EXHIBIT 99.02
CONTACT: Tim Carroll
The Hillhaven Corporation
Vice President, Investor Relations
(206) 756-4806
For Immediate Release
HILLHAVEN TO ACQUIRE NATIONWIDE CARE, INC.
FOR APPROXIMATELY $120 MILLION
Tacoma, Washington (February 28, 1995) -- The Hillhaven
Corporation (NYSE:HIL), one of the nation's largest diversified
health care providers, announced today that it has entered into a
definitive agreement to acquire Nationwide Care, Inc. and certain
related entities for approximately $120 million in common stock.
Nationwide Care, based in Indianapolis, Indiana, is a closely
held provider of long term and subacute care centers in Indiana,
Ohio and Florida.
The merger consideration consists of the issuance of five
million new shares of Hillhaven common stock, subject to a
potential adjustment of up to 500,000 additional shares, if
Hillhaven's average share price prior to closing is below $24.00.
The transaction is subject to customary conditions, including the
receipt of applicable government and third party consents.
Hillhaven expects the acquisition to be at least $.05
accretive to earnings per share in the first year, exclusive of
the effect of one-time transaction costs. The transaction will
be structured as a pooling of interests and is expected to close
in June, 1995.
"This acquisition marks another important step in Hillhaven's
aggressive growth strategy since we completed our
recapitalization," commented Bruce L. Busby, Hillhaven's
Chairman and Chief Executive Officer. "We are delivering on
our promise to increase our growth rates by pursuing strategic
acquisitions in targeted markets that add both short and
long-term value to the company and our shareholders."
With annual revenues of approximately $130 million,
Nationwide Care is a quality operator of long term and subacute
care centers in Indiana, Ohio and Florida. Its operations
include 24 nursing centers with a total of 3,354 beds, two
retirement centers with a total of 240 units, two assisted living
centers with a total of 162 units and 40 additional assisted
living units located within one of the retirement centers.
Additionally, ten of the nursing centers have specialty care
Alzheimer's units, and Nationwide's home health care service,
Med One, has five outlets that service over 60,000 visits
annually.
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Nationwide is a leading provider of nursing care services in
the Indianapolis metropolitan area and the combined company
will be the second largest operator of nursing centers in
Indiana. Nationwide's nursing centers provide quality care for
the elderly and subacute medical and rehabilitation care for
individuals of all ages.
"For the past year, we have been actively pursuing nursing
and subacute care acquisitions that meet our value-added
criteria and which complement our existing geographic
concentration of facilities," Mr. Busby said. "Nationwide
meets these criteria; and we are looking forward to joining
forces with one of the premier providers in our industry. "
Mr. Busby continued, "This acquisition will be an important
platform for our future growth. We can leverage our higher
margin subacute care services by extending them across a larger
group of centers, allowing us to significantly enhance the
combined company's operating performance. The addition of
Nationwide's 24 facilities will complement Hillhaven's 287
nursing centers which include nine centers in Indiana, eleven in
Ohio and fifteen in Florida. This combination will increase
our presence in these markets and allow us to better provide a
broad array of low-cost, high- quality skilled nursing and
subacute care services to enhance our competitive position in
the rapidly evolving health care industry."
Thomas E. Phillippe, Sr., Chairman of the Board of
Nationwide, said, "We are delighted to become part of a growing
company which holds the same commitment to quality patient care
as we do. Both Nationwide and Hillhaven believe that
healthcare services should be tailored to the needs of each
local market. The combined company will benefit on a going
forward basis from increasing its geographic presence while
maintaining a local, customer-oriented focus."
Nationwide Care, Inc., based in Indianapolis, Indiana, is a
quality provider of long term and subacute care services, with
nursing centers, retirement and assisted care centers in
Indiana, Ohio and Florida.
The Hillhaven Corporation is one of the nation's largest
diversified health care providers, operating 363 nursing
centers, retirement housing communities and pharmacy outlets in
36 states. Hillhaven offers an extensive array of health care
services including subacute care, inpatient and outpatient
rehabilitation, orthopedic and stroke recovery programs,
post-operative care, long term care, specialized care for
Alzheimer's disease, pharmacy services and retirement and
assisted living services.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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):
February 27, 1995
THE HILLHAVEN CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 1-10426 91-1459952
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1148 Broadway Plaza, Tacoma, Washington 98402
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(206) 572-4901
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Item 5. Other Events.
On February 27, 1995, The Hillhaven Corporation (the
"Company") signed a definitive agreement to acquire Nationwide
Care, Inc. ("Nationwide") and its affiliated corporations and
partnerships through (i) the merger of Nationwide, Phillippe
Enterprises, Inc. and Meadowvale Skilled Care Center, Inc. with
and into NCI Acquisition Corp. (a newly formed wholly-owned
subsidiary of the Company) and (ii) the assignment of all of the
outstanding partnership interests in Camelot Care Centers,
Shangri-La Partnership and Evergreen Woods, Ltd. to NCI
Acquisition Corp.(the "Merger"). The consideration for the
Merger will be 5.0 million shares of the Company's common stock,
$0.75 par value per share ("Company Stock"). The Company will
issue up to 500,000 additional shares of Company Stock to protect
a minimum purchase price of $120 million. The transaction will
be structured as a pooling of interests and as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code.
The closing is scheduled for June 30, 1995.
A copy of the Company's press release is attached as Exhibit
99.02 hereto and by this reference is incorporated herein.
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SIGNATURE
Pursuant to the requirements 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.
THE HILLHAVEN CORPORATION
By: /s/ Richard P. Adcock
Richard P. Adcock
Senior Vice President,
Secretary and General
Counsel
Dated: March 6, 1995
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EXHIBIT INDEX
Exhibit 99.01 Agreement and Plan of Merger and Agreements to
Assign Partnership Interests by and among The
Hillhaven Corporation, NCI Acquisition Corp.,
Nationwide Care, Inc., Phillippe Enterprises,
Inc., Meadowvale Skilled Care Center, Inc., and
Specified Partners of Camelot Care Centers,
Evergreen Woods, Ltd. and Shangri-La Partnership
dated as of February 27, 1995.
Exhibit 99.02 Press Release dated February 27, 1995.
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EXHIBIT 99.01
Agreement and Plan of Merger
and Agreements to Assign Partnership Interests
by and among
The Hillhaven Corporation
NCI Acquisition Corp.
Nationwide Care, Inc.
Phillippe Enterprises, Inc.
Meadowvale Skilled Care Center, Inc.
and
Specified Partners of
Camelot Care Centers
Evergreen Woods, Ltd.
and
Shangri-La Partnership
Dated
as of
February 27, 1995
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Table of Contents
Preliminary Statement 1
Terms and Conditions 2
ARTICLE I The Mergers 3
Section 1.1. Mergers 3
Section 1.2. Effective Time of Mergers 3
Section 1.3. Legal Effect 3
Section 1.4. Other Actions 3
ARTICLE II Corporate Governance 3
Section 2.1. Certificate of Incorporation; Bylaws 3
Section 2.2. Directors and Officers 4
ARTICLE III Conversion of Shares; Assignment of
Partnership Interests; Prepayment of
Subordinated Notes and Redemption of
Preferred Stock 4
Section 3.1. Conversion of Shares of AC 4
Section 3.2. Merger Consideration 4
Section 3.3. Escrow 5
Section 3.4. Surrender and Payment for the Target
Common Shares 5
Section 3.5. Redemption of Nationwide Subordinated
Notes and Nationwide Preferred Stock 7
ARTICLE IV Representations and Warranties of
Corporate Targets and Partners 7
Section 4.1. Organization; Power 7
Section 4.2. Capital Stock 8
Section 4.3. Authority; No Violation 8
Section 4.4. Consents and Approvals 9
Section 4.5. Transactions with Certain Persons 9
Section 4.6. Books and Records 10
Section 4.7. Financial Statements 10
Section 4.8. Absence of Undisclosed Liabilities 10
Section 4.9. Actions Pending 11
Section 4.10. Outstanding Debt and Related Matters 11
Section 4.11. Tax Matters 11
Section 4.12. Absence of Changes or Events 12
Section 4.13. Compliance with Laws; No Default 14
Section 4.14. Property 14
Section 4.15. Contracts 15
Section 4.16. Licenses and Permits 16
Section 4.17. Proprietary Information 17
Section 4.18. Title to Assets and Related Matters 17
Section 4.19. Environmental Matters 17
Section 4.20. Labor Relations; Employees 18
Section 4.21. Employee Benefit Plans 19
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Section 4.22. Insurance 20
Section 4.23. Life Care Contracts 20
Section 4.24. Survey Reports 20
Section 4.25. Payment Programs 20
Section 4.26. Gratuitous Payments 21
Section 4.27. Brokers' or Finders' Fees 21
Section 4.28. Disclosure 22
Section 4.29. Tax Representations 22
Section 4.30. Representations and Warranties as of Date
Hereof; No Other Representations and
Warranties 22
ARTICLE V Representations and Warranties of
Acquiror and AC 22
Section 5.1. Organization; Power 22
Section 5.2. Capital Stock 23
Section 5.3. Authority; No Violation; Etc. 23
Section 5.4. Consents and Approvals 24
Section 5.5. Reports 24
Section 5.6. Due Authorization of Shares 25
Section 5.7. Compliance with Laws; No Default
or Litigation 25
Section 5.8. Tax Representations 25
Section 5.9. Brokers' or Finders' Fees 25
Section 5.10. Representations and Warranties
as of Date Hereof 25
ARTICLE VI Certain Pre-Closing Covenants of
the Targets 26
Section 6.1. Maintenance of Corporate Status 26
Section 6.2. No Change in Capitalization 26
Section 6.3. Shareholders Meetings; Proxy Material 26
Section 6.4. Operation of the Business 27
Section 6.5. Other Offers 27
Section 6.6. Compliance with the Securities Act;
Affiliates 27
Section 6.7. Taxes 28
Section 6.8. Access; Review 28
Section 6.9. Insurance 28
Section 6.10. Monthly Financial Statements 28
Section 6.11. Approvals, Notices and Consents 29
Section 6.12. The Targets' Actions; Supplements to
Representations and Warranties 29
Section 6.13. Notice of Material Adverse Change 30
Section 6.14. Pooling 30
Section 6.15. Tax Statements 30
Section 6.16. Cooperation 30
ARTICLE VII Certain Pre-Closing Covenants
of Acquiror 30
Section 7.1. Required Consents and Approvals 30
Section 7.2. Premerger Notification 30
Section 7.3. Registration Statement; NYSE Listing 30
Section 7.4. Notice of Material Adverse Change 31
Section 7.5. Pooling Actions 31
Section 7.6. Pooling Letter 31
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Section 7.7. Tax Statements 31
Section 7.8. Environmental Surveys 31
Section 7.9. Cooperation 31
ARTICLE VIII Conditions Precedent to the
Performance of Acquiror 32
Section 8.1. Accuracy of Representations and
Warranties of the Targets 32
Section 8.2. Compliance 32
Section 8.3. Approval 32
Section 8.4. HSR Act Approval 32
Section 8.5. Authorizations 32
Section 8.6. Litigation 32
Section 8.7. No Material Adverse Change 33
Section 8.8. Closing Deliveries 33
Section 8.9. Dissenters' Rights 33
Section 8.10. Pooling Letter 33
Section 8.11. Exercise of Warrants 33
Section 8.12. Tax Opinions 33
Section 8.13. Lease Extensions 33
ARTICLE IX Conditions Precedent to Performance of the
Corporate Targets and Partners 33
Section 9.1. Accuracy of Representations and
Warranties of Acquiror and AC 33
Section 9.2. Compliance 34
Section 9.3. Corporate Approval 34
Section 9.4. Authorizations 34
Section 9.5. Registration Statement 34
Section 9.6. Litigation 34
Section 9.7. No Material Adverse Change 34
Section 9.8. HSR Act Waiting Periods 35
Section 9.9. Closing Deliveries 35
Section 9.10. Tax Opinions 35
Section 9.11. Release of Guarantees 35
ARTICLE X Termination 35
Section 10.1. Termination by Mutual Agreement 35
Section 10.2. Termination by Acquiror 35
Section 10.3. Termination by the Corporate Targets
and Partners 35
ARTICLE XI Additional Agreements 36
Section 11.1. Confidentiality 36
Section 11.2. Employee Benefit Matters 36
Section 11.3. Agreements Respecting Meadowvale 36
Section 11.4. Preservation of Tax-Free Reorganization
Treatment 37
Section 11.5. Publication of Financial Results 37
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ARTICLE XII The Closing 37
Section 12.1. Time and Place 37
Section 12.2. Deliveries to Acquiror at the Closing 37
Section 12.3. Deliveries to the Targets at the Closing 38
ARTICLE XIII Indemnification 39
Section 13.1. Indemnification of Acquiror, AC,
and Surviving Corporation 39
Section 13.2. Threshold and Maximum Amounts 39
Section 13.3. Survival of Indemnification Obligations 40
ARTICLE XIV Supplemental Indemnification 40
Section 14.1. Supplemental Indemnification of
Acquiror, AC, and Surviving Corporation 40
Section 14.2. Maximum Amounts 41
Section 14.3. Survival of Indemnification Obligations 41
ARTICLE XV Miscellaneous Provisions 41
Section 15.1. Survival of Representations
and Warranties 41
Section 15.2. Definition of Knowledge 41
Section 15.3. Counterparts 42
Section 15.4. Entire Agreement 42
Section 15.5. Exhibits and Schedules 42
Section 15.6. Parties in Interest 42
Section 15.7. Expenses 42
Section 15.8. Gender 43
Section 15.9. Governing Law 43
Section 15.10. Headings 43
Section 15.11. Modification and Waiver 43
Section 15.12. Notices 43
Section 15.13. Press Releases 44
Section 15.14. Rights of Parties 44
Section 15.15. Successors 44
Section 15.16. Intent; Construction 45
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger and Agreements to Assign
Partnership Interests (the "Agreement") dated as of the 27th day
of February, 1995, is by and among The Hillhaven Corporation, a
Nevada Corporation ("Acquiror"), NCI Acquisition Corp., a
Delaware corporation ("AC"), Nationwide Care, Inc., an Indiana
corporation ("Nationwide"), Phillippe Enterprises, Inc., an
Indiana corporation ("PEI"), Meadowvale Skilled Care Center,
Inc., an Indiana corporation ("Meadowvale") (Nationwide, PEI and
Meadowvale are collectively referred to herein as the "Corporate
Targets"), the partners of Camelot Care Centers, an Indiana
general partnership ("Camelot"), the partners of Shangri-La
Partnership, an Indiana general partnership ("Shangri-La") and
the limited partners of Evergreen Woods, Ltd., a Florida limited
partnership ("Evergreen") (Camelot, Shangri-La and Evergreen are
collectively referred to herein as the "Partnership Targets"; the
partners of Camelot and Shangri-La and the limited partners of
Evergreen are collectively referred to herein as the "Partners";
the interests in the Partnerships held by the Partners are
collectively referred to herein as the "Partnership Interests").
The Corporate Targets and the Partnership Targets are
collectively referred to herein as the "Targets."
Preliminary Statement
Acquiror and its subsidiaries operate nursing centers,
pharmacies and retirement housing communities. Nationwide and
its subsidiaries operate long-term health care centers primarily
located in Indiana, Ohio and Florida. Dr. Thomas E. Phillippe,
Sr. and Thomas E. Phillippe, Jr. (the "Phillippes") are the
majority owners of Nationwide. Shangri-La, which is owned by the
Phillippes and two other parties, owns an 81-bed long term care
health care facility. PEI is wholly-owned by the Phillippes and
owns a 90 bed assisted living center in Florida managed by
Nationwide. Meadowvale is owned by certain relatives of the
Phillippes. Meadowvale owns a 120 bed long-term care center in
Indiana leased by Nationwide. Each of Camelot and Evergreen
operates long term care facilities. Nationwide owns in excess of
95% of the Partnership Interests of Camelot and Evergreen.
The capital structure of Acquiror consists of 60 million
authorized shares of Common Stock, par value $0.75 per share, of
which approximately 32,824,863 are outstanding (the "Acquiror
Common Shares"); 25 million authorized shares of preferred stock,
par value $0.15 per share, of which the following series have
been designated: 3 million authorized shares of Series A
Preferred Stock, of which no shares are outstanding; 950
authorized shares of Series B Convertible Preferred Stock, of
which 618 shares have been designated as Subseries 1, of which no
shares are outstanding; 35,000 authorized shares of Series C
Preferred Stock, all of which are outstanding; and 300,000
authorized shares of Series D Preferred Stock, of which
approximately 63,403 shares are outstanding. The capital
structure of AC consists of 1,000 authorized shares of Common
Stock, par value $1.00 per share, all
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of which are outstanding and owned by Acquiror. The capital
structure of Nationwide consists of 48,000,000 authorized shares
of Common Stock, without par value, of which 7,431,458 shares are
issued and outstanding (the "Nationwide Voting Common");
2,000,000 authorized shares of Nonvoting Common Stock, without
par value, of which 76,592 shares are issued and outstanding (the
"Nationwide Nonvoting Common") (the Nationwide Voting Common and
the Nationwide Nonvoting Common are collectively referred to
herein as the "Nationwide Common Shares"); and 2,000,000
authorized shares of Preferred Stock, without par value, of which
300,000 shares of Redeemable Preferred Stock are issued and
outstanding (the "Nationwide Preferred Stock"). Nationwide also
has outstanding warrants to purchase 987,188 shares of Nationwide
Nonvoting Common (the "Nationwide Warrants"), which will be
exercised prior to the Closing (as defined in Section 12.1). The
capital structure of PEI consists of 10,000 authorized shares of
Common Stock, without par value, of which 2,000 are issued and
outstanding (the "PEI Common Shares"). The capital structure of
Meadowvale consists of 3,000 authorized shares of Common Stock,
without par value, of which 3,000 are issued and outstanding (the
"Meadowvale Common Shares"). The Nationwide Common Shares, PEI
Common Shares and Meadowvale Common Shares are collectively
referred to herein as the "Target Common Shares." Nationwide owns
substantially all of each of the Partnerships, except that
Shangri-La is controlled by the Phillippes. The ownership of the
Partnerships is as set forth in Section 1 of the statement of
disclosure delivered by the Corporate Targets and the Partners to
Acquiror in connection with the execution of this Agreement (the
"Disclosure Statement").
The Boards of Directors of Acquiror and AC deem the
mergers between AC and each of the Corporate Targets pursuant to
the terms of this Agreement (the "Mergers") desirable and in the
best interests of Acquiror and AC. The Board of Directors of
each of the Corporate Targets deems each respective Merger
desirable and in the best interests of the respective Corporate
Target. The Board of Directors of Acquiror has, by resolutions
duly adopted, approved this Agreement. The Board of Directors
and shareholder of AC have, by resolutions duly adopted, approved
this Agreement. The Board of Directors of each of the Corporate
Targets has, by resolutions duly adopted, approved this
Agreement. The question of approval of each of the Mergers will
be submitted to the shareholders of the respective Corporate
Targets. In connection with this Agreement, the Phillippes have
agreed to approve the Mergers. Each of the Partners deems the
assignment of his, her or its Partnership Interests to be
desirable and in his, her or its best interest and, where
appropriate, has approved such assignment.
It is intended that the Mergers shall qualify for
treatment as "poolings of interests" transactions.
TERMS AND CONDITIONS
In consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and
intending to be legally bound thereby, the parties agree to the
following terms and conditions.
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ARTICLE I
THE MERGERS
Section 1.1. Mergers. Upon the terms and subject to the
satisfaction of the conditions precedent contained in this
Agreement, each of the Corporate Targets shall be merged with and
into AC. The corporation to survive the Mergers is hereinafter
referred to as the "Surviving Corporation" and the corporations
not to survive the Mergers are hereinafter referred to as the
"Merging Corporations." The Mergers shall be effected pursuant
to the provisions of and with the effect provided in the Indiana
Business Corporation Law (the "BCL") and the Delaware General
Corporation Law (the "GCL"). Upon the consummation of the
Mergers, the separate existence of the Merging Corporations shall
cease, the corporate existence of the Surviving Corporation with
all its purposes, powers and objects shall continue unaffected
and unimpaired by the Mergers, and the Merging Corporations and
the Surviving Corporation shall be a single corporation.
Section 1.2. Effective Time of Mergers. If (a) all of
the conditions precedent to the Mergers as set forth in Article
VIII and Article IX of this Agreement are satisfied or waived,
and (b) this Agreement is not terminated prior to the Closing (as
permitted by the provisions of this Agreement, then as soon as
reasonably practicable following the Closing, the Surviving
Corporation shall cause Certificates of Merger conforming to the
requirements of the BCL and the GCL (the "Certificates of
Merger") to be filed with the Secretary of State of the State of
Indiana (the "Indiana Secretary of State") and the Secretary of
State of the State of Delaware (the "Delaware Secretary of
State") with respect to each of the Mergers, in the manner
provided under the BCL and the GCL. The Mergers shall become
effective as of 12:01 a.m., Eastern Standard Time, on the date
following the date of such filing of the Certificates of Merger
(the "Effective Time").
Section 1.3. Legal Effect. At and after the Effective
Time, the Surviving Corporation shall possess all of the rights,
privileges, immunities, powers and franchises of AC and each of
the Corporate Targets and shall be subject to and shall assume
all the duties and liabilities of AC and the Corporate Targets as
a corporation organized and existing under the laws of Delaware.
Section 1.4. Other Actions. If after the Effective Time
any further action is necessary or desirable to carry out the
purposes of this Agreement, the officers and directors of
Acquiror and AC shall have the authority to take that action.
ARTICLE II
CORPORATE GOVERNANCE
Section 2.1. Certificate of Incorporation; Bylaws. The
Certificate of Incorporation and Bylaws of AC as in effect
immediately prior to the Effective Time shall be the Certificate
of Incorporation and Bylaws, respectively, of the Surviving
Corporation until amended or repealed as provided by law.
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Section 2.2. Directors and Officers. The persons set
forth in Schedule 2.2 shall become the directors and officers,
respectively, of the Surviving Corporation, to serve until their
successors shall have been elected or appointed and qualified in
the manner provided in the Certificate of Incorporation and
Bylaws of the Surviving Corporation, or as otherwise provided by
law.
ARTICLE III
CONVERSION OF SHARES; ASSIGNMENT OF PARTNERSHIP INTERESTS;
PREPAYMENT OF SUBORDINATED NOTES AND REDEMPTION OF PREFERRED
STOCK
Section 3.1. Conversion of Shares of AC. The shares of
AC issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Mergers and without any action on the
part of AC or Acquiror, be converted into an equal number of
common shares of the Surviving Corporation, and all certificates
formerly representing shares of AC shall be deemed cancelled and
of no further effect. As soon as practicable following the
Closing, a certificate representing the shares of the Surviving
Corporation described in the preceding sentence shall be issued
and delivered to Acquiror.
Section 3.2. Merger Consideration.
(a) The Target Common Shares issued and
outstanding immediately prior to the Effective Time shall, by
virtue of the Mergers and without any further action by the
Corporate Targets, be converted as of the Effective Time into the
right to receive the number of Acquiror Common Shares as set
forth in Schedule 3.2 (subject to adjustment as described in
Section 3.2(c), below) to this Agreement which shall be provided
by the Phillippes and attached hereto no later than 30 days after
the execution of this Agreement. As of the Effective Time, all
Target Common Shares shall be canceled and shall no longer
represent any interest in the equity of any of the Corporate
Targets, and all certificates formerly representing Target Common
Shares shall be deemed canceled. At the Closing, the Partners of
the Partnerships (except Nationwide) shall assign to AC, free and
clear of all liens, security interests and encumbrances, their
Partnership Interests and shall receive in exchange the number
of Acquiror Common Shares as is set forth in Schedule 3.2
(subject to adjustment as described in Section 3.2(c), below).
The total consideration to be received by holders of the Target
Common Shares and by the Partners of the Partnerships in
connection with the transactions contemplated herein is referred
to herein as the "Merger Consideration."
(b) The Merger Consideration shall consist of five
million (5,000,000) Acquiror Common Shares, provided that the
average closing price of one Acquiror Common Share as reported on
the New York Stock Exchange ("NYSE") for the ten (10) trading
days immediately preceding the Closing Date (the "Trading Price")
is greater than or equal to Twenty-Four Dollars ($24.00). If the
Trading Price is less than Twenty-Four Dollars ($24.00), the
Merger Consideration shall consist of the number (the
"Consideration Number") of Acquiror Common Shares equal to the
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quotient of (i) One
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Hundred Twenty Million Dollars ($120,000,000), divided by the
Trading Price; provided, however, that the Consideration Number
shall not be greater than five and one-half million (5,500,000)
Acquiror Common Shares.
(c) The allocation of Acquiror Common Shares among
the Corporate Targets and the Partners set forth in Schedule 3.2
shall be determined assuming that the Merger Consideration
consists of five million (5,000,000) Acquiror Common Shares. In
the
event of an adjustment in the Merger Consideration as provided in
Section 3.2 (b), above, the number of Acquiror Common Shares to
be received in exchange for each Target Common Share and each
Partnership Interest, respectively, shall be multiplied by a
fraction, the numerator of which is the number of Acquiror Common
Shares which comprise the Merger Consideration as adjusted
pursuant to Section 3.2 (b), above, and the denominator of which
is five million (5,000,000).
Section 3.3. Escrow. As security for, and as the sole
source for satisfaction of, the indemnification obligations
provided for in Article XIII (except as provided in the proviso
to
Section 13.2(b) hereof), ten percent (10%) of the number of
Acquiror Common Shares that comprise the Merger Consideration
shall be held by Bank One, Indianapolis, N.A., as escrow agent,
in escrow for the period and in accordance with the other terms,
conditions and procedures set forth in the Escrow Agreement
attached hereto as Exhibit 3.3(a) (the "Escrow"). In addition, as
security for the indemnification obligations provided for in
Article XIV, five
percent (5%) of the number of Acquiror Common Shares that
comprise the Merger Consideration shall be held by Bank One,
Indianapolis, N.A., as escrow agent, in escrow for the period and
in accordance with the other terms, conditions and procedures set
forth in the
Supplemental Escrow Agreement attached hereto as Exhibit 3.3(b)
(the "Supplemental Escrow"); provided that the Acquiror Common
Shares to be delivered to the Supplemental Escrow shall be
deducted pro rata solely from the Acquiror Common Shares to be
delivered to the shareholders of Nationwide.
Section 3.4. Surrender and Payment for the Target Common
Shares.
(a) At the Closing, each holder of Target Common
Shares shall deliver to Acquiror each certificate (a
"Certificate") for such shares held of record by such holder.
Risk of loss and title to the Certificates shall pass upon
delivery of the certificates to Acquiror. At the Closing, each
Partner shall deliver to Acquiror such documents and instruments
agreed to by Acquiror and the Partners. Promptly following the
Effective Time, Acquiror shall deliver to (i) each holder so
delivering his, her or its Certificate(s) or assigning his, her
or its Partnership Interest in exchange therefor the Acquiror
Common Shares such holder would be entitled to receive under
Section 3.2, less such
Acquiror Common Shares to be escrowed pursuant to Section 3.3 and
(ii) the Escrow and the Supplemental Escrow, the balance of the
Acquiror Common Shares otherwise deliverable pursuant to Sections
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3.2 and 3.3.
