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SUBSCRIPTION AGREEMENT EXHIBIT 4.1
This Agreement made as of the 8th day of October, 1999, as amended and
restated as of the 11th day of October, 1999.
BETWEEN:
IPC ADVISORS S.A.R.L. (the "Purchaser"),
OF THE FIRST PART;
- and -
BALANCED CARE CORPORATION, a corporation governed by the
Laws of the State of Delaware (the "Corporation"),
OF THE SECOND PART.
WHEREAS subject to the terms and conditions hereof the Purchaser
desires to subscribe for and purchase from the Corporation and the Corporation
desires to issue and sell to the Purchaser Sixteen Million Seven Hundred
Thousand (16,700,000) shares of common or convertible preferred stock in the
capital of the Corporation.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and such other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
agree as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS.
In this Agreement, initially capitalized terms shall have the meaning
set out on Schedule A hereto.
1.2 CONSTRUCTION
In this Agreement:
(a) words denoting the singular include the plural and vice versa
and words denoting any gender include all genders;
(b) the words "including", "include", and "includes" shall mean
"including without limitation", "include, without limitation"
and "includes, without limitation", respectively;
(c) any reference to a statute shall mean the statute in force as
at the date hereof and any regulation in force thereunder,
unless otherwise expressly provided;
(d) the use of headings is for convenience of reference only and
shall not affect the construction of this Agreement;
(e) when calculating the period of time within which or filing
which any act is to be done or step taken, the date which is
the reference day in calculating such period shall be
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excluded. If the last day of such period is not a Business
Day, the period shall end on the next Business Day;
(f) all dollar amounts are expressed in United States funds;
(g) whenever reference is made to "generally accepted accounting
principles", such reference shall be deemed to be the United
States generally accepted accounting principles; and
(h) any tender of documents or money under this Agreement may be
made upon the parties or the respective counsel and money may
be tendered by wire transfer, by bank draft drawn upon a bank
or by negotiable cheque payable in United States funds and
certified by a bank.
1.3 SCHEDULES.
The following are the schedules annexed hereto and incorporated by
reference herein and deemed to be part of this Agreement:
Schedule A Definitions
Schedule B Representations and Warranties of the Corporation
-Exhibit I Disclosure Schedule
Schedule C Representations and Warranties of Purchaser
Schedule D Conditions Precedent in favour of the Corporation
Schedule E Conditions Precedent in favour of Purchaser
Schedule F Series C Preferred Share Provisions
Schedule G Registration Rights Agreement
Schedule H Voting Agreement
Schedule I Business Plan
ARTICLE II
PURCHASE AND SALE
2.1 PURCHASE AND SALE OF PURCHASED SHARES.
Subject to the terms and conditions of this Agreement, at the Time of
Closing, the Purchaser shall subscribe for and purchase from the Corporation and
the Corporation shall issue and sell to the Purchaser the Purchased Shares free
and clear from all Encumbrances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation represents and warrants to the Purchaser (and
acknowledges that the Purchaser is relying on such representations and
warranties in entering into this Agreement and the transactions contemplated
hereby) as set out in Schedule B hereto.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to the Corporation (and
acknowledges that the Corporation is relying on such representations and
warranties in entering into this Agreement and the transactions contemplated
hereby) as set out in Schedule C hereto.
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3.3 NATURE AND SURVIVAL.
All representations and warranties contained in this Agreement on the
part of each of the parties shall survive Closing, for a period from the First
Date of Closing to the earlier of twelve (12) months from the Second Date of
Closing or eighteen (18) months from the First Date of Closing. If no claim is
made under this Agreement against a party for any incorrectness in, or breach
of, any representation or warranty made in this Agreement, prior to the expiry
of this survival period, such party shall have no further liability under this
Agreement with respect to such representation or warranty.
ARTICLE IV
CLOSING CONDITIONS
4.1 CONDITIONS FOR THE BENEFIT OF THE CORPORATION.
The obligation of the Corporation to complete the transactions
contemplated by this Agreement is subject to the satisfaction of, or compliance
with, at the Time of Closing, each of the conditions set out in Schedule D
hereto (each of which is acknowledged to be for the exclusive benefit of the
Corporation and may be waived only by the Corporation)
4.2 CONDITIONS FOR THE BENEFIT OF THE PURCHASER.
The obligation of the Purchaser to complete the transactions
contemplated by this Agreement is subject to the satisfaction of, or compliance
with, at the Time of Closing, each of the conditions set out in Schedule E
hereto (each of which is acknowledged to be for the exclusive benefit of the
Purchaser and may be waived only by the Purchaser).
ARTICLE V
CLOSINGS
5.1 LOCATION AND TIME OF CLOSING.
The closing of the purchase and sale of the Purchased Shares shall take
place at the Time of Closing on the First Date of Closing and the Second Date of
Closing at the offices of the Corporation, 0000 Xxxxx Xxxxx, Xxxxxxxxxxxxx,
Xxxxxxxxxxxx 00000.
5.2 DELIVERIES AT CLOSING.
At the Time of Closing on the First Date of Closing, the Corporation
shall issue and deliver to the Purchaser a certificate or certificates
representing Three Million Three Hundred Thousand (3,300,000) Series C Preferred
Shares, together with such other documents as are required or contemplated to be
delivered by the Corporation pursuant to this Agreement, and the Purchaser shall
deliver and pay to the Corporation Four Million One Hundred and Twenty Five
Thousand ($4,125,000) Dollars, together with such other documents as are
required or contemplated to be delivered by the Purchaser pursuant to this
Agreement.
At the Time of Closing on the Second Date of Closing, the Corporation
shall issue and deliver to the Purchaser a certificate or certificates
representing Thirteen Million Four Hundred Thousand (13,400,000) shares of
common stock in the capital of the Corporation, together with such other
documents as are required or contemplated to be delivered by the Corporation
pursuant to this Agreement, and the Purchaser shall deliver and pay to the
Corporation Sixteen Million Seven Hundred and Fifty Thousand ($16,750,000)
Dollars, together with such other documents as are required or contemplated to
be delivered by the Purchaser pursuant to this Agreement.
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ARTICLE VI
POST-CLOSING COVENANTS
6.1 BUSINESS PLAN.
The Corporation agrees that the Purchase Price received by the
Corporation upon the issue and sale of the Purchased Shares shall be used by the
Corporation for the purposes set out in the Business Plan of the Corporation
annexed as Schedule I hereto. The Corporation further agrees that the
Corporation shall not authorize or take any action not expressly contemplated by
the Business Plan nor amend, modify, restate or supersede the Business Plan in
any material respect, without the prior consent of the Purchaser.
6.2 BOARD REPRESENTATION.
The Corporation agrees that it shall cause to be nominated or appointed
to the Board of Directors of the Corporation and shall solicit proxies in favour
of the election, as two (2) Class I directors, one (1) Class II director and one
(1) Class III director, the individual(s) designated by the Purchaser (at its
sole discretion) at each subsequent meeting of the stockholders of the
Corporation at which such Class directors of the Corporation are to be elected.
If any such director designated by the Purchaser shall be disqualified, removed,
resign or otherwise cease to be a director of the Corporation, the Purchaser
shall have the right (exercisable at its sole discretion) to designate (and the
Board of Directors shall appoint) a further individual to fill the vacancy so
created. The Corporation agrees to provide to each director nominated by the
Purchaser any release or indemnity provided to any other director of the
Corporation at any time.
If at any time the Corporation has amended or proposes to amend its
certificate of incorporation to remove the staggered board provisions therein
contained (including so that directors of the Corporation are no longer
organized by Class), the foregoing rights of the Purchaser shall apply mutatus
mutandis but without reference to any particular Class of director.
The Corporation further agrees that it shall not, without the prior
consent of the Purchaser, initiate, facilitate, support or, to the extent
permitted by Law, permit, any action or resolution proposing to fix the number
of directors of the Corporation in excess of nine (9) members. The Corporation
further agrees that the Purchaser shall be entitled to designate at least fifty
(50%) percent of the members of any committee of the Board of Directors of the
Corporation.
6.3 MATERIAL DECISIONS.
During the period commencing on the First Date of Closing and ending
upon the earlier of (i) the Second Date of Closing, and (ii) the date the
Purchaser (and its affiliates and transferees) ceases to hold any Series C
Preferred Shares, no Material Decision shall be taken or implemented.
