EXHIBIT 10.56
AMENDED AND RESTATED
AGREEMENT AND PLAN OF SHARE EXCHANGE
AND AGREEMENTS TO ASSIGN PARTNERSHIP INTERESTS
BY AND AMONG
THE HILLHAVEN CORPORATION
NATIONWIDE CARE, INC.
PHILLIPPE ENTERPRISES, INC.
MEADOWVALE SKILLED CARE CENTER, INC.
AND
SPECIFIED PARTNERS OF
CAMELOT CARE CENTERS
EVERGREEN XXXXX, LTD.
AND
SHANGRI-LA PARTNERSHIP
DATED AS OF
FEBRUARY 27, 1995
==============================================================================
TABLE OF CONTENTS
PAGE
----
Preliminary Statement................................................................... 1
Terms and Conditions.................................................................... 2
ARTICLE I The Share Exchanges................................................... 2
SECTION 1.1. Share Exchanges....................................................... 2
SECTION 1.2. Effective Time of Share Exchanges..................................... 2
SECTION 1.3. Other Actions......................................................... 2
ARTICLE II Corporate Governance.................................................. 3
SECTION 2.1. [Intentionally Omitted]............................................... 3
SECTION 2.2. Directors and Officers................................................ 3
ARTICLE III Exchange of Shares; Assignment of Partnership
Interests; Prepayment of Subordinated Notes and
Redemption of Preferred Stock......................................... 3
SECTION 3.1. Effect of Share Exchanges............................................. 3
SECTION 3.2. Consideration for Share Exchanges..................................... 3
SECTION 3.3. Escrow................................................................ 3
SECTION 3.4. Surrender and Payment for the Target Common Shares.................... 4
SECTION 3.5. Redemption of Nationwide Subordinated Notes and Nationwide Preferred
Stock................................................................. 5
ARTICLE IV Representations and Warranties of Corporate Targets and Partners...... 5
SECTION 4.1. Organization; Power................................................... 5
SECTION 4.2. Capital Stock......................................................... 5
SECTION 4.3. Authority; No Violation............................................... 6
SECTION 4.4. Consents and Approvals................................................ 6
SECTION 4.5. Transactions with Certain Persons..................................... 6
SECTION 4.6. Books and Records..................................................... 7
SECTION 4.7. Financial Statements.................................................. 7
SECTION 4.8. Absence of Undisclosed Liabilities.................................... 7
SECTION 4.9. Actions Pending....................................................... 7
SECTION 4.10. Outstanding Debt and Related Matters.................................. 7
SECTION 4.11. Tax Matters........................................................... 7
SECTION 4.12. Absence of Changes or Events.......................................... 8
SECTION 4.13. Compliance with Laws; No Default...................................... 9
SECTION 4.14. Property.............................................................. 9
SECTION 4.15. Contracts............................................................. 10
SECTION 4.16. Licenses and Permits.................................................. 11
SECTION 4.17. Proprietary Information............................................... 11
SECTION 4.18. Title to Assets and Related Matters................................... 11
SECTION 4.19. Environmental Matters................................................. 11
SECTION 4.20. Labor Relations; Employees............................................ 12
SECTION 4.21. Employee Benefit Plans................................................ 13
SECTION 4.22. Insurance............................................................. 13
SECTION 4.23. Life Care Contracts................................................... 13
SECTION 4.24. Survey Reports........................................................ 13
-i-
PAGE
----
SECTION 4.25. Payment Programs...................................................... 13
SECTION 4.26. Gratuitous Payments................................................... 14
SECTION 4.27. Brokers' or Finders' Fees............................................. 14
SECTION 4.28. Disclosure............................................................ 14
SECTION 4.29. Tax Representations................................................... 15
SECTION 4.30. Representations and Warranties as of Date Hereof;
No Other Representations and Warranties............................... 15
ARTICLE V Representations and Warranties of Acquiror............................ 15
SECTION 5.1. Organization; Power................................................... 15
SECTION 5.2. Capital Stock......................................................... 15
SECTION 5.3. Authority; No Violation; Etc.......................................... 15
SECTION 5.4. Consents and Approvals................................................ 16
SECTION 5.5. Reports............................................................... 16
SECTION 5.6. Due Authorization of Shares........................................... 16
SECTION 5.7. Compliance with Laws; No Default or Litigation........................ 16
SECTION 5.8. Tax Representations................................................... 17
SECTION 5.9. Brokers' or Finders' Fees............................................. 17
SECTION 5.10. Representations and Warranties as of Date Hereof...................... 17
ARTICLE VI Certain Pre-Closing Covenants of the Targets.......................... 17
SECTION 6.1. Maintenance of Corporate Status....................................... 17
SECTION 6.2. No Change in Capitalization........................................... 17
SECTION 6.3. Shareholders Meetings................................................. 17
SECTION 6.4. Operation of the Business............................................. 18
SECTION 6.5. Other Offers.......................................................... 18
SECTION 6.6. Compliance with the Securities Act; Affiliates........................ 18
SECTION 6.7. Taxes................................................................. 19
SECTION 6.8. Access; Review........................................................ 19
SECTION 6.9. Insurance............................................................. 19
SECTION 6.10. Monthly Financial Statements.......................................... 19
SECTION 6.11. Approvals, Notices and Consents....................................... 19
SECTION 6.12. The Targets' Actions; Supplements to Representations and Warranties... 19
SECTION 6.13. Notice of Material Adverse Change..................................... 20
SECTION 6.14. Pooling............................................................... 20
SECTION 6.15. Tax Statements........................................................ 20
SECTION 6.16. Cooperation........................................................... 20
SECTION 6.17. Nationwide to Use Its Best Efforts to Terminate Option................ 20
ARTICLE VII Certain Pre-Closing Covenants of Acquiror............................. 20
SECTION 7.1. Required Consents and Approvals....................................... 20
SECTION 7.2. Pre-transaction Notification.......................................... 20
SECTION 7.3. Registration Statement; NYSE Listing.................................. 20
SECTION 7.4. Notice of Material Adverse Change..................................... 20
SECTION 7.5. Pooling Actions....................................................... 20
SECTION 7.6. Pooling Letter........................................................ 21
-ii-
PAGE
----
SECTION 7.7. Tax Statements........................................................ 21
SECTION 7.8. Environmental Surveys................................................. 21
SECTION 7.9. Cooperation........................................................... 21
ARTICLE VIII Conditions Precedent to the Performance of Acquiror................... 21
SECTION 8.1. Accuracy of Representations and Warranties of the Targets............. 21
SECTION 8.2. Compliance............................................................ 21
SECTION 8.3. Approval.............................................................. 21
SECTION 8.4. HSR Act Approval...................................................... 21
SECTION 8.5. Authorizations........................................................ 21
SECTION 8.6. Litigation............................................................ 22
SECTION 8.7. No Material Adverse Change............................................ 22
SECTION 8.8. Closing Deliveries.................................................... 22
SECTION 8.9. Dissenters' Rights.................................................... 22
SECTION 8.10. Pooling Letter........................................................ 22
SECTION 8.11. Exercise of Warrants.................................................. 22
SECTION 8.12. Tax Opinions.......................................................... 22
SECTION 8.13. Lease Extensions...................................................... 22
SECTION 8.14. Option Termination.................................................... 24
ARTICLE IX Conditions Precedent to Performance of the Corporate Targets and
Partners.............................................................. 22
SECTION 9.1. Accuracy of Representations and Warranties of Acquiror................ 22
SECTION 9.2. Compliance............................................................ 22
SECTION 9.3. Corporate Approval.................................................... 22
SECTION 9.4. Authorizations........................................................ 22
SECTION 9.5. Registration Statement................................................ 23
SECTION 9.6. Litigation............................................................ 23
SECTION 9.7. No Material Adverse Change............................................ 23
SECTION 9.8. HSR Act Waiting Periods............................................... 23
SECTION 9.9. Closing Deliveries.................................................... 23
SECTION 9.10. Tax Opinions.......................................................... 23
SECTION 9.11. Release of Guarantees................................................. 23
ARTICLE X Termination........................................................... 23
SECTION 10.1. Termination by Mutual Agreement....................................... 23
SECTION 10.2. Termination by Acquiror............................................... 23
SECTION 10.3. Termination by the Corporate Targets and Partners..................... 24
ARTICLE XI Additional Agreements................................................. 24
SECTION 11.1. Confidentiality....................................................... 24
SECTION 11.2. Employee Benefit Matters.............................................. 24
SECTION 11.3. Agreements Respecting Meadowvale...................................... 24
SECTION 11.4. Preservation of Tax-Free Reorganization Treatment..................... 24
SECTION 11.5. Publication of Financial Results...................................... 25
SECTION 11.6. The Shangri-La Partners............................................... 25
-iii-
PAGE
----
ARTICLE XII The Closing........................................................... 25
SECTION 12.1. Time and Place........................................................ 25
SECTION 12.2. Deliveries to Acquiror at the Closing................................. 25
SECTION 12.3. Deliveries to the Targets at the Closing.............................. 26
ARTICLE XIII Indemnification....................................................... 26
SECTION 13.1. Indemnification of Acquiror........................................... 26
SECTION 13.2. Threshold and Maximum Amounts......................................... 26
SECTION 13.3. Survival of Indemnification Obligations............................... 27
ARTICLE XIV Supplemental Indemnification.......................................... 27
SECTION 14.1. Supplemental Indemnification of Acquiror.............................. 27
SECTION 14.2. Maximum Amounts....................................................... 27
SECTION 14.3. Survival of Indemnification Obligations............................... 28
ARTICLE XV Miscellaneous Provisions.............................................. 28
SECTION 15.1. Survival of Representations and Warranties............................ 28
SECTION 15.2. Definition of Knowledge............................................... 28
SECTION 15.3. Counterparts.......................................................... 28
SECTION 15.4. Entire Agreement...................................................... 28
SECTION 15.5. Exhibits and Schedules................................................ 28
SECTION 15.6. Parties in Interest................................................... 28
SECTION 15.7. Expenses.............................................................. 29
SECTION 15.8. Gender................................................................ 29
SECTION 15.9. Governing Law......................................................... 29
SECTION 15.10. Headings.............................................................. 29
SECTION 15.11. Modification and Waiver............................................... 29
SECTION 15.12. Notices............................................................... 29
SECTION 15.13. Press Releases........................................................ 30
SECTION 15.14. Rights of Parties..................................................... 30
SECTION 15.15. Successors............................................................ 30
SECTION 15.16. Intent; Construction.................................................. 30
SECTION 15.17. Release............................................................... 30
-iv-
AMENDED AND RESTATED
AGREEMENT AND PLAN OF SHARE EXCHANGE AND
AGREEMENTS TO ASSIGN PARTNERSHIP INTERESTS
This Amended and Restated Agreement and Plan of Share Exchange and
Agreements to Assign Partnership Interests (the "Agreement") dated as of the
27th day of February, 1995, is by and among The Hillhaven Corporation, a Nevada
Corporation ("Acquiror"), Nationwide Care, Inc., an Indiana corporation
("Nationwide"), Phillippe Enterprises, Inc., an Indiana corporation ("PEI"),
Meadowvale Skilled Care Center, Inc., an Indiana corporation ("Meadowvale")
(Nationwide, PEI and Meadowvale are collectively referred to herein as the
"Corporate Targets"), the partners of Camelot Care Centers, an Indiana general
partnership ("Camelot"), (subject to Section 11.6 hereof) the partners of
Shangri-La Partnership, an Indiana general partnership ("Shangri-La") and the
limited partners of Evergreen Xxxxx, Ltd., a Florida limited partnership
("Evergreen") (Camelot, Shangri-La and Evergreen are collectively referred to
herein as the "Partnership Targets"; the partners of Camelot and Shangri-La and
the limited partners of Evergreen are collectively referred to herein as the
"Partners"; the interests in the Partnerships held by the Partners are
collectively referred to herein as the "Partnership Interests"). The Corporate
Targets and the Partnership Targets are collectively referred to herein as the
"Targets."
PRELIMINARY STATEMENT
Acquiror and its subsidiaries operate nursing centers, pharmacies and
retirement housing communities. Nationwide and its subsidiaries operate
long-term health care centers located in Indiana, Ohio and Florida. Xx. Xxxxxx
X. Xxxxxxxxx, Xx. and Xxxxxx X. Xxxxxxxxx, Xx. (the "Phillippes") are the
majority owners of Nationwide. Shangri-La, which is owned by the Phillippes and
two other parties, owns an 81-bed long term care health care facility. PEI is
wholly-owned by the Phillippes and owns a 90 bed assisted living center in
Florida managed by Nationwide. Meadowvale is owned by certain relatives of the
Phillippes. Meadowvale owns a 120 bed long-term care center in Indiana leased by
Nationwide. Each of Camelot and Evergreen operates long term care facilities.
Nationwide owns in excess of 95% of the Partnership Interests of Camelot and
Evergreen.
The capital structure of Acquiror consists of 60 million authorized shares
of Common Stock, par value $0.75 per share, of which approximately 32,824,863
are outstanding (the "Acquiror Common Shares"); 25 million authorized shares of
preferred stock, par value $0.15 per share, of which the following series have
been designated: 3 million authorized shares of Series A Preferred Stock, of
which no shares are outstanding; 950 authorized shares of Series B Convertible
Preferred Stock, of which 618 shares have been designated as Subseries 1, of
which no shares are outstanding; 35,000 authorized shares of Series C Preferred
Stock, all of which are outstanding; and 300,000 authorized shares of Series D
Preferred Stock, of which approximately 63,403 shares are outstanding. The
capital structure of Nationwide consists of 48,000,000 authorized shares of
Common Stock, without par value, of which 7,431,458 shares are issued and
outstanding (the "Nationwide Voting Common"); 2,000,000 authorized shares of
Nonvoting Common Stock, without par value, of which 76,592 shares are issued and
outstanding (the "Nationwide Nonvoting Common")(the Nationwide Voting Common and
the Nationwide Nonvoting Common are collectively referred to herein as the
"Nationwide Common Shares"); and 2,000,000 authorized shares of Preferred Stock,
without par value, of which 300,000 shares of Redeemable Preferred Stock are
issued and outstanding (the "Nationwide Preferred Stock"). Nationwide also has
outstanding warrants to purchase 987,188 shares of Nationwide Nonvoting Common
(the "Nationwide Warrants"), which will be exercised prior to the Closing (as
defined in Section 12.1). The capital structure of PEI consists of 10,000
authorized shares of Common Stock, without par value, of which 2,000 are issued
and outstanding (the "PEI Common Shares"). The capital structure of Meadowvale
consists of 3,000 authorized shares of Common Stock, without par value, of which
3,000 are issued and outstanding (the "Meadowvale Common Shares"). The
Nationwide Common Shares, PEI Common Shares and Meadowvale Common Shares are
collectively referred to herein as the "Target Common Shares." Nationwide owns
substantially all of each of the Partnerships, except that Shangri-La is
controlled by the Phillippes. The ownership of the Partnerships is as set forth
in Section 1 of the statement of disclosure delivered by the
Corporate Targets and the Partners to Acquiror in connection with the execution
of this Agreement (the "Disclosure Statement").
The parties to this Agreement previously had executed an Agreement and Plan
of Merger and Agreements to Assign Partnership Interests, dated as of February
27, 1995 (the "Original Agreement"). Subsequent to execution of the Original
Agreement, the parties determined to restructure the acquisitions of the
Corporate Targets in the form of statutory share exchanges, whereby all of the
outstanding common stock of each of the Corporate Targets would be exchanged for
Acquiror Common Shares (the "Share Exchanges"), so that the transactions
contemplated thereby would be treated as a "reorganization" within the meaning
of Sections 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"). The parties to the Original Agreement have therefore executed this
Agreement to amend and restate the Original Agreement. The Board of Directors of
Acquiror deems the Share Exchanges pursuant to the terms of this Agreement
desirable and in the best interests of Acquiror. The Board of Directors of each
of the Corporate Targets deems each respective Share Exchange desirable and in
the best interests of the respective Corporate Target. The Board of Directors of
Acquiror has, by resolutions duly adopted, approved this Agreement. The Board of
Directors of each of the Corporate Targets has, by resolutions duly adopted,
approved this Agreement. The question of approval of each of the Share Exchanges
will be submitted to the shareholders of each of the respective Corporate
Targets. In connection with this Agreement, the Phillippes have agreed to
approve the Share Exchanges. Each of the Partners deems the assignment of his,
her or its Partnership Interests to be desirable and in his, her or its best
interest and, where appropriate, has approved such assignment.
It is intended that the Share Exchanges shall qualify for treatment as
"poolings of interests" transactions.
TERMS AND CONDITIONS
In consideration of the mutual covenants, agreements, representations and
warranties contained in this Agreement, and intending to be legally bound
thereby, the parties agree to amend and restate the Original Agreement in its
entirety as follows.
ARTICLE I
THE SHARE EXCHANGES
SECTION 1.1. Share Exchanges. Upon the terms and subject to the
satisfaction of the conditions precedent contained in this Agreement, each of
the shareholders of the Corporate Targets shall exchange their respective Target
Common Shares for Acquiror Common Shares. The Share Exchanges shall be effected
pursuant to the provisions of and with the effect provided in the Indiana
Business Corporation Law (the "BCL") and the Nevada General Corporation Law (the
"NCL").
SECTION 1.2. Effective Time of Share Exchanges. If (a) all of the
conditions precedent to the Share Exchanges as set forth in Article VIII and
Article IX of this Agreement are satisfied or waived, and (b) this Agreement is
not terminated prior to the Closing (as permitted by the provisions of this
Agreement, then as soon as reasonably practicable following the Closing,
Acquiror and the Corporate Targets shall cause Articles of Share Exchange
conforming to the requirements of the BCL and the NCL (the "Articles of Share
Exchange") to be filed with the Secretary of State of the State of Indiana (the
"Indiana Secretary of State") and the Secretary of State of the State of Nevada
(the "Nevada Secretary of State") with respect to each of the Share Exchanges,
in the manner provided under the BCL and the NCL. The Share Exchanges shall
become effective as of 12:01 a.m., Eastern Standard Time, on the date following
the date of such filing of the Articles of Share Exchange (the "Effective
Time").
SECTION 1.3. Other Actions. If after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
officers and directors of Acquiror shall have the authority to take that action.
-2-
ARTICLE II
CORPORATE GOVERNANCE
SECTION 2.1. [Intentionally Omitted].
SECTION 2.2. Directors and Officers. The persons set forth in Schedule 2.2
shall become the directors and officers, respectively, of each of the Corporate
Targets at the Effective Time, to serve until their successors shall have been
elected or appointed and qualified in the manner provided in their respective
Articles of Incorporation and Bylaws, or as otherwise provided by law.
ARTICLE III
EXCHANGE OF SHARES; ASSIGNMENT OF PARTNERSHIP INTERESTS;
PREPAYMENT OF SUBORDINATED NOTES AND REDEMPTION OF PREFERRED STOCK
SECTION 3.1. Effect of Share Exchanges. At the Effective Time, each of the
Target Common Shares will be exchanged for Acquiror Common Shares as provided in
this Agreement, and the former holders of Target Common Shares will be entitled
only to the exchange rights provided in this Agreement.
SECTION 3.2. Consideration for Share Exchanges.
(a) As of the Effective Time, the Target Common Shares issued and
outstanding immediately prior to the Effective Time shall be exchanged for the
number of Acquiror Common Shares as set forth in Schedule 3.2 (subject to
adjustment as described in Section 3.2(c), below) to this Agreement. At the
Closing, the Partners of the Partnerships (except Nationwide) shall assign to
Nationwide, free and clear of all liens, security interests and encumbrances,
their Partnership Interests and shall receive in exchange the number of Acquiror
Common Shares as is set forth in Schedule 3.2 (subject to adjustment as
described in Section 3.2(c), below). The total consideration to be received by
holders of the Target Common Shares and by the Partners of the Partnerships in
connection with the transactions contemplated herein is referred to herein as
the "Exchange Consideration."
(b) The Exchange Consideration shall consist of five million (5,000,000)
Acquiror Common Shares, provided that the average closing price of one Acquiror
Common Share as reported on the New York Stock Exchange ("NYSE") for the ten
(10) trading days immediately preceding the Closing Date (the "Trading Price")
is greater than or equal to Twenty-Four Dollars ($24.00). If the Trading Price
is less than Twenty-Four Dollars ($24.00), the Exchange Consideration shall
consist of the number (the "Consideration Number") of Acquiror Common Shares
equal to the quotient of (i) One Hundred Twenty Million Dollars ($120,000,000),
divided by the Trading Price; provided, however, that the Consideration Number
shall not be greater than five and one-half million (5,500,000) Acquiror Common
Shares.
(c) The allocation of Acquiror Common Shares among the Corporate Targets
and the Partners set forth in Schedule 3.2 shall be determined assuming that the
Exchange Consideration consists of five million (5,000,000) Acquiror Common
Shares. In the event of an adjustment in the Exchange Consideration as provided
in Section 3.2(b), above, the number of Acquiror Common Shares to be received in
exchange for each Target Common Share and each Partnership Interest,
respectively, shall be multiplied by a fraction, the numerator of which is the
number of Acquiror Common Shares which comprise the Exchange Consideration as
adjusted pursuant to Section 3.2(b), above, and the denominator of which is five
million (5,000,000).
SECTION 3.3. Escrow. As security for, and as the sole source for
satisfaction of, the indemnification obligations provided for in Article XIII
(except as provided in the proviso to Section 13.2(b) hereof), ten percent (10%)
of the number of Acquiror Common Shares received by the shareholders of the
Corporate Targets and the Partners that comprise the Exchange Consideration
shall be transferred by the shareholders of the Corporate Targets and the
Partners to and held by Bank One, Indianapolis, N.A., as escrow agent, in escrow
for the period and in accordance with the other terms, conditions and procedures
set forth in the Escrow Agreement attached hereto as Exhibit 3.3(a) (the
"Escrow"). In addition, as security for the indemnification obligations provided
for in Article XIV, five percent (5%) of the number of Acquiror Common
-3-
Shares received by the shareholders of the Corporate Targets and the Partners
that comprise the Exchange Consideration shall be transferred by the
shareholders of Nationwide to and held by Bank One, Indianapolis, N.A., as
escrow agent, in escrow for the period and in accordance with the other terms,
conditions and procedures set forth in the Supplemental Escrow Agreement
attached hereto as Exhibit 3.3(b) (the "Supplemental Escrow"); provided that the
Acquiror Common Shares to be delivered to the Supplemental Escrow shall be
deducted pro rata solely from the Acquiror Common Shares to be delivered to the
shareholders of Nationwide.
SECTION 3.4. Surrender and Payment for the Target Common Shares.
(a) At the Closing, each holder of Target Common Shares shall deliver to
Acquiror each certificate (a "Certificate") for such shares held of record by
such holder. Risk of loss and title to the Certificates shall pass upon delivery
of the certificates to Acquiror. At the Closing, each Partner shall deliver to
Acquiror such documents and instruments agreed to by Acquiror and the Partners.
Promptly following the Effective Time, Acquiror shall deliver to (i) each holder
so delivering his, her or its Certificate(s) or assigning his, her or its
Partnership Interest in exchange therefor the Acquiror Common Shares such holder
would be entitled to receive under Section 3.2, less such Acquiror Common Shares
to be escrowed pursuant to Section 3.3 and (ii) the Escrow and the Supplemental
Escrow, the balance of the Acquiror Common Shares otherwise deliverable pursuant
to Sections 3.2 and 3.3.
(b) No certificates or scrip representing fractional Acquiror Common Shares
shall be issued in the Share Exchanges or in connection with the assignment of
the Partnership Interests and no holder of any such fractional share interest
shall be entitled to vote, to receive any dividends or other distributions paid
or declared on Acquiror Common Shares, or to exercise any other rights as a
shareholder of Acquiror with respect to such fractional share interest.
(c) Each holder of Target Common Shares as of the Effective Time shall be
entitled to receive the applicable Exchange Consideration upon surrender to the
Acquiror of the Certificates representing the Target Common Shares owned by the
shareholder. Each Partner shall be entitled to receive the consideration
specified in Section 3.2 upon execution and delivery of such documents and
instruments to be agreed to by Acquiror and the Partners.
(d) In the event that any Certificate representing Target Common Shares is
lost, stolen or destroyed, Acquiror may require as a condition to the payment of
the Exchange Consideration with respect to such Target Common Shares pursuant to
this Agreement that the holder of such Target Common Shares execute such
affidavits and indemnities as Acquiror shall reasonably require.
(e) In the event a dividend or other distribution is declared by Acquiror
on the Acquiror Common Shares the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all Acquiror Common Shares issuable pursuant to this Agreement; provided that
no dividend or other distribution declared or made on the Acquiror Common Shares
shall be paid to the holder of any unsurrendered Certificate with respect to the
Acquiror Common Shares (including those Acquiror Common Shares deliverable into
the Escrow or the Supplemental Escrow) represented thereby until the holder of
such Certificate shall duly surrender such Certificate in accordance with this
Section 3.4; and provided further that no holder of any unsurrendered
Certificate shall have any rights (including voting rights, if applicable) with
respect to Acquiror Common Shares (including those Acquiror Common Shares
deliverable into the Escrow or the Supplemental Escrow) represented thereby
until the holder of such Certificate shall duly surrender such Certificate in
accordance with this Section 3.4.
(f) If, after the Effective Time, Certificates are presented to Acquiror,
they shall be exchanged for the Exchange Consideration deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this Section 3.4.
(g) Following the Effective Time, if Certificates previously representing
Target Common Shares are not delivered to Acquiror or the payment of Exchange
Consideration therefor is not claimed prior to the date on which such payments
would otherwise escheat or become the property of any governmental unit or
agency, the unclaimed items shall, to the extent permitted by abandoned property
and any other applicable law, become
-4-
the property of Acquiror (and to the extent not in its possession shall be paid
over to it), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, neither Acquiror nor any
other person shall be liable to any former holder of Target Common Shares for
any amount delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
SECTION 3.5. Redemption of Nationwide Subordinated Notes and Nationwide
Preferred Stock. At the Closing, the Subordinated Notes of Nationwide, as set
forth on Schedule 3.5 (the "Nationwide Subordinated Notes") shall be prepaid by
Acquiror, in accordance with the terms thereof; provided, however, that no
"Additional Premium" (as that term is defined in that certain Subordinated Note
Purchase Agreement dated as of July 27, 1993 between Nationwide and Continental
Bank, N.A.) shall be incurred in connection with the prepayment of the
Nationwide Subordinated Notes. At the Closing, the Nationwide Preferred Stock
shall be redeemed by Nationwide, in accordance with the terms thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CORPORATE TARGETS AND PARTNERS
For purposes of this Article IV, each of the representations and warranties
of the Corporate Targets shall be deemed to have been made with respect to the
Corporate Targets and their respective subsidiaries. As a material inducement to
Acquiror to enter into this Agreement and to consummate the transactions
contemplated hereby, the Corporate Targets and the Partners jointly and
severally represent and warrant to Acquiror that:
SECTION 4.1. Organization; Power. Each of the Corporate Targets is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. Each of the Corporate Targets is qualified as
a foreign corporation to transact business and is in good standing in each
jurisdiction, if any, in which the conduct of its business or the ownership or
leasing of its properties requires it to be so qualified. Each business entity
in which any of the Targets owns an equity interest, together with such entity's
jurisdiction of organization and such Target's percentage ownership interest
therein and the states in which the Targets and each such entity are qualified
as a foreign corporation or otherwise are listed in Section 4.1 of the
Disclosure Statement. Each of the Corporate Targets has all requisite corporate
power and authority to own, lease and operate its business as it is now being
conducted, and to enter into, execute and deliver this Agreement, to consummate
the transactions contemplated hereby, and to comply with and fulfill the terms
and conditions hereof. Each of the Corporate Targets has delivered to Acquiror
(a) true and complete copies of its Articles of Incorporation, as may be amended
or restated, certified by the Indiana Secretary of State, (b) Certificates of
Existence issued by the Indiana Secretary of State and by any other state in
which it is qualified to do business and (c) a copy of its Bylaws, as currently
in effect, certified as true and complete by the respective Corporate Target's
Secretary. Each of the Partnerships has been duly formed under the laws of its
jurisdiction of formation. Each of the Partnerships is duly qualified to do
business in each jurisdiction in which the conduct of its business or the
ownership or leasing of its properties requires it to be so qualified. Each of
the Partners has all requisite power and authority to enter into, execute and
deliver this Agreement, to consummate the transactions contemplated hereby, and
to comply with and fulfill the terms and conditions hereof. The Partners have
delivered to Acquiror true and complete copies of the partnership agreements of
each of the Partnerships.