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(b) No certificates or scrip representing fractional
Acquiror Common Shares shall be issued in the Mergers or in
connection with the assignment of the Partnership Interests and
no holder of any such fractional share interest shall be entitled
to vote, to receive any dividends or other distributions paid or
declared on Acquiror Common Shares, or to exercise any other
rights as a shareholder of Acquiror with respect to such
fractional share interest.
(c) Each holder of Target Common Shares as of the
Effective Time shall be entitled to receive the applicable Merger
Consideration upon surrender to the Acquiror of the Certificates
representing the Target Common Shares owned by the shareholder.
Each Partner shall be entitled to receive the consideration
specified in Section 3.2 upon execution and delivery of such
documents and instruments to be agreed to by Acquiror and the
Partners.
(d) In the event that any Certificate representing
Target Common Shares is lost, stolen or destroyed, Acquiror may
require as a condition to the payment of the Merger Consideration
with respect to such Target Common Shares pursuant to this
Agreement that the holder of such Target Common Shares execute
such affidavits and indemnities as Acquiror shall reasonably
require.
(e) In the event a dividend or other distribution
is declared by Acquiror on the Acquiror Common Shares the record
date for which is at or after the Effective Time, the declaration
shall include dividends or other distributions on all Acquiror
Common Shares issuable pursuant to this Agreement; provided that
no dividend or other distribution declared or made on the
Acquiror Common Shares shall be paid to the holder of any
unsurrendered Certificate with respect to the Acquiror Common
Shares (including those Acquiror Common Shares deliverable into
the Escrow or the Supplemental Escrow) represented thereby until
the holder of such Certificate shall duly surrender such
Certificate in accordance with this Section 3.4; and provided
further that no holder of any
unsurrendered Certificate shall have any rights (including voting
rights, if applicable) with respect to Acquiror Common Shares
(including those Acquiror Common Shares deliverable into the
Escrow or the Supplemental Escrow) represented thereby until the
holder of such Certificate shall duly surrender such Certificate
in accordance with this Section 3.4.
(f) From and after the Effective Time, there shall
be no transfers on the stock transfer records of any of the
Corporate Targets of any Target Common Shares that were
outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to Acquiror or the
Surviving Corporation, they shall be exchanged for the Merger
Consideration deliverable in respect thereof pursuant to this
Agreement in accordance with the procedures set forth in this
Section 3.4.
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(g) Following the Effective Time, if Certificates
previously representing Target Common Shares are not delivered to
Acquiror or the payment of Merger Consideration therefor is not
claimed prior to the date on which such payments would otherwise
escheat or become the property of any governmental unit or
agency, the unclaimed items shall, to the extent permitted by
abandoned property and any other applicable law, become the
property of Acquiror (and to the extent not in its possession
shall be paid over to it), free and clear of all claims or
interest of any person previously entitled to such claims.
Notwithstanding the foregoing, none of Acquiror, AC, the
Surviving corporation or any other person shall be liable to any
former holder of Target Common Shares for any amount delivered to
a public official pursuant to applicable abandoned property,
escheat or similar laws.
Section 3.5. Redemption of Nationwide Subordinated Notes
and Nationwide Preferred Stock. At the Closing, the Subordinated
Notes of Nationwide, as set forth on Schedule 3.5 (the
"Nationwide Subordinated Notes") shall be prepaid, and the
Nationwide Preferred Stock shall be redeemed, in accordance with
the respective terms thereof; provided, however, that no
"Additional Premium" (as that term is defined in that certain
Subordinated Note Purchase Agreement dated as of July 27, 1993
between Nationwide and Continental Bank, N.A.) shall be incurred
in connection with the prepayment of the Nationwide Subordinated
Notes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CORPORATE TARGETS AND PARTNERS
For purposes of this Article IV, each of the
representations and warranties of the Corporate Targets shall be
deemed to have been made with respect to the Corporate Targets
and their respective subsidiaries. As a material inducement to
Acquiror and AC to enter into this Agreement and to consummate
the transactions contemplated hereby, the Corporate Targets and
the Partners jointly and severally represent and warrant to
Acquiror and AC that:
Section 4.1. Organization; Power. Each of the Corporate
Targets is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation.
Each of the Corporate Targets is qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction, if any, in which the conduct of its business or the
ownership or leasing of its properties requires it to be so
qualified. Each business entity in which any of the Targets owns
an equity interest, together with such entity's jurisdiction of
organization and such Target's percentage ownership interest
therein and the states in which the Targets and each such entity
are qualified as a foreign corporation or otherwise are listed in
Section 4.1 of the Disclosure Statement. Each of the Corporate
Targets has all requisite corporate power and authority to own,
lease and operate its business as it is now being conducted, and
to enter into, execute and deliver this Agreement, to consummate
the transactions
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contemplated hereby, and to comply with and fulfill the terms and
conditions hereof. Each of the Corporate Targets has delivered
to Acquiror (a) true and complete copies of its Articles of
Incorporation, as may be amended or restated, certified by the
Indiana Secretary of State, (b) Certificates of Existence issued
by the Indiana Secretary of State and by any other state in which
it is qualified to do business and (c) a copy of its Bylaws, as
currently in effect, certified as true and complete by the
respective Corporate Target's Secretary. Each of the
Partnerships has been duly formed under the laws of its
jurisdiction of formation. Each of the Partnerships is duly
qualified to do business in each jurisdiction in which the
conduct of its business or the ownership or leasing of its
properties requires it to be so qualified. Each of the Partners
has all requisite power and authority to enter into, execute and
deliver this Agreement, to consummate the transactions
contemplated hereby, and to comply with and fulfill the terms and
conditions hereof. The Partners have delivered to Acquiror true
and complete copies of the partnership agreements of each of the
Partnerships.
Section 4.2. Capital Stock. The authorized capital stock
of each of the Corporate Targets is as set forth in the
Preliminary Statement of this Agreement. All issued and
outstanding Common Shares of each Corporate Target are validly
issued and outstanding, fully paid and nonassessable. Except as
set forth in Section 4.2 of the Disclosure Statement, there are
no outstanding warrants, options, agreements, convertible
securities or other commitments
pursuant to which any of the Corporate Targets are or may become
obligated to issue any Target Common Shares or other securities
of any of the Corporate Targets. Except as set forth in Section
4.2 of the Disclosure Statement, there are not outstanding any
agreements or commitments pursuant to which any of the Corporate
Targets are or may become obligated to purchase or redeem any of
the Target Common Shares or other securities. The ownership of
the Partnerships is as set forth in Section 1 of the Disclosure
Statement.
Section 4.3. Authority; No Violation.
(a) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary action on the
part of each of the Corporate Targets and the Partners. This
Agreement is a valid and binding obligation of each of the
Corporate Targets and the Partners, enforceable against each of
them in accordance with its terms and conditions, except as the
enforcement hereof may be limited by bankruptcy, insolvency,
moratorium or other laws relating to or limiting creditors'
rights generally or by general principles of equity, regardless
of whether such enforceability is considered in a proceeding at
law or in equity.
(b) Except as set forth in Section 4.3 of the
Disclosure Statement, neither the execution and delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance by each of the Corporate
Targets and the Partners with any of the provisions hereof, will:
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(i) conflict with, violate, result in a
breach of, constitute a default (or an event that, with notice or
lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or
acceleration under any provision of the Articles of
Incorporation, Bylaws or partnership agreements of any of the
Targets, or any of the terms, conditions or provisions of any
note, lien, bond, mortgage, indenture, license, lease, contract,
commitment, agreement, understanding, arrangement, restriction or
other instrument or obligation to which any of the Corporate
Targets or Partners is a party or by which any of the Corporate
Targets or Partners may be bound;
(ii) violate any law, rule or regulation of
any government or governmental agency or body, or any judgment,
order, writ, injunction or decree of any court, administrative
agency or governmental agency or body applicable to any of the
Targets; or
(iii) constitute an event that, with or
without notice, lapse of time or action by a third party, could
result in the creation of any lien, charge or encumbrance upon
any of the assets of any of the Targets or cause the maturity of
any liability, obligation or debt of any of the Targets to be
accelerated or increased.
Section 4.4. Consents and Approvals. Except in
connection with the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended ("HSR Act"), the Securities Act of 1933, as
amended ("Securities Act"), the Securities Exchange Act of 1934,
as amended ("Exchange Act"), the approval of the shareholders of
each of the Corporate Targets under the BCL and as set forth in
Section 4.4 of the Disclosure Statement, the execution, delivery
and performance of this Agreement by each of the Corporate
Targets and the Partners, and the consummation of the
transactions contemplated hereby, will not require any notice to,
action of, filing with, or
consent, authorization, order or approval from any court,
administrative agency or other governmental authority or agency,
or any individual, corporation, partnership, joint venture,
association, firm, organization, group or any other entity or
enterprise. Any and all notices, actions, filings, consents,
authorizations, orders and approvals necessary to consummate the
transactions contemplated by this Agreement shall have been made
and obtained on or prior to and shall be in effect as of the
Effective Time.
Section 4.5. Transactions with Certain Persons. Except
as set forth in Section 4.5 of the Disclosure Statement, during
the past two years no Target has, directly or indirectly, in the
ordinary course of business or otherwise, purchased, leased or
otherwise acquired any property or obtained any services from, or
sold, leased or otherwise disposed of any property or furnished
any services (except with respect to remuneration for services
rendered as a director, officer or employee of any of the Targets
in the ordinary course of business) to, any current or former
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<PAGE>
director, officer, employee or consultant of any of the Targets,
any person who is the beneficial owner (within the meaning of
Rule 13d-3 of the SEC under the Exchange Act) of 5% or more of
the outstanding Target Common Shares or any "affiliate" of any of
the Targets as defined in Rule 12b-2 under the Exchange Act
(individually an "Affiliate"). None of the Targets owes any
amount to, or has any contract with or commitment to, any
Affiliate (other than compensation for current services not yet
due and payable and reimbursement of expenses arising in the
ordinary course of business), and no such Affiliate owes any
amount to any of the Targets. No properties or assets owned by
any Affiliate or by any subsidiary or affiliate of any Affiliate
is used by any of the Targets in connection with their respective
businesses. No Affiliate is or during the past three years has
been the direct or indirect owner of any interest in any entity
that is a competitor or supplier or a potential competitor or
supplier of any of the Targets, nor does any Affiliate receive or
has any Affiliate received income from any source other than the
Targets that relates to the business of the Targets or should
properly accrue to the Targets.
Section 4.6. Books and Records. The minute books of each
of the Corporate Targets as previously made available to Acquiror
contain accurate records of all meetings of and corporate actions
or written consents by the respective Board of Directors, any
committee thereof, and the shareholders of each of the Corporate
Targets. There have been no material transactions involving the
business of any of the Corporate Targets that should have been
set
forth in the respective books of account, minute book, stock
record book or stock transfer ledger, but which have not been
accurately set forth therein.
Section 4.7. Financial Statements. True and complete
copies of the consolidated balance sheets of Nationwide as of
September 30, 1994 and 1993, and the related statements of
income,
other shareholders' equity and cash flows for the years then
ended, as audited by Ernst & Young LLP, Certified Public
Accountants, (collectively, the "Audited Financial Statements")
and the unaudited consolidated balance sheets of the Targets as
of December 31, 1994 and 1993, and the related statements of
income for the year and, in the case of Nationwide, the three
months then ended (the "Unaudited Financial Statements"), are set
forth in Section 4.7 of the Disclosure Statement. The Audited
Financial Statements and the Unaudited Financial Statements
(collectively the "Financial Statements") (including any related
schedules and/or notes) present
fairly in all material respects, the financial position of the
Targets at the dates thereof and the results of their operations
and their cash flows for the periods then ended, in conformity
with
generally accepted accounting principles.
Section 4.8. Absence of Undisclosed Liabilities. Except
as set forth or reserved against on the face of the balance
sheets of any of the Targets included in the Financial Statements
("Target Balance Sheets") or in Section 4.8 of the Disclosure
Statement, as of the date of the respective Target Balance
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Sheets, none of the Targets had any debts, liabilities or
obligations of any nature
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<PAGE>
whatsoever (known or unknown, matured or unmatured, absolute,
accrued, fixed, contingent or otherwise, including, without
limitation, any foreign or domestic tax liabilities or
deferred tax liabilities incurred in respect of or measured by
any Target's income, and products liability or any other
liability attributable to defects in products, materials or
workmanship not
covered by insurance) that are required by generally accepted
accounting principles to be so set forth or reserved against that
are not set forth or reserved against on the Target Balance
Sheets.
Section 4.9. Actions Pending. Section 4.9 of the
Disclosure Statement lists all actions, suits and proceedings
pending, or to the knowledge of the each of the Targets,
threatened
(whether or not purportedly brought on behalf of any of the
Targets), and all investigations, to the knowledge of each of the
Targets, pending or threatened, against each of the Targets, or
any
properties or rights of the Targets, by or before any court,
arbitrator or administrative or governmental body. None of such
actions, suits or proceedings, would reasonably be expected
to have a material adverse effect on such Target's condition
(financial or otherwise), properties, assets, liabilities,
operations or prospects, or which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the
transactions contemplated hereby.
Section 4.10. Outstanding Debt and Related Matters. None
of the Targets has outstanding any debt except as set forth in
Section 4.10 of the Disclosure Statement ("Existing Debt").
Except as set forth in Section 4.10 of the Disclosure Statement,
there exists no default under the provisions of any instrument
evidencing such Existing Debt or of any agreement relating
thereto. Section 4.10 of the Disclosure Statement lists all
contracts or commitments of any of the Targets for the guaranty
of any obligation of a third party (i.e., a party not a Target)
in excess of $10,000.
Section 4.11. Tax Matters.
(a) Each of the Targets has timely filed with the
Internal Revenue Service or other appropriate governmental
authority, or provided to its employees, shareholders,
consultants or other persons all tax returns, statements, forms
or reports ("Returns") required to be filed or provided by it on
or before the Closing Date. All federal, state, county, local,
foreign and other taxes, including without limitation income
(including gross, adjusted gross and supplemental net income
taxes), receipts, sales, use, franchise, value added, excise,
recording, filing, real and personal property, employees' income,
unemployment, social security taxes (including withholding
obligations for trust fund taxes), and all other taxes (together
with all interest and penalties imposed thereon) ("Taxes"), due
and payable by or on behalf of each of the Targets have been
timely paid in full or timely and fully withheld and paid, as the
case may be, except for Taxes being contested in good faith by
appropriate proceedings as described in Section 4.11 of the
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Disclosure Statement. None of the Targets has been delinquent in
the payment of any Tax assessment (whether proposed or final) or
governmental charge or deposit of any kind or character.
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(b) All accrued but unpaid Taxes accrued for tax
periods or portions thereof ending on or prior to December 31,
1994 are duly reflected as a liability or reserved against on the
respective Target's Balance Sheet and each Target has established
and maintained adequate reserves for Taxes for all prior tax
periods.
(c) None of the Targets (i) has any Tax deficiency
or claim outstanding, proposed or assessed against it and there
is no basis for any such deficiency or claim; (ii) has any audit,
action, suit, proceeding or investigation for Taxes pending or
threatened against it; and (iii) has received any notice that any
deficiency, claim, audit, action, suit, proceeding or
investigation may be made against or with respect to it. Except
as described in Section 4.11 of the Disclosure Statement, during
their existence none of the
Targets has received any notice of any material deficiency which
has not been satisfactorily resolved or other adjustment from the
Internal Revenue Service or any other Taxing Authority, and,
except as set forth in Section 4.11 of the Disclosure Statement,
none of the Returns has been audited by the Internal Revenue
Service.
(d) Except as described in Section 4.11 of the
Disclosure Statement, there is not now in force any extension of
time with respect to the date on which any Return was or is due
to be filed or provided by or on behalf of or with respect to any
of the Targets or any waiver or agreement by any of the Targets
for an extension of time for the assessment of any Tax. No
election has been made to treat any of the Targets as a
"collapsible corporation" under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"). None of the
Targets is subject to any penalty by reason of a violation of any
order, rule or regulation of, or a default with respect to any
Return required to be filed with any governmental authority.
Except as described in
Section 4.11 of the Disclosure Statement, none of the Targets has
any pending requests with any governmental authority for rulings
as to payment of any Tax.
(e) All leases have been properly reported as
either "capital" leases or "true" leases, as those terms are
commonly used for federal income tax purposes. None of the
property owned or used by any of the Targets is subject to a tax
benefit transfer lease executed in accordance with Section
168(f)(8) of the Internal Revenue Code of 1954, as amended by the
Economic Recovery Tax Act of 1981.
(f) There are no liens for Taxes upon any of the
Targets' assets, except liens for current Taxes not yet due.
Except as described in Section 4.11 of the Disclosure Statement,
none of the Targets is currently under any contractual obligation
to indemnify any other person with respect to Taxes and none of
the Targets is a party to any agreement providing for payments
with respect to Taxes. None of the Targets will be required, as
a result of a change in method of accounting, to include any
adjustment under Section 481(c) of the Code in any period ending
after the Closing Date. Except as set forth in Section 4.11 of
the Disclosure Statement, no agreement exists that may cause any
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payment by any of the Targets to be nondeductible in full or in
part under Section 280G of the Code. Since January 1, 1990, none
of the Targets has been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code but
Nationwide is a common parent of such an affiliated group.
Section 4.12. Absence of Changes or Events. Except as
set forth in Section 4.12 of the Disclosure Statement, since the
most recent date of each Target Balance Sheet delivered to
Acquiror (the "Bring-down Date") the business of each of the
Targets has been conducted only in the ordinary course and
consistent with historical practices and, since the Bring-down
Date, none of the Targets has:
(a) Declared, set aside or made any payment of
dividends or other distributions to its shareholders upon or in
respect of any the Target Common Shares or purchased, retired or
redeemed any Target Common Shares or other securities issued by
it;
(b) Mortgaged, pledged or subjected to lien,
mortgage, pledge, claim, security interest, charge, encumbrance
or restriction any material portion of its tangible or intangible
property, business or assets;
(c) Sold, transferred, leased to others or
otherwise disposed of any material portion of its tangible or
intangible assets or properties, except for inventory sold in the
ordinary course of business;
(d) Encountered any actual or threatened labor
union organizing activity or collective bargaining agreement
negotiation, had any actual or threatened employee strikes, work
stoppages, slow-downs or lock-outs, or had any material change in
its relationship with its employees, agents, consultants,
salespersons, distributors or independent contractors;
(e) Transferred or granted any concessions,
leases, licenses, agreements or other rights with respect to or
under, or entered into any settlement regarding the breach or
infringement of, any United States or foreign license, patent,
copyright, trademark, service mark, trade name, invention or
similar rights, or modified any existing rights with respect
thereto;
(f) Made any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration
payable, or paid or agreed to pay, conditionally or otherwise,
any bonus, extra compensation, pension, severance or vacation
pay, to any
director, officer, employee, consultant, sales representative,
distributor or independent contractor of such Targets other than
normal annual increases consistent with past practice, entered
into any employment contract with any officer or salaried
employee,
instituted any employee welfare, bonus, stock option,
profit-sharing, retirement or similar plan or arrangement, or
made any loan or advance to any third party except those made
pursuant to normal trade terms extended to customers;
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(g) Issued or sold any shares of its capital
stock, partnership interests, bonds, notes or other securities,
or issued, granted or sold any options, rights or warrants with
respect thereto, or acquired any capital stock or other
securities of any corporation or any interest in any business
enterprise, or otherwise made any loan or advance to or
investment in any third party;
(h) Changed its accounting methods or practices,
including without limitation changes in depreciation or
amortization policies or rates and in the method of accounting
for inventory;
(i) Suffered any change, event or condition that,
in any case or in the aggregate, has had or may have a material
adverse effect on the Target's condition (financial or
otherwise), properties, assets, liabilities, operations or
prospects;
(j) Entered into any transaction, contract or
commitment, other than in the ordinary course of business; or
(k) Entered into any agreement or contract, made
any commitment or otherwise obligated itself to take any of the
types of action described in Subsections (a) through (j) of this
Section 4.12.
Section 4.13. Compliance with Laws; No Default. Except
as set forth in Section 4.13 of the Disclosure Statement, none of
the Targets is in default of or has violated (nor is there any
event or condition which, with notice or lapse of time or both,
would constitute a default or violation of) in any respect (i)
any contract, agreement, lease, consent order or other written
commitment or instrument to which it is a party or by which the
assets or business of any of the Targets are bound, or (ii) any
law, rule, regulation, ordinance, writ, injunction, development
order, permit, resolution, approval, order, decree, policy or
guideline of any court or any foreign, federal, state, local or
other governmental department, commission, board, bureau,
agency or instrumentality (including without limitation
applicable laws, rules and regulations relating to environmental
protection, antitrust, civil rights, health and occupational
health and
safety).
Section 4.14. Property.
(a) Section 4.14 of the Disclosure Statement
contains (i) the street address and legal description of each
parcel of all real property owned or leased from third parties
by any of the Targets, including all buildings, structures and
improvements located thereon ("Real Property") and (ii) a brief
description of the use to which each parcel of the Real Property
is being employed and/or the use for which it is currently
intended.
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(b) Each of the Targets owns or leases from third
parties all tools, furniture, machinery, computer hardware and
software, supplies, vehicles, equipment and other items of
tangible personal property that are required to conduct its
business ("Personal Property").
(c) Except as set forth in Section 4.14 of the
Disclosure Certificate, the Real Property and each item of the
Personal Property conforms in all material respects to
applicable federal, state, local and foreign laws, regulations
and ordinances, including without limitation, in the case of the
Real Property, those related to zoning, use or construction, and
the Real Property is zoned for the purposes for which it
presently is used. The Real Property and each item of the
Personal Property is in good operating condition and repair,
subject to normal wear and tear, and is suitable for its intended
use by the Target owning or leasing such Real Property and
Personal Property.
(d) With respect to each parcel of Real Property
and each item of Personal Property that is leased from third
parties ("Leased Property"), the respective Target is the owner
and holder of the entire interest in the leasehold estates
purported to be granted by the leases or agreements, each of
which is in full force and effect and constitutes a legal, valid
and binding obligation of the respective parties thereto,
enforceable in accordance with its terms. No consent of any
lessor of the Leased Property is required
in connection with the transactions contemplated by this
Agreement, except as set forth in Schedule 4.14 of the Disclosure
Certificate.
Section 4.15. Contracts.
(a) Section 4.15(a) of the Disclosure Statement
lists all contracts, leases, commitments, purchase orders, work
orders, agreements, consent orders and other arrangements,
including all amendments thereto, to which each of the Targets is
a party or is subject or by which each of the Targets, its
assets, or its business is bound, that fall into one or more of
the following categories ("Contracts"):
(i) All loans, lines of credit, security
agreements, guaranties or other payment obligations;
(ii) All employment agreements, contracts,
policies and commitments with or between any Target and any of
its employees, directors or officers, individually or as one or
more groups, including without limitation those relating to
severance;
(iii) All agreements of guaranty or
indemnification;
(iv) All agreements, contracts and
commitments containing any covenant limiting the right of any
Target to engage in any line of business or compete with any
person;
(v) Each agreement, contract and commitment
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relating to capital expenditures in excess of One Hundred
Thousand Dollars ($100,000.00), or Two Hundred and Fifty Thousand
Dollars ($250,000.00) in the aggregate;
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(vi) All agreements, contracts and
commitments entered into that individually involve the payment of
One Hundred Thousand Dollars ($100,000) or more over their
remaining terms (including any period of extension or renewal)
and are not cancelable within sixty (60) days or less notice;
(vii) All agreements, contracts and
commitments relating to the grant or receipt of any license or
royalty;
(viii) All agreements, contracts and
commitments that require consent by any other person in
connection with the consummation of the transactions contemplated
by this Agreement and the Mergers either to prevent a breach or
to continue the effectiveness thereof; and
(ix) All agreements with any Affiliate of
any Target.
(b) All of the Contracts are valid and binding
obligations of the respective parties thereto, enforceable in
accordance with their respective terms, are in full force and
effect, and the Surviving Corporation will be entitled to the
full benefits thereof. Within 30 days of the date of this
Agreement, the Targets will deliver to Acquiror true and complete
copies of all of the Contracts. With respect to those Contracts
which are substantially the same from facility to facility of
the Targets, the Targets have provided to Acquiror or its counsel
an example of a form of such Contracts, and such forms are
substantially the same from facility to facility.
Section 4.16. Licenses and Permits.
(a) Section 4.16 of the Disclosure Statement
contains a true and complete list of certificates of need,
franchises, licenses, permits, certificates, approvals,
resolutions, development orders, consents and other
authorizations necessary to own, lease or operate each of the
Target's assets or to conduct its business in compliance with
applicable law ("Permits") and, with respect to each
Permit, the name of the licensor or grantor, a description of the
subject matter, the termination date, and the terms of any
renewal options. Each of the Targets has delivered to Acquiror
true and complete copies of all of its Permits.
(b) Each of the Targets lawfully obtained and
currently possesses the respective Permits and has fulfilled and
performed its obligations under each of the Permits. No event
has occurred and no condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would
constitute a breach or default under any of the Permits or would
allow revocation or termination of any of the Permits, or which
might adversely affect the rights of any Target under any of the
Permits. No notice of cancellation, of default, or of any
dispute concerning any of the Permits, or of any event, condition
or state of facts described in the preceding sentence, has been
received by,
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or is known to, any Target or their respective officers,
directors or employees. Except as set forth in Section 4.16 of
the Disclosure Statement, each of Permits is valid, subsisting
and in full force and effect, and will continue in full force and
effect after the Merger, in each case without (i) the occurrence
of any breach, default or forfeiture of rights thereunder, or
(ii) the consent, approval or act of, or the making of any filing
with, any governmental body, regulatory commission or other
person.
(c) The Permits include all applicable
environmental, land use and growth management obligations
required by any federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or
instrumentality.
Section 4.17. Proprietary Information. Section 4.17 of
the Disclosure Statement contains a true and complete list and
brief description of all Intellectual Property, directly or
indirectly related to the products, services or operations of
each of the Targets or necessary to use the assets or conduct the
business of the Targets as presently used or conducted. Each of
the Targets owns or possesses the licenses or other rights to use
their respective names and all the Intellectual Property
identified in Section 4.17 of the Disclosure Statement. Except
as set forth in Section 4.17 of the Disclosure Statement, to its
knowledge, no Target is infringing upon or otherwise acting
adversely to any Intellectual Property, the rights to which are
owned by any
other person. There is no claim or action by any person pending
or threatened, with respect thereto. For the purposes of this
Agreement, "Intellectual Property" means the names "Nationwide
Care" (and any and all variations thereof) and all the corporate
names, trade names, trademarks, trademark applications, service
marks, service mark applications, theme concepts, copyrights,
copyright applications, patents, patent applications, inventions,
trade secrets, shop rights, know-how, business plans and
strategies, proprietary processes and formulae, data bases,
telephone numbers and all other proprietary technical
information, whether patentable or unpatentable, directly or
indirectly related to the products, services or operations of the
business
or necessary to conduct the business as it is now being
conducted.
Section 4.18. Title to Assets and Related Matters. Each
of the Targets has good, valid, marketable and insurable title to
all of the assets owned by it free and clear of all mortgages,
liens, pledges, charges, claims, security interests,
encumbrances, easements, encroachments, limitations,
restrictions, rights of third parties or other interests of any
kind or character, except
as set forth in Section 4.18 of the Disclosure Statement and
except for liens for Taxes not yet due and payable.
Section 4.19. Environmental Matters.
