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EXHIBIT 2.1
EXECUTION COPY
PLAN OF MERGER
AND
ACQUISITION AGREEMENT
BY AND AMONG
EXTENDICARE HEALTH SERVICES, INC.,
ALPHA ACQUISITION, INC.
AND
ASSISTED LIVING CONCEPTS, INC.
NOVEMBER 4, 2004
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TABLE OF CONTENTS
PAGE
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Article 1 The Merger.................................................................................. 1
1.1 The Merger................................................................................ 1
1.2 The Closing............................................................................... 2
1.3 Effective Time............................................................................ 2
1.4 Effect of the Merger...................................................................... 2
1.5 Effect on Capital Stock................................................................... 2
1.6 Articles of Incorporation and Bylaws of the Surviving Corporation......................... 3
1.7 Directors and Officers.................................................................... 3
1.8 Assets, Liabilities, Reserves and Accounts................................................ 3
1.9 Exchange of Certificates.................................................................. 4
1.10 Effect of the Merger on Stock Options..................................................... 6
1.11 Stockholders' Meeting..................................................................... 7
Article 2 Representations and Warranties of the Acquiring Companies................................... 8
2.1 Organization.............................................................................. 8
2.2 Authority................................................................................. 8
2.3 Noncontravention; Required Filings and Consents........................................... 8
2.4 Advisors' and Brokers' Fees............................................................... 9
2.5 Sufficient Funds.......................................................................... 9
2.6 No Share Ownership........................................................................ 9
Article 3 Representations and Warranties of The Company............................................... 9
3.1 Organization, Qualification, and Corporate Power.......................................... 9
3.2 Subsidiaries.............................................................................. 10
3.3 Authority................................................................................. 10
3.4 Noncontravention; Required Filings and Consents........................................... 10
3.5 Capitalization............................................................................ 11
3.6 Contracts................................................................................. 11
3.7 Insurance................................................................................. 12
3.8 Financial Statements; Fees................................................................ 12
3.9 SEC Filings............................................................................... 13
3.10 Certain Events............................................................................ 13
3.11 Property.................................................................................. 14
3.12 Compliance with Laws...................................................................... 16
3.13 Company Permits........................................................................... 17
3.14 Tax Matters............................................................................... 18
3.15 Litigation................................................................................ 18
3.16 Benefit Plans and Arrangements............................................................ 18
3.17 Security Interests........................................................................ 20
3.18 Labor..................................................................................... 20
3.19 Board Recommendation...................................................................... 20
3.20 Opinion of Financial Advisor.............................................................. 21
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3.21 Brokers or Finders........................................................................ 21
3.22 Inapplicability of Anti-takeover Defense Provisions....................................... 21
3.23 Rights Agreement.......................................................................... 21
Article 4 Pre-Closing Covenants....................................................................... 21
4.1 Notices and Consents...................................................................... 21
4.2 Responsibility of Acquiring Companies in Connection with Antitrust Matters................ 21
4.3 Conduct of the Business of the Company and its Subsidiaries............................... 22
4.4 Access.................................................................................... 24
4.5 Confidentiality Agreement................................................................. 24
4.6 Further Actions........................................................................... 24
4.7 No Solicitation........................................................................... 24
4.8 Fees and Expenses......................................................................... 27
Article 5 Post-Closing Covenants...................................................................... 28
5.1 Employee Benefit Plans and Practices...................................................... 28
5.2 Indemnification; Directors' and Officers' Insurance....................................... 29
5.3 No Stockholders Liability................................................................. 30
Article 6 Conditions to Obligation to Close........................................................... 31
6.1 Conditions to Obligation of the Acquiring Companies....................................... 31
6.2 Conditions to Obligation of the Company................................................... 32
Article 7 Termination................................................................................. 33
7.1 Termination of Agreement.................................................................. 33
7.2 Effect of Termination..................................................................... 34
Article 8 Miscellaneous............................................................................... 34
8.1 Press Releases and Public Announcements................................................... 34
8.2 No Third-Party Beneficiaries.............................................................. 35
8.3 Entire Agreement.......................................................................... 35
8.4 Successors and Assigns.................................................................... 35
8.5 Counterparts.............................................................................. 35
8.6 Headings.................................................................................. 35
8.7 Notices................................................................................... 35
8.8 Termination of Company's Representations.................................................. 36
8.9 Governing Law............................................................................. 36
8.10 Amendments and Waivers.................................................................... 36
8.11 Severability.............................................................................. 36
8.12 Construction.............................................................................. 36
8.13 Further Assurances........................................................................ 37
ANNEX A - Definitions
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PLAN OF MERGER AND ACQUISITION AGREEMENT
This PLAN OF MERGER AND ACQUISITION AGREEMENT (this "Agreement") is
entered into as of November 4, 2004 by and among EXTENDICARE HEALTH SERVICES,
Inc., a Delaware corporation (the "Buyer"); ALPHA ACQUISITION, INC., a Nevada
corporation and a wholly-owned subsidiary of the Buyer ("Alpha Acquisition")
having its principal office at 111 West Michigan Street, Milwaukee, Wisconsin
53203 (the Buyer and Alpha Acquisition are referred to herein collectively as
the "Acquiring Companies" and individually as an "Acquiring Company"); and
ASSISTED LIVING CONCEPTS, INC., a Nevada corporation (the "Company") having its
principal office at 1349 Empire Central, Suite 900, Dallas, Texas 75247. The
Acquiring Companies and the Company are referred to collectively herein as the
"Parties" and individually as a "Party." Capitalized terms used herein shall
have the meanings set forth therefor in Annex A.
RECITALS:
A. The respective boards of directors of the Acquiring Companies and
the Company have approved this Agreement and the merger of Alpha Acquisition
with and into the Company (the "Merger"), in accordance with Chapter 92A of the
Nevada Revised Statutes (the "Nevada Act") and upon the terms and subject to the
conditions hereof, whereby each Share issued and outstanding prior to the Merger
will be converted into the right to receive the Per Share Merger Consideration
provided for herein.
B. The board of directors of the Company has determined that the Merger
is fair to and in the best interests of the Company and its stockholders.
C. The Acquiring Companies and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree that the foregoing recitals
are true and correct and further agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Nevada Act, Alpha Acquisition
shall be merged with and into the Company at the Effective Time. Following the
Effective Time, the separate corporate existence of Alpha Acquisition shall
cease, and the Company shall continue as the surviving corporation (the
"Surviving Corporation") as a corporation incorporated and existing under the
laws of the State of Nevada under the name "Alpha, Inc.", and the Surviving
Corporation shall succeed to and assume all of the rights and obligations of
Alpha Acquisition and shall continue to hold all rights and obligations of the
Company as in effect prior to the Merger, all in accordance with the Nevada Act.
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1.2 THE CLOSING. The closing of the Merger (the "Closing") shall take
place on a date to be specified by the Parties (the "Closing Date"), which shall
be no later than the third business day after the satisfaction or waiver of the
conditions set forth in Sections 6.1 and 6.2, at the offices of Andrews Kurth
LLP in Houston, Texas, unless another date or place is agreed to in writing by
the Parties.
1.3 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
Company and Alpha Acquisition shall file with the Secretary of State of the
State of Nevada Articles of Merger (the "Articles of Merger") executed in
accordance with the relevant provisions of the Nevada Act and shall make all
other filings or recordings required under the Nevada Act to effect the Merger
as soon as practicable on or before the Closing Date. The Merger shall become
effective at such time as the Articles of Merger are duly filed with and
accepted by the Secretary of State of the State of Nevada, or at such later time
as the Acquiring Companies and the Company shall agree and shall specify in the
Articles of Merger (the "Effective Time").
1.4 EFFECT OF THE MERGER. The Merger shall have the effects set forth
in this Agreement, the Articles of Merger and the Nevada Act. Without limiting
the generality of the foregoing, and subject to the Nevada Act and to any other
applicable laws, at the Effective Time, all of the properties, rights,
privileges, powers, franchises and licenses of Alpha Acquisition shall vest in
the Surviving Corporation without reversion or impairment, without further act
or deed, and without any transfer or assignment having occurred; all debts,
liabilities, obligations, restrictions and duties of Alpha Acquisition shall
become the debts, liabilities, obligations, restrictions and duties of the
Surviving Corporation; all properties, rights, privileges, powers, franchises
and licenses of the Company shall remain and continue in the Company, as the
Surviving Corporation, without reversion or impairment, without further act or
deed, and without any transfer or assignment having occurred; and all debts,
liabilities, obligations, restrictions and duties of the Company shall remain
and continue as debts, liabilities, obligations, restrictions and duties of the
Company, as the Surviving Corporation.
1.5 EFFECT ON CAPITAL STOCK. By virtue of the Merger and without any
action on the part of any holder of the Shares or the holder of the shares of
common stock of Alpha Acquisition, as of the Effective Time:
(a) COMMON STOCK. Each share of common stock, par value $1.00
per share, of Alpha Acquisition issued and outstanding immediately
prior to the Effective Time shall be converted into one fully paid and
nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(b) CONVERSION OF THE COMPANY SHARES. Each Share issued and
outstanding as of the Effective Time (other than any Shares (i) held by
the Acquiring Companies, (ii) held by any wholly-owned Subsidiary of
the Acquiring Companies, (iii) in the treasury of the Company or (iv)
held by any wholly-owned Subsidiary of the Company, which Shares, by
virtue of the Merger and without any action on the part of the holder
thereof, shall be cancelled and shall cease to exist with no payment
being made with respect thereto, and other than Dissenting Shares)
shall automatically be converted into the right to receive US$18.50 in
cash (the "Per Share Merger Consideration"). The aggregate amount of
the Per Share Merger Consideration in respect of all Shares entitled
thereto,
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and the aggregate amount payable to holders of Stock Options pursuant
to Section 1.10, are collectively referred to as the "Merger
Consideration."
(c) DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and outstanding
immediately prior to the Effective Time and that are held by a holder
who was entitled to demand, and has validly demanded, dissenter's
rights in accordance with Section 92A of the Nevada Act (the
"Dissenting Shares") shall not be converted into the right to receive
the Per Share Merger Consideration unless and until such holder shall
have failed to perfect or shall have effectively withdrawn or lost such
holder's dissenter's rights under the Nevada Act but instead shall be
converted into the right to receive payment from the Surviving
Corporation with respect to such Dissenting Shares in accordance with
the Nevada Act. If any such holder shall have failed to perfect or
shall have effectively withdrawn or lost such holder's dissenter's
rights, then each of such holder's Shares shall be treated as a Share
that had been converted as of the Effective Time into the right to
receive the Per Share Merger Consideration in accordance with Section
1.5(b).
(d) CANCELLATION OF SHARES. As of the Effective Time, all
Shares that are issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares) shall no longer be
outstanding and shall automatically be cancelled and shall cease to
exist, and each holder of a certificate representing any Shares
outstanding immediately prior to the Effective Time being converted
into the right to receive the Per Share Merger Consideration pursuant
to Section 1.5(b) (each a "Certificate" and collectively, the
"Certificates") shall cease to have any rights with respect thereto,
except the right to receive a cash amount equal to the Per Share Merger
Consideration multiplied by the number of Shares formerly represented
by the Certificate, to be paid in consideration therefor upon surrender
of such Certificate in accordance with Section 1.9(b).
1.6 ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.
From the Effective Time until thereafter amended as provided by law, the
articles of incorporation and bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the articles of incorporation and bylaws
of the Surviving Corporation.
1.7 DIRECTORS AND OFFICERS.
(a) The directors of Alpha Acquisition immediately prior to
the Effective Time shall be the directors of the Surviving Corporation,
each to hold office in accordance with the articles of incorporation
and bylaws of the Surviving Corporation.
(b) From and after the Effective Time, the officers of the
Company shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be, in
accordance with the articles of incorporation and bylaws of the
Surviving Corporation.
1.8 ASSETS, LIABILITIES, RESERVES AND ACCOUNTS. At the Effective Time,
the assets, liabilities, reserves and accounts of Alpha Acquisition and the
Company shall be taken up on the
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books of the Surviving Corporation in such manner as may be appropriate to give
effect to the Merger in accordance with GAAP.
