================================================================================
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): September 1, 1998
CareMatrix Corporation
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 0-19815 04-3069586
- ------------------------------ ---------------------- -------------------------------
State or other jurisdiction of Commission File Number IRS Employer Identification No.
incorporation
</TABLE>
197 First Avenue
Needham, Massachusetts 02194
--------------------------------------------
(Address of principal executive offices)
(781) 433-1000
-----------------------------------
(Registrant's telephone number,
including area code)
================================================================================
<PAGE>
ITEM 5. Other Events.
On September 1, 1998, CareMatrix Corporation ("CareMatrix") closed the
acquisition of the equity interests of Robert Kaplan, Deborah Kaplan-Brooks,
Barton Kaplan and Edward Kaplan (collectively, the "Sellers") in certain
corporations and limited liability companies (the "Companies") pursuant to the
Purchase Agreement dated July 13, 1998, as amended, among CareMatrix, a
subsidiary of CareMatrix and the Sellers. The agreement, included as an exhibit
hereto, provides for the purchase of all of the equity interests in the
Companies, which own and operate assisted living facilities on Long Island, New
York and in New Jersey. The closing on the one facility located in New Jersey
provided for under the Purchase Agreement is pending subject to license
transfer. Including the New Jersey facility, the acquisition price consists of
approximately $105.7 million in cash and the assumption of approximately $43.9
million in debt of the Companies. The determination of the purchase price was
based on CareMatrix's internal valuation which included an evaluation of the
Companies' revenue, operating cash flow, market position and growth potential.
Including the New Jersey Facility, the Companies include an aggregate of ten
facilities with a capacity of 2,100 residents, seven of which are currently
operational and three of which are in the development stage.
In addition, CareMatrix has (i) provided to the Sellers options to purchase
up to an aggregate of 400,000 shares of common stock of CareMatrix with an
exercise price equal to $17.25 per share; (ii) entered into an Operating
Agreement with the Sellers for the operation of the facilities by the Sellers
until the earlier of two years or such time as CareMatrix has received the
requisite licenses and approvals to operate the facilities, at an average annual
fee of approximately $1,000,000; and (iii) entered into an arrangement whereby
the Sellers have the right to put to CareMatrix and CareMatrix has the right to
buy from the Sellers certain pharmacy and home health companies for the greater
of $8 million or eight times net earnings before income taxes for a specified
period prior to closing.
ITEM 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired. The financial statements
of the acquired companies have not been filed herewith and shall be filed by
amendment not later than November 15, 1998.
(b) Pro forma financial information. The required pro forma financial
information has not been filed herewith and shall be filed by amendment not
later than November 15, 1998.
(C) Exhibits.
Exhibit 2.1 Purchase agreement dated as of July 13, 1998 by and among
CareMatrix, a subsidiary of CareMatrix and the Sellers. (Filed
herewith)
Exhibit 2.2 First Amendment to Purchase Agreement dated August 31,
1998 by and among CareMatrix, a subsidiary of CareMatrix and
the Sellers. (Filed herewith)
<PAGE>
Signature
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 hereunto duly authorized.
CAREMATRIX CORPORATION
BY: /S/ Robert M. Kaufman
------------------------------
Robert M. Kaufman
Chief Executive Officer
Dated: September 15, 1998
EXECUTION COPY
================================================================================
-----------------------
PURCHASE AGREEMENT
-----------------------
dated as of July 13, 1998,
among
ROBERT KAPLAN,
DEBORAH KAPLAN-BROOKS,
BARTON KAPLAN,
EDWARD KAPLAN,
CAREMATRIX OF MASSACHUSETTS, INC.
and
CAREMATRIX CORPORATION
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms..................................................1
1.02. Other Defined Terms....................................................7
1.03. Use of Defined Terms...................................................8
ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale......................................................8
2.02. Purchase Price.........................................................8
2.03. Closing................................................................8
2.04. Purchase Price Adjustment..............................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
3.01. Authority of Sellers..................................................11
3.02. Organization and Qualification of the Companies.......................12
3.03. Capital Stock or Membership Interests of Each Company.................12
3.04. Subsidiaries..........................................................12
3.05. No Conflict...........................................................13
3.06. Financial Statements..................................................13
3.07. Labor Matters.........................................................13
3.08. Absence of Certain Changes or Events..................................13
3.09. Absence of Litigation.................................................16
3.10. Compliance with Laws..................................................16
3.11. Consents, Approvals, Licenses, Etc....................................16
3.12. Personal Property.....................................................17
3.13. Real Property.........................................................17
3.14. Employee Benefit Matters..............................................19
3.15. Taxes.................................................................19
3.16. Material Contracts....................................................21
3.17. Brokers...............................................................22
3.18. Insurance.............................................................22
<PAGE>
(ii)
3.19. No Undisclosed Liabilities............................................22
3.20. Environmental Matters.................................................23
3.21. Affiliate Transactions................................................24
3.22. Constituent Documents.................................................24
3.23. No Powers of Attorney.................................................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Incorporation and Authority of the Purchaser..........................25
4.02. No Conflict...........................................................25
4.03. Consents and Approvals................................................25
4.04. Absence of Litigation.................................................26
4.05. Investment Purpose....................................................26
4.06. Financing.............................................................26
4.07. Brokers...............................................................27
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing..............................27
5.02. Access to Information.................................................30
5.03. Confidentiality.......................................................31
5.04. Regulatory and Other Authorizations; Releases; Consents...............31
5.05. Investigation.........................................................32
5.06. Disclosure............................................................33
5.07. No Solicitation of Employees..........................................33
5.08. Intellectual Property.................................................33
5.09. Further Action........................................................33
5.10. Operating Agreement...................................................33
5.11. Construction of Projects under Development............................34
5.12. Pharmacy and Home Health Companies....................................34
5.13. Taking................................................................35
ARTICLE VI
EMPLOYEE MATTERS
6.01. Employee Benefit Plans................................................36
<PAGE>
(iii)
ARTICLE VII
TAX MATTERS
7.01. Tax Indemnities.......................................................36
7.02. Refunds and Tax Benefits..............................................37
7.03. Contests..............................................................38
7.04. Preparation of Tax Returns............................................39
7.05. Section 338(h)(10) Election...........................................39
7.06. Cooperation and Exchange of Information...............................40
7.07. Conveyance Taxes......................................................41
7.08. Miscellaneous.........................................................41
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to Obligations of the Sellers..............................42
8.02. Conditions to Obligations of the Purchaser............................43
ARTICLE IX
INDEMNIFICATION
9.01. Survival..............................................................45
9.02. Indemnification by the Purchaser......................................45
9.03. Indemnification by the Sellers........................................46
9.04. Indemnification Procedures............................................47
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.01. Termination..........................................................49
10.02. Effect of Termination................................................50
10.03. Waiver...............................................................50
<PAGE>
(iv)
ARTICLE XI
GENERAL PROVISIONS
11.01. Expenses.............................................................50
11.02. Notices..............................................................50
11.03. Public Announcements.................................................52
11.04. Headings.............................................................52
11.05. Severability.........................................................52
11.06. Entire Agreement.....................................................53
11.07. Assignment...........................................................53
11.08. No Third-Party Beneficiaries.........................................53
11.09. Waivers and Amendments...............................................53
11.10. Guarantee............................................................53
11.11. Specific Performance.................................................54
11.12. Governing Law........................................................54
11.13. Counterparts.........................................................55
SCHEDULES
Schedule I Ownership of Companies
Schedule II Pro Rata Shares
Schedule 2.02(A) Allocation of Purchase Price
Schedule 2.02(B) Debt
Schedule 5.04(c) Guarantees
EXHIBITS
Exhibit A Form of Operating Agreement
Exhibit 5.12 Put/Call Term Sheet
Exhibit 5.12(f) Services Price
Exhibit 8.01(e) Form of Stock Option Agreement
<PAGE>
PURCHASE AGREEMENT, dated as of July 13, 1998, among ROBERT KAPLAN, DEBORAH
KAPLAN-BROOKS, BARTON KAPLAN and EDWARD KAPLAN (each, a "Seller" and,
collectively, the "Sellers"), CAREMATRIX OF MASSACHUSETTS, INC., a Delaware
corporation (the "Purchaser"), and CAREMATRIX CORPORATION, a Delaware
corporation ("CareMatrix"), as Guarantor.
WHEREAS, each Seller owns: (i) the issued and outstanding shares of common
stock of Alandco Development Corporation, a New Jersey corporation ("Alandco"),
and SeniorCare Group, Ltd., a New York corporation (collectively, the
"Corporations"), having the par value indicated thereon, set forth opposite such
Seller's name on Part I of Schedule I hereto (such shares of all Sellers
collectively, the "Shares"); and (ii) the membership interests in Westbury Home
Operating Company, LLC, a New York limited liability company, Island Manor
Operating Company, LLC, a New York limited liability company, South Shore
Associates, LLC, a New York limited liability company, Shirlbart Real Estate
Operating Company, LLC, a New York limited liability company, Seniorland
Company, LLC, a New York limited liability company, and The Islandia Community
for Seniors Operating Company, LLC, a New York limited liability company
(collectively, the "Limited Liability Companies", and, together with the
Corporations, the "Companies"), set forth opposite such Seller's name on Part II
of Schedule I hereto (such membership interests of all Sellers collectively
being the "Membership Interests", and, together with the Shares, the
"Interests"); and
WHEREAS, each Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from each Seller, such Seller's Interests, upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the Purchaser, each Seller and
CareMatrix hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms have the following meanings:
"Action" means any claim, action, suit, arbitration, investigation, audit
or proceeding by or before any Governmental Authority or arbitrator.
"Affiliate" means, when used with respect to a specified Person, another
Person that, either directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
<PAGE>
2
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Agreement" means this Purchase Agreement, dated as of July 13, 1998, among
the Sellers, the Purchaser and CareMatrix (including the Schedules and Exhibits
hereto, and the Disclosure Schedule) and all amendments and modifications hereto
made in accordance with Section 11.09.
"Books and Records" means all files, documents, instruments, papers, books
and records relating to the business or condition of the Companies, including
without limitation financial statements, tax returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title policies, minute books, stock certificates and books, stock transfer
ledgers, contracts, licenses, tenant lists, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in New York City
or Boston.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and the rules and regulations promulgated
thereunder.
"Code" means the Internal Revenue Code of 1986, as amended and as it may be
further amended from time to time, and any successor statutes thereto.
"Confidentiality Agreement" means the letter agreement dated as of April 6,
1998, between Salomon Smith Barney, on behalf of SeniorCare Group, and the
Purchaser.
"Contracted Real Property" means, with respect to any Company, the real
property for which there exists any option contract, purchase and sale contract,
or letter of intent to which such Company is a party, together with all
buildings and other structures, facilities or improvements, currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of such Company attached thereto and all easements, licenses,
rights and appurtenances related to the foregoing.
"Control" (including the terms "controlled by" or "under common control
with"), with respect to the relationship between or among two or more persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
<PAGE>
3
"Disclosure Schedule" means the Disclosure Schedule dated as of the date of
this Agreement delivered to the Purchaser by the Sellers.
"EL" means the Education Law of the State of New York.
"Encumbrance" means any security interest, pledge, mortgage, lien, charge,
levy, assessment, adverse claim of ownership or use, or other encumbrance of any
kind.
"Environmental Law" means any federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, order or common law, and any enforceable
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment, health, safety or natural resources, including,
without limitation, to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials, in each case in effect as
of the date hereof.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under or issued pursuant to any
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Statements" means the 1997 Financial Statements and the Interim
Financial Statements.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time applied consistently throughout the periods involved.
"Governmental Authority" means any government, any governmental entity,
department, commission, board, agency or instrumentality, and any court,
tribunal, or judicial or arbitral body, whether federal, state or local.
"Governmental Order" means any order, judgment, writ, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Material" means (A) any petroleum or petroleum products,
by-products, or breakdown products, radioactive materials, asbestos in any form
that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid containing levels
of polychlorinated biphenyls (PCBs), and (B) any chemicals, materials,
substances or wastes which are defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous
<PAGE>
4
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import, under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"Income Tax" means any and all Taxes based upon, measured by or calculated
with respect to gross or net income or receipts (including, but not limited to,
any capital gains and alternative minimum taxes).
"Intellectual Property Rights" means all (i) registrations of trademarks,
service marks, logos, corporate names, trade names or other trade rights of each
Seller Entity, (ii) pending applications by each Company for any such
registrations, (iii) rights in or to patents and copyrights and pending
applications therefor of each Company and (iv) each Company's rights to other
trademarks, service marks, logos, corporate names, trade names and other trade
rights and all other trade secrets, designs, plans, specifications, technology,
know-how, methods, designs, concepts and other proprietary rights, whether or
not registered.
"InterCompany Transaction" has the meaning set forth in Section 1.1502-13
of the U.S. Department of Treasury regulations promulgated under the Code.
"Interim Balance Sheet Date" means April 30, 1998.
"Interim Combined Balance Sheet" means the unaudited combined balance
sheets of the Companies as of the Interim Balance Sheet Date, in each case
prepared in accordance with GAAP consistent with the 1997 Financial Statements.
"Interim Financial Statements" means the Interim Combined Balance Sheet and
the unaudited combined statement of income of the Companies for the four-month
period ended on the Interim Balance Sheet Date, in each case prepared in
accordance with GAAP consistent with the 1997 Financial Statements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
through the date hereof.
"IRS" means the United States Internal Revenue Service.
"knowledge" or "known" means, with respect to any matter in question, with
respect to any Seller, the actual knowledge of such Seller.
"Law" means any federal, state or local statute, law, ordinance,
regulation, rule, code, order or rule of common law.
<PAGE>
5
"Leases" means, with respect to any Company, the leases for such Company's
Leased Real Property, copies of which have been made available by the Sellers to
the Purchaser.
"Leased Real Property" means, with respect to any Company, the real
property leased by such Company, as tenant or lessor, together with, to the
extent leased by such Company, all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of such Company attached or appurtenant
thereto, and all easements, licenses, rights and appurtenances relating to the
foregoing.
"Liabilities" means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable.
"Losses" of a Person means any and all losses, liabilities, damages,
claims, awards, judgments, costs and expenses (including, without limitation,
reasonable attorney's fees) actually suffered or incurred by such Person.
"Material Adverse Effect" means any change or effect that is materially
adverse to the results of operations or the financial condition of the
Companies, taken as a whole.
"NJAC" means the New Jersey Administrative Code, as amended from time to
time.
"NYCRR" means the Codes, Rules and Regulations of the State of New York, as
amended from time to time.
"1997 Combined Balance Sheet" means the audited combined balance sheet of
the Companies as of December 31, 1997, together with the notes thereon, in each
case prepared in accordance with GAAP.
"1997 Financial Statements" means the 1997 Combined Balance Sheet and the
audited combined statements of income and cash flow of the Companies for the
12-month period ended on December 31, 1997, together with the notes thereon, in
each case prepared on a basis consistent with GAAP.
"Owned Real Property" means, with respect to any Company, the real property
owned by such Company, together with all buildings and other structures,
facilities or improvements, currently or hereafter located thereon, all
fixtures, systems, equipment and items of personal property of such Company
attached thereto and all easements, licenses, rights and appurtenances related
to the foregoing.
<PAGE>
6
"Permitted Encumbrances" means (i) Encumbrances for inchoate mechanics' and
materialmen's liens for construction in progress and workmen's, repairmen's,
warehousemen's and carriers' liens arising in the ordinary course of business of
any Company, (ii) Encumbrances for Taxes not yet payable and for Taxes being
contested in good faith, (iii) Encumbrances arising out of, under or in
connection with this Agreement and (iv) Encumbrances and imperfections of title
the existence of which would not materially affect the use of the property
subject thereto.
"Person" means any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity.
"PHL" means the Public Health Law of the State of New York.
"Project" means the Project under Construction and the Projects under
Development, collectively.
"Project under Construction" means that certain facility of South Shore
Associates, LLC, located at 8 Freer Street, Lynbrook, New York.
"Projects under Development" means collectively those certain proposed
facilities of Seniorland Company, LLC, located at 9 Hempstead Turnpike,
Farmingdale, New York and 1600 Express Drive South, Brentwood, New York, and
that certain proposed facility of South Shore Associates, LLC, located at 1515
Veterans Memorial Highway, Hauppage, New York.
"Pro Rata Share" means, with respect to any Seller for any amount, the
product of the percentage set forth opposite such Seller's name on Schedule II
hereto and such amount.
"Salomon Smith Barney" means Smith Barney Inc. and Salomon Brothers Inc,
doing business together as "Salomon Smith Barney".
"Tax" or "Taxes" means all income, gross receipts, sales, use, employment,
franchise, profits, property or other taxes, fees, stamp taxes and duties,
assessments or charges of any kind whatsoever (whether payable directly or by
withholding), together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority with respect thereto.
"Total Working Capital" means the total combined current assets minus the
total combined current liabilities of the Companies, which shall not include (i)
any fees, not to exceed 1% of the aggregate indebtedness outstanding, payable by
the Companies pursuant to the agreements governing the indebtedness described in
Schedule 2.02(B) and (ii) the current portion of any long-term indebtedness, as
shown on the Closing Balance Sheet.
<PAGE>
7
SECTION 1.02. Other Defined Terms. The following terms have the meanings
defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Alandco Recitals
Allocation 7.05(b)
Benefit Plans 3.14(a)
CareMatrix Preamble
Closing 2.03(a)
Closing Balance Sheet 2.04(b)
Closing Date 2.03(a)
Companies Recitals
Contest 7.03(b)
Corporations Recitals
Debt Consents 8.02(f)
Designated Amount 2.04(d)
Elections 7.05(a)
Expiration Date 5.12(a)
Guarantees 5.04(c)
Indemnified Party 9.04(a)
Indemnifying Party 9.04(a)
Independent Accounting Firm 2.04(d)
Interests Recitals
Licenses 3.11(b)
Limited Liability Companies Recitals
Material Contracts 3.16(a)
Membership Interests Recitals
NALPAK 5.11
Operating Agreement 5.10
Post-Closing Date Tax Benefit 7.02(b)
Purchase Price 2.02
Purchaser Preamble
Purchaser Indemnified Party 9.03(a)
Purchaser's Accountants 2.04(d)
Put/Call Entities 5.12(a)
Put/Call Notice 5.12(a)
Put/Call Price 5.12(c)
Seller Indemnified Party 9.02(a)
Sellers Preamble
Sellers' Accountants 2.04(b)
Sellers' Threshold Amount 9.03(b)
<PAGE>
8
Shares Recitals
Third Party Sale 5.12(c)
Threshold Amount 7.01(d)
</TABLE>
SECTION 1.03. Use of Defined Terms. The meanings of the terms defined in
this Agreement shall be applicable to the singular as well as the plural forms
of such terms, unless otherwise stated.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, each Seller agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from each Seller, such Seller's
Interests.
