STOCK PURCHASE AGREEMENT
BY AND AMONG
KENSINGTON COTTAGES CORPORATION OF AMERICA,
KARRINGTON HEALTH, INC.,
KENSINGTON COTTAGES CORPORATION OF MINNESOTA
AND
THE INDIVIDUAL SHAREHOLDERS OF
KENSINGTON COTTAGES CORPORATION OF MINNESOTA
APRIL 24, 1997
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement")
is entered into effective as of April 24, 1997, by and among
Kensington Cottages Corporation of Minnesota, a Minnesota
corporation ("Kensington-Minnesota"), Xxx X. Xxxxxxxxx
("Xxxxxxxxx"), Xxxxxx Xxxxx ("Xxxxx"), and Xxxxxxx Xxxxxx
("Xxxxxx"), the individual shareholders of Kensington-Minnesota
(the "Kensington-Minnesota Shareholders"), Kensington Cottages
Corporation of America, a Minnesota corporation (Kensington
Cottages Corporation of America is a wholly-owned subsidiary of
Karrington Operating Company, Inc., an Ohio corporation, and is
referred to as "Karrington"), and Karrington Health, Inc., an Ohio
corporation ("Parent").
RECITALS
Kensington-Minnesota owns and operates a 40-bed
dementia-specific assisted living facility with 8 adult xxxxxx care
licenses in Buffalo, Minnesota, known as Kensington Cottages of
Buffalo I & II.
Karrington desires to purchase the Kensington-Minnesota
Shares (as defined below) from the Kensington-Minnesota
Shareholders, and they wish to sell the Kensington-Minnesota
Shares to Karrington upon the terms set forth in this Agreement
(the Transaction).
The parties desire to make certain agreements,
representations and warranties in connection with the Transaction.
AGREEMENT
NOW THEREFORE, in consideration of these premises and
the parties' covenants, representations and warranties, the parties
agree as follows.
ARTICLE 1
DEFINITIONS
1.1. Definitions.
The following capitalized terms shall have the meaning set
forth:
1.1.1. Assets. All of Kensington-Minnesota's right, title,
and interest in and to the assets pertaining to the operations of
Kensington Cottages of Buffalo I & II.
1.1.2. Land. All of the real property owned in fee
simple by Kensington-Minnesota as more particularly described in
Schedule 1.1.2.
1.1.3. Improvements. All buildings, improvements, and
fixtures located on the Land.
1.1.4. Real Estate. All right, title and interest of
Kensington-Minnesota in and to the streets, alleys, and rights-of-
way adjacent to the Land, if any.
1.1.5. Personal Property. All of the tangible and
intangible personal property located upon, relating to, or used in
connection with or in the operation and maintenance of the Real
Estate, including, but not limited to, electric and gas appliances,
maintenance equipment, furniture, books and records, inventory
and supplies, leases, security deposits, trade names and signage, as
more fully itemized on Schedule 1.1.5.
1.1.6. Property. The Real Estate and Personal Property,
collectively.
1.1.7. Services. The provision or administration of
assisted living services to the residents of Kensington Cottages
Corporation of Minnesota.
1.1.8. Service Employees. Employees associated with
the Services.
1.1.9. Employee Accruals. The amount of accrued
vacation and sick pay liabilities for employees associated with the
Services, as of the Closing, as set forth on Schedule 1.1.9.
1.1.10. Resident Agreements. Any residential leases or
similar agreements with residents of Kensington Cottages
Corporation of Minnesota or their legal representatives or
caregivers.
1.1.11. Contracts. All contracts pertaining to Services
or Resident Agreements, as more fully itemized on Schedule 1.1.11.
1.1.12. Equipment Leases. All leased equipment used in
connection with the Services, as more fully itemized on Schedule
1.1.12.
1.1.13. Software Licenses. All licenses from or to third
parties relating to software as more fully itemized on Schedule
1.1.13.
1.1.14. Motor Vehicles. All motor vehicles associated
with the Services, as more fully itemized on Schedule 1.1.14,
including Motor Vehicles subject to Vehicle Leases.
1.1.15. Vehicle Leases. Leases to which any Motor
Vehicles are subject, as fully itemized on Schedule 1.1.15.
1.1.16. Vehicle Financing. Obligations under the bank
financing identified on Schedule 1.1.16 for certain of the Motor
Vehicles.
Certain other terms used in this Agreement (which may or may not
be capitalized) are defined in Annex A.
1.2. Meaning of Certain Words and Phrases.
The word "including" shall mean "including without
limitation." Except where expressly provided to the contrary,
"discretion" means "sole and absolute discretion." References to
any agreements or other documents include groups of related
agreements or other documents.
1.3. Acquisition Agreements:
"Acquisition Agreements" refers collectively to the
following:
a. this Agreement;
b. the Asset Purchase Agreement by and among
Karrington, Parent, Bismarck Investors, Kensington Living
Centers, Inc., and Xxx X. Xxxxxxxxx;
c. the Asset Purchase Agreement by and among
Karrington, Parent, Kensington Cottages Corporation of
North Dakota, and the individual shareholders of
Xxxxxxxxxx Xxxxxxxx Xxxxxxxxxxx xx Xxxxx Xxxxxx;
d. the Asset Purchase Agreement by and among
Karrington, Parent, Kensington Cottages Corporation of
Iowa, and the individual shareholders of Kensington
Cottages Corporation of Iowa;
e. the Asset Purchase Agreement by and among
Karrington, Parent, Kensington Cottages Corporation of
Rochester, and Xxx X. Xxxxxxxxx (the sole shareholder of
Kensington Cottages Corporation of Rochester);
f. the Asset Purchase Agreement by and among
Karrington, Parent, Centex-Kensington (Mankato I)
Partnership, Kensington Cottages Corporation of Mankato,
Centex Senior Services Corporation, Centex Life Solutions,
Inc., and Xxx X. Xxxxxxxxx;
g. the Asset Purchase Agreement by and among
Karrington, Parent, Buffalo Hills Residence and Xxx X.
Xxxxxxxxx; and,
h. the Agreement and Plan of Merger by and among
Karrington, Parent, Kensington Mergeco, Inc., Kensington
Management Group, Inc. ("KMGI"), and Xxx X. Xxxxxxxxx.
ARTICLE 2
PURCHASE OF STOCK
2.1. Purchase Price.
The total monetary consideration for the Transaction (the
"Purchase Price") shall be Three Million Dollars ($3,000,000.00) minus
the principal amount of Mortgage Debt as of the Closing Date, plus the
increase, if any, in "Current Asset Spread" from December 31, 1996 to
the Closing Date. For purposes of this Section, "Current Asset Spread"
shall mean the amount by which on any specified date the current assets of
Kensington-Minnesota exceed its current liabilities. A Closing Statement
setting forth the principal amount of Mortgage Debt will be agreed upon
by Kensington-Minnesota and Karrington not less than five days prior to
closing. A Closing Statement setting forth the current assets and current
liabilities of Kensington-Minnesota at the Closing Date will be agreed
upon by Kensington-Minnesota and Karrington as soon as possible after
the Closing Date. The Purchase Price shall be payable at Closing by wire
transfer or in other immediately available funds (except for the portion
attributable to the increase in Current Asset Spread, which shall be paid
upon final determination).
2.2. Surrender of Certificates.
At Closing, each Kensington-Minnesota Shareholder shall
surrender all stock certificates representing his Kensington-
Minnesota Shares (or affidavits for lost shares) to Parent or any
agent it designates.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF KARRINGTON AND PARENT
Karrington and Parent each separately represents and
warrants to the Kensington-Minnesota Shareholders as follows:
3.1. Date of Representations and Warranties.
The representations and warranties in this Article 3 are true
and correct as of the effective date of this Agreement.
3.2. Organization, Qualification.
Each of Karrington and Parent is a corporation duly
organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation, is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction
where qualification to do business is required, and has full
corporate power and corporate authority and all licenses, permits,
and authorizations necessary to carry on its business and to own
and use its property.
3.3. Authorization of Transaction.
Each of Karrington and Parent has full power and authority
to execute, deliver, and perform this Agreement. This Agreement
constitutes Karrington's and Parent's valid and legally binding
obligation, enforceable in accordance with its terms and conditions
(Subject to Equitable Principles).
3.4. Effect on Other Agreements.
Karrington's and Parent's execution and delivery of this
Agreement and its consummation of the Transaction will not
violate, breach, conflict with or constitute a default under any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Karrington or Parent is
subject or any provision of its Governing Documents or any
indenture, contract or agreement to which Karrington or Parent is
subject.
3.5. No Notice or Consent.
Neither Karrington nor Parent is required to give any notice
to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for
the parties to consummate the Transaction.
3.6. Finder's Fees.
To Karrington's Knowledge, no person or entity is entitled
to any brokerage commission, finder's fee, or similar compensation
in connection with the execution, delivery, or performance of this
Agreement.
3.7. Proceedings.
There is no action, suit, proceeding or investigation pending
or, to the Knowledge of Karrington or Parent, threatened against
Karrington or Parent which, if decided adversely to Karrington or
Parent, may prevent or in any material way impair the
consummation of the Transaction or have a material adverse effect
on Karrington's business operations or financial condition, taken as
a whole.
3.8. Financing.
Parent either has the funds available or has arranged
financing for consummation of the Transaction.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
BY THE KENSINGTON-MINNESOTA SHAREHOLDERS
Each of the Kensington-Minnesota Shareholders separately
represents and warrants to Karrington and Parent as follows:
4.1. Date of Representations and Warranties.
The representations and warranties in this Article 4 are true
and correct as of the effective date of this Agreement.
4.2. Organization, Qualification.
Kensington-Minnesota is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. It is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction
where qualification to do business is required. It has full corporate
power and corporate authority to carry on its business and to own
and use its property. It has not filed for relief as a debtor under any
state receivership laws or federal bankruptcy laws.
