AGREEMENT AND PLAN OF MERGER
BY AND AMONG
KARRINGTON HEALTH, INC.,
KENSINGTON MERGECO, INC.
KENSINGTON MANAGEMENT GROUP, INC.,
AND
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
APRIL 24, 1997
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of
April 24, 1997 (this "Agreement"), by and among Kensington
Management Group, Inc., a Minnesota corporation ("Kensington
Management"), ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, sole shareholder of Kensington
Management (the "Shareholder"), Karrington Health, Inc., an Ohio
corporation ("Karrington"), and Kensington Mergeco, Inc., a
Minnesota corporation that is a direct, wholly-owned subsidiary of
Karrington ("Mergeco").
RECITALS
WHEREAS, the Board of Directors of Kensington
Management, Karrington, and Mergeco have approved the merger
(the "Merger") of Mergeco with and into Kensington Management,
with Kensington Management as the surviving corporation, upon
the terms and subject to the conditions set forth herein;
WHEREAS, the respective Board of Directors of
Kensington Management, Karrington, and Mergeco have, by
resolutions, approved the execution and delivery of this Agreement
providing for the Merger;
WHEREAS, Karrington, as the sole shareholder of
Mergeco, has, by resolution, approved this Agreement and the
Merger as provided for by the Minnesota Business Corporation Act
(the "MBCA"); and
WHEREAS, the Shareholder has approved the Merger on
behalf of Kensington Management as provided for by the MBCA.
AGREEMENT
NOW THEREFORE, in consideration of these premises and
the parties' covenants, representations and warranties, the parties
agree as follows.
ARTICLE 1
DEFINITIONS
1.1. Definitions.
Certain terms used in this Agreement (which may or may
not be capitalized) are defined in Annex A. Certain other items
shall have the following meanings:
1.1.1. "Assets" means all of Kensington Management's
right, title, and interest in and to the assets pertaining to the
operations of Kensington Management, including property,
contracts, equipment leases, software licenses, motor vehicles,
vehicle leases, cash and accounts receivable.
1.1.2. "Property" means all of the tangible and intangible
property owned by, relating to, or used in connection with or in the
operation of Kensington Management, including, but not limited to,
furniture, books and records, inventory and supplies, leases, trade
names as more fully itemized on Schedule 1.1.2.
1.1.3. "Contracts" means all management contracts and
other material agreements to which Kensington Management is a
party, as more fully itemized on Schedule 5.24.1 (other than
Equipment Leases, Software Licenses and Vehicle Leases).
1.1.4. "Equipment Leases" means all leased equipment
used in connection with or in the operation of Kensington
Management, as more fully itemized on Schedule 1.1.4.
1.1.5. "Software Licenses" means all licenses from or to
third parties relating to software as more fully itemized on Schedule
1.1.5.
1.1.6. "Motor Vehicles" means all motor vehicles used
by Kensington Management in its operations, as more fully itemized
on Schedule 1.1.6, including Motor Vehicles owned or subject to
Vehicle Leases.
1.1.7. "Vehicle Leases" means all leases to which any
Motor Vehicles are subject, as fully itemized on Schedule 1.1.7.
1.2. Meaning of Certain Words and Phrases.
The word "including" shall mean "including without
limitation." Except where expressly provided to the contrary,
"discretion" means "sole and absolute discretion." References to
statements made to the Knowledge of Kensington Management
include the Knowledge of the Shareholder. References to any
agreements or other documents include groups of related
agreements or other documents.
1.3. Acquisition Agreements:
"Acquisition Agreements" refers collectively to the
following:
a. this Agreement;
b. the Asset Purchase Agreement by and among
Karrington, Kensington Cottages Corporation of America
("America"), Bismarck Investors, Kensington Living
Centers, Inc., and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇;
c. the Asset Purchase Agreement by and among
Karrington, America, Kensington Cottages Corporation of
Iowa, and the individual shareholders of Kensington
Cottages Corporation of Iowa;
d. the Asset Purchase Agreement by and among
Karrington, America, Kensington Cottages Corporation of
Rochester, and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇;
e. the Asset Purchase Agreement by and among
Karrington, America, Buffalo Hills Residence, and ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇;
f. the Asset Purchase Agreement by and among
Karrington, America, Kensington Cottages Corporation of
North Dakota, and the individual shareholders of
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇;
g. the Asset Purchase Agreement by and among
Karrington, America, Centex-Kensington (Mankato I)
Partnership, Centex Senior Services Corporation, Centex
Life Solutions, Inc., Kensington Cottages Corporation of
Mankato, and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; and
h. the Stock Purchase Agreement by and among
Karrington, America, Kensington Cottages Corporation of
Minnesota, and the individual shareholders of Kensington
Cottages Corporation of Minnesota.
ARTICLE 2
THE MERGER
2.1. The Merger.
a. On the Closing Date, or as promptly as practicable
thereafter, and upon the terms and subject to the conditions
set forth in this Agreement and pursuant to the Plan of
Merger attached in the form included in Exhibit A hereto,
the parties hereto shall cause Mergeco to be merged with
and into Kensington Management, and Kensington
Management shall be the surviving corporation in the
Merger (hereinafter sometimes called the "Surviving
Corporation") and shall continue its corporate existence
under the laws of the State of Minnesota. At such time, the
separate existence of Mergeco shall cease.
b. The Merger shall have the effects set forth in Section
302A.641 of the MBCA. The Surviving Corporation shall
retain the name of Kensington Management and shall
possess all the rights, privileges, immunities, powers and
franchises of Mergeco and Kensington Management and
shall by operation of law become liable for all the debts,
obligations, liabilities and duties of Kensington Management
and Mergeco.
2.2. Articles of Incorporation
At the Effective Time, the Articles of Incorporation of
Mergeco (in the form included in Exhibit A hereto) shall become
the Articles of Incorporation of the Surviving Corporation, by
virtue of the Merger and this Agreement and without any further
action, provided that effective at the Closing Date, Article I of such
Articles of Incorporation shall be amended, by virtue of the Merger
and this Agreement so that the name of the Surviving Corporation
shall be "Kensington Management Group, Inc."
2.3. Bylaws.
At the Effective Time, the By-Laws of Mergeco shall
become the By-Laws of the Surviving Corporation.
2.4. Directors and Officers.
The directors of Mergeco and the officers of Kensington
Management immediately prior to the Closing Date shall be the
directors and officers, respectively, of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation
and By-Laws of the Surviving Corporation.
2.5. Effective Time.
The Merger shall become effective at the date and time
when properly executed Articles of Merger in the form included in
Exhibit A hereto (the "Articles of Merger") relating to the Merger
shall be filed with the Secretary of State of the State of Minnesota
in accordance with the MBCA or at such other later date and time,
if any, as Mergeco and Kensington Management shall agree and as
shall be specified in the Articles of Merger. The date and time
when the Merger shall become effective is herein referred to as the
"Effective Time."
2.6. Kensington Management Common Stock.
The manner and basis of converting the Shares (as
hereinafter defined) shall be as follows:
a. At the Effective Time, the shares of common stock,
without par value, of Kensington Management (the
"Shares") issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted
into the right to receive the Merger Consideration upon
surrender of the certificates representing such Shares.
b. At the Effective Time, the Shareholder shall cease to
have any rights as a shareholder of Kensington
Management, except such rights, if any, as he may have
pursuant to the MBCA, and, except as aforesaid, his sole
right shall be the right to receive the Merger Consideration
for the Shares represented by certificates as aforesaid.
2.7. Mergeco Common Stock.
The manner and basis of converting the shares of Mergeco
shall be as follows: at the Effective Time, each share of common
stock, par value $.01 per share ("Mergeco Common Stock"), of
Mergeco issued and outstanding immediately prior to the Closing
Date shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into one fully paid and non-
assessable share of common stock, par value $.01 per share
("Surviving Corporation Common Stock"), of the Surviving
Corporation, and shall constitute the only issued and outstanding
shares of capital stock of the Surviving Corporation immediately
following the Merger. From and after the Closing Date, each
outstanding certificate theretofore representing shares of Mergeco
Common Stock shall be deemed for all purposes to evidence
ownership of and to represent the same number of shares of
Surviving Corporation Common Stock.
2.8. Exchange of Shares.
At the Closing, the Shareholder shall deliver to Karrington
or its designees stock certificates representing the Shares, duly
endorsed in blank for transfer or accompanied by appropriate stock
powers duly executed in blank, with all taxes, direct or indirect,
attributable to the transfer of such Shares paid or provided for. At
the Effective Time, Karrington shall deliver to the Shareholder
shares of the common stock, without par value, of Karrington (the
"Common Stock") as determined in Section 2.9 hereof.
2.9. Merger Consideration.
As soon as practical after the Effective Time (and in any
event within fourteen (14) calendar days of the Closing Date).
Karrington shall deliver to the Shareholder (a) certificates for shares
of Common Stock with a value equal to $1,500,000, and (b) cash in
an amount equal to the increase, if any, in "Current Asset Spread"
from December 31, 1996 to the Closing Date (the "Merger
Consideration"). For purposes of this Section, "Current Asset
Spread" shall mean the amount by which on any specified date the
current assets of Kensington Management exceed its current
liabilities. The value of the Common Stock shall be based upon the
Common Stock Fair Market Value, rounded up, if necessary, to the
nearest whole share. A closing statement (the "Closing Statement")
setting forth the current assets and current liabilities of Kensington
Management at the Closing Date will be agreed upon by
Kensington Management and Karrington as soon as possible after
the Closing Date.
"Common Stock Fair Market Value" shall mean the average
of the closing price quotation or, if none, the average of the closing
bid and asked prices for a share of the Common Stock reported on
the National Association of Securities Dealers, Inc. Automated
Quotation/National Market for the fifteen (15) trading days ending
with the third business day preceding the Closing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF KARRINGTON AND MERGECO
Karrington and Mergeco represent and warrant to
Kensington Management and the Shareholder as follows:
3.1. Date of Representations and Warranties.
The representations and warranties in this Article 3 are true
and correct as of the effective date of this Agreement.