SECTION 2.02. Purchase Price. The aggregate purchase price (the "Purchase
Price") shall be the sum of (a) $104,000,000 and (b) the aggregate amount, not
to exceed 1% of the indebtedness outstanding, of any fees payable by the
Companies pursuant to the agreements governing the indebtedness described in
Schedule 2.02(B) in cash, which shall be allocated among the Interests of the
Sellers in the manner set forth in Schedule 2.02(A) hereof. The Purchase Price
shall be subject to adjustment in accordance with Sections 2.04 and 8.02(f) and
shall be increased by $1,000,000 in the event the indebtedness described in
Schedule 2.02(B) is discharged at the Closing (without any additional amounts
for prepayment penalties, premiums or similar charges unless specifically agreed
to by the Purchaser). The Purchase Price shall be payable as provided in Section
2.03(c).
SECTION 2.03. Closing. (a) Subject to the terms and conditions of this
Agreement, the sale and purchase of the Interests contemplated hereby shall take
place at a closing (the "Closing") to be held at 10:00 a.m., local time, on the
last Business Day of the month during which the later of the following occurs:
(i) the expiration or termination of the applicable waiting periods under the
HSR Act, if any, and (ii) the satisfaction or waiver of all other conditions to
the obligations of the parties set forth in Article VIII, at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or at such
other time or on such other date or at such other place as each Seller and the
Purchaser may mutually agree upon in writing (the day on which the Closing takes
place being the "Closing Date").
(b) At the Closing, each Seller shall deliver or cause to be delivered to
the Purchaser: (i) stock certificates evidencing such Seller's Shares duly
endorsed in blank or accompanied by stock powers duly executed in blank; (ii)
membership certificates evidencing such Seller's Membership Interests duly
endorsed in blank or accompanied by transfer powers
<PAGE>
9
duly executed in blank; and (iii) the certificate required to be delivered
pursuant to Section 8.02(a).
(c) At the Closing, the Purchaser shall deliver to each Seller: (i) its Pro
Rata Share of the Purchase Price, by wire transfer in immediately available
funds, to an account or accounts designated at least two Business Days prior to
the Closing Date by such Seller in a written notice to the Purchaser; and (ii)
the certificate required to be delivered pursuant to Section 8.01(a).
(d) All action to be taken at the Closing shall be effective as of 11:59
p.m. on the Closing Date.
SECTION 2.04. Purchase Price Adjustment. (a) The Purchase Price shall be
subject to adjustment, if any, after the Closing Date as specified in this
Section 2.04.
(b) As soon as practicable (but in no event later than 90 calendar days
following the Closing Date), the Sellers shall jointly prepare and deliver to
the Purchaser a combined balance sheet for the Companies (the "Closing Balance
Sheet") as of the Closing Date. The Closing Balance Sheet shall be accompanied
by the report thereon of KPMG Peat Marwick LLP, independent accountants of the
Sellers (the "Sellers' Accountants"), stating that the Closing Balance Sheet
fairly presents in all material respects the combined financial position of the
Companies in accordance with GAAP applied on a basis consistent with the
preparation of the 1997 Combined Balance Sheet. During the preparation of the
Closing Balance Sheet by the Sellers and the period of any dispute provided for
in Section 2.04(d), the Purchaser shall provide each Seller and the Sellers'
Accountants reasonable access to the books, records, facilities and employees of
each Company, and the Purchaser shall cooperate reasonably with the Sellers'
Accountants, in each case to the extent required by any such Seller and the
Sellers' Accountants in order to prepare the Closing Balance Sheet and to
investigate the basis for any such dispute.
(c) Subject to the limitations set forth in Section 2.04(d), within 30
Business Days after the date of receipt by the Purchaser of the Closing Balance
Sheet:
(i) If the amount of the Total Working Capital on the Closing Balance Sheet
is less than zero, each Seller shall immediately pay to the Purchaser, as an
adjustment to the Purchase Price, an amount equal to its Pro Rata Share of such
difference; and
(ii) If the amount of the Total Working Capital on the Closing Balance
Sheet is greater than zero, the Purchaser shall immediately pay, as an
adjustment to the Purchase Price, to each Seller, an amount equal to such
Seller's Pro Rata Share of such excess.
<PAGE>
10
(d) If not disputed by the Purchaser in accordance with this Section
2.04(d), the Closing Balance Sheet delivered by the Sellers to the Purchaser
shall be final, binding and conclusive on the parties hereto. The Purchaser may
dispute any amount reflected on the Closing Balance Sheet to the extent that the
net effect of such disputed amount in the aggregate would be to change the Total
Working Capital by more than $50,000 (the "Designated Amount"), but only on the
basis that the amounts reflected on the Closing Balance Sheet were not arrived
at in accordance with GAAP applied on a basis consistent with the preparation of
the Interim Combined Balance Sheet; provided, however, that the Purchaser shall
notify each Seller and the Sellers' Accountants in writing of each disputed
item, specifying the amount thereof in dispute and setting forth, in detail, the
basis for such dispute, within 30 Business Days of the Purchaser's receipt of
the Closing Balance Sheet. In the event of such a dispute, each Seller and the
Purchaser shall negotiate in good faith to reconcile their differences. If such
dispute has not been resolved within 10 Business Days after the notice referred
to in the preceding sentence has been given, Price Waterhouse Coopers LLP (the
"Purchaser's Accountants") and the Sellers' Accountants shall attempt to
reconcile their differences, and any resolution by them as to any disputed
amounts shall be final, binding and conclusive on the parties hereto. If any
such resolution by the Purchaser's Accountants and the Sellers' Accountants
leaves in dispute amounts the net effect of which in the aggregate would be to
change the Total Working Capital by less than the Designated Amount, all the
amounts remaining in dispute shall then be deemed to have been resolved as such
amounts are set forth on the Closing Balance Sheet, and such resolution shall be
final, binding and conclusive on the parties hereto. If the Purchaser's
Accountants and the Sellers' Accountants are unable to reach a resolution,
leaving in dispute amounts the net effect of which in the aggregate would change
the Total Working Capital by at least the Designated Amount, the Purchaser's
Accountants and the Sellers' Accountants shall submit the items remaining in
dispute that the Purchaser shall be entitled to dispute by the terms of this
Section 2.04(d) for resolution to Deloitte & Touche LLP or such independent
accounting firm as may be mutually acceptable to each Seller and the Purchaser
(the "Independent Accounting Firm"), which shall, within 30 Business Days of
such submission, determine and report to each Seller and the Purchaser upon such
remaining disputed items, and such report shall have the legal effect of an
arbitral award and shall be final, binding and conclusive on each Seller and the
Purchaser. The fees and disbursements of the Independent Accounting Firm shall
be allocated between the Sellers and the Purchaser in the same proportion that
the aggregate amount of such remaining disputed items so submitted to the
Independent Accounting Firm which is unsuccessfully disputed by the Sellers or
the Purchaser (as finally determined by the Independent Accounting Firm) bears
to the total amount of such remaining disputed items so submitted. The amount of
such fees and disbursements allocated to the Sellers pursuant to the immediately
preceding sentence shall be allocated to each Seller in accordance with its Pro
Rata Share of such amount. Any amount that is payable under Section 2.04(c),
including, without limitation, any portion thereof that is subject to dispute
under this Section 2.04(d) shall be paid by the Sellers (each in accordance with
its Pro Rata Share of such amount) or the Purchaser, as the case may be, by wire
transfer in immediately available funds to an account or accounts designated by
the
<PAGE>
11
Sellers or the Purchaser, as applicable, within five Business Days following
the resolution of such dispute and in an amount in accordance with such
resolution.
(e) In acting under this Agreement, the Sellers' Accountants, the
Purchaser's Accountants and the Independent Accounting Firm shall be entitled to
the privileges and immunities of arbitrators.
(f) Any payment required to be made by the Sellers or the Purchaser
pursuant to Section 2.04(c) shall bear interest from the Closing Date through
the date of payment on the basis of the average of the daily rate of interest
publicly announced by Citibank, N.A., in New York, New York, from time to time,
as its base rate plus 2%, from the Closing Date to the date of such payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller represents and warrants to the Purchaser as follows:
SECTION 3.01. Authority of Sellers. Such Seller has the legal right, power
and authority to enter into this Agreement, to carry out his or her obligations
hereunder and to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by such Seller, and (assuming due
authorization, execution and delivery by the other Sellers and the Purchaser of
this Agreement) this Agreement constitutes a legal, valid and binding obligation
of such Seller enforceable against such Seller in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 3.02. Organization and Qualification of the Companies. Each Company
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to own,
operate or lease the properties and assets now owned, operated or leased by it
and to carry on its business in all material respects as currently conducted by
such Company, except for such failures which, when taken together with all such
failures, would not have a Material Adverse Effect. Each Company is duly
qualified as a foreign organization to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary,
except for such failures which, when taken together with all other such
failures, would not have a Material Adverse Effect. True and complete copies of
the certificate of incorporation and bylaws or certificates of formation
<PAGE>
12
and limited liability company agreements, if any, as applicable, of
each Company, each of the foregoing as amended to the date of this Agreement,
have been made available for review by the Purchaser.
SECTION 3.03. Capital Stock or Membership Interests of Each Company. The
Shares constitute all the issued and outstanding shares of capital stock of the
Corporations, respectively. The Membership Interests constitute all the issued
and outstanding membership interests in the Limited Liability Companies,
respectively. The Shares and Membership Interests have been duly authorized and
validly issued, are fully paid and nonassessable, and were not issued in
violation of any preemptive rights. There are no options, warrants or rights of
conversion or other rights, agreements, arrangements or commitments relating to
the capital stock or membership interests, as the case may be, of any Company
obligating any Company to issue or sell any of its shares of capital stock or
membership interests, as the case may be. Such Seller owns the Shares and
Membership Interests set forth opposite such Seller's name on Parts I and II,
respectively, of Schedule I hereto, free and clear of all Encumbrances, except
for any Encumbrances arising out of, under or in connection with this Agreement.
There are no voting trusts, stockholder agreements, proxies or other similar
such agreements or arrangements in effect with respect to the voting or transfer
of the Shares or Membership Interests.
SECTION 3.04. Subsidiaries. There are no other corporations, limited
liability companies, partnerships, joint ventures, associations or other
entities in which any Company owns, of record or beneficially, any direct or
indirect equity or other interest or any right (contingent or otherwise) to
acquire the same. No Company is a member of any partnership, nor is any Company
a participant in any joint venture or similar arrangement.
SECTION 3.05. No Conflict. Assuming all consents, approvals, authorizations
and other actions described in Section 3.11 have been obtained and all filings
and notifications listed in Section 3.11 of the Disclosure Schedule have been
made, and except as may result from any facts or circumstances relating solely
to the Purchaser or as described in Section 3.05 of the Disclosure Schedule, the
execution, delivery and performance of this Agreement by such Seller does not
and will not (a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate or articles of incorporation,
articles of organization or by-laws (or other comparable corporate or limited
liability company charter documents) of any of the Companies; (b) conflict with
or violate any Law or Governmental Order applicable to such Seller or any
Company, except as would not, individually or in the aggregate, have a Material
Adverse Effect; or (c)(i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under (iii) result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to, (iv) result in
or give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under, or (v) result in the
creation or imposition of any Encumbrance upon any Seller or the Companies or
any of their respective assets and properties, in each case pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
<PAGE>
13
franchise or other instrument relating to such assets or properties to which
such Seller or any Company is a party or by which any of such assets or
properties is bound or affected, except as would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.06. Financial Statements. True and complete copies of the
Financial Statements have been delivered to the Purchaser. The Financial
Statements fairly present in all material respects the financial position and
results of operations of the business of each Company as of each date and for
the period covered thereby in conformity with GAAP.
SECTION 3.07. Labor Matters. No Company is a party to any labor agreement
with respect to its employees with any labor organization, group or association.
Except where the failure to comply would not have a Material Adverse Effect,
each Company is in compliance with all applicable Laws respecting employment
practices, terms and conditions of employment and wages and hours. Except as
would not have a Material Adverse Effect, as of the date of this Agreement, (a)
there is no unfair labor practice charge or complaint against any Company
pending before the National Labor Relations Board or any comparable state
agency; (b) there is no labor strike, labor disturbance or work stoppage pending
against any Company, and (c) to the knowledge of any of the Sellers or any of
the Companies there are no threatened or contemplated attempts to organize for
collective bargaining purposes any of the employees of any Company.
SECTION 3.08. Absence of Certain Changes or Events. Since the Interim
Balance Sheet Date to the date of this Agreement and except as set forth in
Section 3.08 of the Disclosure Schedule or as contemplated by this Agreement,
the business of the Companies has been conducted in the ordinary course of
business consistent with past practice. As amplification and not limitation of
the foregoing, between the Interim Balance Sheet Date and the date of this
Agreement, there has not been:
(a) any event that has had a Material Adverse Effect;
(b) except in the ordinary course of business consistent with past
practice, any Encumbrance of any kind created on any properties or assets
(whether tangible or intangible) of any Company, other than (i) Permitted
Encumbrances, (ii) Encumbrances that will be released at or prior to the
Closing and (iii) Encumbrances on assets having a value not exceeding
$500,000 in the aggregate for all Companies;
(c) except in the ordinary course of business consistent with past
practice, any sale, assignment, transfer, lease or other disposition or
agreement to sell, assign, transfer, lease or otherwise dispose of any of
the fixed assets of any Company having an aggregate value, together with
any such sale, arrangement, transfer, lease, disposition or agreement with
respect to the fixed assets of all Companies, exceeding $500,000;
<PAGE>
14
(d) any acquisition (by merger, consolidation, or acquisition of
stock, interests or assets) by any Company of any Person or division
thereof;
(e) except in the ordinary course of business consistent with past
practice, (i) any incurrence by any Company of any indebtedness for
borrowed money, (ii) any issuance by any Company of any debt securities or
(iii) any assumption, granting, guarantee or endorsement, or other
accommodation arrangement making any Company responsible for, the
Liabilities of any Person (other than another Company), (iv) any voluntary
purchase, cancellation, prepayment or complete or partial discharge in
advance of a scheduled payment date with respect to, or waiver of any right
of any of the Companies under, any indebtedness or liability of or owing to
any of the Companies (in either case other than any indebtedness or other
liability of one Company owing to any other Company) in the case of (i),
(ii), (iii) and (iv) above, having an aggregate value for all Companies
exceeding $500,000;
(f) any material change in any method of accounting or accounting
practice used by any Company, other than such changes required by GAAP;
(g) except in the ordinary course of business consistent with past
practice, (i) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock or membership interests
of any of the Companies or (ii) any direct or indirect redemption, purchase
or other acquisition by any of the Companies of any Shares or Membership
Interests;
(h) any authorization, issuance, sale or other disposition by any of
the Companies of any shares of capital stock of, options, or membership
interests with respect to any of the Companies, or any modification or
amendment of any right of any holder of any Shares or Membership Interests;
(i) except for agreements, arrangements or transactions (i) having an
individual value of less than $250,000 and an aggregate value of less than
$1,000,000 with respect to all the Companies and (ii) in the ordinary
course of business consistent with past practice, any agreement,
arrangement or transaction between any Company and any of its Affiliates;
or
<PAGE>
15
(j) (x) any increase in the salary, wages or other compensation of (A)
any officer, employee or consultant of any of the Companies whose annual
salary is, or after giving effect to such change would be, $100,000 or
more, or (B) any other officer, employee or consultant of any of the
Companies except in the ordinary course of business consistent with past
practice; (y) any establishment or modification of (A) targets, goals,
pools or similar provisions in respect of any fiscal year under any Benefit
Plan, employment contract or other employee compensation arrangement or (B)
salary ranges, increase guidelines or similar provisions in respect of any
Benefit Plans, employment contract or other employee compensation
arrangements; or (z) any adoption, entering into, amendment, modification
or termination (partial or complete) of any Benefit Plan except to the
extent required by applicable Law and, in the event compliance with legal
requirements presented options, only to the extent that the option that
such Company reasonably believed to be the least costly was chosen;
(k) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the real or personal property
or equipment of any of the Companies in an aggregate amount exceeding
$100,000;
(l) any work stoppage, discontinuation, or unanticipated delay on any
of the Projects;
(m) any net write-off or write-down of or any determination to
write-off or down any of the assets and properties, net of any reversals of
unnecessary reserves, of any of the Companies in an aggregate amount
exceeding $100,000;
<PAGE>
16
(n) any (x) reorganization, liquidation or dissolution of any of the
Companies or (y) business combination involving any of the Companies and
any other Person;
(o) except as related to the Projects, capital expenditures or
commitments for additions to property, plant or equipment of any of the
Companies constituting capital assets in an aggregate amount exceeding
$250,000;
(p) any agreement to take any actions specified in this Section 3.08,
except for this Agreement.
SECTION 3.09. Absence of Litigation. Except as set forth in Section 3.09 of
the Disclosure Schedule, as of the date of this Agreement (a) there are no
Actions pending against such Seller, any Company or any of the assets or
properties of any Company that, individually or in the aggregate, would have a
Material Adverse Effect or would prevent such Seller from consummating the
transactions contemplated hereby, (b) no Company or any of its assets and
properties are subject to any Governmental Order having a Material Adverse
Effect and (c) there are no facts or circumstances known to any Seller or any of
the Companies on the date hereof that could reasonably be expected by such
Seller or Company to give rise to any Action that would be required to be
disclosed pursuant to this Section 3.09.
SECTION 3.10. Compliance with Laws. Each Company and the conduct of the
business of such Company is in compliance with all applicable Laws, except (a)
as set forth on Section 3.10 of the Disclosure Schedule or (b) where the failure
to comply would not have a Material Adverse Effect. Neither such Seller nor any
Company has received any written notice to the effect that such Seller or such
Company, respectively, is not in compliance with any applicable Laws except (x)
as set forth on Section 3.10 of the Disclosure Schedule or (y) where the failure
to comply would not have a Material Adverse Effect.
SECTION 3.11. Consents, Approvals, Licenses, Etc. (a) Except as set forth
on Section 3.11(a) of the Disclosure Schedule, no consent, approval,
authorization, license, order or permit of, or declaration, filing or
registration with, or notification to, any Governmental Authority, or any other
person or entity, is required to be made or obtained by such Seller or any
Company in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, except:
(i) applicable requirements, if any, of the HSR Act; (ii) where the failure to
obtain such consents, approvals, authorizations, licenses, orders or permits of,
or to make such declarations, filings or registrations or notifications would
not, individually or in the aggregate, prevent such Seller from performing its
obligations under this Agreement and would not have a Material Adverse Effect;
and (iii) as may be necessary as a result of any facts or circumstances relating
solely to the Purchaser.