6.4 HSR ACT.
The parties shall exercise all commercially reasonable efforts to make
all necessary filings with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the HSR Act in order
to satisfy the requirements thereof, and to address any concerns of such
Authorities, to permit the transactions contemplated by this Agreement,
including the purchase and sale of the remaining Purchased Shares at the Second
Date of Closing, to occur as soon as practicable following the First Date of
Closing.
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6.5 SPECIAL MEETING OF SHAREHOLDERS AND VOTING AGREEMENT.
As soon as practicable following the First Date of Closing, , the
Corporation shall convene the Special Meeting. The Corporation shall cause to be
postponed its currently scheduled annual meeting of stockholders such that its
1999 annual meeting of stockholders shall occur contemporaneously with the
Special Meeting.
For these purposes, the Corporation shall cause to be prepared and
filed with and use its reasonable best efforts to have declared effective, the
Securities and Exchange Commission its draft Proxy Statement in form and
substance reasonably satisfactory to the Purchaser. The Purchaser shall provide
the Corporation on a timely basis with all information as may be required to be
included in the Proxy Statement which relates to it, and the Corporation shall
permit the Purchaser and its counsel to review all drafts of the Proxy Statement
and a reasonable opportunity to provide comments thereon.
The Proxy Statement shall comply with all applicable Laws, including
Rule 14A of the Exchange Act. The Corporation shall keep the Purchaser informed
of any requests or comments made by the Securities and Exchange Commission or
other Authority in relation to the Proxy Statement. As soon as permitted by
applicable Laws, the Corporation shall cause the Proxy Statement in form and
substance satisfactory to the Purchaser to be sent to the appropriate Persons in
accordance with applicable Laws.
Immediately following the First Date of Closing and until the Special
Meeting, the Corporation shall use its reasonable best efforts to cause as many
stockholders of the Corporation as possible to enter into a Voting Agreement in
the form annexed as Schedule H hereto as parties thereto and in any event to
obtain their proxies to vote in favor of the transactions contemplated by this
Agreement at the Special Meeting
6.6 CONSENTS, APPROVALS ETC.
The Corporation agrees that it will use all commercially reasonable
efforts to obtain all authorizations, waivers, exemptions, consents, orders and
other approvals from applicable Authorities and other Persons as are necessary
to consummate the transactions contemplated hereby, and to satisfy each of the
conditions precedent to be satisfied by it and to take or cause to be taken all
other action and to do or cause to be done all other things necessary or
advisable under applicable Laws to permit the completion of the transactions
contemplated hereby in accordance with the provisions of this Agreement. The
Corporation will vigorously defend or cause to be defended any lawsuits or other
proceedings that may be brought against it challenging or opposing this
Agreement or the transactions contemplated hereby.
6.7 NON-SOLICITATION.
Subject to the following paragraph, during the period commencing on the
First Date of Closing and ending upon the earlier of (i) the Second Date of
Closing, and (ii) the date the Purchaser (and its affiliates and transferees)
ceases to hold any Series C Preferred Shares, the Corporation agrees that it
will not, directly or indirectly, solicit, initiate, participate in or encourage
any expression of interest, proposal or offer from, or negotiation with, or
provide information to or facilitate discussions with any Person relating to a
Material Transaction, without the prior consent of the Purchaser. During such
period, the Corporation shall immediately notify the Purchaser upon receipt of
any such expression of interest, proposal or offer from any Person relating to a
Material Transaction and forthwith disclose to the Purchaser all details
thereof.
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Provided, nothing contained in this section 6.7 will prevent the Board
of Directors of the Corporation from responding to any unsolicited expression of
interest, proposal or offer if, upon the advice of counsel (acceptable to the
members of the Board of Directors of the Corporation), the failure to do so
would constitute a violation of the Board's fiduciary duties to its stockholders
and the Corporation. Provided further, that any exercise by the Board of
Directors of the Corporation of its right to respond to any such unsolicited
expression of interest, proposal or offer pursuant to the immediately preceding
sentence shall (i) be subject to the Corporation entering into customary
confidentiality and stand-still covenants in favour of the Corporation, with any
Person provided access to the confidential information of the Corporation, and
(ii) permit the Purchaser, at its election, (a) to immediately terminate its
obligations hereunder to consummate the transactions contemplated hereby to
occur at the Second Date of Closing, and/or (b), to receive, upon notice to such
effect from the Purchaser to the Corporation, from the Corporation the payments
contemplated by section 8.8 hereof, and/or (c) to put its Series C Preferred
Shares to the Corporation.
6.8 STANDSTILL.
The Purchaser agrees that for a period of thirty six (36) months
immediately following the date hereof, it shall not, without the prior written
consent of the Corporation given by resolution of the directors of the
Corporation (the directors designated by the Purchaser pursuant to section 6.2
hereof abstaining from voting thereon), (i) initiate any merger, consolidation,
reorganization, recapitalization, amalgamation, liquidation, tender offer for
the outstanding shares of common stock in the capital of the Corporation which
is subject to Section 14(d)(1) of the Exchange Act or any other similar
transaction that would result in the stockholders equity of the Corporation
being exchanged for a cash equivalent value of less than Six ($6.00) Dollars per
share, or (ii) finance any third party to effect any of the foregoing.
6.9 CONFIDENTIALITY.
Each party agrees that, except as may be required by Law, it shall not
disclose this Agreement or the transactions contemplated hereby to any other
Person (other than its directors, officers, employees and advisors who are
advised of and agree to be bound by these confidentiality provisions). Without
limiting the generality of the foregoing, each party agrees that, to the extent
permitted by Law, it shall not make any public announcement or regulatory filing
disclosing this Agreement or the transactions contemplated hereby without the
prior approval of such announcement or regulatory filing by the other, such
approval not to be unreasonably withheld or delayed.
6.10 NOTIFICATION.
During the survival period referred to in section 3.3, each party will
promptly notify the other if any of the representations and warranties made by
it in this Agreement ceases to be true, accurate and complete in any material
respect and of any failure to comply in any material respect with any of its
obligations hereunder.
6.11 POST-CLOSING DELIVERIES
On or prior to October 15, 1999, the Corporation shall cause to be
delivered to the Purchaser and its counsel an executed opinion of counsel
reasonably satisfactory to Purchaser in form, scope and substance reasonably
acceptable to Purchaser , and, if applicable, the amendments referred to in
Section 8 of Schedule E to this Agreement, fully executed by all applicable
parties.
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ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION.
The Corporation covenants and agrees with the Purchaser, and the
Purchaser covenants and agrees with the Corporation, to indemnify and save
harmless the other (which for purposes of this Article VII shall include its
directors, officers, agents and nominees) from and against any claim, demand,
action, cause of action, damage, loss (other than lost profits), costs,
liability or expense (including professional fees and disbursements), other than
arising solely as a result of the indemnified party's gross negligence or
wilfull misconduct, which may be made or brought against the other or which the
other may suffer or incur in respect of, as a result of, or arising out of any
nonfulfillment of any agreement or covenant on its or their part under this
Agreement or any document or certificate given pursuant to this Agreement, or
any inaccuracy in or breach of any of its representations or warranties
contained in this Agreement or any document or certificate given pursuant to
this Agreement.
7.2 CLAIMS OTHER THAN THIRD PARTY CLAIMS.
Following receipt from the Corporation or the Purchaser, as the case
may be (the "Indemnified Party" which for purposes of this Article VII shall
include its directors, officers, agents and nominees), of a written notice of a
claim for indemnification which has not arisen in respect of a Third Party
Claim, the party who was in receipt of such notice (the "Indemnifying Party")
shall have thirty (30) days to make such investigation of the claim as the
Indemnifying Party considers necessary or desirable. For the purpose of such
investigation, the Indemnified Party shall make available to the Indemnifying
Party the information relied upon by the Indemnified Party to substantiate the
claim. If the Indemnified Party and the Indemnifying Party agree at or prior to
the expiration of such thirty (30) days to the validity and amount of the claim,
the Indemnifying Party shall immediately pay the Indemnified Party the full
agreed upon amount of the claim.
