EXHIBIT 10.8
AGREEMENT
AND
PLAN OF MERGER
AND REORGANIZATION
BY AND BETWEEN
ASSISTED LIVING CONCEPTS, INC.,
A NEVADA CORPORATION
AND
HOME AND COMMUNITY CARE, INC.,
A NEVADA CORPORATION
TABLE OF CONTENTS
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Page
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ARTICLE I
THE MERGER............................................... 1
Section 1.1 The Merger............................................... 1
Section 1.2 Effective Time........................................... 1
Section 1.3 Effects of the Merger.................................... 1
Section 1.4 Conversion of HCI Common Stock........................... 1
Section 1.5 ALC Common Stock......................................... 2
Section 1.6 Certificates of Incorporation............................ 2
Section 1.7 Bylaws................................................... 2
Section 1.8 Board of Directors....................................... 3
ARTICLE II
PAYMENT OF CASH UPON EXCHANGE OF SHARES.................. 3
Section 2.1 ALC to Make Cash Available............................... 3
Section 2.2 Exchange of Shares....................................... 3
Section 2.3 Earnout.................................................. 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HCI.................... 5
Section 3.1 Corporate Organization................................... 5
Section 3.2 Capitalization........................................... 6
Section 3.3 Authority; No Violation.................................. 7
Section 3.4 Consents and Approvals................................... 7
Section 3.5 Vote or Consent Required................................. 8
Section 3.6 Financial Statements; Undisclosed Liabilities............ 8
Section 3.7 Broker's Fees............................................ 8
Section 3.8 Absence of Certain Changes or Events..................... 8
Section 3.9 Legal Proceedings........................................ 9
Section 3.10 Taxes and Tax Returns.................................... 10
Section 3.11 Employees................................................ 10
Section 3.12 Compliance with Applicable Law........................... 11
Section 3.13 Certain Contracts........................................ 12
Section 3.14 Environmental Liability.................................. 12
Section 3.15 Properties............................................... 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALC.................... 13
Section 4.1 Corporate Organization................................... 13
Section 4.2 Newco Capitalization..................................... 13
Section 4.3 Authority; No Violation.................................. 13
Section 4.4 Consents and Approvals................................... 14
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TABLE OF CONTENTS (cont'd)
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Section 4.5 Vote or Consent Required.................................... 15
Section 4.6 Opinion of Financial Advisor................................ 15
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS................... 15
Section 5.1 Conduct of Businesses Prior to the Effective Time........... 15
Section 5.2 Forbearances................................................ 15
ARTICLE VI
ADDITIONAL AGREEMENTS....................................... 17
Section 6.1 Cooperation as to Regulatory Matters........................ 17
Section 6.2 Access to Information....................................... 18
Section 6.3 Stockholders' Approvals..................................... 18
Section 6.4 Legal Conditions to Merger.................................. 18
Section 6.5 Indemnification; Directors' and Officers' Insurance......... 19
Section 6.6 Additional Agreements....................................... 19
Section 6.7 Advise of Changes........................................... 19
Section 6.8 Qualified Sites and Identified Sites........................ 20
Section 6.9 Formation of Newco.......................................... 20
Section 6.10 No Solicitation of Alternate Transaction.................... 20
Section 6.11 Bring-Down of Representation and Warranties................. 20
Section 6.12 Guarantee of HCI Obligations................................ 21
ARTICLE VII
CONDITIONS PRECEDENT........................................ 21
Section 7.1 Conditions to Each Party's Obligation
To Effect the Merger....................................... 21
Section 7.2 Conditions to Obligations of ALC............................ 22
Section 7.3 Conditions to Obligations of HCI............................ 22
ARTICLE VIII
TERMINATION AND AMENDMENT................................... 23
Section 8.1 Termination................................................. 23
Section 8.2 Effect of Termination....................................... 24
Section 8.3 Amendment................................................... 24
Section 8.4 Extension; Waiver........................................... 24
ARTICLE IX
GENERAL PROVISIONS.......................................... 25
Section 9.1 Closing..................................................... 25
Section 9.2 Nonsurvival of Representations,
Warranties and Agreements.................................. 25
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Section 9.3 Expenses................................................ 25
Section 9.4 Notices................................................. 25
Section 9.5 Interpretation.......................................... 26
Section 9.6 Counterparts............................................ 26
Section 9.7 Entire Agreement........................................ 26
Section 9.8 Governing Law........................................... 26
Section 9.9 Severability............................................ 26
Section 9.10 Publicity............................................... 26
Section 9.11 Assignment; Third Party Beneficiaries................... 27
Section 9.12 Enforcement of the Agreement............................ 27
EXHIBITS
A Form of Articles of Merger
B Form of Exchange Certificate
C Disclosure Schedule of Home and Community Care, Inc.
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of
October 4, 1997 (this "Agreement"), is by and between Assisted Living Concepts,
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Inc., a Nevada corporation ("ALC"), and Home and Community Care, Inc., a Nevada
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corporation ("HCI").
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WHEREAS, the Boards of Directors of ALC and HCI have determined that
it is in the best interests of their respective companies and their stockholders
to effect the acquisition of HCI, subject to the terms and conditions set forth
in this Agreement;
WHEREAS, in furtherance of such acquisition, the Boards of Directors
of ALC and HCI have approved the merger of a newly formed, wholly owned
subsidiary of ALC incorporated in the State of Nevada ("Newco") with and into
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HCI (the "Merger"), in accordance with the Nevada Revised Statutes (the "NRS"),
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pursuant to which HCI will be the surviving corporation in the Merger;
WHEREAS, ALC and HCI desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, ALC and HCI agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
of this Agreement, in accordance with the NRS at the Effective Time (as defined
in Section 1.2 hereof), Newco shall merge with and into HCI. HCI shall be the
surviving corporation (hereinafter sometimes called the "Surviving Corporation")
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in the Merger, and shall continue its corporate existence under the laws of the
State of Nevada. The name of the Surviving Corporation shall be Home and
Community Care, Inc. Upon consummation of the Merger, the separate corporate
existence of Newco shall terminate.
Section 1.2 Effective Time. The Merger shall become effective as set
forth in the Articles of Merger, substantially in the form of Exhibit A hereto
(the "Articles of Merger"), which shall be filed with the Secretary of State of
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the State of Nevada (the "Nevada Secretary") on the Closing Date (as defined in
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Section 9.1 hereof). The term "Effective Time" shall be the date when the
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Merger becomes effective, as set forth in the Articles of Merger.
Section 1.3 Effects of the Merger. At and after the Effective Time,
the Merger shall have the effects set forth in the NRS and this Agreement.
Section 1.4 Conversion of HCI Common Stock. At the Effective Time,
subject to Section 2.2(d) hereof, by virtue of the Merger and without any action
on the part of ALC, Newco, HCI or the holder of any of the following securities:
(a) Each share of Common Stock, $.001 par value, of HCI ("HCI Common
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Stock") issued and outstanding immediately prior to the Effective Time (other
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than shares of HCI
Common Stock held (x) in HCI's treasury, (y) directly or indirectly by ALC or
any Subsidiaries (as defined in Section 3.1(a) hereof) of HCI or ALC or (z) by
any holder who becomes entitled to the payment of the fair value for his shares
of HCI Common Stock under NRS 92A.300 through 92A.500, inclusive (the
"Dissenters' Rights Statues") if the NRS provides for such payment in connection
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with the Merger ("Dissenting Shares")), shall be converted into the right to
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receive $1.00 in cash, such cash to be paid from the Cash Fund (as defined in
Section 2.1(a) hereof) at or prior to the later of (i) the Effective Time or
(ii) the closing date of a public offering of securities by ALC resulting in
gross proceeds of at least $25 million, but in no event later than December 31,
1997 (payable in certified or ALC company check) (the "Merger Consideration").
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(b) All of the shares of HCI Common Stock converted into cash pursuant
to this Article I shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist as of the Effective Time, and each
certificate (each a "Certificate") previously representing any such shares of
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HCI Common Stock (other than Certificates representing shares of HCI Common
Stock held (x) in HCI's treasury, (y) directly or indirectly by ALC or any
Subsidiaries of HCI or ALC or (z) by holders of Dissenting Shares) shall
thereafter represent the right to receive the Merger Consideration with respect
to the number of shares of HCI Common Stock represented by such Certificate.
(c) At the Effective Time, all shares of HCI Common Stock that are
owned by HCI as treasury stock and all shares of HCI Common Stock that are owned
directly or indirectly by ALC, Newco or HCI or any of their respective
Subsidiaries shall be cancelled and shall cease to exist and no stock of ALC or
other consideration shall be delivered in exchange therefor.
(d) Each share of common stock, $.01 par value, of Newco ("Newco
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Common Stock") issued and outstanding immediately prior to the Effective Time
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shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(e) At the Effective Time, the holders of Dissenting Shares, if any,
shall be entitled to payment for such Dissenting Shares only to the extent
permitted by and in accordance with the provisions of the Dissenters' Rights
Statutes; provided, however, that if, in accordance with such Dissenters' Rights
Statutes, any holder of Dissenting Shares shall forfeit such right to payment of
the fair value of such Dissenting Shares, such Dissenting Shares shall thereupon
be deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the Merger Consideration in accordance
with Section 1.4(a) hereof.
Section 1.5 ALC Common Stock. At and after the Effective Time, each
share of Common Stock, $.01 par value, of ALC (the "ALC Common Stock") issued
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and outstanding immediately prior to the Effective Time shall remain an issued
and outstanding share of ALC Common Stock and shall not be affected by the
Merger.