(a) Except as set forth in Section 4.19 of the
Disclosure Statement, all of the Real Property and all operations
conducted thereon, including without limitation the respective
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Target's use of its assets and the Real Property, are currently
in compliance with all applicable federal, state, local and
foreign
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<PAGE>
environmental, land use and growth management laws, regulations,
rules, ordinances, permits, development orders, approvals,
resolutions and orders, including all consent orders.
(b) Except as set forth in Section 4.19 of the
Disclosure Statement, with respect to the Real Property, there
exists no state of affairs and to each Target's knowledge there
has occurred no event that currently requires, or is currently
expected
to require in the future, reporting or disclosure by the
Surviving Corporation to any federal, state, local or foreign
agency concerned with environmental protection and management or
land use control or growth management.
(c) There are no pending or threatened claims by
any private parties or governmental agencies, and there are no
pending or threatened judicial or administrative actions,
alleging violations of any federal, state, local or foreign
environmental, land use or growth management laws, regulations,
rules, ordinances, permits, development orders, approvals,
resolutions or orders on or connected with the Real Property, the
assets or the operations conducted thereon or at any time prior
to the Closing Date.
(d) Section 4.19 of the Disclosure Statement
contains a list and brief description of all written and oral
communications between each of the Targets and any federal, state
or local governmental authority with respect to any removal,
remediation or clean-up required to be undertaken, the results of
any inspection or compliance review, potential liability arising
under or potential violations of the Clean Air Act, the Clean
Water Act, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act and the Comprehensive Environmental
Response, Compensation and Liability Act and equivalent state and
local laws, regulations, rules, ordinances and all court and
administrative orders issued pursuant thereto, since January 1,
1991.
Section 4.20. Labor Relations; Employees.
(a) The Targets collectively employ approximately
4,500 employees. No Target is a party to any collective
bargaining agreement with respect to its work force or any
portion thereof. Except as set forth in Section 4.20 of the
Disclosure Statement:
(i) each Target has paid in full to all
its employees all due and owing wages, salaries, commissions,
bonuses, fringe benefit payments and all other direct and
indirect compensation of any kind for all services performed by
them and each of them to the date hereof;
(ii) each Target is in compliance with
(1) all federal, state, local and foreign laws, regulations,
rules, ordinances and court and administrative orders dealing
with employment and employment practices of any kind, (2) all of
the terms and conditions of employment of any kind with respect
to its business, and (3) all wages and hours requirements and
regulations;
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(iii) there is no unfair labor practice,
safety, health, discrimination or wage claim, charge, complaint
suit, arbitration or proceeding pending or to each Target's
knowledge threatened against or involving such Target before the
National Labor Relations Board, Occupational Safety and Health
Administration, Equal Employment Opportunity Commission,
Department of Labor or any other federal, state, local or foreign
agency;
(iv) there is no labor dispute, strike,
work stoppage, interference with production or slowdown in
progress or threatened against or involving such Target;
(v) there is no question of
representation under the National Labor Relations Act, as
amended, or any similar state statute, pending with respect to
the employees of any Target;
(vi) there is no grievance pending or
threatened which might have an adverse effect on any Target or on
the conduct of its business; and
(vii) there is no collective bargaining
agreement currently being negotiated or subject to negotiation or
renegotiation by any Target.
Section 4.21. Employee Benefit Plans.
(a) Except as set forth in Section 4.21 of the
Disclosure Statement, no Target maintains any (i) employee
welfare benefit plan (as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), or
(ii) employee pension benefit plan (as defined in Section 3.(2)
of ERISA), (a) which was maintained or administered by the Target
immediately prior to Closing; (b) to which the Target contributed
to, or was legally obligated to contribute to immediately prior
to Closing, or (c) under which the Target had any liability
immediately prior to Closing, with respect to its current or
former employees or independent contractors. Except as set forth
in Section 4.21 of the Disclosure Statement, none of the Targets
or any ERISA Affiliate is now or has been in the past obligated
to contribute to any multiemployer plan (as defined in ERISA
Section 3(37) or to any plan subject to Title IV of ERISA. For
purposes of this Agreement, "ERISA Affiliate" means any member
(other than a Target) of a group of business entities including a
Target, which are treated as a single employer under Section 414
of the Code.
(b) The only plans or arrangements maintained by any of
the Targets for the benefit of current or former employees
(including, without limitation, the plans referred to in
paragraph (a)), are set forth in Section 4.21 of the Disclosure
Statement
(collectively, the "Benefit Plans"). The Targets have delivered
or prior to the Closing shall deliver to Acquiror true and
correct copies of each of the Benefit Plans. Each of the Benefit
Plans has been established and maintained in all material
respects in accordance with its terms and compliance with all
applicable
<PAGE>
laws, including, but not limited to, ERISA and the Code. As of
the
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<PAGE>
Closing, all contributions required under applicable law or the
terms of any Benefit Plan or other agreement relating to a
Benefit Plan to be paid by any Target have been completely and
timely made to such Benefit Plan when due, and each Target has
established adequate reserves on its books to meet liabilities
for contributions accrued but that have not been made because
they are not yet due and payable.
Section 4.22. Insurance.
(a) Each of the Targets is insured by financially
sound and reputable insurers with respect to its properties and
the conduct of its businesses.
(b) Section 4.22 of the Disclosure Statement
contains (i) a true and complete list of all policies of
liability, theft, fidelity, life, fire, product liability,
workers'
compensation, health and other forms of insurance held by the
Targets and specifies the insurer, amount of coverage, type of
insurance and policy number; and (ii) for the past three (3)
fiscal years, an accurate description of any prior claims, any
cancellation or significant increase in premiums and any pending
claims under those or predecessor policies.
(c) The policies listed in Section 4.22 of the
Disclosure Statement are outstanding, in full force and effect
and all premiums billed with respect to those policies have been
paid. The insurance coverage provided by the policies listed in
Section 4.22 of the Disclosure Statement satisfies all
contractual and statutory requirements applicable to each Target,
its assets or its business and is in such amounts and insures
against such liabilities and hazards as is consistent with
past practice and as is customarily maintained by other companies
operating in similar businesses. No Target has, during the past
five fiscal years, been denied or had revoked or rescinded by a
carrier any policy of insurance.
Section 4.23. Life Care Contracts. No Target is a party
to any contract pursuant to which such Target has agreed to care
for any individual for such individual's life.
Section 4.24. Survey Reports. A true and complete copy
of the most recent survey reports and any waivers of
deficiencies, plans of correction and other investigation reports
issued
with respect to any facility of any Target has been delivered to
Acquiror. Each facility is in compliance with all conditions and
standards of licensing and participation in the Medicare and
Medicaid programs.
Section EMPO. Payment Programs. Each Target is now, and
on the Closing Date will be, certified for participation in, and
party to valid provider agreements for payment by, the federal
Medicare and Medicaid programs (the "Programs"); provided,
however, that Nationwide's Markle Health Care facility is not
certified for participation in the Medicare program. The Targets
have filed all cost reports in connection with their businesses
and operations that are required to be filed with any federal or
state
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governmental or regulatory authority (including pursuant to
Titles XVIII and XIX of the Social Security Act). A true and
complete copy of all such cost reports has been provided to
Acquiror. Except as set forth in Section 4.25 of the Disclosure
Statement, the Targets have not received any notice of pending or
threatened
investigations by any Program which poses a risk to the Targets'
participation in the Program or may result in any adjustments to
reimbursements that have been paid, excluding survey report
deficiencies that have been corrected. All billing practices by
the Target to all third payors, including the federal Medicare
program, state Medicaid programs and private insurance
companies, have been true, fair and correct and in compliance
with all applicable laws, regulations and policies of all such
third payors, and the Targets have not billed for or received
any payment or reimbursement in excess of amounts allowed by law,
other than insignificant amounts subject to adjustment pursuant
to periodic audits of cost reports submitted by the Target.
Neither any Target, nor any Affiliate thereof, nor any director,
officer or employee thereof, is a party to any contract, lease,
agreement or arrangement, including any joint venture or
consulting agreement with any physician, hospital, nursing
facility, home health agency or other person who is in a position
to make or influence referrals to or otherwise generate business
for any Target to provide services, lease space, lease equipment
or engage in any other venture or activity, to the extent
prohibited by law or regulations.
Section 4.26. Gratuitous Payments. Neither any Target,
nor any director, officer or employee, nor any agent acting on
behalf of or for the benefit of any thereof, has directly or
indirectly (i) offered or paid any remuneration, in cash or in
kind, to, or made any financial arrangements with, any past or
present customers, past or present suppliers, contractors or
third
party payors of any Target in order to obtain business or
payments from such persons, other than entertainment activities
in the ordinary and lawful course of business; (ii) given or
agreed
to give, or has knowledge that there has been made or that there
is any agreement to make, any gift or gratuitous payment of any
kind, nature or description (whether in money, property or
services) to any customer or potential customer, supplier or
potential supplier, contractors, third party payor or any other
person other than in connection with promotional or entertainment
activities in the ordinary and lawful course of business; (iii)
made or agreed to make, or is aware that there has been made or
that there is any agreement to make, any contribution, payment or
gift of funds or property to, or for the private use of, any
governmental official, employee or agent if either the
contribution, payment or gift or the purpose of such
contribution, payment or gift is or was illegal under the laws of
the United States or under the laws of any state thereof or any
other jurisdiction (foreign or domestic) under which such
payment, contribution or gift was made; (iv) established or
maintained any unrecorded fund or asset for any purpose or made
any false or artificial entries on any of its books or records
for any reason; or (v) made, or agreed to make, or has knowledge
that there has been made or that the intention or understanding
that any part of such payment would be used for any purpose other
<PAGE>
than that
described in the documents supporting such payment.
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<PAGE>
Section 4.27. Brokers' or Finders' Fees. No agent,
broker, investment banker or other person or firm acting on
behalf of the Targets or Partners or any of their directors,
executive officers, or partners or under the authority of any of
them, is or will be entitled to any broker's or finder's fee or
any other commission or similar fee, directly or indirectly, from
any of the parties hereto in connection with any of the
transactions contemplated hereby, except for those fees or
commissions set forth and described in Section 4.27 of the
Disclosure Statement which the Targets shall have paid in full
prior to or at the Closing, and evidence of payment for which
shall have been delivered to Acquiror at the Closing.
Section 4.28. Disclosure
(a) No representation or warranty by any Corporate
Target or Partner contained in this Agreement and no statement
made by any Corporate Target or Partner contained in the
Disclosure Statement or any certificate or other instrument
delivered or to be delivered pursuant to this Agreement contains
or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading. All
information in the Disclosure Statement or any Schedule,
Exhibit or any contract delivered on behalf of the Corporate
Targets and the Partners pursuant hereto or in connection with
the transactions contemplated hereby shall be deemed to have been
relied upon by Acquiror and AC and constitute representations and
warranties by the Corporate Targets and the Partners herein.
(b) None of the information supplied or to be
supplied by the Targets for inclusion in the registration
statement on Form S-4 or other appropriate registration form to
be filed with the SEC by Acquiror in connection with the offer
and issuance of the Acquiror Common Shares in or as a result of
the Mergers (the "Registration Statement"), will at the time the
Registration Statement becomes effective under the Securities Act
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading.
Section 4.29. Tax Representations. The representations
and warranties by the shareholders of the Corporate Targets
required under Section 6.15 shall be true, correct and complete
in all respects as of the Effective Time.
Section 4.30. Representations and Warranties as of Date
Hereof; No Other Representations and Warranties. The
representations and warranties contained in the foregoing
Sections 4.1 through 4.29 inclusive are made as of the date
hereof, except as otherwise expressly indicated therein. None of
the Corporate Targets or Partners makes, and no party shall be
entitled to rely upon, any representation or warranty as to any
fact or matter other than as expressly set forth herein.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
AC
As a material inducement to the Corporate Targets and the
Partners to enter into this Agreement and to consummate the
transactions contemplated hereby, Acquiror and AC represent
and warrant to the Corporate Targets and the Partners that:
Section 5.1. Organization; Power. Acquiror is a
corporation duly organized and validly existing under the laws of
the State of Nevada, for which all required annual reports have
been filed with the Nevada Secretary of State and for which no
Articles of Dissolution appear as having been filed with the
Nevada Secretary of State. AC is a corporation duly organized
and
validly existing under the laws of the State of Delaware. Each
of Acquiror and AC has all the requisite corporate power and
authority to own, lease and operate its business as it is now
being
conducted and to enter into this Agreement, to consummate the
transactions contemplated hereby, and to comply with and fulfill
the terms and conditions of this Agreement.
Section 5.2. Capital Stock. The authorized shares of
Acquiror and AC are as set forth in the Preliminary Statement to
this Agreement. All issued and outstanding Acquiror Common
Shares and common stock of AC are validly issued and outstanding,
fully paid and nonassessable.
Section 5.3. Authority; No Violation; Etc.
(a) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate
action on the part of Acquiror and AC. This Agreement is a valid
and binding obligation of Acquiror and AC, enforceable against
Acquiror and AC in accordance with its terms and conditions,
except as the enforcement hereof and thereof may be affected by
bankruptcy, insolvency, moratorium or other laws relating to or
limiting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered
in a proceeding at law or in equity.
(b) Except as set forth in Section 5.3 of the
statement of disclosure delivered by the Acquiror to the
Corporate Targets and the Partners in connection with the
execution of this Agreement (the "Acquiror's Disclosure
Statement"), neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby, nor compliance by Acquiror
and AC with any of the provisions hereof, will:
(i) conflict with, violate, result in a
breach of, constitute a default (or an event that, with notice or
lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or
<PAGE>
acceleration under any provision of the Articles or Certificate
of Incorporation
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<PAGE>
or Bylaws of Acquiror or AC, or any of the terms, conditions or
provisions of any note, lien, bond, mortgage, indenture, license,
lease, contract, commitment, agreement, understanding,
arrangement, restriction or other instrument or obligation to
which Acquiror or AC is a party or by which Acquiror or AC may be
bound;
(ii) violate any law, rule or regulation
of any government or governmental agency or body, or any
judgment, order, writ, injunction or decree of any court,
administrative agency or governmental agency or body applicable
to Acquiror or AC; or
(iii) constitute an event that, with or
without notice, lapse of time or action by a third party, could
result in the creation of any lien, charge or encumbrance upon
any of the assets of Acquiror or AC or cause the maturity of any
liability, obligation or debt of Acquiror or AC to be accelerated
or increased.
Section 5.4. Consents and Approvals. Except in
connection with the HSR Act, the Securities Act and the Exchange
Act and the approval of this Agreement by Acquiror as the
shareholder of AC and as set forth in Section 5.4 of the
Acquiror's Disclosure Statement, the execution, delivery and
performance of this Agreement by Acquiror and AC and the
consummation of the transactions contemplated hereby will not
require any notice to, action of,
filing with or consent, authorization, order or approval from any
court, administrative agency or other governmental authority or
agency, or any individual, corporation, partnership, joint
venture, association, firm, organization, group or any other
entity or enterprise.
Section 5.5. Reports. Acquiror has filed all required
forms, reports and documents with the SEC required to be filed by
it pursuant to the federal securities laws and the rules and
regulations of the SEC thereunder (the "Acquiror SEC Reports"),
each of which complied, at the time such form, report or document
was filed, in all material respects with the then applicable
requirements of the Securities Act and the Exchange Act, and the
rules and regulations thereunder. None of the Acquiror SEC
Reports, including without limitation any financial statements or
schedules included therein, at the time filed, contained any
untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they
were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of Acquiror
included in the Acquiror SEC Reports (the "Acquiror Financial
Statements") were prepared from Acquiror's books and records in
accordance with generally accepted accounting principles applied
on a consistent basis (except as may be indicated therein or in
the notes thereto) and fairly present the financial position of
Acquiror and its consolidated subsidiaries as at the dates
thereof and the results of their operations and their cash flows
for the
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periods then ended, subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end adjustments
and
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<PAGE>
any other adjustments described therein. Since the date of
the last audited balance sheet in the Acquiror Financial
Statements (the "Acquiror Bring Down Date"), neither Acquiror nor
any of its subsidiaries has incurred any liabilities or
obligations,
whether absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise and whether due or to become due,
except (i) as and to the extent set forth on the audited balance
sheet of
the Acquiror and its subsidiaries as at the Acquiror Bring Down
Date (including the notes thereto), (ii) as incurred in
connection with the transactions contemplated, or as provided, by
this Agreement, (iii) as incurred after the Acquiror Bring Down
Date in the ordinary course of business and consistent with past
practices, (iv) as described in the Acquiror SEC Reports or (v)
as would not, individually or in the aggregate, have a material
adverse effect upon the business, assets or condition, financial
or otherwise, of Acquiror and its subsidiaries considered as a
whole. Acquiror has delivered to Nationwide all Acquiror SEC
Reports filed with the SEC since January 1, 1993.
Section 5.6. Due Authorization of Shares. The Acquiror
Common Shares to be issued at the Closing will, when issued, be
duly authorized Common Shares of Acquiror and, when delivered,
will be duly and validly issued, fully paid and nonassessable and
qualified for trading on the NYSE subject to notice of issuance.
Section 5.7. Compliance with Laws; No Default or
Litigation. Except as set forth in Section 5.7 of the Acquiror's
Disclosure Statement, neither Acquiror nor any of its
subsidiaries
is in default of or has violated (nor is there any event or
condition which, with notice or lapse of time or both, would
constitute a default or violation of) in any respect, (i) any
contract, agreement, lease, consent, order or other written
commitment or instrument to which it is a party or by which the
assets or business of any of the Acquiror or its subsidiaries are
bound, or (ii) any law, rule, regulation, ordinance, writ,
injunction, development order, permit, resolution, approval,
order, decree, policy or guideline of any court or any foreign,
federal, state, local or other governmental department,
commission, board, bureau, agency or instrumentality (including
without limitation applicable laws, rules and regulations
relating to environmental protection, antitrust, civil rights,
health and occupational health and safety) except where such
default or violation would not, individually or in the aggregate
with all other defaults and/or violations, have a material
adverse effect on the business, assets or condition, financial or
otherwise, of Acquiror and its subsidiaries considered as a
whole. Except as disclosed in the Acquiror Financial Statements
or as set forth in Section 5.7 of the Acquiror's Disclosure
Statement: neither Acquiror nor any of its subsidiaries is
presently engaged in or threatened with or aware
of any situation that could subject Acquiror or any of its
subsidiaries (together, the "Acquiring Companies") to any
litigation (including appeals of lower court decisions),
arbitration, claim or other legal proceedings or governmental or
any other investigation relating to the affairs of any
of the Acquiring Companies or any of their properties or assets
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that (a) questions the validity or enforceability of this
Agreement
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or that could prevent, hinder or delay consummation of the
transactions contemplated by this Agreement or (b) would
reasonably be expected to have a material adverse effect on the
business, assets or condition, financial or otherwise, of
Acquiror
and its subsidiaries considered as a whole.
Section 5.8. Tax Representations. The representations
and warranties by Acquiror and AC required under Section 7.7
shall be true, correct and complete in all respects as of the
Effective Time.
Section 5.9. Brokers' or Finders' Fees. No agent,
broker, investment banker or other person or firm acting on
behalf of Acquiror or any of its directors or executive officers,
or under
the authority of any of them is or will be entitled to any
broker's or finder's fee or any other commission or similar fee,
directly or indirectly, from Acquiror in connection with any of
the transactions contemplated hereby.
Section 5.10. Representations and Warranties as of Date
Hereof. The representations and warranties contained in the
foregoing Sections 5.1 through 5.9 inclusive are made as of the
date hereof, except as otherwise expressly indicated therein.
Neither the Acquiror nor AC makes, and no party shall be entitled
to rely upon, any representation or warranty as to any fact
or matter other than as expressly set forth herein.
ARTICLE VI
CERTAIN PRE-CLOSING COVENANTS OF THE TARGETS
Each of the Corporate Targets and the Partners covenants
and agrees that between the date hereof and the Closing:
Section 6.1. Maintenance of Corporate Status. Each of
the Corporate Targets shall be maintained at all times as a
corporation validly existing and in good standing under the laws
of the state of its incorporation and in good standing as a
foreign corporation in all states in which it is currently
qualified to do business. No amendment shall be made to the
Articles of Incorporation or Bylaws of any of the Corporate
Targets without the prior written consent of Acquiror.
Section 6.2. No Change in Capitalization. No change will
be made in the number of issued and outstanding Target Common
Shares, other than as a result of the exercise of outstanding
warrants or options to purchase Target Common Shares in
accordance with the terms of such warrants or options. No
option, warrant or any other right to purchase or to convert any
obligation or security into Target Common Shares will be sold,
issued or granted by the Targets.
Section 6.3. Shareholders Meetings; Proxy Material. Each
of the Corporate Targets shall cause a meeting of its
shareholders to be duly called and held as soon as practicable
following the effectiveness of the Registration Statement for the
purpose of
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voting on the approval and adoption of this Agreement and the
Mergers. The Board of Directors of each of the Corporate Targets
shall recommend approval and adoption of this Agreement and the
Mergers by the respective Corporate Target's shareholders. In
connection with such meeting, each of the Targets:
(a) will cooperate with Acquiror in the prompt
preparation of the Registration Statement and use its best
efforts to have the Registration Statement declared effective by
the SEC, and will thereafter mail to its shareholders as promptly
as practicable the Proxy Statement and all other solicitation
materials for use in connection with the meeting of shareholders;
(b) will use its best efforts to obtain the
necessary approvals by its shareholders of this Agreement and the
Merger, including without limitation the solicitation of proxies
from the respective Target's shareholders voting in favor of the
approval; and
(c) will otherwise comply with all legal
requirements applicable to such meeting.
Section 6.4. Operation of the Business. Each of the
Targets shall operate its business diligently and only in the
regular and ordinary course and manner as it has previously been
operated. Without limiting the generality of the foregoing, each
of the Targets shall use all reasonable efforts to (i) preserve
its present business organization intact and conserve its
goodwill; (ii) keep available and maintain the services of all
officers, employees, agents and representatives on the same or
substantially the same terms; (iii) continue and preserve good
relationships with suppliers, customers, lenders and others
having business dealings or relationships with the Targets; (iv)
maintain in full force and effect all Permits required for the
operation of the business as presently conducted; and (v)
maintain and keep in good order,
consistent with past practice, all of the Targets's tangible
assets, ordinary wear and tear excepted. None of the Targets
shall, without the prior written consent of Acquiror: (i) incur
any
indebtedness to any third party, except trade payables incurred
in the ordinary course of business consistent with past
practices; (ii) declare, set aside or pay any dividends or other
distributions
or payments on or in respect of its outstanding shares, or
purchase, redeem or otherwise acquire, or agree to purchase,
redeem or otherwise acquire any Target Common Shares; (iii)
knowingly
do any act or omit any act or permit any omission to act within
its control, which will cause a breach or default in any of the
Targets' contracts, commitments or obligations; (iv) except in
the ordinary course of business consistent with past practices,
change or increase the rate of compensation paid by any of the
Targets to any of their directors, officers, employees or agents,
including without limitation the payment of bonuses and
arrangements for severance pay, or (v) enter into any agreement
to do any of the foregoing.
Section 6.5. Other Offers. From the date of this
<PAGE>
Agreement until it is terminated in accordance with Article X,
the Targets shall not and shall cause its officers, directors,
partners,
<PAGE>
<PAGE>
employees and other agents not to, directly or indirectly, take
any action to solicit, initiate or encourage the making of any
Acquisition Proposal (as hereinafter defined). Until this
Agreement shall be terminated in accordance with Article X, the
Targets will not enter into any agreement to merge or consolidate
with, issue Target Common Shares to, exchange the Target Common
Shares with, or sell a substantial portion of the Targets' assets
to, any person or entity. The Targets will promptly notify
Acquiror after receipt of any Acquisition Proposal or any
request for nonpublic information relating to the Targets in
connection with an Acquisition Proposal or for access to the
personnel, properties, books or records of any of the Targets by
any person or entity that informs the Board of Directors or
Partners of any of the Targets that it is considering making, or
has made, an Acquisition Proposal. The term "Acquisition
Proposal" as used herein means any offer or proposal for, or any
indication of interest in, a merger or other business combination
involving any of the Targets or the acquisition of a majority of
the equity interest in, or a majority of the assets of, any of
the Targets, other than the transactions contemplated by this
Agreement.
Section 6.6. Compliance with the Securities Act;
Affiliates. Each of the Targets shall use its best efforts to
cause each person who is an "affiliate", as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act, of
such Target to deliver to the Target at or prior to the Effective
Time a written agreement to the effect that such person will not
offer to sell, sell or otherwise dispose of any Acquiror Common
Shares issued in the Mergers, except, in each case, pursuant to
an effective registration statement or in compliance with Rule
145, as
amended from time to time, or in a transaction that, in the
opinion of legal counsel satisfactory to Acquiror, is exempt from
the registration requirements of the Securities Act, such
agreement
to be in substantially the form attached hereto as Exhibit
6.6(a). Each of the Targets shall use its best efforts to cause
each such person not to take any action that would impair
Acquiror's
ability to account for the Mergers as poolings of interests.
Accordingly, each of the Targets shall use its best efforts to
cause each such person to deliver prior to the Effective Time a
written agreement in the form attached as Exhibit 6.6(b) to this
Agreement, to the effect that such person shall not sell or
otherwise reduce his or her risk relative to any Acquiror Common
Shares received in connection with the Mergers (within the
meaning of the SEC's Codification of Financial Reporting Policies
Section 201.01) until Acquiror has published financial results
(including combined sales and net income) covering at least
thirty days of post-Merger operations, except as permitted by
Staff Accounting Bulletin No. 76 issued by the SEC.
Section 6.7. Taxes. Each of the Targets shall timely
file all Tax reports and Returns required to be filed with any
governmental authority wherein the nature of its activities is
such
as to require the filing thereof, and shall promptly pay, when
due, all federal, state, local and foreign taxes, assessments,
<PAGE>
<PAGE>
<PAGE>
governmental charges, fees, interest and penalties lawfully
levied or assessed upon it or its properties.
Section 6.8. Access; Review. Each of the Targets shall
provide to Acquiror, its attorneys, accountants, appraisers and
other authorized representatives or retained experts access
upon reasonable notice to all the premises, books, records,
personnel and income tax returns of or relating to such Target
during normal business hours and shall furnish to such persons
such
financial and operating data and other information as Acquiror or
such persons may from time to time reasonably request. In
addition, each of the Targets shall authorize its independent
certified public accountants to give Acquiror's independent
certified public accountants access to books and records and work
papers regarding the Target's financial statements. No
investigation, test, examination or inquiry by Acquiror shall
affect the representations and warranties contained in this
Agreement.
Section 6.9. Insurance. Each of the Targets shall
maintain the types and levels of insurance currently in effect to
insure its assets and its business against the risk of loss or
damage attributable to casualty, storm, fire, theft, burglary or
riot.
Section 6.10. Monthly Financial Statements. On or prior
to the thirtieth day of each calendar month, each of the Targets
shall deliver to Acquiror copies (identified with a reference to
this Section 6.10) of the unaudited monthly balance sheet and
statement of income of such Target for the immediately preceding
month (the "monthly statements"), prepared in a manner consistent
with past practices used in preparation of such statements, all
of which when
delivered, shall be materially complete and correct, prepared
from the books and records of such Target in accordance with
generally accepted accounting principles (except for the omission
of
notes thereto) consistently applied and maintained throughout
such months, and shall in all material respects fairly present
the financial condition of such Target as at their respective
dates
and the results of the operations of its business for the months
covered thereby.