SECTION 4.2. Capital Stock. The authorized capital stock of each of the
Corporate Targets is as set forth in the Preliminary Statement of this
Agreement. All issued and outstanding Common Shares of each Corporate Target are
validly issued and outstanding, fully paid and nonassessable. Except as set
forth in Section 4.2 of the Disclosure Statement, there are no outstanding
warrants, options, agreements, convertible securities or other commitments
pursuant to which any of the Corporate Targets are or may become obligated to
issue any Target Common Shares or other securities of any of the Corporate
Targets. Except as set forth in Section 4.2 of the Disclosure Statement, there
are not outstanding any agreements or commitments pursuant to which any of the
Corporate Targets are or may become obligated to purchase or redeem any of the
Target Common Shares or other securities. The ownership of the Partnerships is
as set forth in Section 1 of the Disclosure Statement.
-5-
SECTION 4.3. Authority; No Violation.
(a) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of each of the Corporate Targets and the
Partners. This Agreement is a valid and binding obligation of each of the
Corporate Targets and the Partners, enforceable against each of them in
accordance with its terms and conditions, except as the enforcement hereof may
be limited by bankruptcy, insolvency, moratorium or other laws relating to or
limiting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
(b) Except as set forth in Section 4.3 of the Disclosure Statement, neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor compliance by each of the Corporate
Targets and the Partners with any of the provisions hereof, will:
(i) conflict with, violate, result in a breach of, constitute a
default (or an event that, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under any provision of the Articles of
Incorporation, Bylaws or partnership agreements of any of the Targets, or
any of the terms, conditions or provisions of any note, lien, bond,
mortgage, indenture, license, lease, contract, commitment, agreement,
understanding, arrangement, restriction or other instrument or obligation
to which any of the Corporate Targets or Partners is a party or by which
any of the Corporate Targets or Partners may be bound;
(ii) violate any law, rule or regulation of any government or
governmental agency or body, or any judgment, order, writ, injunction or
decree of any court, administrative agency or governmental agency or body
applicable to any of the Targets; or
(iii) constitute an event that, with or without notice, lapse of time
or action by a third party, could result in the creation of any lien,
charge or encumbrance upon any of the assets of any of the Targets or cause
the maturity of any liability, obligation or debt of any of the Targets to
be accelerated or increased.
SECTION 4.4. Consents and Approvals. Except in connection with the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended ("HSR Act"),
the Securities Act of 1933, as amended ("Securities Act"), the Securities
Exchange Act of 1934, as amended ("Exchange Act"), the approval of the
shareholders of each of the Corporate Targets under the BCL and as set forth in
Section 4.4 of the Disclosure Statement, the execution, delivery and performance
of this Agreement by each of the Corporate Targets and the Partners, and the
consummation of the transactions contemplated hereby, will not require any
notice to, action of, filing with, or consent, authorization, order or approval
from any court, administrative agency or other governmental authority or agency,
or any individual, corporation, partnership, joint venture, association, firm,
organization, group or any other entity or enterprise. Any and all notices,
actions, filings, consents, authorizations, orders and approvals necessary to
consummate the transactions contemplated by this Agreement shall have been made
and obtained on or prior to and shall be in effect as of the Effective Time.
SECTION 4.5. Transactions with Certain Persons. Except as set forth in
Section 4.5 of the Disclosure Statement, during the past two years no Target
has, directly or indirectly, in the ordinary course of business or otherwise,
purchased, leased or otherwise acquired any property or obtained any services
from, or sold, leased or otherwise disposed of any property or furnished any
services (except with respect to remuneration for services rendered as a
director, officer or employee of any of the Targets in the ordinary course of
business) to, any current or former director, officer, employee or consultant of
any of the Targets, any person who is the beneficial owner (within the meaning
of Rule 13d-3 of the SEC under the Exchange Act) of 5% or more of the
outstanding Target Common Shares or any "affiliate" of any of the Targets as
defined in Rule 12b-2 under the Exchange Act (individually an "Affiliate"). None
of the Targets owes any amount to, or has any contract with or commitment to,
any Affiliate (other than compensation for current services not yet due and
payable and reimbursement of expenses arising in the ordinary course of
business), and no such Affiliate owes any amount to any of the Targets. No
properties or assets owned by any Affiliate or by any subsidiary or affiliate of
any Affiliate is used by any of the Targets in connection with their respective
businesses. No Affiliate is or during the past three years has been the direct
or indirect owner of any interest in any entity that is a
-6-
competitor or supplier or a potential competitor or supplier of any of the
Targets, nor does any Affiliate receive or has any Affiliate received income
from any source other than the Targets that relates to the business of the
Targets or should properly accrue to the Targets.
SECTION 4.6. Books and Records. The minute books of each of the Corporate
Targets as previously made available to Acquiror contain accurate records of all
meetings of and corporate actions or written consents by the respective Board of
Directors, any committee thereof, and the shareholders of each of the Corporate
Targets. There have been no material transactions involving the business of any
of the Corporate Targets that should have been set forth in the respective books
of account, minute book, stock record book or stock transfer ledger, but which
have not been accurately set forth therein.
SECTION 4.7. Financial Statements. True and complete copies of the
consolidated balance sheets of Nationwide as of September 30, 1994 and 1993, and
the related statements of income, other shareholders' equity and cash flows for
the years then ended, as audited by Ernst & Young LLP, Certified Public
Accountants, (collectively, the "Audited Financial Statements") and the
unaudited consolidated balance sheets of the Targets as of December 31, 1994 and
1993, and the related statements of income for the year and, in the case of
Nationwide, the three months then ended (the "Unaudited Financial Statements"),
are set forth in Section 4.7 of the Disclosure Statement. The Audited Financial
Statements and the Unaudited Financial Statements (collectively the "Financial
Statements") (including any related schedules and/or notes) present fairly in
all material respects, the financial position of the Targets at the dates
thereof and the results of their operations and their cash flows for the periods
then ended, in conformity with generally accepted accounting principles.
SECTION 4.8. Absence of Undisclosed Liabilities. Except as set forth or
reserved against on the face of the balance sheets of any of the Targets
included in the Financial Statements ("Target Balance Sheets") or in Section 4.8
of the Disclosure Statement, as of the date of the respective Target Balance
Sheets, none of the Targets had any debts, liabilities or obligations of any
nature whatsoever (known or unknown, matured or unmatured, absolute, accrued,
fixed, contingent or otherwise, including, without limitation, any foreign or
domestic tax liabilities or deferred tax liabilities incurred in respect of or
measured by any Target's income, and products liability or any other liability
attributable to defects in products, materials or workmanship not covered by
insurance) that are required by generally accepted accounting principles to be
so set forth or reserved against that are not set forth or reserved against on
the Target Balance Sheets.
SECTION 4.9. Actions Pending. Section 4.9 of the Disclosure Statement lists
all actions, suits and proceedings pending, or to the knowledge of each of the
Targets, threatened (whether or not purportedly brought on behalf of any of the
Targets), and all investigations, to the knowledge of each of the Targets,
pending or threatened, against each of the Targets, or any properties or rights
of the Targets, by or before any court, arbitrator or administrative or
governmental body. None of such actions, suits or proceedings, would reasonably
be expected to have a material adverse effect on such Target's condition
(financial or otherwise), properties, assets, liabilities, operations or
prospects, or which in any manner challenges or seeks to prevent, enjoin, alter
or materially delay the transactions contemplated hereby.
SECTION 4.10. Outstanding Debt and Related Matters. None of the Targets has
outstanding any debt except as set forth in Section 4.10 of the Disclosure
Statement ("Existing Debt"). Except as set forth in Section 4.10 of the
Disclosure Statement, there exists no default under the provisions of any
instrument evidencing such Existing Debt or of any agreement relating thereto.
Section 4.10 of the Disclosure Statement lists all contracts or commitments of
any of the Targets for the guaranty of any obligation of a third party (i.e., a
party not a Target) in excess of $10,000.
SECTION 4.11. Tax Matters.
(a) Each of the Targets has timely filed with the Internal Revenue Service
and other appropriate governmental authorities, or provided to its employees,
shareholders, consultants and other persons, as the case may be, all tax
returns, statements, forms or reports ("Returns") required to be filed or
provided by it on or before the Closing Date. All federal, state, county, local,
foreign and other taxes, including without limitation income (including gross,
adjusted gross and supplemental net income taxes), receipts, sales, use,
-7-
franchise, value added, excise, recording, filing, real and personal property,
employees' income, unemployment, social security taxes (including withholding
obligations for trust fund taxes), and all other taxes (together with all
interest and penalties imposed thereon) ("Taxes"), due and payable by or on
behalf of each of the Targets have been timely paid in full or timely and fully
withheld and paid, as the case may be, except for Taxes being contested in good
faith by appropriate proceedings as described in Section 4.11 of the Disclosure
Statement. None of the Targets has been delinquent in the payment of any Tax
assessment (whether proposed or final) or governmental charge or deposit of any
kind or character.
(b) All accrued but unpaid Taxes accrued for tax periods or portions
thereof ending on or prior to December 31, 1994 are duly reflected as a
liability or reserved against on the respective Target's Balance Sheet and each
Target has established and maintained adequate reserves for Taxes for all prior
tax periods.
(c) None of the Targets (i) has any Tax deficiency or claim outstanding,
proposed or assessed against it and there is no basis for any such deficiency or
claim; (ii) has any audit, action, suit, proceeding or investigation for Taxes
pending or threatened against it; and (iii) has received any notice that any
deficiency, claim, audit, action, suit, proceeding or investigation may be made
against or with respect to it. Except as described in Section 4.11 of the
Disclosure Statement, during their existence none of the Targets has received
any notice of any material deficiency which has not been satisfactorily resolved
or other adjustment from the Internal Revenue Service or any other Taxing
Authority, and, except as set forth in Section 4.11 of the Disclosure Statement,
none of the Returns has been audited by the Internal Revenue Service.
(d) Except as described in Section 4.11 of the Disclosure Statement, there
is not now in force any extension of time with respect to the date on which any
Return was or is due to be filed or provided by or on behalf of or with respect
to any of the Targets or any waiver or agreement by any of the Targets for an
extension of time for the assessment of any Tax. No election has been made to
treat any of the Targets as a "collapsible corporation" under Section 341(f) of
the Internal Revenue Code of 1986, as amended (the "Code"). None of the Targets
is subject to any penalty by reason of a violation of any order, rule or
regulation of, or a default with respect to any Return required to be filed with
any governmental authority. Except as described in Section 4.11 of the
Disclosure Statement, none of the Targets has any pending requests with any
governmental authority for rulings as to payment of any Tax.
(e) All leases have been properly reported as either "capital" leases or
"true" leases, as those terms are commonly used for federal income tax purposes.
None of the property owned or used by any of the Targets is subject to a tax
benefit transfer lease executed in accordance with Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended by the Economic Recovery Tax Act of
1981.
(f) There are no liens for Taxes upon any of the Targets' assets, except
liens for current Taxes not yet due. Except as described in Section 4.11 of the
Disclosure Statement, none of the Targets is currently under any contractual
obligation to indemnify any other person with respect to Taxes and none of the
Targets is a party to any agreement providing for payments with respect to
Taxes. None of the Targets will be required, as a result of a change in method
of accounting, to include any adjustment under Section 481(c) of the Code in any
period ending after the Closing Date. Except as set forth in Section 4.11 of the
Disclosure Statement, no agreement exists that may cause any payment by any of
the Targets to be nondeductible in full or in part under Section 280G of the
Code. Since January 1, 1990, none of the Targets has been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code
but Nationwide is a common parent of such an affiliated group.
SECTION 4.12. Absence of Changes or Events. Except as set forth in Section
4.12 of the Disclosure Statement, since the most recent date of each Target
Balance Sheet delivered to Acquiror (the "Bring-down Date") the business of each
of the Targets has been conducted only in the ordinary course and consistent
with historical practices and, since the Bring-down Date, none of the Targets
has:
(a) Declared, set aside or made any payment of dividends or other
distributions to its shareholders upon or in respect of any the Target
Common Shares or purchased, retired or redeemed any Target Common Shares or
other securities issued by it;
-8-
(b) Mortgaged, pledged or subjected to lien, mortgage, pledge, claim,
security interest, charge, encumbrance or restriction any material portion
of its tangible or intangible property, business or assets;
(c) Sold, transferred, leased to others or otherwise disposed of any
material portion of its tangible or intangible assets or properties, except
for inventory sold in the ordinary course of business;
(d) Encountered any actual or threatened labor union organizing
activity or collective bargaining agreement negotiation, had any actual or
threatened employee strikes, work stoppages, slow-downs or lock-outs, or
had any material change in its relationship with its employees, agents,
consultants, salespersons, distributors or independent contractors;
(e) Transferred or granted any concessions, leases, licenses,
agreements or other rights with respect to or under, or entered into any
settlement regarding the breach or infringement of, any United States or
foreign license, patent, copyright, trademark, service xxxx, trade name,
invention or similar rights, or modified any existing rights with respect
thereto;
(f) Made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or paid or agreed to pay,
conditionally or otherwise, any bonus, extra compensation, pension,
severance or vacation pay, to any director, officer, employee, consultant,
sales representative, distributor or independent contractor of such Targets
other than normal annual increases consistent with past practice, entered
into any employment contract with any officer or salaried employee,
instituted any employee welfare, bonus, stock option, profit-sharing,
retirement or similar plan or arrangement, or made any loan or advance to
any third party except those made pursuant to normal trade terms extended
to customers;
(g) Issued or sold any shares of its capital stock, partnership
interests, bonds, notes or other securities, or issued, granted or sold any
options, rights or warrants with respect thereto, or acquired any capital
stock or other securities of any corporation or any interest in any
business enterprise, or otherwise made any loan or advance to or investment
in any third party;
(h) Changed its accounting methods or practices, including without
limitation changes in depreciation or amortization policies or rates and in
the method of accounting for inventory;
(i) Suffered any change, event or condition that, in any case or in
the aggregate, has had or may have a material adverse effect on the
Target's condition (financial or otherwise), properties, assets,
liabilities, operations or prospects;
(j) Entered into any transaction, contract or commitment, other than
in the ordinary course of business; or
(k) Entered into any agreement or contract, made any commitment or
otherwise obligated itself to take any of the types of action described in
Subsections (a) through (j) of this Section 4.12.
SECTION 4.13. Compliance with Laws; No Default. Except as set forth in
Section 4.13 of the Disclosure Statement, none of the Targets is in default of
or has violated (nor is there any event or condition which, with notice or lapse
of time or both, would constitute a default or violation of) in any respect (i)
any contract, agreement, lease, consent order or other written commitment or
instrument to which it is a party or by which the assets or business of any of
the Targets are bound, or (ii) any law, rule, regulation, ordinance, writ,
injunction, development order, permit, resolution, approval, order, decree,
policy or guideline of any court or any foreign, federal, state, local or other
governmental department, commission, board, bureau, agency or instrumentality
(including without limitation applicable laws, rules and regulations relating to
environmental protection, antitrust, civil rights, health and occupational
health and safety).
SECTION 4.14. Property.
(a) Section 4.14 of the Disclosure Statement contains (i) the street
address and legal description of each parcel of all real property owned or
leased from third parties by any of the Targets, including all buildings,
structures and improvements located thereon ("Real Property") and (ii) a brief
description of the use to which each parcel of the Real Property is being
employed and/or the use for which it is currently intended.
-9-
(b) Each of the Targets owns or leases from third parties all tools,
furniture, machinery, computer hardware and software, supplies, vehicles,
equipment and other items of tangible personal property that are required to
conduct its business ("Personal Property").
(c) Except as set forth in Section 4.14 of the Disclosure Certificate, the
Real Property and each item of the Personal Property conforms in all material
respects to applicable federal, state, local and foreign laws, regulations and
ordinances, including without limitation, in the case of the Real Property,
those related to zoning, use or construction, and the Real Property is zoned for
the purposes for which it presently is used. The Real Property and each item of
the Personal Property is in good operating condition and repair, subject to
normal wear and tear, and is suitable for its intended use by the Target owning
or leasing such Real Property and Personal Property.
(d) With respect to each parcel of Real Property and each item of Personal
Property that is leased from third parties ("Leased Property"), the respective
Target is the owner and holder of the entire interest in the leasehold estates
purported to be granted by the leases or agreements, each of which is in full
force and effect and constitutes a legal, valid and binding obligation of the
respective parties thereto, enforceable in accordance with its terms. No consent
of any lessor of the Leased Property is required in connection with the
transactions contemplated by this Agreement, except as set forth in Schedule
4.14 of the Disclosure Certificate.
SECTION 4.15. Contracts.
(a) Section 4.15(a) of the Disclosure Statement lists all contracts,
leases, commitments, purchase orders, work orders, agreements, consent orders
and other arrangements, including all amendments thereto, to which each of the
Targets is a party or is subject or by which each of the Targets, its assets, or
its business is bound, that fall into one or more of the following categories
("Contracts"):
(i) All loans, lines of credit, security agreements, guaranties or
other payment obligations;
(ii) All employment agreements, contracts, policies and commitments
with or between any Target and any of its employees, directors or officers,
individually or as one or more groups, including without limitation those
relating to severance;
(iii) All agreements of guaranty or indemnification;
(iv) All agreements, contracts and commitments containing any covenant
limiting the right of any Target to engage in any line of business or
compete with any person;
(v) Each agreement, contract and commitment relating to capital
expenditures in excess of One Hundred Thousand Dollars ($100,000.00), or
Two Hundred and Fifty Thousand Dollars ($250,000.00) in the aggregate;
(vi) All agreements, contracts and commitments entered into that
individually involve the payment of One Hundred Thousand Dollars ($100,000)
or more over their remaining terms (including any period of extension or
renewal) and are not cancelable within sixty (60) days or less notice;
(vii) All agreements, contracts and commitments relating to the grant
or receipt of any license or royalty;
(viii) All agreements, contracts and commitments that require consent
by any other person in connection with the consummation of the transactions
contemplated by this Agreement and the Mergers either to prevent a breach
or to continue the effectiveness thereof; and
(ix) All agreements with any Affiliate of any Target.
(b) All of the Contracts are valid and binding obligations of the
respective parties thereto, enforceable in accordance with their respective
terms, are in full force and effect, and Acquiror will be entitled to the full
benefits thereof. Within 30 days of the date of this Agreement, the Targets will
deliver to Acquiror true and complete copies of all of the Contracts. With
respect to those Contracts which are substantially the same from facility to
facility of the Targets, the Targets have provided to Acquiror or its counsel an
example of a form of such Contracts, and such forms are substantially the same
from facility to facility.
-10-
SECTION 4.16. Licenses and Permits.
(a) Section 4.16 of the Disclosure Statement contains a true and complete
list of certificates of need, franchises, licenses, permits, certificates,
approvals, resolutions, development orders, consents and other authorizations
necessary to own, lease or operate each of the Target's assets or to conduct its
business in compliance with applicable law ("Permits") and, with respect to each
Permit, the name of the licensor or grantor, a description of the subject
matter, the termination date, and the terms of any renewal options. Each of the
Targets has delivered to Acquiror true and complete copies of all of its
Permits.
(b) Each of the Targets lawfully obtained and currently possesses the
respective Permits and has fulfilled and performed its obligations under each of
the Permits. No event has occurred and no condition or state of facts exists
which constitutes or, after notice or lapse of time or both, would constitute a
breach or default under any of the Permits or would allow revocation or
termination of any of the Permits, or which might adversely affect the rights of
any Target under any of the Permits. No notice of cancellation, of default, or
of any dispute concerning any of the Permits, or of any event, condition or
state of facts described in the preceding sentence, has been received by, or is
known to, any Target or their respective officers, directors or employees.
Except as set forth in Section 4.16 of the Disclosure Statement, each of the
Permits is valid, subsisting and in full force and effect, and will continue in
full force and effect after the Merger, in each case without (i) the occurrence
of any breach, default or forfeiture of rights thereunder, or (ii) the consent,
approval or act of, or the making of any filing with, any governmental body,
regulatory commission or other person.
(c) The Permits include all applicable environmental, land use and growth
management obligations required by any federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality.
SECTION 4.17. Proprietary Information. Section 4.17 of the Disclosure
Statement contains a true and complete list and brief description of all
Intellectual Property, directly or indirectly related to the products, services
or operations of each of the Targets or necessary to use the assets or conduct
the business of the Targets as presently used or conducted. Each of the Targets
owns or possesses the licenses or other rights to use their respective names and
all the Intellectual Property identified in Section 4.17 of the Disclosure
Statement. Except as set forth in Section 4.17 of the Disclosure Statement, to
its knowledge, no Target is infringing upon or otherwise acting adversely to any
Intellectual Property, the rights to which are owned by any other person. There
is no claim or action by any person pending or threatened, with respect thereto.
For the purposes of this Agreement, "Intellectual Property" means the names
"Nationwide Care" (and any and all variations thereof) and all the corporate
names, trade names, trademarks, trademark applications, service marks, service
xxxx applications, theme concepts, copyrights, copyright applications, patents,
patent applications, inventions, trade secrets, shop rights, know-how, business
plans and strategies, proprietary processes and formulae, data bases, telephone
numbers and all other proprietary technical information, whether patentable or
unpatentable, directly or indirectly related to the products, services or
operations of the business or necessary to conduct the business as it is now
being conducted.
SECTION 4.18. Title to Assets and Related Matters. Each of the Targets has
good, valid, marketable and insurable title to all of the assets owned by it
free and clear of all mortgages, liens, pledges, charges, claims, security
interests, encumbrances, easements, encroachments, limitations, restrictions,
rights of third parties or other interests of any kind or character, except as
set forth in Section 4.18 of the Disclosure Statement and except for liens for
Taxes not yet due and payable.
SECTION 4.19. Environmental Matters.
(a) Except as set forth in Section 4.19 of the Disclosure Statement, all of
the Real Property and all operations conducted thereon, including without
limitation the respective Target's use of its assets and the Real Property, are
currently in compliance with all applicable federal, state, local and foreign
environmental, land use and growth management laws, regulations, rules,
ordinances, permits, development orders, approvals, resolutions and orders,
including all consent orders.
-11-
(b) Except as set forth in Section 4.19 of the Disclosure Statement, with
respect to the Real Property, there exists no state of affairs and to each
Target's knowledge there has occurred no event that currently requires, or is
currently expected to require in the future, reporting or disclosure by the
Corporate Targets to any federal, state, local or foreign agency concerned with
environmental protection and management or land use control or growth
management.
(c) There are no pending or threatened claims by any private parties or
governmental agencies, and there are no pending or threatened judicial or
administrative actions, alleging violations of any federal, state, local or
foreign environmental, land use or growth management laws, regulations, rules,
ordinances, permits, development orders, approvals, resolutions or orders on or
connected with the Real Property, the assets or the operations conducted thereon
or at any time prior to the Closing Date.
(d) Section 4.19 of the Disclosure Statement contains a list and brief
description of all written and oral communications between each of the Targets
and any federal, state or local governmental authority with respect to any
removal, remediation or clean-up required to be undertaken, the results of any
inspection or compliance review, potential liability arising under or potential
violations of the Clean Air Act, the Clean Water Act, the Resource Conservation
and Recovery Act, the Toxic Substances Control Act and the Comprehensive
Environmental Response, Compensation and Liability Act and equivalent state and
local laws, regulations, rules, ordinances and all court and administrative
orders issued pursuant thereto, since January 1, 1991.
SECTION 4.20. Labor Relations; Employees.
(a) The Targets collectively employ approximately 4,500 employees. No
Target is a party to any collective bargaining agreement with respect to its
work force or any portion thereof. Except as set forth in Section 4.20 of the
Disclosure Statement:
(i) each Target has paid in full to all its employees all due and
owing wages, salaries, commissions, bonuses, fringe benefit payments and
all other direct and indirect compensation of any kind for all services
performed by them and each of them to the date hereof;
(ii) each Target is in compliance with (1) all federal, state, local
and foreign laws, regulations, rules, ordinances and court and
administrative orders dealing with employment and employment practices of
any kind, (2) all of the terms and conditions of employment of any kind
with respect to its business, and (3) all wages and hours requirements and
regulations;
(iii) there is no unfair labor practice, safety, health,
discrimination or wage claim, charge, complaint suit, arbitration or
proceeding pending or to each Target's knowledge threatened against or
involving such Target before the National Labor Relations Board,
Occupational Safety and Health Administration, Equal Employment Opportunity
Commission, Department of Labor or any other federal, state, local or
foreign agency;
(iv) there is no labor dispute, strike, work stoppage, interference
with production or slowdown in progress or threatened against or involving
such Target;
(v) there is no question of representation under the National Labor
Relations Act, as amended, or any similar state statute, pending with
respect to the employees of any Target;
(vi) there is no grievance pending or threatened which might have an
adverse effect on any Target or on the conduct of its business; and
(vii) there is no collective bargaining agreement currently being
negotiated or subject to negotiation or renegotiation by any Target.
SECTION 4.21. Employee Benefit Plans.
(a) Except as set forth in Section 4.21 of the Disclosure Statement, no
Target maintains any (i) employee welfare benefit plan (as defined in Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or (ii) employee pension benefit plan (as defined in Section 3.(2)
of
-12-
ERISA), (a) which was maintained or administered by the Target immediately prior
to Closing; (b) to which the Target contributed to, or was legally obligated to
contribute to immediately prior to Closing, or (c) under which the Target had
any liability immediately prior to Closing, with respect to its current or
former employees or independent contractors. Except as set forth in Section 4.21
of the Disclosure Statement, none of the Targets or any ERISA Affiliate is now
or has been in the past obligated to contribute to any multiemployer plan (as
defined in ERISA Section 3(37) or to any plan subject to Title IV of ERISA. For
purposes of this Agreement, "ERISA Affiliate" means any member (other than a
Target) of a group of business entities including a Target, which are treated as
a single employer under Section 414 of the Code.
(b) The only plans or arrangements maintained by any of the Targets for the
benefit of current or former employees (including, without limitation, the plans
referred to in paragraph (a)), are set forth in Section 4.21 of the Disclosure
Statement (collectively, the "Benefit Plans"). The Targets have delivered or
prior to the Closing shall deliver to Acquiror true and correct copies of each
of the Benefit Plans. Each of the Benefit Plans has been established and
maintained in all material respects in accordance with its terms and compliance
with all applicable laws, including, but not limited to, ERISA and the Code. As
of the Closing, all contributions required under applicable law or the terms of
any Benefit Plan or other agreement relating to a Benefit Plan to be paid by any
Target have been completely and timely made to such Benefit Plan when due, and
each Target has established adequate reserves on its books to meet liabilities
for contributions accrued but that have not been made because they are not yet
due and payable.