Section 1.6 Certificates of Incorporation. At the Effective Time,
the Articles of Incorporation of HCI, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law.
Section 1.7 Bylaws. At the Effective Time, the Bylaws of HCI, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
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Section 1.8 Board of Directors. At the Effective Time, the Board of
Directors of Newco, as in effect immediately prior to the Effective Time, shall
be the Board of Directors of the Surviving Corporation until their resignation
or removal or until their successors have been duly elected.
ARTICLE II
PAYMENT OF CASH UPON EXCHANGE OF SHARES
Section 2.1 ALC to Make Cash Available. At or prior to the later of
(a) the Effective Time or (b) the closing date of a public offering of
securities by ALC resulting in gross proceeds of at least $25 million, but in no
event later than December 31, 1997, ALC shall deposit, or shall cause to be
deposited, with a third party mutually agreed upon by HCI and ALC (the "Exchange
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Agent"), for the benefit of the holders of Certificates, for exchange in
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accordance with this Article II, cash representing the aggregate Merger
Consideration to be paid to holders of HCI Common Stock pursuant to Section 1.4
hereof and paid pursuant to Section 2.2(a) hereof (the "Cash Fund").
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Section 2.2 Exchange of Shares.
(a) As soon as practicable after the Effective Time, and in no event
later than ten business days thereafter, the Exchange Agent shall mail to each
holder of record of a Certificate or Certificates a form letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent), an Exchange Certificate (as defined below) and instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration with respect to the number of shares of HCI Common Stock
represented by such Certificates. The Exchange Agent shall obtain an express
representation (the "Exchange Certificate") from each holder of a Certificate or
Certificates that the respective Certificates are delivered to the Exchange
Agent free and clear of all liens and that no liens or security interests exist
which continue to encumber the Certificates upon surrender of the Certificates
to the Exchange Agent. A form of the Exchange Certificate is attached as
Exhibit B. Upon proper surrender of a Certificate for exchange and cancellation
to the Exchange Agent, together with such properly completed letter of
transmittal, duly executed, and a completed and signed Exchange Certificate, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration with respect to the number of shares of HCI Common Stock
represented by such Certificates. No interest will be paid or accrued on the
Merger Consideration.
(b) If any cash is to be paid to a person or entity having a name
other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of the payment of such cash that the
Certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such cash shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the payment of cash to
a person or entity having a name other than that of the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(c) All Merger Consideration paid upon the surrender of Certificates
in accordance with the terms of this Article II shall be deemed to have been
paid in full satisfaction of all rights pertaining to the shares of HCI Common
Stock theretofore represented by such Certificates
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(subject, however, to the obligation to pay a $2.50 per share distribution that
has been or will be effected by HCI and payable in the form of cash,
cancellation of indebtedness (including interest thereon) or issuance of
indebtedness). At or after the Effective Time, there shall be no transfers on
the stock transfer books of HCI of the shares of HCI Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be cancelled and exchanged for Merger
Consideration as provided in this Article II.
(d) Any portion of the Cash Fund that remains unclaimed by the
stockholders of HCI for twelve months after the Effective Time shall be paid to
ALC. Any stockholders of HCI who have not theretofore complied with this
Article II shall thereafter look only to ALC for payment of the Merger
Consideration with respect to such stockholders' shares of HCI Common Stock
pursuant to this Agreement, without any interest thereon. Notwithstanding
anything to the contrary contained herein, none of ALC, Newco, HCI, the Exchange
Agent or any other person shall be liable to any former holder of shares of HCI
Common Stock for any amount properly delivered to any public official pursuant
to applicable abandoned property, escheat or similar laws.
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by ALC, the
posting by such person of a bond in such amount as ALC may determine is
reasonably necessary as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration deliverable
in respect thereof pursuant to this Agreement.
(f) ALC or the Exchange Agent shall be entitled to deduct and withhold
from the Merger Consideration otherwise payable pursuant to this Agreement to
any holder of shares of HCI Common Stock such amounts as ALC or the Exchange
Agent is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by ALC or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares in respect of which such deduction and
withholding was made.
Section 2.3 Earnout.
(a) In addition to the Merger Consideration provided to holders of HCI
Common Stock, following the Effective Time, each former stockholder of HCI that
had shares of HCI Common Stock exchanged for Merger Consideration (other than
holders of Dissenting Shares) pursuant to Section 2.2 hereof (the "Former HCI
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Stockholders") shall also be entitled to certain Earnout Payments (as defined
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below), if any, in accordance with the provisions of this Section 2.3.
(b) Subject to paragraph (c) below, within 10 business days following
the earlier of (i) the last day of ALC's fiscal quarter during which either (x)
a permanent certificate of occupancy has been obtained, (y) a temporary
certificate of occupancy and a license to operate a facility have been obtained
or (z) a sale/leaseback transaction has been closed with respect to an
Identified Site (as defined in Section 6.8 hereof), and (ii) two years following
the Effective Time with respect to any Identified Sites for which none of (x),
(y) or (z) of the foregoing clause of this sentence have occurred, ALC shall
provide an Earnout Payment, together with a notice setting forth the calculation
of such Earnout Payment certified by the Chief Financial Officer or Controller
of ALC (the "Earnout Payment Notice"), to each Former HCI Stockholder for each
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"unit" at an assisted living facility that (I) is located on (or within 15
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miles of) such Identified Site referred to in clause (i) of this sentence or
(II) ALC intends to develop on (or within 15 miles of) such Identified Site
referred to in clause (ii) of this sentence; it being understood that if more
than one assisted living facility is located on (or within 15 miles of) an
Identified Site, then Earnout Payments shall be provided by ALC with respect to
all such assisted living facilities on (or within 15 miles of) such Identified
Site. For purposes of this Agreement, an "Earnout Payment" shall be payable in
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certified or ALC company check and shall equal (A) $7,500 multiplied by (B) the
number of "units" located on or to be developed on (or within 15 miles of) such
Identified Site divided by (B) 4,857,500, for each share of HCI Common Stock
held by such Former HCI Stockholder immediately prior to the Effective Time.
ALC shall mail the Earnout Payment, together with the Earnout Payment Notice, to
the address indicated by the respective Former HCI Stockholder on the Exchange
Certificate submitted to the Exchange Agent in compliance with Section 2.2(a)
hereof.
(c) ALC shall be obligated to provide Earnout Payments with respect
to each and every assisted living facility that meets the criteria of paragraph
(b) of this Section 2.3, not to exceed 39 of such facilities in the aggregate.
(d) Any portion of the Earnout Payment that remains unclaimed by a
Former HCI Stockholder for twelve months after the date of the mailing of the
Earnout Payment Notice shall be deemed abandoned and shall revert to ALC.
Thereafter, such Former HCI Stockholder shall have no claim or interest in the
abandoned Earnout Payment. Notwithstanding anything to the contrary contained
herein, none of ALC, Newco, HCI, the Exchange Agent or any other person shall be
liable to any Former HCI Stockholder for any property delivered to any public
official pursuant to applicable abandoned property, escheat or similar laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HCI
HCI hereby represents and warrants to ALC as follows:
Section 3.1 Corporate Organization.
(a) HCI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. HCI has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly qualified to do business in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except for such failures to be so
qualified which, individually or in the aggregate, would not have or reasonably
be expected to have a Material Adverse Effect (as defined below) on HCI. As
used in this Agreement, the term "Material Adverse Effect" means, with respect
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to ALC, HCI or the Surviving Corporation, as the case may be, a material adverse
effect on the business, results of operations or financial condition of such
party and its Subsidiaries (but only to the extent of such party's interest
therein) taken as a whole or a material adverse effect on such party's ability
to consummate the Merger and the transactions contemplated thereby; provided,
however, that in determining whether a Material Adverse Effect has occurred
there shall be excluded any effect on the referenced party of any action or
omission of HCI or ALC or any Subsidiary of either of them taken with the prior
written consent of ALC or HCI, as applicable, in contemplation of the Merger.
As used in this Agreement, the word
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"Subsidiary" when used with respect to any party means any corporation,
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partnership, limited liability company or other organization, whether
incorporated or unincorporated, any equity interests of which are owned by such
party or by a Subsidiary of such party, or which is consolidated with such party
for financial reporting purposes. The copies of the Articles of Incorporation
and Bylaws of HCI which have previously been made available to ALC, are true,
complete and correct copies of such documents as in effect as of the date of
this Agreement.
(b) Each Subsidiary of HCI is a corporation, duly incorporated and
validly existing under the laws of the State of Nevada and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each Subsidiary of HCI is duly qualified to do business and in good standing in
all jurisdictions (whether federal, state, local or foreign) where its ownership
or leasing of property or the conduct of its business requires it to be so
qualified, except for such failures to be so qualified which, individually or in
the aggregate, would not have or reasonably be expected to have a Material
Adverse Effect on HCI.
Section 3.2 Capitalization.
(a) The authorized capital stock of HCI consists of 40,000,000 shares
of HCI Common Stock. As of the date of this Agreement, there were 4,857,500
shares of HCI Common Stock outstanding (2,857,500 shares of which are shares of
voting common stock (the "HCI Voting Common Stock") and 2,000,000 shares of
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which are shares of non-voting common stock (the "HCI Non-Voting Common
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Stock")), and no shares of HCI Common Stock held in HCI's treasury and, except
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for such shares, there were no other shares of HCI capital stock outstanding.
