SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------
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): December 31, 1997
GREENBRIAR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 0-8187 75-2399477
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(State or other jurisdiction (Commission (IRS 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: (972) 407-8400
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Item 1. Changes in Control of Registrant.
Not Applicable
Item 2. Acquisition or Disposition of Assets.
Acquisition of Villa Residential Care Homes, Inc. and related partnerships
On December 31, 1997, the Company acquired Villa Residential Care Homes,
Inc. ("Villa"), a private company, by acquiring all of the outstanding stock of
Villa. At the same time four partnerships owned substantially by the owners of
Villa were reorganized into umbrella partnerships and a wholly owned subsidiary
of the Registrant was admitted to those partnerships both as a Class B limited
partner owning 100% of the Class B limited partnership interests and as the
managing general partner owning in the aggregate 80% of the partnership
interests. Through its subsidiary, the Registrant is entitled to a substantial
preferred return on its investment in the umbrella partnerships. Two other
partnerships were terminated and the Registrant, through a subsidiary, acquired
the partnership assets. Finally, a subsidiary of the Registrant was admitted as
a limited partner in another partnership controlled by Villa's prior owners, and
now owns 49% of the partnership interests. Villa will manage all of the
properties.
Villa and the related partnerships, headquartered in Dallas, Texas, lease
and operate a total of 12 assisted living communities in Texas with a capacity
for 955 residents. The twelve communities are located in Harlingen, Tyler,
Arlington, Benbrook, Granbury, Wollforth, Corpus Christi (2), Fort Worth (2) and
Mt. Pleasant (2).
The consideration for the Villa acquisition was 184,476 shares of
registered Greenbriar common stock and 10,464,321 operating partnership units in
the umbrella partnerships convertible after a one year holding period into
536,990 shares of common stock subject to future registration rights. An
additional 85,984 shares of registered common stock and 1,568,904 operating
partnership units convertible into 80,510 shares of common stock subject to
future registration rights may be issued within two years based on certain of
the communities meeting performance requirements. The total number of Greenbriar
common shares to be issued in the transaction will therefore be between 721,466
and 887,960. Such consideration was determined by means of arms' length
negotiations among the parties. Umbrella partnerships are often used in real
estate acquisitions due to their tax advantages to the sellers.
Item 3. Bankruptcy or Receivership.
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable
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Item 5. Other Events.
Not Applicable
Item 6. Resignations of Registrant's Directors.
Not Applicable
Item 7. Financial Statements and Exhibits.
(a) The financial statement information required to be
filed with respect to this acquisition will be filed
by amendment.
(b) The pro forma financial statement information
required to be filed with respect to this acquisition
will be filed by amendment.
(c) Exhibits
(2.1.1) - Stock Purchase Agreement
(2.1.2) - Exchange Agreement-Villa Residential
Care Homes-Corpus Christi South, L.P.
(2.1.3) - Exchange Agreement-Villa Residential
Care Homes-Granbury, L.P.
(2.1.4) - Exchange Agreement-Villa Residential
Care Homes-Oak Park, L.P.
(2.1.5) - Exchange Agreement-Villa Residential
Care Homes-Fort Worth East, L.P.
(2.1.6) - Agreement and Assignment of Partnership
Interests
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.
GREENBRIAR CORPORATION
Dated: January 13, 1998 By: /s/ Gene Bertcher
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Name: Gene Bertcher
Title: Chief Financial Officer
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EXHIBIT 2.1.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is entered into as of
December ___, 1997 between Villa Residential Care Homes, Inc., a Texas
corporation (the "Company"), William A. Shirley, Jr. (the "Shareholder"), who
owns 100% of the issued and outstanding common stock of the Company, and
Greenbriar Corporation, a Nevada corporation ("Purchaser").
ARTICLE I.
THE EXCHANGE
SECTION 1.1 The Exchange. Upon the terms and subject to the conditions
hereof, the Shareholder will exchange all of his shares of common stock of the
Company (the "Shares") for a certain number of shares of Purchaser's common
stock so that Purchaser will own 100% of the issued and outstanding equity of
the Company and the Shareholder will own shares of Purchaser as soon as
practicable following the satisfaction or waiver, if permissible, of the
conditions set forth in Article VI hereof. Purchaser and the Shareholder intend
that this Agreement and the transactions provided for herein shall constitute
and qualify as a plan of reorganization within the provisions of Section
368(a)(1)(B) of the Internal Revenue Code, as amended (the "Code").
SECTION 1.2 Closing. The closing of the transaction set forth in this
Agreement (the "Closing") will take place, upon and subject to the conditions
hereof, as soon as practicable after the mutual agreement of the Shareholder and
the Purchaser that all conditions described in Article VI below have been
satisfied or waived by the applicable party, but not later than three (3) days
following the written indication by Health Care REIT, Inc. of its willingness to
close the purchase, from the Company, of the properties listed on the attached
Exhibit A (the "Properties") (the "Property Sale") and to lease the Properties
to Residential Healthcare Properties, Inc. (the date of such Closing being
referred to herein as the "Closing Date"). The Property Sale will occur
simultaneously with the Closing. The Closing will be held at the offices of
Andrews & Kurth L.L.P., in Dallas Texas, at a mutually agreeable time on the
Closing Date, for the purpose of implementing all transactions described in this
Agreement.
SECTION 1.3 Consideration.
(a) The purchase price (the "Purchase Price") for the Shares shall consist
of 166,516 shares of newly issued, fully paid, and non-assessable common stock
of the Purchaser, par value $0.01 per share, ("Purchaser Common Stock") and
$4.71, in lieu of fractional shares based on the current market price of
Purchaser Common Stock. All shares of Purchaser Common Stock included in the
Purchase Price shall be registered shares of the Purchaser and shall bear the
customary Rule 145 legend. The Purchaser Common Stock included in the Purchase
Price will be requested from Purchaser's transfer agent at Closing and will be
issued immediately upon consummation of the Closing. The Purchaser hereby agrees
to amend or supplement the current Form S-4 Registration Statement (Commission
File No. 333-28525), if and to the extent necessary to comply with federal and
state securities laws, to permit the Shareholder to resell the Purchaser Common
Stock.
(b) In addition, 39,633 shares of Purchaser Common Stock will be held by an
escrow agent designated by the Shareholder and reasonably acceptable to
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Purchaser (the "Escrow Agent"), in escrow, (the "Harlingen Earn Out Bonus").
During the period commencing on December ___, 1997 and ending on December ___,
1998 (the "Earn Out Period"), the Escrow Agent shall release the Purchaser
Common Stock held as the Harlingen Earn Out Bonus to the Shareholder, in
accordance with an escrow agreement (the "Escrow Agreement") entered into by and
between the Escrow Agent, the Shareholder and the Purchaser, based on the
occupancy of the property described in Exhibit A as the Harlingen Property (the
"Harlingen Property"). Each calendar month during the Earn Out Period in which:
(i) the average occupancy rate of the Harlingen Property, expressed as
a percent (the "Harlingen Average Occupancy"), during such month, exceeds
(ii) the greater of (A) 83% or (B) the highest Harlingen Average
Occupancy for any preceding calendar month subsequent to the Closing Date,
up to 95% (each such month, a "Harlingen Earn Out Month"),
the Shareholder shall be entitled to receive a portion of the Harlingen Earn Out
Bonus. The Escrow Agreement shall provide that, in each such Harlingen Earn Out
Month, the Escrow Agent shall release Purchaser Common Stock to the Shareholder
within 25 days after the end of such calendar month. The number of shares of
Purchaser Common Stock to be released to the Shareholder with respect to each
Harlingen Earn Out Month shall be calculated as the lesser of:
(i) the number of shares of Purchaser Common Stock included in the
Harlingen Earn Out Bonus not previously released to the Shareholder, or
(ii) (A) the Harlingen Average Occupancy for such month less the
highest Harlingen Average Occupancy for any preceding calendar month
subsequent to the Closing Date, divided by (B) 12%, multiplied by (C) the
number of shares of Purchaser Common Stock included in the Harlingen Earn
Out Bonus.
The Harlingen Average Occupancy shall be calculated using Purchaser's standard
daily occupancy report, shall only count occupants paying rent for such period
and shall be rounded down to the nearest percent.
(c) In addition, 46,351 shares of Purchaser Common Stock will be held by
the Escrow Agent, in escrow, (the "Wolfforth Earn Out Bonus"). During the Earn
Out Period, the Escrow Agent shall release the Purchaser Common Stock held as
the Wolfforth Earn Out Bonus to the Shareholder, in accordance with the Escrow
Agreement, based on the occupancy of the property described in Exhibit A as the
Wolfforth Property (the "Wolfforth Property"). Each calendar month during the
Earn Out Period in which:
(i) the average occupancy rate of the Wolfforth Property,
expressed as a percent (the "Wolfforth Average Occupancy"), during such
month, exceeds
(ii) the greater of (A) 81% or (B) the highest Wolfforth
Average Occupancy for any preceding calendar month subsequent to the
Closing Date, up to 95% (each such month, a "Wolfforth Earn Out
Month"),
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the Shareholder shall be entitled to receive a portion of the Wolfforth Earn Out
Bonus. The Escrow Agreement shall provide that, in each such Wolfforth Earn Out
Month, the Escrow Agent shall release Purchaser Common Stock to the Shareholder
within 25 days after the end of such calendar month. The number of shares of
Purchaser Common Stock to be released to the Shareholder with respect to each
Wolfforth Earn Out Month shall be calculated as the lesser of:
(i) the number of shares of Purchaser Common Stock included in the
Wolfforth Earn Out Bonus not previously released to the Shareholder, or
(ii) (A) the Wolfforth Average Occupancy for such month less the
highest Wolfforth Average Occupancy for any preceding calendar month
subsequent to the Closing Date, divided by (B) 14%, multiplied by (C) the
number of shares of Purchaser Common Stock included in the Wolfforth Earn
Out Bonus.
The Wolfforth Average Occupancy shall be calculated using Purchaser's standard
daily occupancy report, shall only count occupants paying rent for such period
and shall be rounded down to the nearest percent.
(d) Any dividends or distributions (of whatever form or type) payable on
the Purchaser Common Stock being held in escrow as contemplated in this Section
1.3, shall be held for the benefit of the Shareholder, such that to the extent
that Purchaser Common Stock becomes releasable to the Shareholder, the
Shareholder shall receive any of such dividends or distributions at the time
that they receive the Purchaser Common Stock.
ARTICLE II.
PURCHASE PRICE ADJUSTMENT
SECTION 2.1 Closing Balance Sheet. As soon as practicable following the
Closing, and effective as of the day of the Closing, the Shareholder and the
Purchaser shall prepare a closing sheet of the Company (the "Closing Balance
Sheet"). The Closing Balance Sheet shall contain a listing of the Company's
current assets and current liabilities, both determined in accordance with
generally accepted accounting principles and the Company's past valuation
practices for such items, including a reasonable reserve for uncollectible
accounts receivable. In the event of any disagreement between the Shareholder
and the Company over the valuation of any item on the Closing Balance Sheet, the
Purchaser, at its sole expense, shall appoint Grant Thornton LLP ("Grant
Thornton") to calculate the disputed item. Following completion of Grant
Thornton's procedures and receipt by the Purchaser and the Shareholder of the
recommendation of Grant Thornton as to how to resolve the disputed item, the
Shareholder may, in its sole discretion, appoint an accounting firm selected by
the Shareholder (the "Shareholder's Accountant") to calculate the disputed item.
Following completion of the procedures of the Shareholder's Accountant, if the
recommendation of such accounting firmdiffers materially from that of Grant
Thornton or is not acceptable to the Purchaser, Grant Thornton and the
Shareholder's Accountant shall together select a third accounting firm to
resolve the disputed item, and such third accounting firm's decision shall be
final and binding. If Grant Thornton and the Shareholder's Accountant are unable
to agree on the appointment of a third accounting firm, such third accounting
firm shall be appointed by an arbitrator by the American Arbitration Association
and such accounting firm's decision shall be final and binding.
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SECTION 2.2 Adjustment. To the extent the current liabilities of the
Company exceed the current assets on the Closing Balance Sheet, the Shareholder
shall pay such difference to the Purchaser in cash within ten days after
delivery of the Closing Balance Sheet. To the extent current assets of the
Company exceed the current liabilities on the Closing Balance Sheet, the
Purchaser 4 shall pay such difference to the Shareholder in cash and/or
additional Purchaser Common Stock (at an agreed upon value of $19.487 per share)
within ten days after delivery of the report of the Closing Balance Sheet.
SECTION 2.3 Post-Closing Refunds of Tenant Deposits. During the one year
period commencing on the Closing Date and ending on the one year anniversary of
the Closing Date, the Shareholder shall be obligated to pay to the Purchaser in
cash the amount of any tenant deposits with respect to any of the Properties,
net of any non-refundable portion of such tenant deposits, provided the
reimbursement of such deposits shall only be due from the Shareholder with
respect to persons that are tenants on, and have paid such deposits to the
Company on or before, the Closing Date and cease to be a tenant during such one
year period. Any such refund must be properly documented by the Company, and the
Purchaser or the Company shall have provided the Shareholder with such proper
documentation. The Purchaser shall not request any payment pursuant to this
Section 2.3 more often than once each calendar month, and the Shareholder shall
have ten days from the date of receipt of the proper documentation to pay to the
Purchaser any amounts then due. Notwithstanding the foregoing, if any of the
Properties are sold or the Purchaser or Company is sold, or any similar
transaction occurs during the one year period commencing on the Closing Date and
ending on the one year anniversary of the Closing Date and the other party in
such transaction requires the Company to credit to them at closing the full
amount of the tenant deposits then validly due and outstanding to third party
tenants pursuant to arm's length transactions (such amount being referred to as
the "Subsequent Sale Credit"), the Shareholder shall be obligated to reimburse
the Purchaser that portion of the Subsequent Sale Credit that relates to tenant
deposits, net of any non-refundable portion of such tenant deposits, with
respect to persons that are tenants on, and have paid such deposits to the
Company as of, the Closing Date.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SHAREHOLDER
The Company and the Shareholder, severally but not jointly, represent and
warrant to the Purchaser as follows:
SECTION 3.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas. The Company has all requisite corporate power and authority to
own or operate its properties and conduct its business as it is now being
conducted. The Company is duly qualified and in good standing as a foreign
corporation or entity authorized to do business in each of the jurisdictions in
which the character of the properties owned or held under lease by it or the
nature of the business transacted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not have
a Material Adverse Effect. The Company has delivered to Purchaser true and
correct copies of the Articles of Incorporation and Bylaws of the Company.
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SECTION 3.2 Capitalization. The authorized capital stock of the Company
consists of (a) 500,000 shares of common stock, par value $1.00 per share
("Company Common Stock"), of which 4,500 shares were outstanding as of the date
hereof and (b) 100,000 shares of preferred stock, of which no shares were
outstanding as of the date hereof. Except as described in the Company Disclosure
Schedule, since December 31, 1996, the Company has not issued any shares or
other capital stock, and has not repurchased or redeemed any shares of Company
Common Stock. All issued and outstanding shares of Company Common Stock are
validly issued, fully paid, non-assessable and free of preemptive rights. The
Shareholder owns 100% of the issued and outstanding common stock of the Company.
Except as described in the Company Disclosure Schedule, there are no outstanding
subscriptions, options, convertible securities, warrants or claims of any kind
issued or granted by or binding on the Company to issue any security of or
equity interest in the Company. The Company does not own 5% or more of the
equity (or securities convertible into 5% or more of the equity) in any company.
SECTION 3.3 Authority Relative to this Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors and
shareholders of the Company, and no other corporate proceedings on the part of
the Company will, as of the Closing, be necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by the Company, and this Agreement constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with and subject to its terms and conditions, subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating the relief of debtors generally, and
(ii) general principles of equity.
SECTION 3.4 Financial Statements. The Company has delivered to Purchaser
copies of its reviewed and unaudited financial statements from inception through
September 30, 1997 (the "Company Financial Statements"). Each of the Company
Financial Statements fairly presents the financial position of the Company as of
its date, and each of the related consolidated statements of operations and
retained earnings and cash flows or equivalent statements in the Company
Financial Statements (including any related notes and schedules) fairly presents
the results of operations, retained earnings and cash flows, as the case may be,
of the Company for the period set forth therein (subject in the case of
unaudited interim statements, to normal year-end adjustments) in each case in
accordance with generally accepted accounting principles applicable to the
particular entity consistently applied throughout the periods involved, except
as may be noted therein. The accounts receivable, notes receivable and any other
contingent assets reflected on the latest balance sheet of the Company arose
from bona fide transactions in the ordinary course of business, and, to the best
of the Company and the Shareholder's knowledge, are not subject to any offset or
counterclaim other than as reflected in such balance sheet.
SECTION 3.5 Consents and Approvals; No Violation. Except as described in
the Company Disclosure Schedule, neither the execution and delivery of this
Agreement by the Company nor the consummation of the transactions contemplated
hereby nor compliance by the Company with any of the provisions hereof will (a)
conflict with or result in any breach of any provision of the Articles of
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Incorporation, Bylaws or other organization documents of the Company, (b)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental authority , except (i) pursuant to the
Securities Act of 1933, as amended (the "Securities Act") and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (ii) such filings and
approvals as may be required under the "blue sky", takeover or securities laws
of various states, (iii) such consent, approval, authorization or permits as
have been obtained or filing or notification as have been done, or (iv) where
the failure to obtain such consent, approval, authorization or permit, or to
make such filing or notification, would not in the aggregate have a Material
Adverse Effect (as defined herein), (c) result in a material default (with or
without due notice or lapse of time or both) (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, Contract (as defined herein),
license, agreement or other instrument or obligation to which the Company is a
party or by which the Company or any of its assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been requested and obtained, or which, in the
aggregate, would not have a Material Adverse Effect, (d) result in the creation
or imposition of any lien, charge or other encumbrance on the assets of the
Company, or (e) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its assets, except for violations
which would not in the aggregate have a Material Adverse Effect.
SECTION 3.6 No Litigation. Except as disclosed in the Company Disclosure
Schedule, (i) there are no material actions or suits, or any proceedings or
investigations by any governmental agency or regulatory body pending against the
Company, the Shareholder or, to the knowledge of the Company or the Shareholder,
the Properties; (ii) the Company has not received notice of any threatened
actions, suits, proceedings or investigations against the Company, the
Shareholder or theProperties at law or in equity, or before any governmental
board, agency or authority which, if determined adversely to the Company or the
Shareholder, would materially and adversely affect the Properties or title to
the Properties (or any part thereof), the right to operate the Properties as
presently operated, or the financial condition of the Company or the
Shareholder; (iii) there are no unsatisfied or outstanding judgments against the
Company, the Shareholder or, to the knowledge of the Company or the Shareholder,
the Properties; (iv) there is no labor dispute materially and adversely
affecting the operation or business conducted by the Company, the Shareholder or
the Properties; and (v) the Company does not have knowledge of any facts or
circumstances which might reasonably form the basis for any such action, suit,
or proceeding.
SECTION 3.7 Compliance with Law and Permits. To the knowledge of the
Shareholder and the Company, the Company has owned and operated its properties
and assets in substantial compliance with the provisions and requirements of all
laws, orders, regulations, rules and ordinances issued or promulgated by all
Governmental Authorities having jurisdiction with respect thereto, except where
the failure to own and operate such properties and assets in compliance with
such provisions and requirements would not reasonably be expected to have a
Material Adverse Effect. All material governmental certificates, consents,
permits, licenses or other authorizations with regard to the ownership or
operation by the Company of its properties and assets have been obtained, and to
the knowledge of the Shareholder and the Company no violation exists in respect
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of such licenses, permits or authorizations, except where the failure to obtain
and hold such permits, or any violation thereof by the Company would not
reasonably be expected to have a Material Adverse Effect. To the knowledge of
the Shareholder and the Company, none of the documents and materials filed with
or furnished to any governmental authority with respect to the properties,
assets or businesses of the Company contains any untrue statement of a material
fact or fails to state a material fact necessary to make the statements therein
not misleading.
