and Medicaid reimbursements, shall be prorated as of the Closing Date,
to the extent not included in the calculation of Net Working Capital in Section
10.5(a) above.
(e) Deposit. The Deposit shall be applied against the Purchase
Price at Closing.
(f) Re-adjustment. All calculations and prorations under this
Section 10.5 shall be made on an accrual basis. At least three (3) days before
Closing, Seller shall deliver to Purchaser a calculation of the Seller's Net
Working Capital, as well as all other prorations described in this Section 10.5,
all effective as of the date of Closing. Seller agrees to communicate with
Purchaser, and to work in good faith to make any adjustments to Seller's
figures, which are demonstrated by Purchaser to be necessary to render Seller's
calculations accurate under this Section 10.5 and final by the time of Closing.
The parties agree that the Seller's figures may be based on estimates, to the
extent actual figures are not available at the time of Closing. Within sixty
(60) days of the Closing, the parties further agree to adjust any such estimates
based on end-of-month figures through the month in which Closing occurs, to the
extent actual figures are available after the close of accounting for the month
in which the Closing occurs, and to correct any errors or miscalculations (with
the parties to make any payments which are necessary to effectuate any such
adjustments and corrections), all provided that the final figures generated for
Net Working Capital and all other prorations so based on end-of-month accounting
through the month in which Closing occurs (including estimates where final
figures are still then unavailable) shall be final and binding. The obligations
of the parties in this Section 10.5(f) shall survive Closing.
10.6 Closing Costs.
(a) Seller shall pay:
(i) Fifty percent (50%) of any escrow or closing
charges of the title company, other than abstracting
costs and the premiums for the Title Policy and any
endorsements which shall be paid by Purchaser;
(ii) All legal fees of the Seller;
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(b) Purchaser shall pay:
(i) Fifty percent (50%) of any escrow or closing
charges of the title company, and all abstracting costs
and premiums for the Title Policy and any endorsements;
(ii) The cost of preparing the environmental reports
with respect to the Real Property, the cost of the
Surveys, and the costs of any other third party due
diligence reports or studies;
(iii) Any sales tax relating to the sale of the
Personal Property to Purchaser (if any);
(iv) Any transfer, recordation, documentary stamp and
other similar taxes and charges imposed in connection
with the delivery and recordation of deeds for the
Real Property or otherwise in connection with the
transactions contemplated in this Agreement;
(v) All legal fees of the Purchaser.
ARTICLE XI
TERMINATION AND ABANDONMENT
11.1 Method of Termination. This Agreement and the transactions
herein contemplated may be terminated at any time on or before the Closing:
(a) by mutual written consent of all of the parties hereto;
(b) by Purchaser in the event that there has been a failure of
a condition to its obligations set forth in Article VIII;
(c) by Seller in the event that there has been a failure of a
condition to its obligations set forth in Article IX;
(d) by Purchaser, if Purchaser is not then in material breach
of this Agreement and Seller is then in breach of this Agreement, and such
breach of Seller remains uncured for more than ten (10) days after Seller's
receipt of written notice thereof from Purchaser specifying in reasonable detail
the nature of such breach;
(e) by Seller, if Seller is not then in material breach of
this Agreement and Purchaser is then in breach of this Agreement, and such
breach of Purchaser remains uncured for more than ten (10) days after
Purchaser's receipt of written notice thereof from Seller specifying in
reasonable detail the nature of such breach; or
(f) by Purchaser upon timely notice following Seller's failure
or refusal to cure objections to matters of title, survey or environmental
reports pursuant to Section 4.12 hereof.
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11.2 Procedure Upon Termination. Any termination described above shall
not serve to limit or diminish any rights or remedies of a party hereto
established by other express provisions of this Agreement upon breach or default
by the other party. However, if this Agreement is terminated, for any reason:
(a) each of the parties will redeliver all documents and other
material of any other party relating to the transactions contemplated hereby to
the party furnishing the same;
(b) no party hereto shall have any liability or further
obligation to any other party to this Agreement, other than under the provisions
of Section 4.4, 4.11, 5.1 and 11.2(a) hereof, and other than expressly provided
herein, including upon breach or default by a party under this Agreement.