Section 6.11. Approvals, Notices and Consents. Promptly
after the execution of this Agreement, each of the Targets shall
file all forms, applications and reports, including without
limitation all filings under the HSR Act, and take such other
action which is required to be taken or filed with any
governmental agency or authority in connection with the
transactions contemplated by this Agreement. Each of the Targets
shall cooperate with Acquiror in promptly producing such
additional information as those authorities may require to allow
early termination of the notice period provided by the HSR Act or
as otherwise necessary to comply with statutory requirements and
requests of the Federal Trade Commission or the Department of
Justice. Each of the Targets shall give all additional notices
to third parties and take such other action required to be given
<PAGE>
or taken by it under any authorization, lease, note, mortgage,
indenture, agreement or other instrument or any law, rule,
<PAGE>
<PAGE>
regulation, demand or court or administrative order in connection
with the transactions contemplated by this Agreement, and shall
use its best efforts to obtain all consents and approvals
necessary to enable it to consummate the transactions
contemplated by this Agreement. Each of the Targets shall use
its reasonable efforts to obtain estoppel certificates from the
lessors under the leases of Real Property.
Section 6.12. The Targets' Actions; Supplements to
Representations and Warranties. From the date of this Agreement
through the Closing, (a) each of the Targets shall use its best
efforts to cause the conditions to the obligations of the
Corporate Targets and the Partners set forth in Article IX to be
satisfied to the extent that the satisfaction of such conditions
is within
the control of such Target; provided, however, that the foregoing
shall not constitute a limitation upon the covenants and
obligations of the Corporate Targets and the Partners otherwise
set forth in this Agreement; (b) none of the Targets shall take
any action or omit to take any action within its control to the
extent such action or omission might result in a breach of any
term or condition of this Agreement or in any representation or
warranty contained in this Agreement being inaccurate or
incorrect on and as of the Closing Date; and (c) each of the
Targets shall deliver
to Acquiror, as soon as possible after discovery thereof, but not
later than at the Closing, supplemental information updating the
information set forth in the representations and warranties
of the Targets set forth in this Agreement to reflect subsequent
occurrences, if any, (along with a notice stating the
representations and warranties, including the schedules referred
to therein, to which such supplemental information relates) so
that such representations and warranties as supplemented by such
information will be true and correct as of the Closing as if then
made.
The foregoing provisions shall not be deemed to permit any
transaction between the date hereof and the Closing not otherwise
contemplated or permitted by this Agreement nor shall any action
taken by any of the Targets pursuant to the foregoing provisions
impair the exercise by Acquiror of its rights as set forth in
Section 10.2.
Section 6.13. Notice of Material Adverse Change. The
Targets shall promptly advise Acquiror in writing of any material
adverse change in the assets or financial condition, results
of operations, businesses or properties of the Targets considered
as a whole.
Section 6.14. Pooling. None of the Targets shall take
any action that would prevent the Mergers from qualifying for
pooling of interests accounting treatment.
Section 6.15. Tax Statements. The Targets will make and
will use their reasonable efforts to cause their respective
shareholders to make the representations and warranties
contained in Exhibit 6.15, and such other representations and
<PAGE>
<PAGE>
warranties as considered reasonably necessary by the accountants
or counsel for purposes of rendering the opinions referred to in
Sections 8.12 and 9.10.
Section 6.16. Cooperation. Each of the Targets shall
generally cooperate with Acquiror and its officers, employees,
attorneys, accountants and other agents and, generally, do such
other acts and things in good faith as may be reasonable,
necessary, or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the
transactions
contemplated hereby.
ARTICLE VII
CERTAIN PRE-CLOSING COVENANTS OF ACQUIROR
Acquiror covenants and agrees that between the date hereof
and the Closing:
Section 7.1. Required Consents and Approvals. It shall
use all reasonable efforts to obtain all consents and approvals
necessary to enable it to consummate the transactions
contemplated by this Agreement. Acquiror shall also use its best
efforts to obtain within 60 days of the date of this Agreement
all necessary consents from its principal lenders, as set forth
in Section 5.4 of Acquiror's Disclosure Statement.
Section 7.2. Premerger Notification. It shall file with
the proper authorities all forms and other documents necessary to
be filed pursuant to the HSR Act and regulations issued
thereunder as promptly as possible and shall cooperate with the
Targets in promptly producing such additional information as such
authorities may require to allow early termination of the notice
period provided by the HSR Act or as otherwise necessary to
comply with statutory requirements and requests of the Federal
Trade Commission or the Department of Justice.
Section 7.3. Registration Statement; NYSE Listing.
(a) Acquiror shall promptly prepare and file with
the SEC under the Securities Act the Registration Statement and
shall use all reasonable efforts to cause the Registration
Statement to be declared effective as promptly as practicable.
Acquiror shall take all reasonable action required to be taken
under applicable state securities or Blue Sky laws in connection
with the issuance of Acquiror Common Shares in the Mergers.
(b) Acquiror shall take all such action as is
reasonably necessary to qualify the Acquiror Common Shares to be
issued in the Mergers for trading on the NYSE effective upon
notice of issuance.
(c) Acquiror as the sole shareholder of AC shall
vote to approve or consent in writing to the approval of this
Agreement and the Mergers. Subject to the satisfaction of the
conditions to Acquiror's obligations set forth in Article VIII,
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<PAGE>
<PAGE>
Acquiror shall cause AC to execute and deliver all documents
reasonably considered necessary for the consummation of the
transactions contemplated hereby.
Section 7.4. Notice of Material Adverse Change. Acquiror
shall promptly advise the Targets in writing of any material
adverse change in Acquiror, its assets or the financial
condition, results of operations, businesses or properties of
Acquiror and its subsidiaries considered as a whole.
Section 7.5. Pooling Actions. Neither Acquiror nor any
of its subsidiaries shall take any action that would prevent the
Merger from qualifying for pooling of interests accounting
treatment.
Section 7.6. Pooling Letter. Prior to the date of
Closing, Acquiror shall have caused KPMG Peat Marwick LLP to
deliver to Acquiror a letter with respect to whether the Mergers
will qualify for pooling of interests accounting treatment.
Section 7.7. Tax Statements. Acquiror and AC will make
the representations, warranties and covenants contained in
Exhibit 7.7, and such other representations, warranties and
covenants as considered reasonably necessary by the accountants
or counsel for purposes of rendering the opinions referred to in
Sections 8.12 and 9.10.
Section 7.8. Environmental Surveys. Acquiror shall use
its reasonable efforts to cause to have performed within 60 days
of execution of this Agreement, at Acquiror's expense, Phase I
environmental surveys of all long-term health care facilities
currently operated but not owned by the Targets and to be
operated by the Surviving Corporation following the Closing.
Section 7.9. Cooperation. Acquiror shall generally
cooperate with each of the Targets and its officers, employees,
attorneys, accountants and other agents, and, generally, do such
other acts and things in good faith as may be reasonable,
necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the
transactions
contemplated hereby, including assisting the Targets in obtaining
agreements to release at the Closing the personal guarantees as
described in Section 9.11. Prior to the Closing Date, Acquiror
and AC agree to disclose to the Targets any fact or matter that
comes to the attention of Acquiror or AC that might indicate that
any of the representations or warranties of any of the Targets
may be untrue, incorrect, or misleading in any material respect.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE PERFORMANCE OF ACQUIROR
The obligations of Acquiror pursuant to the terms of this
Agreement are subject to the satisfaction, at the Closing, of
each of the following conditions:
<PAGE>
<PAGE>
Section 8.1. Accuracy of Representations and Warranties
of the Targets. Each of the representations and warranties of
each of the Corporate Targets and the Partners contained in this
Agreement shall be true and correct in all material respects at
and as of the Closing Date with the same force and effect as if
made at and as of the Closing Date. For purposes of this Section
8.1, all references in such representations and warranties to
"the date hereof," "the date of this Agreement" and like language
shall mean the Closing Date.
Section 8.2. Compliance. Each of the Targets and the
Partners shall have performed, complied with and fulfilled in all
material respects all the covenants, agreements, obligations and
conditions required by this Agreement to be performed, complied
with or fulfilled by it at or prior to the Closing.
Section 8.3. Approval. The execution and delivery of
this Agreement by each of the Corporate Targets and the Partners,
and the performance of the Targets' and Partners' covenants and
obligations hereunder, shall have been duly authorized by all
necessary action on the part of such Target or Partner.
Section 8.4. HSR Act Approval. Any applicable waiting
period under the HSR Act relating to the Mergers shall have
expired or been terminated.
Section 8.5. Authorizations. All material permits,
authorizations, approvals and consents of and notices to any
federal, state or local governmental body, agency or authority or
any other third party, which may be required by law, regulation,
rule, ordinance, order, decree, agreement, indenture, lease or
other instrument or document to which any of the Targets or
Acquiror is a party or by which such Target or Acquiror or its
assets are bound or which Acquiror may otherwise reasonably
require in connection with the execution of this Agreement or
effectuation of the transactions contemplated by this Agreement
shall have been obtained or made by the respective Target or
Acquiror on terms and conditions reasonably satisfactory to
Acquiror, other than licenses set forth in Section 4.16 of the
Disclosure Statement which cannot
be transferred, but which must be issued to Acquiror after the
Closing.
Section 8.6. Litigation. No order, decree, writ or
ruling of any governmental authority or court shall have been
entered that restrains, enjoins, or otherwise prohibits the
consummation
of the transactions contemplated hereby.
Section 8.7. No Material Adverse Change. In the
reasonable judgment of Acquiror, between the date hereof, and the
Closing, there shall not have been any material adverse change or
any event which is likely to result in any material adverse
change in the assets, business, financial condition or results of
operations of the Targets and their subsidiaries taken as a
whole.
<PAGE>
<PAGE>
Section 8.8. Closing Deliveries. Acquiror shall have
received from the respective Target all of the instruments,
documents and considerations described in Section 12.2, and the
form and substance of all such deliveries shall be reasonably
satisfactory in all material respects to Acquiror.
Section 8.9. Dissenters' Rights. Holders in excess of 5%
of the Target Common Shares shall not have exercised appraisal
rights under applicable law.
Section 8.10. Pooling Letter. Acquiror shall have
received a letter from KPMG Peat Marwick LLP, in form and
substance reasonably satisfactory to Acquiror, stating that the
Mergers will qualify for poolings of interests accounting
treatment.
Section 8.11. Exercise of Warrants. All warrants issued
by Nationwide shall have been exercised prior to the Closing.
Section 8.12. Tax Opinions. Acquiror shall have received
opinions of KPMG Peat Marwick LLP acceptable in form and content
to Acquiror substantially to the effect that the merger of each
Corporate Target with and into AC will, in each instance,
constitute a reorganization within the meaning of Section
368(a)(1)(A) and Section 368(a)(2)(D) of the Internal Revenue
Code of 1986, as amended (the "Code"), and each Corporate Target,
AC and
Acquiror will each be a "party to reorganization" within the
meaning of Section 368(b) of the Code.
Section 8.13. Lease Extensions. The lease of Colonial
Oaks Health Care Center shall have been renewed in accordance
with such lease for an additional five year term, and the Targets
shall have used their reasonable efforts to obtain modifications
to the lease of Ossian Health Care to provide for a five year
extension.
ARTICLE IX
CONDITIONS PRECEDENT TO PERFORMANCE OF THE
CORPORATE TARGETS AND PARTNERS
The obligations of each of the Corporate Targets and
Partners pursuant to the terms of this Agreement are subject to
the satisfaction, at the Closing, of each of the following
conditions:
Section 9.1. Accuracy of Representations and Warranties
of Acquiror and AC. Each of the representations and warranties
of Acquiror and AC contained in this Agreement shall be true and
correct in all material respects at the Closing with the same
force and effect as if made at the Closing. For purposes of this
Section 9.1, all references in such representations and
warranties to "the date hereof," "the date of this Agreement" and
like language shall mean the Closing Date.
Section 9.2. Compliance. Acquiror and AC each shall have
performed, complied with and fulfilled in all material respects
all the covenants, agreements, obligations and conditions
<PAGE>
required by this Agreement to be performed, complied with or
fulfilled by it at or prior to the Closing.
<PAGE>
<PAGE>
Section 9.3. Corporate Approval. The execution and
delivery of this Agreement by Acquiror and AC, and the
performance by Acquiror and AC of all of their respective
covenants and obligations hereunder shall have been duly
authorized by all necessary corporate action on the part of
Acquiror and AC.
Section 9.4. Authorizations. All material permits,
authorizations, approvals and consents of and notices to any
federal, state or local governmental body, agency or authority or
any other third party, which may be required by law, regulation,
rule, ordinance, order, decree, agreement, indenture, lease or
other instrument or document to which any of the Targets or
Acquiror is a party or by which such Target or Acquiror or its
assets are bound or which the Targets may otherwise reasonably
require in connection with the execution of this Agreement
or effectuation of the transactions contemplated by this
Agreement shall have been obtained or made by the respective
Target or Acquiror on terms and conditions reasonably
satisfactory to
the Targets.
Section 9.5. Registration Statement. The Registration
Statement shall have become effective under the Securities Act
and the Acquiror Common Shares to be issued in the Mergers shall
have become qualified or registered (or shall be exempt from
qualification or registration) under comparable state securities
laws, and at or prior to the Effective Time no stop order
suspending the effectiveness of the Registration Statement or the
qualification or registration of the Acquiror Common Shares to be
issued in the Mergers under the Blue Sky laws of any jurisdiction
shall have been issued and no proceeding for that purpose shall
have been initiated or shall be threatened or contemplated by the
SEC or the authorities of any such jurisdictions, and the
Acquiror Common Shares shall be eligible for trading on the NYSE
upon notice of issuance.
Section 9.6. Litigation. No order, decree, writ or
ruling of any governmental authority or court shall have been
entered that restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated by this Agreement.
Section 9.7. No Material Adverse Change. In the
reasonable judgment of the Targets, between the date of execution
and the Closing, there shall not have been any material adverse
change or any event which is likely to result in any material
adverse change in the assets, business, financial condition or
results of operations of Acquiror and its subsidiaries, taken as
a whole.
Section 9.8. HSR Act Waiting Periods. Acquiror and the
Targets shall have filed all notifications required by the HSR
Act with the Department of Justice and the Federal Trade
Commission and the applicable waiting periods with respect
thereto (including any extension thereof by reason of a request
for additional information) shall have expired or been
terminated.
<PAGE>
<PAGE>
Section 9.9. Closing Deliveries. Each of the Targets
shall have received from Acquiror all of the instruments,
documents and considerations described in Section 12.3, and the
form and substance of all such deliveries shall be reasonably
satisfactory in all material respects to the Targets.
Section 9.10. Tax Opinions. Nationwide shall have
received opinions of Ice Miller Donadio & Ryan acceptable in form
and content to Nationwide, substantially to the effect that the
merger of each Corporate Target with and into AC will, in each
instance, constitute a reorganization within the meaning of
Section and Section 368(a)(2)(D) of the Code, and each Corporate
Target, AC and Acquiror will each be a "party to a
reorganization" within
the meaning of Section 368(b) of the Code.
Section 9.11. Release of Guarantees. The beneficiaries
with respect to the personal guarantees by the shareholders of
the Corporate Targets and/or Partners in the Partnership Targets
that are set forth in Section 9.11 of the Disclosure Statement
shall have agreed to release such guarantees at the time of the
Closing or Acquiror shall have agreed to indemnify such
shareholders and/or Partners for any losses resulting from such
guarantees.
ARTICLE X
TERMINATION
Section 10.1 Termination by Mutual Agreement. This
Agreement may be terminated by the mutual agreement in writing of
the parties hereto at any time prior to the Closing.
Section 10.2. Termination by Acquiror. This Agreement
and any obligations of Acquiror hereunder (other than its
obligations under the Confidentiality Agreement referred to in
Section 11.1 may be terminated upon written notice to that effect
by Acquiror at any time prior to or at the Closing, if in the
judgment of Acquiror (a) any of the Targets or the Partners shall
have breached or failed to perform in any material respect any of
its covenants or
obligations under this Agreement; (b) any representation or
warranty of any of the Targets or the Partners contained in this
Agreement is false or misleading in any material respect and
cannot be cured prior to July 31, 1995; or (c) any other material
condition precedent to Acquiror's performance of its obligations
under this Agreement is not capable of being met.
Section 10.3. Termination by the Corporate Targets and
Partners. This Agreement and any obligations of any of the
Corporate Targets and Partners hereunder (other than their
obligations under the Confidentiality Agreement referred to in
Section 11.1) may be terminated upon written notice to that
effect by any of the Corporate Targets and the Partners at any
time
prior to or at the Closing if in the judgment of such Target or
Partner (a) Acquiror shall have breached or failed to perform in
any material respect any of its covenants or obligations under
this Agreement; (b) any representation or warranty of Acquiror
contained in this Agreement is false or misleading in any
<PAGE>
material respect and cannot be cured prior to July 31, 1995; (c)
any
<PAGE>
<PAGE>
other material condition precedent to such Target's or Partner's
performance of its obligations under this Agreement is not
capable of being met; (d) the average closing price of one
Acquiror
Common Share as reported by the NYSE for the ten (10) trading
days immediately preceding the Closing Date is less than $21.82;
or (e) the Mergers have not been consummated by July 31, 1995.
ARTICLE XI
ADDITIONAL AGREEMENTS
Section 11.1. Confidentiality. Acquiror and each of the
Targets agree that the Confidentiality Agreement dated November
7, 1994 between Acquiror and Nationwide shall remain in full
force and effect at all times prior to the Effective Time and
after any termination of this Agreement, and each agrees to
comply with the terms of that agreement.
Section 11.2. Employee Benefit Matters. Acquiror and AC
agree to continue in full force and effect the Benefit Plans of
the Targets referred to in Section 4.21 of the Disclosure
Statement and existing at the Effective Time until those
employees o f the Targets who become employees of the Surviving
Corporation in the Mergers become eligible to participate in the
employee benefit plans of Acquiror. Acquiror will recognize such
transferred employees' service with any of the Targets for
purposes of eligibility and vesting under such Acquiror plans.
Nothing set forth in this Agreement shall be construed to impose
any obligation on Acquiror or AC to continue the employment of
any person after the Effective Time or give any person any rights
to such employment; provided, however, that Acquiror acknowledges
that in connection with the Mergers the Surviving Corporation
will assume the obligations of Nationwide pursuant to those
Employment Agreements set forth on Schedule 11.2(a). Acquiror
and the Surviving Corporation also agree that prior to the
termination of any employee whose name is set forth on Schedule
11.2(b), the Surviving Corporation will give such employee thirty
days notice and will pay to such terminated employee as severance
one week's salary for each year such employee has been employed
by Nationwide or its affiliates, as set forth on Schedule
11.2(b), less applicable withholdings.
Section 11.3. Agreements Respecting Meadowvale. Prior to
the Effective Time, Meadowvale will distribute to Donald Cheesman
("Cheesman") as a dividend real property including land and a
home built thereon located at 1529 West Lancaster Street,
Bluffton, Indiana and owned by Meadowvale (the "Residence"). In
addition, Meadowvale will repay to Cheesman all amounts owing by
Meadowvale to Cheesman pursuant to that certain Promissory Note
dated February 1, 1986 executed by Meadowvale in favor of
Cheesman. After the Effective Time, AC shall honor and pay the
debt in the amount of $313,408 owed to Thomas E. Phillippe, Sr.
by Shangri-La. The parties to this Agreement agree that the
transactions contemplated by this Section 11.3 shall not affect
the amount of Merger Consideration due pursuant to this
Agreement.
<PAGE>
<PAGE>
Section 11.4. Preservation of Tax-Free Reorganization
Treatment. Neither Acquiror nor AC shall, and each of them shall
use its best efforts to cause their respective affiliates not to,
take or cause to be taken, any action, whether before or after
the Effective Time, which would disqualify any of the Mergers as
a "reorganization" within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Code.
Section 11.5. Publication of Financial Results. In
accordance with the Codification of Financial Reporting Policies
of the Securities and Exchange Commission, in order to permit the
sale of Acquiror Common Shares following the Closing and also to
preserve the treatment of the transactions described herein as a
pooling of interests for accounting purposes, Acquiror agrees
to publish the financial results of the combined operations of
Acquiror, AC and the Targets, covering at least 30 days of such
combined operations, no later than the last to occur of (a) 60
days following the end of the month in which the Closing occurs
and (b) 10 days following delivery of such financial information
with respect to the operations previously owned by the Targets as
Acquiror considers reasonably necessary to prepare the combined
financial results described in this Section 11.5.
ARTICLE XII
THE CLOSING
Section 12.1. Time and Place. The closing of the
transactions contemplated by this Agreement shall take place at
the offices of Ice Miller Donadio & Ryan, One American Square,
34th Floor, Indianapolis, Indiana, at 10:00 a.m. Indianapolis
time on June 30, 1995, or on such other date as the parties
hereafter agree (the "Closing").
Section 12.2. Deliveries to Acquiror at the Closing. At
the Closing, and simultaneously with the deliveries to the
Targets specified in Section 12.3, the Corporate Targets and the
Partners shall deliver or cause to be delivered to Acquiror the
following:
(a) Certificates of the President and Chief
Financial Officer of each of the Corporate Targets and of each of
the Partners as to the accuracy of its representations and
warranties contained in this Agreement and as to its compliance
with and fulfillment of all covenants, agreements, obligations
and conditions required by this Agreement.
(b) Copies of all resolutions adopted by the Board
of Directors and the shareholders of each of the Corporate
Targets authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby,
together
with a certificate, duly executed by the Secretary of such
Target, stating that such copies are true, complete and correct,
and that the resolutions have been duly adopted by the Board of
Directors and the shareholders, as the case may be, have not been
amended
since adoption, and remain in full force and effect.
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(c) Copies of all permits, authorizations,
approvals and consents required to be obtained pursuant to
Section 8.5.
(d) An opinion of Ice Miller Donadio & Ryan,
counsel to the Targets, dated the Closing Date, in such form as
shall be agreed to by the parties hereto prior to the Closing, in
their reasonable discretion.
(e) If required by Section 6.6, the written
agreements and letters described in Section 6.6.
(f) The Certificates and such documents and
instruments as agreed to by Acquiror and the Partners.
(g) The lease amendment referred to in Section
8.13.
(h) Noncompetition Agreements between Acquiror and
each of the Phillippes, in the form of Exhibit 12.2(h).
(i) Agreements among the shareholders of each of
the Corporate Targets in substantially the form of Exhibit
12.2(i).
Section 12.3. Deliveries to the Targets at the Closing.
At the Closing, and simultaneously with the deliveries to
Acquiror specified in Section 12.2, Acquiror shall deliver or
cause to be delivered to the Targets and the Partners the
following:
(a) Certificates of the President and Chief
Financial Officer of Acquiror as to the accuracy of its
representations and warranties contained in this Agreement and as
to its compliance with and fulfillment of all covenants,
agreements, obligations and conditions required by this
Agreement.
(b) Copies of all permits, authorizations,
approvals and consents required to be obtained pursuant to
Section 9.4.
(c) An opinion of Richard P. Adcock, General
Counsel to Acquiror, dated the Closing Date, in such form as
shall be agreed to by the parties hereto prior to the Closing, in
their reasonable discretion.
(d) The Merger Consideration (less any amounts to
be delivered to the Escrow and the Supplemental Escrow).
(e) Evidence of prepayment of the Nationwide
Subordinated Notes and the Nationwide Preferred Stock.
ARTICLE XIII
INDEMNIFICATION
Section 13.1. Indemnification of Acquiror, AC, and
Surviving Corporation. Subject to Section 13.2, and except with
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respect to Supplemental Losses (as that term is defined in
Section
14.1 hereof), Acquiror, AC and the Surviving Corporation shall be
indemnified and held harmless from and against any damages, loss,
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<PAGE>
cost, liability, or expense (including, without limitation, costs
and expenses of litigation, settlement and reasonable attorney's
fees, but net of amounts received under applicable insurance
carried by the Targets) ("Losses") that may be incurred by or
suffered by or asserted against Acquiror, AC or the Surviving
Corporation or more than one of them (hereinafter, collectively,
the "Indemnified Party"), but without duplication, arising out of
or related to, directly or indirectly, the incorrectness of any
of the representations or warranties contained in Article IV of
this Agreement (or any section of the Disclosure Statement
referred to in Article IV), or the breach prior to the Effective
Time of any
of the covenants or agreements of any Target or Partner contained
in this Agreement or in any other instrument executed or
delivered by the Targets or the Partners.
Section 13.2. Threshold and Maximum Amounts.
(a) The Indemnified Party shall be entitled to
indemnification under this Article XIII only when the aggregate
of all Losses suffered by the Indemnified Party, with respect to
which the Indemnified Party would otherwise be entitled to
indemnification hereunder exceeds Two Hundred and Fifty Thousand
Dollars ($250,000.00) (the "Threshold Amount"), whereupon the
Indemnified Party shall be entitled to indemnification for any
and all such Losses in excess of the Threshold Amount; provided,
however, that in the case of the incorrectness of any
representation contained in Section 4.2 or fraud, the Threshold
Amount shall not apply.
(b) Subject to Section 13.2(c) below, the
aggregate dollar amount of all Losses the Indemnified Party may
be indemnified for under this Article XIII shall not exceed the
fair market value, as of the Closing Date, of the Acquiror Common
Shares delivered to the Escrow Agent for the Escrow pursuant to
Section 3.3 (the "Escrow Value"); provided, however, that, in the
case of the incorrectness of any representation contained in
Section 4.2 or fraud, the Indemnified Party may be indemnified
for an amount in excess of the Escrow Value.
(c) Any and all Losses for which the Indemnified
Party may be indemnified under this Article XIII shall be paid or
satisfied only by distribution to Acquiror of the Acquiror Common
Shares and cash, if any, held in the Escrow in accordance with
Section 3.3 and the Escrow Agreement attached hereto as Exhibit
3.3(a). The Indemnified Party shall have no recourse against any
of the former holders of the Target Common Shares, and such
former holders shall have no personal liability to the
Indemnified Party with respect to the indemnification provided
for in Section 13.1,
except to the extent such holders hold Acquiror Common Shares and
cash, if any, in the Escrow or as otherwise provided in Section
13.2(b). Except with respect to Supplemental Losses,
indemnification pursuant to this Article XIII shall be the
exclusive remedy of Acquiror, AC or the Surviving corporation for
a breach of a representation or warranty made by any Target or
Partner or a covenant of any Target or Partner set forth in this
Agreement.
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Section 13.3. Survival of Indemnification Obligations.
(a) The foregoing indemnification obligations
shall survive, in the case of the incorrectness of any
representation contained in Section 4.2 or fraud, indefinitely.
(b) Except as provided in Section 13.3(a) and
subject to Section 13.3(c), the foregoing indemnification
obligations shall survive, in the case of the representations and
warranties of the Targets and Partners contained in Article IV,
until the date that Acquiror's independent accountants have
completed the first audit following the Effective Time of
Acquiror's and the Targets' combined operations, but not later
than one year after the Closing Date. Acquiror Common Shares and
cash, if any, held in the Escrow shall be distributed, if
available, to the former holders of the Target Common Shares
promptly following completion of such audit, but not later than
one year after the Closing Date.
(c) Notwithstanding the foregoing survival
periods, if written notice of a claim or written notice
describing with particularity facts and circumstances that exist
and will be substantially likely, in the good faith judgment of
Acquiror, to give rise to a claim of indemnification hereunder
has been given by Acquiror to the Targets prior to the
termination of any applicable representation and warranty of the
Targets or the termination of the Escrow as specified in the
Escrow Procedures, then the relevant
representation and warranty, and the term of the Escrow shall
survive, solely as to such claim as provided in the notice, until
the claim has been finally resolved.