4.3. Governing Documents.
Kensington-Minnesota has delivered or made reasonably
available to Karrington true, correct, and complete copies of its
Governing Documents. It is not in default under or in violation of
any provision of its Governing Documents.
4.4. Authorization of Transaction.
Kensington-Minnesota has full power and authority to
execute, deliver, and perform this Agreement. This Agreement
constitutes Kensington-Minnesota's valid and legally binding
obligation, enforceable in accordance with its terms and conditions
(Subject to Equitable Principles).
4.5. Effect on Other Governing Documents.
Kensington-Minnesota's execution and delivery of this
Agreement and its consummation of the Transaction will not violate
any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Kensington-
Minnesota is subject or any provision of its Governing Documents.
4.6. Finder's Fees.
To the Knowledge of such shareholder, no person or entity
is entitled to any brokerage commission, finder's fee, or similar
compensation in connection with the execution, delivery, or
performance of this Agreement.
4.7. Stock Ownership; No Agreement.
4.7.1. Kensington-Minnesota's entire authorized capital
stock consists of 1,000,000 shares of common stock without par
value, of which 5,874 shares are issued and outstanding, all of
which are owned of record by the Kensington-Minnesota
Shareholders (collectively , the "Kensington-Minnesota Shares").
The Kensington-Minnesota Shares constitute all issued and
outstanding shares of capital stock or other equity securities of
Kensington-Minnesota. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that
could require Kensington-Minnesota to issue, sell, or otherwise
cause to become outstanding any of its capital stock. The
Minnesota Business Corporation Act does not have the concept of
treasury shares. The Kensington-Minnesota Shares have been duly
authorized for issuance by all necessary corporate action of
Kensington-Minnesota and are validly issued, fully paid and
nonassessable. Xxxxxxxxx separately represents on his own behalf
that he owns beneficially and of record 4,406 shares of Kensington-
Minnesota. Klane separately represents on his own behalf that he
owns beneficially and of record 880.5 shares of Kensington-
Minnesota. Xxxxxx separately represents on his own behalf that
he owns beneficially and of record 587.5 shares of Kensington-
Minnesota. Each Kensington-Minnesota Shareholder separately
represents on his own behalf that the Kensington-Minnesota Shares
owned beneficially and of record by him are free and clear of any
restrictions on transfer (other than any restrictions applicable under
the Securities Act and state securities laws, restrictions under that
certain Shareholder Control Agreement, dated May 26, 1994, by
and among Kensington-Minnesota and the Kensington-Minnesota
Shareholders (the "Shareholder Control Agreement") and
restrictions under that certain Stock Transfer Restriction
Agreement, dated May 26, 1994, by and among Kensington-
Minnesota and the Kensington-Minnesota Shareholders (the "Stock
Transfer Agreement")), Taxes, Security Interests, preemptive or
similar rights, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. Each Kensington-
Minnesota Shareholder separately represents on his own behalf that
he is not a party to any option, warrant, purchase right, or other
contract or commitment that could require him to sell, transfer, or
otherwise dispose of any capital stock of Kensington-Minnesota,
including the Kensington-Minnesota Shares, other than this
Agreement and the Stock Transfer Agreement. Each Kensington-
Minnesota Shareholder separately represents on his own behalf that
he has full power and authority to transfer his Kensington-
Minnesota Shares to Karrington under this Agreement free of any
adverse claims or other restrictions and, upon consummation of the
Closing hereunder, Karrington shall own his Kensington-Minnesota
Shares free and clear of all adverse claims and restrictions on
transferability (other than any restrictions applicable under the
Securities Act and state securities laws). Each Kensington-
Minnesota Shareholder separately represents on his own behalf that
he is not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of
Kensington-Minnesota other than the Shareholder Control
Agreement.
4.7.2. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights
with respect to Kensington-Minnesota capital stock.
4.8. Subsidiaries.
Kensington-Minnesota has no Subsidiaries. Kensington-
Minnesota owns no equity securities of any other person or entity.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF XXX X. XXXXXXXXX
Xxx X. Xxxxxxxxx represents and warrants to Karrington
and Parent as follows:
5.1. Date of Representations and Warranties.
The representations and warranties in this Article 5 are true
and correct as of the effective date of this Agreement.
5.2. Financial Statements.
Attached as Schedule 5.2 are the following financial
statements of Kensington-Minnesota (the "Kensington-Minnesota
Financial Statements"): (a) unaudited balance sheets and statements
of income for the fiscal years ended on December 31st of each of
the years 1994, 1995, and 1996 and (b) unaudited balance sheets
and statements of income for the one month ended January 31,
1997 (the "Most Recent Financial Statements" - December 31,
1996 is the "Most Recent Fiscal Year End" and January 31, 1997 is
the "Most Recent Fiscal Month End'), all of which are consistent
with Kensington-Minnesota's books and records, and fairly present
Kensington-Minnesota's results of operations for the periods
indicated. "Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
5.3. Events Subsequent to Most Recent Fiscal Year End.
Since the Most Recent Fiscal Year End, there have been no
changes in Kensington-Minnesota's Business, financial condition,
operations, or results of operations which have a material adverse
effect thereon, either separately or in the aggregate (a "Material
Adverse Effect"). Without limiting the generality of the preceding
sentence, since that date, Kensington-Minnesota has not:
5.3.1. imposed any Security Interest of any kind upon
any of the Assets;
5.3.2. granted any license or sublicense pertaining to the
Software Licenses or any rights under or with respect to any
Intellectual Property pertaining to the Services;
5.3.3. experienced any damage, destruction, or loss
(whether or not covered by insurance) to the Assets which would
have a Material Adverse Effect;
5.3.4. sold, leased, transferred, or assigned any of the
Assets other than in the Ordinary Course of Business;
5.3.5. entered into any written or oral employment
contract or collective bargaining agreement concerning the Service
Employees, modified the terms of any such existing contract or
agreement, or made any other change in employment terms
pertaining to the Services, except for changes in compensation or
terms of employment in the Ordinary Course of Business and not in
contemplation of this Agreement;
5.3.6. entered into, accelerated, terminated, modified,
canceled, or made any other type of material change to any
agreement, contract, mortgage, lease, or license pertaining to the
Assets or the Services to which Kensington-Minnesota is a party or
by which it is bound which pertains in any way to the Assets or the
Services; or
5.3.7. committed to any of the foregoing.
5.4. Undisclosed Liabilities.
5.4.1. Kensington-Minnesota has no Liability and, to the
Knowledge of Xxxxxxxxx, there is no Basis for any Liability which
would have a Material Adverse Effect except for (a) Liabilities set
forth on the Most Recent Balance Sheet or which would not be
required to be set forth on a balance sheet prepared in accordance
with GAAP, and (b) Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business, none
of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort,
infringement, violation of law, or similar cause.
5.4.2. Kensington-Minnesota is not a guarantor or
otherwise liable for any Liability or obligation (including
indebtedness) of any other Person.
5.5. Insurance.
5.5.1. Kensington-Minnesota, through KMGI, maintains
insurance policies (copies of which have been delivered to or made
reasonably available to Karrington) reasonable in scope and amount
in connection with the Assets and Services, and has done so for the
past four years, provided, however, that no representation or
warranty is made as to the reasonableness of such insurance after
the Closing and it will be Karrington's exclusive responsibility to
determine the insurance policies to be put in place after the Closing.
5.5.2. Schedule 5.5 sets forth a true and accurate list of
all insurance policies carried on the Assets. The casualty insurance
covering the Property insures the full replacement value thereof.
5.5.3. Kensington-Minnesota has complied with all
notices or requests it has received from any insurance company
issuing any of the insurance policies required to be set forth on
Schedule 5.5.
5.6. Effect on Other Agreements.
Except as disclosed in Schedule 5.6, Kensington-
Minnesota's execution and delivery of this Agreement and its
consummation of the Transaction will not breach, conflict with,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, mortgage, lease,
license, instrument, or other arrangement to which Kensington-
Minnesota is a party or by which it is bound or to which any of its
assets is subject, or result in the imposition of any Security Interest
upon any of its assets.
5.7. No Notice or Consent.
Except as disclosed in Schedule 5.7, Kensington-Minnesota
is not required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or
governmental agency in order for the parties to consummate the
Transaction.
5.8. Tangible Assets.
Each tangible asset included in the Assets is in good
operating condition and repair (normal wear and tear excepted),
and is suitable for the purposes for which it presently is used and
proposed to be used.
5.9. Property Matters.
5.9.1. Except as disclosed on Schedule 5.9, no notices
have been received by Kensington-Minnesota from the holder of
any of the existing mortgages on the Property or from insurers or
governmental authorities requiring any work to be performed with
respect to the Property which has not already been performed.
5.9.2. Except as disclosed on Schedule 5.9, the Property
and the present use of the Property does not violate any provisions
of any applicable zoning ordinances, building codes, fire
regulations, or other governmental ordinances, orders, or
regulations.
5.9.3. Except as disclosed on Schedule 5.9, there are no
hidden structural or mechanical defects in the buildings or
improvements located on the Real Estate or any roof or wall leaks,
or backed up sewer problems. All improvements on the Real Estate
were constructed in accordance with applicable law and
substantially in conformity with all plans and specifications
pertaining thereto, copies of which have been delivered to or made
reasonably available to Karrington.
5.9.4. Except as disclosed on Schedule 5.9, there are no
leases affecting the Real Estate except for the Resident
Agreements.
5.9.5. To the Knowledge of Xxxxxxxxx there is no
threatened taking by any governmental authority which would
affect, involve or be adverse to the Property.
5.9.6. To the Knowledge of Xxxxxxxxx, except as
disclosed in the Environmental Audit, there are no xxxxx,
underground or above-ground storage tanks, or individual sewage
treatment systems on the Property.