SECTION 4.22. Insurance.
(a) Each of the Targets is insured by financially sound and reputable
insurers with respect to its properties and the conduct of its businesses.
(b) Section 4.22 of the Disclosure Statement contains (i) a true and
complete list of all policies of liability, theft, fidelity, life, fire, product
liability, workers' compensation, health and other forms of insurance held by
the Targets and specifies the insurer, amount of coverage, type of insurance and
policy number; and (ii) for the past three (3) fiscal years, an accurate
description of any prior claims, any cancellation or significant increase in
premiums and any pending claims under those or predecessor policies.
(c) The policies listed in Section 4.22 of the Disclosure Statement are
outstanding, in full force and effect and all premiums billed with respect to
those policies have been paid. The insurance coverage provided by the policies
listed in Section 4.22 of the Disclosure Statement satisfies all contractual and
statutory requirements applicable to each Target, its assets or its business and
is in such amounts and insures against such liabilities and hazards as is
consistent with past practice and as is customarily maintained by other
companies operating in similar businesses. No Target has, during the past five
fiscal years, been denied or had revoked or rescinded by a carrier any policy of
insurance.
SECTION 4.23. Life Care Contracts. No Target is a party to any contract
pursuant to which such Target has agreed to care for any individual for such
individual's life.
SECTION 4.24. Survey Reports. A true and complete copy of the most recent
survey reports and any waivers of deficiencies, plans of correction and other
investigation reports issued with respect to any facility of any Target has been
delivered to Acquiror. Each facility is in compliance with all conditions and
standards of licensing and participation in the Medicare and Medicaid programs.
SECTION 4.25. Payment Programs. Each Target is now, and on the Closing Date
will be, certified for participation in, and party to valid provider agreements
for payment by, the federal Medicare and Medicaid programs (the "Programs");
provided, however, that Nationwide's Xxxxxx Health Care facility is not
certified for participation in the Medicare program. The Targets have filed all
cost reports in connection with their businesses and operations that are
required to be filed with any federal or state governmental or regulatory
authority (including pursuant to Titles XVIII and XIX of the Social Security
Act). A true and complete copy of all such cost reports has been provided to
Acquiror. Except as set forth in Section 4.25 of the Disclosure Statement, the
Targets have not received any notice of pending or threatened investigations by
any Program which poses a risk to the Targets' participation in the Program or
may result in any adjustments to reimbursements that have been paid, excluding
survey report deficiencies that have been corrected. All billing
-13-
practices by the Target to all third payors, including the federal Medicare
program, state Medicaid programs and private insurance companies, have been
true, fair and correct and in compliance with all applicable laws, regulations
and policies of all such third payors, and the Targets have not billed for or
received any payment or reimbursement in excess of amounts allowed by law, other
than insignificant amounts subject to adjustment pursuant to periodic audits of
cost reports submitted by the Target. Neither any Target, nor any Affiliate
thereof, nor any director, officer or employee thereof, is a party to any
contract, lease, agreement or arrangement, including any joint venture or
consulting agreement with any physician, hospital, nursing facility, home health
agency or other person who is in a position to make or influence referrals to or
otherwise generate business for any Target to provide services, lease space,
lease equipment or engage in any other venture or activity, to the extent
prohibited by law or regulations.
SECTION 4.26. Gratuitous Payments. Neither any Target, nor any director,
officer or employee, nor any agent acting on behalf of or for the benefit of any
thereof, has directly or indirectly (i) offered or paid any remuneration, in
cash or in kind, to, or made any financial arrangements with, any past or
present customers, past or present suppliers, contractors or third party payors
of any Target in order to obtain business or payments from such persons, other
than entertainment activities in the ordinary and lawful course of business;
(ii) given or agreed to give, or has knowledge that there has been made or that
there is any agreement to make, any gift or gratuitous payment of any kind,
nature or description (whether in money, property or services) to any customer
or potential customer, supplier or potential supplier, contractors, third party
payor or any other person other than in connection with promotional or
entertainment activities in the ordinary and lawful course of business; (iii)
made or agreed to make, or is aware that there has been made or that there is
any agreement to make, any contribution, payment or gift of funds or property
to, or for the private use of, any governmental official, employee or agent if
either the contribution, payment or gift or the purpose of such contribution,
payment or gift is or was illegal under the laws of the United States or under
the laws of any state thereof or any other jurisdiction (foreign or domestic)
under which such payment, contribution or gift was made; (iv) established or
maintained any unrecorded fund or asset for any purpose or made any false or
artificial entries on any of its books or records for any reason; or (v) made,
or agreed to make, or has knowledge that there has been made or that the
intention or understanding that any part of such payment would be used for any
purpose other than that described in the documents supporting such payment.
SECTION 4.27. Brokers' or Finders' Fees. No agent, broker, investment
banker or other person or firm acting on behalf of the Targets or Partners or
any of their directors, executive officers, or partners or under the authority
of any of them, is or will be entitled to any broker's or finder's fee or any
other commission or similar fee, directly or indirectly, from any of the parties
hereto in connection with any of the transactions contemplated hereby, except
for those fees or commissions set forth and described in Section 4.27 of the
Disclosure Statement which the Targets shall have paid in full prior to or at
the Closing, and evidence of payment for which shall have been delivered to
Acquiror at the Closing.
SECTION 4.28. Disclosure.
(a) No representation or warranty by any Corporate Target or Partner
contained in this Agreement and no statement made by any Corporate Target or
Partner contained in the Disclosure Statement or any certificate or other
instrument delivered or to be delivered pursuant to this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. All information in the Disclosure Statement or any
Schedule, Exhibit or any contract delivered on behalf of the Corporate Targets
and the Partners pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to have been relied upon by Acquiror and
constitute representations and warranties by the Corporate Targets and the
Partners herein.
(b) None of the information supplied or to be supplied by the Targets for
inclusion in the registration statement on Form S-4 or other appropriate
registration form to be filed with the SEC by Acquiror in connection with the
offer and issuance of the Acquiror Common Shares in or as a result of the Share
Exchanges (the "Registration Statement"), will at the time the Registration
Statement becomes effective under the Securities Act contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
-14-
SECTION 4.29. Tax Representations. The representations and warranties by
the shareholders of the Corporate Targets required under Section 6.15 shall be
true, correct and complete in all respects as of the Effective Time.
SECTION 4.30. Representations and Warranties as of Date Hereof; No Other
Representations and Warranties. The representations and warranties contained in
the foregoing Sections 4.1 through 4.29 inclusive are made as of the date
hereof, except as otherwise expressly indicated therein. None of the Corporate
Targets or Partners makes, and no party shall be entitled to rely upon, any
representation or warranty as to any fact or matter other than as expressly set
forth herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
As a material inducement to the Corporate Targets and the Partners to enter
into this Agreement and to consummate the transactions contemplated hereby,
Acquiror represents and warrants to the Corporate Targets and the Partners that:
SECTION 5.1. Organization; Power. Acquiror is a corporation duly organized
and validly existing under the laws of the State of Nevada, for which all
required annual reports have been filed with the Nevada Secretary of State and
for which no Articles of Dissolution appear as having been filed with the Nevada
Secretary of State. Acquiror has all the requisite corporate power and authority
to own, lease and operate its business as it is now being conducted and to enter
into this Agreement, to consummate the transactions contemplated hereby, and to
comply with and fulfill the terms and conditions of this Agreement.
SECTION 5.2. Capital Stock. The authorized shares of Acquiror are as set
forth in the Preliminary Statement to this Agreement. All issued and outstanding
Acquiror Common Shares are validly issued and outstanding, fully paid and
nonassessable.
SECTION 5.3. Authority; No Violation; Etc.
(a) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Acquiror. This Agreement is a
valid and binding obligation of Acquiror, enforceable against Acquiror in
accordance with its terms and conditions, except as the enforcement hereof and
thereof may be affected by bankruptcy, insolvency, moratorium or other laws
relating to or limiting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in a proceeding
at law or in equity.
(b) Except as set forth in Section 5.3 of the statement of disclosure
delivered by the Acquiror to the Corporate Targets and the Partners in
connection with the execution of this Agreement (the "Acquiror's Disclosure
Statement"), neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, nor compliance by Acquiror
with any of the provisions hereof, will:
(i) conflict with, violate, result in a breach of, constitute a
default (or an event that, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under any provision of the Articles of
Incorporation or Bylaws of Acquiror, or any of the terms, conditions or
provisions of any note, lien, bond, mortgage, indenture, license, lease,
contract, commitment, agreement, understanding, arrangement, restriction or
other instrument or obligation to which Acquiror is a party or by which
Acquiror may be bound;
(ii) violate any law, rule or regulation of any government or
governmental agency or body, or any judgment, order, writ, injunction or
decree of any court, administrative agency or governmental agency or body
applicable to Acquiror; or
(iii) constitute an event that, with or without notice, lapse of time
or action by a third party, could result in the creation of any lien,
charge or encumbrance upon any of the assets of Acquiror or cause the
maturity of any liability, obligation or debt of Acquiror to be accelerated
or increased.
-15-
SECTION 5.4. Consents and Approvals. Except in connection with the HSR Act,
the Securities Act and the Exchange Act, and as set forth in Section 5.4 of the
Acquiror's Disclosure Statement, the execution, delivery and performance of this
Agreement by Acquiror and the consummation of the transactions contemplated
hereby will not require any notice to, action of, filing with or consent,
authorization, order or approval from any court, administrative agency or other
governmental authority or agency, or any individual, corporation, partnership,
joint venture, association, firm, organization, group or any other entity or
enterprise.
SECTION 5.5. Reports. Acquiror has filed all required forms, reports and
documents with the SEC required to be filed by it pursuant to the federal
securities laws and the rules and regulations of the SEC thereunder (the
"Acquiror SEC Reports"), each of which complied, at the time such form, report
or document was filed, in all material respects with the then applicable
requirements of the Securities Act and the Exchange Act, and the rules and
regulations thereunder. None of the Acquiror SEC Reports, including without
limitation any financial statements or schedules included therein, at the time
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements of Acquiror included in the Acquiror SEC Reports
(the "Acquiror Financial Statements") were prepared from Acquiror's books and
records in accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present the financial position of Acquiror and its consolidated
subsidiaries as at the dates thereof and the results of their operations and
their cash flows for the periods then ended, subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end
adjustments and any other adjustments described therein. Since the date of the
last audited balance sheet in the Acquiror Financial Statements (the "Acquiror
Bring Down Date"), neither Acquiror nor any of its subsidiaries has incurred any
liabilities or obligations, whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due, except
(i) as and to the extent set forth on the audited balance sheet of the Acquiror
and its subsidiaries as at the Acquiror Bring Down Date (including the notes
thereto), (ii) as incurred in connection with the transactions contemplated, or
as provided, by this Agreement, (iii) as incurred after the Acquiror Bring Down
Date in the ordinary course of business and consistent with past practices, (iv)
as described in the Acquiror SEC Reports or (v) as would not, individually or in
the aggregate, have a material adverse effect upon the business, assets or
condition, financial or otherwise, of Acquiror and its subsidiaries considered
as a whole. Acquiror has delivered to Nationwide all Acquiror SEC Reports filed
with the SEC since January 1, 1993.
SECTION 5.6. Due Authorization of Shares. The Acquiror Common Shares to be
issued at the Closing will, when issued, be duly authorized Common Shares of
Acquiror and, when delivered, will be duly and validly issued, fully paid and
nonassessable and qualified for trading on the NYSE subject to notice of
issuance.
SECTION 5.7. Compliance with Laws; No Default or Litigation. Except as set
forth in Section 5.7 of the Acquiror's Disclosure Statement, neither Acquiror
nor any of its subsidiaries is in default of or has violated (nor is there any
event or condition which, with notice or lapse of time or both, would constitute
a default or violation of) in any respect, (i) any contract, agreement, lease,
consent, order or other written commitment or instrument to which it is a party
or by which the assets or business of any of the Acquiror or its subsidiaries
are bound, or (ii) any law, rule, regulation, ordinance, writ, injunction,
development order, permit, resolution, approval, order, decree, policy or
guideline of any court or any foreign, federal, state, local or other
governmental department, commission, board, bureau, agency or instrumentality
(including without limitation applicable laws, rules and regulations relating to
environmental protection, antitrust, civil rights, health and occupational
health and safety) except where such default or violation would not,
individually or in the aggregate with all other defaults and/or violations, have
a material adverse effect on the business, assets or condition, financial or
otherwise, of Acquiror and its subsidiaries considered as a whole. Except as
disclosed in the Acquiror Financial Statements or as set forth in Section 5.7 of
the Acquiror's Disclosure Statement: neither Acquiror nor any of its
subsidiaries is presently engaged in or threatened with or aware of any
situation that could subject Acquiror or any of its subsidiaries (together, the
"Acquiring Companies") to any litigation (including appeals of lower court
decisions), arbitration, claim or other legal proceedings or governmental or
-16-
any other investigation relating to the affairs of any of the Acquiring
Companies or any of their properties or assets that (a) questions the validity
or enforceability of this Agreement or that could prevent, hinder or delay
consummation of the transactions contemplated by this Agreement or (b) would
reasonably be expected to have a material adverse effect on the business, assets
or condition, financial or otherwise, of Acquiror and its subsidiaries
considered as a whole.
SECTION 5.8. Tax Representations. The representations and warranties by
Acquiror required under Section 7.7 shall be true, correct and complete in all
respects as of the Effective Time.
SECTION 5.9. Brokers' or Finders' Fees. Except for certain fees and expense
reimbursements to be paid by Acquiror to Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx,
Incorporated, no agent, broker, investment banker or other person or firm acting
on behalf of Acquiror or any of its directors or executive officers, or under
the authority of any of them is or will be entitled to any broker's or finder's
fee or any other commission or similar fee, directly or indirectly, from
Acquiror in connection with any of the transactions contemplated hereby.
SECTION 5.10. Representations and Warranties as of Date Hereof. The
representations and warranties contained in the foregoing Sections 5.1 through
5.9 inclusive are made as of the date hereof, except as otherwise expressly
indicated therein. The Acquiror does not make, and no party shall be entitled to
rely upon, any representation or warranty as to any fact or matter other than as
expressly set forth herein.
ARTICLE VI
CERTAIN PRE-CLOSING COVENANTS OF THE TARGETS
Each of the Corporate Targets and the Partners covenants and agrees that
between the date hereof and the Closing:
SECTION 6.1. Maintenance of Corporate Status. Each of the Corporate Targets
shall be maintained at all times as a corporation validly existing and in good
standing under the laws of the state of its incorporation and in good standing
as a foreign corporation in all states in which it is currently qualified to do
business. No amendment shall be made to the Articles of Incorporation or Bylaws
of any of the Corporate Targets without the prior written consent of Acquiror.
SECTION 6.2. No Change in Capitalization. No change will be made in the
number of issued and outstanding Target Common Shares, other than as a result of
the exercise of outstanding warrants or options to purchase Target Common Shares
in accordance with the terms of such warrants or options. No option, warrant or
any other right to purchase or to convert any obligation or security into Target
Common Shares will be sold, issued or granted by the Targets.
SECTION 6.3. Shareholders Meetings. Each of the Corporate Targets shall
cause a meeting of its shareholders to be duly called and held as soon as
practicable following the effectiveness of the Registration Statement (but not
earlier than 20 business days after the date of such effectiveness) for the
purpose of voting on the approval and adoption of this Agreement and the Share
Exchanges. The Board of Directors of each of the Corporate Targets shall
recommend approval and adoption of this Agreement and the Share Exchanges by the
respective Corporate Target's shareholders. In connection with such meeting,
each of the Targets:
(a) will cooperate with Acquiror in the prompt preparation of the
Registration Statement and use its best efforts to have the Registration
Statement declared effective by the SEC, and will thereafter mail to its
shareholders as promptly as practicable the Prospectus/Information
Statement and all other solicitation materials for use in connection with
the meeting of shareholders;
(b) will use its best efforts to obtain the necessary approvals by its
shareholders of this Agreement and the Share Exchanges; and
(c) will otherwise comply with all legal requirements applicable to
such meeting.
SECTION 6.4. Operation of the Business. Each of the Targets shall operate
its business diligently and only in the regular and ordinary course and manner
as it has previously been operated. Without limiting the
-17-
generality of the foregoing, each of the Targets shall use all reasonable
efforts to (i) preserve its present business organization intact and conserve
its goodwill; (ii) keep available and maintain the services of all officers,
employees, agents and representatives on the same or substantially the same
terms; (iii) continue and preserve good relationships with suppliers, customers,
lenders and others having business dealings or relationships with the Targets;
(iv) maintain in full force and effect all Permits required for the operation of
the business as presently conducted; and (v) maintain and keep in good order,
consistent with past practice, all of the Targets's tangible assets, ordinary
wear and tear excepted. None of the Targets shall, without the prior written
consent of Acquiror: (i) incur any indebtedness to any third party, except trade
payables incurred in the ordinary course of business consistent with past
practices; (ii) declare, set aside or pay any dividends or other distributions
or payments on or in respect of its outstanding shares, or purchase, redeem or
otherwise acquire, or agree to purchase, redeem or otherwise acquire any Target
Common Shares; (iii) knowingly do any act or omit any act or permit any omission
to act within its control, which will cause a breach or default in any of the
Targets' contracts, commitments or obligations; (iv) except in the ordinary
course of business consistent with past practices, change or increase the rate
of compensation paid by any of the Targets to any of their directors, officers,
employees or agents, including without limitation the payment of bonuses and
arrangements for severance pay, or (v) enter into any agreement to do any of the
foregoing.
SECTION 6.5. Other Offers. From the date of this Agreement until it is
terminated in accordance with Article X, the Targets shall not and shall cause
its officers, directors, partners, employees and other agents not to, directly
or indirectly, take any action to solicit, initiate or encourage the making of
any Acquisition Proposal (as hereinafter defined). Until this Agreement shall be
terminated in accordance with Article X, the Targets will not enter into any
agreement to merge or consolidate with, issue Target Common Shares to, exchange
the Target Common Shares with, or sell a substantial portion of the Targets'
assets to, any person or entity. The Targets will promptly notify Acquiror after
receipt of any Acquisition Proposal or any request for nonpublic information
relating to the Targets in connection with an Acquisition Proposal or for access
to the personnel, properties, books or records of any of the Targets by any
person or entity that informs the Board of Directors or Partners of any of the
Targets that it is considering making, or has made, an Acquisition Proposal. The
term "Acquisition Proposal" as used herein means any offer or proposal for, or
any indication of interest in, a merger or other business combination involving
any of the Targets or the acquisition of a majority of the equity interest in,
or a majority of the assets of, any of the Targets, other than the transactions
contemplated by this Agreement.
SECTION 6.6. Compliance with the Securities Act; Affiliates. Each of the
Targets shall use its best efforts to cause each person who is an "affiliate,"
as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act, of such Target to deliver to the Target at or prior to the Effective Time a
written agreement to the effect that such person will not offer to sell, sell or
otherwise dispose of any Acquiror Common Shares issued in the Share Exchanges,
except, in each case, pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a transaction
that, in the opinion of legal counsel satisfactory to Acquiror, is exempt from
the registration requirements of the Securities Act, such agreement to be in
substantially the form attached hereto as Exhibit 6.6(a). Each of the Targets
shall use its best efforts to cause each such person not to take any action that
would impair Acquiror's ability to account for the Share Exchanges as poolings
of interests. Accordingly, each of the Targets shall use its best efforts to
cause each such person to deliver prior to the Effective Time a written
agreement in the form attached as Exhibit 6.6(b) to this Agreement, to the
effect that such person shall not sell or otherwise reduce his or her risk
relative to any Acquiror Common Shares received in connection with the Share
Exchanges (within the meaning of the SEC's Codification of Financial Reporting
Policies sec. 201.01) until Acquiror has published financial results (including
combined sales and net income) covering at least thirty days of post-Share
Exchange operations, except as permitted by Staff Accounting Bulletin No. 76
issued by the SEC.
SECTION 6.7. Taxes. Each of the Targets shall timely file all Tax reports
and Returns required to be filed with any governmental authority wherein the
nature of its activities is such as to require the filing thereof, and shall
promptly pay, when due, all federal, state, local and foreign taxes,
assessments, governmental charges, fees, interest and penalties lawfully levied
or assessed upon it or its properties.
-18-
SECTION 6.8. Access; Review. Each of the Targets shall provide to Acquiror,
its attorneys, accountants, appraisers and other authorized representatives or
retained experts access upon reasonable notice to all the premises, books,
records, personnel and income tax returns of or relating to such Target during
normal business hours and shall furnish to such persons such financial and
operating data and other information as Acquiror or such persons may from time
to time reasonably request. In addition, each of the Targets shall authorize its
independent certified public accountants to give Acquiror's independent
certified public accountants access to books and records and work papers
regarding the Target's financial statements. No investigation, test, examination
or inquiry by Acquiror shall affect the representations and warranties contained
in this Agreement.
SECTION 6.9. Insurance. Each of the Targets shall maintain the types and
levels of insurance currently in effect to insure its assets and its business
against the risk of loss or damage attributable to casualty, storm, fire, theft,
burglary or riot.
SECTION 6.10. Monthly Financial Statements. On or prior to the thirtieth
day of each calendar month, each of the Targets shall deliver to Acquiror copies
(identified with a reference to this Section 6.10) of the unaudited monthly
balance sheet and statement of income of such Target for the immediately
preceding month (the "monthly statements"), prepared in a manner consistent with
past practices used in preparation of such statements, all of which when
delivered, shall be materially complete and correct, prepared from the books and
records of such Target in accordance with generally accepted accounting
principles (except for the omission of notes thereto) consistently applied and
maintained throughout such months, and shall in all material respects fairly
present the financial condition of such Target as at their respective dates and
the results of the operations of its business for the months covered thereby.
SECTION 6.11. Approvals, Notices and Consents. Promptly after the execution
of this Agreement, each of the Targets shall file all forms, applications and
reports, including without limitation all filings under the HSR Act, and take
such other action which is required to be taken or filed with any governmental
agency or authority in connection with the transactions contemplated by this
Agreement. Each of the Targets shall cooperate with Acquiror in promptly
producing such additional information as those authorities may require to allow
early termination of the notice period provided by the HSR Act or as otherwise
necessary to comply with statutory requirements and requests of the Federal
Trade Commission or the Department of Justice. Each of the Targets shall give
all additional notices to third parties and take such other action required to
be given or taken by it under any authorization, lease, note, mortgage,
indenture, agreement or other instrument or any law, rule, regulation, demand or
court or administrative order in connection with the transactions contemplated
by this Agreement, and shall use its best efforts to obtain all consents and
approvals necessary to enable it to consummate the transactions contemplated by
this Agreement. Each of the Targets shall use its reasonable efforts to obtain
estoppel certificates from the lessors under the leases of Real Property.
SECTION 6.12. The Targets' Actions; Supplements to Representations and
Warranties. From the date of this Agreement through the Closing, (a) each of the
Targets shall use its best efforts to cause the conditions to the obligations of
the Corporate Targets and the Partners set forth in Article IX to be satisfied
to the extent that the satisfaction of such conditions is within the control of
such Target; provided, however, that the foregoing shall not constitute a
limitation upon the covenants and obligations of the Corporate Targets and the
Partners otherwise set forth in this Agreement; (b) none of the Targets shall
take any action or omit to take any action within its control to the extent such
action or omission might result in a breach of any term or condition of this
Agreement or in any representation or warranty contained in this Agreement being
inaccurate or incorrect on and as of the Closing Date; and (c) each of the
Targets shall deliver to Acquiror, as soon as possible after discovery thereof,
but not later than at the Closing, supplemental information updating the
information set forth in the representations and warranties of the Targets set
forth in this Agreement to reflect subsequent occurrences, if any, (along with a
notice stating the representations and warranties, including the schedules
referred to therein, to which such supplemental information relates) so that
such representations and warranties as supplemented by such information will be
true and correct as of the Closing as if then made. The foregoing provisions
shall not be deemed to permit any transaction between the date hereof and the
Closing not otherwise contemplated or permitted by this Agreement nor shall any
action taken by any of the
-19-
Targets pursuant to the foregoing provisions impair the exercise by Acquiror of
its rights as set forth in Section 10.2.
SECTION 6.13. Notice of Material Adverse Change. The Targets shall promptly
advise Acquiror in writing of any material adverse change in the assets or
financial condition, results of operations, businesses or properties of the
Targets considered as a whole.
SECTION 6.14. Pooling. None of the Targets shall take any action that would
prevent the Share Exchanges from qualifying for pooling of interests accounting
treatment.
SECTION 6.15. Tax Statements. The Targets will make and will use their
reasonable efforts to cause their respective shareholders to make the
representations and warranties contained in Exhibit 6.15, and such other
representations and warranties as considered reasonably necessary by the
accountants or counsel for purposes of rendering the opinions referred to in
Sections 8.12 and 9.10.
SECTION 6.16. Cooperation. Each of the Targets shall generally cooperate
with Acquiror and its officers, employees, attorneys, accountants and other
agents and, generally, do such other acts and things in good faith as may be
reasonable, necessary, or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
SECTION 6.17 Nationwide to Use Its Reasonable Best Efforts to Terminate
Option. Nationwide shall use its reasonable best efforts to terminate that
certain option to purchase the Marietta, Ohio facility pursuant to that certain
Lease Agreement by and between Marietta Convalescent Center, Inc. (previously
merged into Nationwide) and Xxxxxxx-Xxxxxx Enterprises, Inc., dated July 12,
1983. The terms of such termination shall be reasonably acceptable to Acquiror
and Acquiror shall assist Nationwide with the negotiations to terminate such
option to the extent Nationwide shall reasonably deem appropriate.
ARTICLE VII
CERTAIN PRE-CLOSING COVENANTS OF ACQUIROR
Acquiror covenants and agrees that between the date hereof and the Closing:
SECTION 7.1. Required Consents and Approvals. It shall use all reasonable
efforts to obtain all consents and approvals necessary to enable it to
consummate the transactions contemplated by this Agreement. Acquiror shall also
use its best efforts to obtain by April 28, 1995 all necessary consents from its
principal lenders, as set forth in Section 5.4 of Acquiror's Disclosure
Statement.
SECTION 7.2. Pre-transaction Notification. It shall file with the proper
authorities all forms and other documents necessary to be filed pursuant to the
HSR Act and regulations issued thereunder as promptly as possible and shall
cooperate with the Targets in promptly producing such additional information as
such authorities may require to allow early termination of the notice period
provided by the HSR Act or as otherwise necessary to comply with statutory
requirements and requests of the Federal Trade Commission or the Department of
Justice.
SECTION 7.3. Registration Statement; NYSE Listing.
(a) Acquiror shall promptly prepare and file with the SEC under the
Securities Act the Registration Statement and shall use all reasonable efforts
to cause the Registration Statement to be declared effective as promptly as
practicable. Acquiror shall take all reasonable action required to be taken
under applicable state securities or Blue Sky laws in connection with the
issuance of Acquiror Common Shares in the Share Exchanges.
(b) Acquiror shall take all such action as is reasonably necessary to
qualify the Acquiror Common Shares to be issued in the Share Exchanges for
trading on the NYSE effective upon notice of issuance.
