SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 15, 1996
GREENBRIAR CORPORATION
(Formerly MEDICAL RESOURCE COMPANIES OF AMERICA)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 0-8187 75-2399477
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
4265 Kellway Circle, Addison, Texas 75244
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 407-8400
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not Applicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
ACQUISITION OF WEDGWOOD RETIREMENT INNS, INC.
On March 15, 1996, the Company acquired Wedgwood Retirement Inns, Inc.
("Wedgwood").
Wedgwood, headquartered in Vancouver, Washington, was one of the first builders
and management companies in the retirement and assisted living industry. It
operates 1,292 units of full-service retirement and assisted living, including
some that provide Alzheimer's care. The residences are located in six states:
Washington, Oregon, California, Idaho, New Mexico and Texas.
As of March, 1996, Wedgwood has three residences under construction, containing
225 assisted living units and Alzheimer's beds. Plans are to begin construction
on four additional facilities this year, expanding into two more states, Georgia
and Florida. A total of nearly 500 new assisted living and Alzheimer's care
units are planned for 1996 construction.
Wedgwood was purchased from 23 individuals, all of whom are unrelated to
Greenbriar.
To structure the Wedgwood acquisition as a tax-free exchange, the Company also
acquired a shopping center in North Carolina from James R. Gilley and members of
his family. The property was valued at its current independently appraised value
of $3,375,000.
Greenbriar issued 675,000 shares ($3,375,000) of Series D preferred stock to the
Gilley family, 1,912,800 shares ($18,200,000) of Series E preferred stock and
$425,000 in cash and notes to the Wedgwood shareholders. Both classes of stock
are unregistered, will have no trading market unless converted to common stock,
and will be entitled to one vote per share on all matters to come before a
meeting of stockholders. The Series D preferred stock will bear a cumulative
quarterly dividend of 9.5% per year. The Series E preferred stock bears no
dividend for two years and it is anticipated that Series E shares will be
converted to Greenbriar common stock before that time. With shareholder
approval, expected at a shareholders' meeting during 1996, both series of
preferred stock will become convertible into unregistered shares of Greenbriar
common stock, with the Series E convertible at 1.2 shares for each share of
Greenbriar common stock and Series D convertible at two shares for each share of
Greenbriar common stock.
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ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not Applicable
ITEM 5. OTHER EVENTS.
Not Applicable
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not Applicable
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not Applicable
(b) The financial statement required to be filed with respect to this
acquisition will be filed by amendment.
(c) Exhibits
1 - Contract of sale
ITEM 8. CHANGE IN FISCAL YEAR.
Not Applicable
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDICAL RESOURCE COMPANIES OF AMERICA
Dated: March 29, 1996 By: /s/ Gene Bertcher
Name: Gene Bertcher
Title: Chief Financial Officer
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STOCK PURCHASE AGREEMENT
By and Among
Medical Resource Companies of America,
Wedgwood Retirement Inns, Inc.
and
Victor L. Lund, Paul Dendy, Mark Hall, Frank R. Reeves,
Doris Thornsbury and Teresa Waldroff
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TABLE OF CONTENTS
Section
1. PURCHASE OF SHARES AND CLOSING....................1
1.1. Purchase of Shares......................1
1.2. Consideration...........................2
1.3. Other Agreements........................3
1.4. Conditions Precedent....................3
1.5. Closing.................................4
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING
STOCKHOLDERS....................................4
2.1. Ownership of Shares.....................4
2.2. Organization............................4
2.3. Corporate Action........................5
2.4. Capitalization..........................5
2.5. Compliance with Law and Other
Instruments...........................5
2.6. Financial Statements....................5
2.7. Absence of Undisclosed Liabilities......7
2.8. Tax Returns and Payments................7
2.9. Absence of Certain Changes and Events...8
2.10. Trademarks, Trade Names,
Copyrights, Etc.......................9
2.11. Litigation and Other Proceedings........9
2.12. Contracts..............................10
2.13. Transactions with Affiliates...........10
2.14. Insurance and Banking Facilities.......11
2.15. Personnel, Compensation and Benefit
Plans................................11
2.16. Powers of Attorney and Suretyship......12
2.17. Minutes and Stock Records..............12
2.18. Governmental Consents..................12
2.19. Brokers and Finders....................13
2.20. Accuracy of Documents and Other
Information..........................13
2.21. Real Estate............................14
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Section
3. REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO THE PURCHASER SHARES...........14
3.1. Investment Experience and
Economic Risk........................15
3.2. Access to Information..................15
3.3. Investment Representation..............15
3.4. Restricted Securities..................15
3.5. Further Limitations on Disposition.....16
3.6. Legends................................16
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER......17
4.1. Organization...........................17
4.2. Authorization..........................17
4.3. Capitalization.........................17
4.4. Brokers and Finders....................18
4.5. Board Representation...................18
4.6. Continued Operations...................18
4.7. Liability Release......................18
4.8. Compliance with Law and Other
Instruments.....................18
4.9. Financial Statements...................19
4.10. Absence of Undisclosed Liabilities.....19
4.11. Tax Returns and Payments...............20
4.12. Absence of Certain Changes and Events..20
4.13. Trademarks, Trade Names Copyrights Etc.21
4.14. Material Litigation and Other
Proceedings......................22
4.15. Minutes and Stock Records..............22
4.16. Accuracy of Documents and
Other Information................22
4.17. Transactions Between Purchaser And
The Gilley Group.................23
4.18. Purchaser Personnel, Compensation and
Benefit Plans....................23
5. COVENANTS OF THE SELLING STOCKHOLDERS............24
5.1. Agreement Not to Compete...............24
5.2. Indemnification........................26
5.3. Release of Claims......................27
5.4. Right of First Refusal on
Purchaser Shares....27
5.5. Further Assurances.....................27
5.6. Security for Obligations...............27
5.7. Stockholder Proxy Assistance...........27
6. MISCELLANEOUS....................................29
6.1. Expenses...............................29
6.2. Entire Agreement.......................29
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6.3. Governing Law..........................29
6.4. Notices................................29
6.5. Severability...........................30
6.6. Survival of Representations, Warranties
and Covenants........................30
6.7. Waiver, Amendment......................30
6.8. Disclosure.............................30
6.9. Assignment.............................31
6.10. No Third Party Rights..................31
6.11. Counterparts...........................31
6.12. Headings, Gender.......................31
6.13. Construction...........................31
6.14. Additional Documents...................31
6.15. Attorney's Fees........................32
SCHEDULES
EXHIBIT A - DEVELOPMENT AGREEMENT
EXHIBIT B - EMPLOYMENT AGREEMENT
EXHIBIT C - REGISTRATION RIGHTS AGREEMENT
EXHIBIT D - CONTRIBUTION AGREEMENT
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement") dated as of ____________, 1996 by
and between Medical Resource Companies of America ("Purchaser"), Wedgwood
Retirement Inns, Inc., a Washington corporation (the "Company") and Victor L.
Lund, Paul Dendy, Mark Hall, Frank R. Reeves, Doris Thornsbury and Teresa
Waldroff ("Selling Stockholder(s)").
W I T N E S S E T H:
WHEREAS, Victor L. Lund, Paul Dendy, Mark Hall, Frank R. Reeves, Doris
Thornsbury and Teresa Waldroff are the owners of _____ shares of the common
stock of the Company, which shares constitute all of the issued and outstanding
shares of capital stock of the Company;
WHEREAS, the Selling Stockholder(s) desire to sell and Purchaser desires to
purchase the stock of the Company owned by the Selling Stockholder(s) on the
terms and conditions set forth in this Agreement;
WHEREAS, the Selling Stockholder(s) desire to sell and Purchaser desires to
purchase the Wedgwood Business Interests (as hereinafter defined) on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements and provisions contained herein, the parties hereto agree as follows:
1. PURCHASE OF SHARES AND CLOSING.
1.1. Purchase of Shares.
Subject to the terms and conditions set forth in this Agreement, each of
the Selling Stockholder(s) agrees to sell, convey, assign, transfer and deliver
to Purchaser the shares of stock of the Company owned by him or her as of the
date of Closing as indicated in the recitals hereto or acquired as part of this
Agreement (individually and collectively the "Shares"), and will deliver to
Purchaser certificates representing such Shares, duly endorsed in blank or with
appropriate stock powers attached, which Shares are free and clear of all liens,
security interests, pledges, agreements, claims, charges, options or
encumbrances of any nature whatsoever except for the Liens (as hereinafter
defined).
The Selling Stockholders agree to use their best efforts to acquire or
cause the Company to acquire on or before Closing, all ownership interests of
others, besides that owned by the Selling Stockholders, in and to the entities
and real estate listed on the attached Schedule 1.1 ("Wedgwood Business
Interests") and Selling Stockholders shall use their best efforts to have the
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new stockholders sell and deliver their stock in the Company to Purchaser. The
Selling Stockholders will transfer to the Purchaser or, at the direction of
Purchaser to any entity wholly owned by Purchaser, all right, title and interest
of the Company and the Selling Stockholders in the Wedgwood Business Interests.
If the Selling Stockholders use Purchaser Shares (hereinafter defined) or the
promise of the future delivery of Purchaser Shares (hereinafter defined) as
consideration for the acquisition of ownership interests of others in the
Wedgwood Business Interests, the Selling Stockholders agree to prepare and
furnish to such seller reasonably sufficient disclosure information on the
Purchaser and the Purchaser Shares (hereinafter defined). The Selling
Stockholders shall i) provide a copy of such information to the Purchaser, ii)
shall use their best efforts to see that such information complies with all
federal and state securities laws and shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, however the Selling Stockholder(s)
shall not be responsible for the accuracy of documents and information received
from Purchaser, and iii) will make any additions to such information reasonably
requested by the Purchaser. The Selling Stockholders agree to pay all transfer
costs in obtaining any of the Wedgwood Business Interests which they do not
currently own, including, but not limited to transfer taxes, sales taxes, excise
taxes, and stock transfer taxes. Purchaser shall pay all transfer costs incurred
in its acquisition of the Wedgwood Business Interests.
1.2. Consideration.
The purchase price for the Shares shall consist of one million seven
hundred twenty thousand seven hundred fifty-eight shares of newly issued
unregistered common stock of Purchaser (which is approximately equal to 1/2 of
the amount of the common shares of Purchaser issued and outstanding immediately
prior to the Closing, so that the Selling Stockholders will own 1/3 of the
issued and outstanding common stock of Purchaser immediately after the Closing
("Purchaser Shares"). Purchaser shall cease any program it has to repurchase its
own shares of common stock until after Closing. At the election of the Selling
Stockholder(s) one or more members of the Gilley Group will purchase interests
held by others in the Wedgwood Business Interests, using $750,000 in personal
notes payable to the seller, and contribute at Closing such interest to
Purchaser in exchange for a pro rata interest in the Purchaser Shares.
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Subject to Section 1.4. of this Agreement, the Purchase Price shall be
adjusted downward if any of the Wedgwood Business Interests cannot be reasonably
obtained (the "Adjustment") because i) one or more members, shareholders,
partners, or owners of one or more of the Wedgwood Business Interests, or owners
of a portion of an entity that owns one or more of the Wedgwood Business
Interests, other than the Selling Stockholders, refuse to sell, ii) such
Wedgwood Business Interests are in the form of a lease and the landlord refuses
to consent to Purchaser acquiring such Wedgwood Business Interests, or iii) such
Wedgwood Business Interests are subject to a loan and the lender refuses to
consent to Purchaser acquiring such Wedgwood Business Interests. The Adjustment
shall be prior to Closing and shall be based, at least in part, on the projected
earnings of such Wedgwood Business Interests for 1998, attached hereto as
Schedule 1.2, and shall be reasonably acceptable to the Selling Stockholder(s).
The Adjustment will not be made where the Landlord Approvals and Lender
Approvals (hereinafter defined) can not be obtained and the Wedgwood Business
Interest subject to such approval is not transferred to Purchaser if Purchaser
and the Selling Stockholders can reasonably formulate a management or other
agreement that effectively transfers to Purchaser substantially all of the
economic interests of ownership of such Wedgwood Business Interests ("Alternate
Agreement").
The Purchaser Shares will be subject to a registration rights agreement in
the form attached hereto as Exhibit "C".
In addition, Victor L. Lund ("Lund") agrees to repay to Purchaser on or
before Closing that portion of a $500,000 loan from Purchaser to Lund that was
not used for construction, operations, necessary repairs and capital
improvements, in the ordinary course of business and prior to Closing for
Wedgwood Business Interests purchased by Purchaser. If Lund has used all of the
$500,000 loan from Purchaser for the operations, construction, repairs, and
capital improvements, with the documentation being provided to Purchaser
establishing the same, this obligation will not have to be repaid by Lund.
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1.3. Other Agreements.
Simultaneously with the execution and delivery of this Agreement, Victor L.
Lund has entered into a construction management agreement with Purchaser in the
form attached hereto as Exhibits "A", Paul Dendy, Mark Hall, and Teresa Waldroff
have entered into employment agreements with Purchaser in the form attached
hereto as Exhibit "B", and Purchaser will enter into a contribution agreement in
the form attached hereto as Exhibit "D" with JRG Investment Co, Inc., The April
Trust, James R. Gilley, and Sylvia Gilley (the "Gilley Group") which will
provide that the Gilley Group, as a significant part of this Agreement, will
exchange Westwood Village Associates, a North Carolina partnership, which owns a
shopping center in Clemons, North Carolina (the "Shopping Center"), for
preferred stock of Purchaser (the "New Gilley Stock") equal to the appraised
value of the Shopping Center plus or minus normal prorations of income and
expenses. Such appraised value will be reasonably acceptable to Selling
Stockholder(s). The annual dividends payable on the New Gilley Stock will be
approximately equal to the annual net cash flow from the Shopping Center.
1.4. Conditions Precedent
Purchaser's obligation to perform shall be contingent upon i) approval of
the board of directors of Purchaser, ii) any required regulatory approvals, and
iii) Purchaser shareholder approval (together the "Purchaser Approvals"), and
iv) a fairness opinion on the value of the Wedgwood Business Interests from an
investment banking concern reasonably acceptable to Purchaser (the "Fairness
Opinion") if requested by the board of directors of Purchaser.
The Selling Stockholders obligation to perform shall be contingent upon i)
approval of this transaction by any lender where their loan is secured by any
material asset of the Wedgwood Business Interests, except where Purchaser agrees
to pay off such loan, ii) approval of this transaction by any lessor where their
lease is of a material asset of the Wedgwood Business Interests, except where
Purchaser agrees to adjust the Purchase Price, and which shall be reasonably
acceptable to the Selling Stockholders, and iii) approval of this transaction by
any shareholder, partner or sole proprietor of the Wedgwood Business Interests,
other than one of the Selling Stockholders, except where Purchaser agrees to
adjust the Purchase Price, and which shall be reasonably acceptable to the
Selling Stockholders.
1.5. Closing
The closing will take place on or before ten (10) days following the
Purchaser Approvals and any associated waiting periods (the "Closing"). The
parties agree to use their best efforts to hold the Closing on or before March
15, 1996.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, VICTOR L. LUND, PAUL DENDY,
MARK HALL, AND TERESA WALDROFF.
In addition to any other representations, warranties, covenants and
undertakings contained elsewhere in this Agreement, Victor L. Lund, Paul Dendy,
Mark Hall, Teresa Waldroff and the Company hereby jointly and severally make the
following representations, warranties and covenants to Purchaser, all of which
survive the Closing for a period of two years:
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2.1. Ownership of Shares.
Immediately prior to the purchase and sale of the Shares, the Selling
Stockholder(s) were the true and lawful owner of the Shares. The Selling
Stockholder(s) have all necessary power and authority to execute this Agreement
and to sell the Shares to Purchaser, free and clear of all claims, liens,
security interests, rights of spouses or present or former family members or
stockholders of the Company, pledges, options, encumbrances and other
restrictions of any nature whatsoever, other than transfer restrictions imposed
by applicable federal and state securities laws with respect to unregistered
shares and except, potentially, the loans listed on the attached Schedule 2.1
(the "Liens"). There is no agreement between the Selling Stockholder(s) and any
other person relating to or restricting the transfer of the Shares. Effective as
of the Closing and subject to the Liens, Purchaser will acquire good and
marketable title to the Shares free and clear of any restrictions of the type
referred to in this Section 2.1. The Selling Stockholder(s) own no securities of
the Company other than the Shares and hereby irrevocably waive any and all
rights to acquire any other shares or securities of the Company or any other
interest in any such shares or securities existing prior to Closing.
2.2. Organization.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of Washington, has the full power and authority to own
or lease its properties and to carry on its business as it is now being
conducted. The Selling Stockholder(s) has delivered to Purchaser complete and
correct copies of the articles of incorporation and bylaws of the Company as in
effect on the date of this Agreement. No action has been taken by the board of
directors of the Company or by the Selling Stockholder(s) to amend any such
documents.
2.3. Corporate Action.
The board of directors of the Company, and the Selling Stockholder(s) have
taken all actions, if any, required by applicable law, the articles of
incorporation or bylaws of the Company or otherwise, to authorize the
transactions contemplated by this Agreement.
2.4. Capitalization.
The authorized capital stock of the Company consists of ___ shares of
common stock of which only the Shares owned by the Selling Stockholder(s) are
issued and outstanding. All of the Shares were validly issued and are fully paid
and nonassessable, and other than the Shares there are no outstanding options,
warrants, scrip, preemptive rights or other subscription rights, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company.
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2.5. Compliance with Law and Other Instruments.
The Company is not in material violation of any term of its charter
documents or bylaws. To the best of the knowledge of Victor L. Lund, Paul Dendy,
Mark Hall, and Teresa Waldroff after due inquiry, the Company and the Wedgwood
Business Interests are not in violation of any material term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment,
decree, order, statute, law, rule or regulation applicable to it or its
properties. If the Landlord Approvals and Lender Approvals (hereinafter defined)
are obtained, the execution, delivery and performance of, and compliance with
this Agreement by the Selling Stockholder(s), and the consummation of the
transactions contemplated herein, have not resulted and will not result in any
such violation or in the creation of any mortgage, pledge, lien, encumbrance or
charge upon any of the properties or assets of the Company or the Wedgwood
Business Interests.
2.6. Financial Statements.
(i) Attached hereto as Schedule 2.6 is the balance sheet of the
Company, consolidated with the Wedgwood Business Interests, at
September 30, 1995 and the related statements of income for the
nine months then ended (the "Interim Financials"). The Interim
Financials (a) have been prepared in accordance with the books
and records of the Company, consolidated with the Wedgwood
Business Interests; (b) fairly present the financial position of
the Company, consolidated with the Wedgwood Business Interests,
as of the date indicated therein and the results of operations
for the periods indicated therein; and (c) have been prepared in
accordance with generally accepted accounting principles
consistently applied. The assets shown on the balance sheet of
the Company, consolidated with the Wedgwood Business Interests,
included in the Interim Financials (the "Interim Balance Sheet")
were owned by the Company, consolidated with the Wedgwood
Business Interests, as of such date, free and clear of any liens
or encumbrances (other than those reflected on such balance sheet
or as disclosed as part of this Agreement) and constituted all of
the assets used in the business of the Company and the Wedgwood
Business Interests. As of the date hereof and as of the date of
Closing, the assets of the Company and the Wedgwood Business
Interests are used in their operations free and clear of any
liens or encumbrances, except liens and encumbrances shown on the
Interim Balance Sheet. The Interim Cash shall mean the aggregate
amount of cash, cash equivalents and marketable securities of the
Company and the Wedgwood Business Interests (valued at the lower
of cost or market value) as shown on the Interim Balance Sheet.
