Exhibit 2.3
EXECUTION COPY
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "AGREEMENT") is entered into as of
January 31, 2006 by and among Skilled Healthcare Group, Inc., a Delaware
corporation, (the "PURCHASER"), each of the entities listed on SCHEDULE 2.1
hereto (individually, a "COMPANY" and collectively, the "COMPANIES"), M. Terence
Reardon and M. Sue Reardon individually and, as Trustees of the M. TERENCE
REARDON TRUST U.T.A. dated 6/26/2003 and M. Sue Reardon and M. Terence Reardon,
as Trustees of the M.SUE REARDON TRUST U.T.A. dated 6/26/2003 (together the
"BENEFICIAL OWNERS," and together with the Companies, the "SELLERS"). The
parties acknowledge that the Purchaser may assign its rights hereunder to one or
more Affiliates, and references herein to "Purchaser" shall include any such
assignees.
INTRODUCTION
The Beneficial Owners collectively own all of the outstanding membership
and equity interests (the "EQUITY INTERESTS") of the Companies. The Sellers wish
to sell, and the Purchaser wishes to buy, substantially all of the assets of the
Companies, on the terms and conditions set forth herein. The Beneficial Owners
are the direct and indirect owners of the Companies, will derive substantial
benefits from such sale and purchase, and wish to cause such sale and purchase
to be consummated. Such sale and purchase and each other related transaction
referred to herein are sometimes collectively referred to herein as the
"TRANSACTIONS".
This Agreement is being made contemporaneously with the Consulting
Agreement between Carmel Hills Healthcare and Rehabilitation Center, LLC., a
Delaware limited liability company; Holmesdale Healthcare and Rehabilitation
Center, LLC, a Delaware limited liability company; Liberty Terrace Healthcare
and Rehabilitation Center, LLC, a Delaware limited liability company; Purchaser;
Sunset Healthcare, Inc., a Missouri corporation; and, with respect to certain
sections only, Edward J. Reardon (the "CONSULTING AGREEMENT").
An index of defined terms used herein is set forth in ARTICLE 10.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE 1.
THE TRANSACTIONS; CLOSING
1.1 PURCHASE AND SALE OF PURCHASED ASSETS. In reliance upon the
representations and warranties contained herein, and subject to the terms and
conditions hereof, each of the Companies shall sell, convey, transfer, assign
and deliver to the Purchaser at the Closing (as hereinafter defined), free and
clear of all liens, security interests, deeds or indentures of trust, mortgages,
encumbrances and restrictions, all of its assets and properties of every kind,
nature and description except as otherwise provided below (all of such assets
being referred to herein as the "PURCHASED ASSETS"), including without
limitation the following assets of the Companies:
(a) all Owned Property (as defined);
(b) all tangible assets, including without limitation machinery
and equipment, furniture, office equipment, leasehold improvements, fixtures and
other improvements on real estate (collectively, the "IMPROVEMENTS"), and all
inventories (including without limitation linens and purchased parts and
supplies);
(c) originals or duplicate copies of all financial, accounting and
operating data and records, including without limitation all books, records,
notes, sales and sales promotional data, advertising materials, credit
information, cost and pricing information, customer and supplier lists, business
plans, projections, reference
catalogs, payroll and personnel records to the extent allowed by law, and other
similar property, rights and information;
(d) all Company Intellectual Property (as hereinafter defined) to
the extent assignable or transferable; and
(e) all rights under all leases, license agreements, contracts,
agreements, sale orders, purchase orders, open bids and other commitments, but
only to the extent they pertain to the operating contracts specifically assumed
by the Purchaser under the Operations Transfer Agreement (the "ASSUMED OPERATING
CONTRACTS").
1.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the Companies shall
not transfer to the Purchaser, and the Purchased Assets shall not include (i)
the Companies' rights under this Agreement; (ii) cash, (iii) accounts
receivables, (iv) any contracts other than the Assumed Operating Contracts and
(v) any assets set forth on SCHEDULE 1.2 (collectively, the "EXCLUDED ASSETS").
1.3 PURCHASE PRICE.
(a) The term "PURCHASE PRICE" means an aggregate of Thirty-One
Million Dollars ($31,000,000).
(b) At the Closing, Seller has and will transfer to Purchaser good
and marketable fee simple title to all Owned Real Property free and clear of all
encumbrances, except for (i) minor liens which in the aggregate are not
substantial in amount, do not materially detract from the value or
transferability of the property or assets subject thereto or interfere with the
present use and have not arisen other than in the ordinary course of business,
and (ii) those items listed on Schedule 1.3(b) (collectively "PERMITTED
ENCUMBRANCES").
(c) PAYMENT AT SIGNING. Upon the execution of this Agreement by
all of the parties, an earnest money deposit in the amount of Five Hundred
Thousand Dollars ($500,000) (the "DEPOSIT") shall be delivered by the Purchaser
to Chicago Title Insurance Company (the "ESCROW AGENT"). Escrow Agent shall hold
and dispose of the Deposit in accordance with the terms of this Agreement.
Sellers and Purchaser agree that the duties of the Escrow Agent hereunder are
purely ministerial in nature and shall be expressly limited to the safekeeping
and disposition of the Deposit in accordance with this Agreement. Escrow Agent
shall incur no liability in connection with the safekeeping or disposition of
the Deposit for any reason other than Escrow Agent's willful misconduct or gross
negligence. If Escrow Agent is in doubt as to its duties or obligations with
regard to the Deposit, or if Escrow Agent receives conflicting instructions from
Purchaser and the Sellers with respect to the Deposit, then Escrow Agent shall
not be required to disburse the Deposit and may, at its option, continue to hold
the Deposit until Purchaser and Sellers agree as to its disposition, or until a
final judgment is entered by a court of competent jurisdiction directing its
disposition, or Escrow Agent may interplead the Deposit in accordance with the
laws of the state in which the Property is located. Escrow Agent shall not be
responsible for any interest on the Deposit except as is actually earned, or for
the loss of any interest resulting from the withdrawal of the Deposit prior to
the date interest is posted thereon. Escrow Agent shall execute this Agreement
solely for the purpose of being bound by the provisions of Sections 1.3(c) and
7.2 hereof. Escrow Agent's General Provisions are attached hereto as Exhibit
1.3(c) and made a part hereof.
(d) PAYMENTS AT CLOSING. At the Closing, the Purchaser shall pay
to the Companies an amount, in the aggregate, equal to the Purchase Price (i)
less the Deposit, and (ii) less the Medicaid Escrow Amount by wire transfer of
immediately available funds. The "MEDICAID ESCROW AMOUNT" shall be an amount
equal to Ninety Thousand Dollars ($90,000) which Purchaser, at the Closing,
shall deposit into the Medicaid escrow account with Chicago Title Insurance
Company (the "MEDICAID ESCROW AGENT") such amount constituting Thirty Thousand
Dollars ($30,000) for each of the Acquired Facilities pursuant to the Medicaid
escrow agreements between each of Holmesdale Care Center, Inc., Carmel Hills
Living Center, Inc., and Liberty Terrace Nursing, LLC, and Purchaser and the
Medicaid Escrow Agent (each a "MEDICAID ESCROW AGREEMENT" and collectively, the
"MEDICAID ESCROW AGREEMENTS").
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1.4 ASSUMPTION OF LIABILITIES. At the Closing, the Purchaser shall
assume and agree to pay when due, perform and discharge in accordance with the
terms thereof, only those liabilities and obligations of the Company for future
performance as of the Closing under the Assumed Operating Contracts (the
"ASSUMED LIABILITIES"). Except with respect to the Assumed Liabilities, the
Purchaser shall not assume and shall not in any way be responsible for any of
the debts, liabilities, or obligations of any nature of the Companies. Without
limiting the generality of the foregoing, the Purchaser shall have no liability
for the following (collectively, together with all other liabilities and
obligations of the Companies other than the Assumed Liabilities, the "EXCLUDED
LIABILITIES"):
(a) the outstanding amount of all principal, interest, fees and
expenses in respect of borrowed money, letters of credit, capital leases and
installment purchases (except as may be provided in the Assumed Operating
Contracts but only to the extent that such obligation relates to a period after
the Closing);
(b) obligations relating to Taxes related to the period prior to
Closing, including, but not limited to, Taxes owed by the Sellers associated
with the Closing, (for purposes hereof, "TAXES" means all taxes, charges, fees,
levies, penalties, additions or other assessments imposed by any federal, state,
or local taxing authority, including, but not limited to, income, excise,
property, sales, transfer, franchise, payroll, withholding, value added, social
security or other taxes, including any interest, penalties or additions
attributable thereto);
(c) obligations under this Agreement or any agreement entered into
in connection with the Transactions (other than the obligations of the
Purchaser);
(d) any litigation, suit, proceeding, arbitration or investigation
with respect to the affairs of any Company prior to the Closing;
(e) any liability of any Company resulting from repayments,
recoupments or adjustments after the Closing Date to any amounts paid or payable
to any Company for any cost report period ending on or before the Closing Date
to or from Medicare, Medicaid or any other Missouri state program with respect
to any cost adjustment, patient trust adjustment or share of cost adjustment for
any cost report, but only for that portion of the cost report period preceding
the Closing Date, if applicable;
(f) any liability of any Company relating to any rate adjustments,
repayments or recoupments after the Closing Date arising out of any uncured
failure by any such Company to comply with routine reporting and clinical
requirements occurring prior to the Closing Date;
(g) any regulatory or enforcement proceeding or action initiated
by, or on behalf of, Medicare, Medicaid or any other state program, which
relates to any alleged act or failure to act undertaken by any Company which
occurs on or before the Closing Date, regardless of when such proceeding or
action is initiated;
(h) amounts in respect of workers compensation for periods prior
to the Closing, including without limitation unpaid premiums for any workers
compensation policy;
(i) liabilities or obligations to any Affiliate of any Company
accrued prior to the Closing;
(j) obligations with respect to any pension, profit sharing,
retirement, employee benefit or similar plan, benefit or arrangement, including
without limitation any and all obligations of the Companies to employees in
respect of accrued paid time off, vacation or similar compensation or benefits
("Accrued PTO");
(k) liabilities relating to contracts other than the Assumed
Operating Contracts;
(l) liabilities or obligations relating to the Excluded Assets, or
not related to the Purchased Assets; or
(m) the aggregate amount payable by the Companies through the
Closing Date, or arising as a result of the Transactions, in respect of (i)
legal, accounting, investment banking, broker and other fees and expenses, (ii)
sales and use taxes and transfer taxes, if any, arising from the Transactions
contemplated hereby, and
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(iii) all other payments, costs and expenses incurred by the Companies in
connection with or as a result of the Transactions contemplated hereby,
including without limitation amounts required to discharge the Companies'
obligations under any Benefit Plans.
1.5 ALLOCATION. The total amount of the Closing Purchase Price and the
Assumed Liabilities shall be allocated among the Purchased Assets and the
Companies as set forth on SCHEDULE 1.5. It is agreed by the parties that such
allocation was arrived at by arm's length negotiation and in the judgment of the
parties properly reflects the fair market value of the Purchased Assets
transferred pursuant to this Agreement. It is agreed that the allocations under
this Section 1.5 will be binding on all parties for federal, state, local and
other tax purposes in connection with the purchase and sale of the Purchased
Assets and will be consistently reflected by each party on such party's tax
returns. This SCHEDULE 1.5 shall be subject to change upon the written consent
of the parties following the appraisal to be completed by Purchaser. To the
extent that any amounts are allocated to the non-competition covenants contained
herein, such allocations shall not constitute a cap on potential liability in
the event such covenants are breached.
1.6 TITLE EXAMINATION.
(a) Following execution of this Agreement, Purchaser shall obtain
and review (i) new or updated ALTA surveys of the Owned Property to be prepared
by a licensed surveyor or engineer hired by Purchaser (the "REAL ESTATE
SURVEYS"), and (ii) an ALTA "extended coverage" supplemental report or reports
for the Owned Property covered by the Real Estate Survey, provided Purchaser
satisfies any other Title Company requirements for the issuance thereof (the
"TITLE REPORT"). Purchaser shall bear the cost of the Real Estate Surveys. The
cost for the ALTA supplemental report shall be allocated among the Beneficial
Owners and the Purchaser such that the Beneficial Owners shall pay for any costs
that would have been charged for a standard title insurance policy and the
Purchaser shall pay for any expenses relating to the ALTA policy that exceeds
the cost of a standard title insurance policy.
(b) Purchaser shall notify Beneficial Owners in writing (the
"TITLE NOTICE") prior to the day which is five days following the receipt of
Sellers' most recent survey for each of the Acquired Facilities (hereinafter
referred to as the "TITLE INSPECTION PERIOD"), which exceptions to title
(including survey matters), if any, will not be accepted by Purchaser.
Notwithstanding anything to the contrary set forth herein, Purchaser may not
object to any issue, restriction or condition that is described in the Prior
Surveys (as defined in SCHEDULE 1.6(b)), except for the matters described on
SCHEDULE 1.6(b). If Purchaser fails to notify Beneficial Owners in writing of
any exceptions to title by the expiration of the Title Inspection Period, then
Purchaser shall be deemed to have approved the condition of title to the Owned
Property. If Purchaser notifies Beneficial Owners in writing that Purchaser
objects to any exceptions to title, then Sellers shall have five (5) days after
receipt of the Title Notice to notify Purchaser in writing (i) that Sellers will
remove such objectionable exceptions from title on or before the Closing; or
(ii) that Sellers elect not to cause such exceptions to be removed. If Sellers
fail to notify Purchaser in writing of their election within said five (5) day
period, the Seller shall be deemed to have elected not to cause such exception
to be cured. The procurement by Sellers of a commitment for the issuance of the
Title Policy (as defined in Section 1.6(e) hereof) or an endorsement thereto
satisfactory to Purchaser and insuring Purchaser against any title exception
which was disapproved pursuant to this Section 1.6(b) shall be deemed a cure by
Sellers of such disapproval. If Sellers give Purchaser notice under clause (ii)
above, then Purchaser shall have five (5) days within which to notify Seller in
writing that Purchaser will either nevertheless proceed with the purchase and
take title to the Owned Property subject to such exceptions, or that Purchaser
will terminate this Agreement. If this Agreement is terminated pursuant to the
foregoing provisions of this paragraph, then neither party shall have any
further rights or obligations hereunder (except for any indemnity obligations of
either party pursuant to the other provisions of this Agreement), the Deposit
and all interest thereon shall be returned to Purchaser and each party shall
bear its own costs incurred hereunder. If Purchaser fails to notify Seller in
writing of its election within said five (5) day period, then Purchaser shall be
deemed to have elected to proceed with the purchase and take title to the Owned
Property subject to such exceptions. Notwithstanding the foregoing, Purchaser
need not disapprove any monetary lien representing monies owed, as Seller hereby
agrees to cause all such monetary liens (other than non-delinquent ad valorem
real estate taxes and assessments) to be removed at or prior to Closing.
(c) PRE-CLOSING "GAP" TITLE DEFECTS. Purchaser may, at or prior to
Closing, notify Beneficial Owners in writing (the "GAP NOTICE") of any
objections to title (a) raised by the Title Company with
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respect to changes in title between the expiration of the Title Inspection
Period and the Closing and (b) title defects that are not of record and not
disclosed by the Title Company or otherwise known to Purchaser prior to the
expiration of the Title Inspection Period. Purchaser must notify Beneficial
Owners of such objection to title within five (5) days of being made aware of
the existence of such exception. If Purchaser sends a Gap Notice to Beneficial
Owners, then Purchaser and Sellers shall have the same rights and obligations
with respect to such notice as apply to a Title Notice under Section 1.6(b)
hereof.
(d) PERMITTED EXCEPTIONS. The Owned Property shall be conveyed
subject to the following matters, which are hereinafter referred to as the
"PERMITTED EXCEPTIONS":
(i) those matters that either are not objected to in writing
within the time periods provided in Sections 1.6(a) or 1.6(b) hereof, or
if objected to in writing by Purchaser, are those which Sellers have
elected not to remove or cure, or have been unable to remove or cure, and
subject to which Purchaser has elected or is deemed to have elected to
accept the conveyance of the Owned Property;
(ii) the lien of all ad valorem real estate taxes and
assessments not yet due and payable as of the date of Closing, subject to
adjustment as herein provided;
(iii) local, state and federal laws, ordinances or
governmental regulations, including but not limited to building and zoning
laws, ordinances and regulations, now or hereafter in effect relating to
the Owned Property; and
(iv) items shown on the Real Estate Survey which are not
objected to by Purchaser or are waived or deemed waived by Purchaser in
accordance with Section 1.6(b) hereof.
(e) CONVEYANCE OF TITLE. At Closing Seller shall convey and
transfer to Purchaser the Owned Property, by execution and delivery of a
notarized grant deed(s) conveying the Owned Property (the "DEED"). The Title
Company shall deliver an ALTA Standard Coverage Owner's Policy(ies) of Title
Insurance (collectively, the "TITLE POLICY") covering the Owned Property,
subject only to the Permitted Exceptions and including such endorsements thereto
as Purchaser may reasonably request; provided, however, that if Purchaser has
delivered to the Title Company prior to the Closing a Survey in compliance with
all applicable ALTA requirements, then the Title Policy required hereunder shall
be an ALTA Extended Coverage Owner's Policy of Title Insurance in accordance
with the terms of this Section 1.6(e) hereof.
1.7 RIGHT OF INSPECTION OF OWNED PROPERTY.
(a) INSPECTION RIGHTS. During the period beginning on the date
hereof and ending on the Closing (hereinafter referred to as the "INSPECTION
PERIOD"), Purchaser shall have the right to:
(i) Perform, or hire consultants to perform a physical
inspection and an appraisal of the Owned Property.
(ii) Inspect, or hire consultants to inspect, the
environmental condition of the Owned Property pursuant to the terms and
conditions of this Agreement, and to obtain and review, at Purchaser's
sole election and cost, soils, geology, structural and environmental and
any other engineering reports.
(iii) To obtain and examine a search report showing liens
against the personal property which have been perfected by filings under
the Uniform Commercial Code.
(iv) To examine at the Owned Properties, the applicable
Company's office, physical delivery to the Purchaser and/or the property
manager's office, as the case may be, all books, records, reports, and
files related to the ownership, leasing, maintenance and operation of the
Owned Property, which are to be provided by Sellers to the extent
available and permitted by law. Such documents include, without
limitation, (i) Sellers' current files for the Owned Properties, including
copies of all existing Assumed Operating Contracts, (ii) as-built plans
and specifications for the Improvements, (iii) prior soils,
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geology, structural and engineering reports, (iv) recorded and unrecorded
parking agreements, (v) common area maintenance agreements or other
agreements affecting the Owned Property, (vi) certificates of occupancy
pertaining to the Improvements, (vii) pertinent correspondence with
governmental agencies and current tenants concerning the Owned Property,
and (viii) evidence that the Owned Property is zoned for the purpose to
which Purchaser intends to use it.
(v) To have access to employees, advisors, consultants,
other personnel, customers or suppliers of, third party payors, health
department and other agency officials, or others having material business
relations with, the Companies.
(b) CONDITIONS TO ON-SITE INSPECTIONS. Any on-site inspections of
the Owned Property: (i) shall be conducted so as not to interfere unreasonably
with the use of the Owned Property by Seller or its tenants, and (iii) shall be
subject to the consent of the Seller with respect to the date, time and manner
of the inspection, which consent shall not be unreasonably withheld or
unreasonably restrictive. Sellers may have a representative present during any
such inspections. If Purchaser desires to do any invasive testing at the Owned
Property, Purchaser shall do so only after notifying the Beneficial Owners and
obtaining the applicable Seller's prior written consent thereto, which consent
shall not be unreasonably withheld or delayed. Purchaser agrees to protect,
indemnify, defend and hold the applicable Seller harmless from and against any
claim for liabilities, losses, costs, expenses (including reasonable attorneys'
fees), damages or injuries arising out of or resulting from the inspection of
the Owned Property by Purchaser or its agents or consultants, and such
obligation to indemnify and hold harmless such Seller shall survive the Closing
or any termination of this Agreement, provided, however, that the foregoing
indemnity shall not extend to any losses, costs or expenses resulting from the
negligence or willful misconduct of Seller. Notwithstanding anything to the
contrary contained in this Agreement, Seller acknowledges and agrees that
Purchaser shall not have any liability pursuant to the terms of this Agreement
for any discovery by Purchaser of an adverse environmental or other condition
during the course of its tests, studies, inspections or examinations of the
Owned Property, unless such conditions are caused by Purchaser. Purchaser shall
keep the Owned Property free and clear of any mechanic's liens or materialmen's
liens arising out of Purchaser's entry onto the Owned Property.
(c) RIGHT OF TERMINATION. If Purchaser reasonably determines that
any aspect of the environmental condition inspections contemplated by Section
1.7 hereof makes the Owned Property unsuitable for Purchaser's acquisition,
Purchaser shall have the right, prior to the expiration of the Inspection
Period, to give written notice of termination specifying the nature of the
environmental condition deficiency to Beneficial Owners. Sellers may elect to
cure any environmental deficiency within thirty (30) days after receipt of such
written notice. If Sellers elect not to cure such deficiency or such cure is
inadequate, as determined in Purchaser's reasonable discretion, this Agreement
shall terminate and neither party shall have any further obligations hereunder
(except for any indemnity obligations of either party pursuant to the other
provisions of this Agreement), the Deposit and all interest thereon shall be
returned to Purchaser and each party shall bear its own costs incurred
hereunder. If Purchaser fails to give Beneficial Owners a notice of termination
prior to the expiration of the Inspection Period, then Purchaser shall be deemed
to have approved all aspects of the Owned Property (except for title and survey,
which shall be governed by Section 1.6 hereof) and to have elected to proceed
with the purchase of the Owned Property pursuant to the terms hereof.
Notwithstanding anything to the contrary set forth herein, Purchaser may not
object to any environmental issue, restriction or condition set forth in the
Phase I Environmental Reports (as defined in Schedule 1.7(c)), except for those
matters described on SCHEDULE 1.7(c).
1.8 CLOSING. The purchase and sale of the Purchased Assets hereunder
shall take place at a closing (the "CLOSING") to be held on March 1, 2006, or as
soon as reasonably practicable thereafter following the satisfaction or waiver
of the conditions set forth in ARTICLE 6, or on such other date as agreed to in
writing by the Sellers and the Purchaser (the "CLOSING DATE").
1.9 DELIVERIES BY THE COMPANY AND THE BENEFICIAL OWNERS. At the Closing,
and upon satisfaction or waiver of the conditions set forth in ARTICLE 6 herein,
the Sellers will deliver or cause to be delivered to the Purchaser the
instruments, consents, opinions, certificates and other documents required of
them by ARTICLE 6.
1.10 DELIVERIES BY THE PURCHASER. At the Closing, and upon satisfaction
or waiver of the conditions set forth in ARTICLE 6 herein, the Purchaser will
deliver or cause to be delivered to the Sellers the instruments, opinions,
certificates and other documents required of it by ARTICLE 6.