<PAGE>
17
(b) Except as set forth on Section 3.11(b) of the Disclosure Schedule, each
Company and, to the extent necessary to the conduct of such Company's business,
such Seller, have obtained, and maintain in force, all licenses, permits,
registrations, approvals, franchises, certificates of authority, orders and
waivers required from any Governmental Authority ("Licenses") to operate its
business in the manner in which such business is currently operated and to
occupy, operate and use any buildings, improvements, fixtures and equipment
owned or leased in connection with the operation of assisted living facilities
that provide the services currently provided by such Company at the location of
such Company, and all such Licenses are valid and in full force and effect,
except where the failure to obtain or maintain such Licenses in full force and
effect would not have a Material Adverse Effect. With respect to the Project
under Construction, Part I approval from the New York Department of Health has
been obtained and all necessary zoning approvals have been received. With
respect to each Project under Development application for Part I approval has
been made to the New York Department of Health, and with respect to the
Farmingdale, New York, property all necessary zoning approvals have been
received, with respect to the Brentwood, New York, property "first stage" zoning
approval has been received and with respect to the Islandia Plaza property,
zoning approvals subject to foot/area review have been received. To the
knowledge of such Seller, each employee of each Company has obtained, and
maintains in force, all licenses or approvals required to authorize such
employee to perform his or her duties on behalf of the applicable Company,
except where the failure to obtain or maintain in force such licenses or
approvals would not have a Material Adverse Effect.
SECTION 3.12. Personal Property. Except as disclosed in Section 3.12 of the
Disclosure Schedule or as would not have a Material Adverse Effect: (a) each
Company owns, has a valid leasehold interest in or has legal right to use all of
the tangible personal property necessary to carry on the business of such
Company, free and clear of all Encumbrances, except Permitted Encumbrances or
Encumbrances reflected on the Interim Financial Statements; (b) all such
tangible property is in good working order and condition, ordinary wear and tear
excepted, and its use complies in all material respects with all applicable
laws; and (c) each Company owns or has a valid license or sublicense to use all
Intellectual Property Rights that are necessary to carry on the business of such
Company, free and clear of all Encumbrances, except Permitted Encumbrances or
Encumbrances reflected on the Interim Financial Statements.
SECTION 3.13. Real Property. (a) Section 3.13(a) of the Disclosure Schedule
contains a true and correct list of (i) each parcel of Owned Real Property, (ii)
each parcel of Leased Real Property, (iii) each parcel of Contracted Real
Property, and (iv) all Encumbrances (other than Permitted Encumbrances) relating
to or affecting any parcel of real property referred to in clause (i).
<PAGE>
18
(b) Except with respect to the Contracted Real Property, the Companies have
good and marketable fee simple title to and, except for the Leased Real Property
leased to a third party by any of the Companies, the Companies are in possession
of each parcel of real property, together with all buildings, structures,
facilities, fixtures and other improvements thereon, listed in Section 3.13(a)
of the Disclosure Schedule, and in each case such parcel is, except as listed in
Section 3.13(a) of the Disclosure Schedule, free and clear of all Encumbrances
other than Permitted Encumbrances. The Companies have adequate rights of ingress
and egress with respect to such real property, buildings, structures,
facilities, fixtures and other improvements. None of the Sellers has knowledge
or has received any notice by any Governmental Authority having applicable
jurisdiction that any such real property, buildings, structures, facilities,
fixtures or other improvements, or the use thereof, contravenes or violates any
building, zoning, administrative, occupational safety and health or other
applicable Law in any material respect (whether or not permitted on the basis of
prior nonconforming use, waiver or variance).
(c) The Companies have a valid and subsisting leasehold estate in and the
right to quiet enjoyment of the Leased Real Properties for the full term of each
respective Lease, except with respect to such properties leased to a third
party. Each Lease is a legal, valid and binding agreement, enforceable in
accordance with its terms, of each Company and, to the knowledge of the Sellers,
of each other Person that is a party thereto, and there is no, and no Company
has received notice of any, default (or any condition or event which, after
notice or lapse of time or both, would constitute a default) thereunder. To the
knowledge of such Seller no Company owes any brokerage commissions with respect
to any such leased space.
(d) To such Seller's knowledge and in respect of any of the following that
are in the Seller's possession, the Sellers have delivered to the Purchaser
prior to the execution of this Agreement true and complete copies of (i) all
deeds, Leases, mortgages, deeds of trust, certificates of occupancy, title
insurance policies, title reports, surveys, and similar documents, and all
amendments thereof, with respect to the real property listed in Section 3.13(a)
of the Disclosure Schedule pursuant to clause (i) of paragraph (a) above, (ii)
all Leases (including any amendments and renewal letters) and, to the extent
reasonably available, all other documents referred to in clause (i) of this
paragraph (d) with respect to the real property listed in Section 3.13(a) of the
Disclosure Schedule pursuant to clause (ii) of paragraph (a) above, and (iii)
all purchase and sale agreements, option contracts, letters of intent, building
plans and specifications (including any amendments and renewal letters to any of
the foregoing) and, to the extent reasonably available, all other documents
referred to in clause (i) of this paragraph (d) with respect to the real
property listed in Section 3.13(a) of the Disclosure Schedule pursuant to clause
(iii) of paragraph (a) above.
<PAGE>
19
(e) To the knowledge of the Sellers, the improvements on the real property
identified in Section 3.13(a) of the Disclosure Schedule are in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, are adequate and suitable for the purposes for which they are
presently being used and there are no condemnation or appropriation proceedings
pending or threatened against any of such real property or the improvements
thereon.
SECTION 3.14. Employee Benefit Matters. (a) Section 3.14(a) of the
Disclosure Schedule sets forth a list of each employee benefit plan, program,
arrangement and contract maintained or contributed to by any Company (the
"Benefit Plans"). Such Seller has made available to the Purchaser a copy of (i)
such Benefit Plans, (ii) the most recent summary plan description for each
Benefit Plan for which a summary plan description is required and (iii) the most
recent Form 5500 and Schedules thereto for each Benefit Plan, if any.
(b) Each of the Benefit Plans has been administered in material compliance
with its terms and with all applicable Law. With respect to the Benefit Plans,
no event has occurred and, to the knowledge of such Seller, there exists no
condition or set of circumstances, in connection with which any Company could be
subject to any liability with respect to such Benefit Plans which would have a
Material Adverse Effect.
(c) None of the Companies sponsors, maintains or contributes to, nor have
any of the Companies ever sponsored, maintained or contributed to, any plan that
is an "employee pension benefit plan" within the meaning of ERISA. None of the
Companies maintains or is obligated to provide benefits under any life, medical
or health plan that provides benefits to retirees or other terminated employees
other than benefit continuation rights under the Consolidated Omnibus Budged
Reconciliation Act of 1985, as amended.
(d) To the knowledge of the Sellers, there are no pending or threatened
claims by or on behalf of any Benefit Plan, by any person covered thereby, or
otherwise, which allege violations of Law that could reasonably be expected to
result in liability on the part of the Purchaser or the Companies.
SECTION 3.15. Taxes. (a) Each of the Companies has filed all Tax returns
that it was required to file. All such Tax returns were correct and complete in
all material respects. All Taxes owed by each of the Companies (whether or not
shown on any Tax return) have been paid. Except for Alandco, which is the
beneficiary of an extension of time within which to file a Tax return until
September 15, 1998, all of the Companies (other than Seniorland Company, LLC)
are beneficiaries of extensions of time within which to file a Tax return until
July 15, 1998, and it is the intention of the Sellers to file for a further
extension with respect to the Companies until October 15, 1998. No claim has
ever been made by an authority in a jurisdiction where any Company does not file
Tax returns that it is or may be
<PAGE>
20
subject to taxation by that jurisdiction. There are no Encumbrances on any of
the respective assets and properties of any of the Companies that arose in
connection with any failure (or alleged failure) to pay any Tax, other than for
Taxes being contested in good faith or Taxes not yet due.
(b) Each of the Companies has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax liability of any of the
Companies either (A) claimed or raised by any authority in writing or (B) as to
which any of the directors and officers (and employees responsible for Tax
matters) of any of the Companies has knowledge. The Sellers have delivered to
the Purchaser true, correct and complete copies of all federal income Tax
returns, examination reports, and statements of deficiencies assessed against or
agreed to by any of the Companies since December 31, 1995.
(d) None of the Sellers or any of the Companies has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(e) The unpaid Taxes of the Companies did not, as of the Interim Balance
Sheet Date, exceed the reserve for Tax liabilities (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the balance sheet included in the Interim
Financial Statements (rather than in any notes thereto).
(f) None of the Sellers or any of the Companies has filed a consent under
Code Section 341(f) concerning collapsible corporations. None of the Sellers or
any of the Companies has made any payments, is obligated to make any payments,
or is a party to any agreement that under certain circumstances could obligate
any Company to make any payments that will not be deductible under Code Section
280G. Each Company has disclosed on its federal income Tax returns all positions
taken therein that management reasonably believed could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662. None of the Sellers or any of the Companies is a party to any Tax
allocation or sharing agreement. None of the Sellers nor any of the Companies
(A) has been a member of an Affiliated Group filing a consolidated federal
income Tax Return (other than a group the common parent of which was one of the
Sellers) or (B) has any liability for the Taxes of any Person (other than the
Sellers or the Companies) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
<PAGE>
21
(g) Except with respect to a refund of Taxes for the Project under
Construction for which a determination has yet to be made by the local taxing
authorities, none of the Sellers or any of the Companies has applied for and not
yet received a ruling or determination from a taxing authority regarding a past
or prospective transaction of any of the Sellers or any of the Companies.
SECTION 3.16. Material Contracts. (a) Section 3.16(a) of the Disclosure
Schedule lists the following contracts (collectively, with the Leases listed on
Section 3.13(b) of the Disclosure Schedule, the "Material Contracts") in effect
as of the date of this Agreement to which any Company is a party:
(i) any commitment, contract, agreement, note, loan, evidence of
indebtedness, purchase order or letter of credit (other than the Leases
listed on Section 3.13(b) of the Disclosure Schedule) that such Seller
reasonably anticipates will, in accordance with its terms, involve
aggregate payments by any Company of more than $500,000 within the 12 month
period following the date of this Agreement and that is not cancelable by
such Company without liability to it within 60 days;
(ii) any lease of personal property involving any annual expense in
excess of $100,000 and not cancelable by such Company without liability to
it within 60 days; and
(iii) any contracts or agreements containing covenants limiting the
freedom of any Company to engage in any line of business or compete with
any Person;
(iv) (A) all contracts or agreements (excluding Benefit Plans)
providing for a commitment of employment or consultation services for a
specified or unspecified term, the name, position and rate of compensation
of each Person party to such a Contract and the expiration date of each
such Contract; and (B) any written or unwritten representations,
commitments, promises, communications or courses of conduct (excluding
Benefit Plans and not embodied in a contract) involving an obligation of
any of the Companies to make payments in any year, other than with respect
to salary or incentive compensation payments in the ordinary course of
business, to any employee exceeding $50,000 or any group of employees
exceeding $100,000 in the aggregate;
(v) all contracts and agreements between or among any of the
Companies, on the one hand, and any of the Sellers, any officer, director,
Affiliate or associate of any Seller or any associate of any such officer,
director or Affiliate (other than any of the Companies), on the other hand;
<PAGE>
22
(vi) all other contracts and agreements that (A) involve the payment
or potential payment, pursuant to the terms of any such contract or
agreement, by or to any of the Companies of more than $100,000 and (B)
cannot be terminated within ninety (90) calendar days after giving notice
of termination without resulting in any material cost or penalty to any of
the Companies; and
(vii) all contracts, agreements, options, letters of intent, or other
memoranda of understanding (including without limitation, all construction,
architect, engineering and development contracts) relating to the Projects
with any Person.
(b) No Company is (and, to the knowledge of such Seller, no other party
is), as of the date of this Agreement, in breach or violation of, or default
under, any of the Material Contracts, where such breach or violation or default
would have a Material Adverse Effect. Each Material Contract, and each agreement
or arrangement between any Company and any Seller, is, as of the date of this
Agreement, a valid agreement, arrangement or commitment of the Company that is a
party thereto, enforceable against such Company in accordance with its terms
and, to the knowledge of such Seller, is a valid agreement, arrangement or
commitment of each other party thereto, enforceable against such party in
accordance with its terms, except in each case where enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and except where enforceability is subject to the application
of equitable principles or remedies or as would not have a Material Adverse
Effect.
SECTION 3.17. Brokers. Except for Salomon Smith Barney, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Sellers. The Sellers are
solely responsible for the fees and expenses of Salomon Smith Barney (and each
Seller is solely responsible for its Pro Rata Share of such fees and expenses).
SECTION 3.18. Insurance. Each Company is covered by valid and currently
effective insurance policies issued in favor of such Company, a Seller or an
Affiliate thereof, that, in the reasonable judgment of such Seller, are
customary for companies of similar size in the industry and location in which
such Company operates.
SECTION 3.19. No Undisclosed Liabilities. Except as set forth in Section
3.19 of the Disclosure Schedule or on the 1997 Combined Balance Sheet, and
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since December 31, 1997, none of the
Companies has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a balance
sheet.
<PAGE>
23
SECTION 3.20. Environmental Matters. (a) Each Company has obtained all
material Licenses which are required in respect to its business, Projects,
operations or assets and properties under applicable Environmental Laws. Each
Company is in compliance in all material respects with the terms and conditions
of all such Licenses and, to Seller's knowledge, with any applicable
Environmental Law. The Sellers have provided to the Purchaser true and complete
copies of the five environmental site assessments described in Section 3.20 of
the Disclosure Schedule,
(b) to the knowledge of such Seller, except as set forth in Section 3.20 of
the Disclosure Schedule (with section references corresponding to those set
forth below):
(i) No Governmental Order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or,
threatened by any Governmental Authority with respect to any alleged failure by
any of the Companies to have any License required in connection with the conduct
of the business, operations or Projects of any of the Companies or with respect
to any treatment, storage, recycling, transportation, disposal or "release" as
defined in 42 U.S.C. Section 9601(22) ("Release"), of any Hazardous Material,
and there are no facts or circumstances which could reasonably be expected to
form the basis for any such Governmental Order, complaint, penalty or
investigation.
(ii) None of the Companies or any prior owner or lessee of any Owned Real
Property, Leased Real Property, Contracted Real Property, or any real property
previously owned or leased by any of the Companies has handled any Hazardous
Material on any property now or previously owned or leased by any of the
Companies and, without limiting the generality of the foregoing, (i) no
polychlorinated biphenyl is or has been present, (ii) no asbestos is or has been
present, (iii) there are no underground storage tanks, active or abandoned, and
(iv) no Hazardous Material has been Released in a quantity reportable under, or
in violation of, any Environmental Law, at, on or under any Owned Real Property,
Leased Real Property, Contracted Real Property or real property previously owned
or leased by any of the Companies, during any period that any of the Companies
owned or leased such property or prior thereto.
(iii) None of the Companies has transported or arranged for the
transportation of any Hazardous Material to any location which is the subject of
any Action that could lead to claims against the Purchaser or any of the
Companies for clean-up costs, remedial work, damages to natural resources or
personal injury claims, including, but not limited to, claims under CERCLA.
(iv) No oral or written notification of a Release of a Hazardous Material
has been filed by or on behalf of any of the Companies and no Owned Real
Property, Leased Real Property, Contracted Real Property or real property
previously owned or leased by any of the
<PAGE>
24
Companies is listed or proposed for listing on the National Priorities List
promulgated pursuant to CERCLA or on any similar state list of sites requiring
investigation or clean-up.
(v) There are no Encumbrances (other than Permitted Encumbrances) arising
under or pursuant to any Environmental Law or Governmental Order on any Owned
Real Property, Leased Real Property, Contracted Real Property or real property
previously owned or leased by any of the Companies, and no action of any
Governmental Authority has been taken or is in process which could subject any
of such properties to such Encumbrances, and none of the Companies is required
to place any notice or restriction relating to the presence of Hazardous
Material on any Owned Real Property in any deed to such property.
(vi) There has been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or which are in the possession
of, any of the Companies in relation to any Owned Real Property, Leased Real
Property, Contracted Real Property or real property previously owned or leased
by any of the Companies which have not been delivered to the Purchaser prior to
the execution of this Agreement.
SECTION 3.21. Affiliate Transactions. Except as disclosed in Section 3.16
of the Disclosure Schedule, as of the date of this Agreement, (i) there are no
Liabilities between any of the Companies, on the one hand, and any of the
Sellers on the other, (ii) no Seller provides or causes to be provided any
assets, services or facilities to any of the Companies, (iii) none of the
Companies provides or causes to be provided any assets, services or facilities
to any of the Sellers, and (iv) none of the Companies beneficially owns,
directly or indirectly, any investment assets of any Seller. Except as disclosed
in Section 3.16 of the Disclosure Schedule, since the Interim Balance Sheet Date
all settlements of Liabilities between any of the Companies, on the one hand,
and any of the Sellers on the other, have been made, and all allocations of
intercompany expenses have been applied, in the ordinary course of business
consistent with past practice.
SECTION 3.22. Constituent Documents. The Sellers have made available to the
Purchaser true and accurate copies of the certificate or articles of
incorporation, by-laws, certificate or articles of organization or operating
agreement (or other comparable corporate constituent documents) of each Company,
and all amendments thereto, in each case as in effect on the date hereof.
SECTION 3.23. No Powers of Attorney. None of the Companies has any powers
of attorney or comparable delegations of authority outstanding.
<PAGE>
25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to each Seller as follows:
SECTION 4.01. Incorporation and Authority of the Purchaser. The Purchaser
is a corporation duly incorporated, validly existing and in good standing under
the laws of Delaware and has all necessary corporate power and authority to
enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Purchaser, the performance by the Purchaser of its
obligations hereunder and the consummation by the Purchaser of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of the Purchaser. This Agreement has been duly executed and
delivered by the Purchaser, and (assuming due authorization, execution and
delivery by each Seller) constitutes a legal, valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 4.02. No Conflict. Except as may result from any facts or
circumstances relating solely to any Seller, the execution, delivery and
performance of this Agreement by the Purchaser does not and will not: (a)
conflict with or violate the Certificate of Incorporation or By-laws (or other
similar applicable documents) of the Purchaser; (b) conflict with or violate any
Law or Governmental Order applicable to the Purchaser, except as would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Purchaser to consummate, or delay the consummation of, the transactions
contemplated by this Agreement; or (c) result in any breach of, or constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of the Purchaser pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which the
Purchaser or any of its subsidiaries is a party or by which any of such assets
or properties is bound or affected, except as would not, individually or in the
aggregate, have a material adverse effect on the ability of the Purchaser to
consummate, or delay the consummation of, the transactions contemplated by this
Agreement.
SECTION 4.03. Consents and Approvals. (a) Except for the approvals referred
to in Section 4.03(b)(ii) hereof, no consent, approval, authorization, license,
order or
<PAGE>
26
permit of, or declaration, filing or registration with, or notification to, any
Governmental Authority, or any other person or entity, is required to be made or
obtained by the Purchaser in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, except: (i) applicable requirements, if any, of the HSR
Act; and (ii) where the failure to obtain such consents, approvals,
authorizations, licenses, orders or permits of, or to make such declarations,
filings or registrations or notifications would not, individually or in the
aggregate, prevent the Purchaser from performing its obligations under this
Agreement and would not have a Material Adverse Effect.