1.9 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT; PAYMENT OF MERGER CONSIDERATION. Prior to
the Effective Time, the Buyer shall appoint a bank or trust company
reasonably acceptable to the Company to act as paying agent (the
"Paying Agent") for the payment of the Merger Consideration for the
benefit of the Stockholders and the Option Holders. On or before the
Closing, the Buyer shall deposit (or cause to be deposited) the Merger
Consideration (such cash consideration being hereinafter referred to as
the "Merger Fund") with the Paying Agent for the benefit of the
Stockholders and the Option Holders. The Merger Fund shall not include
Per Share Merger Consideration for any Dissenting Shares, and the
holders of Dissenting Shares shall not be entitled to receive payment
of the Per Share Merger Consideration related to such Dissenting Shares
from the Merger Fund. The Paying Agent shall, pursuant to irrevocable
instructions of the Buyer given on the Closing Date, transfer to the
Surviving Corporation such amount as is necessary to pay the Option
Holders all amounts due to them under Section 1.10 and to make other
payments of the Merger Consideration out of the Merger Fund. The Merger
Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time
(but not later than five (5) Business Days after the date on which the
Effective Time occurs), the Buyer shall cause the Paying Agent to mail
or deliver to each Person who was, at the Effective Time, a holder of
record of Shares and whose Shares are being converted into the right to
receive the Per Share Merger Consideration pursuant to Section 1.5(b) a
letter of transmittal (which shall be in customary form and 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
Paying Agent and shall otherwise be in a form and have such other
provisions as the Buyer may reasonably specify) containing instructions
for use by holders of Certificates to effect the exchange of their
Certificates for the Per Share Merger Consideration as provided herein.
As soon as practicable after the Effective Time, each holder of an
outstanding Certificate or Certificates shall, upon surrender to the
Paying Agent of such Certificate or Certificates and such letter of
transmittal duly executed and completed in accordance with the
instructions thereto (together with such other documents as the Paying
Agent may reasonably request) and acceptance thereof by the Paying
Agent (or, if such shares are held in book-entry or other
uncertificated form, upon the entry through a book-entry transfer agent
of the surrender of such Shares on a book-entry account statement (it
being understood that any references herein to "Certificates" shall be
deemed to include references to book-entry account statements relating
to the ownership of Shares), be entitled to an amount of cash (payable
by check) equal to the Per Share Merger Consideration multiplied by the
number of Shares formerly represented by such Certificate or
Certificates. The Paying Agent shall accept such Certificates upon
compliance with such reasonable terms and conditions as the Paying
Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. If cash is to be remitted to a Person
other than the Person in whose name the Certificate surrendered for
exchange is registered, it shall be a condition of such
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exchange that the Certificate so surrendered shall be properly
endorsed, with signature guaranteed, or otherwise in proper form for
transfer and that the Person requesting such exchange shall pay to the
Paying Agent any transfer or other taxes required by reason of the
payment of the Per Share Merger Consideration to a Person other than
the registered holder of the Certificate so surrendered, or shall
establish to the satisfaction of the Paying Agent that such tax either
has been paid or is not applicable. Until surrendered as contemplated
by this Section 1.9(b), at any time after the Effective Time, each
Certificate shall be deemed to represent only the right to receive the
Per Share Merger Consideration upon such surrender as contemplated by
Section 1.5. No interest shall be paid or shall accrue on any cash
payable as Per Share Merger Consideration.
(c) NO FURTHER OWNERSHIP RIGHTS IN SHARES EXCHANGED FOR CASH.
All cash paid upon the surrender for exchange of Certificates formerly
representing Shares in accordance with the terms of this Article 1
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares formerly represented by such Certificates, and
there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the Shares which were
issued and outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for transfer, then they shall be cancelled and exchanged as
provided in this Article 1.
(d) TERMINATION OF MERGER FUND. Any portion of the Merger Fund
which remains undistributed to the holders of Certificates for twelve
(12) months after the Effective Time shall be delivered to the Buyer,
and any holders of Certificates who have not theretofore complied with
this Article 1 shall thereafter look only to the Buyer for payment of
the Merger Consideration, subject to escheat and abandoned property and
similar laws.
(e) NO LIABILITY. None of the Parties or the Paying Agent
shall be liable to any Person in respect of any cash from the Merger
Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) INVESTMENT OF MERGER FUND. The Paying Agent shall invest
any cash in the Merger Fund, as directed by the Buyer; provided,
however, that such investments shall be in obligations of, or
guaranteed by, the United States of America, in commercial paper
obligations rated A-1 or P-1 or better by Moody's Investors Service,
Inc. or Standard & Poor's Corporation, respectively, or in certificates
of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $1 billion. Any interest and
other income resulting from such investments shall be paid to the
Buyer.
(g) WITHHOLDING RIGHTS. The Buyer or the Paying Agent shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares such amounts
as the Buyer or the Paying 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 deducted and withheld by the Buyer or the Paying Agent,
such withheld amounts shall
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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 by the Buyer or the Paying Agent.
(h) LOST CERTIFICATES. If 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 the Buyer, the posting by such Person of a bond in
such reasonable amount as the Buyer may require as indemnity against
any claim that may be made against it with respect to such Certificate,
the Paying Agent shall issue in exchange for such lost, stolen or
destroyed Certificate the Per Share Merger Consideration payable
pursuant to this Agreement.
1.10 EFFECT OF THE MERGER ON STOCK OPTIONS.
(a) VESTING OF STOCK OPTIONS. Subject to the applicable
provisions of the Stock Plan, at, or immediately prior to, the
Effective Time, the board of directors of the Company or any committee
administering the Stock Plan shall take all actions necessary, and
obtain all consents necessary, if any, so that all outstanding Stock
Options heretofore granted under the Stock Plan shall become fully
vested and exercisable at the Effective Time and shall be cancelled in
exchange for the right to receive a cash payment from the Acquiring
Companies of an amount equal to (i) the excess, if any, of (x) the Per
Share Merger Consideration over (y) the exercise price per share of the
Shares subject to such Stock Option, multiplied by (ii) the number of
Shares for which such Stock Option shall not theretofore have been
exercised. Promptly after the Effective Time (but not later than five
(5) business days after the date on which the Effective Time occurs),
the Acquiring Companies shall pay the Option Holders the cash payments
specified in this Section 1.10(a).
(b) TERMINATION OF THE STOCK PLAN. The Stock Plan shall
terminate as of the Effective Time, and the provisions in any other
agreement, arrangement or benefit plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest
in respect of any capital stock of the Company in connection with such
Stock Plan shall be of no further force and effect as of the Effective
Time, and the Company shall take such actions to ensure that following
the Effective Time no Option Holder or any participant in or a party to
the Stock Plan or other agreement, arrangement or benefit plan shall
have any right thereunder to acquire any capital stock or any interest
in respect of any capital stock of the Surviving Corporation.
(c) WITHHOLDING RIGHTS. The Acquiring Companies will be
entitled to deduct and withhold from the amounts otherwise payable
pursuant to this Section 1.10 to any Option Holder such amounts as the
Acquiring Companies are 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 deducted
and withheld by the Acquiring Companies, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
Option Holder in respect of which such deduction and withholding was
made by the Acquiring Companies.
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1.11 STOCKHOLDERS' MEETING.
(a) If required by the Company's articles of incorporation
and/or any other applicable laws in order to consummate the Merger, the
Company, acting through its board of directors, shall, in accordance
with applicable laws:
(i) promptly prepare and file with the SEC a
preliminary information or proxy statement relating to the
Merger and this Agreement and (x) obtain and furnish the
information required to be included by the SEC in the Proxy
Statement and, after consultation with the Buyer, respond
promptly to any comments made by the SEC with respect to the
preliminary information or proxy statement and, subject to
compliance with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and SEC rules and regulations
promulgated thereunder, cause a notice of a special meeting
and a definitive information or proxy statement (the "Proxy
Statement") to be mailed to the Stockholders no later than the
time required by applicable laws and the articles of
incorporation and bylaws of the Company, and (y) subject to
Section 4.7, seek to obtain the necessary approvals of the
Merger and this Agreement by the Stockholders;
(ii) duly call, give notice of, convene and hold a
special meeting of the Stockholders (the "Stockholders'
Meeting") as soon as practicable after the date on which the
Proxy Statement has been mailed to the Stockholders for the
purpose of considering and taking action upon the Merger and
this Agreement; and
(iii) subject to Section 4.7, include in the Proxy
Statement the recommendation of the Company's board of
directors that the Stockholders vote in favor of the approval
of the Merger and the adoption of this Agreement.
(b) If, at any time prior to the Stockholders' Meeting, any
event shall occur relating to the Company or the transactions
contemplated by this Agreement that should be set forth in an amendment
or a supplement to the Proxy Statement, the Company shall promptly
notify in writing the Buyer of such event. In such case, the Company,
with the cooperation of the Buyer, shall promptly prepare, file with
the SEC and mail such amendment or supplement.
(c) The Acquiring Companies shall furnish to the Company the
information relating to the Acquiring Companies required under the
Exchange Act and SEC rules and regulations promulgated thereunder to be
set forth in the Proxy Statement and any amendments or supplements
thereto.
(d) The Company shall consult with the Buyer with respect to
the Proxy Statement, and any amendments or supplements thereto, and
shall afford the Buyer reasonable opportunity to comment thereon prior
to finalization of the Proxy Statement. The Company agrees to notify
the Buyer at least three (3) Business Days prior to the mailing of the
Proxy Statement, or any amendments or supplements thereto, to the
Stockholders.
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(e) The Buyer agrees that it will (i) vote, or cause to be
voted, all of the Shares, if any, owned by it and (ii) take, or cause
to be taken, all corporate actions necessary for it to adopt and
approve the Merger and this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE ACQUIRING COMPANIES
Each Acquiring Company hereby jointly and severally represents and
warrants to the Company that the statements contained in this Article 2 are true
and correct as of the date of this Agreement:
2.1 ORGANIZATION. Each Acquiring Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
respective jurisdiction of incorporation and has all corporate powers and
authority required to own, lease and operate its respective properties and carry
on its respective businesses as now conducted. Each Acquiring Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned, leased or operated
by it or the nature of its activities makes qualification necessary, except
where the failure to be so qualified has not had, and would not be reasonably
expected to have, individually or in the aggregate, a material adverse effect on
the Acquiring Company.
2.2 AUTHORITY. Each Acquiring Company has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by each Acquiring Company and the consummation by each Acquiring Company of the
transactions contemplated hereby have been duly and validly authorized and
approved by the board of directors of the Buyer and Alpha Acquisition and,
immediately after the execution and delivery of this Agreement, will be duly and
validly authorized and approved, by the sole stockholder of Alpha Acquisition,
and no other corporate proceedings on the part of either Acquiring Company are
necessary to authorize or approve this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each Acquiring Company and, assuming the due and valid
authorization, execution and delivery of this Agreement by the Company,
constitutes the valid and binding obligation of each Acquiring Company
enforceable against each of them in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
2.3 NONCONTRAVENTION; REQUIRED FILINGS AND CONSENTS. Neither the
execution and the delivery of this Agreement by either of the Acquiring
Companies, nor the consummation of the transactions contemplated hereby by
either of the Acquiring Companies, will violate any statute, regulation, law,
rule, injunction, judgment, order, decree or ruling of any Governmental Entity
to which either Acquiring Company is subject, or contravene or conflict with any
provision of their respective charters or bylaws, except any such violation,
contravention or conflict that would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the Acquiring
Company. Except for (i) the filings contemplated by
8
Section 1.3, (ii) the notification filing required under the Hart-Scott-Rodino
Act, (iii) any filings required to be made with the SEC and (iv) the filing of
any required notices, applications or other filings with any Governmental
Entities related to the Company Permits or to the Company's and/or its
Subsidiaries' continued participation in any Governmental Entities' third party
payor programs (the "Medicaid Waiver Programs"), neither Acquiring Company is
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of, any Governmental Entity in order to
consummate the transactions contemplated by this Agreement.
2.4 ADVISORS' AND BROKERS' FEES. The Acquiring Companies will pay all
fees and charges of any advisor or broker retained by them in connection with
the transactions contemplated by this Agreement.
2.5 SUFFICIENT FUNDS. The Acquiring Companies have, and at all times
will continue to have, sufficient funds available to pay the Merger
Consideration (including the consideration payable pursuant to Section 1.10
hereof) and to perform their other obligations pursuant to this Agreement. The
Acquiring Companies have identified on Schedule 2.5 the source of funds to be
used for the Merger Consideration, and no financing approvals or consents are
needed with respect to the availability of such funds for the purposes intended
therefor pursuant to this Agreement.
2.6 NO SHARE OWNERSHIP. As of the date of this Agreement, neither of
the Acquiring Companies beneficially owns (as such term is defined in Rule 13d-3
of the Exchange Act) any Shares.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Acquiring Companies that,
except as set forth in Schedules 3.1 to 3.23, inclusive, (the "Company
Disclosure Schedules") that correspond with the Sections of this Article 3, the
statements contained in this Article 3 are true and correct as of the date of
this Agreement; provided, however, that the mere inclusion of an item on the
Company Disclosure Schedules as an exception to a representation or warranty
shall not be deemed to be an admission by the Company that such item is or was
material or is or was required to be disclosed thereon. Any matter disclosed, or
as to which any exception is made, in any item on the Company Disclosure
Schedules shall constitute an exception to each representation and warranty
under this Agreement where the applicability of the disclosed matter or
circumstance to the representation or warranty in question is reasonably
apparent.