SECTION 3.8 Changes. Except as expressly contemplated by this Agreement or
as reflected in the Company Disclosure Schedule or in the Company Financial
Statements, since December 31, 1996, the Company has conducted its business only
in the ordinary and usual course, and, except as set forth in the Company
Disclosure Schedule or in the Company Financial Statements, none of the
following has occurred, except as shall have occurred in the ordinary course of
its business:
(a) any material adverse change in the condition (financial or other),
results of operations, business, assets, customer, supplier and employee
relations of the Company;
(b) any change in accounting methods, principles or practices by the
Company materially affecting its assets, liabilities or business, except insofar
as may have been required by a change in generally accepted accounting
principles;
(c) any damage, destruction or loss, whether or not covered by insurance,
resulting in a Material Adverse Change of the Company;
(d) any declaration, setting aside or payment of dividends or distributions
in respect of Company Common Stock, or any redemption, purchase or other
acquisition of any of the securities of the Company;
(e) any issuance by the Company of, or commitment of the Company to issue,
any Company Common Stock or other capital stock or securities convertible into
or exchangeable or exercisable for Company Common Stock or other capital stock;
(f) any entry by the Company into any commitment or transaction material to
the condition (financial or other), business or operations of the Company, taken
as a whole, which is not in the ordinary course of business and consistent with
past practice;
(g) any revaluation by the Company of any of its assets, including without
limitation, writing down the value of assets or writing off notes or accounts
receivable other than in the ordinary course of business and consistent with
past practice;
(h) any agreement by the Company to do any of the things described in the
preceding clauses (a) through (g) other than as expressly contemplated or
provided for herein; or
(i) any waiver by the Company of any rights that, singularly or in the
aggregate, would have a Material Adverse Effect to the business, assets,
financial condition, or results of operation of the Company.
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SECTION 3.9 Definitions, Representations, and Warranties Concerning
Environmental Matters.
(a) Definitions:
(i) "Environmental Claim" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person alleging potential liability
(including, without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from:
(A) the presence or release into the environment of any Environmental
Hazardous Materials at any location, whether or not owned by the Company;
or (B) circumstances forming the basis of any violation or alleged
violation of any Environmental Law; or (C) any and all claims by any person
seeking damages, contribution, indemnification, cost recovery, compensation
or injunctive relief resulting from the presence or Environmental Release
of any Environmental Hazardous Materials.
(ii) "Environmental Laws" shall mean all federal, state, local
statute, law, rule, ordinance, code, policy, rule of common law and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without
limitation, laws and regulations relating to Environmental Releases or
threatened Environmental Releases of Environmental Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Environmental
Hazardous Materials that are presently in effect.
(iii) "Environmental Hazardous Materials" shall mean: (A) any
petroleum or petroleum products, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment that contain dissolved fluid containing
polychlorinated biphenyls (PCBs), and radon gas; and (B) any chemicals,
materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants," or words of similar import, under
any Environmental Law; and (C) any other chemical, material, substance or
waste, exposure to which is prohibited, limited or regulated by any
governmental authority.
(iv) "Environmental Release" shall mean any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersed, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property.
(b) Except as set forth in the Company Disclosure Schedule, the Company:
(i) is currently and at all times in the past has been in compliance in all
material respects with all applicable Environmental Laws and (ii) has not
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received any communication (written or oral) from a governmental authority that
alleges that the Company is or was not in compliance with applicable
Environmental Laws.
(c) Except as set forth in the Company Disclosure Schedule, the Shareholder
and the Company have, to their knowledge, obtained all environmental health and
safety permits, registrations, approvals, licenses and governmental
authorizations (collectively, the "Environmental Permits") necessary for its
operations, and to their knowledge all such permits are in good standing and, to
their knowledge, the Shareholder and the Company are in material compliance with
all terms and conditions of the Environmental Permits. A list of all
Environmental Permits is included in the Company Disclosure Schedule.
(d) Except as set forth in the Company Disclosure Schedule, there is no
Environmental Claim pending or, to the knowledge of the Shareholder or the
Company, threatened against the Company; or pending against any person whose
liability for any Environmental Claim the Company has or may have retained or
assumed either contractually or by operation of law; or pending against any real
or personal property or operations which the Company owns, leases, operates,
uses or manages.
(e) Except as set forth in the Company Disclosure Schedule, to the
knowledge of the Shareholder and the Company, there have been no Environmental
Releases of any Environmental Hazardous Material on real property owned, used,
leased, managed or operated by the Company, specifically including the
Properties, that require reporting or other response under Environmental Laws.
(f) Except as set forth in the Company Disclosure Schedule, to the
knowledge of the Shareholder and the Company, Environmental Hazardous Materials
have not at any time been generated, used, treated, recycled or stored on, or
transported to or from, or disposed of on the Properties.
(g) Except as set forth in the Company Disclosure Schedule, to the
knowledge of the Shareholder and the Company: there are not now and never have
been any underground storage tanks or pipelines located at, on or under the
Properties; there is no asbestos contained in, forming part of, or contaminating
any part of the Properties; no polychlorinated biphenyls (PCBs) are used,
stored, located at or contaminate any part of the Properties; and, no wetland
areas as defined by federal, state or local law are located on the Properties.
(h) Except as set forth in the Company Disclosure Schedule, to the
knowledge of the Shareholder and the Company, no real property at any time
owned, operated, leased, used or controlled by the Company, specifically
including the Properties, is currently listed on the National Priorities List or
the Comprehensive Environmental Response, Compensation and Liability Information
System, both promulgated under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or, to the
knowledge of the Shareholder and the Company, on any comparable state or local
list and the Company has not received any written notice from any person under
or relating to a violation of CERCLA or any comparable state or local law.
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(i) To the knowledge of the Shareholder and the Company, no off-site
location at which the Company has disposed or arranged for the disposal of any
waste is listed on the National Priorities List or on any comparable state or
local list and the Company has not received any written notice from any person
with respect to any off-site location, of potential or actual liability or a
written request for information from any government or person under or relating
to CERCLA or any comparable state or local law.
(j) The Company Disclosure Schedule includes a list of all environmental
studies, audits, or investigations that have been conducted by the Company
regarding the Properties. All books, records, environmental studies or audits
provided to the Purchaser, to the knowledge of the Shareholder and the Company,
are accurate and true in all material respects. The Company has given Purchaser
access to all records and files in its possession at both its corporate
headquarters and its facilities currently owned, operated, leased, managed, used
or controlled by the Company, including, without limitation, all reports,
studies, analyses, tests or monitoring results pertaining to the existence of
Environmental Hazardous Materials or any other environmental concerns relating
to facilities or properties owned, operated, leased, managed, used or controlled
by the Company or concerning compliance with or liability under any
Environmental Laws and the Occupational Safety and Health Act or the equivalent
such Act under state law.
(k) Except as set forth in the Company Disclosure Schedule, to the
knowledge of the Shareholder and the Company, the Properties are not subject to
any United States or state environmental liens.
(l) Except as set forth in the Company Disclosure Schedule and except for
construction contracts, financing transactions, purchase agreements and related
documents entered into in the ordinary course of business, the Company is not a
party, whether as a direct signatory or as successor, assign or third-party
beneficiary, or otherwise bound, to any contract (excluding insurance policies
disclosed on the Company Disclosure Schedule) under which the Company is
obligated by, or entitled to the benefits of, directly or indirectly, any
representation, warranty, indemnification, covenant, restriction or other
undertaking concerning Environmental Laws or the environmental conditions of the
Properties.
(m) Except as set forth in the Company Disclosure Schedule and except for
construction contracts, financing transactions, purchase agreements and related
documents entered into in the ordinary course of business, the Company has not
released any other person from any claim under any Environmental Law or waived
any rights concerning the environmental condition of the Properties, which
release or waiver would have a Material Adverse Effect on the Company.
(n) The Company Disclosure Schedule contains a list of all current
insurance policies covering the Properties or operation of the Company.
(o) The Properties are, to the best of the Shareholder's and Company's
knowledge, in good repair and working order, reasonable wear and tear excepted,
and are not in immediate need of any major repair or material capital
expenditure except as noted on the Company Disclosure Schedule.
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SECTION 3.10 ERISA Matters. The Company and all Employee Benefit Plans as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that cover any of its employees (which Employee Benefit
Plans are listed on the Company Disclosure Schedule), comply in all material
respects with all applicable laws, requirements and orders under ERISA and the
Code, the breach or violation of which would have a Material Adverse Effect on
the Company; the present value of all the assets of each of its Employee Benefit
Plans that it is subject to Title IV of ERISA equals or exceeds to the knowledge
of the Shareholder the present value of all of the benefits accrued under each
such Employee Benefit Plan as of the end of most recent plan year with respect
to such plan ending prior to the date hereof, calculated on the basis of the
actuarial assumptions used in the last actuarial evaluation for each such plan;
none of the employees of the Company is covered by a collective bargaining
agreement; the Company has never contributed to a "multiemployer plan" as
defined in Section 3(37) of ERISA; neither the Employee Benefit Plans nor any
fiduciary or administrator thereof has engaged in a "prohibited transaction" as
defined in Section 406 of ERISA or, where applicable, Section 4975 of the Code
for which no exemption is applicable, that may have any Material Adverse Effect
on the Company, nor to the knowledge of the Shareholder and the Company have
there been any "reportable events" as defined in Section 4043 of ERISA for which
the thirty-day notice has not been waived.
SECTION 3.11 Taxes, Tax Returns.
(a) The Company has delivered to Purchaser copies of all federal income tax
returns and all schedules and exhibits thereto of the Company for each of the
last two fiscal years. Except as set forth on the Company Disclosure Schedule,
the Company has duly and timely filed in correct form all federal, state and
local information returns and tax returns required to be filed by it on or prior
to the date hereof (all such returns to the knowledge of the Shareholder and the
Company being accurate and complete in all material respects) and, to the
knowledge of the Shareholder and the Company, has duly paid or made provision
for the payment of all taxes and other governmental charges which have been
incurred or are due or claimed to be due from them by any governmental authority
(including, without limitation, those due in respect of the Properties, income,
business, capital stock, franchises, licenses, sales and payrolls) other than
taxes or other charges (i) which are not yet delinquent or are being contested
in good faith and set forth in the Company Disclosure Schedule, (ii) have not
been finally determined or (iii) that would not have a Material Adverse Effect
on the Company. The liabilities and reserves for taxes in the Company Financial
Statements are sufficient to the best of the Company and the Shareholder's
knowledge in the aggregate for the payment of all unpaid federal, state and
local taxes (including any interest or penalties thereon), whether or not
disputed or accrued, for the period ended December 31, 1996 through the Closing
Date or for any year or period prior thereto, and for which the Company may be
liable in its own right or as transferee of the assets of, or successor to, any
corporation, person, association, partnership, joint venture or other entity.
(b) To the knowledge of the Shareholder and the Company, (i) proper and
accurate amounts have been withheld by the Company from its employees and others
for all prior periods in compliance in all material respects with the tax
withholding provisions of applicable federal, state and local laws and
regulations, and proper due diligence steps have been taken in connection with
back-up withholding, (ii) federal, state and local returns which are accurate
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and complete in all material respects have been filed by the Company for all
periods for which returns were due with respect to income tax withholding,
Social Security and unemployment taxes and (iii) the amounts shown on such
returns to be due and payable have been paid in full, or adequate provision
therefore has been included by the Company in the most recent Company Financial
Statements.
SECTION 3.12 Undisclosed Liabilities. The Company is not liable for or
subject to any Liabilities (as hereinafter defined), except (a) Liabilities
adequately disclosed or reserved for in the most recent Company Financial
Statements and not heretofore paid or discharged, (b) Liabilities under any
contract, commitment or agreement specifically disclosed on the Company
Disclosure Schedule or (c) Liabilities incurred, consistent with past practice,
in or as a result of the ordinary course of business of the Company since the
date of the most recent Company Financial Statements. As used in this Agreement,
the term "Liability" or "Liabilities" includes any material direct or indirect
liability, indebtedness, obligation, guarantee or endorsement (other than
endorsements of notes, bills, and checks presented to banks for collection or
deposit in the ordinary course of business).
SECTION 3.13 Tax Audits. Except as disclosed in the Company Disclosure
Schedule, (i) no audit of any material federal, state or local U.S. return of
the Company is currently in progress, nor has the Company been notified that
such an audit is contemplated by any taxing authority, (ii) the Company has not
extended any statute of limitations with respect to the period for assessment of
any federal, state or local U.S. tax, (iii) the Company does not contemplate the
filing of an amendment to any return, which amendment would have a Material
Adverse Effect on the Company, and (iv) to the knowledge of the Shareholder and
the Company, the Company does not have any actual or potential material
liability for any tax obligation of any taxpayer other than the Company. Except
as disclosed in the Company Disclosure Schedule, there are no material tax
claims pending against the Company and there are no material tax claims to the
knowledge of the Shareholder and the Company threatened to be asserted against
the Company. For purposes of this Section 3.13, "tax" and "taxes" shall include
all income, gross receipt, franchise, excise, real and personal property, sales,
ad valorem, employment, withholding and other taxes imposed by any foreign,
federal, state, municipal, local, or other governmental authority including
assessments in the nature of taxes.
SECTION 3.14 No Default; Compliance.
(a) Except as set forth in the Company Disclosure Schedule, to the
knowledge of the Shareholder and the Company, the Company is not in material
default under, and no condition exists that with notice or lapse of time or both
would constitute a material default under, (i) any material mortgage, loan
agreement, indenture, evidence of indebtedness or other instrument evidencing
borrowed money to which the Company is a party or by which the Company or its
properties is bound, (ii) any judgment, order or injunction of any court,
arbitrator or governmental agency or (iii) any other agreement, contract, lease,
license or other instrument, which default or potential default might reasonably
be expected to have a Material Adverse Effect.
(b) Except as set forth in the Company Disclosure Schedule, the Company has
complied in all material respects with all laws, regulations, orders, judgments
or decrees of any federal or state court or governmental authority applicable to
its businesses and operations, non-compliance with which might reasonably be
expected to have a Material Adverse Effect.
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SECTION 3.15 Representations and Warranties Continuing. The representations
and warranties set forth herein shall be true and correct on the date hereof
(except to the extent any such representation or warranty speaks of another
date) and, subject to an update of the Company Disclosure Schedule from time to
time, at all times prior to the Closing as if made from time to time, prior to
the Closing, including, without limitation, at the Closing.
SECTION 3.16 Contracts and Commitments. Except as listed and described in
the Company Disclosure Schedule or the Company Financial Statements, the Company
is not a party to, nor is it or its assets bound by any written covenant,
contract, agreement or understanding (a "Contract"), including the following:
(a) Contract with any present or former stockholder, director, officer,
employee or consultants;
(b) Contract with any labor union or other representative of employees;
(c) Contract for the future purchase of, or payment for, supplies or
products, or for the performance of services by a third party, involving payment
or potential payment by the Company of $25,000 or more under any one Contract or
series of related Contracts;
(d) Any Contract, including, without limitation, any outstanding
quotations, bids or proposals, to sell goods or to perform services in an
aggregate amount in excess of $25,000;
(e) Distributorship, representative or sales agency agreement, contract or
commitment;
(f) Conditional sale agreement or lease under which the Company is either
the seller or purchaser, lessor or lessee, involving annualized payments or
potential payments by or to the Company that are in excess of $25,000;
(g) Contract (including, without limitation, any note, debenture, bond,
conditional sale or equipment trust agreement, letter of credit agreement or
loan agreement) for the borrowing or lending of money more than $25,000
(including, without limitation, those to or from officers, directors or
shareholders of the Company, or any affiliates or members of their immediate
families, for a line of credit, or for a guarantee, security, indemnitee, pledge
or undertaking of the indebtedness or obligations of any other person);
(h) Contract for any charitable or political contribution;
(i) Contract for any capital expenditure involving future payments, which,
together with future payments under all other existing Contracts for the same
capital project, are in excess of $25,000;
(j) Contract limiting or restraining the Company from engaging or competing
in any lines of business with any person, nor, to the knowledge of the
Shareholder and the Company, is any officer or employee of the Company subject
to any such agreement, contract or commitment;
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(k) License, franchise, distributorship or other Contract relating in whole
or in part to any ideas, technical assistance or other know-how of or used by
the Company;
(l) Contract calling for future payment greater than $25,000 which is
expected to continue for more than six months from the date hereof;
(m) Any guaranty, direct or indirect, of any person of any contract, lease
or agreement in an amount greater than $25,000 entered into by the Company.
Except as may be disclosed on the Company Disclosure Schedule: to the best of
the Company and the Shareholder's knowledge, each of the Contracts listed on the
Company Disclosure Schedule is valid and enforceable in accordance with its
terms except to the extent such enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws and judicial decisions of general
application relating to or affecting the enforcement of creditors' rights
generally or by general equitable principles; to the best of the Company and the
Shareholder's knowledge, the Company and the other parties thereto are in
substantial compliance with the provisions thereof; except as may be disclosed
on the Company Disclosure Schedule, neither the Company nor any other party is
(or by reason of the consummation of the transactions contemplated by this
Agreement, will be) in default in the performance, observance or fulfillment of
any obligation, covenant or condition contained therein and no event has
occurred or is anticipated to occur (including the consummation of the
transactions contemplated by this Agreement) which with or without the giving of
notice or lapse of time, or both, would constitute a default or give the right
of termination thereunder which would have a Material Adverse Effect.
SECTION 3.17 Title to Property. Except as disclosed on the Company
Disclosure Schedule or in the most recent Company Financial Statements, (i) the
Company has good and indefeasible title to its property and assets that are
material to the Company's business on a consolidated basis, exclusive of the
Properties which are owned by Health Care REIT, Inc., (ii) such property and
assets are insured to the extent they are of a type for which insurance is
generally available, (iii) such property and assets are free and clear of all
security interests, liens, encumbrances and encroachments of a material nature,
except for liens for current taxes not yet due and payable.
SECTION 3.18 Insurance and Bank Accounts.
(a) The Company Disclosure Schedule sets forth a complete and accurate list
of all insurance policies in force naming the Company or any of its employees as
an insured or beneficiary or as a loss payable payee or for which the Company
has paid or is obligated to pay all or part of the premiums. The Company has not
received notice of any pending or threatened termination or retroactive premium
increase with respect thereto, and the Company is in compliance in all material
respects with all conditions contained therein. There are no pending material
claims against such insurance by the Company as to which insurers have denied
liability, no defenses provided by insurers under reservations of rights, and no
material claim under such insurance that has not been properly filed by the
Company.
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(b) The Company Disclosure Schedule contains a list of all bank and
investment accounts maintained by the Company, including the account numbers,
recent balance, institution, and persons having signing authority.
SECTION 3.19 Employees. The Disclosure Statement sets forth a list of the
employees of the Company, stating with respect to each, the name, date of hire
and rate of compensation. Except as described in the Disclosure Statement, there
are no claims or disputes pending with any employee regarding workers'
compensation, unemployment benefits, discrimination (including discrimination
based on any disability), or compensation, and no employment or collective
bargaining agreements are in effect covering any such person.
SECTION 3.20 Investment Representations. Each Shareholder is a
knowledgeable and experienced investor and has had an opportunity to ask
questions and review information about the business and financial condition of
the Purchaser. Each Shareholder acknowledges receipt of an Annual Report of the
Purchaser and all filed Quarterly Reports since the date of the Annual Report.
SECTION 3.21 Parties In Possession. Except as disclosed in the Company
Disclosure Schedule, there are no parties in possession of any of the Properties
or any portion thereof as managers, lessees, tenants at sufferance, or
trespassers.
SECTION 3.22 Condition Of The Properties. To the knowledge of the
Shareholder and the Company, all of the mechanical and electrical systems,
heating and air conditioning systems, plumbing, water and sewer systems, and all
other items of mechanical equipment or appliances are materially in good working
order, condition and repair, are of sufficient size and capacity to service the
Properties for the use of such properties as personal care facilities and
conform with all applicable ordinances and regulations, and with all building,
zoning, fire, safety, and other codes, laws and orders. The buildings,
structures and other improvements, including the roof and foundation, are
structurally sound and free from leaks and other defects.