7.3 ADDITIONAL RULES AND PROCEDURES.
The obligation of the parties to indemnify each other pursuant to
this Article VII shall also be subject to the following:
(a) an Indemnified Party shall only be entitled to make a claim
for indemnification pursuant to section 7.1 if written notice
containing reasonable particulars of such claim is delivered
to the Indemnifying Party within the time period provided for
in section 3.3 hereof;
(b)
if any claim by a person other than the Indemnified Party (a
"Third Party Claim") is of a nature such that the Indemnified
Party is required by applicable Law to make a payment to any
Person (a "Third Party") with respect to such Third Party
Claim before the completion of settlement negotiations or
related legal proceedings, the Indemnified Party may make
such payment and the Indemnifying Party shall, forthwith
after demand by the Indemnifying Party, reimbursement the
Indemnified Party for any such payment. If the amount of any
liability under the Third Party Claim in respect of which
such a payment was made, as finally determined, is less than
the amount which was paid by the Indemnifying Party to the
Indemnified Party, the Indemnified Party shall, forthwith
after receipt of the difference from the Third Party, pay
such difference to the Indemnifying Party;
(c) except in the circumstances contemplated by paragraph 7.3(a)
above, and whether or not the Indemnifying Party assumes
control of the negotiation, settlement or defence of any
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Third Party Claim, the Indemnified Party shall not settle or
compromise any Third Party Claim except with the prior
written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld or delayed); and
(d) the Indemnifying Party and the Indemnified Party shall provide
each other on an ongoing basis with all information which may
be relevant to the other's liability hereunder and shall
supply copies of all relevant documentation promptly as they
become available.
7.4 RIGHTS CUMULATIVE.
The rights of indemnification contained in this Article VII are
cumulative and are in addition to every other right or remedy of the parties
contained in this Agreement or otherwise, provided that there shall be no
duplication of payment of damages.
ARTICLE VIII
GENERAL
8.1 TIME OF ESSENCE.
Time shall be of the essence in this Agreement.
8.2 GOVERNING LAW, JURISDICTION.
This Agreement shall be governed by and construed in accordance with
the Laws of the State of New York. The parties hereto absolutely and irrevocably
consent and submit to the jurisdiction of the courts of the County of New York
and of any federal courts located in the County of New York in connection with
any actions or proceedings brought against it by any other party hereto arising
out of or relating to this Agreement and the transactions contemplated hereby.
The parties hereto waive any right that they may have to have a trial by jury in
any action or proceeding brought against it by or upon the exercise of any
rights or remedies of any other party hereto arising out of or relating to this
Agreement and the transactions contemplated hereby.
8.3 ENTIRE AGREEMENT.
This Agreement, including the schedules annexed hereto, and agreements
contemplated hereby, and the Agreement and Direction among the Purchaser, the
Corporation and Xxxxxxx Xxxxxxxx & Xxxxxxxx dated October 11, 1999, constitute
the entire agreement among the parties hereto relating to the subject matter
hereof and supersede all oral statements and prior writings with respect hereto.
8.4 ASSIGNMENT.
Neither this Agreement nor any right or obligation hereunder may be
assigned by the Corporation without the prior consent of the Purchaser. This
Agreement and any right or obligation hereunder may be assigned by the Purchaser
to any affiliate of the Purchaser, Central Park Lodges Ltd. or any affiliate
thereof without the prior consent of the Corporation.
8.5 SEVERABILITY.
If any provision, or portion thereof, of this Agreement, or of the
application thereof to any Person or circumstance, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such provision or portion thereof, to any other Person or circumstance shall not
be affected thereby and each provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by Law.
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8.6 BINDING EFFECT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and the respective heirs, executives, legal personal
representatives, successors and permitted assigns.
8.7 EXPENSES.
Subject to Section 8.8 hereof, each of the parties hereto shall be
responsible for and shall pay all Taxes, costs, expenses and legal or other fees
incurred by it in connection with the negotiation, settlement and execution of
this Agreement and all matters related thereto and shall indemnify and hold
harmless the other parties from and against any and all liabilities and claims
in respect of any such expenses, costs or fees. Notwithstanding the foregoing,
all applicable filing and administrative costs associated with any required
filings with the United States Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under or in connection with
the HSR Act shall be paid equally by the Corporation and the Purchaser.
8.8 NON-COMPLETION FEE.
If the transactions contemplated hereby to occur on the Second Closing
Date have not been completed on or before the date that is six (6) months from
the date hereof, (a) the Corporation shall on the first Business Day thereafter
deliver and pay to the Purchaser an amount equal to (i) unless the sole reason
such completion did not occur is that the condition in section 10 of Schedule E
has not been met, One Million ($1,000,000) Dollars plus (ii) in all cases, all
costs, expenses and legal or other fees incurred by the Purchaser in connection
with the negotiation, settlement and execution of this Agreement and all matters
related thereto and all disputes arising in connection therewith, (b) the
Purchaser shall have no further obligation to complete the transactions
contemplated hereby to occur on the Second Closing Date and (c) the Purchaser
shall be entitled to exercise the Put Right pursuant to Section 5 of the
certificate attached as Schedule F hereto.
8.9 OBLIGATIONS AS COVENANTS.
Each agreement and obligation of any of the parties hereto in this
Agreement, even though not expressed a covenant, is considered for all purposes
to be a covenant. The parties shall use all commercially reasonable efforts to
cause to be satisfied the respective agreements, covenants and obligations
herein by the date by which same is to be satisfied and co-operate with each
other party in this connection.
8.10 NOTICE.
Any notice, consent, waiver, approval or other communication required
or permitted to be given hereunder shall be in writing and shall be given by
prepaid first-class mail, by facsimile or other means of electronic
communication or by hand-delivery as hereinafter provided. Any such notice,
consent, waiver, approval or other communication, if mailed by prepaid
first-class mail at any time other than during a general discontinuance of
postal service due to strike, lock-out or otherwise shall be deemed to have been
received on the fourth (4th) Business Day after the post-marked date thereof, or
if sent by facsimile or other means of electronic communication, shall be deemed
to have been received on the Business Day following the sending, or if delivery
by hand shall be deemed to have been received at the time it is delivered to the
applicable address noted below either to the individual designated below or to
an individual at such address having apparent authority to accept deliveries on
behalf of the addressee. Notice of change of address shall also be governed by
this section. In the event of a general discontinuance of postal service due to
strike, lockout or otherwise, notices or other communications shall be delivered
by hand or sent by facsimile or other means of electronic communication and
shall be
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deemed to have been received in accordance with this section. Notices and other
communications shall be addressed as follows:
(a) if to the Corporation
Balanced Care Corporation
0000 Xxxxx Xxxxx
Xxxxxxxxxxxxx, Xxxxxxxxxxxx
00000
Attention: Xxxx X. Xxxxxxxxx
Telecopier No: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
00000-0000
Attention: Xxxxxxx Xxxxxxx
Telecopier No.: (000) 000-0000
(b) if to the Purchaser:
IPC Advisors S.A.R.L.
c/o Unsworth & Associates
Xxxxxxxxxxx 000
0000 XX
Xxxxxxxxx
Attention: Xxxx Xxxxxxxx
Telecopier No.: 011-31-20-623-2205
with a copy to:
Xxxxxxx X. Xxxx
x/x Xxxxxxx Xxxx Xxxxxx
000 Xxxxx Xxxxxx Xxxx
Xxxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telecopier No.: (000) 000-0000
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with a further copy to:
Xxxxxxx Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxx
Telecopier No.: (000) 000-0000
8.11 WAIVER.
The failure by any party to enforce at any time any provision of this
Agreement or any of its rights in respect thereto or to insist upon strict
adherence to any term of this Agreement shall not be considered to be a waiver
of such provision, right or term or in any way affect the validity of this
Agreement or deprive the applicable party of the right thereafter to insist on
strict adherence to that term or any other term of this Agreement. The exercise
by any party of any of its rights provided by this Agreement shall not preclude
or prejudice such party from exercising any other right it may have under this
Agreement. Without limiting the generality of the foregoing, any waiver of any
condition for the benefit of a party waived by such party in connection with the
closing of the transactions contemplated hereby to be consummated on the First
Date of Closing, shall not be considered a waiver by such party of such
condition or preclude or prejudice such party from exercising its right to
require satisfaction of such condition in connection with the closing of the
transactions contemplated hereby to occur on the Second Date of Closing.