3.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada and has all corporate powers and authority required
to own, lease and operate its properties and carry on its business as now
conducted. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the property
owned, leased or operated by it or the nature of its activities makes
qualification necessary, except where the failure to be so qualified has not
had, and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. A complete and
9
correct list of every jurisdiction in which the Company and each of its
Subsidiaries are incorporated or qualified to do business as a foreign
corporation is set forth on Schedule 3.1. The Company has made available to the
Buyer correct and complete copies of its articles of incorporation and bylaws as
amended to date. The Company is not in default under, or in violation of, the
provisions of its articles of incorporation or bylaws.
3.2 SUBSIDIARIES. All Subsidiaries of the Company, and holders of their
respective outstanding capital stock or other equity interests, are identified
on Schedule 3.2. Each Subsidiary of the Company is a corporation or limited
partnership duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation or formation and has all corporate or
partnership powers and authority required to own, lease and operate its
properties and carry on its business as now conducted. Each Subsidiary of the
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned, leased
or operated by it or the nature of its activities makes qualification necessary,
except where the failure to be so qualified has not had, and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company has made available to the Buyer complete and correct
copies of the charter, certificate of limited partnership, bylaws, partnership
agreement or other organizational or similar charter-type documents, each as
amended to date, of each of its Subsidiaries. No Subsidiary of the Company is in
default under, or in violation of, the provisions of its respective charter,
certificate of limited partnership, bylaws, partnership agreement or other
similar organizational or similar charter-type documents.
3.3 AUTHORITY. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Company's board of directors, and no other corporate proceedings on the part of
the Company are necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby (other than the approval and
adoption of the Merger and this Agreement by the Stockholders to the extent
required by the Company's articles of incorporation and by applicable laws).
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due and valid authorization, execution and delivery of this
Agreement by the Acquiring Companies, constitutes a valid and binding obligation
of the Company enforceable against it in accordance with its terms, except that
such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
3.4 NONCONTRAVENTION; REQUIRED FILINGS AND CONSENTS. Neither the
execution and the delivery of this Agreement by the Company, nor the
consummation of the transactions contemplated hereby, will (a) contravene or
conflict with any provision of the articles of incorporation or bylaws of the
Company or (b) violate any statute, regulation, law, rule, injunction, judgment,
order, decree or ruling of any Governmental Entity to which the Company is
subject, except in the case of the foregoing clause (b) any such violation that
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. Except for (i) the filings contemplated by Section 1.3,
(ii) the notification filing required under the Hart-Scott-Rodino Act, (iii) any
filings required to be made with the SEC and (iv) any filings
10
required to be made with any Governmental Entities related to the Company
Permits or to the Company's and/or its Subsidiaries' continued participation in
any Governmental Entities' Medicaid Waiver Programs, the Company is not required
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Entity (other than lenders under
financing arrangements) in order to consummate the transactions contemplated by
this Agreement.
3.5 CAPITALIZATION. The entire authorized capital stock of the Company
is as set forth on Schedule 3.5, and no Shares other than those reflected on
such Schedule as being currently outstanding have been issued since January 1,
2002. There are no bonds, debentures, notes or other indebtedness having general
voting rights similar to the voting rights of the Shares (or convertible into
Shares having such rights) ("Voting Debt") of the Company or any of the
Subsidiaries of the Company issued and outstanding. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments of any character,
relating to the issued or unissued capital stock or other equity interests of
the Company or any of its Subsidiaries, obligating the Company or any of its
Subsidiaries to issue, transfer or sell, or cause to be issued, transferred or
sold, any shares of capital stock or Voting Debt of, or other equity interest
in, the Company or any of its Subsidiaries, except for the Stock Options set
forth on Schedule 3.5 (which Schedule includes the grant date and exercise price
of each Stock Option). Except as contemplated by this Agreement, there are no
outstanding contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Shares or the capital stock or other
equity interests of the Company or any of its Subsidiaries. All of the
outstanding Shares are, and all Shares which may be issued pursuant to the
exercise of outstanding Stock Options will be (when issued in accordance with
the respective terms thereof), duly authorized, validly issued, fully paid and
nonassessable, and such Shares were not issued in violation of any laws. Each of
the outstanding shares of capital stock or other equity interests of each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and was not issued in violation of any laws, and such shares are
owned by the Company or by another Subsidiary of the Company free and clear of
any lien, claim, option, charge, security interest, limitation, encumbrance and
restriction of any kind. To the Company's Knowledge, there are no voting trusts,
proxies or other agreements or understandings with respect to the voting of the
capital stock of the Company.
3.6 CONTRACTS. Schedule 3.6 contains, as of the date of this Agreement,
a complete and accurate listing of all Contracts that (i) involve consideration
or other expenditure in excess of $100,000, (ii) involve consideration or other
expenditure in excess of $30,000 annually and are not terminable at the will of
the Company within three years without penalty, and (iii) involve the referral
of residents to or by the Company. The Company has made available to the Buyer
true and correct copies of all such Contracts. There are no existing breaches or
defaults by the Company or any of its Subsidiaries, or, to the Knowledge of the
Company, any other party to a Contract, under any Contract, other than breaches
or defaults which would not have a Material Adverse Effect and, to the Knowledge
of the Company, no event has occurred which, with the passage of time or the
giving of notice or both, could reasonably be expected to constitute a breach or
default of any Contract, other than breaches or defaults which would not have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any stockholders' rights agreement or similar anti-takeover agreement.
11
3.7 INSURANCE. Set forth on Schedule 3.7 is a complete and correct list
of all policies of fire, liability, product liability, professional liability,
environmental impairment, workers compensation, health, medical, director and
officer liability and other forms of insurance presently in effect with respect
to the business and properties of the Company and its Subsidiaries (each a
"Policy" and collectively, the "Policies"). The Company has made available to
the Buyer true and correct copies of all of the Policies. The Company and each
of its Subsidiaries is, and has been continuously since January 1, 2002, insured
with the insurers listed on Schedule 3.7. Neither the Company nor any Subsidiary
of the Company has received any notice of cancellation or termination with
respect to any material Policy of the Company or any of its Subsidiaries. The
Company and its Subsidiaries have duly and timely made all claims that they have
been entitled to make under each Policy, other than such claims, the failure of
which to make has not had, and could not reasonably be expected to have, a
Material Adverse Effect. There is no claim pending by the Company or any of its
Subsidiaries under any Policies as to which coverage has been questioned, denied
or disputed by the underwriters of such Policies, and, to the Knowledge of the
Company, there is no basis for denial of any claim under any Policy as a result
of the applications and information provided by the Company to obtain such
Policies. Neither the Company nor any of its Subsidiaries has received any
written notice from or on behalf of any insurance carrier issuing any Policy
that insurance rates therefore will hereafter be substantially increased (except
to the extent that insurance rates may be increased for all similarly situated
risks) or that there will hereafter be a cancellation or an increase in a
deductible (or an increase in premiums in order to maintain an existing
deductible) or nonrenewal of any such Policy.
3.8 FINANCIAL STATEMENTS; FEES.
(a) FINANCIAL STATEMENTS. The Company has made available to
the Buyer the audited balance sheets, statements of operations/income,
statements of stockholders' equity and statements of cash flows,
including the notes thereto, of the Company as of and for the fiscal
years ended December 31, 2002 and 2003 (the "Financial Statements").
The Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby
and present fairly the financial condition of the Company as of such
dates and the results of operations of the Company for such periods. As
of the date of the Company's financial statements filed with its most
recent Quarterly Report on Form 10-Q (the "Report Date"), neither the
Company nor any of its Subsidiaries had any liabilities or obligations
of any nature (whether absolute, accrued, contingent, unmatured,
unaccrued, unliquidated, unasserted, conditional or otherwise) that are
required to be reflected, disclosed or reserved against in a balance
sheet prepared in accordance with GAAP that were not reflected,
disclosed or reserved against in the Financial Statements, the Company
SEC Documents or otherwise disclosed on Schedule 3.8(a).
(b) FEES. Set forth on Schedule 3.8(b) is a complete and
correct list of all payments (including the dollar amounts thereof)
that are required to be paid, or may be paid, to directors, officers,
employees, representatives or other agents of the Company (other than
payments to be made pursuant to Section 1.10 in respect of Stock
Options) as a result of the Company's execution of this Agreement or
the consummation of the
12
Merger, including fees, severance payments (whether containing a single
or double trigger relating to any change in control) and other similar
payments.
3.9 SEC FILINGS. Available in the SEC's online EDGAR database is a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since January 1,
2002 (the "Company SEC Documents"), which are all of the documents that the
Company was required to file with the SEC since January 1, 2002. As of their
respective dates, the Company SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended, or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder, and none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.10 CERTAIN EVENTS. Except as otherwise disclosed in the Company SEC
Documents, since December 31, 2003 to the date of this Agreement, there has not
been any Material Adverse Change. In addition, since June 30, 2004, the Company
and its Subsidiaries have conducted their businesses only in the ordinary course
of business consistent with past practices and there has not been, directly or
indirectly, any:
(a) capital expenditure by the Company or any of its
Subsidiaries, in any single transaction or series of transactions
relating to a single project, exceeding $1.5 million;
(b) destruction, damage to, or loss of any assets of the
Company or any of its Subsidiaries exceeding $1.5 million;
(c) change in accounting methods, principles or practices
(including, without limitation, any change in depreciation or
amortization policies) by the Company and its Subsidiaries, except
insofar as such changes are (i) required by a change in GAAP or (ii)
not required to be disclosed by GAAP;
(d) sale or transfer of any assets of the Company or its
Subsidiaries having a value in excess of $1.5 million, in any single
transaction or series of related transactions;
(e) employment agreement or agreements entered into by the
Company or any Subsidiary of the Company pursuant to which the employee
is employed otherwise than at will;
(f) payment or granting by the Company or any of its
Subsidiaries of any increase in compensation to any director or
executive officer of the Company or, except as consistent with past
practices, any employee of the Company or its Subsidiaries;
(g) granting by the Company or any of its Subsidiaries to any
of its respective directors, executive officers or employees of any
increase in severance or termination pay, except as required under
employment, severance or termination agreements or plans in effect
prior to the date of this Agreement;
13
(h) adoption or increase in payments to, or benefits under,
any of the Benefit Plans of the Company;
(i) declaration or payment of any dividend or any other
distribution in respect of the Company's capital stock or any direct or
indirect redemption, purchase or other acquisition of any such stock of
the Company; or
(j) agreement or commitment to do any of the things described
in the preceding clauses (a) through (i).
3.11 PROPERTY.
(a) A complete and accurate list of all of the real property
owned by the Company and its Subsidiaries is set forth on Schedule
3.11(a) (collectively, the "Owned Real Property").
(b) A complete and accurate list of all of the real property
that is leased by the Company and its Subsidiaries is set forth on
Schedule 3.11(b) (collectively, the "Leased Real Property") (the Owned
Real Property and the Leased Real Property are collectively referred to
herein as the "Property").
(c) The Company and its Subsidiaries have good and marketable
title to all of their non-leased machinery, equipment, furniture and
other tangible assets located on the Property ("Tangible Property"),
except those subject to Permitted Liens. To the actual knowledge of the
chief executive officer, chief operating officer and chief financial
officer of the Company, the Tangible Property located on the Property
is in good operating condition and repair, reasonable wear and tear
excepted.
(d) To the actual knowledge of the chief executive officer,
chief operating officer and chief financial officer of the Company, all
of the buildings and improvements located on the Property are
structurally sound, and all mechanical, electrical, heating, air
conditioning, drainage, sewer, water and plumbing systems are in proper
working order, reasonable wear and tear excepted, and are usable in the
ordinary course of business and adequate and suitable for their
intended use.
(e) There are no contracts or options to sell the Owned Real
Property or any portion of the Owned Real Property which have been
executed by the Company and its Subsidiaries.
(f) The Company has made available to the Acquiring Companies
true and correct copies of all of the leases, including all amendments
to such leases, under which the Company has possession of the Leased
Real Property (the "Leases").
(g) There is no action or proceeding instituted or pending, or
to the Knowledge of the Company, threatened or contemplated for eminent
domain or for condemnation of the Property.
14
(h) The Company or one of its Subsidiaries has fee title to
the Owned Real Property and a leasehold interest in the Leased Real
Property, as provided in the applicable Lease, in each case, free and
clear of all liens, encumbrances and defects, except for (i) liens,
encumbrances, defects, exceptions, easements, rights of way,
restrictions, covenants, claims or other similar charges, which have
not, individually or in the aggregate, had a Material Adverse Effect,
(ii) taxes or assessments, special or otherwise, not due and payable or
being contested in good faith, (iii) standard exceptions which would be
contained in an ALTA Form extended coverage owner's policy of title
insurance (or the locally available form of title insurance policy, as
applicable), (iv) rights of parties in possession, including residents,
beauticians and physical therapists, (v) any discrepancies, conflicts
or boundary lines, shortages in area, encroachments, or any other facts
which an accurate survey would disclose, the existence of which have
not materially interfered with the continued use of the Property
consistent with the current use thereof, (vi) matters referred to in
Schedule 3.11(h) and (vii) any exceptions to title contained in a title
policy listed on Schedule 3.11(h) (collectively, (i) through (vii), the
"Permitted Liens").
