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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Unison HealthCare Corporation
(Name of Issuer)
Common Stock
(Title of Class of Securities)
909196 10 7
(CUSIP Number)
JERRY M. WALKER
President and Chief Executive Officer
7272 E. Indian School Road
Suite 214
Scottsdale, Arizona 85251
602-423-1954
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
October 31, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [X]. (A fee
is not required only if the filing person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7).
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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SCHEDULE 13D
CUSIP NO. 909196107
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
David A. Kremser
Social Security Number: ###-##-####
-------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
OO
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D)
OR 2(E)
[ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER 1,287,396
8. SHARED VOTING POWER 0
9. SOLE DISPOSITIVE POWER 1,287,396
10. SHARED DISPOSITIVE POWER 0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,287,396
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
21.32%
14. TYPE OF REPORTING PERSON*
IN
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SCHEDULE 13D
DAVID A. KREMSER
UNISON HEALTHCARE CORPORATION
ITEM 1. SECURITY AND ISSUER.
Issuer: Unison HealthCare Corporation ("Unison")
Security: Common Stock, Par Value $0.001 ("Common Stock")
ITEM 2. IDENTITY AND BACKGROUND.
The reported securities have been acquired by David A. Kremser
("Kremser"), a Colorado resident, individually, Kremser is currently serving as
a director of Unison. The business address of Unison is 7272 Indian School
Road, Scottsdale, Arizona 85251.
Kremser has not been convicted in any criminal proceeding (excluding
traffic violations or similar misdemeanors) during the last five years, nor has
he been a party to a civil proceeding which resulted in the enjoining of future
violations of, or prohibiting or demanding activities subject to, federal or
state securities laws or finding any violation with respect to such laws during
the last five years.
Kremser is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Kremser acquired the shares of Unison Common Stock as a consequence of
Unison's acquisition of Signature Health Care Corporation ("Signature"), which
was effective October 31, 1996. In that transaction, the shares of Signature
Common Stock formerly held by Kremser were converted into shares of Unison
Common Stock, by terms of the agreement between Unison and Signature relating
to the transaction.
ITEM 4. PURPOSE OF TRANSACTION.
Kremser acquired the shares of Common Stock for investment purposes, in
the transaction by which Unison acquired Signature. Kremser personally may
purchase or sell additional shares of Common Stock in the market, in isolated
private transactions or if Unison offers to sell theretofore authorized but
unissued shares if at the time Kremser has funds available for investment and
Kremser considers the price at which such shares can be obtained to be
favorable for an additional investment, or favorable for sale.
Except that Kremser became a member of the Board of Directors of
Unison, Kremser has no other present plans or proposals which relate to, or
would result in, an extraordinary corporate transaction involving Unison, a
sale or transfer of Unison's assets, any change in the present Board of
Directors or management of Unison, any material changes in Unison's present
capitalization or dividend policy or in its business, corporate structure,
certificate of incorporation or bylaws, or in the registration of Unison Common
Stock under the Securities Exchange Act of 1934.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
As of the date of this report, Kremser beneficially owns 1,287,396
shares of Unison Common Stock, representing 21.32% of the then-outstanding
shares of Common Stock. Kremser has sole voting and sole dispositive power as
to 1,287,386 shares of Unison Common Stock, which are owned individually.
PAGE 3 OF 5 PAGES
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All of the shares of Unison Common were acquired as of October 31, 1996
in the transaction by which Signature was acquired by Unison.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
See Item 7.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A Agreement and Plan of Merger among Unison HealthCare
Corporation, Signature Health Care Corporation, David
A. Kremser and John D. Filkoski.
PAGE 4 OF 5 PAGES
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SIGNATURE
After reasonable inquiries and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
Date: October 31, 1996
/s/ David A. Kremser
----------------------------
DAVID A. KREMSER
PAGE 5 OF 5 PAGES
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is made as of August 2,
1996, by Unison HealthCare Corporation, a Delaware corporation ("Parent"),
Signature Health Care Corporation, a Delaware corporation ("Signature" or the
"Company"), David A. Kremser, an individual resident in Colorado ("Mr.
Kremser"), and John D. Filkoski, an individual resident in Colorado ("Mr.
Filkoski" and, collectively with Mr. Kremser, the "Warranting Shareholders").
RECITALS
The Boards of Directors of both Parent and the Company have, subject to the
conditions of this Agreement, determined that the Merger (as defined below) is
in the best interests of their respective shareholders and have approved and
adopted this Agreement and the transactions contemplated hereby. Parent and the
Warranting Shareholders desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and to cause the Merger
to occur on the terms set forth in this Agreement. This Agreement contemplates a
reorganization pursuant to IRC Sections 368(a)(1)(A) and 368(a)(2)(E).
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUIRED COMPANIES" -- the Company and its Subsidiaries, collectively.
"ANCILLARY CONTRACTS" -- as defined in Section 3.30.
"APPLICABLE CONTRACT" -- any Contract (a) under which any Acquired Company
has or may acquire any rights, (b) under which any Acquired Company has or may
become subject to any obligation or liability, or (c) by which any Acquired
Company or any of the assets owned or used by it is or may become bound.
"AUDIT DATE" -- as defined in Section 2.10.
"AVERAGE DAILY PRICE" -- the average of the closing selling prices on the
Nasdaq Stock Market's National Market of the Parent's common stock, during the
30 consecutive trading days ending on the fifth trading day prior to the last
trading day immediately prior to the Closing Date, all as reported in The Wall
Street Journal.
"BALANCE SHEET" -- as defined in Section 3.4.
"BASE AMOUNT" -- as defined in Section 2.5(a).
"BEST EFFORTS" -- the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as reasonably possible.
"BREACH" -- except as otherwise expressly provided in Article 10 hereof for
purposes of applying the indemnification provisions, a "Breach" of a
representation, warranty, covenant, obligation, or other provision of this
Agreement or any instrument delivered pursuant to this Agreement will be deemed
to have occurred if there is or has been (a) any material inaccuracy in or
breach of, or any material failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
material claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such material inaccuracy,
breach, failure, claim, occurrence, or circumstance, provided, however, that if
any such representation, warranty, covenant, obligation or other provision is
itself limited to matters of a material nature (however that limitation
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may be expressed), an inaccuracy thereof shall constitute a Breach for all
purposes of this Agreement and no second level of materiality shall be required.
"CLOSING" -- as defined in Section 2.3.
"CLOSING DATE" -- the date and time as of which the Closing actually takes
place.
"COMPANY" -- as defined in the Recitals of this Agreement.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by this
Agreement, including:
(a) the Merger;
(b) the execution, delivery, and performance of the Noncompetition
Agreements, the Securityholders' Releases, and the Escrow Agreement;
(c) the performance by Parent and Warranting Shareholders of their
respective covenants and obligations under this Agreement; and
(d) Parent's acquisition and ownership of the Shares through the
Merger and exercise of control over the Acquired Companies.
"CONTRACT" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES" -- as defined in Section 10.2.
"DCL" -- as defined in Section 2.1.
"DISCLOSURE LETTER" -- the disclosure letter delivered by the Warranting
Shareholders to Parent concurrently with the execution and delivery of this
Agreement.
"DISPUTED MEDICARE RECEIVABLES" -- as defined in Section 7.11.
"EFFECTIVE TIME" -- as defined in Section 2.2.
"ENCUMBRANCE" -- any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or
response actions ("Cleanup") required by applicable Environmental Law or
Occupational
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Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law. The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. '9601
et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated, including medical
wastes;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
Environmental Laws include, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980; Clean Water Act
of 1977; Clean Air Act; Resource Conservation and Recovery Act of 1976; Federal
Insecticide, Fungicide, and Rodenticide Act; Toxic Substances Control Act;
Emergency Planning and Community Right-to-Know Act of 1986; Occupational Safety
and Health Act of 1970; and Safe Drinking Water Act; and state and local
counterparts to these acts.
"EQUITY ADJUSTMENT AMOUNT" -- as defined in Section 2.9.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGREEMENT" -- as defined in Section 2.8.
"EXCHANGE ACT" -- the Securities Exchange Act of 1934, as amended.
"FACILITIES" -- any real property, leaseholds, or other interests currently
or formerly owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles) currently or formerly owned
or operated by any Acquired Company.
"GAAP" -- generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
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"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity
and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including (a) any substance, the presence of which requires investigation or
remediation under any Environmental Law or other common law; (b) any dangerous,
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous substance; (c) any substance, the presence of
which causes or threatens to cause a nuisance upon any SNF or other property
presently and/or previously owned, leased or otherwise used by the Company or
the Subsidiaries of the Company (or poses or threatens to pose a hazard to the
health or safety of persons on or about the property or adjacent properties);
and (d) radon, ureaformaldehyde, polychlorinated biphenyls, asbestos or
asbestos-containing materials, petroleum and petroleum products.
"HCFA" -- the federal Health Care Financing Administration.
"HSR ACT" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"INDEMNIFIED PERSONS" -- as defined in Section 10.2.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.22.
"INTERIM BALANCE SHEET" -- as defined in Section 3.4.
"IRC" -- the Internal Revenue Code of 1986, as amended, or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, or other
administrative order, constitution, law, ordinance, principle of common law,
regulation, statute, or treaty.
"MERGER" -- as defined in Section 2.1.
"MERGER CONSIDERATION" -- as defined in Section 2.5.
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"MERGING COMPANIES" -- Signature Health Care Corporation, Arkansas, Inc.,
Cornerstone, Inc., Douglas Manor, Inc., and Safford Care, Inc.
"NEWCO" -- a newly organized, wholly owned subsidiary of Parent to be
merged with and into the Company in the Merger.
"NONCOMPETITION AGREEMENTS" -- as defined in Section 2.8.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any governmental program designed to provide safe and
healthful working conditions.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or
by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"OTHER SECURITYHOLDERS" -- persons, other than the Warranting Shareholders,
who hold shares or options to acquire shares of any Acquired Company immediately
prior to the Effective Time.
"PER SHARE CASH AMOUNT" -- as defined in Section 2.5.
"PER SHARE CONVERSION AMOUNT" -- as defined in Section 2.5.
"PARENT" -- as defined in the first paragraph of this Agreement.
"PARENT COMPANIES" -- any direct or indirect wholly-owned subsidiary of
Parent.
"PARENT REPORTS" -- as defined in Section 4.11.
"PARENT SHARES" -- shares of the voting common stock, $0.001 par value per
share, of Parent.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" -- as defined in Section 3.13.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation
(including Medicare and Medicaid survey and certification investigations and
proceedings), litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"REGISTRATION RIGHTS AGREEMENT" -- as defined in Section 2.8(d).
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"RELATED PARTY CONTRACTS" -- as defined in Section 2.8(a)(v) and listed
pursuant to Section 3.17(a)(xiv).
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse and former spouses, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SEC" -- the federal Securities and Exchange Commission.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SECURITYHOLDER RELEASES" -- as defined in Section 2.8.
"SHARES" -- the shares of capital stock of the Company issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
Parent, Newco, or any Parent Companies or any of the Company's direct or
indirect wholly-owned subsidiaries, or held in the treasury of the Company).
"SNFs" -- skilled nursing facilities and other licensed providers of health
care and related services owned or leased and operated by any Acquired Company.