(b) The Purchaser knows of no reason why it (or its designee) would not
receive (i) approval to operate adult care facilities under 18 NYCRR 485.6 and
related laws and regulations, (ii) approval to operate a comprehensive personal
care home under NJAC 8:36-2 and related laws and regulations, (iii) approval to
operate a home health care services agency under 44 PHL 3605 and related laws
and regulations and (iv) approval to operate a pharmacy under 16 EL 6808 and
related laws and regulations.
(c) The Purchaser acknowledges and agrees that (i) except as set forth in
the Operating Agreement, after the Closing, the Sellers shall not have any
obligation to obtain or maintain any operating licenses or certificates or any
other approvals necessary for the operation of the business of the Companies as
currently conducted; (ii) after the Closing, the Sellers' obligations to the
Companies and the Companies' facilities shall be restricted solely to the
obligations set forth in the Operating Agreement and in this Agreement; and
(iii) the Sellers shall not be liable for any failure on the part of the
Purchaser or its Affiliates to obtain or maintain at any time any operating
licenses or certificates or any other approvals necessary for the operation of
any business of the Companies.
SECTION 4.04. Absence of Litigation. No Action is pending or, to the
knowledge of the Purchaser, threatened against the Purchaser which seeks to
delay or prevent the consummation of the transactions contemplated hereby or
which would be reasonably likely to materially and adversely affect or restrict
the Purchaser's ability to consummate the transactions contemplated hereby.
SECTION 4.05. Investment Purpose. The Purchaser is acquiring the Interests
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
SECTION 4.06. Financing. The Purchaser has all funds necessary to
consummate the transactions contemplated by this Agreement.
<PAGE>
27
SECTION 4.07. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) Unless the
Purchaser otherwise agrees in writing and except as otherwise set forth herein
or in the Disclosure Schedule (including without limitation Section 5.01
thereof), between the date of this Agreement and the Closing Date, the Sellers
will cause each Company to;
(i) conduct its business only in the ordinary course consistent with
past practice;
(ii) use reasonable efforts to preserve the current relationships of
the Companies with their respective customers, suppliers, distributors,
officers and other key employees and other persons with which the Companies
have significant business relationships;
(iii) use all reasonable efforts to maintain the assets and properties
of the Companies in good working order and condition, ordinary wear and
tear excepted;
(iv) continue all current sales, marketing and promotional activities
relating to the business and operations of the Companies;
(v) use, and will cause the Companies to use, all reasonable efforts
to maintain in full force and effect until the Closing substantially the
same levels of coverage as the insurance in effect on the date hereof;
(vi) cause the Companies to administer each Benefit Plan, or cause the
same to be so administered, in all material respects in accordance with the
applicable provisions of the Code, ERISA and all other applicable Laws;
(vii) promptly notify the Purchaser in writing of each receipt by the
Sellers or any of the Companies (and furnish the Purchaser with copies) of
any notice of investigation or administrative proceeding by the IRS,
Department of Labor or other Person involving any Benefit Plan; and
<PAGE>
28
(viii) use all reasonable efforts to complete the Project under
Construction and continue the Projects under Development, each
substantially in accordance with the plans and projections disclosed to the
Purchaser, or as otherwise permitted with the Purchaser's prior written
consent, and each in compliance with applicable law.
(b) Except as expressly provided in this Agreement or the Disclosure
Schedule (including without limitation Section 5.01 thereof), between the date
of this Agreement and the Closing Date, the Sellers will cause each Company not
to do any of the following without the prior written consent of the Purchaser
(which consent shall not be unreasonably withheld, delayed or conditioned):
(i) except in the ordinary course of business consistent with past
practice, create any Encumbrance of any kind on any properties or assets
(whether tangible or intangible) of any Company, other than (A) Permitted
Encumbrances, (B) Encumbrances that will be released at or prior to the
Closing and (C) Encumbrances on assets having a value per Company not
exceeding $100,000 and an aggregate amount not exceeding $500,000 for all
Companies;
(ii) except in the ordinary course of business consistent with past
practice (A) sell, assign, transfer, lease or otherwise dispose of or agree
to sell, assign, transfer, lease or otherwise dispose of any of the fixed
assets of any Company or (B) cancel any indebtedness owed to any Company,
in the case of both (A) and (B) above, having an aggregate value, together
with any such sale, assignment, transfer, lease, disposition or agreement
with respect to the fixed assets of all Companies, exceeding $500,000;
(iii) acquire (by merger, consolidation, or acquisition of stock,
interests or assets) any Person or division thereof;
(iv) except in the ordinary course of business consistent with past
practice, (A) incur any indebtedness for borrowed money, (B) issue any debt
securities or (C) assume, grant, guarantee or endorse, or make any other
accommodation arrangement making any Company responsible for, the
Liabilities of any Person (other than another Company), in the case of (A),
(B) and (C) above, having an aggregate value for all Companies exceeding
$500,000;
(v) materially change any method of accounting or accounting practice
used by any Company, other than such changes required by GAAP;
(vi) issue or sell any additional shares of the capital stock of,
interests or other equity interests in, any Company, or securities
convertible into or exchangeable for such shares or equity interests, or
issue or grant of any options, warrants, calls,
<PAGE>
29
subscription rights or other rights of any kind to acquire additional
shares of such capital stock, such other equity interests, or such
securities;
(vii) amend any Company's Certificate of Incorporation or By-laws or
equivalent organization documents or take any action with respect to
liquidation or dissolution of any Company;
(viii) redeem any Shares or Membership Interests or pay any dividends
or distributions thereon such that the aggregate amount of cash and cash
equivalents remaining in the Companies is less than the aggregate amount of
resident security deposits at the time of such dividend or distribution;
(ix) except for agreements, arrangements or transactions in the
ordinary course of business consistent with past practice, enter into any
agreement, arrangement or transaction with any Affiliate of the Company;
(x) violate, breach or default under in any material respect, or take
or fail to take any action that (with or without notice or lapse of time or
both) would constitute a material violation or breach of, or default under,
any term or provision of any License held or used by any of the Companies
or any contract to which any of the Companies is a party or by which any of
their respective assets and properties is bound;
(xi) except where related to the Projects, make capital expenditures
or commitments for additions to property, plant or equipment constituting
capital assets in an aggregate amount exceeding $250,000;
(xii) except to the extent the aggregate value of such agreements does
not exceed $100,000 or are terminable by a Company within 60 days of notice
and without penalty, enter into any new rental, management, maintenance or
other agreement affecting any of the Companies without the prior written
consent of the Purchaser;
(xiii) make any representation or promise, oral or written, to any
officer, employee or consultant of the Companies concerning any Benefit
Plan, except for statements as to the rights or accrued benefits of any
officer, employee or consultant under the terms of any Benefit Plan;
(xiv) make any increase in the salary, wages or other compensation of
(A) any officer, employee or consultant of the Companies whose annual
salary is or, after giving to such change, would be $100,000 or more, or
(B) of any other officer, employee or consultant of any of the Companies
except in the ordinary course of business consistent with past practice;
<PAGE>
30
(xv) adopt, enter into, amend, modify or terminate (partially or
completely) any Benefit Plan except to the extent required by applicable
Law and, in the event compliance with legal requirements presents options,
only to the extent that the option which such Company reasonably believes
to be the least costly is chosen;
(xvi) establish or modify any (i) targets, goals, pools or similar
provisions in respect of any fiscal year under any Benefit Plan, employment
contract or other employee compensation arrangement or (ii) salary ranges,
increase guidelines or similar provisions in respect of any Benefit Plan,
employment contract or other employee compensation arrangement;
(xvii) enter into, amend, modify or terminate (partially or
completely), any contract that is, or had it been in existence on the date
of this Agreement would have been required to be, disclosed in Section
3.14(a)(i) of the Disclosure Schedule; or
(xviii) agree to take any of the actions specified in this Section
5.01(b).
SECTION 5.02. Access to Information. (a) From the date of this Agreement
until the Closing, upon reasonable notice, each Seller shall, and the Sellers
shall cause the officers, employees, auditors and agents of each Company to, (i)
afford the officers, employees and authorized agents and representatives of the
Purchaser reasonable access, during normal business hours, to the offices,
properties (owned or leased), books and records of each Company, provided that
such officers, employees, agents or representatives are accompanied at all times
by a Seller or a Seller's representative, and (ii) furnish to the officers,
employees and authorized agents and representatives of the Purchaser such
additional financial and operating data and other information regarding the
assets, properties, goodwill and business of each Company as the Purchaser may
from time to time reasonably request in order to assist the Purchaser in
fulfilling its obligations under this Agreement and to facilitate the
consummation of the transactions contemplated hereby; provided, however, that
the Purchaser shall not unreasonably interfere with any of the businesses or
operations of any Company.
(b) The Purchaser agrees that it shall preserve and keep all Books and
Records in the Purchaser's possession for a period of at least eight years from
the Closing Date. After such eight-year period, before the Purchaser shall
dispose of any of such Books and Records, at least 90 calendar days' prior
written notice to such effect shall be given by the Purchaser to each Seller,
and each Seller shall be given an opportunity, at his or her cost and expense,
to remove and retain all or any part of such Books and Records as such Seller
may select.
(c) Each party agrees that it will cooperate with and make available to the
other party, during normal business hours, all Books and Records, information
and employees
<PAGE>
31
(without substantial disruption of employment) retained and remaining in
existence after the Closing Date which are necessary or useful in connection
with any Tax inquiry, audit, investigation or dispute, any litigation or
investigation or any other matter requiring any such Books and Records,
information or employees for any reasonable business purpose. The party
requesting any such Books and Records, information or employees shall bear all
of the out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for salaries and employee benefits)
reasonably incurred in connection with providing such Books and Records,
information or employees. Each Seller may reasonably require certain financial
information relating to the business of any Company for periods prior to the
Closing Date for the purpose of filing federal, state, local and foreign Tax
returns and other governmental reports, and the Purchaser agrees to furnish such
information to such Seller at such Seller's request and expense.
SECTION 5.03. Confidentiality. The terms of the Confidentiality Agreement
are hereby incorporated herein by reference and shall continue in full force and
effect until the Closing, at which time such Confidentiality Agreement and the
obligations of the Purchaser under this Section 5.03 shall terminate; provided,
however, that the Confidentiality Agreement shall terminate only in respect of
that portion of the Evaluation Material (as defined in the Confidentiality
Agreement) exclusively relating to the transactions contemplated by this
Agreement. If this Agreement is, for any reason, terminated prior to the
Closing, the Confidentiality Agreement shall continue in full force and effect.
SECTION 5.04. Regulatory and Other Authorizations; Releases; Consents. (a)
Each party hereto shall use all reasonable efforts to obtain all authorizations,
consents, orders, permits, licenses and approvals of, and to give all notices to
and make all filings with, all Governmental Authorities and other third parties
that may be or become necessary for its execution and delivery of, and the
performance of his, her or its obligations pursuant to, this Agreement and will
use all reasonable efforts with the other parties in promptly seeking to obtain
all such authorizations, consents, orders and approvals, giving such notices,
and making such filings. Each party hereto agrees to make, or cause to be made,
if applicable, an appropriate filing of a Notification and Report Form pursuant
to the HSR Act with respect to the transactions contemplated hereby within ten
Business Days of the date hereof and to supply promptly any additional
information and documentary material that may be requested pursuant to the HSR
Act. The parties hereto acknowledge that time shall be of the essence in this
Agreement and agree not to take any action that will have the effect of
unreasonably delaying, impairing or impeding the receipt of any required
authorizations, consents, orders or approvals.
(b) Without limiting the generality of the parties' undertakings pursuant
to Section 5.04(a), each of the parties hereto shall use all reasonable efforts
to (i) respond to any inquiries by any Governmental Authority regarding
antitrust or other matters with respect to
<PAGE>
32
the transactions contemplated by this Agreement, (ii) avoid the imposition of
any order or the taking of any action that would restrain, alter or enjoin the
transactions contemplated by this Agreement and (iii) in the event any
Governmental Order adversely affecting the ability of the parties to consummate
the transactions contemplated by this Agreement has been issued, to have such
Governmental Order vacated or lifted.
(c) The Purchaser will use all reasonable efforts to assist each Seller in
obtaining full releases from each beneficiary of each of the guarantees listed
on Schedule 5.04(c) hereto (collectively, the "Guarantees"), including, without
limitation, providing to such beneficiaries (A) replacement guarantees by the
Purchaser on terms and conditions satisfactory to such beneficiaries, so long as
such terms and conditions are not materially more onerous than the existing
terms and conditions of the Guarantees, and (B) such financial statements and
other financial information with respect to the Purchaser as such beneficiaries
may reasonably request.
(d) The Purchaser will use all reasonable efforts to assist each Seller in
obtaining any consents of landlords necessary or advisable in connection with
the transactions contemplated by this Agreement, including, without limitation,
(i) providing to such landlords (A) guarantees by the Purchaser of the
obligations of any Company under the Leases, so long as the terms and conditions
thereof are not materially more onerous than the existing terms and conditions
of such guarantees, and (B) such financial statements and other financial
information with respect to the Purchaser as such landlords may reasonably
request and (ii) agreeing to such adjustments to the terms of each lease not
materially different from their present forms.
SECTION 5.05. Investigation. (a) The Purchaser acknowledges and agrees that
it (i) has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning, each Company and its business, (ii)
has been furnished with or given adequate access to such information about each
Company and its business as it has requested, and (iii) will not assert any
claim against any Seller or any of its agents, consultants, counsel,
accountants, investment bankers or representatives, or hold any Seller or any
such persons liable, for any inaccuracies, misstatements or omissions with
respect to information (other than, with respect to any Seller or any Company
and its business, the representations and warranties contained in this
Agreement) furnished by any Seller or any such persons concerning any Seller or
any Company and its business.
(b) In connection with the Purchaser's investigation of each Company and
its business, the Purchaser has received from the Sellers certain projections
and other forecasts for each Company and certain plan and budget information.
The Purchaser acknowledges that there are uncertainties inherent in attempting
to make such projections, forecasts, plans and budgets, that the Purchaser is
familiar with such uncertainties, that the Purchaser is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
estimates,
<PAGE>
33
projections, forecasts, plans and budgets so furnished to it, and that the
Purchaser will not assert any claim against any Seller or any of its agents,
consultants, counsel, accountants, investment bankers or representatives, or
hold any Seller or any such persons liable, with respect thereto. Accordingly,
each Seller makes no representation or warranty with respect to any estimates,
projections, forecasts, plans or budgets referred to in this Section 5.05(b).
SECTION 5.06. Disclosure. Each Seller agrees to disclose reasonably
promptly to the Purchaser any facts or circumstances of which such Seller
becomes aware that could reasonably be expected by such Seller to give rise to
any Action that would be required to be disclosed pursuant to Section 3.09.
SECTION 5.07. No Solicitation of Employees. Each Seller agrees that it
shall not, during the period from the date hereof until the Closing Date and, if
the Closing occurs, for a period of two years from the Closing Date, without the
prior written consent of the Purchaser, directly or indirectly: (i) solicit on a
specific or targeted basis for employment or employ any person who is an
employee of any Company or negotiate for the employment of any such employee,
provided that this clause (i) shall not prohibit any form of employment
advertising or prevent the hiring of any individual who contacts any Seller, or
(ii) cause or attempt to cause any officer, employee or consultant of any of the
Companies to resign or sever a relationship with such Company or Companies.
SECTION 5.08. Intellectual Property. (a) The Sellers acknowledge that from
and after the Closing the Intellectual Property Rights shall be owned by the
Purchaser, that the Sellers shall have no rights thereto and that the Sellers
will not contest the ownership or validity of any rights of the Purchaser
thereto.
(b) Except as expressly agreed in writing by the Purchaser or pursuant to
any agreements and licenses between the Purchaser and the Sellers, from and
after the Closing, the Sellers shall not use any of the Intellectual Property
Rights.
SECTION 5.09. Further Action. Subject to the terms and conditions herein
provided, each of the parties hereto covenants and agrees to use its best
efforts to deliver or cause to be delivered such documents and other papers and
to take or cause to be taken such further actions as may be necessary, proper or
advisable under applicable Laws to consummate and make effective the
transactions contemplated hereby.
SECTION 5.10. Operating Agreement. The Purchaser shall enter into an
operating agreement with the Sellers at the Closing in the form attached hereto
as Exhibit A (the "Operating Agreement") pursuant to which the Sellers shall
operate the facilities owned by the Companies until the earlier of (a) such time
as the Purchaser or its designee(s) shall be licensed to operate such facilities
and (b) twenty-four months from the Closing Date. The
<PAGE>
34
Purchaser shall pay to the Sellers (a) the Base Operation Fee described in the
Operating Agreement in accordance with the terms of the Operating Agreement, and
(b) one-half of the Base Operation Fee for the period remaining from the date of
termination of the Operating Agreement through December 31, 2003, upon the
termination of the Operating Agreement.
SECTION 5.11. Construction of Projects under Development. The Purchaser and
the Sellers agree, and the Sellers shall cause NALPAK Construction, a New York
corporation ("NALPAK"), to agree, to construct the Projects under Development
pursuant to turnkey construction contracts on terms and conditions to be
mutually agreed upon by the Purchaser and NALPAK, including, without limitation,
that NALPAK will receive a fee equal to not less than 5% of the total costs of
each Project under Development and a requirement that the Purchaser fund all
costs and expenses incurred in developing each such Project under Development.
SECTION 5.12. Pharmacy and Home Health Companies. (a) The Sellers and the
Purchaser shall have the right, by giving written notice to the other no later
than 60 days after the third anniversary of the Closing Date (such third
anniversary being the "Expiration Date", and such notice being the "Put/Call
Notice"), to cause the Sellers to sell to the Purchaser, or to cause the
Purchaser to acquire from the Sellers, as applicable, all of the issued and
outstanding shares of All-Care Pharmacy, Inc., a New York corporation, and
Westbury Seniors, Inc., a New York corporation (collectively, the "Put/Call
Entities"), for a purchase price equal to the greater of (a) $8,000,000 or (b)
eight times the aggregate net income before income taxes of the Put/Call
Entities, determined in accordance with GAAP, for the most recent twelve month
period for which the Put/Call Entities have audited financial statements at the
time the notice of the purchase and sale is provided. The principal terms and
conditions of such purchase and sale, in addition to those set forth in this
Section 5.12, are set forth on Exhibit 5.12 hereto. If the Put/Call Notice has
been delivered by the Sellers or the Purchaser in accordance with this
subsection (a), the following provisions of this Section 5.12 will be
applicable.
(b) The closing on such purchase and sale shall take place as soon as
reasonably possible after the Purchaser obtains all necessary approvals and
consents from applicable Governmental Authorities relating to such transaction.
The Sellers and the Purchaser shall use all reasonable efforts to obtain such
approvals and consents as promptly as practicable following the delivery of the
Put/Call Notice.