ARTICLE XIV
SUPPLEMENTAL INDEMNIFICATION
Section 14.1. Supplemental Indemnification of Acquiror,
AC, and Surviving Corporation. Subject to Section 14.2, and in
addition to the indemnification provided for in Article XIII
hereof, an Indemnified Party shall be indemnified and held
harmless from and against any Loss that may be incurred by or
suffered by or asserted against such Indemnified Party, but
without duplication, arising out of or related to, directly or
indirectly, the litigation entitled [Name Redacted] (the "Pending
Matter")(Losses with respect to the Pending Matter are referred
to herein as "Supplemental Losses").
Section 14.2. Maximum Amounts.
(a) Subject to Section 14.2(b) below, the
aggregate dollar amount of all Supplemental Losses the
Indemnified Party may be indemnified for under this Article XIV
shall not exceed the fair market value, as of the Closing Date,
of the Acquiror Common Shares delivered to the Escrow Agent for
deposit in the Supplemental Escrow pursuant to Section 3.3 (the
"Supplemental Escrow Value").
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(b) Any and all Supplemental Losses for which the
Indemnified Party may be indemnified under this Article XIV shall
be paid or satisfied only by distribution to Acquiror of the
Acquiror Common Shares and cash, if any, held in the Supplemental
Escrow in accordance with Section 3.3 and the Supplemental Escrow
Agreement attached hereto as Exhibit 3.3(b). The Indemnified
Party shall have no recourse against any of the former holders of
Nationwide, and such former holders shall have no personal
liability to the Indemnified Party with respect to the
indemnification provided for in Section 14.1, except to the
extent such holders hold Acquiror Common Shares and cash, if any,
in the Supplemental Escrow. Indemnification pursuant to this
Article XIV shall be the exclusive remedy of Acquiror, AC or the
Surviving Corporation for the incurrence of a Supplemental Loss.
Section 14.3. Survival of Indemnification Obligations.
Notwithstanding the provisions of Section 15.1, the
indemnification obligations set forth in this Article XIV with
respect to Supplemental Losses shall survive until such time as
(a) the Pending Matter has been settled; (b) an order of a court
of competent jurisdiction has been entered and either no appeal
can be taken from such order or the time for such an appeal has
run; or (c) a summary judgment or other order has been granted to
the effect that punitive damages will not be awarded with respect
to
the Pending Matter.
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1. Survival of Representations and Warranties.
Except as set forth in Sections 13.3 and 14.3, the
representations and warranties contained in this Agreement shall
survive until the date that Acquiror's independent accountants
have completed the first audit following the Effective Time of
Acquiror's and the Targets' combined operations, but not later
than one year after the Closing Date.
Section 15.2. Definition of Knowledge. For purposes of
this Agreement, "to the knowledge of" or words of like import
mean that the party to which the statement is attributed:
(a) has made such investigations, and has made
such inquiries of directors, officers, partners and responsible
employees of such party and of legal counsel, independent
auditors, actuaries and other persons who have performed services
for such
party as shall be reasonably necessary to determine the accuracy
of such representation or warranty; and
(b) nothing has come to the person's attention in
the course of such investigation and review or otherwise, which
would cause the person, in the exercise of reasonable care (in
accordance with the standards of what a reasonable person in
similar circumstances would have done to satisfy himself as to
the accuracy of the representation and warranty), to believe that
such representation and warranty is not true and correct in all
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respects.
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Section 15.3. Counterparts. This Agreement may be
executed simultaneously in one or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
Section 15.4. Entire Agreement. This Agreement and the
agreements to be delivered pursuant to this Agreement and the
Confidentiality Agreement between the parties dated November 7,
1994 constitute the entire agreement among the parties pertaining
to the subject matter contained herein and therein and supersede
all other prior and contemporaneous agreements, representations
and understandings of the parties.
Section 15.5. Exhibits and Schedules. All exhibits and
schedules attached to this Agreement are incorporated herein and
made a part hereof in the same manner as if such exhibits and
schedules were set forth at length herein.
Section 15.6. Parties in Interest. This Agreement will
be binding upon and inure solely to the benefit of each of the
parties, and nothing in this Agreement, express or implied, is
intended to or will confer upon any other person any right,
benefit, or remedy; provided, however, each person receiving
Acquiror Common Shares in connection with the Mergers or
the assignments of the Partnership Interests pursuant to this
Agreement shall be a third-party beneficiary of this Agreement
and shall be entitled, after the Effective Time, to enforce the
Agreement against Acquiror, AC and the Surviving Corporation for
the benefit of such shareholders with respect to the covenants of
Acquiror and AC contained herein and shall be entitled to pursue
all remedies available at law or in equity for, and Acquiror
shall indemnify such shareholders from, any Losses that may be
incurred by or suffered by or asserted against such shareholders
(or any of them) arising out of or related to, directly or
indirectly, the
incorrectness of any representations and warranties of Acquiror
or AC in Article V of this Agreement or for any breach of any of
the covenants or agreements of Acquiror or AC contained herein.
Section 15.7. Expenses. Each of the parties shall pay
all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement,
except as otherwise expressly provided for herein.
Section 15.8. Gender. Any reference to the masculine
gender shall be deemed to include the feminine and neuter genders
unless the context otherwise requires.
Section 15.9. Governing Law. This Agreement and all
transactions contemplated hereby shall be governed, construed and
enforced in accordance with the laws of the State of Washington,
notwithstanding any state's choice of law rules to the contrary.
Section 15.10. Headings. The subject headings of the
articles and sections of this Agreement are included for purposes
of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
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Section 15.11. Modification and Waiver. No supplement,
modification or amendment of this Agreement shall be binding
unless executed in writing by the parties. The party for whose
benefit a warranty, representation, covenant or condition is
intended may in writing waive any inaccuracies in the warranties
and representations contained in this Agreement or waive
compliance with any of the covenants or conditions contained
herein and so waive performance of any of the obligations of the
other party hereto, and any defaults hereunder; provided,
however, that such waiver shall not affect or impair the waiving
party's rights with respect to any other warranty, representation
or covenant or any default hereunder, nor shall any waiver
constitute a continuing waiver.
Section 15.12. Notices. All notices, requests, demands,
waivers and other communications required to be given under this
Agreement shall be in writing and shall be deemed to have been
duly given on (a) the date of service if served personally on the
party to whom notice is to be given, (b) the date sent if given
by telegram, confirmed facsimile transmission or telex addressed
to the party to whom notice is to be given or (c) the third day
after mailing if mailed to the party to whom notice is to be
given by certified mail, return receipt requested, and properly
addressed as follows:
If to Acquiror:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Fax: (206) 756-4845
With a copy to:
Edmund O. Belsheim, Jr.
Bogle & Gates
Two Union Square
601 Union Street
Seattle, Washington 98101-2346
Fax: (206) 621-2660
If to any of the Targets:
Dr. Thomas E. Phillippe, Sr.
9200 Keystone Crossing
Suite 800
Indianapolis, Indiana 46240
Fax: (317) 848-3197
With a copy to:
Marcus B. Chandler
Ice Miller Donadio & Ryan
One American Square, Suite 3400
Indianapolis, Indiana 20036
Fax: (317) 236-2219
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<PAGE>
Any party may change the address to which notice is to be sent or
the telephone number for facsimile transmission pursuant to this
Section 15.11 by giving written notice thereof in compliance with
this section.
Section 15.13. Press Releases. Acquiror and the Targets
shall consult with each other with respect to the form and
substance of any press release or other public disclosure of
matters related to this Agreement or any of the transactions
contemplated hereby.
Section 15.14. Rights of Parties. Nothing in this
Agreement, whether express or implied, is intended to confer any
rights or remedies under or by reason of this Agreement on
any person other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of
any third person to any party to this Agreement, nor shall any
provision give any third person any right of subrogation or
action over or against any party to this Agreement.
Section 15.15. Successors. This Agreement shall be
binding on, and shall inure to the benefit of, the parties and
their respective successors and assigns.
Section 15.16. Intent; Construction. It is the intent of
the parties that this Agreement and the transactions contemplated
hereby will satisfy the requirements contained in Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code and the regulations
promulgated thereunder, and that it will qualify as a corporate
reorganization without recognition of gain by any of the holders
of Target Common Shares other than to the extent any holder shall
receive cash for all or part of his, hers or its Target Common
Shares, and this Agreement shall be construed to effect the
foregoing.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
[INTENTIONALLY LEFT BLANK]
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<PAGE>
THE HILLHAVEN CORPORATION
By:
Chairman and Chief Executive
Officer
Attest:
Secretary
NCI ACQUISITION CORP.
By:
President
Attest:
Secretary
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<PAGE>
NATIONWIDE CARE, INC.
By:
Dr. Thomas E. Phillippe, Sr.
Chairman of the Board
Attest:
Secretary
PHILLIPPE ENTERPRISES, INC.
By:
Dr. Thomas E. Phillippe, Sr.
President
Attest:
Secretary
MEADOWVALE SKILLED CARE
CENTER, INC.
By:
Dr. Thomas E. Phillippe, Sr.
President
Attest:
Secretary
<PAGE>
<PAGE>
THE PARTNERS OF
CAMELOT CARE CENTERS
THE PARTNERS OF
SHANGRI-LA PARTNERSHIP
THE LIMITED PARTNERS OF
EVERGREEN WOODS, LTD.
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<PAGE>
Each of the undersigned persons hereby agrees to vote all
shares or ownership interests owned by such person in each of the
Targets (as defined in this Agreement) in favor of approval of
the transactions contemplated by this Agreement.
Dr. Thomas E. Phillippe, Sr.
Thomas E. Phillippe, Jr.
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<PAGE>
EXHIBIT LISTING
Exhibit 3.3(a). Escrow Agreement
Exhibit 3.3(b). Supplemental Escrow Agreement
Exhibit 6.6(a). Affiliate Letter
Exhibit 6.6(b). Pooling Letter
Exhibit 6.15. Tax Certificate of Targets
Exhibit 7.7. Tax Certificate of Acquiror and AC
Exhibit 12.2(h). Noncompetition Agreement
Exhibit 12.2(i). Agreement among Shareholders
<PAGE>
<PAGE>
Exhibit 3.3(a)
Part 1
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made this ___
day of ________, 1995, by and among The Hillhaven Corporation, a
Nevada Corporation ("Acquiror"), NCI Acquisition Corp., a
Delaware corporation (such corporation and the Surviving
Corporation being referred to herein together as "AC"), the
individuals listed on Exhibit A (collectively, the
"Shareholders") and Bank One, Indianapolis, N.A. (the "Escrow
Agent").
EXPLANATION STATEMENT
A. Acquiror, AC and the Targets are parties to that
certain Agreement and Plan of Merger and Agreements to Assign
Partnership Interests (the "Merger Agreement"), dated _______
___, 1995. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings assigned
thereto in the Merger Agreement.
B. Prior to the Effective Time, the Shareholders owned all
the capital stock of the Corporate Targets and all the
partnership interests in the Partnership Targets.
C. In order to induce Acquiror and AC to enter into the
Merger Agreement and to consummate the transactions contemplated
thereby, the Shareholders wish to execute and deliver this
Agreement and to deposit or to cause to be deposited in escrow
hereunder certificates representing ten percent (10%) of the
Acquiror Common Shares that comprise the Merger Consideration
(such percentage of shares being referred to herein collectively
as the "Escrow Shares") to secure the indemnification obligations
under Article XIII of the Merger Agreement, the terms of which
Article are incorporated herein by this reference.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, and in consideration of the mutual covenants herein
contained, agree as follows:
1. Deposit of Escrow Shares; Escrow Account; Shareholder
Agent.
1.1 Promptly following the Effective Time, Acquiror shall
withhold from the Merger Consideration and deposit with the
Escrow Agent the Escrow Shares. The Escrow Agent shall establish
an account (the "Escrow Account") for the Shareholders and place
the Escrow Shares therein. The Escrow Agent agrees that the
Escrow Shares shall be held in the Escrow Account and disbursed
by the Escrow Agent in accordance with, and subject to the terms
and conditions of, this Agreement.
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1.2 Acquiror, AC and the Shareholders acknowledge and agree
that, to the extent and for so long as Escrow Shares are held by
the Escrow Agent hereunder, Acquiror and AC shall have, as of and
from the date such Escrow Shares are received by the Escrow
Agent, a perfected, first priority security interest in such
Escrow Shares to secure the payment of amounts, if any, payable
pursuant to Article XIII of the Merger Agreement. In connection
therewith, the Shareholders expressly agree (i) that the Escrow
Agent is acting solely as Acquiror's and AC's agent to the extent
necessary to perfect their first-priority security interests in
the Escrow Shares and (ii) to execute and deliver such
instruments as Acquiror and AC may from time to time reasonably
request for the purpose of evidencing and perfecting such
security interests.
1.3 All of the Shareholders hereby appoint Thomas E.
Phillippe, Jr., an individual (the "Shareholder Agent"), as their
attorney-in-fact to act as their agent in the performance of all
of their obligations and exercise of all of their rights under
this Agreement.
2. Voting Rights; Dividends on Escrow Shares; Sale of
Shares; Investment of Cash.
2.1 All voting rights with respect to the Escrow Shares
shall remain with the Shareholders. All cash dividends on Escrow
Shares shall be distributed by Acquiror to the Escrow Agent.
Within three (3) business days following receipt thereof by the
Escrow Agent, the Escrow Agent shall distribute such dividends in
respect of the Escrow Shares to the Shareholders, respectively.
2.2 All non-cash dividends (including, without limitation,
any stock split, share dividend, rights offering or
recapitalization) on any Escrow Shares shall be added to the
Escrow Account as additional Escrow Shares fully subject to the
terms of this Agreement.
2.3 At any time while there are Escrow Shares in the Escrow
Account, the Shareholder Agent may, by delivering written
instructions to the Escrow Agent, direct the Escrow Agent to
sell one or more of the Escrow Shares on the NYSE and deposit the
sale proceeds into the Escrow Account, which proceeds shall be
distributed, designated, withheld and otherwise subject to the
terms of this Agreement in the same manner and to the same extent
as the Escrow Shares, except that the Escrow Agent shall
designate and withhold cash in the Escrow Account, to the extent
thereof, to Pending Claim Notices and Escrow Disposition Notices
(as defined in Section 4.2) prior to applying any remaining
Escrow Shares to such claims.
2.4 Cash deposited into the Escrow Account pursuant to
Section 2.3 shall be invested and reinvested by the Escrow Agent
in (a) bonds, treasury notes or other evidences of indebtedness
of, and those unconditionally guaranteed as to the payment of
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principal and interest by, the United States, (b) certificates of
deposit of banks or trust companies (including the Escrow Agent)
organized under the laws of the United States, or any state
thereof, each of which has a combined capital, surplus and
retained earnings of at least $50,000,000 and (c) money market
funds, including short term investment funds of the Escrow Agent.
In investing and reinvesting any such monies, the Escrow Agent
shall seek to obtain the best yields consistent with safety of
principal and ready marketability. The Escrow Agent shall have
no duty or right to invest cash on deposit in the Escrow Account
other than as provided in the foregoing sentence. Earnings on
cash so invested shall be paid to the Shareholders.
3. Accounting.
The Escrow Agent shall mail to Acquiror, AC and the
Shareholder Agent a written accounting of all transactions
relating to the Escrow Account not less frequently than
quarterly.
4. Disposition of Escrow Shares.
4.1 Prior to the Distribution Date (as defined in Section
4.3), Acquiror will issue, or cause to be issued, from time to
time to the Escrow Agent and the Shareholder Agent one or more
Pending Claim Notices in the form of Exhibit B (each a "Pending
Claim Notice") describing with particularity existing facts and
circumstances, if any, that are substantially likely, in the good
faith judgment of Acquiror, to give rise to a claim of
indemnification under Article XIII of the Merger Agreement and
designating the number of Escrow Shares necessary to satisfy in
whole or, if there are not sufficient Escrow Shares in the Escrow
Account, in part such claim. The Escrow Agent shall withhold and
distribute such designated number of Escrow Shares as required by
Sections 4.2 and 4.3. For all designations, withholdings and
distributions of Escrow Shares pursuant to a Pending Claim Notice
or Escrow Disposition Notice, the number of Escrow Shares to be
designated, withheld and/or distributed shall be (i) determined
using the average closing price of one Acquiror Common Share as
reported on the NYSE for the ten (10) trading days immediately
preceding the date of such notice and (ii) rounded to the nearest
whole share. To the extent Acquiror and the Shareholder Agent
are not in dispute as to the distribution or retention of Escrow
Shares withheld pursuant to a Pending Claim Notice, Acquiror and
the Shareholder Agent shall promptly prepare an Escrow
Disposition Notice (as defined in Section 4.2) directing the
Escrow Agent to so distribute or retain such Escrow Shares.
4.2 The Escrow Agent shall distribute the Escrow Shares
only in accordance with (i) written instructions contained in one
or more notices in the form of Exhibit C (each an "Escrow
Disposition Notice") delivered to the Escrow Agent and executed
by Acquiror, AC and the Shareholder Agent, (ii) a final
arbitration award secured under the provisions of Section 4.4
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hereof, (iii) an order of a court of competent jurisdiction
pursuant to Section 9 hereof or (iv) the procedures set forth in
Section 4.3, as applicable. The Escrow Agent shall promptly
comply with such instructions, award, order or procedures, as
applicable, to the extent that there are sufficient Escrow Shares
in the Escrow Account to so comply.
4.3 Promptly following the date that Acquiror's independent
accountants have completed the first audit following the
Effective Time of Acquiror's and the Targets' combined
operations, but not later than one year after the Closing Date
(such audit completion date being referred to herein as the
"Distribution Date"), the Escrow Agent shall distribute to each
Shareholder from the Escrow Account his or her percentage
interest, as listed on Exhibit A, of the Escrow Shares remaining
in the Escrow Account less the number of Escrow Shares specified
in any unresolved Pending Claim Notice(s) received by the Escrow
Agent prior to the Distribution Date, which specified Escrow
Shares the Escrow Agent shall withhold from such distribution and
not distribute except as provided in clause (i), (ii) or (iii) of
Section 4.2, as applicable. If the first audit of Acquiror's and
the Targets' combined operations is completed on or before the
date that is one year after the Closing Date, then Acquiror shall
notify the Escrow Agent and the Shareholder Agent in writing of
such completion within five (5) days following such completion.
4.4 Acquiror, AC and the Shareholder Agent agree to use
their respective best efforts to resolve any dispute that may
arise with respect to this Agreement, including without
limitation any dispute regarding the validity of or the amount of
Escrow Shares designated in any Pending Claim Notice, amicably
and without resort to any third party dispute resolution forum.
At any time Acquiror or AC on the one hand or the Shareholder
Agent on the other believes that a dispute exists among the
parties with respect to this Agreement, it or they shall give
prompt written notice thereof to the other parties. Any dispute
which has not been settled or resolved within thirty (30) days of
receipt by Acquiror, AC or the Shareholder Agent of the notice
thereof shall be submitted for binding arbitration in Marion
County, Indiana in an arbitration proceeding that, except as may
otherwise be provided herein, shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association before a single arbitrator chosen in accordance with
such rules. All evidentiary and discovery matters shall be
conducted in accordance with and governed by the applicable
Federal Rules of Civil Procedure. No later than 10 calendar days
after the arbitrator is appointed, the arbitrator shall schedule
the arbitration for a hearing to commence on a mutually
convenient date. All discovery shall be completed no later than
the commencement of the arbitration hearing or 90 calendar days
after the date that a proper demand for arbitration is served,
whichever occurs first, unless, upon a showing of good cause, the
arbitrator extends such period. The hearing shall commence no
later than 90 calendar days after the arbitrator is appointed and
shall continue until completed. The arbitrator shall issue his
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<PAGE>
or her award in writing no later than 20 calendar days after the
conclusion of the hearing. The parties to this Agreement agree
that, in rendering an award, the arbitrator shall have no
jurisdiction to consider evidence with respect to or render any
award of judgment for punitive damages or any other amount
awarded for purposes of imposing a penalty. The arbitrator shall
not have the power to amend this Agreement in any respect. The
arbitrator's decision shall be binding and conclusive upon the
parties. The costs of any arbitration conducted pursuant to this
Section 4.4 shall be borne by the non-prevailing party(s), as
identified by the arbitrator, regardless of whether the subject
dispute is arbitrated to completion. Each party hereto agrees to
provide notice of the commencement of any such arbitration
proceeding to the Escrow Agent and the other parties, as the case
may be.
5. Control of Litigation.
5.1 Within 20 calendar days following receipt by Acquiror
and/or AC of notice of any claim by a third party or of the
commencement of any action or proceeding by a third party which
may give rise to an indemnity claim under Article XIII of the
Merger Agreement, Acquiror and/or AC shall notify the Shareholder
Agent in writing of such claim, action or proceeding; provided,
that failure to give such notification shall not affect
Acquiror's or AC's rights to indemnification under Article XIII
of the Merger Agreement, except to the extent the Shareholder
Agent shall have been prejudiced as a result of such failure.
Upon receipt of such written notice, the Shareholder Agent shall
be entitled to participate in and, to the extent that it may
wish, unless it is reasonably foreseeable that the Losses from
such claim, action or proceeding will exceed the value of the
Escrow Shares remaining in the Escrow Account or such claim,
action or proceeding involves a claim for injunction or other
specific relief, assume the defense, conduct or settlement of
such claim, action or proceeding by giving written notice thereof
to Acquiror and AC within forty-five (45) days of his receipt of
notice of such claim, action or proceeding. After delivery of
such notice to Acquiror and AC, the Shareholders shall not be
liable to Acquiror or AC for any legal expenses subsequently
incurred by Acquiror or AC in connection with the defense,
conduct or settlement of such claim, action or proceeding;
provided, that, if the Shareholder Agent fails to take reasonable
steps necessary to diligently defend such claim, action or
proceeding within 20 calendar days after receiving written notice
from Acquiror or AC that it believes the Shareholder Agent has
failed to take such steps, then Acquiror and/or AC, as the case
may be, may assume their or its own defense, and the Shareholders
shall be liable for any expenses therefor. Without limiting the
foregoing sentence, if the Shareholder Agent assumes the defense
of a third party claim, action or proceeding hereunder, then
Acquiror and AC shall each have the right to participate in such
defense at its own expense by giving prompt written notice
thereof to the Shareholder Agent. If, after assuming the defense
of a third party claim, action or proceeding hereunder, the
<PAGE>
<PAGE>
Shareholder Agent obtains an award from the third party claimant
on behalf of the Shareholders, then Acquiror and AC shall be
entitled to recover their costs, including reasonable attorney's
fees of outside counsel incurred in defending such claim and
obtaining such award, from the proceeds of such award; provided,
that such recovery shall not be a waiver of any right, claim or
amount to which Acquiror or AC may otherwise be entitled. In the
event the Shareholder Agent assumes the defense of a claim,
action or proceeding hereunder, the Shareholder Agent shall be
entitled to receive from the Escrow Agent distributions of cash
or Escrow Shares from the Escrow Account to reimburse the
Shareholder Agent (and, thereby, the Shareholders for whom he
will be acting) for the reasonable costs incurred in such defense
as well as the costs of any settlement or damages paid with
respect to such claim, action or proceeding. The Escrow Agent
shall make such a distribution to the Shareholder Agent only upon
the receipt of a properly executed Escrow Disposition Notice.
5.2 To the extent that a third party may be responsible for
a Loss incurred or suffered by Acquiror or AC, Acquiror or AC
either (a) may seek recovery of the Loss from the third party, in
which case the Shareholders shall be responsible only to the
extent that the Loss is not recoverable from the third party
(other than claims for Losses incurred in obtaining such
recovery), or (b) seek indemnification from the Shareholders for
the Loss pursuant to Article XIII of the Merger Agreement, in
which case Acquiror or AC, as the case may be, shall assign to
the Shareholders all rights relating to the Loss that Acquiror or
AC, as the case may be, may have against the third party, shall
not release the third party from its obligations and shall
cooperate with the Shareholders and take all other action
reasonably requested by the Shareholders to enable them to seek
recovery of the Loss from the third party.
5.3 Notwithstanding anything herein to the contrary,
neither Acquiror or AC on the one hand nor the Shareholder Agent
on the other shall have the right to settle or compromise a
third-party claim, action or proceeding without obtaining the
prior written consent of the other, which consent shall not be
unreasonably withheld. In addition, the Shareholder Agent shall
not permit to exist any lien, encumbrance or other adverse charge
upon any asset of, or consent to the imposition of any injunction
against, Acquiror or AC or any of their respective affiliates
without obtaining its or their, as applicable, prior written
consent, which consent shall not be unreasonably withheld.
6. Escrow Provisions.
6.1 Upon termination of this Agreement and delivery of the
balance of the Escrow Shares to the parties entitled thereto, the
Escrow Agent shall be discharged from any further obligation
hereunder.
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<PAGE>
6.2 The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or
other writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated
therein or the propriety, validity or service thereof. The
Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person
purporting to give notice or receipt or advice, or make any
statement or execute any document, in connection with the
provisions hereof has been duly authorized to do so.
6.3 The Escrow Agent shall not be liable to the other
parties hereto for any error of judgment, action taken or omitted
in good faith or mistake of fact or law, or anything which it may
do or refrain from doing in connection therewith, except in the
case of its own gross negligence, willful misconduct or bad
faith.
6.4 The Escrow Agent shall be entitled to consult with
competent and responsible counsel of its choice with respect to
the interpretation of the provisions hereof, and any other legal
matters relating hereto, and shall be fully protected in taking
any action or omitting to take any action in good faith and in
accordance with the advice of such counsel.
6.5 The Escrow Agent shall be entitled to be indemnified
and held harmless by Acquiror, AC and the Shareholders, jointly
and severally, for any and all claims, liabilities, costs,
payments and expenses, including reasonable fees of counsel (who
may be selected by the Escrow Agent), incurred by the Escrow
Agent which arise out of or in connection with any act or
omission by it in the performance of its obligations under this
Agreement, except in the case of the Escrow Agent's own gross
negligence, willful misconduct or bad faith.
7. Time of Performance. Whenever under the terms hereof
the time for performance of any provision shall fall on a date
which is not a regular business day of the Escrow Agent, the
performance thereof on the next succeeding regular business day
of the Escrow Agent shall be deemed to be in full compliance.
8. Death, Disability, etc. The death, disability,
bankruptcy or insolvency of any of the Shareholders shall not
affect or prevent the performance by the Escrow Agent of its
obligations and instructions received hereunder. Without
limiting the foregoing sentence, the Shareholder Agent shall
notify the Escrow Agent in writing of any person who or that, as
a result of a Shareholder's death, disability, bankruptcy or
insolvency, should receive distributions, if any, that would
otherwise be made hereunder to such Shareholder.
<PAGE>
<PAGE>
9. Resolution of Controversies. In the event any dispute
or controversy arises respecting the administration or
disposition of the Escrow Shares, or any part thereof, and such
dispute or controversy has not been submitted to arbitration as
provided in Section 4.4 hereof, the Escrow Agent shall have the
right but not the obligation to interplead the parties to such
dispute or controversy in any court of competent jurisdiction,
including but not limited to the courts of the State of Indiana
and the United States District Court for the Southern District of
Indiana which shall be deemed to be courts of competent
jurisdiction, and to deposit with such court the Escrow Shares
remaining in the Escrow Account, or any portion thereof.