"SPREAD" -- the amount by which (a) the excess of $6,430,532 over the
allocated fees to BA Partners in connection with the Merger, divided by (b)
80,171, exceeds (c) the per share exercise price of an outstanding
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employee option to purchase Company common stock, multiplied by the number of
shares of Company common stock to which the option relates.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"SURVIVING CORPORATION" -- as defined in Section 2.1.
"TAX" -- any tax (including without limitation any income tax, capital
gains tax, value-added tax, sales tax, property tax, gift tax, or estate tax),
levy, assessment, tariff, duty (including any customs duty), deficiency, or
other fee, and any related charge or amount (including any fine, penalty,
interest, or addition to tax), imposed, assessed, or collected by or under the
authority of any Governmental Body or payable pursuant to any tax-sharing
agreement or any other Contract relating to the sharing of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"WARRANTING SHAREHOLDERS" -- as defined in the first paragraph of this
Agreement.
2. THE MERGER; CLOSING
2.1 THE MERGER
Subject to the terms and conditions of this Agreement, at the Effective
Time (as defined in Section 2.2), the Company and Newco shall consummate a
merger (the "Merger") in which (a) Newco shall be merged with and into the
Company and the separate corporate existence of Newco shall thereupon cease, (b)
the Company shall be the successor or surviving corporation in the Merger and
shall continue to be governed by the laws of the State of Delaware, and (c) the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
corporation surviving the Merger is sometimes hereinafter referred to as the
"Surviving Corporation." The Company and Newco are sometimes collectively
referred to herein as the "Constituent Corporations." The Merger shall have the
effects set forth in the Delaware Corporation Law (the "DCL").
2.2 EFFECTIVE TIME
Parent, Newco and the Company will cause an appropriate Certificate of
Merger (the "Certificate of Merger") to be executed and filed on the date of the
Closing (or on such other date as Parent and the Company may agree) as provided
in the DCL. The Merger shall become effective on the date on which the
Certificate of Merger has been duly filed with the Secretary of State of the
State of Delaware or such time as is agreed upon by the parties and specified in
the Certificate of Merger, and such time is hereinafter referred to as the
"Effective Time."
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2.3 CLOSING
The closing of the Merger (the "Closing") provided for in this Agreement
will take place at the offices of Parent's counsel at Suite 400, One Camelback
Building, One East Camelback Road, Phoenix, Arizona, at 10:00 a.m. (local time)
on the later of (i) October 15, 1996 or (ii) subject to the provisions of
Section 9, the date that is two business days following the termination of the
applicable waiting period under the HSR Act and the satisfaction of the other
conditions specified in this Agreement, or at such other time and place as the
parties may agree. Subject to the provisions of Section 9, failure to consummate
the Merger provided for in this Agreement on the date and time and at the place
determined pursuant to this Section 2.3 will not result in the termination of
this Agreement and will not relieve any party of any obligation under this
Agreement.
2.4 THE SURVIVING CORPORATION
The Certificate of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation. The Bylaws of the Company, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation. The
directors of Newco at the Effective Time shall, from and after the Effective
Time, be the initial directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation, or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws. The officers of Newco at
the Effective Time shall, from and after the Effective Time, be the initial
officers of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out and effectuate the purposes of this Agreement,
the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of each of the Constituent
Corporations or otherwise, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out and effectuate the purposes of this Agreement.
2.5 CONSIDERATION FOR THE MERGER; CONVERSION OF SHARES IN THE MERGER
At the Effective Time, by virtue of the Merger and without any action on
the part of the holders of capital stock of the Company or of capital stock of
Newco:
(a) Each Share shall, by virtue of the Merger and without any action
on the part of Newco, the Company or the holder thereof, be converted into:
(i) that number of Parent Shares determined by dividing (i)
1,509,434 Parent Shares by the number of Shares (the "Per Share
Conversion Amount"), provided, however, that
(A) if the Average Daily Price is greater than $15.25, then the
aggregate number of Parent Shares used in the foregoing calculation
shall be reduced to an amount that, when multiplied by the Average Daily
Price results in the product $23,018,868.50, and
(B) if the Average Daily Price is less than $11.25, then the
aggregate number of Parent Shares used in the foregoing calculation
shall be increased to an amount that, when multiplied by the Average
Daily Price results in the product $16,981,132.50.
Plus
(ii) an amount of cash (the "Per Share Cash Amount") determined by
dividing
(A) $10,200,000 minus the aggregate Spread on employee options
retired by the Company after the date hereof and prior to the Effective
Time (such excess being referred to herein as the
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"Base Amount"), plus or minus the Equity Adjustment Amount determined
pursuant to Sections 2.9 and 2.10, by
(B) the number of Shares.
(b) All calculations made pursuant to Section 2.5(a) shall be carried
out the third decimal place. No fractional Parent Shares shall be issued in
the Merger, but instead any fraction shall be rounded up to the nearest
whole Parent Share. The Per Share Conversion Amount plus the Per Share Cash
Amount is sometimes referred to herein as the "Merger Consideration."
(c) At the Effective Time, each share of capital stock of the Company
issued and outstanding and owned by any of the Parent Companies or any of
the Company's direct or indirect wholly-owned subsidiaries or authorized
but unissued shares held by the Company immediately prior to the Effective
Time shall cease to be outstanding, be canceled and retired without payment
of any consideration therefor and cease to exist.
(d) At the Effective Time, each share of common stock of Newco issued
and outstanding immediately prior to the Effective Time shall be converted
into one validly issued, fully paid and nonassessable share of common stock
of the Surviving Corporation.
(e) If, between the date of this Agreement and the Effective Time, the
outstanding Shares or the Parent Shares shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split up, combination, exchange of
shares or readjustment, or with respect to any such event there be declared
a record date within said period with a distribution date after the
Effective Time or a stock dividend on the Shares or the Parent Common
Shares shall be declared with a record date within said period, the Merger
Consideration shall be appropriately adjusted.
2.6 EXCHANGE OF CERTIFICATES; NO FRACTIONAL SHARES; RETURN OF CERTIFICATES
Except as set forth in Section 2.5 above, from and after the Effective
Time, each holder of a certificate which immediately prior to the Effective Time
represented outstanding Shares shall be entitled to receive in exchange
therefor, upon surrender thereof to Parent, payment of the Merger Consideration,
provided, however, that if the Equity Adjustment Amount has not yet been
determined in accordance with Sections 2.9 and 2.10(a) hereof an amount equal to
the holder's pro rata share of the Base Amount shall initially be paid and the
parties will comply with the procedures required by Section 2.10(b) hereof, and
provided further that a portion of the Merger Consideration equal to 37,736
Parent Shares (allocated pro rata among the Warranting Shareholders in
proportion to their ownership of Shares immediately prior to the Effective Time)
shall be deposited by the Parent on the holders' behalf with the Escrow Agent in
accordance with Section 2.8 hereof and shall thereafter be held and applied in
accordance with the Escrow Agreement. No holder of a certificate or certificates
which immediately prior to the Effective Time represented Shares shall be
entitled to receive any dividend or other distribution from Parent until
surrender of such holder's certificate or certificates for a certificate or
certificates representing Parent Shares.
2.7 NO DISSENTING SHARES
The parties hereto acknowledge that the shareholders of the Company have
all indicated they will approve the Merger and they will not be entitled to
dissent from the Merger and require appraisal of their Shares.
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2.8 CLOSING OBLIGATIONS
At the Closing:
(a) the Warranting Shareholders, for themselves and as agents for all
Other Securityholders, will deliver to Parent:
(i) certificates representing the Shares;
(ii) releases in the form of Exhibit 2.8(a)(ii) executed by the
Warranting Shareholders, all Other Securityholders and each Related
Person of either Warranting Shareholder that is a party to any Related
Party Contract (collectively, "Securityholder Releases");
(iii) noncompetition agreements in the form of Exhibit 2.8(a)(iii),
executed by the Warranting Shareholders (collectively, the
"Noncompetition Agreements");
(iv) a certificate executed by the Warranting Shareholders
representing and warranting to Parent that each of the Warranting
Shareholders' representations and warranties in this Agreement was
accurate in all material respects as of the date of this Agreement and
is accurate in all material respects as of the Closing Date as if made
on the Closing Date (giving full effect to any supplements to the
Disclosure Letter that were delivered by the Warranting Shareholders to
Parent not less than five business days prior to the Closing Date in
accordance with Section 5.5), provided, that if an inaccuracy
constitutes a "Breach" as defined herein, no further threshold of
materiality shall be permitted hereby and the certificate called for by
this section cannot be given;
(v) mutual termination agreements in respect to each management and
other contracts with any Related Person of either Warranting Shareholder
other than the rehabilitation services contracts with RehabWest, Inc.
(the "Related Party Contracts"), properly executed and delivered by each
party thereto and providing for no future payments or other obligations
by the Company or the Parent with respect thereto; and
(vi) resignations of all directors and officers of each Acquired
Company, if and as requested by Parent;
(b) Parent will deliver to the Warranting Shareholders and Other
Securityholders:
(i) the payment specified by Section 2.6, with the Per Share Cash
Consideration paid by bank cashier's or certified check payable to the
order of or by wire transfer to accounts specified on behalf of each
Warranting Shareholder and Other Securityholder; and
(ii) a certificate executed by Parent to the effect that, except as
otherwise stated in such certificate, each of Parent's representations
and warranties in this Agreement was accurate in all material respects
as of the date of this Agreement and is accurate in all material
respects as of the Closing Date as if made on the Closing Date,
provided, that if an inaccuracy constitutes a "Breach" as defined
herein, no further threshold of materiality shall be permitted hereby
and the certificate required by this section cannot be given.
(c) Parent and the Warranting Shareholders will enter into an escrow
agreement in the form of Exhibit 2.8(c) (the "Escrow Agreement") with
Mellon Bank, F.S.B., and Parent will make the deposit into escrow on behalf
of the Warranting Shareholders that is required by Section 2.6.
(d) Parent and the Warranting Shareholders will enter into a
registration rights agreement in the form of Exhibit 2.8(d) (the
"Registration Rights Agreement").
2.9 EQUITY ADJUSTMENT AMOUNT
The Equity Adjustment Amount (which may be a positive or negative number)
will be equal to (a) the consolidated stockholders' equity of the Acquired
Companies as of the Audit Date determined in accordance with GAAP, plus (b) the
sum of the adjustments listed on Schedule 2.9, if and to the extent such
adjustments were taken into account in subpart (a), minus (c) $760,003.
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2.10 EQUITY ADJUSTMENT PROCEDURE
(a) The Warranting Shareholders will prepare and will cause Arthur Andersen
LLP, the Company's certified public accountants, to audit consolidated financial
statements ("Closing Financial Statements") of the Company through the calendar
month-end closest to the Closing Date (the "Audit Date") and for the period from
the date of the Balance Sheet through the Audit Date, including a computation of
consolidated stockholders' equity as of the Audit Date. The Warranting
Shareholders will deliver the Closing Financial Statements to Parent within
sixty days after the Closing Date. If within thirty days following delivery of
the Closing Financial Statements, Parent has not given the Warranting
Shareholders notice of its objection to the Closing Financial Statements (such
notice must contain a statement of the basis of Parent's objection), then the
consolidated stockholders' equity reflected in the Closing Financial Statements
will be used in computing the Equity Adjustment Amount. If Parent gives such
notice of objection, then the issues in dispute will be submitted to Price
Waterhouse LLP, certified public accountants (the "Accountants"), for
resolution. If issues in dispute are submitted to the Accountants for
resolution, (i) each party will furnish to the Accountants such workpapers and
other documents and information relating to the disputed issues as the
Accountants may request and are available to that party or its Subsidiaries (or
its independent public accountants), and will be afforded the opportunity to
present to the Accountants any material relating to the determination and to
discuss the determination with the Accountants; (ii) the determination by the
Accountants, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties; and (iii) Parent
will bear the fees of the Accountants for such determination.