11.3 Seller's Remedies Upon Termination. In the event of the
termination of this agreement by Seller on account of any breach or default by
Purchaser, including a termination under Section 11.1(e), then the following
provision shall apply:
SELLER'S SOLE REMEDY SHALL BE TO TERMINATE THIS AGREEMENT AND TO RECEIVE
THE DEPOSIT AS FULL AND COMPLETE LIQUIDATED DAMAGES, THE PARTIES
ACKNOWLEDGING AND AGREEING THAT THE AMOUNT OF DAMAGES WHICH SELLER MAY
INCUR AS A RESULT OF SUCH TERMINATION MAY BE DIFFICULT TO ASCERTAIN, AND
THAT THE AMOUNT OF THE DEPOSIT IS A REASONABLE AND FAIR ESTIMATE THEREOF,
AFTER WHICH THE PARTIES SHALL HAVE NO FURTHER RIGHTS OR OBLIGATIONS
HEREUNDER, EXCEPT AS MAY BE EXPRESSLY PROVIDED IN SECTION 11.2(A) & (B)
HEREOF (AND WITHOUT LIMITING SELLER'S RIGHTS UNDER SECTION 12.6 HEREOF).
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Amendment and Modification. This Agreement may be amended,
modified and supplemented only by written agreement of all the parties hereto at
any time prior to the Closing with respect to any of the terms contained herein.
12.2 Waiver of Compliance; Consent. Any failure of a Seller on the one
hand, or Purchaser, on the other hand, to comply with any obligation, covenant
agreement or condition herein may be waived in writing by the other party, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 12.2.
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12.3 Purchaser's Remedies; Limitations; Release and Waiver.
(a) The rights and remedies of Purchaser hereunder may be
enforced in equity, subject to the limitations set forth herein. Any breach of
the agreements, covenants and obligations of the parties under this Agreement
shall be deemed to cause a party irreparable injury justifying a decree of
specific performance by a court of competent jurisdiction and not properly
compensable solely by money damages in an action at law. Seller hereby
acknowledges that Purchaser does not have an adequate remedy at law and that
injunction, specific performance or other equitable relief will not constitute
any hardship on Seller. Purchaser shall have no right to damages, other than to
recover the Deposit upon termination following breach or default of Seller after
applicable notice and grace periods as described in Section 11.1(d) above
(without limiting Purchaser's rights under Section 12.6 hereof).
(b) Except as expressly stated above, or elsewhere in this
Agreement, no statutory or other legal rights under federal, state or local laws
and/or regulations shall apply between the parties with respect to the
Facilities and Assets and the transactions contemplated by this Agreement, and
the parties are liable only pursuant to the covenants, representations and/or
warranties expressly stated in this Agreement and no other agreements, laws or
regulations. Upon closing hereunder, Purchaser, as well as Purchaser's designees
and any affiliates taking any interest in any of the Assets, shall be deemed to
have automatically released and discharged forever the Seller, all partners,
investors and affiliates of Seller, and all officers, directors and employees of
all such parties from any and all claims, suits and liability, including but not
limited to actions for contribution or reimbursement after environmental
remediation, which might otherwise arise under any law or regulation which is
not expressly contained in this Agreement.
(c) Notwithstanding anything to the contrary in this
Agreement, to the extent that any documents or information regarding the Seller
or the Assets are disclosed to Purchaser or brought to Purchaser's attention
prior to Closing, including but not limited to any information that any
representation or warranty set forth in Article II hereof is inaccurate or
incorrect, and Purchaser nevertheless closes on purchase of the Assets, as of
Closing Purchaser shall be deemed to have accepted and to have automatically
waived any objection to, or claim based on, such documents or information.
12.4 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be personally
delivered, or sent by facsimile transmission (provided a copy is thereafter
promptly mailed as hereinafter provided), or sent by overnight commercial
delivery service (provided a receipt is available with respect to such
delivery), or mailed by first-class registered or certified mail, return receipt
requested, postage prepaid (and shall be effective when received, if sent by
personal delivery or by facsimile transmission or by overnight delivery service,
or on the third (3rd) day after mailing, if mailed):
(a) If to Seller, to:
Meridian Healthcare Growth and Income Fund, L.P.
c/o Alex. Brown Realty, Inc.