(i) Except for those matters that do not have, and would not
reasonably be expected to have, a Material Adverse Effect: (i) all
activities and operations of the Company and its Subsidiaries since
January 1, 2002 have been and are being conducted in compliance with
all Hazardous Substances Laws; (ii) since January 1, 2002, the Company
has not received any written notice from any Governmental Entity or
other Person that there exists any violation of any Hazardous
Substances Laws associated with the Company or its Subsidiaries, their
properties, activities or operations; (iii) there are no Hazardous
Substances present on, in or under the Property, and no discharge,
spillage, uncontrolled loss, seepage or filtration of Hazardous
Substances has occurred on, in or under the Property since January 1,
2002; (iv) there is no condition on the Property for which the Company
or any of its Subsidiaries has an obligation to undertake any remedial
action pursuant to Hazardous Substances Laws; and (v) there are no
underground storage tanks currently, or historically, located on, at or
under the Property. For purposes hereof, "Hazardous Substances" means,
without limitation (1) those substances included within definitions of
any one or more of the terms "Hazardous Substance," "Hazardous Waste,"
"Toxic Substance" and "Hazardous Material" in the CERCLA, the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, et
seq., the Toxic Substance Control Act, as amended, 15 U.S.C. Section
2601, et seq., the Hazardous Materials Transportation Act, as amended,
49 U.S.C. Section 1801 et seq., the Clean Water Act, as amended, 42
U.S.C. Section 1251, et seq., the Clean Air Act, as amended, 42 U.S.C.
Section 7401, et seq., the Occupational Safety and Health Act, as
amended, 29 U.S.C. Section 651, et seq. (insofar as it relates to
employee health and safety in relation to exposure to Hazardous
Substances) and any other local, state, federal or foreign laws or
regulations related to the protection of public health or the
environment (collectively, "Hazardous Substances Laws"); (2) such other
substances, materials, pollutants, contaminants or wastes as are or
become regulated under or are classified as hazardous or toxic under
any Hazardous Substances Laws; and (3) any materials, pollutants,
contaminants, wastes or substances that can be defined as (A) petroleum
products or wastes; (B) asbestos; (C) polychlorinated biphenyl; (D)
flammable or explosive; (E) radioactive; or (F) toxic.
15
(j) To the Knowledge of the Company, the Company and its
Subsidiaries have obtained, and are in substantial compliance with, all
permits necessary for their current activities and operations under any
and all Hazardous Substances Laws.
(k) Neither the Company nor any of its Subsidiaries have paid
since January 1, 2002 any civil or criminal fines, penalties, judgments
or other amounts in excess of $5,000 relating to alleged failure to
comply with Hazardous Substances Laws.
(l) To the Knowledge of the Company, no polychlorinated
biphenyls or substances containing polychlorinated biphenyls ("PCBs"),
nor any asbestos or materials containing asbestos are present in the
structures or equipment utilized by the Company or its Subsidiaries,
and, to the Knowledge of the Company, any such PCBs or asbestos
previously present in or on such structures or equipment that were
removed by the Company or its Subsidiaries were disposed of in
accordance with all Hazardous Substances Laws.
(m) The Company has not received any notice since January 1,
2002 from any Governmental Entity that the Company, its Subsidiaries,
their activities or operations, the Property or any condition existing
thereon violates any Hazardous Substances Laws applicable to the
Property in any material respect, which condition remains uncured.
(n) There is no litigation pending or, to the best of the
Company's Knowledge, threatened against the Property that would, if
adversely determined, have a Material Adverse Effect.
(o) The chief executive officer of the Company has evidence
that a general contractor was used in connection with the construction
of at least 90 of the Properties.
3.12 COMPLIANCE WITH LAWS.
(a) The Company and its Subsidiaries are in compliance with
all laws and ordinances and all governmental rules and regulations to
which they are subject, except where the failure to comply with such
laws, ordinances, rules and regulations, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. The Company and its Subsidiaries have not received notice of
any material violation or alleged violation of, and are subject to no
material liability (whether accrued, absolute, contingent, direct or
indirect) for any past or continuing violation of any laws. All
material reports, registrations and returns required to be filed by the
Company and its Subsidiaries with any Governmental Entity have been
filed, and were accurate and complete in all material respects when
filed.
(b) The Company and its Subsidiaries receive payment under
state Medicaid Waiver Programs and are "providers" under certain
agreements with state Medicaid Waiver Programs through applicable state
agencies. There is no pending, nor, to the Knowledge of the Company,
threatened proceeding, recoupment action, vendor hold, stop payment,
investigation or similar action under the Medicaid Waiver Programs
involving the Company or any of its Subsidiaries. The Company and its
Subsidiaries, their employees, agents, contractors and stockholders
have not engaged since January 1,
16
2002 in any activities which are prohibited under the federal
anti-kickback statute, the Stark law, 42 U.S.C. Sections 1320a-7a,
1320a-7b or 1395nn, respectively, or the regulations promulgated
thereunder, or related or similar state or local statutes or
regulations, or which are prohibited by rules of professional conduct,
including (i) knowingly and willfully making or causing to be made any
false statement or representation of a fact in any application for any
benefit or payment; (ii) any failure by a claimant to disclose
knowledge of the occurrence of any event affecting the initial or
continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit
or payment; or (iii) knowingly and willfully soliciting or receiving
any remuneration (including any kickback, bribe or rebate) directly or
indirectly, overtly or covertly, in cash or in kind, or offering to
receive such remuneration in return for referring an individual to a
person for the furnishing or arranging for the furnishing of any item
or service for which payment may be made in whole or in part by the
Medicaid Waiver Programs, or in return for purchasing, leasing or
ordering or arranging for, or recommending, purchasing, leasing or
ordering any good, facility service, or item for which payment may be
made in whole or in part by the Medicaid Waiver Programs. The Company
and its Subsidiaries, and their employees and agents, have conducted
the Company's and its Subsidiaries' business in substantial compliance
with the requirements of the Medicaid Waiver Programs, insofar as
applicable, and of the applicable state law. The Company and its
Subsidiaries make no representation or warranty under this Section 3.12
as to their compliance with laws, ordinances, regulations or rules
regulating environmental matters, Company Permits, tax matters and
benefit plans and arrangements (which representations and warranties
are limited to those set forth in Sections 3.11, 3.13, 3.14 and 3.16,
respectively).
3.13 COMPANY PERMITS. The Company and its Subsidiaries hold all of the
permits, licenses, variances, exemptions, orders, franchises, authorizations,
rights, registrations, certifications, accreditations and approvals of
Governmental Entities (collectively, the "Company Permits") that are necessary
for the lawful conduct of the businesses of the Company and its Subsidiaries,
except for any such Company Permit the failure of which to have would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Set forth on Schedule 3.13 is a complete and accurate list of
all of the principal operating Company Permits that are required to operate an
assisted living facility (i.e., other than incidental Company Permits such as
those for food service, fire extinguishers and fire suppression systems). All
Company Permits are in full force and effect as of the date of this Agreement.
The Company and its Subsidiaries are in substantial compliance with the terms of
all Company Permits. Since January 1, 2002, none of the Company or any of its
Subsidiaries has received any notice of any action pending or, to the Knowledge
of the Company, threatened by any Governmental Entities to revoke, withdraw,
modify, restrict or suspend any Company Permit or fine the Company or any of its
Subsidiaries, and no event has occurred which, with or without the giving of
notice, the passage of time, or both, has resulted in, or could reasonably be
expected to result in, a revocation, withdrawal, modification, restriction or
suspension of any Company Permit or imposition of a fine against the Company or
any of its Subsidiaries, except for any such events that have not, and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company and its Subsidiaries make no representations or
warranties under this Section 3.13 as to permits or licenses relating to
environmental matters, which representations and warranties are limited to those
set forth in Section 3.11.
17
3.14 TAX MATTERS. With respect to the Company and its Subsidiaries: (a)
all reports, returns, statements (including estimated reports, returns or
statements), and other similar filings required to be filed on or before the
Closing Date by the Company (the "Tax Returns") with respect to any Taxes have
been timely filed, and were accurate and complete in all material respects when
filed, with the appropriate Governmental Entities in all jurisdictions in which
such Tax Returns are required to be filed, except where the failure to so file
would not have a Material Adverse Effect; (b) all Taxes owed by the Company and
its Subsidiaries (whether or not shown on any Tax Return) have been paid, except
for Taxes as set forth on the Company's balance sheet dated as of the Report
Date or which are not yet due and payable; (c) none of the forgoing Tax Returns
contain any position which is, or would be, subject to penalties under Section
6662 of the Code (or any corresponding provision of state, local or foreign Tax
law); (d) no Tax deficiencies have been proposed or assessed by any Tax
authority against the Company or any of its Subsidiaries, except where such
deficiencies would not have a Material Adverse Effect; (e) neither the Company
nor any of its Subsidiaries are liable for any Taxes of any other Person other
than the Company and its Subsidiaries; (f) the Company has not extended or
waived the application of any statute of limitations of any jurisdiction
regarding the assessment or collection of any income Tax; (g) the Company is not
a party to any income Tax allocation or sharing agreement; and (h) there are no
requests for rulings in respect of any income Tax pending between the Company
and any Tax authority.
3.15 LITIGATION. As of the date of this Agreement, there are no
actions, lawsuits, claims, proceedings, investigations or inquiries, whether
civil, criminal or administrative ("Litigation"), pending or, to the Knowledge
of the Company, threatened against the Company or any of its Subsidiaries, their
respective businesses or any of their assets, or, to the Knowledge of the
Company and if and to the extent that the Company is, through indemnity or
otherwise, liable therefor, any of the Company's current or former directors or
officers or any other Person whom the Company has agreed to indemnify, as such,
in such amounts as, individually or in the aggregate, would have a Material
Adverse Effect. As of the date of this Agreement, there is no Litigation pending
or, to the Knowledge of the Company, threatened, against the Company by any
Person that questions the legality, validity or propriety of this Agreement or
the Merger. There are no outstanding orders, judgments, injunctions, awards, or
decrees of any Governmental Entity against the Company or any of its
Subsidiaries, any of their properties, assets or businesses, or, to the
Knowledge of the Company, any of the Company's current or former directors or
officers or any other Person whom the Company has agreed to indemnify, as such,
that could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
3.16 BENEFIT PLANS AND ARRANGEMENTS.
(a) Schedule 3.16 lists all employee benefit plans (within the
meaning of Section 3(3) of ERISA), and other material similar funds,
policies, arrangements, practices and programs, including individual
agreements (individually, a "Benefit Plan," and collectively, the
"Benefit Plans"), which are established, contributed to or maintained
by the Company and/or one or more of its Benefits Affiliates (as
defined in the following sentence) for the benefit of any of their
current or former employees or directors of the Company. The term
"Benefits Affiliates" shall mean (i) any corporation which is a member
of a controlled group of corporations (as defined in section 414(b) of
the Code),
18
which includes the Company, (ii) any trade or business (whether or not
incorporated) that is under common control (as defined is section
414(c) of the Code) with the Company, (iii) any organization (whether
or not incorporated) that is a member of an affiliated service group
(as defined in section 414(m) of the Code), which includes the Company
and (iv) any other entity required to be aggregated with the Company
pursuant to the regulations issued under Section 414(o) of the Code.
(b) The Company has made available to the Acquiring Companies
true, correct and complete copies of: (i) all documents embodying each
Benefit Plan, including all amendments thereto, (ii) the most recent
annual report (Form Series 5500) filed with respect to each Benefit
Plan for which such filing is required, including all schedules and
other attachments thereto, and (iii) the most recent actuarial
valuation for each Benefit Plan which is subject to the minimum funding
requirements of section 412 of the Code.
(c) With respect to all such Benefit Plans, the Company has
made (or, as of the Closing Date, will make) all contributions thereto
which it has accrued on its Financial Statements as a liability.
(d) The Benefit Plans and provisions thereof, the trusts
created thereby, the operation of the Benefit Plans and the actions of
any fiduciaries with respect to the Benefit Plans are (and since
January 1, 2002 have been) in material compliance with, and conform
(and since January 1, 2002 have conformed) in all material respects to,
the requirements of applicable provisions of the Code, ERISA and other
applicable statutes and governmental rules and regulations, and each
Benefit Plan has been administered in accordance with its terms.
(e) Neither the Company nor any Benefits Affiliate has any
material plan termination or withdrawal liability with respect to any
Benefit Plan that is (i) a defined benefit pension plan subject to
Title IV of ERISA, (ii) a plan subject to the requirements of Code
Section 412 or 4971, or (iii) a multiemployer pension plan, as that
term is defined in sections 4001(a)(3) and 3(37) of ERISA; and if any
such plan were to be terminated as of the Closing Date, no assets of
the Company or any Benefits Affiliate would be subject, directly or
indirectly, to any liability, contingent or otherwise, or the
imposition of any lien under the Code or ERISA; and no "reportable
event" (as defined in Section 4043 of ERISA) or an event described in
Section 4062 or 4063 of ERISA has occurred with respect to any such
plan; and no such plan has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived.