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(ii) The Selling Stockholders shall cause the Company to update the
Interim Financials through December 31, 1995 and the Interim
Balance Sheet as of December 31, 1995 in accordance with
generally accepted accounting principles, prepared on an accrual
basis and including all appropriate accruals for liabilities or
expenses which shall be audited by Grant Thornton & Co., which
shall render its substantially unqualified report thereon (such
balance sheet and income statement as so audited, is hereinafter
referred to as the "Audited Balance Sheet" and the "Audited
Financials"). Purchaser will be responsible for any of the costs
of such audit unless this Agreement is terminated in which case
Purchaser will be responsible for any of the costs of such audit
through the date of written notice of termination by Purchaser to
the Selling Stockholder(s), which said notice shall be given on
the termination date. The Audited Cash, which shall mean the
aggregate amount of cash, cash equivalents and marketable
securities of the Company and the Wedgwood Business Interests
(valued at the lower of cost or market value) as shown on the
Audited Balance Sheet.
(iii)The Selling Stockholder(s) shall use their best efforts to
deliver the Audited Balance Sheet and the Audited Financials to
Purchaser promptly after such balance sheet and income statement
is audited, but no later than February 28, 1996.
(iv) The Selling Stockholders shall use their best efforts to cause
the Company to update the Audited Financials through Closing and
the Audited Balance Sheet as of Closing in accordance with
generally accepted accounting principles, prepared on an accrual
basis and including all appropriate accruals for liabilities or
expenses (such balance sheet and income statement as so updated,
is hereinafter referred to as the "Closing Balance Sheet" and the
"Closing Financials"). The Closing Cash, which shall mean the
aggregate amount of cash, cash equivalents and marketable
securities of the Company and the Wedgwood Business Interests
(valued at the lower of cost or market value) as shown on the
Closing Balance Sheet. The chief financial officer of the Company
will certify that the Closing Balance Sheet and the Closing
Financials are materially correct.
(v) The Audited Balance Sheet, the Audited Financials, the Closing
Balance Sheet, and the Closing Financials will not materially
vary, to the negative, from the Interim Balance Sheet and the
Interim Financials, adjusted for comparable periods.
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2.7. Absence of Undisclosed Liabilities.
Except as set forth on Schedule 2.7 and except for the Liens, the Company,
consolidated with the Wedgwood Business Interests, has no obligations or
liabilities of any nature, whether absolute, accrued, contingent or otherwise,
whether liquidated or unliquidated, and whether now due or to become due, which,
individually or in the aggregate, would have a material adverse effect on the
financial condition of the Company, consolidated with the Wedgwood Business
Interests. As of the date hereof and as of the date of Closing, the Company and
the Wedgwood Business Interests have no material accounts payable which are
unpaid after their due date.
2.8. Tax Returns and Payments.
(i) All federal, state, local and foreign tax returns and reports
required to be filed by Victor L. Lund, the Company and entities
which own Wedgwood Business Interests, except for Alpha Omega
Partners, have been filed, when due or as extended, with the
appropriate governmental agencies in all jurisdictions in which
such returns and reports are required to be filed, and to the
best of the knowledge of Victor L. Lund, Paul Dendy, Mark Hall,
and Teresa Waldroff such returns were prepared in accordance with
all applicable laws and regulations;
(ii) to the best of the knowledge of Victor L. Lund, Paul Dendy, Mark
Hall, and Teresa Waldroff, all federal, state, local and foreign
income, profits, gross receipts, net worth, capital, franchise,
sales, use, employment, occupation, property, premium, excise and
other taxes (including interest and penalties) due or claimed by
appropriate tax authorities to be due from the Company or from
the Wedgwood Business Interests (a) have been fully paid or
provided for on the books of the Company, consolidated with the
Wedgwood Business Interests, or (b) are being contested in good
faith by appropriate proceedings and are not material and are set
forth on Schedule 2.8;
(iii)no issues have been raised (and are pending) by the Internal
Revenue Service or any other taxing authority in connection with
any of the returns and reports referred to in the foregoing
clause (i) which, if adversely determined, would have a material
adverse effect on the financial condition of the Company,
consolidated with the Wedgwood Business Interests;
(iv) no waivers of statutes of limitations have been given or
requested with respect to the Company or the Wedgwood Business
Interests;
(v) no election has been made, or consent given, under Section 341(f)
of the Internal Revenue Code of 1986, as amended;
(vi) the federal income tax returns of the Company, the Wedgwood
Business Interests and Victor L. Lund have not been audited by
the Internal Revenue Service;
(vii)the Company has furnished Purchaser with complete and correct
copies of federal income tax returns for itself and for the
Wedgwood Business Interests for the last three fiscal years; and
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(viii) the Company has provided Purchaser with the estimated or
approximate tax basis for all of the assets consisting of the
Wedgwood Business Interests.
2.9 Absence of Certain Changes and Events.
Except as shown on Schedule 2.9 and as set forth herein, between September
30, 1995 and the Closing there has not been and there will not be:
(i) any transaction entered into by the Company and the Wedgwood
Business Interests other than in the ordinary course of business
or any material adverse change in the condition (financial or
otherwise), earnings, assets, liabilities, prospects or business
of the Company and the Wedgwood Business Interests whether or not
arising from transactions in the ordinary course;
(ii) any declaration, payment or setting aside of any dividend or
other distribution in respect of the capital stock of the Company
or of the Wedgwood Business Interests, other than in the ordinary
course of business, or any direct or indirect redemption,
purchase or other acquisition by the Company of any such stock or
interest;
(iii)any modification or rescission of, or waiver, except in the
ordinary course of business, by the Selling Stockholder(s) or the
Company and the Wedgwood Business Interests (written or oral) of
rights under any contract now existing relating to the Company
and the Wedgwood Business Interests, except for the Landlord
Approvals and Lender Approvals (hereinafter defined);
(iv) any mortgage, pledge or imposition of any security interest,
claim, encumbrance or other restriction on, or any sale or other
disposition (other than in the ordinary course of business) of,
any assets of the Company and the Wedgwood Business Interests,
tangible or intangible save and except the transactions described
in paragraph 2.9 (viii) described below;
(v) any change in accounting practice or any new method of accounting
introduced in respect of the business of the Company and the
Wedgwood Business Interests or any of its assets, properties or
rights;
(vi) any change in the policies or practices of the Company and the
Wedgwood Business Interests regarding the timely discharge of
accounts payable and other obligations;
(vii)any cancellation or release of any debt or other obligation owed
the Company and the Wedgwood Business Interests, or of any claim
held by the Company and the Wedgwood Business Interests, except
in the ordinary course of business;
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(viii) any borrowing by the Company and the Wedgwood Business
Interests or any incurrence by the Company and the Wedgwood
Business Interests of any obligation or liability (absolute or
contingent), except for current liabilities incurred, and
obligations under contracts entered into, in the ordinary course
of business, and except for loans to be made by Healthcare REIT
and San Benito Bank & Trust and secured by the Camelot Retirement
Community Home in Harlingen, Texas and adjacent parcels of land;
(ix) any new liens created or allowed to be created on material assets
of the Wedgwood Business Interests except for loans to be made by
Healthcare REIT and San Benito Bank & Trust and secured by the
Camelot Retirement Community Home in Harlingen, Texas and
adjacent parcels of land; or
(x) any increases in compensation or wages for any of the Selling
Stockholder(s).
2.10. Trademarks, Trade Names Copyrights. Etc.
The Selling Stockholder(s) or the Company, except for the Liens, (i) own or
have the right to use, free and clear of all liens, claims and restrictions, all
patents, trademarks, trade names, service marks, copyrights, trade secrets,
trade dress, know-how, inventions, designs, processes and technical data,
licenses with respect to the foregoing, and other proprietary rights of any
nature relating to or used in its business, or used or useful in promoting such
business, in the manner in which such business has been or is being conducted
(hereinafter, "Business Property"), without, to the best of the knowledge of
Victor L. Lund, Paul Dendy, Mark Hall, and Teresa Waldroff, infringing upon or
otherwise acting adversely to the right or claimed right of any person under or
with respect to any of the foregoing, and (ii) are free of any obligation or
liability whatsoever to make any payment by way of royalties, fees or otherwise
to any person with respect to the use of Business Property. To the best of the
knowledge of Victor L. Lund, Paul Dendy, Mark Hall, and Teresa Waldroff, there
has not been any infringement or unauthorized use by any third party of any of
the Business Property.
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2.11. Litigation and Other Proceedings.
Except as shown on Schedule 2.11, neither the Company, the Wedgwood
Business Interests nor any of their directors, officers, members or
stockholders, is a party to any pending or, to the best of the knowledge of
Victor L. Lund, Paul Dendy, Mark Hall, and Teresa Waldroff, threatened action,
suit, proceeding or investigation in or by any court or governmental board,
commission, agency, department or office, or before any arbitrator, in the
United States or elsewhere (nor, to the best of the knowledge of Victor L. Lund,
Paul Dendy, Mark Hall, and Teresa Waldroff, is there any reasonable basis
therefor), arising or claimed to arise from actions or inactions of the Company
or the Wedgwood Business Interests or, in the case of an individual, from
actions or inactions in such individual's capacity as a director, officer,
member, owner or stockholder of the Company or the Wedgwood Business Interests.
2.12. Contracts.
Schedule 2.12 describes, and the Selling Stockholder(s) have delivered to
Purchaser complete and correct copies of, all currently effective written and
oral agreements, contracts, indebtedness, liabilities and other obligations to
which the Company or the Wedgwood Business Interests is a party or by which it
or any of its properties or assets is bound or affected (other than the
documents listed on and delivered to Purchaser pursuant to other Schedules
hereto) which (i) require the payment or receipt of more than $20,000, or (ii)
are otherwise material to the conduct or operations of the business of the
Company and the Wedgwood Business Interests. The Company and the Wedgwood
Business Interests is, and to the best of the knowledge of Victor L. Lund, Paul
Dendy, Mark Hall, and Teresa Waldroff, all other parties to such agreements are,
in compliance with all material provisions of such agreements.
2.13. Transactions with Affiliates.
Except for payroll in the normal course of business, Schedule 2.13 is a
true and complete list of (i) all material transactions between the Company and
the Wedgwood Business Interests and the Selling Stockholder(s) or any relative
or affiliate of the Selling Stockholder(s), since September 30, 1995, which list
includes amounts payable or receivable in connection with such transactions, and
(ii) all interests, direct or indirect, of the Selling Stockholders and all
relatives and affiliates of the Selling Stockholders and any corporation,
partnership, firm or association which is a competitor of the Company or the
Wedgwood Business Interests, except for interests in companies whose shares are
traded on a national exchange or the NASDAQ or OTC markets and in which such
Selling Stockholder(s) and his or her immediate relatives (consisting of
siblings, parents, grandparents, children and grandchildren) and affiliates own
no more that 1% of the outstanding shares. Except as described in Schedule 2.13
and for payroll in the normal course of business, (i) the Company and the
Wedgwood Business Interests are not indebted to the Selling Stockholders or any
of their affiliates or relatives other than in respect of salaries for periods
not exceeding the normal monthly or semi-monthly payroll period, or for amounts
due in respect of ordinary traveland business expenses and employee benefit
plans referred to in this Agreement, and (ii) neither the Selling Stockholder(s)
nor any of their relatives or affiliates is indebted to the Company or the
Wedgwood Business Interests.
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2.14. Insurance and Banking Facilities.
Schedule 2.14 comprises a complete and correct list of (i) all contracts of
insurance and indemnity of or relating to the Company and the Wedgwood Business
Interests in force at the date of this Agreement (including name of insurer or
indemnitor, agent, annual premium, coverage and expiration date), and the
Selling Stockholder(s) have delivered to Purchaser complete and correct copies
of all such contracts, (ii) the names and locations of all banks in which the
Company and the Wedgwood Business Interests have accounts, and (iii) the names
of all persons authorized to draw on such accounts. All premiums and other
payments due with respect to all such contracts of insurance and indemnity have
been paid, and to the best of the knowledge of Victor L. Lund, Paul Dendy, Mark
Hall, and Teresa Waldroff there is no act or failure to act that has caused or
might cause any such contract to be cancelled or terminated. All notices have
been given, all known claims have been presented and all other required or
appropriate action with respect to such contracts has been taken by the Company
and the Wedgwood Business Interests in a due and timely fashion. The Company and
the Wedgwood Business Interests shall not make any reductions in such insurance
coverage prior to Closing.
2.15. Personnel, Compensation and Benefit Plans.
(i) Schedule 2.15 comprises a complete and correct list of (a) all
officers, directors, executive personnel and executive employees
of the Company and the Wedgwood Business Interests, and all
management personnel, including those with the title of
"administrator" and "executive director", that manage a full
service retirement center or assisted living facilities,
including Alzheimer's care, owned or leased by the Company or the
Wedgwood Business Interests and the current compensation rate of
each such person, and (b) all employment, non-competition and
similar agreements, bonus, profit-sharing, deferred compensation,
commission, insurance, termination, vacation, fringe benefit,
pension and retirement agreements, plans and programs (whether
formal or informal) respecting or affecting any directors,
officers or other employees or agents of the Company and the
Wedgwood Business Interests. Schedule 2.15 includes with respect
to each such person, his or her name, base compensation, bonus
for the last fiscal year, title, date of birth and start date.
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(ii) To the best of the knowledge of Victor L. Lund, Paul Dendy, Mark
Hall, and Teresa Waldroff all of the personnel and compensation
agreements, plans and programs are described on Schedule 2.15,
and except as disclosed thereon, comply with applicable law,
including, without limitation, the reporting, disclosure and
other requirements of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and any liability therefor is
appropriately reflected in the Interim Balance Sheet, the Audited
Balance Sheet and the Closing Balance Sheet. Neither the Company
nor the Wedgwood Business Interests have engaged in a transaction
which would subject it to any tax, penalty or liability for
prohibited transactions imposed by Section 502(i) of ERISA or
Section 4975 of the Internal Revenue Code, as amended (the
"Code"). Neither the Company, the Wedgwood Business Interests nor
any of its directors, officers or employees has breached in a
material respect any of the responsibilities or obligations
imposed upon such person as a fiduciary under Title I of ERISA
with respect to any employee benefit plan or any terminated plan.
No employee benefit plan which is subject to Part 3 of Subtitle B
of Title I of ERISA or Section 412 of the Code has an accumulated
funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived. The Company and
the Wedgwood Business Interests have made all required
contributions under each employee pension benefit plan for all
periods through and including the date hereof, or adequate
accruals therefor have been provided. None of the existing or
terminated employee pension benefit plans of the Company or the
Wedgwood Business Interests are or was a defined benefit pension
plan. The Company and the Wedgwood Business Interests have never
been obligated to contribute to any employee pension benefit plan
which is a multi-employer plan at any time on or after September
26, 1980. The Company and the Wedgwood Business Interests have no
obligations to provide, and have made no payments in respect of,
life or other insurance benefits or medical benefits to retired
employees or former employees of the Company or the Wedgwood
Business Interests. As used in this Agreement, the terms
"employee benefit plan", "employee pension benefit plan" and
"multi-employer plan" shall have the respective meanings assigned
to such terms in Section 3 of ERISA. Neither the Company, the
Wedgwood Business Interests nor any of their employees is a party
or subject to any union or collective bargaining agreement.
(iii)The Company and the Wedgwood Business Interests are in full
compliance with all applicable wage and hour laws with respect to
its staff and temporary employees.
2.16. Powers of Attorney and Suretyship.
The Company has no powers of attorney outstanding or obligations or
liabilities (absolute or contingent) as guarantor, surety, co-signor, endorser,
co-maker, indemnitor or otherwise respecting the obligation of any person,
corporation or other organization other than those given with respect to the
Liens.
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<PAGE>
2.17. Minutes and Stock Records.
The Selling Stockholder(s) have delivered to Purchaser the originals or
complete and correct copies of the minute books and stock records of the
Company. Such items contain a materially complete and correct record of all
proceedings and actions taken at all meetings of, and all actions taken by
written consent by, the holders of capital stock and board of directors of the
Company.
2.18. Governmental Consents.
To the best of the knowledge of Victor L. Lund, Paul Dendy, Mark Hall, and
Teresa Waldroff Schedule 2.18 comprises a complete and correct list of all
consents, approvals, orders and authorizations from, and all licenses,
registrations, qualifications, designations, declarations and filings with, any
federal, state, local or foreign governmental authority necessary to enable the
Company and the Wedgwood Business Interests to continue to conduct its business
immediately after the date hereof and the date of Closing in the same manner as
it did immediately before the date hereof. All such consents and other items
shown on Schedule 2.18 are in full force and effect and are held by the Company
and the Wedgwood Business Interests as of the date hereof and as of the date of
Closing. To the knowledge of Victor L. Lund, Paul Dendy, Mark Hall, and Teresa
Waldroff, no other consents or other such items are required of the Company and
the Wedgwood Business Interests (or Purchaser, as the sole stockholder of the
Company) in connection with this Agreement or the consummation of the
transactions contemplated by this Agreement.
2.19. Brokers and Finders.
Neither the Company, the Wedgwood Business Interests, nor the Selling
Stockholder(s) have retained or dealt with any broker, finder or investment
banker in connection with this Agreement or the transactions contemplated by
this Agreement which will be owed a fee of any kind upon the closing of this
Agreement.
2.20. Accuracy of Documents and Other Information.
All instruments, agreements, other documents and written information
delivered or to be delivered to Purchaser by the Selling Stockholder(s), the
Company or the Wedgwood Business Interests in connection with the transactions
contemplated by this Agreement are complete and correct in all material
respects. There is no fact which, to the best of the knowledge of Victor L.
Lund, Paul Dendy, Mark Hall, and Teresa Waldroff, materially and adversely
affects the financial position, assets, liabilities, results of operations or
business of the Company or the Wedgwood Business Interests which have not been
expressly and fully set forth in this Agreement or the schedules furnished to
Purchaser pursuant to this Agreement.
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2.21. Real Estate
To the best of the knowledge of Victor L. Lund, Paul Dendy, Mark Hall, and
Teresa Waldroff, all real estate that is part of the Wedgwood Business Interests
(the "Real Estate") are free and clear of any material:
(i) liens or encumbrances except the Permitted Encumbrances as
described on the attached Schedule 2.21;
(ii) environmentally unsound, hazardous or substandard conditions (as
defined or prescribed by federal and state laws, rules or
regulations applicable to the Real Estate) or which would render
the Wedgwood Business Interests liable under any such laws, rules
or regulations;
(iii)violations of any laws, statutes, ordinances, rules or
regulations with respect to the Real Estate;
(iv) claims against any portion of the Real Estate for or on account
of work done, materials furnished or utilities supplied to the
Real Estate and with out any pay-back agreements, revenue bonds,
utility debt service expenses or other charges or expenses
applicable to the Real Estate;
(v) condemnation proceedings, eminent domain proceedings or similar
actions or proceedings now pending or threatened against the Real
Estate;
(vi) unpaid assessments for public or utility improvements against the
Real Estate; and
(vii)violation of any applicable building, zoning or other
ordinances, resolutions, statutes or regulations of any
government or governmental agency, including, but not limited to,
environmental control agencies or the Insurance Board of
Underwriters with respect to the operation, use, maintenance,
condition or operation of the Real Estate or any part thereof, or
requiring any repairs or alterations to the Real Estate or any
portion thereof.