Thereafter the Escrow Agent shall be fully released and
discharged from all further obligations hereunder with respect to
the Escrow Shares held in the Escrow Account or the portion
thereof deposited with the court in such proceedings, except in
the case of its own gross negligence, willful misconduct, or bad
faith. Acquiror, AC and the Shareholders, jointly and severally,
shall reimburse the Escrow Agent for all expenses, fees and
charges (including reasonable attorneys' fees and expenses)
reasonably incurred by the Escrow Agent in any such interpleader
action.
10. Resignation or Removal of Escrow Agent. If the Escrow
Agent resigns or is removed, then Acquiror, AC and the
Shareholder Agent shall mutually agree upon and name a substitute
for the Escrow Agent ("Successor Escrow Agent"), which shall be a
bank or trust company and which shall perform the same duties and
responsibilities, and which shall be entitled to the same
protection and substantially equivalent fees, as the original
Escrow Agent named herein. The Escrow Agent shall have the
unequivocal right to resign as Escrow Agent upon at least sixty
(60) days' prior written notice delivered to Acquiror, AC and the
Shareholder Agent; provided, that, in any event, such resignation
shall not be effective until such time as a Successor Escrow
Agent has been appointed, has accepted its appointment and has
taken possession of the Escrow Shares. Upon mutual agreement by
Acquiror, AC and the Shareholder Agent, the Escrow Agent may be
removed upon at least sixty (60) days' prior written notice;
provided, that, in any event, such removal shall not be effective
until such time as a Successor Escrow Agent has been appointed,
has accepted its appointment and has taken possession of the
Escrow Shares. In either of said events, if a Successor Escrow
Agent is not appointed within said sixty (60) day period, the
Escrow Agent, Acquiror, AC or the Shareholder Agent may petition
a court of competent jurisdiction to name a Successor Escrow
Agent, whether by interpleader or other appropriate action, and
the decision of such court shall be binding upon all parties to
this Agreement.
<PAGE>
<PAGE>
11. Acceptance of Escrow: Compensation of Escrow Agent.
The Escrow Agent hereby agrees to serve as Escrow Agent pursuant
to this Agreement and to perform the duties and responsibilities
conferred upon it hereunder. The Escrow Agent has agreed to
serve hereunder for such fees as are set forth in Exhibit D,
which fees are to be paid as described in Exhibit D. Such fees
shall be borne by Acquiror.
12. Termination. This Agreement shall terminate without
further action of any party when all of the terms hereof shall
have been fully performed.
13. Notices. Any notice, request, instruction or other
document to be given under this Agreement by any party shall be
in writing and shall be delivered personally, by registered or
certified mail, postage prepaid, return receipt requested, by
overnight courier or by facsimile transmission, as follows:
(a) If to Acquiror or AC, at:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, WA 98402
Attention: General Counsel
Facsimile: (206) 756-4845
With a copy to:
Edmund O. Belsheim, Jr.
Bogle & Gates
Two Union Square
601 Union Street
Seattle, WA 98101-2346
Facsimile: (206) 621-2660
(b) If to the Shareholders, at:
c/o Thomas E. Phillippe, Jr.
______________________________
______________________________
Attention:
Facsimile:
With a copy to:
Marcus B. Chandler, Esq.
ICE MILLER DONADIO & RYAN
One American Square
Box 82001
Indianapolis, IN 46282-0002
Facsimile: (317) 236-2219
or to such other address or person as any party may designate by
a notice to the other parties which is given in the manner
<PAGE>
<PAGE>
required above. Any such notice, request, instruction or other
document shall be deemed to have been delivered and received as
of the date personally delivered, or if mailed, three days after
the date so mailed, or if telecopied, the date on which such
telecopy is sent (as confirmed by return facsimile transmission)
or if by overnight courier the day following the day on which
such notice is properly placed with the courier.
14. Cooperation with Escrow Agent. The parties to this
Agreement shall cooperate with the Escrow Agent, as the Escrow
Agent reasonably deems necessary or desirable to perform its
duties and obligations under this Agreement. Without limiting
the foregoing, the parties shall provide the Escrow Agent with
all information necessary to make any distribution, including
names, addresses, social security numbers and tax identification
numbers. The Escrow Agent shall be entitled to rely upon the
most recent information received from any party without further
inquiry and each party shall be responsible for notifying the
Escrow Agent of any new or changed information pertaining to such
party.
15. Taxes: Reports to Governmental Authorities. The
Shareholders severally agree to assume any obligations imposed
now or hereafter by any applicable tax law with respect to any
payment from the Escrow Account to the Shareholders under this
Agreement and undertake to instruct the Escrow Agent in writing
with respect to the Escrow Agent's responsibility for withholding
taxes and any other taxes, assessments or other governmental
charges and any certifications and governmental reporting
required in connection therewith.
16. Miscellaneous.
16.1 This Agreement may not be amended or modified in any
way except by an instrument in writing signed by all of the
parties hereto.
16.2 This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Indiana without
reference to its conflicts of law provisions.
16.3 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same agreement.
16.4 The headings contained in this Agreement are for
convenience only, shall not affect this Agreement in any way, and
shall not be used to construe or interpret the scope or intent of
this Agreement.
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<PAGE>
16.5 This Agreement shall inure to the benefit of and shall
bind the parties hereto and their respective heirs, devisees,
personal representatives, successors, transferees and assigns;
provided, that, except as otherwise expressly set forth in this
Agreement, including without limitation Section 10, neither the
rights nor the obligations of any party may be assigned or
delegated without the prior written consent of the other parties.
IN WITNESS WHEREOF, the parties have duly executed and have
caused to be duly executed this Agreement as of the date first
written above.
THE HILLHAVEN CORPORATION
By____________________________
Name:
Title:
NCI ACQUISITION CORP.
By____________________________
Name:
Title:
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
BANK ONE, INDIANAPOLIS,
N.A.
By____________________________
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT A
SHAREHOLDERS
Individual
Percentage
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
<PAGE>
<PAGE>
EXHIBIT B
PENDING CLAIM NOTICE
To: Bank One, Indianapolis, N.A.
From: The Hillhaven Corporation
Date: _________________________
This Pending Claim Notice is delivered to you pursuant to
Section 4.1 of the Escrow Agreement, dated __________ ___, 1995
(the "Escrow Agreement"), by and among The Hillhaven Corporation,
a Nevada corporation, NCI Acquisition Corp., a Delaware
corporation, the Shareholders and Bank One, Indianapolis, N.A.
Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to those terms in the Escrow
Agreement.
Please be advised that you are hereby instructed to withhold
from the distribution to the Shareholders that is due to be made
on the Distribution Date from the Escrow Account a total of
_______________________ Escrow Shares.
The undersigned maintains in good faith that it is entitled
to indemnification in the aforementioned amount of Escrow Shares
pursuant to the terms of the Merger Agreement based upon the
following:
[LIST INDEMNIFICATION ITEMS AND THE AMOUNT OF EACH ITEM.
ATTACH ANY DOCUMENTS REASONABLY DEMONSTRATING THE
INDEMNIFICATION ITEMS.]
The Shareholder Agent has been sent a copy of this Pending
Claim Notice along with any attached information relating to the
claimed right to indemnification.
Signed this __________ day of______________, 199_.
THE HILLHAVEN
CORPORATION
By_______________________
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT C
ESCROW DISPOSITION NOTICE
To: Bank One, Indianapolis, N.A.
From: The Hillhaven Corporation
NCI Acquisition Corp.
Thomas E. Phillippe, Jr.
Date: _________________________
This Escrow Disposition Notice is delivered to you pursuant
to Section 4.2 of the Escrow Agreement, dated __________ ___,
1995 (the "Escrow Agreement"), by and among The Hillhaven
Corporation, a Nevada corporation, NCI Acquisition Corp., a
Delaware corporation, the Shareholders and Bank One,
Indianapolis, N.A. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to those terms
in the Escrow Agreement.
Please be advised that you are hereby directed to
[distribute from] [retain in] the Escrow Account the property now
held in your possession and described herein in the following
manner, to wit:
[STATE THE NUMBER OF ESCROW SHARES TO BE DISTRIBUTED OR
RETAINED AND, IF DISTRIBUTED, THE RECIPIENT(S) OF SUCH
SHARES]
Signed this ____ day of ____________, 1995.
THE HILLHAVEN
CORPORATION
By____________________________
Name:
Title:
NCI ACQUISITION
CORP.
By____________________________
Name:
Title:
______________________________
Thomas E. Phillippe,
Jr.
<PAGE>
<PAGE>
<PAGE>
EXHIBIT D
ESCROW AGENT FEES
_______________________ DOLLARS ($_____) PER YEAR
<PAGE>
<PAGE>
Exhibit 3.3(b)
Part 2
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made this ___
day of ________, 1995, by and among The Hillhaven Corporation, a
Nevada Corporation ("Acquiror"), NCI Acquisition Corp., a
Delaware corporation (such corporation and the Surviving
Corporation being referred to herein together as "AC"), the
individuals listed on Exhibit A (collectively, the
"Shareholders") and Bank One, Indianapolis, N.A. (the "Escrow
Agent").
EXPLANATION STATEMENT
A. Acquiror, AC and the Targets are parties to that
certain Agreement and Plan of Merger and Agreements to Assign
Partnership Interests (the "Merger Agreement"), dated _______
___, 1995. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings assigned
thereto in the Merger Agreement.
B. Prior to the Effective Time, the Shareholders owned all
the capital stock of Nationwide Care, Inc., an Indiana
corporation.
C. In order to induce Acquiror and AC to enter into the
Merger Agreement and to consummate the transactions contemplated
thereby, the Shareholders wish to execute and deliver this
Agreement and to deposit or to cause to be deposited in escrow
hereunder certificates representing five percent (5%) of the
Acquiror Common Shares that comprise the Merger Consideration
(such percentage of shares being referred to herein collectively
as the "Escrow Shares") to secure the indemnification obligations
under Article XIV of the Merger Agreement, the terms of which
Article are incorporated herein by this reference.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, and in consideration of the mutual covenants herein
contained, agree as follows:
1. Deposit of Escrow Shares; Escrow Account; Shareholder
Agent.
1.1 Promptly following the Effective Time, Acquiror shall
withhold from the Merger Consideration and deposit with the
Escrow Agent the Escrow Shares. The Escrow Agent shall establish
an account (the "Escrow Account") for the Shareholders and place
the Escrow Shares therein. The Escrow Agent agrees that the
Escrow Shares shall be held in the Escrow Account and disbursed
by the Escrow Agent in accordance with, and subject to the terms
and conditions of, this Agreement.
<PAGE>
<PAGE>
1.2 Acquiror, AC and the Shareholders acknowledge and agree
that, to the extent and for so long as Escrow Shares are held by
the Escrow Agent hereunder, Acquiror and AC shall have, as of and
from the date such Escrow Shares are received by the Escrow
Agent, a perfected, first priority security interest in such
Escrow Shares to secure the payment of amounts, if any, payable
pursuant to Article XIV of the Merger Agreement. In connection
therewith, the Shareholders expressly agree (i) that the Escrow
Agent is acting solely as Acquiror's and AC's agent to the extent
necessary to perfect their first-priority security interests in
the Escrow Shares and (ii) to execute and deliver such
instruments as Acquiror and AC may from time to time reasonably
request for the purpose of evidencing and perfecting such
security interests.
1.3 All of the Shareholders hereby appoint Thomas E.
Phillippe, Jr., an individual (the "Shareholder Agent"), as their
attorney-in-fact to act as their agent in the performance of all
of their obligations and exercise of all of their rights under
this Agreement.
2. Voting Rights; Dividends on Escrow Shares; Sale of
Shares; Investment of Cash.
2.1 All voting rights with respect to the Escrow Shares
shall remain with the Shareholders. All cash dividends on Escrow
Shares shall be distributed by Acquiror to the Escrow Agent.
Within three (3) business days following receipt thereof by the
Escrow Agent, the Escrow Agent shall distribute such dividends in
respect of the Escrow Shares to the Shareholders, respectively.
2.2 All non-cash dividends (including, without limitation,
any stock split, share dividend, rights offering or
recapitalization) on any Escrow Shares shall be added to the
Escrow Account as additional Escrow Shares fully subject to the
terms of this Agreement.
2.3 At any time while there are Escrow Shares in the Escrow
Account, the Shareholder Agent may, by delivering written
instructions to the Escrow Agent, direct the Escrow Agent to
sell one or more of the Escrow Shares on the NYSE and deposit the
sale proceeds into the Escrow Account, which proceeds shall be
distributed, designated, withheld and otherwise subject to the
terms of this Agreement in the same manner and to the same extent
as the Escrow Shares.
2.4 Cash deposited into the Escrow Account pursuant to
Section 2.3 shall be invested and reinvested by the Escrow Agent
in (a) bonds, treasury notes or other evidences of indebtedness
of, and those unconditionally guaranteed as to the payment of
principal and interest by, the United States, (b) certificates of
deposit of banks or trust companies (including the Escrow Agent)
organized under the laws of the United States, or any state
thereof, each of which has a combined capital, surplus and
retained earnings of at least $50,000,000 and (c) money market
funds, including short term investment funds of the Escrow Agent.
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<PAGE>
In investing and reinvesting any such monies, the Escrow Agent
shall seek to obtain the best yields consistent with safety of
principal and ready marketability. The Escrow Agent shall have
no duty or right to invest cash on deposit in the Escrow Account
other than as provided in the foregoing sentence. Earnings on
cash so invested shall be paid to the Shareholders.
3. Accounting.
The Escrow Agent shall mail to Acquiror, AC and the
Shareholder Agent a written accounting of all transactions
relating to the Escrow Account not less frequently than
quarterly.
4. Disposition of Escrow Shares.
4.1 The Escrow Agent shall distribute the Escrow Shares
only in accordance with (i) written instructions contained in the
form of Exhibit B (the "Escrow Disposition Notice") delivered to
the Escrow Agent and executed by Acquiror, AC and the Shareholder
Agent, (ii) a final arbitration award secured under the
provisions of Section 4.3 hereof, or (iii) an order of a court of
competent jurisdiction pursuant to Section 9, as applicable. The
Escrow Agent shall promptly comply with such instructions, award
or order, as applicable, to the extent that there are sufficient
Escrow Shares in the Escrow Account to so comply. The number of
Escrow Shares to be distributed hereunder shall be (i) determined
using the average closing price of one Acquiror Common Share as
reported on the NYSE for the ten (10) trading days immediately
preceding the date of such distribution and (ii) rounded to the
nearest whole share.
4.2 Promptly following the earlier of the date that the
[Name Redacted] Litigation (as defined in this Section 4.2) has
been settled or otherwise finally resolved or the date that a
summary judgment to the effect that punitive damages will not be
allowed in such litigation has been granted, either of which must
be reflected in a final order of a court of competent
jurisdiction from which appeal may not be taken (due to lapse of
time or otherwise), Acquiror and the Shareholder Agent shall,
subject to Section 4.3, prepare and deliver to the Escrow Agent
the Escrow Disposition Notice, and the Escrow Agent shall
distribute the Escrow Shares to the Shareholders, Acquiror and/or
AC in accordance therewith. As used herein, the "[Name Redacted]
Litigation" shall mean [Name Redacted].
4.3 Acquiror, AC and the Shareholder Agent agree to use
their respective best efforts to resolve any dispute that may
arise with respect to this Agreement amicably and without resort
to any third party dispute resolution forum. At any time
Acquiror or AC on the one hand or the Shareholder Agent on the
other believes that a dispute exists among the parties with
respect to this Agreement, it or they shall give prompt written
<PAGE>
<PAGE>
notice thereof to the other parties. Any dispute which has not
been settled or resolved within thirty (30) days of receipt by
Acquiror, AC or the Shareholder Agent of the notice thereof shall
be submitted for binding arbitration in Marion County, Indiana in
an arbitration proceeding that, except as may otherwise be
provided herein, shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association before a single arbitrator chosen in accordance with
such rules. All evidentiary and discovery matters shall be
conducted in accordance with and governed by the applicable
Federal Rules of Civil Procedure. No later than 10 calendar days
after the arbitrator is appointed, the arbitrator shall schedule
the arbitration for a hearing to commence on a mutually
convenient date. All discovery shall be completed no later than
the commencement of the arbitration hearing or 90 calendar days
after the date that a proper demand for arbitration is served,
whichever occurs first, unless, upon a showing of good cause, the
arbitrator extends such period. The hearing shall commence no
later than 90 calendar days after the arbitrator is appointed and
shall continue until completed. The arbitrator shall issue his
or her award in writing no later than 20 calendar days after the
conclusion of the hearing. The parties to this Agreement agree
that, in rendering an award, the arbitrator shall have no
jurisdiction to consider evidence with respect to or render any
award of judgment for punitive damages or any other amount
awarded for purposes of imposing a penalty. The arbitrator shall
not have the power to amend this Agreement in any respect. The
arbitrator's decision shall be binding and conclusive upon the
parties. The costs of any arbitration conducted pursuant to this
Section 4.3 shall be borne by the non-prevailing party(s), as
identified by the arbitrator, regardless of whether the subject
dispute is arbitrated to completion. Each party hereto agrees to
provide notice of the commencement of any such arbitration
proceeding to the Escrow Agent and the other parties, as the case
may be.
5. Control of Litigation.
5.1 The Shareholder Agent shall control the defense,
conduct or settlement of the [Name Redacted] Litigation, and
Acquiror and AC shall each have the right, at its own expense, to
participate therein by giving written notice to the Shareholder
Agent. If the Shareholder Agent obtains an award from the third
party claimant in the [Name Redacted] Litigation on behalf of the
Shareholders, then Acquiror and AC shall be entitled to recover
their costs, including reasonable attorney's fees of outside
counsel incurred in defending such claim and obtaining such
award, from the proceeds of such award; provided, that such
recovery shall not be a waiver of any right, claim or amount to
which Acquiror or AC may otherwise be entitled.
5.2 Notwithstanding anything herein to the contrary, the
Shareholder Agent shall not have the right to settle or
compromise the [Name Redacted] Litigation without obtaining the
prior written consent of Acquiror, which consent shall not be
unreasonably withheld. In addition, the Shareholder Agent shall
<PAGE>
<PAGE>
not permit to exist any lien, encumbrance or other adverse charge
upon any asset of, or consent to the imposition of any injunction
against, Acquiror or AC or any of their respective affiliates
without obtaining its or their, as applicable, prior written
consent, which consent shall not be unreasonably withheld.
6. Escrow Provisions.
6.1 Upon termination of this Agreement and delivery of the
balance of the Escrow Shares to the parties entitled thereto, the
Escrow Agent shall be discharged from any further obligation
hereunder.
6.2 The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or
other writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated
therein or the propriety, validity or service thereof. The
Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person
purporting to give notice or receipt or advice, or make any
statement or execute any document, in connection with the
provisions hereof has been duly authorized to do so.
6.3 The Escrow Agent shall not be liable to the other
parties hereto for any error of judgment, action taken or omitted
in good faith or mistake of fact or law, or anything which it may
do or refrain from doing in connection therewith, except in the
case of its own gross negligence, willful misconduct or bad
faith.
6.4 The Escrow Agent shall be entitled to consult with
competent and responsible counsel of its choice with respect to
the interpretation of the provisions hereof, and any other legal
matters relating hereto, and shall be fully protected in taking
any action or omitting to take any action in good faith and in
accordance with the advice of such counsel.
6.5 The Escrow Agent shall be entitled to be indemnified
and held harmless by Acquiror, AC and the Shareholders, jointly
and severally, for any and all claims, liabilities, costs,
payments and expenses, including reasonable fees of counsel (who
may be selected by the Escrow Agent), incurred by the Escrow
Agent which arise out of or in connection with any act or
omission by it in the performance of its obligations under this
Agreement, except in the case of the Escrow Agent's own gross
negligence, willful misconduct or bad faith.
7. Time of Performance. Whenever under the terms hereof
the time for performance of any provision shall fall on a date
which is not a regular business day of the Escrow Agent, the
performance thereof on the next succeeding regular business day
of the Escrow Agent shall be deemed to be in full compliance.
<PAGE>
<PAGE>
8. Death, Disability, etc. The death, disability,
bankruptcy or insolvency of any of the Shareholders shall not
affect or prevent the performance by the Escrow Agent of its
obligations and instructions received hereunder. Without
limiting the foregoing sentence, the Shareholder Agent shall
notify the Escrow Agent in writing of any person who or that, as
a result of a Shareholder's death, disability, bankruptcy or
insolvency, should receive distributions, if any, that would
otherwise be made hereunder to such Shareholder.
9. Resolution of Controversies. In the event any dispute
or controversy arises respecting the administration or
disposition of the Escrow Shares, or any part thereof, and such
dispute or controversy has not been submitted to arbitration as
provided in Section 4.3 hereof, the Escrow Agent shall have the
right but not the obligation to interplead the parties to such
dispute or controversy in any court of competent jurisdiction,
including but not limited to the courts of the State of Indiana
and the United States District Court for the Southern District of
Indiana which shall be deemed to be courts of competent
jurisdiction, and to deposit with such court the Escrow Shares
remaining in the Escrow Account, or any portion thereof.
Thereafter the Escrow Agent shall be fully released and
discharged from all further obligations hereunder with respect to
the Escrow Shares held in the Escrow Account or the portion
thereof deposited with the court in such proceedings, except in
the case of its own gross negligence, willful misconduct, or bad
faith. Acquiror, AC and the Shareholders, jointly and severally,
shall reimburse the Escrow Agent for all expenses, fees and
charges (including reasonable attorneys' fees and expenses)
reasonably incurred by the Escrow Agent in any such interpleader
action.
10. Resignation or Removal of Escrow Agent. If the Escrow
Agent resigns or is removed, then Acquiror, AC and the
Shareholder Agent shall mutually agree upon and name a substitute
for the Escrow Agent ("Successor Escrow Agent"), which shall be a
bank or trust company and which shall perform the same duties and
responsibilities, and which shall be entitled to the same
protection and substantially equivalent fees, as the original
Escrow Agent named herein. The Escrow Agent shall have the
unequivocal right to resign as Escrow Agent upon at least sixty
(60) days' prior written notice delivered to Acquiror, AC and the
Shareholder Agent; provided, that, in any event, such resignation
shall not be effective until such time as a Successor Escrow
Agent has been appointed, has accepted its appointment and has
taken possession of the Escrow Shares. Upon mutual agreement by
Acquiror, AC and the Shareholder Agent, the Escrow Agent may be
removed upon at least sixty (60) days' prior written notice;
provided, that, in any event, such removal shall not be effective
until such time as a Successor Escrow Agent has been appointed,
has accepted its appointment and has taken possession of the
Escrow Shares. In either of said events, if a Successor Escrow
Agent is not appointed within said sixty (60) day period, the
Escrow Agent, Acquiror, AC or the Shareholder Agent may petition
<PAGE>
<PAGE>
a court of competent jurisdiction to name a Successor Escrow
Agent, whether by interpleader or other appropriate action, and
the decision of such court shall be binding upon all parties to
this Agreement.
11. Acceptance of Escrow: Compensation of Escrow Agent.
The Escrow Agent hereby agrees to serve as Escrow Agent pursuant
to this Agreement and to perform the duties and responsibilities
conferred upon it hereunder. The Escrow Agent has agreed to
serve hereunder for such fees as are set forth in Exhibit C,
which fees are to be paid as described in Exhibit C. Such fees
shall be borne by Acquiror.
12. Termination. This Agreement shall terminate without
further action of any party when all of the terms hereof shall
have been fully performed.
13. Notices. Any notice, request, instruction or other
document to be given under this Agreement by any party shall be
in writing and shall be delivered personally, by registered or
certified mail, postage prepaid, return receipt requested, by
overnight courier or by facsimile transmission, as follows:
(a) If to Acquiror or AC, at:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, WA 98402
Attention: General Counsel
Facsimile: (206) 756-4845
With a copy to:
Edmund O. Belsheim, Jr.
Bogle & Gates
Two Union Square
601 Union Street
Seattle, WA 98101-2346
Facsimile: (206) 621-2660
(b) If to the Shareholders, at:
c/o Thomas E. Phillippe, Jr.
______________________________
______________________________
Attention:
Facsimile:
With a copy to:
Marcus B. Chandler, Esq.
ICE MILLER DONADIO & RYAN
One American Square
Box 82001
Indianapolis, IN 46282-0002
Facsimile: (317) 236-2219
<PAGE>
<PAGE>
or to such other address or person as any party may designate by
a notice to the other parties which is given in the manner
required above. Any such notice, request, instruction or other
document shall be deemed to have been delivered and received as
of the date personally delivered, or if mailed, three days after
the date so mailed, or if telecopied, the date on which such
telecopy is sent (as confirmed by return facsimile transmission)
or if by overnight courier the day following the day on which
such notice is properly placed with the courier.
14. Cooperation with Escrow Agent. The parties to this
Agreement shall cooperate with the Escrow Agent, as the Escrow
Agent reasonably deems necessary or desirable to perform its
duties and obligations under this Agreement. Without limiting
the foregoing, the parties shall provide the Escrow Agent with
all information necessary to make any distribution, including
names, addresses, social security numbers and tax identification
numbers. The Escrow Agent shall be entitled to rely upon the
most recent information received from any party without further
inquiry and each party shall be responsible for notifying the
Escrow Agent of any new or changed information pertaining to such
party.
15. Taxes: Reports to Governmental Authorities. The
Shareholders severally agree to assume any obligations imposed
now or hereafter by any applicable tax law with respect to any
payment from the Escrow Account to the Shareholders under this
Agreement and undertake to instruct the Escrow Agent in writing
with respect to the Escrow Agent's responsibility for withholding
taxes and any other taxes, assessments or other governmental
charges and any certifications and governmental reporting
required in connection therewith.
16. Miscellaneous.
16.1 This Agreement may not be amended or modified in any
way except by an instrument in writing signed by all of the
parties hereto.
16.2 This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Indiana without
reference to its conflicts of law provisions.
16.3 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same agreement.
16.4 The headings contained in this Agreement are for
convenience only, shall not affect this Agreement in any way, and
shall not be used to construe or interpret the scope or intent of
this Agreement.
<PAGE>
<PAGE>
16.5 This Agreement shall inure to the benefit of and shall
bind the parties hereto and their respective heirs, devisees,
personal representatives, successors, transferees and assigns;
provided, that, except as otherwise expressly set forth in this
Agreement, including without limitation Section 10, neither the
rights nor the obligations of any party may be assigned or
delegated without the prior written consent of the other parties.
IN WITNESS WHEREOF, the parties have duly executed and have
caused to be duly executed this Agreement as of the date first
written above.
THE HILLHAVEN CORPORATION
By____________________________
Name:
Title:
NCI ACQUISITION CORP.
By____________________________
Name:
Title:
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
BANK ONE, INDIANAPOLIS,
N.A.
By____________________________
Name:
Title:
<PAGE>
<PAGE>
<PAGE>
EXHIBIT A
SHAREHOLDERS
Individual
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
<PAGE>
<PAGE>
EXHIBIT B
ESCROW DISPOSITION NOTICE
To: Bank One, Indianapolis, N.A.
From: The Hillhaven Corporation
NCI Acquisition Corp.
Thomas E. Phillippe, Jr.