3.2. Organization, Qualification.
Each of Karrington and Mergeco is a corporation duly
organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation, is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction
where qualification to do business is required, and has full
corporate power and corporate authority and all licenses, permits,
and authorizations necessary to carry on its business and to own
and use its property.
3.3. Authorization of Transaction.
Each of Karrington and Mergeco has full power and
authority to execute, deliver, and perform this Agreement. This
Agreement constitutes Karrington's and Mergeco's valid and legally
binding obligation, enforceable in accordance with its terms and
conditions (Subject to Equitable Principles).
3.4. Effect on Other Agreements.
Each of Karrington's and Mergeco's execution and delivery
of this Agreement and its consummation of the Merger will not
violate, breach, conflict with or constitute a default under any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which it is subject or any
provision of its Governing Documents or any indenture, contract or
agreement to which it is subject.
3.5. No Notice or Consent.
Neither Karrington nor Mergeco is not required to give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in
order for the parties to consummate the Merger.
3.6. Finder's Fees.
To Karrington's Knowledge, no person or entity is entitled
to any brokerage commission, finder's fee, or similar compensation
in connection with the execution, delivery, or performance of this
Agreement.
3.7. Proceedings.
There is no action, suit, proceeding or investigation pending
or, to the Knowledge of Karrington, threatened against Karrington
which, if decided adversely to Karrington, may prevent or in any
material way impair the consummation of the Merger or have a
material adverse effect on Karrington's business, operations or
financial condition, taken as a whole.
3.8. Reserved.
3.9. Validity of Common Stock.
The shares of Common Stock to be issued to the
Shareholder hereunder as Merger Consideration will not be subject
to any preemptive rights, rights of first refusal or other preferential
rights that have not been waived, and such shares when issued and
delivered in accordance with the terms of this Agreement will be
validly issued, fully paid and non-assessable and will be free of any
liens or encumbrances whatsoever; provided, however, that such
shares shall be subject to restrictions upon transfer under state
and/or federal securities laws and as set forth herein. No holder of
Common Stock has registration rights other than pursuant to that
certain Registration Rights Agreement, dated as of May 8, 1996, by
and among JMAC, Inc., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Karrington, a true and correct copy of
which has been delivered to Kensington Management.
3.10. SEC Reports; Financial Statements.
3.10.1. Karrington has timely filed all forms, reports and
documents with the Securities and Exchange Commission ("SEC")
required to be filed by it pursuant to the Securities Act, and the
rules and regulations promulgated thereunder (collectively, the
"SEC Reports"), all of which have complied, at the time filed, in all
material respects with all applicable requirements of the Securities
Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable, and the rules and regulations
promulgated thereunder. None of the SEC Reports, 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.
3.10.2. The consolidated balance sheets and the related
consolidated statements of operations, consolidated cash flow and
consolidated shareholders' equity (including the notes thereto) of
Karrington and its subsidiaries contained or incorporated by
reference in the SEC Reports comply in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, and present fairly the
consolidated financial position of Karrington and its subsidiaries as
of their respective dates, and the consolidated results of their
operations and their cash flows for the periods presented therein, in
conformity with GAAP applied on a consistent basis, (i) except as
otherwise noted therein, (ii) subject in the case of unaudited
financial statements to normal year-end audit adjustments, (iii)
except that the unaudited financial statements do not contain all of
the footnote disclosures required by GAAP and (iv) except as
otherwise permitted by Form 10-Q.
ARTICLE 4
[Reserved]
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
BY KENSINGTON MANAGEMENT AND SHAREHOLDER
Each of Kensington Management and the Shareholder
separately represents and warrants to Karrington as follows:
5.1. Date of Representations and Warranties.
The representations and warranties in this Article 5 are true
and correct as of the effective date of this Agreement.
5.2. Organization, Qualification.
Kensington Management is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. It is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction
where qualification to do business is required. It has full corporate
power and corporate authority to carry on its business and to own
and use its property. It has not filed for relief as a debtor under any
state receivership laws or federal bankruptcy laws.
5.3. Governing Documents.
Kensington Management has delivered or made reasonably
available to Karrington true, correct, and complete copies of its
Governing Documents. It is not in default under or in violation of
any provision of its Governing Documents.
5.4. Authorization of Transaction.
Each of Kensington Management and Shareholder has full
power and authority to execute, deliver, and perform this
Agreement. This Agreement constitutes Kensington Management's
and Shareholder's valid and legally binding obligation, enforceable
in accordance with its terms and conditions (Subject to Equitable
Principles).
5.5. Effect on Other Governing Documents.
Kensington Management's and Shareholder's execution and
delivery of this Agreement and the consummation of the Merger
will not violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which either is
subject, or any provision of Kensington Management's Governing
Documents.
5.6. Finder's Fees.
To Kensington Management's Knowledge, no person or
entity is entitled to any brokerage commission, finder's fee, or
similar compensation in connection with the execution, delivery, or
performance of this Agreement.
5.7. Stock Ownership; No Agreements.
Kensington Management's entire authorized capital stock
consists of 25,000 Shares of which 1,000 Shares are issued and
outstanding, all of which are owned beneficially and of record by
the Shareholder. The Shares constitute all issued and outstanding
shares of capital stock or other equity securities of Kensington
Management. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could
require Kensington Management to issue, sell, or otherwise cause
to become outstanding any of its capital stock. The Shares have
been duly authorized for issuance by all necessary corporate action
of Kensington Management, are validly issued, fully paid and
nonassessable, and are owned beneficially and of record by the
Shareholder, free and clear of any restrictions on transfer (other
than any restrictions applicable under the Securities Act and state
securities laws), Taxes, Security Interests, preemptive or similar
rights, options, warrants, purchase rights, contracts, commitments,
equities, liens, claims, and demands. The Shareholder is not a party
to any option, warrant, purchase right, or other contract or
commitment that could require him to sell, transfer, or otherwise
dispose of any capital stock of Kensington Management, including
the Shares, other than this Agreement. Neither the Shareholder nor
Kensington Management is a party to any voting trust, proxy or
other agreement or understanding with respect to the voting of any
capital stock of Kensington Management. There are no outstanding
or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Kensington
Management capital stock.
5.8. [Reserved].
5.9. Subsidiaries.
Kensington Management has no Subsidiaries. Kensington
Management owns no equity securities of any other person or
entity.
5.10. Investment Representations.
In connection with the deliverance of the shares of Common
Stock, the Shareholder (a) is taking the shares of Common Stock
for the purposes of investment and not with a view to any resale or
distribution of such shares, (b) is an "accredited investor" as defined
in Rule 501 under the Securities Act of 1933 (the "Securities Act"),
(c) has been given an opportunity to ask questions and receive
answers from representatives of Karrington as to the terms of the
shares of Common Stock and the affairs of Karrington and has
received all information requested from Karrington, and (d)
understands that the shares of Common Stock will be subject to
substantial restrictions on transfer under the Securities Act. In this
regard, Shareholder acknowledges and confirms he has made an
independent review and investigation of the business and financial
condition of Karrington; that he, either alone or with his financial
advisors, has the necessary background and expertise to evaluate
the same; that he has examined and considered in detail such
information, documentation and financial statements and reports
which he deems necessary and material to such review and
investigation including, without limitation, the Prospectus dated
July 18, 1996 for the initial public offering of Common Stock and
the Form 10-K filed by Karrington for the year ended December 31,
1996; that he has had access to and the opportunity to inspect any
and all records, instruments, documents, financial statements,
reports and budgets and other information which he deemed
necessary and material in such determination; and that he has had
the opportunity to ask questions of and receive answers to such
questions from Karrington, and to obtain any additional information
which he requested. No Person other than the Shareholder is or
will be entitled to receive all or any portion of the Merger
Consideration and no Person other than the Shareholder has made
any claim that such Person is entitled to all or any portion of the
Merger Consideration.
5.11. [Reserved].
5.12. Financial Statements.
Attached as Schedule 5.12 are the following financial
statements of Kensington Management (the "Kensington
Management Financial Statements"): unaudited balance sheets and
statements of income for the fiscal years ended on December 31st
of each of the years 1994, 1995, and 1996, all of which are
consistent with Kensington Management's books and records
(which are maintained as provided in Section 5.31) and fairly
present Kensington Management's results of operations for the
periods indicated. The December 31, 1996 financial statements are
the "Most Recent Financial Statements" and December 31, 1996 is
the "Most Recent Fiscal Month End." December 31, 1996 is the
"Most Recent Fiscal Year End." "Most Recent Balance Sheet"
means the balance sheet contained within the Most Recent Financial
Statements.
5.13. Events Subsequent to Most Recent Fiscal Year End.
Since the Most Recent Fiscal Year End, there have been no
changes in Kensington Management's Business, financial condition,
operations, or results of operations which have a material adverse
effect thereon, either separately or in the aggregate (a "Material
Adverse Effect"). Without limiting the generality of the preceding
sentence, since that date, Kensington Management has not:
5.13.1. imposed any Security Interest of any kind upon
any of the Assets;
5.13.2. granted any license or sublicense pertaining to
the Software Licenses or any rights under or with respect to any
Intellectual Property;
5.13.3. experienced any damage, destruction, or loss
(whether or not covered by insurance) to the Assets which would
have a Material Adverse Effect;
5.13.4. sold, leased, transferred, or assigned any of the
Assets other than in the Ordinary Course of Business;
5.13.5. entered into any written or oral employment
contract or collective bargaining agreement concerning Employees,
modified the terms of any such existing contract or agreement, or
made any other change in employment terms, except for changes in
compensation or terms of employment in the Ordinary Course of
Business and not in contemplation of this Agreement;
5.13.6. entered into, accelerated, terminated, modified,
canceled, or made any other type of material change to any
agreement, contract, mortgage, lease, or license pertaining to the
Assets to which Kensington Management is a party or by which it is
bound which pertains in any way to the Assets; or
5.13.7. committed to any of the foregoing.