(c) If such approvals and consents shall not have been obtained by the date
that is six months after the date of delivery of the Put/Call Notice, (i) the
Purchaser shall immediately deposit in escrow on terms and conditions mutually
acceptable to the Sellers and the Purchaser (including, without limitation, that
all interest on such escrowed amount shall be distributed monthly to the
Sellers), an amount equal to $8,000,000 or, if such approvals or
<PAGE>
35
consents have not been obtained as a result of an action or intentional inaction
by the Purchaser, the greater of $8,000,000 and eight times the aggregate net
income before income taxes of the Put/Call Entities, determined as set forth in
Section 5.12(a) above (such escrowed amount being the "Put/Call Price") and (ii)
the Seller shall have the right to sell the Put/Call Entities to any other
Person (a "Third Party Sale").
(d) Upon the closing of any Third Party Sale that is on terms and
conditions, other than price, not substantially more favorable to the Sellers
than those set forth on Exhibit 5.12 hereto and that is with respect to the sale
of all the Put/Call Entities, the amount if any by which the Put/Call Price
exceeds the price received by the Sellers in the Third Party Sale shall be
released from escrow to the Sellers, ratably in accordance with each Seller's
Pro Rata Share. The remainder of the escrowed amount shall be released to the
Purchaser. In connection with a Third Party Sale, the Sellers shall consult with
the Purchaser with respect to the optimal process for effecting such a sale and
shall agree to sell the Put/Call Entities, on terms and conditions no less
favorable to the Sellers than those described in Exhibit 5.12 hereto, to any
bona fide Person recommended by the Purchaser. Notwithstanding the foregoing, in
the event a Third Party Sale has not been consummated within six months of the
date on which the Put/Call Price is deposited in escrow in accordance with
subsection (c), the Put/Call Price shall be released from escrow to the Sellers.
(e) In the period between the Closing Date and the latest of the Expiration
Date, the date of the Third Party Sale or the date of release of the Put/Call
Price from the escrow, at the option of the Sellers (i) to the extent permitted
by law and consistent with existing agreements on the date hereof of the
Purchaser (including agreements for facilities hereafter acquired by the
Purchaser existing as of the date of such acquisition), All-Care Pharmacy, Inc.,
shall be the exclusive provider of pharmaceutical services and products to each
of the Purchaser's facilities in the State of New York that are directly or
indirectly more that 90% owned by the Purchaser and, (ii) to the extent
permitted by law and consistent with existing agreements on the date hereof of
the Purchaser (including agreements for facilities hereafter acquired by the
Purchaser existing as of the date of such acquisition), Westbury Seniors, Inc.,
shall be the exclusive on-site home health care provider for each of the
Purchaser's facilities in the State of New York that are directly or indirectly
more that 90% owned by the Purchaser and, in that regard, shall charge for its
services as set forth on Exhibit 5.12(f) hereto.
SECTION 5.13. Taking. The Purchaser shall cause any funds received after
the Closing Date by The Islandia Community for Seniors Operating Company, LLC,
in an amount not to exceed $45,000, in respect of a public taking of real
property, to be paid promptly to the Sellers.
<PAGE>
36
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Employee Benefit Plans. On and after the Closing, except as
otherwise expressly provided in this Agreement, the Purchaser shall, and shall
cause each Company to, honor in accordance with their terms all Benefit Plans,
as amended as permitted hereunder, and all other contracts, arrangements and
commitments which apply to current or former employees or directors of such
Company. On and after the Closing, the Benefit Plans in effect as of the Closing
shall, subject to applicable law, the terms of this Agreement and the terms of
such plans, remain in effect until such time as the Purchaser or the applicable
Company, as the case may be, adopts new employee benefit plans and arrangements
for the benefit of, or extends coverage under existing benefit plans and
arrangements of the Purchaser to, employees of such Company. Notwithstanding the
foregoing and except as otherwise provided in the applicable Benefit Plan, the
Purchaser shall cause the employee benefit plans and arrangements maintained for
current and former employees of each Company following the Closing to provide,
through the second anniversary of the Closing, a level of compensation and
benefits that is substantially comparable in the aggregate to that provided
under the Benefit Plans as in effect immediately prior to the date of this
Agreement; provided, however, that changes may be made to such plans to the
extent necessary to comply with applicable law. The Purchaser shall also be
required to cause the employees of each Company to receive credit for purposes
of eligibility to participate, vesting, benefit accrual and eligibility to
receive benefits under any employee benefit plan, program or arrangement
established or maintained by the Purchaser or such Company for service accrued
or deemed accrued prior to the Closing with such Company; provided, however,
that such crediting of service shall not operate to duplicate any benefit or the
funding of any such benefit.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Tax Indemnities. (a) From and after the Closing Date, each
Seller agrees, on a several and not joint basis, up to its Pro Rata Share of
such indemnified amounts, to indemnify the Purchaser and each Company against
all Income Taxes imposed on or with respect to any Company for any taxable
period or portion thereof that ends on or before the Closing Date, to the extent
that such Income Taxes are in excess of the amount reserved for such Taxes on
the Closing Balance Sheet; provided, however, that no indemnity shall be
provided under this Agreement for the following: (i) any Income Taxes resulting
from any transaction of such Company occurring on the Closing Date but after the
Closing that is
<PAGE>
37
not in the ordinary course of business; (ii) any incremental Income Taxes
incurred by the Sellers or Alandco as a result of the Elections contemplated by
Section 7.05 hereof; and (iii) any incremental Income Taxes arising from any
election under Section 338 of the Code or similar provisions of state or local
law other than the Elections. The Purchaser shall be responsible for, and shall
indemnify the Sellers against, all Taxes for which the Purchaser is not
indemnified under this Section 7.01.
(b) Payment by the Sellers of any Income Taxes due under this Section 7.01
shall be made within ten days following written notice by the Purchaser that
payment of such amounts to the appropriate tax authority is due, provided that
the Sellers shall not be required to make any payment earlier than two days
before such Taxes are due to the appropriate tax authority. If any Seller
receives an assessment or other notice of Income Tax due with respect to any
Company for any period ending on or before the Closing Date for which the
Sellers are not responsible, in whole or in part, pursuant to paragraph (a) of
this Section 7.01, and any such Seller is obligated by a taxing authority to pay
such Tax prior to the Purchaser or a Company exercising its rights to contest
such tax, then the Purchaser or such Company shall indemnify such Seller, within
ten days following written notice to the Purchaser that such payment has been
made to the appropriate taxing authority, for the amount of such Tax for which
such Seller is not responsible. In the case of an Income Tax that is contested
in accordance with the provisions of Section 7.03, payment of such Tax to the
appropriate taxing authority will be considered due no earlier than the date a
final determination to such effect is made by the appropriate taxing authority
or a court of proper jurisdiction.
(c) For purposes of this Agreement, in the case of any Income Tax that is
payable for a period that begins before the Closing Date and that ends after the
Closing Date, the portion of any such Income Tax that is allocable to the
portion of the period ending on the Closing Date shall be deemed equal to the
amount which would be payable if the taxable year ended on the Closing Date.
SECTION 7.02. Refunds and Tax Benefits. (a) The Purchaser shall promptly
pay to the Sellers any refund or credit (including any interest paid or credited
with respect thereto) received by the Purchaser or any Company of Taxes (i)
relating to taxable periods or portions thereof ending on or before the Closing
Date or (ii) attributable to an amount paid by the Sellers under Section 7.01
hereof except to the extent such refunds are attributable to post-closing date
tax attributes of the Purchaser or the Companies. The Purchaser shall, if any
Seller so requests and at such Seller's expense, cause the relevant Company to
file for and obtain any refund to which such Seller may be entitled under this
Section 7.02. The Purchaser shall permit such Seller to control (at such
Seller's expense) the prosecution of any such refund claim, and shall cause the
relevant Company to authorize by appropriate power of attorney such persons as
such Seller shall designate to represent such entity with respect to such refund
claim.
<PAGE>
38
(b) Any amount otherwise payable by the Sellers under Section 7.01 shall be
reduced by any Tax benefit to the Purchaser or any Company, or any affiliate of
the Purchaser or any Company, for a period or portion thereof beginning after
the Closing Date (a "Post-Closing Date Tax Benefit") that arises in connection
with any underlying adjustment that results in the obligation of the Purchaser
or any Company, or any affiliate of the Purchaser or any Company, to pay Income
Taxes for which the Sellers are responsible under Section 7.01 (such as a timing
adjustment resulting in an Income Tax deduction for any Company for a period
after the Closing Date), or in connection with the payment of such Taxes. If a
payment is made by any Seller in accordance with Section 7.01, and if in a
subsequent taxable year a Post-Closing Date Tax Benefit is realized by the
Purchaser or any Company, or any affiliate of the Purchaser or any Company,
(that was not previously taken into account to reduce an amount otherwise
payable by such Seller under Section 7.01), the Purchaser shall promptly pay to
such Seller, at the time of realization, the amount of such Post-Closing Date
Tax Benefit to the extent that such amount would have resulted in a reduction in
the obligations of such Seller under Section 7.01 if the Post-Closing Date Tax
Benefit had been obtained in the year of such Seller's payment. A Post-Closing
Date Tax Benefit will be considered to be realized for purposes of this Section
7.02 at the time that it is reflected on a Tax return of the Purchaser, any
Company or any affiliate of the Purchaser or any Company.
SECTION 7.03. Contests. (a) After the Closing Date, the Purchaser or any
Company shall promptly notify each Seller, and a Seller shall promptly notify
the Purchaser, upon learning of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on any Seller,
the Purchaser or any Company which, if determined adversely to the taxpayer or
after the lapse of time would be grounds for indemnification under Section 7.01.
Such notice shall be in writing and shall contain factual information (to the
extent known to the Sellers, Purchaser or such Company, as the case may be)
describing the asserted Tax liability in reasonable detail and shall include
copies of any notice or other document received from any taxing authority in
respect of any such asserted Tax liability. If a party fails to give prompt
notice of an asserted Tax liability as required by this Section 7.03, then if
the indemnifying party is precluded by the failure to give prompt notice from
contesting the asserted Tax liability in both the administrative and judicial
forums, then the indemnifying party shall not have any obligation to indemnify
for any loss arising out of such asserted Tax liability.
(b) Any Seller may elect to direct, through counsel of its own choosing and
at its own expense, any audit, claim for refund and administrative or judicial
proceeding involving any asserted liability with respect to which indemnity may
be sought under Section 7.01 (any such audit, claim for refund or proceeding
relating to an asserted Tax liability is referred to herein as a "Contest").
However, the Purchaser may, at its own expense, continue to participate in the
contest. If any Seller elects to direct a Contest, it shall, within 30 calendar
days of receipt of the Purchaser's notice of asserted Tax liability, notify the
Purchaser of its
<PAGE>
39
intent to do so, and the Purchaser shall cooperate and shall cause each Company
or its respective successor or successors to cooperate, at such Seller's
expense, in each phase of such Contest. If no Seller elects to direct the
Contest or fails to notify the Purchaser of its election as herein provided, the
Purchaser or any Company may pay, compromise or contest, at its own expense,
such asserted Tax liability. However, in such case, neither the Purchaser nor
any Company may settle or compromise any asserted Tax liability over the
objection of any Seller; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld. In any event, any Seller may
participate, at its own expense, in the Contest. If any Seller chooses to direct
the Contest, the Purchaser shall promptly empower and shall cause each Company
or its respective successor promptly to empower (by power of attorney and such
other documentation as may be necessary and appropriate) the designated
representatives of such Seller to represent the Purchaser or such Company or its
successor in the Contest insofar as the Contest involves an asserted Tax
liability for which such Seller would be liable under Section 7.01.
Notwithstanding the foregoing, the Purchaser's prior consent, (which consent
shall not be unreasonably withheld) shall be required for any settlement of a
contest that increase items of income, or decreases items of loss, deduction or
credit for the Purchaser or any Company in periods after the Closing Date.
SECTION 7.04. Preparation of Tax Returns. The Sellers shall prepare and
file (i) all Tax returns relating to each Company that are due on or before the
Closing Date, and (ii) subject to the Purchaser's review, all Income Tax returns
relating to each Company that are due after the Closing Date for any taxable
period ending on or before the Closing Date. After the Closing, the Purchaser
shall prepare or cause each Company to prepare all other Tax returns relating to
each Company. Income Tax returns filed by the Purchaser for a taxable year that
includes the Closing Date shall be prepared on a basis consistent with those
prepared for prior tax years (unless counsel for the Purchaser determines that
there is no reasonable basis in law therefor). With respect to any Income Tax
return required to be filed by the Purchaser with respect to the Companies after
the Closing Date, and as to which an amount of Income Tax is allocable to the
Sellers under Section 7.01(c) hereof, the Purchaser shall provide the Sellers
with a copy of such completed return, and a statement (with which the Purchaser
will make available supporting schedules and information) certifying the amount
of Income Tax shown on such return that is allocable to the Sellers pursuant to
Section 7.01(c) hereof, at least 30 days prior to the due date (including any
extension thereof) for the filing of such return, and the Sellers shall have the
right to review such return and statement prior to the filing of such return.
the Purchaser agrees to consult with the Sellers and to attempt in good faith to
resolve any issues arising as a result of the review of such return and
statement by the Sellers.
SECTION 7.05. Section 338(h)(10) Election. (a) At the option of the
Purchaser, in connection with the sale of the Interests contemplated hereby, the
parties shall cause an express election pursuant to Section 338(h)(10) of the
Internal Revenue Code to be made with respect to Alandco and shall cause
corresponding elections to be made, where
<PAGE>
40
available, in any states where Alandco is doing business and is recognized as a
"subchapter S corporation" in the same manner as provided by Federal income tax
law (the "Elections"). The Sellers shall have no liability under Section 7.01
for, and the Purchaser shall indemnify and hold the Sellers harmless against,
any actual or deemed election made by the Purchaser in connection with its
acquisition of the Companies, other than the Elections. The Sellers and the
Purchaser shall file all such Elections on a timely basis and comply with all
rules and regulations applicable to such Elections. The Sellers and the
Purchaser shall cooperate with each other to take all actions necessary and
appropriate (including filing such forms, returns, elections, schedules and
documents on a joint or separate basis as may be required) to effect and
preserve timely Elections in accordance with applicable Treasury Regulations
under Code section 338 and comparable state tax rules.
(b) For the purpose of making the Code section 338(h)(10) Election, the
Purchaser shall compute and allocate the "modified aggregate deemed sales price"
among the assets of Alandco in accordance with the provisions of Code section
338 and the Treasury Regulations thereunder (the "Allocation"), and shall
deliver the Allocation to the Sellers for review and comment within 120 days of
the due date for filing such Election. The Purchaser and the Sellers shall
attempt in good faith to resolve any disputes with respect to the Allocation,
and any resolution shall be final and binding on the parties. If the parties
cannot resolve any such dispute within 60 business days of delivery of the
Allocation by the Purchaser to the Sellers, the items remaining in dispute shall
be submitted to an independent accounting firm of international reputation
selected by, and mutually acceptable to, the Sellers and the Purchaser. In such
case, the independent accounting firm so selected shall make its own
determination with respect to the items remaining in dispute, and the Sellers
and the Purchaser shall be bound by the allocation of such items as determined
by the independent accounting firm. The independent accounting firm shall make
any determination within 30 business days after submission of the remaining
disputed items. Any subsequent adjustments to the modified aggregate deemed
sales price shall be reflected in the Allocation in a manner consistent with
Code section 338 and the Treasury Regulations promulgated thereunder. The
Sellers shall calculate gain or loss, if any, resulting from the Elections and
the Purchaser shall calculate tax basis in the assets of Alandco in a manner
consistent with the Allocation (as determined hereunder) and neither party shall
take any position inconsistent with the Allocation in any tax return, schedule,
estimate or otherwise; provided, however, that the Sellers shall be entitled to
subtract their selling costs from the "modified aggregate deemed sales price"
for purposes of calculating gain or loss and the Purchaser shall be entitled to
add its acquisition costs to the "adjusted grossed-up basis" of the assets of
Alandco for purposes of determining the basis of such assets.
SECTION 7.06. Cooperation and Exchange of Information. Each Seller and the
Purchaser will provide each other with such cooperation and information as
either of them reasonably may request of the other (and the Purchaser shall
cause the Companies to provide
<PAGE>
41
such cooperation and information) in filing any Tax return, amended return or
claim for refund, determining any liability for Taxes or a right to a refund of
Taxes or participating in or conducting any audit or other proceeding in respect
of Taxes. Such cooperation and information shall include providing copies of
relevant Tax returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by taxing authorities. The Sellers shall make themselves
available, and the Purchaser shall make its employees available (and shall cause
the employees of the Companies to be available) on a mutually convenient basis
to provide explanations of any documents or information provided hereunder. The
Purchaser will retain all returns, schedules and work papers and all material
records or other documents in its possession relating to Tax matters of any
Company for the taxable period first ending after the Closing Date and for all
prior taxable periods until the later of (i) the expiration of the statute of
limitations of the taxable periods to which such returns and other documents
relate, without regard to extensions, or (ii) six years following the due date
(without extension) for such returns. After such time, before the Purchaser
shall dispose of any such documents, the Purchaser shall, by 90 days prior
written notice to the Sellers, give any Seller the opportunity (at such Seller's
expense) to remove and retain all or any part of such documents as such Seller
may select. Any information obtained under this Section 7.06 shall be kept
confidential, except as may be otherwise necessary in connection with the filing
of returns or claims for refund or in conducting an audit or other proceeding.
SECTION 7.07. Conveyance Taxes. The Purchaser agrees to assume liability
for and to pay all sales, use, transfer, stamp, stock transfer, real property
transfer or gains and similar Taxes incurred as a result of the sale of the
Interests contemplated hereby but not any Taxes payable by the Sellers as a
result of the Purchaser's payment of such Taxes.
SECTION 7.08. Miscellaneous. (a) To the extent permitted by law, the
parties agree to treat all payments made under this Article VII, under any other
indemnity provision contained in this Agreement, and for any misrepresentations
or breach of warranties or covenants, as adjustments to the Purchase Price for
all Tax purposes.
(b) Except for the representations contained in Section 3.15 of this
Agreement, this Article VII shall be the sole provision governing Tax matters
and indemnities therefor under this Agreement.
(c) For purposes of this Article VII, all references to the Purchaser, any
Seller and any Company include successors.
(d) The obligations of the parties pursuant to this Article VII shall
survive the Closing and shall terminate upon the expiration of the applicable
statute of limitations with respect to the Tax liabilities in question (giving
effect to extensions thereof).