SECTION 3.23 Compliance with Laws. To the best of the Shareholder's and the
Company's knowledge, there is no violation of, or noncompliance with, (i) any
laws, orders, rules or regulations, ordinances or codes of any kind or nature
whatsoever relating to the Properties or the ownership or operation thereof
(including without limitation, building, fire, health, occupational safety and
health, zoning and land use, planning and environmental laws, orders, rules and
regulations); (ii) any covenants, conditions, restrictions or agreement
affecting or relating to the ownership, use or occupancy of the Properties; or
(iii) any order, writ, regulation or decree relating to any matter referred to
in (i) or (ii) above.
SECTION 3.24 Access. Access to the Properties is directly from a dedicated
public right-of-way without any easement. To the knowledge of the Shareholder
and the Company, there is no fact of condition which would result in the
termination or reduction of the current access to and from the Properties to
such right-of-way.
SECTION 3.25 Utilities. There are available at the Properties gas,
municipal water, and sanitary sewer lines, storm sewers, electrical and
telephone services in operating condition which are adequate for the operation
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of the Properties at a reasonable cost. The Properties have direct access to
utility lines located in a dedicated public right-of-way without any easement.
Except as set forth on the Company Disclosure Schedule, as of the Closing Date,
there is no pending or, to the knowledge of the Shareholder or the Company,
threatened governmental or third party proceeding which would impair or result
in the termination of such utility availability.
SECTION 3.26 Condemnation and Assessments. Except as set forth in the
Company Disclosure Schedule, neither the Shareholder nor the Company have
received notice of, and there are no pending or, to the best of the
Shareholder's and the Company's knowledge, threatened condemnation, assessment
or similar proceedings affecting or relating to the Properties, or any portion
thereof, or any utilities, sewers, roadways or other public improvements serving
the Properties.
SECTION 3.27 Zoning. Except as disclosed in the Company Disclosure
Schedule, to the knowledge of the Shareholder, (i) the use and operation of the
Properties as personal care facilities is a permitted use under the applicable
zoning code; (ii) no special use permits, conditional use permits, variances, or
exceptions have been granted or are needed for such use of the Properties; (iii)
the Properties are not located in any special districts such as historical
districts or overlay districts; and (iv) the Properties have been constructed in
accordance with and the Properties comply with all applicable zoning laws,
including but not limited to, dimensional, parking, setback, screening,
landscaping, sign and curb cut requirements.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser represents and warrants to the Company and the Shareholder as
follows:
SECTION 4.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. All Subsidiaries of the Purchaser are legal entities that are duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. Each of the Purchaser and its
Subsidiaries has all requisite power and authority to own or operate its
properties and conduct its business as it is now being conducted. The Purchaser
and each of its Subsidiaries is duly qualified and in good standing as a foreign
corporation or entity authorized to do business in each of the jurisdictions in
which the character of the properties owned or held under lease by it or the
nature of the business transacted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not have
a Material Adverse Effect on the Purchaser. The Purchaser has delivered to the
Company true and correct copies of the Articles of Incorporation and Bylaws of
the Purchaser.
SECTION 4.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of the Purchaser consists of 100,000,000
shares of Purchaser Common Stock, and 10,000,000 shares of preferred stock, par
value $0.10 per share. As of the date hereof, approximately 7,126,189 shares of
Purchaser Common Stock (including 400,000 shares issued to Residential
Healthcare Properties, Inc., a subsidiary of Purchaser ("RHP") as collateral for
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a loan to RHP, 125,000 shares redeemed from an affiliate of Purchaser that will
be contributed to RHP, and 60,049 shares held in escrow pursuant to an
acquisition agreement), 128 shares of Series B Preferred Stock, and 675,000
shares of Series D Preferred Stock (together the "Preferred Shares") were issued
and outstanding. The Preferred Shares are convertible into 341,071 shares of
Purchaser Common Stock. Except as described in the Purchaser Disclosure Schedule
or the Purchaser SEC Reports (as defined below), since December 31, 1996, the
Purchaser has not issued any shares of capital stock, and has not repurchased or
redeemed any shares of its capital stock. Neither the Purchaser nor any
Subsidiary has any shares of its capital stock reserved for issuance, except for
570,000 shares of Purchaser Common Stock, none of which is outstanding, issuable
pursuant to stock options and warrants and 341,071 shares of Purchaser Common
Stock reserved for issuance upon conversion of the Preferred Shares. No other
options, warrants or other securities convertible into Purchaser Common Stock,
any security convertible into Purchaser Common Stock, or any other Purchaser
security are outstanding. All issued and outstanding shares of capital stock of
Purchaser are validly issued, fully paid, non-assessable and free of preemptive
rights.
(b) Except as set forth in the Purchaser Disclosure Schedule or the
Purchaser SEC Reports, all of the outstanding shares of capital stock of each of
the Purchaser's Subsidiaries are owned, directly or indirectly, by the
Purchaser, beneficially and of record. Except as set forth in the Purchaser
Disclosure Schedule or in the Purchaser Financial Statements or Purchaser SEC
Reports, all of such shares of capital stock of the Subsidiaries are owned free
and clear of all liens, charges, encumbrances, rights of others, mortgages,
pledges or security interests, and are not subject to any agreements or
understandings among any persons with respect to the voting or transfer of such
shares. Except as described in the Purchaser Disclosure Schedule or the
Purchaser SEC Reports, there are no outstanding subscriptions, options,
convertible securities, warrants or claims of any kind issued or granted by or
binding on the Purchaser to purchase or otherwise acquire any security of or
equity interest in any of such Subsidiaries. All of the outstanding shares of
capital stock of each such Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable, and none has been issued in
violation of the preemptive rights of any stockholder.
SECTION 4.3 Authority Relative to this Agreement. The Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Boards of Directors of the
Purchaser, and no other corporate proceedings on the part of the Purchaser are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
the Purchaser, and this Agreement constitutes a valid and binding agreement of
the Purchaser, enforceable against the Purchaser in accordance with and subject
to its terms and conditions, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating the relief of debtors generally, and (ii) general principles of equity.
SECTION 4.4 SEC Reports. Since January 1, 1993 the Purchaser has filed all
required forms, reports and documents ("Purchaser SEC Reports") with the
Securities and Exchange Commission (the "SEC") required to be filed by it
pursuant to the federal securities laws and the SEC rules and regulations
thereunder, all of which have complied in all material respects with all
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applicable requirements of the Securities Act and the Exchange Act, and the
rules and interpretive releases promulgated thereunder. None of such Purchaser
SEC Reports, including without limitation any financial statements, notes, or
schedules included therein, at the time filed, contained, or, if to be filed in
the future will contain, any untrue statement of a material fact, or omitted,
omit or will omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. For the last two (2) years,
Purchaser has filed on a timely basis all Purchaser SEC Reports required to be
filed with the SEC.
Each of the consolidated balance sheets in or incorporated by reference
into the Purchaser SEC Reports fairly presents the financial position of the
entity or entities to which it relates as of its date, and each of the related
consolidated statements of operations and retained earnings and cash flows or
equivalent statements in the Purchaser SEC Reports (including any related notes
and schedules) fairly presents the results of operations, retained earnings and
cash flows, as the case may be, of the entity or entities to which it relates
for the period set forth therein (subject in the case of unaudited interim
statements, to normal year-end audit adjustments) in each case in accordance
with generally accepted accounting principles applicable to the particular
entity consistently applied throughout the periods involved, except as may be
noted therein. The consolidated financial statements included or to be included
in the Purchaser SEC Reports are hereinafter sometimes collectively referred to
as the "Purchaser Financial Statements."
SECTION 4.5 Consents and Approvals; No Violation. Except as described in
the Purchaser Disclosure Schedule, neither the execution and delivery of this
Agreement by the Purchaser nor the consummation of the transactions contemplated
hereby nor compliance by the Purchaser with any of the provisions hereof will
(a) conflict with or result in any breach of any provision of the Articles of
Incorporation or By-laws or other organization documents of the Purchaser or any
Subsidiary, (b) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental authority, except (i) pursuant
to the Securities Act and the Exchange Act, (ii) such filings and approvals as
may be required under the "blue sky", takeover or securities laws of various
states, (iii) such consent, approval, authorization or permits as have been
obtained or filing or notification as have been done, or (iv) where the failure
to obtain such consent, approval, authorization or permit, or to make such
filing or notification, would not in the aggregate have a Material Adverse
Effect, (c) result in a material default (with or without due notice or lapse of
time or both) (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, Contract, license, agreement or other instrument or
obligation to which the Purchaser or any of its Subsidiaries is a party or by
which the Purchaser, any of its Subsidiaries or any of their respective assets
may be bound, except for such defaults (or rights of termination, cancellation
or acceleration) as to which requisite waivers or consents have been requested
and obtained or which, in the aggregate, would not have a Material Adverse
Effect, (d) result in the creation or imposition of any lien, charge or other
encumbrance on the assets of the Purchaser or any of its Subsidiaries, or (e)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser, any of its Subsidiaries or any of their respective
assets, except for violations which would not in the aggregate have a Material
Adverse Effect.
SECTION 4.6 No Litigation. Except as described in the Purchaser Disclosure
Schedule or the Purchaser SEC Reports, (a) there is no action, claim, or
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proceeding pending or, to the knowledge of the Purchaser, threatened, to which
the Purchaser or any of its Subsidiaries is or would be a party before any court
or governmental authority acting in an adjudicative capacity or any arbitrator
or arbitration tribunal with respect to which there is a reasonable likelihood
of a determination having, or which, insofar as reasonably can be foreseen, in
the future would have a Material Adverse Effect on the Purchaser; (b) neither
the Purchaser nor any of its Subsidiaries is subject to any outstanding order,
writ, injunction or decree; and (c) since December 31, 1996, there have been no
claims made or actions or proceedings brought against any officer or director of
the Purchaser arising out of or pertaining to any action or omission within the
scope of his employment or position with the Purchaser, which claim, action or
proceeding would involve a Material Adverse Effect on the Purchaser taken as a
whole. All material litigation and other administrative, judicial or
quasi-judicial proceedings to which the Purchaser is a party or to which it has
been threatened to the Purchaser's knowledge to be made a party, are described
in the Purchaser Disclosure Schedule.
SECTION 4.7 Compliance with Law and Permits. To its knowledge, the
Purchaser and its Subsidiaries have owned and operated their properties and
assets in substantial compliance with the provisions and requirements of all
laws, orders, regulations, rules and ordinances issued or promulgated by all
governmental authorities having jurisdiction with respect thereto, except where
the failure to own and operate such properties and assets in compliance with
such provisions and requirements would not reasonably be expected to have a
Material Adverse Effect. All material governmental certificates, consents,
permits, licenses or other authorizations with regard to the ownership or
operation by the Purchaser or its Subsidiaries of their respective properties
and assets have been obtained and to its knowledge no violation exists in
respect of such licenses, permits or authorizations, except where the failure to
obtain and hold such permits, or any violation thereof by the Purchaser or its
Subsidiaries, would not reasonably be expected to have a Material Adverse
Effect. To its knowledge, none of the documents and materials filed with or
furnished to any governmental authority with respect to the properties, assets
or businesses of the Purchaser or its Subsidiaries contains any untrue statement
of a material fact or fails to state a material fact necessary to make the
statements therein not misleading.
SECTION 4.8 Changes. Except as expressly contemplated by this Agreement or
as reflected in the Purchaser Disclosure Schedule or in the Purchaser Financial
Statements or Purchaser SEC Reports, since December 31, 1996, the Purchaser and
its Subsidiaries have conducted their business only in the ordinary and usual
course, and, except as set forth in the Purchaser Disclosure Schedule or in the
Purchaser Financial Statements or Purchaser SEC Reports, none of the following
has occurred, except as shall have occurred in the ordinary course of its
business:
(a) any material adverse change in the condition (financial or other),
results of operations, business, assets, customer, supplier and employee
relations of the Purchaser and its Subsidiaries, taken as a whole;
(b) any change in accounting methods, principles or practices by the
Purchaser materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles;
(c) any damage, destruction or loss, whether or not covered by insurance,
resulting in a Material Adverse Change of the Purchaser and its Subsidiaries;
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(d) any declaration, setting aside or payment of dividends or distributions
in respect of the Purchaser Common Stock, or any redemption, purchase or other
acquisition of any of the securities of the Purchaser or its Subsidiaries;
(e) any issuance by the Purchaser of, or commitment of the Purchaser to
issue, any Purchaser Common Stock or other capital stock or securities
convertible into or exchangeable or exercisable for Purchaser Common Stock or
other capital stock;
(f) any entry by the Purchaser or any of its Subsidiaries into any
commitment or transaction material to the condition (financial or other),
business or operations of the Purchaser and its Subsidiaries, taken as a whole,
which is not in the ordinary course of business and consistent with past
practice;
(g) any revaluation by the Purchaser or any of its Subsidiaries of any of
their respective assets, including without limitation, writing down the value of
assets or writing off notes or accounts receivable other than in the ordinary
course of business and consistent with past practice;
(h) any agreement by the Purchaser to do any of the things described in the
preceding clauses (a) through (g) other than as expressly contemplated or
provided for herein; or
(i) any waiver by the Purchaser or any of its Subsidiaries of any rights
that, singularly or in the aggregate, are material to the business, assets,
financial condition, or results of operation of the Purchaser and its
Subsidiaries, taken as a whole.
SECTION 4.9 Representations, and Warranties Concerning Environmental
Matters.
(a) Except as set forth in the Purchaser Disclosure Schedule, the Purchaser
and all of its Subsidiaries: (i) are currently and at all times in the past has
been in compliance in all material respects with all applicable Environmental
Laws; and (ii) have not received any communication (written or oral) from a
governmental authority that alleges that the Purchaser or a Subsidiary is or was
not in compliance with applicable Environmental Laws.
(b) Except as set forth in the Purchaser Disclosure Schedule, the Purchaser
and the Subsidiaries have to their knowledge obtained all environmental health
and safety permits, registrations, approvals, licenses and governmental
authorizations (collectively, the "Environmental Permits") necessary for its
operations, and to their knowledge all such permits are in good standing and to
their knowledge the Purchaser and the Subsidiaries are in material compliance
with all terms and conditions of the Environmental Permits. A list of all
Environmental Permits is included in the Purchaser Disclosure Schedule.
(c) Except as set forth in the Purchaser Disclosure Schedule, there is
no Environmental Claim pending or, to the knowledge of the Purchaser or any
Subsidiary, threatened against the Purchaser or any Subsidiary; or pending
against any person whose liability for any Environmental Claim the Purchaser or
a Subsidiary has or may have retained or assumed either contractually or by
operation of law; or pending against any real or personal property or operations
which the Purchaser or a Subsidiary owns, leases, operates, uses or manages.
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(d) Except as set forth in the Purchaser Disclosure Schedule, to the
knowledge of the Purchaser and the Subsidiaries there have been no Environmental
Releases of any Environmental Hazardous Material on real property owned, used,
leased, managed or operated by the Purchaser or any Subsidiary, specifically
including the Properties, that require reporting or other response under
Environmental Laws.
(e) Except as set forth in the Purchaser Disclosure Schedule, to the
knowledge of the Purchaser, Environmental Hazardous Materials have not at any
time been generated, used, treated, recycled or stored on, or transported to or
from, or disposed of on the Properties.
(f) Except as set forth in the Purchaser Disclosure Schedule, to the
knowledge of the Purchaser: there are not now and never have been any
underground storage tanks or pipelines located at, on or under the Properties;
there is no asbestos contained in, forming part of, or contaminating any part of
the Properties; no polychlorinated biphenyls (PCBs) are used, stored, located at
or contaminate any part of the Properties; and, no wetland areas as defined by
federal, state or local law are located on the Properties.
(g) Except as set forth in the Purchaser Disclosure Schedule, to the
knowledge of the Purchaser, no real property at any time owned, operated,
leased, used or controlled by the Purchaser or a Subsidiary is currently listed
on the National Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, or to the knowledge of the
Purchaser on any comparable state or local list and neither the Purchaser or any
Subsidiary has received any written notice from any person under or relating to
a violation of CERCLA or any comparable state or local law.
(h) To the knowledge of the Purchaser, no off-site location at which the
Purchaser or any Subsidiary has disposed or arranged for the disposal of any
waste is listed on the National Priorities List or on any comparable state or
local list and neither the Purchaser nor any Subsidiary has received any written
notice from any person with respect to any off-site location, of potential or
actual liability or a written request for information from any government or
person under or relating to CERCLA or any comparable state or local law.
(i) Except as set forth in the Purchaser Disclosure Schedule, to the
knowledge of the Purchaser the Properties are not subject to any United States
or state environmental liens.
(j) Except as set forth in the Purchaser Disclosure Schedule, the Purchaser
and the Subsidiaries are not a party, whether as a direct signatory or as
successor, assign or third-party beneficiary, or otherwise bound, to any
contract (excluding insurance policies disclosed on the Purchaser Disclosure
Schedule) under which the Purchaser or any Subsidiary is obligated by, or
entitled to the benefits of, directly or indirectly, any representation,
warranty, indemnification, covenant, restriction or other undertaking concerning
Environmental Laws or the environmental conditions of the Properties.
(k) Except as set forth in the Purchaser Disclosure Schedule, neither the
Purchaser nor any Subsidiary has released any other person from any claim under
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any Environmental Law or waived any rights concerning the environmental
condition of the Properties, which release or waiver would have a Material
Adverse Effect on the Purchaser.
SECTION 4.10 ERISA Matters. The Purchaser, each of its Subsidiaries and all
Employee Benefit Plans as defined in Section 3(3) of ERISA, that cover any of
its or their employees (which Employee Benefit Plans are listed on the Purchaser
Disclosure Schedule), comply in all material respects with all laws,
requirements and orders under ERISA and the Code, the breach or violation of
which would have a Material Adverse Effect on the Purchaser and its
Subsidiaries, taken as a whole; the present value of all the assets of each of
its Employee Benefit Plans that it is subject to Title IV of ERISA equals or
exceeds to the knowledge of the Purchaser the present value of all of the
benefits accrued under each such Employee Benefit Plan as of the end of most
recent plan year with respect to such plan ending prior to the date hereof,
calculated on the basis of the actuarial assumptions used in the last actuarial
evaluation for each such plan; none of the employees of the Purchaser or any of
its Subsidiaries is covered by a collective bargaining agreement; neither the
Purchaser nor any of its Subsidiaries has ever contributed to a "multiemployer
plan" as defined in Section 3(37) of ERISA; neither the Employee Benefit Plans
nor any fiduciary or administrator thereof has engaged in a "prohibited
transaction" as defined in Section 406 of ERISA or, where applicable, Section
4975 of the Code for which no exemption is applicable, that may have any
Material Adverse Effect on the Purchaser and its Subsidiaries, taken as a whole,
nor to the knowledge of the Purchaser have there been any "reportable events" as
defined in Section 4043 of ERISA for which the thirty-day notice has not been
waived.
SECTION 4.11 Taxes, Tax Returns.
(a) Except as set forth on the Purchaser Disclosure Schedule or the
Purchaser SEC Reports, each of the Purchaser and its Subsidiaries for which it
files returns has duly and timely filed in correct form all federal, state and
local information returns and tax returns required to be filed by it and such
Subsidiaries on or prior to the date hereof (all such returns to the knowledge
of the Purchaser being accurate and complete in all material respects) and, to
the knowledge of the Purchaser, has duly paid or made provision for the payment
of all taxes and other governmental charges which have been incurred or are due
or claimed to be due from them by any governmental authority (including, without
limitation, those due in respect of their properties, income, business, capital
stock, franchises, licenses, sales and payrolls) other than taxes or other
charges (i) which are not yet delinquent or are being contested in good faith
and set forth in the Purchaser Disclosure Schedule or the Purchaser SEC Reports,
(ii) have not been finally determined or (iii) that would have a Material
Adverse Effect on the Purchaser. The liabilities and reserves for taxes in the
Purchaser Financial Statements are sufficient in the aggregate for the payment
of all unpaid federal, state and local taxes (including any interest or
penalties thereon), whether or not disputed or accrued, for the period ended
December 31, 1996 or for any year or period prior thereto, and for which the
Purchaser or any of its Subsidiaries may be liable in its own right or as
transferee of the assets of, or successor to, any corporation, person,
association, partnership, joint venture or other entity.