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
The Sellers hereby represent and warrant to the Purchaser that each of the
statements contained in this ARTICLE 2 is true and correct and will be true and
correct as of the Closing Date. For purposes of this Agreement, the word
"Knowledge" with respect to the Sellers or "TO THE KNOWLEDGE OF SELLERS" or
words of similar import means the knowledge after due inquiry of M. Terence
Reardon, M. Sue Reardon, Edward J. Reardon and any of the other officers,
managers, or administrators of the Sellers; provided, however, Sellers are
entitled to update the disclosure schedules with the knowledge of any officer,
manager or administrator of the Sellers through February 6, 2006 with respect to
any representation or warranty in this ARTICLE 2 qualified by Knowledge.
2.1 ORGANIZATION, POWER AND STANDING. Each of the Companies is a limited
liability company or corporation duly formed, validly existing and in good
standing under the laws of the state or jurisdiction in which it is organized,
as set forth on SCHEDULE 2.1. Each of the Companies has all requisite power and
authority to own, lease and operate its properties and to carry on the Business.
As used herein, "BUSINESS" means leasing and operating nursing homes and
residential care facilities (collectively, the "ACQUIRED FACILITIES"), and
providing management, staffing, recruitment and therapy (including physical,
occupational and speech) contracting services to long term care facilities as
such activities are currently conducted by the Companies. All of the assets,
properties and rights owned, leased or licensed by Sellers necessary to conduct
the Business are located in Missouri.
2.2 SUBSIDIARIES. Except as set forth on SCHEDULE 2.2, no Company
directly or indirectly owns or has the right to acquire any equity interest in
any other corporation, partnership, limited liability company, joint venture, or
other business organization.
2.3 VALIDITY AND ENFORCEABILITY. The execution, delivery and performance
of each of the agreements, documents and instruments contemplated hereby to
which any Company is a party, has been duly authorized by such Company. Each
such agreement, document and instrument shall when executed be the valid and
binding obligations of such Company and of each Seller, enforceable in
accordance with its terms.
2.4 FINANCIAL STATEMENTS. Sellers have previously provided to Purchaser
(a) income statements for each of the Companies for the years ended December 31,
2003 and 2004 during which each such Company owned or operated an Acquired
Facility, (b) income statements for each of the Companies for each of the months
in 2005 ending on or before November 30, 2005, and (c) balance sheets for each
of the Companies as of November 30, 2005. As used herein, November 30, 2005 is
referred to as the "BALANCE SHEET DATE", and each balance sheet as of any such
date attached as SCHEDULE 2.4 is referred to as the "BALANCE SHEET". Such
financial statements and the notes thereto, if any, are unaudited, but are
complete and accurate in all material respects and fairly present the financial
condition of the Companies at the respective dates thereof and the results of
their operations for the periods then ended, and were prepared in accordance
with the books and records of the Companies in conformity with generally
accepted accounting principles, consistently applied during the periods covered
thereby (except for the absence of footnotes in the case of the unaudited
financial statements).
2.5 MATERIAL ADVERSE CHANGES. Since January 1, 2005, other than as set
forth on SCHEDULE 2.5, each Company has operated only in the usual and ordinary
course, and there has been no (a) acquisition or disposition of assets or
securities, or commitment therefor by any Company, except for the acquisition or
disposition of assets in the ordinary course of business, (b) liens, security
interests, restrictions, or encumbrances placed upon any of the assets of any
Company, except in the ordinary course of business, or (c) increase in the
compensation or commission rates payable by any Company to any officer,
director, employee, consultant or sales agent, except in accordance with past
practice, or (d) event or condition relating specifically to the Companies
(rather than to general economic conditions or generally to the industries in
which they operate) which has had or, together with any other events or
conditions, could reasonably be expected to have a material adverse effect on
the Business or the affairs, assets, condition (financial or otherwise) or
prospects of any Company.
2.6 MATERIAL CONTRACTS. SCHEDULE 2.6 sets forth a complete and accurate
list, in each case whether written or unwritten, of all of the following
(including all amendments or modifications thereof):
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(a) agreements, contracts or other arrangements with respect to
which any one or more of the Companies has any liability or obligation involving
more than $10,000 contingent or otherwise, or which may extend for a term of
more than one year after the Closing;
(b) licenses, leases, contracts, agreements and other arrangements
with respect to any material property (including medical equipment, but
excluding other than real property) of any Company, including without
limitation, all licenses or agreements relating to Intellectual Property, and
sales and supply contracts;
(c) agreements, contracts or arrangements of any Company with
officers, directors, managers, members or Affiliates of any Company or any of
their respective relatives or Affiliates (as used herein, "AFFILIATE" has the
meaning ascribed to it in Rule 405 promulgated under the Securities Act of 1933,
as amended (the "SECURITIES Act"));
(d) material agreements or arrangements with physicians, physical
therapists, occupational therapists, nutritionists and other individual and
institutional health care providers, third party payors and other health care
facilities, including without limitation nursing homes, visiting nurse
associations, home health agencies, durable medical equipment suppliers,
pharmacies, hospitals, hospices, retirement homes and life care communities;
(e) employment, collective bargaining, severance, consulting
(except for consulting agreements covered in Section 2.6(d) above), deferred
compensation, benefit and similar plans, agreements, arrangements or contracts
involving any Company;
(f) utility, trust and other bonds (the "BONDS") and deposits,
excluding patient accounts and deposits to be transferred in accordance with the
Operations Transfer Agreement (the "COMPANY DEPOSITS"), maintained or required
to be maintained by any Company and guarantees thereof by any Beneficial Owner;
and
(g) other material agreements, contracts, instruments,
commitments, plans or arrangements of any Company.
All the foregoing (whether written or unwritten) are referred to as
"MATERIAL CONTRACTS". Sellers have furnished to the Purchaser true, correct and
complete copies of all Material Contracts (or written descriptions thereof, in
the case of oral contracts). Each Material Contract (or description) sets forth
the entire agreement and understanding between a Company and the other parties
thereto. Each Assumed Operating Contract is valid, binding and in full force and
effect, and there is no event or condition which has occurred or exists, which
constitutes or which, with or without notice, the happening of any event and/or
the passage of time, could constitute a default or breach under any such Assumed
Operating Contract by any Company or, any other party thereto, or could cause
the acceleration of any obligation of any party thereto or give rise to any
right of termination or cancellation thereof.
2.7 REAL PROPERTY.
(a) SCHEDULE 2.7(a) sets forth each interest in real property
(including all land, buildings, easements and other real property rights) owned
by any Company or the owner of the real property referred to in SCHEDULE 2.7(a)
(the "OWNED PROPERTY"). The respective owner of the Owned Property has, or will
have on the Closing Date, good and clear record and marketable (and insurable,
at ordinary premium rates) title to the Owned Property, free and clear of all
deeds and indentures of trust, mortgages, liens, restrictions, options, leases
and encumbrances of any kind, except Permitted Exceptions or as specified on
SCHEDULE 2.7(a) and enjoys peaceful and quiet possession of the Owned Property.
There are no material taxes, levies, fees or similar costs or charges which must
be paid with respect to existing water or sewer hook-ups or other similar
services relating to the Owned Property. All utility systems serving the Owned
Property are installed, subject to valid and existing easements, if applicable,
and are reasonably adequate for the Business.
(b) The Owned Property constitutes all the real property (or
interest in real property) necessary for, or currently used in, the conduct of
the Business. There are no interests in real property leased by any Seller in
connection with the Business or by any Company.
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(c) There is no pending or, to the Knowledge of the Sellers any
threatened condemnation, eminent domain or similar proceeding with respect to
any Owned Property.
(d) Each Owned Property is in compliance in all material respects
with all building, zoning, subdivision, health, safety and other applicable
federal, state and local laws and regulations. For purposes of the foregoing
sentence, compliance with zoning laws and regulations means compliance with such
laws and regulations as currently in effect and without taking into account any
portion thereof that may permit non-conforming uses. The Owned Property is
legally subdivided and consists of separate tax lots so that each is assessed
separate and apart from any other real property. None of the buildings, plant or
structures included in the Owned Property is in need of material maintenance or
repairs, except for ordinary and routine maintenance and repairs that are not
material.
(e) Sellers hold all consents, permits, licenses, approvals and
authorizations from governmental authorities or other third parties which are
necessary to permit Seller to convey the Owned Property in accordance with the
provisions of this Agreement and the use of the Owned Property for its current
use and the current conduct of the Business by the Sellers, all of which are in
full force and effect and the Owned Property is in compliance with all
applicable zoning ordinances and the Permitted Exceptions .
2.8 DELIVERY OF TITLE DOCUMENTS. Sellers have delivered to Purchaser (a)
copies of the most recent property tax bills for the Owned Property; and (b) a
copy of Sellers' most recent title insurance policy and/or survey for the Owned
Property.
2.9 PERSONAL PROPERTY. Each Company has good title to or a valid
leasehold or license interest in each item of personal property included in the
Purchased Assets, free and clear of any security interests, liens, restrictions
and encumbrances of every kind, nature and description, except such liens and
encumbrances as will be released at Closing. All material assets of each Company
are in good operating condition and repair, normal wear and tear excepted. The
Purchased Assets and properties of each Company include all assets currently
used in the conduct of the Business.
2.10 INTELLECTUAL PROPERTY.
(a) As used herein "INTELLECTUAL PROPERTY" means all (i) patents,
patent applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names, logos and corporate names (in each case,
whether registered or unregistered) and registrations and applications for
registration thereof together, to the extent applicable, with all of the
goodwill associated therewith, (iii) copyrights (registered or unregistered) and
registrations and applications for registration thereof, (iv) computer software,
data, data bases and documentation thereof, (v) trade secrets and other
confidential information (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (vi) World
Wide Web addresses and domain name registrations and (vii) works of authorship
including, without limitation, computer programs, source code and executable
code, whether embodied in software, firmware or otherwise, documentation,
designs, files, records, data and mask works and any rights in semiconductor
masks, layouts, architectures or topography. As used herein "COMPANY
INTELLECTUAL PROPERTY" means Intellectual Property owned or used by any Company,
but excluding the MDI billing and accounting software package and other
intellectual property listed on Schedule 1.2 (Excluded Assets).
(b) SCHEDULE 2.10(b) hereto contains (1) a complete and accurate
list of all Company Intellectual Property included in clauses (i) - (iii) and
(vi) of the definition of Intellectual Property, and (2) a complete and accurate
list of all licenses and other rights granted by any Company to any natural
person, corporation, limited liability company, partnership, trust or other
entity (each a "PERSON") with respect to any Company Intellectual Property and
all licenses and other rights granted by any Person to any Company with respect
to any Company Intellectual Property (excluding "off-the-shelf" programs or
products or other "shrink wrap" software licensed in the ordinary course of
business) identifying the subject Company Intellectual Property and describing
the material terms of such licenses or other rights. Except as set forth on
SCHEDULE 2.10(B), there is no threatened or reasonably foreseeable loss or
expiration of any Company Intellectual Property.
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(c) Each Company owns or possesses sufficient legal rights to all
Intellectual Property necessary for or used in the Business and to the Knowledge
of Sellers, without any infringement of the rights of others.
(d) The Companies have taken all steps that are reasonably
required to protect their rights in, and the confidentiality of, the Company
Intellectual Property belonging to any Company or provided by any other Person
to any Company.
2.11 INVENTORIES. The inventory of each Company is and as of the Closing
will be fit and sufficient for the purposes for which it was provided or
obtained and will be normal and reasonable in kind and amount in light of the
normal needs of the Business.
2.12 RESIDENTS AND SUPPLIERS. SCHEDULE 2.12 sets forth the average daily
census for each Acquired Facility, in each case for 2004 and for each of the
months in 2005 ending prior to the execution of this Agreement. SCHEDULE 2.12
hereto also sets forth a list of (a) each hospital, health maintenance
organization, physician or physician group that (i) accounted for more than 5%
of the patient referrals to any Company during 2004, (ii) accounted for more
than 5% of the aggregate patient referrals to the Companies during 2004, (iii)
is expected by the Sellers to account for more than 5% of the patient referrals
to any Company during 2005, or (iv) is expected by Sellers to account for more
than 5% of the aggregate patient referrals to the Companies during 2005, and (b)
each customer that (i) purchased more than 5% of the services of any Company
during 2004, (ii) purchased more than 5% of the aggregate services of the
Companies during 2004, (iii) is expected by the Sellers to purchase more than 5%
of the services provided by any Company during 2005, or (iv) is expected by the
Sellers to purchase more than 5% of the aggregate services provided by the
Companies during 2005 (such referral sources and customers are referred to
collectively as the "MATERIAL CUSTOMERS"). To the Knowledge of the Sellers, no
Material Customer plans to discontinue or materially reduce resident referrals
to or the services purchased from any Company. Except as set forth on SCHEDULE
2.12, during the previous 18 months no Material Customer has terminated, or to
the Knowledge of the Sellers, threatened to terminate, its relationship with any
Company, or has decreased materially or, to the Knowledge of the Sellers,
threatened to decrease or limit materially the residents referred to or the
service purchased from any Company, and, to the Knowledge of the Sellers, no
Company will lose or suffer material diminution in its relationship with any
Material Customer as a result of the Transactions. To the Knowledge of the
Sellers, all suppliers material to any Company will continue to sell to such
Company the products and services currently sold by each of them. The Sellers
and the Companies do not know or have no reason to know that any Company's
relationship with its residents, Material Customers, referral sources and
suppliers are other than good commercial working relationships.
2.13 THIRD-PARTY PAYORS. Except as set forth on SCHEDULE 2.13 hereto,
during the previous 18 months no Company has lost any third-party payor contract
or the right to participate in any governmentally-sponsored health insurance
program or suffered any material diminution in its relationship with any
third-party payor since such date, to the Knowledge of the Sellers, no such
action is threatened against any Company, and, to the Knowledge of the Sellers,
no Company may reasonably be expected to lose or suffer a material diminution in
its relationship with any material third party payor as a result of the
Transactions.
2.14 CERTAIN FINANCIAL RELATIONSHIPS. All financial relationships
(whether or not memorialized in a writing) that any Company has or had with a
physician or an immediate family member of a physician since January 1, 1998
either (1) satisfy the requirements of an exception to 42 U.S.C. Section 1395nn,
42 U.S.C. Section 1320a-7, 42 U.S.C. Section 1320a-7(a) or 42 U.S.C. Section
1320a-7(b) (including, without limitation, the exception for medical directors),
or (2) do not involve the referral of residents to any Company by a physician
with whom any Company has a "financial relationship" within the meaning set
forth in 42 U.S.C. Section 1395nn.
2.15 SELLERS' REQUIRED CONSENTS. Except as specified on SCHEDULE 2.15, no
consent, order, authorization, approval, declaration or filing, including,
without limitation, any consent, approval or authorization of or declaration or
filing with any governmental or non-governmental authority or any party to a
Material Contract is required on the part of any of the Sellers for or in
connection with the execution, delivery or performance of this Agreement and the
agreements, documents and instruments contemplated hereby (the "SELLERS'
REQUIRED CONSENTS"). The Sellers have no reason to believe that all of the
Sellers' Required Consents will not be obtained. Subject to obtaining the
Sellers' Required Consents specified on SCHEDULE 2.15, the execution, delivery
and
10
performance of this Agreement and the other instruments, documents and
agreements contemplated hereby by the Sellers will not result in any violation
of, be in conflict with or constitute a default under, any law, statute,
regulation, ordinance, agreement, contract, instrument, license, permit,
authorization, judgment, decree or order to which any Company is a party or by
which any Company is bound.
2.16 REGULATORY AND LEGAL COMPLIANCE.
(a) Each Company is in compliance in all material respects with
all federal, state and local statutes, laws, ordinances, judgments, decrees,
orders or governmental rules, regulations, policies and guidelines applicable to
it. Except as set forth on SCHEDULE 2.16(a), to Sellers' Knowledge no Company
has received any notice from any governmental or regulatory authority or
otherwise of any alleged violation or noncompliance that has not been cured or
addressed by a plan of corrective action.
(b) No Company has received written notice that any action has
been taken or recommended by any governmental or regulatory official, body or
authority, either to revoke, withdraw or suspend any license to operate any
Company or to terminate or decertify any participation of any Company in the
Medicare or Medicaid programs, nor to the Knowledge of the Sellers, is there any
decision not to renew any Medicare of Medicaid provider or supplier agreement
related to any Company.
(c) To the Knowledge of Sellers, the operations of each Company
are in compliance with and do not otherwise violate the federal Medicare and
Medicaid statutes regarding health professional self-referrals, 42 U.S.C.
Section 1395nn and 42 U.S.C. Section 1396b, or the regulations promulgated
pursuant to such statute, or similar state or local statutes or regulations.
(d) No Company nor its respective, partners, officers, members,
managers and directors, nor to the Knowledge of the Sellers, any persons who
provide professional services under agreements with such Company have, in
connection with their activities directly or indirectly related to such Company,
engaged in any activities which are prohibited under federal Medicare and
Medicaid statutes, 42 U.S.C. Sections 1320a-7, 1320a-7(a) and 1320a-7b, or the
regulations promulgated pursuant to such statutes or related state or local
statutes or regulations or which are prohibited by rules of professional
conduct, including but not limited to the following:
(i) making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment
(ii) making or causing to be made any false statement or
representation of a material fact for use in determining rights to any
benefit or payment
(iii) presenting or causing to be presented a claim for
reimbursement for services under any Federal health care program,
including but not limited to Medicare, Medicaid or any state health care
program that is for an item or service that is known or should be known to
be (A) not provided as claimed, or (B) false or fraudulent
(iv) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any
benefit or payment on its own behalf or on behalf of another, with intent
to fraudulently secure such benefit or payment
(v) offering, paying, soliciting or receiving any
remuneration (including any kickback, bribe, or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (A) in return for
referring an individual to a person for the furnishing or arranging for
the furnishing of any item or service for which payment may be made in
whole or in part by any Federal health care program, including but not
limited to Medicare, Medicaid, or any state health care program, or (B) in
return for purchasing, leasing, or ordering any good, facility, service,
or item for which payment may be made in whole or in part by Medicare or
Medicaid or other state health care program; or
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(vi) making or causing to be made or inducing or seeking to
induce the making of any false statement or representation (or omitting to
state a fact required to be stated therein or necessary to make the
statements contained therein not misleading) of a material fact with
respect to (A) the conditions or operations of a facility in order that
the facility may qualify for any Federal health care program, including
but not limited to Medicare, Medicaid, or any state health care program
certification, or (B) information required to be provided under Section
1124Aof the Social Security Act (42 U.S.C. Section 1320a-3).
(e) To the Knowledge of Sellers, the operations of each Company
are in compliance with and do not violate any federal, state or other statutes
or regulations governing the lawfulness and fairness of its business practices
or its responsibilities to uphold and protect the rights of residents.
(f) Each Company, or portion thereof, or Company group health plan
which has been determined to be a Covered Entity pursuant to the Health
Insurance Portability and Accountability Act of 1996 and any regulations
promulgated thereunder ("HIPAA"), and each small health plan operated by any
Company and not required to comply with HIPAA prior to April 14, 2004, (i) is
executing transactions in compliance with, or capable of submitting transactions
in compliance with (in the event that insurers or payers are not yet accepting
standard transactions), the standard transaction requirements established by
HIPAA for Covered Entities, (ii) is operating in compliance in all material
respects with the HIPAA privacy regulations for Covered Entities, including
without limitation executing all necessary business associates agreements as
required by HIPAA, and (iii) has developed and implemented appropriate
safeguards to comply with the final HIPAA security regulations.
(g) None of the Companies have provider contracts with TRICARE or
the Department of Veterans Affairs.
(h) Each Company maintains in one or more separate trust accounts
all Company Deposits required by applicable law to be held for the benefit of
residents. The Companies are in compliance with applicable law with respect to
all such Company Deposits.
(i) The Sellers have furnished Purchaser with true, accurate and
complete copies of all surveys, inspection reports and similar examination
reports relating to any inspections or examinations by any federal, state or
local regulatory agency or administration having jurisdiction over the Companies
during the year ended December 31, 2004 and during 2005 (collectively, the
"Surveys"). Except as set forth on SCHEDULE 2.16(i), such Surveys do not contain
any material violations of federal, state and local statutes, laws, ordinances,
judgments, decrees, orders or governmental rules, regulations, policies and
guidelines applicable to it except as have been cured or addressed by a plan of
corrective action.
2.17 COST REPORTS. The Sellers have furnished Purchaser with copies of
all cost reports filed by the Companies with the appropriate Missouri state
agency, the appropriate Medicare and Medicaid agencies and/or fiscal
intermediaries in respect of the operation of the Acquired Facilities for the
years ended December 31, 2002, 2003 and 2004, if applicable, and any interim
periods during the years then ended and during 2005. Such cost reports did not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading. Such
cost reports were filed no later than the date on which such final cost reports
were required to be filed by law under the terms of the Missouri state agency,
Medicare and Medicaid programs, and the Companies have provided the appropriate
agencies and/or fiscal intermediaries with any information needed to support
claims for reimbursement made by the Companies either in said final cost reports
or in any cost reports filed for prior cost reporting periods.
2.18 [INTENTIONALLY OMITTED]
2.19 LICENSES AND PERMITS. SCHEDULE 2.19 sets forth all material
licenses, permits, authorizations and certifications of governmental authorities
and third parties held by any Company, including without limitation all
licenses, franchises, permits, accreditations and provider or supplier
agreements as may be required under Title XVIII and XIX of the Social Security
Act and other applicable laws for reimbursement of services rendered or goods
sold, necessary or advisable under applicable law for the conduct of its
Business (collectively, the "AUTHORIZATIONS"). Each Company is in material
compliance with all such Authorizations, all of which are and will be in full
force and effect up to the Closing. There are no other such licenses, permits,
authorizations or
12
certifications required for the operation of the Business which such Company has
not obtained or which, in good industry practice, such Company should hold for
the conduct of the Business. To the Knowledge of the Sellers, there has been no
threatened suspension, revocation or invalidation of any Authorization, nor is
there any basis therefor.
2.20 LITIGATION. Except as set forth on SCHEDULE 2.20 there is no action,
suit, proceeding or investigation before any court, arbitrator or governmental
authority, pending or, to the Knowledge of the Sellers, threatened against any
Company or, to the Knowledge of the Sellers, against any member, officer,
director or employee of any Company in relation to the affairs of any Company.
No Company is currently planning to initiate any action, suit, or proceeding
relating to the Purchased Assets or the Business before any court, arbitrator or
governmental authority.
2.21 EMPLOYEES AND COMPENSATION.
(a) Each Company is in compliance in all material respects with
the Age Discrimination in Employment Act of 1967, as amended, the Americans with
Disabilities Act of 1990, as amended, ERISA, and state fair employment
practices, laws and regulations and other laws prohibiting employment
discrimination.
(b) Each Company is in compliance in all material respects with
all applicable federal, state and local laws and regulations respecting
employment and employment practices in the jurisdictions within which they
operate. Each Company is in compliance with all applicable laws and regulations
governing minimum wage, including without limitation any other laws (such as
Medicaid) that impose or establish wage requirements based upon minimum wage
laws.