In addition, to the best of the knowledge of Victor L. Lund, Paul Dendy,
Mark Hall, and Teresa Waldroff, the Selling Stockholder(s) and/or the Wedgwood
Business Interests have good and indefeasible fee simple record or leasehold
title to the Real Estate with no outstanding agreements of sale, or any options,
liens or other rights of third parties to acquire any interest therein, subject
only to the Permitted Encumbrances and utilities are adequate to service the
Real Estate.
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3. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE PURCHASER SHARES.
Each of the Selling Stockholder(s) hereby represents, warrants, and
covenants to Purchaser that:
3.1. Investment Experience and Economic Risk.
Each of the Selling Stockholder(s), with their purchaser representatives,
if any, have knowledge and experience in financial or business matters,
including unregistered and restricted securities, and is capable of evaluating
the merits and risks of an investment in the Purchaser Shares or is financially
able to bear the economic risk of his or her investment in the Purchaser Shares
or he or she is an "accredited investor" as that term is defined in Regulation D
promulgated under the Securities Act of 1933 and has the capacity to protect his
or her interests in connection with such investment.
3.2. Access to Information.
Each of the Selling Stockholder(s) has received all information he or she
considers necessary or appropriate for deciding whether to acquire the Purchaser
Shares specifically including those documents listed on the attached Schedule
3.2. Each of the Selling Stockholder(s) further represents that he or she has
had an opportunity to review any documents of Purchaser on file with the SEC and
to ask questions of and receive answers from Purchaser and its officers
regarding the business, financial affairs and other aspects of Purchaser, and
has further had the opportunity to obtain any other information which he or she
deems necessary to evaluate the investment or to verify the accuracy of
information otherwise provided. Notwithstanding this provision and the due
diligence of the Selling Stockholder(s), the Selling Stockholder(s) may continue
to rely upon all of the representations and warranties of Purchaser contained in
this Agreement.
3.3. Investment Representation.
Each of the Selling Stockholder(s) acknowledges that he or she is aware
that the Purchaser Shares have not been registered under the Act or qualified
under any state securities laws, in reliance, in part, on the representations
and warranties of the Selling Stockholder(s) in this Agreement. The Purchaser
Shares are acquired by such Selling Stockholder(s) for investment purposes only
for his or her own account and not for sale or with a view to distribution of
all or part of the Purchaser Shares.
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3.4. Restricted Securities.
Each of the Selling Stockholder(s) understands that the Purchaser Shares
purchased by him or her hereunder are characterized as "restricted securities"
under the federal securities laws inasmuch as they are acquired from Purchaser
in a transaction not involving a public offering and that under such laws and
applicable regulations, such securities may not be resold without registration
under the Act except in certain limited circumstances, and that otherwise the
Purchaser Shares must be held indefinitely. In this connection, each of the
Selling Stockholder(s) represents that he or she is familiar with SEC Rule 144,
as presently in effect, and the conditions which must be met in order for that
Rule to be available for resale of "restricted securities."
3.5. Further Limitations on Disposition.
Without in any way limiting their representations set forth in this
Agreement, each of the Selling Stockholder(s) further agrees not to make any
disposition of all or any part of the Purchaser Shares unless and until:
(i) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made
in accordance with such registration statement and any applicable
requirements of state securities laws; or
(ii) In the case of any disposition of any of the Purchaser Shares
pursuant to SEC Rule 144, in addition to the matters set forth in
the previous paragraph, such Selling Stockholder(s) shall
promptly forward to Purchaser a copy of the Form 144 as filed
with the SEC with respect to such disposition and a letter from
the executing broker indicating compliance with Rule 144. If SEC
Rule 144 is amended or if the SEC's interpretations thereof in
effect at the time of any disposition by such Selling
Stockholder(s) of any of the Purchaser Shares has changed from
its present interpretations thereof, such Selling Stockholder(s)
shall provide Purchaser with such additional documents as it may
require.
3.6. Legends.
It is understood that the certificates evidencing the Purchaser Shares
shall bear the following legends:
"These securities have not been registered under the Securities
Act of 1933, as amended. They may not be sold, offered for sale,
transferred, pledged or hypothecated in the absence of a
registration statement in effect with respect to the securities
under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold
pursuant to Rule 144 of such Act."
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It is understood that the certificates evidencing the Purchaser Shares
of Victor L. Lund, Paul Dendy, Mark Hall, and Teresa Waldroff shall bear
the following additional legend:
"These securities are security until earlier to occur of the
registration of these securities or ________________, 1998 for
the indemnifications and all other obligations of the holder
named hereon pursuant to that certain Stock Purchase Agreement,
dated as of ______________, 1996, which is on file with the
Secretary of the Company."
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER & JIM GILLEY.
In addition to any other representations, warranties, covenants and
undertakings contained elsewhere in this Agreement, Purchaser and Jim Gilley
("Gilley") hereby make the following representations, warranties and covenants
to the Selling Stockholder(s), all of which survive the Closing for a period of
two years:
4.1. Organization.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, has the full power and authority
to own or lease its properties and to carry on its business as it is now being
conducted. Purchaser has delivered to the Selling Stockholder(s) complete and
correct copies of the articles of incorporation and bylaws of Purchaser as in
effect on the date of this Agreement. No action has been taken by the board of
directors of Purchaser to amend any such documents.
4.2. Authorization.
On or before Closing, Purchaser shall have taken all requisite corporate
action to authorize the execution and delivery by Purchaser of this Agreement
and the performance by Purchaser of its obligations hereunder. Purchaser has
duly and validly executed and delivered this Agreement. This Agreement
constitutes the valid, binding and enforceable obligation of Purchaser in
accordance with its terms, subject to applicable bankruptcy laws.
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4.3. Capitalization.
The authorized capital stock of Purchaser consists of twenty million
(20,000,000) shares of common stock, $0.01 par value per share, of which three
million four hundred forty-one thousand five hundred sixteen and one-half
(3,441,516.50) shares of common stock are issued and outstanding (the "Common
Stock") as of January 17, 1996 and not including the Purchaser Shares to be
issued to the Selling Stockholder(s)), and ten million (10,000,000) shares of
preferred stock, $0.10 par value per share, of which 33,679 shares of preferred
stock are issued and outstanding (the "Preferred Stock"). The rights, privileges
and preferences of the Common Stock are as stated in Purchaser's Certificate of
Incorporation, as amended. The rights, privileges and preferences of the
Preferred Stock are as stated in certificates of designations, preferences and
rights of preferred stock as filed with the Nevada Secretary of State. When
issued, sold and delivered to the Selling Stockholder(s), the Purchaser Shares
will be duly and validly authorized and issued, fully paid and nonassessable,
free and clear of all liens, security interests, pledges, agreements, claims,
charges, options and encumbrances of any and every kind and nature whatsoever,
except as set forth in this Agreement, and will have all the rights, privileges
and preferences of the common stock of Purchaser.
Other than the New Gilley Stock, the Purchaser Shares, the Common Stock and
the Preferred Stock there are no outstanding options, warrants, scrip,
preemptive rights or other subscription rights, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of Purchaser except as shown on Schedule 4.3. Gilley
owns no securities of Purchaser other than as disclosed in this Agreement and
hereby irrevocably waives any and all rights to acquire any other shares or
securities of Purchaser or any other interest in any such shares or securities
existing prior to Closing.
4.4. Brokers and Finders.
Purchaser has not retained any broker, finder or investment banker in
connection with this Agreement or the transactions contemplated by this
Agreement, except National Westminster Bank Plc, New York Branch, or its
affiliates ("NatWest"). All fees to NatWest will be paid by Purchaser.
4.5. Board Representation
Purchaser shall, prior to Closing, have expanded its board of directors by
three (3) members and will appoint Victor L. Lund, Mark Hall and Paul Dendy to
those positions subject to the Closing of this Agreement. Victor L. Lund shall
be a Class I director with an initial term of three (3) years with his term to
expire at the annual meeting of stockholders in 1999 and Mark Hall and Paul
Dendy shall be Class III directors with an initial term of one (1) year with
their term to expire at the annual meeting of stockholders in 1997. Each
director elected shall hold office until his successor shall be elected and
shall qualify. At each applicable annual meeting of stockholders referred to
above, directors elected to succeed those whose terms are then expiring shall be
elected for a full term of office expiring at the third succeeding annual
meeting of stockholders after their election.
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4.6. Continued Operations
Purchaser agrees to i) continue to operate its business in the ordinary
course, other than as disclosed in this Agreement, and ii) not to do anything
which would materially and negatively affect, alter, or change its current
financial condition.
4.7. Liability Release
At or prior to the Closing, Purchaser shall request that Victor L. Lund be
released from the Liens. In the event Victor L. Lund is not released from any
such liability, Purchaser shall assume, indemnify and hold Victor L. Lund
harmless from all such liability from which he has not been released.
4.8. Compliance with Law and Other Instruments.
The Purchaser is not in material violation of any term of its charter
documents or bylaws. To the best of the Purchaser's knowledge after due inquiry,
the Purchaser is not in violation of any material term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment,
decree, order, statute, law, rule or regulation applicable to it or its
properties. The execution, delivery and performance of, and compliance with this
Agreement by the Purchaser, and the consummation of the transactions
contemplated herein, have not resulted and will not result in any such violation
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Purchaser.
4.9. Financial Statements.
(i) The balance sheet of the Purchaser at September 30, 1995 and the
related statements of income for the nine months then ended (the
"Purchaser Interim Financials") have been provided to a
representative of the Selling Stockholder(s). The Purchaser
Interim Financials (a) have been prepared in accordance with the
books and records of the Purchaser; (b) fairly present the
financial position of the Purchaser, as of the date indicated
therein and the results of operations for the periods indicated
therein; and (c) have been prepared in accordance with generally
accepted accounting principles consistently applied. The assets
shown on the balance sheet of the Purchaser, included in the
Purchaser Interim Financials (the "Purchaser Interim Balance
Sheet") were owned by the Purchaser, as of such date free and
clear of any liens or encumbrances (other than those reflected on
such balance sheet) and constituted all of the assets used in the
business of the Purchaser. As of the date hereof and as of the
date of Closing, the assets of the Purchaser are used in their
operations free and clear of any liens or encumbrances, except
liens and encumbrances shown on the Purchaser Interim Balance
Sheet. The Purchaser Interim Cash shall mean the aggregate amount
of cash, cash equivalents and marketable securities of the
Purchaser (valued at the lower of cost or market value) as shown
on the Purchaser Interim Balance Sheet.
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(ii) The Purchaser shall use its best efforts to update the Purchaser
Interim Financials through Closing and the Purchaser Balance
Sheet as of Closing in accordance with generally accepted
accounting principles, prepared on an accrual basis and including
all appropriate accruals for liabilities or expenses (such
balance sheet and income statement as so updated, is hereinafter
referred to as the "Purchaser Closing Balance Sheet" and the
"Purchaser Closing Financials"). The Purchaser Closing Cash,
which shall mean the aggregate amount of cash, cash equivalents
and marketable securities of the Purchaser (valued at the lower
of cost or market value) as shown on the Purchaser Closing
Balance Sheet. The chief financial officer of the Purchaser will
certify that the Purchaser Closing Balance Sheet and the
Purchaser Closing Financials are materially correct.
(iii)The Purchaser Closing Balance Sheet, and the Purchaser Closing
Financials will not materially vary, to the negative, from the
Purchaser Interim Balance Sheet and the Purchaser Interim
Financials, adjusted for comparable periods.
4.10. Absence of Undisclosed Liabilities.
Unless covered by applicable insurance, and except as otherwise set forth
in this Agreement, Schedule 4.10 or the published financial statements and
footnotes of Purchaser, the Purchaser has no obligations or liabilities of any
nature, whether absolute, accrued, contingent or otherwise, whether liquidated
or unliquidated, and whether now due or to become due, which, individually or in
the aggregate, would have a material adverse effect on the financial condition
of the Purchaser. As of the date hereof and as of the date of Closing, the
Purchaser have no material accounts payable which are unpaid after their due
date.
4.11. Tax Returns and Payments.
(i) All federal, state, local and foreign tax returns and reports
required to be filed by the Purchaser have been filed, when due
or as extended, with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to
be filed, and to the best knowledge of the Purchaser such returns
were prepared in accordance with all applicable laws and
regulations;
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(ii) to the best of the knowledge of Purchaser, all federal, state,
local and foreign income, profits, gross receipts, net worth,
capital, franchise, sales, use, employment, occupation, property,
premium, excise and other taxes (including interest and
penalties) due or claimed by appropriate tax authorities to be
due from the Purchaser (a) have been fully paid or provided for
on the books of the Purchaser, or (b) are being contested in good
faith by appropriate proceedings and are not material;
(iii)no issues have been raised (and are pending) by the Internal
Revenue Service or any other taxing authority in connection with
any of the returns and reports referred to in the foregoing
clause (i) which, if adversely determined, would have a material
adverse effect on the financial condition of the Purchaser;
(iv) no waivers of statutes of limitations have been given or
requested with respect to the Purchaser;
(v) no election has been made, or consent given, under Section 341(f)
of the Internal Revenue Code of 1986, as amended;
(vi) the federal income tax returns of the Purchaser have not been
audited by the Internal Revenue Service, except that the
consolidated tax return for the year ended 12/31/93 is currently
under examination by the Internal Revenue Service; and
(vii)the Purchaser has made available for inspection to the Selling
Stockholder(s) complete and correct copies of federal income tax
returns for the Purchaser for the last three fiscal years.
4.12 Absence of Certain Changes and Events.
Except as shown on Schedule 4.12 and as set forth herein, between September
30, 1995 and the Closing there has not been and there will not be:
(i) any transaction entered into by the Purchaser other than in the
ordinary course of business or any material adverse change in the
condition (financial or otherwise), earnings, assets,
liabilities, prospects or business of the Purchaser whether or
not arising from transactions in the ordinary course;
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(ii) any declaration, payment or setting aside of any dividend or
other distribution in respect of the capital stock of the
Purchaser or any direct or indirect redemption, purchase or other
acquisition by the Purchaser of any such stock or interest;
(iii)any modification or rescission of, or waiver, except in the
ordinary course of business, by the Purchaser (written or oral)
of rights under any contract now existing relating to the
Purchaser;
(iv) any mortgage, pledge or imposition of any security interest,
claim, encumbrance or other restriction on, or any sale or other
disposition (other than in the ordinary course of business) of,
any assets of the Purchaser, tangible or intangible;
(v) any change in accounting practice or any new method of accounting
introduced in respect of the business of the Purchaser or any of
its assets, properties or rights;
(vi) any change in the policies or practices of the Purchaser
regarding the timely discharge of accounts payable and other
obligations;
(vii)any cancellation or release of any debt or other obligation owed
the Purchaser, or of any claim held by the Purchaser, except in
the ordinary course of business;
(viii) any borrowing by the Purchaser or any incurrence by the
Purchaser of any obligation or liability (absolute or
contingent), except for current liabilities incurred, and
obligations under acquisition contracts and construction and
permanent financing in the ordinary course of business for new
assisted living projects and specifically including bond
financing to be arranged by MMR Investment Bankers, Inc. and
secured by Purchaser's projects in Denison, Texas and Muskogee,
Oklahoma; or
(ix) any new liens created or allowed to be created on material assets
of the Purchaser except as discussed above.
4.13. Trademarks, Trade Names, Copyrights, Etc.
The Purchaser (i) owns or has the right to use, free and clear of all
liens, claims and restrictions, all patents, trademarks, trade names, service
marks, copyrights, trade secrets, know-how, inventions, designs, processes and
technical data, licenses with respect to the foregoing, and other proprietary
rights of any nature relating to or used in its business, or used or useful in
promoting such business, in the manner in which such business has been or is
being conducted (hereinafter, "Purchaser Business Property"), without, to the
knowledge of the Purchaser, infringing upon or otherwise acting adversely to the
right or claimed right of any person under or with respect to any of the
foregoing, and (ii) are free of any obligation or liability whatsoever to make
any payment by way of royalties, fees or otherwise to any person with respect to
the use of Business Property. To the knowledge of the Purchaser, there has not
been any infringement or unauthorized use by any third party of any of the
Purchaser Business Property.
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4.14. Material Litigation and Other Proceedings.
Unless covered by applicable insurance, and except as shown on Schedule
4.14 or as disclosed in its published financial statements and footnotes, the
Purchaser is not a party to any pending or, to the knowledge of the Purchaser,
threatened action, suit, proceeding or investigation in or by any court or
governmental board, commission, agency, department or office, or before any
arbitrator, in the United States or elsewhere (nor, to the knowledge of the
Purchaser, is there any reasonable basis therefor), arising or claimed to arise
from actions or inactions of the Purchaser.
4.15. Minutes and Stock Records.
The Purchaser has made available for inspection to the Selling
Stockholder(s) the originals or complete and correct copies of the minute books
of the Purchaser. Purchaser shall provide to the Selling Stockholder(s) any
minutes of Purchaser that are completed or approved subsequent to execution of
this Agreement and prior to Closing. Such items contain a materially complete
and correct record of all proceedings and actions taken at all meetings of, and
all actions taken by written consent by, the holders of capital stock and board
of directors of the Purchaser.
4.16. Accuracy of Documents and Other Information.
All instruments, agreements, other documents and written information
delivered or to be delivered to the Selling Stockholder(s) by the Purchaser in
connection with the transactions contemplated by this Agreement are complete and
correct in all material respects. There is no fact which, to the knowledge of
the Purchaser, materially and adversely affects the financial position, assets,
liabilities, results of operations or business of the Purchaser which have not
been expressly and fully set forth in this Agreement or the schedules furnished
to Selling Stockholder(s) pursuant to this Agreement.
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4.17. Transactions Between Purchaser And The Gilley Group.
Except for payroll and related grants of stock options in the normal course
of business, Schedule 4.17 is a true and complete list if (I) all material
transactions between Purchaser and the Gilley Group or any relativeor affiliate
of the Gilley Group since September 30, 1995, which list includes amounts
payable or receivable in connection with such transactions, and (ii ) all
interests, direct or indirect, of the Gilley Group and all realtivesand
affiliates of the Gilley Group and any corporation, partnership, firm or
associationwhich is a competitorof the Company or the Wedgwood Business
Interests, except for ownership interests in companies whose shares are traded
on a national exchange or the NASDAQ or OTC markets and in which the Gilley
Group and their immediate relatives (consisting of siblings, parents,
grandparents, children and grandchildren) and affiliates own no more that 1% of
the outstanding shares. Except as described in Schedule 4.17 and for payroll in
the normal course of business, (i) Purchaser is not indebted to the Gilley Group
or any of their affiliates or relatives other than in respect of salaries for
periods not exceeding the normal monthly or semi-monthly payroll period, or for
amounts due in respect of ordinary travel and business expenses and employee
benefit plans referred to in this Agreement, and (ii) neither the Gilley Group
nor any of their relatives or affiliates is indebted to Purchaser.