Date: _________________________
This Escrow Disposition Notice is delivered to you pursuant
to Section 4.1 of the Escrow Agreement, dated __________ ___,
1995 (the "Escrow Agreement"), by and among The Hillhaven
Corporation, a Nevada corporation, NCI Acquisition Corp., a
Delaware corporation, the Shareholders and Bank One,
Indianapolis, N.A. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to those terms
in the Escrow Agreement.
Please be advised that you are hereby directed to distribute
from the Escrow Account the property now held in your possession
and described herein in the following manner, to wit:
[STATE THE NUMBER OF ESCROW SHARES/AMOUNT OF CASH TO BE
DISTRIBUTED AND THE RECIPIENT(S) OF SUCH SHARES/CASH]
Signed this ____ day of ____________, 1995.
THE HILLHAVEN
CORPORATION
By____________________________
Name:
Title:
NCI ACQUISITION
CORP.
By____________________________
Name:
Title:
______________________________
Thomas E. Phillippe,
Jr.
<PAGE>
<PAGE>
<PAGE>
EXHIBIT C
ESCROW AGENT FEES
_______________________ DOLLARS ($_____) PER YEAR
<PAGE>
<PAGE>
EXHIBIT 6.6(a)
________________, 1995
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Gentlemen:
Reference is made to the Agreement and Plan of Merger and
Agreements to Assign Partnership Interests dated as of
_________________, 1995, as amended (the "Agreement"), by and
among The Hillhaven Corporation ("Acquiror"), NCI Acquisition
Corp. ("AC"), Nationwide Care, Inc. ("Nationwide"), Phillippe
Enterprises, Inc. ("PEI"), Meadowvale Skilled Care Center, Inc.
("Meadowvale") and specified Partners of Camelot Care Centers
("Camelot"), Evergreen Woods, Ltd. ("Evergreen") and Shangri-La
Partnership ("Shangri-La")(Nationwide, PEI and Meadowvale are
collectively referred to herein as the "Corporate Targets";
Camelot, Evergreen and Shangri-La are collectively referred to
herein as the "Partnership Targets"; the Corporate Targets and
Partnership Targets are collectively referred to herein as the
"Targets"), providing for the merger of the Corporate Targets
with and into AC and the assignment of all interests in the
Partnership Targets to AC (collectively, the "Acquisitions").
Pursuant to the Agreement, I may receive a certain number of
shares of Common Stock, par value $0.75 per share, of Acquiror in
exchange for the shares of Common Stock of the Corporate Targets
(the "Target Common Shares") or interests in the Partnership
Targets (the "Target Interests") owned by me (all shares of
Acquiror Common Stock to be acquired by me pursuant to the
Agreement being hereinafter referred to as "Acquiror Common
Shares").
I have been advised that I may be deemed to be an
"affiliate" of at least one of the Targets within the meaning of
Rule 144 of the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Act"), and as
that term is used in paragraphs (c) and (d) of Rule 145 under the
Act. For all purposes of this letter, the term "affiliate" shall
have the foregoing meaning. I understand that the Targets are
obligated, pursuant to Section 6.6 of the Agreement, to use their
best efforts to cause me, and each person identified as a
possible affiliate, to deliver this letter (hereinafter referred
to as an "Affiliate Letter") to Acquiror.
A. In connection with, and in consideration of, the matters
set forth above:
<PAGE>
<PAGE>
1. I confirm that I have no agreement (oral or
written) with any other affiliate of the Targets pursuant to
which I am subject to restrictions on sales similar to the
restrictions in this Affiliate Letter. I represent and warrant
that as of the date hereof I beneficially own such Target Common
Shares and Target Interests as are listed on Schedule A attached
hereto.
2. I understand that the Acquiror Common Shares
will, upon the effectiveness of the Acquisitions, be registered
with the SEC under the Act. However, I also understand that,
since I may be an affiliate of one of the Targets at the time the
Agreement is submitted to the stockholders and partners of the
Targets for approval and the distribution by me as a former
affiliate of a Target of Acquiror Common Shares has not been
registered under the Act, any sale or disposition by me of any of
the Acquiror Common Shares may, under current law, be made only
in conformity with the provisions of Rule 145(d) under the Act,
pursuant to an effective registration statement under the Act, or
pursuant to an exemption from registration thereunder. I
understand that the provisions of Rule 145(d) restrict my sales,
during the two-year period after the effective date of the
Acquisitions, and permit sales, in general, while Acquiror is
subject to the requirements to file, and is filing, periodic
reports under Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, only in brokers' transactions or
transactions directly with a market maker where the aggregate
number of shares sold at any time together with all sales of
restricted Acquiror securities sold for my account during the
preceding three-month period, does not exceed, generally, the
greater of (i) one percent of the outstanding shares of Common
Stock of Acquiror, or (ii) the average weekly volume of trading
in such securities on all national securities exchanges and/or
reported through the automated quotation system of a registered
securities association during the four-week period preceding any
such sale, all as set forth in more detail in Rules 144 and 145
under the Act.
3. In view of the foregoing paragraph 2, unless
the Agreement is terminated, I agree that after the effective
date of the Acquisitions, I will not offer to sell, sell or
otherwise dispose of Acquiror Common Shares except (i) pursuant
to an effective registration statement; (ii) pursuant to the
provisions of Rule 145 under the Act; or (iii) pursuant to
another exemption from registration under the Act.
<PAGE>
<PAGE>
I have carefully read this letter and understand the
limitations stated herein upon the sale, transfer or other
disposition of (i) Target Common Shares and Target Interests
beneficially owned by me or hereafter acquired by me and (ii)
Acquiror Common Shares that I may acquire pursuant to the
Agreement.
B. In connection herewith, Acquiror represents, warrants,
acknowledges and agrees as follows:
1. Acquiror shall not give, or cause to be
given, stop transfer instructions to the transfer agent of
Acquiror with respect to any of the Acquiror Common Shares issued
in connection with the Acquisitions except for such instructions
as shall be in conformity with the provisions hereof, and shall
place, or cause to be placed, on any certificate representing
such Acquiror Common Shares only the following legend:
The shares represented by this certificate
were issued in a transaction to which Rule
145 under the Securities Act of 1933 applies.
The shares represented by this certificate
may be transferred only in accordance with
the terms of a letter agreement dated
_________________, 1995 between the
registered holder and The Hillhaven
Corporation, a copy of which is on file at
the principal offices of The Hillhaven
Corporation.
2. Acquiror shall use its best efforts to file,
in a timely manner, all reports with the SEC necessary for the
current public information requirement of Rule 144 under the Act
to be satisfied.
Very truly yours,
Agreed this ______ day of
____________, 1995:
The Hillhaven Corporation
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT 6.6(b)
________________, 1995
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Gentlemen:
Reference is made to the Agreement and Plan of Merger and
Agreements to Assign Partnership Interests dated as of
_________________, 1995, as amended (the "Agreement"), by and
among The Hillhaven Corporation ("Acquiror"), NCI Acquisition
Corp. ("AC"), Nationwide Care, Inc. ("Nationwide"), Phillippe
Enterprises, Inc. ("PEI"), Meadowvale Skilled Care Center, Inc.
("Meadowvale") and specified Partners of Camelot Care Centers
("Camelot"), Evergreen Woods, Ltd. ("Evergreen") and Shangri-La
Partnership ("Shangri-La")(Nationwide, PEI and Meadowvale are
collectively referred to herein as the "Corporate Targets";
Camelot, Evergreen and Shangri-La are collectively referred to
herein as the "Partnership Targets"; the Corporate Targets and
Partnership Targets are collectively referred to herein as the
"Targets"), providing for the merger of the Corporate Targets
with and into AC and the assignment of all interests in the
Partnership Targets to AC (collectively, the "Acquisitions").
Pursuant to the Agreement, I may receive a certain number of
shares of Common Stock, par value $0.75 per share, of Acquiror in
exchange for the shares of Common Stock of the Corporate Targets
(the "Target Common Shares") or interests in the Partnership
Targets (the "Target Interests") owned by me (all shares of
Acquiror Common Stock to be acquired by me pursuant to the
Agreement being hereinafter referred to as "Acquiror Common
Shares").
I understand that the Targets are obligated, pursuant to
Section 6.6 of the Agreement, to use their best efforts to cause
each shareholder of the Corporate Targets and each partner of the
Partnership Targets to deliver this letter (hereinafter referred
to as the a "Pooling Letter") to Acquiror.
In connection with, and in consideration of, the matters set
forth above:
<PAGE>
<PAGE>
1. I confirm that I have no agreement (oral or written)
with any other shareholder or partner of the Targets pursuant to
which I am subject to restrictions on sales similar to the
restrictions in this Pooling Letter. I represent and warrant
that as of the date hereof I beneficially own such Target Common
Shares and Target Interests as are listed on Schedule A attached
hereto.
2. I understand that, for accounting purposes, it is
anticipated that the Acquisitions will qualify for pooling-of-
interests accounting treatment under generally accepted
accounting principles and that, in order for the Acquisitions to
so qualify, shareholders or partners of any Target can sell
Target Common Shares, Target Interests and Acquiror Common Shares
only in accordance with certain restrictions. In this
connection, I will not make any sales of Target Common Shares or
Target Interests prior to the effective date of the Acquisitions,
or sales of Acquiror Common Shares after the effective date of
the Acquisitions, that would cause the criteria for pooling-of-
interests accounting treatment to be violated, it being
understood that sales of shares in accordance with paragraph 3
below shall be deemed not to violate my obligations under this
Pooling Letter.
3. In view of the foregoing paragraph 2, unless the
Agreement is terminated, I agree that with respect to the period
beginning on the effective date of the Acquisitions and ending at
such time as financial results covering at least 30 days of post-
Acquisition combined operations have been published, I will not
sell, transfer or otherwise dispose of, or reduce my interest in,
or risk relating to, any Acquiror Common Shares received by me
pursuant to the Agreement, unless prior to any such transaction I
have obtained a letter from an independent public accounting firm
satisfactory to Acquiror to the effect that such transactions
will not cause the criteria for pooling-of-interests accounting
to be violated.
4. I have carefully read this letter and understand the
limitations stated herein upon the sale, transfer or other
disposition of (i) Target Common Shares and Target Interests
beneficially owned by me or hereafter acquired by me and (ii)
Acquiror Common Shares that I may acquire pursuant to the
Agreement.
Very truly yours,
<PAGE>
<PAGE>
EXHIBIT 6.15
CERTIFICATE
Executed by Nationwide Care, Inc.
This Certificate is executed and delivered in connection
with the Agreement and Plan of Merger and Agreements to Assign
Partnership Interests, by and among The Hillhaven Corporation, a
Nevada corporation ("Acquiror"), NCI Acquisition Corp., a
Delaware corporation ("AC"), Nationwide Care, Inc., an Indiana
corporation ("Nationwide"), Phillippe Enterprises, Inc., an
Indiana corporation ("PEI"), Meadowvale Skilled Care Center,
Inc., an Indiana corporation ("Meadowvale") (Nationwide, PEI and
Meadowvale are collectively referred to as the "Targets"), the
partners of Camelot Care Centers, an Indiana general partnership
("Camelot"), the partners of Shangri-La Partnership, an Indiana
general partnership ("Shangri-La"), and the limited partners of
Evergreen Woods, Ltd., a Florida limited partnership
("Evergreen") (Camelot, Shangri-La and Evergreen are collectively
referred to as the "Partnerships"), dated February 27, 1995
("Reorganization Agreement"); and the documents executed and
delivered in connection therewith (collectively with the
Reorganization Agreement, the "Merger Documents"). Terms which
are not defined herein and are used with initial capitalization
when the rules of grammar would not otherwise so require and
which are defined in the Merger Documents shall have the meanings
assigned to such terms in the Merger Documents.
In accordance with Section 9.10 of the Reorganization
Agreement, the undersigned has requested the opinions of Ice
Miller Donadio & Ryan as to certain federal income tax
consequences of the Merger as a condition precedent to Closing.
In rendering its opinion, Ice Miller Donadio & Ryan may assume
that, and the undersigned hereby certifies, represents, and
warrants to Ice Miller Donadio & Ryan that: (1) the Merger will
be consummated in accordance with the terms, conditions, and
other provisions of the Merger Documents; and (2) all of the
factual information, descriptions, representations, and
assumptions set forth in the Merger Documents and in this
Certificate are accurate and complete in all respects and will be
accurate and complete in all respects at the Effective Time of
the Merger.
The Merger
Nationwide operates long-term health care centers primarily
located in Indiana, Ohio and Florida. Dr. Thomas E. Phillippe,
Sr. and Thomas E. Phillippe, Jr. are the majority owners of
Nationwide. The capital structure of Nationwide consists of:
48,000,000 authorized shares of Common Stock, without par value,
of which approximately 7,431,458 shares are issued and
outstanding (the "Nationwide Voting Common"); 2,000,000
authorized shares of Nonvoting Common Stock, without par value,
<PAGE>
<PAGE>
of which 76,592 shares are issued and outstanding (the
"Nationwide Nonvoting Common") (the Nationwide Voting Common and
the Nationwide Nonvoting Common are collectively referred to
herein as the "Nationwide Common Shares"); and 2,000,000
authorized shares of Preferred Stock, without par value, of which
300,000 shares of Redeemable Preferred Stock are issued and
outstanding (the "Nationwide Preferred Stock"). Nationwide also
has outstanding warrants to purchase 987,188 shares of Nationwide
Nonvoting Common (the "Nationwide Warrants"). Nationwide files a
consolidated return with its one subsidiary, and Nationwide does
not have an excess loss account with respect to the stock of, or
gains deferred under Treasury Regulation Section 1502-13 with respect
to, any such subsidiary. Except for the Nationwide Warrants,
there are no outstanding options or warrants to purchase
Nationwide stock or outstanding securities or other instruments
or rights convertible into Nationwide stock or which constitute
equity under general principles of federal tax law, and no such
options, warrants, securities, instruments, or rights have been
or will be issued or cancelled in contemplation of the Merger.
The Merger Documents provide that Nationwide will be merged
with and into AC. The Merger will be consummated in accordance
with the Indiana Business Corporation Law, as amended ("BCL"),
and the Nevada General Corporation Law, as amended ("NCL"). The
Merger was approved by the Board of Directors of Nationwide and
by the holders of a majority of the outstanding shares of
Nationwide stock at a duly called and held meeting of the
Nationwide shareholders on ______________, 1995.
At the Effective Time of the Merger, the following will
occur: (1) all of the assets and liabilities of Nationwide will,
by operation of law, become assets and liabilities of AC, and the
separate corporate existence of Nationwide will cease; (2) shares
of Nationwide stock held in treasury by Nationwide will be
cancelled; and (3) each remaining share of Nationwide Common
Stock then outstanding will be automatically converted into the
right to receive that number of shares of Acquiror Common Stock
determined in accordance with the Reorganization Agreement,
except that no fractional shares of Acquiror Common Stock will be
issued in the Merger. Instead, each holder of a share of
Nationwide Common Stock otherwise entitled to receive a fraction
of a share of Acquiror Common Stock will receive an amount of
cash determined in accordance with the Reorganization Agreement.
Other than shares of Acquiror Common Stock and cash issued in
lieu of fractional shares, there will be no cash or other
property exchanged in the Merger.
Prior to the Effective Time of the Merger, the Nationwide
Preferred Stock will be redeemed by Nationwide. At the Effective
Time of the Merger, the Nationwide Warrants shall be cancelled in
exchange for warrants for Acquiror Common Stock upon terms no
more favorable than the Nationwide Warrants.
<PAGE>
<PAGE>
At the Effective Time of the Merger, the Partnership
Interests shall be assigned to AC. The parties agree that the
Partnership Interests have no or nominal value.
Additional Representations
In addition to the foregoing, the undersigned hereby
certifies, represents, and warrants to Ice Miller Donadio & Ryan
as follows:
1. The Merger will be a statutory merger, consummated in
accordance with the applicable provisions of the BCL and the NCL.
AC will be the surviving entity following the Merger.
2. The fair market value of the shares of Acquiror Common
Stock and other consideration received by each Nationwide
shareholder will be approximately equal to the fair market value
of the shares of Nationwide stock surrendered in exchange
therefor.
3. There is no plan or intention by the shareholders of
Nationwide who own one percent or more of the shares of
Nationwide stock, and to the best of the knowledge of the
management of Nationwide, there is no plan or intention on the
part of the remaining shareholders of Nationwide, to sell,
exchange, or otherwise dispose of a number of shares of Acquiror
Common Stock received in the Merger that would reduce the
Nationwide shareholders' ownership of such shares of Acquiror
Common Stock (i.e., the shares of Acquiror Common Stock received
in the Merger) to a number of shares having an aggregate value,
as of the Effective Time of the Merger, of less than 50 percent
of the value of all of the formerly outstanding shares of
Nationwide stock as of the same date. For purposes of this
representation, shares of Nationwide stock exchanged for cash or
other property, surrendered by dissenters, or exchanged for cash
in lieu of fractional shares of Acquiror Common Stock will be
treated as outstanding shares of Nationwide stock at the
Effective Time of the Merger. Moreover, shares of Nationwide
stock and shares of Acquiror Common Stock held by Nationwide
shareholders and otherwise sold, redeemed, or disposed of prior
or subsequent to the Merger will be considered in making this
representation. There have been and will be no distributions to
the Nationwide shareholders with respect to their Nationwide
stock made in contemplation of the Merger, and no Nationwide
stock has been or will be sold, redeemed or otherwise disposed of
in contemplation of the Merger. No Nationwide shareholders are
entitled to dissenters rights in connection with the proposed
Merger and, consequently, no payments will be made to dissenters
in connection with the Merger.
<PAGE>
<PAGE>
4. AC will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair
market value of the gross assets held by Nationwide immediately
prior to the Merger. For purposes of this representation,
amounts paid to dissenters, amounts paid to Nationwide
shareholders who receive cash or other property, Nationwide
assets used to pay its reorganization expenses, and all
redemptions and distributions (except for regular, normal
dividends) made by Nationwide immediately preceding the Merger,
will be included as assets of Nationwide held immediately prior
to the Merger.
5. The liabilities of Nationwide assumed by AC and the
liabilities to which the transferred assets of Nationwide are
subject were incurred by Nationwide in the ordinary course of its
business.
6. Acquiror and AC do not own, and have not owned during
the past five years, any Nationwide stock, either directly or
indirectly, including ownership by any Acquiror or AC subsidiary.
7. Nationwide will pay its expenses, if any, incurred in
connection with the Merger, except that Acquiror and AC may pay
or assume certain expenses of Nationwide that are solely and
directly related to the Merger in accordance with the guidelines
established in Revenue Ruling 73-54, 1973-1 C.B. 187. Nationwide
will not pay the expenses of Acquiror, AC, or the Nationwide
shareholders, if any, incurred in connection with the Merger.
8. There is no intercorporate indebtedness existing
between Acquiror and Nationwide or any Nationwide subsidiary, or
between AC and Nationwide or any Nationwide subsidiary, that was
issued, acquired, or will be settled at a discount.
9. Neither Nationwide nor any Nationwide subsidiary is an
investment company as defined in Sections 368 (a)(2)(F)(iii) and
368(a)(2)(F)(iv) of the Internal Revenue Code of 1986, as amended
(the "Code").
10. Neither Nationwide nor any Nationwide subsidiary is
under the jurisdiction of a court in a Title 11 or similar case
within the meaning of Code Section 368(a)(3)(A).
11. The fair market value of the assets of Nationwide
transferred to AC will equal or exceed the sum of the liabilities
assumed by AC, plus the amount of liabilities, if any, to which
the transferred assets are subject.
12. The payment of cash in lieu of fractional shares of
Acquiror Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Acquiror of issuing fractional
shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in
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the Merger to the Nationwide shareholders in lieu of issuing
fractional shares of Acquiror Common Stock will not exceed one
percent of the total consideration that will be issued in the
Merger to the Nationwide shareholders in exchange for their
shares of Nationwide stock. The fractional share interests of
each Nationwide shareholder will be aggregated, and no Nationwide
shareholder will receive cash in an amount equal to or greater
than the value of one full share of Acquiror Common Stock.
13. None of the compensation received by any shareholder
who is an employee of Nationwide will be separate consideration
for, or allocable to, any of their shares of Nationwide stock.
None of the shares of Acquiror Common Stock received by any
shareholder who is an employee of Nationwide will be separate
consideration for, or allocable to, any employment agreement.
The compensation paid to any shareholder who is an employee of
Nationwide will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
14. The Merger is being effected for bona fide business
reasons. Nationwide has looked for opportunities to expand its
nursing care operations and increase its operating efficiencies.
Nationwide also recognizes that some of its senior management
executives, who are both officers and directors, are approaching
retirement age, and others have expressed a desire to reduce or
discontinue their role in the management of Nationwide.
Consequently, Nationwide, in considering business expansion
opportunities, has looked for businesses with strong senior
management with experience in the nursing care industry.
Nationwide determined that Acquiror and AC offer an opportunity
for it to meet these objectives. Nationwide believes that a
combination of its operations with Acquiror and AC will provide
increased opportunity and flexibility for profitable expansion
and diversification, will enhance its ability to provide more
efficient and dependable service, and will result in operating
efficiencies and cost savings.
15. To the extent that a portion of the shares of Acquiror
Common Stock issued by Acquiror in exchange for Nationwide stock
will be placed in escrow by the Nationwide shareholders and will
be made subject to a condition pursuant to the Reorganization
Agreement and the Escrow Agreement, for possible return to
Acquiror under specified conditions: (1) there is a valid
business reason for establishing the arrangement in that the
escrow is a mechanism to accomplish an exchange price adjustment,
bargained for at arm's length, in the event of a breach by
Nationwide, and no Nationwide shareholder is liable for any such
breach; (2) the shares of Acquiror Common Stock subject to such
arrangement will appear as issued and outstanding on the balance
sheet of Acquiror and such shares of Acquiror Common Stock will
be legally outstanding under applicable state law; (3) all
dividends paid on such shares of Acquiror Common Stock will be
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distributed currently to the Nationwide shareholders; (4) all
voting rights of such shares of Acquiror Common Stock will be
exercisable by or on behalf of the Nationwide shareholders or
their authorized agent; (5) no shares of such Acquiror Common
Stock will be subject to restrictions requiring their return to
Acquiror because of death, failure to continue employment, or
similar restrictions; (6) all such shares of Acquiror Common
Stock will be released from the arrangement within five years
from the date of consummation of the Merger (except where there
is a bona fide dispute as to whom the shares of Acquiror Common
Stock should be released); (7) at least 50 percent of the number
of shares of each class of Acquiror Common Stock issued initially
to the Nationwide shareholders will not be subject to the
arrangement; (8) the return of the shares of Acquiror Common
Stock will not be triggered by an event the occurrence or
nonoccurrence of which is within the control of the Nationwide
shareholders; (9) the return of shares of Acquiror Common Stock
will not be triggered by the payment of additional tax or
reduction in tax paid as a result of an Internal Revenue Service
audit of the Nationwide shareholders or the corporations either
(a) with respect to the Merger, or (b) when the Merger involves
persons related within the meaning of Code Section 267(c)(4); and
(10) the mechanism for the calculation of the number of shares of
Acquiror Common Stock to be returned is objective and will be
readily ascertainable.
The foregoing is provided to Ice Miller Donadio & Ryan in
connection with the preparation of its opinions. We understand
that its opinions will be premised on the basis that all of the
facts, representations, and assumptions on which it is relying,
whether contained herein or elsewhere, are accurate and complete
in all respects and will be accurate and complete in all respects
at the Effective Time of the Merger.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of this ________ day of ______________________,
1995.
NATIONWIDE CARE,
INC.
By:
____________________________
Dr. Thomas E.
Phillippe, Sr.
Chairman of the
Board
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Exhibit 7.7
CERTIFICATE
Executed by The Hillhaven Corporation and Acquisition Corp.
for Nationwide Care, Inc.
This Certificate is executed and delivered in connection
with the Agreement and Plan of Merger and Agreements to Assign
Partnership Interests, by and among The Hillhaven Corporation, a
Nevada corporation ("Acquiror"), NCI Acquisition Corp., a
Delaware corporation ("AC"), Nationwide Care, Inc., an Indiana
corporation ("Nationwide"), Phillippe Enterprises, Inc., an
Indiana corporation ("PEI"), Meadowvale Skilled Care Center,
Inc., an Indiana corporation ("Meadowvale") (Nationwide, PEI and
Meadowvale are collectively referred to as the "Targets"), the
partners of Camelot Care Centers, an Indiana general partnership
("Camelot"), the partners of Shangri-La Partnership, an Indiana
general partnership ("Shangri-La"), and the limited partners of
Evergreen Woods, Ltd., a Florida limited partnership
("Evergreen") (Camelot, Shangri-La and Evergreen are collectively
referred to as the "Partnerships"), dated February 27, 1995
("Reorganization Agreement"); and the documents executed and
delivered in connection therewith (collectively with the
Reorganization Agreement, the "Merger Documents"). Terms which
are not defined herein and are used with initial capitalization
when the rules of grammar would not otherwise so require and
which are defined in the Merger Documents shall have the meanings
assigned to such terms in the Merger Documents.
In accordance with Section 9.10 of the Reorganization
Agreement, Nationwide has requested the opinions of Ice Miller
Donadio & Ryan as to certain federal income tax consequences of
the Merger as a condition precedent to Closing. This Certificate
is issued by Acquiror and AC in accordance with Section 7.7 of
the Reorganization Agreement. In rendering its opinion, Ice
Miller Donadio & Ryan may assume that, and the undersigned hereby
certifies, represents, and warrants to Ice Miller Donadio & Ryan
that: (1) the Merger will be consummated in accordance with the
terms, conditions, and other provisions of the Merger Documents;
and (2) all of the factual information, descriptions,
representations, and assumptions set forth in the Merger
Documents and in this Certificate are accurate and complete in
all respects and will be accurate and complete in all respects at
the Effective Time of the Merger.
The Merger
Acquiror and its subsidiaries operate nursing centers,
pharmacies and retirement housing communities. Acquiror is the
parent corporation of AC. AC is a wholly-owned first tier
subsidiary of Acquiror.
The capital structure of Acquiror consists of 60 million
authorized shares of Common Stock, par value $.75 per share of
which approximately 32,824,863 are outstanding (the "Acquiror
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Common Shares"); 25 million authorized shares of preferred stock,
par value $0.15 per share, of which the following series have
been designated: 3 million authorized shares of Series A
Preferred Stock, of which no shares are outstanding; 950
authorized shares of Series B Convertible Preferred Stock, of
which 618 shares have been designated as Subseries 1, of which no
shares are outstanding; 35,000 authorized shares of Series C
Preferred Stock, all of which are outstanding; and 300,000
authorized shares of Series D Preferred Stock, of which
approximately 63,403 are outstanding. The capital structure of
AC consists of 1,000 authorized shares of Common Stock, par
value, $1.00 per share, all of which are outstanding and owned by
Acquiror.
The Merger Documents provide that Nationwide will be merged
with and into AC. The Merger will be consummated in accordance
with the Indiana Business Corporation Law, as amended ("BCL"),
and the Nevada General Corporation Law, as amended ("NCL"). The
Merger was approved by the Board of Directors of Acquiror and AC
and by the holders of a majority of the outstanding shares of
Acquiror Common Stock at a duly called and held meeting of the
Acquiror shareholders on _________________, 1995.