(f) With respect to any Benefit Plan that is an employee
welfare benefit plan (within the meaning of Section 3(1) of ERISA) (a
"Welfare Plan"), (i) each Welfare Plan for which contributions are
claimed as deductions under any provision of the Code is in material
compliance with all applicable requirements pertaining to such
deductions and (ii) any Welfare Plan that is a group health plan
(within the meaning of Section 5000(b)(1) of the Code) complies, and
has complied since January 1, 2002, in all material respects with the
requirements of Part 6 of Title I of ERISA and Section 4980B of the
Code.
19
(g) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the Knowledge of the Company,
threatened with respect to any Benefit Plan or against the assets of
any Benefit Plan.
(h) Each Benefit Plan which is intended to be a qualified plan
under Code Section 401(a) has received a determination letter that
takes into account the so-called "GUST" amendments.
(i) Other than as may be required under Sections 601 through
609 of ERISA or under any applicable state continuation law, neither
the Company, any Benefits Affiliate or any Benefit Plan provides, or
has any obligation to provide, or contribute toward the cost of,
post-retirement welfare benefits with respect to any employees,
including post-retirement medical, dental, prescription drug, life
insurance, severance or any other similar benefit, whether provided on
an insured or self-insured basis.
(j) Except as provided in Section 1.10, the consummation of
the transactions contemplated by this Agreement will not (i) accelerate
the time of payment or vesting, or increase the amount of compensation
due to any employee or director, (ii) increase the amount of any
benefit otherwise payable under any Benefit Plan or (iii) result in any
prohibited transaction described in Section 406 of ERISA or Section
4975 of the Code for which an exemption is not available.
(k) Neither the Company nor any Benefits Affiliate are parties
to any contract, agreement or arrangement which provides for the
payment of compensation for which such entities would not be entitled
to claim a deduction for federal income tax purposes through the
operation of Sections 162(m) or 280G or any other provision of the
Code.
(l) Neither the Company nor any Benefits Affiliate have been
involved in any transaction that could cause the Company or any current
Benefits Affiliate to be subject to any liability under section 4069 or
4212(c) of ERISA.
3.17 SECURITY INTERESTS. Schedule 3.17 accurately sets forth all
security interests or liens to which the Company's assets are subject.
3.18 LABOR. The Company is not a party to, or otherwise bound by, any
collective bargaining agreement. Since January 1, 2002, the Company has not
experienced any strikes or been engaged in any disputes regarding collective
bargaining or unfair labor practices.
3.19 BOARD RECOMMENDATION. The board of directors of the Company, at a
meeting duly called and held on November 4, 2004, has, upon the recommendation
of a special committee (the "Special Committee") formed for the purpose of
representing the Company in connection with the possible transactions
contemplated hereby and any alternatives thereto, (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
advisable and fair to and in the best interests of the Company and the
Stockholders and has approved the same and (ii) resolved to recommend that the
Stockholders adopt this Agreement and approve the Merger.
20
3.20 OPINION OF FINANCIAL ADVISOR. The board of directors of the
Company has received the opinion of Jefferies & Company, Inc., dated November 4,
2004, to the effect that, as of such date, the Per Share Merger Consideration to
be received by the Stockholders pursuant to this Agreement is fair from a
financial point of view to such Stockholders, and such opinion has not been
withdrawn or materially and adversely modified since its issuance.
3.21 BROKERS OR FINDERS. The Company represents, as to itself, its
Subsidiaries and its Affiliates, that no agent, broker, investment banker,
financial advisor or other firm or Person is or shall be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company, except for Jefferies &
Company, Inc., whose fees and expenses shall, prior to the Closing Date, be paid
by the Company in accordance with the Company's agreements with such firm or
accrued on the books and records of the Company.
3.22 INAPPLICABILITY OF ANTI-TAKEOVER DEFENSE PROVISIONS. Subject to
the accuracy of the representation of the Acquiring Companies set forth in
Section 2.6, the Company's board of directors has taken all such actions as may
be necessary to ensure that, as of the date of this Agreement and at all times
on or prior to the Effective Time, Sections 78.411 through 78.444 of the Nevada
Act, as well as any other anti-takeover defense provisions contained in the
Company's articles of incorporation or bylaws or the Nevada Act are, and shall
be, inapplicable to this Agreement and to the Merger.
3.23 RIGHTS AGREEMENT. Neither the execution nor the delivery of this
Agreement nor the consummation of the Merger will result in a "Distribution
Date" (as defined in the Rights Agreement). The Company has irrevocably taken
all actions necessary to make the Rights inapplicable to this Agreement and the
Merger.
ARTICLE 4
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period from the date
of this Agreement through the Closing:
4.1 NOTICES AND CONSENTS. The Parties agree to work together in a cost
effective and expeditious manner to give any notices to, make any filings with,
and use commercially reasonable efforts to obtain any authorizations, consents,
and approvals of the Stockholders and Governmental Entities in connection with
the transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, each of the Parties shall file any Notification and Report
Forms and related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the Hart-Scott-Rodino Act, shall use its commercially reasonable
efforts to obtain a waiver from the applicable waiting period, and shall make
any further filings pursuant thereto that may be necessary in connection
therewith.
4.2 RESPONSIBILITY OF ACQUIRING COMPANIES IN CONNECTION WITH ANTITRUST
MATTERS. In addition to their other obligations pursuant to this Article 4, the
Acquiring Companies, jointly
21
and severally, covenant and agree that, in the event early termination of the
waiting period is not granted under the Hart-Scott-Rodino Act, or the waiting
period under such Act does not expire without extension, or in any respect the
Merger is challenged by the Federal Trade Commission or the Antitrust Division
of the United States Department of Justice, then in such event, the Acquiring
Companies shall take commercially reasonable actions to permit the Merger to be
consummated as promptly as is possible without challenge by any such authority.
4.3 CONDUCT OF THE BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES. Except
as required by this Agreement or with the prior written consent of the Buyer
(which shall not be unreasonably withheld, delayed or conditioned), during the
period from the date of this Agreement to the Effective Time, the Company shall,
and shall cause each of its Subsidiaries to, conduct its operations only in the
ordinary course of business consistent with past practice and shall use its
commercially reasonable efforts, and shall cause each of its Subsidiaries to use
its commercially reasonable efforts to, (i) preserve intact the business
organization of the Company and each of the Subsidiaries, (ii) use, operate,
maintain and repair all of its Property, Tangible Property, buildings,
improvements and other assets in a normal business manner consistent with past
practices, (iii) keep available the services of its and their present officers
and key employees, (iv) preserve the goodwill of those having business
relationships with the Company and/or its Subsidiaries and (v) conduct the
business with suppliers, customers, creditors and others having business
relationships with the Company and/or its Subsidiaries in a manner which the
board of directors of the Company determines, in good faith, is in the best
interests of the Company and/or its Subsidiaries. Without limiting the
generality of the foregoing, and except as otherwise required or contemplated by
this Agreement or set forth in Schedule 4.3, the Company shall not, and shall
not permit any of its Subsidiaries to, prior to the Effective Time, without the
prior written consent of the Buyer (which shall not be unreasonably withheld,
delayed or conditioned):
(a) adopt any amendment to its articles of incorporation or
bylaws or comparable organizational documents;
(b) issue, reissue or sell or authorize the issuance,
reissuance or sale of additional shares of capital stock of any class,
or shares convertible into capital stock of any class, or any rights,
warrants or options to acquire any convertible shares or capital stock,
other than the issuance of Shares pursuant to Stock Options outstanding
on the date of this Agreement;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, shares, or property or any combination
thereof) in respect of any class or series of its capital stock other
than between any of the Company and any wholly-owned Subsidiary of the
Company;
(d) except as contemplated by Section 1.10, split, combine,
subdivide, reclassify or directly or indirectly redeem, purchase or
otherwise acquire, recapitalize or reclassify, or propose to redeem or
purchase or otherwise acquire, any shares of its capital stock, or any
of its other shares or liquidate in whole or in part;
22
(e) except for (A) increases in salary, wages and benefits of
non-executive officers or employees of the Company or its Subsidiaries
in the ordinary course of business consistent with past practice, (B)
increases in salary, wages and benefits granted to officers and
employees of the Company or its Subsidiaries in conjunction with new
hires in the ordinary course of business consistent with past practice,
or (C) increases in salary, wages and benefits to employees of the
Company or its Subsidiaries pursuant to collective bargaining
agreements entered into in the ordinary course of business consistent
with past practice, (i) increase the compensation or fringe benefits
payable or to become payable to its directors, officers or key
employees (whether from the Company or any of its Subsidiaries), (ii)
pay any benefit not required by any existing plan or arrangement
(including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units),
(iii) grant any severance or termination pay to directors, officers or
other employees (except pursuant to existing agreements, plans or
policies and as required by such agreements, plans or policies), (iv)
enter into or modify any employment or severance agreement with any
director, officer or other key employee of the Company or any of its
Subsidiaries or (v) establish, adopt, enter into, or amend any
collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock or Benefit Plans for the benefit or
welfare of any directors, officers or current or former employees,
except in each case to the extent required by applicable laws or
regulations or as contemplated by Section 1.10;
(f) (i) sell, lease, transfer or assign any of its assets,
tangible or intangible, other than for a fair consideration in the
ordinary course of business and other than the disposition of obsolete
or unusuable property; (ii) enter into any Contract (other than
purchase and sales orders in the ordinary course of business in
accordance with past practice) that involves (A) consideration or other
expenditure in excess of $100,000, (B) consideration or other
expenditure in excess of $30,000 annually and are not terminable at the
will of the Company within three years without penalty, or (C) the
referral of residents to or by the Company; (iii) accelerate,
terminate, modify in any material respect, or cancel any Contract
(other than purchase and sales orders and other than in the ordinary
course of business in accordance with past practice) that involves (A)
consideration or other expenditure in excess of $100,000, (B)
consideration or other expenditure in excess of $30,000 annually and
are not terminable at the will of the Company within three years
without penalty, or (C) the referral of residents to or by the Company;
(iv) make any capital expenditure (or series of related capital
expenditures) in excess of $1.5 million (unless such expenditure is
identified in the current business plan of the Company as disclosed to
the Acquiring Companies) or that is outside the ordinary course of
business; (v) delay or postpone the payment of accounts payable and
other liabilities outside the ordinary course of business; (vi) cancel,
compromise, waive or release any right or claim (or series of related
rights and claims) not covered by the reserves or accruals relating to
such claim in the Company's balance sheet dated the Report Date in
excess of $50,000 or that is outside the ordinary course of business;
or (vii) enter into any contract or agreement with any Affiliate of the
Company except for transactions in the ordinary course of business upon
commercially reasonable terms;
(g) (i) incur or assume any long-term debt or incur or assume
any short-term debt, except that the Company and its Subsidiaries may
incur or assume debt in the
23
ordinary course of business consistent with past practice under
existing lines of credit; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person; (iii) enter into,
assume or modify any leases or management contracts; or (iv) make any
loans, advances or capital contributions to, or investments in, any
other Person, including officers and directors of the Company or any
Subsidiary of the Company, except in the ordinary course of business
consistent with past practice and except for loans, advances, capital
contributions or investments between any wholly-owned Subsidiary of the
Company and the Company or another wholly-owned Subsidiary of the
Company; or
(h) agree in writing or otherwise to take any of the foregoing
actions.
4.4 ACCESS. Upon reasonable advance notice, the Company shall permit
representatives of the Buyer to have access at reasonable times during normal
business hours, and in a manner so as not to interfere with the normal business
operations of the Company, to the Company's or any of its Subsidiaries'
premises, properties, personnel, books, records (including Tax records),
contracts and documents.
4.5 CONFIDENTIALITY AGREEMENT. The Confidentiality Agreement, dated as
of July 7, 2004, as amended, between the Buyer and the Company (the
"Confidentiality Agreement") shall be deemed amended by the execution of this
Agreement to allow the Acquiring Companies to disclose the terms and conditions
and other facts with respect to the Merger and the Evaluation Material (as
defined in the Confidentiality Agreement) to (i) any Governmental Entities whose
approval or consent is necessary or advisable in connection with this Agreement
and/or the Merger and (ii) any representatives, agents or employees of the
Acquiring Companies who need to know such information for purposes of preparing
for the operation of the Company following consummation of the Merger, subject
to the recipients' confidentiality agreements, where appropriate. Except for the
foregoing amendments, the Confidentiality Agreement shall remain in full force
and shall apply with respect to information furnished thereunder or hereunder
and any other activities contemplated thereby or hereby.