SECTION 7.4. Notice of Material Adverse Change. Acquiror shall promptly
advise the Targets in writing of any material adverse change in Acquiror, its
assets or the financial condition, results of operations, businesses or
properties of Acquiror and its subsidiaries considered as a whole.
-20-
SECTION 7.5. Pooling Actions. Neither Acquiror nor any of its subsidiaries
shall take any action that would prevent the Share Exchanges from qualifying for
pooling of interests accounting treatment.
SECTION 7.6. Pooling Letter. Prior to the date of Closing, Acquiror shall
have caused KPMG Peat Marwick LLP to deliver to Acquiror a letter with respect
to whether the Share Exchanges will qualify for pooling of interests accounting
treatment.
SECTION 7.7. Tax Statements. Acquiror will make the representations,
warranties and covenants contained in Exhibit 7.7, and such other
representations, warranties and covenants as considered reasonably necessary by
the accountants or counsel for purposes of rendering the opinions referred to in
Sections 8.12 and 9.10.
SECTION 7.8. Environmental Surveys. Acquiror shall use its reasonable
efforts to cause to have performed by April 28, 1995, at Acquiror's expense,
Phase I environmental surveys of all long-term health care facilities currently
operated but not owned by the Targets and to be operated by the Corporate
Targets following the Closing.
SECTION 7.9. Cooperation. Acquiror shall generally cooperate with each of
the Targets and its officers, employees, attorneys, accountants and other
agents, and, generally, do such other acts and things in good faith as may be
reasonable, necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby, including assisting the Targets in obtaining agreements to release at
the Closing the personal guarantees as described in Section 9.11. Prior to the
Closing Date, Acquiror agrees to disclose to the Targets any fact or matter that
comes to the attention of Acquiror that might indicate that any of the
representations or warranties of any of the Targets may be untrue, incorrect, or
misleading in any material respect.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE PERFORMANCE OF ACQUIROR
The obligations of Acquiror pursuant to the terms of this Agreement are
subject to the satisfaction, at the Closing, of each of the following
conditions:
SECTION 8.1. Accuracy of Representations and Warranties of the
Targets. Each of the representations and warranties of each of the Corporate
Targets and the Partners contained in this Agreement shall be true and correct
in all material respects at and as of the Closing Date with the same force and
effect as if made at and as of the Closing Date. For purposes of this Section
8.1, all references in such representations and warranties to "the date hereof,"
"the date of this Agreement" and like language shall mean the Closing Date.
SECTION 8.2. Compliance. Each of the Targets and the Partners shall have
performed, complied with and fulfilled in all material respects all the
covenants, agreements, obligations and conditions required by this Agreement to
be performed, complied with or fulfilled by it at or prior to the Closing.
SECTION 8.3. Approval. The execution and delivery of this Agreement by each
of the Corporate Targets and the Partners, and the performance of the Targets'
and Partners' covenants and obligations hereunder, shall have been duly
authorized by all necessary action on the part of such Target or Partner.
SECTION 8.4. HSR Act Approval. Any applicable waiting period under the HSR
Act relating to the Share Exchanges shall have expired or been terminated.
SECTION 8.5. Authorizations. All material permits, authorizations,
approvals and consents of and notices to any federal, state or local
governmental body, agency or authority or any other third party, which may be
required by law, regulation, rule, ordinance, order, decree, agreement,
indenture, lease or other instrument or document to which any of the Targets or
Acquiror is a party or by which such Target or Acquiror or its assets are bound
or which Acquiror may otherwise reasonably require in connection with the
execution of this Agreement or effectuation of the transactions contemplated by
this Agreement shall have been obtained or made by the respective Target or
Acquiror on terms and conditions reasonably satisfactory to
-21-
Acquiror, other than licenses set forth in Section 4.16 of the Disclosure
Statement which cannot be transferred, but which must be issued to Acquiror
after the Closing.
SECTION 8.6. Litigation. No order, decree, writ or ruling of any
governmental authority or court shall have been entered that restrains, enjoins,
or otherwise prohibits the consummation of the transactions contemplated hereby.
SECTION 8.7. No Material Adverse Change. In the reasonable judgment of
Acquiror, between the date hereof, and the Closing, there shall not have been
any material adverse change or any event which is likely to result in any
material adverse change in the assets, business, financial condition or results
of operations of the Targets and their subsidiaries taken as a whole.
SECTION 8.8. Closing Deliveries. Acquiror shall have received from the
respective Target all of the instruments, documents and considerations described
in Section 12.2, and the form and substance of all such deliveries shall be
reasonably satisfactory in all material respects to Acquiror.
SECTION 8.9. Dissenters' Rights. Holders in excess of 5% of the Target
Common Shares shall not have exercised dissenters' rights under applicable law.
SECTION 8.10. Pooling Letter. Acquiror shall have received a letter from
KPMG Peat Marwick LLP, in form and substance reasonably satisfactory to
Acquiror, stating that the Share Exchanges will qualify for poolings of
interests accounting treatment.
SECTION 8.11. Exercise of Warrants. All warrants issued by Nationwide shall
have been exercised prior to the Closing.
SECTION 8.12. Tax Opinions. Acquiror shall have received opinions of KPMG
Peat Marwick LLP acceptable in form and content to Acquiror substantially to the
effect that the exchange of Target Common Shares for Acquiror Common Shares as
provided in this Agreement will, in each instance, constitute a reorganization
within the meaning of Section 368(a)(1)(B) of the Code, and each Corporate
Target and Acquiror will be a "party to reorganization" within the meaning of
Section 368(b) of the Code.
SECTION 8.13. Lease Extensions. The lease of Colonial Oaks Health Care
Center shall have been renewed in accordance with such lease for an additional
five year term, and the Targets shall have used their reasonable efforts to
obtain modifications to the lease of Ossian Health Care to provide for a five
year extension.
SECTION 8.14. Option Termination. That certain Option to Purchase dated
January 25, 1993 by and among Xxxxx Xxxxx, Xxxx Xxxxxxx, the Xxxxx Xxxxxxx Trust
(collectively, the "Optionees") and Nationwide, relating to the Cambridge and
Parkwood facilities, shall have been terminated in exchange for the payment of
not more than $300,000 to the Optionees, and Acquiror agrees that such
termination and payment shall not constitute a breach of any representation,
warranty or other provision of this Agreement.
ARTICLE IX
CONDITIONS PRECEDENT TO PERFORMANCE OF THE CORPORATE TARGETS AND PARTNERS
The obligations of each of the Corporate Targets and Partners pursuant to
the terms of this Agreement are subject to the satisfaction, at the Closing, of
each of the following conditions:
SECTION 9.1. Accuracy of Representations and Warranties of Acquiror. Each
of the representations and warranties of Acquiror contained in this Agreement
shall be true and correct in all material respects at the Closing with the same
force and effect as if made at the Closing. For purposes of this Section 9.1,
all references in such representations and warranties to "the date hereof," "the
date of this Agreement" and like language shall mean the Closing Date.
SECTION 9.2. Compliance. Acquiror shall have performed, complied with and
fulfilled in all material respects all the covenants, agreements, obligations
and conditions required by this Agreement to be performed, complied with or
fulfilled by it at or prior to the Closing.
-22-
SECTION 9.3. Corporate Approval. The execution and delivery of this
Agreement by Acquiror and the performance by Acquiror of all of its covenants
and obligations hereunder shall have been duly authorized by all necessary
corporate action on the part of Acquiror.
SECTION 9.4. Authorizations. All material permits, authorizations,
approvals and consents of and notices to any federal, state or local
governmental body, agency or authority or any other third party, which may be
required by law, regulation, rule, ordinance, order, decree, agreement,
indenture, lease or other instrument or document to which any of the Targets or
Acquiror is a party or by which such Target or Acquiror or its assets are bound
or which the Targets may otherwise reasonably require in connection with the
execution of this Agreement or effectuation of the transactions contemplated by
this Agreement shall have been obtained or made by the respective Target or
Acquiror on terms and conditions reasonably satisfactory to the Targets.
SECTION 9.5. Registration Statement. The Registration Statement shall have
become effective under the Securities Act and the Acquiror Common Shares to be
issued in the Share Exchanges shall have become qualified or registered (or
shall be exempt from qualification or registration) under comparable state
securities laws, and at or prior to the Effective Time no stop order suspending
the effectiveness of the Registration Statement or the qualification or
registration of the Acquiror Common Shares to be issued in the Share Exchanges
under the Blue Sky laws of any jurisdiction shall have been issued and no
proceeding for that purpose shall have been initiated or shall be threatened or
contemplated by the SEC or the authorities of any such jurisdictions, and the
Acquiror Common Shares shall be eligible for trading on the NYSE upon notice of
issuance.
SECTION 9.6. Litigation. No order, decree, writ or ruling of any
governmental authority or court shall have been entered that restrains, enjoins
or otherwise prohibits the consummation of the transactions contemplated by this
Agreement.
SECTION 9.7. No Material Adverse Change. In the reasonable judgment of the
Targets, between the date of execution and the Closing, there shall not have
been any material adverse change or any event which is likely to result in any
material adverse change in the assets, business, financial condition or results
of operations of Acquiror and its subsidiaries, taken as a whole.
SECTION 9.8. HSR Act Waiting Periods. Acquiror and the Targets shall have
filed all notifications required by the HSR Act with the Department of Justice
and the Federal Trade Commission and the applicable waiting periods with respect
thereto (including any extension thereof by reason of a request for additional
information) shall have expired or been terminated.
SECTION 9.9. Closing Deliveries. Each of the Targets shall have received
from Acquiror all of the instruments, documents and considerations described in
Section 12.3, and the form and substance of all such deliveries shall be
reasonably satisfactory in all material respects to the Targets.
SECTION 9.10. Tax Opinions. Nationwide shall have received opinions of Ice
Xxxxxx Xxxxxxx & Xxxx acceptable in form and content to Nationwide,
substantially to the effect that the exchange of Target Common Shares for
Acquiror Common Shares as provided in this Agreement will, in each instance,
constitute a reorganization within the meaning of Section 368(a)(1)(B) of the
Code, and each Corporate Target and Acquiror will be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
SECTION 9.11. Release of Guarantees. The beneficiaries with respect to the
personal guarantees by the shareholders of the Corporate Targets and/or Partners
in the Partnership Targets that are set forth in Section 9.11 of the Disclosure
Statement shall have agreed to release such guarantees at the time of the
Closing or Nationwide shall have agreed to indemnify such shareholders and/or
Partners for any losses resulting from such guarantees.
-23-
ARTICLE X
TERMINATION
SECTION 10.1. Termination by Mutual Agreement. This Agreement may be
terminated by the mutual agreement in writing of the parties hereto at any time
prior to the Closing.
SECTION 10.2. Termination by Acquiror. This Agreement and any obligations
of Acquiror hereunder (other than its obligations under the Confidentiality
Agreement referred to in Section 11.1) may be terminated upon written notice to
that effect by Acquiror at any time prior to or at the Closing, if in the
judgment of Acquiror (a) any of the Targets or the Partners shall have breached
or failed to perform in any material respect any of its covenants or obligations
under this Agreement; (b) any representation or warranty of any of the Targets
or the Partners contained in this Agreement is false or misleading in any
material respect and cannot be cured prior to July 31, 1995; or (c) any other
material condition precedent to Acquiror's performance of its obligations under
this Agreement is not capable of being met.
SECTION 10.3. Termination by the Corporate Targets and Partners. This
Agreement and any obligations of any of the Corporate Targets and Partners
hereunder (other than their obligations under the Confidentiality Agreement
referred to in Section 11.1) may be terminated upon written notice to that
effect by any of the Corporate Targets and the Partners at any time prior to or
at the Closing if in the judgment of such Target or Partner (a) Acquiror shall
have breached or failed to perform in any material respect any of its covenants
or obligations under this Agreement; (b) any representation or warranty of
Acquiror contained in this Agreement is false or misleading in any material
respect and cannot be cured prior to July 31, 1995; (c) any other material
condition precedent to such Target's or Partner's performance of its obligations
under this Agreement is not capable of being met; (d) the average closing price
of one Acquiror Common Share as reported by the NYSE for the ten (10) trading
days immediately preceding the Closing Date is less than $21.82; or (e) the
Share Exchanges have not been consummated by July 31, 1995.
ARTICLE XI
ADDITIONAL AGREEMENTS
SECTION 11.1. Confidentiality. Acquiror and each of the Targets agree that
the Confidentiality Agreement dated November 7, 1994 between Acquiror and
Nationwide shall remain in full force and effect at all times prior to the
Effective Time and after any termination of this Agreement, and each agrees to
comply with the terms of that agreement.
SECTION 11.2. Employee Benefit Matters. Acquiror agrees to continue in full
force and effect the Benefit Plans of the Targets referred to in Section 4.21 of
the Disclosure Statement and existing at the Effective Time until those
employees of the Targets who continue as employees of the Targets or Acquiror
after the Effective Time become eligible to participate in the employee benefit
plans of Acquiror. Acquiror will recognize such transferred employees' service
with any of the Targets for purposes of eligibility and vesting under such
Acquiror plans. Nothing set forth in this Agreement shall be construed to impose
any obligation on Acquiror to continue the employment of any person after the
Effective Time or give any person any rights to such employment; provided,
however, that Acquiror acknowledges that it will cause Nationwide to honor and
perform after the Effective Time the obligations of Nationwide pursuant to those
Employment Agreements set forth on Schedule 11.2(a). Acquiror also agrees that
prior to the termination of any employee whose name is set forth on Schedule
11.2(b), Acquiror will cause the Corporate Targets to give such employee thirty
days notice and will pay to such terminated employee as severance one week's
salary for each year such employee has been employed by Nationwide or its
affiliates, as set forth on Schedule 11.2(b), less applicable withholdings.
SECTION 11.3. Agreements Respecting Meadowvale. Prior to the Effective
Time, Meadowvale will transfer to Xxxxxx Xxxxxxxx ("Xxxxxxxx") real property
including land and a home built thereon located at 0000 Xxxx Xxxxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxx and owned by Meadowvale (the "Residence"). In addition,
Meadowvale will repay to Xxxxxxxx all amounts owing by Meadowvale to Xxxxxxxx
pursuant to that certain
-24-
Promissory Note dated February 1, 1986 executed by Meadowvale in favor of
Xxxxxxxx. After the Effective Time, Acquiror shall, subject to Section 11.6
below, cause Nationwide to honor and pay out of its own funds the debt in the
amount of $313,408 owed to Xxxxxx X. Xxxxxxxxx, Xx. by Shangri-La. The parties
to this Agreement agree that the transactions contemplated by this Section 11.3
shall not affect the amount of Exchange Consideration due pursuant to this
Agreement.
SECTION 11.4. Preservation of Tax-Free Reorganization Treatment. Acquiror
shall not take or cause to be taken any action, and shall not permit its
affiliates to take or cause to be taken any action within Acquiror's control,
whether before or after the Effective Time, which would disqualify any of the
Share Exchanges as a "reorganization" within the meaning of Section 368(a)(1)(B)
of the Code. Without limiting the foregoing, Acquiror may not participate in any
tax-free reorganization or share exchange without first (i) obtaining an
unqualified opinion, acceptable in form to the Representative (as defined in the
Agreement among Shareholders attached hereto as Exhibit 12.2(i)), of KPMG Peat
Marwick LLP that such reorganization or share exchange does not disqualify any
of the Share Exchanges as a tax-free reorganization within the meaning of
Section 368(a)(1)(B) of the Code; and (ii) providing such opinion to the
Representative.
SECTION 11.5. Publication of Financial Results. In accordance with the
Codification of Financial Reporting Policies of the Securities and Exchange
Commission, in order to permit the sale of Acquiror Common Shares following the
Closing and also to preserve the treatment of the transactions described herein
as a pooling of interests for accounting purposes, Acquiror agrees to publish
the financial results of the combined operations of Acquiror and the Targets,
covering at least 30 days of such combined operations, no later than the last to
occur of (a) 60 days following the end of the month in which the Closing occurs
and (b) 10 days following delivery of such financial information with respect to
the operations previously owned by the Targets as Acquiror considers reasonably
necessary to prepare the combined financial results described in this Section
11.5.
SECTION 11.6. The Shangri-La Partners. Shangri-La owns an 81-bed
long-term care center, known as Rolling Xxxxxxx Health Care Center (the "Rolling
Xxxxxxx Facility"). Pursuant to a certain Lease Agreement (the "Shangri-La
Lease") dated September 23, 1991 between Shangri-La and Rolling Xxxxxxx Health
Care Center, Inc. (the "Lessee"), Shangri-La has leased the Rolling Xxxxxxx
Facility to the Lessee. The Shangri-La Lease grants the Lessee the option to
purchase the Rolling Xxxxxxx Facility from Shangri-La. On March 1, 1995, the
Lessee notified Shangri-La of its intention to exercise this option.
Notwithstanding any other provision of this Agreement, if the Lessee purchases
the Rolling Xxxxxxx Facility prior to the Effective Time, (a) the partners of
Shangri-La shall not be considered parties to the Original Agreement or this
Agreement, and such partners shall be released and forever discharged from all
obligations thereunder or hereunder, including without limitation, any
obligation to assign their partnership interest to Nationwide and any
representation or warranty pursuant to Article IV hereof; and (b) Acquiror and
Nationwide shall be released and forever discharged from all obligations to the
partners of Shangri-La pursuant to the Original Agreement and this Agreement,
and the obligation to pay $313,408 to Xxxxxx X. Xxxxxxxxx, Xx. pursuant to
Section 11.3 above.
ARTICLE XII
THE CLOSING
SECTION 12.1. Time and Place. The closing of the transactions contemplated
by this Agreement shall take place at the offices of Ice Xxxxxx Xxxxxxx & Xxxx,
One American Square, 34th Floor, Indianapolis, Indiana, at 10:00 a.m.
Indianapolis time on June 30, 1995, or on such other date as the parties
hereafter agree (the "Closing").
SECTION 12.2. Deliveries to Acquiror at the Closing. At the Closing, and
simultaneously with the deliveries to the Targets specified in Section 12.3, the
Corporate Targets and the Partners shall deliver or cause to be delivered to
Acquiror the following:
(a) Certificates of the President and Chief Financial Officer of each
of the Corporate Targets and of each of the Partners as to the accuracy of
its representations and warranties contained in this Agreement
-25-
and as to its compliance with and fulfillment of all covenants, agreements,
obligations and conditions required by this Agreement.
(b) Copies of all resolutions adopted by the Board of Directors and
the shareholders of each of the Corporate Targets authorizing the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, together with a certificate, duly executed by the
Secretary of such Target, stating that such copies are true, complete and
correct, and that the resolutions have been duly adopted by the Board of
Directors and the shareholders, as the case may be, have not been amended
since adoption, and remain in full force and effect.
(c) Copies of all permits, authorizations, approvals and consents
required to be obtained pursuant to Section 8.5.
(d) An opinion of Ice Xxxxxx Xxxxxxx & Xxxx, counsel to the Targets,
dated the Closing Date, in such form as shall be agreed to by the parties
hereto prior to the Closing, in their reasonable discretion.
(e) If required by Section 6.6, the written agreements and letters
described in Section 6.6.
(f) The Certificates and such documents and instruments as agreed to
by Acquiror and the Partners.
(g) The lease amendment referred to in Section 8.13.
(h) Noncompetition Agreements between Acquiror and each of the
Phillippes, in the form of Exhibit 12.2(h).
(i) Agreements among the shareholders of each of the Corporate Targets
in substantially the form of Exhibit 12.2(i).
(j) Resignations of each of the officers and directors of each of the
Corporate Targets.
(k) Evidence of redemption of the Nationwide Preferred Stock.
SECTION 12.3. Deliveries to the Targets at the Closing. At the Closing, and
simultaneously with the deliveries to Acquiror specified in Section 12.2,
Acquiror shall deliver or cause to be delivered to the Targets and the Partners
the following:
(a) Certificates of the President and Chief Financial Officer of
Acquiror as to the accuracy of its representations and warranties contained
in this Agreement and as to its compliance with and fulfillment of all
covenants, agreements, obligations and conditions required by this
Agreement.
(b) Copies of all permits, authorizations, approvals and consents
required to be obtained pursuant to Section 9.4.
(c) An opinion of Xxxxxxx X. Xxxxxx, General Counsel to Acquiror,
dated the Closing Date, in such form as shall be agreed to by the parties
hereto prior to the Closing, in their reasonable discretion.
(d) The Exchange Consideration (less any amounts to be delivered to
the Escrow and the Supplemental Escrow).
(e) Evidence of prepayment of the Nationwide Subordinated Notes.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.1. Indemnification of Acquiror. Subject to Section 13.2, and
except with respect to Supplemental Losses (as that term is defined in Section
14.1 hereof), Acquiror shall be indemnified and held harmless from and against
any damages, loss, cost, liability, or expense (including, without limitation,
costs and expenses of litigation, settlement and reasonable attorney's fees, but
net of amounts received under applicable insurance carried by the Targets)
("Losses") that may be incurred by or suffered by or asserted
-26-
against Acquiror or any of its subsidiaries (hereinafter, collectively, the
"Indemnified Party"), but without duplication, arising out of or related to,
directly or indirectly, the incorrectness of any of the representations or
warranties contained in Article IV of this Agreement (or any section of the
Disclosure Statement referred to in Article IV), or the breach prior to the
Effective Time of any of the covenants or agreements of any Target or Partner
contained in this Agreement or in any other instrument executed or delivered by
the Targets or the Partners.
SECTION 13.2. Threshold and Maximum Amounts.
(a) The Indemnified Party shall be entitled to indemnification under this
Article XIII only when the aggregate of all Losses suffered by the Indemnified
Party, with respect to which the Indemnified Party would otherwise be entitled
to indemnification hereunder exceeds Two Hundred and Fifty Thousand Dollars
($250,000.00) (the "Threshold Amount"), whereupon the Indemnified Party shall be
entitled to indemnification for any and all such Losses in excess of the
Threshold Amount; provided, however, that in the case of the incorrectness of
any representation contained in Section 4.2 or fraud, the Threshold Amount shall
not apply.
(b) Subject to Section 13.2(c) below, the aggregate dollar amount of all
Losses the Indemnified Party may be indemnified for under this Article XIII
shall not exceed the fair market value, as of the Closing Date, of the Acquiror
Common Shares delivered to the Escrow Agent for the Escrow pursuant to Section
3.3 (the "Escrow Value"); provided, however, that, in the case of the
incorrectness of any representation contained in Section 4.2 or fraud, the
Indemnified Party may be indemnified for an amount in excess of the Escrow
Value.
(c) Any and all Losses for which the Indemnified Party may be indemnified
under this Article XIII shall be paid or satisfied only by distribution to
Acquiror of the Acquiror Common Shares and cash, if any, held in the Escrow in
accordance with Section 3.3 and the Escrow Agreement attached hereto as Exhibit
3.3(a). The Indemnified Party shall have no recourse against any of the former
holders of the Target Common Shares, and such former holders shall have no
personal liability to the Indemnified Party with respect to the indemnification
provided for in Section 13.1, except to the extent such holders hold Acquiror
Common Shares and cash, if any, in the Escrow or, with respect to the Targets
and their respective officers, directors and employees only, as otherwise
provided in Section 13.2(b). Except with respect to Supplemental Losses,
indemnification pursuant to this Article XIII shall be the exclusive remedy of
Acquiror for a breach of a representation or warranty made by any Target or
Partner or a covenant of any Target or Partner set forth in this Agreement.
SECTION 13.3. Survival of Indemnification Obligations.
(a) The foregoing indemnification obligations shall survive, in the case of
the incorrectness of any representation contained in Section 4.2 or fraud,
indefinitely.
(b) Except as provided in Section 13.3(a) and subject to Section 13.3(c),
the foregoing indemnification obligations shall survive, in the case of the
representations and warranties of the Targets and Partners contained in Article
IV, until the date that Acquiror's independent accountants have completed the
first audit following the Effective Time of Acquiror's and the Targets' combined
operations, but not later than one year after the Closing Date. Acquiror Common
Shares and cash, if any, held in the Escrow shall be distributed, if available,
to the former holders of the Target Common Shares promptly following completion
of such audit, but not later than one year after the Closing Date.
(c) Notwithstanding the foregoing survival periods, if written notice of a
claim or written notice describing with particularity facts and circumstances
that exist and will be substantially likely, in the good faith judgment of
Acquiror, to give rise to a claim of indemnification hereunder has been given by
Acquiror to the Targets prior to the termination of any applicable
representation and warranty of the Targets or the termination of the Escrow as
specified in the Escrow Procedures, then the relevant representation and
warranty, and the term of the Escrow shall survive, solely as to such claim as
provided in the notice, until the claim has been finally resolved.
-27-
ARTICLE XIV
SUPPLEMENTAL INDEMNIFICATION
SECTION 14.1. Supplemental Indemnification of Acquiror. Subject to Section
14.2, and in addition to the indemnification provided for in Article XIII
hereof, an Indemnified Party shall be indemnified and held harmless from and
against any Loss that may be incurred by or suffered by or asserted against such
Indemnified Party, but without duplication, arising out of or related to,
directly or indirectly, the litigation entitled Xxxxx X. Xxxxxx, Guardian of the
Estate and Person of Xxxxx May Xxxxxxx, an Adult Incompetent v. Nationwide Care,
Inc., Vigo Superior Court, State of Indiana, Cause No. 84D01-9409-CP-1618 (the
"Pending Matter")(Losses with respect to the Pending Matter are referred to
herein as "Supplemental Losses").
SECTION 14.2. Maximum Amounts.
(a) Subject to Section 14.2(b) below, the aggregate dollar amount of all
Supplemental Losses the Indemnified Party may be indemnified for under this
Article XIV shall not exceed the fair market value, as of the Closing Date, of
the Acquiror Common Shares delivered to the Escrow Agent for deposit in the
Supplemental Escrow pursuant to Section 3.3 (the "Supplemental Escrow Value").
(b) Any and all Supplemental Losses for which the Indemnified Party may be
indemnified under this Article XIV shall be paid or satisfied only by
distribution to Acquiror of the Acquiror Common Shares and cash, if any, held in
the Supplemental Escrow in accordance with Section 3.3 and the Supplemental
Escrow Agreement attached hereto as Exhibit 3.3(b). The Indemnified Party shall
have no recourse against any of the former holders of Nationwide, and such
former holders shall have no personal liability to the Indemnified Party with
respect to the indemnification provided for in Section 14.1, except to the
extent such holders hold Acquiror Common Shares and cash, if any, in the
Supplemental Escrow. Indemnification pursuant to this Article XIV shall be the
exclusive remedy of the Indemnified Party for the incurrence of a Supplemental
Loss.
SECTION 14.3. Survival of Indemnification Obligations. Notwithstanding the
provisions of Section 15.1, the indemnification obligations set forth in this
Article XIV with respect to Supplemental Losses shall survive until such time as
(a) the Pending Matter has been settled; (b) an order of a court of competent
jurisdiction has been entered and either no appeal can be taken from such order
or the time for such an appeal has run; or (c) a summary judgment or other order
has been granted to the effect that punitive damages will not be awarded with
respect to the Pending Matter.
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1. Survival of Representations and Warranties. Except as set
forth in Sections 13.3 and 14.3, the representations and warranties contained in
this Agreement shall survive until the date that Acquiror's independent
accountants have completed the first audit following the Effective Time of
Acquiror's and the Targets' combined operations, but not later than one year
after the Closing Date.