(c) Except as set forth on SCHEDULE 2.21(c), no employees of any
Company are represented by a union, and there is no labor strike, dispute,
arbitration, grievance, slowdown, stoppage, organizational effort, dispute or
proceeding by or with any employee or former employee of any Company or any
labor union pending or threatened against any Company.
(d) SCHEDULE 2.2 1(d) sets forth a complete list of all employees
of and consultants to any Company, with annual compensation in excess of
$50,000, showing date of hire, hourly rate or salary or other basis of
compensation, other benefits accrued as of a recent date and job function. No
employee listed on SCHEDULE 2.2 1(d) has been convicted of or pleaded guilty or
nolo contendre to (i) any felony or (ii) any other criminal violation applicable
to the Business or any similar business.
(e) There are no Company employees or to the Knowledge of the
Sellers, no Company has entered into consulting contracts or arrangements with
individuals or entities that have been excluded or debarred from participation
in Federal health care programs including, but not limited to Medicare or
Medicaid. No Company has identified, reassigned or terminated within the past
two years, any officer, director, employee, consultant, independent contractor
or vendor/supplier who has been the subject of an exclusion or debarment action.
2.22 ERISA; COMPENSATION AND BENEFIT PLANS.
(a) SCHEDULE 2.22(a) sets forth all employee compensation and
benefit plans, agreements, commitments, practices or arrangements of any type
(including, but not limited to, plans described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) offered,
maintained or contributed to by any Company for the benefit of current or former
employees or directors of any Company, or with respect to which any Company has
or may have any liability, whether direct or indirect, actual or contingent
(including, but not limited to, liabilities arising from affiliation under
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended
(together with applicable regulations, the "Code") or Section 4001 of ERISA)
(collectively, the "BENEFIT PLANS"), and includes a written description of all
oral Benefit Plans. There are no material compensation or benefit plans,
agreements, commitments, practices or arrangements of any type providing
benefits to employees or directors of any Company, or with respect to which any
Company may have any liability, other than the Benefit Plans.
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(b) With respect to each Benefit Plan, each Company has delivered
to the Purchaser true and complete copies of: (i) any and all plan texts and
agreements (including, but not limited to, trust agreements and insurance
contracts); (ii) any and all material employee communications (including all
summary plan descriptions); (iii) the most recent annual report (Form 5500), if
applicable; and (iv) the most recent annual and periodic accounting of plan
assets, if applicable.
(c) With respect to each Benefit Plan: (i) such plan has been
administered and enforced in accordance with its terms and all applicable laws,
regulations and rulings in all material respects; (ii) no material disputes nor
any audits or investigations by any governmental authority are pending or, to
the knowledge of the Sellers, threatened; (iii) all contributions, premiums, and
other payment obligations have been accrued on the Balance Sheet in accordance
with generally accepted accounting principles, and, to the extent due, have been
made on a timely basis, in all material respects; (iv) each Company has
expressly reserved in itself the right to amend, modify or terminate such plan,
or any portion of it, at any time without liability to itself; (v) no such plan
requires any Company to continue to employ any employee or director; (vi) no
such plan is, or has ever been, subject to Title IV of ERISA; (vii) no such plan
provides medical or death benefits with respect to current or former employees
or directors of any Company beyond their termination of employment, other than
coverage mandated by Sections 601- 608 of ERISA and 4980B(f) of the Code.
(d) Except as set forth on SCHEDULE 2.22(d), the consummation of
the Transactions contemplated by this Agreement will not (i) entitle any Person
to severance pay, (ii) accelerate the time of payment or vesting under any
Benefit Plan, or (iii) increase the amount of compensation or benefits due to
any Person. SCHEDULE 2.22(d) lists all estimated Accrued PTO obligations to
current employees, including Accrued PTO obligations that will be owed to
current employees as a result of the consummation of the Transactions.
2.23 ENVIRONMENTAL MATTERS.
(a) The ownership or use of each Company's premises and assets,
the occupancy and operation thereof, and the conduct of each Company's
operations and business, are in compliance in all material respects with all
applicable federal, state and local laws, ordinances, regulations, standards and
requirements relating to pollution, environmental protection, hazardous
substances and related matters. Except as noted on Schedule 1.7(c), there is no
liability attaching to any Company or such premises or assets or the ownership
or operation thereof as a result of (a) to the Knowledge of Sellers, with
respect to actions by Persons other than the Sellers, and (b) the actions of
Sellers, for any hazardous substance that may have been discharged on or
released from such premises, or disposed of on-site or off-site, or any other
circumstance occurring prior to the Closing or existing as of the Closing. For
purposes of this Section, "hazardous substance" shall mean oil, mold or any
other substance which is included within the definition of a "hazardous
substance", "pollutant", "toxic substance", "toxic waste", "hazardous waste",
"contaminant" or other words of similar import in any federal, state or local
environmental law, ordinance or regulation.
(b) No Company is in violation of, or to the Knowledge of Sellers,
is the subject of any investigation, inquiry or enforcement action by any
governmental authority under the Medical Waste Tracking Act, 42 U.S.C. Section
6992 et seq., or any applicable state or local governmental statute, ordinance
or regulation dealing with the disposal of medical wastes ("MEDICAL WASTE
LAWS"). Each Company has obtained and is in compliance in all material respects
with any permits related to medical waste disposal required by the Medical Waste
Laws, and has taken reasonable steps to determine, and has determined, that all
disposal of medical waste by it has been in compliance with the Medical Waste
Laws.
2.24 INSURANCE. SCHEDULE 2.24 sets forth all insurance policies under
which any Company is insured, the name of the insurer of each policy, the type
of policy provided by such insurer, the amount, scope and period covered thereby
and a description of any material claims made thereunder (collectively, the
"INSURANCE POLICIES"). Such Insurance Policies are valid and in full force and
effect and in the good faith estimate of Sellers, are adequate to insure against
all liabilities, claims and risks against which it is customary for companies
similarly situated as the Companies to insure. All premiums due to date under
such Insurance Policies have been paid, no default exists thereunder and, with
respect to any material claims made under such policies, no insurer has made any
"reservation of rights" or refused to cover all or any portion of such claims.
No Company has received any notice of any proposed material increase in the
premiums payable for coverage, or proposed reduction in the scope (or
14
discontinuation) of coverage, under any of such Insurance Policies. All
liabilities and expenses relating to the Insurance Policies have been properly
accrued on the Balance Sheet.
2.25 DEBT. Other than the Excluded Liabilities, at the Closing Sellers
will not have any principal, interest or expenses in respect of borrowed money,
capital leases, letters of credit and installment purchases incurred by the
Companies prior to the Closing that creates a lien or encumbrance on any
Purchased Asset.
2.26 DISCLOSURE. The representations, warranties and other statements of
the Sellers contained in this Agreement and the other documents, certificates
and written statements furnished to the Purchaser by or on behalf of the Sellers
pursuant thereto, taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
2.27 SEVERAL REPRESENTATIONS OF THE BENEFICIAL OWNERS. Each Beneficial
Owner severally represents to the Purchaser solely with respect to such
Beneficial Owner as follows:
(a) AUTHORITY. Such Beneficial Owner has all requisite power and
authority to enter into this Agreement and perform such Beneficial Owner's
obligations hereunder, and this Agreement has been duly authorized by such
Beneficial Owner and constitutes a valid and binding obligation of such
Beneficial Owner enforceable against such Beneficial Owner in accordance with
its terms.
(b) NO CONFLICT. The execution, delivery and performance of this
Agreement and the other instruments and agreements contemplated hereby by such
Beneficial Owner will not result in any violation of, be in conflict with or
constitute a default under, any law, statute, regulation ordinance, material
contract or agreement, instrument, judgment, decree or order to which such
Beneficial Owner is a party or by which such Beneficial Owner is bound.
(c) BROKERS. No finder, broker, agent, financial advisor or other
intermediary has acted on behalf of any Beneficial Owner in connection with this
Agreement or any of the Transactions, and no such Person is entitled to any fee,
payment, commission or other consideration in connection therewith as a result
of any arrangement made by such Beneficial Owner, except for Senior Living
Investment Brokerage, Inc., whose fees and expenses will be paid by such
Beneficial Owner.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
The Purchaser represents and warrants to the Sellers that each of the
statements contained in this ARTICLE 3 is true and correct and will be true and
correct as of the Closing Date:
3.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware.
3.2 AUTHORITY. The Purchaser has all requisite corporate power and
authority to enter into this Agreement and perform such Purchaser's obligations
hereunder, and this Agreement has been duly authorized by Purchaser and
constitutes a valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with its terms.
3.3 PURCHASER REQUIRED CONSENTS. Except as specified on SCHEDULE 3.3, no
consent, order, authorization, approval, declaration or filing is required on
the part of the Purchaser for or in connection with the execution, delivery or
performance of this Agreement and the agreements, documents and instruments
contemplated hereby, or the conduct of the Business by the Purchaser after the
Closing (the "PURCHASER REQUIRED CONSENTS"). Without limiting the generality of
the foregoing, the Purchaser Required Consents shall include (a) any and all
local, state and federal licenses necessary to enable the Purchaser to operate
the Acquired Facilities from and after the Closing and (b) the required
certification by the appropriate Medicaid agencies and/or fiscal intermediaries
necessary to enable Purchaser to bill and receive payment under the Medicaid
program. The Purchaser has no reason
15
to believe that all of the Purchaser Required Consents will not be obtained.
Subject to obtaining the Purchaser Required Consents specified on SCHEDULE 3.3,
the execution, delivery and performance of this Agreement and the other
instruments, documents and agreements contemplated hereby by the Sellers will
not result in any violation of, be in conflict with or constitute a default
under, any law, statute, regulation, ordinance, agreement, contract, instrument,
license, permit, authorization, judgment, decree or order to which Purchaser is
a party or by which Purchaser is bound.
3.4 BROKERS. No finder, broker, agent, financial advisor or other
intermediary has acted on behalf of the Purchaser in connection with this
Agreement or any of the Transactions, and no such Person is entitled to any fee,
payment, commission or other consideration in connection therewith as a result
of any arrangement made by the Purchaser.
3.5 DISCLOSURE. The representations, warranties and other statements of
the Purchaser contained in this Agreement and the other documents, certificates
and written statements furnished to the Purchaser by or on behalf of the
Purchaser pursuant thereto, taken as a whole, do not contain an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements contained herein or therein not misleading
ARTICLE 4.
COVENANTS OF THE SELLERS
4.1 CONDUCT OF THE BUSINESS.
(a) The Sellers will cause each Company to, prior to the Closing:
(i) maintain its corporate or limited liability company
existence;
(ii) use all reasonable efforts to preserve the Business and
its business organization intact, retain its permits, licenses and
franchises, preserve the existing contracts and goodwill of its customers,
suppliers, personnel and others having business relations with it;
(iii) conduct its business only in the ordinary course
(including without limitation the collection of receivables and the
payment of payables); and
(iv) use all reasonable efforts to operate in such a manner
as to assure that the representations and warranties of the Sellers set
forth in this Agreement on the date hereof will be true and correct as of
the Closing Date with the same force and effect as if such representations
and warranties had been made on and as of the Closing Date.
(b) Except as set forth on SCHEDULE 4.1(b), the Sellers will cause
each Company not to, prior to the Closing, without the Purchaser's prior written
consent (such consent not to be unreasonably withheld or delayed):
(i) change its method of management or operations in any
material respect;
(ii) dispose of or acquire any material assets or properties
or make any commitment to do so, other than inventory in the ordinary
course of business;
(iii) subject any of its properties or assets to any lien,
security interest, mortgage or encumbrance, in each case other than in the
ordinary course of business;
(iv) modify, amend, cancel or terminate any Material Contract
or any other existing agreement, contract or instrument material to any
Company or the Business;
(v) make any change in the compensation paid or payable to
any officer, director, employee, agent, representative or consultant as
shown or required to be shown on a schedule hereto, or
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pay or agree to pay any bonus or similar payment (other than bonus
payments or other amounts to which any Company is committed and which are
expressly disclosed in this Agreement or a schedule hereto);
(vi) promote, change the job title of, or otherwise alter in
any material respect the responsibilities or duties of, any management
employee or officer of any Company;
(vii) enter into any lease, contract or agreement that if in
existence on the date hereof would have constituted a Material Contract;
(viii) make any change in its accounting practices or
procedures;
(ix) change its customer pricing, rebates or discounts, other
than in the ordinary course of business;
(x) take any other action which could have a material
adverse effect on the Business or the affairs, assets, condition
(financial or otherwise) or prospects of any Company, or could adversely
affect or detract from the value of any Company, its assets or the
Business; or
(xi) commit to do any of the foregoing referred to in clauses
(i) - (x).
4.2 EFFORTS. The Sellers will use all reasonable efforts (a) to cause
the conditions specified in ARTICLE 6 to be satisfied as soon as practicable,
and (b) to assist Purchaser in its due diligence efforts, including but not
limited to the actions described in Section 1.7.
4.3 EXCLUSIVITY. Until the termination of this Agreement, Sellers will
not, and will cause each Company's equity owners, members, managers, officers,
directors, employees and agents not to solicit or enter into any discussions or
negotiations with, or furnish or cause to be furnished any information
concerning a Company to any person or entity (other than Purchaser and its
officers, managers, employees and agents) in connection with any proposed
acquisition of all or a portion of a Company, whether by merger, purchase of
equity interests, sale of the assets (not in the ordinary course of business) or
other acquisition or business combination involving any Company. Each Seller
agrees to promptly disclose to the Purchaser all such unsolicited offers or
indications of interest and the terms thereof.
4.4 CONFIDENTIALITY. Following the Closing, each Seller shall not,
directly or indirectly, disclose, divulge or make use of any trade secrets or
other information of a business, financial, marketing, technical or other nature
pertaining to any Company or the Business, including information of others that
any Company has agreed to keep confidential, except to the extent that such
information shall have become public knowledge other than by breach of this
Agreement by any of the Sellers and except to the extent that disclosure of such
information is required by law.
4.5 NON-COMPETITION AND NON-SOLICITATION COVENANTS.
(a) For a period of five years after the Closing, no Seller shall,
directly or indirectly, or as a stockholder, partner, member, manager, employee,
consultant or other owner or participant in any Person other than the Purchaser,
engage in or assist any other Person to engage in any business in which any
Company is engaged or in which any Company is planning to engage or is
considering engaging on the date hereof, anywhere within 25 miles from any
Company or from any Acquired Facility without the prior written consent of the
Purchaser; provided, however, any Seller may request that the Purchaser consent,
in writing, to a consulting engagement or activity which may violate the terms
of this Section 4.5 and such consent shall not be unreasonably withheld.
(b) For a period of five years after the Closing, no Seller shall,
directly or indirectly, solicit, endeavor to entice away from the Purchaser or
any of its Affiliates, or offer employment or a consulting or other position to,
or otherwise interfere with the business relationship of the Purchaser or any of
its Affiliates with, any Person who is, or was within the one-year period prior
thereto, a customer or employee of, consultant or supplier to, referral source
for or other Person having a material business relationship with, the Purchaser
or any of its Affiliates.
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(c) The foregoing covenants shall not be applicable to any Seller
that enters into any form of agreement with non-competition and non-solicitation
covenants with Purchaser.
4.6 INJUNCTIVE RELIEF; LIMITATION ON SCOPE. Each of the Sellers
acknowledges that any breach or threatened breach of the provisions of Sections
4.3, 4.4 or 4.5 of this Agreement will cause irreparable injury to the Purchaser
for which an adequate monetary remedy does not exist. Accordingly, in the event
of any such breach or threatened breach, the Purchaser shall be entitled, in
addition to the exercise of other remedies, to seek and (subject to court
approval) obtain injunctive relief, without necessity of posting a bond,
restraining the Sellers from committing such breach or threatened breach. The
right provided under this Section 4.6 shall be in addition to, and not in lieu
of, any other rights and remedies available to the Purchaser. The Sellers
further acknowledge that the provisions of Sections 4.4 and 4.5 of this
Agreement are made as a material inducement to the Purchaser and its Affiliates
to consummate the Transactions contemplated by this Agreement, which
Transactions are of substantial benefit to the Sellers, and that such provisions
are reasonable in geographic scope, duration, activity and subject.
4.7 DELIVERY OF FINANCIAL STATEMENTS. From the date hereof until the
Closing, the Sellers will deliver to the Purchaser, not later than 30 days after
the end of each month, an unaudited, consolidated balance sheet as of the end of
such month and unaudited, consolidated statements of cash flows, income and
members' equity for the Companies for such month. The Sellers covenant and agree
that such financial statements and the notes thereto, if any, shall be complete
and accurate in all material respects and fairly present the financial condition
of the Companies at the respective dates thereof and the results of their
operations for the respective months then ended, and shall be prepared in
accordance with the books and records of the Companies in conformity with
generally accepted accounting principles, consistently applied with the
financial statements referred to in Section 2.4, except for the omission of
footnotes and normal, immaterial year-end adjustments.
4.8 USE OF Name. Following the Closing, the Purchaser shall have the
exclusive right to use the names "Holmesdale," "Carmel Hills", and "Liberty
Terrace" and any derivations thereof, in connection with the operation of the
Business; provided, however, that Sellers shall not be obligated to change the
existing names of any of their corporations or other entities.
4.9 BROKER FEES. The Beneficial Owners shall be jointly and severally
responsible for paying any and all broker fees, expenses or other payments
incurred by the Beneficial Owners in connection with the Transactions, including
those incurred with respect to Senior Living Investment Brokerage, Inc.
4.10 ACCRUED PTO. As soon as reasonably practicable following the
Closing, Sellers shall pay all Accrued PTO obligations of the Companies relating
to a period prior to the Closing.
ARTICLE 5.
COVENANTS OF THE PURCHASER
5.1 REPRESENTATIONS AND WARRANTIES. Until the Closing Date, the
Purchaser will not take any action that would cause any of the representations
and warranties made by the Purchaser in this Agreement not to be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as if such representations and warranties had been made on and
as of the Closing Date.
5.2 EFFORTS. The Purchaser will use all commercially reasonable efforts
to cause the conditions specified in ARTICLE 6 to be satisfied as soon as
practicable.
5.3 CONFIDENTIALITY. Pending the Closing, all proprietary information
obtained by the Purchaser from or on behalf of any Company will be kept
confidential and will not be disclosed by the Purchaser other than to its
partners, members, managers, directors, officers, employees, and advisors, as
necessary; provided that the foregoing restriction shall not apply to
information which (a) is lawfully and independently obtained by the Purchaser
from a third party without restriction as to disclosure by the Purchaser, (b)
was known by the Purchaser prior to its disclosure by or on behalf of any
Company, (c) is in the public domain or enters into the public domain through no
fault of the Purchaser, (d) is independently developed by the Purchaser without
reference to information provided by or on behalf of any Company or (e) the
Purchaser is required by law or legal process to disclose. If this Agreement
18
is terminated, and if requested in writing by the Sellers, the Purchaser will
cause to be delivered to the Sellers all materials obtained by the Purchaser
from or on behalf of any Company, whether obtained before or after the date of
this Agreement.
5.4 ADMINISTRATIVE FILINGS AND APPEALS. Purchaser shall have
responsibility for preparation of all applications for governmental approvals
required as a condition to Closing as set forth herein, and of any filings and
applications made pursuant thereto, including but not limited to the preparation
of any application or statement to be made to any governmental body. Sellers
shall reasonably cooperate in the preparation of such applications and filings
and, if necessary, join in any such applications.
5.5 PUBLIC ANNOUNCEMENTS. Purchaser shall consult with and obtain the
agreement of Sellers before issuing any press release or otherwise making any
public statement with respect to this Agreement or the transactions contemplated
hereunder and shall not issue any such press release or make any such public
statement prior to such consultation or agreement, provided, however, in case of
any press release or public statement which may be required by applicable law or
any contract or agreement of the Purchaser, Purchaser will not, to the extent
reasonably possible, issue any such press release or make any such public
statement prior to consulting with the Sellers. Each party hereto agrees that it
will not unreasonably withhold any such consent or issue any press release or
make any public statement.
ARTICLE 6.
CONDITIONS TO CLOSING
6.1 CONDITIONS PRECEDENT TO THE PARTIES' OBLIGATIONS. The obligation of
the parties to consummate the transactions contemplated hereby shall be subject
to the fulfillment to the satisfaction of, or waiver by, the parties of each of
the following conditions on or prior to the Closing:
(a) NO TERMINATION. This Agreement shall not have been terminated
pursuant to ARTICLE 7.
(b) No ADVERSE PROCEEDINGS. On the Closing Date, no action or
proceeding shall be pending before any governmental authority to restrain,
enjoin or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
(c) NO VIOLATIONS. The consummation of the Transactions shall not
violate any governmental rule which could have a material adverse effect on the
Business or the affairs, assets, condition (financial or otherwise) or prospects
of any Company, and which is incapable of being cured.
6.2 CONDITIONS TO OBLIGATIONS OF THE PURCHASER. Unless waived in writing
by the Purchaser, the obligation of the Purchaser hereunder to consummate the
Transactions is subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Sellers contained in ARTICLE 2 shall be true
and accurate in all material respects (except that the representations and
warranties in Sections 2.1 and 2.2, and each other representation or warranty to
the extent qualified by materiality, shall be true and correct in all respects)
on and as of the Closing Date with the same effect as though made on and as of
such date.
(b) COVENANTS PERFORMED. Each of the Sellers shall have performed
and complied in all material respects with the covenants, agreements and
conditions required to be performed or complied with by them hereunder on or
prior to the Closing Date.
(c) COMPLIANCE CERTIFICATE. The Purchaser shall have received a
certificate of the Sellers certifying as to the matters set forth in Sections
6.2(a) and 6.2(b) above.
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(d) CERTIFICATES; DOCUMENTS. The Purchaser shall have received
copies of each of the following for each of the Companies, certified to its
satisfaction by an officer of each such Company: (i) the Company's Certificate
of Incorporation, as amended, certified by the Secretary of State of the state
of its organization as of a recent date, or the Company's Certificate of
Formation, as amended, certified by the Secretary of State of the state of its
organization as of a recent date; (ii) a form of bylaws applicable to each
Company that is a corporation, and a form of LLC Operating Agreement applicable
to each Company that is a limited liability company (together with a
certification that the actual bylaws or LLC Operating Agreement, as the case may
be, for each such Company is substantially in the form of the documents
provided); (iii) if applicable, resolutions and votes from each Company's Board
of Directors and stockholders, members or similar Persons authorizing M. Terence
Reardon to sign this Agreement and take all actions necessary to consummate the
transactions contemplated hereby, and (iv) a certificate of the Secretary of
State of its state of organization as of a recent date as to the legal existence
and good standing of the Company. The Sellers shall have used commercially
reasonable efforts, and cooperated with Purchaser, in an effort to obtain a
certificate of good standing for each Company from the Secretary of State of the
State of Missouri. The Purchaser shall also have received such other
certificates, documents and materials as it shall reasonably request.