4.18. Purchaser Personnel, Compensation and Benefit Plans.
(i) To the knowledge of Purchaser all of the personnel and
compensation agreements, plans and programs of Purchaser are
described on Schedule 4.18, and except as disclosed thereon,
comply with applicable law, including, without limitation, the
reporting, disclosure and other requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and
any liability therefor is appropriately reflected in the
Purchaser Interim Balance Sheet and the Purchaser Closing Balance
Sheet. Purchaser has not engaged in a transaction which would
subject it to any tax, penalty or liability for prohibited
transactions imposed by Section 502(i) of ERISA or Section 4975
of the Internal Revenue Code, as amended (the "Code"). Neither
Purchaser nor any of its directors, officers or employees has
breached in a material respect any of the responsibilities or
obligations imposed upon such person as a fiduciary under Title I
of ERISA with respect to any employee benefit plan or any
terminated plan. No employee benefit plan which is subject to
Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code has an accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived.
Purchaser has made all required contributions under each employee
pension benefit plan for all periods through and including the
date hereof, or adequate accruals therefor have been provided.
None of the existing or terminated employee pension benefit plans
of Purchaser is or was a defined benefit pension plan. Purchaser
has never been obligated to contribute to any employee pension
benefit plan which is a multi-employer plan at any time on or
after September 26, 1980. Purchaser has no obligations to
provide, and have made no payments in respect of, life or other
insurance benefits or medical benefits to retired employees or
former employees of Purchaser. As used in this Agreement, the
terms "employee benefit plan", "employee pension benefit plan"
and "multi-employer plan" shall have the respective meanings
assigned to such terms in Section 3 of ERISA. Neither Purchaser
nor any of their employees is a party or subject to any union or
collective bargaining agreement.
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(ii) Purchaser is in full compliance with all applicable wage and hour
laws with respect to its staff and temporary employees.
4.19. Insurance and Banking Facilities.
Schedule 4.19 comprises a complete and correct list of (i) all contracts of
insurance and indemnity of or relating to Purchaser in force at the date of this
Agreement (including name of insurer or indemnitor, agent, annual premium,
coverage and expiration date), and Purchaser has delivered to the Selling
Stockholder(s) complete and correct copies of all such contracts, (ii) the names
and locations of all banks in which Purchaser has accounts, and (iii) the names
of all persons authorized to draw on such accounts. All premiums and other
payments due with respect to all such contracts of insurance and indemnity have
been paid, and to the knowledge of Purchaser there is no act or failure to act
that has caused or might cause any such contract to be cancelled or terminated.
All notices have been given, all known claims have been presented and all other
required or appropriate action with respect to such contracts has been taken by
Purchaser in a due and timely fashion. Purchaser shall not make any reductions
in such insurance coverage prior to Closing.
4.20. Access to Information.
Purchaser has received all information it considers necessary or
appropriate for deciding whether to acquire the Shares or the Wedgwood Business
Interests. Each of the Selling Stockholder(s) further represents that it has had
an opportunity to ask questions of and receive answers from the Company and its
officers and each of the Selling Stockholder(s) regarding the business,
financial affairs and other aspects of the Company and the Wedgwood Business
Interests, and has further had the opportunity to obtain any other information
which it deems necessary to evaluate the investment or to verify the accuracy of
information otherwise provided. Notwithstanding this provision and the due
diligence of Purchaser, Purchaser may continue to rely upon all of the
representations and warranties of the Selling Stockholder(s).
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5. COVENANTS OF PURCHASER AND THE SELLING STOCKHOLDER(S).
5.1. Agreement Not to Compete.
(i) Victor L. Lund, Paul Dendy, Mark Hall, and Teresa Waldroff
covenant and agree that, without the prior written consent of
Purchaser or its successors, for a period commencing on the date
of Closing and ending three years following Closing, such Selling
Stockholder(s) shall not, directly or indirectly, individually or
together or through any affiliate or other firm, person,
corporation or entity, except as required in the performance of
his or her duties, if any, as an employee or consultant of
Purchaser or its affiliates (1) engage in or acquire any interest
in any business competitive with that conducted by the Purchaser
or any of its affiliates, franchises, successors or assigns which
are engaged in the full service retirement center or assisted
living business, including Alzheimer's care, (collectively for
purposes of this Section 5, the "Purchaser Companies"), in any
state or foreign country (except that such Selling Stockholder(s)
may acquire interests in companies whose shares are traded on a
national exchange or the NASDAQ or OTC markets and in which such
Selling Stockholder(s) and his or her immediate relatives
(consisting of siblings, parents, grandparents, children and
grandchildren) and affiliates own no more that 1% of the
outstanding shares), (2) approach, solicit, accept business from
or otherwise engage in business in any competitive way with, any
person or entity which is, has been or becomes, a customer or
client of the Purchaser Companies, or any affiliate of such a
person or entity, (3) approach, counsel or attempt to induce any
person who is then in the employ of any of the Purchaser
Companies to leave the employ of the Purchaser Companies, or
employ or attempt to employ any such person or any person who at
any time during the preceding 24 months was in the employ of the
Purchaser Companies, or (4) aid or counsel any other person, firm
or corporation to do any of the above. Notwithstanding this
paragraph, the Selling Stockholder(s) may engage in the full
service retirement center or assisted living business, including
Alzheimer's care, following termination of his or her employment
by the Purchaser in the Portland, Oregon metropolitan area (or
the Dallas, Texas metropolitan area if he or she has relocated to
the Dallas, Texas metropolitan area) which is greater than 5
miles from any facility operated or publicly announced by any of
the Purchaser Companies and 25 miles for any area outside of the
Portland, Oregon (or Dallas, Texas) metropolitan area.
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(ii) Each of the Selling Stockholder(s) further agrees that he or she
will not at any time from and after the date of Closing (1)
except during his or her engagement by Purchaser or its
affiliates as an employee or consultant, indicate on any
stationery, business card or advertising, solicitation or other
business materials that he or she is or was formerly associated
with the Purchaser or any affiliate thereof (provided that any
factual statement on resumes or other similar reference material
shall not be deemed to violate this provision), or (2) disclose,
furnish or make accessible to any person, or make use of, any
confidential information obtained by such Selling Stockholder(s)
while he or she was the owner of any of the Shares or while he or
she was in the employ of the Purchaser or its affiliates as an
employee or consultant, including, without limitation,
information with respect to any designs, procedures, customers,
clients, advertising, finances, financial condition,
organization, personnel, business activities, budgets, plans,
objectives or strategies which are proprietary to the Purchaser
Companies; provided, however, that he or she may disclose such
information as may be required by law in connection with any
judicial or administrative proceeding or inquiry.
(iii)In view of the position of confidence which the Selling
Stockholder(s) have enjoyed as stockholders of the Company, and
recognizing both the access to confidential financial and other
information derived by the Selling Stockholder(s) pursuant to
their employment with the Company and the substantial sums to be
paid to them pursuant to the terms hereof, the Selling
Stockholder(s) expressly acknowledge that the agreement not to
compete and related restrictive covenants set forth in this
Section 5.1 are reasonable and necessary in order to protect and
maintain the proprietary interests and other legitimate business
interests of the Purchaser Companies and that the enforcement of
such agreement not to compete and related restrictive covenants
would not prevent them from earning a livelihood. The Selling
Stockholder(s) further acknowledge: (a) that it would be
difficult to calculate damages to Purchaser from any breach by
them of their obligations under this Section 5.1, (b) that injury
to Purchaser from any such breach would be irreparable and
impossible to measure and (c) that the remedy at law for any
breach or threatened breach of this Section 5.1 would therefore
be an inadequate remedy and, accordingly, that Purchaser shall,
in addition to all other available remedies (including, without
limitation, seeking such damages as it can show it has sustained
by reason of such breach), be entitled to injunctive and other
similar equitable remedies without proving or showing any actual
damage sustained.
(iv) In the event the provisions of this Section 5.1 should ever be
deemed to exceed the time or geographic limitations permitted by
applicable law, then such provisions shall be reformed to the
maximum time or geographic limitations permitted by applicable
law. The covenants contained in Section 5.1(i) shall be construed
as a series of separate covenants, one for each month of each
year and for each county and for each state of the United States
encompassed by the covenants contained in Section 5.1(i). In the
event that any one or more of such covenants shall for any reason
be held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not have any effect on any
other such separate covenant, but such other covenants shall be
construed as if the invalid or unenforceable covenant had never
been contained in Section 5.l(i).
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5.2. Selling Stockholder(s) Indemnification
(i) Subject to the terms and provisions of this Section 5.2, the
Selling Stockholder(s) shall jointly and severally, to the extent
of their interest in the Purchaser Shares, indemnify and hold
Purchaser and the Company harmless from and against and in
respect of any and all liabilities, losses, damages, settlements,
claims, costs and expenses, including but not limited to
reasonable attorneys' fees, and any and all actions, suits,
proceedings, demands, assessments or judgments, costs and
expenses incidental to the foregoing ("Losses"):
(a) resulting from or arising out of the inaccuracy in any
material respect of any representation or warranty, or the
breach of any covenant or other agreement of the Selling
Stockholder(s) contained in this Agreement or resulting from
or arising out of any action, suit or proceeding instituted
by any person and based on an allegation or assertion which,
if true, would constitute such an inaccuracy or breach; or
(b) resulting from or arising out of the activities of the
Company or the Selling Stockholder(s) prior to Closing,
except for the Liens, and specifically including any
liability relating to the "Key Employee Participation
Program".
(ii) Purchaser shall give notice to the Selling Stockholder(s) in the
event it becomes aware of any litigation, claim or other item as
to which an indemnification obligation may arise under this
Section 5.2.
(iii)Subject to paragraph 3.6(ii) of this Agreement, the Purchaser
Shares are security for the these indemnifications of the Selling
Stockholder(s) to Purchaser, and all other obligations of the
Selling Stockholder(s) to Purchaser, for a period until the
earlier to occur of the registration of the Purchaser Shares for
such Selling Stockholder(s) or two years following the Closing.
This Agreement is also intended to be a security agreement and
financing statement. The address of the Selling Stockholder(s)
(Debtor) and the address of Purchaser (Secured Party) are as set
forth for notice in Section 6.4 below. A carbon, photographic or
other reproduction of this Agreement or of a financing statement
pursuant hereto is sufficient as a financing statement.
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5.3. Release of Claims.
Except i) as set forth in Schedule 5.3, ii) reasonable loans secured by
Wedgwood Business Interests which were reasonably required and were made
following execution of this Agreement and prior to Closing, and iii) to the
extent the Company or Purchaser is to discharge any debt, liability or
obligation under the provisions of this Agreement or the heretoeach of the
Selling Stockholder(s) by the Company, the Wedgwood Business Interests or any of
their respective agents or affiliates, excluding Purchaser. Such release will
have no impact on any claim by the Selling Stockholder(s) against Purchaser
relating to this Agreement.
5.4. Further Assurances.
The Selling Stockholder(s) agrees that they will from time to time, at the
request of Purchaser and without further consideration, execute and deliver such
other instruments of conveyance, assignment and transfer and take such other
actions as Purchaser may reasonably request in order more effectively to convey,
assign, transfer to and vest in Purchaser the Shares, and to convey, assign,
transfer to and vest in the Company and Purchaser the ownership or exclusive
rights to the Business Property and to the Wedgwood Business Interests.
5.5. Continued Operations
The Selling Stockholders and the Company agree to i) continue to operate
the Company and the Wedgwood Business Interests in the ordinary course of
business prior to the Closing, ii) make all necessary repairs and replacements
to the Wedgwood Business Interests prior to the Closing, and iii) not dispose of
any of the Wedgwood Business Interests, or personal property used at the
Wedgwood Business Interests, unless the same is replaced by property of equal or
greater value.
5.6. Security for Obligations
Subject to paragraph 3.6(ii) of this Agreement, the Selling Stockholder(s)
agree that the Purchaser Shares shall be pledged as security for the obligations
of the Selling Stockholder(s) under this Agreement. At Closing the Selling
Stockholder(s) will execute a pledge, security agreement and such other
documents reasonably necessary, in favor of Purchaser, to effectuate the intent
of this provision.
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5.7. Stockholder Proxy Assistance
Victor L. Lund, Paul Dendy, Mark Hall, and Teresa Waldroff agree to use
their best efforts in a timely fashion to assist the Purchaser in its
preparation of a proxy for the shareholders of the Purchaser regarding this
transaction including, but not limited to, responding to a personal background
questionnaire and providing a business related biographical for each of the
Selling Stockholder(s).
5.8. Landlord Approvals and Lender Approvals
Victor L. Lund, Paul Dendy, Mark Hall, and Teresa Waldroff agree to use
their best efforts in a timely fashion to obtain the written approvals, in a
form reasonably acceptable to Purchaser, of any landlords, lenders, etc.
pursuant to leases, loans or other agreements required for Purchaser to acquire
the Wedgwood Business Interests (the "Landlord Approvals and Lender Approvals")
and as more particularly described on the attached Schedule 5.8, to keep
Purchaser fully informed on the progress of their requests and to provide a copy
to Purchaser of all correspondence regarding same.
Purchaser agrees to assist Victor L. Lund, Paul Dendy, Mark Hall, and
Teresa Waldroff in their efforts to obtain the Landlord Approvals and Lender
Approvals. Purchaser will comply with all reasonable requirements by lenders,
landlords, etc. to obtain the Landlord Approvals and Lender Approvals. If such
requirements are unreasonable Purchaser and Victor L. Lund, Paul Dendy, Mark
Hall, and Teresa Waldroff will execute an Alternate Agreement if reasonably
possible.
5.9. Purchaser Indemnification
(i) Subject to the terms and provisions of this Section 5.9, the
Purchaser shall indemnify and hold the Selling Stockholder(s)
harmless from and against and in respect of any and all
liabilities, losses, damages, settlements, claims, costs and
expenses, including but not limited to reasonable attorneys'
fees, and any and all actions, suits, proceedings, demands,
assessments or judgments, costs and expenses resulting from or
arising out of the inaccuracy in any material respect of any
representation or warranty, or the breach of any covenant or
other agreement of Purchaser contained in this Agreement or
resulting from or arising out of any action, suit or proceeding
instituted by any person and based on an allegation or assertion
which, if true, would constitute such an inaccuracy or breach. In
addition, Purchaser shall indemnify and hold the Selling
Stockholder(s) for any claims filed by other owners of Wedgwood
Business Interests, besides the Selling Stockholder(s), for any
misleading, false, or undisclosed facts or information relating
to the materials or documents Selling Stockholder(s) received
from Purchaser and forwarded.
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(ii) The Selling Stockholder(s) shall give notice to Purchaser in the
event any of them become aware of any litigation, claim or other
item as to which an indemnification obligation may arise under
this Section 5.9.
(iii)The address of the Selling Stockholder(s) and the address of
Purchaser are as set forth for notice in Section 6.4 below.
6. MISCELLANEOUS.
6.1. Expenses.
Purchaser shall pay its own costs and expenses, and the Selling
Stockholder(s) shall pay his or her own costs and expenses (and those of the
Company and the Wedgwood Business Interests, if any) relating to this Agreement,
the negotiations leading up to this Agreement and the performance of this
Agreement.
6.2. Entire Agreement.
This Agreement and the exhibits, schedules and other documents delivered
pursuant to this Agreement, contain all of the terms and conditions agreed upon
by the parties relating to the subject matter of this Agreement and supersedes
all prior and contemporaneous agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respect that
subject matter. Attached hereto is listing entitled Med Resources/Wedgwood Stock
Purchase Agreement Schedule Preparation And Status Report (the "Status Report").
All schedules not completed upon the execution of this Agreement will be
completed, or updated if applicable, as soon as reasonably possible by the
suggested preparer, as indicated on the Status Report, and shall be reasonably
approved by all of the parties to this Agreement.
6.3. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Texas and venue for any action in a court of law respecting
this agreement will be in Dallas County, Texas.
6.4. Notices.
All notices, requests, demands, and other communications made in connection
with this Agreement shall be in writing and shall be deemed to have been duly
given on the date of delivery, if delivered to the persons identified below, or
two days after mailing if mailed by certified or registered mail, postage
prepaid, return receipt requested, addressed as follows:
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If to Purchaser, to:
Medical Resource Companies of America
4265 Kellway Circle
Addison, TX 75244
Attn: Mark E. Bennett
If to The Selling Stockholder(s), to:
Wedgwood Retirement Inns, Inc.
816 N.E. Eighty-seventh Avenue
Vancouver, Washington 98664
Attn: Victor L. Lund
Such persons and addresses may be changed, from time to time, by means of a
notice given in the manner provided in this Section.
6.5. Severability.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
6.6. Survival of Representations, Warranties and Covenants.
All representations, warranties, covenants and agreements contained in this
Agreement, including the schedules and other documents delivered pursuant to
this Agreement, shall survive the execution and delivery of this Agreement for a
period of two (2) years, regardless of any investigation heretofore or hereafter
made by or on behalf of any of the parties hereto.
6.7. Waiver, Amendment.
No waiver of any term or condition contained in this Agreement and no
purported amendment of this Agreement shall be effective unless it is signed by
the party against whom enforcement of such waiver or amendment is sought. The
waiver of any term or condition of this Agreement by any party shall not be
construed as a waiver of any other breach or failure of the same term or
condition, or a waiver of any other term or condition of this Agreement.
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6.8. Disclosure.
The Selling Stockholder(s) will not, without the prior written consent of
Purchaser, disclose any of the terms or provisions of this Agreement, except i)
to members of his or her immediate family, his or her attorneys, accountants and
professional advisors, ii) as required by law in connection with any judicial or
administrative proceeding or inquiry, iii) as reasonably necessary to obtain the
ownership interests of others in the Wedgwood Business Interests, and iv) as
reasonably necessary to obtain the Landlord Approvals and Lender Approvals.
6.9. Assignment.
This Agreement shall inure to the benefit of, and be binding upon, the
respective successors, heirs, personal representatives and assigns of the
parties hereto, provided, however, that, no assignment may be made by either
party without the prior written consent of other party, however, such permission
shall not be unreasonably withheld.
6.10. No Third Party Rights.
This Agreement is made for the benefit of the parties hereto and their
successors and permitted assigns as provided in Section 6.9, and neither this
Agreement nor any provision hereof shall be construed or deemed to give rise to
rights in any other person.
6.11. Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
Agreement.
6.12. Headings, Gender.
The section headings in this Agreement are inserted for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement. Gender references in this Agreement shall be deemed to include the
masculine, feminine and neuter, as the context may require.
6.13. Construction
Singular terms herein shall be deemed to include the plural and plural
terms shall be deemed to include the singular as the context requires. In
construing this Agreement: (i) no consideration shall be given to the identity
of the party drafting this Agreement, it being acknowledged that this Agreement
was negotiated at arms length in detail by the attorneys for all the parties
hereto and was jointly drafted by all parties; (ii) no consideration shall be
given to the fact that a phrase in one portion of this Agreement differs in
language from a phrase in a different portion of the Agreement, and each such
phrase shall be construed independently, based upon the plain meaning of the
words contained therein (except to the extent that defined terms or terminology
recognized by a particular industry is employed, in which event the definition
given herein or by such industry shall apply).