5.10. Legal Compliance.
5.10.1. Other than with respect to Security Interests
related to any mortgage indebtedness secured by the Property (the
"Mortgage Debt"), the Equipment Leases, Vehicle Leases, and the
Vehicle Financing, and as otherwise required to be disclosed in this
Agreement, Kensington-Minnesota has not taken or failed to take
any action with respect to any legal matter which has resulted in, or
may result in (a) the imposition of any Security Interest on the
Assets, or (b) any Liability with respect to the Assets or Services to
which Karrington may be subject after Closing.
5.10.2. Kensington-Minnesota has complied with all
laws (including any related rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges) of
federal, state, local and foreign governments (including any
governmental agencies) the failure to comply with which would
have a Material Adverse Effect, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced against Kensington-Minnesota
alleging any failure to comply.
5.10.3. Kensington-Minnesota has all necessary or
appropriate governmental licenses, certificates, permits and
authorizations to own or lease the Assets and to perform the
Services (the "Kensington-Minnesota Permits") with respect to
which the failure to have would have a Material Adverse Effect.
To the Knowledge of Xxxxxxxxx, no violations have occurred with
respect to the Kensington-Minnesota Permits, and no proceeding is
pending or threatened which might have the effect of revoking or
rescinding, or otherwise having a materially adverse effect upon,
any Kensington-Minnesota Permit. Kensington-Minnesota has filed
all reports, cost reports, registrations and statements, together with
any required amendments, that are or were required to be filed with
any governmental authorities (or with any fiscal intermediaries)
pursuant to the Kensington-Minnesota Permits or otherwise. As of
their respective dates, all such reports, cost reports, registrations
and statements complied in all material respects with the terms of
the then-existing contracts between any governmental authorities or
fiscal intermediaries and Kensington-Minnesota, and with all
statutes, rules and regulations enforced or promulgated by the
regulatory authority (or by any fiscal intermediary) with which they
were filed, and were true, correct and complete as filed in all
material respects.
5.10.4. Kensington-Minnesota is not a party to any
supervisory agreement, memorandum of understanding, consent
order, cease and desist order, or condition of any regulatory order
or decree with or by any governmental regulatory authority or
agency.
5.10.5. Kensington-Minnesota does not qualify for cost
reporting or cost reimbursement under any health care or similar
program administered by any governmental authority or agency.
5.11. Litigation.
5.11.1. Except as disclosed on Schedule 5.11,
Kensington-Minnesota is not a party and, to the Knowledge of
Xxxxxxxxx, has not been threatened to be made a party, to any
action, suit, proceeding, hearing, or investigation of, in, or before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
5.11.2. Kensington-Minnesota is not subject, and, to the
Knowledge of Xxxxxxxxx, has not been threatened to be made
subject, to any injunction, judgment, order, decree, ruling, or
charge.
5.12. Tax Matters.
5.12.1. Kensington-Minnesota has delivered to
Karrington true and complete copies of (a) the most recent real
estate tax and assessment bills for the Property, (b) all Tax Returns
that have been or are currently subject to audit, and (c) all
examination reports and statements of deficiencies assessed against
or agreed to by Kensington-Minnesota.
5.12.2. Kensington-Minnesota has not taken or failed to
take any action with respect to any tax matter which has resulted in,
or, to the Knowledge of Xxxxxxxxx, may result in (a) the imposition
of any Security Interest on the Assets, or (b) any Liability with
respect to which Kensington-Minnesota may be subject after
Closing.
5.12.3. Kensington-Minnesota has filed all required Tax
Returns, all of which were correct and complete in all material
respects when filed, and has fully paid all Taxes to which it is or has
been subject, whether or not shown on any Tax Return. Except as
set forth on Schedule 5.12, no filing date has been extended for any
Tax Return Kensington-Minnesota is or has been required to file
which has not yet been filed. To the Knowledge of Xxxxxxxxx, no
taxing authority in a jurisdiction where Kensington-Minnesota does
not file Tax Returns has ever asserted that Kensington-Minnesota is
or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the Assets that arose in connection with
any actual or alleged failure to pay any Tax.
5.12.4. Kensington-Minnesota has withheld and paid all
Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
5.12.5. To the Knowledge of Xxxxxxxxx, no taxing
authority plans to assess any additional Taxes for any period for
which Tax Returns have been filed. To the Knowledge of
Xxxxxxxxx, there is no dispute or claim concerning any Tax
Liability claimed or raised by any taxing authority.
5.12.6. Kensington-Minnesota has not waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
5.13. Intellectual Property.
Kensington-Minnesota does not own, license, or otherwise
possess any rights in any Intellectual Property which pertain in any
way to the Assets or Services, and is not subject to any such rights
held by third parties, other than rights made available to it by its
affiliate, KMGI.
5.14. Other Agreements.
5.14.1. Schedule 1.1.11 lists and briefly describes all
material written or oral agreements to which Kensington-Minnesota
is a party, including all maintenance contracts, concession
agreements, or other contracts affecting the Property (other than
the Equipment Leases, Software Licenses, and Vehicle Leases).
5.14.2. Each of the Contracts, Equipment Leases,
Software Licenses, and Vehicle Leases, is legal, valid, and binding
(Subject to Equitable Principles), and in full force and effect and
subject to obtaining any consents or the giving of notices as
disclosed in Schedule 5.6 or 5.7, will continue to be legal, valid, and
binding, and in full force and effect on identical terms immediately
following the consummation of the Transaction (Subject to
Equitable Principles). Kensington-Minnesota is not in default in the
performance of any such agreements and, to the Knowledge of
Xxxxxxxxx no parties thereto have any defenses, set-offs or rebates
relating in default to any such agreements. Except as disclosed in
Schedule 5.14: to the Knowledge of Xxxxxxxxx, no other party is in
breach or default of any such agreement; to the Knowledge of
Xxxxxxxxx no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination,
modification or acceleration, under the agreement, and no party has
repudiated any provision of the agreement.
5.14.3. Kensington-Minnesota has delivered or made
reasonably available to Karrington a correct and complete copy of
each written agreement or a written summary describing the terms
and conditions of each oral agreement referred to in this Section
5.14.
5.14.4. All Resident Agreements have fixed rental
periods of no longer than twelve months.
5.15. Performance of Services.
Schedule 5.15 describes and sets forth copies of all
documents containing the standard terms and conditions for the
Services (including any applicable warranty and indemnity
provisions). Each Service performed or otherwise delivered by
Kensington-Minnesota has been in conformity in all material
respects with all applicable contractual commitments and all express
and implied warranties.
5.16. Employees.
5.16.1. To the Knowledge of Xxxxxxxxx as of the date
hereof, no Service Employee employed in a management capacity
has any plans to terminate employment with Kensington-Minnesota
prior to Closing.
5.16.2. Except as provided in Subparagraph 1.1.9, as of
Closing, Kensington-Minnesota shall have discharged all obligations
to the Service Employees with respect to compensation or benefits
of any kind under any type of Employee Benefit Plan, and after
Closing Karrington shall have no obligation to any Service
Employee for any such item attributable to the action or inaction of
Kensington-Minnesota.
5.16.3. Kensington-Minnesota is not and never has been
a party to or bound by any collective bargaining agreement. To the
Knowledge of Xxxxxxxxx, there has never been and there is not
now any effort by any labor union to organize any employees of
Kensington-Minnesota into one or more collective bargaining units.
Kensington-Minnesota has not experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining
disputes. Kensington-Minnesota has not committed any unfair
labor practice or other violation of labor or employment law
relating to the Service Employees.
5.17. Employee Benefits.
5.17.1. Kensington-Minnesota does not now maintain
and is not now required to contribute to, and has never maintained
or been required to contribute to, any Employee Pension Benefit
Plan.
5.17.2. Schedule 5.17.2 lists and briefly describes each
Employee Benefit Plan the Kensington-Minnesota maintains or to
which Kensington-Minnesota contributes.
5.17.3. All premiums or other payments for all periods
ending on or before the Closing Date have been paid or will be paid
when they become due with respect to each Employee Welfare
Benefit Plan.
5.17.4. Each item required to be listed on Schedule
5.17.2 and each related trust, insurance contract, or fund complies
in form and in operation in all respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
5.17.5. All required reports and descriptions (including
form 5500 annual Reports, Summary Annual Reports and Summary
Plan Descriptions) have been properly filed or distributed, and the
requirements of Part 6 of Subtitle B of Title I of ERISA and of
Code Sec. 4980B have been met with respect to each Employee
Welfare Benefit Plan. Kensington-Minnesota has delivered or made
reasonably available to Karrington copies of all such reports and
descriptions.
5.17.6. Kensington-Minnesota has delivered or made
reasonably available to Karrington correct and complete copies of
the plan documents and summary plan descriptions, and all related
trust agreements, insurance contracts and other funding agreements
which implement each Employee Benefit Plan.
5.17.7. All contributions, including all employer
contributions and employee salary reduction contributions, which
are due have been paid to each Employee Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each Employee Benefit
Plan or properly accrued. All premiums or other payments for all
periods ending on or before the Closing Date have been paid with
respect to each Employee Welfare Benefit Plan.
5.17.8. There have been no Prohibited Transactions
with respect to any Employee Benefit Plan which Kensington-
Minnesota maintains or ever has maintained or to which it
contributes, ever has contributed, or ever has been required to
contribute; no Fiduciary has any Liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee
Benefit Plan; no action, suit, proceeding, hearing or investigation
with respect to the administration or the investment of the assets of
any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of any of Kensington-
Minnesota and its directors, officers, or employees responsible for
employee benefits matters, threatened; neither Kensington-
Minnesota nor any of its directors, officers or employees
responsible for employee benefit matters has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or
investigation.
5.17.9. Kensington-Minnesota does not contribute to,
never has contributed to, and never has been required to contribute
to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan.
5.17.10. Kensington-Minnesota does not maintain or
contribute, never has contributed to, and never has been required to
contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, its spouses or its
dependents (other than in accordance with Code Section 4980B).
