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Exhibit 10.1
INVESTMENT AGREEMENT
DATED AS OF NOVEMBER 21, 1996
BY AND BETWEEN
BRIM, INC.
AND
GOLDER, THOMA, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ FUND IV, L.P.
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INVESTMENT AGREEMENT
This Agreement is made and entered into as of this 21st day of
November, 1996 by and between Brim, Inc. (the "Company") and Golder, Thoma,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Fund IV, L.P., a Delaware limited partnership ("Purchaser") and
Principal Hospital Company, a Delaware corporation ("Principal").
RECITALS
This Agreement describes a series of transactions, some of which shall
be consummated pursuant to the terms hereof and some of which shall be
consummated pursuant to the terms of certain agreements described or referenced
herein, by which the Company will be reorganized and recapitalized (the
"Recapitalization") and will divest certain assets and operating entities and
will acquire by merger Principal. Due to the complexity of these transactions,
they will be briefly described in steps in the following recitals:
STEP ONE: THE CARRYCO MERGER
A. Prior to the closing of the Investment (as defined below) by
Purchaser, certain of the officers of the Company all of whom are shareholders
of the Company and as of the date hereof collectively own approximately 67% of
the Company's fully diluted common stock (the "Carryover Shareholders") will
form a new Oregon corporation to be known as Carryco, Inc. ("Carryco"). The
Carryover Shareholders will contribute to Carryco a number of shares of common
stock of the Company that will have a value estimated to be $4 million, as
determined by reference to the anticipated cash payment that the other current
common shareholders will receive upon consummation of all of the transactions
provided for herein.
B. Thereafter and prior to the closing of the Investment, the Company
and Carryco will adopt a plan and agreement of merger pursuant to which Carryco
will be merged with and into the Company (the "Carryco Merger"). The Company
will be the surviving entity. As consideration to the current holders of the
common stock of the Company for the Carryco Merger, each share of outstanding
common stock of the Company will be exchanged for one share of a newly
designated redeemable junior preferred stock of the Company (the "Redeemable
Junior Preferred"), and each option to purchase common stock of the Company will
be converted into the option to purchase a like number of shares of the
Redeemable Junior Preferred. The outstanding preferred stock of the Company (the
"GECC Preferred") will not be affected by the Carryco Merger. As consideration
to the Carryover Shareholders for the Carryco Merger, each Carryover Shareholder
will receive shares of a newly designated junior preferred stock and shares of
common stock of the Company, each in the same proportion as the shares of common
and junior preferred stock to be issued to Purchaser in connection with the
transaction described in Paragraph H(i) that comprises a portion of the
Investment. The Carryco Merger will occur approximately one day prior to the
closing of the Investment.
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C. Prior to the closing of the Carryco Merger, the Company will amend
its Articles of Incorporation to authorize the issuance of a newly designated
series of preferred stock and a newly designated series of senior preferred
stock, all of which shall by their terms be junior in priority to the GECC
Preferred Stock.
D. Upon consummation of the Carryco Merger, the Company will cancel,
as treasury shares, the shares of its common stock acquired from Carryco
through the Carryco Merger.
E. Prior to the closing of the Investment, the Company will form a new
wholly owned subsidiary to be known as Principal Merger Company.
STEP TWO: THE DIVESTITURES
Following the Carryco Merger and immediately prior to the closing of
the Investment, the Company will dispose of certain assets and subsidiaries in
the following series of transactions (collectively, the "Divestitures"):
D. By Agreement and Plan of Merger of even date herewith (the "BSL
Merger Agreement") the Company has agreed to merge its wholly owned subsidiary,
Brim Senior Living, Inc. ("BSL"), with and into Encore Senior Living, LLC, a
Delaware limited liability company ("Encore"), some of whose members consist of
certain officers of the Company or its Subsidiaries, which officers are also
shareholders of the Company and who as of the date hereof collectively own
approximately 58% of the Company's fully diluted common stock, and to sell to
Encore for a purchase price of $15 million (the "BSL Purchase Price") certain
assets owned by the Company and used in connection with the operation of its
senior living business (the "BSL Transaction").
E. By Purchase and Sale Agreement of even date herewith (the "Excluded
Assets Purchase Agreement") the Company has agreed to sell to a newly formed
limited liability company whose members consist of certain officers and
employees of the Company, all of whom are shareholders of the Company and who as
of the date hereof collectively own approximately 75% of the Company's fully
diluted common stock, for a purchase price of $406,500 (the "Excluded Assets
Purchase Price") plus the assumption of debt related thereto certain assets of
the Company which are not directly related to its health care or its senior
living operations (the "Excluded Assets Transaction").
F. By Purchase and Sale Agreement of even date herewith (the "MSL
Purchase Agreement") the Company has agreed to sell to C-C Lantana, Inc, a
Delaware corporation, which is a wholly owned subsidiary of CC-Development
Group, Inc., for a purchase price of $3 million (the "MSL Purchase Price") all
of the issued and outstanding common stock of its wholly owned subsidiary,
Meridian Senior Living, Inc. ("MSL"), and by Purchase and Sale Agreement of even
date
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herewith (the "LP Purchase Agreement") the Company has agreed to sell to ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, officers of the Company, who collectively own
approximately 27% of the Company's fully diluted common stock, for a purchase
price of $1,000 (the "LP Purchase Price") its limited partnership interest in
Meridian Park Village Limited Partnership (collectively, the "the "Freedom
Village Transaction" and together with the BSL Transaction, the "Senior Living
Transaction").
STEP THREE: THE FINANCING
G. Following the Carryco Merger and immediately prior to the closing of
the Investment, the Company will enter into a credit agreement with First Union
National Bank of North Carolina pursuant to that Commitment Letter dated
September 13, 1996 (the "First Union Commitment Letter"), a true and correct
copy of which is attached hereto as Exhibit A (the "Credit Facility"), which
Credit Facility shall provide for a loan in the principal amount of no less than
$54,000,000 (the "First Union Loan Proceeds").
STEP FOUR: THE INVESTMENT
H. Contemporaneously with closing the Credit Facility, (i) Purchaser
and/or its designees will purchase from the Company shares of a newly designated
class of junior preferred stock and of common stock and (ii) an investor
selected by Purchaser will purchase from the Company shares of a newly
designated class of senior preferred stock pursuant to that Commitment Letter
dated September 17, 1996, a true and correct copy of which is attached hereto as
Exhibit A (the "Investment Commitment Letter") (collectively, the "Investment").
STEP FIVE: THE REDEMPTION/THE ESCROWS
I. Immediately following the closings of the Credit Facility, the
Investment and the Divestitures and using the BSL Purchase Price, the MSL
Purchase Price, the First Union Loan Proceeds and the Investment Proceeds (as
defined below), the Redeemable Junior Preferred will be called for redemption
and then redeemed by the Company and the GECC Preferred will be repurchased by
the Company (collectively, the "Redemption") and the Escrow Account and the
Agent/Legal Fees Expense Account will be established.
STEP SIX: THE SUBSEQUENT TRANSACTION
K. By Agreement and Plan of Merger to be executed and delivered after
the Closing among the Company, Principal Merger Company (a transitory subsidiary
of the Company) and Principal, the parties thereto will provide for the merger
of Principal Merger Company with and into Principal so that, following the
merger Principal will be a wholly-owned subsidiary of the Company (the
"Subsequent Transaction") and in consideration therefor the shareholders of
Principal will receive common stock of the Company.
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Hereinafter the Recapitalization, the Financing, the Investment, the
Divestitures and the Redemption will sometimes be collectively referred to as
the "Transactions."
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS
FOLLOWS:
ARTICLE I
THE REORGANIZATION, RECAPITALIZATION AND REDEMPTION
1.01. Carryco Merger. Subject to the terms and conditions hereof, prior
to the Closing Date (as defined below), the Carryover Shareholders shall
organize Carryco. The Carryover Shareholders and their proportionate
capitalization of and interest in Carryco shall be as set forth on Exhibit B
hereto. Carryco and the Company shall adopt a Plan and Agreement of Merger,
substantially in the form set forth as Exhibit C hereto, providing for the
Carryco Merger. The Carryco Merger shall be consummated on or about the day
prior to the Closing Date as provided for in Paragraph 2.01 hereof and shall be
conditioned on the Purchaser or the Purchaser's designees having deposited into
escrow with a mutually acceptable escrow agent, the Investment Proceeds (as
defined below) along with instructions (which instructions shall be irrevocable
upon compliance by the Company and by the parties (including the Company) to the
BSL Merger Agreement, the MSL Purchase Agreement, the LP Purchase Agreement, the
Excluded Assets Purchase Agreement and the Carryco Merger with their obligations
under each such agreement) directing the release of said funds upon the
consummation of the Carryco Merger and the confirmation of the Company and the
Purchaser that the conditions to closing provided for in this Agreement have
been satisfied or waived.
1.02. The Divestitures. Following the Carryco Merger and immediately
prior to the Closing, the Company shall consummate the Divestitures on the terms
and conditions provided for in the BSL Merger Agreement, the MSL Stock Purchase
Agreement, the LP Purchase Agreement and the Excluded Assets Purchase Agreement.
As set forth more fully in the LP Purchase Agreement and the Excluded Assets
Purchase Agreement, the LP Purchase Price and the Excluded Assets Purchase Price
shall be payable by the purchasers to the Company in immediately available funds
at the closing of the transaction provided for in the LP Purchase Agreement and
in the Excluded Assets Transaction, respectively, and shall be retained by the
Company from and after the closing of said transactions. As set forth more fully
in the BSL Merger Agreement and the MSL Purchase Agreement, the BSL Purchase
Price and the MSL Purchase Price shall be payable by the purchasers at the
closings thereof as follows:
(a) Fourteen Million Two Hundred Thousand and no/100 Dollars
($14,200,000) of the BSL Proceeds shall be paid in immediately available funds
by wire transfer to the Company; and
(b) Seven Hundred Fifty Thousand and no/100 Dollars ($750,000) of the
BSL Proceeds shall be paid in immediately available funds to an interest bearing
escrow account established at Key Bank of Oregon (the "Escrow Agent") and
designated as the Brim/Senior Living Escrow Account
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(the "Senior Living Escrow Account") to be held by the Escrow Agent in
accordance with the terms of the escrow agreement executed in conjunction with
the Senior Living Transaction (the "Senior Living Escrow Agreement").
(c) Fifty Thousand and no/100 Dollars ($50,000) of the BSL Proceeds
shall be paid in immediately available funds to an interest bearing escrow
account established with the Escrow Agent and designated as the "Agent/Legal
Fees Escrow Account" to be held and applied by the Escrow Agent in accordance
with the terms of Paragraph 1.04(b)(iii) hereof and with the terms of the Senior
Living Escrow Agreement.
(d) One Million Nine Hundred Fifty Thousand and no/100 Dollars
($1,950,000) of the MSL Proceeds shall be paid in immediately available funds by
wire transfer to the Company.
(e) One Million and no/100 Dollars ($1,000,000) of the MSL Proceeds
shall be paid in immediately available funds to the Senior Living Escrow Account
to be held by Escrow Agent in accordance with the terms of the Senior Living
Escrow Agreement.
(f) Fifty Thousand and no/100 Dollars ($50,000) of the MSL Proceeds
shall be paid into the Agent/Legal Fees Escrow Account to be held and applied by
the Escrow Agent in accordance with the terms of Paragraph 1.04(b)(iii) hereof
and with the terms of the Senior Living Escrow Agreement;
1.03. The Financing. Following the Carryco Merger and the consummation
of the Divestitures, the Company will enter into the Credit Facility.
1.04. The Investment.
(a) Prior to the Closing Date and in anticipation of the consummation
of the Redemption, the Company shall amend its charter to authorize the issuance
of two additional series of preferred stock, one series to be designated Series
A Senior Preferred Stock, having the rights and preferences set forth in Exhibit
D hereto (the "Senior Preferred Stock"), and the other series to be designated
Series B Junior Preferred Stock, having the rights and preferences set forth in
Exhibit E hereto (the "Junior Preferred Stock" and together with the Senior
Preferred Stock, the "New Preferred Stock", all of which shall, by their terms,
be junior in priority to the GECC Preferred Stock until the repurchase of the
GECC Preferred Stock upon consummation of the Redemption.
