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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 1, 1999
CENTENNIAL HEALTHCARE CORPORATION
-------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 001-35118 58-1839701
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
400 Perimeter Center Terrace, Suite 650, Atlanta, Georgia 30346
- ----------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(770) 698-9040
----------------
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
------------------------------------
Effective January 1, 1999 (the "Effective Date"), Centennial HealthCare
Corporation ("Centennial") completed its acquisition of certain of the assets of
Thomas J. Flatley and Charlotte Flatley d/b/a Flatley Rehabilitation & Nursing
Centers ("Seller"), comprising six skilled nursing facilities, with a total of
795 licensed, available beds, located in the metropolitan Boston area pursuant
to a Purchase and Sale Agreement, dated as of September 2, 1998. Centennial used
funds available under its Senior Credit Facility with NationsBank, N.A. and
First Union, N.A. as lenders and agents for the other lenders to pay the $64.0
million purchase price in cash. The consideration paid was determined through
arms-length negotiations between representatives of Centennial and Seller.
Seller used the acquired physical assets in its operation of the facilities as
skilled nursing facilities and Centennial will continue to use such assets in
such manner. A complete description of the acquisition is contained in the
Purchase Agreement attached as Exhibit 2.1 to this Report, which is incorporated
herein by this reference.
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of Business Acquired.
The required financial statements will be filed on Form 8-K/A as soon
as practicable, but in any event within 60 days after this Current
Report on Form 8-K is filed.
(b) Pro Forma Financial Information.
The required pro forma financial information will be filed on Form
8-K/A as soon as practicable, but in any event within 60 days after
this Current Report on Form 8-K is filed.
(c) Exhibits.
2.1 Purchase and Sale Agreement, by and between Centennial HealthCare
Corporation and Thomas J. Flatley and Charlotte Flatley d/b/a Flatley
Rehabilitation & Nursing Centers, dated as of September 2, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTENNIAL HEALTHCARE CORPORATION
(Registrant)
Date: January 15, 1999 By: /s/ Alan C. Dahl
----------------------------------------
Alan C. Dahl, Executive Vice President
and Chief Financial Officer
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EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
BY AND AMONG
THOMAS J. FLATLEY
CHARLOTTE FLATLEY
(d/b/a FLATLEY REHABILITATION & NURSING CENTERS)
(collectively, the "Seller")
AND
CENTENNIAL HEALTHCARE CORPORATION
(the "Buyer")
Dated: September 2, 1998
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TABLE OF CONTENTS
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<TABLE>
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Page
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PRELIMINARY STATEMENT................................................ 1
ARTICLE I
1.01 Definitions.............................................. 1
1.02 References............................................... 15
1.03 Pronouns................................................. 15
ARTICLE II Agreement for Sale and Purchase....................... 15
2.01 Purchased Assets......................................... 15
2.02 Due Diligence Materials Reviews and Inspections.......... 15
2.03 Schedules and Exhibits................................... 18
ARTICLE III Purchase Price........................................ 18
3.01 Amount of Purchase Price................................. 18
3.02 Payment of Purchase Price................................ 19
3.03 Earnest Money............................................ 19
3.04 Liabilities Assumed and Excluded......................... 20
3.05 Designation of Transferees............................... 20
ARTICLE IV Representations and Warranties........................ 21
4.01 Representations and Warranties of Seller................. 21
(a) Organization and Authority......................... 21
(b) Binding Effect..................................... 21
(c) Non-Contravention.................................. 21
(d) Rights to Purchase................................. 21
(e) Condemnation....................................... 21
(f) Tax Abatements..................................... 22
(g) Personal Property.................................. 22
(h) Operating Agreement and Equipment Leases........... 22
(i) List of Residents.................................. 22
(j) Motor Vehicles..................................... 22
(k) Compliance with Legal Requirements................. 22
(l) Taxes.............................................. 23
(m) Foreign Person Affidavit........................... 23
(n) Permits............................................ 23
(o) Environmental Matters.............................. 23
</TABLE>
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<TABLE>
<S> <C>
(p) Employees.......................................... 24
(q) ERISA Matters...................................... 24
(r) Litigation......................................... 24
(s) Bankruptcy......................................... 25
(t) Insurance.......................................... 25
(u) Patient Funds...................................... 25
(v) Sufficiency of Purchased Assets.................... 25
(w) Participation...................................... 25
(x) Intellectual Property Licenses..................... 25
(y) Financial Statements............................... 26
(z) Certain Changes.................................... 26
(aa) Compliance with HealthCare Regulations............. 27
(bb) Discharge of Obligations........................... 27
(cc) Occupancy.......................................... 27
(dd) No Rebates or Allowances........................... 27
(ee) Utilities.......................................... 27
(ff) Condition and Repair Requirements.................. 27
(gg) Liens on Purchased Assets.......................... 27
4.02 Representations and Warranties of Buyer.................. 28
(a) Organization and Authority......................... 28
(b) Binding Effect..................................... 28
(c) Non-Contravention.................................. 28
(d) Litigation......................................... 28
(e) Suitability........................................ 28
4.03 Condition of the Property; No Warranty; Buyer's
Assumption of Risk...................................... 28
4.04 Survival of Representations and Warranties............... 31
4.05 Agreements Regarding Representations and Warranties...... 31
4.06 Indemnities.............................................. 32
ARTICLE V Closing Matters.......................................... 36
5.01 Time and Place for Closing............................... 36
5.02 Title Commitments and Policies........................... 36
5.03 Surveys.................................................. 37
5.04 Seller Closing Documents................................. 38
5.05 Buyer's Closing Documents................................ 40
5.06 Delivery of Records...................................... 41
5.07 Other Deliveries......................................... 42
5.08 Documentary Taxes; Recording Charges..................... 42
5.09 Form of Documents........................................ 42
5.10 Possession............................................... 42
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI Adjustments and Prorations; Accounts Receivable........ 42
6.01 Adjustments............................................ 43
(a) Taxes................................................. 43
(b) Utilities............................................. 43
(c) Facility Contracts.................................... 43
(d) Employee Matters...................................... 44
(e) Security Deposits; Advance Deposits................... 44
(f) Municipal Betterments................................. 44
(g) Vending Machines; Commissions; Rebates................ 44
(h) Inventories........................................... 44
(i) Patient Funds Account................................. 44
(j) Resident Council Accounts............................. 45
(k) Other Customarily Adjusted Items...................... 45
(l) Adjustment to Purchase Price Related to Changes in
Annualized EBITDAM.................................... 45
6.02 Closing Statements......................................... 45
6.03 Accountant's Examination................................... 45
6.04 Accounts Receivable........................................ 46
ARTICLE VII Conditions Precedent to Closing....................... 46
7.01 Conditions Precedent to Buyer's Obligations................. 46
7.02 Conditions Precedent to Seller's Obligations................ 48
7.03 Waiver...................................................... 49
7.04 Covenant to Satisfy Conditions.............................. 49
7.05 Use of Purchase Price to Clear Title........................ 49
7.06 Hart-Scott.................................................. 50
ARTICLE VIII Further Covenants and Agreements; Default............. 50
8.01 Seller's Covenants Pending Closing.......................... 50
8.02 Publicity................................................... 52
8.03 Condemnation................................................ 52
8.04 Casualty.................................................... 53
8.05 Miscellaneous Covenants of the Parties...................... 53
(a) Expenses............................................... 53
(b) Brokerage.............................................. 53
(c) Operating Taxes........................................ 54
(d) Tax Free Exchange...................................... 54
8.06 Default..................................................... 55
8.07 Employees; Employee Benefits................................ 56
8.08 Resident Property........................................... 56
8.09 Permits; Licenses........................................... 56
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IX Miscellaneous.......................................... 57
9.01 Notices.................................................... 57
9.02 Entire Agreement; Amendments............................... 58
9.03 Governing Law.............................................. 58
9.04 Headings................................................... 59
9.05 Counterparts............................................... 59
9.06 Time of the Essence........................................ 59
9.07 Recoupment Refunds......................................... 59
9.08 Notices of Intent; Waiting Periods, Etc.................... 60
9.09 Binding Effect............................................. 60
9.10 No Third Party Beneficiary................................. 60
9.11 Enforceability............................................. 60
9.12 Non-Recordation............................................ 61
ARTICLE X Noncompetition and Nonsolicitation......................... 61
10.01 Noncompetition............................................. 61
10.02 Nonsolicitation............................................ 62
10.03 Right of First Refusal..................................... 62
10.04 Severability............................................... 63
10.05 Certain Remedies........................................... 63
</TABLE>
<PAGE>
EXHIBITS
--------
EXHIBIT A Facilities
EXHIBIT B Earnest Money Escrow Agreement
EXHIBIT C Massachusetts Quit Claim Deeds
EXHIBIT D Bills of Sale
EXHIBIT E Assignment and Assumption of Permits and Contracts
EXHIBIT F Assignment and Assumption of Leases
EXHIBIT G Assignment and Assumption of Miscellaneous Property Assets
EXHIBIT H Certificate of Non-Foreign Status
EXHIBIT I Written Notices of Change of Ownership
EXHIBIT J Exchange Escrow Agreement
EXHIBIT K Indemnity Fund Escrow Agreement
SCHEDULES
---------
SCHEDULE 1.01(a) Equipment Leases
SCHEDULE 1.01(b) Land
SCHEDULE 1.01(c) Protected Marks
SCHEDULE 1.01(d) Seller Existing Mortgages
SCHEDULE 3.01(b) Allocation of Purchase Price
SCHEDULE 4.01(e) Condemnation/Proceedings in Eminent Domain
SCHEDULE 4.01(f) Tax Abatements
SCHEDULE 4.01(g) Personal Property
SCHEDULE 4.01(h) Operating Agreements and Equipment Leases
SCHEDULE 4.01(j) Motor Vehicles
SCHEDULE 4.01(k) Compliance with Legal Requirements
SCHEDULE 4.01(l) Taxes
SCHEDULE 4.01(n) Permits
SCHEDULE 4.01(o) Environmental Reports
SCHEDULE 4.01(p) Employee Matters
SCHEDULE 4.01(q) ERISA Matters
SCHEDULE 4.01(r) Litigation
SCHEDULE 4.01(t) Insurance
SCHEDULE 4.01(x) Intellectual Property Licenses
SCHEDULE 4.01(z) Unusual/Material Changes Regarding Facilities
SCHEDULE 4.01(bb) Discharge of Obligations
SCHEDULE 4.01(dd) No Rebates or Allowances
SCHEDULE 4.01(ee) Utilities/Maintenance Costs
SCHEDULE 4.01(ff) Condition and Repair Requirements
SCHEDULE 4.01(gg) Liens on Purchased Assets
SCHEDULE 4.02(d) Material Litigation
SCHEDULE 5.04(j) Entities
SCHEDULE 5.04(o) Opinion of Seller's Counsel
SCHEDULE 5.05(h) Opinion of Buyer's Counsel
SCHEDULE 6.01(d) Employee Bonuses
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SCHEDULE 6.01(i) Patient Funds Account
SCHEDULE 6.01(j) Resident Council bank accounts
SCHEDULE 6.04 Accounts Receivable Treatment
SCHEDULE 8.07 Employees
<PAGE>
PURCHASE AND SALE AGREEMENT
---------------------------
THIS PURCHASE AND SALE AGREEMENT is entered into and dated as of September
2, 1998, by and among Thomas J. Flatley and Charlotte Flatley (d/b/a Flatley
Rehabilitation & Nursing Centers) (collectively, the "Seller"), and Centennial
HealthCare Corporation (the "Buyer").
PRELIMINARY STATEMENT
---------------------
A. Quoted terms used but not defined in this Preliminary Statement have
the meanings set forth in Section 1.01 hereof.
B. Seller is the owner of long term care facility properties (each a
"Facility" and collectively, the "Facilities") each being known and numbered as
set forth on Exhibit A.
---------
C. Seller now desires to sell, and Buyer desires to purchase, the
aforesaid Facilities, subject to and in accordance with all of the terms,
covenants, conditions, provisions and limitations hereinafter set forth.
NOW, THEREFORE, for the mutual covenants set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
---------
1.01 Definitions.
-----------
"Accountant" shall mean PricewaterhouseCoopers LLP or another accountant
----------
mutually agreeable to Buyer and Seller.
"Act of Bankruptcy" shall mean if a party hereto shall (a) apply for or
-----------------
consent to the appointment of, or the taking of possession by a receiver,
trustee or liquidator of itself or of all or a substantial part of its property,
(b) admit in writing its inability to pay its debts as they become due, (c) make
a general assignment for the benefit of its creditors, (d) file a voluntary
petition or commence a voluntary case or proceeding under the Federal Bankruptcy
Code (as now or hereafter in effect), (e) be adjudicated a bankrupt or
insolvent, (f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, (g) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
or proceeding under the Federal Bankruptcy Code (as
<PAGE>
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now or hereafter in effect), or (h) take any corporate or trust action for the
purpose of effecting any of the foregoing; or if a proceeding or case shall be
commenced, without the application or consent of a party hereto, in any court of
competent jurisdiction seeking (i) the liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of debts, of such party, (ii)
the appointment of a receiver, trustee or liquidator for such party or all or
any substantial part of its assets, or (iii) other similar relief under any law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, and such proceeding or case shall continue unstayed or
undismissed for a period of sixty (60) days; or an order (including an order for
relief entered in an involuntary case under the Federal Bankruptcy Code, as now
or hereafter in effect), judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
60 consecutive days.
"ADA Requirements" shall mean the requirements, applicable to the
----------------
Facilities, of the Americans with Disabilities Act or any similar requirements
under state or local statutes, regulations or ordinances.
"Additional Deposit" shall have the meaning set forth in Section 3.03.
------------------
"Additional Exceptions" shall have the meaning defined in Section 5.02(c).
---------------------
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
---------
under the Securities Exchange Act of 1934, as amended.
"Agreement" shall mean this Purchase and Sale Agreement, and the Exhibits
---------
and Schedules attached hereto, and any amendments which may hereafter be
executed and delivered among Buyer and Seller.
"Allocated Purchase Price" shall have the meaning set forth in Section
------------------------
3.01(b).
"Annualized EBITDAM" shall mean the year to date EBITDAM of the Facilities
------------------
at the end of a month, divided by the number of months in the calendar year to
that date, multiplied by 12.
"Assignments" shall have the meaning set forth in Section 5.04(c).
-----------
"Assumed Liabilities" shall mean (i) all Liabilities under the Facility
-------------------
Contracts, Permitted Exceptions, Additional Exceptions and Legal Requirements
other than Liabilities for periods prior to the Closing which have not been
expressly assumed by the Buyer, and (ii) all other Liabilities
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which have been expressly assumed by Buyer under this Agreement, including but
not limited to obligations to Transferred Employees under Schedule 8.07 but
excluding all Liabilities which are Excluded Liabilities.
"Average Patient Census" shall mean an amount equal to the total number of
----------------------
days billed to all residents of the Facilities during any portion of the Census
Period divided by the number of calendar days in the Census Period.
"Bills of Sale" shall have the meaning set forth in Section 5.04(b).
-------------
"Business" shall mean with respect to each of the Facilities, the ownership
--------
and operation of such Facility.
"Business Day" shall mean any day of the year, except Saturdays, Sundays
------------
and Federal holidays.
"Buyer's Closing Documents" shall have the meaning set forth in Section
-------------------------
5.05.
"Casualty" shall have the meaning set forth in Section 8.04.
--------
"Census Period" shall mean with respect to Section 4.01(cc) the period from
-------------
January 1, 1998 through July 31, 1998 and with respect to all other provisions
of this Agreement, the period from January 1, 1998 through the earlier of (i)
the Closing Date or (ii) November 30, 1998.
"Closing" shall have the meaning set forth in Section 5.01.
-------
"Closing Date" shall have the meaning set forth in Section 5.01.
------------
"Closing Documents" shall mean the Seller's Closing Documents and the
-----------------
Buyers Closing Documents.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
----
amended from time to time, and as interpreted in Treasury regulations and
rulings issued, adopted or promulgated thereunder.
"Condemnation" shall have the meaning set forth in Section 8.03.
------------
"Condition of Property" shall have the meaning set forth in Section
---------------------
4.03(a).
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"Confidential Information" shall mean any data or information of the
------------------------
Facilities, other than Trade Secrets, which is valuable to the operation of the
Facilities, exclusively used in the operation of the Facilities, and not
generally known to competitors.
"Consumables" shall mean with respect to each of the Facilities all food
-----------
and beverages, medical, pharmaceutical, engineering, maintenance, cleaning and
housekeeping materials and supplies, including soap and other toiletries;
stationery, menus and other printed materials; and all other supplies of all
kinds, whether used, unused or held in reserve storage for future use in
connection with the Business of each of the Facilities, which are, on the date
hereof, subject to such depletion, and including such re-supplies as shall occur
and be made in the Ordinary Course of Business prior to the Closing Date, and
whether issued or held in operating departments or held in reserve storage, but
excluding (i) Fixtures and Tangible Personal Property, (ii) Operating Equipment,
(iii) Miscellaneous Property Assets, (iv) Motor Vehicles, and (v) Third Party
Property.
"Conveyance Documents" shall mean all of the documents to be delivered by
--------------------
Seller to Buyer under Sections 5.04(a), 5.04(b), 5.04(c), 5.04(d) and 5.04(e).
"Cut Off Time" shall mean 12:01 a.m. on the Closing Date.
------------
"Decrease" shall have the meaning set forth in Section 6.01.
--------
"Deeds" shall have the meaning set forth in Section 5.04(a).
-----
"Deposit" shall mean the Additional Deposit and the Initial Deposit,
-------
collectively, together with any interest earned thereon.
"Due Diligence Materials" shall have the meaning set forth in Section 2.02.
-----------------------
"EBITDAM" shall mean earnings before interest, taxes, depreciation,
-------
amortization and management fees pursuant to the accounting principles used by
Seller, consistently applied.
"Earnest Money Escrow" shall have the meaning set forth in Section 3.03.
--------------------
"Earnest Money Escrow Agreement" shall have the meaning set forth in
------------------------------
Section 3.03.
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"Employees" shall mean all employees of each of the Facilities, employed
---------
exclusively in connection with the Facilities.