All of the issued and outstanding shares of HCI Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, HCI does not have and is not bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of HCI Common Stock or any other equity securities of HCI or any securities
representing the right to purchase or otherwise receive any shares of HCI Common
Stock or any other equity securities of HCI, or requiring HCI to repurchase,
redeem or otherwise acquire any shares of its capital stock or any capital
stock, voting securities or ownership interests in any Subsidiary of HCI. There
are no bonds, debentures, notes or other indebtedness of HCI having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which stockholders of HCI may vote.
(b) Pacesetter Home Care Group, Inc., a Nevada corporation
("Pacesetter"), Pacesetter Hospice, Inc., a Nevada corporation, Pacesetter Prime
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Home Care, Inc., a Nevada corporation, and Pacesetter Home Health, Inc., a
Nevada corporation ("Home Health"), are all of HCI's Subsidiaries, and HCI owns,
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directly or indirectly, 100% of the issued and outstanding shares of capital
stock, voting securities or other ownership interests of each of HCI's
Subsidiaries, free and clear of any liens, charges, encumbrances, adverse rights
or claims and security interests whatsoever ("Liens"), and all of such shares
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are duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. None of HCI's Subsidiaries has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase, issuance, repurchase, redemption or other
acquisition of any shares of capital stock, voting securities or other ownership
interests of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock, voting securities or
other ownership interests of such Subsidiary. At the Effective Time, there will
not be any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character by which
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HCI or any of its Subsidiaries will be bound calling for the purchase or
issuance of any shares of the capital stock, voting securities or other
ownership interests of HCI or any of its Subsidiaries.
Section 3.3 Authority; No Violation.
(a) HCI has full corporate power and authority to execute and deliver
this Agreement and the other documents contemplated to be executed and delivered
by HCI in connection with the transactions contemplated hereby (this Agreement,
together with such other documents, collectively, the "HCI Documents"), and to
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consummate the transactions contemplated hereby and thereby. The execution and
delivery of each of the HCI Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved by the Board
of Directors of HCI. The Board of Directors of HCI has directed that the
Articles of Merger and the transactions contemplated hereby be submitted to
HCI's stockholders for approval at a meeting or by written consent of such
stockholders and, except for the adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of HCI Voting Common
Stock, no other corporate proceedings on the part of HCI are necessary to
approve the HCI Documents and to consummate the transactions contemplated hereby
and thereby. This Agreement has been, and prior to the Effective Time, each
other HCI Document will have been, duly and validly executed and delivered by
HCI and (assuming due authorization, execution and delivery by ALC) this
Agreement constitutes, and each other HCI Document will constitute, a valid and
binding obligation of HCI, enforceable against HCI in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of the HCI Documents by HCI nor
the consummation by HCI of the transactions contemplated hereby and thereby, nor
compliance by HCI with any of the terms or provisions hereof or thereof, will
(i) violate any provision of the Articles of Incorporation or Bylaws of HCI or
any of the similar governing documents of any of its Subsidiaries or (ii)
assuming that the consents and approvals referred to in Section 3.4 hereof are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to HCI or any of its
Subsidiaries or any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of HCI or any of its Subsidiaries under, any of the terms, conditions or
provisions of any HCI Contract (as defined in Section 3.13(a) hereof) or any
loan or credit agreement, note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which HCI or any
of its Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected, except (in the case of clause
(ii) above) for such violations, conflicts, breaches or defaults which,
individually or in the aggregate, will not have and would not reasonably be
expected to have a Material Adverse Effect on HCI.
Section 3.4 Consents and Approvals. Except for (i) the filing of the
Articles of Merger with the Nevada Secretary pursuant to NRS 92A.200, (ii) the
adoption of the Articles of Merger by the requisite vote of the holders of HCI
Voting Common Stock and the stockholder of Newco, (iii) the filing of the
Articles of Incorporation of Newco with the Nevada Secretary, and (iv) consents
and approvals, the failure of which to obtain will not have and would not be
reasonably expected to have a Material Adverse Effect on HCI, no consents or
approvals of, or filings or registrations with, any court, administrative agency
or commission or other governmental authority or instrumentality (each a
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"Governmental Entity") or with any third party are necessary in connection with
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(A) the execution and delivery by HCI of the HCI Documents and (B) the
consummation by HCI of the Merger and the other transactions contemplated hereby
and thereby.
Section 3.5 Vote or Consent Required. The affirmative vote or
consent of at least a majority of the outstanding shares of HCI Voting Common
Stock is the only vote or consent of the holders of any class or series of HCI's
capital stock necessary (under applicable law or otherwise) to approve this
Agreement, the Merger and the transactions contemplated hereby and thereby.
Section 3.6 Financial Statements; Undisclosed Liabilities. The
financial statements of Pacesetter Home Care Group, Inc., HCI's predecessor, for
the year ended December 31, 1996 and the consolidated financial statements of
HCI for the period ended June 30, 1997, each of which have previously been
provided to ALC, have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except that the unaudited statements exclude
----
footnotes) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presented, in accordance with
the applicable requirements of GAAP, the consolidated financial position of HCI
(or its predecessor) as of the dates thereof and the consolidated results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except (i) as
disclosed in Section 3.6 of the disclosure schedule of HCI delivered to ALC
concurrently herewith (the "HCI Disclosure Schedule"), (ii) for those
-----------------------
liabilities that are fully reflected or reserved against on the consolidated
balance sheet of HCI included in its financial statements for the period ended
June 30, 1997, and (iii) for liabilities incurred in the ordinary course of
business consistent with past practice since June 30, 1997, neither HCI nor any
of its Subsidiaries has incurred any liability of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
that, either alone or when combined with all other liabilities incurred since
June 30, 1997, has had, or would reasonably be expected to have, a Material
Adverse Effect on HCI. On September 30, 1997, the outstanding indebtedness of
HCI and its Subsidiaries did not exceed $5.7 million. The books and records of
HCI and its Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
Section 3.7 Broker's Fees. None of HCI, any of its Subsidiaries nor
any of their respective officers or directors has employed any broker or finder
or incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by the HCI Documents.
Section 3.8 Absence of Certain Changes or Events.
(a) Except as disclosed in Section 3.8 of the HCI Disclosure Schedule
and except as set forth in Section 3.9(d) hereof, since June 30, 1997, no event
(including, without limitation, any earthquake or other act of God) has occurred
which, either alone or combined with all other events occurring since June 30,
1997, would reasonably be expected to have a Material Adverse Effect on HCI.
(b) Since June 30, 1997, HCI and its Subsidiaries have carried on
their respective businesses in all material respects in the ordinary course of
business, and neither HCI nor any of its Subsidiaries has (i) except for normal
increases in the ordinary course of business consistent with past practice and
except as required by applicable law, increased the wages, salaries,
compensation, pension or other fringe benefits or perquisites payable to any
executive officer or director, or granted any severance or termination pay,
entered into any contract to make or grant any severance or termination
8
pay, or paid any bonus, in each case to any such executive officer or director,
other than pursuant to preexisting agreements or arrangements, (ii) made any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of HCI's capital stock
(except for a $2.50 per share distribution that has been or will be effected by
HCI and payable in the form of cash, cancellation of indebtedness (including
interest thereon) or issuance of indebtedness), (iii) effected any split,
combination or reclassification of any of HCI's capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, or giving the right to acquire by exchange or
exercise, shares of its capital stock or any issuance of an ownership interest
in any Subsidiary of HCI, (iv) made any change in accounting methods, principles
or practices by HCI or any Subsidiary of HCI, except as may be required by a
change in GAAP or (v) suffered any strike, work stoppage, slow-down or other
labor disturbance.
Section 3.9 Legal Proceedings.
(a) Except as provided in Section 3.9(d) hereof, none of HCI nor any
of its Subsidiaries is a party to any, and there are no pending or, to the best
of HCI's knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any
nature against HCI or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by the HCI Documents.
(b) There is no injunction or governmental order, judgment or similar
decree applicable to HCI or any of its Subsidiaries which imposes any
restrictions on HCI or any of its Subsidiaries.
(c) Except as provided in Section 3.9(d) hereof, HCI and its
Subsidiaries and the home health agencies and hospice services that they operate
have, and are in compliance (without any defaults) with all permits,
authorizations, licenses, certifications and approvals they need to conduct the
businesses in which they are engaged and to be paid for the services they
provide, including Medicare and Medicaid provider certification, except where
the failure to be in such compliance would not have or reasonably be expected to
have a Material Adverse Effect on HCI. Except as provided in Section 3.9(d)
hereof, there are no pending or, to the knowledge of HCI, threatened
proceedings, actions or governmental or regulatory investigations of any nature
(including without limitation regulatory actions by the Health Care Financing
Administration ("HCFA")) that restrict, limit or terminate the permits,
----
authorizations, licenses, certifications and approvals referred to in the
foregoing sentence, except for such proceedings, actions or investigations that
would not have or reasonably be expected to have a Material Adverse Effect on
HCI.