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6.14. Additional Documents
The Selling Stockholder(s) agree, upon demand, to do any act or execute any
additional documents as may be reasonably required by Purchaser to effect the
intent of this Agreement, more fully evidence and perfect the rights, titles,
liens and security interests herein created or intended to be created and to
protect the rights, remedies, power and privileges of Purchaser.
6.15. Attorney's Fees
If any legal action is brought by either of the parties, the party in whose
favor final judgment is entered shall be entitled to recover reasonable
attorney's fees from the other party in addition to any other relief that may be
awarded.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth in the first paragraph of this Agreement.
/s/ Victor L. Lund
----------------------
Victor L. Lund
/s/ Paul Dendy
----------------------
Paul Dendy
/s/ Mark Hall
----------------------
Mark Hall
/s/ Frank R. Reeves
----------------------
Frank R. Reeves
/s/ Doris Thornsbury
----------------------
Doris Thornsbury
/s/ Teresa Waldroff
----------------------
Teresa Waldroff
WEDGWOOD RETIREMENT INNS, INC.
By:___________________________
Name:_________________________
Title:________________________
MEDICAL RESOURCE COMPANIES OF AMERICA
By:___________________________
Name:_________________________
Title:________________________
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EXHIBIT A
CONSTRUCTION MANAGEMENT AGREEMENT
CONSTRUCTION MANAGEMENT AGREEMENT dated as of April 1, 1996, by and between
Medical Resource Companies of America, a Nevada corporation (the "Company"), and
Victor L. Lund ("Manager").
W I T N E S S E T H
WHEREAS, pursuant to the Stock Purchase Agreement (the "Stock Purchase
Agreement") dated April 1, 1996 by and between the Company, Manager and Wedgwood
Retirement Inns, Inc. ("Wedgwood"), Manager has agreed, among other things, to
sell to the Company all of the issued and outstanding shares of capital stock
owned by him of Wedgwood;
WHEREAS, Manager has served as an officer of Wedgwood and, under the
leadership of Manager, Wedgwood has developed full service retirement centers
and assisted living facilities, including Alzheimer's care (the "Assisted Living
Facilities");
WHEREAS, the Company deems the continued availability of Manager to develop
Assisted Living Facilities for the Company and its affiliates to be vitally
important to the continued success of such companies;
WHEREAS, without Manager's agreement to perform the services hereinafter
set forth, the Company would not have agreed to enter into the Stock Purchase
Agreement or to consummate the transactions described therein; and
WHEREAS, the parties hereto wish to enter into an agreement providing for
Manager's service as hereinafter set forth;
NOW, THEREFORE, in consideration of the execution of the Stock Purchase
Agreement and the consummation of the transactions described therein and the
mutual covenants herein contained, the parties hereto agree as follows:
1. Service to the Company and its affiliates as a Construction Manager.
(a) During the period commencing upon the closing of the Stock
Purchase Agreement, and ending three (3) years thereafter, the
Company agrees to engage Manager, and Manager agrees to serve the
Company and its affiliates, as a construction manager. The term
of this Agreement may be extended or renewed at any time by a
mutual written agreement entered into by the parties.
Exhibit A - 1
<PAGE>
(b) Manager shall faithfully and to the best of his ability,
experience and talent, carry out his responsibilities and duties
hereunder. Manager agrees to oversee the construction for the
Company, or an affiliate of the Company, Assisted Living
Facilities as listed on the attached Exhibit "A1" in 1996 and an
estimated six (6) Assisted Living Facilities in 1997 and ten (10)
Assisited Living Facilities in 1998 (the "Projects"). So long as
Manager is not in breach of any material provision of this
Agreement or the Stock Purchase Agreement Manager shall have the
right of first refusal, for a period of two (2) weeks following
receipt of written notice, to oversee th construction of all
Assisted Living Facilities of the Company in 1997 and 1998 until
Manager has agreed to oversee six (6) Projects in 1997 and six
(6) Projects in 1998. Manager is not required to oversee the
construction of any of the Assisted Living Facilities to be
developed by the Company in 1997 and 1998. The Company agrees to
develop the Projects subject to reasonably acceptable market
conditions for such Assisted Living Facilities and the ability of
the Company to obtain reasonably acceptable financing.
(c) As consideration for performance of his services, the Company, or
an affiliate of the Company, shall pay to Manager a development
fee of $150,000, for each of the Projects successfully completed.
So long as Manager is not in breach of any material provision of
this Agreement or the Stock Purchase Agreement the Company will
pay to Manager, on a monthly basis, the amount equal to the
percentage of completion of each of the Projects multiplied times
$100,000 ("Partial Payments") with the final $50,000 for each of
the Projects payable upon receipt of a certificate of occupancy.
The obligation of the Company for Partial Payments is hereby
expressly stated to survive termination of this Agreement. Such
payments shall not be subject to withholding of income tax or
other normal employee deductions relating thereto; Manager shall
not have the status of an employee of the Companies or any of its
affiliates hereunder, but shall be an independent contractor in
all respects.
(d) As part of his services hereunder, Manager agrees that in his
business dealings he will speak in harmonious terms of the
Company and its affiliates and their management personnel and
will otherwise use his best efforts to act in a manner so as to
generate goodwill on behalf of the Company and its affiliates.
(e) The Company shall directly pay or reimburse Manager, upon
presentation of proper vouchers, for all reasonable business
expenses relating to a Project except for travel to a Project and
accounting services used by the Manager.
Exhibit A - 2
<PAGE>
(f) During the term of this Agreement Manager may acquire, develop
and own Assisted Living Facilities for his own benefit ("Other
Facilities") to operate or to lease to others outside of the
Non-Competition Zone (defined below), so long as the Manager
executes and records for each of the Other Facilities developed a
right of first refusal to the Company to lease or purchase that
facility. The "Non-Competition Zone" is any location which is
within 25 miles of any Assisted Living Facilities operated or
publicly announced by any of the Company or one of its
affiliates, except for the Portland, Oregon metropolitan area
where 5 miles shall be substituted for 25 miles. The Company will
assist Manager to finance the Other Facilities, but the Company
itself has no obligation to provide Manager with such financing.
2. Termination.
This Agreement and the obligations of the Company and Manager hereunder
shall terminate (except as to such obligations as are expressly stated to
survive such termination) only in the following events: (i) upon the death or
permanent disability of Manager, (ii) the expiration of the term of Manager's
service as consultant to the Company as provided in Section 1, or (iii)
Manager's breach of any material provision of this Agreement or the Stock
Purchase Agreement, including, without limitation, the non-competition covenants
contained therein, and his failure to cure the same after thirty (30) days of
receipt of written notice from the Company or one of its affiliates.
3. Miscellaneous.
(a) Notices. All notices which a party is required or may desire to
give to the other party under or in connection with this
Agreement shall be sufficient when given by addressing the same
to the other party as follows:
If to the Company, to:
Medical Resource Companies of America
4265 Kellway Circle
Addison, TX 75244
Attn: Mark E. Bennett
If to Manager, to:
Victor L. Lund
816 N.E. Eighty-seventh Avenue
Vancouver, Washington 98664
or to such other place as may be designated in writing by like
notice. Any notice shall be deemed to have been given if
personally delivered or two days after mailing if mailed by
certified or registered mail, postage prepaid, return receipt
request, addressed as required herein.
Exhibit A - 3
<PAGE>
(b) Assignment. This Agreement shall be binding upon and inure to the
benefit of Manager and the Company, their successors and assigns.
Manager may not, without the express written permission of the
Company, assign or pledge any rights or obligations hereunder to
any person, firm or corporation, however, Manager is specifically
permitted to assign this Agreement to an entity that Manager
controls. Such assignment shall be approved by the Manager in
writing and shall specifically provide that Manager will be in
material default of this Agreement if Manager ceases to control
such entity.
(c) Entire Agreement. This Agreement contains all of the terms and
conditions agreed upon by the parties relating to the subject
matter of this Agreement and supersedes any and all prior or
contemporaneous agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written,
with respect to that subject matter.
(d) Amendment. No amendment or modification of this Agreement shall
be valid unless evidenced by a written instrument executed by the
parties hereto. No waiver by the Company of any breach by Manager
of any provision or condition of this Agreement shall be deemed a
waiver of any similar or dissimilar provision or condition at the
same or any prior or subsequent time.
(e) Severability. The provisions of this Agreement and the covenants
herein contained shall be construed independently of each other,
it being the express intent of the parties hereto that the
obligations of, and restrictions on, the parties as provided
herein shall be enforced and given effect to the fullest extent
legally permissible.
(f) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but which
together shall constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement
areinserted for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
(i) Attorney's fees. If any legal action is brought by either of the
parties, the party in whose favor final judgment is entered shall
be entitled to recover reasonable attorney's fees from the other
party in addition to any other relief that may be awarded.
Exhibit A - 4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
MANAGER:
/s/ Victor L. Lund
------------------------------
Victor L. Lund
MEDICAL RESOURCE COMPANIES OF AMERICA
By: /s/ James R. Gilley
James R. Gilley
President
Exhibit A - 5
<PAGE>
EXHIBIT "A1"
THE 1996 PROJECTS
-----------------
Villa de la Rosa, Roswell, New Mexico
Sweetwater Springs, Lithia Springs, Georgia
Camelot Assisted Living, Harlingen, Texas
Oak Park, Clermont, Florida
Exhibit A - 6
<PAGE>
EXHIBIT B
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of __________, 1996, by and between Medical
Resource Companies of America, a Nevada corporation (the "Company"), and Paul
Dendy ("Employee");
W I T N E S S E T H:
WHEREAS, pursuant to the Stock Purchase Agreement dated _______________,
1996 by and between the Company, and Employee (the "Stock Purchase Agreement"),
Employee has agreed, among other things, to sell to the Company all of his or
her outstanding shares of capital stock of the Wedgwood Retirement Inns, Inc.
("Wedgwood");
WHEREAS, Employee will be a highly valued employee of the Company whose
qualifications are critical to the success of the Company and without whom the
business of the Company would be irreparably harmed;
WHEREAS, the Company desires to insure that the skills and experience of
Employee will remain available to the Company and will not be used to compete
against the Company;
WHEREAS, without Employee's agreement to continue in the employ of the
Company pursuant hereto, the Company would not have entered into the Stock
Purchase Agreement or agreed to consummate the transactions contemplated
thereby; and
WHEREAS, the parties hereto wish to enter into an agreement providing for
the continued employment of Employee by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
the parties hereto agree as follows:
1. Employment. The Company agrees to continue to employ Employee, and
Employee agrees to continue to serve the Company, upon the terms and
conditions hereinafter set forth.
2. Duties. During the term of this Agreement, Employee agrees to devote
his or her full business time and his or her best efforts to the
affairs of the Company. Employee shall render such executive,
administrative and other duties as are commensurate with his or her
title and as may be requested from time to time by the Board of
Directors of the Company or Employee's immediate supervisor. Employee
will be based out of the Portland, Oregon/Vancouver, Washington area
unless otherwise agreed by Employee. The Company will provide, at its
expense, reasonably adequate office space, staff and equipment to
support Employee's duties.
Exhibit B - 1
<PAGE>
3. Term. The term of Employee's employment hereunder shall commence upon
the closing of the Stock Purchase Agreement, and shall end one (1)
year thereafter, unless terminated prior thereto pursuant to Section 7
hereof. This Agreement shall be renewable for two(2) successive one
(1) year periods as long as the parties hereto agree to the same for
each period.
4. Compensation and Benefits. In consideration of the services to be
rendered by Employee during the Employment Period, Employee shall
receive from the Company the following compensation:
(a) Salary. Employee shall be compensated at an annual salary of
$125,000 per year, payable in twenty-four equal semi-monthly
installments. Salary amounts set forth above shall be reduced for
income tax withholdings and other normal employee deductions
relating thereto. Employee shall also be entitled to receive
annual bonuses in accordance with the standard policy and
procedures of the Company in effect from time to time with
respect to employees at the executive level.
(b) Insurance. The Company shall provide life, medical and disability
insurance coverage to Employee comparable to the coverage
provided to other executive employees of the Company.
(c) Travel, Business and Entertainment Expenses. The Company shall
reimburse Employee, upon presentation of proper vouchers, for the
reasonable travel, entertainment and other business expenses
incurred by him or her in the performance of his or her duties
hereunder pursuant to the standard policy and procedures of the
Company in effect from time to time with respect to employees at
the executive level, unless adjusted by the written agreement of
Employee and the Company.
(d) Vacation & Sick Leave. Employee shall be entitled to paid
vacation and sick leave each year in accordance with the standard
policy and procedures of the Company in effect from time to time
with respect to employees at the executive level. For 1996 the
standard vacation policy and procedure is to allow ten (10) days
per year with accrual of up to thirty (30) days for unused
vacation. For 1996 the standard sick leave policy and procedure
is to allow ten (10) days per year with accrual of up to thirty
(30) days for unused sick leave.
(e) Mileage & Automobile Allowance. The Company shall reimburse
Employee, upon presentation of proper vouchers, on the mileage
basis set by the Internal Revenue Service, for the reasonable
travel, entertainment and other business mileage incurred by his
in the performance of his duties hereunder, unless adjusted by
the written agreement of Employee and the Company. If the
Employee is involved in the operation and management of
facilities, the Company shall continue to pay the Employee the
automobile allowance paid to him which Employee had been
receiving prior to the date of this Agreement, or an equivalent
benefit, and Employee recognizes that such amount will be taxable
income to him.
Exhibit B - 2
<PAGE>
(f) Stock Options. Employee shall be granted a qualified employee
stock option pursuant to the Company's Stock Option Plan. The
option shall cover 10,000 shares of the common stock of the
Company, one-third of which shall vest on each anniversary of
this agreement, shall be granted as of the commencement date
hereof, and shall have an exercise price equal to the closing
sale price of the Company's Common Stock on the date hereof, as
reported by the American Stock Exchange, and shall have a term of
ten years (subject to earlier termination as provided in the
option agreement) from the date of grant. Additional options will
be granted on an annual basis at the discretion of the board of
directors of the Company, or a committee of the board of
directors of the Company. Such options shall continue to vest so
long as Employee continues to be employed by the Company.
5. Employee's Obligations. During the term of his or her employment
hereunder, Employee shall faithfully, industriously and to the best of
his or her ability, experience and talent, carry out his or her
responsibilities and duties hereunder. Employee shall not during his
or her employment hereunder engage, directly or indirectly, in any
other material trade or business activity, whether or not such trade
or business activity is pursued for gain, profit, or other advantage.
Nothing in this Section 5 shall be construed to prohibit Empoyee from
having business interests or investing his or her assets in such form
or manner as he or she shall wish, so long as such investments or
business interests do not materially impair Employee's ability to
perform their obligations and duties to the Company, and so long as
such business interests or investments do not give Employee the right
or ability to control or influence the policy decisions of any
business which is or might be in competition with any of the
businesses of the Company or any of their affiliated companies or
franchisees. Employee represents and warrants that he or she is in
good health, and is not on the date of this Agreement a party to any
agreement, contract or understanding, whether of employment or
otherwise, which would in any way restrict him or her from entering
into this Agreement or undertaking or performing employment in
accordance with this Agreement.
Exhibit B - 3
<PAGE>
6. Agreement Not to Compete.
(a) Employee covenants and agrees that, without the prior written
consent of the Company or its successors, for a period commencing
on the date hereof and ending three years hereafter, he or she
shall not, directly or indirectly, individually or together or
through any affiliate or other firm, person, corporation or
entity, except as required in the performance of his or her
duties as an employee or consultant of the Company, (1) engage in
or acquire any interest in any business competitive with that
conducted by the Company or any of their affiliates, franchises,
successors or assigns which are engaged in the full service
retirement center or assisted living business, including
Alzheimer's care, (collectively, the "Purchaser Companies"), in
any state or foreign country (except that he or she may acquire
interests in companies whose shares are traded on a national
exchange or the NASDAQ or OTC markets and in which Employee and
his or her immediate relatives (consisting of siblings, parents,
grandparents, children and grandchildren) and affiliates own no
more than 1% of the outstanding shares), (2) approach, solicit,
accept business from or otherwise engage in business in any way
with, any person or entity which is, has been or becomes, a
customer or client of the Purchaser Companies, or any affiliate
of such a person or entity, (3) approach, counsel or attempt to
induce any person who is then in the employ of any of the
Purchaser Companies to leave the employ of the Purchaser
Companies, or employ or attempt to employ any such person or any
person who at any time during the preceding 24 months was in the
employ of the Purchaser Companies, or (4) aid or counsel any
other person, firm or corporation to do any of the above.
Notwithstanding this paragraph, Employee may engage in the full
service retirement center or assisted living business, including
Alzheimer's care, following termination of his or her employment
by the Company in the Portland, Oregon metropolitan area (or the
Dallas, Texas metropolitan area if Employee has relocated to the
Dallas, Texas metropolitan area) which is greater than 5 miles
from any facility operated or publicly announced by any of the
Purchaser Companies and 25 miles for any area outside of the
Portland, Oregon (or Dallas, Texas) metropolitan area.
(b) Employee further agrees that he or she will not at any time from
and after the date hereof (1) except during his or her engagement
by the Company or its affiliates, indicate on any stationery,
business card or advertising, solicitation or other business
materials that he or she is or was formerly associated with the
Company or any affiliate thereof (provided that any factual
statement on resumes or other similar reference material of
Employee shall not be deemed to violate this provision), or (2)
disclose, furnish or make accessible to any person, or make use
of, any confidential information obtained by him or her while he
or she was in the employ of the Company or its affiliates as an
employee or consultant, including, without limitation,
information with respect to any designs, procedures, customers,
clients, advertising, finances, financial condition,
organization, personnel, business activities, budgets, plans,
objectives or strategies which are proprietary to the Purchaser
Companies', provided, however, that Employee may disclose such
information as may be required by law in connection with any
judicial or administrative proceeding or inquiry.
Exhibit B - 4
<PAGE>
(c) In view of the anticipated continuation of Employee's
relationship with the customers and employees of the Purchaser
Companies pursuant to this Agreement, and recognizing both the
access to confidential financial and other information derived by
Employee pursuant to his or her employment with the Company and
the substantial sums to be paid to Employee pursuant to the terms
of this Agreement, Employee expressly acknowledges that the
agreement not to compete and related restrictive covenants set
forth in this Section 6 are reasonable and necessary in order to
protect and maintain the proprietary interests and other
legitimate business interests of the Purchaser Companies and that
the enforcement of such agreement not to compete and related
restrictive covenants would not prevent him or her from earning a
livelihood. Employee further acknowledges (i) that it would be
difficult to calculate damages to the Company from any breach by
Employee of his or her obligations under this Section 6, (ii)
that injury to the Company from any such breach would be
irreparable and impossible to measure and (iii) that the remedy
at law for any breach or threatened breach of this Section 6
would therefore be an inadequate remedy and, accordingly, that
the Company shall, in addition to all other available remedies
(including, without limitation, seeking such damages as it can
show it has sustained by reason of such breach), be entitled to
injunctive and other similar equitable remedies without proving
or showing any actual damage sustained by the Company.