"Environmental Claims" shall mean any claim or notice of claim for
--------------------
reimbursement or remediation expense, contribution, personal injury, property
damage or damage to natural resources made, asserted or prosecuted by or on
behalf of any third party (whether based on negligent acts or omissions,
statutory liability, strict liability without fault or otherwise) including,
without limitation, any Governmental Authority, Employee, former employee or
guest, or their respective legal representatives, heirs, beneficiaries and
estates, relating to or arising out of the release of any Hazardous Material or
the violation of any Environmental Laws.
"Environmental Laws" shall mean and include the Comprehensive Environmental
------------------
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
-- ---
Resource Conservation and Recovery Act 42 U.S.C. Sections 6901, et seq.,
-- ---
Massachusetts General Laws Chapter 21E, and all other and similar Legal
Requirements governing the environment or any Hazardous Material, all as amended
from time to time, and all rules and regulations promulgated thereunder.
"Environmental Liabilities" shall mean any cost or expense of any nature
-------------------------
whatsoever required to be undertaken pursuant to any Environmental Laws to
contain, remove, remedy, respond to, clean up or abate any release of Hazardous
Material, or other contamination of surface water, groundwater, land surface or
subsurface strata, whether on-site or off-site arising from operations or
activities on the Real Property or any part thereof with respect to any of the
Facilities, including, but not limited to, the manufacture, generation,
formulation, processing, labeling, distribution, introduction into commerce or
on-site or off-site use, treatment, handling, storage, disposal or
transportation of any Hazardous Material, but excluding cleaning, office and
other supplies or items used in connection with the Business of the Facility
which are properly packaged, stored and used in compliance with all
Environmental Laws.
"Environmental Reports" shall have the meaning set forth in Section
---------------------
4.01(o).
"Equipment Leases" shall mean with respect to each of the Facilities (as
----------------
the case may be) all leases and purchase money security agreements (including
all amendments, modifications and supplements thereto and guaranties, extensions
and renewals thereof) for any Fixtures and Tangible
<PAGE>
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Personal Property used or usable in the Business of such Facility, as identified
on Schedule 1.01(a).
----------------
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended, and the regulations, interpretations and exemptions promulgated
thereunder.
"Escrow Agent" shall mean Lawyers Title Insurance Corporation or a trust
------------
company which is an Affiliate thereof, in its capacity as escrowee under the
Earnest Money Escrow Agreement and the Indemnity Fund Escrow Agreement.
"Exchange Escrowee" shall have the meaning set forth in Section 8.05(d).
-----------------
"Excluded Liabilities" shall mean all Liabilities of the Seller relating to
--------------------
the Business of the Facilities arising or accruing prior to the Closing Date
(other than those expressly assumed by Buyer pursuant to Section 6 and other
than any Liabilities under Facility Contracts entered into prior to the Closing
Date but which relate to periods after the Closing Date), including but not
limited to claims for offset against future payments pursuant to a Reimbursement
Program based on payments made during the period prior to the Closing for which
reimbursement or recoupment is sought following the Closing.
"Excluded Permits" shall mean those Permits which are non-transferable
----------------
under applicable law or under the provisions of such Permit.
"Excluded Property" shall mean (i) Third Party Property including resident
-----------------
funds, (ii) the Excluded Permits, (iii) cash or other funds on deposit in bank
accounts or in transit for deposit (including petty cash), (iv) accounts
receivable, (v) refunds, rebates or other claims or interest thereon, for
periods or events occurring prior to the Cut Off Time, (vi) prepaid insurance
and other prepaid items, (vii) utility deposits, (viii) Protected Name, (ix)
Protected Marks, (x) Motor Vehicles owned by Seller other than the passenger van
currently used in connection with the Facilities, (xi) Seller's proprietary,
general ledger, accounts payable and payroll software, and (xii) financial
records (including invoices) or, if not possible, copies thereof necessary to
enable Seller to prepare cost reports for Reimbursement Programs for periods
prior to the Closing.
"Facility" shall have the meaning set forth in Recital B of the Preliminary
--------
Statement.
<PAGE>
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"Facility Activities" means the business of providing long-term nursing
-------------------
home care, occupational therapy services, physical therapy services and speech
therapy services, but expressly excluding assisted living, congregate care and
services ancillary to the same.
"Facility Assets" shall mean with respect to each Facility, the (i) Real
---------------
Property, (ii) Fixtures and Tangible Personal Property, (iii) Operating
Equipment, (iv) Consumables, (v) Motor Vehicles, (vi) Miscellaneous Property
Assets, and (vii) all right, title and interest of Seller in the Facility
Contracts (to the extent transferable or assignable), but excluding the Excluded
Property.
"Facility Contracts" shall mean with respect to each Facility, the
------------------
Operating Agreements, Reimbursement Programs, Equipment Leases, and Permits
pertaining to such Facility.
"Final Closing Statement" shall have the meaning set forth in Section 6.02.
-----------------------
"Financial Statements" shall have the meaning set forth in Section 4.01(y).
--------------------
"Firm Date" shall mean September 30, 1998.
---------
"Fixtures and Tangible Personal Property" shall mean with respect to each
---------------------------------------
of the Facilities all fixtures, furniture, furnishings, fittings, equipment,
machinery, apparatus, appliances, computer hardware, art work and other articles
of tangible personal property owned by Seller at Closing and used exclusively in
connection with the Business of such Facility or any part thereof, subject to
such depletions, re-supplies, substitutions and replacements as shall occur and
be made in the Ordinary Course of Business prior to the Closing Date, excluding,
however (i) Operating Equipment, (ii) Consumables, (iii) Miscellaneous Property
Assets, (iv) Motor Vehicles, and (vi) Third Party Property.
"Force Majeure Causes" shall mean causes beyond the reasonable control of
--------------------
Seller or Buyer, as the case may be, including, without limitation, casualties,
war, insurrection, strikes, lockouts and governmental actions.
"Governmental Authority" shall mean any federal, state, county, municipal
----------------------
or other governmental or quasi-governmental body or agency or any subdivision
thereof.
"Hart-Scott Act" shall have the meaning set forth in Section 7.06.
--------------
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"Hazardous Materials" shall mean any material or substance which is (i)
-------------------
defined as a "hazardous waste" under the Resource Conservation and Recovery Act
of 1976 (42 U.S.C. Sections 6901 et seq.), as amended from time to time, and
regulations promulgated thereunder; (ii) defined as a "hazardous substance"
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (42 U.S.C. Sections 9601 et seq.), as amended from time to time, and
regulations promulgated thereunder ("CERCLA"); (iii) defined as a hazardous or
toxic substance, pollutant, contaminant or waste in any Legal Requirement in the
State in which any of the Real Property is located; (iv) petroleum; (v)
asbestos; or (vi) designated as a "hazardous substance" pursuant to Section 311
of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321)
or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section
1317).
"Improvements" shall mean with respect to each Facility, the buildings,
------------
structures (surface and subsurface) and other improvements located on the Land
for such Facility, including such fixtures as shall constitute real property
under applicable Legal Requirements, including, without limitation, all
electrical, mechanical, plumbing and other building systems; fire protection,
security and surveillance systems; and all telecommunications, computer, wiring
and cable installations, to the extent owned by Seller.
"Increase" shall have the meaning set forth in Section 6.01.
--------
"Indemnification Threshold" shall have the meaning set forth in Section
-------------------------
4.06(d).
"Indemnitee" shall have the meaning set forth in Section 4.06(c).
----------
"Indemnitor" shall have the meaning set forth in Section 4.06(c).
----------
"Indemnity Fund Escrow Agreement" shall have the meaning set forth in
-------------------------------
Section 4.06(f).
"Indemnity Fund Termination Date" shall have the meaning set forth in
-------------------------------
Section 4.06(f).
"Initial Deposit" shall have the meaning set forth in Section 3.03.
---------------
"Inspection Matters" shall have the meaning set forth in Section 2.02(b).
------------------
<PAGE>
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"Inspection Period" shall mean the period from the date hereof to the Firm
-----------------
Date.
"Inspection Termination Notice" shall have the meaning set forth in Section
-----------------------------
2.02(b).
"Insurance Policies" shall have the meaning set forth in Section 4.01(t).
------------------
"Intangibles Assignments" shall have the meaning set forth in Section
-----------------------
5.04(e).
"Intellectual Property" shall mean with respect to each of the Facilities
---------------------
all of the following owned by, issued to or licensed to Seller and used
exclusively in the Business of such Facility: (i) trademarks, service marks,
logos and trade names, together with all goodwill associated therewith,
including the names under which the Facilities are currently operated (other
than the Protected Names) and all registrations, applications, renewals,
translations, adaptations, derivations and combinations thereof; (ii) copyrights
and copyrightable works and all registrations, applications and renewals
therefor; (iii) trade secrets and confidential information (including, without
limitation, ideas, drawings, specifications, designs, plans, proposals,
financial and accounting data, business and marketing plans, and customer and
supplier lists); (iv) computer software other than Seller's proprietary
software; (v) all other intellectual property rights; and (vi) all copies and
tangible embodiments of the foregoing (in whatever form or medium), but
excluding the Protected Marks and Protected Name and other Excluded Property.
"Knowledge" shall mean, (i) with respect to the Seller, the actual
---------
knowledge of Thomas J. Flatley, Philip Baldi, Steven Esdale, David Rubenstein
and William Porter and shall not be construed to refer to the knowledge of any
other officer, director, agent, employee or representative of Seller, or any
Affiliate of Seller; and (ii) with respect to the Buyer, the actual knowledge of
J. Stephen Eaton, Alan C. Dahl, Michael C. Lake, Daryl R. Griswold and Kent C.
Fosha, Sr., and shall not be construed to refer to the knowledge of any other
trustee, partner, officer, director, agent, employee or representative of Buyer,
or any Affiliate of Buyer.
"Land" shall mean those parcels of land legally described on Schedule
---- --------
1.01(b), together with all easements, rights of way, servitudes, tenements,
- -------
hereditaments, appurtenances, privileges and other rights with respect thereto,
and all landscaping located thereon.
<PAGE>
-10-
"Lease Assignments" shall have the meaning set forth in Section 5.04(d).
-----------------
"Legal Requirements" shall mean all federal, state and local laws,
------------------
statutes, ordinances, rules and regulations affecting or in any way relating to
the Facilities or the Business of the Facilities, including, without limitation,
the Environmental Laws, the Americans with Disabilities Act, and the
Occupational Safety and Health Act of 1970, as amended from time to time.
"Liabilities" shall mean any liability, obligation, loss in value, damage,
-----------
cost or expense of any nature whatsoever, whether now known or unknown, asserted
or unasserted, accrued or unaccrued, liquidated or unliquidated, due or to
become due, including, without limitation, any liability with respect to taxes
of any kind whatsoever that relate to any of the Purchased Assets or the
Business of the Facilities.
"Major Casualty" shall mean either (i) a Casualty where the cost of
--------------
restoring the Facility and repairing the loss, damage or destruction, as
determined by a Massachusetts registered architect chosen by Buyer is Two
Million Dollars and no/100 ($2,000,000) or more; or (ii) a Casualty which is
reasonably anticipated to cause a Facility to discontinue operations and
relocate more than 10 percent of its patients for a period of 5 days or more.
"Major Condemnation" shall mean a condemnation which involves the
------------------
Condemnation of all of a Facility or of so much of a Facility as, in the opinion
of a Massachusetts registered architect chosen by Buyer is reasonably
anticipated to take out of operation more than 10% of the licensed beds in a
Facility, or is determined by the Massachusetts Department of Health to render a
Facility uninhabitable.
"Material Adverse Effect" shall mean any condition, event, development or
-----------------------
circumstance which has resulted in, or is foreseeably likely to result in, any
Liability in excess of One Million Dollars ($1,000,000.00) in the aggregate with
respect to the Business of all of the Facilities, but expressly excluding any
matter related to the financial condition of the Business which is subject to
the provisions of Section 6.01(l) of this Agreement dealing with a Purchase
Price adjuster (whether or not there is an adjustment) and excluding any matters
subject to cure or Decrease under Section 2.02(b) or Section 7.01(b) of this
Agreement.
"Material Equipment Leases" shall mean with respect to each of the
-------------------------
Facilities, the Equipment Leases requiring aggregate remaining payments in
excess of Twenty Thousand and No/100 Dollars ($20,000.00).
<PAGE>
-11-
"Material Operating Agreements" shall mean with respect to each of the
-----------------------------
Facilities, the Operating Agreements requiring aggregate remaining payments in
excess of Twenty Thousand and No/100 Dollars ($20,000.00).
"Maximum Indemnity Amount" shall have the meaning set forth in Section
------------------------
4.06(d).
"Medicaid Claims" shall mean claims against Buyer made subsequent to the
---------------
Closing by federal or state agencies which have made payments to Seller under
the Medicaid program seeking to recover or recoup overpayments for services
performed by Seller at the Facilities prior to the Closing.
"Medicare Claims" shall mean claims against Buyer made subsequent to the
---------------
Closing by federal or state agencies which have made payments to Seller under
the Medicare program seeking to recover or recoup overpayments for services
performed by Seller at the Facilities prior to Closing.
"Miscellaneous Property Assets" shall mean with respect to each of the
-----------------------------
Facilities all (i) Intellectual Property, (ii) contract rights, leases and
concessions; (iii) rights under guaranties or warranties relating to goods,
merchandise or services; (iv) plans and specifications; (v) telephone numbers
(except for those numbers related to the Protected Name or Protected Marks);
(vi) books and records, including patient and personnel records; (vii) other
items of intangible personal property relating to the Business of such Facility,
as the case may be, or any part thereof, and the goodwill associated therewith,
including, without limitation, any goods, merchandise or services either in
transit, under fabrication or otherwise ordered but not yet received at such
Facility, on or prior to the Closing Date, but excluding: (a) Facility
Contracts, and (b) the Excluded Property.
"Motor Vehicles" shall mean with respect to each of the Facilities all
--------------
motor vehicles owned or leased by Seller and used exclusively by Seller in the
Business of such Facility.
"Noncompete Period" or Nonsolicitation Period" shall mean the period
--------------------------------------------
beginning on the date hereof and ending on the fifth anniversary of the Closing
Date.
"Notice" shall mean (i) with respect to notices to Seller, written notices
------
of which Thomas J. Flatley, Philip Baldi, Steven Esdale, David Rubenstein or
William Porter has actual knowledge, and (ii) with respect to notices to
<PAGE>
-12-
Buyer, written notices of which J. Stephen Eaton, Alan C. Dahl, Michael C. Lake,
Daryl R. Griswold or Kent C. Fosha, Sr. has actual knowledge.
"Operating Agreements" shall mean with respect to each of the Facilities
--------------------
all service and maintenance contracts, and other contracts (including all
amendments, modifications and supplements thereto and guaranties, extensions and
renewals thereof) with respect to the Business of such Facility, other than the
(i) Equipment Leases and (ii) Reimbursement Programs.
"Operating Equipment" shall mean with respect to each of the Facilities all
-------------------
china, glassware, linens, kitchen utensils, silverware and uniforms, whether in
use or held in reserve storage for future use, in connection with the Business
of such Facility, which are on hand on the date hereof, subject to such
depletion and including such re-supplies, substitutions and replacements as
shall be made in the Ordinary Course of Business prior to the Closing Date.
"Ordinary Course of Business" shall mean with respect to each of the
---------------------------
Facilities the ordinary course of business consistent with past customs and
practices for such Facility, including but not limited to past customs and
practices concerning admission criteria for private patients, increases in the
annual compensation of Employees and the removal or replacement of equipment.
"Permits" shall mean with respect to each of the Facilities all licenses,
-------
governmental franchises and permits used in or relating to the Business of such
Facility or any part thereof or facilities located thereon.
"Permitted Assignee" shall mean a bank, trust company, insurance company or
------------------
pension fund or such other entity to which Buyer may assign its interests for
financing purposes.
"Permitted Exceptions" shall mean those matters (i) specified on the Title
--------------------
Commitments delivered to the Buyer, other than the Seller Existing Mortgages,
but including the rights of Facility residents or (ii) which may be otherwise
specified in this Agreement or agreed upon in writing by the Seller and Buyer.
"Personal Property" shall mean with respect to each of the Facilities, all
-----------------
Facility Assets other than Real Property.
"Preliminary Closing Statement" shall have the meaning set forth in Section
-----------------------------
6.02.
<PAGE>
-13-
"Protected Marks" shall mean those trademarks, service marks, trade names,
---------------
logos, designs, and all goodwill appurtenant thereto which are owned by Seller
or an Affiliate thereof as identified on Schedule 1.01(c), including, but not
-------- -------
limited to, the Flatley logo/shield, which consists of the letter "F" on a
crest.
"Protected Name" shall mean the name "Flatley", "Flatley Mayo", and any
--------------
variations thereof or derivations thereof, whether used alone or in combination
with one or more other words or names.
"Purchase Price" shall have the meaning set forth in Section 3.01(a).
--------------
"Purchased Assets" shall mean all Facility Assets with respect to all of
----------------
the Facilities.
"Real Property" shall mean with respect to each of the Facilities, the Land
-------------
and Improvements.
"Reimbursement Programs" shall mean rights and obligations under
----------------------
arrangements and agreements with third party payors concerning payments and
reimbursements, including participation in Medicare, Medicaid and other
government sponsored programs.
"Release" shall mean releasing, spilling, leaking, pumping, pouring,
-------
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping.
"Seller Closing Documents" shall have the meaning set forth in Section
------------------------
5.04.
"Seller Continuation Notice" shall have the meaning set forth in Section
--------------------------
2.02(b).
"Seller Existing Mortgages" shall mean those mortgages encumbering the
-------------------------
Facilities and more particularly described on Schedule 1.01(d) hereof.
----------------
"Surveys" shall have the meaning set forth in Section 5.03.
-------
"Survival Period" shall have the meaning set forth in Section 4.04(a).
---------------
"Tax-Free Exchange" shall have the meaning set forth in Section 8.05(d).
-----------------
<PAGE>
-14-
"Taxes" shall mean any federal, state, local or foreign income, gross
-----
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, room, transfer, registration, ad
valorem, betterment assessments, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not, and including any obligation to
indemnify or otherwise assume or succeed to such tax liability of any other
person.
"Territory" shall mean the area within a 10 mile radius of any Facility.