8.12 EXECUTION AND COUNTERPARTS.
For the convenience of the parties, this Agreement may be executed by
facsimile or otherwise in several counterparts, each of which when so executed
shall be, and be deemed to be, an original instrument and such counterparts
together shall constitute one in the same instrument.
IN WITNESS WHEREOF this Agreement has been duly executed by the parties
hereto on the date first indicated above.
BALANCED CARE CORPORATION
By:
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IPC ADVISORS S.A.R.L.
By:
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SCHEDULE A
DEFINITIONS
"AGREEMENT" means this agreement and all schedules annexed to this agreement,
and all agreements contemplated hereby, in each case as they may be amended or
supplemented from time to time, and the expressions "hereof', "herein",
"hereto", "hereunder", "hereby" and similar expressions refer to this agreement,
and unless otherwise indicated, references to Articles and sections are to
Articles and sections in this agreement.
"AFFILIATE" has the meaning ascribed to it in Rule 405 of the Securities Act.
"AUDITED FINANCIAL STATEMENTS" means the audited financial statements of the
Corporation as at and for the fiscal year ended June 30, 1999 and the report of
the auditors of the Corporation thereon filed with the Securities and Exchange
Commission on the Form 10-K/A.
"AUTHORITY" means any governmental or regulatory authority, agency, body, court,
commission, department or stock exchange, whether federal, provincial, state,
municipal or local, having jurisdiction over the Corporation or the Purchaser,
as applicable.
"BUILDINGS" means the buildings constructed on the Real Property and all other
structure, fixtures, erections, appurtenances and improvements located on, in or
forming part of the Real Property.
"BUSINESS DAY" means any day, other than (i) a Saturday, Sunday or statutory
holiday in the State of New York or (ii) any of the first, second, seventh or
eighth day of Passover, the first or second day of Shavuoth, the first or second
day of Rosh Hashanah, Yom Kippur, the first or second day of Sukkoth, Shemini
Azereth or Simchas Torah, and the day prior to any of the foregoing days.
"BUSINESS PLAN" means the business plan annexed as Schedule I hereto.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CLAIMS" means any administrative, court, regulatory or similar proceeding,
arbitration or other dispute resolution settlement procedure, investigation or
inquiry.
"CLOSING" means the consummation of the purchase and sale of the Purchased
Shares contemplated by this Agreement, whether on the First Date of Closing or
the Second Date of Closing, as applicable.
"CORPORATION" means Balanced Care Corporation, a corporation governed by the
Laws of the State of Delaware, and (unless expressly provided otherwise) each of
its affiliates.
"DISCLOSURE SCHEDULE" means Exhibit 1 to Schedule B of this Agreement.
"ENVIRONMENTAL LAWS" means all Laws relating to the protection of human health
and safety, the environment or Hazardous Materials.
"ENCUMBRANCES" means and includes any mortgage, deed of trust, lien, pledge,
charge, security interest, restriction, claim, Encumbrance, preemptive right or
other right to use or acquire, ownership interest, action or demand of any
nature whatsoever.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
and the rules, regulations and interpretations promulgated thereunder.
00
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"XXXXXXXX XXX" means the Securities Exchange Act of 1934, as amended, and all of
the rules and regulations thereunder.
"FACILITIES" means the senior living and care facilities developed, acquired,
owned, leased, managed and/or operated by the Corporation, whether under
construction, in lease-up or in operation.
"FIRST DATE OF CLOSING" means October 8, 1999 or such other date as the parties
shall mutually agree.
"1998 FORM 10-K/A" means the Form 10-K/A of the Corporation dated as of June 30,
1998, together with Exhibits thereto, filed with the Securities and Exchange
Commission.
"1999 FORM 10-K/A" means the Form 10-K/A (Amendment No. 1) of the Corporation
dated September 28, 1999, together with Exhibits thereto, filed with the
Securities and Exchange Commission.
"HAZARDOUS MATERIALS" means any contaminants, pollutants, substances or
materials, including polychlorinated biphenyls, petroleum, petroleum products,
radioactive materials, lead-containing materials, radon, asbestos, urea
formaldehyde foam insulation, liquid waste, special waste, toxic substances,
hazardous or toxic chemicals, or any other substance or material that, when
released to the natural environment could cause, at some immediate or future
time, harm or degradation to the natural environment or risk to human health,
whether or not such contaminants, pollutants, substances or materials are or
shall become prohibited, controlled or regulated by any Authority and any
"contaminants", "dangerous substances", "hazardous materials", "hazardous
substances", "hazardous wastes", "industrial wastes", "liquid wastes",
"pollutants" and "toxic substances", all as defined in, referred to or
contemplated in any Environmental Law.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as
amended, and the rules and regulations thereunder.
"LAWS" means all legally binding federal, provincial, state, municipal and local
constitutions, treaties, Laws, including Environmental Laws, statutes, codes,
ordinances, decrees, rules, regulations, by-laws, judicial or administrative
judgements, orders, decisions, rulings or awards, policies, guidelines,
including general principles of civil and common Law.
"MATERIAL DECISION" means any decision involving:
(a) the declaration or payment of any dividends or any other
distribution in respect of any securities of the Corporation;
(b) the issuance of any debt over one million ($1,000,000) Dollars
(other than drawdowns under the Corporation's existing credit
facility or specifically contemplated by the Business Plan) or
equity securities, warrants and options of the Corporation;
(c) the sale or disposition of any assets or property of the
Corporation during any fiscal year (whether in one or more
transactions) with an aggregate book value in excess of three
million ($3,000,000) Dollars, except as expressly provided for
in the Business Plan;
(d) making or committing to make during any fiscal year capital
expenditures which, in the aggregate, exceed five hundred
thousand ($500,000) Dollars and which have not been expressly
provided for in the Business Plan;
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(e) establishing, acquiring or otherwise becoming involved in any
corporate entity or any partnership, joint venture or similar
arrangements, except as expressly provided for in the Business
Plan;
(f) hiring any employee whose annual remuneration, or retaining any
consultant whose annual consulting fee, exceeds or could exceed
one hundred fifty thousand ($150,000) Dollars per annum, or
amending, terminating or otherwise altering or waiving the terms
of any employment, consulting or management contract with
respect to an individual whose annual remuneration or fee
exceeds that amount;
(g) entering into any transactions with directors, officers, or
employees of the Corporation or members of their families or
other Persons with whom the Corporation does not act at arm's
length;
(h) entering into (other than in the ordinary course to fund working
capital needs expressly contemplated by the Business Plan),
modifying or cancelling any credit facility;
(i) the creation of any mortgage, lien, charge or other form of
Encumbrance with respect to any of the assets of the
Corporation, other than in the ordinary course of business as
expressly contemplated by the Business Plan;
(j) the alteration of the nature of the business of the Corporation
or otherwise engaging in other businesses or activities that are
not incidental to the businesses or activities currently
undertaken by the Corporation, except as expressly contemplated
by the Business Plan;
(k) the entering into of any agreement with a term in excess of one
year which contemplates the payment by or to the Corporation of
more than five hundred thousand ($500,000) Dollars during its
term, except as expressly contemplated by the Business Plan;
(l) the institution, modification or termination of any incentive
compensation arrangement for the directors, officers or
employees of the Corporation;
(m) the amendment, modification or restatement of, or deviation from
the Business Plan;
(n) or changing the auditors of the Corporation.
"MATERIAL TRANSACTION" means any debt or equity financing (other than ordinary
course mortgage refinancings) or offering, tender offer, amalgamation, merger,
arrangement or other business combination involving the Corporation,
acquisition, disposition (other than the sale of the Missouri nursing homes),
lease or exchange of any assets or liabilities or the adoption of any plan of
liquidation or dissolution of or involving the Corporation, or any transaction
similar to any of the foregoing, other than as expressly contemplated by this
Agreement.
"PERSON" means any individual, partnership, limited partnership, joint venture,
syndicate, sole proprietorship, company or corporation with or without share
capital, unincorporated association, trust, trustee, executor, administrator or
other legal personal representative, regulatory body or agency, government or
governmental agency, Authority or entity however designated or constituted.