5.18. Powers of Attorney.
There are no outstanding powers of attorney executed on
behalf of Kensington-Minnesota.
5.19. Environment, Health and Safety.
5.19.1. To the Knowledge of Xxxxxxxxx, Kensington-
Minnesota has no Liability for any illness of or personal injury to
any employee or other individual, for damage to any site, location,
or body of water (surface or subsurface), for any damages or claims
under any past, present, or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice, or for
any other reason under any Environmental, Health and Safety Law
in any way pertaining to or affecting the Assets or Services.
5.19.2. Kensington-Minnesota and its predecessors (i)
have complied with all Environmental, Health and Safety Laws, and
no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced
against any of them alleging any failure to comply, and (ii) have
obtained and been in compliance in all material respects with all of
the terms and conditions of all permits, licenses, and other
authorizations which are required under, and have complied in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health and
Safety Laws.
5.19.3. Kensington-Minnesota has not disposed of or
arranged for the disposal of any Hazardous Substance on the
Property and Xxxxxxxxx has no Knowledge of the disposal of any
Hazardous Substance on the Property by any other person or entity.
5.19.4. There have not been, and there currently are no
pending or, to the Knowledge of Xxxxxxxxx, threatened claims
against Kensington-Minnesota alleging the violation of any
Environmental, Health and Safety Laws.
5.19.5. Except as disclosed in the Environmental Audit,
to the Knowledge of Xxxxxxxxx the Property is free of asbestos,
PCB's, methylene chloride, trichloroethylene, dioxins,
dibenzofurans and Extremely Hazardous Substances.
5.20. Data Processing Matters.
5.20.1. With respect to the computer equipment,
associated peripheral devices, related operating and application
systems, and other software used in connection with the Services
and Assets which Kensington-Minnesota owns, leases, or licenses
(the "Data Processing Systems"):
a. Kensington-Minnesota, through KMGI, has taken
appropriate action, by instruction, agreement, or otherwise,
with its employees or other persons permitted access to
system application programs and data files, to protect
against unauthorized access, use, copying, modification,
theft and destruction of any such programs and files; and
Kensington-Minnesota has not sustained, and Xxxxxxxxx is
not aware of any information or circumstances indicating
that Kensington-Minnesota may sustain, disruption of
business or loss by reason of unauthorized access, use,
copying, modification, theft, or destruction of any such
programs and files by its employees or any such other
persons; and
b. Kensington-Minnesota, through KMGI, has arranged
for back-up data processing services adequate to meet data
processing needs in the event that the Data Processing
Systems are rendered temporarily or permanently
inoperative as a result of a natural disaster or other cause.
5.20.2. Kensington-Minnesota's data processing and
data storage facilities are adequate for the Services, are properly
protected, and possess proper temperature and humidity control
devices and fire protection equipment.
5.21. Books and Records.
5.21.1. Kensington-Minnesota's books of account
pertaining to the Services reflect all material items of income and
expense and all material assets, liabilities and accruals, and are
prepared and maintained in form and substance adequate for
preparing financial statements and related information in
accordance with any accounting principles required by any
governmental agency with regulatory authority over Kensington-
Minnesota's financial statements and otherwise in accordance with
the standards required by this Agreement.
5.21.2. Kensington-Minnesota has devised and
maintained a system of internal accounting controls with respect to
the Services sufficient to provide reasonable assurances that (a)
transactions are executed in accordance with management
directives, (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with Subsection
5.21.1, (c) the recorded amounts are compared with the actual
levels at reasonable intervals and appropriate action is taken with
respect to any differences, and (d) access to information pertaining
to the preceding items (a) - (c) is permitted only in accordance with
management directives.
5.22. Residents' Assets.
Except for security deposits held in connection with the
Resident Agreements, Kensington-Minnesota does not hold, and
the Assets do not include, funds of any residents of Kensington
Cottages of Buffalo I & II in excess of two hundred dollars
($200.00) per resident.
ARTICLE 6
NATURE OF DISCLOSURES
6.1. Disclosure by Kensington-Minnesota and Xxx X.
Xxxxxxxxx.
Xxx X. Xxxxxxxxx represents and warrants to Karrington
and Parent as follows:
6.1.1. All items concerning Kensington-Minnesota
which are required to be disclosed or identified on the Schedules to
this Agreement have been disclosed and identified accurately,
completely, and with reasonable particularity.
6.1.2. No representation or warranty made by or about
Kensington-Minnesota in this Agreement, and no schedule, list,
certificate, document, or other instrument or exhibit concerning
Kensington-Minnesota which is required under this Agreement
contains any untrue statement of a material fact or omits any
material fact necessary to make the statements made not
misleading.
6.1.3. To the Knowledge of Xxxxxxxxx, there is no fact
which materially and adversely affects Kensington-Minnesota which
has not been set forth in this Agreement, the Schedules, or any
other materials Kensington-Minnesota is required to furnish under
this Agreement.
6.1.4. Karrington and Parent each agree that it is not
relying upon any representations and warranties of any or all of the
Kensington-Minnesota Shareholders that are not set forth in this
Agreement or required to be set forth in a schedule, list, certificate,
document or other instrument or exhibit required under this
Agreement and that there shall not be deemed to be any other
express or implied representations or warranties made by or on
behalf of any or all of the Kensington-Minnesota Shareholders in
connection with the Transaction.
6.2. Copies and Lists.
Unless a representation and warranty made about
Kensington-Minnesota in this Agreement is solely with respect to
the existence or non-existence of a document or other item, the
mere listing or inclusion of a copy of the document or other item
shall not be adequate to disclose (a) a permitted exception to a
representation or warranty if an additional description of facts and
circumstances is reasonably necessary to enable Karrington to
understand the exception or (b) an exception to a representation or
warranty which is not permitted.
6.3. Due Diligence.
The obligations of the Kensington-Minnesota Shareholders
to make representations and warranties in accordance with the
standards set forth in this Agreement shall not be affected or
deemed waived on the grounds that Karrington, based upon its
investigation and review or otherwise, should have known that any
such representation or warranty is or might be inaccurate or
incomplete.
ARTICLE 7
TITLE TO REAL ESTATE; ENVIRONMENTAL AUDIT
7.1. Title Commitment and Policy.
7.1.1. Kensington-Minnesota, has furnished and
delivered to Karrington in form acceptable to Karrington, a current
Owner's Title Insurance Commitment (form ALTA 1966), together
with copies of all documents referred to therein (the "Title
Commitment").
7.1.2. Kensington-Minnesota shall furnish and deliver to
Karrington:
a. An update of the Title Commitment certified to within
ten (10) days prior to the Closing Date (the "Updated Title
Commitment"); and
b. At Closing, an Owner's Title Insurance Policy (form
ALTA 1992) in the amount of the full purchase price of the
Real Estate and effective as of the date and time of the
recording of the Deeds (the "Title Policy").
7.2. Title.
The Updated Title Commitment shall show in Kensington-
Minnesota good and marketable title in fee simple to the Real
Estate, free and clear of all liens and encumbrances except those
listed in Section 7.3 (the "Permitted Encumbrances"), and the Title
Policy shall insure the same in Karrington.
7.3. Permitted Encumbrances.
Permitted Encumbrances are as follows:
7.3.1. Those created or assumed by Karrington, or
which are otherwise acceptable to Karrington in its discretion;
7.3.2. General real estate taxes and special assessments
which are a lien but not payable or delinquent as of Closing; and
7.3.3. Liens and encumbrances listed in Schedule 7.3.
7.4. Exceptions and Endorsements.
7.4.1. The Title Policy shall not contain a survey
exception or an exception for unfiled mechanics liens or an
exception for rights of parties in possession other than rights of
residents under the Resident Agreements.
7.4.2. The Title Policy shall contain a zoning
endorsement, general comprehensive endorsement, access
endorsement, survey endorsement, environmental lien endorsement,
and such other endorsements which Karrington determines are
necessary, in Karrington's reasonable discretion, each of which shall
be satisfactory to Karrington in its discretion.
7.5. Survey and Legal Descriptions.
Kensington-Minnesota, has furnished to Karrington (a) plats
of survey for the Real Estate prepared in accordance with the
Minimum Standard Detail Requirements for Urban Class Land Title
Surveys (jointly established by ALTA/ACSM, as revised in 1992
including the following items of Table A thereof: 1, 2, 3, 6, 7, 8, 9,
10, 11, 13, 14, 15 and 16), and acknowledging receipt of the Title
Commitment and that the location of each exception set forth in the
Title Commitment, to the extent it can be located, has been shown
thereon (with recording references and reference to the exception
number of the Title Commitment), which on or prior to the Closing
shall be certified to Karrington, the title insurer and any lender of
Karrington's if requested (dated subsequent to the date of this
Agreement) and (b) legal descriptions for the Real Estate prepared
by a surveyor registered in the State of Minnesota who is
acceptable to Karrington (the "Surveys").
7.6. Occupancy Permits.
Kensington-Minnesota has provided Karrington with true
and complete copies of the occupancy permits for the Real Estate.
7.7. Environmental Audit
Karrington has received from Kensington-Minnesota a
Phase I Environmental Audit of the Real Property, in form and
content satisfactory to Karrington and performed by an
environmental engineer satisfactory to Karrington (the
"Environmental Audit").
ARTICLE 8
PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period of
time between the date of this Agreement and the Closing:
8.1. In General.
8.1.1. The Kensington-Minnesota Shareholders shall
cause Kensington-Minnesota to use its best efforts to take all action
and to do all things necessary, proper or advisable in order to
consummate the Transaction, including but not limited to those
actions specifically set forth in this Article.
8.1.2. Karrington will use its best efforts to take all
action and to do all things necessary, proper or advisable in order to
consummate the Transaction.