(d) The provisions of this Section 6 shall survive the termination of
Employee's employment for any reason whatsoever. In the event the
provisions of this Section 6 should ever be deemed to exceed the
time or geographic limitations permitted by applicable law, then
such provisions shall be reformed to the maximum time or
geographic limitations permitted by applicable law. The covenants
contained in Section 6(a) shall be construed as a series of
separate covenants, one for each month of the year and for each
county and for each state of the United States encompassed by the
covenants contained in Section 6(a). In the event that any one or
more of such covenants shall for any reason be held to be invalid
or unenforceable in any respect, such invalidity or
unenforceability shall not have any effect on any other such
separate covenant, but such other covenants shall be construed as
if the invalid or unenforceable covenant had never been contained
in this Section 6(a).
Exhibit B - 5
<PAGE>
7. Termination.
(a) As a material inducement for the Company to enter into the Stock
Purchase Agreement, Employee agrees to perform his or her duties
hereunder during the period specified in Section 3.
(b) The termination provisions of this paragraph are all-inclusive.
This Agreement and the obligations of the Company and Employee
hereunder shall terminate (except as to such obligations as are
expressly stated to survive such termination) only in the
following events: (i) upon Employee's death or upon written
notice from the Company to Employee in the event of permanent
disability, (ii) upon written notice from the Company to Employee
in the event Employee is convicted of any criminal act that is a
felony or involves moral turpitude, or (iii) upon written notice
from the Company to Employee in the event Employee commits an act
of gross negligence or gross misconduct in the performance of his
or her duties or willfully violates any material provision of
this Agreement, (iv) upon payment by the Company to the Employee
of the salary for the remaining term of this Agreement or (v)
upon the expiration of the term of employment set forth in
Section 3.
8. Miscellaneous.
(a) Notices. All notices which a party is required or may desire to
give to the other party under or in connection with this
Agreement shall be sufficient if given by addressing the same to
the other party as follows:
If to Employee to:
Paul Dendy
816 N.E. Eighty-seventh Avenue
Vancouver, Washington 98664
If to the Company, to:
Medical Resource Companies of America
4265 Kellway Circle
Addison, TX 75244
Attn: Mark E. Bennett
or to such other place as may be designated in writing by like
notice. Any notice shall be deemed to have been given when
personally delivered or five days after mailing if mailed by
certified or registered mail, postage prepaid, return receipt
requested, when addressed as required herein.
(b) Assignment. It is expressly intended that Section 6 of this
Agreement shall inure to the benefit of, and be enforceable by,
the "Purchaser Companies" as defined therein. This Agreement
shall be binding upon and inure to the benefit of Employee, his
or her heirs, distributees and assigns and the Company and its
successors and assigns. Employee may not, without the express
written permission of the Company, assign or pledge any rights or
obligations hereunder.
Exhibit B - 6
<PAGE>
(c) Entire Agreement. This Agreement contains all of the terms and
conditions agreed upon by the parties relating to the subject
matter of this Agreement and supersedes any and all prior and
contemporaneous agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written,
with respect to that subject matter.
(d) Amendment Waiver. No amendment or modification of this Agreement
shall be valid unless evidenced by a written instrument executed
by the parties hereto. No waiver by the Company of any breach by
Employee of any provision or condition of this Agreement shall be
deemed a waiver of any similar or dissimilar provision or
condition at the same time or any prior or subsequent time.
(e) Severability. The provisions of this Agreement and the covenants
herein contained shall be construed independently of each other,
it being the express intent of the parties hereto that the
obligations of, and restrictions on, the parties as provided
herein shall be enforced and given effect to the fullest extent
legally permissible.
(f) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but which
together shall constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
(i) Attorney's fees. If any legal action is brought by either of the
parties, the party in whose favor final judgment is entered shall
be entitled to recover reasonable attorney's fees from the other
party in addition to any other relief that may be awarded.
(j) MRC Payroll, Inc. It is understood and agreed that the actual
employer of the Employee will probably be MRC Payroll, Inc.
("Payroll") and that Payroll and the Company will be considered
one and the same for purposes of this Agreement. Notwithstanding
the foregoing, the Company agrees to perform or cause to be
performed all of the obligations, duties, and covenants set forth
in this Agreement.
Exhibit B - 7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
MEDICAL RESOURCE COMPANIES OF AMERICA
By:/s/ James R. Gilley
James R. Gilley
President
EMPLOYEE:
/s/ Paul Dendy
------------------
Paul Dendy
Exhibit B - 8
<PAGE>
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
by and between
Victor L. Lund
(the "Shareholder")
and
Medical Resource Companies of America
a Nevada corporation
(the "Company")
Dated as of April 1, 1996
Exhibit C - 1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article I. INTRODUCTION....................................................... 1
Section 1.1. Recitals.............................................. 1
Article II. DEMAND REGISTRATION............................................... 1
Section 2.1. Request............................................... 1
Section 2.2. Registration Statement Form........................... 2
Section 2.3. Expenses.............................................. 2
Section 2.4. Effective Registration Statement...................... 2
Section 2.5. Selection of Underwriters............................. 2
Section 2.6. Priority in Requested Registration.................... 2
Section 2.7. Not a Requested Registration if Company Participates.. 3
Section 2.8. Shelf Registration.................................... 3
Article III. "PIGGY BACK" REGISTRATION........................................ 4
Section 3.1. Right to Include Registrable Securities............... 4
Section 3.2. Priority in Incidental Registrations.................. 4
Article IV. REGISTRATION PROCEDURES........................................... 5
Section 4.1. Preparation of Filings................................ 5
Section 4.2. Data from Holders of Registerable Securities.......... 9
Section 4.3. Discontinuance of Use of Prospectus................... 9
Section 4.4. References to Holders in Registration Statements...... 9
Section 4.5. Underwritten Offerings................................ 9
Section 4.6. Holdback Agreements................................... 10
Section 4.7. Preparation; Reasonable Investigation................. 10
Section 4.8. Rights of Requesting Holders.......................... 10
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article V. INDEMNIFICATION.................................................... 11
Section 5.1. Indemnification by the Company........................ 11
Section 5.2. Indemnification by the Sellers........................ 12
Section 5.3. Notices of Claims, etc................................ 12
Section 5.4. Other Indemnification................................. 13
Section 5.5. Indemnification Payments.............................. 13
Article VI. DEFINITIONS....................................................... 14
Article VII. RULE 144......................................................... 15
Section 7.1. Rule 144.............................................. 15
Article VIII. MISCELLANEOUS................................................... 15
Section 8.1. Remedies.............................................. 15
Section 8.2. No Inconsistent Agreements............................ 15
Section 8.3. Adjustments Affecting Registrable Securities.......... 16
Section 8.4. Assignment............................................ 16
Section 8.5. Descriptive Headings.................................. 16
Section 8.6. Governing Law......................................... 16
Section 8.7. Counterparts.......................................... 16
Section 8.8. Entire Agreement...................................... 16
Section 8.9. Severability.......................................... 16
Section 8.10. Amendments and Waivers................................ 16
Section 8.11. Nominees for Beneficial Owners........................ 17
Section 8.12. Notices............................................... 17
</TABLE>
(ii)
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of this
___ day of _______________, 1996, by and between Medical Resource Companies of
America, a Nevada corporation (the "Company"), and Victor L. Lund (the
"Shareholder") and evidences that for good and valuable consideration, the
receipt and sufficiency of which is acknowledged, the parties hereto agree as
follows:
ARTICLE I.
Introduction
Section 1.1. Recitals. Pursuant to the Stock Purchase Agreement dated
______________, 1996 by and between the Company, and Shareholder and
others (the "Stock Purchase Agreement") the Company has issued _______
shares (the "Shares") of the Company's common stock, par value $.001
per share. Certain capitalized terms used in this Agreement are
defined in Article VI hereof; references to sections shall be to
sections of this Agreement.
ARTICLE II.
Demand Registration
Section 2.1. Request. Commencing two years following the closing of the
Stock Purchase Agreement and upon the written request of the
Shareholder, requesting that the Company effect the registration under
the Securities Act of all or part of such Initiating Holders'
Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of
such requested registration to all registered holders of Registrable
Securities, and thereupon the Company will use its best efforts to
effect the registration under the Securities Act of the following:
(a) the Registrable Securities which the Company has been so
requested to be registered by such Initiating Holder for
disposition in accordance with the intended method of disposition
stated in such request;
(b) all other Registrable Securities the holders of which shall have
made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the
Company (which request shall specify the intended method of
disposition of such Registrable Securities); and
- 1 -
<PAGE>
(c) all shares of Common Stock which the Company may elect to
register in connection with the offering of Registrable
Securities pursuant to this Article II;
all to the extent requisite to permit the disposition (in accor dance
with the intended methods thereof as aforesaid) of the Reg istrable
Securities and the additional shares of Common Stock, if any, so to be
registered; provided, that, the provisions of this Article II shall
not require the Company to effect more than two registrations of
Registrable Securities.
Section 2.2. Registration Statement Form. Registrations under this Article
II shall be on an appropriate registration form of the Commission (i)
as shall be selected by the Company and shall be reasonably acceptable
to the holders of more than fifty percent (by number of shares) of the
Registrable Securities so to be registered and (ii) as shall permit
the disposition of such Registrable Securities in accordance with the
intended method or methods of disposition specified in their request
for such regis tration. The Company agrees to include in any such
registration statement all information which holders of Registrable
Securities being registered shall reasonably request.
Section 2.3. Expenses. The Company will pay all Registration Expenses in
connection with any registrations requested pursuant to this Article
II.
Section 2.4. Effective Registration Statement. A regis tration requested
pursuant to this Article II shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become
effective; provided, that a registration which does not become
effective after the Company has filed a registration statement with
respect thereto solely by reason of the refusal to proceed of the
Initiating Holder (other than a refusal to proceed based upon the
advice of counsel relating to a matter with respect to the Company)
shall be deemed to have been effected by the Company at the request of
such Initiating Holders unless the Initiating Holders shall have
elected to pay all Registration Expenses in connection with such
registration, (ii) if, after it has become effective, such
registration is withdrawn by the Company (other than at the request of
a majority of the Initiating Holder), interfered with by any stop
order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason prior to the
expiration of a 180 day period following such registration statement
effectiveness (or, in the case of a Shelf Registration, the time
period provided in Section 2.9), or (iii) the conditions to closing
specified in any purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied, other
than due solely to some act or omission by such Initiating Holder.
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Section 2.5. Selection of Underwriters. If a requested registration
pursuant to this Article II involves an underwritten offering, the
underwriter or underwriters thereof shall be selected by the consent
of holders of a majority (by number of shares) of Registrable
Securities and shall be reasonably acceptable to the Company.
Section 2.6. Priority in Requested Registrations. If a requested
registration pursuant to this Article II involves an underwritten
offering, and the managing underwriter shall advise the Company in
writing (with a copy to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of
securities requested to be included in such registration (including
securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering within a price
range reasonably acceptable to the Company and to the holders of a
majority (by number of shares) of the Registrable Securities requested
to be included in such registration, the Company will include in such
registration, to the extent of the number which the Company is so
advised can be sold in such offering, (i) first, Registrable
Securities requested to be included in such registration pro rata
among the holders thereof requesting such registration as provided in
Section 2.1 on the basis of the number of such securities requested to
be included in such registration by the holder or holders of
Registrable Securities, and (ii) second, other securities of the
Company included in such registration in any manner and amount
selected by the Company.
Section 2.7. Not a Requested Registration if Company Par ticipates. If the
Company registers any of its securities on its own behalf in a
Registration initiated as a Requested Registration pursuant to this
Article II, such Requested Registration shall not count for the
purposes of determining the number of Requested Registrations which
holders of Registrable Securities are entitled to under this Article
II; provided, however, that the registration shall continue to be a
Requested Registration for all other purposes.
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Section 2.8. Shelf-Registration. A request by an Initiating Holder pursuant
to Section 2.1 may specify that the intended method of disposition is
a "shelf offering" ("Shelf Offering Request"). In addition to the
other obligations of the Company set forth herein, in connection with
a Shelf Offering Request, the Company will file a "shelf" registration
statement on an appropriate form pursuant to Rule 415 under the
Securities Act or any similar rule that may be adopted by the
Commission with respect to all Registrable Securities the Company is
required to effect the registration of under this Article II (a "Shelf
Registration"). The Company shall keep the Shelf Registration
continuously effective for a period of at least twenty-four months
following the date on which the Shelf Registration is declared
effective (or such shorter period that terminates on the earlier of
(i) a date specified by the holders of a majority (by number of
shares) of the Registerable Securities covered by such statement or
(ii) the date on which all Registrable Securities covered by such
Shelf Registration have been sold or withdrawn, but in no case prior
to the expiration of the 90-day period referred to in Section 4(3) of
the Securities Act and rule 174 thereunder, if applicable). The
Company shall supplement or make amendments to the Shelf Registration,
if required by the registration form used by the Company, the
instructions thereto, the Securities Act or the rules and regulations
of the Commission, or if reasonably requested by a holder of
Registrable Securities covered by the Shelf Registration. The Company
will furnish the holders of Registrable Securities covered by the
Shelf Registration a copy of all such supplements or amendments at
least one business day prior to filing such supplement or amendment.
ARTICLE III.
"Piggy Back" Registration
Section 3.1. Right to Include Registrable Securities. If the Company at any
time after the closing of the Stock Purchase Agreement proposes to
file a registration statement under the Securities Act covering any of
its securities, other than a registration on Form S-8 or S-4, or any
successor or similar forms, whether or not for sale or its own
account, it will each such time give prompt written notice to all
holders of Registrable Securities of its intention to do so and of
such holders' rights under this Article III. Upon the written request
of any such holder made within 30 days after the receipt of any such
notice (which request shall specify the Registrable Securities
intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the
holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the
Registrable Secu rities so to be registered, by inclusion of such
Registrable Se curities in the registration statement which covers the
securities which the Company proposes to register; provided, that if,
at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company
shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election,
give written notice of such determination to each holder of Reg
istrable Securities and, thereupon, (i) in the case of a deter
mination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such reg
istration (but not from its obligation to pay the Registration
Expenses in connection therewith), without prejudice, however, to the
rights of any holder or holders of Registrable Securities entitled to
do so to request that such registration be effected as a registration
under Article II and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. No registration effected under this Article III shall
relieve the Company of its obligation to effect any registration upon
request under Article II. The Company will pay all Registration
Expenses incurred by holders by Registrable Securities in connection
with each registration of Registrable Securities requested pursuant to
this Article III, except for holders share of underwriting discounts,
fees and commissions.
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Section 3.2. Priority in Piggy-Back Registrations. If (i) a registration
pursuant to this Article III involves an underwritten offering of the
securities being registered, whether or not for sale for the account
of the Company, to be distributed (on a firm commitment basis) by or
through one or more underwriters of recognized standing under
underwriting terms appropriate for such a transaction, and (ii) the
managing underwriter of such underwritten offering shall inform the
Company and holders of the Registrable Securities requesting such
registration by letter of its belief that the distribution of all or a
specified number of such Registrable Securities concurrently with the
securities being distributed by such underwriters would interfere with
the successful marketing of the securities being distributed by such
underwriters (such writing to state the basis of such belief and the
approximate number of such Registrable Securities which may be
distributed without such effect), then the Company may, upon written
notice to all holders of such Registrable Securities, reduce pro rata
(if and to the extent stated by such managing underwriter to be
necessary to eliminate such effect) the number of such Registrable
Securities and securities proposed to be sold by any person other than
the Company the registration of which shall have been requested by
each holder of Registrable Securities and each person other than the
Company so that the resultant aggregate number of such Registrable
Securities so included in such registration shall be equal to the
number of shares stated in such managing underwriter's letter.
ARTICLE IV.
Registration Procedures
Section 4.1. Preparation of Filings. If and whenever the Company is
required to use its best efforts to effect the regis tration of any
Registrable Securities under the Securities Act as provided in
Articles II or III, the following shall apply:
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(a) Registration Statement. The Company shall promptly prepare and
file (in the case of a registration pursuant to Article II, such
filing to be made within 90 days after the initial request of one
or more Initiating Holders of Registrable Securities or in any
event as soon after such request as possible) with the Commission
the requisite registration statement to effect such registration
(including such audited financial statements as may be required
by the Securities Act or the rules and regulations promulgated
thereunder) and thereafter use its best efforts to cause such
registration statement to become and remain effective; provided,
however, that the Company may withdraw any registration of its
securities which are not Registrable Securities (and, under the
circumstances specified in Section 3.2, its securities which are
Registrable Securities) at any time prior to the effective date
of the registration statement relating thereto; provided further,
that before filing such registration statement or any amendments
thereto, the Company will furnish to the holders of Registrable
Securities that are to be included in such registration and their
counsel copies of all such documents proposed to be filed, which
documents will be subject to the review and reasonable approval
of such holders and their counsel.
(b) Amendments. The Company shall prepare and file with the
Commission such amendments, post effective amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement for the
following time periods: (i) in the case of a Shelf Registration
under Article II, the time period specified in Section 2.8; (ii)
in the case of a registration under Article II other than a Shelf
Registration, such period as all Register able Securities have
been sold in accordance with the intended methods of disposition
specified by the holders thereof; and (iii) in the case of a
registration under Article III, such period of time as the
Company determines.
(c) Copies of Documents. The Company shall furnish to each seller of
Registrable Securities covered by such registration statement and
each underwriter, if any, of the securities being sold by such
seller such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each
case including all exhibits to such Registration Statement), such
number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed pursuant to Rule 424
under the Securities Act and such other documents, as such seller
and underwriter, if any, may reasonably request in order to
facilitate the public sale or other disposition of the
Registrable Securities owned by such Seller (it being understood
that the Company consents to the use of the prospectus and any
amendments or supplement thereto by each holder of Registrable
Securities covered by the Registration Statement and the
underwriter or underwriters, if any, in connection with the
offering and sale of Registrable Securities covered by the
prospectus or any amendment or supplement thereto).
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(d) Blue-Sky. The Company will use its best efforts to register or
qualify all Registrable Securities under the securities laws or
blue sky laws of the jurisdictions as any seller thereof and any
underwriter of the securities being sold by such seller and any
Re questing Holder shall reasonably request, to keep such
registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other
action which may be reasonably necessary or ad visable to enable
such seller and underwriter to con summate the disposition in
such jurisdictions of the securities owned by such seller, except
that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the re quirements of
this subsection (d) be obligated to be so qualified, or to
consent to general service of process in any such jurisdiction.
(e) Other Approvals. The Company will use its best efforts to cause
all Registrable Securities covered by such registration statement
to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller
or sellers thereof to consummate the intended disposition of such
Registrable Securities.
(f) Opinions; Comfort Letters. The Company shall furnish to each
seller of Registrable Securities a signed counterpart, addressed
to such seller, (and the under writers, if any) of
(i) an opinion of counsel for the Compa ny, dated the effective
date of such registra tion statement (and, if such
registration in cludes an underwritten public offering, an
opinion dated the date of the closing under the underwriting
agreement), reasonably sat isfactory in form and substance
to such seller, and
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(ii) a "comfort" letter, dated the effec tive date of such
registration statement (and, if such registration includes
an underwritten public offering, a letter dated the date of
the closing under the underwriting agreement), signed by the
independent public accountants who have certified the
Company's financial statements included in such registration
statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and,
in the case of the accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opin ions of issuer's counsel and in
accountants' letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of
the accountants' letter, such other financial matters, and, in
the case of the legal opinion, such other legal mat ters, as such
seller or such Requesting Holder (or the underwriters, if any)
may reasonably request.