---------
"Third Party Property" shall mean all items of Personal Property located at
--------------------
each of the Facilities which are (i) owned by Employees, residents, other
persons furnishing food or services to such Facilities, or other third parties,
or (ii) leased pursuant to the Equipment Leases with respect to such Facilities.
"Title Commitments" shall have the meaning set forth in Section 5.02(a).
-----------------
"Title Company" shall mean Lawyers Title Insurance Corporation.
-------------
"Title Policies" shall have the meaning set forth in Section 5.02(b).
--------------
"Trade Secrets" shall mean information relating to the Facilities,
-------------
exclusively used in the operation of the Facilities and not generally known to
competitors, including, but not limited to, technical or nontechnical data, a
formula, pattern, compilation, program, including, without limitation, computer
software and related source codes, device, method, technique, process, financial
data, financial plan, product plan, services plans, list of actual or potential
patient referral sources or other information similar to any of the foregoing,
which derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can derive economic value from its disclosure or use.
"Transferred Employees" shall mean any Employees who accept offers of
---------------------
employment from the Buyer in accordance with the provisions set forth on
Schedule 8.07.
- -------------
<PAGE>
-15-
"WARN Act" shall mean the Worker Adjustment Retraining and Notification Act
--------
of 1988, as amended, and any similar state or local law or regulation.
1.02 References. All references in this Agreement to particular sections
----------
or articles shall, unless expressly otherwise provided, or unless the context
otherwise requires, be deemed to refer to the specific sections or articles in
this Agreement. The words "herein", "hereof", "hereunder", "hereinafter",
"hereinabove" and other words of similar import refer to this Agreement as a
whole and not to any particular section, subsection or article hereof.
1.03 Pronouns. All pronouns and variations thereof used herein shall,
--------
regardless of the pronoun actually used, be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the person or persons
may, in the context in which such pronoun is used, require.
ARTICLE II
Agreement for Sale and Purchase
-------------------------------
2.01 Purchased Assets. For the consideration and subject to the terms and
----------------
conditions herein set forth and in reliance upon the representations,
warranties, covenants and undertakings herein contained, and subject to each of
the terms, covenants and conditions herein set forth, Seller hereby agrees to
sell, transfer, assign, convey, set over and confirm the Purchased Assets unto
Buyer, and Buyer hereby agrees to purchase the Purchased Assets from Seller, all
at the Closing on the Closing Date, subject to the provisions of this Agreement.
The Buyer may assign this Agreement to a Permitted Assignee or designate a
transferee of certain of the Facility Assets, in the manner specified in Section
3.05.
2.02 Due Diligence Materials Reviews and Inspections.
-----------------------------------------------
(a) Seller will provide and make available to Buyer during the
Inspection Period the types of documents and materials relating to the
Facilities reasonably requested by Buyer (the "Due Diligence Materials"). Seller
will assemble and make available for review all such Due Diligence Materials. In
addition, Seller agrees to deliver to Buyer copies of any Due Diligence
Materials which Buyer reasonably requests for review. In the event that this
Agreement is terminated for any reason, Buyer shall promptly return all such
copies (including, without limitation, all information provided to Buyer under
the confidentiality agreement
<PAGE>
-16-
between the parties) to Seller, which obligation shall survive the termination
of this Agreement.
(b) During the Inspection Period, the Buyer may conduct such due
diligence inquiries as may be deemed appropriate or necessary by Buyer with
respect to (i) all matters then existing related to the environmental condition
of the Facilities, (ii) all matters then existing related to the physical and
structural condition and adequacy of the Properties, including, without
limitation, all Personal Property, all Operating Equipment, Improvements and
other capital items, and all matters related to Legal Requirements and Facility
Contracts, (iii) all matters related to the Title Commitments, the existing
surveys for the Facilities (other than matters affecting title that are first
disclosed to Buyer in a title update obtained from the Title Company after the
Firm Date which are not Permitted Exceptions), (iv) all matters relating to the
financial statements and operating budgets for the Facilities, (v) all
information relating to the medical staff and Employees of the Facilities, (vi)
all information concerning the residents of the Facilities (other than
information which may not be disclosed under applicable Legal Requirements) and
the persons or Reimbursement Programs responsible for payment of their charges
and (vii) all other matters relating to the Condition of the Property (items (i)
through (vii) above are hereinafter referred to collectively as the "Inspection
Matters"). In the event that on or prior to the Firm Date, Buyer determines in
Buyer's sole discretion that Buyer is not satisfied with respect to one or more
of the Inspection Matters, Buyer shall provide written notice of the same to the
Seller (the "Inspection Termination Notice"), in which event, Seller shall have
the option, exercisable within ten (10) days of receipt of the Inspection
Termination Notice to (i) terminate this Agreement (which shall occur without
regard to Seller's option if Buyer fails to list any specific Inspection Matters
that are issues in its Inspection Termination Notice), in which event the
Initial Deposit shall be returned to the Buyer, and Seller and Buyer shall have
no further rights or obligations hereunder, except those terms and provisions of
this Agreement which survive such a termination (including, without limitation,
the confidentiality agreement and the provisions of Section 2.02(d)); or (ii) to
elect to proceed by notice to Buyer (the "Seller Continuation Notice"), in which
event Seller shall, in its sole discretion, either (A) cure such unsatisfactory
Inspection Matters to the reasonable satisfaction of Buyer on or prior to
Closing or (B) provide for a Decrease in the Purchase Price in an amount
sufficient for Buyer to cure such unsatisfactory Inspection Matters after
Closing, such amount to be mutually satisfactory to Buyer and Seller. Failure by
Seller to provide the Seller Continuation Notice shall be deemed an election by
Seller to terminate this Agreement. In the event that this Agreement terminates
<PAGE>
-17-
in accordance with this Section or at any time thereafter prior to Closing, and
Seller so requests in writing within thirty (30) days thereafter, Buyer agrees
to deliver to Seller, at no cost to Seller, any and all plans, studies, tests,
reports or surveys (including, without limitation, environmental reports and
structural reports) prepared by third parties and obtained by or on behalf of
Buyer in connection with its due diligence inquiries. In the event that Buyer
does not provide the Inspection Termination Notice to Seller or the transaction
otherwise proceeds in accordance with a Seller Continuation Notice, Seller shall
have no Liability to Buyer relating to any Inspection Matters existing on or
before the Firm Date except those specifically set forth in the Inspection
Termination Notice which Seller has agreed to cure or allow for a Decrease in
the Purchase Price as set forth above, and none of the Inspection Matters shall
be taken into account in the determination of whether a Material Adverse Effect
has occurred at the time of Closing.
(c) The Seller agrees to cooperate with Buyer in facilitating its due
diligence during the Inspection Period, including, without limitation, providing
or making available, all such materials and documents (or copies) in Seller's
possession or control as Buyer reasonably requests, and Seller agrees to use
good faith efforts to respond to any such request as promptly as reasonably
practicable. Seller shall at all reasonable times, and upon reasonable prior
notice from Buyer from time to time, until the Firm Date, grant to Buyer and its
engineers, architects and other agents or representatives access to the
Facilities, and all portions thereof, for the purpose of making inspections,
examinations and tests with respect thereto, provided that no such tests shall
--------
result in any material damage to the Properties (whether or the not the same
shall be repairable) or unreasonably interfere with the normal conduct of
business of the Properties (including without limitation the care of residents),
and further provided that Seller may require that such inspectors and
----------------
representatives of Buyer be accompanied at all times by a representative of
Seller, and Seller agrees to make its representatives available for such
purpose.
(d) Buyer agrees that it will indemnify and hold Seller harmless from
and against all damage (whether material or not) to persons or property caused
by any inspection, examination or test in the course of due diligence matters
described in Section 2.02, which are caused by Buyer or its inspectors,
consultants, contractors, agents or Affiliates. Buyer agrees that its
obligations under the confidentiality agreement shall apply to all information
in connection with the above referenced inspections, examinations or tests and
Buyer agrees that all such information shall be kept confidential by Buyer and
its inspectors,
<PAGE>
-18-
consultants, contractors, agents, and affiliates, and that Buyer shall be
responsible for the compliance by such parties with the terms of the
confidentiality agreement, and the terms of this paragraph, provided, that
--------
nothing herein or therein is intended to prevent any inspectors or consultants
from making disclosures to government agencies which are required by law.
(e) Following the Inspection Period, if Buyer does not give the
Inspection Termination Notice or otherwise proceeds in accordance with a Seller
Continuation Notice, Seller will provide reasonable access to the Facilities to
Buyer and its employees, on the conditions specified above, and shall make
available to Buyer and its accountants one or more of the employees of Seller at
reasonable times and upon reasonable prior notice for the purpose of addressing
Buyer's and its accountants' questions relating to the Financial Statements.
After the Closing Date Buyer shall have the right to cause its accountants to
conduct an audit of the Financial Statements of the Seller relating to the
Facilities. Seller agrees to execute and deliver to the accountants after the
Closing Date, a reliance letter in a form mutually acceptable to the Buyer's
accountants and Seller's accountants, and to cooperate with the accountants in
the audit. All costs, expenses and other charges incurred in connection with
such audit shall be borne and paid for by Buyer. After the Closing, Seller
agrees to provide Buyer with reasonable access to the books, records and
financial information for the Facilities held by Seller at reasonable times and
upon reasonable prior notice.
2.03 Schedules and Exhibits. Buyer and Seller acknowledge that the
----------------------
Schedules and Exhibits to this Agreement are currently being prepared and will
not be available at the time of execution of this Agreement. Seller and Buyer
agree to complete all of the Schedules and Exhibits for attachment to this
Agreement on or before ten (10) days after the date hereof. In the event that
such Schedules and Exhibits are not completed by such date, either Buyer or
Seller may elect to terminate this Agreement, in which event the Deposit shall
be returned to Buyer, and Seller and Buyer shall have no further rights or
obligations hereunder, except with respect to those terms and provisions of this
Agreement which survive such a termination.
ARTICLE III
Purchase Price
--------------
3.01 Amount of Purchase Price.
------------------------
<PAGE>
-19-
(a) In consideration for the sale of the Purchased Assets, Buyer
agrees to pay Seller, at the Closing, an amount equal to Sixty-Four Million
Dollars ($64,000,000). The foregoing sum, as adjusted by any Increase or
Decrease, is referred to herein as the "Purchase Price".
(b) The Purchase Price shall be allocated among each Facility (the
"Allocated Purchase Price"), and further allocated among Land, Improvements,
Personal Property (other than goodwill) and goodwill with respect to each
Facility, as set forth on Schedule 3.01(b) attached hereto. Seller and Buyer
----------------
agree that the allocation set forth on Schedule 3.01(b) has been arrived at by a
----------------
process of arm's-length negotiations, including the parties' best judgment as to
the fair market value of each respective asset, and the parties specifically
agree to such allocation as final and binding (as between the parties) and will
consistently reflect such allocations on their respective federal, state and
local tax returns. The terms of this Section 3.01(b) shall survive the Closing.
(c) Notwithstanding the allocation of the Purchase Price, (i) the
sale of the Facilities shall be on an all or nothing basis, the sale of each
item of each Facility to be conditioned upon the simultaneous sale of all other
items of all Facilities on a concurrent basis, and (ii) Buyer shall have no
right to purchase, and Seller shall have no right to cause Buyer to purchase,
less than all of the Facilities, as an entirety in accordance with the
provisions of this Agreement.
3.02 Payment of Purchase Price. The full amount of the Purchase Price
-------------------------
shall be paid at Closing by wire transfer of immediately available funds. The
Purchase Price shall be wired to such account or accounts as Seller may direct
in a written instrument delivered to Buyer.
3.03 Earnest Money. Concurrently with the execution of this Agreement,
-------------
Buyer shall deposit, in a strict joint order escrow (the "Earnest Money Escrow")
with the Escrow Agent the sum of One Million and No/100 Dollars ($1,000,000.00)
(the "Initial Deposit"), such amount to be held as an earnest money deposit
hereunder in accordance with the provisions of a strict joint order escrow
agreement in the form attached hereto as Exhibit B (the "Earnest Money Escrow
---------
Agreement"). On or before the thirteenth (13/th/) day following the Firm Date,
Buyer shall deposit with the Escrow Agent in the Earnest Money Escrow an
additional sum of One Million Dollars ($1,000,000.00) (the "Additional
Deposit"). The Initial Deposit and the Additional Deposit are collectively
referred to as the "Deposit". The Deposit is non-refundable and the Buyer shall
have no right to receive the Deposit at any time after the Firm Date, unless one
of the conditions specified in Section
<PAGE>
-20-
7.01(a), (b), (c), (d), (e), (f), (g), (h), (i) or (j) shall not have been
satisfied or waived. At the Closing, unless this Agreement has been terminated
in accordance with the terms hereof, Buyer and Seller shall cause their
respective representatives to direct the transfer of the remaining Deposit in
the Earnest Money Escrow to Seller, such amount to be applied in partial
satisfaction of the obligation of Buyer with respect to the Purchase Price. The
Deposit shall be invested from time to time in United States government
securities, commercial paper, certificates of deposit or other interest-bearing
accounts or certificates as directed by Buyer and as reasonably approved by
Seller, in all events such investments to have dates of maturity not later than
the then estimated date for Closing. All costs and expenses of the Escrow Agent
incurred in connection with the establishment of the Earnest Money Escrow or the
Earnest Money Escrow Agreement shall be paid one-half by Seller and one-half by
Buyer.
3.04 Liabilities Assumed and Excluded. In addition to the payment of the
--------------------------------
Purchase Price as above provided, at the Closing, Buyer shall assume, and agree
to pay, perform and fully discharge all of the Assumed Liabilities at and after
the Closing. Buyer shall not assume and shall have no liability for, and Seller
shall retain and have full responsibility for the Excluded Liabilities,
provided, that with respect to each applicable year through the Closing, on the
- --------
date which is the later of (i) five (5) years following the Closing or (ii) five
(5) years following the date of final notice of program reimbursement for such
year, claims for offset or recoupment against post-closing payments pursuant to
a Reimbursement Program shall no longer be an Excluded Liability except for
claims which have been asserted in writing prior to such date.
3.05 Designation of Transferees. On or before two (2) Business Days prior
--------------------------
to Closing, Buyer shall have the right to assign this Agreement to an Affiliate
of Buyer or a Permitted Assignee or designate an Affiliate of Buyer or a
Permitted Assignee as the transferee to be named in one or more of the
Conveyance Documents and may instruct the Seller in writing to execute and
deliver one or more of the Conveyance Documents to the designee so designated by
Buyer. Each such assignee or designee must execute and deliver an Acknowledgment
and Assumption Agreement in a form reasonably satisfactory to the Seller and
Buyer, pursuant to which assignee or designee (as the case may be) shall
acknowledge that such designee is an assignee of Buyer with respect to this
Agreement or the Facility Assets transferred to such designee or assignee (as
the case may be) and shall agree to assume and discharge all of the obligations
of Buyer at Closing and thereafter arising under this Agreement with respect to
such Facility Assets. The assignment of this Agreement to such Affiliate or
Permitted Assignee or the designation of such Affiliate or Permitted
<PAGE>
-21-
Assignee and the execution and delivery of the Conveyance Documents to them by
the Seller in accordance with Buyer's instructions shall not relieve or
discharge Buyer of any of its obligations arising under this Agreement,
including, without limitation, the obligation of the Buyer to pay the Purchase
Price, all indemnification obligations of the Buyer under this Agreement, and
any other obligations of the Buyer which survive Closing.
ARTICLE IV
Representations and Warranties
------------------------------
4.01 Representations and Warranties of Seller. Seller hereby represents
----------------------------------------
and warrants to Buyer, and to Buyer's successors and permitted assigns, as
follows:
(a) Execution and Delivery. This Agreement has been duly executed
----------------------
and delivered by Seller.
(b) Binding Effect. This Agreement represents the valid and binding
--------------
obligation of Seller enforceable against Seller in accordance with its terms.
Subject to obtaining necessary governmental approvals, Seller has full right,
power and authority to sell the Purchased Assets as herein contemplated without
consent or approval of any party, except for any consents which may be required
under Facility Contracts.
(c) Non-Contravention. The execution and delivery of this Agreement
-----------------
and the performance by Seller of its obligations hereunder will not result in a
breach, violation, default or loss of material rights under (i) any provision of
any document by which Seller is bound or to which its assets are subject, (ii)
any judgment, injunction, order, decree or other instrument binding upon Seller,
or (iii) to the Knowledge of Seller, any Legal Requirement, except for any
consents required under any Facility Contracts.
(d) Rights to Purchase, Lease or Manage the Facilities. Except for
--------------------------------------------------
Buyer's rights to purchase the Facilities under this Agreement, there are no
outstanding options, rights of first offer, or rights of first refusal or other
agreements to purchase, lease or manage any of the Facilities, the Purchased
Assets or any rights with respect thereto.
(e) Condemnation. Except as set forth in Schedule 4.01(e), there are
------------ ----------------
no condemnation or other proceedings in eminent domain pending, or to the
Knowledge of Seller, threatened, against any of the Real Property or any part
thereof.
<PAGE>
-22-
(f) Tax Abatements. Except as set forth in Schedule 4.01(f), the
-------------- ----------------
Seller has not commenced any proceedings which are pending for the reduction of
the assessed valuation of any of the Real Property or Fixtures and Tangible
Personal Property or any part thereof for any of the Facilities.
(g) Personal Property. Except as set forth on Schedule 4.01(g),
----------------- ----------------
Seller has good and marketable title and to all of the Personal Property,
subject only to the Permitted Exceptions, whether or not reflected in its books
and records and whether or not reflected in its most current balance sheet
included in the Financial Statements as being owned by it, free and clear of any
mortgage, pledge, conditional bill of sale, security agreement, financing
statement or any other lien, claim or encumbrance (other than liens which will
be released in full on or prior to the Closing Date and liens arising from ad
valorem property taxes unpaid but not yet due). Buyer acknowledges that the
Personal Property will fluctuate from time to time in the Ordinary Course of
Business. The Personal Property shall include on the date of Closing sufficient
quantities of operating supplies for the normal operation of the Facilities in
the Ordinary Course of Business and in accordance with applicable Legal
Requirements.