(d) On September 17, 1997, Home Health received a 23-day notice of
termination, pursuant to HCFA State Operations Manual (S) 3010(B), (the
"September Notice") to the effect that HCFA would terminate the status of Home
----------------
Health's main office in Forth Worth, Texas (the "Fort Worth Office") on October
-----------------
6, 1997 if by September 26, 1997 Home Health did not submit to HCFA a
satisfactory "Plan of Correction" addressing certain noted deficiencies. Home
Health delivered to HCFA a plan of correction on September 26, 1997, and at that
time, Home Health was verbally informed by HCFA staff that such plan of
correction appropriately responded to HCFA's concerns and that HCFA no longer
considered Home Health's license to operate its Forth Worth Office to be
scheduled for termination on October 6, 1997. As of the date of this Agreement,
neither HCI nor Home Health have received any written confirmation from HCFA
which indicates that the Fort Worth Office's license is no longer subject to
termination as a consequence of the September Notice.
9
Section 3.10 Taxes and Tax Returns.
(a) HCI and each of its Subsidiaries has timely filed or caused to be
filed, and has heretofore furnished to ALC true and complete copies of, any
returns, declarations, reports, estimates, information returns and statements
required to be filed under federal, state, local or any foreign tax laws ("Tax
---
Returns") with respect to HCI or any of its Subsidiaries, except where the
- -------
failure to file timely such Tax Returns would not, individually or in the
aggregate, have and would not reasonably be expected to have a Material Adverse
Effect on HCI. All Taxes due, whether or not shown to be due on such Tax
Returns, have been paid or adequate reserves have been established for the
payment of such Taxes, except where the failure to pay or establish adequate
reserves would not, individually or in the aggregate, have and would not
reasonably be expected to have a Material Adverse Effect on HCI. No material
(i) audit or examination of any Tax Return with respect to HCI or any of its
Subsidiaries is currently in progress or has been conducted and neither HCI nor
any of its Subsidiaries has received notice of any proposed audit or
examination, (ii) deficiencies for any taxes have been proposed, asserted or
assessed or (iii) refund litigation with respect to any Tax Return is pending.
All material Tax Returns filed by HCI and each of its Subsidiaries are complete
and accurate in all material respects.
(b) For purposes of this Agreement, "Taxes" shall mean all taxes,
-----
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, goods and
services, capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority.
Section 3.11 Employees.
(a) Section 3.11(a) of the HCI Disclosure Schedule lists each Employee
Benefit Plan and Benefit Arrangement covering employees or former employees of
HCI or its Subsidiaries. HCI has delivered to ALC copies of written documents
comprising such Employee Benefit Plans and Benefit Arrangements.
(b) Except as set forth in Section 3.11(b) of the HCI Disclosure
Schedule:
(i) Neither HCI nor any of its ERISA Affiliates sponsors or
has previously sponsored, maintained, contributed to or incurred an obligation
to contribute to any Employee Benefit Plan regulated under Title IV of ERISA,
including any Multiemployer Plan.
(ii) Neither HCI nor any of its ERISA Affiliates sponsors or
has previously sponsored, maintained, contributed to or incurred an obligation
to contribute to any Employee Benefit Plan that provides or will provide
benefits described in Section 3(1) of ERISA to any former employee or retiree of
HCI or any ERISA Affiliate of any of them, except as required under Part 6 of
Title I or ERISA and Section 4980B of the Code.
(iii) In all material respects, all Employee Benefit Plans
and Benefit Arrangements covering employees or former employees of HCI or its
Subsidiaries comply with ERISA and the Code.
10
(iv) To the best knowledge of HCI, none of the Employee
Benefit Plans covering employees or former employees of HCI or its Subsidiaries
has engaged in or been a party to a transaction that is prohibited under Section
4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of
the Code or Section 408 of ERISA, respectively.
(v) No employee or former employee of HCI or its
Subsidiaries shall accrue or receive additional benefits, service or accelerated
rights to payment of benefits under any Employee Benefit Plan or Benefit
Arrangement covering employees or former employees of HCI or its Subsidiaries or
become entitled to severance, termination allowance or similar payments as a
result of the transactions contemplated by this Agreement.
(vi) Each Employee Benefit Plan that covers or has covered
employees or former employees of HCI or its Subsidiaries and is intended to
qualify under Section 401(a) of the Code is the subject of a favorable
determination letter from the Internal Revenue Service, a copy of which has been
delivered to ALC.
(vii) The following definitions apply to this Section 3.11:
"Benefit Arrangement" means any material benefit arrangement that is
-------------------
not an Employee Benefit Plan, including (i) each employment or consulting
agreement, (ii) each arrangement providing insurance benefits, (iii) each
incentive bonus or deferred bonus arrangement, (iv) each arrangement providing
termination allowance, severance or similar benefits, (v) each equity
compensation plan, and (vi) each deferred compensation plan.
"Employee Benefit Plan" means any employee benefit plan, as defined in
---------------------
Section 3(3) of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" of HCI means any other person that, together with
---------------
HCI as of the relevant measuring date under ERISA, was or is required to be
treated as a single employer under Section 414 of the Code.
"Multiemployer Plan" means a multiemployer plan, as defined in
------------------
Sections 3(37) and 4001(a)(3) of ERISA.
Section 3.12 Compliance with Applicable Law. HCI and each of its
Subsidiaries have complied with and are not in default in any material respect
under any, applicable law, statute, order, rule, regulation, policy and/or
guideline of any Governmental Entity relating to HCI or any of its Subsidiaries,
except where such noncompliance or default would not, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect on
HCI, and neither HCI nor any of its Subsidiaries knows of, or has received
notice of, any noncompliance or default of any of the above which, individually
or in the aggregate, would have or would reasonably be expected to have a
Material Adverse Effect on HCI.
11
Section 3.13 Certain Contracts.
(a) Except as set forth in Section 3.13(a) of the HCI
Disclosure Schedule, neither HCI nor any of its Subsidiaries is a party to or is
bound by any contract, arrangement, commitment or understanding (whether written
or oral) (i) which is a material to the conduct of HCI's business, (ii) which
materially restricts the conduct of any line of business by HCI, (iii)
evidencing or concerning any loan or credit agreements, notes, bonds, mortgages,
indentures and other agreements and instruments pursuant to which any
indebtedness of HCI or any of its Subsidiaries is evidenced or (iv) with or to a
labor union or guild (including any collective bargaining agreement). Each
contract, arrangement, commitment or understanding of the type described in this
Section 3.13(a), other than the HCI Documents, whether or not set forth in
Section 3.13(a) of the HCI Disclosure Schedule, is referred to herein as a "HCI
---
Contract," and neither HCI nor any of its Subsidiaries knows of, or has received
- --------
notice of, any violation of the above by any of the other parties thereto which,
individually or in the aggregate, would have or would reasonably be expected to
have a Material Adverse Effect on HCI.
(b) (i) Each HCI Contract is valid and binding and in full
force and effect, (ii) HCI and each of its Subsidiaries has in all material
respects performed all obligations required to be performed by it to date under
each HCI Contract, and (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute a material default on
the part of HCI or any of its Subsidiaries under any such HCI Contract, except,
in each case, where such invalidity, failure to be binding, failure to so
perform or default, individually or in the aggregate, would not have or
reasonably be expected to have a Material Adverse Effect on HCI.
Section 3.14 Environmental Liability. Except as disclosed in "phase
one" environmental reports listed in Section 3.14 of the HCI Disclosure
Schedule, there are no legal, administrative, arbitral or other proceedings,
claims, actions, causes of action, private environmental investigations or
remediation activities or governmental investigations of any nature seeking to
impose, or that reasonably could be expected to result in the imposition, on HCI
or any of its Subsidiaries of any liabilities or obligations arising under
common law standards relating to environmental protection, human health or
safety, or under any local, state or federal environmental statute, regulation
or ordinance, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (collectively, the
"Environmental Laws"), pending or, to the knowledge of HCI, threatened, against
------------------
HCI or any of its Subsidiaries, which liabilities or obligations, individually
or in the aggregate, would have or would reasonably be expected to have a
Material Adverse Effect on HCI. To the knowledge of HCI or any of its
Subsidiaries, there is no reasonable basis for any such proceeding, claim,
action or governmental investigation that, individually or in the aggregate,
would impose any liabilities or obligations that would have or would reasonably
be expected to have a Material Adverse Effect on HCI.
Section 3.15 Properties. Section 3.15 of the HCI Disclosure Schedule
contains a complete and accurate list of all real property owned by HCI (the
"Owned Real Property"). HCI has provided to ALC accurate and complete copies of
-------------------
title reports covering all Owned Real Property (the "Title Reports"). Section
-------------
3.15 of the HCI Disclosure Schedule also contains a complete and accurate list
of all options to purchase ("Options to Purchase") or purchase and sale
-------------------
agreements ("Purchase Agreements") to which HCI is a party. All such Purchase
-------------------
Agreements are valid, binding and enforceable against HCI in accordance with
their terms and are in full force and effect; no event of default has occurred
which (whether with or without notice, lapse of time or both or the happening or
occurrence of any other event) would constitute a default thereunder on the part
of HCI. The zoning ordinances applicable to each Owned Real Property and, to
the knowledge of HCI, each real property subject to a
12
Purchase Agreement are not inconsistent with the development, construction, use
and operation of an assisted living facility. HCI has good and marketable fee
simple title to all Owned Real Property, subject only to the following liens,
claims and encumbrances: (i) materialmen's, mechanics', carriers', workmen's,
repairmen's or other like liens arising in the ordinary course of HCI's business
for amounts not yet due or which are being contested in good faith by
appropriate proceedings; (ii) liens for current taxes not yet due or any taxes
being contested in good faith by appropriate proceedings; and (iii) any other
liens, claims or encumbrances affecting title to the Owned Real Property which
are set forth on the Title Reports.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALC
ALC hereby represents and warrants to HCI as follows:
Section 4.1 Corporate Organization.