4.6 FURTHER ACTIONS. The Parties agree to use their commercially
reasonable efforts to take all actions and to do all things necessary, proper or
advisable to consummate the Merger by the Closing Date; notwithstanding the
foregoing, nothing set forth in this Section 4.6 shall diminish in any respect
the Acquiring Companies' obligations under Section 4.2 above.
4.7 NO SOLICITATION.
(a) From the date of this Agreement until the Effective Time
or, if earlier, the termination of this Agreement in accordance with
Article 7 (and the payments, if any, required to be made in connection
with such termination pursuant to Section 4.8(b) have been made), the
Company will not, and will not direct, authorize or permit any of its
officers, directors, employees, consultants, representatives and other
agents, including, but not limited to, investment bankers, attorneys
and accountants (collectively, the "Representatives"), to, directly or
indirectly, (i) initiate, solicit, encourage or facilitate any
prospective purchaser or the invitation or submission of any inquiries,
proposals or offers or any other efforts or attempts that constitute,
or may reasonably be expected to
24
lead to, an Acquisition Proposal, (ii) participate in any discussions
or negotiations with, or furnish or disclose any nonpublic information
to, any Person or group of Persons (other than the Acquiring Companies)
in connection with any Acquisition Proposal or otherwise cooperate with
or assist or participate in, or facilitate any such inquiries,
proposals, discussions or negotiations or (iii) accept an Acquisition
Proposal or enter into any agreement or agreement in principle
providing for or relating to an Acquisition Proposal or enter into any
agreement or agreement in principle requiring the Company to abandon,
terminate or fail to consummate the transactions contemplated hereby or
breach its obligations hereunder. Notwithstanding anything in this
Section 4.7 to the contrary, the Company may furnish or disclose
nonpublic information to its lessors and lenders, in their capacity as
such.
(b) Notwithstanding anything to the contrary contained in
Section 4.7(a), if at any time prior to obtaining Stockholder Approval,
(i) the Company and its Representatives have otherwise complied with
the obligations under this Section 4.7(b) and the Company has received
an unsolicited written Acquisition Proposal from a third party that the
board of directors of the Company or the Special Committee believes in
good faith to be bona fide, (ii) the board of directors of the Company
or the Special Committee determines in good faith, after consultation
with its outside legal counsel and after taking into account the advice
of its independent financial advisors that (A) the Person or group of
Persons submitting such Acquisition Proposal is reasonably capable of
consummating such Acquisition Proposal taking into account the legal,
financial, regulatory and other aspects of such Acquisition Proposal
and (B) that such Acquisition Proposal constitutes or could reasonably
be expected to result in a Superior Proposal and (iii) after
consultation with its outside legal counsel, the board of directors of
the Company or the Special Committee determines in good faith that
taking such action is necessary for the board of directors of the
Company or the Special Committee to comply with its fiduciary duties
under applicable law, then the Company may (x) furnish information with
respect to the Company and its Subsidiaries to the Person or group of
Persons making such Acquisition Proposal and (y) participate in
discussions or negotiations with the Person or group of Persons making
such Acquisition Proposal regarding such Acquisition Proposal;
provided, however, that prior to furnishing any such information or
participating in any such discussions or negotiations, (1) the Company
provides written notice to the Buyer of the identity of the Person or
group of Persons making such Acquisition Proposal and the material
terms and conditions thereof and the Company receives from such Person
or group of Persons an executed confidentiality agreement containing
terms no less restrictive than the terms of the Confidentiality
Agreement, dated as of July 7, 2004, as amended, between the Buyer and
the Company, and (2) the Company furnishes such information to the
Buyer (to the extent such information has not been previously delivered
or made available by the Company to the Buyer).
(c) Nothing contained in this Section 4.7 shall prohibit the
Company or the board of directors of the Company from taking and
disclosing to the Stockholders a position with respect to a tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making any other disclosure
if, in the good faith judgment of the board of directors of the
Company, after consultation
25
with its outside legal counsel, failure to do so would result in a
violation of applicable law.
(d) Neither the board of directors of the Company nor any
committee thereof shall, directly or indirectly, withdraw (or modify in
a manner adverse to the Buyer and Alpha Acquisition), or propose to
withdraw (or modify in a manner adverse to the Buyer and Alpha
Acquisition), the approval, recommendation or declaration of
advisability by such board of directors or any such committee thereof
of this Agreement, or the Merger or the other transactions contemplated
by this Agreement (any such action being referred to as an "Adverse
Recommendation Change"). Notwithstanding the foregoing, at any time
prior to obtaining Stockholder Approval, the board of directors of the
Company or any committee thereof may make an Adverse Recommendation
Change if the members of such board of directors or any committee
thereof determines in good faith, after consultation with outside legal
counsel, that taking such action is necessary to comply with its
fiduciary duties under applicable law.
(e) Neither the board of directors of the Company nor any
committee thereof shall, directly or indirectly, approve, adopt or
recommend, or propose to approve, adopt or recommend, or allow the
Company or any of its Subsidiaries to execute or enter into, any letter
of intent, memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar agreement
constituting or related to, or that is intended to or could reasonably
be expected to lead to, an Acquisition Proposal. Notwithstanding the
foregoing, the Company shall not be prohibited from entering into a
definitive agreement with respect to an unsolicited, bona fide and
written Acquisition Proposal that is submitted after the date of this
Agreement and prior to obtaining Stockholder Approval by a third party
if (i) the Company and its Representatives have otherwise complied with
the obligations under this Section 4.7, (ii) the Company provides Buyer
with written notice at least five Business Days prior to any meeting of
the board of directors of the Company at which such board of directors
will consider whether such Acquisition Proposal constitutes a Superior
Proposal, during which five-Business Day period the Company shall cause
its financial and legal advisors to negotiate in good faith with Buyer
in an effort to make such adjustments in the terms and conditions of
this Agreement as would enable the Company to proceed with the
transactions contemplated herein on such adjusted terms, (iii)
notwithstanding such negotiations and adjustments pursuant to clause
(ii) above, the board of directors of the Company makes the
determination necessary for such Acquisition Proposal to constitute a
Superior Proposal, (iv) the board of directors of the Company
determines in good faith, after having taken into account the advice of
its outside legal counsel, that taking such action is necessary for the
board of directors of the Company to comply with its fiduciary duties
under applicable law, (v) the Company does not approve or recommend or
enter into a definitive agreement with respect to such Acquisition
Proposal at any time before the day that is the fifth Business Day
after Buyer receives written notice from the Company stating that the
board of directors of the Company has determined such Acquisition
Proposal constitutes a Superior Proposal and (vi) on the date of the
approval or recommendation of, or execution of a definitive agreement
with respect to, any such Superior Proposal, the Company makes the
payments
26
required to be made pursuant to Section 4.8(b) (any such definitive
agreement being referred to herein as a "Permitted Alternative
Agreement").
(f) In addition to the obligations of the Company set forth in
this Section 4.7, from and after the date hereof, the Company will (i)
keep the Buyer generally informed on a reasonably prompt basis of the
status of and material developments respecting any solicitations,
inquiries, proposals and/or negotiations (including the identity of the
Person making any such inquiry, solicitation or proposal and as to the
material terms and price in respect of any Acquisition Proposal), (ii)
provide to the Buyer as soon as practicable after receipt or delivery
thereof with copies of all written acquisition proposals sent or
provided to the Company or its Representatives from any Person and
(iii) provide the required notice to the Buyer of any intent to take
any of the actions described in Section 4.7(e) or to terminate this
Agreement pursuant to Section 7.1(c) or to enter into a Permitted
Alternative Agreement (it being understood that the Company shall not
be entitled to take any of the actions described in Section 4.7(e), or
to terminate this Agreement in accordance with Section 7.1(c), unless
and until it fully complies with Section 4.7(e)).
(g) The Company and its Representatives shall immediately
cease any discussions or negotiations, if any, with any other parties
that may be ongoing as of the date hereof with respect to any
Acquisition Proposal. The Company shall, within five (5) Business Days
after the date of this Agreement, request each Person who has
heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company or any portion thereof to return
or destroy all confidential information heretofore furnished to such
Person by or on behalf of the Company. The Company represents and
warrants to the Acquiring Companies that neither the Company nor any of
its Representatives has any agreement, arrangement or understanding in
connection with any party's proposed acquisition of the Company that,
directly or indirectly, would be violated or require any payments in
the nature of a topping or break-up fee, expense reimbursement or the
like by reason of the execution of this Agreement and/or consummation
of the Merger.
4.8 FEES AND EXPENSES.
(a) Except as otherwise provided in this Section 4.8, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the party incurring
such costs and expenses.
(b) If (i) the Company terminates this Agreement pursuant to
Section 7.1(c), (ii) the Buyer terminates this Agreement pursuant to
Section 7.1(d), (iii) the Buyer terminates this Agreement pursuant to
Section 7.1(f) or (iv) the Company or the Buyer terminate this
Agreement pursuant to Sections 7.1(b) or 7.1(i) and in the case of such
a termination pursuant to Sections 7.1(b) or 7.1(i) (A) at any time
after the date of this Agreement and prior to such termination an
Acquisition Proposal shall have been publicly announced or otherwise
publicly communicated to the Stockholders generally and (B) prior to
the twelve month anniversary of such termination, the Company shall
enter into a definitive agreement with respect to an Acquisition
Proposal or an
27
Acquisition Proposal is consummated, then the Company shall, in the
case of clause (i), as provided in Section 4.7(e)(vi), in the case of
clauses (ii) or (iii), not later than one Business Day following such
termination, or in the case of clause (iv) not later than one Business
Day following the entering into of a definitive agreement with respect
to, or the consummation of, an Acquisition Proposal prior to the twelve
month anniversary of such termination, as applicable, (I) reimburse the
Buyer in immediately available funds for the documented out-of-pocket
fees and expenses (but in no event greater than $2,000,000) incurred by
the Buyer in connection with this Agreement, the transactions
contemplated hereby and any related financing and (II) in the case of
clauses (i), (ii) or (iv), pay to the Buyer in immediately available
funds an amount equal to $6,000,000. The Company acknowledges that the
agreements contained in this Section 4.8(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these
agreements, the Buyer and Alpha Acquisition would not enter into this
Agreement; accordingly, if the Company fails to pay the amount due
pursuant to this Section 4.8(b), and, in order to obtain such payment,
the Buyer commences a suit which results in a judgment against the
Company for the fee set forth in this Section 4.8(b), the Company shall
pay to the Buyer its costs and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together
with interest on the amount of the fee at the prime rate as set forth
in the Midwest Edition of The Wall Street Journal in effect on the date
such payment was required to be made.
(c) If the Company terminates this Agreement pursuant to
Section 7.1(e), then the Buyer shall, not later than one Business Day
following such termination, reimburse the Company in immediately
available funds for the documented out-of-pocket fees and expenses (but
in no event greater than $2,000,000) incurred by the Company in
connection with this Agreement and the transactions contemplated
hereby. The Acquiring Companies acknowledge that the agreements
contained in this Section 4.8(c) are an integral part of the
transactions contemplated by this Agreement, and that, without these
agreements, the Company would not enter into this Agreement;
accordingly, if the Buyer fails to pay the amount due pursuant to this
Section 4.8(c), and, in order to obtain such payment, the Company
commences a suit which results in a judgment against the Buyer for the
fee set forth in this Section 4.8(c), the Buyer shall pay to the
Company its costs and expenses (including reasonable attorneys' fees
and expenses) in connection with such suit, together with interest on
the amount of the fee at the prime rate as set forth in the Midwest
Edition of The Wall Street Journal in effect on the date such payment
was required to be made.
ARTICLE 5
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
5.1 EMPLOYEE BENEFIT PLANS AND PRACTICES.
(a) From and after the Effective Time, the Surviving
Corporation and its Subsidiaries shall honor in accordance with their
terms all of the existing employment, severance, consulting and salary
continuation agreements between the Company or any
28
of its Subsidiaries and any current or former officer, director,
employee or consultant of the Company or any of its Subsidiaries or
group of such officers, directors, employees or consultants that are
set forth on Schedule 5.1(a).
(b) Until the first anniversary of the Effective Time, the
Surviving Corporation shall not materially and adversely alter the
benefits (including health benefits, severance policies and general
employment policies and procedures) that are available to employees of
the Company and its Subsidiaries on the date hereof (other than
modifications to any employee benefit plans in the ordinary course of
business consistent with past practice and other than with respect to
any equity-based compensation). Nothing in this Section 5.1(b) shall be
deemed to prevent the Surviving Corporation or any of its Subsidiaries
from making any change required by applicable law.
(c) To the extent permitted under applicable law, each
employee of the Company or its Subsidiaries shall be given credit for
all service with the Company or its Subsidiaries (or service credited
by the Company or its Subsidiaries) under all employee benefit plans,
programs, policies and arrangements maintained by the Surviving
Corporation and its Subsidiaries in which they participate or in which
they become participants for purposes of eligibility, vesting and
benefit accrual (but not benefit accrual in any defined benefit pension
plan) including, for purposes of determining (i) short-term and
long-term disability benefits, (ii) severance benefits, (iii) vacation
benefits and (iv) benefits under any retirement plan.