(b) On the tenth business day following the final determination of the
Equity Adjustment Amount, if the Equity Adjustment Amount is positive, Parent
will pay the Equity Adjustment Amount to the Warranting Shareholders, and if the
Equity Adjustment Amount is negative, the Warranting Shareholders will pay the
absolute value of such amount to Parent, all as contemplated by and in
accordance with Section 2.5(a) hereof. Payments must be made in immediately
available funds. Payments to the Warranting Shareholders must be made in the
manner and will be allocated in the proportions set forth in Section 2.8(b)(i).
Payments to Parent must be made by wire transfer to such bank account as Parent
will specify.
3. REPRESENTATIONS AND WARRANTIES OF THE WARRANTING SHAREHOLDERS
The Disclosure Letter called for by the Warranting Shareholders'
representations and warranties in this Part 3 has been prepared by the
Warranting Shareholders without full involvement of other personnel of the
Acquired Companies because of the confidential nature of this Agreement. For the
same reasons, a portion of the due diligence investigation which Parent wishes
to complete in respect of the Acquired Companies and the SNFs has not yet been
completed. Although the Warranting Shareholders believe all of the information
in the Disclosure Letter is accurate and complete, the Warranting Shareholders
shall have the right to complete or supplement the Disclosure Letter not later
than August 16, 1996 (the "Disclosure Supplement"). Parent shall have the right
to continue its due diligence investigation after the date of this Agreement and
through the Closing Date. Parent shall have the right to terminate this
Agreement by written notice to the Warranting Shareholders within five business
days after receipt of the Disclosure Supplement if Parent in its sole discretion
determines that the information contained in the disclosures as supplemented, or
any other information or documentation learned or discovered in the course of
Parent's due diligence investigation, constitutes, has, or is likely to have, a
material adverse effect. In the event Parent terminates this Agreement pursuant
to the foregoing provision, this Agreement shall become null and void and have
no effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or shareholders, except that the Confidentiality
Agreement shall survive and each party shall pay its own expenses incurred in
connection with this Agreement. In the event Parent does not terminate this
Agreement pursuant to the foregoing provision, the Disclosure Supplement shall
be deemed delivered as of the date of this Agreement and made a part of the
Disclosure Letter to this Agreement.
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The Warranting Shareholders represent and warrant to Parent as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate list
for each Acquired Company of its name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each). Each Acquired Company is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. Each
Acquired Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
(b) The Warranting Shareholders have made available to Parent copies of the
Organizational Documents of each Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
the Company and the Warranting Shareholders, enforceable against the Company and
the Warranting Shareholders in accordance with its terms. Upon the execution and
delivery by the Warranting Shareholders of the Escrow Agreement, the
Registration Rights Agreement, the Warranting Shareholders' Releases, and the
Noncompetition Agreements (collectively, the "Warranting Shareholders' Closing
Documents"), the Warranting Shareholders' Closing Documents will constitute the
legal, valid, and binding obligations of the Warranting Shareholders,
enforceable against the Warranting Shareholders in accordance with their
respective terms. The Warranting Shareholders have the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this Agreement and
the Warranting Shareholders' Closing Documents and to perform their obligations
under this Agreement and the Warranting Shareholders' Closing Documents.
(b) To the best of Warranting Shareholders' Knowledge, except as set forth
in Part 3.2 of the Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Acquired Companies, or (B)
any resolution adopted by the board of directors or the stockholders of any
Acquired Company;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which any Acquired Company,
any SNF or either Warranting Shareholder, or any of the assets owned or
used by any Acquired Company or any SNF, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by any Acquired Company or that otherwise
relates to any SNF or otherwise to the business of, or any of the assets
owned or used by, any Acquired Company;
(iv) cause Parent or any Acquired Company to become subject to, or to
become liable for the payment of, any Tax;
(v) cause any of the assets owned by any Acquired Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
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(vi) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by any SNF or any Acquired
Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no SNF,
Warranting Shareholder or Acquired Company is or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
3.3 CAPITALIZATION
The authorized and outstanding equity securities of Signature and the
record and beneficial ownership of such equity securities, are as described in
Part 3.3 of the Disclosure Letter. The Warranting Shareholders and the Other
Securityholders are and will be on the Closing Date the record and beneficial
owners and holders of the Shares, free and clear of all Encumbrances. With the
exception of the Shares and the options described in Part 3.3 of the Disclosure
Letter, all of the outstanding equity securities and other securities of each
Acquired Company are owned of record and beneficially by one or more of the
Acquired Companies. Except as described in Part 3.3 of the Disclosure Schedule,
such securities are owned free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of any Acquired Company. All of the outstanding equity
securities of each Acquired Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of any
Acquired Company. No outstanding equity securities or other securities of any
Acquired Company were issued in violation of the Securities Act or any other
Legal Requirement. No Acquired Company owns, or has any Contract to acquire, any
equity securities or other securities of any Person (other than Acquired
Companies) or any direct or indirect equity or ownership interest in any other
business.
3.4 FINANCIAL STATEMENTS
The Warranting Shareholders have delivered to Parent: (a) consolidated
balance sheets of the Acquired Companies as of December 31 in each of the years
1988 through 1995, and the related consolidated statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
together with the report thereon of Arthur Anderson, LLP, independent certified
public accountants, (b) a consolidated balance sheet of the Acquired Companies
as of December 31, 1995 (including the notes thereto, the "Balance Sheet"), and
the related consolidated statements of income, changes in stockholders' equity,
and cash flow for the fiscal year then ended, together with the report thereon
of Arthur Andersen LLP, independent certified public accountants, and (c) an
unaudited consolidated balance sheet of the Acquired Companies as of June 30,
1996 (the "Interim Balance Sheet") and the related unaudited consolidated
statements of income, changes in stockholders' equity, and cash flow for the six
months then ended, including in each case the notes thereto. Such financial
statements and notes fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Acquired
Companies as of the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, subject, in the case of
interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the Balance Sheet); the financial statements
referred to in this Section 3.4 reflect the consistent application of such
accounting principles throughout the periods involved. No financial statements
of any Person other than the Acquired Companies are required by GAAP to be
included in the consolidated financial statements of the Company.
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3.5 BOOKS AND RECORDS
To the best of the Warranting Shareholders' Knowledge, the books of
account, minute books, stock record books, and other records of the Acquired
Companies, all of which have been made available to Parent, are complete and
correct and have been maintained in accordance with sound business practices,
including the maintenance of an adequate system of internal controls. The minute
books of the Acquired Companies contain accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the Acquired Companies,
and no meeting of any such stockholders, Board of Directors, or committee has
been held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be in the
possession of the Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
To the best of the Warranting Shareholders' Knowledge, Part 3.6 of the
Disclosure Letter contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by any Acquired Company. The
Warranting Shareholders have delivered or made available to Parent copies of the
deeds and other instruments (as recorded) by which the Acquired Companies
acquired such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of the Warranting
Shareholders or the Acquired Companies and relating to such property or
interests. The Acquired Companies own (with good and marketable title in the
case of real property, subject only to the matters permitted by the following
sentence) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that they purport to own, including all of the
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet (except for assets held under leases disclosed or not required to be
disclosed in Part 3.6 of the Disclosure Letter and personal property sold since
the date of the Balance Sheet and the Interim Balance Sheet, as the case may be,
in the Ordinary Course of Business), and all of the properties and assets
purchased or otherwise acquired by the Acquired Companies since the date of the
Balance Sheet (except for personal property acquired and sold since the date of
the Balance Sheet in the Ordinary Course of Business and consistent with past
practice). To the best of the Warranting Shareholders' Knowledge, all material
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) mortgages or security interests shown on the
Balance Sheet or the Interim Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Interim Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (c) liens for current taxes not yet due, and (d)
with respect to real property, (i) minor imperfections of title, if any, none of
which is substantial in amount, materially detracts from the value or impairs
the use of the property subject thereto, or impairs the operations of any
Acquired Company, and (ii) zoning laws and other land use restrictions that do
not impair the present use of the property subject thereto. To the best of the
Warranting Shareholders' Knowledge, all buildings, plants, and structures owned
by the Acquired Companies lie wholly within the boundaries of the real property
owned by the Acquired Companies and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
To the best of the Warranting Shareholders' Knowledge, all of the
buildings, plants, structures, and equipment of the SNFs and of the Acquired
Companies are structurally sound, are in good operating condition and repair,
and are adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the SNFs and
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of the Acquired Companies are sufficient for the continued conduct of the SNFs
and of the Acquired Companies' businesses after the Closing in substantially the
same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
To the best of the Warranting Shareholders' Knowledge all accounts
receivable of the Acquired Companies that are reflected on the Balance Sheet or
the Interim Balance Sheet or on the accounting records of the Acquired Companies
as of the Closing Date (collectively, the "Accounts Receivable") represent or
will represent valid obligations arising from services actually performed in the
Ordinary Course of Business. Unless paid prior to the Closing Date and assuming
that after the Closing the Acquired Companies follow similar collection policies
to those followed by the Acquired Companies through the date hereof, the
Accounts Receivable (excluding only the Disputed Medicare Receivables), are or
will be as of the Closing Date collectible net of the respective reserves shown
on the Balance Sheet or the Interim Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date (which reserves are adequate
and except for the reserves identified in Schedule 2.9, calculated consistent
with past practice and, in the case of the reserve as of the Closing Date, will
not represent a materially greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the Interim Balance Sheet
represented of the Accounts Receivable reflected therein and will not represent
a material adverse change in the composition of such Accounts Receivable in
terms of aging). On the Closing Date each of the Acquired Companies will have
transmitted bills and invoices in the Ordinary Course of Business for all
services performed through the end of the most recent practicable month. To the
best of the Warranting Shareholders' Knowledge, there is no contest, claim, or
right of set-off, other than returns in the Ordinary Course of Business, under
any Contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable, other than the Disputed Accounts
Receivable. To the best of the Warranting Shareholders' Knowledge Part 3.8 of
the Disclosure Letter contains a complete and accurate list of all Accounts
Receivable as of the date of the Interim Balance Sheet, which list sets forth
the aging of such Accounts Receivable. Parent acknowledges that there are time
constraints with respect to the billing of Government Agencies and third party
payers which, if not followed, can result in a denial of payment.
3.9 PREPAID SUPPLIES
To the best of the Warranting Shareholders' Knowledge all inventory or
supplies and other materials of the Acquired Companies, whether or not reflected
in the Balance Sheet or the Interim Balance Sheet, consists of a quality and
quantity usable in the Ordinary Course of Business. The amounts thereof are not
excessive and are reasonable in the present circumstances of the Acquired
Companies and satisfy all Legal Requirements applicable to any Acquired Company
or SNF with respect to inventory and supplies.