(b) On the Closing Date, subject to the terms and conditions set forth
herein, the Company shall issue (i) to Purchaser's designees and the Purchaser's
designees shall purchase from the Company 20,000 shares of the Senior Preferred
Stock, for an aggregate purchase price of $20 million, and (ii) to Purchaser
and/or its designees and the Purchaser and/or its designees shall purchase from
the Company such number of shares of the Junior Preferred Stock and shares of
Common Stock as shall be necessary to ensure that there are sufficient funds
available at Closing
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to consummate the redemption of the Redeemable Junior Preferred and the GECC
Preferred in accordance with the terms hereof, which funds are currently
anticipated to be approximately $10,000,000. The aggregate purchase price for
the New Preferred Stock and the common stock to be purchased by Purchaser and
its designees is estimated to be approximately $30,000,000, and is referred to
herein as the "Investment Proceeds." On the Closing Date, the Investment
Proceeds and the First Union Loan Proceeds shall be payable to the Company as
follows:
(i) Sixty Nine Million Eight Hundred Thousand and no/100 Dollars
($69,800,000) shall be paid in immediately available funds by wire transfer to
the Company.
(ii) Four Million and no/100 Dollars ($4,000,000) shall be paid in
immediately available funds to an interest bearing escrow account established by
the Escrow Agent and designated as the "Brim/Principal Escrow Account" to be
held by the Escrow Agent.
(iii) Two Hundred Thousand and no/100 Dollars ($200,000) shall be paid
in immediately available funds to the Agent/Legal Fees Expense Account to be
used by ▇▇▇ ▇▇▇▇▇▇, as the agent for the benefit of the former holders of the
Redeemed Preferred Stock and of the GECC Preferred Stock (the "Agent") to pay
any costs and expenses incurred by the Agent in connection with any claims made
under the indemnity provisions hereof and/or under the indemnity provisions of
the Senior Living Escrow Agreement. The funds in the Brim/Principal Escrow
Account shall be disbursed in accordance with the provisions of Article IX
hereof and/or any Escrow Agreement which may be executed pursuant thereto.
(c) Concurrently with the Closing, the Company shall repurchase all of
the GECC Preferred Stock pursuant to the terms of that Preferred Stock
Repurchase Agreement entered into with General Electric Capital Corporation in
the form attached hereto as Exhibit F (the "Preferred Stock Repurchase
Agreement").
1.05. Redemption of the Redeemable Junior Preferred and the GECC
Preferred.
(a) On or immediately prior to the Closing Date, the Company shall call
for redemption all of the then outstanding shares of the Redeemable Junior
Preferred (the "Redeemed Preferred Stock"). Purchaser acknowledges and agrees
that the shares of Redeemable Junior Preferred may include shares of Redeemable
Junior Preferred acquired upon the purchase or the exercise of the Options (as
defined in Paragraph 3.02) and which are described more fully in Section 3.02(a)
of the Company Disclosure Letter in accordance with Paragraph 1.05(b). In
connection with the redemption of the Redeemed Preferred Stock, prior to Closing
each holder will be advised of the procedures for surrendering to Key Bank of
Oregon, the payment agent (the "Payment Agent") the certificates representing
either the common stock which shall be converted into shares of Redeemable
Junior Preferred in accordance with the terms of the Carryco Merger or the
Redeemed Preferred Stock, as applicable. Upon surrender and exchange of a
certificate to the Payment Agent in care of the Agent, the holder will be paid
the amount of cash to which such holder is entitled
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hereunder as a result of the closing of the Transactions less any amount
required to be withheld under applicable federal income tax regulations.
(b) Purchaser further acknowledges and agrees that between the date
hereof and the Closing Date the Board of Directors or the shareholders, as
applicable, of the Company shall have the right to take such action as may be
necessary to either (i) declare any of such Options which are unvested as of the
date hereof or as of the Closing Date to be vested as of the Closing Date (the
"Accelerated Options") and, subject to the terms of the Stock Option Plans under
which such Options were issued or to such other action as may be lawfully taken
by the Board of Directors or shareholders of the Company, each of the holders
thereof may exercise said Accelerated Options on or immediately prior to the
Closing Date and shall in the event of the exercise thereof first receive the
shares of Redeemable Junior Preferred which are due upon the exercise thereof
(which Redeemable Junior Preferred will become part of the Redeemed Preferred
Stock) and thereafter receive the amount due for the Redeemed Preferred Stock
held by such option holder on the Closing Date in accordance with Paragraph
1.05(a) less the exercise price per share provided for in each such Accelerated
Option or (ii) offer to purchase vested and unvested Options for a purchase
price equal to the difference between the price per share owing at Closing to
the holders of the Redeemed Preferred Stock and the exercise price under such
Options, which purchase price shall be due and payable concurrently with the
payment of the redemption price due to the holders of the Redeemed Preferred
Stock (the "Purchased Options").
1.06. The Redemption Price. Based on a continuing investment by the
Carryover Shareholders of Three Million Nine Hundred Fifty Thousand Nine Hundred
Forty and no/100 Dollars ($3,950,940), the aggregate redemption price for the
Redeemed Preferred Stock and the GECC Preferred Stock shall be Eighty Five
Million Nine Hundred Ninety Nine Thousand Sixty and no/100 Dollars ($85,999,060)
(the "Redemption Price").
1.07. Distribution of Redemption Price/Interest in Escrow Accounts.
Prior to the distribution of the Redemption Price the Company shall deduct
therefrom the amount of the Estimated Senior Living Tax Liability (as
hereinafter defined), the Senior Living ▇▇▇▇▇ ▇▇▇▇▇▇ Fee (as hereinafter
defined), the GECE Payment (as hereinafter defined) and any costs of the Senior
Living Transaction as contemplated by Paragraph 10.14 in excess of $200,000
(collectively, the "Price Adjustments"), and shall pay to the appropriate third
parties the amounts which are the subject of the Price Adjustments as and when
due in accordance with the terms hereof, such that the proceeds distributed to
the holder of the GECC Preferred Stock and the holders of the Redeemed
Preferred Stock in connection with the Closing shall be in the aggregate amount
of Eighty One Million Seven Hundred Ninety Thousand Eight Hundred Nineteen and
no/100 Dollars ($81,790,819) (the "Net Redemption Price") and shall be
allocated between the holder of the GECC Preferred Stock and the holders of the
Redeemed Preferred Stock (the latter of which for purposes hereof shall include
the holders of the Accelerated Options or the Purchased Options) as follows:
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(a) GECC Preferred Stock: Thirty Million Three Thousand One Hundred Six
and no/100 Dollars ($30,003,106), representing an accrued dividend of Two
Million Six Hundred Twenty Four Thousand and no/100 Dollars ($2,624,000) and
Twenty Seven Million Three Hundred Seventy Nine Thousand One Hundred Six and
no/100 Dollars ($27,379,106) as the purchase price for the Seller's Shares.
(b) Redeemed Preferred Stock: Fifty One Million Seven Hundred Eighty
Seven Thousand Seven Hundred Thirteen and no/100 Dollars ($51,787,713);
provided, however, that with respect to the holders of the Accelerated Options
or the Purchased Options, as applicable, the portion of the Net Redemption Price
distributed to them shall, as set forth more fully in Paragraph l.05(b), be
equal to the difference between the price per share owing at Closing to the
holders of the Redeemed Preferred Stock and the exercise price under such
Options, with the excess retained by the Company as the consideration for the
Redeemed Preferred Stock evidenced by said Accelerated Options or Purchased
Options.
The foregoing assumes the costs of the Senior Living Transaction borne
by the holder of the GECC Preferred and the holders of the Redeemed Preferred
Stock equals $500,000, it being understood and agreed that pursuant to Paragraph
10.14, the first $200,000 of such costs shall be borne by the Company and any
excess of such costs shall be borne by the former shareholders of the Company
through an offset against the Redemption Price which is reflected in the Net
Redemption Price. In the event the costs are greater or less than said amount,
the Net Redemption Price shall be reduced or increased respectively on a dollar
for dollar basis by said difference and the amount distributed to each of GECC
and the holders of the Redeemed Preferred Stock shall be adjusted accordingly.
The foregoing also assumes that the Senior Living Tax Liability will be
in an amount equal to the Estimated Senior Living Tax Liability. In the event of
a change in the Senior Living Tax Liability at Closing in accordance with the
final sentence of Paragraph 1.08, the Net Redemption Price shall be reduced or
increased on a dollar for dollar basis by said difference and the amount
distributed to each of GECC and the holders of the Redeemed Preferred Stock
shall be adjusted accordingly.
In addition, after the Closing the former holders of the Redeemed
Preferred Stock, the GECC Preferred Stock, the Accelerated Options and/or the
Purchased Options and the Carryover Shareholders shall have an interest in the
Senior Living Escrow Account, in the Brim/Principal Escrow Account established
under the terms of this Agreement and in the Agent/Legal Fees Expense Account.
The interest of the holders of the Redeemed Preferred Stock and the GECC
Preferred Stock in the Brim/Principal Escrow Account and in the Agent/Legal Fees
Expense Account is set forth more fully in Paragraph IX hereof.
The following table is inserted for purposes of summarizing the amounts
set forth in Paragraphs 1.01 through this Paragraph 1.07:
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REDEMPTION AND ALLOCATION OF PROCEEDS
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Healthcare Senior Living Total Consideration
Transaction Transaction
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Purchaser's Offer $78,000,000 $18,000,000 $96,000,000
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Escrows: 4,200,000 1,850,000 6,050,000
GECC 1,505,644 663,200 2,168,845
Redeemed
Preferred
Shareholders 2,694,356 1,186,800 3,881,155
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Carryover 3,950,940 3,950,940
Shareholders
Investment
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Redemption Price 69,849,060 16,150,000 85,999,060
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Less: Payment for (150,000) (150,000)
CC Release
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Less: Tax on Senior (3,336,598) (3,336,598)
Living Spin Off
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Less: ▇▇▇▇▇ ▇▇▇▇▇▇ (221,642) (221,642)
Fee
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Less: Payments in (500,000) (500,000)
Excess of $200,000
related to Senior
Living Transaction
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Net Redemption 69,849,060 11,941,759 81,790,819
Price
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Cash to GECC 25,622,543 4,380,563 30,003,106
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Cash to Redeemed
Preferred
Shareholders(1) $44,226,517 $ 7,561,196 $51,787,713
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(1) Approximately $1.7 million of this amount will remain with the Company
after netting the option exercise price under the Accelerated Options and/or
Purchased Options against the price per share due to the holders of the Redeemed
Preferred Stock.
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1.08. Estimated Senior Living Tax Liability. The Company and Purchaser
acknowledge and agree that the cash proceeds distributed to the holders of the
Redeemed Preferred Stock has been calculated based on the agreement of the
Company's and the Purchaser's independent certified public accountants that it
is anticipated that the Company will incur a state and federal tax liability in
the aggregate amount of $3,336,598 (determined based on the Company's financial
statements as of June 30, 1996) in conjunction with the Senior Living
Transaction, which liability will be due and payable in 1997 (the "Estimated
Senior Living Tax Liability"). Purchaser will cause the Company to prepare the
Company's state and federal tax returns for calendar year 1996 (the "1996 Tax
Returns") and upon the completion thereof shall be liable for the payment of
such taxes whether the same are more or less than the estimated Senior Living
Tax Liability and from and after the Closing Date none of the holders of GECC
Preferred Stock and Redeemable Preferred Stock, the Carryover Shareholders or
the purchasers in the Senior Living Transaction shall have any liability
therefor. In addition, the Purchaser acknowledges and agrees that the Company
shall be liable for any and all state and federal income taxes which are due and
payable after Closing or which were due and not paid in full prior to the
Closing Date and which, in either event, relate to periods prior to the Closing
Date with respect to the business which is the subject of the Senior Living
Transaction and that there shall be no adjustment to the amount of the
Investment Proceeds due pursuant to Paragraph 1.04(b) or the redemption price
provided for in Paragraph 1.06 as a result thereof. Notwithstanding the
foregoing, in the event (i) the actual Senior Living Tax Liability is less than
the Estimated Senior Living Tax Liability or (ii) the Company receives a tax
refund with respect to the Senior Living Tax Liability actually paid by it, in
either instance, solely as a result of a deemed reduction in the purchase price
paid with respect to the Senior Living Transaction arising from a claim against
any escrow accounts established at the closing thereof as security for the
indemnity obligations of the Company under the Purchase or Merger Agreements
executed pursuant thereto and the remittance of funds in said escrow to the
purchaser(s) in the Senior Living Transaction, 64.15% of the amount of such tax
savings or tax refund shall be remitted by the Company to the former holders of
the Redeemed Preferred Stock and 35.85% of the amount thereof shall be remitted
by the Company to the former holder of the GECC Preferred Stock. The Company and
Purchaser agree that at or immediately prior to Closing they shall review and
agree upon any necessary adjustments to the amount of the estimated Senior
Living Tax Liability reflected in this Paragraph 1.08 based on the financial
statements of the Company prepared as of the Closing Date.