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"PLANS" means all written or unwritten bonus, deferred compensation and
incentive compensation, stock purchase, stock option, severance or termination
pay, hospitalization or other medical benefits, life or other insurance,
supplemental unemployment benefits, profit sharing, pension or retirement plans,
programs, agreements or arrangements, and each other employee benefit plan,
program, agreement or arrangement sponsored, maintained or contributed to or
required to be contributed to by the Corporation or any of its affiliates or by
any other Person for the benefit of any employee, officer, former employee or
former officer of the Corporation or any of its affiliates whether formal or
informal and whether legally binding or not, and includes, where applicable, the
assets and funds maintained to provide benefits under or related to the Plans
and any employee benefit, profit sharing or other plan within the meaning of or
subject to ERISA.
"PROXY STATEMENT" means the information statement, together with form of proxy,
to be disseminated by the Corporation in connection with the solicitation by the
Corporation of proxies in favour of such of the transactions contemplated by
this Agreement as are required to be approved under applicable Laws, and such
other matters as may be designated by the Purchaser pursuant to Article VI
hereof.
"PURCHASE PRICE" means Twenty Million Eight Hundred and Seventy Five Thousand
($20,875,000) Dollars, being One Dollar and Twenty Five Cents ($1.25) per
Purchased Share, payable as set out in Article V hereof.
"PURCHASED SHARES" means the Three Million Three Hundred Thousand (3,300,000)
Series C Preferred Shares and the Thirteen Million Four Hundred Thousand
(13,400,000) shares of common stock in the capital of the Corporation to be
issued and sold by the Corporation and purchased by the Purchaser pursuant to
this Agreement.
"PURCHASER" means IPC Advisors S.A.R.L.
"REAL PROPERTY" means all real property upon which the Facilities are situate
and all adjacent real properties, whether or not owned or leased by the
Corporation, and all Buildings, whether or not owned or leased by the
Corporation, facilities, landscaping, fencing, surfacing or paving, on, or
plumbing, electrical, mechanical or other systems of any of the foregoing.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement in the
form annexed as Schedule F hereto.
"SEC DOCUMENTS" has the meaning set out in Schedule B to the agreement to which
this Schedule A is attached.
"SECOND DATE OF CLOSING" means the second Business Day next following the date
on which the later of the date of the Special Meeting, and the expiry or
termination of any waiting period (and any extension thereof) under the HSR Act
applicable to the transactions contemplated by this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and all of the
rules and regulations thereunder.
"SERIES C PREFERRED SHARE" means a share of preferred stock Series C having the
rights, conditions, privileges and entitlements set out in Schedule F hereto.
"SPECIAL MEETING" means the annual meeting of the stockholders of the
Corporation to be convened, as soon as practicable, or such later date as the
parties may agree, to consider and if deemed advisable to
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approve such of the transactions contemplated by this Agreement as require
stockholder approval under applicable Laws, and such other matters as may be
designated by the Purchaser pursuant to Article VI hereof.
"TAXES" means all taxes (including income, corporation, capital, value added,
sales, withholding, franchise, customs duties, profits, gross receipts, excise,
property, stamp, transfer, water, business, payroll, workers' compensation and
goods and services taxes), imposts, duties, levies, deductions, withholdings,
charges, assessments, reassessments or fees of any nature (including interest,
penalties and additions) that are imposed under any Laws or by any relevant
taxing Authority, and "TAX" means any one of them.
"THIRD PARTY CLAIM" has the meaning set out in section 7.3 hereof.
"TIME OF CLOSING" means 10:00 a.m. (New York time) on each of the First Date of
Closing and the Second Date of Closing, as applicable, or such other time as the
parties shall mutually agree.
18
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to the Purchaser (and acknowledges that
the Purchaser is relying on such representations and warranties in entering into
this Agreement and the transactions contemplated hereby) as follows:
1. CORPORATE.
The Corporation is a corporation incorporated, existing and in good standing
under the Laws of the State of Delaware, and each of its material affiliates has
been incorporated, existing and in good standing under the Laws of their
respective jurisdiction of incorporation. The Corporation has all necessary
corporate power, authority and capacity to own its assets and to carry on its
business as currently conducted.
2. AUTHORIZATION.
The Corporation has all necessary corporate power, authority and capacity to
enter into this Agreement and to perform its obligations hereunder and
thereunder, including under section 203 of the General Corporation Law of the
State of Delaware. This Agreement and each of the agreements and instruments
contemplated by this Agreement has been authorized, executed and delivered by
the Corporation, and is a valid and binding obligation of it, enforceable in
accordance with its terms, subject only to creditors' rights generally and the
rules of Law governing equitable remedies.
3. CAPITALIZATION.
The authorized capital of the Corporation consists of Five Million (5,000,000)
shares of preferred stock par value $0.001 of which none are outstanding, One
Million One Hundred and Fifty Thousand Nine Hundred and Fifty Eight (1,150,958)
shares of preferred stock Series A of which none are outstanding, Five Million
Nine Thousand Seven Hundred and Fifty (5,009,750) shares of preferred stock
Series B of which none are outstanding, and Fifty Million (50,000,000) shares of
common stock par value $0.001 of which, prior to giving effect to the issuance
and sale of the Purchased Shares contemplated hereby, Sixteen Million Seven
Hundred and Twenty Two Thousand Eight Hundred and Forty Six (16,722,846) shares
have been issued and are outstanding as fully paid and non-assessable shares of
common stock in the capital of the Corporation.
Except for 2,589,028 options to purchase an equal number of shares of common
stock in the capital of the Corporation and 1,023,268 warrants to purchase an
equal number of shares of common stock in the capital of the Corporation, there
are no outstanding securities convertible into or exchangeable or exercisable
for any shares of the capital stock of the Corporation, nor does the Corporation
have outstanding any rights to subscribe for or to purchase, or any option for
the purchase of, or any agreements providing for the issuance, transfer or sale
of, any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock.
Except as set out in the 1999 Form 10-K/A, the Corporation does not as principal
own or have any obligation to acquire any assets or securities in the capital of
any other Person. Except as set out in the Prospectus dated February 11, 1998
filed by the Corporation in connection with its initial public offering, the
1998 Form 10-K/A and the 1999 Form 10-K/A (the "SEC Documents"), the Corporation
is not a party to any partnership, joint venture or other similar arrangement
with any other Person. Except as set out in the Form 10-K/A, all of the shares
in the capital of each affiliate of the Corporation and
19
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beneficially owned by the Corporation have been validly issued and are
outstanding as fully paid and non-assessable shares of the capital stock of each
such affiliate, free and clear of all Encumbrances.
Except as set out in the 1999 Form 10-K/A, there are no outstanding securities
convertible into or exchangeable or exercisable for any shares of the capital
stock of any affiliate of the Corporation, nor does any such affiliate have
outstanding any rights to subscribe for or to purchase, or any option for the
purchase of, or any agreements providing for the issuance, transfer or sale of,
any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock.
4. PURCHASED SHARES.
Upon their issuance subject to and in accordance with the terms and conditions
of this Agreement, the Purchased Shares will have been authorized, validly
issued and outstanding as fully paid and non-assessable shares of common stock
or preferred stock, as the case may be, in the capital of the Corporation, free
and clear of any Encumbrances.
The shares of common stock in the capital of the Corporation are listed and
posted for trading on the American Stock Exchange and there are no proceedings
to revoke or suspend such listing. All shares of common stock to be issued at
the Second Date of Closing or upon the conversion of the Series C Preferred
Shares in accordance with their terms, will be eligible for listing and upon
exercise of the Purchaser's rights under the Registration Rights Agreement, the
Corporation will use its reasonable best efforts to list them on the American
Stock Exchange.
5. VALIDITY OF TRANSACTIONS.
The execution, delivery and performance of this Agreement by the Corporation has
not and will not contravene or violate or result in any breach or default (with
or without the giving of notice or lapse of time, or both) under, or give rise
to any right of termination, cancellation or acceleration of any obligations or
loss of any material benefit of it under any Laws applicable to it, any
judgement, order, writ, injunction or decree of any Authority currently
applicable to it, the provisions of its certificate of incorporation or by-laws,
the provisions of any material agreement (including leases), arrangement or
understanding to which it is a party or by which it or its assets are bound, or
the provisions of any agreement, arrangement or understanding to which it or any
of its affiliates is a party with any of their respective employees or officers.