3.10 NO UNDISCLOSED LIABILITIES
To the best of the Warranting Shareholders' Knowledge, except as set forth
in Part 3.10 of the Disclosure Letter, the Acquired Companies have no material
liabilities or obligations of any nature except for liabilities or obligations
reflected or reserved against in the Balance Sheet or the Interim Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.11 TAXES
(a) To the best of the Warranting Shareholders' Knowledge the Acquired
Companies have filed or caused to be filed (on a timely basis since 1990) all
Tax Returns that are or were required to be filed by or with respect to any of
them, either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. The Warranting Shareholders have made available
to Parent copies of, and Part 3.11 of the Disclosure Letter contains a complete
and accurate list of, all such Tax Returns filed since January 1, 1993. Based
upon the Warranting Shareholders' inquiry and advice from Arthur Andersen, LLP,
the Acquired Companies have paid, or made provision for the payment of, all
Taxes that have or may have become due pursuant to those Tax Returns, or
pursuant to any assessment received by either of the Warranting Shareholders or
any Acquired Company, except such Taxes, if any, as are listed in Part 3.11 of
the Disclosure
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Letter and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet and
the Interim Balance Sheet.
(b) Based upon the Warranting Shareholders' inquiry of and advice from
Arthur Andersen LLP, the United States federal and state income Tax Returns of
each Acquired Company subject to such Taxes have been audited by the IRS or
relevant state tax authorities or are closed by the applicable statute of
limitations for all taxable years through 1991. To the best of the Warranting
Shareholders' Knowledge Part 3.11 of the Disclosure Letter contains a complete
and accurate list of all audits of all such Tax Returns, including a reasonably
detailed description of the nature and outcome of each audit. No deficiencies
were proposed as a result of such audits. To the best of the Warranting
Shareholders' Knowledge, except as described in Part 3.11 of the Disclosure
Letter, no Warranting Shareholder or Acquired Company has given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of any Acquired Company or for which any Acquired
Company may be liable.
(c) To the best of the Warranting Shareholders' Knowledge the charges,
accruals, and reserves with respect to Taxes on the respective books of each
Acquired Company are adequate (determined in accordance with GAAP) and are at
least equal to that Acquired Company's liability for Taxes, provided, however,
that this warranty is made prior to and without accruing for any Tax benefit or
liability related to the adjustments described on Schedule 2.9. To the best of
the Warranting Shareholders' Knowledge there exists no proposed tax assessment
against any Acquired Company except as disclosed in the Balance Sheet or in Part
3.11 of the Disclosure Letter. No Acquired Company has filed a consent under
Section 341(f) of the IRC concerning collapsible corporations. To the best of
the Warranting Shareholders' Knowledge all Taxes that any Acquired Company is or
was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) To the best of the Warranting Shareholders' Knowledge all Tax Returns
filed by (or that include on a consolidated basis) any Acquired Company are
true, correct, and complete. There is no tax sharing agreement that will require
any payment by any Acquired Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of any SNF or any Acquired Company, and the best of the Warranting
Shareholders' Knowledge no event has occurred or circumstance exists that may
result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
To the best of the Warranting Shareholders' Knowledge (provided that the
foregoing qualification shall cease to apply as to paragraphs (a) and (c) below
five (5) business days prior to the Closing Date):
(a) Except as set forth in Part 3.13(a) of the Disclosure Letter, none
of the Acquired Companies nor any member of its controlled group within the
meaning of Section 414 of the IRC maintains or contributes to, or at any
time in the preceding five calendar years maintained or contributed to: (i)
any non-qualified deferred compensation or retirement plans or
arrangements; (ii) any qualified defined contribution retirement plans or
arrangements; (iii) any qualified defined benefit pension plan; (iv) any
multiemployer plan (as defined in Section 3(37) of ERISA); (v) any other
plan, program, agreement or arrangement under which former employees of any
of the Acquired Companies or its beneficiaries are entitled, or current
employees of any of the Acquired Companies will be entitled following
termination of employment, to medical, health, life insurance or other
benefits other than pursuant to benefit continuation rights granted by
state of federal law; or (vi) any other employee benefit, health, welfare,
severance, vacation, medical, disability, life insurance, stock, stock
purchase or stock option plan, program, agreement, arrangement, custom,
practice or policy. The plans described in Part 3.13(a) are referred to
herein as the "Plans."
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(b) The Plans comply in all respects with the requirements of all
applicable laws, including ERISA, and the Plans meet any applicable
requirements for favorable tax treatment under the IRC in both form and
operation. The contributions to the Plans and the costs of administering
the Plans, including fees for the trustee and other service providers which
are customarily paid by any of the Acquired Companies, have been paid or
will be paid prior to the Closing Date or are reflected in the Interim
Balance Sheet. There have been no prohibited transactions as defined in
Section 406 of ERISA or Section 4975 of the IRC with respect to any of the
Plans or any parties in interest or disqualified persons with respect to
the Plans or any reduction or curtailment of accrued benefits with respect
to any of the Plans. There are no pending, or to the Knowledge of the
Warranting Shareholders, threatened claims, lawsuits, arbitrations, audits
or investigations which have been asserted or instituted against the Plans,
any fiduciaries thereof with respect to their duties to the Plans or the
assets of any of the trusts under any of the Plans. None of the Acquired
Companies has any plans, programs, agreements or arrangements or other
commitments to its employees, former employees or their beneficiaries under
which it has any obligation to provide any retiree or other employee
benefit payments which are not adequately funded through a trust or other
funding arrangement. No Warranting Shareholder, Acquired Company or ERISA
Affiliate has any liability to the IRS, the Department of Labor, or the
Pension Benefit Guaranty Company. No event has occurred or circumstance
exists that could result in a material increase in premium costs of Plans
that are insured, or a material increase in benefit costs of Plans that are
self-insured. No payment that is owed or may become due to any employee of
any Acquired Company will be characterized as an "excess parachute payment"
as defined in Code Section 280G, and the Merger contemplated by this
Agreement will not result in the payment, vesting, or acceleration of any
benefit.
(c) To the extent applicable, the Warranting Shareholders have made
available to Parent true and complete copies of: (i) the Plans and any
related trusts or funding vehicles, policies or contracts and the related
summary plan descriptions with respect to each Plan; (ii) the most recent
determination letters received from the IRS regarding the Plans and copies
of any pending applications, filings or notices with respect to any of the
Plans with the IRS, the Pension Benefit Guaranty Corporation, the
Department of Labor or any other governmental agency and any notices or
other communications from any governmental agency regarding any of the
Plans; (iii) the financial statements and annual reports for each of the
Plans and related trusts or funding vehicles, policies or contracts as of
the end of the most recent plan year with respect to which the filing date
for such information has passed and the two prior Plan years; (iv) the
reports of the most recent actuarial valuations for the Plans; (v) copies
of all corporate resolutions or other documents pertaining to the adoption
of the Plans or any amendments thereto or to the appointment of any
fiduciaries thereunder and copies of any investment policies,
administrative services agreements or other contracts with third parties,
surety bonds, rules, regulations or policies of the trustees or any
committee thereunder; and (vi) copies of any communications or notices
provided to employees or plan participants with respect to the Plans along
with information concerning the date and extent of distribution of such
communications.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) To the best of the Warranting Shareholders' Knowledge, except as set
forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company and each SNF is, and at all times since
January 1, 1995 has been, in substantial compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets, and has every
Governmental Authorization required in connection therewith;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by any Acquired Company or any SNF of, or a failure on the part
of any Acquired Company or any SNF to comply with, any Legal Requirement,
which violation or failure may have a material adverse effect on any
Acquired Company or SNF, or (B) may give rise to any obligation on the part
of any Acquired Company or any SNF to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
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(iii) no Acquired Company or SNF has received, at any time since
January 1, 1995, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged, possible, or
potential obligation on the part of any Acquired Company or SNF to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature, except for state and federal licensing and
certification surveys, all of which have been provided to Parent.
(b) To the best of the Warranting Shareholders' Knowledge Part 3.14 of the
Disclosure Letter contains a complete and accurate list of each Governmental
Authorization that is held by any Acquired Company or SNF or that otherwise
relates to the business of, or to any of the assets owned or used by, any
Acquired Company or any SNF. To the best of the Warranting Shareholders'
Knowledge each Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter is valid and in full force and effect. To the
best of the Warranting Shareholders' Knowledge, except as set forth in Part 3.14
of the Disclosure Letter:
(i) each Acquired Company and SNF is, and at all times since January
1, 1995 has been, in substantial compliance with all of the terms and
requirements of each Governmental Authorization identified or required to
be identified in Part 3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter, which violation or failure
may have a material adverse effect on any Acquired Company or any SNF, or
(B) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Part 3.14 of
the Disclosure Letter;
(iii) no Acquired Company or SNF has received, at any time since
January 1, 1995, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or failure to comply
with any term or requirement of any Governmental Authorization, which
violation or failure may have a material adverse effect on any Acquired
Company or any SNF, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of
the Governmental Authorizations listed or required to be listed in Part
3.14 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly
made on a timely basis with the appropriate Governmental Bodies.
To the best of the Warranting Shareholders' Knowledge, the Governmental
Authorizations listed in Part 3.14 of the Disclosure Letter collectively
constitute all of the Governmental Authorizations necessary to permit the
Acquired Companies to lawfully conduct and operate the SNFs and the other
aspects of their businesses in the manner they currently conduct and operate the
SNFs and such businesses and to permit the Acquired Companies to own and use
their assets in the manner in which they currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) To the best of the Warranting Shareholders' Knowledge, except as set
forth in Part 3.15 of the Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or against any Acquired Company or that
otherwise relates to or may materially affect any SNF or the business of,
or any of the assets owned or used by, any Acquired Company; or
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(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of the Warranting Shareholders and the Acquired Companies,
(1) no such Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding. If requested by Parent, the Warranting
Shareholders will promptly deliver to Parent copies of all pleadings,
correspondence, and other documents relating to each or any Proceeding listed in
Part 3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of any SNF or any Acquired Company.
(b) To the best of the Warranting Shareholders' Knowledge, except as set
forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies, any SNF
or any of the assets owned or used by any Acquired Company, is subject, the
existence or violation of which could have a material adverse effect on any
Acquired Company or any SNF;
(ii) neither Warranting Shareholder is subject to any Order that
relates to the business of, or any of the assets owned or used by, any SNF
or any Acquired Company; and
(iii) no officer, director, agent, or employee of any Acquired Company
is subject to any Order or Legal Requirement that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to any SNF or to the business of any
Acquired Company.