8.2. [Reserved]
8.3. Pre-Closing Audit.
Kensington-Minnesota shall fully cooperate with Ernst &
Young in connection with the completion of their audit, prior to
Closing, of Kensington-Minnesota's financial statements for the
fiscal years ending December 31, 1994, 1995, and 1996 (the
"Audit"). Karrington shall use its best efforts to cause the Audit to
be completed by Ernst & Young on or before April 30, 1997.
8.4. Insurance.
Kensington-Minnesota shall maintain the insurance required
to be set forth on Schedule 5.5 in full force and effect through
Closing.
8.5. First Union Financing.
The parties shall fully cooperate and use commercially
reasonably efforts to obtain the consent of First Union National
Bank of North Carolina, the first mortgage lender with respect to
the Property ("First Union"), with respect to the Transaction.
8.6. Operation of Business.
Kensington-Minnesota will not engage in any practice, take
any action or enter into any transaction which is outside the
Ordinary Course of Business, including any practice, action, or
transaction of a type described in Section 5.3.
8.7. Preservation of Assets.
Kensington-Minnesota will use commercially reasonable
efforts to keep the Assets and Services substantially intact,
including all present operations, physical facilities, working
conditions and relationships with lessors, licensors, suppliers,
lessees, residents, customers, and employees. Kensington-
Minnesota shall maintain the Assets in their present condition and
repair (ordinary wear and tear excepted), shall not enter into any
material contract which extends beyond the Closing Date without
the consent of Karrington, and shall continue the existing operation
of the Property including continuing its present advertising
commitments and its usual program of advertising. Kensington-
Minnesota shall not remove from the Property any items of
Personal Property between the date hereof and the Closing, except
as may be required for repair or replacement; and any replacements
shall be of equal or better quality and quantity. Nothing herein shall
require Kensington-Minnesota to repair or replace Property
substantially damaged or destroyed by fire or other casualty prior to
Closing.
8.8. Access to Properties.
Kensington-Minnesota will permit representatives of
Karrington full access during normal business hours to all of its
premises, properties, personnel, books, records, contracts,
documents and other materials as reasonably required by
Karrington.
8.9. Notice of Developments.
Karrington and Xxxxxxxxx each will give prompt written
notice to one another of any development of which it has
Knowledge which reasonably appears to cause any representations
and warranties by any party in this Agreement not to be true and
correct in all material respects as of Closing (except as provided
with respect to the dates of financial statements under Section 5.2
and except for the date limitation concerning certain employee
matters set forth in Subsection 5.16.1). Such written notice shall
describe the matter with reasonable particularity and shall set forth
the manner in which it would cause any such representation and
warranty (identified by specific reference to the applicable provision
of this Agreement) not to be true as of Closing. No notice under
this Section 8.9 shall be deemed to amend or supplement any
representation or warranty or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant by the
party giving notice; provided that in the event a party would have
the right not to proceed to Closing by reason of such breach, if the
nondefaulting party elects to close notwithstanding such breach,
such breach shall be deemed waived for all purposes of this
Agreement unless the parties otherwise agree in writing.
8.10. Updated Schedules.
Kensington-Minnesota will update the Schedules to this
Agreement at and as of (a) five business days prior to the Closing
Date or (b) any other time specifically required by this Agreement,
and shall provide the updated Schedules to Karrington for its
review at the applicable time. No updated Schedule shall be
deemed to amend or supplement any representation or warranty or
any Schedule or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant related to any Schedule; provided
that in the event a party would have the right not to proceed to
Closing by reason of such breach, if the nondefaulting party elects
to close notwithstanding such breach, such breach shall be deemed
waived for all purposes of this Agreement unless the parties
otherwise agree in writing.
8.11. Exclusivity.
So long as this Agreement has not been terminated,
Kensington-Minnesota will not (a) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the
acquisition of any substantial portion of its assets (including any
acquisition structured as a merger, consolidation or share exchange)
or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
otherwise facilitate any of the foregoing except as required by this
Agreement. Kensington-Minnesota will notify Karrington
immediately if any of the foregoing occur.
8.12. Confidentiality.
8.12.1. Each party will hold all Confidential Information
concerning every other party in strictest confidence, refrain from
using it except in connection with this Agreement, and, promptly
upon the direction of the other party, deliver to the other party or
destroy all originals or copies of the Confidential Information in its
possession. Each party shall immediately notify the other if it is
requested or required to disclose any Confidential Information in
any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process. If a protective order cannot be
obtained and the party is, on the written advice of counsel,
compelled to disclose the Confidential Information or else be held
in contempt, the party may disclose the Confidential Information to
the tribunal; provided, however, that it shall use its best efforts to
obtain an appropriate order or other assurance that confidential
treatment will be accorded to the Confidential Information
disclosed.
8.12.2. Notwithstanding the definition of Confidential
Information set forth on Annex A, for purposes of this Section 8.12
any material identified as Confidential Information shall not be
regarded as Confidential Information if it is information already
available to the public or already known from a lawful source to the
party receiving such Confidential Information.
8.12.3. The provisions of this Section 8.12 shall not
supersede any confidentiality provisions contained in the letter of
intent between KMGI and Karrington Operating Company, Inc.
dated November 12, 1996, which confidentiality provisions shall
remain in full force and effect; provided that, the provisions of this
Agreement shall control in the event of any conflict.
ARTICLE 9
DAMAGE, EMINENT DOMAIN
9.1. Damage or Other Destruction of Property.
Risk of loss to the Property from fire or other casualty shall
be borne by Kensington-Minnesota until Closing. If the Property is
substantially damaged or destroyed by fire or other casualty prior to
the Closing of the transaction, Kensington-Minnesota shall not be
obligated to repair or replace the damaged or destroyed Property,
but in that event Karrington may (a) elect to proceed with the
Transaction, in which event Karrington shall, as its exclusive
recourse under this Agreement for such damage or destruction, be
entitled to all insurance money payable to Kensington-Minnesota
under any and all policies of insurance covering the Property so
damaged or destroyed, or (b) elect to terminate this Agreement.
9.2. Eminent Domain.
If prior to the Closing all or any material part of the
Property shall be taken by any governmental authority under its
power of eminent domain, Karrington may (a) elect to proceed with
the Transaction, in which event Karrington shall, as its exclusive
recourse under this Agreement for such taking, be entitled to all
payments payable to Kensington-Minnesota on account of such
taking, or (b) elect to terminate this Agreement.
ARTICLE 10
TERMINATION
10.1. Termination of Agreement.
10.1.1. The parties may terminate this Agreement by
mutual written consent at any time prior to the Closing.
10.1.2. Karrington may terminate this Agreement as
provided in Article 9.
10.1.3. Any party may terminate this Agreement by
written notice to the others at any time prior to the Closing if (a)
any party other than the terminating party has breached any material
representation, warranty or covenant in this Agreement, and the
breach continues without cure for ten Business Days after notice of
the breach from the terminating party, or (b) the Closing shall not
have occurred on or before May 30, 1997, because of the failure of
any condition to the terminating party's obligation to close the
Transaction.
10.2. Effect of Termination.
If the Agreement is terminated as provided in this Article
10, all rights and obligations of the parties shall cease immediately
upon termination, except for any Liability of a party then in breach,
and except for any obligations of the parties with respect to use or
disclosure of Confidential Information.
ARTICLE 11
CONDITIONS TO OBLIGATION TO CLOSE
11.1. Conditions to Karrington's Obligation to Close.
The obligation of Karrington to consummate the
Transaction is subject to satisfaction in favor of Karrington or
waiver by Karrington of the following conditions as of Closing:
11.1.1. The representations and warranties by the
Kensington-Minnesota Shareholders set forth in this Agreement
shall be true and correct in all material respects as of the Closing
Date as though made on such date, except as provided with respect
to the dates of financial statements under Section 5.2 and except for
the date limitation concerning certain employee matters set forth in
Subsection 5.16.1.
11.1.2. The Kensington-Minnesota Shareholders shall
have performed and complied in all material respects with all of
their covenants set forth in this Agreement through the Closing.
11.1.3. No action, suit, or proceeding shall be pending
or, to the Knowledge of Xxxxxxxxx, threatened before any court or
quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator, to which
Kensington-Minnesota or any Kensington-Minnesota Shareholder is
a party or is threatened or expected to be made a party, or which is
otherwise known to Xxxxxxxxx, in which an unfavorable outcome
would prevent the Closing, cause the Transaction to be rescinded in
whole or in part after Closing, or adversely effect Karrington's right
to own and operate Kensington-Minnesota after Closing, and no
injunction, judgment, order, decree, ruling, charge or other holding
having such an effect shall be in force.
11.1.4. Xxxxxxxxx shall have delivered to Karrington
certificates in the form set forth on Exhibit 11.1.4A certifying that
each of the conditions specified above in Sections 11.1.1 through
11.1.3 is satisfied as of the Closing Date, and each of the
Kensington-Minnesota Shareholders shall have delivered to
Karrington a certificate in the form set forth on Exhibit 11.1.4B
specifying that the representations and warranties made by each of
them are true and correct in all material respects as of the Closing
Date.
11.1.5. The consent of First Union shall have been
obtained as provided in Section 8.5.
11.1.6. Karrington shall have received the Updated Title
Commitment.
11.1.7. Kensington-Minnesota shall have executed and
delivered to Karrington and the title insurance company an affidavit
certifying that: (a) there are no mortgages, judgment liens or other
encumbrances of any nature whatsoever affecting the Property
except as set forth in the Updated Title Commitment; (b) there are
no rights of possession, use or otherwise, outstanding in third
persons by reasons of unrecorded leases, land contracts, sale
contracts, options or other documents, other than rights of any
individual residing on the Real Estate pursuant to any Resident
Agreement ("Resident") or as disclosed on Schedule 1.1.5; and (c)
no unpaid-for improvements have been made, or materials,
machinery or fuel delivered to the Real Estate preceding the
Closing Date, which might form the basis of a mechanic's lien upon
the Real Estate (the "Title Insurance Affidavit").