(b) To the knowledge of the Purchaser, (i) proper and accurate amounts have
been withheld by the Purchaser and its Subsidiaries from their employees and
others for all prior periods in compliance in all material respects with the tax
withholding provisions of applicable federal, state and local laws and
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regulations, and proper due diligence steps have been taken in connection with
back-up withholding, (ii) federal, state and local returns which are accurate
and complete in all material respects have been filed by the Purchaser and each
of its Subsidiaries for all periods for which returns were due with respect to
income tax withholding, Social Security and unemployment taxes and (iii) the
amounts shown on such returns to be due and payable have been paid in full, or
adequate provision therefore has been included by the Purchaser in the most
recent Purchaser Financial Statements.
SECTION 4.12 Undisclosed Liabilities. The Purchaser is not liable for or
subject to any Liabilities, except (a) Liabilities adequately disclosed or
reserved for in the most recent Purchaser Financial Statements or Purchaser SEC
Reports and not heretofore paid or discharged, (b) Liabilities under any
contract, commitment or agreement specifically disclosed on the Purchaser
Disclosure Schedule or the Purchaser SEC Reports (and Purchaser represents that
it has adequately reserved for any such liabilities if so required by generally
accepted accounting principles), or (c) Liabilities incurred, consistent with
past practice, in or as a result of the ordinary course of business of the
Purchaser since the date of the most recent Purchaser Financial Statements.
Since the date of the most recent Purchaser Financial Statements, no Material
Adverse Event has occurred with respect to Purchaser.
SECTION 4.13 Tax Audits. Except as disclosed in the Purchaser Disclosure
Schedule or the Purchaser SEC Reports, (i) no audit of any material federal,
state or local U.S. return of the Purchaser or any Subsidiary is currently in
progress, nor has the Purchaser or any Subsidiary been notified that such an
audit is contemplated by any taxing authority, (ii) neither the Purchaser nor
any Subsidiary has extended any statute of limitations with respect to the
period for assessment of any federal, state or local U.S. tax, (iii) neither the
Purchaser nor any Subsidiary contemplates the filing of an amendment to any
return, which amendment would have a Material Adverse Effect on the Purchaser,
and (iv) neither the Purchaser nor any Subsidiary has any actual or potential
material liability for any tax obligation of any taxpayer (including, without
limitation, any affiliated group of corporations or other entities which
included the Purchaser or any Subsidiary during a prior period) other than the
Purchaser or its Subsidiaries. Except as disclosed in the Purchaser Disclosure
Schedule or the Purchaser SEC Reports, there are no material tax claims pending
against the Purchaser or any Subsidiary and there are no material tax claims to
the knowledge of the Purchaser threatened to be asserted against the Purchaser
or any Subsidiary. For purposes of this Section 4.13, "tax" and "taxes" shall
include all income, gross receipt, franchise, excise, real and personal
property, sales, ad valorem, employment, withholding and other taxes imposed by
any foreign, federal, state, municipal, local, or other governmental authority
including assessments in the nature of taxes.
SECTION 4.14 No Default; Compliance.
(a) Except as set forth in the Purchaser Disclosure Schedule or the
Purchaser SEC Reports, neither the Purchaser nor any of its Subsidiaries is in
material default under, and no condition exists that with notice or lapse of
time or both would constitute a material default under, (i) any mortgage, loan
agreement, indenture, evidence of indebtedness or other instrument evidencing
borrowed money to which either the Purchaser or any of its Subsidiaries is a
party or by which either the Purchaser or any of its Subsidiaries or its
properties is bound, (ii) any judgment, order or injunction of any court,
arbitrator or governmental agency or (iii) any other agreement, contract, lease,
license or other instrument, which default or potential default might reasonably
be expected to have a Material Adverse Effect.
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(b) Except as set forth in the Purchaser Disclosure Schedule or the
Purchaser SEC Reports, the Purchaser and each of its Subsidiaries have complied
in all material respects with all laws, regulations, orders, judgments or
decrees of any federal or state court or governmental authority applicable to
their respective businesses and operations, non-compliance with which might
reasonably be expected to have a Material Adverse Effect.
SECTION 4.15 Representations and Warranties Continuing. The representations
and warranties set forth herein shall be true and correct on the date hereof
(except to the extent any such representation or warranty speaks of another
date) and, subject to an update to the Purchaser Disclosure Schedule and the
Purchaser SEC Reports, from time to time, at all times prior to the Closing as
if made from time to time, prior to the Closing including, without limitation,
at the Closing.
SECTION 4.17 Title to Property. Except as disclosed on the Purchaser
Disclosure Schedule or in the most recent Purchaser Financial Statements, (i)
the Purchaser and each of its Subsidiaries has good and indefeasible title to
its real property and other property and assets that are material to the
Purchaser's business on a consolidated basis, (ii) such real property and other
property and assets are insured to the extent they are of a type for which
insurance is generally available, (iii) such real property and other property
and assets are free and clear of all security interests, liens, encumbrances and
encroachments of a material nature, except for liens for current taxes not yet
due and payable.
SECTION 4.18 Insurance. The Company has not received notice of any pending
or threatened termination or retroactive premium increase with respect to any
insurance policies in force naming the Purchaser or any of its Subsidiaries or
any employees of any of them as an insured or beneficiary hereto, and the
Company and its Subsidiaries are in compliance in all material respects with all
conditions contained therein. There are no pending material claims against such
insurance by the Purchaser or any of its Subsidiaries as to which insurers have
denied liability, no defenses provided by insurers under reservations of rights,
and no material claim under such insurance that has not been properly filed by
the Purchaser or any of its Subsidiaries.
SECTION 4.19 Employees. Except as described in the Disclosure Statement,
there are no claims or disputes pending with any employee regarding workers'
compensation, unemployment benefits, discrimination (including discrimination
based on any disability), or compensation, and no employment or collective
bargaining agreements are in effect covering any such person.
SECTION 4.20 Purchaser Common Stock. The Purchaser Common Stock will have
been duly authorized and, when issued in accordance with the terms of this
Agreement, will (i) be validly authorized and issued and fully paid and
nonassessable, (ii) have been issued pursuant to an effective registration
statement and (iii) have been properly registered for trading on the American
Stock Exchange. No shareholder of Purchaser will have any preemptive rights or
dissenter's right with respect to the issuance of the Purchaser Common Stock.
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SECTION 4.21 Registration Statement. The Purchaser has a
presently-effective Registration Statement on Form S-4 (Commission File No.
333-28525) (the "Registration Statement"), pursuant to which the Purchaser shall
issue the Purchaser Common Stock issued to the Shareholder on the Closing Date
pursuant to this Agreement. The Registration Statement currently does not, and
will not, on the Closing Date, contain any untrue statement of a material fact,
or omit to state any materi al fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE V.
COVENANTS
SECTION 5.1 Conduct of Business of the Company. Except as contemplated by
this Agreement or disclosed in the Company Disclosure Schedule, during the
period from the date of this Agreement to the Closing, the Company and its
Subsidiaries will each conduct their operations according to their ordinary and
usual course of business and consistent with past practice. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement or disclosed in the Company Disclosure Schedule, neither the Company
nor any of its Subsidiaries will, prior to the Closing, without the prior
written consent of Purchaser (a) issue, sell or pledge, or authorize or propose
the issuance, sale or pledge of (i) additional shares of capital stock of any
class, or securities convertible into any such shares, or any rights, warrants
or options to acquire any such shares or other convertible securities, other
than pursuant to commitments outstanding at the date hereof and referred to in
Section 3.2, or (ii) any other securities in respect of, in lieu of or in
substitution for, capital stock outstanding on the date hereof; (b) purchase or
otherwise acquire, or propose to purchase or otherwise acquire, any outstanding
securities; (c) declare or pay any dividend or distribution on any shares of its
capital stock; (d) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in principle or an
agreement with respect to, any merger, consolidation or business combination,
any acquisition of a material amount of assets or securities, any disposition of
a material amount of assets or securities or any material change in its
capitalization, or any entry into a material contract or any release or
relinquishment of any material contract rights, not in the ordinary course of
business; (e) propose or adopt any amendments to its charter or by-laws; (f)
enter into, assign or terminate, or amend in any material respect, any Contract
other than in the ordinary course of business; (g) acquire, dispose of, encumber
or relinquish any material asset (other than sale of real properties at prices
equal to or greater than their carrying values); (h) waive, compromise or settle
any right or claim that would materially adversely affect the ownership,
operation or value of any asset; (i) make any capital expenditures other than
pursuant to existing capital expenditure programs that are disclosed in the
Company Disclosure Schedule or in the ordinary course of business; (j) allow or
permit the expiration, termination or cancellation at any time prior to the
Closing of any of the insurance policies or coverages or surety bonds currently
maintained by or on behalf of the Company unless replaced with a policy,
coverage or bond having substantially the same coverage and similar terms and
conditions; (k) increase, directly or indirectly, the salary or other
compensation of any officer or member of management, enter into any employment
agreement with any person or pay or enter into any agreement to pay any bonuses
or other extraordinary compensation to any officer of the Company or to any
member of management or other employees, or institute any general increase in
rates of compensation for its employees, or increase, directly or indirectly,
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any provisions or other benefits of any of such persons other than in the
ordinary course of business; or (l) waive, settle or compromise any material
litigation or other claim on a basis materially adverse to the Company.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE COMPANY MAY DECLARE AND PAY
A DIVIDEND OR DISTRIBUTION ON ITS SHARES OF CAPITAL STOCK OR REDEEM A PORTION OF
SUCH CAPITAL STOCK ON OR BEFORE CLOSING UP TO THE NET PROCEEDS RECEIVED FROM THE
SALE OF THE PROPERTIES TO HEALTH CARE REIT, INC., LESS ALL LEGAL FEES PAID OR
PAYABLE BY THE COMPANY RELATING IN ANY WAY TO THE TRANSACTION SET FORTH IN THIS
AGREEMENT. "NET PROCEEDS" IS DEFINED FOR THESE PURPOSES AS ALL CASH RECEIVED
LESS ALL SECURED AND SHAREHOLDER DEBT, TITLE INSURANCE PREMIUMS AND SURVEY FEES,
BUT EXPLICITLY EXCLUDING ANY ENVIRONMENTAL SURVEY FEES AND APPRAISAL FEES. SUCH
NET PROCEEDS ARE SET FORTH ON THE ATTACHED SCHEDULE 5.1.
SECTION 5.2 Access to Information.
(a) Between the date of this Agreement and the Closing, the parties will
afford to one another and their authorized representatives reasonable access
(subject to tenants' rights) to the assisted living facilities, offices, and
other real property and to the books and records of such party and its
Subsidiaries, will permit the parties and their representatives to make such
reasonable inspections as they may require and will cause their officers and
those of their Subsidiaries to furnish the parties and their representatives
with such financial and operating data, environmental assessments and other
information with respect to the business and real property of the parties and
their Subsidiaries as they and their representatives may from time to time
reasonably request. No inspection or examination by either party will constitute
a waiver of any claim against the other party for misrepresentation or breach of
this Agreement.
(b) The parties will hold and will cause their representatives to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process, or, in the opinion of counsel, by other requirements of law, all
documents and information concerning the parties furnished to them and their
representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) in the public domain through no fault of the parties or their
representatives, or (ii) later lawfully acquired by the parties or their
representatives from other sources unless they or their representatives know
that such other sources are not entitled to disclose such information) and will
not release or disclose such information to any other person, except their
auditors, attorneys, financial advisors and other consultants and advisors in
connection with this Agreement, provided that such person shall have first been
advised of the confidentiality provision of this Section 5.2. If the
transactions contemplated by this Agreement are not consummated, such confidence
shall be maintained except to the extent such information can be shown to have
been (i) in the public domain through no fault of Purchaser or their
representatives, or (ii) later lawfully acquired by the parties or
representatives from other sources, and, if requested by the other party will,
and will cause its agents, auditors, consultants, representatives and advisors
to, return to the other or destroy all copies of written information furnished.
(c) Purchaser agrees to furnish the Shareholder with, upon their request,
the Purchaser SEC Reports and, at the time of filing, copies of all reports and
filing (including exhibits and schedules) filed by Purchaser with the SEC
between the date hereof and the Closing.
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SECTION 5.3 Best Efforts. Subject to the terms and conditions herein
provided, and to the fiduciary duties of the Boards of Directors of the parties
under applicable law, each of the parties hereto agrees to use its reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including without limitation, causing the conditions set forth
in Article VI to be met. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take all
such necessary action.
SECTION 5.4 Consents. Purchaser and the Company each will use reasonable
efforts to obtain such consents of third parties to agreements which would
otherwise be violated by closing this Agreement, to take all actions necessary
to effect the transactions contemplated hereby, and to make such filings with
governmental authorities necessary to consummate the transactions contemplated
by this Agreement.
SECTION 5.5 Public Announcements. Purchaser and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the existence of this Agreement and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law or by obligations pursuant to any
listing agreement with any national securities exchange.
SECTION 5.6 Noncompete Agreements.
(a) For a period of one year following the date of Closing, the Shareholder
shall not directly or indirectly (i) act or serve as an employee (except in a
capacity which does not involve management, executive policy-making, sales,
marketing, product development, finance, or accounting activities or advice to
management, sales, marketing, development or accounting personnel), officer,
director, manager, trustee, agent, operator, advisor, or consultant for any
Competing Business (as defined below) operating within the Area (as defined
below); (ii) have any beneficial ownership or equity interest (except for a
passive ownership interest of less than five percent in any company) in any
Competing Business operating within the Area, whether such interest is derived
as a sole proprietor, partner, shareholder, beneficiary, or otherwise, or have
any right, option, agreement, understanding, or arrangement to acquire any such
interest; (iii) solicit, divert, or appropriate, or attempt to solicit, divert,
or appropriate to or for a Competing Business the business of any person or
entity located within the Area which was a customer of the Company on or within
one year prior to the Closing Date (or later termination of employment) or the
business of which the Company had solicited within one year prior to the Closing
Date (or later termination of employment) or (iv) solicit, divert, or
appropriate, or attempt to solicit, divert, or appropriate to or for a Competing
Business the employment, directly or indirectly, of any person located within
the Area which was an employee of the Company on or within one year prior to the
Closing Date (or later termination of employment of such Shareholder); provided,
however, this Section 5.6(a) shall not restrict any such activities by the
Shareholder in relation to his business activities as of the date hereof,
including all such business activities involving or related to:
(A) the Shareholder's Class A limited partnership interest in Villa
Residential Care Homes-Corpus Christi South, L.P., Villa Residential
Care Homes-Fort Worth East, L.P., Villa Residential Care
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Homes-Granbury, L.P. and Villa Residential Care Homes-Oak Park, L.P.,
each of which are Texas limited partnerships;
(B) the Shareholder's ownership interest in VRCH-Dallas, Inc., Villa
Residential Care Homes, Arlington, Inc., VRCH South, Inc., VRCH-FW
East, Inc., VRCH-Granbury, Inc. and VRCH-Oak Park, Inc., each of which
are Texas corporations; or
(C) the Shareholder's limited partnership interest in Villa Residential
Care Homes-Arlington I, L.P. and Villa Residential Care Homes-Dallas,
L.P., each of which are Texas limited partnerships.
(b) (i) Notwithstanding anything to the contrary herein (including,
specifically, Section 5.06(a)), the Shareholder shall be entitled to engage in
the development and operation of assisted living facilities wholly-owned by the
Shareholder (a "Facility") in a Permissible Development Area (as defined below),
subject to the provisions and limitations set forth herein. In the event that
the Shareholder wishes to develop a Facility in the limits of any city or town
that Purchaser (or any Subsidiary of Purchaser) is not engaged in the
management, operation or lease of an assisted living facility (the "Permissible
Development Area"), Purchaser shall be notified in writing no later than ninety
(90) days prior to the entering into any agreement for the acquisition or lease
of a site for the development of the Facility. Such notification shall include,
in reasonable detail, a description of the proposed development, market studies,
and such other information as may be reasonably necessary to evaluate the
proposed development. Upon such notification, Purchaser shall have the option,
exercisable within thirty (30) days after receipt of such notification, to elect
to manage the Facility upon terms and conditions customary in the industry.
Further, Purchaser shall have the right of "first refusal" to purchase, lease or
manage any Facility developed by the Shareholder during the term of the
restriction set forth in Section 5.06(a) above in accordance with Section
5.06(b)(ii) below.
(b) (ii) During the term of the restriction set forth in Section 5.06(a)
above, before offering the Facility for sale, lease or management (but not for
mortgage), Shareholder shall give Purchaser notice of its intention to do so,
specifying the minimum purchase price, cash down and deferred payment terms, if
any, including interest rate, amortization period and balloon payment date,
types or amounts of security required and guarantees, term of lease and rental
rates, or terms of management agreement, and all other material terms and
conditions which Shareholder is willing to accept ("Shareholder's Offer").
Purchaser, its successors and assigns, shall have a period of thirty (30) days
following the date of Shareholder's Offer to elect to purchase, lease or manage
the Facility for the price, lease or management terms and other terms set forth
therein. If Purchaser accepts Shareholder's Offer, in the case of a sale, the
purchase and sale shall take place on the date and in accordance with the
procedures set forth therein but in any event Purchaser shall have at least
ninety (90) days after the date of acceptance of Shareholder's Offer to conduct
due diligence, to obtain financing, and close. In the case of a lease or
management agreement, Purchaser shall have sixty (60) days after the date of
acceptance of Shareholder's Offer to conduct its due diligence. If Purchaser
fails to give Shareholder notice of acceptance within thirty (30) days after the
date of Shareholder's Offer, or (except as hereinafter expressly provided) if
Purchaser gives notice of acceptance and thereafter fails to close within such
sixty (60) day period or to enter into a management agreement or lease
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agreement, for any reason other than Shareholder's default, such offer and all
rights of Purchaser under this Section shall lapse, and Shareholder shall
thereafter be free to sell and convey, or to lease or enter into a management
agreement for the Facility with any party on the terms set forth in
Shareholder's Offer. If Shareholder does not enter into a binding purchase and
sale agreement, lease agreement or management agreement, upon the terms set
forth in Shareholder's Offer or Shareholder desires to accept materially
different terms, then all of the provisions of this Section shall again apply.
In addition, if at any time during the term set forth in Section 5.06(a) above,
Shareholder receives an offer to purchase, lease, or manage the Facility (an
"Unsolicited Offer") on terms which Shareholder desires to accept, Shareholder
shall, before unconditionally accepting such Unsolicited Offer, first offer to
sell the Facility to Purchaser on the same terms and conditions as are set forth
therein, which offer shall constitute Shareholder's Offer with exactly the same
force and effect as an offer made in accordance with the first sentence of this
Section.
(c) For the purposes of this Section 5.6, "Competing Business" means any
business which is engaged in the ownership or management of retirement, assisted
living or Alzheimer's care residences and facilities. "Area" shall mean any
state of the United States in which the Purchaser or its Subsidiaries owned or
managed one or more assisted living facilities at the date of this Agreement or
at any time thereafter that the Shareholder is employed by the Purchaser or a
Subsidiary.
(d) If any Shareholder commits a breach, or threatens to commit a breach of
the provisions of subsection (a) above, Purchaser shall have the right and
remedy to have the provisions of subsection (a) specifically enforced by any
court having jurisdiction, it being acknowledged and agreed that any such breach
or threatened breach will cause irreparable injury to Purchaser and that money
damages will not provide an adequate remedy to Purchaser.