SECTION 15.2. Definition of Knowledge. For purposes of this Agreement, "to
the knowledge of" or words of like import mean that the party to which the
statement is attributed:
(a) has made such investigations, and has made such inquiries of
directors, officers, partners and responsible employees of such party and
of legal counsel, independent auditors, actuaries and other persons who
have performed services for such party as shall be reasonably necessary to
determine the accuracy of such representation or warranty; and
(b) nothing has come to the person's attention in the course of such
investigation and review or otherwise, which would cause the person, in the
exercise of reasonable care (in accordance with the standards of what a
reasonable person in similar circumstances would have done to satisfy
himself as to the accuracy of the representation and warranty), to believe
that such representation and warranty is not true and correct in all
respects.
-28-
SECTION 15.3. Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
SECTION 15.4. Entire Agreement. This Agreement and the agreements to be
delivered pursuant to this Agreement and the Confidentiality Agreement between
the parties dated November 7, 1994 constitute the entire agreement among the
parties pertaining to the subject matter contained herein and therein and
supersede all other prior and contemporaneous agreements, representations and
understandings of the parties.
SECTION 15.5. Exhibits and Schedules. All exhibits and schedules attached
to this Agreement are incorporated herein and made a part hereof in the same
manner as if such exhibits and schedules were set forth at length herein.
SECTION 15.6. Parties in Interest. This Agreement will be binding upon and
inure solely to the benefit of each of the parties, and nothing in this
Agreement, express or implied, is intended to or will confer upon any other
person any right, benefit, or remedy; provided, however, each person receiving
Acquiror Common Shares in connection with the Share Exchanges or the assignments
of the Partnership Interests pursuant to this Agreement shall be a third-party
beneficiary of this Agreement and shall be entitled, after the Effective Time,
to enforce the Agreement against Acquiror for the benefit of such shareholders
with respect to the covenants of Acquiror contained herein and shall be entitled
to pursue all remedies available at law or in equity for, and Acquiror shall
indemnify such shareholders from, any Losses that may be incurred by or suffered
by or asserted against such shareholders (or any of them) arising out of or
related to, directly or indirectly, the incorrectness of any representations and
warranties of Acquiror in Article V of this Agreement or for any breach of any
of the covenants or agreements of Acquiror contained herein. Except in the case
of fraud, such indemnification obligations shall survive until the date that
Acquiror's independent accountants have completed the first audit following the
Effective Time of Acquiror's and the Targets' combined operations, but not later
than one year after the Closing Date.
SECTION 15.7. Expenses. Each of the parties shall pay all costs and
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated by this
Agreement, except as otherwise expressly provided for herein.
SECTION 15.8. Gender. Any reference to the masculine gender shall be deemed
to include the feminine and neuter genders unless the context otherwise
requires.
SECTION 15.9. Governing Law. This Agreement and all transactions
contemplated hereby shall be governed, construed and enforced in accordance with
the laws of the State of Washington, notwithstanding any state's choice of law
rules to the contrary.
SECTION 15.10. Headings. The subject headings of the articles and sections
of this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
SECTION 15.11. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by the
parties. The party for whose benefit a warranty, representation, covenant or
condition is intended may in writing waive any inaccuracies in the warranties
and representations contained in this Agreement or waive compliance with any of
the covenants or conditions contained herein and so waive performance of any of
the obligations of the other party hereto, and any defaults hereunder; provided,
however, that such waiver shall not affect or impair the waiving party's rights
with respect to any other warranty, representation or covenant or any default
hereunder, nor shall any waiver constitute a continuing waiver.
SECTION 15.12. Notices. All notices, requests, demands, waivers and other
communications required to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on (a) the date of service if served
personally on the party to whom notice is to be given, (b) the date sent if
given by telegram, confirmed facsimile transmission or telex addressed to the
party to whom notice is to be given or
-29-
(c) the third day after mailing if mailed to the party to whom notice is to be
given by certified mail, return receipt requested, and properly addressed as
follows:
If to Acquiror:
The Hillhaven Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxxxx, Xx.
Xxxxx & Gates
Two Union Square
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Fax: (000) 000-0000
If to any of the Targets:
Xx. Xxxxxx X. Xxxxxxxxx, Xx.
0000 Xxxxxxxx Xxxxxxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxxxx
Ice Xxxxxx Xxxxxxx & Xxxx
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Any party may change the address to which notice is to be sent or the telephone
number for facsimile transmission pursuant to this Section 15.11 by giving
written notice thereof in compliance with this section.
SECTION 15.13. Press Releases. Acquiror and the Targets shall consult with
each other with respect to the form and substance of any press release or other
public disclosure of matters related to this Agreement or any of the
transactions contemplated hereby.
SECTION 15.14. Rights of Parties. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any person other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third person to any
party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.
SECTION 15.15. Successors. This Agreement shall be binding on, and shall
inure to the benefit of, the parties and their respective successors and
assigns.
SECTION 15.16. Intent; Construction. It is the intent of the parties that
this Agreement and the transactions contemplated hereby will satisfy the
requirements contained in Section 368(a)(1)(B) of the Code and the regulations
promulgated thereunder, and that it will qualify as a corporate reorganization
without recognition of gain by any of the holders of Target Common Shares other
than to the extent any holder shall receive cash in lieu of fractional shares
for all or part of his, hers or its Target Common Shares, and this Agreement
shall be construed to effect the foregoing. Any transactions inconsistent with
the foregoing shall be void and of no force or effect.
-30-
SECTION 15.17. Release. NCI Acquisition Corp., a party to the Original
Agreement, is hereby released of any obligation under the Original Agreement and
shall have no obligation under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
THE HILLHAVEN CORPORATION
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx
Senior Vice President and Chief
Financial Officer
Attest: /s/ XXXXXXX X. XXXXXX
-----------------------------
Xxxxxxx X. Xxxxxx
Secretary
NATIONWIDE CARE, INC.
By: /s/ XXXXXX X. XXXXXXXXX, XX.
---------------------------------
Xx. Xxxxxx X. Xxxxxxxxx, Xx.
Chairman of the Board
Attest: /s/ XXXXXXX X. XXXXXXX
-----------------------------
Xxxxxxx X. Xxxxxxx
Secretary
PHILLIPPE ENTERPRISES, INC.
By: /s/ XXXXXX X. XXXXXXXXX, XX.
---------------------------------
Xx. Xxxxxx X. Xxxxxxxxx, Xx.
President
Attest: /s/ XXXXXX X. XXXXXXXXX, XX.
-----------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
Secretary
MEADOWVALE SKILLED CARE
CENTER, INC.
By: /s/ XXXXXX XXXXXXXX
---------------------------------
Xxxxxx Xxxxxxxx
President
Attest: /s/ XXXX X. XXXXXXXXX
-----------------------------
Xxxx X. Xxxxxxxxx
Secretary
-31-
THE PARTNERS OF
CAMELOT CARE CENTERS
/s/ XXXXXX XXXXXX
-------------------------------------
Xxxxxx Xxxxxx
THE PARTNERS OF
SHANGRI-LA PARTNERSHIP
/s/ XXXXXX X. XXXXXXXXX, XX.
-------------------------------------
Xx. Xxxxxx X. Xxxxxxxxx, Xx.
/s/ XXXXXX X. XXXXXXXXX, XX.
-------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
/s/ XXXX X. XXXXXX
-------------------------------------
Xxxx X. Xxxxxx, as Executor of Estate
of Xxx Xxxxxx
/s/ XXXXXXX X. XXXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxxx
THE LIMITED PARTNERS OF
EVERGREEN XXXXX, LTD.
/s/ XXXXXX X. XXXXXXXXX, XX.
-------------------------------------
Xx. Xxxxxx X. Xxxxxxxxx, Xx.
/s/ XXXXXX X. XXXXXXXXX, XX.
-------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
/s/ XXXXXX XXXXX
-------------------------------------
Xxxxxx Xxxxx
/s/ XXXXXX XXXXX
-------------------------------------
Xxxxxx Xxxxx
Each of the undersigned persons hereby agrees to vote all shares or
ownership interests owned by such person in each of the Targets (as defined in
this Agreement) in favor of approval of the transactions contemplated by this
Agreement.
/s/ XXXXXX X. XXXXXXXXX, XX.
-------------------------------------
Xx. Xxxxxx X. Xxxxxxxxx, Xx.
/s/ XXXXXX X. XXXXXXXXX, XX.
-------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
-32-
EXHIBIT LISTING
Exhibit 3.3(a). Escrow Agreement
Exhibit 3.3(b). Supplemental Escrow Agreement
Exhibit 6.6(a). Affiliate Letter
Exhibit 6.6(b). Pooling Letter
Exhibit 6.15. Tax Certificate of Targets
Exhibit 7.7. Tax Certificate of Acquiror and AC
Exhibit 12.2(h). Noncompetition Agreement
Exhibit 12.2(i). Agreement among Shareholders
-33-
EXHIBIT 3.3 (A)
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made this day of
, 1995, by and among The Hillhaven Corporation, a Nevada Corporation
(such corporation and its subsidiaries being referred to herein collectively as
"Acquiror"), the individuals listed on Exhibit A (collectively, the
"Shareholders") and Bank One, Indianapolis, N.A. (the "Escrow Agent").
EXPLANATION STATEMENT
A. Acquiror and the Targets are parties to that certain Amended and
Restated Agreement and Plan of Share Exchange and Agreements to Assign
Partnership Interests (the "Share Exchange Agreement"), dated as of February 27,
1995. Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings assigned thereto in the Share Exchange Agreement.
B. Prior to the Effective Time, the Shareholders owned all the capital
stock of the Corporate Targets and all the partnership interests in the
Partnership Targets.
C. In order to induce Acquiror to enter into the Share Exchange Agreement
and to consummate the transactions contemplated thereby, the Shareholders wish
to execute and deliver this Agreement and to deposit or to cause to be deposited
in escrow hereunder certificates representing ten percent (10%) of the Acquiror
Common Shares that comprise the Exchange Consideration (such percentage of
shares being referred to herein collectively as the "Escrow Shares") to secure
the indemnification obligations under Article XIII of the Share Exchange
Agreement, the terms of which Article are incorporated herein by this reference.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
and in consideration of the mutual covenants herein contained, agree as follows:
1. DEPOSIT OF ESCROW SHARES; ESCROW ACCOUNT; SHAREHOLDER AGENT.
1.1 Promptly following the Effective Time, Acquiror shall withhold from
the Exchange Consideration and deposit with the Escrow Agent the Escrow Shares.
The Escrow Agent shall establish an account (the "Escrow Account") for the
Shareholders and place the Escrow Shares therein. The Escrow Agent agrees that
the Escrow Shares shall be held in the Escrow Account and disbursed by the
Escrow Agent in accordance with, and subject to the terms and conditions of,
this Agreement.
1.2 Acquiror and the Shareholders acknowledge and agree that, to the
extent and for so long as Escrow Shares are held by the Escrow Agent hereunder,
Acquiror shall have, as of and from the date such Escrow Shares are received by
the Escrow Agent, a perfected, first priority security interest in such Escrow
Shares to secure the payment of amounts, if any, payable pursuant to Article
XIII of the Share Exchange Agreement. In connection therewith, the Shareholders
expressly agree (i) that the Escrow Agent is acting solely as Acquiror's agent
to the extent necessary to perfect Acquiror's first-priority security interest
in the Escrow Shares and (ii) to execute and deliver such instruments as
Acquiror may from time to time reasonably request for the purpose of evidencing
and perfecting such security interest.
1.3 All of the Shareholders hereby appoint Xxxxxx X. Xxxxxxxxx, Xx., an
individual (the "Shareholder Agent"), as their attorney-in-fact to act as their
agent in the performance of all of their obligations and exercise of all of
their rights under this Agreement.
2. VOTING RIGHTS; DIVIDENDS ON ESCROW SHARES; SALE OF SHARES; INVESTMENT OF
CASH.
2.1 All voting rights with respect to the Escrow Shares shall remain with
the Shareholders. All cash dividends on Escrow Shares shall be distributed by
Acquiror to the Escrow Agent. Within three (3) business days following receipt
thereof by the Escrow Agent, the Escrow Agent shall distribute such dividends in
respect of the Escrow Shares to the Shareholders, respectively.
-34-
2.2 All non-cash dividends (including, without limitation, any stock split,
share dividend, rights offering or recapitalization) on any Escrow Shares shall
be added to the Escrow Account as additional Escrow Shares fully subject to the
terms of this Agreement.
2.3 At any time while there are Escrow Shares in the Escrow Account, the
Shareholder Agent may, by delivering written instructions to the Escrow Agent,
direct the Escrow Agent to sell one or more of the Escrow Shares on the NYSE and
deposit the sale proceeds into the Escrow Account, which proceeds shall be
distributed, designated, withheld and otherwise subject to the terms of this
Agreement in the same manner and to the same extent as the Escrow Shares, except
that the Escrow Agent shall designate and withhold cash in the Escrow Account,
to the extent thereof, to Pending Claim Notices and Escrow Disposition Notices
(as defined in Section 4.2) prior to applying any remaining Escrow Shares to
such claims.
2.4 Cash deposited into the Escrow Account pursuant to Section 2.3 shall
be invested and reinvested by the Escrow Agent in (a) bonds, treasury notes or
other evidences of indebtedness of, and those unconditionally guaranteed as to
the payment of principal and interest by, the United States, (b) certificates of
deposit of banks or trust companies (including the Escrow Agent) organized under
the laws of the United States, or any state thereof, each of which has a
combined capital, surplus and retained earnings of at least $50,000,000 and (c)
money market funds, including short term investment funds of the Escrow Agent.
In investing and reinvesting any such monies, the Escrow Agent shall seek to
obtain the best yields consistent with safety of principal and ready
marketability. The Escrow Agent shall have no duty or right to invest cash on
deposit in the Escrow Account other than as provided in the foregoing sentence.
Earnings on cash so invested shall be paid to the Shareholders.
3. ACCOUNTING.
The Escrow Agent shall mail to Acquiror and the Shareholder Agent a written
accounting of all transactions relating to the Escrow Account not less
frequently than quarterly.
4. DISPOSITION OF ESCROW SHARES.
4.1 Prior to the Distribution Date (as defined in Section 4.3), Acquiror
will issue, or cause to be issued, from time to time to the Escrow Agent and the
Shareholder Agent one or more Pending Claim Notices in the form of Exhibit B
(each a "Pending Claim Notice") describing with particularity existing facts and
circumstances, if any, that are substantially likely, in the good faith judgment
of Acquiror, to give rise to a claim of indemnification under Article XIII of
the Share Exchange Agreement and designating the number of Escrow Shares
necessary to satisfy in whole or, if there are not sufficient Escrow Shares in
the Escrow Account, in part such claim. The Escrow Agent shall withhold and
distribute such designated number of Escrow Shares as required by Sections 4.2
and 4.3. For all designations, withholdings and distributions of Escrow Shares
pursuant to a Pending Claim Notice or Escrow Disposition Notice, the number of
Escrow Shares to be designated, withheld and/or distributed shall be (i)
determined using the average closing price of one Acquiror Common Share as
reported on the NYSE for the ten (10) trading days immediately preceding the
date of such notice and (ii) rounded to the nearest whole share. To the extent
Acquiror and the Shareholder Agent are not in dispute as to the distribution or
retention of Escrow Shares withheld pursuant to a Pending Claim Notice, Acquiror
and the Shareholder Agent shall promptly prepare an Escrow Disposition Notice
(as defined in Section 4.2) directing the Escrow Agent to so distribute or
retain such Escrow Shares.
4.2 The Escrow Agent shall distribute the Escrow Shares only in accordance
with (i) written instructions contained in one or more notices in the form of
Exhibit C (each an "Escrow Disposition Notice") delivered to the Escrow Agent
and executed by Acquiror and the Shareholder Agent, (ii) a final arbitration
award secured under the provisions of Section 4.4 hereof, (iii) an order of a
court of competent jurisdiction pursuant to Section 9 hereof or (iv) the
procedures set forth in Section 4.3, as applicable. The Escrow Agent shall
promptly comply with such instructions, award, order or procedures, as
applicable, to the extent that there are sufficient Escrow Shares in the Escrow
Account to so comply.
4.3 Promptly following the date that Acquiror's independent accountants
have completed the first audit following the Effective Time of Acquiror's and
the Targets' combined operations, but not later than one year after the Closing
Date (such audit completion date being referred to herein as the "Distribution
Date"), the
-35-
Escrow Agent shall distribute to each Shareholder from the Escrow Account his or
her percentage interest, as listed on Exhibit A, of the Escrow Shares remaining
in the Escrow Account less the number of Escrow Shares specified in any
unresolved Pending Claim Notice(s) received by the Escrow Agent prior to the
Distribution Date, which specified Escrow Shares the Escrow Agent shall withhold
from such distribution and not distribute except as provided in clause (i), (ii)
or (iii) of Section 4.2, as applicable. If the first audit of Acquiror's and the
Targets' combined operations is completed on or before the date that is one year
after the Closing Date, then Acquiror shall notify the Escrow Agent and the
Shareholder Agent in writing of such completion within five (5) days following
such completion.
4.4 Acquiror and the Shareholder Agent agree to use their respective best
efforts to resolve any dispute that may arise with respect to this Agreement,
including without limitation any dispute regarding the validity of or the amount
of Escrow Shares designated in any Pending Claim Notice, amicably and without
resort to any third party dispute resolution forum. At any time Acquiror on the
one hand or the Shareholder Agent on the other believes that a dispute exists
among the parties with respect to this Agreement, it or he shall give prompt
written notice thereof to the other party(s). Any dispute which has not been
settled or resolved within thirty (30) days of receipt by Acquiror or the
Shareholder Agent of the notice thereof shall be submitted for binding
arbitration in Xxxxxx County, Indiana in an arbitration proceeding that, except
as may otherwise be provided herein, shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association before a
single arbitrator chosen in accordance with such rules. All evidentiary and
discovery matters shall be conducted in accordance with and governed by the
applicable Federal Rules of Civil Procedure. No later than 10 calendar days
after the arbitrator is appointed, the arbitrator shall schedule the arbitration
for a hearing to commence on a mutually convenient date. All discovery shall be
completed no later than the commencement of the arbitration hearing or 90
calendar days after the date that a proper demand for arbitration is served,
whichever occurs first, unless, upon a showing of good cause, the arbitrator
extends such period. The hearing shall commence no later than 90 calendar days
after the arbitrator is appointed and shall continue until completed. The
arbitrator shall issue his or her award in writing no later than 20 calendar
days after the conclusion of the hearing. The parties to this Agreement agree
that, in rendering an award, the arbitrator shall have no jurisdiction to
consider evidence with respect to or render any award of judgment for punitive
damages or any other amount awarded for purposes of imposing a penalty. The
arbitrator shall not have the power to amend this Agreement in any respect. The
arbitrator's decision shall be binding and conclusive upon the parties. The
costs of any arbitration conducted pursuant to this Section 4.4 shall be borne
by the non-prevailing party(s), as identified by the arbitrator, regardless of
whether the subject dispute is arbitrated to completion. Each party hereto
agrees to provide notice of the commencement of any such arbitration proceeding
to the Escrow Agent and the other parties, as the case may be.
5. CONTROL OF LITIGATION.
5.1 Within 20 calendar days following receipt by Acquiror of notice of any
claim by a third party or of the commencement of any action or proceeding by a
third party which may give rise to an indemnity claim under Article XIII of the
Share Exchange Agreement, Acquiror shall notify the Shareholder Agent in writing
of such claim, action or proceeding; provided, that failure to give such
notification shall not affect Acquiror's rights to indemnification under Article
XIII of the Share Exchange Agreement, except to the extent the Shareholder Agent
shall have been prejudiced as a result of such failure. Upon receipt of such
written notice, the Shareholder Agent shall be entitled to participate in and,
to the extent that it may wish, unless it is reasonably foreseeable that the
Losses from such claim, action or proceeding will exceed the value of the Escrow
Shares remaining in the Escrow Account or such claim, action or proceeding
involves a claim for injunction or other specific relief, assume the defense,
conduct or settlement of such claim, action or proceeding by giving written
notice thereof to Acquiror within forty-five (45) days of his receipt of notice
of such claim, action or proceeding. After delivery of such notice to Acquiror,
the Shareholders shall not be liable to Acquiror for any legal expenses
subsequently incurred by Acquiror in connection with the defense, conduct or
settlement of such claim, action or proceeding; provided, that, if the
Shareholder Agent fails to take reasonable steps necessary to diligently defend
such claim, action or proceeding within 20 calendar days after receiving written
notice from Acquiror that it believes the Shareholder Agent has failed to take
such steps, then Acquiror may assume such defense, and the Shareholders shall be
liable for any expenses therefor.
-36-
Without limiting the foregoing sentence, if the Shareholder Agent assumes the
defense of a third party claim, action or proceeding hereunder, then Acquiror
shall have the right to participate in such defense at its own expense by giving
prompt written notice thereof to the Shareholder Agent. If, after assuming the
defense of a third party claim, action or proceeding hereunder, the Shareholder
Agent obtains an award from the third party claimant on behalf of the
Shareholders, then Acquiror shall be entitled to recover its costs, including
reasonable attorney's fees of outside counsel incurred in defending such claim
and obtaining such award, from the proceeds of such award; provided, that such
recovery shall not be a waiver of any right, claim or amount to which Acquiror
may otherwise be entitled. In the event the Shareholder Agent assumes the
defense of a claim, action or proceeding hereunder, the Shareholder Agent shall
be entitled to receive from the Escrow Agent distributions of cash or Escrow
Shares from the Escrow Account to reimburse the Shareholder Agent (and, thereby,
the Shareholders for whom he will be acting) for the reasonable costs incurred
in such defense as well as the costs of any settlement or damages paid with
respect to such claim, action or proceeding. The Escrow Agent shall make such a
distribution to the Shareholder Agent only upon the receipt of a properly
executed Escrow Disposition Notice.
5.2 To the extent that a third party may be responsible for a Loss
incurred or suffered by Acquiror, Acquiror either (a) may seek recovery of the
Loss from the third party, in which case the Shareholders shall be responsible
only to the extent that the Loss is not recoverable from the third party (other
than claims for Losses incurred in obtaining such recovery), or (b) seek
indemnification from the Shareholders for the Loss pursuant to Article XIII of
the Share Exchange Agreement, in which case Acquiror shall assign to the
Shareholders all rights relating to the Loss that Acquiror may have against the
third party, shall not release the third party from its obligations and shall
cooperate with the Shareholders and take all other action reasonably requested
by the Shareholders to enable them to seek recovery of the Loss from the third
party.
5.3 Notwithstanding anything herein to the contrary, neither Acquiror on
the one hand nor the Shareholder Agent on the other shall have the right to
settle or compromise a third-party claim, action or proceeding without obtaining
the prior written consent of the other, which consent shall not be unreasonably
withheld. In addition, the Shareholder Agent shall not permit to exist any lien,
encumbrance or other adverse charge upon any asset of, or consent to the
imposition of any injunction against, Acquiror or any of its respective
affiliates without obtaining its prior written consent, which consent shall not
be unreasonably withheld.
6. ESCROW PROVISIONS.
6.1 Upon termination of this Agreement and delivery of the balance of the
Escrow Shares to the parties entitled thereto, the Escrow Agent shall be
discharged from any further obligation hereunder.
6.2 The Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety, validity or service
thereof. The Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person purporting to give
notice or receipt or advice, or make any statement or execute any document, in
connection with the provisions hereof has been duly authorized to do so.
6.3 The Escrow Agent shall not be liable to the other parties hereto for
any error of judgment, action taken or omitted in good faith or mistake of fact
or law, or anything which it may do or refrain from doing in connection
therewith, except in the case of its own gross negligence, willful misconduct or
bad faith.
6.4 The Escrow Agent shall be entitled to consult with competent and
responsible counsel of its choice with respect to the interpretation of the
provisions hereof, and any other legal matters relating hereto, and shall be
fully protected in taking any action or omitting to take any action in good
faith and in accordance with the advice of such counsel.
6.5 The Escrow Agent shall be entitled to be indemnified and held harmless
by Acquiror and the Shareholders, jointly and severally, for any and all claims,
liabilities, costs, payments and expenses, including reasonable fees of counsel
(who may be selected by the Escrow Agent), incurred by the Escrow Agent which
-37-
arise out of or in connection with any act or omission by it in the performance
of its obligations under this Agreement, except in the case of the Escrow
Agent's own gross negligence, willful misconduct or bad faith.
7. TIME OF PERFORMANCE. Whenever under the terms hereof the time for
performance of any provision shall fall on a date which is not a regular
business day of the Escrow Agent, the performance thereof on the next succeeding
regular business day of the Escrow Agent shall be deemed to be in full
compliance.
8. DEATH, DISABILITY, ETC. The death, disability, bankruptcy or insolvency
of any of the Shareholders shall not affect or prevent the performance by the
Escrow Agent of its obligations and instructions received hereunder. Without
limiting the foregoing sentence, the Shareholder Agent shall notify the Escrow
Agent in writing of any person who or that, as a result of a Shareholder's
death, disability, bankruptcy or insolvency, should receive distributions, if
any, that would otherwise be made hereunder to such Shareholder.
9. RESOLUTION OF CONTROVERSIES. In the event any dispute or controversy
arises respecting the administration or disposition of the Escrow Shares, or any
part thereof, and such dispute or controversy has not been submitted to
arbitration as provided in Section 4.4 hereof, the Escrow Agent shall have the
right but not the obligation to interplead the parties to such dispute or
controversy in any court of competent jurisdiction, including but not limited to
the courts of the State of Indiana and the United States District Court for the
Southern District of Indiana which shall be deemed to be courts of competent
jurisdiction, and to deposit with such court the Escrow Shares remaining in the
Escrow Account, or any portion thereof. Thereafter the Escrow Agent shall be
fully released and discharged from all further obligations hereunder with
respect to the Escrow Shares held in the Escrow Account or the portion thereof
deposited with the court in such proceedings, except in the case of its own
gross negligence, willful misconduct, or bad faith. Acquiror and the
Shareholders, jointly and severally, shall reimburse the Escrow Agent for all
expenses, fees and charges (including reasonable attorneys' fees and expenses)
reasonably incurred by the Escrow Agent in any such interpleader action.
10. RESIGNATION OR REMOVAL OF ESCROW AGENT. If the Escrow Agent resigns or
is removed, then Acquiror and the Shareholder Agent shall mutually agree upon
and name a substitute for the Escrow Agent ("Successor Escrow Agent"), which
shall be a bank or trust company and which shall perform the same duties and
responsibilities, and which shall be entitled to the same protection and
substantially equivalent fees, as the original Escrow Agent named herein. The
Escrow Agent shall have the unequivocal right to resign as Escrow Agent upon at
least sixty (60) days' prior written notice delivered to Acquiror and the
Shareholder Agent; provided, that, in any event, such resignation shall not be
effective until such time as a Successor Escrow Agent has been appointed, has
accepted its appointment and has taken possession of the Escrow Shares. Upon
mutual agreement by Acquiror and the Shareholder Agent, the Escrow Agent may be
removed upon at least sixty (60) days' prior written notice; provided, that, in
any event, such removal shall not be effective until such time as a Successor
Escrow Agent has been appointed, has accepted its appointment and has taken
possession of the Escrow Shares. In either of said events, if a Successor Escrow
Agent is not appointed within said sixty (60) day period, the Escrow Agent,
Acquiror or the Shareholder Agent may petition a court of competent jurisdiction
to name a Successor Escrow Agent, whether by interpleader or other appropriate
action, and the decision of such court shall be binding upon all parties to this
Agreement.