(d) This Section 5.1 shall survive the consummation of the
Merger at the Effective Time and shall continue without limit except as
expressly set forth herein.
5.2 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) All rights to indemnification and exculpation from
liability for acts and omissions occurring at or prior to the Effective
Time and rights to advancements of expenses relating thereto now
existing in favor of the current or former directors, officers,
employees and agents of the Company and its Subsidiaries (the
"Indemnitees") as provided in their respective charters and/or bylaws
(or similar organizational documents) or in any indemnification
agreement as of the date of this Agreement, shall survive the Merger
and, for a period of six years from the Effective Time, such provisions
shall not be amended, repealed or otherwise modified in any manner that
would adversely affect the rights thereunder of any such Indemnitees,
unless an alteration or modification of such documents is required by
applicable law or each Indemnitee affected thereby otherwise consents
in writing thereto. Without limiting the generality of the foregoing,
from and after the Closing Date, the Surviving Corporation shall
indemnify and hold harmless each Indemnitee against all claims, losses,
liabilities, damages, judgments, fines and reasonable fees, costs and
expenses, including attorneys' fees and disbursements, incurred in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out
of or pertaining to (i) the fact that the Indemnitee is or was an
officer, director, employee or agent of the Company or any of its
Subsidiaries or (ii) matters existing or occurring at or prior to the
Effective Time (including this Agreement and the transactions and
actions contemplated hereby),
29
whether asserted or claimed prior to, at or after the Effective Time,
to the fullest extent permitted under applicable law. Each Indemnity
shall be entitled to advancement of expenses incurred in the defense of
any claim, action, suit, proceeding or investigation from the Surviving
Corporation within ten (10) Business Days of receipt by the Surviving
Corporation from the Indemnitee of a request thereof; provided,
however, that any Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that
such a Person is not entitled to indemnification. If any claim or
claims are asserted or made as to matters subject to the foregoing
indemnity provisions within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue
until the disposition thereof. The Buyer shall take all commercially
reasonable steps necessary to assure compliance with the foregoing
covenants.
(b) For a period of six years after the Effective Time, the
Surviving Corporation shall, and the Buyer shall (in the event of a
failure by the Surviving Corporation to do so), maintain, at no expense
to the beneficiaries thereof, the current policies of officers' and
directors' liability insurance and fiduciary liability insurance in
respect of acts or omissions occurring at or prior to the Effective
Time (including the transactions contemplated by this Agreement), so
long as the annual premium therefor would not be in excess of
$1,050,000 (such $1,050,000 the "Maximum Premium"). If the Company's
existing insurance expires, is terminated or cancelled during such
six-year period or exceeds the Maximum Premium, the Surviving
Corporation or the Buyer, as the case may be, shall obtain as much
directors' and officers' liability insurance as can be obtained for the
remainder of such period for an annualized premium not in excess of the
Maximum Premium, on terms and conditions no less advantageous to the
Indemnitees than the Company's existing directors' and officers'
liability insurance, covering Indemnitees who are currently covered by
the Company's existing officers' and directors' or fiduciary liability
insurance policies.
(c) In the event that the Buyer or the Surviving Corporation
or any of its respective successors or assigns (i) consolidates with or
merges into any other Person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers
all or substantially all of its properties and assets to any Person,
proper provisions shall be made so that such Person assumes the
obligations set forth in this Section 5.2, and Buyer shall cause such
Person to assume such obligations.
(d) This Section 5.2, which shall survive the consummation of
the Merger at the Effective Time and shall continue for the periods
specified herein, is intended to benefit the Indemnitees, each of whom
are intended third-party beneficiaries and may enforce the provisions
of this Section 5.2.
5.3 NO STOCKHOLDERS LIABILITY. No actions taken by the Acquiring
Companies, whether in connection with the financing of the transactions
contemplated hereby or otherwise, will result in any liability or obligation on
the part of the Stockholders, whether arising in connection with fraudulent
conveyance laws or otherwise. This Section 5.3, which shall survive the
consummation of the Merger at the Effective Time, is intended to benefit the
Stockholders, each of whom are intended third-party beneficiaries and may
enforce the provisions of this Section 5.3.
30
ARTICLE 6
CONDITIONS TO OBLIGATION TO CLOSE
6.1 CONDITIONS TO OBLIGATION OF THE ACQUIRING COMPANIES. The obligation
of the Acquiring Companies to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Article 3
are true and correct as of the Closing Date as though made on and as of
the Closing Date (provided that, to the extent any such representation
or warranty speaks as of a specified date, it need only be true and
correct as of such specified date), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth therein), individually or in the aggregate,
does not have, and would not be reasonably expected to have, a Material
Adverse Effect;
(b) the Company shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(c) this Agreement and the Merger shall have been adopted and
approved at a meeting of the Stockholders (or an adjournment thereof)
by the holders of a majority of the Shares outstanding as of the record
date for such meeting, or by the written consent of Stockholders having
the same effect (the "Stockholder Approval");
(d) there shall have been no Material Adverse Change since
June 30, 2004;
(e) no action, suit or proceeding before any Governmental
Entity shall have been commenced or threatened, and no investigation by
any Governmental Entity shall have been commenced, against the
Acquiring Companies or the Company or any of their respective
Affiliates, officers or directors (in such capacity) seeking to
restrain, prevent or change the Merger, or questioning the validity or
legality of the Merger, or seeking damages in connection with, or
imposing any condition on, the Merger; provided, however, that neither
of the following shall impede the Closing: (i) any such action, suit or
proceeding by LTC Properties, Inc. or any of its Affiliates or (ii) any
stockholder litigation arising from allegations of breach of fiduciary
duty relating to this Agreement, except for such litigation set forth
on Schedule A;
(f) the Company shall have received the resignations of all of
its directors and the directors of all of its Subsidiaries in a form
reasonably satisfactory to the Buyer or such directors shall have
otherwise been removed;
(g) the Company shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
in Sections 6.1(a) through (f) is satisfied;
(h) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
31
(i) the Parties shall have received (A) all authorizations,
consents and approvals and (B) all material licenses, registrations,
certifications and accreditations, in the case of each of clauses (A)
and (B), of Governmental Entities (other than lenders under financing
agreements) required in order to consummate the transaction
contemplated by this Agreement or necessary for the lawful conduct of
the business of the Company and its Subsidiaries upon consummation of
the Merger; and
(j) all actions to be taken by the Company in connection with
consummation of the transactions contemplated by this Agreement, and
all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated by this Agreement, shall have
been reasonably satisfactory in form and substance to the Buyer.
The Acquiring Companies may waive any condition specified in this Section 6.1.
6.2 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article 2
that are qualified as to materiality shall be true and correct, and the
representations and warranties set forth in Article 2 that are not so
qualified shall be true and correct in all material respects, in each
case, as of the Closing Date as though made on and as of the Closing
Date (provided that, to the extent that any such representation or
warranty speaks as of a specified date, it need only be true and
correct as of such specified date);
(b) the Acquiring Companies shall have performed and complied
with all of their covenants hereunder in all material respects through
the Closing, and shall have paid the Merger Consideration to the Paying
Agent as required hereunder;
(c) no action suit or proceeding before any Governmental
Entity shall have been commenced or threatened, and no investigation by
any Governmental Entity shall have been commenced, against the
Acquiring Companies or the Company or any of their respective
Affiliates, officers or directors (in such capacity) seeking to
restrain, prevent or change the Merger, or questioning the validity or
legality of the Merger, or seeking damages in connection with, or
imposing any condition on, the Merger; provided, however, that neither
of the following shall impede the Closing: (i) any such action, suit or
proceeding by LTC Properties, Inc. or any of its Affiliates or (ii) any
stockholder litigation arising from allegations of breach of fiduciary
duty relating to this Agreement, except for such litigation set forth
on Schedule A;
(d) the Acquiring Companies shall have delivered to the
Company a certificate to the effect that each of the conditions
specified above in Sections 6.2(a) through (c) is satisfied;
(e) Stockholder Approval shall have been obtained;
(f) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
32
(g) the Parties shall have received all other authorizations,
consents, and approvals of Governmental Entities referred to in Section
2.3, other than those the failure of which to obtain would not be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect; and
(h) all actions to be taken by the Acquiring Companies in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby shall have been
reasonably satisfactory in form and substance to the Company.
The Company may waive any condition specified in this Section 6.2.
ARTICLE 7
TERMINATION
7.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
as provided below:
(a) the Buyer and the Company may terminate this Agreement by
mutual written consent at any time prior to the Closing, in each case
duly authorized by their respective board of directors;
(b) the Company or the Buyer may terminate this Agreement by
giving written notice thereof to the other Party if the Stockholders'
Meeting is held and the Company fails to obtain Stockholder Approval at
such meeting (or any reconvened meeting after any adjournment thereof);
(c) the Company may, at any time prior to obtaining
Stockholder Approval, terminate this Agreement if the board of
directors of the Company shall have approved, adopted or recommended,
or the Company shall have executed or entered into a definitive
agreement with respect to, a Permitted Alternative Agreement in
compliance with Section 4.7(e).
(d) The Buyer may terminate this Agreement if any of the
following have occurred: (i) the Company or any of its Representatives
violates in any material manner any of the provisions of Section 4.7;
(ii) the Company enters into any agreement, letter of intent or similar
document contemplating or otherwise relating to any Acquisition
Proposal or Permitted Alternative Agreement; (iii) the board of
directors of the Company or any committee thereof (A) shall have made
an Adverse Recommendation Change, or publicly proposed to make an
Adverse Recommendation Change, or shall have approved or recommended or
publicly proposed to approve or recommend to the Stockholders an
Acquisition Proposal or a Permitted Alternative Agreement or (B) fails
to reaffirm publicly and unconditionally its recommendation to the
Stockholders that they approve this Agreement and the Merger, which
public reaffirmation must be made within ten (10) Business Days after
the Buyer's written request to do so (which request may be made at any
time that an Acquisition Proposal is pending and not withdrawn); or
(iv) an Acquisition Proposal is publicly announced and the Company
fails to issue a press
33
release announcing its opposition to such Acquisition Proposal within
ten (10) Business Days after such Acquisition Proposal is announced.
(e) the Company may terminate this Agreement if prior to the
Effective Time, there shall have occurred, on the part of the Acquiring
Companies, a material breach of any representation, warranty, covenant
or agreement contained in this Agreement which is not curable or, if
curable, is not cured within thirty (30) days after written notice of
such breach is given by the Company to the Buyer, except, in any case,
such failures which are not reasonably like to adversely affect the
ability of the Acquiring Companies to consummate the Merger;
(f) the Buyer may terminate this Agreement if prior to the
Effective Time, there shall have occurred, on the part of the Company,
a material breach of any representation, warranty, covenant or
agreement contained in this Agreement which is not curable or, if
curable, is not cured within thirty (30) days after written notice of
such breach is given by the Buyer to the Company, except, in any case,
such failures which are not reasonably like to adversely affect the
Company's ability to consummate the Merger;
(g) the Company may terminate this Agreement if there has been
a failure of satisfaction of a condition to the obligations of the
Company set forth in Section 6.2 that has not been waived;
(h) the Buyer may terminate this Agreement if there has been a
failure of satisfaction of a condition to the obligations of the
Acquiring Companies set forth in Section 6.1 that has not been waived;
and
(i) in the event the Closing shall not have occurred on or
before February 28, 2005, either the Buyer or the Company may terminate
this Agreement by giving written notice thereof to the other Party
prior to Closing (unless the failure to close results primarily from
the Party that elects to terminate because it has breached any covenant
contained in this Agreement); provided, however, that the Buyer or the
Company may elect to extend such date by no more than thirty (30) days
if the condition set forth in Section 6.1(i) or Section 6.2(g),
respectively, has not been satisfied by such date.
7.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7.1 above, then this Agreement shall forthwith become void,
and there shall be no further liability or obligation hereunder on the part of
any party hereto or their respective Affiliates, officers, directors or
stockholders; provided, however, that (i) Section 4.8, this Section 7.2, Article
8 and the confidentiality and other provisions contained in the Confidentiality
Agreement shall each survive termination and (ii) no such termination shall
release any Party from liability (which liability shall not be limited by
Section 4.8) for a breach of any term or provision of this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior
34
to the Closing without the prior approval of the other Party; provided, however,
that either Party may make any public disclosure that it believes in good faith
is required by applicable law or any listing agreement concerning its
publicly-traded securities (in which case such Party shall use commercially
reasonable efforts to advise the other Party prior to making the disclosure and
to limit its disclosures to those required under such applicable law or
agreement). Notwithstanding the foregoing, the Company and the Acquiring
Companies shall use commercially reasonable efforts to jointly draft all
disclosures to employees of matters relating to the Merger.