5.14. Undisclosed Liabilities.
5.14.1. Kensington Management has no Liability and, to
the Knowledge of Kensington Management, there is no Basis for
any Liability which would have a Material Adverse Effect except
for (a) Liabilities set forth on the Most Recent Balance Sheet or
which would not be required to be disclosed on a balance sheet
prepared in accordance with GAAP, and (b) Liabilities which have
arisen after the Most Recent Fiscal Month End in the Ordinary
Course of Business, none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, violation of law, or
similar cause.
5.14.2. Kensington Management is not a guarantor or
otherwise liable for any Liability or obligation (including
indebtedness) of any other Person.
5.15. Insurance.
5.15.1. Kensington Management maintains insurance
policies (copies of which have been delivered to or made reasonably
available to Karrington) reasonable in scope and amount in
connection with the Assets, and has done so for the past four years,
provided, however, that no representation or warranty is made as to
the reasonableness of such insurance after the Closing and it shall
be Karrington's exclusive responsibility to determine the insurance
policies to be put in place after the Closing.
5.15.2. Schedule 5.15 sets forth a true and accurate list
of all insurance policies carried on the Assets. The casualty
insurance covering the Property insures the full replacement value
thereof.
5.15.3. Kensington Management has complied with all
notices or requests it has received from any insurance company
issuing any of the insurance policies required to be set forth on
Schedule 5.15.
5.16. Effect on Other Agreements.
Except as disclosed in Schedule 5.16, Kensington
Management's execution and delivery of this Agreement and its
consummation of the Merger will not breach, conflict with,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, mortgage, lease,
license, instrument, or other arrangement to which Kensington
Management is a party or by which it is bound or to which any of
its assets is subject, or result in the imposition of any Security
Interest upon any of its assets.
5.17. No Notice or Consent.
Except as disclosed in Schedule 5.17, Kensington
Management is not required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the parties to
consummate the Merger.
5.18. Tangible Assets.
Each tangible asset included in the Assets is in good
operating condition and repair (normal wear and tear excepted),
and is suitable for the purposes for which it presently is used and
proposed to be used.
5.19. Real Property.
Kensington Management owns no real property.
5.20. Legal Compliance.
5.20.1. Kensington Management has not taken or failed
to take any action with respect to any legal matter which has
resulted in, or may result in (a) the imposition of any Security
Interest on the Assets, or (b) any Liability with respect to the
Assets to which Karrington may be subject after Closing.
5.20.2. Kensington Management has complied with all
laws (including any related rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges) of
federal, state, local and foreign governments (including any
governmental agencies), the failure to comply with which would
have a Material Adverse Effect, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced against Kensington Management
alleging any failure to comply.
5.20.3. Kensington Management has all necessary or
appropriate governmental licenses, certificates, permits and
authorizations to own or lease the Assets and to perform services
under the contracts (the "Kensington Management Permits") with
respect to which the failure to have would have a Material Adverse
Effect. To Kensington Management's Knowledge, no violations
have occurred with respect to the Kensington Management Permits,
and no proceeding is pending or threatened which might have the
effect of revoking or rescinding, or otherwise having a materially
adverse effect upon, any Kensington Management Permit.
Kensington Management has filed all reports, cost reports,
registrations and statements, together with any required
amendments, that are or were required to be filed with any
governmental authorities (or with any fiscal intermediaries)
pursuant to the Kensington Management Permits or otherwise. As
of their respective dates, all such reports, cost reports, registrations
and statements complied in all material respects with the terms of
the then-existing contracts between any governmental authorities or
fiscal intermediaries and Kensington Management, and with all
statutes, rules and regulations enforced or promulgated by the
regulatory authority (or by any fiscal intermediary) with which they
were filed, and were true, correct and complete as filed in all
material respects.
5.20.4. Kensington Management is not a party to any
supervisory agreement, memorandum of understanding, consent
order, cease and desist order, or condition of any regulatory order
or decree with or by any governmental regulatory authority or
agency.
5.20.5. Kensington Management does not qualify for
cost reporting or cost reimbursement under any health care or
similar program administered by any governmental authority or
agency except in connection with the facility managed by it known
as "The Kensington-Bismarck."
5.21. Litigation.
5.21.1. Except as disclosed on Schedule 5.21,
Kensington Management is not a party and, to the Knowledge of
Kensington Management, has not been threatened to be made a
party, to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any
arbitrator.
5.21.2. Kensington Management is not subject, and, to
the Knowledge of Kensington Management, has not been
threatened to be made subject, to any injunction, judgment, order,
decree, ruling, or charge.
5.22. Tax Matters.
5.22.1. Kensington Management has delivered to
Karrington true and complete copies of (a) all Tax Returns that
have been or are currently subject to audit, and (b) all examination
reports and statements of deficiencies assessed against or agreed to
by Kensington Management.
5.22.2. Kensington Management has not taken or failed
to take any action with respect to any tax matter which has resulted
in, or, to the Knowledge of Kensington Management, may result in
(a) the imposition of any Security Interest on the Assets, or (b) any
Liability with respect to which Kensington Management may be
subject after Closing.
5.22.3. Kensington Management has filed all required
Tax Returns, all of which were correct and complete in all material
respects when filed, and has fully paid all Taxes to which it is or has
been subject, whether or not shown on any Tax Return. Except as
set forth on Schedule 5.22, no filing date has been extended for any
Tax Return Kensington Management is or has been required to file
which has not yet been filed. To Kensington Management's
Knowledge, no taxing authority in a jurisdiction where Kensington
Management does not file Tax Returns has ever asserted that
Kensington Management is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the Assets
that arose in connection with any actual or alleged failure to pay
any Tax.
5.22.4. Kensington Management has withheld and paid
all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
5.22.5. To the Knowledge of Kensington Management,
no taxing authority plans to assess any additional Taxes for any
period for which Tax Returns have been filed. To the Knowledge of
Kensington Management, there is no dispute or claim concerning
any Tax Liability claimed or raised by any taxing authority.
5.22.6. Kensington Management has not waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
5.23. Intellectual Property.
To the Knowledge of Kensington Management, the current
use by Kensington Management of its Assets does not infringe the
rights of any other person or entity including, but not limited to,
patent, copyright, trademark and other intellectual property rights,
and Kensington has not received any notice claiming any such
infringement. Schedule 5.23 contains a true and complete list of all
Kensington Management trade names, trademarks or service marks,
patents, registered copyrights and licenses; and Kensington
Management has good title to all such intangible assets. As
indicated on Schedule 5.23, certain marks have been duly registered
with the United States Patent and Trademark Office, and such
registrations remain in full force and effect. Subject to (a) rights
provided under various management agreements of Kensington
Management with respect to the facilities which are being conveyed
to Karrington under the Acquisition Agreements, (b) the rights of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ under that certain letter of understanding by
and between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and Shareholder dated May 16,
1994, (c) that certain Licensing Agreement dated March 30, 1995
by and among Centex Senior Services Corporation, Shareholder
and Kensington Management, (d) that certain license agreement by
and between Kensington Management and Centex-Kensington
(Mankato I) Partnership, and (e) the license agreements identified
on Schedule 5.23, Kensington Management has the right to use the
intangible assets listed on Schedule 5.23 and has not licensed to any
other person the right to use such intangible assets.
5.24. Other Agreements.
5.24.1. Schedule 5.24.1 lists and briefly describes all
material written or oral agreements to which Kensington
Management is a party, including all management contracts and
leases (other than the Equipment Leases, Software Licenses, and
Vehicle Leases).
5.24.2. Each of the Contracts, Equipment Leases,
Software Licenses, and Vehicle Leases, is legal, valid, and binding
(Subject to Equitable Principles), and in full force and effect and
subject to obtaining any consents or the giving of notices as
disclosed in Schedule 5.11 or 5.17, will continue to be legal, valid,
and binding, and in full force and effect on identical terms
immediately following the consummation of the Merger (Subject to
Equitable Principles). Kensington Management is not in default in
the performance of any such agreements and, to the Knowledge of
Kensington Management no parties thereto have any defenses, set-
offs or rebates relating to any such agreements. Except as disclosed
in Schedule 5.24: to the Knowledge of Kensington Management,
no other party is in breach or default of any such agreement; to the
Knowledge of Kensington Management no event has occurred
which with notice or lapse of time would constitute a breach or
default, or permit termination, modification or acceleration, under
the agreement, and no party has repudiated any provision of the
agreement.
5.24.3. Kensington Management has delivered or made
reasonably available to Karrington a correct and complete copy of
each written agreement or a written summary describing the terms
and conditions of each oral agreement referred to in this Section
5.24.
5.25. [Reserved]
5.26. Employees.
5.26.1. To Kensington Management's Knowledge as of
the date hereof, no Employee employed in a management capacity
has any plans to terminate employment with Kensington
Management prior to Closing or following Closing.
5.26.2. Kensington Management shall have discharged
all current obligations to the employees with respect to
compensation or benefits of any kind under any type of Employee
Benefit Plan.
5.26.3. Kensington Management is not and never has
been a party to or bound by any collective bargaining agreement.
To the Knowledge of Kensington Management, there has never
been and there is not now any effort by any labor union to organize
any employees of Kensington Management into one or more
collective bargaining units. Kensington Management has not
experienced any strikes, grievances, claims of unfair labor practices,
or other collective bargaining disputes. Kensington Management
has not committed any unfair labor practice or other violation of
labor or employment law relating to its employees.
5.27. Employee Benefits.
5.27.1. Kensington Management does not now maintain
and is not now required to contribute to, and has never maintained
or been required to contribute to, any Employee Pension Benefit
Plan.
5.27.2. Schedule 5.27.2 lists and briefly describes each
Employee Benefit Plan that Kensington Management maintains or
to which Kensington Management contributes.
5.27.3. All premiums or other payments for all periods
ending on or before the Closing Date have been paid or will be paid
when they become due with respect to each Employee Welfare
Benefit Plan.
5.27.4. Each item required to be listed on Schedule
5.27.2 and each related trust, insurance contract, or fund complies
in form and in operation in all respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
5.27.5. All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports and
Summary Plan Descriptions) have been properly filed or distributed,
and the requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code Sec. 4980B have been met with respect to each
Employee Welfare Benefit Plan. Kensington Management has
delivered or made reasonably available to Karrington copies of all
such reports and descriptions.