11. ACCEPTANCE OF ESCROW: COMPENSATION OF ESCROW AGENT. The Escrow Agent
hereby agrees to serve as Escrow Agent pursuant to this Agreement and to perform
the duties and responsibilities conferred upon it hereunder. The Escrow Agent
has agreed to serve hereunder for such fees as are set forth in Exhibit D, which
fees are to be paid as described in Exhibit D. Such fees shall be borne by
Acquiror.
12. TERMINATION. This Agreement shall terminate without further action of
any party when all of the terms hereof shall have been fully performed.
-38-
13. NOTICES. Any notice, request, instruction or other document to be given
under this Agreement by any party shall be in writing and shall be delivered
personally, by registered or certified mail, postage prepaid, return receipt
requested, by overnight courier or by facsimile transmission, as follows:
(a) If to Acquiror, at:
The Hillhaven Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxxxx, Xx.
Xxxxx & Gates
Two Union Square
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
(b) If to the Shareholders, at:
c/o Xxxxxx X. Xxxxxxxxx, Xx.
Attention:
Facsimile:
With a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
ICE XXXXXX XXXXXXX & XXXX
Xxx Xxxxxxxx Xxxxxx
Xxx 00000
Xxxxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
or to such other address or person as any party may designate by a notice to the
other parties which is given in the manner required above. Any such notice,
request, instruction or other document shall be deemed to have been delivered
and received as of the date personally delivered, or if mailed, three days after
the date so mailed, or if telecopied, the date on which such telecopy is sent
(as confirmed by return facsimile transmission) or if by overnight courier the
day following the day on which such notice is properly placed with the courier.
14. COOPERATION WITH ESCROW AGENT. The parties to this Agreement shall
cooperate with the Escrow Agent, as the Escrow Agent reasonably deems necessary
or desirable to perform its duties and obligations under this Agreement. Without
limiting the foregoing, the parties shall provide the Escrow Agent with all
information necessary to make any distribution, including names, addresses,
social security numbers and tax identification numbers. The Escrow Agent shall
be entitled to rely upon the most recent information received from any party
without further inquiry and each party shall be responsible for notifying the
Escrow Agent of any new or changed information pertaining to such party.
15. TAXES: REPORTS TO GOVERNMENTAL AUTHORITIES. The Shareholders severally
agree to assume any obligations imposed now or hereafter by any applicable tax
law with respect to any payment from the Escrow Account to the Shareholders
under this Agreement and undertake to instruct the Escrow Agent in writing with
respect to the Escrow Agent's responsibility for withholding taxes and any other
taxes, assessments or
-39-
other governmental charges and any certifications and governmental reporting
required in connection therewith.
16. MISCELLANEOUS.
16.1 This Agreement may not be amended or modified in any way except by an
instrument in writing signed by all of the parties hereto.
16.2 This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Indiana without reference to its conflicts of law
provisions.
16.3 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
16.4 The headings contained in this Agreement are for convenience only,
shall not affect this Agreement in any way, and shall not be used to construe or
interpret the scope or intent of this Agreement.
16.5 This Agreement shall inure to the benefit of and shall bind the
parties hereto and their respective heirs, devisees, personal representatives,
successors, transferees and assigns; provided, that, except as otherwise
expressly set forth in this Agreement, including without limitation Section 10,
neither the rights nor the obligations of any party may be assigned or delegated
without the prior written consent of the other parties.
IN WITNESS WHEREOF, the parties have duly executed and have caused to be
duly executed this Agreement as of the date first written above.
THE HILLHAVEN CORPORATION
By
------------------------------------
Name:
Title:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
BANK ONE, INDIANAPOLIS, N.A.
By
------------------------------------
Name:
Title:
-40-
EXHIBIT A
SHAREHOLDERS
INDIVIDUAL PERCENTAGE
- ----------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
-41-
EXHIBIT B
PENDING CLAIM NOTICE
To: Bank One, Indianapolis, N.A.
From: The Hillhaven Corporation
Date:
------------------------------
This Pending Claim Notice is delivered to you pursuant to Section 4.1 of
the Escrow Agreement, dated , 1995 (the "Escrow Agreement"), by and among
The Hillhaven Corporation, a Nevada corporation, the Shareholders and Bank One,
Indianapolis, N.A. Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to those terms in the Escrow Agreement.
Please be advised that you are hereby instructed to withhold from the
distribution to the Shareholders that is due to be made on the Distribution Date
from the Escrow Account a total of Escrow Shares.
The undersigned maintains in good faith that it is entitled to
indemnification in the aforementioned amount of Escrow Shares pursuant to the
terms of the Share Exchange Agreement based upon the following:
[LIST INDEMNIFICATION ITEMS AND THE AMOUNT OF EACH ITEM. ATTACH ANY
DOCUMENTS REASONABLY DEMONSTRATING THE INDEMNIFICATION ITEMS.]
The Shareholder Agent has been sent a copy of this Pending Claim Notice
along with any attached information relating to the claimed right to
indemnification.
Signed this day of , 199 .
THE HILLHAVEN CORPORATION
By
--------------------------------
Name:
Title:
-42-
EXHIBIT C
ESCROW DISPOSITION NOTICE
To: Bank One, Indianapolis, N.A.
From: The Hillhaven Corporation
Xxxxxx X. Xxxxxxxxx, Xx.
Date:
-------------------------------
This Escrow Disposition Notice is delivered to you pursuant to Section 4.2
of the Escrow Agreement, dated , 1995 (the "Escrow Agreement"), by and
among The Hillhaven Corporation, a Nevada corporation, the Shareholders and Bank
One, Indianapolis, N.A. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to those terms in the Escrow Agreement.
Please be advised that you are hereby directed to [distribute from] [retain
in] the Escrow Account the property now held in your possession and described
herein in the following manner, to wit:
[STATE THE NUMBER OF ESCROW SHARES TO BE DISTRIBUTED OR RETAINED AND, IF
DISTRIBUTED, THE RECIPIENT(S) OF SUCH SHARES]
Signed this day of , 199 .
THE HILLHAVEN CORPORATION
By
-----------------------------------
Name:
Title:
--------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
-43-
EXHIBIT D
ESCROW AGENT FEES
DOLLARS ($ ) PER YEAR
-44-
EXHIBIT 3.3(B)
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made this day of ,
1995, by and among The Hillhaven Corporation, a Nevada Corporation (such
corporation and its subsidiaries being referred to herein collectively as
"Acquiror"), the individuals listed on Exhibit A (collectively, the
"Shareholders") and Bank One, Indianapolis, N.A. (the "Escrow Agent").
EXPLANATION STATEMENT
A. Acquiror and the Targets are parties to that certain Amended and
Restated Agreement and Plan of Share Exchange and Agreements to Assign
Partnership Interests (the "Share Exchange Agreement"), dated as of February 27,
1995. Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings assigned thereto in the Share Exchange Agreement.
B. Prior to the Effective Time, the Shareholders owned all the capital
stock of Nationwide Care, Inc., an Indiana corporation.
C. In order to induce Acquiror to enter into the Share Exchange Agreement
and to consummate the transactions contemplated thereby, the Shareholders wish
to execute and deliver this Agreement and to deposit or to cause to be deposited
in escrow hereunder certificates representing five percent (5%) of the Acquiror
Common Shares that comprise the Exchange Consideration (such percentage of
shares being referred to herein collectively as the "Escrow Shares") to secure
the indemnification obligations under Article XIV of the Share Exchange
Agreement, the terms of which Article are incorporated herein by this reference.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
and in consideration of the mutual covenants herein contained, agree as follows:
1. DEPOSIT OF ESCROW SHARES; ESCROW ACCOUNT; SHAREHOLDER AGENT.
1.1 Promptly following the Effective Time, Acquiror shall withhold from
the Exchange Consideration and deposit with the Escrow Agent the Escrow Shares.
The Escrow Agent shall establish an account (the "Escrow Account") for the
Shareholders and place the Escrow Shares therein. The Escrow Agent agrees that
the Escrow Shares shall be held in the Escrow Account and disbursed by the
Escrow Agent in accordance with, and subject to the terms and conditions of,
this Agreement.
1.2 Acquiror and the Shareholders acknowledge and agree that, to the
extent and for so long as Escrow Shares are held by the Escrow Agent hereunder,
Acquiror shall have, as of and from the date such Escrow Shares are received by
the Escrow Agent, a perfected, first priority security interest in such Escrow
Shares to secure the payment of amounts, if any, payable pursuant to Article XIV
of the Share Exchange Agreement. In connection therewith, the Shareholders
expressly agree (i) that the Escrow Agent is acting solely as Acquiror's agent
to the extent necessary to perfect Acquiror's first-priority security interest
in the Escrow Shares and (ii) to execute and deliver such instruments as
Acquiror may from time to time reasonably request for the purpose of evidencing
and perfecting such security interest.
1.3 All of the Shareholders hereby appoint Xxxxxx X. Xxxxxxxxx, Xx., an
individual (the "Shareholder Agent"), as their attorney-in-fact to act as their
agent in the performance of all of their obligations and exercise of all of
their rights under this Agreement.
2. VOTING RIGHTS; DIVIDENDS ON ESCROW SHARES; SALE OF SHARES; INVESTMENT OF
CASH.
2.1 All voting rights with respect to the Escrow Shares shall remain with
the Shareholders. All cash dividends on Escrow Shares shall be distributed by
Acquiror to the Escrow Agent. Within three (3) business days following receipt
thereof by the Escrow Agent, the Escrow Agent shall distribute such dividends in
respect of the Escrow Shares to the Shareholders, respectively.
-45-
2.2 All non-cash dividends (including, without limitation, any stock
split, share dividend, rights offering or recapitalization) on any Escrow Shares
shall be added to the Escrow Account as additional Escrow Shares fully subject
to the terms of this Agreement.
2.3 At any time while there are Escrow Shares in the Escrow Account, the
Shareholder Agent may, by delivering written instructions to the Escrow Agent,
direct the Escrow Agent to sell one or more of the Escrow Shares on the NYSE and
deposit the sale proceeds into the Escrow Account, which proceeds shall be
distributed, designated, withheld and otherwise subject to the terms of this
Agreement in the same manner and to the same extent as the Escrow Shares.
2.4 Cash deposited into the Escrow Account pursuant to Section 2.3 shall
be invested and reinvested by the Escrow Agent in (a) bonds, treasury notes or
other evidences of indebtedness of, and those unconditionally guaranteed as to
the payment of principal and interest by, the United States, (b) certificates of
deposit of banks or trust companies (including the Escrow Agent) organized under
the laws of the United States, or any state thereof, each of which has a
combined capital, surplus and retained earnings of at least $50,000,000 and (c)
money market funds, including short term investment funds of the Escrow Agent.
In investing and reinvesting any such monies, the Escrow Agent shall seek to
obtain the best yields consistent with safety of principal and ready
marketability. The Escrow Agent shall have no duty or right to invest cash on
deposit in the Escrow Account other than as provided in the foregoing sentence.
Earnings on cash so invested shall be paid to the Shareholders.
3. ACCOUNTING.
The Escrow Agent shall mail to Acquiror and the Shareholder Agent a written
accounting of all transactions relating to the Escrow Account not less
frequently than quarterly.
4. DISPOSITION OF ESCROW SHARES.
4.1 The Escrow Agent shall distribute the Escrow Shares only in accordance
with (i) written instructions contained in the form of Exhibit B (the "Escrow
Disposition Notice") delivered to the Escrow Agent and executed by Acquiror and
the Shareholder Agent, (ii) a final arbitration award secured under the
provisions of Section 4.3 hereof, or (iii) an order of a court of competent
jurisdiction pursuant to Section 9, as applicable. The Escrow Agent shall
promptly comply with such instructions, award or order, as applicable, to the
extent that there are sufficient Escrow Shares in the Escrow Account to so
comply. The number of Escrow Shares to be distributed hereunder shall be (i)
determined using the average closing price of one Acquiror Common Share as
reported on the NYSE for the ten (10) trading days immediately preceding the
date of such distribution and (ii) rounded to the nearest whole share.
4.2 Promptly following the earlier of the date that the [redacted]
Litigation (as defined in this Section 4.2) has been settled or otherwise
finally resolved or the date that a summary judgment to the effect that punitive
damages will not be allowed in such litigation has been granted, either of which
must be reflected in a final order of a court of competent jurisdiction from
which appeal may not be taken (due to lapse of time or otherwise), Acquiror and
the Shareholder Agent shall, subject to Section 4.3, prepare and deliver to the
Escrow Agent the Escrow Disposition Notice, and the Escrow Agent shall
distribute the Escrow Shares to the Shareholders and/or Acquiror in accordance
therewith. As used herein, the "[redacted] Litigation" shall mean [redacted].
4.3 Acquiror and the Shareholder Agent agree to use their respective best
efforts to resolve any dispute that may arise with respect to this Agreement
amicably and without resort to any third party dispute resolution forum. At any
time Acquiror on the one hand or the Shareholder Agent on the other believes
that a dispute exists among the parties with respect to this Agreement, it or he
shall give prompt written notice thereof to the other party(s). Any dispute
which has not been settled or resolved within thirty (30) days of receipt by
Acquiror or the Shareholder Agent of the notice thereof shall be submitted for
binding arbitration in Xxxxxx County, Indiana in an arbitration proceeding that,
except as may otherwise be provided herein, shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
before a single arbitrator chosen in accordance with such rules. All evidentiary
and discovery matters shall be conducted in accordance with and governed by the
applicable Federal Rules of Civil Procedure. No later than
-46-
10 calendar days after the arbitrator is appointed, the arbitrator shall
schedule the arbitration for a hearing to commence on a mutually convenient
date. All discovery shall be completed no later than the commencement of the
arbitration hearing or 90 calendar days after the date that a proper demand for
arbitration is served, whichever occurs first, unless, upon a showing of good
cause, the arbitrator extends such period. The hearing shall commence no later
than 90 calendar days after the arbitrator is appointed and shall continue until
completed. The arbitrator shall issue his or her award in writing no later than
20 calendar days after the conclusion of the hearing. The parties to this
Agreement agree that, in rendering an award, the arbitrator shall have no
jurisdiction to consider evidence with respect to or render any award of
judgment for punitive damages or any other amount awarded for purposes of
imposing a penalty. The arbitrator shall not have the power to amend this
Agreement in any respect. The arbitrator's decision shall be binding and
conclusive upon the parties. The costs of any arbitration conducted pursuant to
this Section 4.3 shall be borne by the non-prevailing party(s), as identified by
the arbitrator, regardless of whether the subject dispute is arbitrated to
completion. Each party hereto agrees to provide notice of the commencement of
any such arbitration proceeding to the Escrow Agent and the other parties, as
the case may be.
5. CONTROL OF LITIGATION.
5.1 The Shareholder Agent shall control the defense, conduct or settlement
of the [redacted] Litigation, and Acquiror shall have the right, at its own
expense, to participate therein by giving written notice to the Shareholder
Agent. If the Shareholder Agent obtains an award from the third party claimant
in the [redacted] Litigation on behalf of the Shareholders, then Acquiror shall
be entitled to recover its costs, including reasonable attorney's fees of
outside counsel incurred in defending such claim and obtaining such award, from
the proceeds of such award; provided, that such recovery shall not be a waiver
of any right, claim or amount to which Acquiror may otherwise be entitled.
5.2 Notwithstanding anything herein to the contrary, the Shareholder Agent
shall not have the right to settle or compromise the [redacted] Litigation
without obtaining the prior written consent of Acquiror, which consent shall not
be unreasonably withheld. In addition, the Shareholder Agent shall not permit to
exist any lien, encumbrance or other adverse charge upon any asset of, or
consent to the imposition of any injunction against, Acquiror or any of its
affiliates without obtaining its prior written consent, which consent shall not
be unreasonably withheld.
6. ESCROW PROVISIONS.
6.1 Upon termination of this Agreement and delivery of the balance of the
Escrow Shares to the parties entitled thereto, the Escrow Agent shall be
discharged from any further obligation hereunder.
6.2 The Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety, validity or service
thereof. The Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person purporting to give
notice or receipt or advice, or make any statement or execute any document, in
connection with the provisions hereof has been duly authorized to do so.
6.3 The Escrow Agent shall not be liable to the other parties hereto for
any error of judgment, action taken or omitted in good faith or mistake of fact
or law, or anything which it may do or refrain from doing in connection
therewith, except in the case of its own gross negligence, willful misconduct or
bad faith.
6.4 The Escrow Agent shall be entitled to consult with competent and
responsible counsel of its choice with respect to the interpretation of the
provisions hereof, and any other legal matters relating hereto, and shall be
fully protected in taking any action or omitting to take any action in good
faith and in accordance with the advice of such counsel.
6.5 The Escrow Agent shall be entitled to be indemnified and held harmless
by Acquiror and the Shareholders, jointly and severally, for any and all claims,
liabilities, costs, payments and expenses, including reasonable fees of counsel
(who may be selected by the Escrow Agent), incurred by the Escrow Agent which
-47-
arise out of or in connection with any act or omission by it in the performance
of its obligations under this Agreement, except in the case of the Escrow
Agent's own gross negligence, willful misconduct or bad faith.
7. TIME OF PERFORMANCE. Whenever under the terms hereof the time for
performance of any provision shall fall on a date which is not a regular
business day of the Escrow Agent, the performance thereof on the next succeeding
regular business day of the Escrow Agent shall be deemed to be in full
compliance.
8. DEATH, DISABILITY, ETC. The death, disability, bankruptcy or insolvency
of any of the Shareholders shall not affect or prevent the performance by the
Escrow Agent of its obligations and instructions received hereunder. Without
limiting the foregoing sentence, the Shareholder Agent shall notify the Escrow
Agent in writing of any person who or that, as a result of a Shareholder's
death, disability, bankruptcy or insolvency, should receive distributions, if
any, that would otherwise be made hereunder to such Shareholder.
9. RESOLUTION OF CONTROVERSIES. In the event any dispute or controversy
arises respecting the administration or disposition of the Escrow Shares, or any
part thereof, and such dispute or controversy has not been submitted to
arbitration as provided in Section 4.3 hereof, the Escrow Agent shall have the
right but not the obligation to interplead the parties to such dispute or
controversy in any court of competent jurisdiction, including but not limited to
the courts of the State of Indiana and the United States District Court for the
Southern District of Indiana which shall be deemed to be courts of competent
jurisdiction, and to deposit with such court the Escrow Shares remaining in the
Escrow Account, or any portion thereof. Thereafter the Escrow Agent shall be
fully released and discharged from all further obligations hereunder with
respect to the Escrow Shares held in the Escrow Account or the portion thereof
deposited with the court in such proceedings, except in the case of its own
gross negligence, willful misconduct, or bad faith. Acquiror and the
Shareholders, jointly and severally, shall reimburse the Escrow Agent for all
expenses, fees and charges (including reasonable attorneys' fees and expenses)
reasonably incurred by the Escrow Agent in any such interpleader action.
10. RESIGNATION OR REMOVAL OF ESCROW AGENT. If the Escrow Agent resigns or
is removed, then Acquiror and the Shareholder Agent shall mutually agree upon
and name a substitute for the Escrow Agent ("Successor Escrow Agent"), which
shall be a bank or trust company and which shall perform the same duties and
responsibilities, and which shall be entitled to the same protection and
substantially equivalent fees, as the original Escrow Agent named herein. The
Escrow Agent shall have the unequivocal right to resign as Escrow Agent upon at
least sixty (60) days' prior written notice delivered to Acquiror and the
Shareholder Agent; provided, that, in any event, such resignation shall not be
effective until such time as a Successor Escrow Agent has been appointed, has
accepted its appointment and has taken possession of the Escrow Shares. Upon
mutual agreement by Acquiror and the Shareholder Agent, the Escrow Agent may be
removed upon at least sixty (60) days' prior written notice; provided, that, in
any event, such removal shall not be effective until such time as a Successor
Escrow Agent has been appointed, has accepted its appointment and has taken
possession of the Escrow Shares. In either of said events, if a Successor Escrow
Agent is not appointed within said sixty (60) day period, the Escrow Agent,
Acquiror or the Shareholder Agent may petition a court of competent jurisdiction
to name a Successor Escrow Agent, whether by interpleader or other appropriate
action, and the decision of such court shall be binding upon all parties to this
Agreement.
11. ACCEPTANCE OF ESCROW: COMPENSATION OF ESCROW AGENT. The Escrow Agent
hereby agrees to serve as Escrow Agent pursuant to this Agreement and to perform
the duties and responsibilities conferred upon it hereunder. The Escrow Agent
has agreed to serve hereunder for such fees as are set forth in Exhibit C, which
fees are to be paid as described in Exhibit C. Such fees shall be borne by
Acquiror.
12. TERMINATION. This Agreement shall terminate without further action of
any party when all of the terms hereof shall have been fully performed.
-48-
13. NOTICES. Any notice, request, instruction or other document to be given
under this Agreement by any party shall be in writing and shall be delivered
personally, by registered or certified mail, postage prepaid, return receipt
requested, by overnight courier or by facsimile transmission, as follows:
(a) If to Acquiror, at:
The Hillhaven Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxxxx, Xx.
Xxxxx & Gates
Two Union Square
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
(b) If to the Shareholders, at:
c/o Xxxxxx X. Xxxxxxxxx, Xx.
---------------------------------------------
---------------------------------------------
Attention:
Facsimile:
With a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
ICE XXXXXX XXXXXXX & XXXX
Xxx Xxxxxxxx Xxxxxx
Xxx 00000
Xxxxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
or to such other address or person as any party may designate by a notice to the
other parties which is given in the manner required above. Any such notice,
request, instruction or other document shall be deemed to have been delivered
and received as of the date personally delivered, or if mailed, three days after
the date so mailed, or if telecopied, the date on which such telecopy is sent
(as confirmed by return facsimile transmission) or if by overnight courier the
day following the day on which such notice is properly placed with the courier.
14. COOPERATION WITH ESCROW AGENT. The parties to this Agreement shall
cooperate with the Escrow Agent, as the Escrow Agent reasonably deems necessary
or desirable to perform its duties and obligations under this Agreement. Without
limiting the foregoing, the parties shall provide the Escrow Agent with all
information necessary to make any distribution, including names, addresses,
social security numbers and tax identification numbers. The Escrow Agent shall
be entitled to rely upon the most recent information received from any party
without further inquiry and each party shall be responsible for notifying the
Escrow Agent of any new or changed information pertaining to such party.
15. TAXES: REPORTS TO GOVERNMENTAL AUTHORITIES. The Shareholders severally
agree to assume any obligations imposed now or hereafter by any applicable tax
law with respect to any payment from the Escrow Account to the Shareholders
under this Agreement and undertake to instruct the Escrow Agent in writing with
respect to the Escrow Agent's responsibility for withholding taxes and any other
taxes, assessments or
-49-
other governmental charges and any certifications and governmental reporting
required in connection therewith.
16. MISCELLANEOUS.
16.1 This Agreement may not be amended or modified in any way except by an
instrument in writing signed by all of the parties hereto.
16.2 This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Indiana without reference to its conflicts of law
provisions.
16.3 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
16.4 The headings contained in this Agreement are for convenience only,
shall not affect this Agreement in any way, and shall not be used to construe or
interpret the scope or intent of this Agreement.
16.5 This Agreement shall inure to the benefit of and shall bind the
parties hereto and their respective heirs, devisees, personal representatives,
successors, transferees and assigns; provided, that, except as otherwise
expressly set forth in this Agreement, including without limitation Section 10,
neither the rights nor the obligations of any party may be assigned or delegated
without the prior written consent of the other parties.
IN WITNESS WHEREOF, the parties have duly executed and have caused to be
duly executed this Agreement as of the date first written above.
THE HILLHAVEN CORPORATION
By
----------------------------------
Name:
Title:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
BANK ONE, INDIANAPOLIS, N.A.
By
----------------------------------
Name:
Title:
-50-
EXHIBIT A
SHAREHOLDERS
INDIVIDUAL
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
-51-
EXHIBIT B
ESCROW DISPOSITION NOTICE
To: Bank One, Indianapolis, N.A.
From: The Hillhaven Corporation
Xxxxxx X. Xxxxxxxxx, Xx.
Date:
---------------------------
This Escrow Disposition Notice is delivered to you pursuant to Section 4.1
of the Escrow Agreement, dated , 1995 (the "Escrow Agreement"), by
and among The Hillhaven Corporation, a Nevada corporation, the Shareholders and
Bank One, Indianapolis, N.A. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to those terms in the Escrow Agreement.
Please be advised that you are hereby directed to distribute from the
Escrow Account the property now held in your possession and described herein in
the following manner, to wit:
[STATE THE NUMBER OF ESCROW SHARES/AMOUNT OF CASH TO BE DISTRIBUTED AND THE
RECIPIENT(S) OF SUCH SHARES/CASH]
Signed this day of , 1995.
THE HILLHAVEN CORPORATION
By
----------------------------------
Name:
Title:
-------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
-52-
EXHIBIT C
ESCROW AGENT FEES
DOLLARS ($ ) PER YEAR
-53-
EXHIBIT 6.15
CERTIFICATE
EXECUTED BY NATIONWIDE CARE, INC.
This Certificate is executed and delivered in connection with the Amended
and Restated Agreement and Plan of Share Exchange and Agreements to Assign
Partnership Interests, by and among The Hillhaven Corporation, a Nevada
corporation ("Acquiror"), Nationwide Care, Inc., an Indiana corporation
("Nationwide"), Phillippe Enterprises, Inc., an Indiana corporation ("PEI"),
Meadowvale Skilled Care Center, Inc., an Indiana corporation ("Meadowvale")
(Nationwide, PEI and Meadowvale are collectively referred to as the "Targets"),
the partners of Camelot Care Centers, an Indiana general partnership
("Camelot"), the partners of Shangri-La Partnership, an Indiana general
partnership ("Shangri-La"), and the limited partners of Evergreen Xxxxx, Ltd., a
Florida limited partnership ("Evergreen") (Camelot, Shangri-La and Evergreen are
collectively referred to as the "Partnerships"), dated as of February 27, 1995
("Reorganization Agreement"); and the documents executed and delivered in
connection therewith (collectively with the Reorganization Agreement, the
"Transaction Documents"). Terms which are not defined herein and are used with
initial capitalization when the rules of grammar would not otherwise so require
and which are defined in the Transaction Documents shall have the meanings
assigned to such terms in the Transaction Documents.
In accordance with Section 9.10 of the Reorganization Agreement, the
undersigned has requested the opinions of Ice Xxxxxx Xxxxxxx & Xxxx as to
certain federal income tax consequences of the Share Exchange as a condition
precedent to Closing. In rendering its opinion, Ice Xxxxxx Xxxxxxx & Xxxx xxx
assume that, and the undersigned hereby certifies, represents, and warrants to
Ice Xxxxxx Xxxxxxx & Xxxx that: (1) the Share Exchange will be consummated in
accordance with the terms, conditions, and other provisions of the Transaction
Documents; and (2) all of the factual information, descriptions,
representations, and assumptions set forth in the Transaction Documents, in the
Form S-4 Registration Statement to be filed with the Securities and Exchange
Commission on April , 1995 in connection with the Share Exchange (the
"Registration Statement"), and in this Certificate are accurate and complete in
all respects and will be accurate and complete in all respects at the time the
Registration Statement becomes effective and at the Effective Time of the Share
Exchange (the "Effective Time").