(e) If any of the covenants contained in subsection (a) above, or any part
thereof, are hereafter construed to be invalid or unenforceable, the same shall
not affect the remainder of the covenant or covenants, which shall be given full
effect, without regard to the invalid portions.
(f) If any of the covenants contained in subsection (a) above, or any part
thereof, are held to be unenforceable because of the scope or duration of such
provision or the geographic area covered thereby, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, or area of such provision and, in its reduced form, said provision
shall then be enforceable.
SECTION 5.7 Management and Operations of the Properties. Except in the case
of a change of control of Purchaser, the Purchaser shall cause the Company to
continue to manage and operate the Properties and each of the other properties
that is subject to a management agreement set forth on Exhibit C attached hereto
for a minimum period of two (2) years from the Closing Date, in each case,
pursuant to the respective subleases and management agreements set forth in such
Exhibit C. Additionally, Purchaser shall cause each of the management agreements
and subleases to remain in full force and effect during such two (2) year
period.
SECTION 5.8 Voting of Shares. The Shareholder agrees that, if it becomes
necessary for the Purchaser to submit to a vote of its stockholders a proposal
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to approve the spin-off of the shares of Residential Healthcare Properties,
Inc., he will vote all of his shares of the Common Stock of the Purchaser in
favor of such proposal.
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THIS AGREEMENT
SECTION 6.1 Conditions to Consummation of this Agreement by Purchaser. The
obligation of Purchaser to consummate the transactions contemplated herein is
subject to the satisfaction of the following conditions at or before the Closing
Date:
(a) The Board of Directors of the Purchaser shall have approved this
Agreement.
(b) Since the date of this Agreement, there shall have been no material
adverse change in the business, properties, or financial condition of the
Company.
(c) All parties shall have delivered all documents and taken all other
actions required by this Agreement.
(d) All representations and warranties of each party contained herein shall
be true in all material respects as of the Closing Date, except as to
transactions contemplated by this Agreement or representations which are as of a
specific date.
(e) Purchaser shall have been furnished with such certificates of officers
of Company, in form and substance reasonably satisfactory to Purchaser, dated as
of the Closing Date, certifying to such matters as Purchaser may reasonably
request, including but not limited to the fulfillment of the conditions
specified in this Section.
(f) No statute, rule, regulation, executive order, decree, or injunction
shall have been enacted, entered, promulgated or enforced by any court of
competent jurisdiction in the United States or domestic governmental authority
which prohibits or restricts the consummation of this Agreement.
(g) At the Closing, each Shareholder shall deliver a release of all claims
he may have against the Company or any Subsidiary.
(h) The transactions contemplated by the agreements listed on the attached
Exhibit B shall also close.
(i) The Shareholder shall have caused to be delivered to the Purchaser an
opinion of counsel to the Shareholder dated as of the Effective Date, in form
and substance reasonably satisfactory to the Purchaser, as to each of the
matters set forth in Sections 3.1, 3.2, 3.3 and 3.6 and such other matters as
the Purchaser may reasonably request, which opinion may contain customary
exceptions and qualifications.
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SECTION 6.2 Conditions to Consummation of this Agreement by Shareholder and
Company. The obligation of the Shareholder and the Company to consummate the
transactions contemplated herein is subject to the satisfaction of the following
conditions at or before the Closing Date:
(a) Since the date of this Agreement, there shall have been no material
adverse change in the business, properties, or financial condition of Purchaser.
(b) All parties shall have delivered all documents and taken all other
actions required by this Agreement.
(c) All representations and warranties of each party contained herein shall
be true in all material respects as of the Closing Date, except as to
transactions contemplated by this Agreement or representations which are as of a
specific date.
(d) The Shareholder shall have been furnished with such certificates of
officers of Purchaser, in form and substance reasonably satisfactory to the
Shareholder, dated as of the Closing Date, certifying to such matters as the
Company may reasonably request, including but not limited to the fulfillment of
the conditions specified in this Section.
(e) All consents, approvals, authorizations and permits of or filing with
or notifications to any Government Authority necessary for the performance by
the Purchaser of this Agreement shall have been obtained, and no statute, rule,
regulation, executive order, decree, or injunction shall have been enacted,
entered, promulgated or enforced by any court of competent jurisdiction in the
United States or domestic governmental authority which prohibits or restricts
the consummation of this Agreement.
(f) The transactions contemplated by the agreements listed on the attached
Exhibit B shall also close.
(g) The Purchaser shall have caused to be delivered to the Company and the
Shareholder, an opinion of counsel to the Purchaser dated as of the Effective
Date, in form and substance satisfactory to the Shareholder, as to each of the
matters set forth in Sections 4.1, 4.2, 4.3 and 4.6 and such other matters as
the Shareholder may reasonably request, which opinion may contain customary
exceptions and qualifications.
ARTICLE VII.
TERMINATION, AMENDMENTS; WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time notwithstanding
approval thereof by the Purchaser and the Shareholder, but prior to the Closing:
(a) by mutual written consent duly authorized by the Shareholder and the
Board of Directors of Purchaser and the Company;
31
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(b) by Purchaser or the Shareholder if the Closing shall not have occurred
on or before December 31, 1997, unless such failure is caused by the party
seeking termination;
(c) by Purchaser or the Shareholder if any court of competent jurisdiction
or other governmental authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting this
Agreement or if litigation or proceedings shall be pending that are reasonably
likely to result in any of the foregoing;
(d) by the Shareholder, if Purchaser shall not have performed all
obligations required to be performed by them under this Agreement, except where
any failures to perform would, in the aggregate, not materially impair or delay
the ability of Purchaser and the Shareholder to effect this Agreement;
(e) by the Shareholder or Purchaser, if there shall have been a breach of
any of the covenants contained herein or if any representation or warranty made
by any other party is untrue in any material respect;
SECTION 7.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party or its directors, officers, or shareholders, other than for
intentional breach or the provisions of Sections 5.2(b).
SECTION 7.3 Amendment. This Agreement may be amended only by means of an
instrument in writing signed on behalf of all the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Closing, the
parties hereto, by action taken by or on behalf of the Shareholder and the Board
of Directors of the Company and the Purchaser, may (a) extend the time for the
performance of any of the obligations or other acts of any other applicable
party hereto, (b) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by an other applicable party, or (c) waive
compliance with any of the agreements of any other applicable party or with any
conditions to its own obligations. Any agreement on the part of any other
applicable party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1 Purchaser's Right to Indemnification. The Shareholder shall and
does hereby indemnify and hold harmless, Purchaser, and its shareholders,
directors, officers, employees, agents and representatives from any and all
liabilities, obligations, claims, contingencies, damages, costs and expenses
(including all court costs and reasonable attorneys' fees) that Purchaser or any
such other indemnified party may suffer or incur as a result of or relating to
(i) the material breach or inaccuracy of any of the representations, warranties,
covenants or agreements made by Company and/or the Shareholder herein or
pursuant hereto, (ii) any loss, liability or claim resulting from the operation
of the Company prior to the Closing Date, and (iii) any loss, including
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attorneys' fees and expenses, resulting from any litigation against the Company
pending on the Closing Date, whether or not disclosed to Purchaser. The
Shareholder's liability under this Section shall be limited to the value of the
Purchaser Common Stock included in the Purchase Price and received by such
Shareholder. The Shareholder may satisfy any such obligation under this Section
by transferring Purchaser Common Stock valued on the basis of the greater of (i)
the Current Market Price on the Closing Date or (ii) the Current Market Price on
the 20th trading day after the date notice was given of the claim. Except with
respect to any amounts due by the Shareholder pursuant to Section 2.2 and 2.3
hereof, the obligation of the Company and the Shareholder to indemnify the
Purchaser pursuant to this Section 8.1 shall be effective only if the aggregate
amount of such indemnity exceeds $25,000; provided, however, once the aggregate
amount of such indemnity exceeds $25,000, the indemnification obligations of
each of the Shareholder and the Company shall be effective as to all amounts
incurred by the Purchaser, subject to the limitations set forth in this Section
8.1.
SECTION 8.2 Company's or Shareholder's Right to Indemnification. Purchaser
shall and does hereby indemnify and hold Company and the Shareholder, and their
directors, officers, employees, agents and representatives harmless from any and
all liabilities, obligations, claims, contingencies, damages, costs and expenses
(including all court costs and reasonable attorneys' fees) that Company or any
such indemnified party may suffer or incur as a result of or relating to: (a)
the breach or inaccuracy, or any alleged breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by Purchaser herein or
pursuant hereto; (b) any personal guaranty or personal obligations of the
Shareholder in connection with a Company obligation, including without
limitations any amounts drawn on the Company's letters of credit that are
guaranteed by the Shareholder; and (c) those liabilities, obligations, claims,
contingencies and encumbrances accruing or arising after the Closing in
connection with the business of the Purchaser, except to the extent that such
liabilities, obligations, claims, contingencies or encumbrances are attributable
to a breach of warranty, representation or covenant by Company and/or the
Shareholder prior to the Closing.
SECTION 8.3 Notice. The party seeking indemnification hereunder
("Indemnitee") shall promptly, and within 30 days after notice to it (notice to
Indemnitee being the filing of any action, receipt of any claim in writing or
similar form of actual notice) of any claim as to which it asserts a right to
indemnification, notify the party from whom indemnification is sought
("Indemnitor") of such claim. Indemnitee shall bill Indemnitor for any such
claims no more frequently than on a monthly basis, and Indemnitor shall promptly
pay (or cause to be paid) Indemnitee upon receipt of any such bill. The failure
of Indemnitee to give the notification to Indemnitor contemplated above in this
Section shall not relieve Indemnitor from any liability or obligation that it
may have pursuant to this Agreement unless the failure to give such notice
within such time shall have been materially prejudicial to it, and in no event
shall the failure to give such notification relieve Indemnitor from any
liability it may have other than pursuant to this Agreement.
SECTION 8.4 Third-Party Claims. If any claim for indemnification by
Indemnitee arises out of an action or claim by a person other than Indemnitee,
Indemnitor may, by written notice to Indemnitee, undertake to conduct the
defense thereof and to take all other steps or proceedings to defeat or
compromise any such action or claim, including the employment of counsel;
provided that Indemnitor shall reasonably consider the advice of Indemnitee as
to the defense or compromise of such actions and claims, and Indemnitee shall
have the right to participate, at its own expense, in such proceedings, but
control of such proceedings shall remain exclusively with Indemnitor; provided,
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however, if defendants in any action include the Indemnitee and the Indemnitor,
and the Indemnitee shall have been advised by its counsel in writing that there
are material legal defenses available to the Indemnitee which are different from
or in addition to those available to the Indemnitor, the Indemnitee shall have
the right to employ its own counsel in such action, and, in such event, the fees
and expenses of such counsel shall be born by the Indemnitor. If the Indemnitor
shall not assume the defense of any such claim or litigation resulting
therefrom, the Indemnitee may defend against any such claim or litigation in
such manner as it may deem appropriate and the Indemnitee may settle such claim
or litigation on such terms as it may deem appropriate; provided, however, that
any such settlement shall be subject to the prior consent of the Indemnitor,
which consent shall not be unreasonably withheld. Indemnitee shall provide all
reasonable cooperation to Indemnitor in connection with such proceedings.
Counsel and auditor costs and expenses and court costs and fees of all
proceedings with respect to any such action or claim shall be borne by
Indemnitor. If any such claim is made hereunder and Indemnitor does not elect to
undertake the defense thereof by written notice to Indemnitee, Indemnitee shall
be entitled to control such proceedings and shall be entitled to indemnity with
respect thereto pursuant to the terms of this Article VIII. To the extent that
Indemnitor undertakes the defense of such claim by written notice to Indemnitee
and diligently pursues such defense at its expense, Indemnitee shall be entitled
to indemnification hereunder only to the extent that such defense is
unsuccessful as determined by a final judgment of a court of competent
jurisdiction, or by written acknowledgment of the parties. Within ten (10) days
after final determination with respect to a third party claim, the Indemnitor
shall pay to the Indemnitee the costs incurred by Indemnitee in respect of which
indemnity may be sought pursuant to this Article VIII. In the case of a
non-third party claim, payment of damages incurred by the Indemnitee shall be
made by the Indemnitor within ten (10) days after receipt of the indemnity
notice by Indemnitor.
SECTION 8.5 Time to Assert Claims; Survivability. Any claim asserted
pursuant to Section 8.1 or Section 8.2 above must be asserted by written notice
given by one party to the other on or before the second anniversary of the
Closing Date. All representations and warranties of the parties contained herein
shall survive the Closing for a period of two years.
SECTION 8.6 Access to Records. Shareholder, or its agents, shall be
afforded reasonable access to the Purchaser's books and records during normal
business hours upon reasonable notice for the purpose of verifying any claim
against Shareholder hereunder. Shareholder, or its agents, may be required to
sign an appropriate confidentiality agreement prior to any inspection of books
and records hereunder.
SECTION 8.7 Arbitration. All disputes under this Agreement shall be settled
by arbitration in Dallas, Texas before three arbitrators pursuant to the rules
of the American Arbitration Association. Each party shall select one arbitrator
and the two arbitrators shall select a third. Arbitration may be commenced at
any time by any party hereto giving written notice to each other party to a
dispute that such dispute has been referred to arbitration under this Section
8.7. Any award rendered by the arbitrators shall be conclusive and binding upon
the parties hereto; provided, however, that any such award shall be accompanied
by a written opinion giving the reasons for the award. This provision for
arbitration shall be specifically enforceable by the parties and the decision of
the arbitrators shall be final and binding and there shall be no right of appeal
therefrom, except for alleged errors of law. Each party shall pay its own
expenses of arbitration and the expenses of the arbitrators shall be equally
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<PAGE>
shared; provided, however, that if in the opinion of the arbitrators any claim
for indemnification or any defense or objection thereto was unreasonable, the
arbitrators may assess, as part of their award, all or any part of the
arbitration expenses of the other party (including reasonable attorney's fees)
and of the arbitrators against the party raising such unreasonable claim,
defense or objection.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.1 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person or
persons any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 9.2 Brokerage Fees and Commissions. The Shareholder shall be
responsible for payment to C. Kent Harrington with funds that are not the
Company's any brokerage commissions resulting from this Agreement, except for
commissions payable to Joe P. Foor, for which Purchaser shall be responsible.
Purchaser represents that it has incurred no obligation for brokerage
commissions except to Joe P. Foor.
SECTION 9.3 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise.
SECTION 9.4 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
SECTION 9.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by facsimile telegram or telex, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
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(a) If to the Company:
Villa Residential Care Homes, Inc.
2621 State Street
Dallas, Texas 75204
Attention: William A. Shirley, Jr.
If to the Shareholder:
William A. Shirley, Jr.
2621 State Street
Dallas, Texas 75204
in each case, with a copy to:
Andrews & Kurth, L.L.P.
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: Kathleen J. Wu
(b) If to Purchaser:
Greenbriar Corporation
4265 Kellway Circle
Addison, Texas 75244
Attention: Gene S. Bertcher
with a copy to:
Mark E. Bennett, Esq.
14933 Oaks North Drive
Dallas, Texas 75240
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, REGARDLESS OF THE
LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF.
SECTION 9.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
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SECTION 9.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
SECTION 9.9 Expenses. Except as otherwise provided herein, the Purchaser
and Shareholder shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial or other consultants, investment bankers,
accountants and counsel.
SECTION 9.10 Certain Definitions.
(a) "Material Adverse Effect" shall mean any adverse change in the
financial condition, assets, business or operations of any party and its
Subsidiaries which is material to such party taken as a whole.
(b) "Subsidiary" shall mean, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity. When referring to Purchaser, Subsidiary
shall also mean Residential Healthcare Properties, Inc., a Nevada corporation,
and all of its subsidiaries, whether currently owned by Purchaser or not. Such
term shall also refer to any other partnership, limited partnership, joint
venture, trust, or other business entity in which a party hereto owns a material
interest.
SECTION 9.12 Disclosure Schedule. Both the Company Disclosure Schedule and
the Purchaser Disclosure Schedule shall contain all information required to
disclose fully any exception or qualification to this Agreement and shall cross
reference the section of this Agreement so qualified.
[Remainder of page intentionally left blank]
37
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year set forth above.
GREENBRIAR CORPORATION,
a Nevada corporation
By:
James R. Gilley, Chairman
VILLA RESIDENTIAL CARE HOMES, INC.,
a Texas corporation
By:
William A. Shirley, Jr.
President
SHAREHOLDER:
-------------------------------------
William A. Shirley, Jr.
The undersigned spouse of William A. Shirley, Jr., the Shareholder
executing the foregoing Agreement, hereby executes this Agreement in evidence of
her agreement and consent to the disposition of the shares of capital stock of
the Company referred to herein and to all other provisions hereof.
-------------------------------------
Colleen Shirley
<PAGE>
EXHIBIT A
---------
THE PROPERTIES
[Exhibit begins on next page]
<PAGE>
EXHIBIT B
---------
TRANSACTIONS TO BE COMPLETED PRIOR TO OR
CONTEMPORANEOUSLY WITH THE EXECUTION OF THIS AGREEMENT.
1. Each of the Management Agreements and Subleases described in Exhibit C
to this Agreement.
2. First Amended and Restated Agreement of Limited Partnership of Villa
Residential Care Homes - Corpus Christi South, L.P.
3. First Amended and Restated Agreement of Limited Partnership of Villa
Residential Care Homes - Fort Worth East, L.P.
4. First Amended and Restated Agreement of Limited Partnership of Villa
Residential Care Homes - Granbury, L.P.
5. First Amended and Restated Agreement of Limited Partnership of Villa
Residential Care Homes - Oak Park, L.P.
6. Exchange Agreement by and between Greenbriar Corporation, William A.
Shirley, Jr. and C. Kent Harrington regarding the Class A Limited Partnership
Units of Villa Residential Care Homes - Corpus Christi South, L.P.
7. Exchange Agreement by and between Greenbriar Corporation, William A.
Shirley, Jr. and C. Kent Harrington regarding the Class A Limited Partnership
Units of Villa Residential Care Homes - Fort Worth, East, L.P.
8. Exchange Agreement by and between Greenbriar Corporation, William A.
Shirley, Jr. and C. Kent Harrington regarding the Class A Limited Partnership
Units of Villa Residential Care Homes - Granbury, L.P.
9. Exchange Agreement by and between Greenbriar Corporation, William A.
Shirley, Jr. and C. Kent Harrington regarding the Class A Limited Partnership
Units of Villa Residential Care Homes - Oak Park, L.P.
10. Registration Rights Agreement by and between William A. Shirley, Jr.,
C. Kent Harrington and Greenbriar Corporation.
11. Agreement and Assignment of Partnership Interest by and between William
A. Shirley, Jr., Lucy M. Brody, C. Kent Harrington and Greenbriar Corporation.
regarding the partnership interest in Villa Residential Care Homes - Arlington
I, L.P.
<PAGE>
EXHIBIT C
---------
MANAGEMENT AGREEMENTS AND SUBLEASES
Management Agreements:
- ----------------------
1. Management Services Agreement dated as of December ___, 1997 between
Villa Residential Care Homes, Inc., as the Manager, and Residential Healthcare
Properties, Inc., as the Operator, with respect to that certain assisted living
facility located in Corpus Christi, Texas, known as Corpus Christi Northwest.
2. Management Services Agreement dated as of December ___, 1997 between
Villa Residential Care Homes, Inc., as the Manager, and Villa Residential Care
Homes - Corpus Christi South, L.P., as the Operator, with respect to that
certain assisted living facility located in Corpus Christi, Texas, known as
Corpus Christi South III aka Everhart.
3. Management Services Agreement dated as of December ___, 1997 between
Villa Residential Care Homes, Inc., as the Manager, and Villa Residential Care
Homes - Fort Worth East, L.P., as the Operator, with respect to that certain
assisted living facility located in Fort Worth, Texas, known as Tandy Village.
4. Management Services Agreement dated as of December ___, 1997 between
Villa Residential Care Homes, Inc., as the Manager, and Villa Residential Care
Homes - Granbury, L.P., as the Operator, with respect to that certain assisted
living facility located in Granbury, Texas, known as The Oaks of Granbury.