6. APPROVALS AND CONSENTS.
Except as set out in Section 1 of the Disclosure Schedule, no authorization,
consent or approval of, or filing with, or notice to, any Authority or other
Person (including any Person that is a party to any material agreement
(including leases), arrangement or understanding with the Corporation or, if an
officer or employee, any other agreement, arrangement or understanding with the
Corporation) is required to be made or obtained by the Corporation in connection
with the purchase and sale of the Purchased Shares contemplated by this
Agreement.
7. CONDUCT OF BUSINESS.
The Corporation has conducted its business in material compliance with, and
holds all material licenses, permits, authorizations, service provider
agreements, reimbursement contracts and any other agreements necessary for the
lawful operation of its business, pursuant to all applicable Laws or as may be
required for the use and participation of each of its Facilities, or as may be
necessary for participation in the
20
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Medicare, Medicaid or other applicable reimbursement programs, free and clear of
any Encumbrance which would materially adversely affect the use or operation of
any of its Facilities.
The Corporation has not received any notice of proceedings relating to the
suspension, revocation, limitation, modification or non-renewal of any such
licence, permit, authorization, service provider agreement or reimbursement
contract which, alone or in the aggregate, would result in a material adverse
effect on the condition, financial or otherwise, of the Corporation or any of
its Facilities. The Corporation has not granted to any other person the right to
reduce the number of licensed skilled care beds or licensed intermediate care
beds in any of its Facilities or applied for approval to transfer the right to
any such licensed beds to any other location.
The Corporation has maintained and maintains (i) the standard of care for the
patients/residents of each Facility at all times at a level reasonably necessary
to ensure quality care for the patients/residents of such Facility in accordance
with customary and prudent industry standards, (ii) sufficient inventory,
furniture, fixtures and equipment of types and quantities at each Facility to
adequately perform operations at such Facility to adequately perform operations
at such Facility, and (iii) sufficient cash in the operating accounts in order
to satisfy the working capital needs of each Facility.
8. ASSETS.
The Corporation owns or leases all of the assets (including real, personal and
intellectual assets and properties) used in its businesses, with good, valid and
marketable title thereto in fee simple or a valid and subsisting leasehold or
use and occupancy interest therein, in each case free and clear of all
Encumbrances, except for the Encumbrances specifically set out in Section 2 of
the Disclosure Schedule. None of such assets encroaches upon the property of, or
otherwise conflicts with the rights of any other Person, in each case which
would materially adversely affect the operation of or title to the properties.
The Real Property is adequately serviced by all necessary utilities to operate
the Facilities and or the business of the Corporation operated thereon and there
is free and unlimited access to and from all of the Real Property. None of the
Real Property is need of any material improvements, repair or other remedial
action. Except as set out in the SEC Documents, no lease of any Real Property or
Facility is subject to any exceptions that materially interfere with the use
made and proposed to be made of such property or Facility by the Corporation.
9. INSURANCE.
The Corporation is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are customary in the
business in which it is engaged. The Corporation has not been refused any
insurance coverage sought or applied for by the Corporation. The Corporation has
no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a material adverse effect on the condition (financial or
otherwise) of the Corporation.
10. ENVIRONMENTAL MATTERS.
The businesses and all activities pertaining to any of the assets or carried on
at any Real Property owned or leased by the Corporation or any of its affiliates
have been and are being carried on in compliance with all Laws, including
Environmental Laws. Neither the Corporation nor any of its affiliates has used
or uses any of the assets owned or leased by it or permits them to be used to
generate, manufacture, refine,
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treat, transport, handle, store, dispose of, transfer, produce or process
Hazardous Materials, except in compliance with all applicable Laws, including
Environmental Laws. No Hazardous Material other than medical waste held in the
ordinary course of business is or was present in, at, on or under, or has been
released from, any of the Real Property owned or leased by the Corporation or
any of its affiliates.
In the ordinary course of its business, the Corporation reviews the effect of
Environmental Laws on the business , operations, properties (including
Facilities) of the Corporation and its affiliates, in the course of which it
identifies and evaluates associated costs and liabilities (including any capital
or operating expenditures required for remedial activities for compliance with
applicable Laws, including Environmental Laws, any related constraints on
operating activities and any potential liabilities to other Persons). On the
basis of such review, the Corporation has reasonably concluded that such
associated costs and liabilities would not, singly or in the aggregate, have a
material adverse effect on the condition (financial or otherwise) of the
Corporation.
11. PENSION AND BENEFIT MATTERS
Section 7 of the Disclosure Schedule contains a complete and correct list of
each of the Plans. Except as otherwise described therein, neither the
Corporation nor any of its affiliates has any formal plans or commitments
whether legally binding or not, to create any additional Plan or modify or
change any existing Plan that would affect any of its employees or former
employees. The Plans are duly registered where required by, and are in good
standing under all applicable Laws and, to the knowledge of the Corporation,
there exists no state of facts which could jeopardize such status. Each of the
Plans has been maintained, funded and administered in compliance in all respects
with its terms and with all applicable Laws, including, if applicable, ERISA and
the Code. All employee and employer contributions and premiums required under
the Plans to the date hereof have been made. The Corporation and each of its
affiliates has given all proper notices required under Section 4980B of the Code
and does not maintain a self-funded medical plan. None of the Corporation or any
of its affiliates, the administrator or any fiduciary of the Plans (or agent of
any of the foregoing) have been in breach of any fiduciary obligation with
respect to the administration of the Plans or have engaged in any transaction or
act or have failed to act in a manner which would subject the Corporation or any
of its affiliates to any liability for a breach of fiduciary duty under any
applicable Laws. All obligations of the Corporation or any of its affiliates
required to be performed in connection with the Plans and funding media
established therefor up to the date hereof have been performed. There have been
no improper withdrawals, applications or transfers of assets from any Plan or
the trusts or other funding media relating thereto. Neither the Corporation nor
any of its affiliates has any plans, programs, agreements or arrangements or
other commitments to employees or former employees or their beneficiaries under
which any of them have any obligation to provide any retiree or other employee
benefit payments which are not adequately funded through a trust or other
funding arrangement. The consummation of the transactions contemplated by this
Agreement will not entitle any employee or officer or former employee or officer
of the Corporation or any of its affiliates to severance pay, unemployment
compensation or any other payment, or accelerate the time of payment or vesting
or increase in the amount of any compensation due any such employee or officer.
No Plan is intended to qualify under Section 401(a) of the Code. The Corporation
and each of its affiliates is not now, and at no time has it been, a member of a
controlled group, as defined in Section 412(n)(6)(B) of the Code, with any other
enterprise. The Corporation and each of its affiliates does not presently
maintain or contribute to, and at no time has it maintained or contributed to,
any single-employer plan (within the meaning of Section 3(41) of ERISA) or any
multi-employer plan (within the meaning of Section 3(37) of ERISA) subject to
Title IV of ERISA, and the Corporation is not aware of any circumstances
pursuant to which the Corporation or any of its affiliates could have liability
to any Person under Title IV of ERISA. Neither the Corporation nor any of its
affiliates has not incurred any liability
22
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for any tax imposed under Section 4971 through 4980B of the Code or civil
liability under Section 502(i) or (1) of ERISA which could have an adverse
effect on the condition of the Corporation or any of its affiliates. No Plan
provides health or death benefit coverage beyond the termination of an
employee's employment, except as required by Part 6 of Subtitle b of Title I of
ERISA or Section 4980B of the Code.
12. FINANCIAL STATEMENTS.
The Audited Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved, and present fairly, in all material respects, the financial position
of the Corporation as of June 30, 1999 and June 30, 1998, and the results of
their operations and their cash flows for each of the years in the three year
period ended June 30, 1999. The related financial statement schedule to the
Audited Financial Statements, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein. Since June 30, 1999, there
has been no material adverse change (actual or threatened) in the assets,
liabilities (contingent or other), affairs, operations, prospects or condition
(financial or other) of the Corporation. Other than as disclosed in the Audited
Financial Statements, since June 30, 1999, the Corporation has not incurred
material liabilities or obligations, fixed or contingent, matured or unmatured
or otherwise, except for liabilities or obligations, that, individually or in
the aggregate, do not or would not have a material adverse effect on the
condition (financial or otherwise) of the Corporation, or arising in the
ordinary course of business. There has been no reportable disagreement between
the Corporation and its auditors or any predecessor auditors, as applicable. The
Corporation and each of its affiliates is solvent for purposes of 11 U.S.C.
s.548. All material liabilities and obligations, fixed or contingent, matured or
unmatured or otherwise, of the Corporation now existing or reasonably expected
to be incurred or arise in connection with any "black box" arrangements with the
Corporation are specifically set out in Section 3(c) of the Disclosure Schedule.