(e) SELLER REQUIRED CONSENTS, CERTIFICATION AND LICENSES RECEIVED.
The Sellers shall have obtained and delivered to the Purchaser copies of (i) all
Sellers' Required Consents listed on or required to be listed on SCHEDULE 2.15,
and (ii) all other consents, licenses, approvals, permits or authorizations
which are identified in writing by the Purchaser on or prior to January 31, 2006
and are required to be obtained for the Transactions contemplated hereby and as
to which the failure to obtain the same could have a material adverse effect on
the Business or the affairs, assets, condition (financial or otherwise) or
prospects of any Company, or interfere with the Purchaser's right or ability to
consummate the Transactions.
(f) PURCHASER REQUIRED CONSENTS, CERTIFICATION AND LICENSES
RECEIVED. The Purchaser shall have obtained and delivered to the Sellers copies
of all Purchaser Required Consents listed on SCHEDULE 3.3 and no such Purchaser
Required Consents shall have been withdrawn or suspended. Without limiting the
generality of the foregoing, the Purchasers' Required Consents shall include (a)
any and all local, state and federal licenses necessary to enable Purchaser to
operate the Acquired Facilities from and after the Closing and (b) the required
certification by the appropriate Medicaid agencies and/or fiscal intermediaries
necessary to enable Purchaser to bill and receive payment under the Medicaid
program.
(g) INSTRUMENTS OF TRANSFER. Each Company shall have delivered to
the Purchaser such bills of sale, leases, assignments and other instruments of
transfer as the Purchaser may reasonably require to transfer to it good and
marketable title to the Purchased Assets, free and clear of all liens, security
interests, mortgages, encumbrances and restrictions of every kind.
(h) NO INJUNCTION. The consummation of the Transactions
contemplated hereby shall not violate any order, decree or judgment of any court
or governmental body having competent jurisdiction.
(i) PURCHASE OF OWNED PROPERTY. The Purchaser shall have (i)
completed its review of the environmental condition of the Owned Property
pursuant to Section 1.7(c), (ii) resolved any objections to title set forth in a
Title Notice or Gap Notice in accordance with Sections 1.6(b) and 1.6(c), and
(iii) received unconditional commitments from a title company to issue the Title
Policy.
(j) OPERATIONS TRANSFER AGREEMENT. On or prior to January 31,
2006, each of the Companies that operates a skilled nursing facility and/or a
residential care facility and the Purchaser shall have entered into an
operations transfer agreement substantially in the form attached hereto as
Exhibit 6.2(j) (the "OPERATIONS TRANSFER AGREEMENT").
(k) ADVERSE CHANGE OR CONDITION. Since the Balance Sheet Date,
there shall have been no event which has had or, together with any other events,
could have a material adverse effect on the Business or the affairs, assets or
prospects of any Company, whether or not such effect is foreseeable, and since
the execution of this Agreement, the Purchaser shall have become aware of no
development or event adversely affecting the Business or its prospects.
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(l) INSURANCE COVERAGE. The Sellers shall have provided evidence
reasonably satisfactory to Purchaser that the Sellers have arranged for
insurance coverage adequate to insure, or assets (including any trust account
established for this purpose) sufficient to self insure, against all
liabilities, claims and risks against which it is customary for companies
similarly situated as the Companies to insure, to remain in full force and
effect to cover claims brought after the Closing where the events giving rise to
such claims occurred prior to the Closing; provided, however, this condition
will be deemed satisfied if Sellers' liability trust established for this
purpose has at least Three Hundred Thousand Dollars ($300,000) in assets or
cash.
(m) ACTIONS AND PROCEEDINGS. Prior to the Closing, all actions,
proceedings, instruments and documents required to carry out the transactions
contemplated hereby or incident hereto and all other legal matters required for
such transactions shall have been reasonably satisfactory to counsel for the
Purchaser.
(n) NO BAN ON NEW ADMISSIONS. None of the Acquired Facilities
shall be operating under a ban on new admissions or an order of denial of
payment for new admissions.
(o) MDS FORMS AND CERTIFICATIONS. The Sellers shall have delivered
a certificate stating that there are current, complete and signed MDS forms and
physician certifications in the medical record of each patient included in the
patient census for all Acquired Facilities.
(p) LIST OF SERVICE PROVIDERS. Prior to the Closing, Sellers shall
provide to Purchaser a schedule setting forth a complete list of all of the
physicians, physical therapists, occupational therapists, nutritionists and
other health care providers who provide medical or other services to residents
of the Companies on an independent contractor basis, and the material terms of
such arrangements.
(q) EMPLOYEES. Seventy-five percent (75%) of the employees listed
on SCHEDULE 2.21(d) have agreed to initially accept employment with Purchaser,
provided, however, that this condition will be deemed satisfied with respect to
any employee who was not offered employment on similar terms from the Purchaser
following the Closing.
(r) MEDICAID ESCROW AGREEMENTS. On or prior to the Closing, each
of the Companies that operates a skilled nursing facility and/or a residential
care facility and the Purchaser and the Sellers shall have entered into the
Medicaid Escrow Agreements with the Medicaid Escrow Agent substantially in the
form attached hereto as Exhibit 6.2(r).
(s) CONSULTING AGREEMENT. The Consulting Agreement shall not have
been terminated or withdrawn and will be in full force and effect immediately
after the consummation of the Transactions contemplated hereby.
6.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS. Unless waived in writing
by the Beneficial Owners, the obligation of the Sellers hereunder to consummate
the Transactions is subject to the satisfaction at or prior to the Closing of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties contained in ARTICLE 3 shall be true and accurate in all material
respects (except that each representation or warranty to the extent qualified by
materiality, shall be true and correct in all respects) on and as of the Closing
Date with the same effect as though made on and as of such date.
(b) COVENANTS PERFORMED. The Purchaser shall have performed and
complied in all material respects with the covenants, agreements and conditions
required to be performed or complied with by it hereunder on or prior to the
Closing Date.
(c) COMPLIANCE CERTIFICATE. The Sellers shall have received a
certificate of the Purchaser certifying as to the matters set forth in Sections
6.3(a) and (b) above.
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(d) PURCHASER REQUIRED CONSENTS, CERTIFICATION AND LICENSES
RECEIVED. The Purchaser shall have obtained and delivered to the Sellers copies
of all Purchaser Required Consents listed on SCHEDULE 3.3 and no such Purchaser
Required Consents shall have been withdrawn or suspended.
(e) NO INJUNCTION. The consummation of the Transactions
contemplated hereby shall not violate any order, decree or judgment of any court
or governmental body having competent jurisdiction.
(f) CERTIFICATES; DOCUMENTS. The Sellers shall have received
copies of each of the following for the Purchaser, certified to its satisfaction
by an officer of the Purchaser: (i) the Purchaser's Certificate of
Incorporation, as amended, certified by the Secretary of State of Delaware as of
a recent date; (ii) a form of bylaws applicable to each Company that is a
corporation, and a form of LLC Operating Agreement applicable to each Company
that is a limited liability company (together with a certification that the
actual bylaws or LLC Operating Agreement, as the case may be, for each such
Company is substantially in the form of the documents provided); (iii) if
applicable, resolutions and votes from each Company's Board of Directors and
stockholders, members or similar Persons authorizing Beneficial Owners to sign
this Agreement and take all actions necessary to consummate the transactions
contemplated hereby, and (iv) a certificate of the Secretary of State of its
state of organization as of a recent date as to the legal existence and good
standing of the Company. The Sellers shall have used commercially reasonable
efforts, and cooperated with Purchaser, in an effort to obtain a certificate of
good standing for each Company from the Secretary of State of the State of
Missouri. The Purchaser shall also have received such other certificates,
documents and materials as it shall reasonably request.
(g) ACTIONS AND PROCEEDINGS. Prior to the Closing, all actions,
proceedings, instruments and documents required to carry out the Transactions
contemplated hereby or incident hereto and all other legal matters required for
such Transactions shall have been reasonably satisfactory to counsel for the
Sellers.
ARTICLE 7.
TERMINATION
7.1 TERMINATION. This Agreement and the Transactions contemplated hereby
may be terminated at any time prior to the Closing:
(a) by mutual written consent of the Purchaser and the Sellers;
(b) by the Purchaser, if any Seller shall have breached or failed
to perform in any material respect any of such Seller's obligations, covenants
or agreements under this Agreement, or if any of the representations and
warranties of any Seller set forth in this Agreement shall not be true and
correct to the extent set forth in Section 6.2(a), and such breach, failure or
misrepresentation is not cured to the Purchaser's reasonable satisfaction within
30 days after the Purchaser gives the Sellers written notice identifying such
breach, failure or misrepresentation;
(c) by the Sellers, if the Purchaser shall have breached or failed
to perform in any material respect any of its obligations, covenants or
agreements under this Agreement, or any of the representations and warranties of
the Purchaser set forth in this Agreement shall not be true and correct to the
extent set forth in Section 6.3(a), and such breach, failure or
misrepresentation is not cured to the Sellers' reasonable satisfaction within 30
days after the Sellers give the Purchaser written notice identifying such
breach, failure or misrepresentation;
(d) by either party, if the conditions set forth in Section 6.1
become incapable of satisfaction;
(e) by the Purchaser, if the conditions set forth in Section 6.2
become incapable of satisfaction; (f) by the Purchaser, in accordance with
Section 1.6 or Section 1.7(c); (g) by the Sellers, if the conditions set forth
in Section 6.3 become incapable of satisfaction;
22
(h) by the Purchaser or the Sellers, if the Closing shall not have
occurred on or before March 31, 2006 or such other date, if any, as the
Purchaser and the Sellers may agree in writing; or
(i) by the Purchaser prior to January 31, 2006, if the Purchaser
is not satisfied with its due diligence review of the Purchased Assets and the
Business in any respect, as determined by Purchaser in its reasonable
discretion;
except that this Agreement may not be terminated under this Section by or on
behalf of any party that is in breach of any representation or warranty or in
violation of any covenant or agreement contained herein.
7.2 EFFECT OF TERMINATION.
(a) If, and only if, (i) this Agreement is terminated by the
Sellers pursuant to Section 7. 1(c), and (ii) none of the Sellers is in material
breach of any representation or warranty contained herein, or material violation
or any covenant or agreement contained herein, then the Purchaser and the
Sellers shall instruct the Escrow Agent to deliver the Deposit, together with
any interest thereon, immediately to the Sellers. Delivery of such amount to the
Sellers pursuant to this Section 7.2(a) shall be as liquidated damages and not
as a penalty, and shall be the Sellers' exclusive remedy, and neither the
Purchaser nor any of its Affiliates shall have any other liability or obligation
to the Sellers hereunder, or with respect to the Transactions contemplated
hereby. Such liquidated damages have been computed and estimated as a reasonable
forecast of the probable actual loss to the Sellers because of the difficulty of
estimating with exactness the damages which would actually result.
(b) If this Agreement is terminated in any manner, or under any
circumstance (other than as set forth in Section 7.2(a) above), including but
not limited to the circumstances contemplated under Section 1.6 or Section
1.7(c); then the Sellers and the Purchaser shall immediately instruct the Escrow
Agent to deliver the Deposit, together with any interest thereon, immediately to
the Purchaser, and the Purchaser and its affiliates shall have no further
liability or obligation to the Sellers hereunder, or with respect to the
Transactions contemplated hereby.
(c) If the Purchaser terminates this Agreement at a time when any
of the Sellers are in material breach of any representation or warranty
contained herein, or in material violation of any covenant or agreement
contained herein, then, in addition to the rights and obligations of the parties
under Subsection (b) above, the Sellers shall remain liable for such breaches
and violations, and nothing contained herein shall be deemed to restrict the
rights and remedies available to the Purchaser against such party or parties.
(d) The obligations of the Purchaser under Section 5.3 shall survive the
termination of this Agreement for a period of one year.
ARTICLE 8. SURVIVAL;
INDEMNIFICATION
8.1 SURVIVAL. The representations, warranties, covenants and agreements
contained herein shall survive the Closing. No action for a breach of the
representations, warranties, covenants, or agreements contained herein nor any
demand for indemnification shall be brought more than two years following the
Closing Date, except for claims or potential claims of which the Sellers have
been notified with reasonable specificity by the Purchaser, or claims of which
the Purchaser has been notified with reasonable specificity by the Sellers,
within such two-year period.
8.2 INDEMNIFICATION BY THE SELLERS.
(a) GENERAL. Subject to any applicable limitations set forth below
in this Section 8.2, the Sellers shall, jointly and severally, indemnify and
hold the Purchaser and its Affiliates harmless from and against all claims,
liabilities, obligations, costs, damages, losses and expenses (including
reasonable attorneys fees) of any nature, except for Lost Profit Losses which
are defined and set forth in Section 8.2(b) below (collectively, "Losses")
arising out of or relating to (i) any breach or violation of the
representations, warranties, covenants or agreements of
23
the Sellers set forth in this Agreement, in the Operations Transfer Agreements,
or in any certificate or document delivered by the Sellers pursuant to this
Agreement, (ii) any lien, security interest, mortgage, restriction or
encumbrance on the Purchased Assets after the Closing as a result of matters
existing or relating to any period prior to the Closing, or (iii) any Excluded
Liability (regardless of whether information with respect thereto is set forth
on a Schedule hereto).
(b) Subject to any applicable limitations set forth below in this
Section 8.2, the Sellers shall, jointly and severally, indemnify the Purchaser
and its assignees designated pursuant to the introductory paragraph of this
Agreement for lost profits of the Business (collectively, "LOST PROFIT Losses")
to the extent that such Lost Profit Losses are caused by any breach or violation
of the representations, warranties, covenants or agreements of the Sellers set
forth in this Agreement, in the Operations Transfer Agreements, or in any
certificate or document delivered by the Sellers pursuant to this Agreement.
(c) If the Closing occurs, (i) no Company shall have any
obligation to indemnify or be liable with respect to that portion of Losses or
Lost Profit Losses in excess of the total amount of the Purchase Price allocated
to such Company on Schedule 1.5, and (ii) no Beneficial Owner shall have any
obligation to indemnify or be liable with respect to that portion of Losses or
Lost Profit Losses in excess of the product of (x) such Beneficial Owner's
percentage interest in all Companies multiplied by (y) the total amount of the
Purchase Price allocated to such Companies on Schedule 1.5; provided, that (i)
claims arising out of the representations and warranties contained in Sections
2.3, 2.14, 2.16, 2.22, or 2.23 (the "SPECIFIED REPRESENTATIONS") and (ii)
indemnification claims pursuant to subsection (iii) of Section 8.2(a) shall not
be subject to the foregoing limitation and shall not be included in the
determination of whether the limit in this Section 8.2 has been reached.
(d) Notwithstanding anything in this Agreement to the contrary,
the maximum amount of the obligation of the Sellers under this Section 8.2 or
under any other provision of this Agreement to Purchaser and its Affiliates
shall be subject to the following limitation:
(i) No Seller shall have any liability pursuant to Section
8.2(a) until the aggregate Losses suffered or incurred by Purchaser for
which Purchaser is entitled to indemnification hereunder exceeds Fifty
Thousand Dollars ($50,000) (the "THRESHOLD"). The parties acknowledge and
agree that the Threshold shall be a deductible, and that Sellers shall
only have liability hereunder for Losses over and above the Threshold.
(ii) No Seller shall have any liability pursuant to Section
8.2(b) until the aggregate Lost Profit Losses suffered or incurred by
Purchaser for which Purchaser is entitled to indemnification hereunder
exceeds Five Hundred Thousand Dollars ($500,000) (the "LOST PROFIT
THRESHOLD"). The parties acknowledge and agree that the Lost Profit
Threshold shall be a deductible, and that Sellers shall only have
liability hereunder for Lost Profit Losses over and above the Lost Profit
Threshold.
(iii) The limitation set forth above shall not apply to
conduct of the Sellers constituting fraud or intentional misrepresentation
or any breach of the Operations Transfer Agreements.
8.3 INDEMNIFICATION BY THE PURCHASER. The Purchaser shall indemnify and
hold the Sellers harmless from and against all Losses arising out of or relating
to any breach or violation of the representations, warranties, covenants or
agreements of the Purchaser set forth in this Agreement.
8.4 CALCULATION OF LOSSES. The amount of Losses and Lost Profit Losses
incurred by a party seeking indemnification hereunder shall be calculated after
taking into account insurance proceeds and other third party recoveries by, and
tax costs and benefits to, such party.
8.5 DEFENSE OF CLAIMS. Upon acknowledgement in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or action, the
indemnifying party shall be entitled, if it so elects at its own cost, risk and
expense, (i) to take control of the defense and investigation of such lawsuit or
action, (ii) to employ and engage attorneys of its own choice to handle and
defend the same unless the named parties to such action or proceeding include
both the indemnifying
24
party and the indemnified party and the indemnified party has been advised in
writing by counsel that there may be one or more legal defenses available to
such indemnified party that are different from or additional to those available
to the indemnifying party, in which event the indemnified party shall be
entitled, at the indemnified party's cost, risk and expense, to separate counsel
of its own choosing, and (iii) to compromise or settle such claim, which
compromise or settlement shall be made only with the written consent of the
indemnified party, such consent not to be unreasonably withheld.
ARTICLE 9.
MISCELLANEOUS
9.1 NOTICES. All notices, demands or other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered in
person, or by United States mail, certified or registered with return receipt
requested, or by a nationally recognized overnight courier service, or otherwise
actually delivered:
(a) if to the Sellers, to:
M. Terence Reardon
9101 Buena Vista
Prairie Village, Kansas 66207
with a copy (which shall not constitute notice) to:
Senior Living Investment
Brokerage 20 Allen
Avenue, Suite 410 St.
Louis, MO 63119
Attention: Jeff Binder
and with a copy (which shall not constitute notice) to:
Blackwell Sanders Peper
Martin LLP 4801 Main St.,
Suite 1000 Kansas City,
MO 64112 Attention: Linda
K. Tiller
(b) if to the Purchaser, to:
Skilled Healthcare
Group, Inc. 27442
Portola Parkway, Suite
200 Foothill Ranch, CA
92610 Attention:
General Counsel
with a copy (which shall not constitute notice) to:
Latham & Watkins LLP
650 Town Center Drive,
20th Floor Costa Mesa,
CA 92626 Attention:
Derek D. Dundas David
C. Meckler
or at such other address as may have been furnished by such person in writing to
the other parties.
9.2 Severability AND Governing Law. This Agreement shall be interpreted
in such a manner as to be effective and valid under applicable law, but if any
provision hereof shall be prohibited or invalid under any such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating or
25
nullifying the remainder of such provision or any other provisions of this
Agreement. If any one or more of the provisions contained in this Agreement
shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, such provisions shall be construed by
limiting and reducing it so as to be enforceable to the maximum extent permitted
by applicable law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Missouri, without regard to
its conflicts of laws principles.
9.3 AMENDMENTS, WAIVERS. This Agreement may be amended or modified only
with the written consent of the Purchaser and the Sellers. No waiver of any term
or provision hereof shall be effective unless in writing signed by the party
waiving such term or provision. No failure to exercise or delay in exercising
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The rights provided hereunder are cumulative and not
exclusive of any rights, powers or remedies provided by law.
9.4 EXPENSES. Whether or not the Transactions contemplated hereby are
consummated, (a) the legal, accounting, financing and due diligence expenses
incurred by the Purchaser in connection with the Transactions will be borne by
the Purchaser and (b) the legal and other costs and expenses incurred by the
Beneficial Owners or any Company in connection with the Transactions
contemplated hereby will be borne by the Sellers.
9.5 SUCCESSORS AND ASSIGNS. This Agreement, and all provisions hereof,
shall be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto, provided that this Agreement may not be assigned
by any party without the prior written consent of the other parties hereto
except that (a) the indemnification and other rights hereunder of a party may be
assigned to any bank or other financial institution which is or becomes a lender
to the Purchaser or any of its successors and assigns and (b) this Agreement may
be assigned by the Purchaser to any of its Affiliates or, to any Person
acquiring a material portion of the assets, business or securities of the
Purchaser, whether by merger, consolidation, sale of assets or securities or
otherwise.
9.6 ENTIRE AGREEMENT. This Agreement, the attached exhibits and
schedules, and the other agreements, documents and instruments contemplated
hereby contain the entire understanding of the parties, and there are no further
or other agreements or understanding, written or oral, in effect between the
parties relating to the subject matter hereof unless expressly referred to
herein.
9.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and with counterpart facsimile signature pages, each of which
shall be an original, but all of which when taken together shall constitute one
and the same Agreement.
9.8 HEADINGS. The headings of Articles and Sections herein are inserted
for convenience of reference only and shall be ignored in the construction or
interpretation hereof.
9.9 FURTHER ASSURANCES. Following the Closing, the Sellers will execute
and deliver to the Purchaser such documents and take such other actions as the
Purchaser may reasonably request in order to fully consummate the Transactions.
9.10 THIRD PARTY BENEFICIARIES. Nothing in the Agreement shall be
construed to confer any right, benefit or remedy upon any Person that is not a
party hereto or a permitted assignee of a party hereto.
9.11 NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement and the other agreements and
documents contemplated herein. In the event an ambiguity or question of intent
or interpretation arises under any provision of this Agreement or any other
agreement or documents contemplated herein, this Agreement and such other
agreements or documents shall be construed as if drafted jointly by the parties
thereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authoring any of the provisions of this
Agreement or any other agreements or documents contemplated herein.
26
9.12 SCHEDULES AND Exhibits. All schedules (as the same may be updated as
provided herein) and exhibits to this Agreement are an integral part of this
Agreement and are incorporated herein by reference. All Schedules delivered with
this Agreement shall be arranged to correspond with the numbered and lettered
Sections and Subsections contained in this Agreement, and the disclosures in
such Schedules shall qualify only the corresponding Sections and Subsections
contained in this Agreement, unless otherwise expressly provided herein.
ARTICLE 10.