(g) Notice of Events. The Company will notify each seller of
Registrable Securities covered by such regis tration statement at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon the Company's discovery
that, or upon the happening of any event as a result of which,
the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a mate rial fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and at the
request of any such seller promptly prepare and furnish to such
seller and each underwriter, if any, a reasonable number of
copies of a supplement to or an amendment of such pro spectus as
may be necessary so that, as thereafter de livered to the
purchasers of such securities, such pro spectus shall not include
an untrue statement of a ma terial fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the
circumstances under which they were made.
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(h) Earnings Statement. The Company will otherwise use its best
efforts to comply with all applicable rules and regulations of
the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and will furnish to each such seller and each
Requesting Holder at least five business days prior to the filing
thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file any
thereof to which any such seller or any Requesting Holder shall
have reason ably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder.
(i) Listing. The Company will cause all Registrable Securities
covered by the registration statement to be listed on each
securities exchange or traded or quoted on each market on which
the same class of securities issued by the Company are then
listed, traded or quoted.
(j) Transfer Agent. The Company will provide a transfer agent,
registrar and a CUSIP number for all Registrable Securities no
later than the effective date of such Registration Statement.
(k) Access. The Company will make available for inspection by any
holder of Registrable Securities included in such registration
statement, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney,
accountant or other agent retained by any such seller or
underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence
responsibility, and cause the Company's offi cers, directors and
employees to supply all information reasonably requested by any
such Inspector in connection with such registration statement;
provided that records which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors
are confidential shall not be disclosed to the Inspectors unless
(i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in the registration statement
or (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction;
provided, further, that any decision not to disclose information
pursuant to clause (i) shall be made after consultation with
counsel for the Company and counsel for such holders; and each
holder of Registrable Securities agrees that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the
Company at its expense, to undertake appropriate action and to
prevent disclosure of the Records deemed confidential.
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Section 4.2. Data from Holders of Registerable Securities. The Company may
require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the
Company may from time to time reasonably request in writing.
Section 4.3. Discontinuance of Use of Prospectus. Each holder of
Registrable Securities agrees by acquisition of such Registrable
Securities that, upon receipt of any written notice from the Company
of the occurrence of any event of the kind described in Section
4.1(g), such holder will forthwith discontinue such holder's offer of
Registrable Securities pursuant to the registration statement relating
to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by
Section 4.1(g) and, if so directed by the Company, will deliver to the
Company (at the Com pany's expense) all copies, other than permanent
file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice,
the period mentioned in Section 4.1(b) shall be extended by the length
of the period from and including the date when each seller of any
Registrable Securities covered by such registration statement shall
have received such notice to the date on which each such seller has
received the copies of the supplemented or amended prospectus
contemplated by Section 4.1(g).
Section 4.4. References to Holders in Registration State ments. If any
registration or comparable statement refers to any holder of
Registrable Securities by name or otherwise as the holder of any
securities of the Company then such holder shall have the right to
require (i) the insertion therein of language, in form and substance
satisfactory to such holder, to the effect that the holding by such
holder of such securities is not to be construed as a recommendation
by such holder of the investment quality of the Company's securities
covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such holder by
name or otherwise is not required by the Securities Act or any similar
federal statute then in force, the deletion of the reference to such
holder.
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Section 4.5. Underwritten Offerings. If requested by the underwriters for
any underwritten offering by holders of Regis terable Securities
pursuant to a registration requested under Art icle II, the Company
will enter into an underwriting agreement with such underwriters for
such offering, such agreement to be reasonably satisfactory in form
and substance to the Company, each such holder and the underwriters,
and to contain such repre sentations and warranties by the Company and
such other terms as are generally prevailing in agreements of this
type, including, without limitation, indemnities to the effect and to
the extent provided in Section 5.1. The holders of the Registrable
Securities will cooperate with the Company in the negotiation of the
underwriting agreement and will give consideration to the reason able
suggestions of the Company regarding the form thereof; provided, that
nothing herein contained shall diminish the forego ing obligations of
the Company. The holders of Registrable Secu rities to be distributed
by such underwriters shall be parties to such underwriting agreement
and may, at their option0, require that any or all of the
representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of such holders of Registrable
Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable
Securities. Any such holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of
distribution and any other representation required by law.
Section 4.6. Holdback Agreements. The Company agrees (i) if so required by
a managing underwriter of an offering of Register able Securities not
to effect any public sale or distribution of its equity securities or
securities convertible into or exchange able or exercisable for any of
such securities during the seven days prior to and the 90 days after
any underwritten registration pursuant to Articles II or III has
become effective, except as part of such underwritten registration and
except pursuant to registrations on Form S-8, or any successor or
similar forms thereto, and (ii) to cause each holder of its securities
or any securities convertible into or exchangeable or exercisable for
any of such securities, in each case purchased directly from the
Company at any time after the date of this Agreement (other than in a
public offering) to agree not to effect any such public sale or
distribution of such securities during such period except as part of
such underwritten registration.
Section 4.7. Preparation; Reasonable Investigation. In con nection with the
preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
holders of Registrable Securities registered under such registration
statement, their underwriters, if any, and their respective counsel
and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed
with the Commission, and each amendment thereof or supplement thereto,
and will give each of them such access to its books and records and
such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
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Section 4.8. Rights of Requesting Holders. The Company will not file any
registration statement under the Securities Act (other than by a
registration on Form S-8), unless it shall first have given to each
holder of Registrable Securities at the time out standing at least
thirty days prior written notice thereof. The Company shall provide
any Person who requests, within thirty days after such notice (a
"Requesting Holder"), the following: (i) all information, documents
and other materials such Requesting Holder would be entitled to if
such Requesting Holder were a seller of Registerable Securities as
provided in Section 4.1(c), (f), and (g); and (ii) the rights to
participate and access provided to sellers of Registerable Securities
under Section 4.7. In addition, if any such registration statement
refers to any Requesting Holder by name or otherwise then such holder
shall have the right to require (i) the insertion therein of language,
in form and substance satisfactory to such holder, to the effect that
the holding by such holder of such securities does not necessarily
make such holder of a "controlling person" of the Company within the
meaning of the Securities Act and is not to be construed as rec
ommendation by such holder of the investment quality of the Company's
debt or equity securities covered thereby and that such holding does
not imply that such holder will assist in meeting any future financial
requirements of the Company, or (ii) in the event that such reference
to such holder by name or otherwise is not required by the Securities
Act or any rules and regulations promul gated thereunder, the deletion
of the reference to such holder.
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ARTICLE V.
Indemnification
Section 5.1. Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities
Act, the Company will, and hereby does, indemnify and hold harmless
(i) in the case of any registration statement filed pursuant to
Articles II and III, the holder of any Registrable Securities covered
by such registration statement, its directors and officers, each other
Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such
holder or any such underwriter within the meaning of the Securities
Act, and (ii) in the case of any registration statement of the
Company, any Requesting Holder, its directors and officers and each
other Person, if any, who controls such Requesting Holder within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such holder or Requesting
Holder or any such director or officer or underwriter or controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act,
any preliminary prospectus, final prospectus or summary prospectus con
tained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and the Company will reimburse such holder, such
Requesting Holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses rea sonably
incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the
Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by such holder or
Requesting Holder, as the case may be, specifically stating that its
for use in the preparation thereof and, provided further that the
Company shall not be liable to any Person who participates as an
underwrit er, in the offering or sale of Registrable Securities or to
any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Securities
Act to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or such Requesting
Holder or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by such
holder.
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Section 5.2. Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to Article II or III, that the Company shall
have received an undertaking satisfactory to it from the prospective
seller of Registrable Securities, to indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 5.1)
the Company, each director of the Company, each officer of the Company
and each other person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission
or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument
duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, that such Sellers' liability under such
indemnification shall be limited to the net sales proceeds actually
received by such seller from the sale of the Company's securities
pursuant to such Registration Statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such
director, officer or controlling person and shall survive the transfer
of such securities by such seller.
Section 5.3. Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in Sections 5.1 or 5.2, such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of
the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve
the indemnifying party of its obligations under Sections 5.1 or 5.2,
except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying
party similarly notified, to the extent that the indemnifying party
may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof,
the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability, or a covenant
not to sue, in respect to such claim or litigation. No indemnified
party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by
an indemnifying party without the consent of such indemnifying party.
- 14 -
<PAGE>
Section 5.4. Other Indemnification. Indemnification similar to that
specified in Sections 5.1 and 5.2 (with appropriate modifications)
shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other
qualification of securities under any federal or state law or
regulation of any governmental authority, other than the Securities
Act.
Section 5.5. Indemnification Payments. The indemnification required by this
Article V shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred.
ARTICLE V.
Definitions
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings:
Commission: The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
Common Stock: The common stock, par value $.01, of the Company.
Company: As defined in the introductory paragraph of this Agreement.
Exchange Act: The Securities Exchange Act of 1934, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. Reference to a particular section of the
Securities Exchange Act of 1934 shall include a reference to the comparable
section, if any, of any such similar federal statute.
Initiating Holder: The Shareholder and any holder or holders of at least
51% of the Registrable Securities by number of shares at the time outstanding
and initiating a request pursuant to Section 2.1 for the registration of all or
part of such holder's or holders' Registrable Securities.
Person: A corporation, an association, a partnership, an organization,
business, an individual, a governmental or political subdivision thereof or a
governmental agency.
- 15 -
<PAGE>
Registrable Securities: (a) The Shares, (b) any securities issued or
issuable with respect to the Shares referred to in the foregoing subdivision by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securi ties Act, (c) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force, or (d) they shall have ceased to be
outstanding.
Registration Expenses: All expenses incident to the Company's performance
of or compliance with Article II or III, including, without limitation, all
registration, filing, listing, and NASD fees, all fees and expenses of complying
with securities or blue sky laws, all word processing, duplicating, printing and
engraving expenses, messenger and delivery expenses, the fees and dis bursements
of counsel for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, the fees and disbursements of a
single counsel and accountants retained by the holder or holders of more than
51% of the Registrable Securities being registered, premiums and other costs of
policies of insurance against liabilities arising out of the public offering of
the Registrable Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any.
Requesting Holder: As defined in Section 4.8 of this Agreement.
Securities Act: The Securities Act of 1933, or any similar Federal statute,
and the rules and regulations of the Commission thereunder, all as of the same
shall be in effect at the time. References to a particular section of the
Securities Act of 1933 shall include a reference to the comparable section, if
any, of any such similar Federal statute.
Shareholder. As defined in Section 1 of this Agreement.
Shares: As defined in Section 1 of this Agreement.
- 16 -
<PAGE>
ARTICLE VII.
Rule 144
Section 7.1. Rule 144. The Company shall timely file the reports required
to be filed by it under the Securities Act and the Exchange Act
(including but not limited to the reports under Sections 13 and 15(d)
of the Exchange Act referred to in subpara graph (c)(1) of Rule 144
adopted by the Securities and Exchange Commission under the Securities
Act) and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports,
will, upon the request of any holder of Registrable Securities, make
publicly available other informa tion) and will take such further
action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to
sell Regis trable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Registrable Securities,
the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
ARTICLE VIII.
Miscellaneous
Section 8.1. Remedies. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of such a
breach and hereby agrees to waive the defense in any action for
specific performance of such an obligation that a remedy at law would
be adequate.
Section 8.2. No Inconsistent Agreements. Without the written consent of the
holders of a majority of the then outstanding Reg istrable Securities,
the Company will not on or after the date of this Agreement enter into
any agreement with respect to its secu rities which is inconsistent
with the rights granted to the holders of Registrable Securities in
this Agreement or otherwise conflicts with the provisions hereof. The
Company has not previously entered into any agreement with respect to
its securities granting any registration rights to any Person. The
rights granted to the holders of Registrable Securities hereunder do
not in any way conflict with and are not inconsistent with the rights
granted to the holders of the Company's securities under any
agreements previously entered into by the Company.
Section 8.3. Adjustments Affecting Registrable Securities. The Company will
not take any action, or permit any change to occur, with respect to
the Registrable Securities which would adversely affect the ability of
the holders of Registrable Securities to include such Registrable
Securities in a registration undertaken pursuant to this Agreement.
- 17 -
<PAGE>
Section 8.4. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, and whether or not any
express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than
the Company shall also be for the benefit of and enforceable by any
subsequent holder of any Registrable Securities.
Section 8.5. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
Section 8.6. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAWS OF THE STATE OF TEXAS WITH OUT REFERENCE TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
Section 8.7. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original,
but all such counterparts shall together constitute one and the same
instrument.
Section 8.8. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the Company and each other party hereto and
supersedes all prior agreements and under standings relating to the
subject matter hereof.
Section 8.9. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
Section 8.10. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if the Company shall
have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of 51% or more of the shares
of Registrable Securities. Each holder of any Registrable Securities
at the time or thereafter outstanding shall be bound by any consent
authorized by this section 5, whether or not such Registrable
Securities shall have been marked to indicate such consent.
- 18 -
<PAGE>
Section 8.11. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or other action by any
holder or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
Section 8.12. Notices. Except as otherwise provided in this Agreement,
all communications provided for hereunder shall be in writing and sent by
certified first-class mail, postage prepaid, and addressed to such party at such
address as such party shall have furnished to the Company in writing.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
Medical Resource Companies of America
By: /s/ James R. Gilley
James R. Gilley
President
/s/ Victor L. Lund
Victor L. Lund
-19-
<PAGE>
Schedule 1.1
Wedgwood Business Interests
Wedgwood Retirement Inns, Inc.
Camelot/Harlingen Retirement LC/Harlingen, TX
Crown Pointe/Crown Pointe Development/Carona, CA
Liberty Rehabilitation/Liberty Acquired Brain Injury Habilitation
Services, Inc./Ellensburg, WA
Meadowbrook Place/Hermiston Assisted Living, Inc./Baker City, OR
Pacific Pointe/King City Retirement, Inc./King City, OR
Summer Hill/Oak Harbor Retirement Center L.P./Oak Harbor, WA
The Terrace/The Terrace, Inc./Portland, OR
Villa del Rey/Retirement Housing Associates/Merced, CA
Villa del Rey/Retirement Housing Associates/Visalia, CA
Villa del Rey/Victor Lund/Napa, CA
Villa del Rey/Villa del Rey-Roswell Limited Partnership/Roswell, NM
Lincolnshire Retirement/Lincolnshire Partners/Lincoln City, OR
Neawanna By The Sea/Neawanna by the Sea Limited Partnership/
Seaside, OR
Rose Garden Estates/Rose Garden Estates, LLC/Ritzville, WA
Villa del Sol/Roswell Senior Apts, LLC/Roswell, NM
Villa Dela Rosa/Roswell Retirement LLC/Roswell, NM
Wedgwood Terrace/Lewiston Group LLC/Lewiston, ID
Sweetwater Springs/Sweetwater Springs Group, LLC/Lithia Springs, GA
Management contract for Timberhill Place, Corvallis, OR
Village at Forest Glen, Beaverton, OR
Assisted Living, ("Oak Park"?) Clermont, FL
Assisted Living, Beaverton, OR
Assisted Living, Harlingen, TX
-20-
<PAGE>
Schedule 1.2
Projected Earnings Of Wedgwood Business Interests For 1998
-21-
<PAGE>
Schedule 2.1
Liens
-22-
<PAGE>
Schedule 2.6
Interim Financials
-23-
<PAGE>
Schedule 2.7
Undisclosed Liabilities of Wedgwood Business Interests
-24-
<PAGE>
Schedule 2.8
Tax Liabilities and Tax Contests
-25-
<PAGE>
Schedule 2.9
Certain Changes and Events To The Wedgwood Business Interests
-26-
<PAGE>
Schedule 2.11
Wedgwood Business Interests Litigation and Other Proceedings
-27-
<PAGE>
Schedule 2.12
Currently Effective Agreements, Contracts, Indebtedness,
Liabilities and Other Obligations
Wedgwood Retirement Inns, Inc.
Documents
Office lease
Lease - Benz 12/12/94
Ford Loan - $15,605.15 (Ford Taurus)
Northwest National Promissory Note $20,000 12/20/93 Northwest National
Promissory Note $14,604.25 9/12/95 Northwest National Promissory Note $22,269
9/12/95 Cellular One Lease - Phones First United Leasing Corp - Facsimile
Machine Western Telephone - Telephone System (Toshiba) Communication
Resources, Inc. - Voice Mail
Camelot/Harlingen Retirement LC/Harlingen, TX
Documents
Old Entity-
Management Contract 9/12/94
Agreement of Purchase and Sale 9/9/94
Bill of Sale, Assignment of Leases and General Assignment
List of Disbursements
Wraparound Real Estate Lien Note
Deed of Trust
Assignment of Buyer's Position
Deed w/Vendors's lien
Owner's Title Policy
Endorsement to Title Policy
Owner's Title Policy (corrected)
Security Agreement
Guaranty Agreement
Financing Statements (State & County)
Settlement Statement (Closing Statement)
UHF Purchasing Agreement
AFCO Finance Agreement 12/4/94
Surety Bond $14970.
Valley Office Systems (Copier Lease)
New Entity-
Harlingen Retirement LC regs.
Health Care REIT Financing Terms
Certificate of Deposit 8/31/95
Crown Pointe/Crown Pointe Development/Carona, CA
Documents
Management Contract 1/1/93
Arbitration Association
Agreement (Redlands Federal Shared Appreciation Agreement)
UHF Purchasing Agreement
IKON Business Systems (Sharp Copier)
Colonial Pacific Leasing (Ice Machine)
-28-
<PAGE>
Crown Point Development - Carona
General Partnership Agreement
" " " Amendment No. 2 (7/10/86)
" " " Addendum (12/__/87)
" " " Second Amendment (2/1/90)
Agreement Liquidating Partnership Interest (2/11/88) Ballenger
Liberty Rehabilitation/Liberty Acquired Brain Injury Habilitation
Services, Inc./Ellensburg, WA
Documents
Real Estate Contract (Parcel A)
Deed
Escrow Instructions
Closing Statement
Real Estate Contract (Parcel B)
Deed
Escrow Instructions
Closing Statement
*Real Estate Contract (Parcel C)
Promissory Note - U.S. Bank Washington ($1,035,000)
Settlement Statement
Assignment of Rents
Partnership Borrowering Agreement
Deed of Trust (every other page)
Financing Statement
Management Contract
UHF Purchasing Agreement
Borrower's Settlement Statement
Survey
Partnership Agreement, Liberty Group
Meadowbrook Place/Hermiston Assisted Living, Inc./Baker City, OR
Documents
Management Contract 1/1/93
Option Agreement & Agreement of Purchase and Sale (Lund/Rood) Memorandum of
Option Agreement Oregon Assisted Living Facilities Contract Grand Voyager
Contract UHF Purchasing Agreement Title Commitment Appraisal Western Bank Loan
(Modification of Mortgage, Guaranty, etc.)