<PAGE>
42
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Sellers. The obligations of
each Seller to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment or waiver, at or prior to the Closing, of each of
the following conditions:
(a) Representations and Warranties; Covenants. (i) The representations
and warranties of the Purchaser contained in this Agreement shall be true
and correct as of the Closing, with the same force and effect as if made as
of the Closing (or, in the case of representations and warranties of the
Purchaser which address matters only as of a particular date, as of such
date), except where the failure to be so true and correct would not have a
material adverse effect on the ability of the Purchaser to consummate the
transactions contemplated by this Agreement; (ii) the covenants and
agreements contained in this Agreement to be complied with by the Purchaser
at or prior to the Closing shall have been complied with in all material
respects; and (iii) the Sellers shall have received a certificate of the
Purchaser as to the matters set forth in clauses (i) and (ii) above signed
by a duly authorized officer of the Purchaser;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Interests contemplated hereby
shall have expired or shall have been terminated;
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Governmental Order which is in effect
and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise prohibiting consummation of such
transactions; provided, however, that the provisions of this Section
8.01(c) shall not apply if any Seller has directly or indirectly solicited
or encouraged any such action;
(d) Assumption of Guarantees. The Purchaser shall have assumed or
replaced the Guarantees in their entirety;
(e) Stock Options. Each Seller shall have received its Pro Rata Share
of 400,000 options to purchase stock of CareMatrix pursuant to the Stock
Option Agreement in the form attached hereto as Exhibit 8.01(e) and a duly
executed counterpart of such Stock Option Agreement shall have been
delivered to such Seller;
<PAGE>
43
(f) Other Governmental Approvals. The Sellers shall have obtained the
approval of the New Jersey Department of Health and Senior Services
Division of Long Term Care Systems Development and Quality to the sale of
Alandco by the Sellers to the Purchaser pursuant to this Agreement and the
performance of the obligations of the Sellers pursuant to the Operating
Agreement and such approval shall be in form and substance reasonably
satisfactory to the Sellers and shall not be subject to the satisfaction of
any condition that has not been satisfied or waived; and
(g) Operating Agreement. The Purchaser shall have delivered to each
Seller duly executed counterparts of the Operating Agreement.
SECTION 8.02. Conditions to Obligations of the Purchaser. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or waiver, at or prior to the Closing, of
each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The representations
and warranties of each Seller contained in this Agreement shall be true and
correct as of the Closing, with the same force and effect as if made as of
the Closing (or, in the case of representations and warranties of such
Seller which address matters only as of a particular date, as of such
date), except where the failure to be so true and correct would not have a
Material Adverse Effect; (ii) the covenants and agreements contained in
this Agreement to be complied with by each Seller at or prior to the
Closing shall have been complied with in all material respects; and (iii)
the Purchaser shall have received a certificate of each Seller as to the
matters set forth in clauses (i) and (ii) above signed by such Seller;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Interests contemplated hereby
shall have expired or shall have been terminated;
(c) Other Governmental Approvals. The Purchaser shall have obtained
the approval of the New Jersey Department of Health and Senior Service
Division of Long Term Care Systems Development and Quality to the
acquisition by the Purchaser of Alandco from the Sellers pursuant to this
Agreement and the performance of the obligations of the Sellers pursuant to
the Operating Agreement and such approval shall be in form and substance
reasonably satisfactory to the Purchaser and shall not be subject to the
satisfaction of any condition that has not been satisfied or waived;
(d) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction
or other
<PAGE>
44
Governmental Order which is in effect and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise
prohibiting consummation of such transactions; provided, however, that the
provisions of this Section 8.02(c) shall not apply if the Purchaser has
directly or indirectly solicited or encouraged any such action; and
(e) Operating Agreement. The Sellers shall have delivered duly
executed counterparts of the Operating Agreement.
(f) Third Party Consents. All consents (or in lieu thereof waivers) to
the performance by the Sellers of their obligations under this Agreement
and the Operating Agreement or to the consummation by the Sellers of the
transactions contemplated hereby and thereby as are required under any
contract to which any of the Sellers or the Companies is a party or by
which any of their respective assets and properties are bound and where the
failure to obtain any such consent (or in lieu thereof waiver) could
reasonably be expected, individually or in the aggregate with other such
failures, to have a Material Adverse Effect, (a) shall have been obtained,
(b) shall be in form and substance reasonably satisfactory to the
Purchaser, (c) shall not be subject to the satisfaction of any condition
that has not been satisfied or waived and (d) shall be in full force and
effect; provided, however, that in the event the consent of any party to
any of the loan agreements or mortgages set forth in Section 3.05 of the
Disclosure Schedule is not obtained to such performance or consummation
(the "Debt Consents"), the Sellers shall have the right to elect to reduce
the purchase price by an amount equal to the amount of any prepayment
penalty incurred as a result of the prepayment of any amounts owing under
such loan agreement or mortgage and, if such election is made, the
condition set forth in this Section 8.02(f) will be deemed satisfied with
respect to any such loan agreement or mortgage.
(g) Good Standing Certificates. The Sellers shall have delivered to
the Purchaser (a) copies of the certificates or articles of incorporation
(or other comparable corporate charter documents), including all amendments
thereto, of the Companies certified by the Secretary of State or other
appropriate official of the jurisdiction of incorporation, and (b)
certificates from the Secretary of State or other appropriate official of
the respective jurisdiction of incorporation to the effect that each of the
Companies is in good standing or subsisting in such jurisdiction, listing
all charter documents of the Companies on file and attesting to its payment
of all franchise or similar Taxes.
(h) Resignations of Directors and Officers. Such members of the boards
of directors and such officers of the Companies as are designated in a
written notice delivered at least two (2) Business Days prior to the
Closing Date by the Purchaser to
<PAGE>
45
the Sellers shall have tendered, effective at the Closing, their
resignations as such directors and officers.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival. Subject to the limitations and other provisions of
this Agreement, the representations, warranties, covenants and agreements of the
parties hereto contained herein shall survive the Closing and shall remain in
full force and effect, regardless of any investigation made by or on behalf of
any Seller or the Purchaser, for a period of one year after the Closing Date;
provided, however, that the covenants and agreements set forth in Sections 2.04,
5.02(b), 5.02(c), 5.03, 5.05, 5.06, 5.07, 5.08, 5.09, 5.11, 5.12 and 5.13 and
Articles VI, VII, IX and XI shall remain in full force and effect for the
applicable periods specified in the respective Sections or Articles or, if no
such period is specified, indefinitely.
SECTION 9.02. Indemnification by the Purchaser. (a) The Purchaser agrees,
subject to the other terms and conditions of this Agreement and without gross-up
for Taxes, to indemnify each Seller and its agents, successors and assigns (as
used in this Section 9.02, each a "Seller Indemnified Party") against and hold
each Seller Indemnified Party harmless from all Losses arising out of (i) the
breach of any representation or warranty contained in Article IV, (ii) the
breach of any covenant or agreement of the Purchaser herein (other than Article
VII, it being understood that the sole remedy for breach thereof shall be
pursuant to Article VII) and (iii) the conduct of the business of each Company
by the Purchaser following the Closing. Anything in Section 9.01 to the contrary
notwithstanding, no claim may be asserted nor may any action be commenced
against the Purchaser for breach of any representation, warranty, covenant or
agreement contained herein, unless written notice of such claim or action is
received by the Purchaser describing in detail the facts and circumstances with
respect to the subject matter of such claim or action on or prior to the date on
which the representation, warranty, covenant or agreement on which such claim or
action is based ceases to survive as set forth in Section 9.01.
(b) The indemnification obligations of the Purchaser pursuant to Section
9.02(a)(i) shall not be effective until the aggregate dollar amount of all
Losses which would otherwise be indemnifiable pursuant to Section 9.02(a)(i)
exceeds $3,000,000 (the "Purchaser's Threshold Amount"), and then only to the
extent such aggregate amount exceeds the Purchaser's Threshold Amount. In
addition, no claim may be made against the Purchaser for indemnification
pursuant to Section 9.02(a)(i) with respect to any individual item of Loss,
unless such item exceeds $250,000, nor shall any such item which does not exceed
$250,000 be applied to or considered part of the Purchaser's Threshold Amount.
The indemnification
<PAGE>
46
obligations of the Purchaser pursuant to Section 9.02(a)(i) shall be effective
only until the dollar amount paid by the Purchaser in respect of all Losses
indemnified against under Section 9.02(a)(i) aggregates to an amount equal to
$15,000,000. For the purposes of this Section 9.02(b), in computing such
individual or aggregate amounts of claims, the amount of each claim shall be
deemed to be an amount (i) net of any Tax benefits to such Seller Indemnified
Party, (ii) net of any insurance proceeds and any indemnity, contribution or
other similar payment recoverable by any such Seller Indemnified Party from any
third party with respect thereto and (iii) net of any adjustments to the
Purchase Price pursuant to Section 2.04 with respect to the subject matter in
dispute.
(c) Payments by the Purchaser to any Seller Indemnified Party pursuant to
Section 9.02(a) shall be limited to the amount of any Losses that remains after
deducting therefrom (i) any Tax benefit to such Seller Indemnified Party and
(ii) any insurance proceeds and any indemnity, contribution or other similar
payment recoverable by such Seller Indemnified Party from any third party with
respect thereto. If a payment is made by the Purchaser to any Seller Indemnified
Party in accordance with this Section 9.02, and if in a subsequent taxable year
a Tax benefit is realized by such Seller Indemnified Party (that was not
previously taken into account to reduce an amount otherwise payable by the
Purchaser to such Seller Indemnified Party under this Section 9.02), such Seller
Indemnified Party shall pay to the Purchaser at the time of such realization the
amount of such Tax benefit to the extent that the Tax benefit would have
resulted in a reduction in the amount paid by the Purchaser under Section 9.02
if the Tax benefit had been obtained in the year of such payment. A Tax benefit
will be considered to be realized for purposes of this Section 9.02 at the time
that it is reflected on a Tax return of the applicable Seller Indemnified Party.
SECTION 9.03. Indemnification by the Sellers. (a) Each Seller agrees,
subject to the other terms and conditions of this Agreement and without gross-up
for Taxes, on a several not joint basis, up to its Pro Rata Share of such
indemnified amounts, to indemnify the Purchaser and its Affiliates (including,
without limitation, the Companies) (as used in this Section 9.03, each a
"Purchaser Indemnified Party") against and hold each Purchaser Indemnified Party
harmless from all Losses arising out of (i) the breach of any representation or
warranty of such Seller contained in Article III (other than Section 3.15, it
being understood that the sole remedy for breach thereof shall be pursuant to
Article VII) and (ii) the breach by such Seller of any covenant or agreement of
such Seller contained herein (other than Article VII, it being understood that
the sole remedy for breach thereof shall be pursuant to Article VII). Anything
in Section 9.01 to the contrary notwithstanding, no claim may be asserted nor
any action commenced against any Seller for breach of any representation,
warranty, covenant or agreement contained herein, unless written notice of such
claim or action is received by such Seller describing in detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation, warranty, covenant or agreement
on which such claim or action is based ceases to survive as set forth in Section
9.01.
<PAGE>
47
(b) The indemnification obligations of the Sellers pursuant to Section
9.03(a)(i) shall not be effective until the aggregate dollar amount of all
Losses which would otherwise be indemnifiable pursuant to Section 9.03(a)(i)
exceeds $3,000,000 (the "Sellers' Threshold Amount"), and then only to the
extent such aggregate amount exceeds the Sellers' Threshold Amount. In addition,
no claim may be made against any Seller for indemnification pursuant to Section
9.03(a)(i) with respect to any individual item of Loss, unless such item exceeds
$250,000, nor shall any such item which does not exceed $250,000 be applied to
or considered part of the Sellers' Threshold Amount. The indemnification
obligations of each Seller pursuant to Section 9.03(a)(i) shall be effective
only until the dollar amount paid by all Sellers in respect of all Losses
indemnified against under Section 9.03(a)(i) aggregates to an amount equal to
$15,000,000. For the purposes of this Section 9.03(b), in computing such
individual or aggregate amounts of claims, the amount of each claim shall be
deemed to be an amount (i) net of any Post-Closing Date Tax Benefit, (ii) net of
any insurance proceeds and any indemnity, contribution or other similar payment
recovered by any Purchaser Indemnified Party from any third party with respect
thereto and (iii) net of any adjustments to the Purchase Price pursuant to
Section 2.04 with respect to the subject matter in dispute. The limitations
imposed by this Section 9.03(b) shall not be applicable to any loss relating to
Taxes, which shall be governed exclusively by Article VII.
(c) Payments by any Seller pursuant to Section 9.03(a) shall be limited to
such Seller's Pro Rata Share of the amount of any Losses that remains after
deducting therefrom (i) any Post-Closing Date Tax Benefit, (ii) any insurance
proceeds and any indemnity, contribution or other similar payment recovered by
any Purchaser Indemnified Party from any third party with respect thereto and
(iii) any adjustments to the Purchase Price pursuant to Section 2.04 with
respect to the subject matter in dispute. If a payment is made by any Seller in
accordance with this Section 9.03, and if in a subsequent taxable year a Post-
Closing Date Tax Benefit is realized by any Purchaser Indemnified Party or any
Affiliate of any Purchaser Indemnified Party (that was not previously taken into
account to reduce an amount otherwise payable by such Seller under Section
9.03), the Purchaser shall promptly pay to such Seller at the time of
realization, the amount of such Post-Closing Date Tax Benefit to the extent that
such amount would have resulted in a reduction in the obligations of such Seller
under this Section 9.03 if the Post-Closing Date Tax Benefit had been obtained
in the year of such Seller's payment. A Post-Closing Date Tax Benefit will be
considered to be realized for purposes of this Section 9.03 at the time that it
is reflected on a Tax return of any Purchaser Indemnified Party or any Affiliate
of any Purchaser Indemnified Party.
SECTION 9.04. Indemnification Procedures. (a) A Seller Indemnified Party or
a Purchaser Indemnified Party, as the case may be (for purposes of this Section
9.04, an "Indemnified Party"), shall give the indemnifying party under Section
9.02 or 9.03, as applicable (for purposes of this Section 9.04, an "Indemnifying
Party"), prompt written notice of any claim, assertion, event or proceeding by
or in respect of a third party as to which it may
<PAGE>
48
request indemnification hereunder or as to which the Seller's Threshold Amount
may be applied as soon as is practicable and in any event within 30 days of the
time that such Indemnified Party learns of such claim, assertion, event or
proceeding; provided, however, that the failure to so notify the Indemnifying
Party shall not affect rights to indemnification hereunder except to the extent
that the Indemnifying Party is actually prejudiced by such failure. The
Indemnifying Party shall have the right to direct, through counsel of its own
choosing, the defense or settlement of any such claim or proceeding at its own
expense. If the Indemnifying Party elects to assume the defense of any such
claim or proceeding, the Indemnified Party may participate in such defense, but
in such case the expenses of such Indemnified Party shall be paid by such
Indemnified Party. Such Indemnified Party shall provide the Indemnifying Party
with access to its records and personnel relating to any such claim, assertion,
event or proceeding during normal business hours and shall otherwise cooperate
with the Indemnifying Party in the defense or settlement thereof, and the
Indemnifying Party shall reimburse such Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith. If the Indemnifying Party elects
to direct the defense of any such claim or proceeding, such Indemnified Party
shall not pay, or permit to be paid, any part of any claim or demand arising
from such asserted liability, unless the Indemnifying Party consents in writing
to such payment or unless the Indemnifying Party, subject to the last sentence
of this Section 9.02(a), withdraws from the defense of such asserted liability,
or unless a final judgment from which no appeal may be taken by or on behalf of
the Indemnifying Party is entered against such Indemnified Party for such
liability. If the Indemnifying Party shall fail to defend against such claim or
proceeding, or if, after commencing or undertaking any such defense, the
Indemnifying Party fails to prosecute or withdraws from such defense, such
Indemnified Party shall have the right to undertake the defense or settlement
thereof, at the Indemnifying Party's expense. If such Indemnified Party assumes
the defense of any such claim or proceeding pursuant to this Section 9.04(a) and
proposes to settle such claim or proceeding prior to a final judgment thereon or
to forego appeal with respect thereto, then such Indemnified Party shall give
the Indemnifying Party prompt written notice thereof and the Indemnifying Party
shall have the right to participate in the settlement or assume or reassume the
defense of such claim or proceeding.
(b) Each party hereto hereby acknowledges and agrees that, from and after
the Closing, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article IX and in Article VII. In
furtherance of the foregoing, each party hereto hereby waives, to the fullest
extent permitted under applicable law, any and all other rights, claims and
causes of action it may have, from and after the Closing, against the other
parties hereto or its officers, directors, employees, agents, representatives
and Affiliates relating to the subject matter of this Agreement.
<PAGE>
49
(c) Except as set forth in this Agreement, the parties hereto are not
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. Notwithstanding anything to the contrary contained in
this Agreement, no breach of any representation, warranty, covenant or agreement
contained herein shall give rise to any right on the part of any party hereto,
after the consummation of the purchase and sale of the Interests contemplated by
this Agreement, to rescind this Agreement or any of the transactions
contemplated hereby, unless required by law.
(d) Notwithstanding anything to the contrary contained in this Agreement,
no party hereto shall have any liability under any provision of this Agreement
for, and in no event shall the Seller's Threshold Amount be applied to, any
consequential damages. Each party hereto shall take all reasonable steps to
mitigate its Losses upon and after becoming aware of any event which could
reasonably be expected to give rise to any Losses.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of each Seller and the Purchaser;
(b) by either the Sellers jointly or the Purchaser, if any
Governmental Authority with jurisdiction over such matters shall have
issued a Governmental Order restraining, enjoining or otherwise prohibiting
the sale of the Interests hereunder and such order, decree, ruling or other
action shall have become final and unappealable; provided, however, that
the provisions of this Section 10.01(b) shall not be available to any party
unless such party shall have complied with its obligations under Section
5.04 or otherwise used its reasonable best efforts to oppose any such
Governmental Order or to have such Governmental Order vacated or made
inapplicable to the transactions contemplated by this Agreement; or
(c) by either the Sellers or the Purchaser, if the Closing shall not
have occurred prior to October 31, 1998; provided, however, that (i) in the
event the Sellers notify the Purchaser that the Debt Consents will not be
obtained, such date will be the later of October 31, 1998 and the date that
is 60 days following such notification by the Sellers and (ii) the right to
terminate this Agreement under this Section 10.01(c) shall not be available
to any party whose failure to fulfill any obligation under this
<PAGE>
50
Agreement shall have been the cause of, or shall have resulted in, the
failure of the Closing to occur prior to such date.
Time shall be of the essence in this Agreement.
SECTION 10.02. Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except (a)
as set forth in Section 5.03 and Section 11.01 and (b) that nothing herein shall
relieve either party from liability for any willful breach hereof.
SECTION 10.03. Waiver. At any time prior to the Closing, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. (a) All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
(b) Notwithstanding the foregoing, if the Closing does not occur because of
a breach by a party hereto, such party will reimburse the other parties (as
their sole and exclusive remedy hereunder) for their out-of-pocket costs and
expenses, including, without limitation, fees and expenses of counsel, financing
and accountants and disbursements of financial advisors, incurred in connection
with the preparation, negotiation and performance of this Agreement and the
transactions contemplated hereby.