Subleases:
- ----------
1. Lease Agreement dated as of December ___, 1997 between Villa Residential
Care Homes, Inc., as the Lessee, and Residential Healthcare Properties, Inc., as
the Lessor, with respect to that certain assisted living facility located in Mt.
Pleasant, Texas, known as Mt. Pleasant.
2. Lease Agreement dated as of December ___, 1997 between Villa Residential
Care Homes, Inc., as the Lessee, and Residential Healthcare Properties, Inc., as
the Lessor, with respect to that certain assisted living facility located in
Harlingen, Texas, known as Harlingen.
3. Lease Agreement dated as of December ___, 1997 between Villa Residential
Care Homes, Inc., as the Lessee, and Residential Healthcare Properties, Inc., as
the Lessor, with respect to that certain assisted living facility located in
Wolfforth, Texas, known as Wolfforth.
4. Lease Agreement dated as of December ___, 1997 between Villa Residential
Care Homes, Inc., as the Lessee, and Residential Healthcare Properties, Inc., as
the Lessor, with respect to that certain assisted living facility located in
Tyler, Texas, known as Tyler.
<PAGE>
5. Lease Agreement dated as of December ___, 1997 between Villa Residential
Care Homes, Inc., as Lessee, and Residential Healthcare Properties, Inc., as the
Lessor, with respect to that certain apartment complex located in Fort Worth,
Texas, known as Palm House.
6. Lease Agreement dated as of December ___, 1997 between Villa Residential
Care Homes, Inc., as the Lessee, and Villa Residential Care Homes - Oak Park,
L.P., as the Lessor, with respect to that certain assisted living facility
located in Oak Park, Texas, known as Oak Park.
<PAGE>
SCHEDULE 5.1
------------
NET PROCEEDS
<PAGE>
PURCHASER DISCLOSURE SCHEDULE
-----------------------------
<PAGE>
EXHIBIT 2.1.2
EXCHANGE AGREEMENT
------------------
Villa Residential Care Homes-Corpus Christi South, L.P.
This Exchange Agreement (the "Agreement") is made as of the ___ day of
December, 1997 by and between Greenbriar Corporation, a Nevada corporation (the
"Company"), William A. Shirley, Jr., and C. Kent Harrington and their permitted
assignees hereunder, the (collectively, the "Original Partners").
WHEREAS, the Original Partners wish to induce the Company and/or its
subsidiaries to manage and operate the properties managed and operated by Villa
Residential Care Homes-Corpus Christi South, L.P. (the "Partnership") and to
manage the affairs of the Partnership; and
WHEREAS, pursuant to that certain First Amended and Restated Agreement of
Limited Partnership of Villa Residential Care Homes-Corpus Christi South, L.P.
(the "Partnership Agreement") dated as of the date hereof, Kellway Corporation,
a subsidiary of the Company, was admitted as the Managing General Partner and as
the Class B Limited Partner of the Partnership, and the partnership interests of
the Original Partners in the Partnership were converted into Class A Limited
Partnership Units of the Partnership (the "Class A Units"); and
WHEREAS, as an inducement to the acceptance by the Original Partners of the
Class A Units pursuant to the Partnership Agreement, the Company has agreed to
exchange shares of its Common Stock (as defined below) for the Class A Units
held by the Original Partners and the Partnership has agreed to allow the Class
A Units to be exchanged for shares of the Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
"Agreement" shall have the meaning set forth in the Preamble hereto.
"Change in Control" shall mean, after the date of this Agreement, (i) the
occurrence of an event of a nature that would be required to be reported in
response to Item 1 or Item 2 of a Form 8-K Current Report of the Company
promulgated pursuant to Sections 13 and 15(d) of the Exchange Act; provided
that, without limitation, such a Change in Control shall be deemed to have
occurred if any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company), is or becomes the
<PAGE>
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the Company's then outstanding
securities; (ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than eighty percent (80%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a reorganization or recapitalization of
the Company, or a similar transaction (collectively, a "Reorganization"), in
which no "person" acquires more than twenty percent (20%) of the combined voting
power of the Company's then outstanding securities shall not constitute a Change
in Control of the Company; or (iii) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
"Class A Units" shall have the meaning set forth in the Preamble hereto.
"Closing Date" shall have the meaning given such term in the Partnership
Agreement.
"Common Stock" shall mean the common stock of the Company issued by the
Company to one or more of the Original Partners upon exchange of any Class A
Units hereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Rights" shall have the meaning set forth in Section 2.1 hereof.
"Notice of Exchange" shall have the meaning set forth in Section 2.1
hereof.
"Original Partners" shall have the meaning set forth in the Preamble
hereof.
"Partnership Agreement" shall have the meaning set forth in the Preamble
hereof.
"Registration Rights Agreement" shall mean that certain Registration Rights
Agreement dated the date hereof by and between each of the parties hereto
relating to the resale registration rights of the Original Partners with respect
to the Common Stock to be received in connection with the exercise of the
Exchange Right pursuant to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
Capitalized terms not otherwise defined have the meaning set forth in the
Partnership Agreement.
-2-
<PAGE>
ARTICLE II
EXCHANGE RIGHTS
---------------
Section 2.1 Exchange Rights. Subject to the limitations set forth in this
Article II, each Original Partner shall have the right (such right, an "Exchange
Right") to require the Company to issue shares of Common Stock in exchange for
all or a portion of the Class A Units (the "Affected Class A Units") held by
such Original Partner upon thirty (30) days prior written notice to the Company,
which notice shall be in the form of a Notice of Exchange; provided, however,
the Class A Units held by each Original Partner may be exchanged for shares of
the Common Stock only on and after the earlier to occur of (i) the first day
after the one year anniversary date of this Agreement and (ii) the date on which
a Change in Control of Company occurs. The Company shall satisfy the Exchange
Right of the Original Partner through the issuance of fully paid and
non-assessable shares of Common Stock within 30 days of receipt of the Notice of
Exchange, but not sooner than the date such shares are registered for resale
under the Registration Rights Agreement. Affected Class A Units are exchangeable
for shares of the Common Stock at the rate of one (1) share of Common Stock for
each 19.487 of such Affected Class A Units; provided, however, the number of
shares of Common Stock shall be determined prior to giving effect to any
securities issued or issuable with respect to the Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
occurring after the date of this Agreement.
Section 2.2 Company's Covenants Relating to the Rights. The Company shall
at all times reserve for issuance such amount of Common Stock as may be
necessary to enable the Original Partners to exchange all Class A Units which
are from time to time outstanding.
Section 2.3 Conditions Precedent to Issuance of Common Stock.
Notwithstanding anything to the contrary herein provided, the Company shall have
no obligation to issue to an Original Partner shares of Common Stock unless,
together with a Notice of Exchange, such Original Partner executes and delivers
to the Company a subscription letter agreement in the form of Exhibit B hereto.
Section 2.4 Representations and Warranties of the Company. The Company
represents and warrants to the Original Partner exercising its Exchange Right
pursuant to this Agreement that the Common Stock which is to be issued and
delivered to the Original Partner pursuant to the terms of this Agreement, when
so issued and delivered will be validly authorized and issued and will be fully
paid and non-assessable and free and clear of any liens, and such Common Stock
will not be subject to any limitations on free transferability other than any
restrictions imposed pursuant to this Agreement, the Registration Rights
Agreement or state or federal securities laws.
-3-
<PAGE>
ARTICLE III
MISCELLANEOUS
-------------
Section 3.1 Amendments and Waivers. This Agreement may be modified or
amended only by a writing signed by the Company and the Original Partners who
hold an amount of Class A Units at least equal to two-thirds of all the Class A
Units then outstanding.
Section 3.2 No Waiver. No failure to exercise and no delay in exercising,
on the Company's or the Original Partners' part, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
Section 3.3 Survival of Agreements. All agreements and covenants contained
herein or made in writing by or on behalf of the Company in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement.
Section 3.4 Assignment. The Original Partners cannot assign or otherwise
transfer their rights under this Agreement without the prior consent of the
Company except by inheritance or devise; provided, however that the Original
Partner shall be allowed to assign its rights hereunder, to any party to which
it may assign its Class A Units pursuant to the Partnership Agreement but only
if (i) all requirements for assignments of the Class A Units from the Original
Partner to such assignees pursuant to the Partnership Agreement shall have been
met and (ii) the Original Partner shall provide advance written notice of any
assignment to the Company. Any such assignee complying with the requirements
heretofore set forth shall be entitled to further assign, pledge or hypothecate
their rights hereunder to an Institutional Lender (as defined in the Partnership
Agreement), subject to (a) compliance with the provisions of the Partnership
Agreement for pledge or hypothecation of the Class A Units and (b) compliance
with item (ii) heretofore provided with respect to assignment to the assignees.
Section 3.5 Binding Effect and Benefits. This Agreement shall be binding
upon and shall inure to the benefit of the Company and its successors and the
Original Partners and their permitted successors, assigns and transferees.
Section 3.6 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.
Section 3.7 Severability of Provisions. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. Such provisions shall be deemed to be modified to the extent
necessary to render it legal, valid and enforceable, and if no such modification
shall render it legal, valid and enforceable, then this Agreement shall be
-4-
<PAGE>
construed as if not containing the provision held to be invalid, and the rights
and obligations of the parties shall be construed and enforced accordingly.
Section 3.8 Certain Litigation Costs. In the event of litigation between
the Company and the Original Partners regarding the matters encompassed by this
Agreement, the prevailing party in a final non-appealable judgment from a court
of competent jurisdiction (following such final judgment) shall be promptly
reimbursed by the other party (or parties) thereto for all of its reasonably
incurred out-of-pocket costs and expenses connected directly to the litigation
matters upon which such party has prevailed.
Section 3.9 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be by telecopy, facsimile
transmission (confirmed by U. S. mail), telegraph, hand delivery or mailed by
certified or registered mail postage prepaid, returned receipt requested, to the
addressed set forth below or to such other address as any party may advise the
other party in a written notice given in accordance with this Section.
if to the Company:
Greenbriar Corporation
4265 Kellway Circle
Addison, TX 75244
Attention: Gene S. Bertcher
Telecopy Number: (972) 407-8426
if to the Original Partners:
William A. Shirley, Jr.
Villa Residential Care Homes, Inc.
2621 State Street
Dallas, TX 75204
Telecopy Number: (214) 871-0090
and
C. Kent Harrington
Harrington, Moran, Barksdale & Day
306 West 7th Street
415 Fort Worth Club Building
Ft. Worth, TX 76102
Telecopy Number: (817) 335-0800
Any notice or other communication so addressed and so mailed shall be deemed to
have been given when duly delivered or sent.
-5-
<PAGE>
Section 3.10 Construction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without giving
effect to the conflict of laws provisions thereof. The descriptive headings of
the several sections and subsections hereof are for convenience only and shall
not control or effect the meaning of construction of any of the provisions
hereof.
Section 3.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute a single original instrument.
Section 3.12 Effectiveness. This Agreement shall only become effective, if
at all, on the Closing Date.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
GREENBRIAR CORPORATION
By:
Name:
Title:
----------------------------------------
William A. Shirley, Jr.
----------------------------------------
C. Kent Harrington
The undersigned hereby executes this Agreement for purposes of consenting
to the exchange of the Class A Units for shares of Common Stock pursuant to the
terms of this Agreement.
VILLA RESIDENTIAL CARE HOMES-
CORPUS CHRISTI SOUTH, L.P.
By: Kellway Corporation, a Texas corporation,
its managing general partner
By:
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF EXCHANGE NOTICE
The undersigned hereby irrevocably (i) exchanges ________ Class A Units in
Villa Residential Care Homes-Corpus Christi South, L.P., (ii) surrenders such
Class A Units and all right, title and interest therein, and (iii) directs that
the Common Stock of Greenbriar Corporation (the "Common Stock") deliverable upon
exchange be delivered to the address specified below, and registered or placed
in the name(s) and at the address(es) specified below.
The undersigned hereby represents and warrants that (i) it has full power
and authority to exchange all of its right, title and interest in such Class A
Units into shares of the Common Stock, (ii) such Class A Units so exchanged are
free and clear of all liens and other encumbrances of whatever nature, and (iii)
it will assume and pay any state or local transfer tax that may be payable as a
result of the transfer of such Class A Units; provided, however, that the
undersigned shall not be responsible for paying any state or local transfer tax
arising out of this exchange.
Dated:
Name of Original Partner:
----------------------------------------
Signature of Original Partner:
----------------------------------------
By:
Title:
Address:
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signature [Attested or Witnessed by]:
<PAGE>
EXHIBIT B
SUBSCRIPTION LETTER AGREEMENT
------------------, ------
Greenbriar Corporation
4265 Kellway Circle
Addison, TX 75244
Re: Exchange Agreement dated December ___, 1997
Gentlemen:
Pursuant to the terms and conditions of that certain Exchange Agreement
dated December ___, 1997 (the "Exchange Agreement") between Greenbriar
Corporation (the "Company"), William A. Shirley, Jr. and C. Kent Harrington, the
undersigned hereby delivers this subscription letter agreement to the Company as
a condition to the exercise by the undersigned of the Exchange Rights (as
defined in the Exchange Agreement).
As a condition to its exercise of the Exchange Rights, the undersigned
hereby makes the following representations and warranties:
1. The undersigned is an "Accredited Investor" as such term is defined
in Section 501(a) of the Securities Act of 1933, as amended (the
"Securities Act"). The undersigned warrants that it has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment in the Common Stock (as defined in
the Exchange Agreement). The undersigned has had the opportunity to obtain
from the Company any and all information, to the extent possessed by the
Company or obtainable with reasonable efforts by the Company, necessary to
evaluate the merits and risks of an investment in the Common Stock and has
concluded, based on such information and other information previously known
to the undersigned, to invest in the Common Stock pursuant to the Exchange
Agreement.
2. The undersigned acknowledges that the shares of the Common Stock
may lack liquidity as compared with other securities investments. The
undersigned acknowledges that it must bear the economic risk of its
investment in the Common Stock for an indefinite period of time since the
Common Stock has not been registered under the Securities Act and therefore
cannot be sold unless they are subsequently registered or an exemption from
<PAGE>
registration available; provided, however, that such Common Stock may be
sold in connection with any effective registration statement filed on
behalf of the undersigned in accordance with the Registration Rights
Agreement, in compliance with the terms and conditions of such registration
statement.
3. The undersigned is acquiring the Common Stock for investment
purposes only, for its own account and not as a nominee or agent for any
other person or entity, and not with a view to, or for resale in connection
with, any distribution thereof within the meaning of the Securities Act.
4. The undersigned acknowledges that the Company is transferring the
Common Stock to the undersigned without registration under the Securities
Act. The undersigned further acknowledges that representatives of the
Company have advised the undersigned that no state or federal agency or
instrumentality has made any finding or determination as to the investment
in the Common Stock, nor has any state or federal agency or instrumentality
made any recommendation with respect to any purchase or investment in the
Common Stock.
[Name of Undersigned]
---------------------------------------
-2-
<PAGE>
EXHIBIT 2.1.3
EXCHANGE AGREEMENT
Villa Residential Care Homes-Granbury, L.P.
This Exchange Agreement (the "Agreement") is made as of the ___ day of
December, 1997 by and between Greenbriar Corporation, a Nevada corporation (the
"Company"), William A. Shirley, Jr., and C. Kent Harrington and their permitted
assignees hereunder, the (collectively, the "Original Partners").
WHEREAS, the Original Partners wish to induce the Company and/or its
subsidiaries to manage and operate the properties managed and operated by Villa
Residential Care Homes-Granbury, L.P. (the "Partnership") and to manage the
affairs of the Partnership; and
WHEREAS, pursuant to that certain First Amended and Restated Agreement
of Limited Partnership of Villa Residential Care Homes-Granbury, L.P. (the
"Partnership Agreement") dated as of the date hereof, Kellway Corporation, a
subsidiary of the Company, was admitted as the Managing General Partner and as
the Class B Limited Partner of the Partnership, and the partnership interests of
the Original Partners in the Partnership were converted into Class A Limited
Partnership Units of the Partnership (the "Class A Units"); and
WHEREAS, as an inducement to the acceptance by the Original Partners of
the Class A Units pursuant to the Partnership Agreement, the Company has agreed
to exchange shares of its Common Stock (as defined below) for the Class A Units
held by the Original Partners and the Partnership has agreed to allow the Class
A Units to be exchanged for shares of the Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
"Agreement" shall have the meaning set forth in the Preamble hereto.
"Change in Control" shall mean, after the date of this Agreement, (i) the
occurrence of an event of a nature that would be required to be reported in
response to Item 1 or Item 2 of a Form 8-K Current Report of the Company
promulgated pursuant to Sections 13 and 15(d) of the Exchange Act; provided
that, without limitation, such a Change in Control shall be deemed to have
occurred if any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company), is or becomes the
<PAGE>
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the Company's then outstanding
securities; (ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than eighty percent (80%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a reorganization or recapitalization of
the Company, or a similar transaction (collectively, a "Reorganization"), in
which no "person" acquires more than twenty percent (20%) of the combined voting
power of the Company's then outstanding securities shall not constitute a Change
in Control of the Company; or (iii) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
"Class A Units" shall have the meaning set forth in the Preamble hereto.
"Closing Date" shall have the meaning given such term in the Partnership
Agreement.
"Common Stock" shall mean the common stock of the Company issued by the
Company to one or more of the Original Partners upon exchange of any Class A
Units hereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Rights" shall have the meaning set forth in Section 2.1 hereof.
"Notice of Exchange" shall have the meaning set forth in Section 2.1
hereof.
"Original Partners" shall have the meaning set forth in the Preamble
hereof.
"Partnership Agreement" shall have the meaning set forth in the Preamble
hereof.
"Registration Rights Agreement" shall mean that certain Registration Rights
Agreement dated the date hereof by and between each of the parties hereto
relating to the resale registration rights of the Original Partners with respect
to the Common Stock to be received in connection with the exercise of the
Exchange Right pursuant to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
Capitalized terms not otherwise defined have the meaning set forth in the
Partnership Agreement.
-2-
<PAGE>
ARTICLE II
EXCHANGE RIGHTS
---------------
Section 2.1 Exchange Rights. Subject to the limitations set forth in this
Article II, each Original Partner shall have the right (such right, an "Exchange
Right") to require the Company to issue shares of Common Stock in exchange for
all or a portion of the Class A Units (the "Affected Class A Units") held by
such Original Partner upon thirty (30) days prior written notice to the Company,
which notice shall be in the form of a Notice of Exchange; provided, however,
the Class A Units held by each Original Partner may be exchanged for shares of
the Common Stock only on and after the earlier to occur of (i) the first day
after the one year anniversary date of this Agreement and (ii) the date on which
a Change in Control of Company occurs. The Company shall satisfy the Exchange
Right of the Original Partner through the issuance of fully paid and
non-assessable shares of Common Stock within 30 days of receipt of the Notice of
Exchange, but not sooner than the date such shares are registered for resale
under the Registration Rights Agreement. Affected Class A Units are exchangeable
for shares of the Common Stock at the rate of one (1) share of Common Stock for
each 19.487 of such Affected Class A Units; provided, however, the number of
shares of Common Stock shall be determined prior to giving effect to any
securities issued or issuable with respect to the Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
occurring after the date of this Agreement.
Section 2.2 Company's Covenants Relating to the Rights. The Company shall
at all times reserve for issuance such amount of Common Stock as may be
necessary to enable the Original Partners to exchange all Class A Units which
are from time to time outstanding.
Section 2.3 Conditions Precedent to Issuance of Common Stock.
Notwithstanding anything to the contrary herein provided, the Company shall have
no obligation to issue to an Original Partner shares of Common Stock unless,
together with a Notice of Exchange, such Original Partner executes and delivers
to the Company a subscription letter agreement in the form of Exhibit B hereto.