(h) Operating Agreements and Equipment Leases. Schedule 4.01(h) sets
------------------------------------------- ----------------
forth a true, accurate and complete list of all Material Operating Agreements
and Material Equipment Leases respectively, currently in effect with respect to
each of the Facilities. Except as disclosed on Schedule 4.01(h), or as
----------------
otherwise herein or in any other exhibit or schedule hereto expressly provided,
Seller has neither received nor delivered any written notice that any party to
any Material Operating Agreement or Material Equipment Lease is currently in
default thereunder, and to Seller's Knowledge, no event has occurred or
circumstance exists which, with the giving of notice or passage of time, would
result in a default thereunder.
(i) List of Residents. Seller has provided to Buyer an accurate and
-----------------
complete list of the residents of each of the Facilities as of July 31 together
with the date of each resident's admission, the current primary source of
payment for such resident, and the amount of any deposit made by such resident
for future services and currently held by Seller.
(j) Motor Vehicles. Schedule 4.01(j) sets forth a true, accurate and
-------------- ----------------
complete list of all Motor Vehicles owned or leased by Seller with respect to
each of the Facilities.
(k) Compliance with Legal Requirements. Except as provided in
----------------------------------
Schedule 4.01(k), Seller has not received any written Notice of violation of
- ----------------
<PAGE>
-23-
any Legal Requirements from any Governmental Authority having jurisdiction over
or affecting the Seller or the Facilities or with respect to the Business of the
Facilities which has not previously been complied with, nor, to the Knowledge of
Seller, is there any uncured material violation of any Legal Requirement
relating to any of the Facilities.
(l) Taxes. Except as provided in Schedule 4.01(l), all business,
----- ----------------
occupation, sales, use and other similar Taxes imposed with respect to any of
the Purchased Assets, or the operation thereof for its currently intended
purpose, which are due and payable by Seller have been paid in full, or will be
paid by Seller when such Taxes become due and payable and all real estate ad
valorem taxes have been paid before the dates on which interest or penalties
would be due thereon. Seller has timely and properly filed (or timely requested
extensions with respect to) all federal, state, local and foreign Tax returns,
reports and forms for which it is or has been required to file with respect to
the operation, use and ownership of the Purchased Assets.
(m) Foreign Person Affidavit. In order to induce Buyer to waive the
------------------------
requirement of withholding tax under Section 1445 of the Code, Seller represents
and warrants (and will confirm by sworn affidavit delivered at the Closing) that
Seller is not a foreign person for purposes of said Section 1445.
(n) Permits. Except as provided in Schedule 4.01(n), Seller has
------- ----------------
received no written Notice from any Governmental Authority (i) of any intended
or threatened non-renewal, suspension or revocation of any Permit or (ii) that
such Seller has failed to obtain a Permit required for the operation of a
Facility or a Facility Asset. Each of the Facilities is duly licensed pursuant
to Mass. G.L. c. 111 (S)71 and the regulations thereunder.
(o) Environmental Matters. Seller has delivered to Buyer true,
---------------------
correct and complete copies of all written environmental site assessments,
reports and summaries and asbestos surveys (collectively, the "Environmental
Reports") described on Schedule 4.01(o). To Seller's Knowledge, the
----------------
Environmental Reports are the only reports in Seller's possession regarding
environmental matters and Hazardous Materials at the Real Property for each of
the Facilities. Except as set forth on Schedule 4.01(o), Seller has not
----------------
received any written Notice of any alleged Environmental Claims or of the
presence of any Hazardous Material on the Facilities which is not permitted by
Environmental Laws. To the Knowledge of Seller, except as otherwise disclosed
in the Environmental Reports, during Seller's ownership of the Facilities, there
has been no Release of any Hazardous Materials on, or (in connection with the
operation of the Facilities) offsite of, the Facilities in violation of
applicable Environmental
<PAGE>
-24-
Laws. To the Knowledge of Seller, except as may be disclosed in Schedule 4.01(o)
----------------
or in the Environmental Reports, there are no uncured material violations of any
Environmental Laws relating to any of the Facilities. To Seller's Knowledge,
except as may be disclosed in the Environmental Reports, during the period of
Seller's ownership of the Facilities, Seller has not caused or permitted the
Facilities to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials, or other
dangerous or toxic substances, or solid waste, except in compliance with
Environmental Laws. Except as may be disclosed in Schedule 4.01(o) or in the
----------------
Environmental Reports, to Seller's Knowledge, there has not been incorporated
into the Facilities and the Facilities do not contain, any asbestos products,
urea-formaldehyde, or other known building products which constitute Hazardous
Materials, in violation of Environmental Laws.
(p) Employees. All Employees of each of the Facilities are employees
---------
of the Seller or an Affiliate. There are no union contracts or collective
bargaining agreements affecting any of the Facilities or the employees of the
Facilities. To Seller's Knowledge, during the three (3) years prior to the date
of this Agreement, the Employees of the Facilities have not been subject to a
union election nor is there any pending or threatened attempt to unionize any of
the Employees of the Facilities. There has been no significant increase in any
salaries of any of the Employees of the Facilities during the past year other
than in the Ordinary Course of Business and, except as set forth on Schedule
--------
4.01(p), there are no oral or written contracts, agreements or arrangements
- -------
obligating Seller to increase the compensation or benefits paid or payable to
any Employee now or in the future. To Seller's Knowledge, Seller has not
employed any natural person at the Facilities in violation of the Immigration
Reform and Control Act of 1986, as amended.
(q) ERISA Matters. Except as set forth on Schedule 4.01(q), neither
------------- ----------------
Seller nor any Affiliate maintains or contributes to any single employer or
multi-employer defined benefit pension plans as defined by Title IV of ERISA
with respect to the Facilities or their Employees. With respect to any other
employee benefit plans maintained by Seller with respect to the Facilities
Seller has made or properly accrued all required payments with respect to such
plans.
(r) Litigation. Except as set forth on Schedule 4.01(r), (i) there
---------- ----------------
is no action, suit or proceeding pending, or to the Knowledge of Seller
threatened, against or affecting Seller or any of the Facilities in any court or
before any arbitrator or other Governmental Authority, (ii) there are no
unappealable, final judgments unsatisfied against Seller and (iii) there are
<PAGE>
-25-
no consent decrees to which Seller is subject, which in the case of any of the
foregoing, relate to the Facilities or would adversely affect Seller's ability
to satisfy his closing obligations set forth in Section 5 of this Agreement.
(s) Bankruptcy. No Act of Bankruptcy has occurred with respect to
----------
Seller.
(t) Insurance. Schedule 4.01(t) sets forth a true, correct and
--------- ----------------
complete list of all insurance policies covering Seller and each of the
Facilities (the "Insurance Policies"). Each of the Insurance Policies is in
full force and effect. Except as set forth on Schedule 4.01(t), no written
----------------
Notice has been received by Seller from the insurance company which issued any
of such policies stating that any of such policies is not in full force and
effect, will not be renewed or will be renewed only at a higher premium rate
than is presently payable therefor. Seller has delivered to Buyer true,
accurate and complete copies of each of the Insurance Policies. With respect to
the general liability, malpractice and property insurance maintained by Seller
there have been no gaps in coverage during the three year period prior to the
date of this Agreement.
(u) Patient Funds. All patient funds held for the benefit of
-------------
residents of the Facilities have been kept in accordance with applicable Legal
Requirements.
(v) Sufficiency of Purchased Assets. Except for the Excluded
-------------------------------
Property, the Purchased Assets (i) constitute all of the assets and properties
used or held for use in the conduct of the Business of the Facilities and (ii)
are generally adequate to conduct the Business as currently conducted.
(w) Participation. Seller has received no Notice from any
-------------
Governmental Authority or third party fiscal intermediary or carrier
administering any Medicare or Medicaid program of any intended or threatened
suspension or termination of Seller's or the Facilities' right to participate in
the Medicare or Medicaid programs or any action, suit or proceeding threatened
by any such Governmental Authority or third party intermediary with respect to
any such suspension or termination, nor does Seller have any Knowledge of any
events that could lead to suspension or termination of Seller's or the
Facilities' right to participate in the Medicare or Medicaid programs.
(x) Intellectual Property Licenses. To Seller's Knowledge, except as
------------------------------
disclosed on Schedule 4.01(x), Seller holds no licenses with respect to the
----------------
Intellectual Property.
<PAGE>
-26-
(y) Financial Statements. Seller has delivered to Buyer, (i) true
--------------------
and complete copies of the unaudited financial statements for each of the
Facilities for the periods ended December 31, 1995, 1996 and 1997; and (ii) true
and complete copies of the unaudited financial statements for each of the
Facilities for the period ended June 30, 1998, and for the three (3) months
period and year to date then ended (collectively, the "Financial Statements").
The Financial Statements were prepared in accordance with the books of account
and other financial records of each of the Facilities and represent fairly the
results of operation of the Facilities as of the dates thereof or for the
periods covered thereby and have been prepared in a manner consistent with past
practice and custom of the Facilities. Seller shall deliver to Buyer as soon as
reasonably practicable, all cost reports and any audits of cost reports under
Medicare or Medicaid for the three years prior to the date of this Agreement for
the Facilities, and the Medicare and Medicaid rate sheets for the last three
years for the Facilities. Seller and Buyer acknowledge and agree that Seller
shall have no additional liability or obligation for a breach of a
representation or warranty set forth in Section 4.01(y) to the extent that such
matter is subject to the provisions of Section 6.01(l) of this Agreement dealing
with a Purchase Price adjuster (whether or not there is an adjustment).
(z) Certain Changes. Except as may be set forth in Schedule 4.01(z),
--------------- ----------------
or reflected on the Financial Statements, since the date of the last Financial
Statement: (i) there has not been any material adverse change in the results of
operations, business, assets, properties, liabilities, financial position or
affairs of the Facilities or the Seller which has had or will have a Materially
Adverse Effect on the Purchased Assets; (ii) there has not been any damage,
destruction or loss whether or not covered by insurance, affecting the Purchased
Assets of the Facilities which is a Major Casualty or Major Condemnation; (iii)
except for transactions in the Ordinary Course of Business, there has not been
any disposition of, any encumbrance or agreement to dispose of or to encumber,
or any pledge or grant of a security interest in or agreement to pledge an
interest in, any of the Purchased Assets used in connection with the Facilities
or any increase (except for the accrual of interest) or any agreement to
increase any indebtedness of, or prepayment or any agreement to prepay any
indebtedness of, Seller with respect to the Facilities; (iv) there has not been
any change in the accounting methods or practices of Seller with respect to the
Facilities (except as required by law) adopted by Seller with respect to the
Facilities; (v) there has not been any contract entered into for services at any
Facility for any family member of Seller or any members of his families.
<PAGE>
-27-
(aa) Compliance With Healthcare Regulations. The Facilities
--------------------------------------
currently are licensed for 795 beds by the Commonwealth of Massachusetts. To
Seller's Knowledge, each Facility is fully licensed by the Commonwealth of
Massachusetts and is in good standing as a healthcare provider under the
Medicare program as administered by the federal government and the Medicaid
program as administered by the Commonwealth of Massachusetts. To Seller's
Knowledge, the Medicare and Medicaid reports for the last three calendar years
and the current portion of this calendar year are true and correct in all
material respects.
(bb) Discharge of Obligations. Except as set forth in Schedule
------------------------ --------
4.01(bb), all obligations imposed on Seller under any admission agreements,
- --------
agreements with residents or agreements with others concerning patient services
at the Facilities have been carried out, performed and complied with in all
material respects.
(cc) Occupancy. The Average Patient Census for the period from
---------
January 1, through July 31, 1998 at the Facilities taken as a group, is 751,
which is 94.465% of available licensed beds.
(dd) No Rebates or Allowances. Except as set forth in Schedule
------------------------ --------
4.01(dd), none of the residents of the Facilities have been given any concession
- --------
or consideration for the rental of any room, and no residents are entitled
hereinafter to any concessions, rebates, and/or allowances of free occupancy for
any period after the Closing Date.
(ee) Utilities. Schedule 4.01(ee) sets forth for the period January
--------- -----------------
1, 1997 through December 31, 1997, the total amount of water, sewer, gas, fuel
oil, electric, trash removal and repair and maintenance costs for each Facility
incurred by Seller.
(ff) Condition and Repair Requirements. To Seller's Knowledge,
---------------------------------
except as set forth in Schedule 4.01(ff), there are no outstanding requirements
-----------------
by any mortgagee or insurance company, requiring any repairs or work to be done
on the Facility.
(gg) Liens on Purchased Assets. Except as shown on Schedule 4.01(gg),
------------------------- -----------------
all debt or security instruments which create a lien on the Purchased Assets
owned by Seller with respect to the Facilities are in good standing and will be
paid in full on or before Closing; all payments of principal and interest and
all reserves, deposits and other charges required by the holders thereof to be
paid or made thereunder prior to the Closing Date have or will have been paid or
made; no default or breach exists thereunder irrespective of any applicable
grace period; and no notice has been
<PAGE>
-28-
received from any holder of any of such debt claiming any default of breach to
exist which has not been remedied or waived.
4.02 Representations and Warranties of Buyer. Buyer hereby represents and
---------------------------------------
warrants to Seller as follows:
(a) Organization and Authority. Buyer is a corporation organized,
--------------------------
existing and in good standing under the laws of the State of Georgia and has all
necessary power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.
(b) Binding Effect. This Agreement has been duly authorized,
--------------
executed and delivered by all requisite action on the part of Buyer and
represents the valid and binding obligation of Buyer enforceable against Buyer
in accordance with its terms. Subject to obtaining necessary governmental
approvals, Buyer has full right, power and authority to purchase the Purchased
Assets as herein contemplated without the consent or approval of any third
party.
(c) Non-Contravention. The execution and delivery of this Agreement
-----------------
and the performance by Buyer of its obligations hereunder will not result in a
breach, violation, default or loss of material rights under (i) any provision of
any document by which Buyer is bound or to which its assets are subject, (ii)
any judgment, injunction, order, decree or other instrument binding upon Buyer,
or (iii) to the Knowledge of Buyer, any Legal Requirement, except for any
consents required under any Facility Contracts.
(d) Litigation. Except as set forth on Schedule 4.02(d), (i) there
---------- ----------------
is no action, suit or proceeding pending or, to Buyer's Knowledge, threatened,
against or affecting Buyer in any court or before any arbitrator or other
Governmental Authority, (ii) there are no unappealable, final judgments
unsatisfied against Buyer and (iii) there are no consent decrees to which Buyer
is subject, which in the case of any of the foregoing, would adversely affect
Buyer's ability to satisfy its closing obligation set forth in Section 5 of this
Agreement.
(e) Bankruptcy. No Act of Bankruptcy has occurred with respect to
----------
Buyer.
4.03 Condition of the Property; No Warranty; Buyer's Assumption of Risk.
------------------------------------------------------------------
(a) The term "Condition of the Property" means with respect to each
of the Facilities and the Facility Assets the following:
<PAGE>
-29-
(i) the quality and adequacy of the physical condition of the Real
Property and Personal Property, or any part thereof, including, without
limitation, (1) nature or quality of the construction, design or engineering of
the Improvements, and the labor and materials used to construct the
Improvements; (2) the condition of structural elements, foundations, roofs,
glass, mechanical, plumbing, electrical, HVAC, sewage, and utility components
and systems of the Improvements; (3) the capacity of sewer, water or other
utilities with respect to the Improvements; (4) the geology, topography, flora,
fauna, soils, drainage, subsurface conditions, groundwater, landscaping and
irrigation of or with respect to any of the Real Property; (5) the location of
the Facility or any part thereof in or near any special taxing district, flood
hazard zone, wetlands area, protected habitat, geological fault or subsidence
zone, hazardous waste disposal or clean-up site, (6) the existence, location or
condition of ingress, egress, access to and from the Real Property, and any
parking thereon; and (7) the presence of any asbestos or other Hazardous
Materials, dangerous or toxic substance, material or waste in, on, under or
about the Real Property or any part thereof;
(ii) the development potential, economic feasibility, cash flow and
expenses of the Facility, the Facility Assets, the Business or any part thereof;
(iii) the habitability, merchantability, fitness, suitability and
adequacy of the Facility or the Facility Assets, or any part thereof for any
particular use or purpose;
(iv) the compliance or non-compliance of Seller or any other person
or entity or the operation of the Facilities, the Facility Assets or any part
thereof in accordance with Legal Requirements;
(v) the condition of the Real Property or the condition of title to
the Real Property or any part thereof, including, without limitation, matters
relating to zoning, building, public works, parking, fire and police access,
handicap access, life safety, subdivision and subdivision sales, and Hazardous
Materials, dangerous and toxic substances, materials, conditions or waste,
including, without limitation, the presence of Hazardous Materials in, on, under
or about any portion of the Purchased Assets that would cause state or federal
agencies to order a clean up of any portion of the Purchased Assets under any
Environmental Laws; and all agreements, covenants, conditions, restrictions
(public or private), condominium plans, development agreements, site plans,
building permits, building rules, and other instructions and documents governing
the use, management, and operation
<PAGE>
-30-
of the Purchased Assets or any part thereof; legal descriptions, title defects,
liens, encumbrances, boundaries, encroachments, mineral rights, options,
easements, access, covenants, zoning ordinances, setback lines and development
agreements;
(vi) the availability, cost and available coverages of title
insurance for the Real Property, including any special endorsements desired by
Buyer;
(vii) the availability, cost, terms and coverage of liability,
hazard, comprehensive, workers' compensation, and any other insurance with
respect to the Facilities, any Facility Assets or any part thereof;
(viii) the terms and conditions of Facility Contracts and the
financial condition and business prospects of the Business of the Facilities;
and
(ix) all other Inspection Matters.