The Corporation has no obligation, present or future, to purchase any "black
box' entities or any assets thereof. Except with respect to Facilities leased
from American Health Properties, Ocwen Financial and Healthcare Realty Trust,
all working capital and construction finance required by each "black box" entity
with which the Corporation has any relationship or arrangement is required to be
funded by the lessor of the relevant facility or Real Property and the
Corporation has no reason to believe any such funding will not be provided when
required.
13. AGREEMENTS.
All contracts, agreements and instruments required to be filed as an exhibit to
the SEC Documents are legal, valid, binding and in full force and effect and
enforceable by the Corporation in accordance with their respective terms,
subject only to creditors' rights generally and the rules of Law governing
equitable remedies. The Corporation is not in default or breach in any material
respect of any material agreement, contract, lease or other instrument to which
it is a party or by which it is bound, and the Corporation has not received
notice of any intention of any Person to terminate any such agreement, contract,
lease or other instrument, otherwise than in the ordinary course business, and
the Corporation has no knowledge of any fact or circumstance that will (with or
without the giving of notice or lapse of time, or both) give rise to any right
of termination, cancellation or acceleration of any obligations of loss of any
material benefit of it under any such agreement.
Section 3 of the Disclosure Schedule lists all material contracts, agreements,
leases and other instruments (including any which involve the payment by or to
the Corporation of more than Five Hundred Thousand ($500,000) Dollars in any
twelve (12) month period or which cannot be terminated by the Corporation or any
of its affiliates, as applicable, on less than thirty (30) days' notice) to
which the Corporation or any of its affiliates is a party or by which any of
them is bound, and sets out in summary form all material
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business terms and conditions thereof (other than terms and conditions which the
Board of Directors of the Corporation has reasonably determined are customary to
agreements of such nature and on commercially reasonable terms in the ordinary
course of business), categorized as follows:
(a) leases of real property;
(b) financing and security agreements;
(c) material obligations, fees and options under management,
option, funding, construction and other agreements relating to
"black box" structures;
(d) agreements and other arrangements (including stock option
plans, separation agreements, consulting agreements and change
of control agreements) with present and former directors,
officers and employees and other non-arm's length persons, in
each case whose annual compensation currently exceeds One
Hundred Thousand ($100,000) Dollars; and
(e) non-competition and other restrictions.
14. TAX MATTERS.
Each of the Corporation and its affiliates has filed all Tax returns required to
be filed by it in all applicable jurisdictions and has paid all Taxes due and
payable by it or has made adequate provision in the audited consolidated
financial statements of the Corporation included in the 1999 Form 10-K/A for the
payment of all Taxes not due and payable for any taxation period ending on, or
prior to, the date thereof. There are no claims or assessments pending against
the Corporation or any of its affiliates for any material alleged deficiency in
any Tax, and neither the Corporation nor any of its affiliates has been notified
in writing of any material proposed Tax claims or assessments against the
Corporation or any of this affiliates. No Tax return of the Corporation is or
has been the subject of an examination by any Tax Authority. The Corporation has
withheld from each payment made to any of its past or current employees,
officers and directors, and any other Person, the amount of all material Taxes
and other deductions required to be withheld therefrom and paid the same to the
proper Tax Authority within the time required by applicable Laws.
15. LITIGATION AND OTHER PROCEEDINGS.
Except as set out in Section 4 of the Disclosure Schedule or the 1999 Form
10-K/A, there are no Claims in excess of $25,000 pending or, to the knowledge of
the Corporation, threatened against the Corporation or any of its directors or
senior management (including executive officers) or affecting any of its assets,
properties, businesses or affairs, and there are no facts or circumstances known
to the Corporation which are likely to give rise to any Claims. There is not
currently outstanding against the Corporation any judgment, execution, decree,
injunction, rule, proceeding or order of, or to the knowledge of the
Corporation, investigation of any Authority in excess of Twenty Five Thousand
($25,000) Dollars.
16. FINDER'S FEES ETC.
Except as disclosed in Section 5 of the Disclosure Schedule, the Corporation has
not taken any action that would cause the Purchaser or the Corporation to become
liable to any claim or demand for a brokerage commission, finder's fee or other
similar arrangement.
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17. SEC DOCUMENTS.
The Corporation has furnished to the Purchaser, a true and complete copy of each
of the SEC Documents). As of the their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, as applicable, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, as of their respective filing dates. Other than the SEC
Documents listed in Section 6 of the Disclosure Schedule, the Corporation has
not filed or been required to file any other reports or statements with the
Securities and Exchange Commission since July 1, 1999.
18. DISCLOSURE
No representation or warranty in this Agreement contains any untrue statement of
a material fact or omits to state any material fact necessary to make any such
representation or warranty not misleading to a prospective purchaser of the
Purchased Shares seeking full information as to the Corporation and its
affiliates and their respective assets, businesses and affairs. All facts,
events and circumstances which the Corporation believes could reasonably be
expected to be material to a prospective purchaser of the Purchased Shares
relating to the assets, liabilities (contingent or other), affairs, operations,
prospects or condition (financial or other) of the Corporation has been
disclosed in the SEC Documents (without having reference to the Exhibits
thereto) or the Disclosure Schedule.
25
EXHIBIT 1
DISCLOSURE SCHEDULE
26
SCHEDULE C
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Corporation (and acknowledges that
the Corporation is relying on such representations and warranties in entering
into this Agreement and the transactions contemplated hereby) as follows:
1. CORPORATE.
It is a corporation incorporated and existing under the Laws of Luxembourg. The
principal office of the Purchaser is located at 00-00 Xxx Xxxxxx Xxxxx, X-0000,
Xxxxxxxxxx.
2. AUTHORIZATION.
It has all necessary corporate power, authority and capacity to enter into this
Agreement and to perform its obligations hereunder. This Agreement and each of
the agreements and instruments contemplated by this Agreement has been
authorized, executed and delivered by it, and is a valid and binding obligation
of it, enforceable in accordance with its terms, subject to creditors' rights
generally and rules of Law governing equitable remedies.
3. VALIDITY OF TRANSACTIONS.
The execution, delivery and performance of this Agreement by it has not and will
not contravene or violate or result in any breach or default (with or without
the giving of notice or lapse of time, or both) under, or give rise to any right
of termination, cancellation or acceleration of any obligations or loss of any
material benefit of it under any Laws applicable to it, any judgement, order,
writ, injunction or decree of any Authority currently applicable to it, the
provisions of its articles or by-laws, or the provisions of any material
agreement, arrangement or understanding to which it is a party or by which it or
its assets is bound.
4. APPROVALS AND CONSENTS.
No authorization, consent or approval of, or filing with, or notice to, any
Authority or other Person is required to be made or obtained by the Purchaser in
connection with the purchase and sale of the Purchased Shares contemplated by
this Agreement.
5. SECURITIES MATTERS.
The Purchaser is acquiring the Purchased Shares for its own account for
investment purposes and not for resale or with a view to distribution thereof in
violation of the Securities Act. The Purchaser is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act.
6. PURCHASED SHARES.
The Purchaser understands that the Purchased Shares have not been registered
under the Securities Act, by reason of their issuance by the Corporation in a
transaction that is exempt from the registration requirements of the Securities
Act, and that, subject to the Registration Rights Agreement, the Purchased
Shares must continue to be held by the Purchaser unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration. The Purchaser understands that the exemptions from registration
afforded by Rule 144 under the Securities Act depend on the satisfaction of
27
C- 2
various conditions, and that, if applicable, Rule 144 may afford the basis for
sales only in limited amounts.
7. FINDER'S FEES ETC.
The Purchaser has not taken any action that would cause the Corporation to
become liable to any claim or demand for a brokerage commission, finder's fee or
other similar arrangement.