(a) ALC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada. ALC has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted.
(b) On the Closing Date, Newco will be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. On the Closing Date, Newco will have the corporate power and authority
to effect the Merger and will be duly qualified in Nevada as may be necessary to
effect the Merger. The copies of the Articles of Incorporation and Bylaws of
Newco, which will be made available to HCI prior to the Closing Date, will be
true, complete and correct copies of such documents as in effect on the Closing
Date.
Section 4.2 Newco Capitalization, Etc. As of the Closing Date, ALC
will own directly 100% of the issued and outstanding shares of capital stock,
voting securities or other ownership interests of Newco.
Section 4.3 Authority; No Violation.
(a) ALC has full corporate power and authority to execute and
deliver this Agreement and the other documents contemplated to be executed and
delivered by ALC in connection with the transactions contemplated hereby (this
Agreement, together with such other documents, collectively, the "ALC
---
Documents") and to consummate the transactions contemplated hereby and thereby.
- ---------
The execution and delivery of each of the ALC Documents and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of ALC. No other corporate proceedings on the
part of ALC are necessary to approve ALC Documents and to consummate the
transactions contemplated hereby and thereby. This Agreement has been, and prior
to the Effective Time, each other ALC Document will have been, duly and validly
executed and delivered by ALC and (assuming due authorization, execution and
delivery by HCI) this Agreement constitutes, and each other ALC Document will
constitute, a valid and binding obligation of ALC, enforceable against ALC in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
13
(b) Neither the execution and delivery of ALC Documents by
ALC nor the consummation by ALC of the transactions contemplated hereby and
thereby, nor compliance by ALC with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Articles of Incorporation or
Bylaws of ALC or any of the similar governing documents of any of its
Subsidiaries or (ii) assuming that the consents and approvals referred to in
Section 4.4 hereof are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to ALC
or any of its Subsidiaries or any of their respective properties or assets, or
(y) violate, conflict with, result in a breach of any provision of or the loss
of any benefit under, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any Lien upon any of the
respective properties or assets of ALC or any of its Subsidiaries under, any of
the terms, conditions or provisions of any material contract (as defined in Item
601(b)(10) of Regulation S-K of the Securities and Exchange Commission to which
ALC or any of its Subsidiaries is a party, any contract which materially
restricts the conduct of the business of ALC or any loan or credit agreement,
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which ALC or any of its Subsidiaries is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except (in the case of clause (ii) above) for such
violations, conflicts, breaches or defaults which either individually or in the
aggregate will not have and would not reasonably be expected to have a Material
Adverse Effect on ALC.
(c) On the Closing Date, Newco will have full corporate power
and authority to execute and deliver all documents to be executed and delivered
by Newco on the Closing Date in connection with the Merger and the transactions
contemplated thereby (the "Newco Documents"). The execution and delivery of each
---------------
of the Newco Documents and the consummation of the transactions contemplated
hereby and thereby will have been duly and validly approved by the Board of
Directors of Newco and the stockholder of Newco. No other corporate proceedings
on the part of Newco will be necessary to authorize the execution and delivery
and performance of the Newco Documents and the consummation of the Merger. Prior
to the Effective Time, each Newco Document will have been, duly and validly
executed and delivered by Newco and (assuming due authorization, execution and
delivery by the other parties to such documents) will constitute, a valid and
binding obligation of Newco, enforceable against Newco in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(d) Neither the execution and delivery of Newco Documents by
Newco nor the consummation by Newco of the transactions contemplated hereby and
thereby, nor compliance by Newco with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Articles of Incorporation or
Bylaws of Newco or (ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Newco.
Section 4.4 Consents and Approvals. Except for (i) the filing of the
Articles of Merger with the Nevada Secretary pursuant to the NRS, (ii) the
adoption of the Articles of Merger by the requisite vote of the stockholder of
Newco, (iii) the filing of the Articles of Incorporation of Newco with the
Nevada Secretary, and (iv) consents and approvals, the failure of which to
obtain would not, individually or in the aggregate, have and would not be
reasonably expected to have a Material Adverse Effect on ALC, no consents or
approvals of, or filings or registrations with, any Governmental Entity or any
third party are necessary in connection with (A) the execution and delivery by
ALC of the ALC Documents, (B) the execution and delivery by Newco of the Newco
Documents, and (C) the
14
consummation by ALC and Newco of the Merger and the other transactions
contemplated hereby and thereby.
Section 4.5 Vote or Consent Required. No holders of outstanding
shares of ALC Common Stock are required to vote or consent to the approval this
Agreement, the Merger or the transactions contemplated hereby (under applicable
law or otherwise). ALC, as the sole stockholder of Newco, will be required to
consent to the approval of Merger and the transactions contemplated thereby
(under applicable law or otherwise).
Section 4.6 Opinion of Financial Advisor. ALC has received the
opinion of McDonald & Company Securities, Inc., dated September 8, 1997,
satisfactory to ALC, a signed version of which has been provided to HCI, to the
effect that the consideration to be received by the holders of the HCI Common
Stock under this Agreement is fair to ALC from a financial point of view.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Businesses Prior to the Effective Time.
During the period from the date of this Agreement to the Effective Time, except
as expressly contemplated or permitted by this Agreement or as required by
applicable law, HCI shall, and shall cause its Subsidiaries to, (i) conduct its
business in the usual, regular and ordinary course consistent with past
practice, (ii) use reasonable best efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees and (iii) take no action
which would reasonably be expected to adversely affect or delay the ability of
either HCI to obtain any approvals of any Governmental Entity required to
consummate the transactions contemplated hereby or to perform its covenants and
agreements under the HCI Documents. HCI agrees that HCI and its Subsidiaries
will not incur indebtedness in excess of $6.0 million in the aggregate without
the prior written consent of ALC, which consent shall not be unreasonably
withheld, conditioned or delayed.
Section 5.2 Forbearances. Except (i) for the acquisition of parcels
of land where assisted living facilities can be developed that are subject to
Options to Purchase as of the date of this Agreement (which acquisition(s) shall
have been consented to in writing by ALC (which consent shall not be
unreasonably withheld, conditioned or delayed)) or that are subject to Purchase
Agreements as of the date of this Agreement, (ii) for the execution and delivery
by HCI of Purchase Agreements with respect to additional parcels of land on
which assisted living facilities can be developed (the execution and delivery of
which shall have been consented to in writing by ALC (which consent shall not be
unreasonably withheld, conditioned or delayed)), (iii) for the execution and
delivery by HCI of Options to Purchase with respect to additional parcels of
land on which assisted living facilities can be developed, and (iv) for the
execution and delivery of the LTC Commitment (as defined in Section 7.1(e)
hereof), during the period from the date of this Agreement to the Effective Time
and, except as expressly contemplated or permitted by this Agreement or as
required by applicable law, rule or regulation, HCI shall not and shall not
permit any of its Subsidiaries to:
(a) adjust, split, combine or reclassify any capital stock;
make, declare or pay any dividend or make any other distribution on (other than
a $2.50 per share distribution by HCI payable in the form of cash, cancellation
of indebtedness (including interest thereon) or issuance of indebtedness), or
directly or indirectly redeem, purchase or otherwise acquire, any shares of its
capital
15
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, voting securities or other ownership interests, or
grant any stock appreciation rights or grant any individual, corporation or
other entity any right to acquire any shares of its capital stock, voting
securities or other ownership interests (except for the issuance of employee
stock options and restricted stock consistent with past practices); or
repurchase, redeem or otherwise acquire any shares of its capital stock or any
capital stock, voting securities or ownership interests in any Subsidiary; or
issue any additional shares of capital stock, voting securities or other
ownership interests;
(b) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity other
than a direct or indirect wholly owned Subsidiary, or cancel, release or assign
any indebtedness to any such person or any claims held by any such person, in
each case that is material to such party, except (i) in the ordinary course of
business consistent with past practice, (ii) pursuant to contracts or agreements
in force at the date of this Agreement in accordance with the terms of such
contract or agreement as in effect on the date of this Agreement, (iii) pursuant
to plans disclosed in writing prior to the execution of this Agreement to the
other party or (iv) for the cancellation of approximately $5.0 million of
indebtedness (plus interest thereon) owing under certain outstanding promissory
notes issued by stockholders of HCI;
(c) except for transactions in the ordinary course of business
consistent with past practice, make any material acquisition or investment
either by purchase of stock or securities, merger or consolidation,
contributions to capital, property transfers, or purchases of any property or
assets of any other individual, corporation or other entity other than a wholly
owned Subsidiary thereof;
(d) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any contract or
agreement, or make any change in any of its leases or contracts, in each case
that is material to such party, other than renewals of contracts and leases
without materially adverse changes of terms thereof;
(e) incur any liability for indebtedness, guarantee the obligations of
others, indemnify others or, except in the ordinary course of business, incur
any other liability;
(f) increase in any material respect the compensation or fringe
benefits of any of its employees or pay any pension or retirement allowance not
required by any existing plan or agreement to any such employees other than in
the ordinary course of business consistent with past practice, or become a party
to, amend or commit it itself to any material pension, retirement, profit-
sharing or welfare benefit plan or agreement or employment agreement with or for
the benefit of any employee or accelerate the vesting of any stock options or
other stock-based compensation;
(g) settle any claim, action or proceeding involving money damages
which is material to HCI, except in the ordinary course of business consistent
with past practice;
(h) take any action that would prevent or impede the Merger from
qualifying for the purchase method of accounting;
(i) amend its Articles of Incorporation, Bylaws or similar governing
documents in any case in a manner that would materially and adversely effect any
party's ability to consummate the Merger or the economic benefits of the Merger
to either party;
16
(j) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set forth
in Article VII not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable law;
(k) except for capital expenditures approved by LTC
Development, Inc. (which approval shall not be unreasonably withheld), incur any
capital expenditures in excess of $5,000 individually or $25,000 in the
aggregate;
(l) make any change in accounting methods, principles or
practices, except as required by a change in GAAP; or
(m) agree to, or make any commitment to, take any of the
actions prohibited by this Section 5.2.