11.1.8. The closings under each of the Acquisition
Agreements shall occur simultaneously with the Closing under this
Agreement or in a sequence reasonably agreed upon by Parent,
Karrington, and Kensington-Minnesota;
11.1.9. The Xxxxxxxxx Letter of Understanding shall
have been terminated.
11.1.10. The Audit shall have been completed and Ernst
& Young shall have issued an unqualified opinion in connection
with Kensington-Minnesota's financial statements for the fiscal
years ended December 31, 1994, 1995 and 1996, and the results of
the Audit shall not require any material adjustments to the
Kensington-Minnesota Financial Statements.
11.1.11. Karrington shall have received a written
opinion from Kensington-Minnesota's legal counsel in form and
substance as set forth on Exhibit 11.1.11, dated as of the Closing
Date.
11.1.12. Kensington-Minnesota and the Kensington-
Minnesota Shareholders shall have taken all actions required of
them in connection with the Transaction, and all certificates,
opinions, instruments and other documents required for the
Transaction will be reasonably satisfactory in form and substance to
Karrington and its legal counsel.
11.2. Conditions to Obligation of Kensington-Minnesota
Shareholders.
The obligation of the Kensington-Minnesota Shareholders
to consummate the Transaction is subject to satisfaction in favor of
the Kensington-Minnesota Shareholders or waiver by the
Kensington-Minnesota Shareholders of the following conditions as
of Closing:
11.2.1. Karrington's representations and warranties set
forth in this Agreement shall be true and correct in all material
respects as of the Closing Date as though made on such date,
except to the extent such representations and warranties are
expressly made as of a specified date.
11.2.2. Karrington shall have performed and complied in
all material respects with all of its covenants set forth in this
Agreement through the Closing.
11.2.3. No action, suit or proceeding shall be pending
or, to the Knowledge of Karrington, threatened before any court or
quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator to which Karrington is a
party or is threatened or expected to be made a party, or which is
otherwise known to Karrington in which an unfavorable outcome
would prevent the Closing or cause the Transaction to be rescinded
in whole or in part after Closing, and no injunction, judgment,
order, decree, ruling, charge or other holding having such an effect
shall be in force.
11.2.4. Karrington shall have delivered to Kensington-
Minnesota a certificate of its Chief Operating Officer and Chief
Financial Officer in the form set forth on Exhibit 11.2.4 certifying
that each of the conditions specified above in Sections 11.2.1
through 11.2.3 is satisfied in all respects.
11.2.5. The closing under the Acquisition Agreements
shall occur simultaneously with the Closing under this Agreement
or in a sequence reasonably agreed upon by Parent, Karrington and
Kensington-Minnesota.
11.2.6. Kensington-Minnesota shall have received from
Karrington's legal counsel a written opinion in form and substance
as set forth on Exhibit 11.2.6, dated as of the Closing Date.
11.2.7. Karrington shall have taken all actions required
of it in connection with the Transaction, and all certificates,
opinions, instruments and other documents required for the
Transaction shall be reasonably satisfactory in form and substance
to Kensington-Minnesota and its legal counsel.
ARTICLE 12
CLOSING
12.1. Closing.
The closing of the Transaction (the "Closing") shall take
place at the offices of Xxxxxxx & Xxxxxx, 000 Xxxxx Xxxxx Xxxxxx,
Xxxxxxxx, Xxxx, on April 30, 1997 provided all conditions to the
obligations of the parties to Closing as set forth in Article 11 are
then satisfied, otherwise on a date mutually agreed upon by the
parties but in no event later than May 30, 1997 (the "Closing
Date"). Closing shall be effective as of 11:59 p.m. local time on the
Closing Date.
12.2. Deliveries by the Parties at Closing.
12.2.1. At Closing, (a) Karrington shall pay the cash
purchase price in accordance with Article 2, and (b) each party shall
deliver to each other the various documents, instruments,
certificates, and opinions required to be delivered at Closing under
Article 11.
12.2.2. Deliveries by Kensington-Minnesota shall
include the following:
a. The Title Insurance Affidavit;
b. Any well, private sewage, or septic system certificates
required by law or regulation, or which Karrington
reasonably believes are necessary or advisable;
c. The Title Policy;
d. All appropriate evidence of authorization for the
execution of this Agreement;
e. Consents reasonably satisfactory to Karrington from
the parties to the Contracts which require consent to the
Transaction and approvals satisfactory to Karrington from
all federal, state, and local governmental authorities and
private parties which require approval of the Transactions;
f. Certificates representing all of the issued and
outstanding Shares duly endorses for transfer or
accompanied by duly executed stock powers, sufficient to
transfer the Shares to Karrington;
g. The complete and correct corporate minute book,
stock transfer book, and other corporate records of
Kensington-Minnesota;
h. Possession of the original of all Contracts,
commitments, franchises, licenses, permits, or instruments
evidencing rights or obligations of Kensington-Minnesota
and its Business and possession of all of the assets of
Kensington-Minnesota and all books, records, and other
documents relating to Kensington-Minnesota and its
Business (all such books and records being open for
Karrington's inspection prior to Closing during reasonable
business hours);
i. The revocation by Kensington-Minnesota of all prior
bank borrowing or depository authorizations;
j. Resignations of the officers and directors of
Kensington-Minnesota as requested by Karrington; and
k. Such other documents as are otherwise required of
Kensington-Minnesota by this Agreement.
12.2.3. Deliveries by Karrington shall include the
following:
a. All appropriate evidence of authorization for the
execution of this Agreement and all other agreements,
documents or instruments required to be executed by
Karrington or Parent;
b. Such other documents as are otherwise required by
Karrington or Parent by this Agreement; and
c. Releases satisfactory to Xxxxxxxxx of personal
guarantees of the Mortgage Debt.
ARTICLE 13
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period
following the Closing:
13.1. General.
Each party shall take such further action, and execute and
deliver such further instruments as any other party may reasonably
request to carry out the purposes of this Agreement.
13.2. Litigation Support.
In the event of any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection
with (a) any transaction contemplated under this Agreement or (b)
any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving Kensington-
Minnesota, each party will make available its personnel, provide
testimony and access to its books, and otherwise cooperate to the
extent reasonably necessary or advisable without jeopardizing its
own interests. Any such cooperation shall be at the expense of the
contesting or defending party, except to the extent it is entitled to
indemnification under Article 14.
13.3. Transition.
Kensington-Minnesota Shareholders shall take no action
intended to discourage any lessor, licensor, lessee, resident,
customer, supplier or other business associate of Kensington-
Minnesota from maintaining the same business relationships with
Kensington-Minnesota after the Closing as it maintained with
Kensington-Minnesota prior to the Closing.
ARTICLE 14
INDEMNIFICATION
14.1. Meaning of Certain Terms.
14.1.1. In this Article, Kensington-Minnesota and the
Kensington-Minnesota Shareholders are collectively referred to as
the "Kensington Entities," and Karrington and Parent are
collectively referred to as the "Karrington Entities."
14.1.2. A party asserting a claim for indemnification
under this Article is referred to as the "Indemnified Party." The
party obligated to indemnify the Indemnified Party under this
Article is referred to as the "Indemnifying Party."
14.1.3. For purposes of this Article, a party shall be
deemed to have made a "misrepresentation" if any representation or
warranty by or about it in this Agreement is untrue or otherwise
does not conform to the standards for representations and
warranties set forth in this Agreement.
14.1.4. It is acknowledged and agreed that the
indemnification obligations of Klane under this Article shall pertain
only to those covenants, representations, or warranties expressly
made by him individually or in his capacity as a Kensington-
Minnesota Shareholder in this Agreement. It is acknowledged and
agreed that the indemnification obligations of Xxxxxx under this
Article shall pertain only to those covenants, representations, or
warranties expressly made by him individually or in his capacity as a
Kensington-Minnesota Shareholder in this Agreement.
14.2. Survival of Representations and Warranties.
14.2.1. Except as provided in Section 14.7, the parties'
covenants, representations and warranties set forth in this
Agreement shall survive Closing and continue in full force and
effect for a period of eighteen (18) months from and after Closing.
14.2.2. "Survival Period" means the eighteen (18)
month period set forth in Subsection 14.2.1 or the period described
in Section 14.7, whichever applies.
14.2.3. In order to be eligible for indemnification under
this Article, the Indemnified Party must bring a claim for
indemnification during the Survival Period.
14.3. Indemnification Obligations of the Kensington
Entities.
14.3.1. If any Kensington Entity breaches any covenant
or makes any misrepresentation in this Agreement, the Kensington-
Minnesota Shareholders shall jointly and severally indemnify and
hold harmless the Karrington Entities from and against all related
Adverse Consequences, subject to the limitations set forth in
Sections 14.1.4, 14.5 and 14.6.
14.3.2. In addition, Xxxxxxxxx shall indemnify and hold
harmless the Karrington Entities from and against all Adverse
Consequences related to (a) any Liability for the unpaid Taxes of (i)
Kensington-Minnesota relating to periods prior to the Closing Date
or (ii) any other Person (as a transferee or successor, by contract,
or otherwise) as a result of any action taken or not taken by
Kensington-Minnesota prior to the Closing Date, or (b) any matter
which is the subject of actual or threatened litigation, judicial order,
administrative action, or any similar matter concerning Kensington-
Minnesota (other than related to the enforcement of this Article) to
the extent, but only to the extent, it is the result of any action taken
or not taken by Kensington-Minnesota prior to the Closing Date,
whether or not disclosed or required to be disclosed on any
Schedule to this Agreement.
14.4. Indemnification Obligations of Karrington and
Parent.
14.4.1. If any Karrington Entity breaches any covenant
or makes any misrepresentation in this Agreement, the Karrington
Entities shall jointly and severally indemnify and hold harmless the
Kensington-Minnesota Shareholders from and against all related
Adverse Consequences, subject to the limitations set forth in
Section 14.5 and 14.6.
