EXHIBIT 2.1
AMENDMENT NO. 1 TO
AGREEMENT OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT OF MERGER ("Amendment") is made as
of March 4, 1999 among SUNRISE ASSISTED LIVING, INC., a Delaware corporation
(referred to herein as "Acquiror"), BUCKEYE MERGER CORPORATION, an Ohio
corporation and wholly-owned subsidiary of Acquiror (referred to herein as
"Merger Sub"), and KARRINGTON HEALTH, INC., an Ohio corporation (referred to
herein as the "Company").
WHEREAS, Acquiror, Merger Sub and the Company are parties to an
Agreement of Merger dated as of October 18, 1998;
WHEREAS, Acquiror, Merger Sub and the Company wish to amend certain
of the terms and conditions of the Agreement as more fully set forth below; and
WHEREAS, as a condition to Acquiror's and Merger Sub's willingness
to enter into this Amendment, concurrently herewith certain shareholders and
each of the directors and officers of the Company are entering into an amendment
to the Shareholder Agreement (as defined in the Agreement) with Acquiror, which
amendment is dated as of the date hereof and is intended to reference and
incorporate this Amendment into such Shareholder Agreement;
NOW THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. Section 2.1(a). Section 2.1(a) of the Agreement is hereby
amended by deleting Section 2.1(a) in its entirety and replacing it with the
following new Section 2.1(a):
"(a) Each issued and outstanding share of Company Common Stock
(other than shares of Company Common Stock to be canceled in accordance
with Section 2.1(d)) shall be automatically converted into the right to
receive (i) 0.3333 of a share of Acquiror Common Stock (the "Exchange
Ratio"), plus (ii) the associated right to purchase shares of Series C
Junior Participating Preferred Stock of Acquiror pursuant to that certain
Rights Agreement dated as of April 25, 1996 between Acquiror and First
Union National Bank of North Carolina, as amended (the "Rights
Agreement"). If, between the date of this Agreement and the Effective
Time, Acquiror or the Company should split, subdivide, reclassify,
recapitalize, combine or exchange their respective Common Stock, or pay a
stock dividend or other stock distribution in their respective Common
Stock, or otherwise change their respective Common Stock into a different
number of shares, a different class or a different type of security, or
make any other dividend or distribution on their respective Common Stock,
then the Exchange Ratio will be appropriately adjusted to reflect such
split, subdivision, reclassification, recapitalization, combination,
exchange, dividend or other distribution or change.
The Exchange Ratio shall be rounded, in each case, to the nearest
ten-thousandth of a share."
2. Section 4.1. Section 4.1 of the Agreement is hereby amended by deleting
the second sentence of Section 4.1 in its entirety and replacing it with the
following new sentence:
"The term "Material Adverse Effect on the Company" as used in this
Agreement shall mean any change or effect that, individually or when taken
together with all such other changes or effects, is or would reasonably be
expected to be materially adverse to the financial condition, results of
operations, properties or business of the Company and the Company
Subsidiaries taken as a whole; provided, however, that Material Adverse
Effect on the Company shall not be deemed to include the impact of (i)
changes in general economic conditions or conditions applicable to the
assisted living industry generally, (ii) changes or effects which result
from the execution and delivery of this Agreement or the consummation of
any transactions contemplated hereby other than changes or effects which
result from (A) a change in control or change of control or similar event
applicable to the Company or any Company Subsidiary or (B) the failure to
obtain one or more Third Party Consents (as defined below) which failure
individually or in the aggregate would have a Material Adverse Effect on
the Company, (iii) the matters set forth in Section 4.1 of the Company
Disclosure Schedule, (iv) the inability of the Company to obtain the
consent to this Agreement of Catholic Health Initiatives ("CHI") related
to the joint venture agreements between the Company and CHI to develop,
own and/or operate assisted living residences in Ohio, New Mexico and
Colorado, and (v) changes or effects which result from any action or
inaction of Acquiror or any of Acquiror's affiliates, or any action that
the Company or any of the Company's affiliates takes or is directed not to
take at the request of Acquiror or any affiliate of Acquiror, in
connection with the performance of management, consulting or other
services provided to the Company or any of the Company's affiliates by
Acquiror or any of Acquiror's affiliates pursuant to those certain three
Development Agreements each dated as of December 1, 1998 between Sunrise
Development, Inc. and the Company (relating to Hamilton, Ohio, Farmington
Hills, Michigan and Edina, Minnesota, respectively), that certain
Management Consulting Agreement dated as of December 31, 1998 between
Sunrise Assisted Living Management, Inc. and the Company and that certain
Management Services Agreement dated as of January 1, 1999 between Sunrise
Assisted Living Management, Inc. and the Company (such Development
Agreements, Management Consulting Agreement and Management Services
Agreement are collectively referred to as the "Sunrise Services
Agreements")."