For purposes of the provisions of this Section 5.2, the execution and
delivery of Purchase Agreements with respect to assisted living facilities and
the purchase of such facilities are not considered transactions in the ordinary
course of business.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Cooperation as to Regulatory Matters.
(a) The parties hereto shall cooperate with each other and
use reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger), to comply with the terms
and conditions of all such permits, consents, approvals and authorizations of
all such Governmental Entities, and to defend any lawsuits or other legal
proceedings challenging this Agreement and the transactions contemplated by this
Agreement.
(b) ALC and HCI shall, upon request, furnish each other with
all information concerning themselves, their Subsidiaries, Newco, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with any statement, filing, notice or application
made by or on behalf of ALC, HCI, Newco or any of their respective Subsidiaries
to any Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement.
(c) ALC and HCI shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined below) will not be
obtained or that the receipt of any such approval will be materially delayed.
17
Section 6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, HCI shall, and shall cause each of its
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the other property access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records, and to its officers, employees, accountants,
counsel and other representatives and, during such period, HCI shall, and shall
cause its Subsidiaries to, make available to the other party (i) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal securities laws
(other than reports or documents which HCI, as the case may be, is not permitted
to disclose under applicable law) and (ii) all other information concerning its
business, properties and personnel as such other party may reasonable request.
None of HCI nor any of its Subsidiaries shall be required to provide access to
or to disclose information where such access or disclosure would violate or
prejudice the rights of its customers, jeopardize the attorney-client privilege
of the institution in possession or control of such information or contravene
any law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The parties hereto
will make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
(b) Neither HCI nor ALC shall disclose to any third party,
other than its directors, officers, employees, accountants, attorneys, advisors
or other representatives, information furnished by the other party or any of
such party's Subsidiaries or representatives pursuant to Section 6.2(a) hereof,
unless such information is otherwise publicly available.
Section 6.3 Stockholders' Approvals. HCI shall either: (i) obtain
written consent from holders of the requisite shares of HCI Voting Stock to
effect the Merger or (ii) duly call, give notice of, convene and hold a meeting
of its stockholders to be held, in each case, as soon as practicable following
the date hereof for the purpose of obtaining the requisite stockholder approvals
required in connection with this Agreement and the Merger. Subject to the
provisions of the next sentence, HCI shall, through its Board of Directors,
recommend to its stockholders approval of such matters. The Board of Directors
of HCI may fail to make such recommendation, or withdraw, modify or change any
such recommendation in a manner adverse to the other party hereto, if such Board
of Directors, after having consulted with and considered the advice of outside
counsel, has reasonably determined in good faith that the making of such
recommendation, or the failure to withdraw, modify or change its recommendation,
would constitute a breach of the fiduciary duties of the members of such Board
of Directors under applicable law.
Section 6.4 Legal Conditions to Merger. Subject to the terms and
conditions of this Agreement, each of ALC and HCI shall, and shall cause their
respective Subsidiaries to use their reasonable best efforts (i) to take, or
cause to be taken, all actions necessary, proper or advisable to comply promptly
with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set forth
in Article VII hereof, to consummate the transactions contemplated by this
Agreement and (ii) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by HCI or ALC or any of their respective Subsidiaries in connection with the
Merger and the other transactions contemplated by this Agreement.
18
Section 6.5 Indemnification; Directors' and Officers' Insurance.
(a) ALC agrees that from and after the Effective Time, ALC
shall, and shall cause the Surviving Corporation to, indemnify and hold harmless
each present and former director and officer of HCI and its Subsidiaries,
determined as of the Effective Time (the "Indemnified Parties"), against any
-------------------
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively "Costs") incurred in
-----
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that HCI or such Subsidiary would have been required to indemnify under
the Articles of Incorporation or Bylaws of HCI or such Subsidiary in effect on
the date hereof to indemnify such person (and such party shall also advance
expenses as incurred to the fullest extent permitted under applicable law;
provided, that the person to whom expenses are advanced provides an undertaking
to repay such advances if it is ultimately determined that such person is not
entitled to indemnification).
(b) An Indemnified Party wishing to claim indemnification
under Section 6.5(a) or (b) hereof upon learning of any such claim, action,
suit, proceeding or investigations shall promptly notify the indemnifying party
thereof, but the failure to so notify shall not relieve the indemnifying party
of any liability it may have to such Indemnified Party except to the extent such
failure materially prejudices the indemnifying party. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), the indemnifying party shall have the right to assume
the defense thereof and it shall not be liable to such Indemnified Parties for
any legal expenses of other counsel or any other expenses subsequently incurred
by such Indemnified Parties in connection with the defense thereof, except that,
if the indemnifying party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the indemnifying party and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and the
indemnifying party shall pay all reasonable fees and expense of such counsel for
the Indemnified Parties promptly as statements therefor are received. If such
indemnity is not available with respect to any Indemnified Party, then the
indemnifying party and the Indemnified Party shall contribute to the amount
payable in such proportion as is appropriate to reflect relative faults and
benefits.
(c) The provisions of this Section 6.5 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
Section 6.6 Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of any
of the parties to the merger, the proper officers and directors of each party of
this Agreement and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by, and at the sole expense of, ALC;
provided, further, that the vote or written consent of the Former HCI
Stockholders that, immediately prior to the Effective Time, were holders of a
majority of the outstanding shares of HCI Common Stock (including HCI Voting
Common Stock and HCI Non-Voting Common Stock) shall be effective for any such
further action required on the part of the Former HCI Stockholders and shall be
effective and binding upon all Former HCI Stockholders.
Section 6.7 Advise of Changes. HCI shall promptly advise ALC of any
change or event which, individually or in the aggregate with other such changes
or events, has a Material Adverse
19
Effect on HCI or which it believes would or would be reasonably likely to cause
or constitute a material breach of any of its representations, warranties or
covenants contained herein.
Section 6.8 Qualified Sites and Identified Sites. On or prior to
Closing, HCI shall notify ALC of: (i) all parcels of land that HCI owns where
assisted living facilities can be developed, and (ii) all Options to Purchase or
Purchase Agreements to which HCI is a party with respect to such parcels of land
where assisted living facilities can be developed. Such notice shall list all
such parcels and shall identify up to 39 of such parcels as "Qualified Sites"
---------------
for the purposes of this Agreement. Within 90 calendar days following the
Effective Time (the "First 90-Day Period"), ALC shall notify the Former HCI
-------------------
Stockholders in writing of the Qualified Sites on which (or within 15 miles of
which) ALC intends to develop an assisted living facility and may identify up to
10 Qualified Sites on which (or within 15 miles of which) it may have an
intention to develop an assisted living facility (the "Possible Sites"). Within
--------------
90 calendar days following the First 90-Day Period (the "Second 90-Day Period"),
--------------------
ALC shall notify the Former HCI Stockholders in writing of the Possible Sites on
which (or within 15 miles of which) ALC intends to develop an assisted living
facility. Each Qualified Site on which (or within 15 miles of which) ALC
indicates during the First 90-Day Period that an assisted living facility will
be developed shall be considered an "Identified Site" for purposes of this
---------------
Agreement. In addition, each Possible Site on which (or within 15 miles of
which) ALC indicates during the Second 90-Day Period that an assisted living
facility will be developed shall be considered an "Identified Site" for purposes
---------------
of this Agreement. For the two-year period following the Effective Time, ALC
shall not develop, construct, obtain a certificate of occupancy with respect to,
purchase and/or operate an assisted living facility that is at (or within 15
miles of) a Qualified Site, unless such Qualified Site is an Identified Site.
Section 6.9 Formation of Newco. As soon as reasonably practicable
following the execution of this Agreement, ALC shall cause Newco to be formed as
a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada with the corporate power and authority to effect the
Merger.
Section 6.10 No Solicitation of Alternate Transaction. HCI and its
Subsidiaries will not, directly or indirectly, and will use its reasonable best
efforts to cause its officers, directors and agents not to solicit, initiate or
deliberately encourage submission of proposals or offers from any person
relating to any acquisition or purchase of all or a material amount of the
assets of, or any equity interest in, HCI or any merger, consolidation or
business combination with HCI; provided, however, that consistent with its
fiduciary obligations under applicable law as advised by counsel, HCI may
participate in any discussions or negotiations regarding, and may furnish to any
other person information with respect to, any of the foregoing. HCI shall
promptly notify ALC if any such proposal or offer, or any inquiry or contact
with any person with respect thereto, is made.