(b) If Buyer does not give the Inspection Termination Notice, or
otherwise proceeds in accordance with a Seller Continuation Notice, Buyer
acknowledges as of the Firm Date for itself and on behalf of its successors,
assigns, agents, participants, shareholders, directors, transferees, designees
and all other third parties, that, other than as expressly set forth in this
Agreement, the Bills of Sale and the Deeds, neither Seller nor any agent of
Seller makes any representations or warranties whatsoever, express, implied or
arising by operation of law, with respect to any of the Facilities, the Facility
Assets or any part thereof or the Condition of the Property. Buyer hereby
represents and warrants to Seller that Buyer has not entered into this Agreement
based upon any representation, warranty, agreement, statement or expression of
opinion by Seller or any other person or entity acting, or allegedly acting, for
or on behalf of Seller with respect to Seller, any of the Facilities, the
Facility Assets or any part thereof or the Condition of the Property, other than
the representations and warranties of Seller expressly set forth in this
Agreement, the Bills of Sale and the Deeds. Buyer agrees, for itself and on
behalf of its successors, assigns, agents, participants, shareholders,
directors, transferees, designees and all other third parties, that the
Facilities, the Facility Assets and each part thereof, will be sold and conveyed
to (and accepted by) Buyer at the Closing in the then condition of the
Facilities and the Facility Assets, "AS-IS, WHERE-IS," WITH ALL FAULTS, AND
WITHOUT ANY WRITTEN OR ORAL REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS,
IMPLIED OR ARISING BY OPERATION OF LAW, other than (i) the representations and
warranties of Seller expressly set forth in this Agreement, (ii) the warranties
in the Bills of
<PAGE>
-31-
Sale, and (iii) the limited warranties of title in the Deeds. Buyer acknowledges
that Buyer has knowledge and expertise in financial and business matters that
enable Buyer to evaluate the merits and risks of the transactions contemplated
by this Agreement.
(c) Seller acknowledges that Buyer makes no representations or
warranties except as expressly set forth in this Agreement.
(d) The provisions of this Section 4.03 shall survive the Closing.
4.04 Survival of Representations and Warranties.
------------------------------------------
(a) All representations and warranties herein contained, as updated
as provided in Section 7.01(b), shall be deemed to have been remade and
republished by Buyer and Seller, respectively, on and as of the Closing Date,
and shall be effective for all purposes on and as of said date. All
representations and warranties of Seller and Buyer set forth in this Agreement,
shall survive the Closing hereunder for a period of two (2) years after the
Closing Date (the "Survival Period"), and shall not be deemed to have been
waived at the Closing, or merged into any of the Conveyance Documents to be
delivered by Seller at the Closing; provided, however, no party shall have any
--------
liability or obligation with respect to any such representation or warranty
herein contained unless prior to the expiration of the Survival Period the party
seeking to assert liability under any such representation or warranty shall have
notified the other party hereto in writing setting forth specifically the
representation or warranty allegedly breached, and a description of the alleged
breach in reasonable detail. All liability or obligation of either party hereto
under any such representation or warranty shall lapse and be of no further force
or effect with respect to any matters not contained in a written notice
delivered as contemplated within the Survival Period, or, if such notice is
given within the Survival Period, unless suit on the claim described in such
notice is commenced within three (3) years following the Closing.
(b) The provisions of this Section 4.04 shall survive the Closing.
4.05 Agreements Regarding Representations and Warranties.
---------------------------------------------------
Any breach or discrepancy with respect to any representation or
warranty contained in Sections 4.01 or 4.02 hereof of which Buyer with respect
to Section 4.01, or Seller with respect to Section 4.02, as the case may be, has
Knowledge on the Firm Date, and all Inspection Matters of which Buyer has
Knowledge on the Firm Date, shall be deemed waived by Buyer or
<PAGE>
-32-
Seller, as the case may be, for all purposes, and Buyer or Seller, as the case
may be, shall have no right to terminate this Agreement or to fail or refuse to
consummate the purchase of the Purchased Assets by reason thereof, and Seller or
Buyer, as the case may be, shall have no liability with respect thereto
(including, without limitation, any liability for any damages), except to the
extent that Seller has agreed in a Seller Continuation Notice to cure certain
unsatisfactory Inspection Matters or provide a Decrease in the Purchase Price as
set forth in Section 2.02(b). In any event, none of such breaches of
representations or warranties or Inspection Matters shall be taken into account
in the determination of whether a Material Adverse Effect has occurred at the
time of Closing. The provisions of this Section 4.05 shall survive the Closing.
4.06 Indemnities.
-----------
(a) Seller shall indemnify, defend and hold Buyer harmless against
all claims, suits, obligations, liabilities, damages, losses, costs, and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, based upon, arising out of, or resulting from (i) any breach of
any of the representations, warranties or covenants of Seller set forth herein,
subject to the limitations set forth in Sections 4.03, 4.04, 4.05 and 4.06(d),
(e), (g) and (h), (ii) any Excluded Liability, subject to the limitations set
forth in Section 3.04, and (iii) any Liability incurred by Buyer as a result of
Seller's failure to comply with any applicable bulk sales acts in connection
with the transactions contemplated by this Agreement. Seller shall not be liable
for consequential damages and, without limitation, shall not be liable for any
changes in reimbursement rates under any Reimbursement Program, whether or not
such rate changes are claimed to be based on pre-closing facts or circumstances.
(b) Buyer shall indemnify, defend and hold Seller harmless against
all claims, suits, obligations, liabilities, and damages, including, without
limitation, reasonable attorneys' fees and disbursements, based upon, arising
out of, or resulting from (i) any breach of any of the representations or
warranties made by such party herein, subject to the limitations set forth in
Sections 4.03(c), 4.04, 4.05 and Sections 4.06(d), (e), (g) and (h); (ii) any
Assumed Liability; (iii) any Liability under the WARN Act applicable to the
Employees of the Facilities and Seller, which arises on account of (A) this
transaction or (B) any action taken by Buyer after the Closing Date, and any
compensation payable to transferred employees in respect of their employment
with Buyer after the Closing; (iv) the failure of Buyer to offer any employee
employment on the terms and conditions stated in Schedule 8.07 hereof; (v) a
transferred employee's termination of employment with the Buyer after the
Closing Date; (vi) any Environmental
<PAGE>
-33-
Liability relating to any act or occurrence taking place after the Closing Date;
and (vii) any failure to perform the covenants or obligations of Buyer which
survive Closing as set forth herein, including without limitation those pursuant
to Schedule 8.07 hereof. Buyer shall not be liable for consequential damages.
(c) Upon obtaining Knowledge thereof, a party seeking indemnification
(the "Indemnitee") shall promptly notify the other party (the "Indemnitor") of
any claim or demand which such Indemnitee has determined has given or reasonably
may give rise to a right of indemnification under this Agreement, and such
Indemnitor shall have a reasonable time to contest any such claim. If such
claim or demand relates to a claim or demand asserted by a third party against
such Indemnitee, such Indemnitor shall have the right to settle any such claim
or demand (at the expense of such Indemnitor but without admitting that such
Indemnitee had any liability with respect thereto) or to employ counsel
reasonably acceptable to such Indemnitee to defend any such claim or demand
asserted against such Indemnitee, and such Indemnitee shall have the right to
cooperate in the defense of any such claim with counsel selected by such
Indemnitee at its own expense. So long as such Indemnitor is diligently
defending in good faith any such claim or demand, such Indemnitee shall not
settle such claim or demand. Such Indemnitee shall make available to such
Indemnitor all records and other materials required by it for its use in
contesting any such claim or demand asserted by a third party against such
Indemnitee. Whether or not such Indemnitor so elects to defend any such claim
or demand, such Indemnitee shall have no obligation to do so. If such claim or
demand relates to a claim or demand other than one asserted by a third party
against such Indemnitee, such Indemnitee shall promptly notify such Indemnitor
of such Indemnitee's claim or demand against such Indemnitor and of such
Indemnitee's demand for indemnification hereunder. If Indemnitor does not
dispute such claim or demand, then Indemnitor promptly shall pay to such
Indemnitee the amount of such Indemnitee's claim or demand. In the event that
such Indemnitor disputes such claim or demand or any portion thereof, such
Indemnitor shall within thirty (30) days after receipt of written notice from
such Indemnitee notify such Indemnitee in writing (a "Dispute Notice")
specifying in detail the portion of such claim or demand (if less than all)
which is disputed and the facts relied upon by such Indemnitor as a basis for
such dispute. Such Indemnitee and such Indemnitor agree to negotiate in good
faith to attempt to reach a resolution of any disputed claim for indemnification
hereunder. In the event that Indemnitor and Indemnitee are unable to resolve
the disputed claim within thirty (30) days after the Dispute Notice is delivered
to Indemnitee, Indemnitee shall have the right to exercise any and all remedies
available to it at law and/or at equity with respect to such indemnification
claim in the forum designated by this Agreement. In calculating the loss or
<PAGE>
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damage which an Indemnitee is entitled to recover hereunder (i) no loss or
damage shall be deemed to have been sustained by such party to the extent of any
proceeds received by such party from any insurance policies with respect
thereto, and (ii) the amount of such loss or damage shall take into account any
beneficial tax effect of such loss or damage to the Indemnitee.
(d) Notwithstanding anything to the contrary contained herein, Buyer
shall not assert any claims under Section 4.06(a)(i) hereof, and, to the extent
the same relate to representations or warranties made by Buyer in Section 4.02
hereof, Seller shall not assert any claims under Section 4.06(b)(i) hereof, as
the case may be, unless and until the aggregate of such party's claims
thereunder exceeds One Hundred Thousand Dollars ($100,000.00) (the
"Indemnification Threshold"), and Buyer and Seller shall each bear the amount of
such claims up to the Indemnification Threshold; provided, however, that in the
event that the aggregate amount of any claim(s) asserted by a party exceeds the
Indemnification Threshold, then subject to the procedures set forth herein, the
Indemnitor shall be liable to pay only the amount of all such claims above the
Indemnification Threshold up to the Maximum Indemnity Amount, as the case may
be. The aggregate liability of Buyer or Seller (in each case to be measured
cumulatively) for breach of any representation, warranty or covenant referenced
in this Section 4.06(d) shall not exceed Five Million Dollars ($5,000,000.00)
(the "Maximum Indemnity Amount"), less the Indemnification Threshold.
Notwithstanding the foregoing or anything to the contrary herein,
neither the Indemnification Threshold, the Maximum Indemnity Amount nor the
Survival Period shall apply with respect to any claim under Section 4.06(a)(ii)
hereof or under Section 4.06(b)(ii) through (vii) hereof.
(e) No claim for indemnification under this Section 4.06, other than
with respect (i) to Sections 4.06(b)(ii) through (vii), inclusive, and (ii) to
Section 4.06(a)(ii), shall be made or asserted after the expiration of the
Survival Period; provided, however, that any claim made under this Section 4.06
for which notice has been delivered prior to the expiration of the Survival
Period shall be deemed to have been made and asserted in a timely manner and,
subject to the limitations provided in Section 4.04(a), shall be prosecuted to
completion, regardless of whether the Survival Period expires prior to the
resolution thereof.
(f) At Closing, Seller and Buyer shall enter into an Indemnity Fund
Escrow Agreement in the form attached hereto as Exhibit K (the "Indemnity Fund
---------
Escrow Agreement"), pursuant to which Seller shall deposit Four Million and
No/100 Dollars ($4,000,000.00) with Escrow Agent, which shall be held in escrow
by Escrow Agent in a segregated account (the
<PAGE>
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"Indemnity Fund Escrow"). All interest and/or investment income accruing or
earned on the amounts deposited in the Indemnity Fund Escrow shall be for the
benefit of the Seller. In the event Buyer makes a claim or demand under this
Section 4.06, and the Indemnitor does not dispute such claim or demand, or is
determined to be liable pursuant to such claim or demand by a court of competent
jurisdiction or otherwise in a mutually acceptable dispute resolution forum
(after the expiration of all applicable and available appeal periods or the
earlier resolution of such appeals), then if the Indemnitor fails promptly to
pay such claim, Escrow Agent promptly upon the receipt of the notice specified
in the Indemnity Fund Escrow Agreement shall pay such claim or demand in full,
not to exceed the available funds in the Indemnity Fund Escrow, provided, that
--------
following the Survival Period no payments shall be made from the Indemnity Fund
Escrow except payment of (i) claims which were made within the Survival Period
pursuant to (S)4.04(a) and concerning which suit was brought within the time
period specified in (S)4.04(a), or (ii) Medicaid Claims or Medicare Claims. The
Indemnity Fund Escrow shall expire on the date which is five (5) years after the
Closing Date (the "Indemnity Fund Termination Date"), provided that on the date
--------
which is two and one half years after the Closing Date, Two Million Dollars
($2,000,000) shall be paid from the Indemnity Fund Escrow to Seller. On the
Indemnity Fund Termination Date, the balance of the amounts then in the
Indemnity Fund Escrow shall be paid to Seller; provided, however, that if prior
to the Indemnity Fund Termination Date, Buyer shall have either commenced
litigation to enforce the terms of its indemnification rights hereunder or
provided notice to Escrow Agent setting forth in reasonable detail the facts and
circumstances of any claim or demand made by a third party for which Buyer is
entitled to indemnification under this Agreement and is entitled to claim
payment from the Indemnity Fund Escrow, the term of the Indemnity Fund Escrow
Agreement shall be extended until the final resolution of such litigation or
claim, including any appeal, provided further that all amounts remaining in the
-------- -------
Indemnity Fund Escrow at such time in excess of the amount of the alleged claim
shall be returned to the Seller on the Indemnity Fund Termination Date.
(g) Buyer acknowledges that in order to resolve claims for offsets or
recoupment made by Reimbursement Program providers Seller must respond to any
such claim within a very short period. Buyer agrees to give Seller notice of
any such claim within fifteen days of the date on which Buyer or a Permitted
Assignee first receives written notice at the Facilities of any claim. If Buyer
fails to give such notice to Seller as to any such claim within such fifteen day
period and Seller is adversely affected by failure to receive such notice Buyer
shall be deemed to have waived any right to indemnification from Seller with
respect to such claim. In addition, Seller agrees to give Buyer notice of any
such claim within fifteen days of the date
<PAGE>
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on which Seller first receives written notice of any claim at its address set
forth in Section 9.01 of this Agreement. If Seller fails to give such notice to
Buyer as to any such claim within such fifteen day period and Buyer is adversely
affected by failure to receive such notice, Seller shall reimburse Buyer for any
damage, cost or expense incurred by Buyer as a result of Seller's failure to
give such notice in accordance with this Section.
(h) Buyer and Seller agree that any and all claims for
indemnification or breach of representation or warranty brought under this
Agreement shall be brought exclusively in accordance with the procedures
specified in this Section 4.06 and shall be governed by the terms and provisions
of this Section 4.06.
(i) The provisions of this Section 4.06 shall survive the Closing.
ARTICLE V
Closing Matters
---------------
5.01 Time and Place for Closing. Subject to the satisfaction of each of
--------------------------
the conditions precedent herein set forth, the closing of the transactions
contemplated by this Agreement shall take place at 10:00 a.m. Eastern Time on
December 31, 1998, at the offices of Bingham Dana LLP, 150 Federal Street,
Boston, Massachusetts, or such other time and place as agreed upon by Seller and
Buyer, with the concurrent delivery of all Closing Documents and the payment of
the Purchase Price in full. If Buyer shall have obtained the suitability
determination described in Section 7.01(c) on an expedited basis, Seller and
Buyer shall use reasonable efforts to accelerate the Closing Date. The date on
which the transactions herein contemplated shall be consummated is herein
referred to as the "Closing Date" and the transactions occurring at that time
are herein referred to as "Closing."
5.02 Title Commitments and Policies.
------------------------------
(a) Buyer has received written commitments (individually, as the
same may be updated prior to the Firm Date, a "Title Commitment", and,
collectively, the "Title Commitments") from the Title Company to issue owner's
ALTA Form-1992 title insurance policies relating to each parcel of Real Property
at regular rates for each of the Facilities, together with a copy of all
documents referenced in the Title Commitments.
(b) At the Closing, Buyer shall receive, at Buyer's expense, a title
insurance policy (which may be in the form of a "marked-up" Title Commitment
issued by the Title Company) with respect to the Real Property
<PAGE>
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for each of the Facilities insuring Buyer's fee simple interest in such Real
Property (including all recorded easements benefiting such Real Property) with
gap coverage from the Seller through the date of recording of the respective
Deeds, in the amount of the Allocated Purchase Price with respect to the Real
Property and Improvements, to the extent set forth in Schedule 3.01(b) hereto
----------------
for such Facility, and otherwise in accordance with the Title Commitment
therefor as set forth above, but subject only to the Permitted Exceptions (the
"Title Policies").
(c) If any title update covering the period from the date of the
Title Commitment to the time of Closing for any Facility discloses any
exceptions to title other than the Permitted Exceptions which exceptions are
voluntarily created by Seller or would otherwise materially and adversely affect
the Buyer's proposed operation of such Facility ("Additional Exceptions"),
Seller shall remove such Additional Exceptions or provide such affidavits,
indemnities or other assurances requested by the Title Company to provide
affirmative insurance to Buyer over such Additional Exceptions. If Seller fails
to have any such Additional Exceptions removed or fails to cause the Title
Company to insure over the same on the Title Policy in a manner reasonably
acceptable to Buyer, Buyer may, as its sole remedy, either elect to (i) take
title with respect to that portion of the Real Property covered by such Title
Policy subject to such Additional Exceptions, or (ii) elect to terminate this
Agreement in its entirety, in which event the Deposit shall be promptly refunded
to Buyer, and Seller and Buyer shall have no further rights or obligations
hereunder except those terms and provisions of this Agreement which expressly
survive termination. If Buyer shall elect to take title subject to any
exceptions which are not Permitted Exceptions, all of such exceptions shall
thereupon become, for all purposes hereof, additional Permitted Exceptions.
(d) All costs of preparation and delivery of the Title Commitments
and the Title Policies required to be delivered hereunder and any charges made
by the Title Company for the Closing or otherwise shall be borne and paid for by
Seller, with the exception of the title insurance premiums for the Title
Policies and all costs and charges incurred in connection with the issuance of
endorsements (including, without limitation, attorneys' fees) which shall be
borne and paid for by the Buyer.
5.03 Surveys. During the Inspection Period Buyer will receive copies of
-------
surveys for the Real Property with respect to each of the Facilities in form
required by the Title Company to remove the survey exceptions from the Title
Policies (individually, a "Survey", and, collectively, the "Surveys").
<PAGE>
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5.04 Seller Closing Documents. At or prior to the Closing, and in
------------------------
addition to any other instruments, documents or certificates otherwise required
hereunder to be delivered by Seller, the Seller shall deliver, or cause to be
delivered, to Buyer, the following (herein referred to collectively as the
"Seller Closing Documents"):
(a) Massachusetts Quitclaim Deeds in the respective forms attached
hereto as Exhibits C-1 to C-6 (collectively, the "Deeds"), conveying good and
-------------------
marketable fee simple title to each parcel of the Real Property from Seller to
Buyer, subject only to the Permitted Exceptions affecting such Real Property.