1.09. GECE Payment. The Company and the Purchaser acknowledge and agree
that the cash proceeds distributed to the holders of the Redeemed Preferred
Stock shall be net of a One Hundred Fifty Thousand and no/100 Dollar ($150,000)
payment which is due to General Electric Credit Equities in connection with the
Senior Living Transaction (the "GECE Payment") and which shall be paid to GECE
concurrently with the closing of the Senior Living Transaction in the manner
agree upon by the Company and GECE.
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ARTICLE II
CLOSING
2.01. Deliveries by the Company at Closing. In the event all of the
conditions to Closing (as defined below) set forth in Paragraphs 8.01 and 8.02
have been satisfied or waived, the Company shall deliver all certificates,
documents, exhibits, schedules, and other instruments required to be delivered
at Closing by the Company or its counsel pursuant to this Agreement, each of
which shall be fully executed and completed, as appropriate.
2.02. Deliveries by Purchaser at Closing. In the event all of the
conditions to Closing (as defined below) set forth in Paragraphs 8.01 and 8.02
have been satisfied or waived, Purchaser shall deliver and/or cause its
designees to deliver all of the certificates, documents, exhibits, schedules,
and other instruments required to be delivered at Closing by Purchaser and/or
its designees or its or their counsel, pursuant to this Agreement, each of which
shall be fully executed and completed, as appropriate and shall remit or cause
(pursuant to the terms of the instructions under which the same was delivered
into escrow prior to the consummation of the Carryco Merger) to be remitted to
the Company the consideration described in Paragraph 1.04.
2.03. Time and Place. The closing (the "Closing") of the Transactions
contemplated by this Agreement shall occur at the Chicago offices of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ at 10:00 am, local time, on December 13, 1996, provided that as of said
date all of the conditions to Closing set forth in Paragraphs 8.01 and 8.02 have
been satisfied by the responsible party or waived by the party benefitted
thereby and thus entitled to waive the same (the "Closing Date"), or at such
other time or on such other date or at such other place as the Company and
Purchaser may mutually agree, but in no event later than December 17, 1996 (the
"Outside Closing Date"). In the event all of the conditions to Closing have not
been satisfied or waived as of the Outside Closing Date, either party shall
thereafter have the right to terminate this Agreement in accordance with the
terms of Article IX hereof.
ARTICLE III
THE COMPANY'S REPRESENTATIONS AND WARRANTIES
Except as otherwise provided in that letter of even date herewith
delivered by the Company to Purchaser concurrently with the execution of this
Agreement, including any and all appendices thereto and updates thereto
authorized by and/or approved by Purchaser in accordance with the terms of
Paragraph 10.08 hereof (the "Company Disclosure Letter"), the Company does
hereby represent and warrant to Purchaser and to Purchaser's designees who
execute a counterpart of this Agreement or a separate certificate pursuant to
Paragraph 4.08(f) as follows with respect to the Company and the Subsidiaries
(other than the Excluded Subsidiaries (as hereinafter defined) and the
business, assets, liabilities and operations thereof, it being understood and
agreed that the Company is not making any representations or warranties with
respect to the Excluded Subsidiaries or the business, assets, liabilities and
operations thereof):
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3.01. Organization and Qualification.
(a) The Company is a corporation duly organized and validly existing
under the laws of the State of Oregon. Each of the Subsidiaries (as defined in
Paragraph 3.01(c) below) is a corporation, partnership or limited liability
company, duly organized and validly existing under the laws of the jurisdiction
reflected opposite its name in Section 3.01(a) of the Company Disclosure Letter.
The Company and each Subsidiary has full corporate or partnership power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties.
(b) The Company and each of the Subsidiaries is duly qualified,
licensed or admitted to do business and is in good standing in each jurisdiction
in which the ownership, use or leasing of its assets and properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary. Section 3.01(b) of the Company Disclosure Letter sets forth
the foreign jurisdictions in which the Company and each of the Subsidiaries is
qualified to do business.
(c) Except for those entities disclosed in Part I of Section 3.01(c) of
the Company Disclosure Letter (individually, a "Subsidiary" and collectively,
the "Subsidiaries"), the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity. For purposes of this Agreement, including, but not
limited to, the representations and warranties, covenants and conditions to
Closing set forth herein, any and all references to the Subsidiaries of the
Company shall specifically exclude those entities disclosed in Part II of
Section 3.01(c) of the Company Disclosure Letter (the "Excluded Subsidiaries"),
it being understood and agreed that immediately prior to the closing of the
Transactions, the Company shall have consummated the Senior Living Transaction
and the Excluded Assets Transaction and that in conjunction with the
consummation of the Senior Living Transaction and the Excluded Assets
Transaction certain stock and partnership interest transfers and/or subsidiary
dissolutions may occur concurrently with the closing of the Senior Living
Transaction and the Excluded Assets Transaction.
3.02. Capital Stock.
(a) As of the date hereof, the authorized capital stock of the Company
consists solely of 10 million shares of Common Stock, without par value, and the
GECC Preferred Stock which consists of 96,000 shares of Series A Preferred
Stock, without par value. The number of issued and outstanding shares of the
Common Stock and the holders thereof are listed in Section 3.02(a) of the
Company Disclosure Letter (the "Common Stock"). All of the shares of the GECC
Preferred Stock are issued and outstanding and are owned by General Electric
Capital Corporation. In addition, as of the date hereof, the Company has
granted those options to purchase shares of the common stock of the Company
listed in Section 3.02(a) of the Company Disclosure Letter to the persons
identified therein (the "Options" and together with the Common Stock and the
Preferred Stock, the "Shares").
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Except as set forth in Section 3.02(a) of the Company Disclosure Letter and
except as specifically contemplated by Article I of this Agreement, there are no
outstanding subscriptions, options, warrants, rights (including "phantom" stock
rights), preemptive rights or other contracts, commitments, understandings or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or agreement (together, the "Rights"),
obligating the Company or any Subsidiary to issue or sell any shares of its
capital stock or to grant, extend or enter into any Right with respect thereto
nor any voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person other than the Company with
respect to the voting of or the right to participate in dividends or other
earnings on any capital stock or other equity security of the Company or any of
the Subsidiaries.
(b) The outstanding shares of Common Stock and GECC Preferred Stock are
duly authorized, validly issued, fully paid and nonassessable.
(c) Except as set forth in Section 3.02(c) of the Company Disclosure
Letter and except for the obligations undertaken by the Company under Article I
hereof and under the Preferred Stock Repurchase Agreement, there are no
outstanding contractual obligations to which the Company is a party to
repurchase, redeem or otherwise acquire any of the Shares.
(d) Except as set forth in Section 3.02(d) of the Company Disclosure
Letter, there are no outstanding obligations by the Company to provide funds in
excess of $100,000 to, or to make any investment (in the form of a loan, capital
contribution or otherwise) in excess of $100,000 in, any other person, excluding
any of the Subsidiaries. Purchaser acknowledges and agrees that Section 3.02(d)
of the Company Disclosure Letter does not include any commitments with respect
to equipment purchases or leases, which are described in Section 3.10(b) of the
Company Disclosure Letter.
(e) The Common Stock and the New Preferred Stock when issued at Closing
to Purchaser and/or its designees shall be duly authorized, validly issued,
fully paid (assuming the payment of the Investment Proceeds therefor by
Purchaser and/or its designee) and non-assessable and shall be issued free and
clear of all Liens (as hereinafter defined).
3.03. Authority Relative to this Agreement. The Company has full
corporate power and authority to enter into this Agreement and each other
instrument, document and agreement necessary to consummate the transactions
contemplated hereby, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the company, and no other corporate proceedings on the
part of the Company are necessary to authorize the execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby, it being understood and agreed that the
consummation of the Transactions is subject to the approval of the shareholders
of the Company,
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which the Company shall use its best efforts to secure in accordance with the
provisions of Paragraph 7.04(a). This Agreement has been duly and validly
executed and delivered by the Company and, subject to securing the HSR Approval,
the Regulatory Approvals, the Third Party Consents (as each such term is defined
in Article VII) and the shareholder approval contemplated by Paragraph 7.04,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.04. Approvals and Consents. Subject to obtaining such consents or
making such filings as may be described in Section 3.04 of the Company
Disclosure Letter and as may be described in Paragraphs 7.02 and 7.03 of this
Agreement, the execution and delivery of this Agreement by the Company does not,
and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby will not:
(a) conflict with, result in a violation or breach of, constitute (with
or without notice or lapse of time or both) a default under, result in or give
to any person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
liens, claims, mortgages, encumbrances, pledges, security interests, equities
and charges of any kind (each a "Lien") upon any of the assets or properties of
the Company or any of the Subsidiaries under, any of the terms, conditions or
provisions of:
(i) the articles of incorporation or bylaws (or other comparable
charter or organizational documents) of the Company or any Subsidiary,
(ii) any Company Management Contract (as such.term is defined in
Paragraph 3.10(c)),
(iii) any Company Lease (as such term is defined in Paragraph
3.10(c)), or
(iv) (A) any statute, law, rule, regulation or ordinance (together,
"Laws") of any state or of the United States, or any judgment, decree,
order or writ (together, "Orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic or foreign state
(a "Governmental or Regulatory Authority"), applicable to the Company
or any of the Subsidiaries or any of its or their respective assets or
properties, or (B) to the knowledge of the Company, any Laws or Orders
of any jurisdiction or governmental authority not specified in clause
(A), or (C) any Company Contract, as defined in Paragraph 3.10(b), or
(D) any Company Permit (as defined in Paragraph 3.09 below).
(b) require any consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority or other public or private third
party under any of the terms, conditions or
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provisions of any Law or Order of any Governmental or Regulatory Authority to
which the Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries or any of its or their respective assets or
properties is bound; or
(c) require any consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority or other public or private third
party under any of the terms, conditions or provisions of any Company Management
Contract, Company Contract or Company Lease to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries or
any of its or their assets or properties is bound.
3.05. Financial Statements.
(a) The Company has delivered to Purchaser prior to the execution of
this Agreement a true and complete copy of the audited consolidated balance
sheet of the Company and its consolidated Subsidiaries as of December 31, 1995
(the "1995 Financial Statements") and a true and complete copy of the unaudited
consolidated balance sheet of the Company and its consolidated Subsidiaries
(after giving effect to the Excluded Assets Transaction and the Senior Living
Transaction) as of the six months ended June 30, 1996 (the "June 30, 1996
Financial Statements") and the related statements of operations, stockholders'
equity, and cash flows for the fiscal period ended as of each such date, all
such audited financial statements with the reports thereon by KPMG Peat Marwick
LLP (collectively, the "Company Financial Statements").
(b) The Company Financial Statements were prepared in accordance with
GAAP (except as may be indicated therein or in the notes thereto) and fairly
present the consolidated financial position of the Company and its consolidated
Subsidiaries (after giving effect, in the case of the June 30, 1996 Financial
Statements, to the Excluded Assets Transaction and the Senior Living
Transaction) as at the respective dates thereof and the consolidated results of
their operations and cash flows for the respective periods then ended.
(c) The June 30, 1996 financial statements reflect on a Pro Forma basis
the consummation of the Senior Living Transaction and the Excluded Assets
Transaction.