Section 6.11 Bring-Down of Representation and Warranties. At the
Effective Time, by the filing of the Articles of Merger with the Nevada
Secretary, each of HCI and ALC shall be deemed to have affirmed in all material
respects the representations and warranties that are not qualified as to
materiality in Articles III and IV, respectively, as if made on such Closing
Date (except to the extent such representations and warranties speak as of an
earlier date) and shall be deemed to have affirmed the representations and
warranties that are qualified as to materiality in Articles III and IV,
respectively, as if made on such Closing Date (except to the extent such
representations and warranties speak as of an earlier date); provided, however,
HCI shall have the right to amend the HCI Disclosure Schedule, so long as such
amended HCI Disclosure Schedule is not materially different from the HCI
Disclosure Schedule provided to ALC on the date of this Agreement; it being
understood that HCI shall, nonetheless, be permitted to amend Sections 3.15 of
the HCI Disclosure Schedule, whether or not material, to provide
20
for the addition of any Owned Real Property and/or Purchase Agreements (so long
as such Owned Real Property is acquired and/or such Purchase Agreements are
entered into, as the case may be, in accordance with the provisions of Section
5.2(a) hereof) and/or to provide for the addition of any Options to Purchase, in
each case, with respect to parcels of land on which assisted living facilities
can be developed (as contemplated by Section 6.8 hereof).
Section 6.12 Guarantee of HCI Obligations. At the Effective Time,
ALC shall guarantee the performance of all obligations of HCI owing to LTC
Properties, Inc. ("LTC"), including without limitation, the obligations of HCI
---
pursuant to the LTC Commitment (as defined in Section 7.1(e) hereof) and
pursuant to the note to be issued to LTC in connection with the $2.50 per share
distribution to HCI stockholders.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement, the Merger and the
transactions contemplated hereby and thereby shall have been approved and
adopted by the requisite affirmative votes or written consent of the holders of
HCI Common Stock entitled to vote thereon.
(b) Other Approvals. All material regulatory approvals
required to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired or been terminated (all such
approvals and the expiration of all such waiting periods being referred to
herein as the "Requisite Regulatory Approvals") and no such approval shall
------------------------------
contain any conditions or restrictions which the Board of Directors of either
ALC or HCI reasonably determines in good faith will have or reasonably be
expected to have a Material Adverse Effect on ALC and its Subsidiaries
(including the Surviving Corporation and its Subsidiaries) taken as a whole.
(c) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
----------
consummation of the Merger or any of the other transactions contemplated by this
Agreement shall be in effect. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restricts or makes illegal the consummation
of the Merger.
(d) Consents. All consents and waivers from third parties
necessary in connection with the consummation of the transactions contemplated
by this Agreement shall have been obtained, other than such consents and waivers
from third parties which, if not obtained, would not result in a Material
Adverse Effect on ALC and its Subsidiaries (including the Surviving Corporation
and its Subsidiaries) taken as a whole.
(e) Commitment Between HCI and LTC. HCI and LTC shall have
entered into a commitment (the "LTC Commitment"), subject to the approval of ALC
--------------
(which approval shall not
21
be unreasonably withheld), with respect to the financing by LTC of up to
$50,000,000 in connection with HCI's development and construction of assisted
living facilities.
Section 7.2 Conditions to Obligations of ALC. The obligation of ALC
to effect the Merger is also subject to the satisfaction or waiver by ALC at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of HCI set forth in Article III hereof that are not qualified as to
materiality shall be true and correct in all material respects as of the date of
this Agreement (except to the extent such representations and warranties speak
as of an earlier date) and as of the Closing Date as though made on and as of
the Closing Date; the representations and warranties of HCI set forth in Article
III hereof that are qualified as to materiality shall be true and correct in all
respects as if made on such date as of the date of this Agreement (except to the
extent such representations and warranties speak as of an earlier date) and as
of the Closing Date as though made on and as of the Closing Date.
(b) Performance of Obligations of HCI. HCI shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) Licensing and Certification. The licenses and
certifications of HCI and its Subsidiaries that are necessary for HCI and its
Subsidiaries, as the case may be, to be Medicare and Medicaid providers or to
provide home health or hospice services, shall not be subject to a notice of
termination or suspension or be suspended or terminated and there shall be no
notice of termination, issued pursuant to HCFA State Operations Manual (S)
3010(B), pending as against any assisted living facility operated by HCI.
(d) Estoppel Certificate. LTC shall have executed and
delivered a certificate to ALC confirming that: (i) LTC is aware of no defects
by HCI on any of its obligations to LTC; (ii) all commitments made by LTC to HCI
pursuant to the LTC Commitment shall remain in full force and effect after the
consummation of the transactions contemplated by this Agreement; and (iii) the
terms in the construction loans between HCI and LTC requiring a 30-day notice of
prepayment shall be modified to a 10-day notice of prepayment; provided,
however, that at the time of any such prepayment HCI shall confirm its
obligation to effect sale and leaseback transactions of the properties subject
to such construction loans in accordance with the terms of the LTC Commitment.
(e) ALC/HCI License Agreement. HCI shall have paid ALC all
license fees owed to ALC pursuant to the Agreement Regarding License to Use
Proprietary Information and Materials entered into as of the 15th day of June,
1997 by and between HCI and ALC.
(f) Closing Certificates. HCI shall provide any closing
certificates, in a form reasonably acceptable to ALC, as ALC shall reasonably
request to evidence satisfaction of the conditions set forth in Sections 7.1 and
7.2 hereof.
Section 7.3 Conditions to Obligations of HCI. The obligation of HCI
to effect the Merger is also subject to the satisfaction or waiver by HCI at or
prior to the Effective Time of the following conditions:
22
(a) Representations and Warranties. The representations and
warranties of ALC set forth in Article III hereof that are not qualified as to
materiality shall be true and correct in all material respects as of the date of
this Agreement (except to the extent such representations and warranties speak
as of an earlier date) and as of the Closing Date as though made on and as of
the Closing Date; the representations and warranties of set forth in Article III
hereof that are qualified as to materiality shall be true and correct in all
respects as if made on such date as of the date of this Agreement (except to the
extent such representations and warranties speak as of an earlier date) and as
of the Closing Date as though made on and as of the Closing Date.
(b) Performance of Obligations of ALC. ALC shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) Closing Certificates. ALC shall provide any closing
certificates, in a form reasonably acceptable to HCI, as HCI shall reasonably
request to evidence satisfaction of the conditions set forth in Sections 7.1 and
7.3 hereof.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time:
(a) by mutual consent of ALC and HCI in a written instrument,
if the Board of Directors of each so determines;
(b) by either the Board of Directors of ALC or the Board of
Directors of HCI if a Governmental Entity of competent jurisdiction shall have
issued a final nonappealable order enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement;
(c) by either the Board of Directors of ALC or the Board of
Directors of HCI if the Merger shall not have been consummated on or before
December 31, 1997 (or, if at such date the Merger shall not have been
consummated as a result of the failure of the condition set forth in Section
7.1(d) hereof to be satisfied, and such condition shall not have failed to have
been satisfied by reason of the enactment or promulgation of any statute, rule
or regulation which prohibits, restricts or makes illegal consummation of the
Merger, the earlier of (i) the date on which such condition is satisfied and
(ii) December 31, 1997) unless the failure of the Closing to occur by such date
shall be due to the failure of the party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such party set forth herein;
(d) by either the Board of Directors of ALC or the Board of
Directors of HCI (provided that the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein) if the other party shall have breached (i) any of the covenants or
agreements made by such other party herein or (ii) any of the representations or
warranties made by such other party herein, and in either case, such breach (x)
is not cured within thirty days following written notice to the party committing
such breach, or which breach, by its nature, cannot be
23
cured prior to the Closing and (y) would entitle the non-breaching party not to
consummate the transactions contemplated hereby under Article VII hereof; and
(e) by either the Board of Directors of ALC or the Board of
Directors of HCI if any approval of the stockholders of HCI contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or at any adjournment or
postponement thereof.
Section 8.2 Effect of Termination. In the event of termination of
this Agreement by either ALC or HCI as provided in Section 8.1 hereof, this
Agreement shall forthwith become void and have no effect, and none of ALC, HCI,
any of their respective Subsidiaries or any of the officers or directors of any
of them shall have any liability of any nature whatsoever hereunder, or in
connection with the transactions contemplated hereby, except (i) Sections
6.2(b), 8.2, and 9.3 hereof shall survive any termination of this Agreement, and
(ii) notwithstanding anything to the contrary contained in this Agreement,
neither ALC nor HCI shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement.
Section 8.3 Amendment. Subject to compliance with applicable law,
this Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before approval
of the matters presented in connection with the Merger by the stockholders of
HCI. Subject to compliance with applicable law, this Agreement may be amended
or compliance with the provisions hereof may be waived by the parties hereto at
any time after approval of the matters presented in connection with the Merger
by the stockholders of HCI, by action taken or authorized by their respective
Board of Directors, and by vote or written consent of holders of a majority of
the then outstanding shares of HCI Voting Common Stock (if such action is taken
prior to the Effective Time) or by vote or written consent of Former HCI
Stockholders that, immediately prior to the Effective Time, were holders of a
majority of the outstanding shares of HCI Common Stock (including HCI Voting
Common Stock and HCI Non-Voting Common Stock) (if such action is taken after the
Effective Time). This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 8.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Board of Directors, may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party,
but such extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
24
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Closing. Upon the terms and subject to the conditions of
this Agreement, the closing of the Merger (the "Closing") shall take place at
-------
10:00 a.m. on a date to be specified by the parties, which unless otherwise
agreed by the parties shall be no later than two business days after the
satisfaction or waiver (subject to applicable law) of the latest to occur of the
conditions set forth in Article VII hereof (the "Closing Date").