5.27.6. Kensington Management has delivered or made
reasonably available to Karrington correct and complete copies of
the plan documents and summary plan descriptions, and all related
trust agreements, insurance contracts and other funding agreements
which implement each Employee Benefit Plan.
5.27.7. All contributions, including all employer
contributions and employee salary reduction contributions, which
are due have been paid to each Employee Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each Employee Benefit
Plan or properly accrued. All premiums or other payments for all
periods ending on or before the Closing Date have been paid with
respect to each Employee Welfare Benefit Plan.
5.27.8. There have been no Prohibited Transactions
with respect to any Employee Benefit Plan which Kensington
Management maintains or ever has maintained or to which it
contributes, ever has contributed, or ever has been required to
contribute; no Fiduciary has any Liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee
Benefit Plan; no action, suit, proceeding, hearing or investigation
with respect to the administration or the investment of the assets of
any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of Kensington
Management, threatened; and Kensington Management has no
Knowledge of any Basis for any such action, suit, proceeding,
hearing, or investigation.
5.27.9. Kensington Management does not contribute to,
never has contributed to, and never has been required to contribute
to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan.
5.28. Powers of Attorney.
There are no outstanding powers of attorney executed on
behalf of Kensington Management.
5.29. Environment, Health and Safety.
5.29.1. To the Knowledge of Kensington Management,
it has no Liability for any illness of or personal injury to any
employee or other individual, for damage to any site, location, or
body of water (surface or subsurface), for any damages or claims
under any past, present, or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice, or for
any other reason under any Environmental, Health and Safety Law
in any way pertaining to or affecting the Assets.
5.29.2. Kensington Management and its predecessors (i)
have complied with all Environmental, Health and Safety Laws, and
no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced
against any of them alleging any failure to comply, and (ii) have
obtained and been in compliance in all material respects with all of
the terms and conditions of all permits, licenses, and other
authorizations which are required under, and have complied in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health and
Safety Laws.
5.29.3. There have not been, and there currently are no
pending or, to the Knowledge of Kensington Management,
threatened claims against Kensington Management alleging the
violation of any Environmental, Health and Safety Laws.
5.30. Data Processing Matters.
5.30.1. With respect to the computer equipment,
associated peripheral devices, related operating and application
systems, and other software used in connection with its Business
which Kensington Management owns, leases, or licenses (the "Data
Processing Systems"):
a. Kensington Management has taken appropriate
action, by instruction, agreement, or otherwise, with its
employees or other persons permitted access to system
application programs and data files, to protect against
unauthorized access, use, copying, modification, theft and
destruction of any such programs and files; and Kensington
Management has not sustained, and Shareholder is not
aware of any information or circumstances indicating that it
may sustain, disruption of business or loss by reason of
unauthorized access, use, copying, modification, theft, or
destruction of any such programs and files by its employees
or any such other persons; and
b. Kensington Management has arranged for back-up
data processing services adequate to meet data processing
needs in the event that the Data Processing Systems are
rendered temporarily or permanently inoperative as a result
of a natural disaster or other cause.
5.30.2. Kensington Management's data processing and
data storage facilities are adequate for the Services, are properly
protected, and possess proper temperature and humidity control
devices and fire protection equipment.
5.31. Books and Records.
5.31.1. Kensington Management's books of account
pertaining to the Services reflect all material items of income and
expense and all material assets, liabilities and accruals, and are
prepared and maintained in form and substance adequate for
preparing financial statements and related information in
accordance with any accounting principles required by any
governmental agency with regulatory authority over Kensington
Management's financial statements and otherwise in accordance
with the standards required by this Agreement.
5.31.2. Kensington Management has devised and
maintained a system of internal accounting controls with respect to
the Services sufficient to provide reasonable assurances that (a)
transactions are executed in accordance with management
directives, (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with Subsection
5.31.1, (c) the recorded amounts are compared with the actual
levels at reasonable intervals and appropriate action is taken with
respect to any differences, and (d) access to information pertaining
to the preceding items (a) - (c) is permitted only in accordance with
management directives.
ARTICLE 6
NATURE OF DISCLOSURES
6.1. Disclosure by Kensington Management and
Shareholder.
Kensington Management and Shareholder each separately
represent and warrant to Karrington as follows:
6.1.1. All items concerning Kensington Management
which are required to be disclosed or identified on the Schedules to
this Agreement have been disclosed and identified accurately,
completely, and with reasonable particularity.
6.1.2. No representation or warranty made by or about
Kensington Management in this Agreement, and no schedule, list,
certificate, document, or other instrument or exhibit concerning
Kensington Management which is required under this Agreement
contains any untrue statement of a material fact or omits any
material fact necessary to make the statements made not
misleading.
6.1.3. To the Knowledge of Kensington Management,
there is no fact which materially and adversely affects Kensington
Management which has not been set forth in this Agreement, the
Schedules, or any other materials Kensington Management is
required to furnish under this Agreement.
6.1.4. Karrington agrees that it is not relying upon any
representations and warranties of Kensington Management and the
Shareholder that are not set forth in this Agreement or required to
be set forth in a schedule, list, certificate, document or other
instrument or exhibit required under this Agreement and that there
shall not be deemed to be any other express or implied
representations or warranties made by or on behalf of Kensington
Management or the Shareholder in connection with the Merger.
6.2. Copies and Lists.
Unless a representation and warranty made by or about
Kensington Management in this Agreement is solely with respect to
the existence or non-existence of a document or other item, the
mere listing or inclusion of a copy of the document or other item
shall not be adequate to disclose (a) a permitted exception to a
representation or warranty if an additional description of facts and
circumstances is reasonably necessary to enable Karrington to
understand the exception or (b) an exception to a representation or
warranty which is not permitted.
6.3. Due Diligence.
The obligations of Kensington Management and the
Shareholder to make representations and warranties in accordance
with the standards set forth in this Agreement shall not be affected
or deemed waived on the grounds that Karrington, based upon its
investigation and review or otherwise, should have known that any
such representation or warranty is or might be inaccurate or
incomplete.
ARTICLE 7
[RESERVED]
ARTICLE 8
PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period of
time between the date of this Agreement and the Closing:
8.1. In General.
Each of the parties will use its best efforts to take all actions
and to do all things necessary, proper or advisable in order to
consummate the Merger.
8.2. ▇▇▇▇▇▇▇▇▇ Letter of Understanding.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ shall terminate
the letter of understanding by and between the two of them dated
May 16, 1994, as amended, in which they make certain agreements
regarding the development and ownership of Kensington Cottages
projects and related matters (the "▇▇▇▇▇▇▇▇▇ Letter of
Understanding").
8.3. Pre-Closing Audit.
Kensington Management shall fully cooperate with Ernst &
Young in connection with the completion of their audit, prior to
Closing, of Kensington Management's financial statements for the
fiscal years ending December 31, 1994, 1995, and 1996 (the
"Audit"). Karrington shall use its best efforts to cause the Audit to
be completed by Ernst & Young on or before April 30, 1997.
8.4. Insurance.
Kensington Management shall maintain the insurance
required to be set forth on Schedule 5.15 in full force and effect
through Closing.
8.5. Operation of Business.
Kensington Management will not engage in any practice,
take any action or enter into any transaction pertaining to the
Services which is outside the Ordinary Course of Business,
including any practice, action, or transaction of a type described in
Section 5.13.
8.6. Preservation of Assets.
Kensington Management will use commercially reasonable
efforts to keep the Assets substantially intact, including all present
operations, physical facilities, working conditions and relationships
with lessors, licensors, suppliers, lessees, residents, customers, and
employees. Kensington Management shall maintain the Assets in
their present condition and repair (ordinary wear and tear
excepted), shall not enter into any material contract relating to the
Assets or Services which extends beyond the Closing Date without
the consent of Karrington, and shall continue the existing Business
including continuing its present advertising commitments and its
usual program of advertising. Kensington Management shall not
remove any items of Property between the date hereof and the
Closing, except as may be required for repair or replacement; and
any replacements shall be of equal or better quality and quantity.
Nothing herein shall require Kensington Management to repair or
replace Property substantially damaged or destroyed by fire or
other casualty prior to Closing.
8.7. Access to Properties.
Kensington Management will permit representatives of
Karrington full access during normal business hours to all of its
premises, properties, personnel, books, records, contracts,
documents and other materials as reasonably required by
Karrington.
8.8. Notice of Developments.
Karrington and Kensington Management each will give
prompt written notice to one another of any development of which
it has Knowledge which reasonably appears to cause any
representations and warranties by any party in this Agreement not
to be true and correct in all material respects as of Closing (except
as provided with respect to the dates of financial statements under
Section 5.12 and except for the date limitation concerning certain
employee matters set forth in Subsection 5.26.1). Such written
notice shall describe the matter with reasonable particularity and
shall set forth the manner in which it would cause any such
representation and warranty (identified by specific reference to the
applicable provision of this Agreement) not to be true as of Closing.
No notice under this Section 8.8 shall be deemed to amend or
supplement any representation or warranty or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant
by the party giving notice; provided that in the event a party would
have the right not to proceed to Closing by reason of such breach,
if the nondefaulting party elects to close notwithstanding such
breach, such breach shall be deemed waived for all purposes of this
Agreement unless the parties otherwise agree in writing.
8.9. Updated Schedules.
Kensington Management will update the Schedules to this
Agreement at and as of (a) five business days prior to the Closing
Date or (b) any other time specifically required by this Agreement,
and shall provide the updated Schedules to Karrington for its
review at the applicable time. No updated Schedule shall be
deemed to amend or supplement any representation or warranty or
any Schedule or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant related to any Schedule; provided
that in the event a party would have the right not to proceed to
Closing by reason of such breach, if the nondefaulting party elects
to close notwithstanding such breach, such breach shall be deemed
waived for all purposes of this Agreement unless the parties
otherwise agree in writing.