(c) To the best of the Warranting Shareholders' Knowledge, except as set
forth in Part 3.15 of the Disclosure Letter:
(i) each Acquired Company and SNF is, and at all times since January
1, 1995 has been, in substantial compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or used
by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or
failure to comply with any term or requirement of any Order or Legal
Requirement to which any SNF or Acquired Company, or any of the assets
owned or used by any SNF or Acquired Company, is subject, the existence or
violation of which could have a material adverse effect on any Acquired
Company or any SNF; and
(iii) no SNF or Acquired Company has received, at any time since
January 1, 1995, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential material violation of, or failure
to comply with, any material term or requirement of, any Order or Legal
Requirement to which any SNF or Acquired Company, or any of the assets
owned or used by any SNF or Acquired Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
To the best of the Warranting Shareholders' Knowledge, except as set forth
in Part 3.16 of the Disclosure Letter, since the date of the Interim Balance
Sheet, the Acquired Companies have operated the SNFs and conducted their
businesses only in the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital
stock of any Acquired Company; issuance of any security convertible into
such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any Acquired Company of any shares of
any such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
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(c) payment or increase by any Acquired Company of any bonuses,
salaries, or other compensation to either Warranting Shareholder or their
Related Persons or to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment,
severance, or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
SNF or Acquired Company, whether or not covered by insurance, materially
and adversely affecting the properties, assets, business, financial
condition, or prospects of any SNF or any of the Acquired Companies;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to any
Acquired Company (and prior to any unilateral right of termination by the
Acquired Company without any cost or penalty) of at least $50,000;
(g) sale, lease, or other disposition of any SNF or other asset or
property of any Acquired Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any SNF or other material asset or property of
any Acquired Company, including the sale, lease, or other disposition of
any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to any
Acquired Company in excess of $10,000;
(i) material change in the accounting methods used by any Acquired
Company; or
(j) agreement, whether oral or written, by any Acquired Company to do
any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) To the best of the Warranting Shareholders' Knowledge, Part 3.17(a) of
the Disclosure Letter contains a complete and accurate list, and the Warranting
Shareholders have made available to Parent, and if requested will promptly
deliver to Parent, true and complete copies, of:
(i) each Applicable Contract that involves performance of services or
delivery of goods or materials by one or more Acquired Companies (prior to
any unilateral right of termination by the Acquired Company without any
cost or penalty) of an amount or value in excess of $50,000;
(ii) each Applicable Contract that involves performance of services or
delivery of goods or materials to one or more Acquired Companies (prior to
any unilateral right of termination by the Acquired Company without any
cost or penalty) of an amount or value in excess of $50,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business or that involves expenditures or receipts of
one or more Acquired Companies (prior to any unilateral right of
termination by the Acquired Company without any cost or penalty) in excess
of $50,000;
(iv) each lease, rental or occupancy agreement, license, installment
and conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property (except personal property leases
and installment and conditional sales agreements having a value per item or
aggregate payments of less than $50,000 or with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract with respect
to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
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(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a
group of employees;
(vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or
liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any Acquired Company or any
Affiliate of an Acquired Company or limit the freedom of any Acquired
Company or any Affiliate of an Acquired Company to engage in any line of
business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments
for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking by
any Acquired Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in excess of
$50,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any
Acquired Company other than in the Ordinary Course of Business;
(xiv) each Medicare and Medicaid provider contract for each SNF, and
evidence of appropriate certification of each SNF;
(xv) each Related Party Contract; and
(xvi) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
To the best of the Warranting Shareholders' Knowledge Part 3.17(a) of the
Disclosure Letter sets forth reasonably complete details concerning such
Contracts, including the parties to the Contracts, the amount of the remaining
commitment of the Acquired Companies under the Contracts, and the Acquired
Companies' office where details relating to the Contracts are located.
(b) To the best of the Warranting Shareholders' Knowledge, except as set
forth in Part 3.17(b) of the Disclosure Letter:
(i) neither Warranting Shareholder (and no Related Person of either
Warranting Shareholder) has or may acquire any rights under, and neither
Warranting Shareholder has or may become subject to any obligation or
liability under, any Contract that relates to the business of, or any of
the assets owned or used by, any SNF or Acquired Company; and
(ii) no officer, director, agent, employee, consultant, or contractor
of any Acquired Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or
contractor to (A) engage in or continue any conduct, activity, or practice
relating to the business of any Acquired Company, or (B) assign to any
Acquired Company or to any other Person any rights to any invention,
improvement, or discovery.
(c) To the best of the Warranting Shareholders' Knowledge, except as set
forth in Part 3.17(c) of the Disclosure Letter, each Contract identified or
required to be identified in Part 3.17(a) of the Disclosure Letter is in full
force and effect and is valid and enforceable in accordance with its terms.
(d) To the best of the Warranting Shareholders' Knowledge, except as set
forth in Part 3.17(d) of the Disclosure Letter:
(i) each Acquired Company is, and at all times since January 1, 1996
has been, in substantial compliance with all applicable terms and
requirements of each Contract under which such Acquired
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Company has or had any obligation or liability or by which such Acquired
Company or any of the assets owned or used by such Acquired Company is or
was bound;
(ii) each other Person that has or had any obligation or liability
under any Contract under which an Acquired Company has or had any rights
is, and at all times since January 1, 1996 has been, in substantial
compliance with all applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result
in a violation or breach of, or give any Acquired Company or other Person
the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any other
Person, at any time since January 1, 1996, any notice or other
communication (whether oral or written) regarding any actual, alleged,
possible, or potential violation or breach of, or default under, any
Contract.
(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to any Acquired
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
(f) The Contracts relating to the sale or provision of services by the
Acquired Companies have been entered into in the Ordinary Course of Business and
have been entered into without the commission of any act alone or in concert
with any other Person, or any consideration having been paid or promised, that
is or would be in violation of any Legal Requirement.
3.18 INSURANCE
(a) To the best of the Warranting Shareholders' Knowledge, Part 3.18(a) of
the Disclosure Letter contains a complete and accurate list, and the Warranting
Shareholders have made available to Parent and, upon request will promptly
deliver to Parent:
(i) true and complete copies of all policies of insurance to which any
Acquired Company is a party or under which any Acquired Company, or any
director of any Acquired Company, is or has been covered at any time since
January 1, 1995;
(ii) true and complete copies of all pending applications for policies
of insurance; and
(iii) any statement by the auditor of any Acquired Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting any Acquired
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by any Acquired Company; and
(iii) all obligations of the Acquired Companies to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided
(unless such information is disclosed elsewhere in the Disclosure Letter).
(c) To the best of the Warranting Shareholders' Knowledge, except as set
forth on Part 3.18(c) of the Disclosure Letter:
(i) All policies to which any Acquired Company is a party or that
provide coverage to either Warranting Shareholder, any Acquired Company, or
any director or officer of an Acquired Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
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(C) are sufficient for compliance with all Legal Requirements and
Contracts to which any Acquired Company is a party or by which any of
them is bound;
(D) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(E) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of any Acquired Company.
(ii) No Warranting Shareholder or Acquired Company has received (A)
any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or
able to perform its obligations thereunder.
(iii) The Acquired Companies have paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy
to which any Acquired Company is a party or that provides coverage to any
Acquired Company or director thereof.
(iv) The Acquired Companies have given notice to the insurer of all
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
To the best of the Warranting Shareholders' Knowledge, except as set forth
in part 3.19 of the Disclosure Letter:
(a) Each Acquired Company is, and at all times has been, in
substantial compliance with, and has not been and is not in violation of or
liable under, any Environmental Law. No Warranting Shareholder or Acquired
Company has any basis to expect, nor has any of them or any other Person
for whose conduct they are or may be held to be responsible received, any
actual or Threatened order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public interest, or (ii)
the current or prior owner or operator of any SNFs or other Facilities, of
any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake
or bear the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the SNFs or other Facilities or any other properties or
assets (whether real, personal, or mixed) in which either Warranting
Shareholder or any Acquired Company has had an interest, or with respect to
any property or SNFs or other Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used, or
processed by either Warranting Shareholder, any Acquired Company, or any
other Person for whose conduct they are or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(b) There are no pending or Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and
Safety Liabilities or arising under or pursuant to any Environmental Law,
with respect to or affecting any of the SNFs or other Facilities or any
other properties and assets (whether real, personal, or mixed) in which
either Warranting Shareholder or any Acquired Company has or had an
interest.
(c) No Warranting Shareholder or Acquired Company has any basis to
expect, nor has any of them or any SNF or any other Person for whose
conduct they are or may be held responsible, received, any citation,
directive, inquiry, notice, Order, summons, warning, or other communication
that relates to Hazardous Activity, Hazardous Materials, or any alleged,
actual, or potential violation or failure to comply with any Environmental
Law, or of any alleged, actual, or potential obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the SNFs or other Facilities or any other properties or
assets (whether real, personal, or mixed) in which either Warranting
Shareholder or any Acquired Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or
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processed by either Warranting Shareholder, any Acquired Company, or any
other Person for whose conduct they are or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(d) No Warranting Shareholder or Acquired Company, or any other Person
for whose conduct they are or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect to the
Facilities or with respect to any other properties and assets (whether
real, personal, or mixed) in which either Warranting Shareholder or any
Acquired Company (or any predecessor), has or had an interest, or at any
property geologically or hydrologically adjoining the SNFs or other
Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the Environment
at the SNFs or other Facilities or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in barrels,
above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary
or permanent, and deposited or located in land, water, sumps, or any other
part of the Facilities or such adjoining property, or incorporated into any
structure therein or thereon. No Warranting Shareholder, Acquired Company,
any other Person for whose conduct they are or may be held responsible, or
any other Person, has permitted or conducted, or is aware of, any Hazardous
Activity conducted with respect to the SNFs or other Facilities or any
other properties or assets (whether real, personal, or mixed) in which
either Warranting Shareholder or any Acquired Company has or had an
interest.
(f) There has been no Release or Threat of Release of any Hazardous
Materials at or from the SNFs or other Facilities or at any other locations
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the
Facilities, or from or by any other properties and assets (whether real,
personal, or mixed) in which either Warranting Shareholder or any Acquired
Company has or had an interest, or any geologically or hydrologically
adjoining property, whether by a Warranting Shareholder, any Acquired
Company, or any other Person.
(g) The Warranting Shareholders have delivered to Parent true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by the Warranting Shareholders or any
Acquired Company pertaining to Hazardous Materials or Hazardous Activities
in, on, or under the SNFs or other Facilities, or concerning compliance by
either Warranting Shareholder, any Acquired Company, or any other Person
for whose conduct they are or may be held responsible, with Environmental
Laws.
3.20 EMPLOYEES
(a) The Warranting Shareholders have provided Parent access to a complete
and accurate list of the following information for each employee or director of
the Acquired Companies, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or payable and any
change in compensation since January 1, 1996; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under any
Acquired Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension Benefit
Plan or Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
(b) To the best of the Warranting Shareholders' Knowledge, no employee or
director of any Acquired Company is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any other
Person ("Proprietary Rights Agreement") that in any way adversely affects or
will affect (i) the performance of his duties as an employee or director of the
Acquired Companies, or (ii) the ability of any Acquired Company to conduct its
business, including any Proprietary Rights Agreement with the Warranting
Shareholders or the Acquired Companies by any such employee or director. Neither
Warranting Shareholder, and no employee or director of any Acquired Company, is
entitled to any severance or "parachute" payment of any kind in
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connection with a change in control of any Acquired Company. To the best of the
Warranting Shareholders' Knowledge, no director, officer, or other key employee
of any Acquired Company, excepting the Warranting Shareholders themselves,
intends to terminate his or her employment with such Acquired Company.
(c) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or director
of the Acquired Companies, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Except as disclosed in Part 3.21 of the Disclosure Letter, since January 1,
1996, no Acquired Company has been or is a party to any collective bargaining or
other labor Contract. Since January 1, 1996, there has not been, there is not
presently pending or existing, and there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting any Acquired Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Acquired Companies or their
premises, or (c) any application for certification of a collective bargaining
agent. To the best of the Warranting Shareholders' Knowledge, no event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by any
Acquired Company, and no such action is contemplated by any Acquired Company. To
the best of the Warranting Shareholders' Knowledge, each Acquired Company has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. To the best of the
Warranting Shareholders' Knowledge, no Acquired Company is liable for the
payment of any compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets -- The term "Intellectual Property Assets"
includes:
(i) the names Signature Health Care Corporation, all fictional
business names (including all names under which any SNF or other Facility
is licensed or has done business at any time within the past three years),
trading names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and discoveries
that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets"); owned, used, or
licensed by any Acquired Company as licensee or licensor.