SECTION 11.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 11.02):
<PAGE>
51
(a) if to Robert Kaplan:
265 Post Avenue
Suite 240
Westbury, New York 11590
Telecopier: (516) 997-9186;
if to Deborah Kaplan-Brooks:
265 Post Avenue
Suite 240
Westbury, New York 11590
Telecopier: (516) 997-9186;
if to Barton Kaplan:
265 Post Avenue
Suite 240
Westbury, New York 11590
Telecopier: (516) 997-9186;
if to Edward Kaplan:
265 Post Avenue
Suite 240
Westbury, New York 11590
Telecopier: (516) 997-9186;
with a copy, in each case, to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Clare O'Brien, Esq.
Telecopier: (212) 848-7179
(b) if to the Purchaser or CareMatrix:
CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
<PAGE>
52
Attention: Chief Executive Officer
Telecopier: (781) 433-1190;
with a copy to:
CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: General Counsel
Telecopier: (781) 433-1073
Cadwalader Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Francis J. Serbaroli, Esq.
Telecopier: (212) 504-6666
SECTION 11.03. Public Announcements. Unless otherwise required by
applicable Law, no party to this Agreement shall make any public announcements
in respect of this Agreement or the transactions contemplated hereby or
otherwise communicate with any news media without the prior written consent of
the other parties, and the parties hereto shall cooperate as to the timing and
contents of any such announcement. Each party hereto acknowledges that the other
intends to make a public announcement with respect to this Agreement as soon as
reasonably possible after its execution, and the parties agree to cooperate with
each other in making such announcement. Each party hereto agrees that such
public announcement shall be subject to the other parties' prior reasonable
approval.
SECTION 11.04. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
<PAGE>
53
SECTION 11.06. Entire Agreement. This Agreement (including the Disclosure
Schedule and the Exhibits hereto) constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, other than the
Confidentiality Agreement, between each Seller and the Purchaser with respect to
the subject matter hereof and except as otherwise expressly provided herein.
SECTION 11.07. Assignment. This Agreement shall not be assigned by
operation of Law or otherwise; provided, however, that the Purchaser may assign
all or any portion of its rights and obligations under this Agreement to one or
more direct or indirect Affiliates of the Purchaser without the consent of the
Sellers so long as, in the event of such assignment, the Purchaser will remain
liable for any obligations hereunder not performed by such assignee or
assignees; provided, however, that any Seller may assign all or any portion of
its rights and obligations under this Agreement to a charitable trust without
the consent of the Purchaser, so long as, in the event of such assignment, such
Seller remains liable for any obligations hereunder not performed by such
assignee.
SECTION 11.08. No Third-Party Beneficiaries. Except as specifically
provided in Article IX, this Agreement is for the sole benefit of the parties
hereto and their permitted successors, assigns and nothing herein, express or
implied, is intended to or shall confer upon any other person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION 11.09. Waivers and Amendments. This Agreement may be amended or
modified, and the terms and conditions hereof may be waived, only by a written
instrument signed by the parties hereto or, in the case of a waiver, by each
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right, power or privilege hereunder,
nor any single or partial exercise of any other right, power or privilege
hereunder, preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. The rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies which
any party may otherwise have at Law or in equity.
SECTION 11.10. Guarantee. CareMatrix, hereby guarantees the performance by
the Purchaser (or any of its assignees pursuant to Section 11.07) of all the
Purchaser's obligations hereunder, including, without limitation, all indemnity
obligations hereunder. In connection with such guarantee, CareMatrix hereby
represents and warrants to the Sellers (i) that it is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all necessary corporate power and authority to enter into
this Agreement, and to carry out its obligations hereunder, (ii) that the
execution and delivery of
<PAGE>
54
this Agreement by CareMatrix and the performance of its obligations hereunder
have been duly authorized by all requisite corporate action on the part of
CareMatrix and (assuming due authorization, execution and delivery by the
Sellers and the Purchaser) constitutes a legal, valid and binding obligation of
CareMatrix enforceable against CareMatrix in accordance with its terms.
SECTION 11.11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
required to be performed prior to the Closing was not performed in accordance
with the terms hereof and that, prior to the Closing, the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or in equity.
SECTION 11.12. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed wholly in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in a New York state or federal court sitting in Nassau County in the
State of New York, and the parties hereto hereby irrevocably submit to the
exclusive jurisdiction of such courts in any such action or proceeding and
irrevocably waive the defense of an inconvenient forum to the maintenance of any
such action or proceeding.
<PAGE>
55
SECTION 11.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Agreement.
IN WITNESS WHEREOF, each Seller and the Purchaser (by, in the case of the
Purchaser, its respective officers thereunto duly authorized) have caused this
Agreement to be executed as of the date first written.
ROBERT KAPLAN
By /s/ Robert Kaplan
------------------------------
Name:
Title:
DEBORAH KAPLAN-BROOKS
By /s/ Deborah Kaplan-Brooks
------------------------------
Name:
Title:
BARTON KAPLAN
By /s/ Barton Kaplan
------------------------------
Name:
Title:
CAREMATRIX CORPORATION
By /s/ Robert M. Kaufman
------------------------------
Name: Robert M. Kaufman
Title: CEO
<PAGE>
56
EDWARD KAPLAN
By /s/ Edward Kaplan
------------------------------
Name:
Title:
CAREMATRIX OF MASSACHUSETTS, INC.
By /s/ Robert M. Kaufman
------------------------------
Name: Robert M. Kaufman
Title: CEO
EXECUTION COPY
FIRST AMENDMENT TO PURCHASE AGREEMENT
FIRST AMENDMENT dated August 31, 1998 to the PURCHASE AGREEMENT
("Agreement") dated as of July 13, 1998, among Robert Kaplan, Deborah
Kaplan-Brooks, Barton Kaplan, and Edward Kaplan ("Sellers"), CareMatrix of
Massachusetts, Inc., a Delaware corporation ("Purchaser") and CareMatrix
Corporation, a Delaware corporation ("CareMatrix"), as Guarantor:
WHEREAS, the parties hereto desire that certain provisions of the Agreement
be amended as herein set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
1. Section 1.01. (a) Section 1.01 is hereby amended by adding the following
definitions in proper alphabetical order:
"`Alandco Purchase Price' means the amount of the Purchase Price allocated
to Alandco as set forth on Schedule 2.02(A) to this Agreement."
"`Alandco Shares' means the issued and outstanding shares of common stock
of Alandco."
"`Closing' means, with respect to all the Companies other than Alandco, the
Initial Closing, and with respect to Alandco, the Alandco Closing."
"`Closing Date' means, with respect to all the Companies other than
Alandco, the Initial Closing Date, and with respect to Alandco, the Alandco
Closing Date."
"`North Fork Loan' means that certain loan from North Fork Bank to South
Shore Associates, LLC entered into pursuant to a Building Loan Agreement,
dated November 4, 1997 between South Shore Associates, LLC and North Fork
Bank, and the agreements and instruments related thereto."
"`SeniorCare Shares' means the issued and outstanding shares of common
stock of SeniorCare Group, Ltd. a New York corporation."
"`Trust Interests' means the membership interests in Seniorland Company,
LLC owned by the Trusts as set forth on Schedule I hereto."
(b) The definition of "Projects under Development" is hereby amended by
deleting therein the name "South Shore Associates, LLC" and substituting
therefor the name "Seniorland, LLC".
<PAGE>
(c) The definition of "Total Working Capital" is hereby amended by (i)
adding the parenthetical "(other than Alandco)" after the word "Companies"
wherever it appears and (ii) replacing the term "Closing Balance Sheet"
contained therein with the term "Initial Closing Balance Sheet".
2. Section 1.02. The references in Section 1.02 to "Closing", "Closing
Balance Sheet" and "Closing Date" are hereby deleted, along with their
corresponding section references, and the following terms are hereby added to
such Section, in proper alphabetical order, with their corresponding section
references:
"Alandco Closing" "2.04"
"Alandco Closing Balance Sheet" "2.06"
"Alandco Closing Date" "2.04"
"Alandco Debt Consents" "8.02"
"Consulting Agreement" "5.10"
"Initial Closing" "2.03"
"Initial Closing Balance Sheet" "2.07"
"Initial Closing Date" "2.03"
"South Shore Note" "8.01"
"Trusts" "3.24"
3. Section 2.02. Section 2.02 is hereby amended as follows:
(a) The first sentence of Section 2.02 is amended by (i) deleting the
figure "104,000,000" contained therein and replacing such figure with the figure
"105,714,763".
(b) The second sentence of Section 2.02 is hereby deleted in its entirety
and replaced with the following:
"The Purchase Price shall be subject to adjustment in accordance with
Sections 2.05, 2.06, and 8.02."
4. Section 2.03. Section 2.03 is hereby deleted in its entirety and
replaced with the following:
-2-
<PAGE>
"SECTION 2.03. Initial Closing. (a) Subject to the terms and conditions of
this Agreement, the sale and purchase of the Senior Care Shares and the
Membership Interests, contemplated hereby shall take place at a closing (the
"Initial Closing") to be held at 10:00 a.m., local time, on the last Business
Day of the month during which the later of the following occurs: (i) the
expiration or termination of the applicable waiting periods under the HSR Act,
if any, and (ii) the satisfaction or waiver of all other conditions to the
obligations of the parties set forth in Sections 8.01(a) and 8.02(a) of this
Agreement, at the offices of Shearman & Sterling, 599 Lexington Avenue, New
York, New York 10022, or at such other time or on such other date or at such
other place as each Seller and the Purchaser may mutually agree upon in writing
(the day on which the Initial Closing takes place being the "Initial Closing
Date").
(b) At the Initial Closing, each Seller shall deliver or cause to be
delivered to the Purchaser: (i) stock certificates evidencing such Seller's
SeniorCare Shares duly endorsed in blank or accompanied by stock powers duly
executed in blank; (ii) membership certificates evidencing such Seller's
Membership Interests duly endorsed in blank or accompanied by transfer powers
duly executed in blank, and (iii) the certificate required to be delivered
pursuant to Section 8.02(a)(i).
(c) At the Initial Closing, Deborah Kaplan-Brooks will cause the Trusts to
deliver membership certificates evidencing the Trust Interests, duly endorsed in
blank or accompanied by transfer powers duly executed in blank.
(d) At the Initial Closing, the Purchaser shall deliver to each Seller: (i)
its Pro Rata Share of the Purchase Price, less the Alandco Purchase Price, by
wire transfer in immediately available funds, to an account or accounts
designated at least two Business Days prior to the Initial Closing Date by such
Seller in a written notice to the Purchaser; provided, however, that the amount
of the Purchase Price delivered to Deborah Kaplan-Brooks shall be reduced by the
amount of the Purchase Price which Deborah Kaplan-Brooks directs the Purchaser
to pay to the Trusts for the Trust Interests; and (ii) the certificate required
to be delivered pursuant to Section 8.01(a)(i).
(e) At the Initial Closing, the Purchaser shall deliver to the Trusts the
amount of the Purchase Price which Deborah Kaplan-Brooks directs the Purchaser
to pay to the Trusts for the Trust Interests, by wire transfer in immediately
available funds, to an account or accounts designated at least two Business Days
prior to the Initial Closing Date by Deborah Kaplan-Brooks in a written notice
to the Purchaser.
(f) All action to be taken at the Initial Closing shall be effective as of
11:59 p.m. on the Initial Closing Date."
5. Section 2.04. Previous Section 2.04 is hereby renumbered Section 2.05,
and a new Section 2.04 is hereby added as follows:
"Section 2.04. Alandco Closing. (a) Subject to the terms and conditions of
this Agreement, the sale and purchase of the Alandco Shares contemplated hereby
shall take place at a closing (the "Alandco Closing") to be held at 10:00 a.m.,
local time, on the last Business
-3-
<PAGE>
Day of the month during which the later of the following occurs: (i) written
approval of the New Jersey Department of Health and Senior Service Division of
Long Term Care Systems Development and Quality to the acquisition by the
Purchaser of Alandco from the Sellers pursuant to this Agreement, and (ii) the
satisfaction or waiver of all other conditions to the obligations of the parties
set forth in Sections 8.01(b) and 8.02(b) of this Agreement, at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or at such
other time or on such other date or at such other place as each Seller and the
Purchaser may mutually agree upon in writing (the day on which the Alandco
Closing takes place being the "Alandco Closing Date").
(b) At the Alandco Closing, each Seller shall deliver or cause to be
delivered to the Purchaser (i) the certificate required to be delivered pursuant
to Section 8.02(b)(i), and (ii) the stock certificates evidencing such Seller's
Alandco Shares duly endorsed in blank or accompanied by stock powers duly
endorsed in blank.
(c) At the Alandco Closing, the Purchaser shall deliver to each Seller: (i)
its Pro Rata Share of the Alandco Purchase Price, by wire transfer in
immediately available funds, to an account or accounts designated at least two
Business Days prior to the Alandco Closing Date by such Seller in a written
notice to the Purchaser; and (ii) the certificate required to be delivered
pursuant to Section 8.01(b)(i).
(d) All action to be taken at the Alandco Closing shall be effective as of
11:59 p.m. on the Alandco Closing Date."
6. Section 2.05. Renumbered Section 2.05 is hereby amended as follows:
(a) Renumbered Section 2.05 is hereby renamed "Initial Closing Purchase
Price Adjustment," all references to "Section 2.04" shall be changed to "Section
2.05", and all references to "Closing Balance Sheet" are hereby deleted and
replaced with "Initial Closing Balance Sheet".
(b) The first two sentences of Section 2.05(b) are hereby deleted in their
entirety and replaced with the following:
"(b) As soon as practicable, but in no event later than 90 calendar days
following the Initial Closing Date, the Sellers shall jointly prepare a
combined balance sheet (the "Initial Closing Balance Sheet") reflecting the
financial position of the Companies other than Alandco as of the Initial
Closing Date. The Initial Closing Balance Sheet shall be accompanied by the
report thereon of KPMG Peat Marwick LLP, independent accountants of the
Sellers (the "Sellers' Accountants"), stating that the Initial Closing
Balance Sheet fairly presents in all material respects the combined
financial position of the Companies reflected on the Initial Closing
Balance Sheet in accordance with GAAP applied on a basis consistent with
the preparation of the 1997 Combined Balance Sheet."
-4-
<PAGE>
7. Section 2.06. A new Section 2.06 is hereby added to the Agreement as
follows:
"SECTION 2.06. Alandco Purchase Price Adjustment. As soon as practicable,
but in no event later than 90 calendar days following the Alandco Closing Date,
the Sellers shall jointly prepare a balance sheet (the "Alandco Closing Balance
Sheet") reflecting the financial position of Alandco as of the Alandco Closing
Date. All other provisions of Section 2.05 shall apply mutatis mutandis as if
all references to the Closing Balance Sheet therein were references to the
Alandco Closing Balance Sheet."
8. Section 3.03. Section 3.03 is hereby amended by deleting the penultimate
sentence therein and substituting therefor the following:
"Each Seller and, in the case of the Trust Interests, the Trusts, own the
Shares and Membership Interests set forth opposite such Person's name on Parts I
and II, respectively of Schedule I hereto, free and clear of all Encumbrances,
except for any Encumbrances arising out of, under or in connection with this
Agreement."
9. Section 3.24. Article III is hereby amended by adding at the end thereof
a new Section 3.24 to read as follows:
"SECTION 3.24. Trusts. Deborah Kaplan-Brooks represents and warrants that
(a) the Deborah Kaplan Brooks Trust f/b/o Michael Brooks, the Deborah Kaplan
Brooks Trust f/b/o Hilary Brooks, and the Deborah Kaplan Brooks Trust f/b/o
Stephanie Brooks (collectively, the "Trusts") have the legal right, power and
authority to (i) own the Trust Interests, and (ii) transfer the Trust Interests
to the Purchaser, free and clear of all Encumbrances, except for any
Encumbrances arising out of, under or in connection with this Agreement, and (b)
the Trust Interests shall be transferred by the Trusts to the Purchaser at the
Initial Closing. For the purposes of Article III only, all references to
"Membership Interests" shall be deemed to include the Trust Interests."
10. Section 5.08. Section 5.08 is hereby deleted in its entirety and
replaced with the following:
"SECTION 5.08. Intellectual Property. (a) The Sellers acknowledge that from
and after the Initial Closing, the Intellectual Property Rights of the Companies
other than Alandco shall be owned by the Purchaser, that from and after the
Alandco Closing, the Intellectual Property Rights of Alandco shall be owned by
the Purchaser, that the Sellers shall have no rights thereto and that the
Sellers will not contest the ownership or validity of any rights of the
Purchaser thereto, in each case from and after the applicable closings.
(b) Except as expressly agreed in writing by the Purchaser or pursuant to
any agreements and licenses between the Purchaser and the Sellers, (i) from and
after the Initial Closing, the Sellers shall not use any of the Intellectual
Property Rights of the Companies other than Alandco, and (ii) from and after the
Alandco Closing, the Sellers shall not use any of the Intellectual Property
Rights of Alandco."
-5-
<PAGE>
11. Section 5.10. The first sentence of Section 5.10 is hereby deleted in
its entirety and replaced with the following:
"The Purchaser shall enter into an operating agreement with the Sellers at
the Initial Closing in substantially the form attached hereto as Exhibit A (the
"Operating Agreement") pursuant to which the Sellers shall operate the
facilities owned by the Companies other than Alandco. The Purchaser shall enter
into a consulting agreement with the Sellers at the Alandco Closing in
substantially the form attached hereto as Exhibit B (the "Consulting Agreement")
pursuant to which the Sellers shall make themselves available for consultations
with the Purchaser with respect to the operation of the facility owned by
Alandco during the term set forth therein."
12. Section 5.12. Sections 5.12(a) and 5.12(e) are hereby amended by
replacing the references to "Closing Date" therein with "Initial Closing Date".
13. Section 5.13. Section 5.13 is hereby amended by replacing the reference
to "Closing Date" therein with "Initial Closing Date".
14. Section 5.14. A new Section 5.14 is hereby added to read as follows:
"SECTION 5.14. South Shore Note. The Purchaser shall punctually make all
payments due under the South Shore Note."
15. Section 7.01. Section 7.01(a) is hereby amended by replacing the
reference to "Closing Balance Sheet" therein with "Initial Closing Balance Sheet
with respect to each Company other than Alandco and the Alandco Closing Balance
Sheet with respect to Alandco".
16. Section 7.06. Section 7.06 is hereby amended by deleting all references
to "Companies" and replacing them with "Companies other than Alandco after the
Initial Closing Date and all Companies after the Alandco Closing Date".
17. Section 8.01. Section 8.01 is hereby amended as follows:
(a) The first paragraph of Section 8.01 is hereby deleted in its entirety
and replaced with the following:
"(a) The obligations of each Seller to consummate the Initial Closing,
shall be subject to the fulfillment or waiver, at or prior to the Initial
Closing, of each of the following conditions:"
(b) Sections 8.01(a) through (e) are hereby renumbered Sections 8.01(a)(i)
through (v), Section 8.01(f) is hereby deleted in its entirety, and Section
8.01(g) is hereby renumbered Section 8.01(a)(vi).