At the Effective Time of the Merger, the following will
occur: (1) all of the assets and liabilities of Nationwide will,
by operation of law, become assets and liabilities of AC, and the
separate corporate existence of Nationwide will cease; (2) shares
of Nationwide stock held in treasury by Nationwide will be
cancelled; and (3) each remaining share of Nationwide Common
Stock then outstanding will be automatically converted into the
right to receive that number of shares of Acquiror Common Stock
determined in accordance with the Reorganization Agreement,
except that no fractional shares of Acquiror Common Stock will be
issued in the Merger. Instead, each holder of a share of
Nationwide Common Stock who otherwise would be entitled to
receive a fraction of a share of Acquiror Common Stock will
receive an amount of cash determined in accordance with the
Reorganization Agreement. Other than shares of Acquiror Common
Stock and cash issued in lieu of fractional shares, there will be
no cash or other property exchanged in the Merger.
At the Effective Time of the Merger, the Nationwide Warrants
shall be cancelled in exchange for warrants for Acquiror Common
Stock upon terms no more favorable than the Nationwide Warrants.
At the Effective Time of the Merger, the Partnership
Interests shall be assigned to AC. The parties agree that the
Partnership Interests have no or nominal value.
Neither Acquiror nor AC will make or permit any
distributions to the Nationwide shareholders with respect to
their Nationwide stock in contemplation of the Merger or any
payments to dissenters in connection with the Merger.
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Except for the Nationwide Warrants, neither Acquiror nor AC
is aware of any outstanding options or warrants to purchase
Nationwide shares or outstanding securities or other instruments
or rights, convertible into Nationwide shares or which constitute
equity under general principles of federal tax law, and no such
options, warrants, securities, instruments or rights have been or
will be issued or cancelled in contemplation of the Merger.
Additional Representations
In addition to the foregoing, the undersigned hereby
certify, represent, and warrant to Ice Miller Donadio & Ryan as
follows:
1. The Merger will be a statutory merger, consummated in
accordance with the applicable provisions of the BCL and NCL. AC
will be the surviving entity following the Merger.
2. The fair market value of the shares of Acquiror Common
Stock and other consideration received by each Nationwide
shareholder will be approximately equal to the fair market value
of the shares of Nationwide stock surrendered in exchange
therefor.
3. Prior to the Merger, Acquiror will be in control of AC
within the meaning of Section 368(c) of the Internal Revenue Code
of 1986, as amended (the "Code"), and AC will be a first-tier
subsidiary of Acquiror.
4. Following the Merger, AC will not issue additional
shares of its stock that would result in Acquiror losing control
of AC within the meaning of Code Section 368(c).
5. Acquiror has no plan or intention to reacquire any of
its stock issued in the Merger.
6. Acquiror has no plan or intention to liquidate AC or
any Target subsidiary; to merge AC or any Target subsidiary with
and into another corporation; to sell or otherwise dispose of the
stock of AC or any Target subsidiary; or to cause or permit AC to
sell or otherwise dispose of any of its assets, the assets of
Nationwide acquired in the Merger, or the assets of any Target
subsidiary, except for dispositions made in the ordinary course
of business or transfers described in Code Section 368(a)(2)(C).
7. Following the Merger, AC will continue the historic
business of Nationwide or use a significant portion of
Nationwide's historic business assets in a business.
8. Acquiror and AC will pay their respective expenses, if
any, incurred in connection with the Merger. Neither Acquiror
nor AC will pay the expenses of Nationwide or the Nationwide
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shareholders, if any, incurred in connection with the Merger,
except that Acquiror and AC may pay or assume certain expenses of
Nationwide that are solely and directly related to the Merger in
accordance with the guidelines established in Revenue Ruling 73-
54, 1973-1 C.B. 187.
9. There is no intercorporate indebtedness existing
between Acquiror and Nationwide, or between AC and Nationwide,
that was issued, acquired, or will be settled at a discount.
10. Neither Acquiror nor AC is an investment company as
defined in Code Sections 368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
11. Neither Acquiror nor AC is under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Code
Section 368(a)(3)(A).
12. No stock of AC will be issued in the Merger.
13. The payment of cash in lieu of fractional shares of
Acquiror Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Acquiror of issuing fractional
shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in
the Merger to the Nationwide shareholders in lieu of issuing
fractional shares of Acquiror Common Stock will not exceed one
percent of the total consideration that will be issued in the
Merger to the Nationwide shareholders in exchange for their
shares of Nationwide stock. The fractional share interests of
each Nationwide shareholder will be aggregated, and no Nationwide
shareholder will receive cash in an amount equal to or greater
than the value of one full share of Acquiror Common Stock.
14. Acquiror and AC do not own, and have not owned during
the past five years, any shares of Nationwide stock, either
directly or indirectly, including any ownership by any Acquiror
or AC subsidiary. Neither Acquiror nor AC will acquire, directly
or indirectly, any shares of Nationwide stock prior to the
Effective Time of the Merger.
15. The Merger is being effected for the bona fide business
reasons that Acquiror and its subsidiaries have looked for growth
opportunities which would increase their percentage share of the
nursing care market while increasing their operating efficiencies
by achieving economies of scale as a larger service provider.
Due in part to the proximity of the service areas, Acquiror
determined that Nationwide represented such an opportunity and
expressed an interest in combining the resources of the
companies. Acquiror and AC believe that a combination of their
operations with Nationwide will provide increased opportunity and
flexibility for profitable expansion and diversification, will
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enhance their ability to provide more efficient and dependable
service, and will result in operating efficiencies and cost
savings.
16. Following the Merger, AC will hold at least 90 percent
of the fair market value of the net assets of Nationwide and at
least 70 percent of the fair market value of the gross assets of
Nationwide held immediately prior to the Merger, and at least 90
percent of the fair market value of the net assets of AC and at
least 70 percent of the fair market value of the gross assets of
AC held immediately prior to the Merger. For purposes of this
representation, amounts paid by Nationwide or AC to dissenters,
amounts paid by Nationwide or AC to Nationwide or AC shareholders
who receive cash or other property, amounts used by Nationwide or
AC to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by
Nationwide or AC immediately preceding the Merger, will be
included as assets of Nationwide or AC, respectively, immediately
prior to the Merger.
17. The fair market value of the assets of Nationwide
transferred to AC will equal or exceed the sum of the liabilities
of Nationanwide assumed by AC, plus the amount of liabilities, if
any, to which the transferred assets are subject.
18. None of the compensation received by any shareholder
who is an employee of Nationwide will be separate consideration
for, or allocable to, any of such shareholder's shares of
Nationwide stock. None of the shares of Acquiror Common Stock
received by any shareholder who is an employee of Nationwide will
be separate consideration for, or allocable to, any employment
agreement. The compensation paid to any shareholder who is an
employee of Nationwide will be for services actually rendered and
will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services.
19. To the extent that a portion of the shares of Acquiror
Common Stock issued in exchange for the Nationwide stock will be
placed in escrow by the Nationwide shareholders and will be made
subject to a condition pursuant to the Reorganization Agreement
and the Escrow Agreement, for possible return to Acquiror under
specified conditions: (1) there is a valid business reason for
establishing the arrangement in that the escrow is a mechanism to
accomplish an exchange price adjustment, bargained for at arm's
length, in the event of a breach by Nationwide, and no Nationwide
shareholder is liable for any such breach; (2) the shares of
Acquiror Common Stock subject to such arrangement will appear as
issued and outstanding on the balance sheet of Acquiror and such
shares of Acquiror Common Stock will be legally outstanding under
applicable state law; (3) all dividends paid on such shares of
Acquiror Common Stock will be distributed currently to the
Nationwide shareholders; (4) all voting rights of such shares of
Acquiror Common Stock will be exercisable by or on behalf of the
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Nationwide shareholders or their authorized agent; (5) no shares
of such Acquiror Common Stock will be subject to restrictions
requiring their return to Acquiror because of death, failure to
continue employment, or similar restrictions; (6) all such shares
of Acquiror Common Stock will be released from the arrangement
within five years from the date of consummation of the Merger
(except where there is a bona fide dispute as to whom the shares
of Acquiror Common Stock should be released); (7) at least 50
percent of the number of shares of each class of Acquiror Common
Stock issued initially to the Nationwide shareholders will not be
subject to the arrangement; (8) the return of the shares of
Acquiror Common Stock will not be triggered by an event the
occurrence or nonoccurrence of which is within the control of the
Nationwide shareholders; (9) the return of shares of Acquiror
Common Stock will not be triggered by the payment of additional
tax or reduction in tax paid as a result of an Internal Revenue
Service audit of the Nationwide shareholders or the corporations
either (a) with respect to the Merger, or (b) when the Merger
involves persons related within the meaning of Code Section
267(c)(4); and (10) the mechanism for the calculation of the
number of shares of Acquiror Common Stock to be returned is
objective and will be readily ascertainable.
The foregoing is provided to Ice Miller Donadio & Ryan in
connection with the preparation of its opinions. We understand
that its opinions will be premised on the basis that all of the
facts, representations, and assumptions on which it is relying,
whether contained herein or elsewhere, are accurate and complete
in all respects and will be accurate and complete in all respects
at the Effective Time of the Merger.
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of this _______ day of ______________, 1995.
THE HILLHAVEN CORPORATION
By:
Printed:
Title:
NCI ACQUISITION CORP.
By:
Printed:
Title:
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Exhibit 12.2(h)
Part 1
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT
(this "Agreement"), dated [ ], 1995, is made among The
Hillhaven Corporation, a Nevada corporation ("Acquiror"), NCI
Acquisition Corp., a Delaware corporation ("AC"), and Dr. Thomas
E. Phillippe, Sr. ("Phillippe"), an individual.
WHEREAS, Phillippe and certain
other persons have, on this date, as part of a single
transaction, delivered to Acquiror all the issued and outstanding
shares of the capital stock of Nationwide Care, Inc., Phillippe
Enterprises, Inc., and Meadowvale Skilled Care Center, Inc., each
an Indiana corporation (collectively, the "Corporate Targets"),
and delivered to AC all the outstanding interests in Camelot Care
Centers, a general partnership governed by the laws of Indiana,
Shangri-La Partnership, a general partnership governed by the
laws of Indiana, and Evergreen Woods, Ltd., a Florida limited
partnership (together, the "Partnership Targets") (the Corporate
Targets and the Partnership Targets being referred to herein
collectively as the "Targets"), pursuant to that certain
Agreement and Plan of Merger and Agreements to Assign Partnership
Interests among Acquiror, AC and the Targets, dated [ ],
1995 (the "Merger Agreement"; such transaction contemplated
therein hereinafter referred to as the "Transaction");
WHEREAS, immediately prior to the
Transaction, Acquiror and the Targets are engaged in various
locations in the following businesses (i) owning, operating and
managing nursing homes and assisted living centers and
(ii) providing home health care and rehabilitation therapy care
(the foregoing businesses being referred to herein collectively
as the "Business Activities");
WHEREAS, upon consummation of the
Transaction, Acquiror and AC shall be engaged in the Business
Activities;
WHEREAS, Phillippe has acquired
knowledge relating to the Business Activities as a result of
Phillippe's relationship with the Targets; and
WHEREAS, as part of, and a
condition precedent to, the Transaction, Phillippe has agreed to
enter into this Agreement.
NOW, THEREFORE, in consideration
of the mutual premises and agreements herein set forth, the
parties hereto, intending to be legally bound, agree as follows:
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1.Definitions. All capitalized
terms used and not defined herein shall have the meanings given
such terms in the Merger Agreement. References to "Phillippe"
herein shall mean Phillippe and any of his Affiliates.
2.Rights of Acquiror and AC.
Covenants herein contained are cumulative to the rights of
Acquiror and AC under the laws of the United States, the states
of Washington, Indiana, Ohio and Florida and other states, as
applicable, respecting Acquiror's and AC's rights to protect
themselves from the competition of Phillippe.
3.Non-Competition. Phillippe
agrees that, for a period of five (5) years from the date of the
Effective Time, Phillippe shall not, directly or indirectly:
(a)have an interest in, own,
manage, operate, control, be
connected with as a stockholder
(other than as a stockholder of
less than 5% of the issued and
outstanding stock of a publicly
held corporation), joint
venturer, partner, limited
liability company member or
manager, or consultant, or
otherwise engage or invest or
participate in, or enjoy a
financially beneficial
relationship with, any business
which conducts any of the
Business Activities within a five
(5) mile radius of any facility
or other location at or from
which Acquiror, AC or any of
their respective Affiliates
conducts any of the Business
Activities.
(b)(i)solicit, recruit or hire
any employee of Acquiror, AC or
any of their respective
Affiliates or any person who has
worked for Acquiror, AC or any of
their respective Affiliates
within the six months preceding
such solicitation, recruitment or
hire; or (ii) solicit or
encourage any employee of
Acquiror, AC or any of their
respective Affiliates to leave
such employment.
4.Specific Performance.
Phillippe acknowledges that his failure to comply with the
provisions of this Agreement will result in irreparable and
continuing damage to Acquiror and AC for which there will be no
adequate remedy at law and that, in the event of a failure of
Phillippe so to comply, Acquiror, AC and their successors and
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assigns shall be entitled to injunctive relief and to such other
and further relief as may be proper and necessary to ensure
compliance with the provisions of this Agreement.
5.Amendments. No amendment to
this Agreement shall be effective unless it shall be in writing
and signed by each party hereto.
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6.Counterparts. This Agreement
may be executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall become
effective when one or more such counterparts have been signed by
each of the parties and delivered to each other party.
7.Entire Agreement. This
Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to
such subject matter.
8.Severability. If any provision
of this Agreement or the application of any such provision to any
person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof or other applications
of such provision.
9.Governing Law. This Agreement
shall be governed by and construed in all respects in accordance
with the laws of the State of Indiana, without regard to the
conflicts of law principles of such state.
10.Arbitration. Any claim or
controversy relating to the breach, interpretation or enforcement
of this Agreement shall be submitted to final and binding
arbitration in Marion County, Indiana, in an arbitration
proceeding that, except as may otherwise be provided herein,
shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association before a single
arbitrator chosen in accordance with such rules. All evidentiary
and discovery matters shall be conducted in accordance with and
governed by the applicable Federal Rules of Civil Procedure. No
later than 10 calendar days after the arbitrator is appointed,
the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. All discovery shall be
completed no later than the commencement of the arbitration
hearing or 90 calendar days after the date that a proper demand
for arbitration is served, whichever occurs first, unless, upon a
showing of good cause, the arbitrator extends such period. The
hearing shall commence no later than 90 calendar days after the
arbitrator is appointed and shall continue until completed. The
arbitrator shall issue his or her award in writing no later than
20 calendar days after the conclusion of the hearing. The
arbitrator shall not have the power to amend this Agreement in
any respect. The arbitrator's decision shall be binding and
conclusive upon the parties.
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IN WITNESS WHEREOF, the parties
have duly executed and have caused to be duly executed this
Agreement as of the date first above written.
THE HILLHAVEN CORPORATION
By:
_________________________
Robert F. Pacquer
Senior Vice President and
Chief Financial Officer
NCI ACQUISITION CORP.
By:
_________________________
_________________________
______________________________
Dr. Thomas E. Phillippe, Sr.
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Exhibit 12.2(h)
Part 2
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT
(this "Agreement"), dated [ ], 1995, is made among The
Hillhaven Corporation, a Nevada corporation ("Acquiror"), NCI
Acquisition Corp., a Delaware corporation ("AC"), and Thomas E.
Phillippe, Jr. ("Phillippe"), an individual.
WHEREAS, Phillippe and certain
other persons have, on this date, as part of a single
transaction, delivered to Acquiror all the issued and outstanding
shares of the capital stock of Nationwide Care, Inc., Phillippe
Enterprises, Inc., and Meadowvale Skilled Care Center, Inc., each
an Indiana corporation (collectively, the "Corporate Targets"),
and delivered to AC all the outstanding interests in Camelot Care
Centers, a general partnership governed by the laws of Indiana,
Shangri-La Partnership, a general partnership governed by the
laws of Indiana, and Evergreen Woods, Ltd., a Florida limited
partnership (together, the "Partnership Targets") (the Corporate
Targets and the Partnership Targets being referred to herein
collectively as the "Targets"), pursuant to that certain
Agreement and Plan of Merger and Agreements to Assign Partnership
Interests among Acquiror, AC and the Targets, dated [ ],
1995 (the "Merger Agreement"; such transaction contemplated
therein hereinafter referred to as the "Transaction");
WHEREAS, immediately prior to the
Transaction, Acquiror and the Targets are engaged in various
locations in the following businesses (i) owning, operating and
managing nursing homes and assisted living centers and
(ii) providing home health care and rehabilitation therapy care
(the foregoing businesses being referred to herein collectively
as the "Business Activities");
WHEREAS, upon consummation of the
Transaction, Acquiror and AC shall be engaged in the Business
Activities;
WHEREAS, Phillippe has acquired
knowledge relating to the Business Activities as a result of
Phillippe's relationship with the Targets; and
WHEREAS, as part of, and a
condition precedent to, the Transaction, Phillippe has agreed to
enter into this Agreement.
NOW, THEREFORE, in consideration
of the mutual premises and agreements herein set forth, the
parties hereto, intending to be legally bound, agree as follows:
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1.Definitions. All capitalized
terms used and not defined herein shall have the meanings given
such terms in the Merger Agreement. References to "Phillippe"
herein shall mean Phillippe and any of his Affiliates.
2.Rights of Acquiror and AC.
Covenants herein contained are cumulative to the rights of
Acquiror and AC under the laws of the United States, the states
of Washington, Indiana, Ohio and Florida and other states, as
applicable, respecting Acquiror's and AC's rights to protect
themselves from the competition of Phillippe.
3.Non-Competition. Phillippe
agrees that, for a period of five (5) years from the date of the
Effective Time, Phillippe shall not, directly or indirectly:
(a)have an interest in, own,
manage, operate, control, be
connected with as a stockholder
(other than as a stockholder of
less than 5% of the issued and
outstanding stock of a publicly
held corporation), joint
venturer, partner, limited
liability company member or
manager, or consultant, or
otherwise engage or invest or
participate in, or enjoy a
financially beneficial
relationship with, any business
which conducts any of the
Business Activities within a five
(5) mile radius of any facility
or other location at or from
which Acquiror, AC or any of
their respective Affiliates
conducts any of the Business
Activities.
(b)(i)solicit, recruit or hire
any employee of Acquiror, AC or
any of their respective
Affiliates or any person who has
worked for Acquiror, AC or any of
their respective Affiliates
within the six months preceding
such solicitation, recruitment or
hire; or (ii) solicit or
encourage any employee of
Acquiror, AC or any of their
respective Affiliates to leave
such employment.
4.Specific Performance.
Phillippe acknowledges that his failure to comply with the
provisions of this Agreement will result in irreparable and
continuing damage to Acquiror and AC for which there will be no
adequate remedy at law and that, in the event of a failure of
Phillippe so to comply, Acquiror, AC and their successors and
assigns shall be entitled to injunctive relief and to such other
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and further relief as may be proper and necessary to ensure
compliance with the provisions of this Agreement.
5.Amendments. No amendment to
this Agreement shall be effective unless it shall be in writing
and signed by each party hereto.
6.Counterparts. This Agreement
may be executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall become
effective when one or more such counterparts have been signed by
each of the parties and delivered to each other party.
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<PAGE>
7.Entire Agreement. This
Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to
such subject matter.
8.Severability. If any provision
of this Agreement or the application of any such provision to any
person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof or other applications
of such provision.
9.Governing Law. This Agreement
shall be governed by and construed in all respects in accordance
with the laws of the State of Indiana, without regard to the
conflicts of law principles of such state.
10.Arbitration. Any claim or
controversy relating to the breach, interpretation or enforcement
of this Agreement shall be submitted to final and binding
arbitration in Marion County, Indiana, in an arbitration
proceeding that, except as may otherwise be provided herein,
shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association before a single
arbitrator chosen in accordance with such rules. All evidentiary
and discovery matters shall be conducted in accordance with and
governed by the applicable Federal Rules of Civil Procedure. No
later than 10 calendar days after the arbitrator is appointed,
the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. All discovery shall be
completed no later than the commencement of the arbitration
hearing or 90 calendar days after the date that a proper demand
for arbitration is served, whichever occurs first, unless, upon a
showing of good cause, the arbitrator extends such period. The
hearing shall commence no later than 90 calendar days after the
arbitrator is appointed and shall continue until completed. The
arbitrator shall issue his or her award in writing no later than
20 calendar days after the conclusion of the hearing. The
arbitrator shall not have the power to amend this Agreement in
any respect. The arbitrator's decision shall be binding and
conclusive upon the parties.
IN WITNESS WHEREOF, the parties
have duly executed and have caused to be duly executed this
Agreement as of the date first above written.
THE HILLHAVEN CORPORATION
By:
_________________________
Robert F. Pacquer
Senior Vice President and
Chief Financial Officer
<PAGE>
<PAGE>
<PAGE>
NCI ACQUISITION CORP.
By:
_________________________
_________________________
______________________________
Thomas E. Phillippe, Jr.
<PAGE>
<PAGE>
EXHIBIT 12.2(i)
AGREEMENT AMONG SHAREHOLDERS
THIS AGREEMENT AMONG SHAREHOLDERS
("Agreement") is entered into as of ______________, 1995, by and
among all of the shareholders (the "Shareholders") of Nationwide
Care, Inc., an Indiana corporation ("Nationwide").
Preliminary Statements
Nationwide, The Hillhaven
Corporation, a Nevada corporation ("Acquiror"), Acquisition
Corp., a _______________ corporation and a wholly-owned, first-
tier subsidiary of Acquiror ("AC"), Phillippe Enterprises, Inc.,
an Indiana corporation ("PEI"), Meadowvale Skilled Care Center,
Inc., an Indiana corporation ("Meadowvale") (Nationwide, PEI and
Meadowvale are collectively referred to as the "Targets"), the
partners of Camelot Care Centers, an Indiana general partnership
("Camelot"), the partners of Shangri-La Partnership, an Indiana
general partnership ("Shangri-La"), and the limited partners of
Evergreen Woods, Ltd., a Florida limited partnership
("Evergreen") (Camelot, Shangri-La and Evergreen are collectively
referred to as the "Partnerships"), have entered into that
certain Agreement and Plan of Merger and Agreements to Assign
Partnership Interests, dated as of _______________, 1995 (the
"Reorganization Agreement"), and the documents executed and
delivered in connection therewith (collectively with the
Reorganization Agreement, the "Merger Documents"), pursuant to
which Nationwide will merge with and into AC (the "Merger") in a
reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
(the "Code"). Voting Acquiror Common Shares will be the only
consideration issued to the Shareholders in the Merger.
Section 9.11 of the
Reorganization Agreement provides that, as a condition precedent
to the consummation of the Merger, Nationwide shall receive
opinions of counsel that the Merger will qualify as a
reorganization within the meaning of Code Sections 368(a)(1)(A)
and 368(a)(2)(D). The Shareholders desire to set
forth their agreement concerning ownership of the Acquiror Common
Shares received in the Merger in order to facilitate the issuance
of the opinions referred to in Section 9.11 of the Reorganization
Agreement and to otherwise ensure that the continuity of
shareholder interest requirement set forth in Treasury Regulation
Section 1.368-1(b) will be satisfied with respect to the Merger.
Terms which are not defined
herein and are used with initial capitalization when the rules of
grammar would not otherwise so require and which are defined in
the Merger Documents shall have the meanings assigned to such
terms in the Merger Documents.
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<PAGE>
NOW, THEREFORE, in consideration
of the mutual covenants, undertakings and promises set forth in
this Agreement, the Shareholders agree as follows:
Terms and Conditions
Section 1.Representations,
Warranties, and Covenants of the ShareholdersEach Shareholder
severally represents, warrants, and covenants to the other
Shareholders that the Shareholder has no present plan, intention,
or arrangement to sell, exchange or otherwise dispose of a number
of the Acquiror Common Shares received in the Merger that would
reduce that Shareholder's ownership of the Acquiror Common Shares
to a number of Acquiror Common Shares having a value, determined
as of the Effective Time of the Merger (the "Effective Time"), of
less than 50 percent of the value of the Nationwide stock held by
that Shareholder immediately before the Merger. For purposes of
this representation, warranty, and covenant, Nationwide stock
exchanged for cash in lieu of fractional Acquiror Common Shares
will be treated as outstanding Nationwide stock as of the
Effective Time. Moreover, Nationwide stock and Acquiror Common
Shares held by the Shareholder and otherwise sold, redeemed, or
disposed of prior or subsequent to the Merger have been
considered in making this representation, warranty, and covenant.
Each Shareholder further represents, warrants, and covenants that
such Shareholder has no present plan, intention, or arrangement
to sell, exchange, or otherwise dispose of any Acquiror Common
Shares received in the Merger except as set forth on Exhibit A.
Section 2. Prohibition on
Disposition within Three YearsNo Shareholder shall, within three
years of the Effective Time, sell, exchange, or otherwise dispose
of any of the Acquiror Common Shares received in the Merger,
except as set forth on Exhibit A, unless and until: (a) such
sale, exchange, or disposition would not reduce the fair market
value of the Acquiror Common Shares (determined as of the
Effective Time) retained by that Shareholder to an amount less
than 50 percent of the fair market value of the Nationwide stock
held by that Shareholder immediately before the Merger
(determined in the same manner as set forth in Section 1 of this
Agreement), and (b) such Shareholder notifies Thomas E.
Phillippe, Jr. ("Phillippe"), acting as representative of all of
the Shareholders, in writing of the terms of such proposed sale,
exchange, or disposition, and Phillippe informs such Shareholder
that there is no objection to such proposed sale, exchange, or
disposition, because there is no potential adverse effect on the
tax-free status of the Merger due to the proposed transaction.
Phillippe shall use his reasonable efforts to inform a
Shareholder proposing a transaction subject to this Section 2, as
to whether any objection will be raised, within 30 days of the
receipt of the notice specified in Section
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2(b). Phillippe may, in his sole discretion, require the
Shareholder desiring to effect a sale, exchange or disposition to
obtain prior to such transaction an unqualified opinion of
counsel experienced in federal income tax matters that such sale,
exchange, or disposition will not adversely affect the tax-free
status of the Merger.
Section 3. NonwaiverThe failure
of any Shareholder, or of Phillippe as representative of all of
the Shareholders for purposes of Section 2(b), to insist in any
one or more instances upon performance of any provisions of this
Agreement or to pursue rights under this Agreement shall not be
construed as a waiver of any such provisions or the
relinquishment of any such rights.
Section 4. Governing LawThe laws
of the State of Indiana shall govern the validity, performance,
enforcement, interpretation and any other aspect of this
Agreement.
Section 5. ModificationThis
Agreement may not be modified or altered except by written
instrument duly executed by all of the Shareholders.
Section 6. Entire AgreementThe
Merger Documents and this Agreement contain the entire agreement
of the Shareholders with respect to the subject matter of this
Agreement and shall be deemed to supersede all prior agreements,
whether written or oral, and the terms and provisions of any such
prior agreements shall be deemed to have been merged into this
Agreement.
Section 7. CounterpartsThis
Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument.
____________________________
Dr. Thomas E. Phillippe, Sr.
____________________________
Thomas E. Phillippe, Jr.
____________________________
<PAGE>
<PAGE>
EXHIBIT A
NUMBER OF SHARES
WHICH THE
SHAREHOLDER HAS A
PRESENT PLAN,
INTENTION, OR
ARRANGEMENT TO
NUMBER SELL, EXCHANGE, OR
OF OTHERWISE
SHAREHOLDER SHARES HELD DISPOSE OF
Thomas E. Phillippe, Sr.
Thomas E. Phillippe, Jr.
__________________
__________________
TOTALS: __________ ___________
<PAGE>
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