DEFINITIONS
The following terms, as used in this Agreement, have the meanings given to
them where indicated below:
Term SECTION OR PLACE WHERE DEFINED
- ---- ------------------------------
Accrued PTO Section 1.4
Acquired Facilities Section 2.1
Affiliate Section 2.6
Agreement Preamble
Assumed Liabilities Section 1.4
Assumed Operating Contracts Section 1.1
Authorizations Section 2.19
Balance Sheet Section 2.4
Balance Sheet Date Section 2.4
Beneficial Owners Preamble
Benefit Plans Section 2.22
Bonds Section 2.6
Business Section 2.1
Closing Section 1.8
Closing Date Section 1.8
Code Section 2.22
Company or Companies Preamble
Company Deposits Section 2.6
Company Intellectual Property Section 2.10
Consulting Agreement Introduction
Deed Section 1.6(e)
Deposit Section 1.3(c)
Equity Interests Introduction
ERISA Section 2.22
Escrow Agent Section 1.3(c)
Escrow Fund Exhibit 1.3(c)
Excluded Assets Section 1.2
Excluded Liabilities Section 1.4
Gap Notice Section 1.6(c)
HIPAA Section 2.16
Improvements Section 1.1
Inspection Period Section 1.7
Insurance Policies Section 2.24
Intellectual Property Section 2.10
Knowledge of Sellers Preamble to Article 2
27
TERM SECTION OR PLACE WHERE DEFINED
- ---- ------------------------------
Losses Section 8.2
Lost Profit Losses Section 8.2
Lost Profit Threshold Section 8.2
Material Contracts Section 2.6
Material Customers Section 2.12
Medicaid Escrow Agent Section 1.3
Medicaid Escrow Agreement Section 1.3
Medicaid Escrow Amount Section 1.3
Medical Waste Laws Section 2.23
Operations Transfer Agreement Section 6.2
Owned Property Section 2.7
Permitted Encumbrances Section 1.3(b)
Permitted Exceptions Section 1.6(d)
Permitted Investments Exhibit 1.3(c)
Person Section 2.10
Purchased Assets Section 1.1
Purchase Price Section 1.3
Purchaser Preamble
Purchaser Required Consents Section 3.3
Real Estate Survey Section 1.6
Securities Act Section 2.6
Seller or Sellers Preamble
Sellers' Required Consents Section 2.15
Specified Representations Section 8.2
Surveys Section 2.16
Taxes Section 1.4
Threshold Section 8.2
Title Inspection Period Section 1.6
Title Notice Section 1.6
Title Policy Section 1.6(e)
Title Report Section 1.6
Transactions Introduction
[Signature Pages follow]
28
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as a sealed instrument as of the date first above written.
PURCHASER:
SKILLED HEALTHCARE GROUP, INC.
By: /s/ Jose Lynch
-------------------------------------
Name: Jose Lynch
Title: President
SELLERS:
HOLMESDALE CARE CENTER, INC.
By:
-------------------------------------
Name:
Title:
HOLMESDALE DEVELOPMENT, LLC
By:
-------------------------------------
Name:
Title:
CARMEL HILLS LIVING CENTER, INC.
By:
-------------------------------------
Name:
Title:
CARMEL HILLS PROPERTY, LLC
By:
-------------------------------------
Name:
Title:
LIBERTY TERRACE NURSING, LLC
By:
-------------------------------------
Name:
Title:
LIBERTY TERRACE CARE CENTER, INC.
By:
-------------------------------------
Name:
Title:
[Signature Page to the Asset Purchase Agreement]
S-1
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as a sealed instrument as of the date first above written.
PURCHASER:
SKILLED HEALTHCARE GROUP, INC.
By:
-------------------------------------
Name:
Title:
SELLERS:
HOLMESDALE CARE CENTER, INC.
By: /s/ M. Terence Reardon
-------------------------------------
Name: M. Terence Reardon
Title: President
HOLMESDALE DEVELOPMENT, LLC
By: /s/ M. Terence Reardon
-------------------------------------
Name: M. Terence Reardon
Title: Managing Member
CARMEL HILLS LIVING CENTER, INC.
By: /s/ M. Terence Reardon
-------------------------------------
Name: M. Terence Reardon
Title: President
CARMEL HILLS PROPERTY, LLC
By: /s/ M. Terence Reardon
-------------------------------------
Name: M. Terence Reardon
Title: Managing Member
LIBERTY TERRACE NURSING, LLC
By: /s/ M. Terence Reardon
-------------------------------------
Name: M. Terence Reardon
Title: Managing Member
LIBERTY TERRACE CARE CENTER, INC.
By: /s/ M. Terence Reardon
-------------------------------------
Name: M. Terence Reardon
Title: President
[Signature Page to the Asset Purchase Agreement]
S-1
BENEFICIAL OWNERS
M. TERENCE REARDON TRUST
By: /s/ M. Terence Reardon
-------------------------------------
M. Terence Reardon, Co-Trustee
By: /s/ M. Sue Reardon
-------------------------------------
M. Sue Reardon, Co-Trustee
M. SUE REARDON TRUST
By: /s/ M. Terence Reardon
-------------------------------------
M. Terence Reardon, Co-Trustee
By: /s/ M. Sue Reardon
-------------------------------------
M. Sue Reardon, Co-Trustee
M. TERENCE REARDON
By: /s/ M. Terence Reardon
-------------------------------------
M. Terence Reardon
M. SUE REARDON
By: /s/ M. Sue Reardon
-------------------------------------
M. Sue Reardon
[Signature Page to the Asset Purchase Agreement]
S-2
ACKNOWLEDGMENT
Escrow Agent executes this Agreement below as of the date first written
above solely for the purpose of acknowledging that it agrees to be bound by the
provisions of Sections 1.3(c) and 7.2 hereof.
ESCROW AGENT:
CHICAGO TITLE INSURANCE COMPANY,
a Missouri corporation
By: /s/ Gus Aguilar
-------------------------------------
Name: Gus Aguilar
Title: Assistant Vice President, Senior Escrow Officer
[Signature Page to the Asset Purchase Agreement]
S-3
EXHIBIT 1.3(c)
ESCROW AGENT'S GENERAL PROVISIONS
(a) APPOINTMENT OF ESCROW AGENT. Chicago Title Insurance Company is hereby
appointed as the Escrow Agent under this Agreement, and the Escrow Agent
hereby accepts such appointment.
(b) DEPOSIT OF ESCROW FUND. Pursuant to this Agreement, the Purchaser has
deposited, via wire transfer of immediately available funds, with the
Escrow Agent the Deposit. The Deposit, together with all interest,
dividends and other income earned with respect thereto, less amounts
distributed from time to time in accordance herewith, is referred to
herein as the "ESCROW FUND". The Escrow Fund will be held, invested and
disbursed by the Escrow Agent in accordance with the terms hereof.
(c) RELEASE OF ESCROW FUND. The Escrow Fund will be retained by the Escrow
Agent and shall only be distributed pursuant to the following terms:
(i) RELEASE AT CLOSING. At the closing of the transactions contemplated
by the Purchase Agreement, the Escrow Agent shall deliver the Escrow
Fund by wire transfer of immediately available funds, as directed in
joint written instructions from the Purchaser and the Beneficial
Owners, to the Purchaser or to such account as the Purchaser shall
direct, to be credited towards payment of the Purchase Price under
the Purchase Agreement.
(ii) RELEASE AT REQUEST OF PURCHASER AND BENEFICIAL OWNERS.
Notwithstanding any term in this Agreement to the contrary, the
Escrow Agent shall release the Escrow Fund (on account of the
termination of the Purchase Agreement or otherwise) in accordance
with any joint written instructions received from the Beneficial
Owners and the Purchaser. The Escrow Fund shall be delivered by wire
transfer of immediately available funds to the Purchaser or the
Beneficial Owners, as the case may be, two (2) business days after
receipt by the Escrow Agent of such joint written instructions. In
the event that the Escrow Agent has not received such joint written
instructions, the Escrow Fund shall remain in escrow with the Escrow
Agent until such time as the Escrow Agent receives a copy of a
final, non-appealable order of a court of competent jurisdiction as
to the disposition of the Escrow Fund, whereupon the Escrow Agent
shall deliver the Escrow Fund in accordance with such court order.
(iii) If at any time the Escrow Agent shall consider or be advised that
any further agreements, assurances or other documents are reasonably
necessary or desirable to carry out the provisions hereof and the
transactions contemplated hereby, the parties hereto shall execute
and deliver any and all such agreements or other documents, and do
all things reasonably necessary or appropriate to carry out fully
the provisions hereof.
(iv) Any wire transfers shall be made subject to, and in accordance with,
the Escrow Agent's normal electronic funds transfer procedures.
(d) INVESTMENT OF ESCROW FUND.
(i) The Escrow Agent shall invest and reinvest the Escrow Fund in
Permitted Investments (as defined below) as directed by joint
written instruction from the Purchaser and the Beneficial Owners;
provided that such Permitted Investments shall have maturity dates
that permit payments to be made from the Escrow Fund in accordance
with the terms hereof. Absent its timely receipt of such specific
written investment instructions, the Escrow Agent shall invest the
Escrow Fund in any Permitted Investments. Investments pursuant to
such investment instructions described above shall in all instances
be subject to availability (including any time-of-day requirements).
"PERMITTED INVESTMENTS" shall mean (i) savings or interest bearing
accounts at Bank of America, (ii) readily marketable obligations of,
or fully and unconditionally guaranteed (as to both principal and
interest) by, the United States of America or an agency thereof
available through Bank of America; (iii) negotiable certificates of
deposit available at Bank of America; or (iv) shares of so-called
"money market funds" available through Bank of America.
(ii) In no instance shall the Escrow Agent have any obligation to provide
investment advice of any kind or to invest the Escrow Fund other
than as expressly provided herein. The Escrow Agent shall not be
responsible for any loss incurred upon any such investment made in
good faith and under circumstances not constituting willful
misconduct or gross negligence. The Escrow Agent may sell or
liquidate investments in order to comply with this Agreement and
instructions issued hereunder, and shall not be responsible for any
loss due to interest rate fluctuation, early withdrawal penalty or
market value changes. The Purchaser and the Beneficial Owners
understand that investments of the Escrow Fund are not necessarily
insured by the United States Government or any agency or
instrumentality thereof, or by any state or municipality, and that
such investments do not necessarily earn a fixed rate of return.
(iii) All income earned on the Escrow Fund, after payment of expenses
incurred in connection therewith, shall be reported as income to the
party that eventually receives the Escrow Fund. The Purchaser and
the Beneficial Owners each agree to provide the Escrow Agent with a
certified tax identification number by signing and returning a Form
W-9 to the Escrow Agent prior to the date on which interest or other
income is first earned by the Escrow Fund. The Purchaser and the
Beneficial Owners each understands that, in the event tax
identification numbers are not certified to the Escrow Agent prior
to any income being earned on the Escrow Fund, the Internal Revenue
Code may require withholding of a portion of any interest or other
income earned on the investment of the Escrow Fund.
(e) PROVISIONS REGARDING ESCROW AGENT.
(i) The duties of the Escrow Agent hereunder will be limited to the
observance of the express provisions of this Agreement. The Escrow
Agent's duties shall be determined only with reference to this
Agreement and applicable laws and it shall have no implied duties.
(ii) The Escrow Agent shall not be bound by, deemed to have knowledge of,
or have any obligation to make inquiry into or consider, any term or
provision of any agreement between the Purchaser, the Sellers and/or
any other third party which may be referred to herein or as to which
the escrow relationship created by this Agreement relates, including
but not limited to this Agreement. The Escrow Agent will not be
subject to, or be obliged to recognize, any other agreement
between the parties hereto or directions or instructions not
specifically set forth or as provided for herein, other than any
joint written instructions of the Purchaser and the Beneficial
Owners.
(iii) The Escrow Agent will not make any payment or disbursement from or
out of the Escrow Fund that is not expressly authorized pursuant to
this Agreement. The Escrow Agent may rely upon and act upon any
written notice, certificate, statement, request, advice,
instruction, direction or other instrument or signature received by
it that it believes in good faith to be genuine and to have been
delivered pursuant to the provisions of this Agreement, and may
assume that any person purporting to give the Escrow Agent any of
the foregoing in accordance with the provisions hereof, or in
connection with either this Agreement or the Escrow Agent's duties
hereunder, has been duly authorized to do so. The Escrow Agent will
not be liable for any error of judgment, mistake of fact or law, any
act or omission, or any step taken or not taken, except as a result
of its willful misconduct or gross negligence. This provision shall
survive resignation or removal of the Escrow Agent and the
termination of this Escrow Agreement.
(iv) The Escrow Agent may consult with and obtain advice from legal
counsel in the event of any dispute or question as to the
construction of any of the provisions hereof or the Escrow Agent's
duties hereunder, and the Escrow Agent shall incur no liability and
shall be fully protected in acting in good faith in accordance with
the advice of its legal counsel. The Escrow Agent shall not be
responsible in any manner whatsoever for any failure or inability of
any of the other parties hereto, or anyone else, to perform or
comply with any provisions of this Agreement.
(v) If at any time the Escrow Agent shall be in doubt as to the party or
parties entitled to receive any or all of the Escrow Fund, or the
Escrow Agent shall receive any certificate, statement, request,
notice, advice, instruction, direction or other agreement or
instrument from any other party with respect to the Escrow Fund
which, in the Escrow Agent's reasonable and good faith opinion, is
in conflict with any of the provisions of this Agreement, or shall
be advised that a dispute has arisen with respect to the Escrow Fund
or any part thereof, or if for any other reason it shall be unable
in good faith to determine the party or parties entitled to receive
a disbursement from the Escrow Fund, or be uncertain as to its
duties or rights hereunder, the Escrow Agent shall be entitled,
without liability to any person, to refrain from taking any action
other than to keep safely the Escrow Fund until the Escrow Agent
shall be directed otherwise in accordance with Section (c) of this
Exhibit 1.3(c), whereupon the Escrow Agent shall make such
disbursement in accordance with such joint written instructions or
in accordance with a final, non-appealable order of a court of
competent jurisdiction as to the disposition of the Escrow Fund. The
Escrow Agent shall be under no duty to institute or defend any legal
proceedings, although the Escrow Agent may, in its discretion and at
the expense of Sellers and Purchaser, institute or defend such
proceedings. The parties hereto authorize the Escrow Agent, if the
Escrow Agent is threatened with litigation or is sued, to interplead
all interested parties in any court of competent jurisdiction and to
deposit the Escrow Fund with the clerk of that court. In the event
of any dispute hereunder, the Escrow Agent shall be entitled to
petition a court of competent jurisdiction and shall perform any
acts ordered by such court. The Escrow Agent's fees and costs for
such litigation shall be reimbursed as incurred as provided in
Section (f) of this Exhibit 1.3(c) below.
(vi) In no event will the Escrow Agent be liable for any lost profits or
other indirect, special, incidental or consequential damages which
the parties may incur or experience by reason of having entered into
or relied on this Agreement or arising out of or in connection with
the Escrow Agent's services, even if the Escrow Agent was advised or
otherwise made aware of the possibility of such damages; nor shall
the Escrow Agent be liable for acts of God, breakdowns or
malfunctions of machines or computers, interruptions or malfunctions
of communications or power supplies, actions of public authorities,
or any other similar cause or catastrophe, in each case beyond the
Escrow Agent's reasonable control.
(vii) The Escrow Agent makes no representations as to the validity, value,
genuineness, or the collectibility of any security or other document
or instrument held by or delivered to the Escrow Agent by or on
behalf of the parties hereto.
(f) INDEMNIFICATION OF ESCROW AGENT. The Purchaser and the Beneficial Owners
will, jointly and severally, indemnify and hold the Escrow Agent harmless
from and against any and all claims, suits, actions, proceedings,
investigations, judgments, deficiencies, damages, settlements, liabilities
and expenses (including reasonable legal fees and expenses of one attorney
chosen by the Escrow Agent) as and when incurred, arising out of or based
upon any act, omission, alleged act or alleged omission by the Escrow
Agent or any other cause, in any case in connection with the performance
or non-performance by the Escrow Agent of or any of the Escrow Agent's
duties under this Agreement, except as a result of the Escrow Agent's
willful misconduct or gross negligence. The foregoing indemnification
shall survive the resignation or removal of the Escrow Agent and the
termination of this Agreement.
(g) FEES AND EXPENSES OF THE ESCROW AGENT. The Escrow Agent will be entitled
to an initial one-time fee of $5,200 and its reasonable counsel fees, as
incurred. As between the Purchaser and the Sellers, the fees and expenses
to be paid to the Escrow Agent shall be paid first from interest that
accrues on the Escrow Fund and, thereafter, borne 50% by Purchaser and 50%
by the Sellers. The parties agree that if, ten (10) days following the
submission of a bill for reasonable fees and expenses by the Escrow Agent
to the Purchaser and the Beneficial Owners, either the Purchaser or the
Beneficial Owners, or both, have not paid the amounts then owed by such
party, the Escrow Agent shall be entitled to pay itself for such amounts
owed to the Escrow Agent out of the amounts held in the Escrow Fund and
the parties hereby grant to the Escrow Agent a first priority security
interest in the Escrow Fund to secure all obligations owed by them to the
Escrow Agent under this Agreement. If the Escrow Agent pays itself out of
the Escrow Fund, the party that didn't pay its portion of the bill will be
obligated to restore such amounts to the Escrow Fund.
(h) RESIGNATION AND REMOVAL OF ESCROW AGENT
(i) Resignation of Escrow Agent. The Escrow Agent may resign from its
duties hereunder by giving each of the parties hereto not less than
30 days' prior written notice of the effective date of such
resignation (which effective date shall be at least 30 days after
the date such notice is given). In the event of such resignation,
Purchaser and Beneficial Owners agree that they will jointly appoint
a successor escrow agent within 30 days of notice of such
resignation. After such date, the Escrow Agent shall have no further
obligation hereunder except to hold the Escrow Fund as depository,
and not as Escrow Agent, until a successor escrow agent is
appointed. The Escrow Agent shall refrain from taking any action
until it shall receive joint written instructions from the Purchaser
and the
Beneficial Owners designating the successor escrow agent. The Escrow
Agent shall deliver all of the Escrow Fund to such successor escrow
agent in accordance with such instructions and upon receipt of the
Escrow Fund, the successor escrow agent shall be bound by all of the
provisions hereof.
(ii) REMOVAL OF ESCROW AGENT. The Purchaser and the Beneficial Owners
acting together shall have the right to terminate the appointment of
the Escrow Agent, specifying the date upon which such termination
shall take effect. After such date, the Escrow Agent shall have no
further obligation hereunder except to hold the Escrow Fund as
depository. The Purchaser and the Beneficial Owners agree that they
will jointly appoint a successor escrow agent effective with the
termination of the appointment of the Escrow Agent hereunder. The
Escrow Agent shall refrain from taking any action until it shall
receive joint written instructions from the Purchaser and the
Beneficial Owners designating the successor Escrow Agent. The Escrow
Agent shall deliver all of the Escrow Fund to such successor Escrow
Agent in accordance with such instructions and upon receipt of the
Escrow Fund, the successor Escrow Agent shall be bound by all of the
provisions hereof.
EXHIBIT 6.2(j)
FORM OF OPERATIONS TRANSFER AGREEMENT
[See Doc # 789,941]
EXHIBIT 6.2(j)
OPERATIONS TRANSFER AGREEMENT
[There will be a separate agreement for each facility and we will tailor
the bracketed language as appropriate.]
THIS AGREEMENT is made and entered into by and between [Holmesdale Care
Center, Inc. <or> Carmel Hills Living Center, Inc. <or> Liberty Terrace Nursing,
LLC], a Missouri [corporation <or> limited liability company] ("OPERATOR") and
[Holmesdale Healthcare and Rehabilitation Center, LLC <or> Carmel Hills
Healthcare and Rehabilitation Center, LLC <or> Liberty Terrace Healthcare and
Rehabilitation Center, LLC], a Delaware limited liability company
("TRANSFEREE").
RECITALS
A. Operator is the licensed operator of that [residential
living/skilled nursing] facility commonly known as the [Holmesdale Care Center
<or> Carmel Hills Living Center <or> Liberty Terrace Care Center] (the
"FACILITY").
B. [Holmesdale Development, LLC <or> Carmel Hills Property, LLC <or>
Liberty Terrace Care Center, Inc.] (the "OWNER") is the owner of the Facility.
C. Pursuant to an Asset Purchase Agreement, dated as of January 31,
2006, by and among Transferee, Operator and the other parties named therein (the
"ASSET PURCHASE AGREEMENT"), Operator has agreed to transfer operational
responsibility for the Facility to Transferee.
D. Operator and Transferee are desirous of documenting the terms and
conditions under which said transfer will occur.
E. Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS
FOLLOWS:
AGREEMENT
1. TERM. This Agreement shall terminate ninety (90) days after the Closing
Date ("EXPIRATION DATE") unless continuing obligations are otherwise
specifically set forth herein below.
2. TRANSFER OF PATIENT TRUST FUNDS.
2.1. On the Closing Date, Operator shall provide to Transferee a true,
correct and complete accounting (properly reconciled) of any patient trust funds
and an inventory of all residents' property held by Operator on the Closing Date
for residents at the Facility (collectively
the "PATIENT TRUST FUNDS"). Operator shall provide notice to residents and their
responsible parties or agents of the transfer of operations and the transfer of
the Patient Trust Funds.
2.2. Operator hereby agrees to transfer such Patient Trust Funds and
property to Transferee upon Closing. Transferee hereby agrees that it will
accept such Patient Trust Funds in trust for the residents, in accordance with
applicable statutory and regulatory requirements.
2.3. Operator will indemnify, defend and hold Transferee harmless from
all liabilities, claims and demands, including reasonable attorney's fees, in
the event the amount of the Patient Trust Funds, if any, transferred to
Transferee did not represent the full amount of the Patient Trust Funds shown to
have been delivered to Operator as custodian or with respect to any Patient
Trust Funds delivered, or claimed to have been delivered, to Operator, but which
were not delivered by Operator to Transferee, or for claims which arise from
actions or omissions of Operator with respect to the Patient Trust Funds prior
to the Closing Date.
2.4. Transferee will indemnify, defend and hold Operator harmless from
all liabilities, claims and demands, including reasonable attorneys' fees, in
the event a claim is made against Operator by a patient for his/her Patient
Trust Funds where such funds were transferred to Transferee pursuant to the
terms hereof.
2.5. The parties agree to execute any documents required by State
licensing authorities to reflect this transfer.
3. COST REPORTS AND CLAIMS.
3.1. Operator shall timely prepare and file with the appropriate
Missouri state agencies and Medicare agencies and/or fiscal intermediaries all
terminating and other cost reports (or claims for reimbursement for items and
services) required by law to be filed under the Medicare or Medicaid or other
third party payer programs for periods ending prior to the Closing Date, or
required as a result of the consummation of the transaction described herein.
Operator will provide the appropriate agencies and/or fiscal intermediaries with
any information needed to support claims for reimbursement made by Operator
either in said final cost report or in any cost reports filed for prior cost
reporting periods, it being specifically understood and agreed that the intent
and purpose of this provision is to ensure that the reimbursement paid to
Transferee after it becomes the licensed operator of the Facility is not reduced
or offset in any manner as a result of Operator's failure to accurately and
timely file such final cost reports, claims or such supporting documentation
with respect to any past reimbursement claims, including, but not limited to,
those included in the final cost reports. Operator shall promptly provide
Transferee with copies of such reports or claims and supporting documentation.
Transferee will provide Operator with any information which the Transferee has
in its possession that Operator reasonably requests in order to prepare these
reports or claims. Transferee will otherwise reasonably cooperate with the
Operator to assist it in the preparation of such reports or claims.
3.2. In the event the federal or state agencies and/or fiscal
intermediaries making payments to Operator for services performed prior to the
Closing Date make any claim for reimbursement of overpayment occurring for any
such period, then Operator agrees to
2
immediately remit the overpaid amount to the overpaying agency as directed
except where such claim is disputed in good faith. If any such sum is deducted
from Transferee's payments, then Operator agrees to pay said amount directly to
Transferee within five (5) business days of notice even if Operator objects to
the finding of overpayment; provided, however, that if Operator prevails in its
objection, Transferee shall reimburse Operator within five (5) business days of
notice thereof by Operator.