Section 2.4 Representations and Warranties of the Company. The Company
represents and warrants to the Original Partner exercising its Exchange Right
pursuant to this Agreement that the Common Stock which is to be issued and
delivered to the Original Partner pursuant to the terms of this Agreement, when
so issued and delivered will be validly authorized and issued and will be fully
paid and non-assessable and free and clear of any liens, and such Common Stock
will not be subject to any limitations on free transferability other than any
restrictions imposed pursuant to this Agreement, the Registration Rights
Agreement or state or federal securities laws.
-3-
<PAGE>
ARTICLE III
MISCELLANEOUS
-------------
Section 3.1 Amendments and Waivers. This Agreement may be modified or
amended only by a writing signed by the Company and the Original Partners who
hold an amount of Class A Units at least equal to two-thirds of all the Class A
Units then outstanding.
Section 3.2 No Waiver. No failure to exercise and no delay in exercising,
on the Company's or the Original Partners' part, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
Section 3.3 Survival of Agreements. All agreements and covenants contained
herein or made in writing by or on behalf of the Company in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement.
Section 3.4 Assignment. The Original Partners cannot assign or otherwise
transfer their rights under this Agreement without the prior consent of the
Company except by inheritance or devise; provided, however that the Original
Partner shall be allowed to assign its rights hereunder, to any party to which
it may assign its Class A Units pursuant to the Partnership Agreement but only
if (i) all requirements for assignments of the Class A Units from the Original
Partner to such assignees pursuant to the Partnership Agreement shall have been
met and (ii) the Original Partner shall provide advance written notice of any
assignment to the Company. Any such assignee complying with the requirements
heretofore set forth shall be entitled to further assign, pledge or hypothecate
their rights hereunder to an Institutional Lender (as defined in the Partnership
Agreement), subject to (a) compliance with the provisions of the Partnership
Agreement for pledge or hypothecation of the Class A Units and (b) compliance
with item (ii) heretofore provided with respect to assignment to the assignees.
Section 3.5 Binding Effect and Benefits. This Agreement shall be binding
upon and shall inure to the benefit of the Company and its successors and the
Original Partners and their permitted successors, assigns and transferees.
Section 3.6 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.
Section 3.7 Severability of Provisions. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. Such provisions shall be deemed to be modified to the extent
necessary to render it legal, valid and enforceable, and if no such modification
-4-
<PAGE>
shall render it legal, valid and enforceable, then this Agreement shall be
construed as if not containing the provision held to be invalid, and the rights
and obligations of the parties shall be construed and enforced accordingly.
Section 3.8 Certain Litigation Costs. In the event of litigation between
the Company and the Original Partners regarding the matters encompassed by this
Agreement, the prevailing party in a final non-appealable judgment from a court
of competent jurisdiction (following such final judgment) shall be promptly
reimbursed by the other party (or parties) thereto for all of its reasonably
incurred out-of-pocket costs and expenses connected directly to the litigation
matters upon which such party has prevailed.
Section 3.9 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be by telecopy, facsimile
transmission (confirmed by U. S. mail), telegraph, hand delivery or mailed by
certified or registered mail postage prepaid, returned receipt requested, to the
addressed set forth below or to such other address as any party may advise the
other party in a written notice given in accordance with this Section.
if to the Company:
Greenbriar Corporation
4265 Kellway Circle
Addison, TX 75244
Attention: Gene S. Bertcher
Telecopy Number: (972) 407-8426
if to the Original Partners:
William A. Shirley, Jr.
Villa Residential Care Homes, Inc.
2621 State Street
Dallas, TX 75204
Telecopy Number: (214) 871-0090
and
C. Kent Harrington
Harrington, Moran, Barksdale & Day
306 West 7th Street
415 Fort Worth Club Building
Ft. Worth, TX 76102
Telecopy Number: (817) 335-0800
Any notice or other communication so addressed and so mailed shall be deemed to
have been given when duly delivered or sent.
-5-
<PAGE>
Section 3.10 Construction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without giving
effect to the conflict of laws provisions thereof. The descriptive headings of
the several sections and subsections hereof are for convenience only and shall
not control or effect the meaning of construction of any of the provisions
hereof.
Section 3.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute a single original instrument.
Section 3.12 Effectiveness. This Agreement shall only become effective, if
at all, on the Closing Date.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
GREENBRIAR CORPORATION
By:
Name:
Title:
---------------------------------------------
William A. Shirley, Jr.
---------------------------------------------
C. Kent Harrington
The undersigned hereby executes this Agreement for purposes of consenting
to the exchange of the Class A Units for shares of Common Stock pursuant to the
terms of this Agreement.
VILLA RESIDENTIAL CARE HOMES-
GRANBURY, L.P.
By: Kellway Corporation, a Texas corporation
its managing general partner
By:
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF EXCHANGE NOTICE
The undersigned hereby irrevocably (i) exchanges ________ Class A Units in
Villa Residential Care Homes-Granbury, L.P., (ii) surrenders such Class A Units
and all right, title and interest therein, and (iii) directs that the Common
Stock of Greenbriar Corporation (the "Common Stock") deliverable upon exchange
be delivered to the address specified below, and registered or placed in the
name(s) and at the address(es) specified below.
The undersigned hereby represents and warrants that (i) it has full power
and authority to exchange all of its right, title and interest in such Class A
Units into shares of the Common Stock, (ii) such Class A Units so exchanged are
free and clear of all liens and other encumbrances of whatever nature, and (iii)
it will assume and pay any state or local transfer tax that may be payable as a
result of the transfer of such Class A Units; provided, however, that the
undersigned shall not be responsible for paying any state or local transfer tax
arising out of this exchange.
Dated:
Name of Original Partner:
-----------------------------------
-----------------------------------
Signature of Original Partner:
By:
Title:
Address:
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
Signature [Attested or Witnessed by]:
<PAGE>
EXHIBIT B
SUBSCRIPTION LETTER AGREEMENT
------------------, ------
Greenbriar Corporation
4265 Kellway Circle
Addison, TX 75244
Re: Exchange Agreement dated December ___, 1997
Gentlemen:
Pursuant to the terms and conditions of that certain Exchange Agreement
dated December ___, 1997 (the "Exchange Agreement") between Greenbriar
Corporation (the "Company"), William A. Shirley, Jr. and C. Kent Harrington, the
undersigned hereby delivers this subscription letter agreement to the Company as
a condition to the exercise by the undersigned of the Exchange Rights (as
defined in the Exchange Agreement).
As a condition to its exercise of the Exchange Rights, the undersigned
hereby makes the following representations and warranties:
1. The undersigned is an "Accredited Investor" as such term is defined
in Section 501(a) of the Securities Act of 1933, as amended (the
"Securities Act"). The undersigned warrants that it has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment in the Common Stock (as defined in
the Exchange Agreement). The undersigned has had the opportunity to obtain
from the Company any and all information, to the extent possessed by the
Company or obtainable with reasonable efforts by the Company, necessary to
evaluate the merits and risks of an investment in the Common Stock and has
concluded, based on such information and other information previously known
to the undersigned, to invest in the Common Stock pursuant to the Exchange
Agreement.
2. The undersigned acknowledges that the shares of the Common Stock
may lack liquidity as compared with other securities investments. The
undersigned acknowledges that it must bear the economic risk of its
investment in the Common Stock for an indefinite period of time since the
Common Stock has not been registered under the Securities Act and therefore
cannot be sold unless they are subsequently registered or an exemption from
-1-
<PAGE>
registration available; provided, however, that such Common Stock may be
sold in connection with any effective registration statement filed on
behalf of the undersigned in accordance with the Registration Rights
Agreement, in compliance with the terms and conditions of such registration
statement.
3. The undersigned is acquiring the Common Stock for investment
purposes only, for its own account and not as a nominee or agent for any
other person or entity, and not with a view to, or for resale in connection
with, any distribution thereof within the meaning of the Securities Act.
4. The undersigned acknowledges that the Company is transferring the
Common Stock to the undersigned without registration under the Securities
Act. The undersigned further acknowledges that representatives of the
Company have advised the undersigned that no state or federal agency or
instrumentality has made any finding or determination as to the investment
in the Common Stock, nor has any state or federal agency or instrumentality
made any recommendation with respect to any purchase or investment in the
Common Stock.
[Name of Undersigned]
----------------------------------------
-2-
<PAGE>
EXHIBIT 2.1.4
EXCHANGE AGREEMENT
Villa Residential Care Homes-Oak Park, L.P.
This Exchange Agreement (the "Agreement") is made as of the ___ day of
December, 1997 by and between Greenbriar Corporation, a Nevada corporation (the
"Company"), William A. Shirley, Jr., and C. Kent Harrington and their permitted
assignees hereunder, the (collectively, the "Original Partners").
WHEREAS, the Original Partners wish to induce the Company and/or its
subsidiaries to manage and operate the properties managed and operated by Villa
Residential Care Homes-Oak Park, L.P. (the "Partnership") and to manage the
affairs of the Partnership; and
WHEREAS, pursuant to that certain First Amended and Restated Agreement of
Limited Partnership of Villa Residential Care Homes-Oak Park, L.P. (the
"Partnership Agreement") dated as of the date hereof, Kellway Corporation, a
subsidiary of the Company, was admitted as the Managing General Partner and as
the Class B Limited Partner of the Partnership, and the partnership interests of
the Original Partners in the Partnership were converted into Class A Limited
Partnership Units of the Partnership (the "Class A Units"); and
WHEREAS, as an inducement to the acceptance by the Original Partners of the
Class A Units pursuant to the Partnership Agreement, the Company has agreed to
exchange shares of its Common Stock (as defined below) for the Class A Units
held by the Original Partners and the Partnership has agreed to allow the Class
A Units to be exchanged for shares of the Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
"Agreement" shall have the meaning set forth in the Preamble hereto.
"Change in Control" shall mean, after the date of this Agreement, (i) the
occurrence of an event of a nature that would be required to be reported in
response to Item 1 or Item 2 of a Form 8-K Current Report of the Company
promulgated pursuant to Sections 13 and 15(d) of the Exchange Act; provided
that, without limitation, such a Change in Control shall be deemed to have
occurred if any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company), is or becomes the
<PAGE>
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the Company's then outstanding
securities; (ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than eighty percent (80%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a reorganization or recapitalization of
the Company, or a similar transaction (collectively, a "Reorganization"), in
which no "person" acquires more than twenty percent (20%) of the combined voting
power of the Company's then outstanding securities shall not constitute a Change
in Control of the Company; or (iii) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
"Class A Units" shall have the meaning set forth in the Preamble hereto.
"Closing Date" shall have the meaning given such term in the Partnership
Agreement.
"Common Stock" shall mean the common stock of the Company issued by the
Company to one or more of the Original Partners upon exchange of any Class A
Units hereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Rights" shall have the meaning set forth in Section 2.1 hereof.
"Notice of Exchange" shall have the meaning set forth in Section 2.1
hereof.
"Original Partners" shall have the meaning set forth in the Preamble
hereof.
"Partnership Agreement" shall have the meaning set forth in the Preamble
hereof.
"Registration Rights Agreement" shall mean that certain Registration Rights
Agreement dated the date hereof by and between each of the parties hereto
relating to the resale registration rights of the Original Partners with respect
to the Common Stock to be received in connection with the exercise of the
Exchange Right pursuant to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
Capitalized terms not otherwise defined have the meaning set forth in the
Partnership Agreement.
-2-
<PAGE>
ARTICLE II
EXCHANGE RIGHTS
---------------
Section 2.1 Exchange Rights. Subject to the limitations set forth in this
Article II, each Original Partner shall have the right (such right, an "Exchange
Right") to require the Company to issue shares of Common Stock in exchange for
all or a portion of the Class A Units (the "Affected Class A Units") held by
such Original Partner upon thirty (30) days prior written notice to the Company,
which notice shall be in the form of a Notice of Exchange; provided, however,
the Class A Units held by each Original Partner may be exchanged for shares of
the Common Stock only on and after the earlier to occur of (i) the first day
after the one year anniversary date of this Agreement and (ii) the date on which
a Change in Control of Company occurs. The Company shall satisfy the Exchange
Right of the Original Partner through the issuance of fully paid and
non-assessable shares of Common Stock within 30 days of receipt of the Notice of
Exchange, but not sooner than the date such shares are registered for resale
under the Registration Rights Agreement. Affected Class A Units are exchangeable
for shares of the Common Stock at the rate of one (1) share of Common Stock for
each 19.487 of such Affected Class A Units; provided, however, the number of
shares of Common Stock shall be determined prior to giving effect to any
securities issued or issuable with respect to the Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
occurring after the date of this Agreement.
Section 2.2 Company's Covenants Relating to the Rights. The Company shall
at all times reserve for issuance such amount of Common Stock as may be
necessary to enable the Original Partners to exchange all Class A Units which
are from time to time outstanding.
Section 2.3 Conditions Precedent to Issuance of Common Stock.
Notwithstanding anything to the contrary herein provided, the Company shall have
no obligation to issue to an Original Partner shares of Common Stock unless,
together with a Notice of Exchange, such Original Partner executes and delivers
to the Company a subscription letter agreement in the form of Exhibit B hereto.
Section 2.4 Representations and Warranties of the Company. The Company
represents and warrants to the Original Partner exercising its Exchange Right
pursuant to this Agreement that the Common Stock which is to be issued and
delivered to the Original Partner pursuant to the terms of this Agreement, when
so issued and delivered will be validly authorized and issued and will be fully
paid and non-assessable and free and clear of any liens, and such Common Stock
will not be subject to any limitations on free transferability other than any
restrictions imposed pursuant to this Agreement, the Registration Rights
Agreement or state or federal securities laws.
-3-
<PAGE>
ARTICLE III
MISCELLANEOUS
-------------
Section 3.1 Amendments and Waivers. This Agreement may be modified or
amended only by a writing signed by the Company and the Original Partners who
hold an amount of Class A Units at least equal to two-thirds of all the Class A
Units then outstanding.
Section 3.2 No Waiver. No failure to exercise and no delay in exercising,
on the Company's or the Original Partners' part, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
Section 3.3 Survival of Agreements. All agreements and covenants contained
herein or made in writing by or on behalf of the Company in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement.
Section 3.4 Assignment. The Original Partners cannot assign or otherwise
transfer their rights under this Agreement without the prior consent of the
Company except by inheritance or devise; provided, however that the Original
Partner shall be allowed to assign its rights hereunder, to any party to which
it may assign its Class A Units pursuant to the Partnership Agreement but only
if (i) all requirements for assignments of the Class A Units from the Original
Partner to such assignees pursuant to the Partnership Agreement shall have been
met and (ii) the Original Partner shall provide advance written notice of any
assignment to the Company. Any such assignee complying with the requirements
heretofore set forth shall be entitled to further assign, pledge or hypothecate
their rights hereunder to an Institutional Lender (as defined in the Partnership
Agreement), subject to (a) compliance with the provisions of the Partnership
Agreement for pledge or hypothecation of the Class A Units and (b) compliance
with item (ii) heretofore provided with respect to assignment to the assignees.
Section 3.5 Binding Effect and Benefits. This Agreement shall be binding
upon and shall inure to the benefit of the Company and its successors and the
Original Partners and their permitted successors, assigns and transferees.
Section 3.6 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.
Section 3.7 Severability of Provisions. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. Such provisions shall be deemed to be modified to the extent
necessary to render it legal, valid and enforceable, and if no such modification
-4-
<PAGE>
shall render it legal, valid and enforceable, then this Agreement shall be
construed as if not containing the provision held to be invalid, and the rights
and obligations of the parties shall be construed and enforced accordingly.
Section 3.8 Certain Litigation Costs. In the event of litigation between
the Company and the Original Partners regarding the matters encompassed by this
Agreement, the prevailing party in a final non-appealable judgment from a court
of competent jurisdiction (following such final judgment) shall be promptly
reimbursed by the other party (or parties) thereto for all of its reasonably
incurred out-of-pocket costs and expenses connected directly to the litigation
matters upon which such party has prevailed.
Section 3.9 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be by telecopy, facsimile
transmission (confirmed by U. S. mail), telegraph, hand delivery or mailed by
certified or registered mail postage prepaid, returned receipt requested, to the
addressed set forth below or to such other address as any party may advise the
other party in a written notice given in accordance with this Section.
if to the Company:
Greenbriar Corporation
4265 Kellway Circle
Addison, TX 75244
Attention: Gene S. Bertcher
Telecopy Number: (972) 407-8426
if to the Original Partners:
William A. Shirley, Jr.
Villa Residential Care Homes, Inc.
2621 State Street
Dallas, TX 75204
Telecopy Number: (214) 871-0090
and
C. Kent Harrington
Harrington, Moran, Barksdale & Day
306 West 7th Street
415 Fort Worth Club Building
Ft. Worth, TX 76102
Telecopy Number: (817) 335-0800
-5-
<PAGE>
Any notice or other communication so addressed and so mailed shall be deemed to
have been given when duly delivered or sent.
Section 3.10 Construction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without giving
effect to the conflict of laws provisions thereof. The descriptive headings of
the several sections and subsections hereof are for convenience only and shall
not control or effect the meaning of construction of any of the provisions
hereof.
Section 3.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute a single original instrument.
Section 3.12 Effectiveness. This Agreement shall only become effective, if
at all, on the Closing Date.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
GREENBRIAR CORPORATION
By:
Name:
Title:
-------------------------------
William A. Shirley, Jr.
-------------------------------
C. Kent Harrington
The undersigned hereby executes this Agreement for purposes of consenting
to the exchange of the Class A Units for shares of Common Stock pursuant to the
terms of this Agreement.
VILLA RESIDENTIAL CARE HOMES-
OAK PARK, L.P.
By: Kellway Corporation, a Texas corporation
its managing general partner
By:
Name:
Title:
-7-
<PAGE>
EXHIBIT A
FORM OF EXCHANGE NOTICE
The undersigned hereby irrevocably (i) exchanges ________ Class A Units in
Villa Residential Care Homes-Oak Park, L.P., (ii) surrenders such Class A Units
and all right, title and interest therein, and (iii) directs that the Common
Stock of Greenbriar Corporation (the "Common Stock") deliverable upon exchange
be delivered to the address specified below, and registered or placed in the
name(s) and at the address(es) specified below.
The undersigned hereby represents and warrants that (i) it has full power
and authority to exchange all of its right, title and interest in such Class A
Units into shares of the Common Stock, (ii) such Class A Units so exchanged are
free and clear of all liens and other encumbrances of whatever nature, and (iii)
it will assume and pay any state or local transfer tax that may be payable as a
result of the transfer of such Class A Units; provided, however, that the
undersigned shall not be responsible for paying any state or local transfer tax
arising out of this exchange.
Dated:
Name of Original Partner:
----------------------------------------
Signature of Original Partner:
----------------------------------------
By:
Title:
Address:
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signature [Attested or Witnessed by]:
-8-
<PAGE>
EXHIBIT B
SUBSCRIPTION LETTER AGREEMENT
------------------, ------
Greenbriar Corporation
4265 Kellway Circle
Addison, TX 75244
Re: Exchange Agreement dated December ___, 1997
Gentlemen:
Pursuant to the terms and conditions of that certain Exchange Agreement
dated December ___, 1997 (the "Exchange Agreement") between Greenbriar
Corporation (the "Company"), William A. Shirley, Jr. and C. Kent Harrington, the
undersigned hereby delivers this subscription letter agreement to the Company as
a condition to the exercise by the undersigned of the Exchange Rights (as
defined in the Exchange Agreement).
As a condition to its exercise of the Exchange Rights, the undersigned
hereby makes the following representations and warranties:
1. The undersigned is an "Accredited Investor" as such term is defined
in Section 501(a) of the Securities Act of 1933, as amended (the
"Securities Act"). The undersigned warrants that it has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment in the Common Stock (as defined in
the Exchange Agreement). The undersigned has had the opportunity to obtain
from the Company any and all information, to the extent possessed by the
Company or obtainable with reasonable efforts by the Company, necessary to
evaluate the merits and risks of an investment in the Common Stock and has
concluded, based on such information and other information previously known
to the undersigned, to invest in the Common Stock pursuant to the Exchange
Agreement.