8.10. Exclusivity.
So long as this Agreement has not been terminated,
Kensington Management will not (a) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to
the acquisition of any substantial portion of its assets (including any
acquisition structured as a merger, consolidation or share exchange)
or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
otherwise facilitate any of the foregoing except as required by this
Agreement. Kensington Management will notify Karrington
immediately if any of the foregoing occur.
8.11. Confidentiality.
8.11.1. Each party will hold all Confidential Information
concerning the other in strictest confidence, refrain from using it
except in connection with this Agreement, and, promptly upon the
direction of the other party, deliver to the other party or destroy all
originals or copies of the Confidential Information in its possession.
Each party shall immediately notify the other if it is requested or
required to disclose any Confidential Information in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or
similar process. If a protective order cannot be obtained and the
party is, on the written advice of counsel, compelled to disclose the
Confidential Information or else be held in contempt, the party may
disclose the Confidential Information to the tribunal; provided,
however, that it shall use its best efforts to obtain an appropriate
order or other assurance that confidential treatment will be
accorded to the Confidential Information disclosed.
8.11.2. Notwithstanding the definition of Confidential
Information set forth on Annex A, for purposes of this Section 8.11
any material identified as Confidential Information shall not be
regarded as Confidential Information if it is information already
available to the public or already known from a lawful source to the
party receiving such Confidential Information.
8.11.3. The provisions of this Section 8.11 shall not
supersede any confidentiality provisions contained in the letter of
intent between Kensington Management and Karrington Operating
Company, Inc. dated November 12, 1996, which shall remain in full
force and effect; provided that, the provisions of this Agreement
shall control in the event of any conflict.
ARTICLE 9
[RESERVED]
ARTICLE 10
TERMINATION
10.1. Termination of Agreement.
10.1.1. The parties may terminate this Agreement by
mutual written consent at any time prior to the Closing.
10.1.2. Any party may terminate this Agreement by
written notice to the others at any time prior to the Closing if (a)
any party other than the terminating party has breached any material
representation, warranty or covenant in this Agreement, and the
breach continues without cure for ten Business Days after notice of
the breach from the terminating party, or (b) the Closing shall not
have occurred on or before May 30, 1997, because of the failure of
any condition to the terminating party's obligation to close the
Merger.
10.2. Effect of Termination.
If the Agreement is terminated as provided in this Article
10, all rights and obligations of the parties shall cease immediately
upon termination, except for any Liability of a party then in breach,
and except for any obligations of the parties with respect to use or
disclosure of Confidential Information.
ARTICLE 11
CONDITIONS TO OBLIGATION TO CLOSE
11.1. Conditions to Karrington's and Mergeco's Obligation
to Close.
The obligation of Karrington and Mergeco to consummate
the Merger is subject to satisfaction in their favor or waiver by them
of the following conditions as of Closing:
11.1.1. The representations and warranties by or about
Kensington Management set forth in this Agreement shall be true
and correct in all material respects as of the Closing Date as though
made on such date, except as provided with respect to the dates of
financial statements under Section 5.12 and except for the date
limitation concerning certain employee matters set forth in
Subsection 5.26.1.
11.1.2. Kensington Management and the Shareholder
shall have performed and complied in all material respects with all
of their covenants set forth in this Agreement through the Closing.
11.1.3. No action, suit, or proceeding shall be pending
or, to the Knowledge of Kensington Management, threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator,
to which Kensington Management or Shareholder is a party or is
threatened or expected to be made a party, or which is otherwise
known to Kensington Management, in which an unfavorable
outcome would prevent the Closing, cause the Merger to be
rescinded in whole or in part after Closing, or adversely effect the
Surviving Corporation after Closing, and no injunction, judgment,
order, decree, ruling, charge or other holding having such an effect
shall be in force.
11.1.4. Kensington Management and Shareholder shall
have delivered to Karrington certificates in the form set forth on
Exhibit 11.1.4 certifying that each of the conditions specified above
in Sections 11.1.1 through 11.1.3 is satisfied as of the Closing Date.
11.1.5. The closings under each of the Acquisition
Agreements shall occur simultaneously with the Closing under this
Agreement or in a sequence reasonably agreed upon by Karrington
and Shareholder;
11.1.6. The ▇▇▇▇▇▇▇▇▇ Letter of Understanding shall
have been terminated.
11.1.7. Shareholder and America shall have entered into
an Employment Agreement in the form attached as Exhibit 11.1.7
(the "Employment Agreement").
11.1.8. The Audit shall have been completed and Ernst
& Young shall have issued an unqualified opinion in connection
with Kensington Management's financial statements for the fiscal
years ended December 31, 1994, 1995 and 1996, and the results of
the Audit shall not require any material adverse adjustments to the
Kensington Management Financial Statements.
11.1.9. Karrington shall have received a written opinion
from Kensington Management's legal counsel in form and substance
as set forth on Exhibit 11.1.9, dated as of the Closing Date.
11.1.10. Kensington Management and the Shareholder
shall have taken all actions required of them in connection with the
Merger, and all certificates, opinions, instruments and other
documents required for the Merger will be reasonably satisfactory
in form and substance to Karrington and its legal counsel.
11.2. Conditions to Obligation of Kensington Management
and the Shareholder.
The obligation of Kensington Management and the
Shareholder to consummate the Transaction is subject to
satisfaction in favor of Kensington Management and the
Shareholder or waiver by Kensington Management and the
Shareholder of the following conditions as of Closing:
11.2.1. Karrington's representations and warranties set
forth in this Agreement shall be true and correct in all material
respects as of the Closing Date as though made on such date,
except to the extent such representations and warranties are
expressly made as of a specified date.
11.2.2. Karrington shall have performed and complied in
all material respects with all of its covenants set forth in this
Agreement through the Closing.
11.2.3. No action, suit or proceeding shall be pending
or, to the Knowledge of Karrington, threatened before any court or
quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator to which Karrington is a
party or is threatened or expected to be made a party, or which is
otherwise known to Karrington in which an unfavorable outcome
would prevent the Closing or cause the Merger to be rescinded in
whole or in part after Closing, and no injunction, judgment, order,
decree, ruling, charge or other holding having such an effect shall
be in force.
11.2.4. Karrington shall have delivered to Kensington
Management a certificate of its Chief Operating Officer and Chief
Financial Officer in the form set forth on Exhibit 11.2.4 certifying
that each of the conditions specified above in Sections 11.2.1
through 11.2.3 is satisfied in all respects.
11.2.5. The closing under the Acquisition Agreements
shall occur simultaneously with the Closing under this Agreement
or in a sequence reasonably agreed upon by Karrington and
Kensington Management.
11.2.6. Kensington Management shall have received
from Karrington's legal counsel a written opinion in form and
substance as set forth on Exhibit 11.2.6, dated as of the Closing
Date.
11.2.7. Karrington shall have taken all actions required
of it in connection with the Merger, and all certificates, opinions,
instruments and other documents required for the Merger shall be
reasonably satisfactory in form and substance to Kensington
Management and its legal counsel.
11.2.8. America shall have entered into the Employment
Agreement with Shareholder.
11.2.9. There shall not have been any event which
would cause the Common Stock of Karrington issued in connection
with Karrington's initial public offering to no longer be qualified for
trading on the National Association of Securities Dealers, Inc.
Automated Quotation/National Market.
ARTICLE 12
REGISTRATION RIGHTS AGREEMENT
12.1. Registration Rights Agreement.
The Shareholder shall be granted certain "piggyback"
registration rights with respect to the Common Shares pursuant to
the Registration Rights Agreement in the form attached as Exhibit
B, to be executed and delivered by the parties at Closing.
ARTICLE 13
CLOSING
13.1. Closing.
The closing of the Transaction (the "Closing") shall take
place at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇, on April 30, 1997 provided all conditions to the
obligations of the parties to Closing as set forth in Article 11 are
then satisfied, otherwise on a date mutually agreed upon by the
parties but in no event later than May 30, 1997 (the "Closing
Date").
13.2. Deliveries by the Parties at Closing.
13.2.1. At Closing, each party shall deliver to each other
the various documents, instruments, certificates, and opinions
required to be delivered at Closing under Article 11.
13.2.2. Deliveries by Kensington Management and
Shareholder shall include the following:
a. All appropriate evidence of authorization for the
execution of this Agreement;
b. The executed Employment Agreement;
c. Consents reasonably satisfactory to Karrington from
the parties to the Contracts and Kensington Management
Permits which require consent to the Merger and approvals
satisfactory to Karrington from all federal, state, and local
governmental authorities and private parties which require
approval of the Merger;
d. Certificates representing all of the issued and
outstanding Shares duly endorsed for transfer or
accompanied by duly executed stock powers, sufficient to
transfer the Shares;
e. The complete and correct corporate minute book,
stock transfer book, and other corporate records of
Kensington Management;
f. Possession of the originals of all Contracts,
commitments, franchises, licenses, permits, or instruments
evidencing rights or obligations of Kensington Management
and its Business and possession of all of the assets of
Kensington Management and all books, records, and other
documents relating to Kensington Management and its
Business;
g. The revocation by Kensington Management of all
prior bank borrowing or depository authorizations;
h. Resignations of the officers and directors of
Kensington Management as requested by Karrington;
i. Such other documents as are otherwise required of
Kensington Management or Shareholder by this Agreement.
13.2.3. Deliveries by Karrington shall include the
following:
a. All appropriate evidence of authorization for the
execution of this Agreement and all other agreements,
documents or instruments required to be executed by
Karrington;
b. Certificates evidencing the Common Stock (to be
delivered within 14 days of Closing);
c. The Registration Rights Agreement in the form
attached as Exhibit 12.1.
d. Cash in the amount determined pursuant to Section
2.9 (to be delivered upon final determination);
e. Such other documents as are otherwise required of
Karrington by this Agreement.
13.2.4. At the Closing, Karrington, Mergeco and
Kensington Management shall cause the Articles of Merger to be
filed with the Secretary of State of the State of Minnesota in
accordance with the MBCA, and shall take any and all other lawful
actions and do any and all other lawful things necessary to cause
the Merger to become effective.