3.3. If, on or after the Closing Date, Transferee receives payment from
any federal or state agency and/or fiscal intermediaries which payment
represents reimbursement with respect to payment for services rendered by
Operator prior to the Closing Date, then Transferee shall promptly (within five
(5) business days) forward such payments to Operator pursuant to Section 5
hereof; provided, however, that Transferee shall have the right to offset
against any such payments, any amounts which are due and owing to it from
Operator or any amounts deducted from its Missouri Medicaid Program or Medicare
payments as a result of a default by Operator in its obligations under this
Section 3. Within ten (10) days after the end of each month, Transferee shall
provide Operator with a detailed accounting of all payments received during such
month, any offset claimed by Transferee against any such payments, and the net
amount of any payments to Transferee.
3.4. Any payments received by Operator on or after the Closing Date
from any federal or state agency which represents reimbursement for services
rendered by Transferee on or after the Closing Date shall be promptly remitted
by Operator to Transferee; provided, however, that Operator shall have the right
to offset against any such payments, any amounts which are due and owing to it
from Transferee. Operator and Transferee agree to cooperate in providing the
State of Missouri and the Facility's designated fiscal intermediary with an
appropriate statement concerning Missouri Division of Medical Services and
federal liabilities, respectively, and the respective obligations of the parties
hereto if and to the extent required by Missouri law.
4. EMPLOYEES.
4.1. Twenty days prior to the Closing Date, Operator shall deliver to
Transferee (A) a schedule (the "EMPLOYEE SCHEDULE") which reflects among other
things the following: (i) the name of all employees of the Facility as of the
date thereof, (ii) their positions, (iii) rates of pay, (iv) dates of service
and (B) a schedule of employee benefits.
4.2. Upon reasonable notice to Operator, Transferee shall have access
to the Facility during regular business hours prior to the Closing Date to meet
with and interview employees and Operator agrees to cooperate with Transferee in
this process with respect to availability of employees and space suitable for
interviews. Transferee reserves the right not to hire any individual employee of
Operator for any lawful reason whatsoever. Nothing herein shall be deemed to
create or grant to any such employees third party beneficiary rights or claims
of any kind or nature. Transferee shall have no liability whatsoever with
respect to any matter relating to the employment of the Operator's employees
prior to the Closing Date. Transferee intends to hire substantially all, but in
any event no less than two-thirds, of the employees named on the Employee
Schedule.
3
4.3. No less than fourteen (14) days prior to the Closing Date,
Operator shall provide appropriate notice to all its employees of the pending
change in ownership of the facility, which shall include a notice of termination
effective on the Closing Date and, if requested by Purchaser, information
regarding how the employee should submit an application for employment with
Transferee.
4.4. Operator will satisfy all employees with respect to wages, and all
benefits accrued to the employees without respect to whether the employee is
hired by Transferee, and make any necessary payments to employees accordingly
and as required by law through the Closing Date, including without limitation
all payments required to be made in respect of Accrued PTO in accordance with
the terms of the Asset Purchase Agreement. Operator agrees to indemnify, defend
and hold harmless the Transferee with respect to any Employee claims for acts or
omissions of Operator or any other employee claims of any nature which relate to
the period prior to the Closing Date. Transferee agrees to indemnify, defend and
hold harmless the Operator with respect to any Employee claims for acts or
omissions of Transferee or any other employee claims of any nature which relate
to the period after the Closing Date.
4.5. Operator shall offer and provide, as appropriate, group health
plan continuation coverage pursuant to the requirements of Section 601, et seq.
of ERISA and Section 498B of the Internal Revenue Code ("COBRA") to all of the
employees of the Facility to whom it is required to offer the same under
applicable law. Operator acknowledges and agrees that Transferee is not assuming
any of Operator's obligations to its employees under COBRA.
5. ACCOUNTS RECEIVABLE.
5.1. Operator shall retain its right, title and interest in and to all
unpaid accounts receivable with respect to the Facility which relate to the
period prior to the Closing Date, including, but not limited to, any accounts
receivable arising from rate adjustments which relate to the period prior to the
Closing Date even if such adjustments occur on or after the Closing Date and
Operator shall remain liable for any overpayments made to Operator prior to the
Closing Date for which payment is due to the Missouri Medicaid Program or any
other third party payor on or after the Closing Date.
5.2. Payments received by Transferee on or after the Closing Date from
third party payors, such as the Missouri Medicaid Program, Medicare, HMO and VA,
shall be handled as follows:
(a) If such payments either specifically indicate on the
accompanying remittance advice, or if the parties agree, that they relate to the
period prior to the Closing Date, they shall be forwarded to Operator by
Transferee, along with the applicable remittance advice.
(b) If such payments indicate on the accompanying remittance advice,
or if the parties agree, that they relate to the period on or after the Closing
Date, they shall be retained by Transferee.
(c) If such payments indicated on the accompanying remittance
advice, or if the parties agree, that they relate to periods both prior to and
on or after the Closing
4
Date, the portion thereof which relates to the period on or after the Closing
Date shall be retained by Transferee and the balance shall be remitted to
Operator.
5.3. Any payments received by Transferee or Operator during the first
thirty days after the Closing Date from or on behalf of private pay residents or
residents with outstanding balances as of the Closing Date which fail to
designate the period to which they relate, will first be applied by Transferee
to reduce the patient's pre-Closing Date balances which Transferee has received
notice of in advance of the Closing Date, with any excess applied to reduce any
balances due for services rendered by Transferee on or after the Closing Date.
Thereafter all non-designated payments will first be applied to any balances for
the period on or after the Closing Date, with the excess, if any, applied to the
extent of any balances due for services rendered by Operator prior to the
Closing Date.
5.4. Nothing herein shall be deemed to limit in any way Transferee's or
Operator's rights and remedies to recover accounts receivable due and owing
Transferee or Operator under the terms of this Agreement.
5.5. In the event the parties mutually determine that any payment
hereunder was misapplied by the parties, the party which erroneously received
said payment shall remit the same to the other within ten (10) days after said
determination is made.
5.6. Each party shall have the right to inspect all cash receipt
records of the other party in order to confirm that party's compliance with the
obligations imposed on it under this Section 5.
5.7. Transferee will provide billing services for Operator, which may
include any or all of the following:
(a) Create a General Ledger tie-in to the Accounts Receivable system
for both Operator and Transferee General Ledgers.
(b) Bill the Missouri Medicaid Program, Medicare, and other third
party payers, private pay or resident claims, and deductibles and coinsurance as
appropriate for any unbilled services rendered prior to or on the Closing Date.
(c) When funds arrive, provide a reconciliation as to what is owed
to Operator based upon actual days of patient or resident service, and a copy of
the Missouri Medicaid Program Remittance Advice and supporting documentation
within five days of receipt.
(d) Wire transfer or issue a cashiers check to Operator within 24
hours of receipt of a payment net of any fees earned under this Section 5.
(e) Provide an updated consolidated aging report by the twentieth of
each month broken down by patient and payor type.
(f) Provide a general ledger summary of revenues by the twentieth of
each month broken down by payor type.
5
The foregoing services will be provided at no cost to Operator commencing on the
Closing Date and continuing until the Expiration Date; provided, however, that
during such time, Operator shall provide assistance in connection with the
transition of the billing, accounting and collection activities. If Operator
elects to have Transferee continue to provide these services after the
Expiration Date, the parties will negotiate a mutually acceptable arrangement.
5.8. To the extent permitted by law, Operator shall allow Transferee
the right to bill Medicare under Operator's provider numbers for the period
commencing on the Closing Date until all of Transferee's certifications and
provider enrollments are final and Transferee is readily able to bill Medicare
directly under Transferee's own provider numbers.
6. PRORATIONS.
6.1. Revenues and expenses pertaining to Assumed Operating Contracts
(as defined in Section 8), utility charges for the billing period in which the
Closing Date occurs, real and personal property taxes and other related items of
revenue or expense attributable to the Facility shall generally be prorated
between Operator and Transferee as of the Closing Date.
6.2. All such prorations shall be made on the basis of actual days
elapsed in the relevant accounting or revenue period and shall be based on the
most recent information available to Operator. Utility charges which are not
metered and read on the Closing Date shall be estimated based on prior charges,
and shall be re-prorated upon receipt of statements therefor.
6.3. All amounts owing from one party hereto to the other party hereto
that require adjustment after the Closing Date shall be settled within thirty
(30) days after the expiration of the term of this Agreement or, in the event
the information necessary for such adjustment is not available within said
thirty (30) day period, then as soon thereafter as practicable.
7. ACCESS TO RECORDS.
7.1. On the Closing Date Operator shall deliver to Transferee all of
the records of the Facility, including, but not limited to, patient or resident
medical and financial records and non-confidential employee records; provided,
however, that nothing herein shall be construed as precluding Operator from
removing from the Facility on the Closing Date the financial records which
relate to its operations at the Facility and/or to its overall corporate
operations; and provided, further, that Operator shall give Transferee access to
any information in any such removed records as Transferee may demonstrate to the
reasonable satisfaction of Operator is necessary for the efficient operation of
the Facility by Transferee.
7.2. Subsequent to the Closing Date, Transferee shall allow Operator
and its agents and representatives to have reasonable access to (upon reasonable
prior notice and during normal business hours), and to make copies of, the books
and records and supporting material of the Facility relating to the period prior
to the Closing Date, to the extent reasonably necessary to enable Operator to
investigate and defend malpractice, employee or other claims, to file or defend
cost reports and tax returns and to verify accounts receivable collections due
Operator.
6
7.3. Operator shall be entitled to remove the originals of any records
delivered to Transferee, for purposes of litigation involving a patient or
employee to whom such record relates, if an officer of or counsel for Operator
certified that such original must be produced in order to comply with applicable
law or the order of a court of competent jurisdiction in connection with such
litigation. Any record so removed shall promptly be returned to Transferee
following its use.
7.4. Transferee agrees to maintain such books, records and other
material comprising records of the Facility's operations prior to the Closing
Date that have been received by Transferee from Operator or otherwise,
including, but not limited to, patient or resident records and records of
patient funds, to the extent required by law, but in no event less than three
(3) years, and shall allow Operator a reasonable opportunity to remove such
documents, at Operator's expense, at such time after such record retention
period as may be required by law has expired or as Transferee shall decide to
dispose of such documents.
8. ASSUMED OPERATING CONTRACTS. Effective as of the Closing Date,
Operator shall assign, and Transferee shall assume and agree to be bound by all
of the terms and conditions of, the operating contracts which are described more
fully in Exhibit A hereto (the "ASSUMED OPERATING CONTRACTS"). Nothing herein
shall be construed as imposing any liability on Transferee with respect to any
obligation under (A) the Assumed Operating Contracts which relate to the period
prior to the Closing Date even if the same do not arise until after the Closing
Date, it being specifically understood and agreed that Transferee's liability
shall be limited to its acts and omissions thereunder from and after the Closing
Date or (B) the operating contracts which Transferee has not agreed to assume as
of the Closing Date (the "EXCLUDED OPERATING CONTRACTS"), including without
limitation those set forth on Exhibit B. Operator shall cooperate with
Transferee in obtaining any third party consent required for the valid transfer
of the Assumed Operating Contracts as contemplated by this Agreement.
9. INDEMNIFICATION
(a) OPERATOR INDEMNITY. Operator agrees to indemnify, defend and
hold harmless Transferee against any and all costs, liability and expenses,
including reasonable attorneys' fees, which it may incur as a result of (i) a
breach by Operator of its obligations under this Agreement, (ii) the acts or
omissions of the Operator under the Assumed Operating Contracts prior to the
Closing Date and any amounts owed with respect to such period, (iii) the acts or
omissions of the Operator under any terminated contract regardless of whether it
relates to the period prior to or after the Closing Date or (iv) the ownership
or operation of any Facility prior to the Closing Date. Notwithstanding the
foregoing, Operator shall be subject to the same rights and obligations with
respect to indemnification as apply to Owner under Article 8 of the Asset
Purchase Agreement.
(b) OWNER AND TRANSFEREE INDEMNITY. The indemnification obligations
of Transferee and Owner shall be satisfied under the terms set forth in the
Asset Purchase Agreement.
10. GENERAL PROVISIONS.
7
10.1. FURTHER ASSURANCES. Each of the parties hereto agrees to execute
and deliver any and all further agreements, documents or instruments necessary
to effectuate this Agreement and the transactions referred to herein or
contemplated hereby or reasonably requested by the other party to perfect or
evidence their rights hereunder, including but not limited to Operator's
surrender of its license, assignment or transfer of its provider agreements to
Transferee, to the extent permissible, or other documents as may be required to
effect the transfer of the license and certification to Transferee.
10.2. NOTICES. All notices to be given by either party to this
Agreement to the other party hereto shall be in writing, and shall be (a) given
in person, (b) deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested, or (c) sent by national overnight
courier service, each addressed as follows:
(a) If to Operator:
[Holmesdale Care Center, Inc. <or> Carmel Hills Living Center,
Inc. <or> Liberty Terrace Nursing, LLC]
9101 Buena Vista
Prairie Village, Kansas 66207
Attention: M. Terence Reardon
(b) If to Transferee:
Skilled Healthcare Group, Inc.
27442 Portola Parkway, Suite 200
Foothill Ranch, CA 92610
Attention: Roland Rapp, Esq.
Any such notice personally delivered shall be deemed delivered when
actually received, any such notice deposited in the United States mail,
registered or certified, return receipt requested, with all postage prepaid,
shall be deemed to have been given on the earlier of the date received or the
date when delivery is first refused, and any notice deposited with an overnight
courier service for delivery shall be deemed delivered on the business day
following such deposit. Any party to whom notices are to be sent pursuant to
this Agreement may from time to time change its address for further
communications thereunder by giving notice in the manner prescribed herein to
all other parties hereto.
10.3. PAYMENT OF EXPENSES. Each party hereto shall bear its own legal,
accounting and other expenses incurred in connection with the preparation and
negotiation of this Agreement and the consummation of the transactions
contemplated hereby, whether or not the transactions are consummated.
10.4. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, together
with the other agreements referred to herein, constitutes the entire
understanding between the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions and preliminary agreements. This
Agreement may not be modified or amended except in writing signed by the parties
hereto. No waiver of any term, provision or condition of this Agreement in
8
any one or more instances, shall be deemed to be or be construed as a further or
continuing waiver of any such term, provision, condition or rights granted
hereunder.
10.5. ASSIGNMENT. Neither this Agreement nor the rights, duties or
obligations arising hereunder shall be assignable or delegable by either party
hereto without the express prior written consent of the other party hereto;
provided, however, Transferee may assign its rights hereunder to one or more
Affiliates without the prior written consent of Operator.
10.6. JOINT VENTURE; THIRD PARTY BENEFICIARIES. Nothing contained
herein shall be construed as forming a joint venture or partnership between the
parties hereto with respect to the subject matter hereof. The parties hereto do
not intend that any third party shall have any rights under this Agreement.
10.7. CAPTIONS. The section headings contained herein are for
convenience only and shall not be considered or referred to in resolving
questions of interpretation.
10.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts taken together shall constitute a single
original Agreement.
10.9. GOVERNING LAW. This Agreement shall be governed in accordance
with the laws of the State of Missouri.
10.10. ATTORNEY FEES. In the event that a lawsuit is commenced to
enforce a provision of this agreement by either party against the other the
prevailing party in such action shall be entitled to reasonable attorney fees
and costs associated with bringing the action.
10.11. SEVERABILITY. This Agreement shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
hereof shall be prohibited or invalid under any such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating or nullifying the remainder of such provision or any other
provisions of this Agreement.
9
IN WITNESS WHEREOF, the parties hereby execute
this Agreement as of the day and year first set forth above.
"OPERATOR" "TRANSFEREE"
By: By:
------------------------ --------------------
Name: Name:
------------------------ --------------------
Its: Its:
------------------------ --------------------
EXHIBIT A
ASSUMED OPERATING CONTRACTS
2
EXHIBIT B
EXCLUDED OPERATING CONTRACTS
3
EXHIBIT 6.2(R)
FORM OF MEDICAID ESCROW AGREEMENT
EXHIBIT 6.2(R)
MEDICAID AGREEMENT
This Agreement is made on this ____ day of ______________, ______, by and
between [Holmesdale Care Center, Inc. <or> Carmel Hills Living Center, Inc.
<or> Liberty Terrace Nursing, LLC], a Missouri [corporation <or> limited
liability company] (the "Prior Operator"), [Holmesdale Healthcare and
Rehabilitation Center, LLC <or> Carmel Hills Healthcare and Rehabilitation
Center, LLC <or> Liberty Terrace Healthcare and Rehabilitation Center, LLC], a
Delaware limited liability company (the "New Operator"), and Chicago Title
Insurance Company ("Escrow Agent"). This Agreement is based upon the following:
A. Missouri Department of Social Services is an agency of the State of
Missouri in which the Division of Medical Services ("DMS") is contained. DMS has
authority to make reimbursement payments to nursing home facilities
participating in the Title XIX (Medicaid) program in the State of Missouri.
B. Prior Operator operates a long-term care facility (the "Facility")
located at:
--------------------
--------------------
--------------------
C. The Facility is certified by the Missouri Department of Health and
Senior Services ("DHSS") to participate in the Title XVIII (Medicare) and Title
XIX (Medicaid) reimbursement program.
D. Prior Operator and the New Operator have entered into an agreement
whereby Prior Operator and New Operator contemplate that as of
____________________, there will be a change of operator of the Facility so that
the New Operator will become the licensee and operator of the Facility effective
on that date.
E. As a result of the change in operator of the Facility, the parties
acknowledge that the Prior Operator is required by 13 CSR 70-10.015(10)(E) to
file a Medicaid cost report for the period ending on the effective date of the
change in ownership or control of the Facility not later than the first day of
the sixth month after the effective date of the change of control or ownership
or on such other date as may be provided by any amendment to said regulation
(the "Cost Report Deadline").
F. Prior Operator and New Operator wish to provide DMS with assurances
satisfactory to DMS that the final cost report of the Prior Operator will be
filed on or before the Cost Report Deadline.
G. Prior Operator and New Operator request that Escrow Agent hold the
escrow fund created pursuant to this Agreement.
Now, therefore, in consideration of the mutual covenants, the parties
agree as follows:
1. FILING OF COST REPORT FOR PRIOR OPERATOR. In the event the change of
operator described above shall occur, Prior Operator and New Operator each agree
to take all action which may be necessary or appropriate in order to cause the
cost report of the Prior Operator for the period ending on the date when the
Prior Operator will no longer be the operator of the Facility (the "Effective
Date") to be filed on or before the Cost Report Deadline. Prior Operator agrees
to file its final Medicaid cost report on or before the Cost Report Deadline
with DMS and to deliver to New Operator a copy of its cost report for the period
ended on the Effective Date on or before the Cost Report Deadline.
2. WITHHOLDING OF REIMBURSEMENT TO NEW OPERATOR. In the event the
change in operator described above shall occur and if the final cost report of
the Prior Operator shall not be filed on or before the Cost Report Deadline, the
New Operator hereby authorizes DMS to withhold from one or more future Medicaid
reimbursements otherwise payable to the New Operator the aggregate sum of
$30,000. Nothing in this Agreement is intended to modify any other agreement
entered into by and between Prior Operator and New Operator or to relieve either
party of any of its obligations arising under any such other agreement.
3. ENROLLMENT BY NEW OPERATOR. The parties acknowledge that in order
for Prior Operator to file its final Medicaid Cost Report it needs to receive a
provider statistical and reimbursement reconciliation ("PS&R") from its fiscal
intermediary and that the PS&R report will not be sent to Prior Operator unless
New Operator shall file documents required to enroll in the Medicare and
Medicaid programs.
New Operator agrees to use its best efforts in good faith to file all
documents necessary for enrollment of New Operator in the Medicare and Medicaid
programs within ten (10) days after the Effective Date and in any event, no
later than thirty (30) days after the Effective Date.
If New Operator fails to file all such documents within the stated time
period, this Agreement shall terminate and the Cost Report Deposit (as such term
in defined in Section 4) shall be immediately distributed to Prior Operator.
4. MEDICAID COST REPORT DEPOSIT. Prior Operator delivers herewith to
Escrow Agent the sum of Thirty Thousand Dollars ($30,000.00) in the form of a
wire transfer or bank cashier's check (the "Cost Report Deposit"), which sum
shall be held and disbursed by Escrow Agent upon the terms and conditions set
forth hereafter.
5. FEE OF ESCROW AGENT. New Operator agrees to pay Escrow Agent's fee
for services hereunder. The total amount of Escrow Agent's fee is $__________
(the "Escrow Fee"). Such fee shall be payable upon execution of this Agreement
by the parties.
6. INTEREST ON COST REPORT DEPOSIT AND FEE. Escrow Agent agrees to
place the Cost Report Deposit in an interest-bearing account at an institution
insured by the Federal Deposit Insurance Corporation. All interest earned on the
Cost Report Deposit shall become a part of the Cost Report Deposit. All
distributions shall be distributed in the same manner and on the same terms and
conditions as provided herein for the Cost Report Deposit.
7. DISPERSAL OF COST REPORT DEPOSIT. Prior Operator and New Operator
hereby authorize Escrow Agent to deliver the Cost Report Deposit to Prior
Operator promptly in the event
2
New Operator and Prior Operator shall deliver to Escrow Agent a statement (or
statements) that Prior Operator filed its Medicaid Cost Report described in
paragraph 1. Prior Operator and New Operator hereby authorize Escrow Agent to
deliver the Cost Report Deposit to New Operator in the event New Operator and
Prior Operator shall deliver a statement (or statements) to Escrow Agent that
Prior Operator failed to file its Medicaid Cost Report described in paragraph 1
above by the Cost Report Deadline. Prior Operator and New Operator each agree to
execute statements and otherwise cooperate in good faith to effectuate delivery
of the Cost Report Deposit to Prior Operator if Prior Operator shall file its
final Medicaid cost report on or before the Cost Report Deadline and delivery of
the Cost Report Deposit to New Operator in the event Prior Operator shall fail
to file its final Medicaid cost report on or before the Cost Report Deadline.
Nothing in the foregoing shall give New Operator the right to withhold its
signature on the statement to the Escrow Agent for any reason if Prior Operator
has delivered evidence that the Cost Report was filed on or prior to the Cost
Report Deadline.
8. DISPUTES.
(a) In the event a dispute arises about Prior Operator's or New
Operator's entitlement to the Escrow Deposit, including but not limited to the
alleged failure by Prior Operator to file its final Medicaid Cost Report, Escrow
Agent shall give seven days' written notice to Prior Operator and New Operator
by certified mail, return receipt requested, to the addresses listed herein of
Escrow Agent's intent to institute an interpleader action to obtain a judicial
declaration of the parties' entitlement to the Escrow Deposit. In the event
Prior Operator and New Operator fail to provide Escrow Agent with a written
agreement signed by each of them regarding disposition of the Escrow Deposit
within said seven-day period, Prior Operator and New Operator agree that Escrow
Agent shall be entitled to institute an interpleader action in the Circuit Court
of ___________ County, Missouri, and pay the Cost Report Deposit into the court
registry. From the Cost Report Deposit, Prior Operator and New Operator agree
that Escrow Agent shall be entitled to reimbursement for all expenses of
instituting said interpleader action, including but not limited to filing fees,
reasonable attorney's fees, and certified mail cost for the seven-day notice
provided above.