------------
Section 9.2 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and agreements
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Effective Time, except for those covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time.
Section 9.3 Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense.
Section 9.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed driven if delivered personally,
telecopied (with confirmation), mailed by registered or certified mail (return
receipt requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to ALC, Newco or the Surviving Corporation to:
Assisted Living Concepts, Inc.
9955 Southeast Washington
Suite 201
Portland, Oregon 97216
Telecopy: (503) 252-6597
Attention: Chief Financial Officer
with a copy to:
Bullivant Houser Bailey Pendergrass & Hoffman
300 Pioneer Tower
888 Southwest 5th Avenue
Portland, Oregon 97204
Telecopy: (503) 295-0915
Attention: Sandra Campbell, Esq.
(b) if to HCI, to:
Home and Community Care, Inc.
300 Esplanade Dive
Suite 1860
Oxnard, California 93030
25
Telecopy: (805) 981-8655
Attention: Andre Dimitriadis
with a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071
Telecopy: (213) 891-8763
Attention: Gary Olson, Esq.
Section 9.5 Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Whenever the word "material" is used in this Agreement
and the context in which it is used refers to any of the parties to this
Agreement or any of their respective Subsidiaries, it shall be deemed to be
followed by "to [HCI] [ALC] and its Subsidiaries, taken together as a whole," as
applicable. No provision of this Agreement shall be construed to require HCI,
ALC or any of their respective Subsidiaries or Affiliates to take any action
which would violate or conflict with any applicable law (whether statutory or
common), rule or regulation.
Section 9.6 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
Section 9.7 Entire Agreement. This Agreement (together with the
documents and the instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
an oral, among the parties with respect to the subject matter hereof, the HCI
Documents and ALC Documents.
Section 9.8 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Nevada, without regard to
any applicable conflicts of law.
Section 9.9 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
Section 9.10 Publicity. Except as otherwise required by applicable
law or the rules of the ASE, neither ALC nor HCI shall, or shall permit any of
its Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the written consent of the other party, which consent shall not be unreasonably
withheld.
26
Section 9.11 Assignment; Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations of any party hereunder
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party provided that
ALC shall not be required to obtain any consent, after the Effective Time, in
the event this Agreement or the rights, interests or obligations hereunder are
assigned to, and the related obligations are assumed by, a wholly-owned
subsidiary of ALC, as long as ALC shall, contemporaneous with such assignment
and assumption, guarantee the payment of any obligations owed hereunder,
including the Earnout Payments. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except as otherwise
specifically provided in Section 6.5 hereof, this Agreement (including the
documents and instruments referred to herein) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder. After
the Effective Time, a vote or the written consent of the holders of a majority
of the then outstanding shares of HCI Common Stock (including HCI Voting Common
Stock and HCI Non-Voting Common Stock) shall be required to permit the
assignment of this Agreement and any of the rights, interests or obligations of
the Former HCI Stockholders hereunder and such vote or written consent shall be
effective and binding upon all Former HCI Stockholders.
Section 9.12 Enforcement of the Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
27
IN WITNESS WHEREOF, ALC and HCI have caused this Agreement to be
executed by their respective authorized signatories as of the date first above
written.
ASSISTED LIVING CONCEPTS, INC.
By: /s/ Stephen Gordon
---------------------------
Stephen Gordon
Chief Financial Officer
HOME AND COMMUNITY CARE, INC.
By: /s/ Andre Dimitriadis
---------------------------
Andre Dimitriadis
Chairman of the Board
S-1
EXHIBIT A
ARTICLES OF MERGER
OF
HCI MERGER, INC.
A NEVADA CORPORATION
INTO
HOME AND COMMUNITY CARE, INC.,
A NEVADA CORPORATION
The undersigned, as the President and Secretary of Home and Community
Care, Inc., a Nevada corporation (the "Surviving Constituent Entity"), and of
HCI Merger, Inc., a Nevada corporation (the "Merged Constituent Entity" and,
together with the "Surviving Constituent Entity", the "Constituent Entities"),
as and for the purpose of complying with the provisions of Nevada Revised
Statutes ("NRS") 92A.005 et seq., and in order to effectuate the merger of the
Merged Constituent Entity into the Surviving Constituent Entity (the "Merger"),
hereby certify as follows:
1. The jurisdiction of organization of each Constituent Entity is the
State of Nevada.
2. A plan of merger (the "Plan of Merger") has been adopted by the
Board of Directors of each Constituent Entity. The Plan of Merger has been
approved by the sole stockholder of the Merged Constituent Entity. Pursuant to
NRS Chapter 92A and the Surviving Constituent Entity's Articles of Incorporation
and Bylaws, the Plan of Merger was submitted to the holders of the Surviving
Constituent Entity's issued and outstanding common stock entitled to vote
("Voting Stock"), a majority thereof (___ of ____ shares of Voting Stock) were
required to approve and did approve the Plan of Merger, and such majority vote
of the voting Stock was sufficient for approval of the Plan of Merger by the
stockholders of the Surviving Constituent Entity.
3. The Articles of Incorporation of the Surviving Constituent Entity
have not been and will not be amended in connection with the Merger.
4. A complete executed Plan of Merger is on file at the registered
office of the Surviving Constituent Entity, currently: 300 Esplanade Drive,
Suite 1880, Oxnard, California 93030.
5. A copy of the Plan of Merger will be furnished by the Surviving
Constituent Entity on request and without any cost to any stockholder of either
Constituent Entity.
6. The effective date of the Merger is the date upon which these
Articles of Merger are filed in the office of the Secretary of State of Nevada.
IN WITNESS WHEREOF, we have set forth our hands as of the ___ day of
_____________, 1997.
Surviving Constituent Entity
HOME AND COMMUNITY CARE, INC., a
Nevada corporation
_____________________________________
William McBride III, President
_____________________________________
James J. Pieczynski, Secretary
Merged Constituent Entity
HCI MERGER, INC., a Nevada corporation
_____________________________________
Keren Brown Wilson, President
_____________________________________
Stephen Gordon, Secretary
State of ___________________)
)
County of __________________)
This instrument was acknowledged before me on ____________, 1997 by
William McBride III, as President of Home and Community Care, Inc., a Nevada
corporation.
_____________________________________
Notary Public
State of ____________________)
) ss.
County of ___________________)
This instrument was acknowledged before me on _______________, 1997 by
Keren Brown Wilson, as President of HCI Merger, Inc., a Nevada corporation.
_____________________________________
Notary Public
EXHIBIT "B"
EXCHANGE CERTIFICATE
FOR
COMMON STOCK OF HOME AND COMMUNITY CARE, INC.
I, (name of shareholder) , in accordance with that
--------------------------------------
Agreement and Plan of Merger and Reorganization By and Between Assisted Living
Concepts, Inc., a Nevada corporation, and Home and Community Care, Inc., a
Nevada corporation, dated October 4, 1997, ("the Merger Agreement"), hereby
certify that:
1. I am in receipt of a copy of the Merger Agreement.
2. I am the sole and absolute owner of (no. of shares) shares of
-------------------
common stock of Home and Community Care, Inc., ("HCI"), a Nevada corporation.
3. These shares of stock are represented by certificate no(s). ____
issued by HCI and such certificate(s) is/are attached hereto and hereby
surrendered in exchange for the Merger Consideration (as such term is defined at
section 1.4(a) of the Merger Agreement) as contemplated by Article II of the
Merger Agreement.
4. I have the sole and exclusive right to sell and transfer these
shares of stock.
5. The shares of stock are fully paid and nonassessable and are not
subject to any liens, mortgages or other encumbrances or claims of any kind or
nature and are surrendered free and clear of any liens, mortgages, or
encumbrances.
6. My current mailing address is :
-------------------------------------
-------------------------------------
-------------------------------------
7. All payments, notices, and correspondence from Assisted Living
Concepts, Inc. ("ALC"), in connection with the Merger Agreement, should be
delivered at the address noted above, unless I notify ALC in writing of a new
mailing address.
8. I acknowledge and agree that, in accordance with the terms of the
Merger Agreement, the vote or written consent of a majority of the Former HCI
Shareholders (as such term is defined at section 2.3(a) of the Merger Agreement)
shall be required before the terms of the Merger Agreement may be amended or
before the Merger Agreement or any of the
rights, interests or obligations of ALC under the Merger Agreement may be
assigned, and, if such a majority of the Former HCI Shareholders so vote or
consent, such vote or consent shall be binding on me or my assignee.
9. I further acknowledge and agree that all notices and other
communication to ALC shall be delivered to ALC at the following address, unless
ALC notifies me in writing of a new mailing address, and that all such notices
or communications must specifically identify the Merger Agreement:
Chief Financial Officer
Assisted Living Concepts, Inc.
9955 S.E. Washington
Suite 201
Portland, Oregon 97216
Attn: Former HCI Shareholder Obligations
with a copy to:
Bullivant Houser Bailey Pendergrass & Hoffman
300 Pioneer Tower
888 S.W. 5th Avenue
Portland, Oregon 97204
Attn: Sandra Campbell, Esq.
10. This certificate shall be binding upon any successor-in-interest,
including my heirs, personal representatives, agents and assignees.
DATED this _________ day of ____________________, 19___.
By: ________________________________
Name: (Print)
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