14.4.2. The Karrington Entities shall indemnify and hold
harmless the Kensington Minnesota Shareholders from and against
all Adverse Consequences arising from or in connection with
Kensington-Minnesota after the Closing Date, except to the extent
that any or all of the Kensington-Minnesota Shareholders are
required to indemnify the Karrington Entities in respect thereof
under this Article.
14.5. Basket Amount.
14.5.1. Except as provided in Section 14.7, the
Kensington-Minnesota Shareholders shall have no obligation to
indemnify the Karrington Entities under this Article unless and until
the Karrington Entities have suffered Adverse Consequences giving
rise to a right of indemnification under this Article of at least Thirty
Thousand Dollars ($30,000.00) in the aggregate (the "Basket
Amount"), and then only as to the amount by which aggregate
claims by the Karrington Entities exceed the Basket Amount.
14.5.2. Except as provided in Section 14.7, the
Karrington Entities shall have no obligation to indemnify the
Kensington-Minnesota Shareholders under this Article unless and
until the Kensington-Minnesota Shareholders have suffered
Adverse Consequences giving rise to a right of indemnification
under this Article in the aggregate of at least the Basket Amount
(except with respect to Mortgage Debt as to which the Basket
Amount shall not apply); and then only as to the amount by which
aggregate claims by the Kensington-Minnesota Shareholders
exceed the Basket Amount.
14.6. Limitation on Recovery.
14.6.1. Except as provided in Section 14.7, the
aggregate obligation of the Karrington Entities to indemnify the
Kensington-Minnesota Shareholders under this Article shall be
limited to Three Hundred Thousand Dollars ($300,000.00) (the
"Indemnity Cap").
14.6.2. Except as provided in Section 14.7, the
aggregate obligation of the Kensington-Minnesota Shareholders to
indemnify the Karrington Entities under this Article shall be limited
to the Indemnity Cap.
14.7. Liability for Certain Claims.
The limitations set forth in Sections 14.5 and 14.6 shall not
apply to any claim for indemnification (a) if the Indemnifying Party
had actual conscious awareness as of Closing of the breach or
misrepresentation giving rise to the claim for indemnification by the
Indemnified Party, (b) by the Karrington Entities under Subsection
14.3.2, or (c) by the Kensington-Minnesota Shareholders under
Subsection 14.4.2. The aggregate obligation of the Karrington
Entities to indemnify the Kensington-Minnesota Shareholders for all
such indemnity claims shall be limited to the purchase price
(provided that such limitation shall not apply to any claims related
to the Mortgage Debt), and the Kensington-Minnesota
Shareholders' aggregate obligation to indemnify the Karrington
Entities for all such indemnity claims shall be limited to the
purchase price. The Survival Period for any such indemnity claim
shall be the greater of the eighteen (18) month period set forth in
Section 14.2.1 or the period set forth in the statute of limitations
under applicable law.
14.8. Extent of Indemnification.
The right to indemnification under this Article shall extend
to Adverse Consequences incurred through and after the date of the
claim for indemnification.
14.9. Right of Set-Off.
If the Karrington Entities suffer Adverse Consequences as a
result of a breach or misrepresentation by the Kensington Entities
under this Agreement, the Karrington Entities may, in their
discretion, apply the actual dollar amount of any such Adverse
Consequences as a set-off against any liability or obligation they
may have under this Agreement.
14.10. Remedies.
The rights of indemnification set forth in this Article shall be
the parties' sole and exclusive remedy with respect to claims
relating to this Agreement except with respect to actions for
specific performance under Section 15.14 or claims relating to
Intellectual Property, Confidential Information, and also except to
the extent this Agreement provides Karrington with a right of
insurance recovery (for example, and not in limitation, as provided
in Sections 9.1 and 9.2), or where it otherwise reasonably appears
that irreparable harm may occur or a remedy in damages may be
inadequate. In furtherance of the foregoing, each of the parties, to
the fullest extent permitted by applicable law, waives any and all
rights, claims and causes of action that it may have against each of
the other parties in connection with any such claims arising under or
based upon any federal, state or local statute, law, ordinance, rule
or regulation of, arising under or based upon common law or
otherwise, except to the extent provided in this Article.
14.11. Notice.
An Indemnified Party shall assert a claim for indemnification
under this Article by notifying the Indemnifying Party in writing of
its claim.
14.12. Matters Involving Third Parties.
14.12.1. If any Person other than a party to this
Agreement (a "Third Party") asserts a right or claim which may
give rise to a claim for indemnification under this Article (a "Third
Party Claim"), any party having Knowledge of the matter shall
promptly notify the other parties of the matter; provided that any
delay by the Indemnified Party in providing notice shall not affect
the right of indemnification unless the Indemnifying Party's rights
and interests under this Article or otherwise have been materially
prejudiced by the delay.
14.12.2. An Indemnifying Party may defend an
Indemnified Party against any Third Party Claim giving rising to a
right of indemnification under this Article provided (a) the
Indemnifying Party notifies the Indemnified Party in writing within
fifteen days after receipt of the notice required under this Section
that the Indemnifying Party will indemnify the Indemnified Party as
required by this Article, (b) the Indemnifying Party provides the
Indemnified Party with reasonable evidence that the Indemnifying
Party will have the financial resources to both undertake the
defense and fulfill its indemnification obligations, (c) the Third
Party Claim involves only money damages and does not seek
equitable relief which might be materially adverse to the
Indemnified Party's continuing business, (d) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in
the good faith judgment of the Indemnified Party, likely to establish
a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (e) the
Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently. The Indemnifying Party's choice of legal
counsel for a defense under this Subsection 14.12.2 shall be
reasonably satisfactory to the Indemnified Party.
14.12.3. At any time an Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with
Section 14.12.2, the Indemnified Party may retain separate co-
counsel at its own expense and participate in the defense. If both
the Indemnifying Party and the Indemnified Party are participating
in the defense, neither may consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the other's prior written consent, which shall not be
withheld unreasonably.
14.12.4. If, however, at any time an Indemnifying Party
is conducting the defense of the Third Party Claim but not in
accordance with Section 14.12.2, the Indemnified Party may
conduct its own defense and may consent to the entry of any
judgment or enter into any settlement with respect to the Third
Party Claim in any manner it may reasonably determine with the
consent of the Indemnifying Party, which shall not be unreasonably
withheld, in which case the Indemnifying Party shall promptly and
at reasonable intervals periodically reimburse the Indemnified Party
for the costs of its defense (including reasonable attorneys' fees).
An Indemnified Party's action under this Section 14.12.4 shall not
affect its right of indemnification under this Article.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1. Expenses.
Kensington-Minnesota Shareholders and Karrington share
equally all expenses (including the costs of the Audit and the
opinion of Ernst & Young with respect to such Audit, the Surveys,
the Title Commitment, Updated Title Commitment and Title Policy,
the Environmental Audit, but excluding any financing costs of
Karrington) incurred in connection with this Agreement and the
Transaction, except as provided in Article 14 or as otherwise
specifically provided to the contrary in this Agreement, and except
that each party shall bear its own attorneys' fees.
15.2. Press Releases and Public Announcements.
No party shall issue any press release or make any public
announcement relating to this Agreement or the Transaction prior
to the Closing without the prior written approval of the other
parties; provided, however, that any party may make any public
disclosure it believes in good faith is required by applicable law, in
which case the disclosing party shall advise the other party and
consult with the legal counsel of such other party prior to making
the disclosure.
15.3. No Third-Party Beneficiaries.
This Agreement shall not confer any rights or remedies on
any Person other than the parties and their respective successors
and permitted assigns.
15.4. Entire Agreement.
Except as provided in Section 8.12.3, this Agreement
constitutes the entire agreement among the parties concerning its
subject matter and supersedes all other understandings, agreements,
or representations by or among the parties, written or oral, to the
extent they relate in any way to its subject matter (including the
letter of intent dated November 12, 1996 by and between
Karrington Operating Company, Inc. and KMGI).
15.5. No Merger.
All warranties, representations and covenants contained
herein shall survive the Closing as provided herein.
15.6. Succession and Assignment.
This Agreement shall bind and benefit the parties and its
respective successors and permitted assigns. No party may assign
either this Agreement or any rights, interests, or obligations arising
under it without the prior written approval of all parties; provided,
however, that Karrington may assign all or any portion of its
interest in this Agreement to one or more of its Affiliates without
the consent of Kensington-Minnesota or the Kensington-Minnesota
Shareholders.
15.7. Headings.
The section headings contained in this Agreement are
inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement.
15.8. Notices.
All notices, requests, demands, claims, and other
communications under this Agreement shall be in writing and, shall
be deemed duly given two days after being deposited postage
prepaid, registered or certified, return receipt requested, in the
United States Mail, addressed to the intended recipient as set forth
below:
If to Kensington-Minnesota:
Xxx X. Xxxxxxxxx
Vice President
Kensington Cottages Corporation of Minnesota
0000 Xxxxx Xxxxxxx 000, Xxxxx 000
Xxxxxx Xxxxxx, XX 00000
If to Xxxxxxxxx:
Xxx X. Xxxxxxxxx
Kensington Cottages Corporation of Minnesota
0000 Xxxxx Xxxxxxx 000, Xxxxx 000
Xxxxxx Xxxxxx, XX 00000
If to Klane:
Xxxxxx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxx, XX 00000
If to Xxxxxx:
Xxxxxxx Xxxxxx
0000 Xxxxx Xxxxxxx 000
Xxxxx 000
Xx. Xxxxx Xxxx, XX 00000
If to Kensington-Minnesota, Xxxxxxxxx, Xxxxx or
Xxxxxx, copy to:
Xxxxx X. Xxxxxx Xxxx, Esq.
Faegre & Xxxxxx LLP
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
If to Karrington or Parent:
Xxxx X. Xxxxxxxxxxx
COO and CFO
Karrington Operating Company, Inc.