(d) The Company has delivered to Purchaser prior to the execution of
this Agreement a true and correct copy of its interim unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries as of July 31,
1996, August 31, 1996 and September 30, 1996 and related statements of
operations, stockholder's equity and cash flows for the fiscal periods ended as
of each such date (collectively, the "Interim Financial Statements"). The
Interim Financial Statements fairly present the consolidated financial position
of the Company and its consolidated Subsidiaries (without giving effect to the
Excluded Assets Transaction and the Senior Living Transaction) as at the
respective periods then ended and were prepared in a manner consistent with the
past practices of the Company.
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(e) The Company shall deliver to Purchaser between the date hereof and
the Closing Date, a true and correct copy of its interim unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries and related
statements of operations, stockholder's equity and cash flows for each month
included therein prepared for any periods subsequent to the periods included in
the Interim Financial Statements (collectively, the "Subsequent Interim
Financial Statements"). The Subsequent Interim Financial Statements will be
prepared in a manner so as to fairly present the consolidated financial position
of the Company and its consolidated Subsidiaries (without giving effect to the
Excluded Assets Transaction and the Senior Living Transaction) as at the
respective periods then ended and consistent with the past practices of the
Company.
3.06. Absence of Certain Changes or Events. Except as set forth in
Section 3.06 of the Company Disclosure Letter or as contemplated by this
Agreement, (a) since June 30, 1996 there has not been any change, event or
development out of the ordinary course of business having, or that would be
reasonably expected to have a continuing, as compared to temporary, adverse
effect on the Company and the Subsidiaries, in any one instance of more than
$100,000 or in the aggregate of more than $500,000 and (b) except as disclosed
in Section 3.06 of the Company Disclosure Letter, (i) between June 30, 1996 and
the date hereof each of the Company and the Subsidiaries has conducted its
businesses only in the ordinary course and with due regard to the proper
maintenance and repair of any real property or personal property owned or leased
by it or them and (ii) between June 30, 1996 and the date hereof, neither the
Company nor any of the Subsidiaries has engaged in any of the transactions
described in Paragraph 5.01(a). Nothing herein shall be construed as requiring
the Company to disclose to Purchaser or its designees general changes in the
health care industry which may, could or would have an affect on the Company
tither prior to or after the Closing, it being understood and agreed that the
Purchaser is, and its designees will be, sophisticated investors in and
purchasers of health care companies and can and will keep themselves advised as
to any such general developments.
3.07. Legal Proceedings. Except as disclosed in Section 3.07 of the
Company Disclosure Letter, there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting, nor are there any Governmental or Regulatory Authority
investigations or audits pending or to the knowledge of the Company threatened
against, relating to or affecting, the Company or any of the Subsidiaries or any
of its or their assets and properties. For purposes hereof disputes with third
party payors over the reimbursement due or paid to the Owned Company Facilities
or the Leased Company Facilities shall not be deemed to be a legal proceeding,
but should be the subject of the disclosure, if any, set forth under Paragraph
3.16.
3.08. Information Supplied. Any documents to be filed by the Company
with any Governmental or Regulatory Authority in connection with this Agreement
and the other transactions contemplated hereby will not, on the date it is filed
or required to be filed, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading, except that no representation is made by the Company
with respect to
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information supplied in writing by or on behalf of Purchaser and/or its
designees expressly for inclusion therein. The Company further represents and
warrants that no representation or warranty by the Company contained in this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material facts required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
3.09. Compliance with Laws and Orders.
(a) The Company and each of the Subsidiaries holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental and
Regulatory Authorities necessary for the leasing, ownership or operation of the
hospitals and other related health care facilities owned (the "Owned Company
Facilities") or leased (the "Leased Company Facilities") by the Company and the
Subsidiaries and for the lawful conduct of the business of the Company and the
Subsidiaries (the "Company Permits") at the Company Facilities (as defined
below). A true and correct list of each of the Owned Company Facilities, each
hospital and related healthcare facility managed by the Company or its
subsidiaries (the "Managed Company Facilities"), the Leased Company Facilities
and any other related health care facilities owned, leased or operated by the
Company, including, but not limited to, outpatient clinics and medical office
buildings, is set forth in Section 3.09 of the Company Disclosure Letter
(collectively, the "Company Facilities").
(b) Each of the Company and the Subsidiaries is in substantial
compliance with the terms of the Company Permits held by it. Except as disclosed
in Section 3.09 of the Company Disclosure Letter, to the knowledge of the
Company, the Company and each of the Subsidiaries is in substantial compliance
with any Law and in full compliance with any Order of any Governmental or
Regulatory Authority applicable to it. For purposes hereof, the Company and the
Subsidiaries shall be deemed to be in substantial compliance with the Company
Permits and with any Law if its failure to comply therewith is the subject of a
plan of correction which has been accepted by the applicable Governmental or
Regulatory Authority.
3.10. Compliance with Agreements: Certain Agreements.
(a) Except as disclosed in Section 3.10(a) of the Company Disclosure
Letter, neither the Company nor any of the Subsidiaries is in breach or
violation of, or in default in the performance or observance of any term or
provision of, and no event has occurred which, with notice or lapse of time or
both, would be reasonably expected to result in a default under:
(i) its articles of incorporation or bylaws (or other comparable
charter documents);
(ii) any Company Management Contract;
(iii) any Company Lease;
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(iv) any Company Partnership Agreement (as defined below); or
(v) any Company Contract.
(b) Except with respect to those agreements listed in Section 3.10(b)
of the Company Disclosure Letter, true and correct copies of which have been
made available to Purchaser prior to the execution of this Agreement, the
receipt of which is hereby acknowledged by Purchaser, or as provided for in this
Agreement, to its knowledge, neither the Company nor any of the Subsidiaries is
a party to, nor are any of its or their assets bound or affected by, any oral or
written agreements of the following nature (the "Company Contracts"):
(i) consulting agreement, contract, arrangement or understanding not
terminable whether with or without penalty on 90 days' or less notice involving
the payment of more than $50,000 per annum individually or $100,000 per annum in
the aggregate for all such agreements;
(ii) union or collective bargaining agreement;
(iii) agreement contract, arrangement, commitment, understanding or
obligation with any Key Employee (as hereinafter defined) of the Company or any
of the Subsidiaries the benefits of which are contingent or vest, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company of the nature contemplated by this Agreement;
(iv) agreement, contract, arrangement, commitment, understanding or
obligation with respect to any Key Employee of the Company or any Subsidiary
providing any term of employment or compensation guarantee extending for a
period longer than 90 days after the date hereof and for the payment of more
than $50,000 per annum individually or $100,000 per annum in the aggregate for
all such agreements;
(v) agreement or plan, including any stock option, stock appreciation
right, restricted stock or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement;
(vi) agreement, contract, arrangement, commitment, understanding or
obligation to which it is a party limiting in any material respect its freedom
or the freedom of any Key Employee to compete in any line of business with any
person;
(v) agreement, contract, arrangement, commitment, understanding or
obligation (i) evidencing any liability (A) in excess of $100,000, or (B) any
liability for the obligations of any person in excess of $100,000 or (C)
regardless of the amount thereof, that is not to be fully performed or that
cannot be terminated whether with or without penalty within ninety (90) days
after
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the Closing Date or (ii) defining the terms on which any other debt in excess of
$100,000 has been or may be issued or incurred; provided, however, that for
purposes of this Paragraph 3.l0(a)(vii), an accrual or third party contractual
allowance reflected on the Company Financial Statements shall not be deemed to
be a liability subject to disclosure under the terms hereof; or
(viii) agreement, contract, arrangement, commitment, understanding or
obligation relating to it, its present or prospective business, operations,
properties or assets in which any Key Employee has any interest, direct or
indirect, including a description of any transactions between it and any Key
Employee or any entity in which any Key Employee has any interest (other than
transactions between any corporation and a publicly held corporation in which
the Key Employee holds less than five percent (5%) of the issued and outstanding
shares of capital stock).
(c) For purposes of this Agreement the following defined terms used in
this Paragraph and elsewhere in this Agreement shall have the meanings set forth
below:
(i) "Company Management Contract" means any agreement to which the
Company or any Subsidiary is a party providing for management,
administrative or other services to be rendered in connection with the
operation, administration, or supervision of any managed Company
Facility, which contracts include as of the date of this Agreement,
those Company Management Contracts listed in Section 3.l0(c) of the
Company Disclosure Letter, true and correct copies of which have been
made available to Purchaser prior to the execution of this Agreement
the receipt of which is hereby acknowledged by Purchaser.
(ii) "Company Lease" means those leases to which the Company or any
Subsidiary is a party with respect to those hospitals and other
related health care facilities listed in Section 3.10(c) of the
Company Disclosure Letter, true and correct copies of which have been
made available to Purchaser prior to the execution of this Agreement,
the receipt of which is hereby acknowledged by Purchaser.
(iii) "Company Partnership Agreement" means those partnership
agreements in which the Company or any Subsidiary holds a general
and/or limited partnership interest listed in Section 3.10(c) of the
Company Disclosure Letter, true and correct copies of which have been
made available to Purchaser prior to the execution of this Agreement,
the receipt of which is hereby acknowledged by Purchaser.
(iv) "Key Employee" means all officers, managers and other employees
and consultants of the Company or any Subsidiary whose current annual
salary or rate of compensation (including bonus and incentive
compensation) is $100,000 or more, as set forth more fully in Section
3.10(c) of the Company Disclosure Letter.
3.11. Taxes. The Company has filed all tax returns which are required
to have been filed in any jurisdiction with respect to the Company and each of
the Subsidiaries, and has paid, before
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they have become delinquent, all taxes shown to be due and payable on such
returns and, to the knowledge of the Company, all other taxes and assessments
payable by the Company on behalf of itself or any of the Subsidiaries, to the
extent the same have become due and payable, except for any taxes and
assessments the amount, applicability or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which the
Company has set aside on its books reserves to the extent required by, and
segregated in accordance with, GAAP. Except as set forth in Section 3.11 of the
Company Disclosure Letter, (i) the Company has no knowledge of any proposed
material tax assessment against the Company or any of the Subsidiaries. (ii) to
the knowledge of the Company all tax liabilities of the Company and the
Subsidiaries are adequately provided for on the books of the Company and (iii)
to the knowledge of the Company all of the tax returns previously filed by the
Company and which, as of the date hereof, have not been audited by the
applicable Governmental or Regulatory Authority having jurisdiction thereof,
were true and correct in all material respects at the time filed by the Company.
The Company has not received any notice of any past due or unpaid tax or
assessment which as of the date hereof has not either been paid or is being
contested in good faith by appropriate proceedings and with respect to which the
Company has set aside on its books reserves to the extent required by, and
segregated in accordance with, GAAP.
3.12. Employee Benefit Plans: ERISA.
(a) Section 3.12 of the Company Disclosure Letter sets forth a list of
all of the bonus, deferred and incentive compensation, profit sharing,
retirement, vacation, sick leave, leave of absence, hospitalization, severance
and fringe benefit plans, all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all "employee welfare benefit plans" (as defined in Section 3(1)
of ERISA) which the Company maintains, to which the Company contributes or has
an obligation to contribute, or with respect to which the Company has any
liability or reasonable expectation of liability, whether or not any such plan
has terminated and whether or not any such plan is or was maintained or
contributed to by any current or former member of the Company's Controlled Group
(within the meaning of Section 414 of the IRC) (the "Plans").
(b) With respect to each of the Plans, the Company further represents
and warrants as follows:
(i) None of the Plans (A) is subject to Title IV of ERISA or the
minimum funding requirements of Section 412 of the Internal Revenue
Code of 1986, as amended (the "IRC") or Section 302 of ERISA, (B) is a
plan of the type described in Section 4063 of ERISA or Section 413(c)
of the IRC, (C) is a "multi employer plan" (as defined in Section 3(37)
of ERISA) or (D) provides for medical or life insurance benefits to
current or future retired or former employees of the Company (other
than as required under IRC Section 4980B or applicable state law).
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(ii) Each Plan is, in all material respects, in compliance, and has
been administered, maintained and funded in all material respects in
accordance with the applicable provisions of ERISA and the IRC and all
other applicable laws, rules and regulations, including, but not
limited to, medical continuation under IRC Section 4980B. None of the
Company, any Controlled Group member, any fiduciary or, to the
knowledge of the Company, any other person has, with respect to any
Plan, (A) engaged in any transaction prohibited by ERISA, the IRC or
other applicable law; (B) breached any fiduciary duty owed by it; or
(C) failed to file and distribute timely and properly all reports and
information required to be filed or distributed in accordance with
ERISA or the IRC.