Pursuant to the foregoing, the undersigned hereby certifies, represents,
and warrants to Ice Xxxxxx Xxxxxxx & Xxxx as follows:
THE SHARE EXCHANGE
Nationwide operates long-term health care centers primarily located in
Indiana, Ohio and Florida. Xx. Xxxxxx X. Xxxxxxxxx, Xx. and Xxxxxx X. Xxxxxxxxx,
Xx. are the majority owners of Nationwide. The capital structure of Nationwide
consists of: 48,000,000 authorized shares of Common Stock, without par value, of
which approximately 7,431,458 shares are issued and outstanding (the "Nationwide
Voting Common"); 2,000,000 authorized shares of Nonvoting Common Stock, without
par value, of which 76,592 shares are issued and outstanding (the "Nationwide
Nonvoting Common") (the Nationwide Voting Common and the Nationwide Nonvoting
Common are collectively referred to herein as the "Nationwide Common Shares");
and 2,000,000 authorized shares of Preferred Stock, without par value, of which
300,000 shares of Redeemable Preferred Stock are issued and outstanding (the
"Nationwide Preferred Stock"). Nationwide also has outstanding warrants to
purchase 987,188 shares of Nationwide Nonvoting Common (the "Nationwide
Warrants"). Nationwide files a consolidated return with its one subsidiary, and
Nationwide does not have an excess loss account with respect to the stock of, or
gains deferred under Treasury Regulation sec. 1502-13 with respect to, any such
subsidiary. The Share Exchange is totally unrelated to the Nationwide 1993
reorganization.
The Transaction Documents provide that all of the outstanding Nationwide
Common Shares will be exchanged solely for shares of Acquiror Common Stock. The
Share Exchange will be consummated in accordance with the Indiana Business
Corporation Law, as amended ("BCL"), and the Nevada General Corporation Law, as
amended ("NCL"). The Share Exchange was approved by the Board of Directors of
-54-
Nationwide on April , 1995 and is subject to the approval of the holders of a
majority of the outstanding shares of Nationwide stock at a duly called and held
meeting of the Nationwide shareholders on June , 1995.
At the Effective Time, each Nationwide Common Share then outstanding will
be exchanged for that number of shares of Acquiror Common Stock determined in
accordance with the Reorganization Agreement, rounded to the nearest whole
share. Other than shares of Acquiror Common Stock, there will be no cash or
other property exchanged in the Share Exchange.
Prior to the Effective Time, the Nationwide Preferred Stock will be
redeemed by Nationwide with its own funds and without reimbursement directly or
indirectly from Acquiror. Prior to the Effective Time, the Nationwide Warrants
shall be exercised into the corresponding number of Nationwide Nonvoting Common
pursuant to the terms of the Warrants, and the resulting Nationwide Nonvoting
Common will be exchanged for that number of shares of Acquiror Common Stock
determined in accordance with the Reorganization Agreement, rounded to the
nearest whole share.
At the Closing, the Nationwide Subordinated Notes will be prepaid directly
by Acquiror. The Nationwide Subordinated Notes are debt (not stock or equity)
under general principles of federal taxation law, and Acquiror will not pay any
amounts in excess of such indebtedness. The Nationwide Common Shares held by the
holders of the Nationwide Subordinated Notes shall be valued in the Share
Exchange in the same manner as other Nationwide Common Shares.
Except for the redemption of the Nationwide Preferred Stock, there have
been and will be no distributions to any of the Nationwide shareholders with
respect to their Nationwide stock in contemplation of the Share Exchange, and no
Nationwide stock has been or will be sold, redeemed or otherwise disposed of in
contemplation of the Share Exchange. Nationwide shareholders are entitled to
dissenters' rights in connection with the proposed Share Exchange. Any payments
to dissenters in connection with the Share Exchange shall be made by Nationwide
out of its own funds without reimbursement directly or indirectly from Acquiror.
Except for the Nationwide Warrants, there are no outstanding options or
warrants to purchase any Nationwide stock or outstanding securities or other
instruments or rights convertible into any Nationwide stock or which constitute
equity under general principles of federal tax law, and no such options,
warrants, securities, instruments, or rights have been or will be issued or
cancelled in contemplation of the Share Exchange.
At the Effective Time, the Partnership Interests shall be assigned to
Nationwide. All of the parties to the Reorganization Agreement agree that the
Partnership Interests have no value, nor do they represent liabilities. None of
the Acquiror Common Stock is being transferred pursuant to the Reorganization
Agreement in exchange for such Partnership Interests. The parties agree that the
shareholders of the Targets and Partners of the Partnerships were not the
primary obligors with respect to the obligations which they personally
guaranteed and which will be released prior to the Share Exchange. The
Nationwide Common Shares held by the Partners and by the guarantors shall be
valued in the Share Exchange in the same manner as the other Nationwide Common
Shares. Any debts owed by any Partnership to any of the Target shareholders
(including without limitation the debt owed by Shangri-La to Xxxxxx X.
Xxxxxxxxx, Xx.) shall be paid by Nationwide out of its own funds without
reimbursement directly or indirectly from Acquiror. Acquiror is making no
payment of cash or Acquiror Common Stock or other property or assuming any
liabilities in connection with or pursuant to the assumption of the Partnership
Interests, releases of guarantees or the Noncompetition Agreements, and will not
directly or indirectly reimburse Nationwide for any such payments.
ADDITIONAL REPRESENTATIONS
1. The fair market value of the shares of Acquiror Common Stock
received by each Nationwide shareholder will be approximately equal to the
fair market value of the shares of Nationwide stock surrendered in exchange
therefor.
2. There is no plan or intention by the shareholders of Nationwide who
own one percent or more of the shares of Nationwide stock, and to the best
of the knowledge of the management of Nationwide, there is no plan or
intention on the part of the remaining shareholders of Nationwide to sell,
exchange, or otherwise dispose of a number of shares of Acquiror Common
Stock received in the Share Exchange that
-55-
would reduce the Nationwide shareholders' ownership of such shares of
Acquiror Common Stock (i.e., the shares of Acquiror Common Stock received
in the Share Exchange) to a number of shares having an aggregate value, as
of the Effective Time, of less than 50 percent of the value of all of the
formerly outstanding shares of Nationwide stock as of the same date. For
purposes of this representation, shares of Nationwide stock surrendered by
dissenters will be treated as outstanding shares of Nationwide stock at the
Effective Time. Moreover, shares of Nationwide stock and shares of Acquiror
Common Stock held by Nationwide shareholders and otherwise sold, redeemed,
or disposed of prior or subsequent to the Share Exchange (including the
Nationwide Preferred Stock) will be considered in making this
representation. Except for the redemption of the Nationwide Preferred
Stock, there have been and will be no distributions to the Nationwide
shareholders with respect to their Nationwide stock made in contemplation
of the Share Exchange, and no Nationwide stock has been or will be sold,
redeemed or otherwise disposed of in contemplation of the Share Exchange.
3. Nationwide has no plan or intention to issue additional shares of
its stock that would result in Acquiror losing control of Nationwide within
the meaning of Section 368(c) of the Internal Revenue Code of 1986, as
amended (the "Code").
4. Acquiror will acquire Nationwide stock solely in exchange for
Acquiror voting stock (Acquiror Common Shares). For purposes of this
representation, Nationwide stock redeemed for cash or other property
furnished by Acquiror will be considered as acquired by Acquiror. Further,
no liabilities of Nationwide or the Nationwide shareholders will be assumed
by Acquiror, nor will any of the Nationwide stock be subject to any
liabilities.
5. At the Effective Time, Nationwide will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Nationwide that, if
exercised or converted, would affect Acquiror's acquisition or retention of
control of Nationwide, as defined in Code Section 368(c).
6. Nationwide will pay its dissenting shareholders the value of their
stock out of its own funds. No funds will be supplied for that purpose,
directly or indirectly, by Acquiror, nor will Acquiror directly or
indirectly reimburse Nationwide for any payments to dissenters.
7. The liabilities of Nationwide were incurred by Nationwide in the
ordinary course of its business.
8. Acquiror does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any Nationwide stock,
including ownership by any Acquiror subsidiary.
9. Nationwide will pay its expenses incurred in connection with the
Share Exchange. Nationwide will not pay the expenses of Acquiror or the
Nationwide shareholders incurred in connection with the Share Exchange;
provided, however, that Nationwide may pay certain expenses it was
previously obligated to pay by contract in connection with the issuance of
the Nationwide Warrants, Nationwide Subordinated Notes and Nationwide
Preferred Stock out of its own funds and without reimbursement directly or
indirectly from Acquiror.
10. There is no intercorporate indebtedness existing between Acquiror
and Nationwide or between Acquiror and any Nationwide subsidiary that was
issued, acquired, or will be settled at a discount.
11. Neither Nationwide nor any Nationwide subsidiary is an investment
company as defined in Code Sections 368 (a)(2)(F)(iii) and
368(a)(2)(F)(iv).
12. Neither Nationwide nor any Nationwide subsidiary is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Code Section 368(a)(3)(A).
13. At the Effective Time, the fair market value of the assets of
Nationwide will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
14. None of the compensation received by any shareholder who is an
employee of Nationwide will be separate consideration for, or allocable to,
any of their shares of Nationwide stock. None of the shares of Acquiror
Common Stock received by any shareholder who is an employee of Nationwide
will be separate consideration for, or allocable to, any employment
agreement. The compensation paid to any shareholder who is an employee of
Nationwide will be for services actually rendered and will be commensurate
with amounts paid to third parties bargaining at arm's-length for similar
services.
-56-
15. The Share Exchange is being effected for bona fide business
reasons, including without limitation the reasons set forth in the
Registration Statement. Nationwide has looked for opportunities to expand
its nursing care operations and increase its operating efficiencies.
Nationwide also recognizes that some of its senior management executives,
who are both officers and directors, are approaching retirement age, and
others have expressed a desire to reduce or discontinue their role in the
management of Nationwide. Consequently, Nationwide, in considering business
expansion opportunities, has looked for businesses with strong senior
management with experience in the nursing care industry. Nationwide
determined that Acquiror offers an opportunity for it to meet these
objectives. Nationwide believes that a combination of its operations with
Acquiror will provide increased opportunity and flexibility for profitable
expansion and diversification, will enhance its ability to provide more
efficient and dependable service, and will result in operating efficiencies
and cost savings.
16. To the extent that a portion of the shares of Acquiror Common
Stock issued by Acquiror in exchange for Nationwide stock will be placed in
escrow by the Nationwide shareholders and will be made subject to a
condition pursuant to the Reorganization Agreement and the Escrow
Agreement, for possible return to Acquiror under specified conditions: (1)
there is a valid business reason for establishing the arrangement in that
the escrow is a mechanism to accomplish an exchange price adjustment,
bargained for at arm's length, in the event of a breach by Nationwide, and
no Nationwide shareholder is liable for any such breach; (2) the shares of
Acquiror Common Stock subject to such arrangement will appear as issued and
outstanding on the balance sheet of Acquiror and such shares of Acquiror
Common Stock will be legally outstanding under applicable state law; (3)
all dividends paid on such shares of Acquiror Common Stock will be
distributed currently to the Nationwide shareholders; (4) all voting rights
of such shares of Acquiror Common Stock will be exercisable by or on behalf
of the Nationwide shareholders or their authorized agent; (5) no shares of
such Acquiror Common Stock will be subject to restrictions requiring their
return to Acquiror because of death, failure to continue employment, or
similar restrictions; (6) all such shares of Acquiror Common Stock will be
released from the arrangement within five years from the date of
consummation of the Share Exchange (except where there is a bona fide
dispute as to whom the shares of Acquiror Common Stock should be released);
(7) at least 50 percent of the number of shares of each class of Acquiror
Common Stock issued initially to the Nationwide shareholders will not be
subject to the arrangement; (8) the return of the shares of Acquiror Common
Stock will not be triggered by an event the occurrence or nonoccurrence of
which is within the control of the Nationwide shareholders; (9) the return
of shares of Acquiror Common Stock will not be triggered by the payment of
additional tax or reduction in tax paid as a result of an Internal Revenue
Service audit of the Nationwide shareholders or the corporations either (a)
with respect to the Share Exchange, or (b) when the Share Exchange involves
persons related within the meaning of Code Section 267(c)(4); and (10) the
mechanism for the calculation of the number of shares of Acquiror Common
Stock to be returned is objective and will be readily ascertainable.
The foregoing is provided to Ice Xxxxxx Xxxxxxx & Xxxx in connection with
the preparation of its opinions. We understand that its opinions will be
premised on the basis that all of the facts, representations, and assumptions on
which it is relying, whether contained herein or elsewhere, are accurate and
complete in all respects and will be accurate and complete in all respects at
the time the Registration Statement becomes effective and at the Effective Time.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
this day of , 1995.
NATIONWIDE CARE, INC.
By:
-------------------------------
Xx. Xxxxxx X. Xxxxxxxxx, Xx.,
Chairman of the Board
-57-
EXHIBIT 6.6(A)
, 1995
The Hillhaven Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Gentlemen:
Reference is made to the Restated and Amended Agreement and Plan of Share
Exchange and Agreements to Assign Partnership Interests dated as of ,
1995, as amended (the "Agreement"), by and among The Hillhaven Corporation
("Acquiror"), Nationwide Care, Inc. ("Nationwide"), Phillippe Enterprises, Inc.
("PEI"), Meadowvale Skilled Care Center, Inc. ("Meadowvale") and specified
Partners of Camelot Care Centers ("Camelot"), Evergreen Xxxxx, Ltd.
("Evergreen") and Shangri-La Partnership ("Shangri-La")(Nationwide, PEI and
Meadowvale are collectively referred to herein as the "Corporate Targets";
Camelot, Evergreen and Shangri-La are collectively referred to herein as the
"Partnership Targets"; the Corporate Targets and Partnership Targets are
collectively referred to herein as the "Targets"), providing for the exchange of
all of the outstanding common stock of each of the Corporate Targets for common
stock of the Acquiror and the assignment of all interests in the Partnership
Targets to Nationwide (collectively, the "Acquisitions"). Pursuant to the
Agreement, I may receive a certain number of shares of Common Stock, par value
$0.75 per share, of Acquiror in exchange for the shares of Common Stock of the
Corporate Targets (the "Target Common Shares") or interests in the Partnership
Targets (the "Target Interests") owned by me (all shares of Acquiror Common
Stock to be acquired by me pursuant to the Agreement being hereinafter referred
to as "Acquiror Common Shares").
I have been advised that I may be deemed to be an "affiliate" of at least
one of the Targets within the meaning of Rule 144 of the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "Act"),
and as that term is used in paragraphs (c) and (d) of Rule 145 under the Act.
For all purposes of this letter, the term "affiliate" shall have the foregoing
meaning. I understand that the Targets are obligated, pursuant to Section 6.6 of
the Agreement, to use their best efforts to cause me, and each person identified
as a possible affiliate, to deliver this letter (hereinafter referred to as an
"Affiliate Letter") to Acquiror.
A. In connection with, and in consideration of, the matters set forth
above:
1. I confirm that I have no agreement (oral or written) with any other
affiliate of the Targets pursuant to which I am subject to restrictions on
sales similar to the restrictions in this Affiliate Letter. I represent and
warrant that as of the date hereof I beneficially own such Target Common
Shares and Target Interests as are listed on Schedule A attached hereto.
2. I understand that the Acquiror Common Shares will, upon the
effectiveness of the Acquisitions, be registered with the SEC under the
Act. However, I also understand that, since I may be an affiliate of one of
the Targets at the time the Agreement is submitted to the stockholders and
partners of the Targets for approval and the distribution by me as a former
affiliate of a Target of Acquiror Common Shares has not been registered
under the Act, any sale or disposition by me of any of the Acquiror Common
Shares may, under current law, be made only in conformity with the
provisions of Rule 145(d) under the Act, pursuant to an effective
registration statement under the Act, or pursuant to an exemption from
registration thereunder. I understand that the provisions of Rule 145(d)
restrict my sales, during the two-year period after the effective date of
the Acquisitions, and permit sales, in general, while Acquiror is subject
to the requirements to file, and is filing, periodic reports under Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, only in
brokers' transactions or transactions directly with a market maker where
the aggregate number of shares sold at any time together with all sales of
restricted Acquiror securities sold for my account during the preceding
three-month period, does not exceed, generally, the greater of (i) one
percent of the outstanding shares of Common Stock of Acquiror, or (ii) the
average weekly volume of trading in such securities on all national
securities exchanges and/or
-58-
reported through the automated quotation system of a registered securities
association during the four-week period preceding any such sale, all as set
forth in more detail in Rules 144 and 145 under the Act.
3. In view of the foregoing paragraph 2, unless the Agreement is
terminated, I agree that after the effective date of the Acquisitions, I
will not offer to sell, sell or otherwise dispose of Acquiror Common Shares
except (i) pursuant to an effective registration statement; (ii) pursuant
to the provisions of Rule 145 under the Act; or (iii) pursuant to another
exemption from registration under the Act.
4. I have carefully read this letter and understand the limitations
stated herein upon the sale, transfer or other disposition of (i) Target
Common Shares and Target Interests beneficially owned by me or hereafter
acquired by me and (ii) Acquiror Common Shares that I may acquire pursuant
to the Agreement.
B. In connection herewith, Acquiror represents, warrants, acknowledges and
agrees as follows:
1. Acquiror shall not give, or cause to be given, stop transfer
instructions to the transfer agent of Acquiror with respect to any of the
Acquiror Common Shares issued in connection with the Acquisitions except
for such instructions as shall be in conformity with the provisions hereof,
and shall place, or cause to be placed, on any certificate representing
such Acquiror Common Shares only the following legend:
The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933
applies. The shares represented by this certificate may be
transferred only in accordance with the terms of a letter agreement
dated , 1995 between the registered holder and The
Hillhaven Corporation, a copy of which is on file at the principal
offices of The Hillhaven Corporation.
2. Acquiror shall use its best efforts to file, in a timely manner,
all reports with the SEC necessary for the current public information
requirement of Rule 144 under the Act to be satisfied.
Very truly yours,
--------------------------------------
Agreed this day of
, 1995:
The Hillhaven Corporation
- ---------------------------------------------------------
Name:
Title:
-59-
EXHIBIT 6.6 (B)
, 1995
The Hillhaven Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Gentlemen:
Reference is made to the Restated and Amended Agreement and Plan of Share
Exchange and Agreements to Assign Partnership Interests dated as of
, 1995, as amended (the "Agreement"), by and among The Hillhaven Corporation
("Acquiror"), Nationwide Care, Inc. ("Nationwide"), Phillippe Enterprises, Inc.
("PEI"), Meadowvale Skilled Care Center, Inc. ("Meadowvale") and specified
Partners of Camelot Care Centers ("Camelot"), Evergreen Xxxxx, Ltd.
("Evergreen") and Shangri-La Partnership ("Shangri-La")(Nationwide, PEI and
Meadowvale are collectively referred to herein as the "Corporate Targets";
Camelot, Evergreen and Shangri-La are collectively referred to herein as the
"Partnership Targets"; the Corporate Targets and Partnership Targets are
collectively referred to herein as the "Targets"), providing for the exchange of
all of the outstanding common stock of each of the Corporate Targets for common
stock of the Acquiror and the assignment of all interests in the Partnership
Targets to Nationwide (collectively, the "Acquisitions"). Pursuant to the
Agreement, I may receive a certain number of shares of Common Stock, par value
$0.75 per share, of Acquiror in exchange for the shares of Common Stock of the
Corporate Targets (the "Target Common Shares") or interests in the Partnership
Targets (the "Target Interests") owned by me (all shares of Acquiror Common
Stock to be acquired by me pursuant to the Agreement being hereinafter referred
to as "Acquiror Common Shares").
I understand that the Targets are obligated, pursuant to Section 6.6 of the
Agreement, to use their best efforts to cause each shareholder of the Corporate
Targets and each partner of the Partnership Targets to deliver this letter
(hereinafter referred to as the a "Pooling Letter") to Acquiror.
In connection with, and in consideration of, the matters set forth above:
1. I confirm that I have no agreement (oral or written) with any
other shareholder or partner of the Targets pursuant to which I am subject
to restrictions on sales similar to the restrictions in this Pooling
Letter. I represent and warrant that as of the date hereof I beneficially
own such Target Common Shares and Target Interests as are listed on
Schedule A attached hereto.
2. I understand that, for accounting purposes, it is anticipated that
the Acquisitions will qualify for pooling-of-interests accounting treatment
under generally accepted accounting principles and that, in order for the
Acquisitions to so qualify, shareholders or partners of any Target can sell
Target Common Shares, Target Interests and Acquiror Common Shares only in
accordance with certain restrictions. In this connection, I will not make
any sales of Target Common Shares or Target Interests prior to the
effective date of the Acquisitions, or sales of Acquiror Common Shares
after the effective date of the Acquisitions, that would cause the criteria
for pooling-of-interests accounting treatment to be violated, it being
understood that sales of shares in accordance with paragraph 3 below shall
be deemed not to violate my obligations under this Pooling Letter.
3. In view of the foregoing paragraph 2, unless the Agreement is
terminated, I agree that with respect to the period beginning on the
effective date of the Acquisitions and ending at such time as financial
results covering at least 30 days of post-Acquisition combined operations
have been published, I will not sell, transfer or otherwise dispose of, or
reduce my interest in, or risk relating to, any Acquiror Common Shares
received by me pursuant to the Agreement, unless prior to any such
transaction I have obtained a letter from an independent public accounting
firm satisfactory to Acquiror to the effect that such transactions will not
cause the criteria for pooling-of-interests accounting to be violated.
-60-
4. I have carefully read this letter and understand the limitations
stated herein upon the sale, transfer or other disposition of (i) Target
Common Shares and Target Interests beneficially owned by me or hereafter
acquired by me and (ii) Acquiror Common Shares that I may acquire pursuant
to the Agreement.
Very truly yours,
-------------------------------------
-61-
EXHIBIT 7.7
CERTIFICATE
EXECUTED BY THE HILLHAVEN CORPORATION
FOR NATIONWIDE CARE, INC.
This Certificate is executed and delivered in connection with the Amended
and Restated Agreement and Plan of Share Exchange and Agreements to Assign
Partnership Interests, by and among The Hillhaven Corporation, a Nevada
corporation ("Acquiror"), Nationwide Care, Inc., an Indiana corporation
("Nationwide"), Phillippe Enterprises, Inc., an Indiana corporation ("PEI"),
Meadowvale Skilled Care Center, Inc., an Indiana corporation ("Meadowvale")
(Nationwide, PEI and Meadowvale are collectively referred to as the "Targets"),
the partners of Camelot Care Centers, an Indiana general partnership
("Camelot"), the partners of Shangri-La Partnership, an Indiana general
partnership ("Shangri-La"), and the limited partners of Evergreen Xxxxx, Ltd., a
Florida limited partnership ("Evergreen") (Camelot, Shangri-La and Evergreen are
collectively referred to as the "Partnerships"), dated as of February 27, 1995
("Reorganization Agreement"); and the documents executed and delivered in
connection therewith (collectively with the Reorganization Agreement, the
"Transaction Documents"). Terms which are not defined herein and are used with
initial capitalization when the rules of grammar would not otherwise so require
and which are defined in the Transaction Documents shall have the meanings
assigned to such terms in the Transaction Documents.
In accordance with Section 9.10 of the Reorganization Agreement, Nationwide
has requested the opinions of Ice Xxxxxx Xxxxxxx & Xxxx as to certain federal
income tax consequences of the Share Exchange as a condition precedent to
Closing. This Certificate is issued by Acquiror in accordance with Section 7.7
of the Reorganization Agreement. In rendering its opinion, Ice Xxxxxx Xxxxxxx &
Xxxx xxx assume that, and the undersigned hereby certifies, represents, and
warrants to Ice Xxxxxx Xxxxxxx & Xxxx that: (1) the Share Exchange will be
consummated in accordance with the terms, conditions, and other provisions of
the Transaction Documents; and (2) all of the factual information, descriptions,
representations, and assumptions set forth in the Transaction Documents, in the
Form S-4 Registration Statement to be filed with the Securities and Exchange
Commission on April , 1995 in connection with the Share Exchange (the
"Registration Statement"), and in this Certificate are accurate and complete in
all respects and will be accurate and complete in all respects at the time the
Registration Statement becomes effective and at the Effective Time of the Share
Exchange (the "Effective Time").
Pursuant to the foregoing, the undersigned hereby certifies, represents,
and warrants to Ice Xxxxxx Xxxxxxx & Xxxx as follows:
THE SHARE EXCHANGE
Acquiror and its subsidiaries operate nursing centers, pharmacies and
retirement housing communities. The capital structure of Acquiror consists of 60
million authorized shares of voting Common Stock, par value $.75 per share of
which approximately 32,824,863 are outstanding (the "Acquiror Common Shares");
25 million authorized shares of preferred stock, par value $0.15 per share, of
which the following series have been designated: 3 million authorized shares of
Series A Preferred Stock, of which no shares are outstanding; 950 authorized
shares of Series B Convertible Preferred Stock, of which 618 shares have been
designated as Subseries 1, of which no shares are outstanding; 35,000 authorized
shares of Series C Preferred Stock, all of which are outstanding; and 300,000
authorized shares of Series D Preferred Stock, of which approximately 63,403 are
outstanding.
The Transaction Documents provide that all of the outstanding shares of
common stock of Nationwide will be exchanged solely for Acquiror Common Shares.
The Share Exchange will be consummated in accordance with the Indiana Business
Corporation Law, as amended ("BCL"), and the Nevada General Corporation Law, as
amended ("NCL"). The Share Exchange was approved by the Board of Directors of
Acquiror on April 12, 1995, and does not require the approval of the Acquiror
shareholders.
-62-
At the Effective Time, each Nationwide Common Share then outstanding will
be exchanged for that number of shares of Acquiror Common Stock determined in
accordance with the Reorganization Agreement, rounded to the nearest whole
share. Other than shares of Acquiror Common Stock, there will be no cash or
other property exchanged in the Share Exchange.
Prior to the Effective Time, the Nationwide Preferred Stock will be
redeemed by Nationwide with its own funds and without reimbursement directly or
indirectly from Acquiror. Immediately prior to the Effective Time, the
Nationwide Warrants shall be exercised into the corresponding number of
Nationwide Nonvoting Common pursuant to the terms of the Warrants, and the
resulting Nationwide Nonvoting Common will be exchanged for that number of
shares of Acquiror Common Stock determined in accordance with the Reorganization
Agreement, rounded to the nearest whole share.
At the Closing, the Nationwide Subordinated Notes will be prepaid directly
by Acquiror. The Nationwide Subordinated Notes are debt (not stock or equity)
under general principles of federal taxation law, and Acquiror will pay only the
fair market value of such indebtedness, and will not pay any amounts in excess
of such indebtedness. The Nationwide Common Shares held by the holders of the
Nationwide Subordinated Notes shall be valued in the Share Exchange in the same
manner as the other Nationwide Common Shares.
At the Effective Time, the Partnership Interests shall be assigned to
Nationwide. All of the parties to the Reorganization Agreement agree that the
Partnership Interests have no value, nor do they represent liabilities. None of
the Acquiror Common Stock is being transferred pursuant to the Reorganization
Agreement in exchange for such Partnership Interests. The parties agree that the
shareholders of the Targets and Partners of the Partnerships were not the
primary obligors with respect to the obligations which they personally
guaranteed and which will be released prior to the Share Exchange. The
Nationwide Common Shares held by the Partners and by the guarantors shall be
valued in the Share Exchange in the same manner as the other Nationwide Common
Shares. Any debts owed by any Partnership to any of the Target shareholders
(including without limitation the debt owed by Shangri-La to Xxxxxx X.