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300 East Lombard Street, Suite 1200
Baltimore, MD 21202
Attention: Robert L. Huether
with copies to both (which shall not constitute notice):
Alex. Brown Realty, Inc. 300 East Lombard
Street, Suite 1200 Baltimore, MD 21202
Attention: David E. Wolfe, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
100 Light Street, 13th Floor
Baltimore, MD 21202
Attention: John B. Watkins, Esq.
(b) If to Purchaser, to:
FC Properties VI, LLC
1035 Powers Place
Alpharetta, GA 30004
Attention: Christopher Sertich
with a copy (which shall not constitute notice) to:
Williams Mullen
222 Central Park Avenue, Suite 1700
Virginia Beach, VA 23462
Attention: Lawrence R. Siegel, Esq.
or to such other person or address as any party hereto shall furnish to the
other parties hereto in writing pursuant to this Section 12.4.
12.5 Brokers and Finders; Expenses. The parties hereto represent and
warrant to each other that none of them has retained any broker or finder in
connection with this transaction. Seller on the one hand, and Purchaser, on the
other, each agrees to indemnify the other for any losses incurred with respect
to a breach of this Section 12.5.
12.6 Attorney's Fees. In the event any proceeding or suit is brought to
enforce this Agreement, the prevailing party shall be entitled to all reasonable
costs and expenses (including reasonable attorneys' fees) incurred by such party
in connection with any action, suit or proceeding to enforce the other's
obligations under this Agreement.
12.7 [Intentionally deleted.]
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12.8 Assignment. This Agreement and all the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors and permitted assigns. This Agreement may not be assigned or
otherwise transferred by Seller, on one hand, or Purchaser, on the other hand,
without the prior written consent of the other, as the case may be (which
consent shall not be unreasonably withheld). Notwithstanding the foregoing,
Purchaser may assign the Agreement to an affiliate that is controlled by
Purchaser or the shareholders of Purchaser, without the prior written consent of
Seller, provided that Purchaser shall remain jointly and severally liable with
such assignee for all obligations of Purchaser under this Agreement.
Furthermore, upon Closing hereunder Seller may assign this Agreement to a
liquidating trust, formed as a business trust under Delaware law ("Trust"),
without the prior written consent of Purchaser, and upon such assignment Seller
shall be released from all obligations and liabilities under this Agreement,
provided that the Trust shall assume all such obligations and liabilities of the
Seller. In all events, Purchaser hereby agrees to not undertake any assignment
for the purpose of transferring directly or indirectly the rights to purchase
the Assets in return for monetary consideration.
12.9 Governing Law. This Agreement shall be governed by the laws of the
State of Maryland as to, including, but not limited to, matters of validity,
construction, effect and performance but exclusive of its conflicts of laws
provisions.
12.10 Jurisdiction. Each party hereto consents to the jurisdiction of
the courts of Baltimore, Maryland, if it can acquire jurisdiction, in the United
States District Court for the District of Maryland as to claims arising under or
brought in connection with this Agreement and the transactions contemplated
herein.
12.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.12 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.13 Entire Agreement. This Agreement, which term as used throughout
includes the Exhibits and Schedules hereto, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to such subject matter.
12.14 Warranty of Authority. The signatories hereto personally warrant
that they have the right and power to enter into this Agreement and to bind the
party for whom they are executing this Agreement.
12.15 Schedules. All schedules and exhibits attached hereto shall be
deemed a part hereof. Any fact or item disclosed on any Schedule to this
Agreement shall be deemed disclosed
35
on all other Schedules to this Agreement to which such fact or item may
reasonably apply so long as such disclosure is insufficient detail to enable
a party hereto to identify the facts or items to which it applies.
12.16 Compliance with Bulk Sales Law. Purchaser hereby waives
compliance by Seller with any applicable bulk sales law and any other similar
laws with respect to the transactions contemplated by this Agreement.
12.17 Survivorship. Except as expressly stated to the contrary in this
Agreement, all warranties, covenants, representations and guarantees shall be
merged in, and shall not survive, the Closing and execution of the documents
contemplated by this Agreement. The parties hereto in executing, and in carrying
out the provisions of, this Agreement are relying solely on the representations,
warranties and agreements contained in this Agreement or in any writing
delivered pursuant to provisions of this Agreement or at the closing of the
transactions herein provided for and not upon any representation, warranty,
agreement, promise or information, written or oral, made by any person other
than as specifically set forth herein or therein.