(b) If Prior Operator and New Operator agree in writing to a
disposition of said Cost Report Deposit, Escrow Agent shall be reimbursed for
the cost of the certified mailings from the escrow sum, Prior Operator and New
Operator to each bear the cost of its respective mailing.
(c) In the event Escrow Agent institutes an interpleader action as
provided herein, Escrow Agent's obligations hereunder shall immediately
terminate upon the filing of such action, and Escrow Agent shall have no further
obligations hereunder.
9. NATURE OF DUTIES OF ESCROW AGENT. Escrow Agent shall not be liable
for any damages, or have any obligations other than the duties prescribed herein
in carrying out or executing the purposes and intent of this Escrow Agreement;
provided, however, that nothing herein contained shall relieve Escrow Agent from
liability arising out of its own willful misconduct or gross negligence. Escrow
Agent's duties and obligations under this Escrow Agreement shall be entirely
administrative and not discretionary. Escrow Agent shall not be liable to any
party hereto or to any third party as a result of any action or omission taken
or made by Escrow Agent in good faith. New Operator and Prior Operator jointly
and severally indemnify Escrow Agent,
3
hold Escrow Agent harmless, and reimburse Escrow Agent from, against and for,
any and all liabilities, costs, fees and expenses (including reasonable
attorneys' fees) Escrow Agent may suffer or incur by reason of its execution and
performance of this Escrow Agreement, except for any such claims arising as a
result of Escrow Agent's willful misconduct, gross negligence, or failure to act
in good faith. In the event any legal questions arise concerning Escrow Agent's
duties and obligations hereunder, Escrow Agent may consult its counsel and rely
without liability upon written opinions given to it by such counsel.
10. ACTING UPON WRITTEN NOTICE. Escrow Agent shall be protected in
acting upon any written notice, request, waiver, consent, authorization, or
other paper or document which Escrow Agent, in good faith, believes to be
genuine and what it purports to be.
11. NOTICES. All notices and other communications given or made pursuant
to this Agreement must be in writing and will be deemed to have been duly given
or made (i) the second business day after the date of mailing, if delivered by
registered or certified mail, postage prepaid, (ii) upon delivery, if sent by
hand delivery, (iii) upon delivery, if sent by prepaid courier, with a record of
receipt, or (iv) the next day after the date of dispatch, if sent by cable,
telegram, facsimile or telecopy (with a copy simultaneously sent by registered
or certified mail, postage prepaid, return receipt requested), to the parties at
the following addresses:
(i) If to Prior Operator:
--------------------
--------------------
--------------------
(ii) With a copy to:
--------------------
--------------------
--------------------
(iii) If to New Operator:
--------------------
--------------------
--------------------
(iv) With copies to:
Skilled Healthcare Group, Inc.
27442 Portola Parkway, Suite 200
Foothill Ranch, CA 92610
Attention: General Counsel
4
And
Latham & Watkins LLP
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626
Attention: Derek D. Dundas
David C. Meckler
(iv) If to Escrow Agent:
Chicago Title Insurance Company
--------------------
--------------------
(v) With a copy to:
--------------------
--------------------
--------------------
12. MISCELLANEOUS.
(a) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement will not affect the validity or enforceability of
any other provision.
(b) INTERPRETATION. The headings used herein are for convenience
only and do not limit or expand the contents of this Agreement.
(c) NO WAIVER. No waiver of a breach of any provision of this
Agreement will be construed to be a waiver of any other breach of this
Agreement, whether of a similar or dissimilar nature.
(d) SURVIVAL. Any provisions of this Agreement creating obligations
extending beyond the term of this Agreement will survive the expiration or
termination of this Agreement, regardless of the reason for such termination.
(e) AMENDMENTS. Any amendments to this Agreement will be effective
only if in writing and signed by the parties hereto.
(f) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof.
(g) ASSIGNMENT. No party may assign its rights or obligations
hereunder without the prior written approval of all other parties.
5
(h) MISSOURI LAW. This Agreement shall be governed in all respects,
including validity, interpretation, and effect in accordance with the laws of
the State of Missouri.
(i) NO VIOLATION. Neither party shall be deemed to be in violation
of this Agreement if it is, or reasonably determines it is, prevented from
performing any of its duties or obligations for any reason beyond such party's
control, including, without limitation, flood, storm, strikes, acts of God or
the public enemy, or statute, ordinance, regulation, rule or action of any
applicable governmental entity.
(j) NO JOINT VENTURE. It is understood and agreed by the parties
that nothing contained in this Agreement shall be construed to create a joint
venture, partnership, association, or other affiliation or like relationship
between the parties, or a relationship of landlord and tenant, it being
specifically agreed that their relationship is and shall remain that of
independent parties to a contractual relationship as set forth in this
Agreement. In no event shall either party be liable for the debts or obligations
of the other of them, except as otherwise specifically provided in this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PRIOR OPERATOR:
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date:
-----------------------------------
NEW OPERATOR:
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date:
-----------------------------------
6
ESCROW AGENT:
Chicago Title Insurance Company
By:
-------------------------------------
Name: Maggie G. Watson
Title: Senior vice President
Date:
-----------------------------------
7
SCHEDULE 1.2
EXCLUDED ASSETS
1. Deposits, dividends and other assets related to Worker's Compensation
Insurance maintained by the Companies
2. Rebates/refunds from vendors for items purchased prior to closing
3. Automobiles: 1997 Toyota Avalon and 2002 Toyota Sequoia capitalized and
fully depreciated on the books of Liberty Terrace Nursing
4. Computer Servers and resident software running on servers including but
not limited to: Microsoft Server 2000, Microsoft Terminal Server 2000,
Citrix MetaFrame, Microsoft SQL server 2000, Microsoft Office open
license, Veritas Backup Exec and McAfee Managed VirusScan. All of which
are wholly owned by Sunset Healthcare and located at Carmel Hills Living
Center.
5. UPC Battery Backup owned wholly by Sunset Healthcare and located at Carmel
Hills Living Center
6. Exabyte Tape Backup cartridges and FireKing Media Vault wholly owned by
Sunset Healthcare and located at Carmel Hills Living Center
7. Nobilis PC system and resident software including but not limited to:
Microsoft Windows 2000 server, Microsoft Office 2003, Veritas Backup Exec
located at Eddie Reardon's office but owned by Holmesdale Care Center.
8. 1- 4 Drawer HON lateral file located at Holmesdale Care Center and wholly
owned by Sunset Healthcare
9. MDI On-line advantage SQL databases for each facility
10. SonicWall TZ-170 VPN/Firewall hardware located at each facility, 3 total
and owned by Sunset Healthcare
11. 2- External 250 GB Western Digital USB hard drives located at Carmel Hills
Living Center and owned by Sunset Healthcare
SCHEDULE 1.3(B)
PERMITTED ENCUMBRANCES
HOLMESDALE
Liens and encumbrances of record reflected on Title Commitment #020062044,
except for the following which will be released at or before Closing:
1. Deed of Trust executed by Holmesdale Development, LLC to Larry K.
Enkelmann, as Trustee for Security Bank of Kansas City, dated July
30, 2002 and filed July 31, 2002 under Document No. 2002K0047382, as
modified and amended January 15, 2004 under Document No.
2004K0003140
2. Assignment of Rents executed by Holmesdale Development, LLC to
Security Bank of Kansas City, filed July 31, 2002 under Document No.
2002K0047383
3. Deed of Trust executed by Holmesdale Development, LLC to Larry K.
Enkelmann, as Trustee for Security Bank of Kansas City, dated
January 21, 2003 and filed January 23, 2003 under Document No.
2003K0005097
4. Assignment of Rents executed by Holmesdale Development, LLC to
Security Bank of Kansas City, filed January 23, 2003 under Document
No. 2003K0005098
UCC Financing Statement(s) for each entity filed with the Missouri Secretary of
State in favor of Security Bank of Kansas City (to be released at or before
Closing)
CARMEL HILLS
Liens and encumbrances of record reflected on Title Commitment #020062043,
except for the following which will be released at or before Closing:
1. Deed of Trust executed by Carmel Hills Property, LLC to Deanna A.
Burns, as Trustee for Bank of America, N.A., filed August 23, 2002
under Document No. 2002I10072470
2. Assignment of Leases and Rents executed by Carmel Hills Property,
LLC to Bank of America filed august 23, 2002 under Document No.
200210072471
3. Financing Statement executed by Carmel Hills Property LLC to Bank of
America, N.A. filed August 23, 2002 under Document No. 200210072474
4. Assignment of Lessee's Interest in Leases and Contract Rights, dated
August 22, 2002, executed by Carmel Hills Living Center, Inc. to
Bank of America, N.A. filed August 23, 2002, under Document No.
200210072473
5. Memorandum of Lease, dated August 22, 2002 by Carmel Hills Property
LLC, to Carmel Hills Living Center, Inc. filed August 23, 2002 under
Document No. 200210072473
UCC Financing Statement(s) for each entity filed with the Missouri Secretary of
State in favor of Bank of America (to be released at or before Closing)
LIBERTY TERRACE
Liens and encumbrances of record reflected on Title Commitment #020062042,
except for the following which will be released at or before Closing:
1. Deed of Trust, Security Agreement and Fixture Filing executed by
Liberty Terrace Care Center, Inc. to Deanna A. Burns, as Trustee for
Bank of America, N.A., filed August 23, 2002 under Document No.
$-30562 in book 3732 at Page 956
2. Assignment of Leases and Rents executed by Liberty Terrace Care
Center, Inc. to Bank of America filed Agust 23, 2002 under Document
No. R-30563 in Book 3732 at Page 984
3. Financing Statement executed by Liberty Terrace Care Center, Inc. to
Bank of America, N.A. filed August 23, 2002 under Document No.
R-30566 in Book 3733 at Page 5
4. Assignment of Lessee's Interest in Leases and Contract Rights, dated
August 22, 2002, executed by Liberty Terrace Care Center, Inc. to
Bank of America, N.A. filed August 23, 2002, under Document No.
R-30564, in book 3732 at Page 995
5. Memorandum of Lease, dated August 22, 2002 by Liberty Terrace Care
Center, Inc. to Liberty Terrace Nursing LLC filed August 23, 2002
under Document No. R-30565, in book 3733 at Page 1
UCC Financing Statement(s) for each entity filed with the Missouri Secretary of
State in favor of Bank of America (to be released at or before Closing)
UCC filing in favor of Invacare Credit Corporation for equipment lease (to
be released at or before Closing)
SCHEDULE 1.5
PURCHASE PRICE ALLOCATION
LTCC CHLC HCC TOTAL
- --------------------------------------------------------------------------------
LAND $ 624,750
BUILDINGS 5,500.000 7,300,000 3,600,000 16,400,000
FFE 432,500
INTANGIBLES 13,542,750
TOTAL $31,000,000
SCHEDULE 1.6(B)
EXCEPTIONS TO TITLE
"Prior Surveys" includes:
1. The survey for Carmel Hills, dated March 27, 2002 by Boundary &
Construction Surveying, Inc.
2. The survey for Holmesdale Center, dated May 21, 2002 by Anderson
Survey Company.
- 10 foot sewer easement that runs through the southeast portion
of the building.
3. The survey for Liberty Terrace, dated October 23, 1997 by George
Butler Associates, Inc.
- 15' public utility and drainage easement recorded in Doc No.
G80282, Bk 2001, Page 741,
[Unable to discern whether or not the easement affects the
property.]
SCHEDULE 1.7(C)
ENVIRONMENTAL REPORTS
1. Underground Storage Tank located on the Holmesdale Care Center facility,
as further described in the Phase I Environmental Reports. Purchaser shall bear
the cost of any soil testing and the cost of filling and closing the underground
storage tank.
2. Elevator leakage located at the Holmesdale Care Center facility, as
further described in the Phase I Environmental Reports.
Phase I Environmental Reports means those environmental site assessments
conducted by Professional Service Industries, Inc., dated January 24, 2006,
related to each of the Acquired Facilities.
SCHEDULE 2.1
COMPANIES AND BENEFICIAL OWNERS
Companies Beneficial Owners Percentage Interest
- --------- ----------------- -------------------
Holmesdale Care Center, Inc. M. Terence Reardon and M. Sue 50%
(Operator) Reardon as co-trustees of the M.
TERENCE REARDON TRUST
dated 6/26/2003
50%
M. Terence Reardon and M. Sue
Reardon as co-trustees of the M.
SUE REARDON TRUST dated
6/26/2003
Holmesdale Development, LLC Same Same
(Building Owner)
Carmel Hills Living Center, Inc. Same Same
(Operator)
Carmel Hills Property, LLC Same Same
(Building Owner)
Liberty Terrace Nursing, LLC Same Same
(Operator)
Liberty Terrace Care Center, Inc. Same Same
(Building Owner)
SCHEDULE 2.2
ORGANIZATION
Companies State of Organization
- --------- ---------------------
Holmesdale Care Center, Inc. Missouri
(Operator)
Holmesdale Development, LLC. Missouri
(Building Owner)
Carmel Hills Living Center, Inc. Missouri
(Operator)
Carmel Hills Property, LLC Missouri
(Building Owner)
Liberty Terrace Nursing, LLC Missouri
(Operator)
Liberty Terrace Care Center, Inc. Missouri
(Building Owner)
SCHEDULE 2.2
SUBSIDIARIES
NONE
SCHEDULE 2.5
MATERIAL ADVERSE CHANGES
NONE
SCHEDULE 2.6(a)
MATERIAL CONTRACTS
HOLMESDALE CARE CENTER
REHAB OUTREACH LLC $ 343,734 Therapy Provider
Sunset Healthcare $ 341,436 Management Fee
Holmesdale Development, LLC $ 265,913 Lessor
Great Plains Cmpd Center $ 165,103 Pharmacy
Sysco Of Kansas City $ 106,026 Food Vendor
Health Care Facilities Of Missouri $ 84,616 Work Comp Insurance
McKesson Medical-Surgical $ 65,019 Medical Supplies
LCH Liability Trust $ 54,996 Insurance Trust
Kansas City Power & Light $ 42,413 Electric Utility
U S Foodservice (Topeka Division) $ 41,812 Food Vendor
Razorback Plumbing $ 30,406 Plumbing Vendor-Water Heater Replacement
HMP DME Services $ 30,360 Medical Equipment/Rentals
Missouri Gas Energy $ 25,191 Gas Utility
Blackwell Sanders Peper Martin, LLP $ 20,167 Legal
Life Systems, Inc $ 17,669 Medical Supplies
Massco $ 17,306 Hskpg/Laundry/Dietary Supplies
Aflac Corporate Office $ 15,539 Supplemental Insurance-EE funded
Schindler Elevator Corporation $ 14,586 Elevator Pump Replacement/Maintenance
Carmel Hills $ 13,442 Shared Services
Roberts Dairy $ 13,245 Food Vendor
MMS - A Medical Supply Company $ 12,560 Medical Supplies
Heartland Health Laboratories, Inc. $ 11,851 Lab
Direct Supply $ 11,008 Medical Supplies
Birch Telecom $ 10,384 Telephone
LARSONALLEN $ 9,511 Accounting Fees
- ----------------------------------------------------
Grand Total $1,764,291
- ----------------------------------------------------
SCHEDULE 2.6(a) (CONT.)
MATERIAL CONTRACTS
LIBERTY TERRACE CARE CENTER
Aegis Therapies $ 439,788 Therapy Services
Blue Cross Blue Shield $ 304,416 Health Premiums
Omnicare Pharmacy $ 250,859 Pharmacy
Sysco $ 225,290 Food/Dietary Supplies/Briefs
Health Care Facilities Of Missouri $ 142,508 Work Comp Ins
McKesson Medical-Surgical $ 82,103 Medical Supplies
Aquila $ 69,436 Electric Service
City Of Liberty $ 50,661 Water/sewer
Missouri Gas Energy $ 38,960 Gas Service
Massco, Inc $ 34,057 Hskpg/Laundry/Dietary Supplies Per Diem
AFLAC $ 32,977 Supplemental Insurance
Quality Home Siding And Windows $ 30,784 Gutters/soffitts/ceilings
Town And Country Medical $ 25,265 Equipment Rental
Philadelphia Insurance Company $ 20,872 Property Insurance
Mobile Medical Services, Inc. $ 20,171 X-Ray Services
Larsen Allen $ 18,652 Tax Services
Roberts Dairy $ 17,659 Dairy Products
Fortis Benefits DentalCare $ 17,622 Dental Premiums
Lincare $ 17,445 Oxygen
Heartland Health Laboratories $ 16,692 Lab Service
John Amick, DO $ 15,000 Medical Director
Grainger, Inc. $ 12,100 Maintenance Supplies/Water Heaters
Direct Supply $ 11,702 Medical Supplies
R J Kool Company $ 11,301 Laundry Equipment Maintenance/New Washer
SBC Telephone Service $ 11,253 Telephone Service
Assisted Transportation $ 11,001 Transportation
Mms $ 10,623 Briefs
Life Systems $ 10,500 Vital Sign Equipment
Providers Plus $ 9,781 Linens
Pro Cut Lawn Care $ 9,600 Lawn Mowing/Snow Removal
- ----------------------------------------------------
Grand Total $1,969,080
- ----------------------------------------------------
SCHEDULE 2.6(a) (CONT.)
MATERIAL CONTRACTS
CARMEL HILLS LIVING CENTER
AEGIS Therapies $1,134,978 Therapy Provider
Carmel Hills Property, LLC $ 946,080 Lessor
Sunset Healthcare $ 649,239 Management Fee
Sysco $ 326,256 Food Vendor
Great Plains CMPD Center $ 268,236 Pharmacy
Health Care Facilities Of Missouri $ 145,809 Work Comp Insurance Trust
Liberty Terrace Care Center $ 141,531 Health Insurance/Operation Advances
City Of Independence $ 135,524 Electric/Water/Sewer
Lch Liability Trust $ 110,004 PG&L Insurance
McKesson-Redline $ 94,570 Medical Supplies
Control Service Co., Inc $ 50,208 Emergency Generator/Backup Power
Massco, Inc $ 45,263 Hskpg/Laundry/Dietary Supplies
AFLAC $ 31,414 Supplemental Insurance
Missouri Gas Energy $ 26,898 Gas Utility
Roberts Dairy Company $ 24,789 Dairy/Food Vendor
Lincare $ 22,152 Oxygen Vendor
Martin Mechanical Corporation $ 21,876 HVAC Vendor
Larsen Allen $ 19,811 Accounting Firm
Town And Country Medical $ 19,669 Medical Device Rental
Data Essentials, Inc $ 17,411 Office Supplies
Philadelphia Insurance Company $ 16,821 Property Insurance
Life Systems $ 16,208 Medical Supplies
Direct Supply $ 15,968 Medical Supplies
Providers Plus, Inc $ 15,262 Linens
MMS $ 14,556 Medical Supplies
Blackwell Sanders Peper Martin $ 14,459 Legal
Birch Telecom $ 12,677 Telephone / Internet
Comcast $ 12,190 Cable Vendor
Dr. Johnny Johnson $ 12,000 Medical Director
Farmer Bros. Co. $ 11,953 Food Vendor
Medical Resources Of Kansas City, Inc $ 11,797 Oxygen Vendor
Health Technologies, Inc $ 11,569 Dietary Consultant
Interstate Brands Corporation $ 11,547 Food Vendor
Mobile Medical Services $ 11,066 Medical Supplies
MDI Technologies $ 10,390 Software Vendor
Orth, Myra $ 10,147 Beauty Salon via Resident Trust
Pro Cut Lawn Care $ 9,900 Lawn Care/Snow Removal
SCHEDULE 2.6 (CONT.)
MATERIAL CONTRACTS
(b) See Schedule 2.6(a)
(c) None
(d) See Schedule 2.6(a)
(e) See Schedule 2.22
(f) None
SCHEDULE 2.7(a)
REAL PROPERTY
COMPANIES INTEREST
- --------- --------
Holmesdale Care Center, Inc. Lessee
(Operator)
Holmesdale Development, LLC. Fee Simple Owner
(Building Owner)
Carmel Hills Living Center, Inc. Lessee
(Operator)
Carmel Hills Property, LLC Fee Simple Owner
(Building Owner)
Liberty Terrace Nursing, LLC Lessee
(Operator)
Liberty Terrace Care Center, Inc. Fee Simple Owner
(Building Owner)
SCHEDULE 2.10(b)
COMPANY INTELLECTUAL PROPERTY
1. (I) PATENTS - NONE
(II) TRADEMARKS, SERVICE MARKS, LOGOS AND CORPORATE NAMES
- Tree Logo for Liberty Terrace Care Center
- Grapevines and hills for Carmel Hills Living Center
- Corporate Names:
Holmesdale Care Center, Inc.
Holmesdale Development, LLC
Carmel Hills Living Center, Inc.
Carmel Hills Property, LLC
Liberty Terrace Nursing, LLC
Liberty Terrace Care Center, Inc.