Xxxxxxxxx, Xx.) shall be paid by Nationwide out of its own funds without
reimbursement directly or indirectly from Acquiror. Acquiror is making no
payment of cash or Acquiror Common Stock or other property or assuming any
liabilities in connection with or pursuant to the assumption of the Partnership
Interests, releases of gurantees or the Noncompetition Agreements, and will not
directly or indirectly reimburse Nationwide for any such payments.
Acquiror will not make, directly or indirectly, any payments to dissenters
or any other distributions to the Nationwide shareholders with respect to their
Nationwide stock in contemplation of the Share Exchange.
Except for the Nationwide Warrants, Acquiror is not aware of any
outstanding options or warrants to purchase Nationwide shares or outstanding
securities or other instruments or rights, convertible into Nationwide shares or
which constitute equity under general principles of federal tax law, and no such
options, warrants, securities, instruments or rights have been or will be issued
or cancelled in contemplation of the Share Exchange.
ADDITIONAL REPRESENTATIONS
1. The fair market value of the shares of Acquiror Common Stock
received by each Nationwide shareholder will be approximately equal to the
fair market value of the shares of Nationwide stock surrendered in exchange
therefor.
2. Following the Share Exchange, Acquiror will not permit Nationwide
to issue additional shares of its stock that would result in Acquiror
losing control of Nationwide within the meaning of Section 368(c) of the
Internal Revenue Code of 1986, as amended (the "Code").
3. Acquiror has no plan or intention to reacquire any of its stock
issued in the Share Exchange.
4. Acquiror has no plan or intention to liquidate Nationwide or any
Nationwide subsidiary; to merge Nationwide or any Nationwide subsidiary
with and into another corporation; to cause or permit Nationwide to sell or
otherwise dispose of any of its assets, or the assets of any Nationwide
subsidiary,
-63-
except for dispositions made in the ordinary course of business; or to sell
or otherwise dispose of the stock of Nationwide or any Nationwide
subsidiary except for transfers described in Code Section 368 (a)(2)(C).
5. Following the Share Exchange, Nationwide will continue its historic
business or use a significant portion of its historic business assets in a
business.
6. Acquiror will pay its expenses incurred in connection with the
Share Exchange. Acquiror will not pay the expenses of Nationwide or the
Nationwide shareholders, if any, incurred in connection with the Share
Exchange.
7. Acquiror will acquire Nationwide stock solely in exchange for
Acquiror voting stock (Acquiror Common Shares). For purposes of this
representation, Nationwide stock redeemed for cash or other property
furnished by Acquiror will be considered as acquired by Acquiror. Further,
no liabilities of Nationwide or the Nationwide shareholders will be assumed
by Acquiror, nor will any of the Nationwide stock be subject to any
liabilities.
8. Nationwide will pay its dissenting shareholders the value of their
stock out of its own funds. No funds will be supplied for that purpose,
directly or indirectly, by Acquiror, nor will Acquiror directly or
indirectly reimburse Nationwide for any payments to dissenters.
9. There is no intercorporate indebtedness existing between Acquiror
and Nationwide or between Acquiror and any Nationwide subsidiaries that was
issued, acquired, or will be settled at a discount.
10. Acquiror is not an investment company as defined in Code Sections
368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
11. Acquiror is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Code Section 368(a)(3)(A).
12. Acquiror does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any shares of
Nationwide stock, including any ownership by any Acquiror subsidiary.
Acquiror will not acquire, directly or indirectly, any shares of Nationwide
stock prior to the Effective Time.
13. The Share Exchange is being effected for bona fide business
reasons, including without limitation the reasons set forth in the
Registration Statement and for the reasons that Acquiror and its
subsidiaries have looked for growth opportunities which would increase
their percentage share of the nursing care market while increasing their
operating efficiencies by achieving economies of scale as a larger service
provider. Due in part to the proximity of the service areas, Acquiror
determined that Nationwide represented such an opportunity and expressed an
interest in combining the resources of the companies. Acquiror believes
that a combination of its operations with Nationwide will provide increased
opportunity and flexibility for profitable expansion and diversification,
will enhance their ability to provide more efficient and dependable
service, and will result in operating efficiencies and cost savings.
14. At the Effective Time, the fair market value of the assets of
Nationwide will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
15. None of the compensation received by any shareholder who is an
employee of Nationwide will be separate consideration for, or allocable to,
any of such shareholder's shares of Nationwide stock. None of the shares of
Acquiror Common Stock received by any shareholder who is an employee of
Nationwide will be separate consideration for, or allocable to, any
employment agreement. The compensation paid to any shareholder who is an
employee of Nationwide will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length
for similar services.
16. To the extent that a portion of the shares of Acquiror Common
Stock issued in exchange for the Nationwide stock will be placed in escrow
by the Nationwide shareholders and will be made subject to a condition
pursuant to the Reorganization Agreement and the Escrow Agreement, for
possible return to Acquiror under specified conditions: (1) there is a
valid business reason for establishing the arrangement
-64-
in that the escrow is a mechanism to accomplish an exchange price
adjustment, bargained for at arm's length, in the event of a breach by
Nationwide, and no Nationwide shareholder is liable for any such breach;
(2) the shares of Acquiror Common Stock subject to such arrangement will
appear as issued and outstanding on the balance sheet of Acquiror and such
shares of Acquiror Common Stock will be legally outstanding under
applicable state law; (3) all dividends paid on such shares of Acquiror
Common Stock will be distributed currently to the Nationwide shareholders;
(4) all voting rights of such shares of Acquiror Common Stock will be
exercisable by or on behalf of the Nationwide shareholders or their
authorized agent; (5) no shares of such Acquiror Common Stock will be
subject to restrictions requiring their return to Acquiror because of
death, failure to continue employment, or similar restrictions; (6) all
such shares of Acquiror Common Stock will be released from the arrangement
within five years from the date of consummation of the Share Exchange
(except where there is a bona fide dispute as to whom the shares of
Acquiror Common Stock should be released); (7) at least 50 percent of the
number of shares of each class of Acquiror Common Stock issued initially to
the Nationwide shareholders will not be subject to the arrangement; (8) the
return of the shares of Acquiror Common Stock will not be triggered by an
event the occurrence or nonoccurrence of which is within the control of the
Nationwide shareholders; (9) the return of shares of Acquiror Common Stock
will not be triggered by the payment of additional tax or reduction in tax
paid as a result of an Internal Revenue Service audit of the Nationwide
shareholders or the corporations either (a) with respect to the Share
Exchange, or (b) when the Share Exchange involves persons related within
the meaning of Code Section 267(c)(4); and (10) the mechanism for the
calculation of the number of shares of Acquiror Common Stock to be returned
is objective and will be readily ascertainable.
17. The purpose of the Hillhaven rights plan is to provide a mechanism
by which Hillhaven, a publicly traded corporation, can, in the future,
provide shareholders with rights to purchase Hillhaven stock at
substantially less than fair market value as a means of responding to
unsolicited offers to acquire Hillhaven. The plan provides that in the
event of an unsolicited offer in the future to acquire Hillhaven under
certain circumstances (a "triggering event"), the Hillhaven shareholders
will have the right to purchase Hillhaven stock. The rights until they
become exercisable may be redeemed at any time by Hillhaven for one cent
per right until a specified date. Until a triggering event, the rights are
not exercisable or separately tradeable, transferrable, or detachable, nor
are they represented by any certificate other than the Acquiror Common
Share certificate. Until a triggering event occurs, the exercise price is
anticipated to exceed the value of the Hillhaven stock at all times during
the life of the right. The likelihood that the rights would, at any time,
be exercised is both remote and speculative. No event has occurred, or is
anticipated to occur, that would make the rights exercisable.
The foregoing is provided to Ice Xxxxxx Xxxxxxx & Xxxx in connection with
the preparation of its opinions. We understand that its opinions will be
premised on the basis that all of the facts, representations, and assumptions on
which it is relying, whether contained herein or elsewhere, are accurate and
complete in all respects and will be accurate and complete in all respects at
the time the Registration Statement becomes effective.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as of
this day of , 1995.
THE HILLHAVEN CORPORATION
By:
-------------------------------
Printed:
--------------------------
Title:
----------------------------
-65-
EXHIBIT 12.2(H)
PART 1
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "Agreement"), dated [ ], 1995,
is made among The Hillhaven Corporation, a Nevada corporation ("Acquiror"), and
Xx. Xxxxxx X. Xxxxxxxxx, Xx. ("Phillippe"), an individual.
WHEREAS, Phillippe and certain other persons have, on this date, as part of
a single transaction, delivered to Acquiror all the issued and outstanding
shares of the capital stock of Nationwide Care, Inc. ("Nationwide"), Phillippe
Enterprises, Inc., and Meadowvale Skilled Care Center, Inc., each an Indiana
corporation (collectively, the "Corporate Targets"), and delivered to Nationwide
all the outstanding interests in Camelot Care Centers, a general partnership
governed by the laws of Indiana, Shangri-La Partnership, a general partnership
governed by the laws of Indiana, and Evergreen Xxxxx, Ltd., a Florida limited
partnership (together, the "Partnership Targets") (the Corporate Targets and the
Partnership Targets being referred to herein collectively as the "Targets"),
pursuant to that certain Amended and Restated Agreement and Plan of Share
Exchange and Agreements to Assign Partnership Interests among Acquiror and the
Targets, dated as of February 27, 1995 (the "Share Exchange Agreement"; such
transaction contemplated therein hereinafter referred to as the "Transaction");
WHEREAS, Acquiror and the Targets are engaged in various locations in the
following businesses (i) owning, operating and managing nursing homes and
assisted living centers and (ii) providing home health care and rehabilitation
therapy care (the foregoing businesses being referred to herein collectively as
the "Business Activities");
WHEREAS, Phillippe has acquired knowledge relating to the Business
Activities as a result of Phillippe's relationship with the Targets; and
WHEREAS, as part of, and a condition precedent to, the Transaction,
Phillippe has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and agreements
herein set forth, the parties hereto, intending to be legally bound, agree as
follows:
1. Definitions. All capitalized terms used and not defined herein
shall have the meanings given such terms in the Share Exchange Agreement.
References to "Phillippe" herein shall mean Phillippe and any of his
Affiliates.
2. Rights of Acquiror. Covenants herein contained are cumulative to
the rights of Acquiror under the laws of the United States, the states of
Washington, Indiana, Ohio and Florida and other states, as applicable,
respecting Acquiror's rights to protect itself from the competition of
Phillippe.
3. Non-Competition. Phillippe agrees that, for a period of five (5)
years from the date of the Effective Time, Phillippe shall not, directly or
indirectly:
(a) have an interest in, own, manage, operate, control, be
connected with as a stockholder (other than as a stockholder of less
than 5% of the issued and outstanding stock of a publicly held
corporation), joint venturer, partner, limited liability company member
or manager, or consultant, or otherwise engage or invest or participate
in, or enjoy a financially beneficial relationship with, any business
which conducts any of the Business Activities within a five (5) mile
radius of any facility or other location at or from which Acquiror, a
Target or any of their respective Affiliates conducts any of the
Business Activities as of the date hereof.
(b) (i) solicit, recruit or hire any employee of Acquiror, a Target
or any of their respective Affiliates or any person who has worked for
Acquiror, a Target or any of their respective Affiliates
-66-
within the six months preceding such solicitation, recruitment or hire;
or (ii) solicit or encourage any employee of Acquiror, a Target or any
of their respective Affiliates to leave such employment.
4. Specific Performance. Phillippe acknowledges that his failure to
comply with the provisions of this Agreement will result in irreparable and
continuing damage to Acquiror for which there will be no adequate remedy at
law and that, in the event of a failure of Phillippe so to comply, Acquiror
and its successors and assigns shall be entitled to injunctive relief and
to such other and further relief as may be proper and necessary to ensure
compliance with the provisions of this Agreement.
5. Amendments. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by each party hereto.
6. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been
signed by each of the parties and delivered to each other party.
7. Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to
such subject matter.
8. Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be
held invalid, illegal or unenforceable in any respect by a court of
competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof or other applications of such
provision.
9. Governing Law. This Agreement shall be governed by and construed
in all respects in accordance with the laws of the State of Indiana,
without regard to the conflicts of law principles of such state.
10. Arbitration. Any claim or controversy relating to the breach,
interpretation or enforcement of this Agreement shall be submitted to final
and binding arbitration in Xxxxxx County, Indiana, in an arbitration
proceeding that, except as may otherwise be provided herein, shall be
conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association before a single arbitrator chosen in
accordance with such rules. All evidentiary and discovery matters shall be
conducted in accordance with and governed by the applicable Federal Rules
of Civil Procedure. No later than 10 calendar days after the arbitrator is
appointed, the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. All discovery shall be completed no
later than the commencement of the arbitration hearing or 90 calendar days
after the date that a proper demand for arbitration is served, whichever
occurs first, unless, upon a showing of good cause, the arbitrator extends
such period. The hearing shall commence no later than 90 calendar days
after the arbitrator is appointed and shall continue until completed. The
arbitrator shall issue his or her award in writing no later than 20
calendar days after the conclusion of the hearing. The arbitrator shall not
have the power to amend this Agreement in any respect. The arbitrator's
decision shall be binding and conclusive upon the parties.
-67-
IN WITNESS WHEREOF, the parties have duly executed and have caused to be
duly executed this Agreement as of the date first above written.
THE HILLHAVEN CORPORATION
By:
--------------------------------
Xxxxxx X. Xxxxxxx
Senior Vice President and
Chief Financial Officer
------------------------------------
Xx. Xxxxxx X. Xxxxxxxxx, Xx.
-68-
EXHIBIT 12.2(H)
PART 2
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "Agreement"), dated [ ],
1995, is made among The Hillhaven Corporation, a Nevada corporation
("Acquiror"), and Xxxxxx X. Xxxxxxxxx, Xx. ("Phillippe"), an individual.
WHEREAS, Phillippe and certain other persons have, on this date, as part of
a single transaction, delivered to Acquiror all the issued and outstanding
shares of the capital stock of Nationwide Care, Inc. ("Nationwide"), Phillippe
Enterprises, Inc., and Meadowvale Skilled Care Center, Inc., each an Indiana
corporation (collectively, the "Corporate Targets"), and delivered to Nationwide
all the outstanding interests in Camelot Care Centers, a general partnership
governed by the laws of Indiana, Shangri-La Partnership, a general partnership
governed by the laws of Indiana, and Evergreen Xxxxx, Ltd., a Florida limited
partnership (together, the "Partnership Targets") (the Corporate Targets and the
Partnership Targets being referred to herein collectively as the "Targets"),
pursuant to that certain Amended and Restated Agreement and Plan of Share
Exchange and Agreements to Assign Partnership Interests among Acquiror and the
Targets, dated as of February 27, 1995 (the "Share Exchange Agreement"; such
transaction contemplated therein hereinafter referred to as the "Transaction");
WHEREAS, Acquiror and the Targets are engaged in various locations in the
following businesses (i) owning, operating and managing nursing homes and
assisted living centers and (ii) providing home health care and rehabilitation
therapy care (the foregoing businesses being referred to herein collectively as
the "Business Activities");
WHEREAS, Phillippe has acquired knowledge relating to the Business
Activities as a result of Phillippe's relationship with the Targets; and
WHEREAS, as part of, and a condition precedent to, the Transaction,
Phillippe has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and agreements
herein set forth, the parties hereto, intending to be legally bound, agree as
follows:
1. Definitions. All capitalized terms used and not defined herein
shall have the meanings given such terms in the Share Exchange Agreement.
References to "Phillippe" herein shall mean Phillippe and any of his
Affiliates.
2. Rights of Acquiror. Covenants herein contained are cumulative to
the rights of Acquiror under the laws of the United States, the states of
Washington, Indiana, Ohio and Florida and other states, as applicable,
respecting Acquiror's rights to protect itself from the competition of
Phillippe.
3. Non-Competition. Phillippe agrees that, for a period of five (5)
years from the date of the Effective Time, Phillippe shall not, directly or
indirectly:
(a) have an interest in, own, manage, operate, control, be
connected with as a stockholder (other than as a stockholder of less
than 5% of the issued and outstanding stock of a publicly held
corporation), joint venturer, partner, limited liability company member
or manager, or consultant, or otherwise engage or invest or participate
in, or enjoy a financially beneficial relationship with, any business
which conducts any of the Business Activities within a five (5) mile
radius of any facility or other location at or from which Acquiror, a
Target or any of their respective Affiliates conducts any of the
Business Activities as of the date hereof.
(b) (i) solicit, recruit or hire any employee of Acquiror, a Target
or any of their respective Affiliates or any person who has worked for
Acquiror, a Target or any of their respective Affiliates
-69-
within the six months preceding such solicitation, recruitment or hire;
or (ii) solicit or encourage any employee of Acquiror, a Target or any
of their respective Affiliates to leave such employment.
4. Specific Performance. Phillippe acknowledges that his failure to
comply with the provisions of this Agreement will result in irreparable and
continuing damage to Acquiror for which there will be no adequate remedy at
law and that, in the event of a failure of Phillippe so to comply, Acquiror
and its successors and assigns shall be entitled to injunctive relief and
to such other and further relief as may be proper and necessary to ensure
compliance with the provisions of this Agreement.
5. Amendments. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by each party hereto.
6. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been
signed by each of the parties and delivered to each other party.
7. Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to
such subject matter.
8. Severability. If any provision of this Agreement or the application
of any such provision to any person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision hereof or other applications of such provision.
9. Governing Law. This Agreement shall be governed by and construed in
all respects in accordance with the laws of the State of Indiana, without
regard to the conflicts of law principles of such state.
10. Arbitration. Any claim or controversy relating to the breach,
interpretation or enforcement of this Agreement shall be submitted to final
and binding arbitration in Xxxxxx County, Indiana, in an arbitration
proceeding that, except as may otherwise be provided herein, shall be
conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association before a single arbitrator chosen in
accordance with such rules. All evidentiary and discovery matters shall be
conducted in accordance with and governed by the applicable Federal Rules
of Civil Procedure. No later than 10 calendar days after the arbitrator is
appointed, the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. All discovery shall be completed no
later than the commencement of the arbitration hearing or 90 calendar days
after the date that a proper demand for arbitration is served, whichever
occurs first, unless, upon a showing of good cause, the arbitrator extends
such period. The hearing shall commence no later than 90 calendar days
after the arbitrator is appointed and shall continue until completed. The
arbitrator shall issue his or her award in writing no later than 20
calendar days after the conclusion of the hearing. The arbitrator shall not
have the power to amend this Agreement in any respect. The arbitrator's
decision shall be binding and conclusive upon the parties.
-70-
IN WITNESS WHEREOF, the parties have duly executed and have caused to be
duly executed this Agreement as of the date first above written.
THE HILLHAVEN CORPORATION
By:
---------------------------------
Xxxxxx X. Xxxxxxx
Senior Vice President and
Chief Financial Officer
------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
-71-
EXHIBIT 12.2(i)
AGREEMENT AMONG SHAREHOLDERS
THIS AGREEMENT AMONG SHAREHOLDERS ("Agreement") is entered into as of
, 1995, by and among all of the shareholders (the "Shareholders") of
Nationwide Care, Inc., an Indiana corporation ("Nationwide").
PRELIMINARY STATEMENTS
Nationwide, The Hillhaven Corporation, a Nevada corporation ("Acquiror"),
Phillippe Enterprises, Inc., an Indiana corporation ("PEI"), Meadowvale Skilled
Care Center, Inc., an Indiana corporation ("Meadowvale") (Nationwide, PEI and
Meadowvale are collectively referred to as the "Corporate Targets"), the
partners of Camelot Care Centers, an Indiana general partnership ("Camelot"),
the partners of Shangri-La Partnership, an Indiana general partnership
("Shangri-La"), and the limited partners of Evergreen Xxxxx, Ltd., a Florida
limited partnership ("Evergreen") (Camelot, Shangri-La and Evergreen are
collectively referred to as the "Partnerships"), have entered into that certain
Amended and Restated Agreement and Plan of Share Exchange and Agreements to
Assign Partnership Interests, dated as of February 27, 1995 (the "Reorganization
Agreement"), and the documents executed and delivered in connection therewith
(collectively with the Reorganization Agreement, the "Transaction Documents"),
pursuant to which all of the shares of common stock of Nationwide will be
exchanged solely for Acquiror Voting Common Stock (the "Share Exchange") in a
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"). Voting Acquiror Common Shares
will be the only consideration issued to the Shareholders in the Share Exchange.
Section 9.10 of the Reorganization Agreement provides that, as a condition
precedent to the consummation of the Share Exchange, Nationwide shall receive
opinions of counsel that the Share Exchange will qualify as a reorganization
within the meaning of Code Section 368(a)(1)(B). The Shareholders desire to set
forth their agreement concerning ownership of the Acquiror Common Shares
received in the Share Exchange in order to facilitate the issuance of the
opinions referred to in Section 9.10 of the Reorganization Agreement and to
otherwise ensure that the continuity of shareholder interest requirement set
forth in Treasury Regulation sec. 1.368-1(b) will be satisfied with respect to
the Share Exchange.
Terms which are not defined herein and are used with initial capitalization
when the rules of grammar would not otherwise so require and which are defined
in the Transaction Documents shall have the meanings assigned to such terms in
the Transaction Documents.
NOW, THEREFORE, in consideration of the mutual covenants, undertakings and
promises set forth in this Agreement, the Shareholders agree as follows:
TERMS AND CONDITIONS
SECTION 1. Representations, Warranties, and Covenants of the
Shareholders. Each Shareholder severally represents, warrants, and covenants to
the other Shareholders that the Shareholder has no plan, intention, or
arrangement to sell, exchange or otherwise dispose of a number of the Acquiror
Common Shares received in the Share Exchange that would reduce that
Shareholder's ownership of the Acquiror Common Shares to a number of Acquiror
Common Shares having a value, determined as of the Effective Time of the Share
Exchange (the "Effective Time"), of less than 50 percent of the value of the
Nationwide stock held by that Shareholder immediately before the Share Exchange.
For purposes of this representation, warranty, and covenant, Nationwide stock
(including voting and nonvoting common stock and preferred stock) and Acquiror
Common Shares held by the Shareholder and otherwise sold, redeemed, or disposed
of prior or subsequent to the Share Exchange have been considered in making this
representation, warranty, and covenant. Each Shareholder further represents,
warrants, and covenants that such Shareholder has no plan, intention, or
arrangement to sell, exchange, or otherwise dispose of any Acquiror Common
Shares received in the Share Exchange except as set forth on Exhibit A.
-72-
SECTION 2. Prohibition on Disposition within Two Years. No Shareholder
shall, within two years of the Effective Time, sell, exchange, or otherwise
dispose of any of the Acquiror Common Shares received in the Share Exchange,
except as set forth on Exhibit A, unless and until (a) such sale, exchange or
disposition would not reduce the fair market value of the Acquiror Common Shares
(determined as of the Effective Time) retained by that Shareholder to an amount
less than fifty percent (50%) of the fair market value of the Nationwide stock
held by that Shareholder immediately before Share Exchange (determined in the
same manner as set forth in Section 1 of this Agreement); or (b) in the event
such sale, exchange or disposition would reduce the fair market value of the
Acquiror Common Shares (determined as of the Effective Time) retained by that
Shareholder to an amount less than fifty percent (50%) of the fair market value
of the Nationwide stock held by that Shareholder immediately before the Share
Exchange, (i) such Shareholder obtains and delivers to Xxxxxx X. Xxxxxxxxx, Xx.,
acting as representative of all the Shareholders (the "Representative"), an
unqualified opinion of counsel (from counsel reasonably acceptable to the
Representative, and in a form acceptable to the Representative) to the effect
that such sale, exchange or disposition would not adversely affect the tax-free
status of the Share Exchange; and (ii) the Representative and Xxxxxx X.
Xxxxxxxxx, Xx. (the "Phillippes") jointly consent in writing to such sale,
exchange or disposition. The Phillippes shall use reasonable efforts to reply to
a request for a disposition of shares pursuant to clause (b) above within 30
days of receipt of a written notice of a Shareholder's request to sell shares
pursuant to such clause.
SECTION 3. Nonwaiver. The failure of any Shareholder or of the
Representative to insist in any one or more instances upon performance of any
provisions of this Agreement or to pursue rights under this Agreement shall not
be construed as a waiver of any such provisions or the relinquishment of any
such rights.
SECTION 4. Governing Law. The laws of the State of Indiana shall govern the
validity, performance, enforcement, interpretation and any other aspect of this
Agreement.
SECTION 5. Modification. This Agreement may not be modified or altered
except by written instrument duly executed by all of the Shareholders.
SECTION 6. Entire Agreement. The Transaction Documents and this Agreement
contain the entire agreement of the Shareholders with respect to the subject
matter of this Agreement and shall be deemed to supersede all prior agreements,
whether written or oral, and the terms and provisions of any such prior
agreements shall be deemed to have been merged into this Agreement.
SECTION 7. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but which
together shall constitute one and the same instrument.
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
-73-
EXHIBIT A
NUMBER OF SHARES
WHICH THE
SHAREHOLDER HAS
A PLAN,
INTENTION, OR
ARRANGEMENT TO
SELL, EXCHANGE,
NUMBER OF OR OTHERWISE
SHAREHOLDER SHARES HELD DISPOSE OF
----------- ----------- ----------------
VOTING COMMON SHARES
Xxxxxx Xxxxx..................................... 35,418
Xxx Xxxxxx....................................... 159,694
Xxxxx Xxxxxx..................................... 60,000
Xxx Xxxxxxx...................................... 66,570
Xxx Xxxxxxx...................................... 30,000
Xxxxxxx Xxxxxxxx................................. 7,500
Xxxx Xxxxxx...................................... 7,500
Xxx Xxxxxx....................................... 7,500
Xxxxx Xxxxxx..................................... 7,500
Lorayn Hoop...................................... 113,172
Xxxx Xxxxxxxx.................................... 3,750
Xxxxx Xxxxxx..................................... 3,750
Xxxxxxx Xxxxxxxxx................................ 79,206
Xxx Xxxxxxxxx.................................... 22,540
Xxxx Xxxxxxxxx................................... 24,624
Xxx Xxxxxxxxx, Xx................................ 1,475,812
Xxx Xxxxxxxxx, Xx................................ 1,982,967
Xxx Xxxxxxxxx, Xx., as Trustee under Annuity
Trust for the benefit of Xxx Xxxxxxxxx, Xx..... 850,000
Xxx Xxxxxxxxx, Xx., as Trustee under Annuity
Trust for the benefit of Xxxxxx Xxxxx.......... 850,000
Xxx Xxxxxxxxx, Xx., as Trustee under Annuity
Trust for the benefit of Xxxxxx Xxxxxxx........ 850,000
Indiana Wesleyan................................. 50,000
Xxxxxx Xxxxx..................................... 264,865
Xxxxx Xxxxx...................................... 110,736
Xxxx & Xxxxx Xxxxxxx............................. 368,354
Warrants to be exercised......................... 987,188
TOTAL FOR VOTING COMMON SHARES:................ 8,418,646
NONVOTING COMMON SHARES
Ford X. Xxxxxxxxxxx.............................. 3,192
Xxxxxxx X. Xxxxx................................. 1,596
Xxxxxxx X. Xxxx.................................. 2,394
M. Xxx X'Xxxxx................................... 16,754
Xxxxxx X. Xxxxxxx................................ 18,350
Xxxxxxxxxxx X. Xxxxx............................. 32,710
Xxxxxx X. Xxx Xxxx............................... 1,596
TOTAL FOR NONVOTING COMMON SHARES:............. 76,592
-74-