12.18 Publicity. All pre-Closing publicity concerning the transactions
contemplated by this Agreement and all notices respecting publicity shall be
jointly planned, coordinated and released by and between Purchaser and Seller.
12.19 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION BROUGHT ON OR WITH RESPECT TO
THIS AGREEMENT, INCLUDING TO ENFORCE OR DEFEND ANY RIGHTS HEREUNDER, AND AGREES
THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
12.20 Consent of MHIGF. MHGIF joins in this Agreement for the limited
purpose of evidencing its consent to the sale of the Assets pursuant to the
terms of this Agreement by each of the partnerships named collectively as Seller
hereunder.
12.21f No Third Party Beneficiaries. This Agreement shall inure to the
benefit of only the parties named herein (including their designees, successors
and assigns) and no other parties. No rights of third party beneficiaries of any
kind shall exist in connection with this Agreement.
{Signature page follows}
36
IN WITNESS WHEREOF, the parties hereto have executed or have caused
their duly authorized officers to execute this Agreement as of the date first
written above.
PURCHASER: FC Properties VI, LLC,
a Delaware limited liability company
By: /s/ Chris Sertich
Name: Chris Sertich
Title: Manager
SELLER:
Plainfield Meridian Limited Partnership
By: Brown Healthcare, Inc., General Partner
By: /s/ Timothy M. Gisriel
Name: Timothy M. Gisriel
Title: Treasurer
By: Meridian Healthcare Investments, Inc., General Partner
By: /s/ Eileen M. Coggins
Name: Eileen M. Coggins
Title: Sr. Vice President/General Counsel
Caton Manor Meridian Limited Partnership
By: Brown Healthcare, Inc., General Partner
By: /s/ Timothy M. Gisriel
Name: Timothy M. Gisriel
Title: Treasurer
By: Meridian Healthcare Investments, Inc., General Partner
By: /s/ Eileen M. Coggins
Name: Eileen M. Coggins
Title: Treasurer
Frederick Meridian Limited Partnership
By: Brown Healthcare, Inc., General Partner
By: /s/ Timothy M. Gisriel
Name: Timothy M. Gisriel
Title: Treasurer
By: Meridian Healthcare Investments, Inc., General Partner
By: /s/ Eileen M. Coggins
Name: Eileen M. Coggins
Title: Sr. Vice President/General Counsel
Hamilton Meridian Limited Partnership
By: Brown Healthcare, Inc., General Partner
By: /s/ Timothy M. Gisriel
Name: Timothy M. Gisriel
Title: Treasurer
By: Meridian Healthcare Investments, Inc., General Partner
By: /s/ Eileen M. Coggins
Name: Eileen M. Coggins
Title: Sr. Vice President/General Counsel
Randallstown Meridian Limited Partnership
By: Brown Healthcare, Inc., General Partner
By: /s/ Timothy M. Gisriel
Name: Timothy M. Gisriel
Title: Treasurer
By: Meridian Healthcare Investments, Inc., General Partner
By: /s/ Eileen M. Coggins
Name: Eileen M. Coggins
Title: Sr. Vice President/General Counsel
Mooresville Meridian Limited Partnership
By: Brown Healthcare, Inc., General Partner
By: /s/ Timothy M. Gisriel
Name: Timothy M. Gisriel
Title: Treasurer
By: Meridian Healthcare Investments, Inc., General Partner
By: /s/ Eileen M. Coggins
Name: Eileen M. Coggins
Title: Sr. Vice President/General Counsel
Spencer Meridian Limited Partnership
By: Brown Healthcare, Inc., General Partner
By: /s/ Timothy M. Gisriel
Name: Timothy M. Gisriel
Title: Treasurer
By: Meridian Healthcare Investments, Inc., General Partner
By: /s/ Eileen M. Coggins
Name: Eileen M. Coggins
Title: Sr. Vice President/General Counsel
MHGIF Meridian Healthcare Growth and Income Fund, L.P.
By: Brown Healthcare, Inc., General Partner
By: /s/ Timothy M. Gisriel
Name: Timothy M. Gisriel
Title: Treasurer
By: Meridian Healthcare Investments, Inc., General Partner
By: /s/ Eileen M. Coggins
Name: Eileen M. Coggins
Title: Sr. Vice President/General Counsel