(iii) Copyrights -- None
(iv) World Wide Web addresses and domain name registrations
- www.carmelhillslivingcenter.com Registered by AssistGuide
Expires 4-12-06
- www.libertyterrace.com Registered by AssistGuide Expires
4-12-06
- www.holmesdalecarecenter.com Registerd by AssistGuide Expires
4-12-06
- www.liberty-terrace.com Registered by Sunset Healthcare
Expires 4-17-06
- www.holmesdalecc.com Registered by Holmesdale Care Center
Expires 5-1-08
- www.carmel-hills.com Registered by Sunset Healthcare Expires
4-17-06
2. Licenses and other rights granted to any person by any company - None
SCHEDULE 2.12
RESIDENTS AND SUPPLIERS
HOLMESDALE CARE CENTER
Count of Admission Date Year
- ----------------------- ---------------------------------
Referred By 2004 2005 2006 Grand Total
- ----------- ---- ---- ---- -----------
Baptist Lutheran Medical Center 18.73% 25.66% 26.67% 22.03%
Research Medical Center 20.76% 20.35% 20.00% 20.56%
N/A 6.84% 9.73% 20.00% 8.41%
Truman Medical Center 5.06% 6.78% 6.67% 5.87%
St. Luke's Hospital 4.05% 6.19% 6.67% 5.07%
Kansas City Care & Rehab 5.57% 1.77% 0.00% 3.74%
Daughter 1.77% 2.95% 13.33% 2.54%
Research Belton Hospital 2.53% 2.65% 0.00% 2.54%
Family 3.04% 1.47% 6.67% 2.40%
KC CARE AND REHAB 4.05% 0.59% 0.00% 2.40%
KC Care & Rehab 2.03% 1.77% 0.00% 1.87%
Wife 2.03% 1.47% 0.00% 1.74%
Va Medical Center 1.77% 1.77% 0.00% 1.74%
Independence Regional 1.27% 2.36% 0.00% 1.74%
Truman Hospital 0.51% 2.95% 0.00% 1.60%
Neice 2.28% 0.00% 0.00% 1.20%
Son 1.01% 1.18% 0.00% 1.07%
Truman Mecical Center 0.00% 2.06% 0.00% 0.93%
Gardens 0.76% 1.18% 0.00% 0.93%
Liberty Terrace 1.27% 0.59% 0.00% 0.93%
Relative 1.52% 0.29% 0.00% 0.93%
Shawnee Mission Medical Center 1.52% 0.00% 0.00% 0.80%
Juanita Mcgill 1.01% 0.59% 0.00% 0.80%
Home 1.27% 0.00% 0.00% 0.67%
Sister 1.01% 0.29% 0.00% 0.67%
KC CARE 1.27% 0.00% 0.00% 0.67%
Baptist Hostpital 1.27% 0.00% 0.00% 0.67%
Visiting Nurse Association 0.00% 1.18% 0.00% 0.53%
KU Medical Center 1.01% 0.00% 0.00% 0.53%
Kansas City Rehab 0.51% 0.59% 0.00% 0.53%
Husband 0.51% 0.29% 0.00% 0.40%
St Joesph 0.76% 0.00% 0.00% 0.40%
KC Hospice 0.25% 0.59% 0.00% 0.40%
St. Joseph Health Center 0.25% 0.59% 0.00% 0.40%
Research Hopsptial 0.51% 0.00% 0.00% 0.27%
Compass Hospital TX 0.00% 0.59% 0.00% 0.27%
St Lukes 0.51% 0.00% 0.00% 0.27%
Odyssey 0.25% 0.00% 0.00% 0.13%
Mid America Rehab Hospital 0.25% 0.00% 0.00% 0.13%
Kansas City Cre & Rehab 0.25% 0.00% 0.00% 0.13%
Independence Regional Health Center 0.25% 0.00% 0.00% 0.13%
Overland Park Regional Medical Center 0.25% 0.00% 0.00% 0.13%
Hospital 0.00% 0.29% 0.00% 0.13%
Menorah Medical Center 0.00% 0.29% 0.00% 0.13%
St Joseph 0.00% 0.29% 0.00% 0.13%
Truman Lakewood 0.00% 0.29% 0.00% 0.13%
Tiffany Young 0.25% 0.00% 0.00% 0.13%
Truman West 0.00% 0.29% 0.00% 0.13%
Grand Total 100.00% 100.00% 100.00% 100.00%
CARMEL HILLS LIVING CENTER
Count of AdmissionDate Year
- ---------------------- --------------------------------
ReferredBy 2004 2005 2006 Grand Total
- ---------- ---- ---- ---- -----------
Independence Regional Hospital 30.91% 32.99% 20.83% 31.69%
Family 30.00% 26.55% 12.50% 27.73%
Medical Center Of Independence 6.36% 7.70% 20.83% 7.46%
N/A 4.55% 5.63% 2.08% 5.04%
St Marys 4.42% 4.14% 0.00% 4.15%
Tour 0.00% 2.76% 18.75% 1.95%
Self 1.17% 1.61% 0.00% 1.36%
North Kansas City Hospital 1.04% 1.26% 6.25% 1.30%
Liberty Terrace 1.30% 0.92% 2.08% 1.13%
Baptist Lutheran Medical Center 0.65% 0.92% 0.00% 0.77%
Research Hospital 1.56% 0.00% 0.00% 0.71%
Spectrum/Susan 0.52% 0.92% 0.00% 0.71%
Michael Bryant/grandson 1.43% 0.00% 2.08% 0.71%
Regency 1.04% 0.34% 0.00% 0.65%
Carondelet Manor 0.13% 1.15% 0.00% 0.65%
Royal Terrace 0.78% 0.46% 0.00% 0.59%
The Groves 0.39% 0.69% 0.00% 0.53%
Dr. Johnson 0.91% 0.23% 0.00% 0.53%
Research/Belton/Lou 0.52% 0.57% 0.00% 0.53%
Research Psych 0.78% 0.34% 0.00% 0.53%
KU Med Center 1.04% 0.11% 0.00% 0.53%
Truman Medical Center 0.52% 0.46% 0.00% 0.47%
St. Lukes Hospital 0.26% 0.69% 0.00% 0.47%
Garden Valley/Dtr Barb 0.00% 0.92% 0.00% 0.47%
Menorah/Julie 0.26% 0.57% 2.08% 0.47%
Liberty Hospital 0.00% 0.92% 0.00% 0.47%
Lee's Summit Hospital 0.26% 0.69% 0.00% 0.47%
Calloway Co. Comm Hosp/Joan Brewer/Neice 0.91% 0.00% 0.00% 0.41%
Truman Lake Manor 0.65% 0.11% 0.00% 0.36%
Cass Medical Center 0.26% 0.46% 0.00% 0.36%
Dr Johnson 0.13% 0.57% 0.00% 0.36%
VA 0.65% 0.00% 0.00% 0.30%
DHHS/Terry 0.65% 0.00% 0.00% 0.30%
Heartland Hospice / Lynn, MSW 0.00% 0.46% 0.00% 0.24%
Dr Ravenscroft 0.39% 0.11% 0.00% 0.24%
Independence Manor 0.00% 0.46% 0.00% 0.24%
Timothea Richardson 0.52% 0.00% 0.00% 0.24%
St Lukes 0.52% 0.00% 0.00% 0.24%
Social Worker 0.00% 0.46% 0.00% 0.24%
Cedars Of Liberty/Scott 0.52% 0.00% 0.00% 0.24%
Research Medical Center 0.00% 0.46% 0.00% 0.24%
Good Shepherd/Cunningham 0.00% 0.34% 0.00% 0.18%
Kimberly Sharier 0.39% 0.00% 0.00% 0.18%
Newspaper 0.13% 0.23% 0.00% 0.18%
Clay Co PA/Sara Emighy 0.39% 0.00% 0.00% 0.18%
VNA/Judy 0.00% 0.34% 0.00% 0.18%
Two Rivers/Beth Stanton 0.00% 0.34% 0.00% 0.18%
St Lukes Home Health Hospice 0.00% 0.34% 0.00% 0.18%
VNA 0.26% 0.00% 0.00% 0.12%
Jeanette Miller, SW 0.00% 0.23% 0.00% 0.12%
Dr. Alcox 0.26% 0.00% 0.00% 0.12%
MARH/Norma 0.00% 0.23% 0.00% 0.12%
Providence/Barbara 0.26% 0.00% 0.00% 0.12%
St Josephs 0.26% 0.00% 0.00% 0.12%
Margarie Ruhl/Transition Office 0.26% 0.00% 0.00% 0.12%
ITHC/Laurie Hawley 0.26% 0.00% 0.00% 0.12%
Co. State Vet. Home At Fitsimons 0.26% 0.00% 0.00% 0.12%
Heartland Hospice/Lynn 0.26% 0.00% 0.00% 0.12%
St. Luke's Northland 0.00% 0.00% 4.17% 0.12%
Columbia Regional/JoAnn 0.26% 0.00% 0.00% 0.12%
Lyn Ripper, RN / IRHCC 0.00% 0.00% 4.17% 0.12%
KC Hospice/Debbie Wilson 0.26% 0.00% 0.00% 0.12%
Village Hospice/Harley 0.00% 0.23% 0.00% 0.12%
Glennon/Mary 0.00% 0.23% 0.00% 0.12%
Southern Care Hospice / Admit From Home 0.00% 0.00% 2.08% 0.06%
Truman Manor 0.00% 0.11% 0.00% 0.06%
VA/Karen 0.00% 0.11% 0.00% 0.06%
Jefferson Healthcare/Cheryl Thornton-Dtr 0.13% 0.00% 0.00% 0.06%
Town & Country Paper 0.13% 0.00% 0.00% 0.06%
Carondelet St Joesph 0.13% 0.00% 0.00% 0.06%
Dr. Johnson/dtr 0.00% 0.11% 0.00% 0.06%
Case Manger / Chris Dewberry 0.00% 0.11% 0.00% 0.06%
Lee's Summit Hospital/June 0.00% 0.00% 2.08% 0.06%
Kansas City Hospice 0.00% 0.11% 0.00% 0.06%
DHHS/Joyce Smith 0.00% 0.11% 0.00% 0.06%
Henrietta Glossip 0.13% 0.00% 0.00% 0.06%
Jackson Co PA, Sherrie Keller 0.00% 0.11% 0.00% 0.06%
Grand Total 100.00% 100.00% 100.00% 100.00%
LIBERTY TERRACE CARE CENTER
Count of Admission Date Year
- ----------------------- -------------------------------
Grand
Referred By 2004 2005 2006 Total
- ----------- ---- ---- ---- -----
Liberty Hospital 35.58% 42.24% 41.67% 39.38%
Family 11.95% 14.49% 16.67% 13.46%
North Kansas City Hospital 14.03% 7.14% 4.17% 10.01%
N/A 8.31% 6.12% 12.50% 7.23%
St Lukes 6.75% 7.14% 4.17% 6.90%
St Lukes North 3.64% 7.14% 12.50% 5.78%
St Lukes Smithville 4.42% 2.86% 4.17% 3.56%
St Marys 1.56% 1.02% 0.00% 1.22%
KU Medical Center 0.00% 1.63% 0.00% 0.89%
Ray CTY Hosp Walter Peck 0.26% 1.02% 0.00% 0.67%
Pleasant Valley Grandson Tour 0.00% 1.22% 0.00% 0.67%
Pat Minor- Sedalia BRHC 1.56% 0.00% 0.00% 0.67%
Kim Harms- SW - St Johns- St Louis 1.04% 0.41% 0.00% 0.67%
Hilltop in Arkansas 0.78% 0.41% 0.00% 0.56%
Ashton Court 1.04% 0.20% 0.00% 0.56%
Tour 0.00% 1.02% 0.00% 0.56%
Care Alternatives Hospice 0.78% 0.41% 0.00% 0.56%
Dr Bean 0.00% 1.02% 0.00% 0.56%
Dr Bartlett 0.52% 0.61% 0.00% 0.56%
Aaron Victoria SW 1.04% 0.20% 0.00% 0.56%
Hospital 1.04% 0.00% 0.00% 0.44%
Research Medical 0.26% 0.41% 0.00% 0.33%
Beverly Sue Ryan (res At Woodbine) 0.52% 0.20% 0.00% 0.33%
Gardens Berry Rd -S. Allen 0.00% 0.61% 0.00% 0.33%
Independence Regional Hospital 0.26% 0.41% 0.00% 0.33%
White Oak 0.26% 0.41% 0.00% 0.33%
Boone County Hospital 0.78% 0.00% 0.00% 0.33%
Internet 0.00% 0.41% 0.00% 0.22%
Chip Schmelzer 0.26% 0.20% 0.00% 0.22%
St Lukes Hospital 0.52% 0.00% 0.00% 0.22%
Truman Hospital 0.52% 0.00% 0.00% 0.22%
St Johns 0.52% 0.00% 0.00% 0.22%
Carondelet 0.00% 0.41% 0.00% 0.22%
Cox Health Care -Jennifer 0.00% 0.20% 0.00% 0.11%
Carmel Hills 0.00% 0.20% 0.00% 0.11%
JoAnn Allison DPOA 0.00% 0.00% 4.17% 0.11%
K C V A 0.26% 0.00% 0.00% 0.11%
Dr Amick 0.26% 0.00% 0.00% 0.11%
Home Health 0.26% 0.00% 0.00% 0.11%
Overland Park Regional Med Center STACY 0.00% 0.20% 0.00% 0.11%
Hospice 0.26% 0.00% 0.00% 0.11%
Garden Village 0.26% 0.00% 0.00% 0.11%
Providence/Barbara 0.26% 0.00% 0.00% 0.11%
Good Sheppard Hospice- AMY 0.26% 0.00% 0.00% 0.11%
- --------------------------------------------------------------------------------------------------------
Grand Total 100.00% 100.00% 100.00% 100.00%
- --------------------------------------------------------------------------------------------------------
b) No Resident purchases more than 5% of services for any company.
SCHEDULE 2.13
THIRD-PARTY PAYORS
NONE
SCHEDULE 2.15
SELLERS' REQUIRED CONSENTS
None
SCHEDULE 2.16
REGULATORY AND LEGAL COMPLIANCE
NONE
SCHEDULE 2.19
LICENSES AND PERMITS
SNF LICENSE FROM MISSOURI DEPARTMENT HEALTH AND SENIOR SERVICES
RCF LICENSE FROM MISSOURI DEPARTMENT OF HEALTH AND SENIOR SERVICES
CERTIFICATE OF NEED FOR EACH SNF AND RCF LICENSE
CITY OCCUPATION LICENSE
CITY BUSINESS LICENSE
CLIA LABORATORY CERTIFICATION
CERTIFICATE OF PARTICIPATION IN STATE OF MISSOURI MEDICAID
CERTIFICATE OF PARTICIPATION IN MEDICARE
ALZHEIMER'S SPECIAL UNIT CERTIFICATION
SCHEDULE 2.20
PENDING LITIGATION
CARMEL HILLS
- - County of Jackson v. Carmel Hills Property LLC,
Tax Suit No. I2005:
Serial No. I2005-00114
Tax Parcel No. 26-130-06-11
Serial No. I2005-00115
Tax Parcel No. 26-130-06-34-01
Dispute regarding application of reassessment against Serial No.
I2005-00114, and Serial No. I2005-00115. Trial held on December 1, 2005
and decision is pending. Carmel Hills may file suit against a former tax
consultant to recoup the damages.
- - Estate of Betty Williams v. Carmel Hills Living Center
Wrongful death suit filed July 2003 - trial set for December 4, 2006
- - Mary Anderson as representative of the Estate of Ralph Anderson v. Carmel
Hills Living Center
Wrongful death suit filed May 2004 - mediation tentatively scheduled for
February 2006
LIBERTY TERRACE
- Request for Release of Medical Records of William John Miller filed
January 18, 2006 [reference is made in the Request that the purpose
is to investigate a potential wrongful death claim]
SCHEDULE 2.20 (CONT.)
PENDING LITIGATION
HOLMESDALE
- Tonia Jackson v. Holmesdale Care Center, Inc., Case No. 04CV222400
(Jackson County, MO) - On or about July 29, 2004, Tonia Jackson
(hereinafter "Plaintiff"), an African American female, filed this
action in Jackson County, Missouri Circuit Court alleging race and
sexual harassment. Generally, Plaintiff alleges her supervisor,
Norman Montgomery, subjected her to a hostile work environment by
subjecting her to various inappropriate sexual comments and
behavior, as well as making derogatory comments about her race.
Holmesdale denies any behavior by Mr. Montgomery rose to the level
of a hostile work environment and asserts that it effected prompt
remedial action when it learned of Plaintiff's complaints regarding
Mr. Montgomery. Company has taken Plaintiff's deposition and
exchanged written discovery and responses with Plaintiff. In
addition, Plaintiff has taken a number of depositions, including
those of a number of alleged fact witnesses and a corporate
representative of Holmesdale. The parties continue to engage in
discovery in this matter. There is no trial date set in this matter
as of yet.
- Lisa Hawthorne v. Holmesdale Care Center, Inc., Case No. 0516CV19572
(Jackson County, MO) - On or about July 15, 2005, Lisa Hawthorne,
(hereinafter "Plaintiff"), an African American female, filed this
action in Jackson County, Missouri Circuit Court alleging race
discrimination. Generally, Plaintiff alleges she was denied pay and
was forced to resign because of alleged harassment because of her
race. Holmesdale denies the allegation and asserts that the
Plaintiff was terminated for engaging in inappropriate language with
another employee in front of residents, which other employee was a
Caucasian male. That employee was also terminated for engaging in
the same inappropriate behavior as Plaintiff. The Company has issued
written discovery to Plaintiff, to which discovery Plaintiff has
responded. Plaintiff's deposition is scheduled for February 1, 2006.
There is no trial date set in this matter as of yet.
- Lonnie B. Spearman, in her individual capacity, and as Personal
Representative of the Estate of Mancy Spearman, Jr. vs. Holmesdale
Care Center, Inc., Holmesdale Development LLC, and Ramilo I.
Gatapie, M.D.
Wrongful death suit filed August 2005 - no trial date set
SCHEDULE 2.21(c)
EMPLOYEES AND COMPENSATION
NONE
SCHEDULE 2.21(d)
EMPLOYEES AND COMPENSATION
EMPLOYEES WITH ESTIMATED ANNUAL COMPENSATION OVER $50,000
2005
Name Facility Position Base Bonus Wages
- ---------------------------------------------------------------------------------------------------------------------------
Jennifer McGowan LTCC Administrator $65,000 $ 43,603
Barb Shipley LTCC DON $66,000 $ -- $ 70,724
Condon "Lee" Perry LTCC RN $ 23 $ 52,546 Hourly
Dianne Williamson CHLC Administrator $50,000 $ 8,553 $ 53,027 * Bonus was for Admissions promoted to
Administrator in April 2005
Pat Harmon CHLC DON $64,890 $ -- $ 63,800
Rose Pelton CHLC ADON $51,417 $ -- $ 52,815
MDS
Kim Purtle CHLC Coordinator $ 25 $ -- $49,225 Hourly
Richard Ferling HCC Administrator $60,000 $ 44,690
Angela Martin HCC DON $58,000 $ -- $ 20,300
Mabel Moses-Anid HCC RN $ 27 $ -- $ 58,227 Hourly
Wanda Estill HCC RN $ 30 $ -- $ 2,520 Houly
Eunice Oriaku HCC RN $ 30 $ -- $ -- Houly
Lucy Ponnle HCC RN $ 30 $ -- $ 39,870 Hourly
Susie Briscoe Sunset DOO $82,000 $78,267 $160,267 $20,034 of bonus for 4th Q 2004
SCHEDULE 2.22
ERISA; COMPENSATION AND BENEFIT PLANS
(a) - Cafeteria Plan Administered by AFLAC affiliate and applicable to all
three facilities.
- Health Blue Cross Blue Shield of Kansas City. Employer pays 50% of the
Employee Rate. a PPO and an HMO are offered. See attached Schedule of Benefits
- Dental - Fortis Dental Benefits. 100% Employee Paid Plan See attached
Schedule of Benefits
AFLAC. Various Supplemental Insurance Plans, 100% Employee Paid Plans.
Some Pre-Tax Life Insurance plans offered.
- - Bonus-For Administrators at each facility and for Admissions Coordinator at
Holmesdale only and Susie Briscoe Director of Operations bonus paid by Sunset
Healthcare. Director of Operations bonus is 20%of the portion of EBITDAR that
exceeds 18% Operating Margin.
ADMINISTRATOR SCHEDULE: (THE CENSUS PIECE VARIES UPON THE NUMBER OF BEDS AT EACH
FACILITY)
3-Part Bonus Structure ranging from 1%-5% per part for a total possible bonus of
15% of Base Salary
I. Budget
a. 5% Bonus for a Variance of 1/2% or Less of Budgeted Operating
Expenses
b. 4% Bonus for a Variance of 1% or Less of Budgeted Operating
Expenses
c. 3% Bonus for a Variance of 1.5% or Less of Budgeted Operating
Expenses
d. 2% Bonus for a Variance of 2% or Less of Budgeted Operating
Expenses
e. 1% Bonus for a Variance of 2.5% or Less of Budgeted Operating
Expenses
II. Accounts Receivable: Days Receivable Determined by (A/R Balance) /
(Average Daily Revenue)
a. 5% Bonus for Less than 32 Days Receivable
b. 4% Bonus for Less than 35 Days Receivable
c. 3% Bonus for Less than 37 Days Receivable
d. 2% Bonus for Less than 39 Days Receivable
e. 1% Bonus for Less than 42 Days Receivable
III. Census: Based upon 120 for remainder 2003 and 133 for 2004 and
thereafter
a. 5% Bonus for 93% Occupancy
b. 4% Bonus for 90% Occupancy
c. 3% Bonus for 86% Occupancy
d. 2% Bonus for 84% Occupancy
e. 1% Bonus for 82% Occupancy
Bonuses are determined on a six-month basis from date of employment and all
parts will be determined prior to the payment of the bonus. Bonus will be based
on the sum of percentages achieved above times the salary earned for the period.
A lump sum of money will be set aside each year for survey bonus's. Money will
be divided among all employees and Administrator as deemed appropriate by
Administrator.
(d) Upon consummation of the transaction, all employees will be terminated and
will become entitled to receive a payout of all accrued and unused PTO
SCHEDULE 2.24
INSURANCE
Vendor Policy Type Amount Scope Period
- --------------------------------------------------------------------------------------------------------------
Philadelphia Property & Casualty 4,640,000 Bldg Property/Building 12/2005-12/2006
Insurance-Liberty Insurance.
350,000 Contents Business
Income/Personal
2,008,600 Bus Income Property
- --------------------------------------------------------------------------------------------------------------
Philadelphia Property& Casualty 7,300,000 Bldg Property/Building 12/2005-12/2006
Insurance - Carmel Insurance.
743,000 Contents Business
Income/Personal
2,000,000 Bus Income Property
5,000 Deductible
- --------------------------------------------------------------------------------------------------------------
Philadelphia Property& Casualty 3,800,000-Bldg Property/Building 12/2005-12/2006
Insurance - Insurance.
Holmesdale 222,222 Pers Prop Business
Income/Personal
1,000,000 Bus Income Property
5,000 Deductible
- --------------------------------------------------------------------------------------------------------------
LCH Liability Trust Professional & 250,000/500,000 Self Insured Trust 1/2005-1/2006
General Liability for P&GL claims
Insurance Trust at each facility
- --------------------------------------------------------------------------------------------------------------
Health Care Worker's 1,000,000 Trust for 1/2005-1/2006
Facilities of Compensation Worker's
Missouri Insurance compensation
Claims
- --------------------------------------------------------------------------------------------------------------
SCHEDULE 3.3
PURCHASER REQUIRED CONSENTS
1. Reasonable assurance that, after the Closing, Purchaser will receive a SNF
License from Missouri Department of Health and Senior Services
2. Reasonable assurance that, after the Closing, Purchaser will receive a RCF
License from Missouri Department of Health and Senior Services
3. City Occupation License
4. City Business License
5. CLIA Laboratory Certification, or waiver
6. Reasonable assurance that Purchaser, after the Closing, will receive a
Certificate of Participation in State of Missouri Medicaid
7. Reasonable assurance that Purchaser, after the Closing, will receive a
Certificate of Participation in Medicare
SCHEDULE 4.1(b)
CONDUCT OF THE BUSINESS
(iv) - Notice of the sale will be given immediately following the expiration of
the Due Diligence Review Period with an effective termination date expected as
of the Closing Date.
(v) - Compensation increases made in connection with annual reviews not to
exceed 5% of the prior year's compensation for such employee and bonuses payable
in accordance with each Company's bonus policy