8.2 NO THIRD-PARTY BENEFICIARIES. Except as specifically provided in
Section 5.2 and Section 5.3, this Agreement shall not confer any rights or
remedies upon any Person other than the Parties and their respective successors
and permitted assigns.
8.3 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) and the Confidentiality Agreement constitute the entire agreement
among the Parties and supersede any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
have related in any way to the subject matter hereof.
8.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, including, without limitation, facsimile counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
8.6 HEADINGS. The Section headings contained in this Agreement are
inserted for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed to have been duly given
when delivered in person, by overnight courier or facsimile to the intended
recipient as set forth below:
If to the Company: Assisted Living Concepts, Inc.
1349 Empire Central, Suite 900
Dallas, Texas 75247
Attention: Special Committee of Board of
Directors Mark Holliday, Chairman
Copy to: Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
Attention: Roy Bertolatus
35
If to an Acquiring
Company: Extendicare Health Services, Inc.
111 West Michigan Street
Milwaukee, Wisconsin 53203
Attention: Chief Financial Officer
Copy to: Foley & Lardner LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5306
Attention: Russell E. Ryba
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
8.8 TERMINATION OF COMPANY'S REPRESENTATIONS. All representations and
warranties made by the Company pursuant to this Agreement shall terminate as of
the Effective Time or upon the termination and abandonment of this Agreement
pursuant to Section 7.1, as the case may be; and neither the Company, nor any of
its officers or directors, shall have any liability hereunder to the Acquiring
Companies or their stockholders, directors or officers in respect thereof from
and after the Effective Time.
8.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Nevada without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Nevada or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Nevada.
8.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
of the Parties; provided, however, that, after Stockholder Approval is obtained,
no term or condition contained in this Agreement shall be amended or modified in
any manner that by law requires further approval by the Stockholders without so
obtaining such further Stockholder Approval.
8.11 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
8.12 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean "including, without limitation".
36
8.13 FURTHER ASSURANCES. Upon the terms and subject to the conditions
of this Agreement, each of the Parties hereto shall use commercially reasonable
efforts to take, or cause to be taken, all action, to do, or cause to be done,
all other things necessary, proper or advisable to consummate and make effective
as promptly as practical the transactions contemplated by this Agreement, to
obtain in a timely manner all waivers, consents and approvals required by this
Agreement and to effect all necessary registrations and filings and otherwise to
satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement.
[SIGNATURE PAGE FOLLOWS]
37
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
EXTENDICARE HEALTH SERVICES, INC.
By: /s/ Melvin A. Rhinelander
------------------------------------------
Name: Melvin A. Rhinelander
Title: Chairman and Chief Executive Officer
ALPHA ACQUISITION:
ALPHA ACQUISITION, INC.
By: /s/ Melvin A. Rhinelander
------------------------------------------
Name: Melvin A. Rhinelander
Title: Chairman and Chief Executive Officer
COMPANY:
ASSISTED LIVING CONCEPTS, INC.
By: /s/ Steven Vick
-----------------------------------------
Name: Steven Vick
Title: President and CEO
38
ANNEX A
Definitions
"Acquiring Company" / "Acquiring Companies" has the meaning set forth
in the preface above.
"Acquisition Proposal" means any inquiry, proposal or offer received
after the date of this Agreement from any Person or group of Persons relating to
(i) any direct or indirect acquisition or purchase of assets of the Company or
any of its Subsidiaries that constitutes 20% or more of the net revenues, net
income or assets of the Company and its Subsidiaries, taken as a whole, or 10%
or more of the outstanding Shares, or 20% or more of any class of equity
securities of any Material Subsidiary, (ii) any tender offer or exchange offer
that if consummated would result in any Person or group of Persons beneficially
owning 10% or more of the outstanding Shares or 20% or more of any class of
equity securities of any Material Subsidiary, (iii) any merger, reorganization,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any
Material Subsidiary or (iv) any other transaction, the consummation of which
would reasonably be expected to impede, interfere with, prevent or materially
delay the Merger or which would reasonably be expected to dilute materially the
benefits to the Buyer of the transactions contemplated hereby; other than, in
each case, the transactions contemplated by this Agreement.
"Adverse Recommendation Change" has the meaning set forth in Section
4.7(d) above.
"Affiliates" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"Agreement" has the meaning set forth in the preface above.
"Alpha Acquisition" has the meaning set forth in the preface above.
"Articles of Merger" has the meaning set forth in the Section 1.3
above.
"Benefits Affiliate" has the meaning set forth in Section 3.16 above.
"Benefit Plan" / "Benefit Plans" has the meaning set forth in Section
3.16 above.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in the State of Nevada are authorized or required by
law to be closed.
"Buyer" has the meaning set forth in the preface above.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, as amended.
"Certificate" / "Certificates" has the meaning set forth in Section
1.5(d) above.
"Closing" has the meaning set forth in Section 1.2 above.
"Closing Date" has the meaning set forth in Section 1.2 above.
A-1
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Disclosure Schedules" has the meaning set forth in the preface
to Article 3 above.
"Company Permits" has the meaning set forth in Section 3.13 above.
"Company SEC Documents" has the meaning set forth in Section 3.9 above.
"Confidentiality Agreement" has the meaning set forth in Section 4.5
above.
"Contract" / "Contracts" means all of the contracts, agreements and
obligations, written or oral, to which the Company or its Subsidiaries are a
party or by which the Company or its Subsidiaries or any of their respective
assets are bound, including any loan, bond, mortgage, indenture, lease
instrument, franchise, license or supplier, vendor or employment agreement.
"Dissenting Shares" has the meaning set forth in Section 1.5(c) above.
"Effective Time" has the meaning set forth in Section 1.3 above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" has the meaning set forth in Section 1.11(a)(i) above.
"Financial Statements" has the meaning set forth in Section 3.8(a)
above.
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time.
"Governmental Entity" / "Governmental Entities" means any court,
tribunal, judicial body, arbitrator, stock exchange, administrative or
regulatory agency, self-regulatory organization, regulatory body or commission
or other governmental or quasi-governmental authority or instrumentality,
whether local, state or federal, domestic or foreign.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Hazardous Substances" has the meaning set forth in Section 3.11(i)
above.
"Hazardous Substances Laws" has the meaning set forth in Section
3.11(i) above.
"Indemnitees" has the meaning set forth in Section 5.2(a) above.
"Knowledge" when applied to the Company means the actual knowledge of
Steven Vick, Edward Barnes and/or Linda Martin, after reasonable inquiry.
"Leased Real Property" has the meaning set forth in Section 3.11(b)
above.
A-2
"Leases" has the meaning set forth in Section 3.11(f) above.
"Litigation" has the meaning set forth in Section 3.15 above.
"LTC Leases" means those certain Leases pursuant to which LTC
Properties, Inc., or one of its Affiliates, is the lessor of the Leased Real
Property.
"Material Adverse Change" means any change in or effect on the
business, results of operations, assets, financial condition or liabilities of
the Company or any of the Subsidiaries of the Company that in the aggregate
equals or exceeds 5% of the aggregate amount of the Merger Consideration.
"Material Adverse Effect" means any change in or effect on the
business, results of operations, assets, financial condition or liabilities of
the Company or any of the Subsidiaries of the Company that is materially adverse
to the Company and its Subsidiaries taken as a whole; provided, however, that
any change or effect resulting from, or directly relating to, any of the
following shall not be taken into account in making any such determination and
shall not be deemed to constitute or give rise to a Material Adverse Effect: (i)
any change or changes in general economic conditions or local, regional or
national industry conditions (including, without limitation, changes in
applicable laws or regulations, and changes in financial or market conditions);
(ii) in and of itself, any change in the market price or trading volume of the
Shares; (iii) in and of itself, a failure by the Company to meet the revenue or
earnings predictions of equity analysts for any period ending (or for which
earnings are released) during the period prior to the Closing Date; (iv) the
taking of any action required by this Agreement or to which the Buyer has given
its written consent; (v) any changes or effects to the extent primarily
attributable to the fact that Echo is the Buyer; (vi) any changes or effects
resulting from the actions of the Buyer or any of its Subsidiaries; (vii) any
stockholder litigation arising from allegations of breach of fiduciary duty
relating to this Agreement, except for such litigation set forth on Schedule A;
(viii) any acts of war or terrorism; (ix) changes in GAAP; or (x) any event or
matter having a change in or effect on the LTC Leases (including, without
limitation, any declaration or threat of declaring an event of default under the
LTC Leases) or any Litigation pending or threatened in connection with the LTC
Leases that directly results from the execution of this Agreement or the
consummation of the Merger; in the case of each of (i), (viii) and (ix), that do
not disproportionately affect the Company or its Subsidiaries.
"Material Subsidiary" means any Subsidiary or Subsidiaries of the
Company whose business constitutes 20% or more of the net revenues, net income
or assets of the Company and its Subsidiaries, taken as a whole.
"Maximum Premium" has the meaning set forth in Section 5.2(b) above.
"Medicaid Waiver Programs" has the meaning set forth in Section 2.3
above.
"Merger" has the meaning set forth in the recitals above.
"Merger Consideration" has the meaning set forth in Section 1.5(b)
above.
"Merger Fund" has the meaning set forth in Section 1.9(a) above.
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"Nevada Act" has the meaning set forth in the recitals above.
"Option Holder" / "Option Holders" means the holders, or individually a
holder, of Stock Options, together with their successors and assigns.
"Owned Real Property" has the meaning set forth in Section 3.11(a)
above.
"Party" / "Parties" has the meaning set forth in the preface above.
"Paying Agent" has the meaning set forth in Section 1.9(a) above.
"PCBs" has the meaning set forth in Section 3.11(l) above.
"Permitted Alternative Agreement" has the meaning set forth in Section
4.7(e) above.
"Permitted Liens" has the meaning set forth in Section 3.11(h) above.
"Per Share Merger Consideration" has the meaning set forth in Section
1.5(b) above.
"Person" shall mean any natural person, firm, partnership, limited
liability company, joint venture, business trust, trust, association,
corporation, company, unincorporated entity or other entity.
"Policy" / "Policies" has the meaning set forth in Section 3.7 above.
"Property" has the meaning set forth in Section 3.11(b) above.
"Proxy Statement" has the meaning set forth in Section 1.11(a)(i)
above.
"Report Date" has the meaning set forth in Section 3.8(a) above.
"Representatives" has the meaning set forth in Section 4.7(a) above.
"Rights" means rights under the Rights Agreement.
"Rights Agreement" means the Rights Agreement, dated October 1, 2004,
between the Company and American Stock Transfer & Trust Company, as Rights
Agent.
"SEC" means the Securities and Exchange Commission.
"Share" / "Shares" means the shares, or individually a share, of common
stock, par value $.01 per share, of the Company.
"Special Committee" has the meaning set forth in Section 3.19 above.
"Stockholders" means the holders of Shares, together with their
successors and assigns.
"Stockholder Approval" has the meaning set forth in Section 6.1 above.
"Stockholders' Meeting" has the meaning set forth in Section
1.11(a)(ii) above.
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"Stock Options" means outstanding options to acquire Shares under the
Stock Plan.
"Stock Plan" means the Company's 2002 Incentive Award Plan, as amended
to date.
"Subsidiary" / "Subsidiaries" means with respect to any party, any
Person (A) of which such party or any other Subsidiary of such party is a
general partner, (B) of which voting power to elect a majority of the board of
directors or others performing similar functions with respect to such Person is
held by such party or by one or more of its Subsidiaries or (C) of which at
least 50% of the equity interests (or economic equivalent) of such Person are,
directly or indirectly, owned or controlled by such party or by one or more of
its Subsidiaries.
"Superior Proposal" means a bona fide written Acquisition Proposal to
acquire all of the issued and outstanding Shares or all or substantially all of
the properties and assets of the Company that the board of directors of the
Company or the Special Committee in good faith determines, after consultation
with its outside legal counsel and after taking into account the advice of its
independent financial advisor and all of the terms and conditions of such
Acquisition Proposal (including, without limitation, any expense reimbursement
provisions, termination fees and conditions), (A) would, if consummated, result
in a transaction that is more favorable to the Stockholders entitled to receive
the Merger Consideration hereunder (in their capacities as stockholders), from a
financial point of view, than the transactions contemplated hereby and (B) is
capable of being, and is reasonably likely to be, completed without undue delay.
"Surviving Corporation" has the meaning set forth in the Section 1.1
above.
"Tangible Property" has the meaning set forth in Section 3.11(c) above.
"Tax" means any federal, state, county, local, territorial, provincial
or foreign income, net income, gross receipts, single business, unincorporated
business, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, gains,
withholding, social security (or similar), payroll, unemployment, disability,
workers' compensation, real property, personal property, ad valorem,
replacement, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition, whether or not disputed.
"Tax Returns" has the meaning set forth in Section 3.14 above.
"Voting Debt" has the meaning set forth in Section 3.5 above.
"Welfare Plan" has the meaning set forth in Section 3.16(f) above.
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