(iii) All contributions, premiums or payments which are due on or
before the Closing Date with respect to the Plans have been timely, or
will have been prior to the Closing Date, paid.
(iv) Each Plan which is intended to be qualified under Section 401(a)
of the IRC (A) has been timely amended to reflect all requirements of
the Tax Reform Act of 1986 ("TRA 86") and all subsequent legislation
which is required to be adopted prior to the end of the TRA 86 remedial
amendment period and (B) has received from the Internal Revenue Service
a favorable determination letter which considers the terms of the Plan
as amended for such tax law changes. To the best knowledge of the
Company, nothing has occurred since the date of such letter that could
adversely affect the qualified status of such Plan or the tax-exempt
status of any related trust.
(v) No under funded defined benefit plan has been, during the five
years preceding the Closing Date, transferred out of the Company's
Controlled Group.
(vi) Except as set forth in Section 3.12 of the Company Disclosure
Letter, the Company has not incurred, and has no reason to expect that
it will incur, any material liability to the Internal Revenue Service,
the Department of Labor, the Pension Benefit Guaranty Corporation, any
multi employer plan or otherwise under Title IV of ERISA (including any
withdrawal liability) or under the IRC with respect to any Plan or any
other plan that the Company or any member of its Controlled Group
maintains or ever has maintained or to which any of them contributes,
ever has contributed, or ever has been required to contribute.
(vii) Purchaser acknowledges and agrees that the Company has made
available to Purchaser a copy of each Plan and the Company represents
and warrants that each Plan so provided was a true, complete and
correct copy, to the extent applicable, of (A) all documents pursuant
to which the Plans are maintained, funded and administered, (B) the
three most recent annual reports (Form 5500 series) filed with the
Internal Revenue Service (with attachments), (C) the three most recent
financial statements, and (D) all governmental rulings, determinations,
and opinions (and pending requests for governmental rulings,
determination, and opinions).
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(c) Nothing in this Paragraph 3.12 shall be construed as a
representation or warranty by the Company with respect to any liability which
the Company or Purchaser may incur under any or all of the Plans as a result of
the acts or omissions of the Company or Purchaser in connection with the Plans
after the Closing.
3.13. Labor Matters. Except as set forth in Section 3.13 of the Company
Disclosure Letter, no unfair labor practice complaint for sex, age, race or
other discrimination claim has been brought against the Company or any of the
Subsidiaries in connection with its or their business before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any other
Governmental Body during the three-year period ending as of the Closing Date nor
has the Company or any of the Subsidiaries received written notice of the
intention of any person to file any such claim which remains unresolved as of
the date hereof.
3.14. Environmental Matters.
(a) Except as disclosed in Section 3.14 of the Company Disclosure
Letter, which section contains all of the Phase I Assessments of the Leased
Facilities which were prepared by or at the direction of the Company prior to
the date thereof and which section Purchaser acknowledges and agrees contains
all of the Phase I Assessments of the Leased Facilities which were prepared by
or at the direction of Purchaser: (i) the Company complies with all applicable
Environmental Laws and possesses and complies with all applicable Environmental
Permits required under such laws to operate as it presently operates; (ii) to
the knowledge of the Company, no events are likely to occur between the date
hereof and the Closing Date at any of the Owned Company Facilities or Leased
Company Facilities that would prevent compliance with, or materially increase
the burden on the Company of complying with, applicable Environmental Laws or
Environmental Permits required under such laws; (iii) there are no Materials of
Environmental Concern in conditions and concentrations at any of the Owned
Company Facilities or Leased Company Facilities, that are reasonably expected to
give rise prior to Closing to liability of the Company under any Environmental
Law; and (iv) the Company has not received any written notification alleging
that it is liable for, or request for information pursuant to Section 104(e) of
the Comprehensive Environmental Response, Compensation and Liability Act
concerning, disposal of Materials of Environmental Concern at any location.
(b) For purposes of this Agreement the following defined terms used in
this Paragraph and elsewhere in this Agreement shall have the meanings set forth
below:
(i) "Environmental Laws" shall mean all Federal, state, or local
statutes, regulations, ordinances, codes, or decrees protecting the
quality of the ambient air, soil, surface water or groundwater, in
effect as of or, to the extent applicable, at any time prior to, the
date of this Agreement.
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(ii) "Environmental Permits" shall mean all permits, licenses,
registrations, and other authorizations required under applicable
Environmental Laws.
(iii) "Environmental Report" shall mean any report, study, assessment,
audit, or other similar document that addresses any issue of
noncompliance with, or liability under, any Environmental Law that may
affect the Company.
(iv) "Materials of Environmental Concern" shall mean any hazardous,
acutely hazardous, or toxic substance or waste defined and regulated
as such under the Environmental Laws, including without limitation the
federal Comprehensive Environmental Response. Compensation and
Liability Act and the federal Resource Conservation and Recovery Act.
(c) Nothing in this Paragraph 3.14 shall be construed as a
representation or warranty by the Company with respect to any liability which
the Company or Purchaser may incur under the Environmental Laws or any costs
which the Company or Purchaser may incur in complying with the Environmental
Laws as a result of either (i) changes in the Environmental Laws after the
Closing Date or(ii) the acts or omissions of the Company or Purchaser after the
Closing Date, including, but not limited to, any acts which result in the
release of Materials of Environmental Concern which may be present at any of the
Leased Company Facilities or Owned Company Facilities as of the date hereof but
which, as of the date hereof, are in a condition or quantity which do not
require the Company to secure any Environmental Permits or to take any other
action to be in compliance with the Environmental Laws with respect thereto.
3.15. Brokers or Finders. The Company represents that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement, other
than ▇▇▇▇▇ ▇▇▇▇▇▇, which has acted as a financial advisor to the Company with
respect to the Transactions and which shall be compensated by the Company at
Closing for its services rendered in connection therewith. The Company further
represents and warrants that the fee due to ▇▇▇▇▇ ▇▇▇▇▇▇ shall be based on the
total consideration paid to the Company pursuant to this Investment Agreement
and any documents executed in connection with the Senior Living Transaction and
that, although the Company shall be required to pay in its entirety the fee due
to ▇▇▇▇▇ ▇▇▇▇▇▇, the Company shall only be economically responsible for the
portion of the fee allocated to the Transactions which are the subject of this
Agreement, it being understood and agreed that the portion of the fee allocable
to the Senior Living Transaction (the "Senior Living ▇▇▇▇▇ ▇▇▇▇▇▇ Fee") shall
effectively be paid by the shareholders of the Company in that the same is
included in the Purchase Price Adjustments and accordingly shall be deducted
from the proceeds to which they are otherwise entitled prior to the distribution
thereof in accordance with Article I. The Company acknowledges and agrees that a
breach of its obligations under this Paragraph 3.15 shall survive the Closing.
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3.16. Cost Reports. The Company and each Subsidiary has duly and timely
filed all cost reports which are required as of the date hereof to be filed by
it in connection with the operation of the Company Facilities. A true and
correct list of all such cost reports which have been filed by the Company and
each Subsidiary and provided to Purchaser as of the date hereof is set forth in
Section 3.16 of the Company Disclosure Letter, the receipt of which cost reports
is hereby acknowledged by Purchaser. To the knowledge of the Company, all of
such cost reports are true, correct and complete in all material respects and,
except as set forth in Section 3.16 of the Company Disclosure Letter have been
prepared in all material respects in accordance with the requirements of the
Medicare and/or Medicaid Act, as applicable. Nothing herein shall be construed
as a representation or warranty by the Company with respect to the filing of the
cost reports with respect to the Managed Company Facilities.
3.17. Tangible Property and Assets.
(a) The Company and the Subsidiaries have good and marketable title to,
or have valid fee simple title or leasehold interests in, as applicable, or
valid rights under contract to use, all tangible property and assets owned
and/or used in and, individually or in the aggregate, material to the conduct of
its or their businesses (including all tangible property and assets reflected on
the latest audited balance sheet included in the Company Financial Statements,
other than property or assets disposed of since such date or held subject to a
lease or other contract permitted to expire in accordance with its terms since
such date, in either case in the ordinary course of business,) which property
and assets include the Company's corporate office building located in Portland,
Oregon, which the Company represents and warrants is the only real property
owned by it as of the date here of (the "Tangible Property and Assets").
(b) The Company's title to the Tangible Property and Assets described
in clause (a) is free and clear of all Liens other than (i) any statutory Lien
arising in the ordinary course of business by operation of law with respect to a
liability that is nor yet due or delinquent and (ii) any imperfection of title
or similar Lien which individually or in the aggregate with other such Liens
does not materially impair the value of the property or asset subject to such
Lien or the use of such property or asset in the conduct of the business of the
Company and the Subsidiaries taken as a whole and (iii) any Lien which shall be
satisfied and released of record as of the Closing Date. All such property and
assets are, in all material respects, in good working order and condition,
ordinary wear and tear excepted, and, to the knowledge of the Company, adequate
and suitable for the purposes for which they are presently being used.
(c) On the date hereof and on the Closing Date, the inventory and
consumable supplies located at and used in connection with the operation of the
Leased Company Facilities are and shall be in a good and useable condition and
sufficient in quantity and quality to operate such Leased Company Facilities in
a manner consistent with the past practices of the Company.
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(d) Neither the Company nor any of the Subsidiaries has received notice
of any pending or threatened condemnation or taking by power of eminent domain
or otherwise of any of the Tangible Assets or Property or, with respect to the
Company's corporate office, any notice of any tax or special lien or assessment
which would not be paid in full by the Closing Date.
(e) Except as set forth in Section 3.17(e) of the Company Disclosure
Letter, neither the Company nor any of the Subsidiaries has notice that any of
the Tangible Assets or Property is not in compliance with applicable building or
zoning codes and ordinances.
3.18. Certification and Accreditation. Except as otherwise set forth in
Section 3.l8 of the Company Disclosure Letter, the Leased Company Facilities are
certified to participate in Medicare and/or Medicaid and are duly accredited by
the Joint Commission on Accreditation of Healthcare Organizations, subject to no
contingencies other than those set forth in the correspondence described in
Section 3.18 of the Company Disclosure Letter. Purchaser acknowledges and agrees
that it has been provided with copies of the correspondence described in Section
3.18 of the Company Disclosure Letter and the Company represents and warrants
that it provided Purchaser with true and correct copies of the correspondence
described in Section 3.18 of the Company Disclosure Letter. Nothing herein shall
be construed as a representation or warranty by the Company with respect to the
certification or accreditation of the Managed Company Facilities, which
certification and accreditation is in the name of the owner of such Managed
Company Facilities and not in the name of the Company. As of the date hereof,
the Company has not received any written or verbal notice of any action,
investigation or other proceeding which has not been resolved as of the date
hereof to revoke, terminate or not renew any such certification or accreditation
with respect to the Leased Company Facilities.
3.19. Insurance. Section 3.19 of the Company Disclosure Letter sets
forth the insurance policies covering the Company's operations with respect to
the Leased Company Facilities and the Managed Company Facilities in effect as of
the date hereof, including the policy numbers, terms, identity of the insurers
and amounts and nature of coverage. All of such policies are now and will be
until Closing in full force and effect, with no premium arrearages. Purchaser
acknowledges and agrees that copies of all such policies and any endorsements
thereto with respect to the Leased Company Facilities and copies of any
endorsements with respect to the Managed Company Facilities have been made
available to Purchaser prior to the date hereof and the Company represents and
warrants that all such policies and endorsements made available to Purchaser
were true and correct.
3.20. Payments. Neither the Company nor any of the Subsidiaries has,
directly or indirectly, paid or delivered or agreed to pay or deliver any fee,
commission, or other sum of money or item or property, however, characterized,
to any person, government official or other party related to the businesses of
the Leased Company Facilities or the Managed Company Facilities which was, at
the time paid or delivered, illegal under any applicable federal, state or local
law.
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3.21. Intellectual Property.