ARTICLE 14
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period
following the Closing:
14.1. General.
Each party shall take such further action, and execute and
deliver such further instruments as any other party may reasonably
request to carry out the purposes of this Agreement.
14.2. Litigation Support.
In the event of any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection
with (a) any transaction contemplated under this Agreement or (b)
any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving Kensington
Management, each party will make available its personnel, provide
testimony and access to its books, and otherwise cooperate to the
extent reasonably necessary or advisable without jeopardizing its
own interests. Any such cooperation shall be at the expense of the
contesting or defending party, except to the extent it is entitled to
indemnification under Article 15.
14.3. Transition.
Shareholder shall not take any action intended to discourage
any lessor, licensor, lessee, resident, customer, supplier or other
business associate of the Surviving Corporation from maintaining
the same business relationships with the Surviving Corporation
after the Closing as it maintained with Kensington Management
prior to the Closing.
14.4. Transfer Restrictions; Legend.
The Shareholder agrees that he will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or
otherwise dispose of (hereinafter, "Transfer") any of the shares of
Common Stock acquired pursuant to the Merger unless such
Transfer complies with the provisions of this Agreement and (i) the
Transfer is pursuant to an effective registration statement under the
Securities Act and the rules and regulations in effect thereunder, or
(ii) counsel for the Shareholder (which counsel shall be reasonably
acceptable to Karrington) shall have furnished Karrington with an
opinion, reasonably satisfactory in form and substance to
Karrington, to the effect that no such registration is required.
(b) The Shareholder acknowledges that each certificate
representing shares of Common Stock acquired pursuant to the
Merger shall bear the following legend:
The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Securities Act") and may not be sold,
assigned or transferred in the absence of an effective
registration statement under the Securities Act or an
opinion of counsel satisfactory to the issuer that
such registration is not required.
ARTICLE 15
INDEMNIFICATION
15.1. Meaning of Certain Terms.
15.1.1. In this Article, Kensington Management and the
Shareholder are collectively referred to as the "Kensington
Entities," and Karrington and its Subsidiaries are collectively
referred to as the "Karrington Entities."
15.1.2. A party asserting a claim for indemnification
under this Article is referred to as the "Indemnified Party." The
party obligated to indemnify the Indemnified Party under this
Article is referred to as the "Indemnifying Party."
15.1.3. For purposes of this Article, a party shall be
deemed to have made a "misrepresentation" if any representation or
warranty by or about it in this Agreement is untrue or otherwise
does not conform to the standards for representations and
warranties set forth in this Agreement.
15.1.4. For purposes of this Article, all covenants,
representations, and warranties made by Kensington Management
in this Agreement shall be deemed to have been made by
Shareholder, and Shareholder shall be solely liable for indemnity
claims related thereto.
15.2. Survival of Representations and Warranties.
15.2.1. Except as provided in Section 15.7, the parties'
covenants, representations and warranties set forth in this
Agreement shall survive Closing and continue in full force and
effect for a period of eighteen (18) months from and after Closing.
15.2.2. "Survival Period" means the eighteen (18)
month period set forth in Subsection 15.2.1 or the period described
in Section 15.7, whichever applies.
15.2.3. In order to be eligible for indemnification under
this Article, the Indemnified Party must bring a claim for
indemnification during the Survival Period.
15.3. Indemnification Obligations of the Kensington
Entities.
15.3.1. If any Kensington Entity breaches any covenant
or makes any misrepresentation in this Agreement, the Kensington
Entities shall jointly and severally indemnify and hold harmless the
Karrington Entities from and against all related Adverse
Consequences, subject to the limitations set forth in Sections
15.1.4, 15.5 and 15.6
15.3.2. In addition, Shareholder shall indemnify and
hold harmless the Karrington Entities from and against all Adverse
Consequences related to (a) any Liability for the unpaid Taxes of (i)
Kensington Management for periods prior to the Closing Date or
(ii) any other Person (as a transferee or successor, by contract, or
otherwise) as a result of any action taken or not taken by
Kensington Management prior to the Closing Date, or (b) any
matter which is the subject of actual or threatened litigation, judicial
order, administrative action, or any similar matter concerning
Kensington Management (other than related to the enforcement of
this Article) but only to the extent resulting from any action taken
or not taken by Kensington Management prior to the Closing Date,
whether or not disclosed or required to be disclosed on any
Schedule to this Agreement.
15.4. Indemnification Obligations of Karrington and
Karrington.
15.4.1. If any Karrington Entity breaches any covenant
or makes any misrepresentation in this Agreement, the Karrington
Entities shall jointly and severally indemnify and hold harmless the
Kensington Entities from and against all related Adverse
Consequences, subject to the limitations set forth in Section 15.5
and 15.6.
15.4.2. The Karrington Entities shall indemnify and hold
harmless the Shareholder from and against all Adverse
Consequences arising from or in connection with Kensington
Management after the Closing Date, except to the extent the
Kensington Entities are required to indemnify the Karrington
Entities in respect thereof under this Article.
15.5. Basket Amount.
15.5.1. Except as provided in Section 15.7, the
Kensington Entities shall have no obligation to indemnify the
Karrington Entities under this Article unless and until the
Karrington Entities have suffered Adverse Consequences giving rise
to a right of indemnification under this Article of at least $15,000 in
the aggregate (the "Basket Amount"), and then only as to the
amount by which aggregate claims by the Karrington Entities
exceed the Basket Amount.
15.5.2. Except as provided in Section 15.7, the
Karrington Entities shall have no obligation to indemnify the
Kensington Entities under this Article unless and until the
Kensington Entities have suffered Adverse Consequences giving
rise to a right of indemnification under this Article in the aggregate
of at least the Basket Amount; and then only as to the amount by
which aggregate claims by the Kensington Entities exceed the
Basket Amount.
15.6. Limitation on Recovery.
15.6.1. Except as provided in Section 15.7, the
aggregate obligation of the Karrington Entities to indemnify the
Kensington Entities under this Article shall be limited to $150,000
(the "Indemnity Cap").
15.6.2. Except as provided in Section 15.7, the
aggregate obligation of the Kensington Entities to indemnify the
Karrington Entities under this Article shall be limited to the
Indemnity Cap.
15.7. Liability for Certain Claims.
The limitations set forth in Sections 15.5 and 15.6 shall not
apply to any claim for indemnification (a) if the Indemnifying Party
had actual conscious awareness as of Closing of the breach or
misrepresentation giving rise to the claim for indemnification by the
Indemnified Party, (b) by the Karrington Entities under Subsection
15.3.2, or (c) by the Kensington Entities under Subsection 15.4.2.
The aggregate obligation of the Karrington Entities to indemnify
the Kensington Entities for all such indemnity claims shall be limited
to the Merger Consideration, and the Kensington Entities'
aggregate obligation to indemnify the Karrington Entities for all
such indemnity claims shall be limited to the Merger Consideration.
The Survival Period for any such indemnity claim shall be the
greater of the eighteen (18) month period set forth in Section
15.2.1 or the period set forth in the statute of limitations under
applicable law.
15.8. Extent of Indemnification.
The right to indemnification under this Article shall extend
to Adverse Consequences incurred through and after the date of the
claim for indemnification.
15.9. Right of Set-Off.
If the Karrington Entities suffer Adverse Consequences as a
result of a breach or misrepresentation by the Kensington Entities
under this Agreement, the Karrington Entities may, in their
discretion, apply the actual dollar amount of any such Adverse
Consequences as a set-off against any liability or obligation they
may have under this Agreement.
15.10. Remedies.
The rights of indemnification set forth in this Article shall be
the parties' sole and exclusive remedy with respect to claims
relating to this Agreement except with respect to actions for
specific performance under Section 16.14 or claims relating to
Intellectual Property, Confidential Information or where it
otherwise reasonably appears that irreparable harm may occur or a
remedy in damages may be inadequate. In furtherance of the
foregoing, each of the parties, to the fullest extent permitted by
applicable law, waives any and all rights, claims and causes of
action that it may have against each of the other parties in
connection with any such claims arising under or based upon any
federal, state or local statute, law, ordinance, rule or regulation of,
arising under or based upon common law or otherwise, except to
the extent provided in this Article.
15.11. Notice.
An Indemnified Party shall assert a claim for indemnification
under this Article by notifying the Indemnifying Party in writing of
its claim.
15.12. Matters Involving Third Parties.
15.12.1. If any Person other than a party to this
Agreement (a "Third Party") asserts a right or claim which may
give rise to a claim for indemnification under this Article (a "Third
Party Claim"), any party having Knowledge of the matter shall
promptly notify the other parties of the matter; provided that any
delay by the Indemnified Party in providing notice shall not affect
the right of indemnification unless the Indemnifying Party's rights
and interests under this Article or otherwise have been materially
prejudiced by the delay.
15.12.2. An Indemnifying Party may defend an
Indemnified Party against any Third Party Claim giving rising to a
right of indemnification under this Article provided (a) the
Indemnifying Party notifies the Indemnified Party in writing within
fifteen days after receipt of the notice required under this Section
that the Indemnifying Party will indemnify the Indemnified Party as
required by this Article, (b) the Indemnifying Party provides the
Indemnified Party with reasonable evidence that the Indemnifying
Party will have the financial resources to both undertake the
defense and fulfill its indemnification obligations, (c) the Third
Party Claim involves only money damages and does not seek
equitable relief which might be materially adverse to the
Indemnified Party's continuing business, (d) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in
the good faith judgment of the Indemnified Party, likely to establish
a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (e) the
Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently. The Indemnifying Party's choice of legal
counsel for a defense under this Subsection 15.12.2 shall be
reasonably satisfactory to the Indemnified Party.
15.12.3. At any time an Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with
Section 15.12.2, the Indemnified Party may retain separate co-
counsel at its own expense and participate in the defense. If both
the Indemnifying Party and the Indemnified Party are participating
in the defense, neither may consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the other's prior written consent, which shall not be
withheld unreasonably.