Pacific Pointe/King City Retirement, Inc./King City, OR
Documents
Residential Center Lease 11/5/92
Memorandum of Lease Agreement
First Amendment To Residential Center Lease
Second Amendment to Residential Center Lease
Lease Approval Agreement
Management Contract 1/1/93
Housing Division Regulatory Agreement 7/16/86
Oregon Housing Management Agreement 4/13/93
Pacific Office Automation - Copier
-29-
<PAGE>
Buy-Sell Agreement
Articles of Inc., King City Retirement Corporation
Restrictive Covenants/Elderly Housing Finance Program
Summer Hill/Oak Harbor Retirement Center L.P./Oak Harbor, WA
Documents
Management Contract 2/15/95
Loan Agreement 4/14/94
Promissory Note 4/14/94
Deed of Trust, Security Agreement, and Fixture Filing w/
Assignment of Leases and Rents
Certificate and Indemnity Agreement Regarding Hazardous Materials
Guaranties: Lunds, Skeltons, Johnstons, and Roods
Buyers Settlement Statement
Statutory Warranty Deed
Title Policy
Easements and Restrictive Covenants
Bill of Sale 4/14/94
Assignment 4/7/94
Closing Statement 4/11/94
Closing Statement 4/19/94
Real Estate Purchase and Sale Agreement
Retirement Facility Lease 4/14/94
Lease America Corp - Copier
PUC Agreement
Owner & Architect Agreement (Johnston Assoc)
Agreement of Limited Partnership, Oak Harbor Retirement Center,
Partners, L.P.
Indemnity Agreement, Johnston to Rood et al.
Art. of Inc., Oak Harbor Retirement Center, Inc.
Survey
The Terrace/The Terrace, Inc./Portland, OR
Documents
Management Contract 1/1/93
Oregon Residential Care Facility Contract First Security Note 9/17/91
Borrower's Statement Deed of Trust Settlement Statement Promissory Note -
First Interstate $80,000 City of Portland, OR - 2,697.96 Contract City of
Portland, OR - 55,051.24 Contract Warranty Deed Title Policy
Articles of Incorporation, the Terrace Retirement, Inc.
Bylaws, The Terrace Retirement, Inc.
Loan $330,000.00 First Security Oregon
Note
Commercial Deed of Trust
Collateral Assignment of Leases and Rents
Villa del Rey/Retirement Housing Associates/Merced, CA
Documents
-30-
<PAGE>
Management Contract 1/1/93
Lease Agreement with Park Merced
First Amendment of Lease
Standard Office Systems (Toshiba Copier)
Pacific States Leasing (Ice Maker)
Alco Capital Resource, Inc. (Toshiba Copier)
UHF Purchasing Agreement
Partnership Agreement, Retirement Housing Associates
Villa del Rey/Retirement Housing Associates/Visalia, CA
Documents
Management Contract 1/1/93
Lease - Park Visalia
First Amendment of Lease 6/7/94
Partnership Agreement Retirement Housing Associates
Villa del Rey/Victor Lund/Napa, CA
Documents
Lease Agreement - Vintage Investors
Amendment to Lease Agreement - Vintage Investors
Reassignment of Amended Management Contract
UHF Purchasing Agreement
Villa del Rey/Villa del Rey-Roswell Limited Partnership/Roswell, NM
Documents
Lease - HCPI
Contract of Acquisition (Ray Barlow)
Amendment to Contract of Acquisition (Ray Barlow)
Second Amendment to Contract of Acquisition (Ray Barlow)
Management Contract 1/1/93 Promissory Note $300,000 Winston Lenz 6/28/91
Promissory Note $300,000 Larry Hall 6/19/92 Promissory Note $300,00 Larry Hall
3/6/95 Promissory Note $50,000 Gail Rood 5/18/92 Lease America Corp - Copier
Van Purchase Certificate of Deposit 10/12/95 VLS Bylaws, Shareholders &
Consent of Board of Directors
Limited Partnership Agreement Villa Del Rey - Roswell, Ltd.
Addendum to Ltd Pnp Agt Villa Del Ret - Roswell, Ltd.
Restated and Amended Certificate of Limited Partnership (formerly
VDR - Roswell, Ltd.)
Survey
Lincolnshire Retirement/Lincolnshire Partners/Lincoln City, OR
Documents
First Interstate (Construction Loan Agreement, Note, Guaranties,
Deed of Trust, Financial Statements)
Ground Lease
Agreement to Support North Lincoln Hospital
Partnership Agreement
Survey
Neawanna By The Sea/Neawanna by the Sea Limited Partnership/
-31-
<PAGE>
Seaside, OR
Documents
Lease Agreement - HCPI
Promissory Note - John Taylor 11/3/93
Promissory Note - Hall 2/17/93
Van Note - Columbia River Banking (Guaranties, Security
Agreement)
Copy of Time Certificate 10/12/95
List of Partnership Ownership
Agreement to Transfer Ltd Pnp Interest (Taylor)
Notice of Intent to Transfer Partnership Interest (Taylor)
Quitclaim Deed, Lund et al. to Limited Partnership
Acknowledgment re Ownership
Lot Book Report Ticor Title
Rose Garden Estates/Rose Garden Estates, LLC/Ritzville, WA
Documents
Certificate of Formation - LLC and Agreement Promissory Note $850,000 - Bank
of Whitman Deed of Trust $850,000 Amendment: Change of Loan Terms Real Estate
Purchase & Sale Agreement 6/30/94 Agreement as to Allocation of Values Sanwa
Leasing Corporation - Copier Warranty Deed Owner's Title Policy
Villa del Sol/Roswell Senior Apts, LLC/Roswell, NM
Documents
First Federal Loan Approval
Roswell Villa Partners Partnership Agreement
Warranty Deed - Roswell Partners
First Savings Bank of New Mexico Loan
Adjustable Rate Note
Multifamily Mortgage, Assignment of Rents and Sec. Agt.
Guaranty Agreement
Construction Loan Agreement
Certificate and Articles of Incorporation, Bylaws of VLS &
Associates, Inc.
Villa Dela Rosa/Roswell Retirement LLC/Roswell, NM
Owned property. Not build yet.
No 3rd parties to buy out, except son
Wedgwood Terrace/Lewiston Group LLC/Lewiston, ID
Documents
Lease Agreement 6/29/95
Limited Liability Company Agreement
First Interstate Loan ($2,300,000.00)
Note
Deed of Trust and Security Agreement
UCC 1's
Indemnity
Combined Authority, Individual Guaranty and Pledge Agreements
-32-
<PAGE>
for Partnership
Assignment of Leases
Conditional Assignment of Rentals
Sweetwater Springs/Sweetwater Springs Group, LLC/Lithia Springs, GA
Documents
Articles of Organization
Operating Agreement
Settlement Memorandum - 4/1/95
Note
Pre-Formation Agreement
GE Capital Modular Space - Trailer Rental
Real Estate Development and Construction Loan Agreement
Lease Agreement 6/12/95
First Amendment to Lease 6/27/95
$214,000.00 Note
Settlement Statement 7/14/95
Preformation Agreement
Warranty Deed July __, 1995, Sweetwater Springs Group,, LLC to
Investors real Estate Trust
-33-
<PAGE>
Schedule 2.13
Transactions with Affiliates
-34-
<PAGE>
Schedule 2.14
Insurance and Banking Facilities
-35-
<PAGE>
Schedule 2.15
Personnel, Compensation and Benefit Plans
-36-
<PAGE>
Schedule 2.18
Governmental Consents
-37-
<PAGE>
Schedule 2.21
Permitted Encumbrances
-38-
<PAGE>
Schedule 3.2
Information Provided
Form 10-K for the year ended December 31, 1994
Forms 10-Q for the quarters ended March 1, June 30 and
September 30, 1995
Proxy Statement for 1995 Annual Meeting of Shareholders,
dated April 28, 1995
Annual Report to Shareholders for year ended December 31,
1994
Quarterly Reports to Shareholders for the quarters ended
March 31, June 30 and September 31, 1995
All press releases issued since January 1, 1996
Any exhibits to the foregoing, available upon request
-39-
<PAGE>
Schedule 4.3
Outstanding Options, Warrants, Scrip, Preemptive Rights Or Other
Subscription Rights, Calls Or Commitments Of Any Character Whatsoever Relating
To, Or Securities Or Rights Convertible Into, Any Shares Of Capital Stock Of
Purchaser
(Other than the New Gilley Stock, the Purchaser Shares, the
Common Stock and the Preferred Stock)
<TABLE>
<CAPTION>
Convertible Instruments Conversion
or Option Expiration
Price Shares Date
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FF Partnership Options $13.20 108,000 03/21/2001
Ron Brown Options $11.25 10,000 10/01/2003
Newmeyer, Landrum & Dillion
Options $25.00 10,000 (a)
Al Chamblis Equivest
Options $12.50 7,500 05/21/01
Jim Gilley Options $10.75 200,000 12/01/00
Gene Bertcher Options $11.25 8,000 (b)
Series "B" Preferred $27.75 49,293* (c)
Series "C" Preferred $15.00 33,333*
(20,000 shares)
</TABLE>
(*-shares after conversion from preferred stock into common stock)
(a) Copy of option is not available, but it is believed to have
expired.
(b) An option for an additional 12,000 shares may be exercised over the
next 6 years @ $11.25 per share.
(c) A dividend payable in cash or in stock totalling 346 shares has not
been issued or paid pending discussions with the shareholder. The
shareholder has indicated a desire to convert her or her shares into
common stock.
(d) Options for 10,000 shares issued to Mark Bennett exercisable
@ $12.50 per share. Options do not vest until September 8,
1997.
(e) Purchaser's Stock Option Plan has total shares available for issuance
of 217,500. Of this amount 47,500 shares have been issued. The plan
expires October 31, 2002.
-40-
<PAGE>
Schedule 4.10
Undisclosed Liabilities of Purchaser
None
-41-
<PAGE>
Schedule 4.12
Certain Changes and Events To Purchaser
1. Possible sale of the stock or a majority of the material
assets of Alpha Mobility, Inc., Odyssey Mobility Systems,
Inc., and Aviation Mobility, Inc.
2. Possible purchase of one or more nursing homes known as
Brownwood Nursing Homes, Heritage Home of Summerville, and
Wilkes Healthcare Center.
3. Possible settlement agreement with Sun Healthcare Group and/or
its subsidiaries.
4. Possible sale of headquarters building of Purchaser.
5. Possible sale of shopping centers located in the greater
Atlanta area.
6. Purchase of common stock through the American Stock Exchange.
7. One for five common stock split and odd lot offering.
-42-
<PAGE>
Schedule 4.14
Purchaser Litigation and Other Proceedings
1. Usury Claim by Altman Nursing, Inc. ("Altman") against Clay
Capital Corporation ("Clay")
-43-
<PAGE>
Schedule 4.17
Transactions Between Purchaser And The Gilley Group
Description Amount
----------- ------
1. Purchase of land, and related architectural $221,901.00
drawings, in North Carolina from SMG Investment,
L.L.C.
2. SMG Investment, L.L.C. paid Medical Resource 179,612.57
Companies of America for construction
services at the Gardens of Rivermont
3. Approximate monthly interest accrual on a note 31,191.00
receivable in the original principal balance of
$2,250,000 at 5.5% from Jim Gilley or April Trust
4. Monthly rental payment to Bartram Investment 2,000.00
Properties
-44-
<PAGE>
Schedule 4.18
Purchaser Personnel, Compensation and Benefit Plans
1992 Stock Option Plan
-45-
<PAGE>
Schedule 5.3
Claims Not Released
-46-
<PAGE>
Schedule 5.8
Landlord Approvals and Lender Approvals
-47-
<PAGE>
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT AGREEMENT (the "Amendment") is made and entered into
March __, 1996, by and between Medical Resource Companies of America
("Purchaser") and Wedgwood Retirement Inns, Inc. (the "Company"), and Victor L.
Lund, Paul Dendy, Mark Hall, Frank R. Reeves, Doris Thornsbury and Teresa
Waldroff ("Selling Stockholder(s)").
W I T N E S S E T H:
WHEREAS, Selling Stockholder(s), the Company and Purchaser
entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement") dated January 26, 1996.
WHEREAS, the parties hereto are desirous of amending the Stock Purchase
Agreement.
NOW THEREFORE, in consideration of the mutual covenants contained
herein and for other valuable consideration, the receipt and legal sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
The second paragraph of the Stock Purchase Agreement is hereby amended
by substituting the following:
WHEREAS, Victor L. Lund, Paul Dendy, Mark Hall, Frank R.
Reeves, Doris Thornsbury and Teresa Waldroff are the owners of 380
shares of the common stock of the Company, which shares constitute
all of the issued and outstanding shares of capital stock of the
Company;
The first sentence of paragraph 1.2 is hereby amended by substituting
the following:
"The purchase price for the Shares shall consist of one million nine hundred
twelve thousand seven hundred eighty-four (1,912,784) shares of newly issued
unregistered Series E Preferred Stock of Purchaser ("Purchaser Shares") as more
particularly described on the attached Exhibit "E"." Purchaser agrees to submit
for a shareholder vote, within one year of the date of this Agreement, the
ability to convert Series E Preferred Stock into the common stock of Purchaser.
In addition, Purchaser shall pay $303,000 in good funds on behalf of the Selling
Shareholder(s), consisting of $110,500 payable to Mr. Don Kirkman, $92,500 to
Mr. Michael Cancelosi and $100,000 to Mr. Gary Rood.
Section 1.2 is hereby amended by substituting Purchaser, instead of one
or more members of the Gilley Group, to purchase interests held by
others in the Wedgwood Business Interests, using a recourse note for
$120,000 payable to Charles Smick. The principal of the note will be
payable 5 years following their execution with interest payable monthly
at 10%.
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The first sentence of Section 1.1 of Exhibit "C" to the Stock Purchase
Agreement, which is referred to in Section 1.2, is hereby amended by
substituting the following:
Section 1.1. Recitals. Pursuant to the Stock Purchase Agreement dated
January 26, 1996 by and between the Company, and Shareholder and others (the
"Stock Purchase Agreement") the Company has issued 1,912,784 shares of Series E
Preferred Stock which, with shareholder approval, is convertible into the
Company's common stock, par value $.001 per share (once converted, the common
stock will be referred to as the "Shares"). Certain capitalized terms used in
this Agreement are defined in Article VI hereof; references to sections shall be
to sections of this Agreement.
Section 1.3 is hereby amended by substituting "At Closing" for
"Simultaneously with the execution and delivery of this Agreement" and
"will enter" for "has entered" and "have entered".
The first sentence of Section 1.2 of Exhibit "D1" to the contribution
agreement, which is attached to the Stock Purchase Agreement as Exhibit
"D", and is referred to in Section 1.3, is hereby amended by
substituting the following:
The purchase price for the Partnership Interests shall consist of
675,000 newly issued unregistered shares of Series "D" preferred stock of
Purchaser ("Purchaser Shares") as more particularly set forth on the attached
Exhibit "D" at an issue price of $5.00 per share.
The first sentence of paragraph 4 of Exhibit "D1" to the contribution
agreement, which is attached to the Stock Purchase Agreement as Exhibit
"D", and is referred to in Section 1.3, is hereby amended by
substituting the following:
4. An annual dividend shall be payable on Series D Preferred Stock in
the amount of $.47407 in cash per share, payable quarterly, beginning three
months following the date of issuance.
The second full paragraph of paragraph 10 of Exhibit "D1" to the
contribution agreement, which is attached to the Stock Purchase
Agreement as Exhibit "D", and is referred to in Section 1.3, is hereby
amended by substituting the following:
The "Issuance Conversion Price" per share of the stock conveyed shall be $10.00.
The second sentence of Section 2.1, is hereby amended by adding the
following at the end:
"and that Buy-Sell Agreement dated June 1, 1991 provided to
Purchaser."
The first sentence of Section 2.4, is hereby amended by substituting
the following:
2.4. Capitalization.
The authorized capital stock of the Company consists of 50,000 shares
of common stock of which only the Shares owned by the Selling Stockholder(s) are
issued and outstanding.
The second legend described in Section 3.6, is hereby amended by
substituting the following:
"These securities are security until the earlier to
occur of the registration of these securities or March ___,
1998 for the indemnifications and all other obligations of the
holder named hereon pursuant to that certain Stock Purchase
Agreement, dated as of January 26, 1996, which is on file with
the Secretary of the Company."
The first sentence of Section 2.7, is hereby amended by substituting
the following:
2.7. Absence of Undisclosed Liabilities.
Except as set forth on the Interim Balance Sheet, the Audited Balance
Sheet or the Closing Balance Sheet, except as set forth on Schedule 2.7 and
except for the Liens, the Company, consolidated with the Wedgwood Business
Interests, has no obligations or liabilities of any nature, whether absolute,
accrued, contingent or otherwise, whether liquidated or unliquidated, and
whether now due or to become due, which, individually or in the aggregate, would
have a material adverse effect on the financial condition of the Company,
consolidated with the Wedgwood Business Interests.
The first sentence of Section 2.8, is hereby amended by substituting
for "Omega Alpha, Inc." for "Alpha Omega
Partners."
Paragraph (v) of Section 2.9 is hereby amended by adding the following
at the end:
"except for the sale of garden homes at Camelot Retirement Community."
Paragraph (viii) and (ix) of Section 2.9 are hereby amended by deleting
the word "Home".
The first sentence of Section 4.7, is hereby amended by substituting
the following:
"At or prior to the Closing, the Company shall request that Victor
L. Lund be released from the Liens."
The first sentence of Section 5.2(iii), is hereby amended by
substituting the following:
"Subject to paragraph 3.6(ii) of this Agreement, the Purchaser Shares owned by
Victor L. Lund, Paul Dendy, Mark Hall, and Teresa Waldroff are security for the
these indemnifications of the Selling Stockholder(s) to Purchaser, and all other
obligations of the Selling Stockholder(s) to Purchaser, for a period until the
earlier to occur of the registration of the Purchaser Shares for such Selling
Stockholder(s) or two years following the Closing."
The first sentence of Section 5.6, is hereby amended by substituting
the following:
"Subject to paragraph 3.6(ii) of this Agreement, Victor L. Lund, Paul Dendy,
Mark Hall, and Teresa Waldroff agree that the Purchaser Shares owned by them
shall be pledged as security for the obligations of the Selling Stockholder(s)
under this Agreement."
The second sentence of Section 4.20, is hereby amended by substituting
the following:
"Purchaser further represents that it has had an opportunity to ask questions of
and receive answers from the Company and its officers and each of the Selling
Stockholder(s) regarding the business, financial affairs and other aspects of
the Company and the Wedgwood Business Interests, and has further had the
opportunity to obtain any other information which it deems necessary to evaluate
the investment or to verify the accuracy of information otherwise provided."
The second sentence of Section 5.9, is hereby amended by substituting
the following:
"In addition, Purchaser shall indemnify and hold the Selling Stockholder(s)
harmless for any claims filed by other owners of Wedgwood Business Interests,
besides the Selling Stockholder(s), for any misleading, false, or undisclosed
facts or information relating to the materials or documents Selling
Stockholder(s) received from Purchaser and forwarded."
All other terms and conditions of the Stock Purchase Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year above first written.
Purchaser:
Medical Resource Companies of America
Signature:___________________________________
Printed Name: _______________________________
Printed Title: ______________________________
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The Company:
Wedgwood Retirement Inns, Inc.
Signature:___________________________________
Printed Name: _______________________________
Printed Title: ______________________________
Selling Stockholder(s):
/s/ Victor L. Lund
Victor L. Lund
/s/ Paul Dendy
Paul Dendy
/s/ Mark Hall
Mark Hall
/s/ Frank R. Reeves
Frank R. Reeves
/s/ Dorothy Thornsbury
Doris Thornsbury
/s/ Teresa Waldroff
Teresa Waldroff
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