(a) Neither the Company nor any of the Subsidiaries has received
protection under federal or state law of any trademarks, trade names, logos,
service marks, patents, patent rights, assumed names, trade secrets or
copyrights used by them in their business.
(b) The Company has filed a service ▇▇▇▇ application with the United
States Patent and Trade ▇▇▇▇ Office for the logo utilized by the Nurse Call
Center operated by the Health Direct Program, and has filed a trademark
application with the United States Patent and Trademark Office for the
"HealthDirect" trademark but has not received any final determinations as of the
date hereof with respect to either such service ▇▇▇▇ or trademark filings.
(c) The Company has implemented, and is actively engaged in, a program
designed to monitor the compliance at the corporate office of the Company with
applicable laws governing the licensure of the computer hardware and software
used by them in their businesses. Such a compliance program has not yet been
implemented at the Leased Facilities and is not anticipated to be implemented at
the Managed Facilities. Nothing herein shall be construed as a representation or
warranty by the Company that the use by the Company and the Subsidiaries is in
full compliance with all applicable hardware and software licensure laws and/or
that the trademarks, trade names, logos, service marks, patents, patent rights,
assumed names, trade secrets or copyrights used by the Company do not infringe
on or violate the rights of any third parties; provided, however, that the
Company does hereby represent and warrant that, except as set forth in Section
3.21 of the Company Disclosure Letter with respect to certain copyright
violations which have been corrected as of the date hereof, it has not received
notice of, nor does it have actual knowledge of, any such infringement or
claimed infringement.
ARTICLE IV
PURCHASER'S AND PRINCIPAL'S
REPRESENTATIONS AND WARRANTIES
Purchaser hereby represents and warrants to the Company and to the
Carryover Shareholders as follows:
4.01. Organization. Purchaser is a limited partnership organized and in
good standing under the laws of the State of Delaware.
4.02. Authority Relative to this Agreement. Purchaser has full power
and authority to enter into this Agreement and each other instrument, document
and agreement necessary to consummate the transactions contemplated hereby, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Purchaser and the consummation by Purchaser of the transactions contemplated
hereby have been duly and validly approved by Purchaser, and no other
proceedings on the part of Purchaser or its
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general or limited partners are necessary to authorize the execution, delivery
and performance of this Agreement by Purchaser and the consummation by
Purchaser of the Transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and, subject to obtaining the
HSR Approval, the Third Party Consents and Regulatory Approvals described in
Paragraphs 7.02 and 7.03, constitutes a legal, valid and binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.03. Approvals and Consents. Subject to obtaining the HSR Approval,
and the Third Party Consents and Regulatory Approvals described in Paragraphs
7.02 and 7.03, the execution and delivery of this Agreement by Purchaser does
not, and the performance by Purchaser of its obligations hereunder and the
consummation of the transactions contemplated hereby will not:
(a) conflict with, result in a violation or breach of, constitute (with
or without notice or lapse of time or both) a default under, result in or give
to any person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien upon any of the assets or properties of Purchaser under any of the terms,
conditions or provisions of:
(i) the organizational documents of Purchaser;
(ii) any material contract or agreement to which Purchaser is a party
or by which the assets of Purchaser may be bound or affected; or
(iii) (A) any Laws of any state or of the United States or Orders of
any court, tribunal, arbitrator or Governmental or Regulatory
Authority, applicable to Purchaser or any of its assets or properties,
(B) to the knowledge of Purchaser, any Laws or Orders of any
jurisdiction or governmental authority not specified in clause (A), or
(C) any contracts to which Purchaser is a party or by which Purchaser
or any of its assets or properties is bound.
(b) require any consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority or other public or private third
party under any of the terms, conditions or provisions of any Law or Order of
any Governmental or Regulatory Authority to which Purchaser or any of the
Purchasers' Subsidiaries is a party or by which Purchaser or any of its assets
or properties is bound; or
(c) require any consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority or other public or private third
party.
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4.04. Information Supplied. Any documents to be filed by Purchaser with
any Governmental or Regulatory Authority in connection with this Agreement and
the other transactions contemplated hereby will not, on the date it is filed or
required to be filed, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation is made by Purchaser with
respect to information supplied in writing by or on behalf of the Company or the
Subsidiaries expressly for inclusion therein. Purchaser further represents and
warrants that no representation or warranty by Purchaser contained in this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material facts required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
4.05. Brokers or Finders. Purchaser represents that no agent, broker,
investment banker, financial advisor or other firm or person has been engaged by
it and is or will be entitled to any broker's or finder's fee or any other
commission or similar fee from it in connection with any of the Transactions
contemplated by this Agreement.
4.06. Financing. Purchaser will provide the Company with any and all
documents evidencing, securing or otherwise executed in connection with the
Investment and the Credit Facility (the "Financing Transactions"). Both prior to
and after the execution of the documents evidencing the Financing Transactions,
Purchaser will further provide the Company, upon request, with periodic updates
with respect to the status of such Financing Transactions. As of the date
hereof, Purchaser has no actual knowledge of any facts or circumstances which
would prevent the Financing Transactions from being consummated on or prior to
the Outside Closing Date with the exception of the consents which may be
required under the Credit Facility from the landlords of the Leased Company
Facilities.
4.07. Due Diligence. Purchaser and its agents have had such access to
the Company and the Subsidiaries and the books, records and facilities thereof
as they deemed to be necessary to conduct a due diligence investigation with
respect to the Company and the Subsidiaries in order to enter into this
Agreement and to carry out the Transactions provided for herein. As of the date
hereof, Purchaser and its agents do not have actual knowledge of any facts or
circumstances with respect to the Company or any of the Subsidiaries which would
prevent them from consummating the Transactions on the terms and conditions
provided for herein, including, but not limited to, for the Investment Proceeds
provided for in Paragraph 1.04(b).
4.08. Investment Representations.
(a) The terms of the Investment provided for in Paragraph 1.04 have
been independently negotiated between the parties hereto and all the various
terms and provisions of this Agreement and all exhibits and schedules hereto
have been agreed to by Purchaser based upon its own deliberations, judgements
and business experience, independent of any material statement, whether or fact
or
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opinion, by the Company or its officers, directors, agents or employees, other
than the representations, warranties and covenants of the Company and the
Subsidiaries set forth in this Investment Agreement.
(b) Purchaser is making the Investment for investment purposes only and
not with the intent to resell the same. The Company has disclosed to such
Purchaser that the common stock and the New Preferred Stock being acquired by
Purchaser and/or by Purchaser's designees, has not been registered under the
Securities Act of 1933, as amended, or in any state in which it may be offered
for sale.
(c) Purchaser is an "accredited investor", as defined by Rule 501
promulgated under the Securities Act of 1933, as amended.
(d) Purchaser has, or prior to Closing will have, been furnished with
sufficient written information about the Company and the Subsidiaries and their
respective assets and liabilities to allow such Purchaser to make an informed
investment decisions prior to his or its investment.
(e) Purchaser's investment is not being made for the purpose of
speculating in securities.
(f) In the event of an assignment by Purchaser of any or all of its
rights and obligations hereunder with respect to the Investment, Purchaser will
cause its designees to either execute a counterpart of this Investment Agreement
or a separate certificate, which in either event confirms on behalf of each such
designee of the truth as applied to such designee of the representations and
warranties set forth in this Paragraph 4.08.
Principal hereby represents and warrants to the Company and to the
Carryover Shareholders as follows:
4.01A. Financing. Principal will provide the Company with any and all
documents concerning the Financing Transactions as and when executed. Both prior
to and after the execution of the documents evidencing the Financing
Transactions, Principal will further provide the Company, upon request, with
periodic updates with respect to the status of such Financing Transactions.
Principal has paid any and all commitment fees required as of the date hereof
for the lenders to proceed with the Financing Transactions. As of the date
hereof, Principal has no actual knowledge of any facts or circumstances which
would prevent the Financing Transactions from being consummated on or prior to
the Outside Closing Date with the exception of the consents which may be
required under the Credit Facility from the landlords of the Leased Company
Facilities.
4.02A. Due Diligence. Principal and its agents have had such access to
the Company and the Subsidiaries and the books, records and facilities thereof
as they deemed to be necessary to conduct a due diligence investigation with
respect to the Company and the Subsidiaries in order to enter into this
Agreement and to carry out the Transactions provided for herein. As of the date
hereof,
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Principal and its agents do not have actual knowledge of any facts or
circumstances with respect to the Company or any of the Subsidiaries which would
prevent the Transactions from being consummated on the terms and conditions
provided for herein, including, but not limited to, for the amount of the
Investment Proceeds provided for in Paragraph 1.04(b).
ARTICLE V
COMPANY COVENANTS
5.01. Pre Closing. The Company covenants that between the date hereof
and the Closing:
(a) Except as contemplated by this Agreement (including the Company
Disclosure Letter) or with the consent of either Purchaser or Principal, which
consent shall not be unreasonably withheld, conditioned or delayed and which
approval shall be deemed to have been given if not denied within four (4)
business days after Purchaser's and Principal's receipt of a written approval
request from the Company directed to Purchaser and to the Chief Executive
Officer or Chief Financial Officer of Principal, the Company or the
Subsidiaries, as applicable, will operate the businesses which are the subject
of the Transactions only in the ordinary course of business and with due regard
to the proper maintenance and repair of any real property or personal property
owned or leased by it or them. In furtherance and not in limitation of the
foregoing:
(i) Neither the Company nor any Subsidiary will make any material
change in the operation of the business of, nor, except in the
ordinary course of the business of owning and/or operating, as
applicable, the Company Facilities, sell or agree to sell any items of
machinery, equipment or other fixed assets of any of the Company
Facilities having a value in any one instance of $100,000 or more or
having a value of $500,000 or more in the aggregate nor otherwise
enter into any agreements affecting any of the Company Facilities
having a value in any one instance of $100,000 or more or having a
value of $500,000 or more in the aggregate;
(ii) Neither the Company nor any Subsidiary will enter into any
contract or commitment affecting any of the Company Facilities or the
assets or liabilities reflected in the Company Financial Statements
except in the ordinary course of business or as otherwise specifically
permitted by this Paragraph 5.01 nor, except as specifically
contemplated by this Agreement, will the Company or any Subsidiary
declare or pay any dividend or other distribution other than
distributions in the ordinary course of business from a Subsidiary to
the Company or from one Subsidiary to another Subsidiary; provided,
however, that nothing herein shall be construed as prohibiting the
Company prior to the Closing Date from engaging in any or all of the
following activities:
(A) selling, transferring or conveying to a newly formed legal entity
which it contemplates will be owned by certain of the shareholders of
the Company, those assets and liabilities listed in Section 7.01 of
the Company Disclosure Letter (the "Excluded Assets")
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for a cash purchase price of $406,500 plus (i) the assumption of that
mortgage dated November 20, 1990 executed by Brim Senior Living, Inc.
in favor of US National Bank of Oregon and (ii) the assumption of any
and all liabilities with respect to the Excluded Assets whether the
same relate to the period prior to or after the Closing of the
Excluded Assets Transaction,
(B) selling, transferring or conveying the assets and/or stock
interests described in Exhibit G hereof hereto necessary to consummate
the Senior Living Transaction for an aggregate cash purchase price of
$18,000,000 plus an amount equal to all Excluded Subsidiary Loans made
with the approval of Encore to BSL or MSL prior to or after the date
hereof:
(C) continuing to advance funds on an intercompany loan basis from the
Company to the Subsidiaries, from the Subsidiaries to the Company and
from the Company with respect to the Excluded Assets and the Senior
Living Transaction (the latter of which is hereinafter defined as the
"Excluded Subsidiary Loans"; provided, however, that the Company shall
cause the Excluded Subsidiaries to repay at Closing the Excluded
Subsidiary Loans and shall provide Purchaser with evidence thereof as
required by Paragraph 5.02(j); and provided, further, that the Company
shall use the portion of the proceeds of the Senior Living Transaction
specifically allocated thereto to repay the Excluded Subsidiary Loans
made with respect to BSL, MSL or the Excluded Assets;
(D) paying at Closing any intercompany liabilities owing from the
Company to the subsidiaries involved in the Senior Living Transaction
which intercompany liability as of June 30, 1996 was owing solely to
Brim Senior Living, Inc. and was in the amount of $2,198,785.00;
(E) converting at Closing the investment of the Company in MSL from a
loan to an equity contribution, which investment as of June 30, 1996
was, and on the Closing Date will be, $5,155,264. The Company and
Purchaser acknowledge and agree that it is anticipated that additional
funds will be advanced by the Company prior to Closing to MSL. The
Company covenants and agrees that all of such advances shall be in the
form of intercompany loans and not investments and the Company shall
cause the same to be repaid at Closing and evidence thereof to be
delivered to Purchaser as required by Paragraph 5.02(j); provided,
however, that the Company shall use the portion of the proceeds of the
Senior Living Transaction specifically allocated thereto to repay the
same;
(F) distributing to the non-facility based employees of the Company at
or immediately prior to Closing the incentive compensation funds
reserved on the Company Financial Statements, which reserves as of the
Closing Date shall not exceed $793,829; and
(G) making severance payments to, and the vesting of matching 401(k)
contributions which would not otherwise vest for the benefit of,
employees of the Company terminated by
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the Company or by Purchaser prior to or after the Closing Date in
conjunction with or as a result of the transaction contemplated
herein; provided, however, that all such severance payments shall be
in accordance with the Company's severance policy in effect as of the
date of the execution of this Agreement or those specific severance
agreements described in Section 3.10(b) of the Company Disclosure
Letter.