(b) Agreements -- Part 3.22(b) of the Disclosure Letter contains a complete
and accurate list and summary description, including any royalties paid or
received by the Acquired Companies, of all Intellectual Property Assets owned or
used by any of the Acquired Companies since January 1, 1995, and all Contracts
relating to the Intellectual Property Assets to which any Acquired Company is a
party or by which any Acquired Company is bound, except for any license implied
by the sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $25,000 under which an Acquired
Company is the licensee. There are no outstanding and, to the best of the
Warranting Shareholders' Knowledge, no Threatened disputes or disagreements with
respect to any such agreement.
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3.23 CERTAIN PAYMENTS
To the best of the Warranting Shareholders' Knowledge no Acquired Company
or director, officer, agent, or employee of any Acquired Company, or any other
Person associated with or acting for or on behalf of any Acquired Company, ever
has directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of any Acquired Company
or any Affiliate of an Acquired Company, or (iv) in violation of any Legal
Requirement, (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Acquired Companies.
3.24 DISCLOSURE
(a) To the best of the Warranting Shareholders' Knowledge no representation
or warranty of the Warranting Shareholders in this Agreement and no statement in
the Disclosure Letter omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
(b) To the best of the Warranting Shareholders' Knowledge no notice given
pursuant to Section 5.5 will contain any untrue statement or omit to state a
material fact necessary to make the statements therein or in this Agreement, in
light of the circumstances in which they were made, not misleading.
(c) There is no fact known to either Warranting Shareholder that has
specific application to either Warranting Shareholder, any SNF or any Acquired
Company (other than general economic or industry conditions) and that materially
adversely affects or, as far as either Warranting Shareholder can reasonably
foresee, materially threatens, the assets, business, prospects, financial
condition, or results of operations of any SNF or of any of the Acquired
Companies that has not been set forth in this Agreement or the Disclosure
Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
To the best of the Warranting Shareholders' Knowledge no Warranting
Shareholder or any Related Person of either Warranting Shareholder or of any
Acquired Company has, or since January 1, 1995, has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in or pertaining to any SNF or the Acquired Companies' businesses. Except
as set forth in Part 3.25 of the Disclosure Letter, no Warranting Shareholder or
any Related Person of either Warranting Shareholder or of any Acquired Company
is, or since January 1, 1995 has owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, a Person that has
(i) had business dealings or a material financial interest in any transaction
with any Acquired Company, or (ii) engaged in competition with any Acquired
Company with respect to any line of the products or services of such Acquired
Company (a "Competing Business") in any market presently served by such Acquired
Company. Except as set forth in Part 3.25 of the Disclosure Letter, no
Warranting Shareholder or any Related Person of either Warranting Shareholder or
of any Acquired Company is a party to any Contract with, or has any claim or
right against, any Acquired Company.
3.26 BROKERS OR FINDERS
The Warranting Shareholders and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement except
their obligations to BA Partners which will be paid in full on or before the
Closing Date.
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3.27 INVESTMENT INTENT
The Parent Shares to be acquired by the Warranting Shareholders hereunder
are being acquired by the Warranting Shareholders for their own accounts and not
with the view to, or for release in connection with, any distribution or public
offering thereof within the meaning of the Securities Act. The Warranting
Shareholders understand the Parent Shares have not been registered under the
Securities Act by reason of their issuance in transactions exempt from the
registration and prospectus delivery requirements of the Securities Act pursuant
to Section 4(2) thereof and agree to deliver to Parent, if requested by Parent,
an investment letter in customary form. The Warranting Shareholders understand
that the Parent Shares may not be sold, transferred or otherwise disposed of
without registration under the Securities Act or an exemption therefrom, and
that in the absence of effective registration statement covering the Parent
Shares, or an available exemption from registration under the Securities Act,
the Parent Shares must be held indefinitely. In particular, each Warranting
Shareholder is aware that the Parent Shares may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of the Rule
are met. Each Warranting Shareholder further understands that the certificates
representing the Parent Shares will bear the following legend and agrees that he
will hold such shares subject thereto:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE
SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE
SAME IS REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE COMPANY
SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH
EXEMPTION REASONABLY SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG
OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
3.28 SUITABILITY AND SOPHISTICATION
The Warranting Shareholders have such knowledge and experience in financial
and business matters that the Warranting Shareholders are capable of evaluating
independently the risks and merits of acquiring the Parent Shares. The
Warranting Shareholders have independently evaluated the risks and merits of
acquiring the Parent Shares and have independently determined that the Parent
Shares are a suitable investment for each Warranting Shareholder.
3.29 RECEIPT OF INFORMATION
The Warranting Shareholders further represent that they have had or will be
provided an opportunity at an acceptable and appropriate time to ask questions
and receive answers from the officers and directors of Parent regarding the
business, properties, prospects, and financial condition of Parent and to obtain
additional information (to the extent Parent possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of such information furnished to the Warranting Shareholders or to
which the Warranting Shareholders had access. The foregoing does not, however,
limit or modify the representations and warranties of Parent in Article 4 of
this Agreement or the right of the Warranting Shareholders to rely thereon.
3.30 TERMINATION OF ANCILLARY CONTRACTS
Except for the Contract with RehabWest, Inc. which has been provided to
Parent, all Contracts for management services or ancillary services (as that
term is commonly understood in the long term health care industry) (a) to which
any Acquired Company is a party or by which any Acquired Company or any of their
SNFs or other Facilities or properties may be bound, or (b) through which
medical or ancillary products or services are provided to any of the Acquired
Companies or to the patients or residents of any SNF or other
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Facility owned or operated by any Acquired Company (collectively, the "Ancillary
Contracts") are terminable without premium or penalty on not more than sixty
days notice at the option of the Acquired Companies.
4. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and the Warranting
Shareholders as follows:
4.1 ORGANIZATION AND GOOD STANDING
Parent is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware. On the Closing Date and
immediately prior to the Effective Time, Newco will be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Parent, enforceable against Parent in accordance with its terms. Upon the
execution and delivery by Parent of the Escrow Agreement and the Registration
Rights Agreement (the "Parent's Closing Documents"), the Parent's Closing
Documents will constitute the legal, valid, and binding obligations of Parent,
enforceable against Parent in accordance with their respective terms. Parent has
the absolute and unrestricted right, power, and authority to execute and deliver
this Agreement and the Parent's Closing Documents and to perform its obligations
under this Agreement and the Parent's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and delivery
of this Agreement by Parent nor the consummation or performance of any of the
Contemplated Transactions by Parent will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:
(i) any provision of Parent's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Parent;
(iii) any Legal Requirement or Order to which Parent may be subject;
or
(iv) any Contract to which Parent is a party or by which Parent may be
bound.
Except as set forth in Schedule 4.2, Parent is not and will not be required
to obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT
Parent is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS
To the best of Parent's Knowledge, there is no pending Proceeding that has
been commenced against Parent and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions, including registration of the Parent's Shares being
issued hereunder pursuant to the Registration Rights Agreement. To Parent's
Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS
Parent and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold the Warranting Shareholders harmless from any such payment
alleged to be due by or through Parent as a result of the action of Parent or
its officers or agents.
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4.6 SUITABILITY AND SOPHISTICATION
Parent has such knowledge and experience in financial and business matters
that Parent is capable of evaluating independently the risks and merits of
acquiring the Shares of the Acquired Companies. Parent has independently
evaluated the risks and merits of acquiring such Shares and has independently
determined that such Shares are a suitable investment for Parent.
4.7 RECEIPT OF INFORMATION
Parent further represents that it has had or upon compliance by the
Warranting Shareholders with this Agreement will be provided an opportunity to
ask questions and receive answers from the Warranting Shareholders and the other
officers of the Acquired Companies regarding the business, properties,
prospects, and financial condition of the Acquired Companies and the SNFs and to
obtain additional information (to the extent the Warranting Shareholders
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of such information furnished to
Parent or to which Parent has had access or will have access pursuant to this
Agreement. The foregoing does not, however, limit or modify the representations
and warranties of the Warranting Shareholders in Article 3 of this Agreement or
the right of Parent to rely thereon.
4.8 CONFLICTING AGREEMENTS
Except as may be disclosed in Schedule 4.8 hereto, to the best of Parent's
Knowledge, Parent is not a party to any contract or agreement that will prevent
or materially interfere with Parent's ability to obtain the financing
contemplated by Section 7.11 hereof.
4.9 PARENT COMMON STOCK
Upon consummation of the Contemplated Transactions and the issuance and
delivery of the certificates representing the Parent Shares to the Warranting
Shareholders, the Parent Shares will be validly issued, fully paid and
non-assessable shares of Parent Common Stock.
4.10 PARENT CAPITALIZATION
The authorized capital stock of Parent consists of 10,000,000 shares of
Parent Common Stock and 1,000,000 shares of preferred stock. As of July 26,
1996, (i) 3,900,312 shares of Parent Common Stock were validly issued and
outstanding, fully paid and nonassessable, none of which were issued in
violation of any preemptive right of any stockholder of Parent; and (ii) no
shares of preferred stock were issued and outstanding.
4.11 REPORTS AND FINANCIAL STATEMENTS; NASDAQ COMPLIANCE
Except where failure to have done so did not and would not have a material
adverse effect on Parent, Parent has filed all reports, registrations and other
documents, together with any required amendments thereto, that it was required
to have filed with the SEC prior to the date hereof pursuant to the Exchange
Act, including but not limited to Forms 10-K, Forms 10-Q, Forms 8-K and proxy
statements (collectively, the "Parent Reports"). Parent has previously furnished
to the Warranting Shareholders copies of all Parent Reports filed with the SEC
since January 1, 1996, and Parent will promptly furnish to the Warranting
Shareholders all Parent Reports filed after the date of this Agreement and prior
to the Closing Date. To the best of Parent's Knowledge, as of their respective
dates (but taking into account any amendments filed prior to the date of this
Agreement, the Parent Reports complied, or, with respect to Parent Reports filed
after the date of this Agreement, will comply, in all material respects, with
all the rules and regulations promulgated by the SEC and did not contain, or,
with respect to Parent Reports filed after the date of this Agreement, will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were or will be made,
not misleading. Parent has taken all action within its reasonable control
necessary to ensure its
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continued inclusion in, and the continued eligibility of the Parent Common Stock
for trading on, the NASDAQ National Stock Market under all currently effective
inclusion requirements.
4.12 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as disclosed in Parent Reports filed by Parent with the SEC prior to
the date of this Agreement or set forth in Schedule 4.12 hereto, to the best of
Parent's Knowledge since December 31, 1995 to the date of this Agreement, there
has not been any change in the financial condition, results of operations or
business of Parent that either individually or in the aggregate would have a
material adverse effect on the financial condition of Parent.