15.12.4. If, however, at any time an Indemnifying Party
is conducting the defense of the Third Party Claim but not in
accordance with Section 15.12.2, the Indemnified Party may
conduct its own defense and may consent to the entry of any
judgment or enter into any settlement with respect to the Third
Party Claim in any manner it may reasonably determine with the
consent of Indemnifying Party, which shall not be unreasonably
withheld, in which case the Indemnifying Party shall promptly and
at reasonable intervals periodically reimburse the Indemnified Party
for the costs of its defense (including reasonable attorneys' fees).
An Indemnified Party's action under this Section 15.12.4 shall not
affect its right of indemnification under this Article.
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1. Expenses.
The Shareholder and Karrington shall share equally all
expenses (including the costs of the Audit and the opinion of Ernst
& Young with respect to such Audit), incurred in connection with
this Agreement and the Merger, except as provided in Article 15 or
as otherwise specifically provided to the contrary in this
Agreement, and except that each party shall bear it own attorneys'
fees.
16.2. Press Releases and Public Announcements.
No party shall issue any press release or make any public
announcement relating to this Agreement or the Merger prior to the
Closing without the prior written approval of the other parties;
provided, however, that any party may make any public disclosure
it believes in good faith is required by applicable law, in which case
the disclosing party shall advise the other party and consult with the
legal counsel of such other party prior to making the disclosure.
16.3. No Third-Party Beneficiaries.
This Agreement shall not confer any rights or remedies on
any Person other than the parties and their respective successors
and permitted assigns.
16.4. Entire Agreement.
Except as provided in Section 8.11.3, this Agreement
constitutes the entire agreement among the parties concerning its
subject matter and supersedes all other understandings, agreements,
or representations by or among the parties, written or oral, to the
extent they relate in any way to its subject matter (including the
letter of intent dated November 12, 1996 by and between
Karrington Operating Company, Inc. and Kensington
Management).
16.5. No Merger.
All warranties, representations and covenants contained
herein shall survive the Closing as provided herein.
16.6. Succession and Assignment.
This Agreement shall bind and benefit the parties and its
respective successors and permitted assigns. No party may assign
either this Agreement or any rights, interests, or obligations arising
under it without the prior written approval of all parties; provided,
however, that Karrington may assign all or any portion of its
interest in this Agreement to one or more of its Affiliates without
the consent of Kensington Management or the Shareholder.
16.7. Headings.
The section headings contained in this Agreement are
inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement.
16.8. Notices.
All notices, requests, demands, claims, and other
communications under this Agreement shall be in writing and, shall
be deemed duly given two days after being deposited postage
prepaid, registered or certified, return receipt requested, in the
United States Mail, addressed to the intended recipient as set forth
below:
If to Kensington Management:
▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
Kensington Management Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇:
▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Kensington Management or ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, copy
to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇, Esq.
Faegre & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
If to Karrington or Mergeco:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
COO and CFO
Karrington Health, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Any party may send any notice, request, demand, claim, or other
communication to the intended recipient using other means,
including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail, in which case the
notice, request, demand, claim or other communication shall be
deemed duly given when actually received by the intended recipient.
Any party may change its address of record for purposes of this
Section 16.8 by giving the other parties written notice in the
manner set forth in this section.
16.9. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota without giving
effect to any choice or conflict of law provision or rule (whether of
the State of Minnesota or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Minnesota.
16.10. Amendments and Waivers.
This Agreement may be amended only by a writing signed
by all parties. No waiver by any party of any provision, default, or
breach of this Agreement, whether intentional or not, shall be
deemed to extend to any other provision, default, or breach or to
the same provision, default or breach on another occasion.
16.11. Severability.
If any term or provision of this Agreement is determined by
a court of competent jurisdiction or in binding arbitration to be
invalid or unenforceable, that finding shall not affect the validity or
enforceability of the remaining terms and provisions.
16.12. General Rules of Construction.
The parties have participated jointly in negotiating and
drafting this Agreement. If a question concerning intent or
interpretation arises, no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of authorship. Any
reference to any federal, state, local or foreign statute or law shall
be deemed also to refer to all related rules and regulations unless
the context requires otherwise. Each representation, warranty and
covenant shall have independent significance, and if any party has
breached any of them in any respect, the fact that there exists
another representation, warranty or covenant relating to the same
subject matter which the party has not breached shall not detract
from or mitigate the fact that the party is in breach.
16.13. Incorporation of Annexes, Exhibits, and Schedules.
The Annexes, Exhibits, and Schedules identified in this
Agreement are incorporated into this Agreement by this reference.
16.14. Specific Performance.
Each of the parties acknowledges and agrees that the other
party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with
its specific terms or otherwise are breached. Accordingly, the non-
breaching party shall be entitled to appropriate injunctive relief,
including specific performance in any action instituted in any court
of the United States or any of the fifty states having jurisdiction
over the parties and the matter, in addition to any other remedy to
which it may be entitled under this Agreement or otherwise.
16.15. Forum.
Except as provided in Section 16.14, the forum for legal
action concerning this Agreement and the Merger shall be the
appropriate court in the State of Minnesota, and the parties agree to
in personam jurisdiction for that purpose.
IN WITNESS WHEREOF, the parties have executed this
Agreement to be effective on the date indicated above.
KARRINGTON HEALTH,
INC.
By:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Its: Chief Operating
Officer and Chief Financial
Officer
KENSINGTON
MERGECO, INC.
By:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Its: Vice President
KENSINGTON
MANAGEMENT GROUP,
INC.
By:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President and Chief
Executive Officer
SHAREHOLDER
________________________
________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Individually
ANNEX A
TO
SHARE EXCHANGE AGREEMENT
DEFINITIONS
Transactional Terms.
The following terms used in this Agreement are defined in
the Sections of this Agreement identified below:
Term Section Containing
Definition
Acquisition Agreements
1.3
Agreement
Preamble
America
1.3
Articles of Merger
2.5
Assets
1.1.1
Audit
8.3
Basket Amount
15.5
Closing
13.1
Closing Date
13.1
Common Stock
2.6
Common Stock Fair Market Value
2.9
Contracts
1.1.3
Current Asset Spread
2.2
Data Processing Systems
5.30
Effective Time
2.5
Employment Agreement
11.1.7
Equipment Leases
1.1.4
Indemnity Cap
15.6
Karrington
Preamble
Karrington Entities
15.1
Kensington Management
Preamble
Kensington Management Financial
Statements
5.12
Kensington Management Permits
5.20.3
Knowledge of Kensington Management
1.2
MBCA
Recitals
Material Adverse Effect
5.13
Mergeco
Preamble
Mergeco Common Stock
2.7
Merger
Recitals
Merger Consideration
2.9
Most Recent Financial Statements
5.12
Most Recent Fiscal Month End
5.12
Most Recent Fiscal Year End
5.12
Motor Vehicles
1.1.6
Property
1.1.2
▇▇▇▇▇▇▇▇▇ Letter of Understanding
8.2
Securities Act
5.10
Shareholder
Preamble
Shares
2.6
Software Licenses
1.1.5
Surviving Corporation
2.1
Surviving Corporation Common Stock
2.7
Transfer
14.4
Vehicle Leases
1.1.7
Miscellaneous Terms
Adverse Consequences means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court
costs and reasonable attorneys' fees and expenses.
Affiliate has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
Basis means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence,
event, incident, action, failure to act, or transaction that forms or
could form the basis for any specified consequence.
Business refers to a party's business as presently conducted
and as presently proposed to be conducted.
Business Day shall mean any day on which banks are open
to conduct business in Minneapolis, Minnesota.
Confidential Information means information in whatever
form, including without limitation information which is written,
electronically stored, orally transmitted, or memorized, which is of
commercial value to a party's Business, including any idea,
knowledge, know-how, process, system, formula, composition,
method, technique, research and development, drawing, design,
specification, technology, software, technical information, trade
secret, trademark, copyrighted material, reports, records,
documentation, data, customer or supplier lists, pricing or cost
information, tax or financial information, business or marketing
plan, proposal, strategy, or forecast; provided, that Confidential
Information does not include information which is or becomes
generally known within a party's industry through no act or
omission by any other party or which is or becomes generally
known to the public or otherwise is required to be made public by
state or federal law; further provided, however, that the
compilation, manipulation, or other exploitation of generally known
information may constitute Confidential Information.
Environmental, Health and Safety Laws means the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act
of 1976, and the Occupational Safety and Health Act of 1970, each
as amended through the date hereof, together with all other laws
(including rules, regulations, codes, judgments, orders, decrees,
rulings, and changes thereunder), of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
Extremely Hazardous Substance has the meaning set forth
in Sec. 302 of the Emergency Planning and Community Right-to-
Know Act of 1986, as amended.
GAAP means United States generally accepted accounting
principles in effect from time to time.
Governing Documents means, as to any Person, the articles
or certificate of incorporation, code of regulations, and bylaws if
the Person is a corporation; the partnership agreement and
partnership certificate if the Person is a partnership; or the
operating agreement if the Person is a limited liability company; and
any other documents relating to and establishing or governing the
existence and legal operation of any Person of any type or nature,
each as amended.
Intellectual Property means: (a) all inventions, whether
patentable or unpatentable and whether or not reduced to practice,
all improvements to any such inventions, and all patents, patent
applications, and patent disclosures, together with all related
reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations; (b) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with
all related translations, adaptations, derivations, and combinations,
including all associated goodwill, and all applications, registrations,
and renewals in connection with the same; (c) all copyrightable
works, all copyrights, and all applications, registrations, and
renewals in connection with the same, (d) all mask works and all
applications, registrations, and renewals in connection with the
same, (e) all computer software, data, and related documentation,
(f) all other proprietary rights, and (g) all copies and tangible
embodiments of the foregoing, in whatever form or medium.
Knowledge means actual knowledge or knowledge which
could be reasonably obtained by inquiry and investigation within the
scope of a Person's normal operations, duties, or responsibilities.
Liability means any liability, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, and whether due or to
become due, including any liability for Taxes.
Ordinary Course of Business means the ordinary course of
business consistent with past custom and practice.