(iii) The Company or the Subsidiaries, as applicable, will maintain
its and their assets in substantially the same condition as they are
in at the date hereof, ordinary wear and tear, insured casualty loss
and taking by eminent domain excepted.
(iv) The Company will promptly provide the Purchaser with the
Subsequent Interim Financial Statements as and when the same are
available.
For purposes of this Paragraph 5.01(a), the Company and the
Subsidiaries shall be deemed to be acting in the ordinary course of business if
the act, event or occurrence, including any changes or expenditures which are
the subject thereof, are reflected in the Company's 1996 Budget described in
Section 5.01(a) of the Company Disclosure Letter, a true and correct copy of
which has been provided to Purchaser, the receipt of which is acknowledged by
Purchaser. In addition, the execution and/or renewal of any Management Contracts
by the Company or any of the Subsidiaries between the date hereof and the
Closing Date shall be deemed to be in the ordinary course of the business of the
Company and the Subsidiaries and accordingly shall not require the approval of,
but shall require reasonable notice to, Purchaser of the execution and delivery
of any such Management Contracts; provided, however, that in the event any such
Management Contracts contemplate the advance of funds by the Company or any
Subsidiary to the owner of the relevant facility or health care entity, whether
by loan or capital contribution or otherwise, in excess of $100,000 in any one
instance or $500,000 in the aggregate, the approval of Purchaser shall be
required in accordance with the terms of this Paragraph 5.01.
(b) During normal business hours, the Company will provide Purchaser
and its agents and employees with access on twenty-four (24) hours notice to the
books and records of the Company and the Subsidiaries provided they do not
interfere with the operations of the Company and the Subsidiaries;
(c) Subject to the limitations set forth in Paragraph 7.04(a), the
Company will use its reasonable efforts to cause all of the conditions to
Closing set forth in Paragraphs 8.01 and 8.02 which are within the Company's
control to be satisfied prior to the Outside Closing Date and the Company will
not take, not permit any Subsidiary to take, any action inconsistent with its or
their obligations under this Agreement or which could hinder or delay the
consummation of the transactions contemplated by this Agreement or which is
intended to cause any representation, warranty or covenant made by the Company
in this Agreement or in any certificate, list, exhibit, or other instrument
furnished or to be furnished pursuant hereto, or in connection with the
transaction contemplated hereby, to be untrue in any material respect as of the
Closing Date;
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(d) Except with respect to the Excluded Assets Transaction and the
Senior Living Transaction, neither the Company nor any of its officers,
directors, advisors or others authorized to act on its behalf shall directly
initiate or solicit discussions relating to any alternative acquisition proposal
or similar transaction including, without limitation, a merger or other business
combination involving the Company and/or the Subsidiaries, or offer to acquire
or convey in any manner, directly or indirectly, all or substantially all of the
equity interests in, the voting securities of, or the assets of the Company or
any of the Subsidiaries; provided, however, that public announcements of the
transaction contemplated by this Agreement and responses to inquiries received
thereafter shall not be prohibited hereby and that the Company shall not be
deemed to be in breach of its obligations hereunder in the event the Board of
Directors determines in the exercise of its fiduciary duties that the Company is
required to provide information in response to any acquisition or merger
proposals or discussions which are initiated by a third party;
(e) Except as specifically contemplated herein the Company will not
materially amend or permit any Subsidiary to materially, amend its or their
Articles of Incorporation or Bylaws;
(f) Except with respect to the New Preferred Stock and the Common Stock
to be issued to Purchaser and/or its designees pursuant to Paragraph 1.02 and
the shares of Redeemable Junior Preferred Stock issued upon the consummation of
the Carryco Merger and upon the exercise prior to or at Closing of vested
Options, the Company will not issue or cause to be issued any additional shares
of the Company's common stock or preferred stock;
(g) Neither the Company nor any Subsidiary will agree to do or to cause
to be done any of the acts which it has covenanted not to do under this
Paragraph 5.01;
(h) The Company will use its best efforts to secure professional
liability insurance with respect to the services rendered by it to the Managed
Company Facilities in such amounts as may be reasonably acceptable to Purchaser,
which coverage shall include a prior acts insurance policy for periods prior to
the effective date thereof during which no such coverage was in effect;
(i) From and after the satisfaction or deemed satisfaction of the
condition to Closing set forth in Paragraph 8.01(p), the Company shall not amend
or modify in any respect any of the BSL Merger Agreement the Excluded Assets
Purchase Agreement, the MSL Purchase Agreement or the LP, Purchase Agreement,
(j) The Company shall not waive, nor consent to the waiver by the
purchaser under the BSL Merger Agreement, the Excluded Assets Purchase
Agreement, the MSL Purchase Agreement or the LP Purchase Agreement, of any third
party consents or approvals required as a condition to the Closing thereof nor
to a waiver of the condition to Closing set forth in the MSL Purchase Agreement
with respect to the execution and delivery of the BNP Loan Amendment Documents
(as defined therein).
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Purchaser acknowledges and agrees that nothing in this Paragraph 5.01
shall be construed as granting Purchaser any approval, notice or other rights
with respect to the day to day operations of the senior living business of the
Company which is the subject of the Senior Living Transaction and the day to day
operations of the medical office buildings and home health agency which are the
subject of the Excluded Assets Transaction.
5.02. Closing Date. On the Closing Date, the Company will deliver or
cause to be delivered to Purchaser the following documents:
(a) A certificate of a responsible officer of the Company dated as of
the Closing Date, certifying on behalf of the Company in such detail as
Purchaser may reasonably specify the fulfillment of the conditions set forth in
Paragraphs 8.0 l(a) and (b);
(b) Resolutions of the Company's Board of Directors and a vote of the
Company's shareholders, certified by the Secretary or Assistant Secretary of the
Company, authorizing and approving the Transactions contemplated herein;
(c) Certified copies of the Charter or Articles of Incorporation of the
Company and of each of the Subsidiaries and Certificates of Legal Existence or
Good Standing, as applicable, with respect to the Company and each Subsidiary
issued within the 10 days prior to the Closing Date by the Secretary of State
(or other authorized official) in each of the States in which the Company and
each Subsidiary is organized or qualified to do business as a foreign
corporation as set forth more fully in Section 3.01 of the Company Disclosure
Letter;
(d) True and correct copies of the Bylaws of the Company and each
Subsidiary certified by the Secretary or Assistant Secretary of each as of the
Closing Date;
(e) One or more certificates evidencing the shares of Common Stock and
the New Preferred Stock issued to Purchaser and/or its designees;
(f) An opinion or opinions of counsel to the Company dated as of the
Closing Date in form and substance reasonably acceptable to Purchaser;
(g) Employment Agreements with Messrs. ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇. ▇. ▇▇▇▇ in the forms attached hereto as Exhibits H duly executed
by each of Messrs. ▇▇▇▇▇▇, ▇▇▇▇▇▇ and Brim (the "Employment Agreements");
(h) The resignations of the members of the Board of Directors and those
officers of the Company and certain of its Subsidiaries listed in Exhibit I;
(i) Evidence that all of the Excluded Subsidiary Loans have been paid
in full; and
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(j) Copies of all third party and governmental consents and approvals
(including, without limitation, all blue sky law filings, approvals and/or
exemption letters) obtained in connection with the consummation of the
transactions hereunder.
(k) Copies of any and all documents executed and delivered at the
closing of the Senior Living Transaction and the Excluded Asset Transaction,
including, but not limited to, bills of sale or cross receipts evidencing the
consummation thereof.
5.03. Post Closing: From and after the Closing Date, the Company
covenants and agrees as follows:
(a) Unless the Board of Directors or the officers of the Company, as
applicable, determines that other action is in the best interest of the
shareholders of the Company, considered as a whole, the Company shall not take
action to reduce the labor force of the Company beyond those actions reasonably
deemed necessary to enable the Company to operate efficiently and at a level of
profitability consistent with the Company's long range objectives.
(b) The Company shall develop a stock option, stock purchase or other
similar equity program and shall consider for participation therein certain
Company key employees who continue to work for the Company after the Closing
Date.
(c) For a period of three (3) years after the Closing, the Company
shall maintain offices in Portland, Oregon and shall conduct therefrom the
management of the hospitals managed by Brim Healthcare, Inc. as of the Closing
Date.
(d) Unless the Board of Directors determines that other action is in
the best interests of the shareholders of the Company, considered as a whole,
the Company shall request that certain of the current officers of the Company
and the Subsidiaries, identified in Exhibit J hereto, continue to serve for a
period of three (3) years after the Closing Date, subject to (A) the Company's
right (i) to remove any or all of such officers for cause, (ii) to remove any or
all of such officers without cause, in which instance the Company shall provide
severance to any such removed officers through the period ending one year from
the date of severance and (iii) to replace any of such officers who elect to
resign at Closing or thereafter and (B) such officer's right to resign at any
time.
(e) For a period of not less than three years after the Closing, the
Company shall (A) cause the Company's 401(K) Plan and Supplemental Retirement
Plan to remain in effect or shall make available to the employees of the Company
alternative benefit plans that offer no less favorable benefits than those
currently provided to the employees of the Company and the Subsidiaries under
such 401 (K) and Supplement Retirement Plans and (B) provide healthcare benefits
to the employees of Brim, Inc. and Brim Healthcare, Inc. (or the successors
thereto in the event of a merger or liquidation of either or both such entities
after Closing) substantially comparable to the benefits
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provided as of the date of this Investment Agreement, subject to the right of
the Company to provide such benefits through a managed care, rather than an
indemnity, plan.
(f) Unless the Board of Directors determines that other action is in
the best interests of the shareholders of the Company, considered as a whole,
the Company shall maintain employee benefits substantially comparable to the
benefits provided to the Company's employees as of the Closing Date; provided,
however, that the provisions of this Paragraph 5.03(f) shall not affect or limit
the Company's obligations under Paragraph 5.03(e),
(g) The Company shall pay as and when due under the terms of the
Company`s emplovee benefit plans in effect on the Closing Date, any severance
payments due to the employees of the Company (other than the officers listed in
Exhibit J whose severance payments shall be as specified in Paragraph 5.03(d))
who are given notice of termination by the Company on or within ninety (90) days
after the Closing Date.
(h) The Company shall purchase as of the Closing Date and shall keep
continuously in effect thereafter for a period of no less than three (3) years a
tail insurance policy from the carrier providing the Company's directors and
officers liability insurance as of the Closing Date with limits in an amount
equal to limits provided for in the Company's directors and officers liability
insurance as of the Closing Date and providing coverage with respect to claims
which are covered by the Company's directors or officers liability insurance as
of the Closing Date and which are brought during such three year period after
the Closing Date against the persons who were officers and directors of the
Company on or prior to the Closing Date.
(i) The Company shall not amend or otherwise modify its Articles of
Incorporation or Bylaws in any manner which would reduce or eliminate the
indemnity obligations of the Company to the persons who were officers or
directors of the Company on or prior to the Closing Date.