000 Xxx Xxxxxxxxx Xx.
Xxxxxxxx, XX 00000
Copy to:
Xxxxxxx X. XxXxxxxx, Esq.
Xxxxxxx & Xxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Any party may send any notice, request, demand, claim, or other
communication to the intended recipient using other means,
including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail, in which case the
notice, request, demand, claim or other communication shall be
deemed duly given when actually received by the intended recipient.
Any party may change its address of record for purposes of this
Section 15.8 by giving the other parties written notice in the
manner set forth in this section.
15.9. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota without giving
effect to any choice or conflict of law provision or rule (whether of
the State of Minnesota or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Minnesota.
15.10. Amendments and Waivers.
This Agreement may be amended only by a writing signed
by all parties. No waiver by any party of any provision, default, or
breach of this Agreement, whether intentional or not, shall be
deemed to extend to any other provision, default, or breach or to
the same provision, default or breach on another occasion.
15.11. Severability.
If any term or provision of this Agreement is determined by
a court of competent jurisdiction or in binding arbitration to be
invalid or unenforceable, that finding shall not affect the validity or
enforceability of the remaining terms and provisions.
15.12. General Rules of Construction.
The parties have participated jointly in negotiating and
drafting this Agreement. If a question concerning intent or
interpretation arises, no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of authorship. Any
reference to any federal, state, local or foreign statute or law shall
be deemed also to refer to all related rules and regulations unless
the context requires otherwise. Each representation, warranty and
covenant shall have independent significance, and if any party has
breached any of them in any respect, the fact that there exists
another representation, warranty or covenant relating to the same
subject matter which the party has not breached shall not detract
from or mitigate the fact that the party is in breach.
15.13. Incorporation of Annexes, Exhibits, and Schedules.
The Annexes, Exhibits, and Schedules identified in this
Agreement are incorporated into this Agreement by this reference.
15.14. Specific Performance.
Each of the parties acknowledges and agrees that the other
party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with
its specific terms or otherwise are breached. Accordingly, the non-
breaching party shall be entitled to appropriate injunctive relief,
including specific performance in any action instituted in any court
of the United States or any of the fifty states having jurisdiction
over the parties and the matter, in addition to any other remedy to
which it may be entitled under this Agreement or otherwise.
15.15. Forum.
Except as provided in Section 15.14, the forum for legal
action concerning this Agreement and the Transaction shall be the
appropriate court in the State of Minnesota, and the parties agree to
in personam jurisdiction for that purpose.
(Remainder of Page Blank)
IN WITNESS WHEREOF, the parties have executed this
Agreement to be effective on the date indicated above.
KENSINGTON
COTTAGES
CORPORATION OF
AMERICA
By:
Xxxx X. Xxxxxxxxxxx
Its: COO and CFO
KARRINGTON HEALTH,
INC.
By:
Xxxx X. Xxxxxxxxxxx
Its: COO and CFO
KENSINGTON
COTTAGES
CORPORATION OF
MINNESOTA
By:
Xxx X. Xxxxxxxxx
Its: President
KENSINGTON-
MINNESOTA
SHAREHOLDERS
Xxx X. Xxxxxxxxx
Xxxxxx Xxxxx
Xxxxxxx Xxxxxx
ANNEX A
TO
STOCK PURCHASE AGREEMENT
DEFINITIONS
Transactional Terms.
The following transactional terms used in this Agreement
are defined in the Sections of this Agreement identified below:
Term Section Containing
Definition
Acquisition Agreements
1.3
Assets
1.1.1
Audit
8.3
Basket Amount
14.5
Closing
12.1
Closing Date
12.1
Contracts
1.1.11
Current Asset Spread
2.1
Data Processing Systems
5.20
Deeds
7.1
Environmental Audit
7.7
Employee Accruals
1.1.9
Equipment Leases
1.1.12
First Union
Improvements
8.5
1.1.3
Indemnity Cap
14.6
Karrington
Preamble
Karrington Entities
14.1
Kensington Cottages of Buffalo I & II
Recitals
Kensington-Minnesota
Preamble
Kensington-Minnesota Financial
Statements
5.2
Kensington-Minnesota Permits
5.10.3
Kensington-Minnesota Shareholders
Preamble
Kensington-Minnesota Shares
4.7
KMGI
1.3
Land
1.1.2
Material Adverse Effect
5.3
Mortgage Debt
5.10.1
Most Recent Financial Statements
5.2
Most Recent Fiscal Month End
5.2
Most Recent Fiscal Year End
5.2
Motor Vehicles
1.1.14
Parent
Preamble
Permitted Encumbrances
7.3
Personal Property
1.1.5
Property
1.1.6
Purchase Price
2.1
Xxxxxxxxx Letter of Understanding
8.2
Real Estate
1.1.4
Resident
11.1.7
Resident Agreements
1.1.10
Service Employees
1.1.8
Services
1.1.7
Software Licenses
1.1.13
Surveys
7.5
Title Commitment
7.1.1
Title Insurance Affidavit
11.1.7
Title Policy
7.1.2
Transaction
Recitals
Updated Title Commitment
7.1.2
Vehicle Financing
1.1.16
Vehicle Leases
1.1.15
Miscellaneous Terms
Adverse Consequences means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court
costs and reasonable attorneys' fees and expenses.
Affiliate has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
Basis means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence,
event, incident, action, failure to act, or transaction that forms or
could form the basis for any specified consequence.
Business refers to a party's business as presently conducted
and as presently proposed to be conducted.
Business Day shall mean any day on which banks are open
to conduct business in Minneapolis, Minnesota.
Confidential Information means information in whatever
form, including without limitation information which is written,
electronically stored, orally transmitted, or memorized, which is of
commercial value to a party's Business, including any idea,
knowledge, know-how, process, system, formula, composition,
method, technique, research and development, drawing, design,
specification, technology, software, technical information, trade
secret, trademark, copyrighted material, reports, records,
documentation, data, customer or supplier lists, pricing or cost
information, tax or financial information, business or marketing
plan, proposal, strategy, or forecast; provided, that Confidential
Information does not include information which is or becomes
generally known within a party's industry through no act or
omission by any other party or which is or becomes generally
known to the public or otherwise is required to be made public by
state or federal law; further provided, however, that the
compilation, manipulation, or other exploitation of generally known
information may constitute Confidential Information.
Environmental, Health and Safety Laws means the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act
of 1976, and the Occupational Safety and Health Act of 1970, each
as amended through the date hereof, together with all other laws
(including rules, regulations, codes, judgments, orders, decrees,
rulings, and changes thereunder), of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
Extremely Hazardous Substance has the meaning set forth
in Sec. 302 of the Emergency Planning and Community Right-to-
Know Act of 1986, as amended.
GAAP means United States generally accepted accounting
principles in effect from time to time.
Governing Documents means, as to any Person, the articles
or certificate of incorporation, code of regulations, and bylaws if
the Person is a corporation; the partnership agreement and
partnership certificate if the Person is a partnership; or the
operating agreement if the Person is a limited liability company; and
any other documents relating to and establishing or governing the
existence and legal operation of any Person of any type or nature,
each as amended.
Intellectual Property means: (a) all inventions, whether
patentable or unpatentable and whether or not reduced to practice,
all improvements to any such inventions, and all patents, patent
applications, and patent disclosures, together with all related
reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations; (b) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with
all related translations, adaptations, derivations, and combinations,
including all associated goodwill, and all applications, registrations,
and renewals in connection with the same; (c) all copyrightable
works, all copyrights, and all applications, registrations, and
renewals in connection with the same, (d) all mask works and all
applications, registrations, and renewals in connection with the
same, (e) all computer software, data, and related documentation,
(f) all other proprietary rights, and (g) all copies and tangible
embodiments of the foregoing, in whatever form or medium.
Knowledge means actual knowledge or knowledge which
could be reasonably obtained by inquiry and investigation within the
scope of a Person's normal operations, duties, or responsibilities.
Liability means any liability, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, and whether due or to
become due, including any liability for Taxes.
Ordinary Course of Business means the ordinary course of
business consistent with past custom and practice.
Party, unless the context indicates otherwise, includes a
party's Subsidiaries and Affiliates.
Person means any individual, partnership, corporation,
association, joint stock company, trust, joint venture,
unincorporated organization, governmental or quasi-governmental
entity (or any governmental department, agency, or political
subdivision), or any other form of legal entity or enterprise.
Security Interest means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for Taxes not
yet due and payable or for Taxes that the taxpayer is contesting in
good faith through appropriate proceedings, (c) purchase money
liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of
money. Security Interest does not include any protective filing by a
lessor of any of the Assets.
Subject to Equitable Principles means subject, as to
enforcement of remedies, to bankruptcy, reorganization, insolvency,
moratorium and other similar laws relating to or affecting creditors'
rights generally and to general equitable principles.
Subsidiary means any corporation with respect to which a
specified Person or its Subsidiary owns a majority of the common
stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
Tax Terms
Code means the Internal Revenue Code of 1986, as
amended.
Tax means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including
taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including
any interest, penalty, or addition thereto, whether disputed or not.
Tax Return means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment.
Employee Benefits and ERISA Terms
Employee Benefit Plan means any (a) Employee Welfare
Benefit Plan or other material fringe benefit plan or program, (b)
qualified defined contribution retirement plan or arrangement which
is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d)
nonqualified deferred compensation or retirement plan or
arrangement which is an Employee Pension Benefit Plan.
Employee Pension Benefit Plan has the meaning set forth in
ERISA Section 3(2).
Employee Welfare Benefit Plan has the meaning set forth in
ERISA Section 3(1).
ERISA means the Employee Retirement Income Security
Act of 1974, as amended.
Fiduciary has the meaning set forth in ERISA Section
3(21).
Multiemployer Plan has the meaning set forth in ERISA
Section 3(37).
Prohibited Transaction has the meaning set forth in ERISA
Section 406 and Code Section 4975.