3. Section 4.11. Section 4.11 is hereby amended by deleting clause (i) of
Section 4.11 in its entirety, and by adding to the end of clause (ii) of Section
4.11 the phrase "and except for debt obligations incurred pursuant to the loan
agreement between Karrington Operating Company, Inc. and Acquiror entered into
in accordance with Section 5.19 of this Agreement".
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4. Section 5.2(a). Section 5.2(a) of the Agreement is hereby amended by
inserting the following phrase immediately following the phrase "conduct their
respective businesses only in the ordinary course and consistent in all material
respects with past practice,":
"as modified or supplemented by any suggestions, guidance, assistance,
advice and/or recommendations provided by Acquiror or any of Acquiror's
affiliates in connection with the performance of management, consulting or
other services provided to the Company or any of the Company's affiliates
by Acquiror or any of Acquiror's affiliates pursuant to the Sunrise
Services Agreements,"
5. Section 5.3(d). Section 5.3(d) of the Agreement is hereby amended by
deleting clause (1) of Section 5.3(d) in its entirety and replacing it with the
following new clause (1):
"(1) Acquiror agrees to use its best efforts to make adequate provision in
such Acquisition Transaction for shareholders of the Company to be
entitled to receive, in lieu of Acquiror Common Stock as provided in
Article II, the same type of securities or other property from another
Person that the stockholders of Acquiror would so receive from such other
Person, giving effect to the Exchange Ratio and"
6. Section 5.19. Section 5.19 of the Agreement is hereby amended by adding
the following new sentence to the end of Section 5.19:
"Concurrently with the execution and delivery of the Amendment No. 1 to
Agreement of Merger dated as of March 4, 1999 among Acquiror, Merger Sub
and the Company ("Amendment No. 1"), and pursuant to amended loan
documentation entered into concurrently therewith, Acquiror shall make
available to the Company an additional fully secured line of credit in the
principal amount of up to $6.5 million, the proceeds of which are to be
used for the working capital needs of the Company and its subsidiaries
prior to the Closing (the "Additional Loan")."
7. Section 6.1(g). Section 6.1(g) of the Agreement is hereby amended by
inserting the phrase "dated within two (2) business days before the date on
which the Registration Statement shall become effective," immediately prior to
the phrase "as provided in Section 5.1(e)".
8. Section 6.1(j). Section 6.1(j) of the Agreement is hereby amended by
adding the parenthetical phrase "(as amended to reflect Amendment No. 1)"
immediately prior to the phrase "from each of the Company Affiliates".
9. Section 6.3. Section 6.3 of the Agreement is hereby amended by deleting
clauses 6.3(c) and 6.3(i) in their entirety.
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10. Section 7.1(b). Section 7.1(b) of the Agreement is hereby amended by
deleting clause (i) of Section 7.1(b) in its entirety and replacing it with the
following new clause (i): "(i) the Merger shall not have been consummated by
June 30, 1999, (provided, however, that this date may be extended to a date not
later than September 30, 1999 by written notice of either Acquiror or the
Company given to the other if the Merger shall not have been consummated as a
result of Acquiror or the Company having failed by June 30, 1999 to receive all
necessary Third Party Consents with respect to the Merger (as contemplated in
Sections 6.2(e) and 6.3(e)) or as a result of an order, writ, judgment,
injunction, consent decree, stipulation, determination or award entered by or
with any Governmental Entity, as contemplated in Sections 6.1(c) and (f)), or".
11. Other Provisions. All other provisions of the Agreement shall remain
in full force and effect.
12. Defined Terms. Capitalized terms used in this Amendment and not
otherwise defined shall have the meanings set forth in the Agreement.
13. Counterparts. This Amendment may be executed and delivered in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
14. Governing Law. The validity and interpretation of this Amendment shall
be governed by, and construed in accordance with, the laws of the State of
Delaware, without reference to the conflict of laws principles thereof; except
that the effectiveness of the Merger shall be governed by, and construed in
accordance with, the laws of the State of Ohio.
15. Meditrust Covenants. By separate agreement, the measurement period for
the covenants of the Meditrust loans and leases will be extended an additional
one quarter and certain covenants which may be in default will be waived.
16. Section 4.20 of the Company Disclosure Schedule. In accordance with
Section 5.14 of the Agreement, Section 4.20 of the Company Disclosure Schedule
is hereby amended to read in the manner set forth on Exhibit A to this
Amendment.
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IN WITNESS WHEREOF, Acquiror, Merger Sub and the Company have caused
this Amendment to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first written above.
SUNRISE ASSISTED LIVING, INC. KARRINGTON HEALTH, INC.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx
President Chairman and Chief
Executive Officer
BUCKEYE MERGER CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
President
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