2. The undersigned acknowledges that the shares of the Common Stock
may lack liquidity as compared with other securities investments. The
undersigned acknowledges that it must bear the economic risk of its
investment in the Common Stock for an indefinite period of time since the
Common Stock has not been registered under the Securities Act and therefore
cannot be sold unless they are subsequently registered or an exemption from
<PAGE>
registration available; provided, however, that such Common Stock may be
sold in connection with any effective registration statement filed on
behalf of the undersigned in accordance with the Registration Rights
Agreement, in compliance with the terms and conditions of such registration
statement.
3. The undersigned is acquiring the Common Stock for investment
purposes only, for its own account and not as a nominee or agent for any
other person or entity, and not with a view to, or for resale in connection
with, any distribution thereof within the meaning of the Securities Act.
4. The undersigned acknowledges that the Company is transferring the
Common Stock to the undersigned without registration under the Securities
Act. The undersigned further acknowledges that representatives of the
Company have advised the undersigned that no state or federal agency or
instrumentality has made any finding or determination as to the investment
in the Common Stock, nor has any state or federal agency or instrumentality
made any recommendation with respect to any purchase or investment in the
Common Stock.
[Name of Undersigned]
----------------------------------
-2-
<PAGE>
EXHIBIT 2.1.5
EXCHANGE AGREEMENT
Villa Residential Care Homes-Fort Worth East, L.P.
This Exchange Agreement (the "Agreement") is made as of the ___ day of
December, 1997 by and between Greenbriar Corporation, a Nevada corporation (the
"Company"), William A. Shirley, Jr., and C. Kent Harrington and their permitted
assignees hereunder, the (collectively, the "Original Partners").
WHEREAS, the Original Partners wish to induce the Company and/or its
subsidiaries to manage and operate the properties managed and operated by Villa
Residential Care Homes-Fort Worth East, L.P. (the "Partnership") and to manage
the affairs of the Partnership; and
WHEREAS, pursuant to that certain First Amended and Restated Agreement of
Limited Partnership of Villa Residential Care Homes-Fort Worth East, L.P. (the
"Partnership Agreement") dated as of the date hereof, Kellway Corporation, a
subsidiary of the Company, was admitted as the Managing General Partner and as
the Class B Limited Partner of the Partnership, and the partnership interests of
the Original Partners in the Partnership were converted into Class A Limited
Partnership Units of the Partnership (the "Class A Units"); and
WHEREAS, as an inducement to the acceptance by the Original Partners of the
Class A Units pursuant to the Partnership Agreement, the Company has agreed to
exchange shares of its Common Stock (as defined below) for the Class A Units
held by the Original Partners and the Partnership has agreed to allow the Class
A Units to be exchanged for shares of the Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
"Agreement" shall have the meaning set forth in the Preamble hereto.
"Change in Control" shall mean, after the date of this Agreement, (i) the
occurrence of an event of a nature that would be required to be reported in
response to Item 1 or Item 2 of a Form 8-K Current Report of the Company
promulgated pursuant to Sections 13 and 15(d) of the Exchange Act; provided
that, without limitation, such a Change in Control shall be deemed to have
occurred if any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company), is or becomes the
<PAGE>
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the Company's then outstanding
securities; (ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than eighty percent (80%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a reorganization or recapitalization of
the Company, or a similar transaction (collectively, a "Reorganization"), in
which no "person" acquires more than twenty percent (20%) of the combined voting
power of the Company's then outstanding securities shall not constitute a Change
in Control of the Company; or (iii) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
"Class A Units" shall have the meaning set forth in the Preamble hereto.
"Closing Date" shall have the meaning given such term in the Partnership
Agreement.
"Common Stock" shall mean the common stock of the Company issued by the
Company to one or more of the Original Partners upon exchange of any Class A
Units hereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Rights" shall have the meaning set forth in Section 2.1 hereof.
"Notice of Exchange" shall have the meaning set forth in Section 2.1
hereof.
"Original Partners" shall have the meaning set forth in the Preamble
hereof.
"Partnership Agreement" shall have the meaning set forth in the Preamble
hereof.
"Registration Rights Agreement" shall mean that certain Registration Rights
Agreement dated the date hereof by and between each of the parties hereto
relating to the resale registration rights of the Original Partners with respect
to the Common Stock to be received in connection with the exercise of the
Exchange Right pursuant to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
Capitalized terms not otherwise defined have the meaning set forth in the
Partnership Agreement.
-2-
<PAGE>
ARTICLE II
EXCHANGE RIGHTS
---------------
Section 2.1 Exchange Rights. Subject to the limitations set forth in this
Article II, each Original Partner shall have the right (such right, an "Exchange
Right") to require the Company to issue shares of Common Stock in exchange for
all or a portion of the Class A Units (the "Affected Class A Units") held by
such Original Partner upon thirty (30) days prior written notice to the Company,
which notice shall be in the form of a Notice of Exchange; provided, however,
the Class A Units held by each Original Partner may be exchanged for shares of
the Common Stock only on and after the earlier to occur of (i) the first day
after the one year anniversary date of this Agreement and (ii) the date on which
a Change in Control of Company occurs. The Company shall satisfy the Exchange
Right of the Original Partner through the issuance of fully paid and
non-assessable shares of Common Stock within 30 days of receipt of the Notice of
Exchange, but not sooner than the date such shares are registered for resale
under the Registration Rights Agreement. Affected Class A Units are exchangeable
for shares of the Common Stock at the rate of one (1) share of Common Stock for
each 19.487 of such Affected Class A Units; provided, however, the number of
shares of Common Stock shall be determined prior to giving effect to any
securities issued or issuable with respect to the Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
occurring after the date of this Agreement.
Section 2.2 Company's Covenants Relating to the Rights. The Company shall
at all times reserve for issuance such amount of Common Stock as may be
necessary to enable the Original Partners to exchange all Class A Units which
are from time to time outstanding.
Section 2.3 Conditions Precedent to Issuance of Common Stock.
Notwithstanding anything to the contrary herein provided, the Company shall have
no obligation to issue to an Original Partner shares of Common Stock unless,
together with a Notice of Exchange, such Original Partner executes and delivers
to the Company a subscription letter agreement in the form of Exhibit B hereto.
Section 2.4 Representations and Warranties of the Company. The Company
represents and warrants to the Original Partner exercising its Exchange Right
pursuant to this Agreement that the Common Stock which is to be issued and
delivered to the Original Partner pursuant to the terms of this Agreement, when
so issued and delivered will be validly authorized and issued and will be fully
paid and non-assessable and free and clear of any liens, and such Common Stock
will not be subject to any limitations on free transferability other than any
restrictions imposed pursuant to this Agreement, the Registration Rights
Agreement or state or federal securities laws.
-3-
<PAGE>
ARTICLE III
MISCELLANEOUS
-------------
Section 3.1 Amendments and Waivers. This Agreement may be modified or
amended only by a writing signed by the Company and the Original Partners who
hold an amount of Class A Units at least equal to two-thirds of all the Class A
Units then outstanding.
Section 3.2 No Waiver. No failure to exercise and no delay in exercising,
on the Company's or the Original Partners' part, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
Section 3.3 Survival of Agreements. All agreements and covenants contained
herein or made in writing by or on behalf of the Company in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement.
Section 3.4 Assignment. The Original Partners cannot assign or otherwise
transfer their rights under this Agreement without the prior consent of the
Company except by inheritance or devise; provided, however that the Original
Partner shall be allowed to assign its rights hereunder, to any party to which
it may assign its Class A Units pursuant to the Partnership Agreement but only
if (i) all requirements for assignments of the Class A Units from the Original
Partner to such assignees pursuant to the Partnership Agreement shall have been
met and (ii) the Original Partner shall provide advance written notice of any
assignment to the Company. Any such assignee complying with the requirements
heretofore set forth shall be entitled to further assign, pledge or hypothecate
their rights hereunder to an Institutional Lender (as defined in the Partnership
Agreement), subject to (a) compliance with the provisions of the Partnership
Agreement for pledge or hypothecation of the Class A Units and (b) compliance
with item (ii) heretofore provided with respect to assignment to the assignees.
Section 3.5 Binding Effect and Benefits. This Agreement shall be binding
upon and shall inure to the benefit of the Company and its successors and the
Original Partners and their permitted successors, assigns and transferees.
Section 3.6 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.
Section 3.7 Severability of Provisions. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. Such provisions shall be deemed to be modified to the extent
necessary to render it legal, valid and enforceable, and if no such modification
shall render it legal, valid and enforceable, then this Agreement shall be
construed as if not containing the provision held to be invalid, and the rights
and obligations of the parties shall be construed and enforced accordingly.
-4-
<PAGE>
Section 3.8 Certain Litigation Costs. In the event of litigation between
the Company and the Original Partners regarding the matters encompassed by this
Agreement, the prevailing party in a final non-appealable judgment from a court
of competent jurisdiction (following such final judgment) shall be promptly
reimbursed by the other party (or parties) thereto for all of its reasonably
incurred out-of-pocket costs and expenses connected directly to the litigation
matters upon which such party has prevailed.
Section 3.9 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be by telecopy, facsimile
transmission (confirmed by U. S. mail), telegraph, hand delivery or mailed by
certified or registered mail postage prepaid, returned receipt requested, to the
addressed set forth below or to such other address as any party may advise the
other party in a written notice given in accordance with this Section.
if to the Company:
Greenbriar Corporation
4265 Kellway Circle
Addison, TX 75244
Attention: Gene S. Bertcher
Telecopy Number: (972) 407-8426
if to the Original Partners:
William A. Shirley, Jr.
Villa Residential Care Homes, Inc.
2621 State Street
Dallas, TX 75204
Telecopy Number: (214) 871-0090
and
C. Kent Harrington
Harrington, Moran, Barksdale & Day
306 West 7th Street
415 Fort Worth Club Building
Ft. Worth, TX 76102
Telecopy Number: (817) 335-0800
Any notice or other communication so addressed and so mailed shall be deemed to
have been given when duly delivered or sent.
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<PAGE>
Section 3.10 Construction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without giving
effect to the conflict of laws provisions thereof. The descriptive headings of
the several sections and subsections hereof are for convenience only and shall
not control or effect the meaning of construction of any of the provisions
hereof.
Section 3.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute a single original instrument.
Section 3.12 Effectiveness. This Agreement shall only become effective, if
at all, on the Closing Date.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
GREENBRIAR CORPORATION
By:
Name:
Title:
----------------------------------------
William A. Shirley, Jr.
----------------------------------------
C. Kent Harrington
The undersigned hereby executes this Agreement for purposes of consenting
to the exchange of the Class A Units for shares of Common Stock pursuant to the
terms of this Agreement.
VILLA RESIDENTIAL CARE HOMES-
FORT WORTH EAST, L.P.
By: Kellway Corporation, a Texas corporation,
its managing general partner
By:
Name:
Title:
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EXHIBIT A
FORM OF EXCHANGE NOTICE
The undersigned hereby irrevocably (i) exchanges ________ Class A Units in
Villa Residential Care Homes-Forth Worth East, L.P., (ii) surrenders such Class
A Units and all right, title and interest therein, and (iii) directs that the
Common Stock of Greenbriar Corporation (the "Common Stock") deliverable upon
exchange be delivered to the address specified below, and registered or placed
in the name(s) and at the address(es) specified below.
The undersigned hereby represents and warrants that (i) it has full power
and authority to exchange all of its right, title and interest in such Class A
Units into shares of the Common Stock, (ii) such Class A Units so exchanged are
free and clear of all liens and other encumbrances of whatever nature, and (iii)
it will assume and pay any state or local transfer tax that may be payable as a
result of the transfer of such Class A Units; provided, however, that the
undersigned shall not be responsible for paying any state or local transfer tax
arising out of this exchange.
Dated:
Name of Original Partner:
----------------------------------------
Signature of Original Partner:
----------------------------------------
By:
Title:
Address:
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signature [Attested or Witnessed by]:
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<PAGE>
EXHIBIT B
SUBSCRIPTION LETTER AGREEMENT
------------------, ------
Greenbriar Corporation
4265 Kellway Circle
Addison, TX 75244
Re: Exchange Agreement dated December ___, 1997
Gentlemen:
Pursuant to the terms and conditions of that certain Exchange Agreement
dated December ___, 1997 (the "Exchange Agreement") between Greenbriar
Corporation (the "Company"), William A. Shirley, Jr. and C. Kent Harrington, the
undersigned hereby delivers this subscription letter agreement to the Company as
a condition to the exercise by the undersigned of the Exchange Rights (as
defined in the Exchange Agreement).
As a condition to its exercise of the Exchange Rights, the undersigned
hereby makes the following representations and warranties:
1. The undersigned is an "Accredited Investor" as such term is defined
in Section 501(a) of the Securities Act of 1933, as amended (the
"Securities Act"). The undersigned warrants that it has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment in the Common Stock (as defined in
the Exchange Agreement). The undersigned has had the opportunity to obtain
from the Company any and all information, to the extent possessed by the
Company or obtainable with reasonable efforts by the Company, necessary to
evaluate the merits and risks of an investment in the Common Stock and has
concluded, based on such information and other information previously known
to the undersigned, to invest in the Common Stock pursuant to the Exchange
Agreement.
2. The undersigned acknowledges that the shares of the Common Stock
may lack liquidity as compared with other securities investments. The
undersigned acknowledges that it must bear the economic risk of its
investment in the Common Stock for an indefinite period of time since the
Common Stock has not been registered under the Securities Act and therefore
cannot be sold unless they are subsequently registered or an exemption from
<PAGE>
registration available; provided, however, that such Common Stock may be
sold in connection with any effective registration statement filed on
behalf of the undersigned in accordance with the Registration Rights
Agreement, in compliance with the terms and conditions of such registration
statement.
3. The undersigned is acquiring the Common Stock for investment
purposes only, for its own account and not as a nominee or agent for any
other person or entity, and not with a view to, or for resale in connection
with, any distribution thereof within the meaning of the Securities Act.
4. The undersigned acknowledges that the Company is transferring the
Common Stock to the undersigned without registration under the Securities
Act. The undersigned further acknowledges that representatives of the
Company have advised the undersigned that no state or federal agency or
instrumentality has made any finding or determination as to the investment
in the Common Stock, nor has any state or federal agency or instrumentality
made any recommendation with respect to any purchase or investment in the
Common Stock.
[Name of Undersigned]
----------------------------------------
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<PAGE>
EXHIBIT 2.1.6
AGREEMENT AND ASSIGNMENT OF PARTNERSHIP INTERESTS
This Agreement and Assignment of Partnership Interests (this "Agreement")
is made and entered into as of the ____ day of December, 1997, by and between
WILLIAM A. SHIRLEY, JR.("Shirley"), LUCY M. BRODY ("Brody") and C. KENT
HARRINGTON ("Harrington") (individually, each an "Assignor" and collectively,
the "Assignors"), and GREENBRIAR CORPORATION ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignors are Limited Partners in VILLA RESIDENTIAL CARE HOMES
- -ARLINGTON, I, L.P., a Texas limited partnership (the "Partnership");
WHEREAS, Shirley owns a 90.21% limited partnership interest in the
Partnership, Brody owns an 8.78% limited partnership interest in the Partnership
and Harrington owns a .01% limited partnership interest in the partnership;
WHEREAS, Shirley desires to assign and transfer a 44.65% limited
partnership interest in the Partnership to Assignee, Brody desires to assign and
transfer a 4.35% limited partnership interest in the Partnership to Assignee and
Harrington desires to assign and transfer a .005% limited partnership interest
in the Partnership to the Assignee, such that, collectively, Assignee acquires a
49.005% limited partnership interest in the Partnership;
WHEREAS, Assignee desires to acquire the respective percentages of each
Assignor's right, title and interest in the Partnership set forth in the
preceding paragraph (the "Assigned Partnership Interests"), totally a 49.005%
limited partnership interest in the Partnership;
NOW, THEREFORE, in consideration of the premises, warranties and mutual
covenants set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Assignment of Partnership Interests. Each Assignor hereby transfers and
assigns to Assignee, and Assignee hereby accepts from each Assignor, the
respective Assigned Partnership Interest owned by such Assignor, including, but
not limited to, all right, title and interest of such Assignor in and to the
properties (real and personal), capital, cash flow distributions and profits and
losses of the Partnership attributable to the Assigned Partnership Interest.
2. Effective Date. The assignment herein is effective as of December ___,
1997, and from and after that date the net profits or net losses of the
Partnership attributable to the Assigned Partnership Interest shall be credited
or charged, as the case may be, to Assignee, and not to Assignors.
3. Consideration. The consideration for the Partnership Interest shall
consist of 17,961 shares of newly issued, fully paid and non-assessable common
stock of the Assignee, par value $0.01per share, 16,365 of such shares being due
to Shirley, 1,594 of such sharesbeing due to Brody and 2 of such shares being
due to Harrington.
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<PAGE>
4. Representations and Warranties of Assignors. Each Assignor individually
represents and warrants to Assignee that: (a) such Assignor is the legal and
beneficial owner of the Assigned Partnership Interest attributable to such
Assignor and has full authority to convey and has hereby conveyed good title to
the Assigned Partnership Interest; (b) the Assigned Partnership Interest is not
subject to any lien or assessments by any of such Assignor's creditors or by any
other party; (c) to such Assignor's knowledge, there are no actions, suits,
proceedings or claims affecting its respective Assigned Partnership Interest
that are threatened or pending, (d) there are no other partners in the
Partnership or any other parties who have any right, title or interest in or to
the Assigned Partnership Interests, and (e) it has obtained the consent of any
third parties required in order for such Assignor to make this assignment.
5. Future Cooperation on Subsequent Documents. Assignors and Assignee
mutually agree to cooperate at all times from and after the date hereof with
respect to the supplying of any information requested by the other regarding any
of the matters described in this Agreement, and each agrees to execute such
future deeds, bills of sale, assignments, releases or other documents as may be
reasonably requested for the purpose of giving effect to, evidencing or giving
notice of the transactions described herein.
6. Capital Indemnification by Assignors. Each Assignor hereby severally
indemnifies and agrees to hold harmless Assignee against any and all losses,
liabilities, costs (including, without limitation, attorneys' fees and
expenses), expenses, penalties, judgments, damages, claims and demands of every
kind and character arising out of or in connection with any of such Assignor's
individual liabilities, obligations and responsibilities with respect to the
Partnership of whatever kind or nature, whether arising from notes, guarantees,
endorsements, liens, property, tax assessments, leases, loans, advances or other
similar written obligations incurred in connection with the business of the
Partnership or which have arisen or may arise by reason of any past, present or
future contract, promissory note, mortgage, negligent act or omission, or any
other event pertaining to the Partnership, the properties and business
operations, and liabilities arising out of any act on the part of such Assignor
which would constitute fraud, wrongful or unauthorized actions. Each Assignor
agrees to give notice to Assignee of any claim for which such Assignor would be
liable hereunder promptly after any such claim is asserted against or becomes
known to such Assignor. Neither Assignee nor any successors or assigns thereof,
shall be deemed by this Agreement to have waived any cause of action or claim
that Assignee may have by virtue of fraud, wrongful or unauthorized actions of
Assignors, and each Assignor agrees to indemnify Assignee from any such loss,
claim, damage or expense arising from such conduct.
7. Successors and Assigns. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their successors and assigns.
8. Survival of Representations. The representations, warranties, covenants
and agreements of the parties contained in this Agreement shall survive the
execution hereof for a period of one year.
9. Modification and Waiver. No supplement, modification, waiver or
termination of this Agreement or any provisions hereof shall be binding unless
executed in writing by the parties to be bound thereby.
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No waiver of any of the provisions of this Agreement shall constitute a waiver
of any other provision (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
10. GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND IS INTENDED TO BE
PERFORMED IN THE STATE OF TEXAS, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THAT STATE.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first
above written.
ASSIGNORS:
By:
WILLIAM A. SHIRLEY, JR.
By:
LUCY M. BRODY
By:
C. KENT HARRINGTON
ASSIGNEE:
GREENBRIAR CORPORATION
By:
Name:
Title:
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