(b) Bills of Sale in the form attached hereto as Exhibit D, from
---------
Seller transferring and selling to Buyer each and every item of Personal
Property to be transferred hereunder (which are not covered by clauses (c), (d)
and (e) hereof) with warranties of title, but without warranty as to condition,
merchantability or fitness for use (the "Bills of Sale"). With respect to any
item of Personal Property (such as the Motor Vehicles) owned by Seller, title to
which is registered in a public office, separate forms of assignment, in
required form, shall be executed and delivered sufficient to cause registration
of such title to be transferred to Buyer.
(c) Assignment and Assumption Agreements in the form attached
hereto as Exhibit E (the "Assignments"), from Seller transferring and assigning
---------
(to the extent transferable or assignable) to Buyer all of the right, title and
interest of the Seller in, to and under all Operating Agreements and Permits
(other than Excluded Permits).
(d) Assignment and Assumption of Lease Agreements in the form
attached hereto as Exhibit F (the "Lease Assignments"), from the Seller
---------
transferring and assigning (to the extent transferable or assignable) to Buyer
all of the right, title and interest of the Seller in, to and under all
Equipment Leases.
(e) Assignment and Assumption Agreements in the form attached hereto
as Exhibit G (the "Intangibles Assignments"), from the applicable Seller
---------
transferring and assigning to Buyer all of the right, title and interest of the
Seller in, to and under the Miscellaneous Property Assets. If so requested
Seller will deliver to Buyer separate assignments of any trademarks, tradenames
or other Intellectual Property included in the Miscellaneous Property Assets.
(f) Original copies, executed by or on behalf of the applicable
Seller, of any required real estate transfer tax declarations, or any similar
<PAGE>
-39-
documentation required in connection with any tax imposed by the state, county
or municipality on the transaction contemplated hereby.
(g) Affidavits in the form attached hereto as Exhibit H stating
---------
Seller's U.S. taxpayer identification number and that such Seller is a "United
States person", as defined by Section 1445(f)(3) and Section 7701(b) of the
Code.
(h) The Title Policies pursuant to Section 5.02.
(i) Such affidavits, indemnities, instruments, documents or
certificates, executed by or on behalf of Seller in favor of the Title Company
and Buyer, as may be reasonably required by the Title Company as a condition to
the issuance of any of the Title Policies as required hereunder, including but
not limited to affidavits as to parties in possession and mechanics liens, which
documents may, if required by the Title Company, include, without limitation, an
ALTA owner's statement and a so-called "gap undertaking" required in order to
effect a New York-style closing, but in no event shall Seller be obligated to
deliver any instrument, document or certificate to the Title Company or to any
other person if the effect thereof is to cause such Seller to assume or be
subject to any liability or obligation to which it is not otherwise subject
under the provisions of this Agreement, except for the indemnification
obligations of the Seller under the gap undertaking.
(j) Written notices in the form attached hereto as Exhibit I
---------
addressed to the other party under each of the Operating Agreements, Equipment
Leases and Reimbursement Programs advising them of the change of ownership of
each of the Facilities, and directing all future inquiries, notices and payments
if applicable, be made directly to Buyer and, to the extent consents may be
required under any of such Reimbursement Programs (except Medicare, Medicaid and
VA), originals of such consents, provided, that no consents shall be required
from any entity shown on Schedule 5.04(j) unless Seller's 1998 annualized income
----------------
for all Facilities from its contractual arrangements with any such entity
exceeds $500,000.
(k) Such instruments, documents or certificates (including
certificates of public officials to the extent the same are available) as Buyer
or its counsel may reasonably request in order to attest to the organization and
existence of Seller or the authority of Seller to execute and deliver this
Agreement and to effect the transactions herein contemplated, and attesting to
the taking of all necessary action to authorize the herein contemplated
transactions.
<PAGE>
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(l) To the extent any Employees are employees of an Affiliate of
Seller, the written consent of such Affiliate to the provisions of this
Agreement relating to such Employees.
(m) The Preliminary Closing Statement pursuant to Section 6.03.
(n) An updated list of Facility residents as of a date five days
prior to the Closing in the form required by Section 4.01(i).
(o) An opinion of Seller's counsel substantially in the form
attached hereto a Schedule 5.04(o).
----------------
(p) Such other documents, instruments or agreements which Seller is
required to deliver to Buyer pursuant to the provisions of this Agreement or
which Buyer may, either at or subsequent to the Closing, deem reasonably
necessary or desirable, in order to consummate the transactions contemplated by
this Agreement, provided that the form thereof is reasonably acceptable to
Seller and that Seller shall not, in connection with or by virtue of the
execution and delivery of any such other documents, instruments or agreements be
obligated to incur any Liabilities or obligations in addition to those otherwise
herein contemplated.
5.05 Buyer's Closing Documents. At or prior to the Closing, Buyer shall
-------------------------
deliver, or cause to be delivered, to Seller, in addition to each of the other
instruments, documents, certificates or other deliveries required to be made and
delivered hereunder, the following (herein referred to collectively as the
"Buyer's Closing Documents"):
(a) The full amount of the Purchase Price payable pursuant to
Section 3.01(a), plus any and all other sums required to be paid by Buyer to
Seller in accordance with the provisions of this Agreement.
(b) The Assignments, the Lease Assignments and the Intangibles
Assignments, pursuant to which Buyer shall assume all of the obligations and
Liabilities of Seller under each of the Facility Contracts and the Miscellaneous
Property Assets assigned to Buyer arising from and after the Closing Date, and
the other Assumed Liabilities.
(c) Original copies, executed by or on behalf of Buyer, of any
required real estate transfer tax declarations, or any similar documentation
required in connection with any tax imposed by the state, county or municipality
on the transaction contemplated hereby.
<PAGE>
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(d) The Preliminary Closing Statement pursuant to Section 6.03.
(e) Originals or certified copies of all of the formation documents
of the Buyer.
(f) Such instruments, documents or certificates, executed by or on
behalf of Buyer, as may be required by the Title Company as a condition to the
issuance of any of its Title Policies as herein contemplated.
(g) Such instruments, documents or certificates (including
certificates of public officials to the extent the same are available) as Seller
or its counsel may, reasonably request in order to attest to the organization
and existence of Buyer, its authority to execute and deliver this Agreement and
to effect the transactions herein contemplated, and attesting to the taking of
all necessary action to authorize the herein contemplated transactions.
(h) An opinion of Buyer's counsel substantially in the form attached
hereto as Schedule 5.05(h).
----------------
(i) Such other documents, instruments or agreements which Buyer is
required to deliver to Seller pursuant to the provisions of this Agreement or
which is reasonably required to consummate the transactions contemplated by this
Agreement, provided that Buyer shall not, in connection with the execution and
delivery of any such other documents, instruments or agreements be obligated to
incur any Liabilities or obligations in addition to those otherwise herein in
this Agreement contemplated.
5.06 Delivery of Records. At the Closing, Seller shall deliver to Buyer
-------------------
at each respective Facility, all records and books of account, or copies
thereof, relating to the Business of the Facility which are in Seller's
possession on the Closing Date and which Buyer is required to have in its
possession under applicable Legal Requirements other than records which are
included in the definition of Excluded Property. Seller shall also deliver to,
or at the direction of Buyer, both prior to and after the Closing, copies of all
documents in the possession of Seller, or in the possession of its agents which
may be necessary for Buyer in enforcing or settling claims with respect to
Operating Agreements and Equipment Leases. From and after the date hereof, and
up to and including the Closing, Seller agrees that it shall retain in its
possession with respect to each of the Facilities, all books, records,
documents, information and other data customarily and usually retained in
connection with the performance of its duties with respect to the Facility.
After the Closing, Buyer agrees to retain the books and records delivered to it
by Seller and to comply with all Legal Requirements relating to retention of
<PAGE>
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records and to provide Seller with access to the books, records, documents and
other information referred to in this Section 5.06 upon the reasonable advance
request of the Seller from time to time. In particular, for the seven (7) year
period after the Closing, Buyer shall preserve all patient records and provide
Seller with access to such records upon the reasonable advance request of Seller
from time to time. The provisions of this Section 5.06 shall survive the
Closing.
5.07 Other Deliveries. In addition to each of the deliveries set forth
----------------
above, on the Closing Date Seller shall deliver, or cause to be delivered, to
Buyer with respect to each of the Facilities, the following to the extent in the
possession of a Seller: (a) the originals (or copies if originals are not
available) of all Facility Contracts, (b) keys and combinations to all locked
rooms or compartments within the Facility, (c) copies of the plans and
specifications for each Facility on an "as-built" basis to the extent the same
are available, and (d) the originals, or, if unavailable, copies of all
guaranties, warranties or indemnities which remain in effect relating to any of
the Facilities.
5.08 Documentary Taxes; Recording Charges. All state, county and local
------------------------------------
documentary stamp, sales and transfer and similar taxes payable in connection
with this transaction shall be borne and paid for exclusively by Seller. The
cost of recording and registering the Deeds, as well as any other Conveyance
Documents which are to be recorded, shall be borne by Buyer. Seller shall pay
the cost of recording any instruments required to remove title exceptions which
are not Permitted Exceptions and which are required to be removed by the Seller
hereunder.
5.09 Form of Documents. All documents required to be delivered at or
-----------------
prior to the Closing in accordance with the provisions of this Agreement shall
be in the respective forms attached to this Agreement as Exhibits, or if not so
attached, in forms reasonably satisfactory to each of the parties hereto, and
their respective counsel. Any documents, including the Deeds, or other
Conveyance Documents intended to be recorded in any public office, shall be duly
notarized and in recordable form and shall be recorded concurrently with, or as
soon as reasonably practicable after, the Closing.
5.10 Possession. Seller shall deliver possession of the Purchased Assets
----------
to Buyer at the Closing, subject to the rights of occupants and other persons in
possession.
ARTICLE VI
Adjustments and Prorations; Accounts Receivable
-----------------------------------------------
<PAGE>
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6.01 Adjustments. The following matters shall be adjusted as of the Cut
-----------
Off Time and the net amount thereof shall be added (the "Increase") or deducted
(the "Decrease") from the Purchase Price (as the case may be) in accordance with
the provisions of Section 3.01:
(a) Taxes. All Taxes, except federal, state or local income,
-----
capital stock, estate, inheritance, windfall profits, franchise or gift taxes,
levied or imposed upon the Seller relating to the Facility Assets or upon the
Facility Assets or any portion thereof shall be prorated among the parties
hereto. If the amount of Taxes assessed against the Purchased Assets is not
known at the Closing, then the Taxes shall be apportioned on the basis of the
Taxes assessed for the preceding year, with a reapportionment as soon as the
next tax rate and valuation can be ascertained; provided that if the parties can
estimate an amount which is likely to be more accurate than the preceding year's
Taxes, then such estimated amount shall be used as the basis for the tentative
apportionment (subject to reapportionment as aforesaid). Seller hereby retains
all of its rights with respect to its full or pro rata share of tax abatements
for all periods prior to the Closing Date, including, without limitation, its
right to contest the amount of any such abatement. The full or pro rata share of
Seller with respect to any such abatement proceeds received by or credited to
Buyer shall be promptly delivered by Buyer to Seller.
(b) Utilities. Sewer, water and municipal electric charges shall
---------
be prorated among the parties hereto. The value of any fuel stored on the Real
Property shall be adjusted in favor of the Seller. Seller and Buyer shall make
necessary arrangement for the discontinuance and commencement of all other
utility services, including, electric, gas, cable and telephone service, on the
Closing Date. All unapplied utility deposits of the Seller shall be returned to
Seller (or shall be an Increase for the Seller and assigned to Buyer). To the
extent possible, final meter readings shall be made at the Cut Off Time. In the
event that actual final adjustments cannot be made on the Closing Date,
estimated adjustments based on the charge for such service for the preceding
year shall be made and shall be re-adjusted when actual final adjustments are
available, provided that if the representatives of Buyer and Seller or the
Accountant (if conducting the audit pursuant to Section 6.02 hereof) can
estimate an amount which is likely to be more accurate than the preceding year's
charges, then such estimated amount shall be used as the basis for the tentative
adjustments (subject to readjustment as aforesaid).
(c) Facility Contracts. All fees and charges under the Facility
------------------
Contracts assigned or transferred to Buyer (including prepaid fees or charges)
shall be prorated among the parties hereto.
<PAGE>
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(d) Employee Matters. Buyer shall receive a Decrease for earned
----------------
and unpaid or unused vacation, sick time, and bonuses for all Transferred
Employees through the Closing, provided, that Buyer shall refund to Seller on
--------
the date one year following the Closing an amount equal to any earned bonuses
for which Buyer received a Decrease and which were not actually paid to the
Transferred Employees prior to such date and shall provide to Seller on request
an accounting as to payment of Employee bonuses and Employee credit for other
accruals. A schedule of such bonuses is attached hereto as Schedule 6.01(d).
----------------
(e) Security Deposits; Advance Deposits. Buyer shall receive a
-----------------------------------
Decrease against the Purchase Price in the amount of any deposits and prepaid
rent or use charges paid to a Seller (and not transferred to Buyer) in
connection with any resident deposits or any other deposits made for future
services to be provided after the Closing Date. Buyer shall honor all such
obligations, deposits, rents or use charges in accordance with their terms.
(f) Municipal Betterments. The Purchase Price shall have a Decrease
---------------------
by an amount equal to municipal betterments assessed prior to the date of this
Agreement, which are due and payable on or before the Closing Date but which
have not been paid by Seller on or before the Closing Date. Without reduction
of the Purchase Price, Buyer shall be responsible for all municipal betterments
assessed prior to the date of this Agreement but which are not yet due and
payable on or before the Closing Date and for all municipal betterments assessed
after the date of this Agreement.
(g) Vending Machines; Commissions; Rebates. Rental or concession
--------------------------------------
income from coin-operated telephones, vending machines, game machines, laundry,
facilities and other coin-operated equipment shall be adjusted as of the Cut Off
Time. In addition, rebates or commissions owing from long-distance telephone
services providers and other service providers or vendors shall be adjusted as
of the Cut Off Time.
(h) Inventories. Seller shall receive an Increase for all food and
-----------
beverages and other Consumables which are unopened at the Cut Off Time and are
in excess of the amounts necessary for continued operation in the Ordinary
Course of Business and under applicable Legal Requirements.
(i) Patient Funds Account. A schedule of patient funds accounts is
---------------------
attached as Schedule 6.01(i). Such schedule shall be updated as of the Closing
----------------
Date. At Closing Seller shall transfer and deliver to Buyer custody of all bank
accounts in which all patient funds are held along with a copy of all
<PAGE>
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documentation relating to such funds and Buyer shall assume all liability with
respect to such accounts.
(j) Resident Council Accounts. A Schedule of Resident Council bank
-------------------------
accounts is attached as Schedule 6.01(j). At Closing Seller shall transfer and
----------------
deliver to Buyer custody of all bank accounts which hold funds of the Resident
Councils of the Facilities and Buyer shall assume all liability with respect to
such Accounts.
(k) Other Customarily Adjusted Items. Other items of income and
--------------------------------
expense (including without limitation prepaid items of Seller) as are
customarily adjusted upon the sale of a Facility business similar to the
Business of the Facilities.
(l) Adjustment to Purchase Price Related to Changes in Annualized
-------------------------------------------------------------
EBITDAM. The Purchase Price shall be increased by the product of 7.5 times any
- -------
dollar amount that the 1998 Annualized EBITDAM is in excess of $8,895,000; or
(ii) the Purchase Price shall be decreased by the product of 7.5 times any
dollar amount that the 1998 Annualized EBITDAM is less than $7,895,000. The
Purchase Price adjustment provided for in this Section, if any, shall be
calculated as of the last day of the month preceding the month in which the
Buyer shall have received a suitability for licensure determination pursuant to
105 Code of Mass. Reg. (S)153.022.
6.02 Closing Statements. Buyer and Seller agree that the amounts of the
------------------
foregoing adjustments shall be determined by an examination to be conducted by
representatives of Buyer and Seller during the periods immediately prior to,
during and immediately after the Cut Off Time and on the Closing Date, and using
the same accounting principles used by Seller, consistently applied. At
Closing, Buyer and Seller shall agree on a preliminary closing statement setting
forth the adjustments and prorations required under this Section 6 and showing
the amount of any Increase or Decrease (as the case may be) (the "Preliminary
Closing Statement"). Within thirty (30) days following the Closing Date, after
having considered any matters for which complete information was not available
at Closing, Buyer and Seller shall agree on a final closing statement showing
the additional adjustments or prorations or corrections in adjustments or
prorations (the "Final Closing Statement") following which any net Increase or
Decrease shall be paid promptly in cash. The Final Closing Statement shall be
binding on the parties without right of further challenge, action or proceeding.
6.03 Accountant's Examination. In the event that Buyer and Seller cannot
------------------------
mutually agree upon the foregoing adjustments or the Preliminary Closing
Statement or the Final Closing Statement, Buyer and Seller agree
<PAGE>
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that the amounts of the foregoing adjustments shall be determined by an
examination to be conducted by the Accountant on behalf of Buyer and Seller
during the periods immediately prior to, during, and immediately after the Cut
Off Time and on the Closing Date, and using the same accounting principles used
by the Seller, consistently applied. Buyer and Seller shall each be responsible
for fifty percent (50%) of the fees and expenses of the Accountant which fees
and expenses shall be paid or put into escrow on the Closing Date. At Closing,
the Accountant shall deliver to each of the parties a Preliminary Closing
Statement setting forth the adjustments and prorations required under this
Agreement and thereafter a final closing statement showing the additional
adjustments or prorations or corrections in adjustments or prorations, following
which any net Increase or Decrease shall be paid promptly in cash. The Final
Closing Statement shall be binding on the parties without right of further
challenge, action or proceeding.
6.04 Accounts Receivable. Accounts receivable arising from performance of
-------------------
patient services by the Seller prior to the Closing Date shall be dealt with in
accordance with the procedures set forth in Schedule 6.04 attached hereto.