28
SCHEDULE D
CONDITIONS PRECEDENT IN FAVOUR OF THE CORPORATION
The obligation of the Corporation to complete the transactions contemplated by
this Agreement is subject to the satisfaction of, or compliance with, at the
Time of Closing at each of the First Date of Closing and the Second Date of
Closing, each of the following conditions, each of which is for the exclusive
benefit of the Corporation and may only be waived by the Corporation.
1. ACCURACY OF REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties of the Purchaser made in, or pursuant
to, this Agreement shall be true and correct in all material respects at each
Time of Closing, and the Corporation shall have received a certificate to such
effect from a senior officer of the Purchaser.
2. COMPLIANCE WITH COVENANTS.
The Purchaser shall have performed or complied with, in all material respects,
each of its agreements, obligations and covenants in this Agreement which are to
be performed or complied with by the Purchaser at or prior to each Time of
Closing, and the Corporation shall have received a certificate to such effect
from a senior officer of the Purchaser.
3. APPROVALS AND CONSENTS.
The Purchaser shall have co-operated with the Corporation and shall have used
all commercially reasonable efforts to obtain and shall have obtained at or
prior to each Time of Closing all necessary approvals and consents of applicable
Authorities and other Persons as are required to consummate the transactions
contemplated hereby at such time. Without limiting the generality of the
foregoing, at the Time of Closing on the Second Date of Closing, any waiting
period (and any extension thereof) under the HSR Act applicable to the
transactions contemplated hereby shall have expired and no action shall have
been taken thereunder by any Authority or other Person to preclude the
completion of the transactions contemplated hereby.
4. RECEIPT OF CLOSING DOCUMENTATION.
All documentation relating to the authorization and completion of the
transactions contemplated hereby, including the purchase and sale of the
Purchased Shares, and all actions and proceedings taken on or prior to each
Closing Date in connection with the performance by the Purchaser of its
obligations hereunder shall be satisfactory to the Corporation and its counsel,
acting reasonably, and the Corporation shall have received copies of all such
documentation or other evidence as they may reasonably request in order to
establish the consummation of the transactions contemplated hereby and the
taking of all corporate proceedings in connection therewith in compliance with
these conditions, in form and substance satisfactory to the Corporation and its
counsel, acting reasonably.
5. NO ACTION TO RESTRAIN.
No action or proceeding shall be pending or threatened by any Authority or any
other Person (including a party hereto) to restrain or prohibit the completion
of the transactions contemplated by this Agreement.
29
SCHEDULE E
CONDITIONS PRECEDENT IN FAVOUR OF PURCHASER
The obligation of the Purchaser to complete the transactions contemplated by
this Agreement is subject to the satisfaction of, or compliance with, at the
Time of Closing at each of the First Date of Closing and the Second Date of
Closing, each of the following conditions, each of which is for the exclusive
benefit of the Purchaser and may only be waived by the Purchaser.
1. ACCURACY OF REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties of the Corporation made in, or
pursuant to, this Agreement shall be true and correct in all material respects
at each Time of Closing, and the Purchaser shall have received a certificate to
such effect from each of the President and Chief Executive Officer, the Chief
Financial Officer and the Senior Vice President and Counsel, Assistant Secretary
of the Corporation.
2. COMPLIANCE WITH COVENANTS.
The Corporation shall have performed or complied with, in all material respects,
each of its agreements, obligations and covenants in this Agreement which are to
be performed or complied with by Corporation at or prior to each Time of
Closing, and the Purchaser shall have received a certificate to such effect from
each of the President and Chief Executive Officer, the Chief Financial Officer
and the Senior Vice President and Counsel, Assistant Secretary of the
Corporation.
3. APPROVALS AND CONSENTS.
The Corporation shall have co-operated with the Purchaser and shall have used
all commercially reasonable efforts to obtain and shall have obtained at or
prior to each Time of Closing all necessary approvals and consents of applicable
Authorities and other Persons as are required to consummate the transactions
contemplated hereby at such time. Without limiting the generality of the
foregoing, at the Time of Closing on the Second Date of Closing, any waiting
period (and any extension thereof) under the HSR Act applicable to the
transactions contemplated hereby shall have expired and no action shall have
been taken thereunder by any Authority or other Person to preclude the
completion of the transactions contemplated hereby, and any approval of
stockholders of the Corporation required under applicable Laws to approve the
transactions contemplated hereby to be consummated at such Time of Closing shall
have been obtained.
4. BOARD REPRESENTATION.
The Corporation shall have caused to be elected or appointed four (4) directors
designated by the Purchaser (at its sole discretion) comprising two (2) Class I
directors having a current term expiring in 2001, one (1) Class II director
having a current term expiring in at the Special Meeting, and one (1) Class III
director having a current term expiring in 2000, and the Board of Directors of
the Corporation shall be comprised of not more than nine (9) directors. The
Corporation shall also have increased the size of each of the Audit Committee
and the Compensation Committee to four (4) directors comprising in each case at
least two (2) directors designated by the Purchaser (at its sole discretion).
30
E-2
5. SERIES C PREFERRED SHARES.
The Corporation shall have amended its certificate of designation and
certificate of incorporation in order to create the Series C Preferred Shares.
6. REGISTRATION RIGHTS AGREEMENT.
The Corporation shall have entered into the Registration Rights Agreement in the
form annexed as Schedule G hereto.
7. VOTING AGREEMENT.
The Voting Agreement in the form annexed as Schedule H hereto shall have been
entered into by the Corporation and each of the other parties contemplated
thereby (other than the Purchaser), which other parties beneficially own or have
control or direction over not less than Seventeen (17%) percent of the
outstanding shares of common stock in the capital of the Corporation entitled to
vote at the Special Meeting, and such other parties shall, if requested by the
Purchaser, have delivered to the Purchaser an irrevocable proxy in blank
designating the Purchaser representing all of the shares of common stock in the
capital of the Corporation beneficially owned or controlled by such parties and
designating the Purchaser as their respective proxy, coupled with an interest
and with full power of substitution, to vote such share at the Special Meeting.
8. EMPLOYMENT AGREEMENTS.
The Corporation shall have amended in form and substance acceptable to the
Purchaser its employment agreement with each of its executive officers referred
to in Section 1 of Schedule E to provide (unless counsel to the Purchaser
confirms that the applicable employment or change of control agreement
termination provisions covers this matter to the same effect) that any material
breach of a representation or warranty of the Corporation within such
executive's specific knowledge shall be deemed to be reason for termination for
cause of such executive officer by the Corporation.
9. RECEIPT OF CLOSING DOCUMENTATION.
All documentation relating to the authorization and completion of the
transactions contemplated hereby, including the purchase and sale of the
Purchased Shares, and all actions and proceedings taken on or prior to each Time
of Closing in connection with the performance by the Corporation of its
obligations hereunder shall be satisfactory to the Purchaser and its counsel,
acting reasonably, and the Purchaser shall have received copies of all such
documentation or other evidence as they may reasonably request, including on the
Second Date of Closing an opinion of counsel to the Corporation in substantially
the form attached as Schedule J, in order to establish the consummation of the
transactions contemplated hereby and the taking of all corporate proceedings in
connection therewith in compliance with these conditions, all in form and
substance satisfactory to the Purchaser and its counsel, acting reasonably.
10. NO MATERIAL ADVERSE CHANGE.
There shall have been no material adverse change (actual, proposed, whether
financial or otherwise) in the condition of the Corporation or in any material
assets, liabilities (contingent or otherwise), capital, affairs, business or
operations of the Corporation since the date of the 1999 Form 10-K/A, including
there being no actions, suits, proceedings or inquiries pending or threatened
against or affecting the
31
X- 0
Corporation at law or in equity before or by any Authority which may, in the
reasonable discretion of the Purchaser, materially and adversely affect the
Corporation.
11. NO ACTION TO RESTRAIN.
No action or proceeding shall be pending or threatened by any Authority or any
other Person (including a party hereto) to restrain or prohibit the completion
of the transactions contemplated by this Agreement.
32
SCHEDULE F
SERIES C PREFERRED SHARE PROVISIONS
33
SCHEDULE G
REGISTRATION RIGHTS AGREEMENT
34
SCHEDULE H
VOTING AGREEMENT
35
SCHEDULE I
BUSINESS PLAN