5. COVENANTS OF THE WARRANTING SHAREHOLDERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, the Warranting
Shareholders will, and will cause each Acquired Company and its Representatives
to, (a) afford Parent and its Representatives and prospective lenders and their
Representatives (collectively, "Parent's Advisors") full and free access during
normal business hours after reasonable notice to each Acquired Company's
personnel, properties (including subsurface testing), contracts, books and
records, and other documents and data, (b) furnish Parent and Parent's Advisors
with copies of all such contracts, books and records, and other existing
documents and data as Parent may reasonably request, and (c) furnish Parent and
Parent's Advisors with such additional financial, operating, and other data and
information as Parent may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, the Warranting
Shareholders will, and will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current business
organization of such Acquired Company, keep available the services of the
current officers, employees, and agents of such Acquired Company, and maintain
the relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with such Acquired
Company;
(c) confer with Parent concerning operational matters of a material nature;
and
(d) otherwise report periodically to Parent concerning the status of the
business, operations, and finances of such Acquired Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date
of this Agreement and the Closing Date, the Warranting Shareholders will not,
and will cause each Acquired Company not to, without the prior consent of
Parent, take any affirmative action, or fail to take any reasonable action
within their or its control, as a result of which any of the changes or events
listed in Section 3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, the Warranting
Shareholders will, and will cause each Acquired Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions (including all filings under the HSR Act), and it will
inform Parent in writing of all state licensing and Medicaid approvals, if any
necessary to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, the Warranting Shareholders will, and will cause
each Acquired Company to, (a) cooperate with Parent with respect to all filings
that Parent elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b) cooperate with Parent in
obtaining all consents identified in Schedule 4.2
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(including taking all actions requested by Parent to cause early termination of
any applicable waiting period under the HSR Act).
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each Warranting
Shareholder will promptly notify Parent in writing if such Warranting
Shareholder or any Acquired Company becomes aware of any fact or condition that
causes or constitutes a Breach of any of Warranting Shareholders'
representations and warranties as of the date of this Agreement, or if such
Warranting Shareholder or any Acquired Company becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any such
fact or condition, the Warranting Shareholders will promptly deliver to Parent a
supplement to the Disclosure Letter specifying such change. During the same
period, each Warranting Shareholder will promptly notify Parent of the
occurrence of any Breach of any covenant of the Warranting Shareholders in this
Section 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, the Warranting Shareholders
will cause all indebtedness owed to an Acquired Company by either Warranting
Shareholder or any Related Person of either Warranting Shareholder to be paid in
full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, the Warranting Shareholders will not, and will cause each Acquired
Company and each of their Representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Parent)
relating to any transaction involving the sale of the business or assets of any
Acquired Company, or any of the capital stock of any Acquired Company, or any
merger, consolidation, business combination, or similar transaction involving
any Acquired Company, provided, however, that after the public disclosure of
this Agreement the Warranting Shareholders shall have the right to negotiate for
such an agreement that is expressly conditioned upon the lawful termination or
expiration of this Agreement.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, the Warranting
Shareholders will use their Best Efforts to cause the conditions in Sections 7
and 8 to be satisfied.
6. COVENANTS OF PARENT PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Parent will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of this
Agreement and the Closing Date, Parent will, and will cause each Related Person
to, cooperate with the Warranting Shareholders with respect to all filings that
the Warranting Shareholders are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with the
Warranting Shareholders in obtaining all consents identified in Part 3.2 of the
Disclosure Letter; provided that this Agreement will not require Parent to
dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization.
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6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Parent will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE
Each and every obligation of Parent and Newco under this Agreement to be
performed at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions specified in this Part 7 of this
Agreement (any of which may be waived by Parent, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of the Warranting Shareholders' representations and warranties in
this Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Disclosure Letter.
(b) Each of the Warranting Shareholders' representations and warranties in
Sections 3.3, 3.4, 3.12, and 3.24 must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Disclosure Letter.
7.2 WARRANTING SHAREHOLDERS' PERFORMANCE
(a) All of the covenants and obligations that the Warranting Shareholders
are required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.4 must
have been delivered, and each of the other covenants and obligations in Sections
5.4 and 5.8 must have been performed and complied with in all material respects.
7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter, and
each Consent identified in Schedule 4.2, must have been obtained and must be in
full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to or obtained by
Parent:
(a) an opinion of Houtchens Daniel & Greenfield, dated the Closing
Date, in the form of Exhibit 7.4(a);
(b) estoppel certificates executed on behalf of HealthPartners
Funding, L.P., National Health Investors,Inc., Health Care Reit, Inc.,
Whitehead Family Investments, Ltd. and Omega HealthCare Investors, Inc.,
and such of their related or affiliated persons as Parent may reasonably
require, dated as of a date not more than five (5) days prior to the
Closing Date, each substantially in the form of Exhibit 7.4(b);
(c) a consent and release signed by each Warranting Shareholder and
each of the Other Securityholders pursuant to which they sell or surrender
any equity interest in the Company (including any outstanding options) in
accordance with the form of option repurchase agreement attached as Exhibit
7.4(c).
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(d) the Certificate of Merger, duly approved by the Company and its
shareholders as required by law and duly executed on behalf of the Company;
(e) such other documents as Parent may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (ii) evidencing the accuracy of any of the Warranting
Shareholders' representations and warranties, (iii) evidencing the
performance by either Warranting Shareholder of, or the compliance by
either Warranting Shareholder with, any covenant or obligation required to
be performed or complied with by such Warranting Shareholder, (iv)
evidencing the satisfaction of any condition referred to in this Section 7,
or (v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Parent, or against any Person affiliated with Parent, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any of the Acquired Companies,
or (b) is entitled to all or any portion of the Purchase Price payable for the
Shares.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Parent or any Person affiliated with Parent to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise formally proposed by or before any Governmental Body.
7.8 COMPLETION OF DILIGENCE
Parent's review of the Company's businesses Assets Contracts, Governmental
Authorizations and similar matters shall have been completed to the satisfaction
of Parent and its counsel, provided, however, that this condition shall expire
on August 15, 1996.
7.9 ENVIRONMENTAL REPORTS
Parent shall have obtained at Parent's expense environmental surveys or
reports satisfactory to Parent in its sole discretion in respect of the
operations of each of the Acquired Companies and SNFs and in respect of each of
the properties owned or operated by any of the Acquired Companies or SNFs,
including leased properties.
7.10 UNISON APPROVALS
This Agreement and the Contemplated Transactions shall have been approved
by Unison's stockholders by a vote satisfactory to Parent.
7.11 UNISON FINANCING; AVERAGE DAILY PRICE
Parent shall have completed a public or private offering of subordinated
debt or common stock in an amount and on terms acceptable to Parent. In
addition, the Average Daily Price as of the Closing Date shall not be lower than
$10.25 per Parent Share nor higher than $16.25 per Parent Share.
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7.12 TREATMENT OF DISPUTED MEDICARE RECEIVABLES
The parties acknowledge that the Company's Closing Financial Statements are
expected to include certain Medicare accounts receivable that are currently in
dispute with HCFA (the" Disputed Medicare Receivables"). The Disputed Medicare
Receivables are identified or more fully described on Schedule 2.9, which
schedule shall be updated as of the Closing Date. It is a condition of Parent's
obligation to close that the Company shall have created an appropriate financial
statement reserve for the full amount of the Disputed Medicare Receivables and
shall have incurred and recorded any charge against income associated therewith.
7.13 ACQUISITION OF REHABWEST, INC.
Parent shall have entered into a definitive agreement to acquire the assets
and business of RehabWest, Inc. for an aggregate purchase price of $5,500,000
and subject to other terms that are satisfactory to Parent and to the
shareholders and creditors of RehabWest, Inc.
7.14 CONSUMMATION OF MERGERS WITH OTHER MERGING COMPANIES
The mergers between a subsidiary of Parent and each of the other Merging
Companies shall be consummated concurrently with the Merger.
8. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY AND
THE WARRANTING SHAREHOLDERS TO CLOSE
Each and every obligation of the Company and the Warranting Shareholders
under this Agreement to be performed at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
specified in this Part 8 of this Agreement (any of which may be waived by the
Company and the Warranting Shareholders, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Parent's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 PARENT'S PERFORMANCE
(a) All of the covenants and obligations that Parent is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Parent must have delivered each of the documents required to be
delivered by Parent pursuant to Section 2.4 and must have made the cash payments
required to be made by Parent pursuant to Sections 2.4(b)(i) and 2.4(b)(ii).
8.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter must
have been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
The following documents must have been obtained by or delivered to the
Warranting Shareholders:
(a) an opinion of Quarles & Brady, dated the Closing Date, in the form
of Exhibit 8.4(a); and
(b) estoppel certificates executed on behalf of National Health
Investors, Inc., and Health Care Reit, Inc., and such of their related or
affiliated persons as the Warranting Shareholders may reasonably
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require, dated as of a date not more than five (5) days prior to the
Closing Date, each substantially in the form of Exhibit 7.4(b);
(c) a consent and release signed by each of the Other Securityholders
pursuant to which they sell or surrender any equity interest in the Company
(including any outstanding options) on terms reasonably satisfactory to the
Warranting Shareholders;
(d) a release by National Health Investors, Inc. of the guarantee of
Mr. Kremser, or the satisfaction of the obligation of the Company
underlying such guarantee (which satisfaction may occur concurrently with
the Closing;
(e) the Certificate of Merger, duly approved by Parent, Newco, and
their shareholders as required by law and duly executed on behalf of Newco;
and
(f) such other documents as the Company or the Warranting Shareholders
may reasonably request for the purpose of (i) enabling their counsel to
provide the opinion referred to in Section 7.4(a), (ii) evidencing the
accuracy of any representation or warranty of Parent, (iii) evidencing the
performance by Parent of, or the compliance by Parent with, any covenant or
obligation required to be performed or complied with by Parent, (ii)
evidencing the satisfaction of any condition referred to in this Section 8,
or (v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Shares by the Warranting
Shareholders to Parent, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
8.6 AVERAGE DAILY PRICE
The Average Daily Price as of the Closing Date must not be lower than
$10.25 per Parent Share nor higher than $16.25 per Parent Share, provided that
the $16.25 condition shall not apply if, promptly after the Warranting
Shareholders elect to terminate this Agreement for failure of this condition,
Parent agrees to amend this Agreement and the Certificate of Merger so that the
number of Parent Shares issued in the Merger is not less than 1,416,546.
8.7 PARENT DIRECTOR
David A. Kremser shall have been elected or appointed as a director of
Parent.
8.8 ACQUISITION OF REHABWEST, INC.
Parent shall have entered into a definitive agreement to acquire the assets
and business of RehabWest, Inc. for an aggregate purchase price of $5,500,000
and subject to other terms and conditions that are satisfactory to Parent and to
the shareholders and creditors of RehabWest, Inc.
8.9 CONSUMMATION OF MERGERS WITH OTHER MERGING COMPANIES
The mergers between a subsidiary of Parent and each of the other Merging
Companies shall be consummated concurrently with the Merger.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Parent or the Warranting Shareholders if a Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been cured or waived within 10 days following the occurrence
or discovery thereof by the Breaching party, whichever is later;
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(b)(i) by Parent if any conditions in Section 7 have not been
satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Parent to comply
with its obligations under this Agreement) and Parent has not waived such
condition on or before the Closing Date; or (ii) by the Warranting
Shareholders, if any conditions in Section 8 have not been satisfied of the
Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of the Warranting Shareholders
to comply with their obligations under this Agreement) and the Warranting
Shareholders have not waived such condition on or before the Closing Date;
(c) by the Warranting Shareholders if the registration of Parent's
Common Stock under the Exchange Act is terminated or if the trading thereof
on the NASDAQ National Stock Market is suspended as of the Closing Date; or
(d) by mutual consent of Parent and the Warranting Shareholders; or
(e) by either Parent or the Warranting Shareholders if the Closing has
not occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before November 1, 1996, or such later date as the parties
may agree upon.