-------------
The provisions of Sections 6.01, 6.02, 6.03 and 6.04 hereof shall survive
the Closing.
ARTICLE VII
Conditions Precedent to Closing
-------------------------------
7.01 Conditions Precedent to Buyer's Obligations. Satisfaction on or prior
-------------------------------------------
to the Closing Date of each of the following shall be a condition precedent to
obligations of Buyer to purchase the Purchased Assets and to pay the required
consideration therefor:
(a) Seller shall have delivered all of the Seller's Closing Documents
required to be delivered by Seller under the provisions of Section 5.04 and
elsewhere in this Agreement, in accordance with the provisions hereof.
(b) Subject to the provisions of Section 4.05 hereof, the
representations and warranties of Seller contained in Section 4.01 and elsewhere
in this Agreement shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date, and
Buyer shall have received a certificate to that effect by Seller and Seller
shall have complied with its covenants and obligations hereunder in all material
respects; provided, however, that Buyer shall
--------
<PAGE>
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nonetheless be obligated to close the transactions set forth herein, unless such
untruth, inaccuracy or failure, taken together with all other such untruths,
inaccuracies or failures, would have a Material Adverse Effect with respect to
the Business of all Facilities in the aggregate, not taking into account any
obligations of Seller set forth in Section 7.01(k) hereof. Notwithstanding the
foregoing, Buyer shall be entitled to a Decrease in the Purchase Price at
Closing on account of untruths, inaccuracies or failures of the Seller which
Buyer did not have Knowledge of on the Firm Date if such untruths, inaccuracies
or failures have resulted in, or are foreseeably likely to result in, any
Liability in excess of $100,000 in the aggregate (the "Decrease Threshold") with
respect to the Business of all of the Facilities, in which case, the Decrease
shall be equal to all Liabilities above the Decrease Threshold up to but not in
excess of One Million Dollars ($1,000,000) (which Decrease shall be up to a
maximum amount of $900,000). Notwithstanding the foregoing provisions of this
Section 7.01(b) there shall be no Decrease hereunder for any matter related to
the financial condition of the Business which is subject to the provisions of
Section 6.01(l) of this Agreement dealing with a Purchase Price adjuster
(whether or not there is an adjustment).
(c) Buyer shall have received a suitability for licensure
determination, pursuant to 105 Code of Massachusetts Regulations (S)153.022,
from the Department of Health of the Commonwealth of Massachusetts with
reference to its acquisition of the Facilities. Buyer shall promptly file all
applications, pay all fees, publish all notices, and submit all other materials
required in connection with such determination, and shall otherwise make
reasonable efforts to obtain such determination. Buyer shall submit all such
applications, notices, publications and other materials to Seller simultaneously
with submission of such documents for filing or publication and shall keep
Seller and its regulatory counsel informed on a regular basis of the status of
all such applications, including requests for further information, possible
delays and possible obstacles to approval, including delivery to Seller of
copies of all communications from Governmental Authorities concerning such
applications. On or before October 15, 1998, Buyer shall file its initial
application for such determination, and within fifteen days after the execution
and delivery of this Agreement, Buyer shall give the notice required by 105 CMR
(S)100.250.
(d) No action, suit, or formal administrative proceeding shall have
been commenced and be continuing which seeks to enjoin the transactions
contemplated by this Agreement or which would have a Material Adverse Effect on
the business or financial condition of the Facilities.
<PAGE>
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(e) If a filing under the Hart-Scott Act is required the applicable
waiting period under the Hart-Scott Act shall have expired or shall have been
terminated and no Governmental Authority shall have taken action pursuant to the
Hart-Scott Act to prevent the Closing.
(f) No Major Casualty or Major Condemnation shall have occurred.
(g) The Average Patient Census shall be not less than 711.
(h) Buyer shall have obtained, at its sole cost and expense, a
completed appraisal or appraisals in reasonable form which indicates that the
value of the Purchased Assets equals or exceeds fifty percent (50%) of the
Purchase Price.
(i) All liens on the Purchased Assets will have been released in full
and Form UCC-3s will have been filed or delivered for filing as appropriate,
except for those relating to leased copiers and postage machines and other
Excluded Property.
(j) If Seller has given a Seller Continuation Notice in accordance
with Section 2.02(b), Seller shall have either cured the unsatisfactory
Inspection Matters set forth in the Inspection Termination Notice or provided a
Decrease in the Purchase Price on account thereof in accordance with the
requirements set forth in Section 2.02(b).
7.02 Conditions Precedent to Seller's Obligations. Satisfaction on or
--------------------------------------------
prior to the Closing Date of each of the following shall be a condition
precedent to the obligations of Seller to sell the Purchased Assets:
(a) Buyer shall have paid the Purchase Price in full as set forth in
Section 3.01(a), at the Closing.
(b) The representations and warranties of Buyer contained in Section
4.02 and elsewhere in this Agreement shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date, and Seller shall have received a Certificate to that effect by
a duly authorized officer of Buyer (the liability thereunder being solely that
of Buyer and not the personal liability of the officer executing the same).
(c) There shall have been no uncured material breach of any covenant
or obligation of Buyer under this Agreement.
<PAGE>
-49-
(d) Buyer shall have received the suitability determination described
in Section 7.01(c) and Buyer shall have complied with the other provisions of
Section 7.01(c).
(e) No action, suit or formal administrative proceeding shall have
been commenced and be continuing which seeks to enjoin the transactions
contemplated by this Agreement.
(f) If a filing under the Hart-Scott Act is required the applicable
waiting period under the Hart-Scott Act shall have expired or shall have been
terminated and no Governmental Authority shall have taken action pursuant to the
Hart-Scott Act to prevent the Closing.
(g) Buyer shall have delivered all Buyer Closing Documents required
to be delivered by Buyer under Section 5.05 and elsewhere in this Agreement, in
accordance with the provisions of this Agreement.
7.03 Waiver. Each of the parties hereto shall have the right in its sole
------
and absolute discretion, but under no circumstances shall be obligated, to waive
or defer compliance by the other party with any of the above conditions
precedent to their respective obligations hereunder; provided, however, no
waiver shall be effective unless set forth in a written instrument, executed by
the waiving party and delivered to the other party. No act or circumstance,
other than the delivery of a written waiver as contemplated by the preceding
sentence shall be deemed to constitute a waiver of any condition herein set
forth. No waiver given on one occasion shall obligate the waiving party to
grant similar waivers or deferrals in any other circumstance or on an other
occasion.
7.04 Covenant to Satisfy Conditions. Buyer and Seller hereby agree to use
------------------------------
commercially reasonable efforts to cause each of the conditions precedent to the
obligations of the other party to be fully satisfied, performed and discharged
on and as of the Closing Date, except that neither party shall have any
obligation to expend any funds, or incur any Liabilities or obligations, which
it would not otherwise be required to spend or incur under the provisions of
this Agreement.
7.05 Use of Purchase Price to Clear Title. To enable Seller to make
------------------------------------
conveyance as herein provided, Seller may, at the time of delivery of the Deeds,
use the Purchase Price, or any part thereof, to remove any unpermitted
exceptions or cure other title or survey defects, provided that all instruments
so procured shall be delivered at the Closing, unless reasonably satisfactory
arrangements for the recording of such instruments after the Closing Date are
made at the Closing, and the Title Company issues the Title
<PAGE>
-50-
Policies at the Closing without exception for, or with insurance over, the
matters so cured. In particular, Seller shall, at the time of delivery of the
Deeds, use a portion of the Purchase Price to remove the Seller Existing
Mortgages from the Title Policies to be issued to Buyer at Closing.
7.06 Hart-Scott. If a filing under the Hart-Scott Act is required Seller
----------
and Buyer shall each make, by October 31, 1998, all necessary filings required
to be made pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended and the regulations promulgated thereunder (the "Hart-Scott Act").
Seller and Buyer hereby agree to cooperate with each other in making such
filings. The Seller and Buyer acknowledge that the closing of the transaction
contemplated hereby shall not occur until the applicable waiting period under
the Hart-Scott Act has expired or has been terminated. If a request for
additional information is made to Seller or Buyer such party shall promptly
comply with such request. Buyer shall pay all filing fees in connection with
such filings under the Hart-Scott Act.
ARTICLE VIII
Further Covenants and Agreements; Default
-----------------------------------------
8.01 Seller's Covenants Pending Closing. Seller hereby covenants and
----------------------------------
agrees that, from and after the date hereof and to and including the Closing
Date, it will fully perform and comply with each of the following covenants and
agreements (except where such performance or compliance is prevented or limited
by Force Majeure Causes):
(a) Seller will do all things reasonably necessary or appropriate to
cause the continued operation of each of the Facilities in accordance with the
Ordinary Course of Business.
(b) Seller will not consent to, authorize or approve any change in
zoning or similar land use classification for the Land or any part thereof
without first obtaining the consent of Buyer, which consent shall not be
unreasonably withheld, conditioned or delayed.
(c) Seller shall maintain all insurance coverages with respect to
each of the Facilities existing as of the date hereof.
(d) Seller shall maintain inventories of Consumables at substantially
the same levels at each of the Facilities, except for sales in the Ordinary
Course of Business.
<PAGE>
-51-
(e) Seller shall not transfer any of the Facilities to a third party.
(f) Seller shall not incur any material amount of additional debt
obligations in connection with any of the Facilities.
(g) Seller shall give Buyer notice of any rate adjustments or
recoupment or offset claims made pursuant to any Reimbursement Program for
Medicare or Medicaid patients.
(h) Without Buyer's prior written consent, which shall not be
unreasonably withheld or delayed, Seller shall not enter into any new Material
Operating Agreements or Material Equipment Leases which are not cancelable with
30 days prior notice other than renewals of existing agreements.
(i) Seller will give Buyer notice of any capital expenditures in
excess of $25,000.
(j) Seller shall provide to the Buyer, within thirty (30) days of the
end of each calendar month subsequent to the date hereof and prior to the
Closing Date, unaudited financial statements for each of the Facilities for the
preceding calendar month prepared in a manner consistent with past practice and
custom of the Facilities.
(k) Seller has provided Buyer with evidence of business interruption
insurance covering the Facilities for a period of one year. Seller shall keep
such business interruption insurance in full force and effect from the date
hereof until and including the Closing Date.
(l) Seller has provided Buyer with evidence of all risk property
insurance covering each of the Facilities in an amount equal to the Allocated
Purchase Price for each Facility. Seller shall keep such insurance in full
force and effect from the date hereof until and including the Closing Date.
(m) The underground fuel tank located at the Milton Facility shall be
removed and replaced in accordance with all applicable laws and the cost of such
removal and replacement and any associated remediation shall be borne by Seller
and Buyer equally.
(n) Seller will satisfy or cause to be satisfied in the Ordinary
Course of Business all of the Facilities' trade payables incurred
<PAGE>
-52-
prior to the Closing Date which are due and payable prior to the Closing Date,
including, but not limited to, payables for inventory, supplies and other
consumer goods.
(o) Seller will cooperate with Buyer to preserve and maintain the
Facilities' business operations; continue to develop, grow and promote the
Facilities' business; present the transaction contemplated by this Agreement in
a positive, favorable manner to employees, vendors, referral sources and
residents of the Facilities; and preserve the goodwill of the Facilities'
business.
8.02 Publicity. Buyer and Seller each hereby agree that neither shall,
---------
without the prior written consent of the other, issue any press release, hold
any press conference or otherwise make any public announcement relating to the
transaction contemplated by this Agreement; provided, however, (i) nothing
herein contained shall be deemed to limit or impair in any way a Seller's or
Buyer's ability to disclose the details of the herein contemplated transaction
to their respective counsel, or to such persons (including public notices) as
they deem necessary in order to enable either of them to comply with any Legal
Requirement or any court order; and (ii) nothing herein contained shall limit or
impair in any way Buyer's right or ability to disclose the details of the herein
contemplated transaction to (1) persons or entities who in good faith are
considering providing debt or equity financing to Buyer for purposes of this
transaction, or to (2) any Governmental Authority in connection with the
application by Buyer for any required license or permit, or for transfer of any
Permit from a Seller to Buyer, or to comply with applicable Legal Requirements
under securities laws and regulations, provided that, other than with respect to
a Governmental Authority, Buyer delivers an agreement from any such party
agreeing to be bound by the confidentiality provisions of this Section 8.02, and
with respect to a Government Authority, Buyer first delivers such materials to
Seller for review pursuant to Section 7.01(c). Buyer agrees to provide notice
of any such public disclosure at least one (1) Business Day prior to such public
disclosure, unless Buyer is unable to do so pursuant to a Legal Requirement
which makes immediate notice necessary. In any event, Buyer shall consult with
Seller as to the content of such disclosure.
8.03 Condemnation. In the event of the actual or threatened taking by
------------
exercise of the right of eminent domain (whether temporary or permanent) of any
part of the Real Property with respect to any of the Facilities (a
"Condemnation") of which Seller acquires knowledge on or prior to the Closing
Date, and which is not a Major Condemnation (a) Seller will give Buyer notice
within three (3) days of acquiring such knowledge, (b) the Closing of the sale
hereby contemplated shall take place as herein provided
<PAGE>
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without any abatement of the Purchase Price, and (c) at the Closing Seller shall
assign to the Buyer, by written instrument, all of Seller's right, title and
interest in and to any Condemnation award which may be payable to Seller on
account of such condemnation.
8.04 Casualty. In the event of any loss, damage, or destruction to the
--------
Improvements or the Personal Property after the date hereof and prior to the
Closing by fire or other casualty (a "Casualty") which is not a Major Casualty
Seller shall promptly notify Buyer of the occurrence thereof. In the event of
such Casualty, at the Seller's sole option, Seller shall have the right to (i)
repair and restore the loss, damage or destruction before or after the Closing,
in which event (a) Seller shall cause the Improvements and/or Personal Property
to be restored to substantially the condition in which they existed immediately
prior to the Casualty, (b) Seller shall be entitled, but not obligated, in
Seller's sole discretion, to postpone the Closing for up to thirty (30) days
upon written notice of such postponement to Buyer, which notice shall specify a
new date for Closing hereunder, and (c) if such repair and restoration work is
not completed at Closing, Buyer shall have the right to withhold payment of the
estimated cost of repair and restoration for such Facility, which shall be paid
promptly upon completion of the repair and restoration work, or (ii) without
repairing the Casualty, and without recourse or warranty, assign to Buyer at the
Closing all of Seller's right, title, and interest, if any, in and to all
insurance proceeds payable with respect to the Casualty, and pay Buyer the
amount of the deductible (or the self-insured retainage) under Seller's
insurance policy, whereupon the Closing shall take place as if no Casualty had
occurred and without any reduction in the Purchase Price.
8.05 Miscellaneous Covenants of the Parties. In addition to each of the
--------------------------------------
terms, covenants and conditions herein set forth, the parties hereto do hereby
agree as follows:
(a) Expenses. Except as otherwise provided in this Agreement, each
--------
party hereto shall be responsible for the fees and expenses of their respective
counsel and their other out-of-pocket costs and expenses in connection with the
transactions under this Agreement.
(b) Brokerage. Seller and Buyer each hereby represent and warrant to
---------
the other that neither has dealt with any broker or finder in connection with
the transactions contemplated hereby, and each hereby agrees to indemnify,
defend and hold the other harmless of and from any and all manner of claims,
liabilities, loss, damage, attorneys' fees and expenses incurred by either party
and arising out of, or resulting from, any claim by any broker or finder in
contravention of its representation and warranty
<PAGE>
-54-
herein contained. Each party hereby further represents and warrants to the other
that neither has dealt with any broker or finder purportedly acting for or on
behalf of the other party, and that neither party has any reason to believe that
the representation and warranty herein contained is untrue or incorrect in any
respect. The provisions of this Section 8.05(b) shall survive the Closing.
(c) Operating Taxes. It shall be the sole obligation and liability
---------------
of Seller to file all necessary tax returns and reports relating to the conduct
of Business of the Facilities prior to the Closing Date with respect to all
Taxes, whether such taxes are imposed directly upon Seller or collected by
Seller from residents and remitted to the appropriate taxing authority, and it
shall be the sole obligation of the Seller to pay, or cause the payment of, any
and all of such Taxes. If requested by Seller, Buyer agrees to reasonably
cooperate with Seller in the preparation and filing of such reports, which
obligation shall survive the Closing.
(d) Tax Free Exchange. Notwithstanding anything to the contrary
-----------------
contained in this Agreement, Seller shall have the right, in lieu of receiving
the Purchase Price contemplated by this Agreement, to exchange the Purchased
Assets in a transaction intended to qualify as a tax free exchange (the "Tax
Free Exchange") under the provisions of the Code. In the event that Seller
desires to undertake the Tax Free Exchange, Buyer, Seller and Exchange Escrowee
(as defined below) shall, promptly following Seller's request, enter into an
Exchange Escrow Agreement substantially in the form attached to this Agreement
as Exhibit J and Seller shall assign its rights under this Agreement to the
------- -
Exchange Escrowee, provided, however, such assignment shall not relieve Seller
of its obligations hereunder. Buyer's rights will remain unaffected by the
Seller's assignment to the Exchange Escrowee. The Exchange Escrowee, as that
term is defined in the Exchange Escrow Agreement, shall be the Title Company, or
such other title company or entity mutually acceptable to Buyer and Seller.
Buyer agrees to execute and deliver such additional documents as may be required
to complete the transactions contemplated by the Exchange Escrow Agreement,
provided that such documents do not increase Buyer's obligations or liabilities
set forth in this Agreement or decrease its rights hereunder. In the event that
changes occur in the Code, regulations promulgated thereunder, or applicable
case law relating to transactions such as the Tax Free Exchange and such changes
cause the attached Exchange Escrow Agreement to be incorrect, inadequate or
obsolete for the purposes contemplated in this Agreement, then at Seller's
request, Buyer and Seller shall modify or amend the Exchange Escrow Agreement or
enter into a new Exchange Escrow Agreement to effectuate the Tax Free Exchange;
provided, however, that such changes or additional documents do not increase any
cost or liability of Buyer
<PAGE>
-55-
thereunder or under this Agreement or decrease or modify Buyer's rights to
purchase the Purchased Assets. Buyer and Seller also agree that if the Seller
exercises its right to transfer the Purchased Assets in a Tax Free Exchange
pursuant to this Section 8.05(d), then the Earnest Money and all accrued
interest will be transferred to the Exchange Escrowee prior to the Closing
subject to escrow instructions reasonably satisfactory to Buyer. Seller shall
bear all costs associated with the Tax Free Exchange. The fact that the Code may
be hereafter amended, supplemented, or replaced with the effect that a Tax Free
Exchange is no longer possible shall not have any effect on Seller's obligation
to comply with the other provisions of this Agreement subject to its terms. In
no event shall Buyer be obligated to (i) take title to any other property, (ii)
assume any obligations with respect to any other property, or (iii) incur or
sustain any Liability not otherwise required to be incurred or sustained by
Buyer pursuant to this Agreement. Notwithstanding anything contained herein to
the contrary, the ability of Seller to effectuate a Tax Free Exchange in
accordance with the provisions of this Section 8.05(d) shall not be a condition
precedent to the Seller's obligations to close the transactions contemplated by
this Agreement.