Party, unless the context indicates otherwise, includes a
party's Subsidiaries and Affiliates.
Person means any individual, partnership, corporation,
association, joint stock company, trust, joint venture,
unincorporated organization, governmental or quasi-governmental
entity (or any governmental department, agency, or political
subdivision), or any other form of legal entity or enterprise.
Security Interest means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for Taxes not
yet due and payable or for Taxes that the taxpayer is contesting in
good faith through appropriate proceedings, (c) purchase money
liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of
money. Security Interest does not include any protective filing by a
lessor of any of the Assets.
Subject to Equitable Principles means subject, as to
enforcement of remedies, to bankruptcy, reorganization, insolvency,
moratorium and other similar laws relating to or affecting creditors'
rights generally and to general equitable principles.
Subsidiary means any corporation with respect to which a
specified Person or its Subsidiary owns a majority of the common
stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
Tax Terms
Code means the Internal Revenue Code of 1986, as
amended.
Tax means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including
taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including
any interest, penalty, or addition thereto, whether disputed or not.
Tax Return means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment.
Employee Benefits and ERISA Terms
Employee Benefit Plan means any (a) Employee Welfare
Benefit Plan or other material fringe benefit plan or program, (b)
qualified defined contribution retirement plan or arrangement which
is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d)
nonqualified deferred compensation or retirement plan or
arrangement which is an Employee Pension Benefit Plan.
Employee Pension Benefit Plan has the meaning set forth in
ERISA Section 3(2).
Employee Welfare Benefit Plan has the meaning set forth in
ERISA Section 3(1).
ERISA means the Employee Retirement Income Security
Act of 1974, as amended.
Fiduciary has the meaning set forth in ERISA Section
3(21).
Multiemployer Plan has the meaning set forth in ERISA
Section 3(37).
Prohibited Transaction has the meaning set forth in ERISA
Section 406 and Code Section 4975.
---------------------------------------------
EXHIBIT A
PLAN OF MERGER
PLAN OF MERGER, dated as of April 24, 1997 (this
"Plan"), by and among Kensington Management Group, Inc., a
Minnesota corporation ("Kensington Management"), ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, sole shareholder of Kensington Management (the
"Shareholder"), Karrington Health, Inc., an Ohio corporation
("Karrington"), and Kensington Mergeco, Inc., a Minnesota
corporation that is a direct, wholly-owned subsidiary of Karrington
("Mergeco").
RECITALS
WHEREAS, the Board of Directors of Kensington
Management, Karrington, and Mergeco have approved the merger
(the "Merger") of Mergeco with and into Kensington Management,
with Kensington Management as the surviving corporation;
WHEREAS, the respective Board of Directors of
Kensington Management, Karrington, and Mergeco have, by
resolutions, approved the execution and delivery of this Plan;
WHEREAS, Karrington, as the sole shareholder of
Mergeco, has, by resolution, approved this Plan and the Merger as
provided for by the Minnesota Business Corporation Act (the
"MBCA"); and
WHEREAS, the Shareholder has approved the Merger on
behalf of Kensington Management as provided for by the MBCA.
AGREEMENT
NOW THEREFORE, in consideration of these premises and
the parties' covenants, representations and warranties, the parties
agree as follows.
1.1. The Merger.
a. At the Effective Time, the parties hereto shall cause
Mergeco to be merged with and into Kensington
Management, and Kensington Management shall be the
surviving corporation in the Merger (hereinafter sometimes
called the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of
Minnesota. At such time, the separate existence of
Mergeco shall cease.
b. The Merger shall have the effects set forth in Section
302A.641 of the MBCA. The Surviving Corporation shall
retain the name of Kensington Management and shall
possess all the rights, privileges, immunities, powers and
franchises of Mergeco and Kensington Management and
shall by operation of law become liable for all the debts,
obligations, liabilities and duties of Kensington Management
and Mergeco.
1.2. Articles of Incorporation
At the Effective Time, the Articles of Incorporation of
Mergeco (in the form included in Exhibit A hereto) shall become
the Articles of Incorporation of the Surviving Corporation, by
virtue of the Merger and without any further action, provided that
effective at the Closing Date, Article I of such Articles of
Incorporation shall be amended, by virtue of the Merger and this
Plan, so that the name of the Surviving Corporation shall be
"Kensington Management Group, Inc."
1.3. Bylaws.
At the Effective Time, the By-Laws of Mergeco shall
become the By-Laws of the Surviving Corporation.
1.4. Directors and Officers.
The directors of Mergeco and the officers of Kensington
Management immediately prior to the Closing Date shall be the
directors and officers, respectively, of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation
and By-Laws of the Surviving Corporation.
1.5. Effective Time.
The Merger shall become effective at the date and time
when properly executed Articles of Merger (the "Articles of
Merger") relating to the Merger shall be filed with the Secretary of
State of the State of Minnesota in accordance with the MBCA or at
such other later date and time, if any, as Mergeco and Kensington
Management shall agree and as shall be specified in the Articles of
Merger. The date and time when the Merger shall become effective
is herein referred to as the "Effective Time."
1.6. Kensington Management Common Stock.
The manner and basis of converting the Shares (as
hereinafter defined) shall be as follows:
a. At the Effective Time, the shares of common stock,
without par value, of Kensington Management (the
"Shares") issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted
into the right to receive the Merger Consideration upon
surrender of the certificates representing such Shares.
b. At the Effective Time, the Shareholder shall cease to
have any rights as a shareholder of Kensington
Management, except such rights, if any, as he may have
pursuant to the MBCA, and, except as aforesaid, his sole
right shall be the right to receive the Merger Consideration
for the Shares represented by certificates as aforesaid.
1.7. Mergeco Common Stock.
The manner and basis of converting the shares of Mergeco
shall be as follows: at the Effective Time, each share of common
stock, par value $.01 per share ("Mergeco Common Stock"), of
Mergeco issued and outstanding immediately prior to the Closing
Date shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into one fully paid and non-
assessable share of common stock, par value $.01 per share
("Surviving Corporation Common Stock"), of the Surviving
Corporation, and shall constitute the only issued and outstanding
shares of capital stock of the Surviving Corporation immediately
following the Merger. From and after the Closing Date, each
outstanding certificate theretofore representing shares of Mergeco
Common Stock shall be deemed for all purposes to evidence
ownership of and to represent the same number of shares of
Surviving Corporation Common Stock.
1.8. Exchange of Shares.
At the Closing, the Shareholder shall deliver to Karrington
or its designees stock certificates representing the Shares, duly
endorsed in blank for transfer or accompanied by appropriate stock
powers duly executed in blank, with all taxes, direct or indirect,
attributable to the transfer of such Shares paid or provided for. At
the Effective Time, Karrington shall deliver to the Shareholder
shares of common stock, without par value, of Karrington (the
"Common Stock") as determined pursuant to this Plan.
1.9. Merger Consideration.
As soon as practical after the Effective Time (and in any
event within fourteen (14) calendar days of the Closing Date).
Karrington shall deliver to the Shareholder (a) certificates for shares
of Common Stock with a value equal to $1,500,000, and (b) cash
in an amount equal to the increase, if any, in "Current Asset
Spread" from December 31, 1996 to the Closing Date (the "Merger
Consideration"). For purposes of this Section, "Current Asset
Spread" shall mean the amount by which on any specified date the
current assets of Kensington Management exceed its current
liabilities. The value of the Common Stock shall be based upon the
Common Stock Fair Market Value, rounded up, if necessary, to the
nearest whole share. A closing statement (the "Closing Statement")
setting forth the current assets and current liabilities of Kensington
Management at the Closing Date will be agreed upon by
Kensington Management and Karrington as soon as possible after
the Closing Date.
"Common Stock Fair Market Value" shall mean the average
of the closing price quotation or, if none, the average of the closing
bid and asked prices for a share of the Common Stock reported on
the National Association of Securities Dealers, Inc. Automated
Quotation/National Market for the fifteen (15) trading days ending
with the third business day preceding the Closing.
IN WITNESS WHEREOF, the parties have executed this
Plan as of the date indicated above.
KARRINGTON HEALTH,
INC.
By:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Its: Chief Operating
Officer and Chief Financial
Officer
KENSINGTON
MERGECO, INC.
By:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Its: Vice President
KENSINGTON
MANAGEMENT GROUP,
INC.
By:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President and Chief
Executive Officer
SHAREHOLDER
________________________
________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Individually
-------------------------------------
EXHIBIT B
Registration Rights Agreement
This Registration Rights Agreement is entered into effective
as of April 30, 1997 by and between Karrington Health, Inc. (the
"Company") and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("Holder").
1. Background.
Pursuant to a certain Agreement and Plan of Merger dated
as of April 24, 1997, the Company has agreed to acquire from
Holder all of the outstanding shares of capital stock of Kensington
Management Group, Inc., a Minnesota corporation, in exchange for
cash and 137,363 common shares of the Company (the "Common
Shares"). Holder's agreement to acquire the Common Shares is on
the condition that the Company grant certain limited registration
rights with respect thereto. Pursuant to a certain Registration
Rights Agreement dated as of May 8, 1996, a copy of which is
attached hereto (the "Registration Rights Agreement"), the
Company previously has granted registration rights to certain other
holders of the Company's securities. Holder desires to become a
party to the Registration Rights Agreement for such limited
purposes with respect to the Common Shares.
2. Piggyback Registration Rights.
The Company and Holder agree that (i) the Common Shares
shall be deemed and treated as "Registrable Securities" under the
Registration Rights Agreement only for purposes of "Piggyback
Registration" under Section 3(g) and Section 4 of such agreement,
(ii) Holder shall not have any right with respect to, and the
Common Shares shall not be deemed "Registrable Securities" for
purposes of, any "Demand Registration" under such agreement, and
(iii) Holder shall be a party to the Registration Rights Agreement
for such purposes as if an original signatory thereto, and shall be
bound by the terms and conditions of the Registration Rights
Agreement.
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement effective as of the date first set forth
above.
Karrington Health, Inc.
By: _______________________
______________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ Chief Operating Officer and
Chief Financial Officer