9.2 EFFECT OF TERMINATION
If this Agreement is terminated pursuant to Section 9.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 11.1 and 11.3 will survive; provided, however, that if
this Agreement is terminated by a party because of the Breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
9.3 WRONGFUL TERMINATION OR FAILURE TO CLOSE BY PARENT
Notwithstanding anything to the contrary herein, in the event that Parent
wrongfully terminates this Agreement or refuses or fails to consummate the
Merger or any of the Contemplated Transactions without justification hereunder,
the Company shall be entitled to receive, as liquidated damages, the sum of
$1,600,000, which shall be the exclusive remedy of the Company and the
Warranting Shareholders therefor.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION LIMITED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.8(a)(iv), and any other certificate
or document delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will be precluded if the
injured party had actual Knowledge thereof before Closing but otherwise will not
be affected by any investigation conducted with respect to, or any Knowledge
capable of being acquired (but not actually acquired) at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The party asserting that the
injured party's remedies are limited by its actual Knowledge in accordance with
the preceding sentence shall have the burden of proof in establishing such
actual Knowledge. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
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10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE
WARRANTING SHAREHOLDERS
The Warranting Shareholders, jointly and severally, will indemnify and hold
harmless Parent, the Acquired Companies, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by the
Warranting Shareholders in this Agreement as of the time of its execution,
the Disclosure Letter or any other certificate or document delivered by the
Warranting Shareholders pursuant to this Agreement;
(b) any Breach of any representation or warranty made by the
Warranting Shareholders in this Agreement as if such representation or
warranty were made on and as of the Closing Date, other than any such
Breach that is disclosed in a supplement to the Disclosure Letter;
(c) any Breach by either Warranting Shareholder of any covenant or
obligation of such Warranting Shareholder in this Agreement;
(d) any services provided by any SNF or Acquired Company prior to the
Closing Date and any liability for Ancillary Contracts except as provided
in Section 3.30; or
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Warranting
Shareholder or any Acquired Company (or any Person acting on their behalf)
in connection with any of the Contemplated Transactions;
provided, however, that for purposes of this Section 10.2 and Section 10.3 (and
the limitations of Sections 10.5 and 10.6), the term "Breach" shall not be
limited or qualified by the materiality of the matter and all Damages therefrom
shall be applied against the limitations in Sections 10.5 and 10.6.
Except as expressly provided in Section 9.3, the remedies provided in this
Section 10.2 will be exclusive and will preclude any other remedies that may be
available to Parent or the other Indemnified Persons in respect of any breach of
this Agreement by the Warranting Shareholders.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY PARENT
Parent will indemnify and hold harmless the Warranting Shareholders, and
will pay to the Warranting Shareholders the amount of any Damages arising,
directly or indirectly, from or in connection with (a) any Breach of any
representation or warranty made by Parent in this Agreement or in any
certificate delivered by Parent pursuant to this Agreement, (b) any Breach by
Parent of any covenant or obligation of Parent in this Agreement, (c) any
services provided by any SNF, or Acquired Company after the Closing Date, (d)
liabilities accruing after the Closing Date pursuant to any Ancillary Contract
or other Contract or Encumbrance not terminated on or prior to the Closing Date,
or (e) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by such Person with Parent (or any Person acting on its behalf) in
connection with any of the Contemplated Transactions.
10.4 TIME LIMITATIONS
If the Closing occurs, the Warranting Shareholders will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, other than those in Sections 3.3, 3.11, 3.13, and 3.19, unless
on or before the first anniversary of the Closing Parent notifies the Warranting
Shareholders of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Parent. A claim with respect to Section 3.3
or 3.13 must be made within two (2) years after the Closing Date; a claim
pursuant to
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Section 3.11 must be made within three (3) years after the Closing Date, and a
claim pursuant to Section 3.19 must be made within three (3) years after the
Closing Date. If the Closing occurs, Parent will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before the second anniversary of the Closing the Warranting
Shareholders notify Parent of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by the Warranting Shareholders.
10.5 LIMITATIONS ON AMOUNT -- WARRANTING SHAREHOLDERS
The limitations on the amount of the liability of the Warranting
Shareholders will be as set forth in the Escrow Agreement. However, this Section
10.5 will not apply to any Breach of any of the Warranting Shareholders'
representations and warranties of which either Warranting Shareholder had
Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional Breach by either Warranting Shareholder of
any covenant or obligation, and the Warranting Shareholders will be jointly and
severally liable for all Damages with respect to such Breaches.
10.6 LIMITATIONS ON AMOUNT -- PARENT
Parent will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a) or (b) of Section 10.3 until the
total of all Damages with respect to such matters exceeds $125,000, at which
time all of such amounts shall become payable. Thereafter, amounts shall be
payable in $25,000 increments, up to a maximum of $500,000. However, this
Section 10.6 will not apply to any Breach of any of Parent's representations and
warranties of which Parent had Knowledge at any time prior to the date on which
such representation and warranty is made or any intentional Breach by Parent of
any covenant or obligation, and Parent will be liable for all Damages with
respect to such Breaches.
10.7 ESCROW
Except for breach of any of the Warranting Shareholders' representations
and warranties of which either Warranting Shareholder had Knowledge at any time
prior to the date on which such representation and warranty was made, or any
intentional Breach by either Warranting Shareholder of any covenant or
obligation, Parent's sole and only source to satisfy a Claim shall be against
the amount placed in escrow under the Escrow Agreement. Notwithstanding the
foregoing, if and to the extent that within the time limitations specified under
Section 10.4 for claims against the Warranting Shareholders any property has
been returned to the Warranting Shareholders from the General Accounts of the
Escrow Funds (upon expiration of the Escrow Agreement or otherwise), Parent may
make claims directly against the Warranting Shareholders or their property up to
the amount of the escrow proceeds that was returned to the Warranting
Shareholders from the General Accounts therein.
10.8 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 10.2 or
10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in Section 10.8(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide reasonable indemnification with respect to such Proceeding), to assume
the defense of such Proceeding with counsel reasonably satisfactory to the
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indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) The Warranting Shareholders hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on the Warranting Shareholders
with respect to such a claim anywhere in the world.
10.9 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. The Warranting Shareholders will pay all amounts
payable to BA Partners in connection with this Agreement and the Contemplated
Transactions. Parent will pay the HSR Act filing fee. The Warranting
Shareholders will cause the Acquired Companies not to incur any out-of-pocket
expenses in connection with this Agreement except for professional fees not in
excess of $100,000. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement
or the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Parent and the Warranting Shareholders jointly determine, except
in instances where Parent determines in good faith that disclosure is necessary
to assure compliance with applicable law. Unless consented to by
Parent/Warranting Shareholders
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in advance or required by Legal Requirements, prior to the Closing the
Warranting Shareholders and Parent shall, and the Warranting Shareholders shall
cause the Acquired Companies to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. The Warranting
Shareholders and Parent will consult with each other concerning the means by
which the Acquired Companies' employees, customers, and suppliers and others
having dealings with the Acquired Companies will be informed of the Contemplated
Transactions, and Parent will have the right to be present for any such
communication.
11.3 CONFIDENTIALITY; ACCESS TO INFORMATION
Between the date of this Agreement and the Closing Date, Parent and the
Warranting Shareholders will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Parent and the Acquired
Companies to maintain in confidence, any written information furnished by
another party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, each party hereby
waives, and the Warranting Shareholders will upon Parent's request cause the
Acquired Companies to waive, any cause of action, right, or claim arising out of
the access of Parent or its representatives to any trade secrets or other
confidential information of the Acquired Companies except for the intentional
competitive misuse by Parent of such trade secrets or confidential information.
If the Contemplated Transactions are consummated, the Warranting
Shareholders shall have the right, after the Closing, to access to the books and
records of the Acquired Companies for inspection and copying by the Warranting
Shareholders or their duly authorized representatives, attorneys, accountants
and agents for purposes of defending any claim for indemnity under this
Agreement or for any other lawful purpose which does not violate the Warranting
Shareholders' confidentiality and noncompetition obligations. All books and
records of the Acquired Companies will be maintained by Parent and made
available to the Warranting Shareholders so long as the Warranting Shareholders
may have any obligation to indemnify Parent or may have any material liability
to third parties or Governmental Bodies. The Warranting Shareholders' right of
access for purposes of inspection and copying hereunder shall be limited to
inspections after reasonable notice and during normal business hours and shall
be subject to such other Company policies as Parent or the Company may
reasonably establish from time to time.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Company: Signature Health Care Corporation, 225 East 16th Avenue, Suite
670, Denver, CO 80203
Warranting Shareholders:
Attention: Mr. David A. Kremser, 784 Yankee Creek Road, Evergreen, CO 80439
Facsimile No.: 303-670-5207
Attention: Mr. John D. Filkoski, 4715 Eleventh Street, Greeley, CO
80634-2318
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Facsimile No.: 970-351-7068
with a copy to: Houtchens Daniel & Greenfield, 1007 Ninth Avenue, Greeley,
CO 80631-4094
Attention: John B. Houtchens, Esq.
Facsimile No.: 970-353-0151
Parent: Unison HealthCare Corporation, 7272 East Indian School Road,
Suite 214, Scottsdale, Arizona 85251.
Attention: Mr. Jerry M. Walker, President
Facsimile No.: 602-481-6479
with a copy to: Quarles & Brady, One East Camelback Road, Suite 400,
Phoenix, AZ 85012-1649
Attention: Mr. P. Robert Moya
Facsimile No.: 602-230-5598
11.5 SPECIFIC PERFORMANCE; JURISDICTION; SERVICE OF PROCESS
The Company and the Warranting Shareholders agree that the Parent shall
have a right of specific performance of the covenants and obligations contained
in this Agreement and the Ancillary Contracts. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Arizona, County of Maricopa, or, if it has or can acquire jurisdiction, in
the United States District Court for the District of Arizona, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Parent and
the Warranting Shareholders dated June 13, 1996) and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
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the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
11.9 DISCLOSURE LETTER
In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Letter (other than an exception
expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control. If a disclosure which is properly and fully made
under one part of the Disclosure Letter also relates to one or more other parts,
it shall be deemed made in all appropriate sections thereof even in the absence
of cross references.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties except that Parent may assign any of its
rights under this Agreement to any Subsidiary of Parent. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Arizona without
regard to conflicts of laws principles.
11.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
11.16 MUTUAL RELEASE
The consummation of the Closing shall act as a mutual release of the
Warranting Shareholders by the Parent and of the Parent by the Warranting
Shareholders in respect of any and all rights, damages, claims and
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causes of action arising on or before the Closing, whether known or unknown,
absolute or contingent, except rights, damages, claims and causes of action
arising under and governed by this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
<TABLE>
<S> <C>
Parent: Warranting Shareholders:
Unison HealthCare Corporation
By: /s/ PAUL J. CONTRIS /s/ DAVID A. KREMSER
----------------------------------------- ---------------------------------------------
Paul J. Contris, David A. Kremser
Executive Vice President
Signature Health Care Corporation
By: /s/ DAVID A. KREMSER /s/ JOHN D. FILKOSKI
----------------------------------------- ---------------------------------------------
David A. Kremser, President JOHN D. FILKOSKI
</TABLE>
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