8.06 Default.
-------
(a) If any condition set forth herein for the benefit of Buyer under
Section 7.01 hereof cannot or will not be satisfied prior to Closing, or upon
the occurrence of any other event that would entitle Buyer to terminate this
Agreement and its obligations hereunder, and if Seller fails to cure any such
matter or satisfy that condition within ten (10) Business Days after notice
thereof from Buyer (or such other time period as may be explicitly provided for
herein), Buyer, at its option, shall elect, as its sole alternatives, to: (i)
terminate this Agreement, in which event the Buyer shall be entitled to receive
the Deposit and any interest thereon; or (ii) elect to proceed to Closing, in
which event such conditions shall, to the extent of Section 7.01(b) and Section
7.01(f) conditions only, be deemed to have been waived by Buyer, and subject to
such waiver, Buyer shall be entitled to proceed to Closing by action for
specific performance; provided, however, that in no event shall Seller be
--------
required to expend any monies to cure any such Section 7.01(b) or 7.01(f)
conditions or to otherwise comply with an order for specific performance, other
than the transaction expenses contemplated to be borne by Seller under this
Agreement. Other than Buyer's alternatives set forth in this Section 8.06(a),
Buyer shall have no other remedy at law or in equity, including, without
limitation, any right to other damages, including consequential or special or
punitive or damages pursuant to Massachusetts General Laws c.93A et seq., or any
other right to bring an action for specific performance of this Agreement.
<PAGE>
-56-
(b) If any condition set forth herein for the benefit of Seller
cannot or will not be satisfied prior to Closing, and if Buyer fails to satisfy
that condition within ten (10) Business Days after notice thereof from Seller
(or such other time period as may be explicitly provided for herein), or if,
prior to Closing, Buyer defaults in performing any of its obligations under this
Agreement (including its obligation to purchase the Purchased Assets) and Buyer
fails to cure any such default within ten (10) Business Days after notice
thereof from Seller, then Seller's sole and exclusive remedy shall be to
terminate this Agreement in which event the Deposit shall be paid over to Seller
and the parties hereto shall be released from all further obligations hereunder.
Seller and Buyer agree that, in the event of a termination of this Agreement as
a result of such a default, the damages that Seller would sustain as a result
thereof would be difficult if not impossible to ascertain. Therefore, Seller and
Buyer agree that in such event, Seller shall retain the Deposit as full and
complete liquidated damages and as Seller's sole remedy. Other than as set forth
in this Section 8.06(b), Seller shall have no other remedy at law or in equity,
including, without limitation, any right to other damages, including
consequential or special or punitive damages pursuant to Massachusetts General
Laws c.93A et seq., or any right to bring an action for specific performance of
this Agreement.
8.07 Employees; Employee Benefits. All matters related to the Employees of
----------------------------
the Facilities, including, without limitation, continued employment, terms of
employment, benefit plans and retirement plans, shall be dealt with in
accordance with the provisions set forth on Schedule 8.07 attached hereto.
-------------
8.08 Resident Property.
-----------------
(a) On or immediately prior to the Closing Date, representatives of
Buyer and Seller shall take an inventory of all resident property checked or
left in the care of Seller at the Facilities. From and after the Closing Date,
Buyer shall be responsible for all resident property listed in said inventory
and verified by Buyer at Closing, and Buyer hereby agrees to indemnify and to
hold Seller harmless from any liability therefor.
(b) The provisions of this Section 8.08 shall survive the Closing.
8.09 Permits; Licenses. Seller shall cooperate, at Buyer's sole cost and
-----------------
expense, with Buyer and Buyer's representatives to enable and assist Buyer to
procure and maintain all licenses, permits and authorizations necessary for
Buyer's ownership and operation of the Facilities. Buyer shall promptly apply
for and use all reasonable efforts to obtain all such requisite
<PAGE>
-57-
licenses, permits and authorizations, but the obtaining of such licenses,
permits and authorizations shall not be a condition to Buyer's obligations
hereunder, except as expressly stated in Section 7.01(c).
ARTICLE IX
Miscellaneous
-------------
9.01 Notices. Except as otherwise provided in this Agreement, all notices,
-------
demands, requests, consents, approvals and other communications required or
permitted to be given hereunder, or which are to be given with respect to this
Agreement, shall be in writing and shall be deemed delivered (i) upon the
personal delivery thereof, (ii) upon the delivery by facsimile electronic
transmission (provided that such facsimile is sent on a Business Day prior to
3:00 p.m. of the recipient's local time, and a confirmation copy is sent via
another manner set forth in this Section 9.01), (iii) the next business day
following delivery to a reliable and recognized air-freight or delivery service,
or (iv) three (3) Business Days following deposit thereof in the United States
mail, certified mail (return receipt requested), provided such notices shall be
addressed or delivered to the parties at their respective addresses or facsimile
telephone numbers set forth below. Copies of all notices delivered hereunder
shall also be delivered in the same manner to counsel for the parties hereto.
If to Seller: c/o The Flatley Company
50 Braintree Hill Office Park
Braintree, Massachusetts 02184-8754
Attn: Mr. Thomas J. Flatley
Telephone No.: 781-848-2000
Facsimile No.: 781-849-5140
With a copy to Seller's attorneys: Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attn: Lawrence I. Silverstein, Esq.
Telephone No.: 617-951-8254
Facsimile No. 617-951-8736
<PAGE>
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If to Buyer: Centennial HealthCare Corporation
400 Perimeter Terrace, Suite 650
Atlanta, Georgia 30346
Attn: Alan C. Dahl
Telephone No.: 770-698-9040
Facsimile No.: 770-730-1377
and
With a copy to Buyer's attorneys: King & Spalding
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Paul A. Quiros, Esq.
Telephone No.: 404-572-4600
Facsimile No.: 404-572-5146
All costs and expenses of the delivery of notices hereunder shall be borne and
paid for by the delivering party. No notice shall be deemed duly delivered
hereunder unless all postage or delivery charges shall have been prepaid by the
sending party, or otherwise delivered to the receiving party free of delivery
charges.
9.02 Entire Agreement; Amendments. This Agreement and the Exhibits and
----------------------------
Schedules hereto constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersede all prior
understandings or agreements between the parties with respect to the subject
matter hereof. This Agreement may not be altered, modified, extended, revised or
changed, nor may any party hereto be relieved of any of its Liabilities or
obligations hereunder, except by written instrument duly executed by each of the
parties hereto. Any such written instrument entered into accordance with the
provisions of the preceding sentence shall be valid and enforceable
notwithstanding the lack of separate legal consideration therefor.
9.03 Governing Law.
-------------
(a) This Agreement is made pursuant to, and shall be governed by and
construed in accordance with, the laws of the Commonwealth of Massachusetts
without reference to the conflicts of laws provisions thereof.
(b) Any suit, action or proceeding involving this Agreement shall be
subject to arbitration in accordance with the rules of the American Arbitration
Association. Demand for arbitration shall be filed in writing with
<PAGE>
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the other party to this Agreement and with the American Arbitration Association
in the City of Boston. Buyer and Seller acknowledge and agree that any
arbitration proceedings arising out of this Agreement shall occur in Boston,
Massachusetts. Any arbitration proceedings shall be subject to the limitations
set forth in this Agreement, including, without limitation, the Survival Period
set forth in Section 4.04 hereof, and the limits on indemnification set forth in
Section 4.06 hereof. The award rendered by the arbitrator shall be final and may
be enforced in any court of law.
9.04 Headings. Section, subsection and article headings used herein are
--------
for convenience and ease of reference only and are not intended to have any
legal effect. Accordingly, no reference shall be made to any such article,
section or subsection headings for the purpose of interpreting, construing or
enforcing any of the provisions of this Agreement.
9.05 Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed an original and all of which, when
taken together, shall be deemed to be one Agreement. In the absence of an
original signature page, a signature page transmitted by facsimile transmission
shall be effective to bind the party for all purposes of this Agreement.
9.06 Time of the Essence. Time is of the essence of this Agreement. In
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the event the parties hereto shall elect to extend the time for performance, or
extend the Closing Date, and such election shall be set forth in a written
instrument, such election shall nevertheless not be deemed a waiver on the part
of either party of time as being of the essence of this Agreement. In the
computation of any period of time provided for in this Agreement or by law, the
day of the act or event from which said period of time runs shall be excluded,
and the last day of such period shall be included, unless it is a Saturday,
Sunday or legal holiday, in which case the period shall be deemed to run until
the end of the next day which is not a Saturday, Sunday or legal holiday.
9.07 Recoupment Refunds. In the event that Seller pays to Buyer or any
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provider under any Reimbursement Program any amounts as indemnification for
offsets or recoupments and a reduction or withdrawal of any such offset or
recoupment claim or credit to Buyer on account of such paid claim later takes
place, Buyer will immediately refund to Seller an amount equal to any amounts
paid by Seller as indemnification to the extent of any refund, credit or other
benefit obtained by Buyer as a result of such reduction or withdrawal of such
offset or recoupment claim. Buyer shall provide prompt notice to Seller of any
such reductions or withdrawals of or credits on account of offsets or recoupment
claims and, on request of Seller,
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shall provide to Seller from time to time a report in reasonable detail
concerning the status of all offsets and recoupment claims and any subsequent
credits, withdrawals, reductions or other benefits which Buyer may have received
relating to such claims.
9.08 Notices of Intent; Waiting Periods; Etc. The Closing shall not take
---------------------------------------
place, the provisions of this Agreement relating to the acquisition of the
Facilities (other than those provisions requiring the giving of notices to and
filing of applications with Government Authorities) shall not be implemented and
this Agreement shall not have any binding effect unless and until all required
notices of intent to acquire the Assets and other required notices to the
Massachusetts Department of Health have been given and the applicable waiting
periods have expired without notice from the Massachusetts Department of Health
prior to the expiration of such waiting period that a determination of need
shall be required or further information must be furnished, or such waiting
periods have been waived by the Massachusetts Department of Health, provided,
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that upon the expiration or waiver of applicable waiting periods without such
notice from the Massachusetts Department of Health this Agreement shall
automatically become fully binding and enforceable without further action by
either party.
9.09 Binding Effect. Subject to the provisions of Section 9.08, this
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Agreement shall be binding upon and shall inure to the benefit of, the parties
hereto, and their respective successors and permitted assigns. Except as
permitted pursuant to Section 3.05, Buyer may not assign this Agreement or any
of its rights hereunder without first obtaining the written consent of Seller,
which consent may be withheld by Seller in its sole discretion and,
notwithstanding any such assignment, Buyer shall remain liable for the
performance by Buyer of all of its obligations hereunder.
9.10 No Third Party Beneficiary. Each of the covenants, undertakings and
--------------------------
agreements of the parties hereto are entitled solely for the benefit of the
other party and its successors and permitted assigns under the provisions of
this Agreement, and are not intended for the benefit of, and may not be enforced
by, any third party.
9.11 Enforceability. In the event that any provision of this Agreement
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shall be unenforceable in whole or in part, such provision shall be limited to
the extent necessary to render the same valid, or shall be excised from this
Agreement, as circumstances require, and this Agreement shall be construed as if
said provision had been incorporated herein as so limited, or as if said
provision has not been included herein (as the case may be).
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9.12 Non-Recordation. Buyer shall not file or record this Agreement or any
---------------
evidence or memorandum of this Agreement in any public records. A violation of
this section shall constitute a default by Buyer hereunder. Buyer and Seller
agree that in the event that Buyer records this Agreement or any evidence or
memorandum of this Agreement, Seller shall have the right on behalf of the Buyer
to execute and record a termination of the same, and the Buyer hereby grants to
the Seller a power of attorney for the limited purpose thereof.
ARTICLE X
Noncompetition and Nonsolicitation
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10.01 Noncompetition.
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(a) Seller acknowledges that Buyer will be engaged in Facility
Activities throughout the Territory and that to protect adequately the interest
of the Buyer in the Facilities it is essential that any noncompete covenant with
respect thereto cover all Facility Activities and the entire Territory.
(b) The Seller hereby agrees that he shall not, during the
Noncompete Period, in any manner (other than as a shareholder and/or an employee
of or consultant to Buyer or as otherwise permitted under this Section 10.01),
directly or indirectly, own, manage, operate, join, control, or engage or
participate in the ownership, management, operation, or control of any business
or organization any part of which engages in the provision of Facility
Activities in the Territory, including, without limitation, (i) participation as
a stockholder, or partner of, or having any direct or indirect financial
interest in any enterprise which engages in Facility Activities in the Territory
and/or (ii) participation as an employees, officer, director, agent,
representative, or consultant in, or rendering of any services to, any
enterprise in which his responsibilities are related directly and/or indirectly
to any Facility Activities in the Territory.
(c) The Seller shall hold in confidence at all times after the date
hereof and until the expiration of the Noncompete Period, all Trade Secrets, and
shall not disclose or publish Trade Secrets at any time after the date hereof
and until the expiration of the Noncompete Period, without the prior written
consent of Buyer, provided that nothing contained herein shall prevent or
--------
prohibit Seller from using such Trade Secrets for his own account or in the
operation of facilities not prohibited by this Agreement. Nothing in this
Agreement shall diminish the rights of Buyer regarding the protection of trade
secrets and other intellectual property pursuant to applicable law.
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(d) The Seller hereby agrees that he shall hold in confidence at
all times after the date hereof and until the expiration of the Noncompete
Period, all Confidential Information and will not disclose or publish
Confidential Information without the prior written consent of the Buyer,
provided that nothing contained herein shall prevent or prohibit Seller from
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using such Confidential Information for his own account or in the operation of
facilities not prohibited by this Agreement.
(e) Notwithstanding anything in this Section 10.01 to the contrary,
nothing contained herein shall prohibit the Seller from owning not more than ten
percent (10%) of any company which engages in Facility Activities and whose
common stock is publicly traded on a national securities exchange or in the
NASDAQ National Market System.
10.02 Nonsolicitation. The Seller hereby agrees that he shall not, during
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the Nonsolicitation Period, in any manner (other than as an employee of or a
consultant to the Facilities or the Buyer), directly or indirectly as an
employee, officer, director, investor or consultant of or to any other person or
entity or otherwise by assisting others;
(a) solicit or to attempt to solicit any of the Facilities'
patients for any activities in competition with the Facility Activities;
(b) recruit, attempt to recruit or hire on Seller's behalf or on
behalf of any other person, firm or corporation, any person that is an employee
of the Facilities, except with the prior written permission of Buyer.
Seller and Buyer acknowledge and agree that general advertising campaigns
and efforts of the Seller, including without limitation, through print media or
radio, shall not be deemed solicitation or recruitment for the purposes of this
Section 10.02, and that if a patient or employee (as the case may be) responds
to such general advertisement and subsequently enters into an arrangement with
Seller, Seller shall not be deemed to have breached its obligations under this
Section 10.02.
10.03 Right of First Refusal. Seller hereby agrees to give Buyer a right
----------------------
of first refusal exercisable to the extent applicable only during the Noncompete
Period to purchase, own, lease or manage, as the case may be, from Seller any
congregate living facility or assisted living facility which Seller constructs,
owns, leases or manages during the Noncompete Period within five (5) miles of
the Facilities. In the event that Buyer does not exercise the right of first
refusal within 20 days after receipt of a written notice from Seller indicating
Seller's intention to sell, own, lease or manage
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such a facility during the Noncompete Period, Buyer shall be deemed to have
waived its rights in their entirety with respect to such facility, and such
facility shall no longer be subject to the right of first refusal thereafter.
Notwithstanding anything contained herein to the contrary, the right of first
refusal shall not apply to the development by Seller at any time of facilities
for assisted living, congregate care or home care services on residential
properties owned by Seller on the Closing Date.
10.04 Severability. If a judicial or arbitral determination is made that
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any of the provisions of this Article 10 constitutes an unreasonable or
otherwise unenforceable restriction against the Seller, the provisions of this
Article 10 shall be rendered void only to the extent that such judicial or
arbitral determination finds such provisions to be unreasonable or otherwise
unenforceable with respect to the Seller. In this regard, the Seller and Buyer
hereby agree that any judicial authority construing this Agreement shall be
empowered to sever any portion of the Territory, any prohibited business
activity or any time period from the coverage of this Article 10 and to apply
the provisions of this Article 10 to the remaining portion of the Territory, the
remaining business activities and the remaining time period not so severed by
such judicial or arbitral authority. Moreover, notwithstanding the fact that any
provision of this Article 10 is determined not to be specifically enforceable,
Buyer shall nevertheless be entitled to recover monetary damages as a result of
the breach of such provision by any of the Seller, subject to the limitations on
indemnification set forth in Section 4.06. The time period during which the
prohibitions set forth in this Article 10 shall apply shall be tolled and
suspended for a period equal to the aggregate time during which Seller violates
such prohibitions in any respect.
10.05 Certain Remedies. The Seller agrees that any remedy at law for any
----------------
breach of the provisions contained in this Article 10 shall be inadequate and
that Buyer shall be entitled to injunctive relief in addition to any other
remedy Buyer might have under this Agreement. This provision will survive the
Closing.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their behalf as of the day and year first above written.
SELLER:
/s/ Thomas J. Flatley
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Thomas J. Flatley
/s/ Charlotte Flatley
----------------------------------
Charlotte Flatley
BUYER:
CENTENNIAL HEALTHCARE CORPORATION
By: J. Stephen Eaton
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Title: President and Chief
Executive Officer
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