-6-
<PAGE>
(c) Former Section 8.01(a) is hereby amended by deleting all references to
"Closing" therein and replacing them with "Initial Closing" and by relettering
(i), (ii), and (iii) as (A), (B), and (C).
(d) Former Section 8.01(c) is hereby amended by deleting the reference to
"Section 8.01(c)" therein and replacing it with "Section 8.01(a)(iii)."
(e) Former Section 8.01(d) is hereby deleted in its entirety and replaced
with the following:
"(iv) Assumption of Guarantees. The Purchaser shall have assumed or
replaced the Guarantees applicable to the Companies other than
Alandco;"
(f) A new Section 8.01(a)(vii) shall be added as follows:
"(vii) Assignment. (A) The Building Loan Mortgage Note dated November
4, 1997, from South Shore Associates, LLC, to North Fork Bank, and the
Subordinated Soft Cost Loan Note dated November 4, 1997, from South
Shore Associates, LLC, to North Fork Bank shall have been assigned in
full by North Fork Bank to R.K. Associates; (B) all mortgages in South
Shore Associates, LLC's properties held by North Fork Bank shall have
been assigned in full to R.K. Associates; (C) all guarantees entered
into in connection therewith shall have been terminated; (D) South
Shore Associates, LLC, shall have entered into amendments to such
notes and mortgages, pursuant to which it agrees to pay on a secured
basis the principal amount of $6,500,000 to R.K. Associates on
September 30, 1998 (such agreement, the "South Shore Note"); provided,
however, that such date shall be extended to not later than October
31, 1998, upon Purchaser's written assurances satisfactory to the
Sellers that it is diligently working to obtain mortgage financing for
South Shore Associates LLC's properties; and (E) CareMatrix shall have
entered into guarantees and indemnities for the benefit of R.K.
Associates substantially similar to those entered into by South Shore
Associates, LLC, in connection with the notes referred to in clause
(A) above."
(g) A new Section 8.01(b) shall be added as follows:
"(b) The obligations of each Seller to consummate the Alandco Closing
shall be subject to the fulfillment or waiver, at or prior to the
Alandco Closing, of each of the following conditions:
-7-
<PAGE>
(i) Representations and Warranties; Covenants. (A) The representations
and warranties of the Purchaser to the extent made with respect to
Alandco contained in this Agreement shall be true and correct as of
the Alandco Closing, with the same force and effect as if made as of
the Alandco Closing (or, in the case of such representations and
warranties of the Purchaser which address matters only as of a
particular date, as of such date), except where the failure to be so
true and correct would not have a material adverse effect on the
ability of the Purchaser to consummate the Alandco Closing; (B) the
covenants and agreements contained in this Agreement to be complied
with by the Purchaser with respect to Alandco at or prior to the
Alandco Closing shall have been complied with in all material
respects; and (C) the Sellers shall have received a certificate of the
Purchaser as to the matters set forth in clauses (A) and (B) above
signed by a duly authorized officer of the Purchaser;
(ii) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Governmental Order which is in
effect and has the effect of making the Alandco Closing illegal or
otherwise prohibiting consummation thereof; provided, however, that
the provisions of this Section 8.01(b)(ii) shall not apply if any
Seller has directly or indirectly solicited or encouraged any such
action;
(iii) Assumption of Guarantees. The Purchaser shall have assumed or
replaced the Guarantees applicable to Alandco in their entirety;
(iv) Other Governmental Approvals. The Sellers shall have obtained the
approval of the New Jersey Department of Health and Senior Services
Division of Long Term Care Systems Development and Quality to the sale
of Alandco by the Sellers to the Purchaser pursuant to this Agreement
and such approval shall be in form and substance reasonably
satisfactory to the Sellers and shall not be subject to the
satisfaction of any condition that has not been satisfied or waived;
and
(v) Consulting Agreement. The Purchaser shall have delivered to each
Seller duly executed counterparts of the Consulting Agreement."
-8-
<PAGE>
18. Section 8.02. Section 8.02 is hereby amended as follows:
(a) The first paragraph of Section 8.02 is hereby deleted in its entirety
and replaced with the following:
"(a) The obligations of the Purchaser to consummate the Initial
Closing shall be subject to the fulfillment or waiver, at or prior to
the Initial Closing, of each of the following conditions:"
(b) Sections 8.02(a) and (b) are hereby renumbered Sections 8.02(a)(i) and
(ii), Section 8.02(c) is hereby deleted in its entirety, and Sections 8.02(d)
through (h) are hereby renumbered Sections 8.02(a)(iii) through (vii).
(c) Former Section 8.02(a) is hereby amended by deleting all references to
"Closing" therein and replacing them with "Initial Closing" and by relettering
(i), (ii), and (iii) as (A), (B), and (C).
(d) Former Section 8.02(d) is hereby amended by deleting the reference to
"Section 8.02(c)" therein and replacing it with "Section 8.02(b)(iii)."
(e) Former Section 8.02(f) is hereby deleted in its entirety and replaced
with the following:
"(v) Third Party Consents. All consents (or in lieu thereof waivers)
to the performance by the Sellers of their obligations with respect to
the Companies other than Alandco, under this Agreement and the
Operating Agreement or to the consummation by the Sellers of the
transactions contemplated hereby and thereby at or prior to the
Initial Closing as are required under any contract to which any of the
Sellers or the Companies is a party or by which any of their
respective assets and properties are bound and where the failure to
obtain any such consent (or in lieu thereof waiver) could reasonably
be expected, individually or in the aggregate with other such
failures, to have a Material Adverse Effect, (A) shall been obtained,
(B) shall be in form and substance reasonably satisfactory to the
Purchaser, (C) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (D) shall be in
full force and effect; provided, however, that in the event the
consent of any party to any of the loan agreements or mortgages set
forth in Section 3.05 of the Disclosure Schedule is not obtained to
such performance or consummation (the "Debt Consents"), the Sellers
shall have the right to elect to reduce the amount of the Purchase
Price payable at the Initial Closing by an amount equal to the amount
of any prepayment penalty incurred as a result of the prepayment of
any amounts owing under such loan agreement or mortgage and, if
-9-
<PAGE>
such election is made, the condition set forth in this Section
8.02(a)(v) will be deemed satisfied with respect to any such loan
agreement or mortgage."
(f) Former Section 8.02(g) is hereby amended by deleting all references to
"Companies" therein and replacing them with "Companies other than Alandco," and
renumbering (a) and (b) as (A) and (B).
(g) Former Section 8.02(h) is hereby amended by deleting the reference to
"the Companies" therein and replacing it with "the Companies other than Alandco"
by deleting the reference to "Closing Date" therein and replacing it with
"Initial Closing Date" and by deleting the reference to "Closing" therein and
replacing it with "Initial Closing."
(h) A new Section 8.02(a)(viii) shall be added as follows:
"North Fork Loan. The Purchaser shall have evidence in form and
substance reasonably satisfactory to the Purchaser that South Shore
Associates, LLC has no further obligations to North Fork Bank under
the North Fork Loan."
(i) A new Section 8.02(b) shall be added as follows:
"(b) The obligations of each Purchaser to consummate the Alandco
Closing shall be subject to the fulfillment or waiver, at or prior to
the Alandco Closing, of each of the following conditions:
(i) Representations and Warranties; Covenants. (A) The
representations and warranties of each Seller contained in this
Agreement to the extent made with respect to Alandco shall be
true and correct as of the Alandco Closing, with the same force
and effect as if made as of the Alandco Closing (or, in the case
of such representations and warranties of such Seller which
address matters only as of a particular date, as of such date),
except where the failure to be so true and correct would not have
a Material Adverse Effect; (B) the covenants and agreements
contained in this Agreement to be complied with by each Seller
with respect to Alandco at or prior to the Alandco Closing shall
have been complied with in all material respects; and (C) the
Purchaser shall have received a certificate of each Seller as to
matters set forth in clauses (A) and (B) above signed by such
Seller;
(ii) Other Governmental Approvals. The Purchaser shall have
obtained the approval of the New Jersey
-10-
<PAGE>
Department of Health and Senior Service Division of Long Term
Care Systems Development and Quality to the acquisition by the
Purchaser of Alandco from the Sellers pursuant to this Agreement
and such approval shall be in form and substance reasonably
satisfactory to the Purchaser and shall not be subject to the
satisfaction of any condition that has not been satisfied or
waived;
(iii) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other Governmental Order which is in
effect and has the effect of making the Alandco Closing illegal
or otherwise prohibiting consummation thereof; provided, however,
that the provisions of this Section 8.02(b)(iii) shall not apply
if the Purchaser has directly or indirectly solicited or
encouraged any such action;
(iv) Consulting Agreement. The Sellers shall have delivered duly
executed counterparts of the Consulting Agreement;
(v) Third Party Consents. All consents (or in lieu thereof
waivers) to the performance by the Sellers of their obligations
with respect to Alandco under this Agreement and the Consulting
Agreement or to the consummation by the Sellers of the
transactions contemplated hereby and thereby at or prior to the
Alandco Closing as are required under any contract to which any
of the Sellers or Alandco is a party or by which any of their
respective assets and properties are bound and where the failure
to obtain any such consent (or in lieu thereof waiver) could
reasonably be expected, individually or in the aggregate with
other such failures, to have a Material Adverse Effect, (A) shall
have been obtained, (B) shall be in form and substance reasonably
satisfactory to the Purchaser, (C) shall not be subject to the
satisfaction of any condition that has not been satisfied or
waived, and (D) shall be in full force and effect; provided,
however, that in the event the consent of any party to any of the
loan agreements or mortgages set forth in Section 3.05 of the
Disclosure Schedule to which Alandco is a party is not obtained
to such performance or consummation (the "Alandco Debt
Consents"), the Sellers shall have the right to elect to reduce
the Alandco Purchase Price by an amount equal to the amount of
any prepayment penalty incurred as a result of the prepayment
-11-
<PAGE>
of any amounts owing under such loan agreement or mortgage and,
if such election is made, the condition set forth in this Section
8.02(b)(v) will be deemed satisfied with respect to any such loan
agreement or mortgage;
(vi) Good Standing Certificates. The Sellers shall have delivered
to the Purchaser (a) copies of the articles of incorporation
including all amendments thereto, of Alandco certified by the
Secretary of State or other appropriate official of the
jurisdiction of incorporation, and (b) certificates from the
Secretary of State or other appropriate official of the
respective jurisdiction of incorporation to the effect that
Alandco is in good standing or subsisting in such jurisdiction,
listing all charter documents of Alandco on file and attesting to
its payment of all franchise or similar Taxes; and
(vii) Resignations of Directors and Officers. Such members of the
board of directors and such officers of Alandco as are designated
in a written notice delivered at least two (2) Business Days
prior to the Alandco Closing Date by the Sellers to the Purchaser
shall have tendered, effective at the Alandco Closing, their
resignations as such directors and officers."
19. Section 9.01. Section 9.01 is hereby amended by deleting the term "the
Closing Date" and substituting therefor the following: "(a) with respect to any
such representations, warranties, covenants or agreements made relating to any
Company other than Alandco, the Initial Closing Date and (b) with respect to any
such representations, warranties, covenants or agreements made relating to
Alandco, the Alandco Closing Date".
20. Section 9.04. Section 9.04(b) is hereby deleted in its entirety and
replaced with the following:
"(b) Each party hereto hereby acknowledges and agrees that, from and after
the Initial Closing, with respect to matters relating to the Companies other
than Alandco, and from and after the Alandco Closing, with respect to matters
relating to Alandco, its sole and exclusive remedy with respect to any and all
claims relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article IX and in Article VII. In
furtherance of the foregoing, each party hereto hereby waives, to the fullest
extent permitted under applicable law, any and all other rights, claims and
causes of action it may have, from and after the applicable closing, against the
other parties hereto its officers, directors, employees, agents, representatives
and Affiliates relating to the subject matter of this Agreement."
21. Section 10.01. Section 10.01 is hereby amended as follows:
-12-
<PAGE>
(a) The introductory sentence of Section 10.01 is hereby deleted in its
entirety and replaced with the following:
"This Agreement may be terminated at any time prior to the Initial Closing
and the Alandco Closing, with respect to Interests not yet transferred to
Purchaser pursuant to this Agreement:"
(b) Subsection 10.01(c) is hereby amended by replacing the references to
"Closing" therein with "Initial Closing."
(c) A new Subsection 10.01(d) is hereby added before the last sentence of
Section 10.01 to read as follows:
"(d) by Sellers if the Alandco Closing shall not have occurred by
December 31, 1998, unless such closing shall not have taken place
due to the failure by Sellers to fulfill any obligation under
this Agreement; provided, however, that in the event that
Purchaser is making good faith efforts to obtain the approvals
required by Sections 8.01(b)(iv) and 8.02(b)(ii), such date shall
be extended for an additional sixty days."
22. Section 10.02. Section 10.02 is hereby amended by adding the following
sentence at the end of the Section:
"Notwithstanding the foregoing, in the event of termination as
provided in Section 10.01, this Agreement shall only become void, and
liability shall only be limited as set forth in this Section 10.02,
with respect to Interests not yet transferred to Purchaser pursuant to
this Agreement."
23. Section 10.03. Section 10.03 is hereby amended by deleting the
reference to "Closing" therein and replacing it with "Initial Closing or the
Alandco Closing".
24. Section 11.01. Section 11.01 is hereby amended as follows:
(a) Section 11.01(a) is hereby amended by deleting the reference to
"Closing" therein and replacing it with "Initial Closing or the Alandco
Closing".
(b) Section 11.01(b) is hereby deleted in its entirety and replaced with
the following:
"Notwithstanding the foregoing, (i) if the Initial Closing does not
occur because of a breach by a party hereto, such party will reimburse
the other parties (as their sole and exclusive remedy hereunder) for
their out-of-pocket costs and expenses, including, without limitation,
fees and expenses of counsel, financing sources and accountants and
disbursements of financial advisors, incurred in connection with the
preparation,
-13-
<PAGE>
negotiation and performance of this Agreement and the transactions
contemplated hereby, and (ii) if the Initial Closing occurs, but the
Alandco Closing does not occur because of a breach by a party hereto,
such party will reimburse the other parties (as their sole and
exclusive remedy hereunder) for six percent of their aggregate out-of
pocket costs and expenses, as described in clause (i) above.
25. Section 11.11. Section 11.11 is hereby amended by deleting the first
reference to "Closing" therein and replacing it with "Initial Closing or Alandco
Closing" and by deleting the second reference to "Closing" therein and replacing
it with "applicable closing."
26. Schedule I. Schedule I is hereby amended as set forth in the attached
revised form of Schedule I to reflect the Trust Interests in Seniorland Company,
LLC.
27. Schedule 2.02(A). Schedule 2.02(A) is hereby amended by deleting the
figure "21,290,000" contained therein and substituting therefor the figure
"24,304,763", and by deleting the figure $9,600,000 and substituting therefor
the figure "8,300,000".
28. Exhibit A. The form of Operating Agreement attached to the Agreement as
Exhibit A is hereby amended by (a) deleting Alandco as a party thereto and (b)
amending Section 6.M by (i) inserting at the end of the first sentence thereof
the following:
", except that Operators shall pay all "back-office" expenses of the
Facilities for the period from and after the Initial Closing Date to
and until the earlier of (x) the second anniversary thereof and (y)
the termination of this Agreement, so long as the aggregate amount of
such expenses shall not have exceeded $1,386,763. To the extent that
the aggregate amount of such expenses upon the earlier of such second
anniversary and the date of such termination is less than $1,386,763,
the Operators shall pay the difference between $1,386,763 and such
aggregate amount to the Owners.";
(ii) inserting at the end of the third sentence thereof the following:
", and any taxes (and reasonable legal and accounting fees related
thereto) imposed on the Operators, or for which the Operators are held
liable, to the extent relating to the obligations of the Operators
under this Section 6.M to pay "back-office" expenses (such as taxes
that become payable by the Operators as a result of the disallowance
of a current tax deduction or similar tax benefit for back-office
expenses), net of any tax deduction or similar benefit to which the
Operators become entitled as a result of the facts that gave rise to
the increased tax liability."; and
-14-
<PAGE>
(iii) inserting at the end thereof the following:
"For the purposes of this Paragraph 6.M, "back-office" expenses shall
mean the salaries of the personnel employed by the Operators to
provide controller, payroll, accounts payable, accounts receivable,
secretarial, purchasing and maintenance services; employee benefits
expenses; telephone expenses; and expenses for supplies, postage and
computer maintenance incurred by the Operators in operating the
Facilities, and shall not include capital expenditures."
29. Disclosure Schedule. Section 3.13(a) of the Disclosure is hereby
amended by deleting the reference to the property located at 1515 Veterans
Memorial Highway from the section set forth across from South Shore Associates,
LLC.
30. References. (a) All references to Sections in the Agreement renumbered
hereby shall be deemed to be references to such Sections as renumbered.
(b) All references to "this Agreement" and terms of like import in the
Agreement shall be deemed to the references to the Agreement as amended hereby.
31. Construction. The parties hereto acknowledge and agree that unless
specifically stated otherwise in this Agreement as amended, (a) all obligations
of the parties relating to any Company other than Alandco referring to "Closing"
or the "Closing Date" therein shall mean and be a reference to the "Initial
Closing" and the "Initial Closing Date", respectively, and (b) all obligations
of the parties relating to Alandco referring to "Closing" or the "Closing Date"
therein shall mean and be a reference to the "Alandco Closing" and the "Alandco
Closing Date", respectively.
32. No Other Amendments. Except as expressly amended hereby, the provisions
of the Agreement are and shall remain in full force and effect.
33. Counterparts. This First Amendment may be executed by the parties
hereto in any number of separate counterparts, each of which shall be deemed to
be an original and all of which taken together shall be deemed to constitute one
and the same instrument.
34. Headings. The headings of this First Amendment are for reference only
and shall not limit or otherwise affect the meaning hereof.
35. Governing Law. The Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
[remainder of page intentionally left blank]
-15-
<PAGE>
EXECUTION COPY
IN WITNESS WHEREOF, this First Amendment to Purchase Agreement has been
executed and delivered as of the date first written above by each Seller and,
with respect to the Purchaser and the Guarantor, by its respective officers
thereunto duly authorized.
/s/ Robert Kaplan
-------------------------------------
ROBERT KAPLAN
/s/ Deborah Kaplan-Brooks
-------------------------------------
DEBORAH KAPLAN-BROOKS
/s/ Barton Kaplan
-------------------------------------
BARTON KAPLAN
/s/ Edward Kaplan
-------------------------------------
EDWARD KAPLAN
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
---------------------------------
Name: David B. Currie
Title: VP
CAREMATRIX CORPORATION
By: /s/ David B. Currie
----------------------------------
Name: David B. Currie
Title: VP