(i) The Company will indemnify, defend and hold harmless the persons
who were officers or directors of the Company on or prior to the Closing Date
with respect to their acts or omissions on behalf of the Company prior to the
Closing Date to the fullest extent permitted by law.
ARTICLE VI
PURCHASER'S AND PRINCIPAL'S COVENANTS
6.01. Purchaser; Pre Closing. Purchaser covenants that between the
date hereof and the Closing, except as contemplated by this Agreement or with
the consent of the Company, which consent shall not be unreasonably withheld,
conditioned or delayed and which approval shall be deemed to have been given if
not denied within four (4) business days after the Company's receipt of a
written approval request from Purchaser directed to the President of the
Company:
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(a) Purchaser will use its reasonable efforts to cause all of the
conditions to Closing set forth in Paragraphs 8.01 and 8.02, other than the
conditions set forth in ▇▇▇▇▇▇▇▇▇ ▇.▇▇(▇), (▇), (▇), (▇), (▇), (▇), (▇), (▇) and
(n) and in Paragraph 8.02(e), (f), (g) and (h) which are solely within the
Company's control, to be satisfied prior to the Outside Closing Date and
Purchaser will not take any action inconsistent with its obligations under this
Agreement or which could hinder or delay the consummation of the transactions
contemplated by this Agreement or which is intended to cause any representation,
warranty, covenant made by Purchaser in this Agreement or in any certificate,
list, exhibit, or other instrument furnished or to be furnished pursuant hereto,
or in connection with the transaction contemplated hereby, to be untrue in any
material respect as of the Closing Date:
(b) Purchaser will not agree to do or to cause to be done any of the
acts which it has covenanted under this Paragraph 6.01 not to do.
(c) Purchaser will proceed with all reasonable diligence to consummate
the Financing Transactions in the name of the Company effective as of Closing on
the terms reflected in the First Union Commitment Letter and the Investment
Commitment Letter.
6.01A. Principal; Pre-Closing. Principal covenants that between the
date hereof and the Closing, except with the consent of the Company, which
consent may be withheld in the sole discretion of the Company, except as
otherwise provided herein:
(a) Principal shall not (A) sell or otherwise dispose of all or
substantially all of its assets, equity interests or voting securities or (B)
directly or indirectly initiate or solicit discussions relating to any
acquisition proposal or similar transaction including, without limitation, a
merger or other business combination or offer to acquire, directly or
indirectly, all or substantially all of the equity interests in, the voting
securities of, or the assets of any corporation or other legal entity which owns
or operates three hospitals or more, whether by lease, ownership or management
contract. Nothing herein shall be construed as prohibiting Principal from
pursuing the acquisition or leases of individual acute care hospitals between
the date hereof and the Closing Date. Principal shall not be deemed to be in
breach of this Paragraph 6.01A(a) in connection with any acquisition
discussions, negotiations or proposal engaged in or made by it in response to
(i) an "auction" type bid process or (ii) a contact initiated by a third party
or (iii) any transaction permitted by the terms of Paragraph 6.03(b).
(b) To pay all fees and other expenses required to consummate the
Financing Transactions.
6.02. Closing. On the Closing Date, in addition to the delivery of the
consideration for the New Preferred Stock and the Common Stock due under
Paragraph 1.04, Purchaser will deliver, or cause to be delivered (on behalf of
the Company, in the case of clauses (d), (e) and (f)) to the Company the
following documents:
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(a) A Certificate of Purchaser dated as of the Closing Date, certifying
on behalf of Purchaser in such detail as the Company may reasonably specify the
fulfillment of the conditions set forth in Paragraphs 8.02 (a) and (b);
(b) If applicable, certified resolutions of Purchaser's and/or its
designees' General Partner or other governing body authorizing and approving as
to Purchaser and/or such designees the Transactions contemplated herein and the
execution and delivery by Purchaser and/or its designees, as applicable, of all
of the documents contemplated herein to be executed and delivered by it, the
purchase by such Purchaser and/or its designees, as applicable, of the New
Preferred Stock and the Common Stock to be purchased by it pursuant to Paragraph
1.05 and the payment by Purchaser and/or its designees of the consideration for
the New Preferred Stock and the Common Stock due from it under Paragraph 1.05;
(c) If applicable, a Certificate of Good Standing with respect to
Purchaser and/or its designees issued within the 10 days prior to the Closing
Date by the Secretary of State of Delaware and/or the state of incorporation of
Purchaser's designees if other than Delaware;
(d) The Employment Agreements duly executed by an individual
authorized to act on behalf of the Company effective immediately after the
Closing;
(e) A Lease Agreement in the form attached hereto as Exhibit K duly
executed by an individual authorized to act on behalf of the Company effective
immediately after the Closing (the "BSL Lease");
(f) A Shared Services Agreement in the form attached hereto as
Exhibit L duly executed by an individual authorized to act on behalf of the
Company effective immediately after the Closing (the "Shared Services
Agreement"); and
(g) An opinion or opinions of counsel to Purchaser dated as of the
Closing Date in form and substance reasonably acceptable to the Company.
6.03. Other Covenants.
(a) Purchaser shall not solicit any of the officers, employees or
consultants of the Company or any of the Subsidiaries or interfere with the
consummation of, or pursue in its own name or on its own behalf, any
acquisition, management or lease opportunities which are under consideration or
negotiation by the Company as of the date hereof or as of the Closing Date and
with respect to which Purchaser has obtained knowledge during the course of its
negotiations with or due diligence investigation of the Company. Purchaser shall
not be deemed to be in breach of this Paragraph 6.03(a) and/or its obligations
under the Confidentiality Agreement (as defined below) in connection with any
acquisition, management or lease opportunities pursued by it in response to (i)
an "auction" type bid process or (ii) a contact initiated by a third party. The
obligations of the
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Purchaser under this Paragraph 6.03(a) shall survive the termination of this
Agreement pursuant to Article IX hereof for the period specified in Article X
hereof.
(b) Principal shall not solicit any of the officers, employees or
consultants of the Company or any of the Subsidiaries or interfere with the
consummation of, or pursue in its own name or on its own behalf, any
acquisition, management or lease opportunities which are under consideration or
negotiation by the Company as of the date hereof or as of the Closing Date and
with respect to which Principal has obtained knowledge during the course of its
negotiations with or due diligence investigation of the Company. Principal shall
not be deemed to be in breach of this Paragraph 6.03(b) and/or its obligations
under the Confidentiality Agreement in connection with any acquisition,
management or lease opportunities pursued by it in response to (i) an "auction"
type bid process or (ii) a contact initiated by a third party. The obligations
of Principal under this Paragraph 6.03(b) shall survive the termination of this
Agreement pursuant to Article IX hereof for the period specified in Article X
hereof.
ARTICLE VII
MUTUAL COVENANTS
7.01. General Covenants. Following the execution of this Agreement and
until the Closing Date, the Company and Purchaser agree:
(a) If any event should occur, either within or without the control of
any party, which would prevent fulfillment of the conditions to the obligations
of any party hereto to consummate the transactions contemplated by this
Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein;
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(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
7.02. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing.
(a) The Company and Purchaser agree to file with the Antitrust Division
of the United States Department of Justice and the Federal Trade Commission a
Notification and Report Form in accordance with the notification requirements of
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") and to
use its and their reasonable efforts to achieve the prompt termination or
expiration of the waiting period or any extension thereof provided for under the
HSR Act as a prerequisite to the consummation of the transactions provided for
herein (the "HSR Approval"); provided, however, that the Principal shall be
responsible for any filing fees due under the HSR Act.
(b) Nothing in this Paragraph 7.02 shall be construed as requiring the
Company to (i) sell or otherwise dispose of any of its assets which either alone
or in the aggregate, with all such other sales or dispositions, would constitute
the sale or disposition of a "significant subsidiary" (as defined in Rule 1-02
of Regulation S-X of the rules and regulations of the Securities and Exchange
Commission), (ii) take any action, the consummation of which cannot be
conditioned on the consummation of the transactions contemplated by this
Agreement, where such action would have a Company Material Adverse Effect (as
defined in Paragraph 8.01) or (iii) take any action which either would have a
Company Material Adverse Effect or would materially impair the value of the
transaction contemplated by this Agreement to the Company or Purchaser.
(c) Nothing in this Paragraph 7.02 shall be construed as requiring
Purchaser to (i) sell or otherwise dispose of any of its assets which either
alone or in the aggregate, with all such other sales or dispositions, would
constitute the sale or disposition of a "significant subsidiary," (ii) take any
action, the consummation of which cannot be conditioned on the consummation of
the transactions contemplated by this Agreement or (iii) take any action which
either would materially impair the value of the transaction contemplated by this
Agreement to the Company or Purchaser.
7.03. Third Party Consents/Regulatory Approval. The Company and the
Purchaser will use its and their reasonable efforts to obtain prior to the
Closing Date all consents, approvals and licenses necessary to permit the
consummation of the transactions contemplated by this Agreement, including, but
not limited to, such licensure and certification approval in each of the states
in which the Company Facilities are located as may be necessary to enable
Purchaser to consummate the Transactions (the "Regulatory Approvals"), and the
consent of its or their lenders, lessors and other third parties to the extent
required under any loan documents, lease agreements, management agreements or
other instruments to which it or its subsidiaries are a party (the "Third Party
Consents").
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7.04. Shareholder Approval. The Company shall promptly submit this
Agreement and the transactions contemplated herein and in the Senior Living
Transaction and the Excluded Assets Transaction for the approval of its
shareholders at a meeting of shareholders. Subject to the fiduciarv duties of
the Board of Directors of the Company under applicable law, the Board of
Directors of the Company has agreed to recommend to its shareholders approval of
the Transactions. Subject to the fiduciary duties of the Board of Directors of
the Company under applicable law, the Company shall use its reasonable efforts
to obtain shareholder approval and adoption of this Agreement and the
Transactions contemplated hereby. Subject to the notice requirements of the
Oregon Business Corporation Act, such meeting shall be held as soon as
practicable following the execution of this Agreement.
7.05. Public Announcements. The parties shall consult with each other
prior to the issuance by either party of any press release or any written
statement with respect to this Agreement or the transaction contemplated hereby.
7.06. Subsequent Transaction. On the next business day after the
Closing Date or as soon thereafter as may be agreed upon by the Company and
Purchaser, pursuant to the terms of a Plan and Agreement of Merger between the
Company and Principal to be executed substantially in the form attached hereto
as Exhibit M, Principal shall merge with Principal Merger Company, with
Principal to be the surviving entity and a wholly-owned subsidiary of the
Company.
ARTICLE VIII
CONDITIONS
8.01. Purchaser's Conditions. All obligations of the Purchaser under
this Agreement are subject to the fulfillment, prior to or as of the Closing
Date, of each of the following conditions any one or more of which may be waived
by written instrument signed by Purchaser or by written instrument signed by
Purchaser:
(a) Except as would not have a "Company Material Adverse Effect", as
defined below, the representations and warranties of the Company contained in
this Agreement or in any certificate or document prepared by the Company and
delivered in connection with this Agreement or the transaction contemplated
herein shall be true at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof; provided, however, that in
the event this condition is not satisfied as of the Closing Date and the
representation or warranty which is untrue is capable of being cured, the
Closing Date shall be extended in order to allow the Company to satisfy this
condition; provided, however, in no event shall the Closing Date be extended
beyond the Outside Closing Date.
A "Company Material Adverse Effect" shall be any statement, condition
or event that would (A) materially adversely affect the ability of the Company
to consummate the Transactions, (B)
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adversely affect the licensure at Closing of any of the Leased Company
Facilities as acute care facilities under applicable state law or the
certification at Closing of any of the Leased Company Facilities which as the
Closing Date are certified under the Medicare and/or Medicaid Programs or result
in the termination of any of the Company Management Contracts, where, in each
case, such loss of licensure, certification or of the termination of any Company
Management Contracts at Closing would result in a Material Adverse Change, as
defined below, or (C) result in a "Material Adverse Change."
For purposes of this Paragraph 8.01, the term "Material Adverse Change"
shall be defined as an event or series of events affecting the Company (but
specifically excluding events which are disclosed pursuant to the terms hereof
in the Company's Disclosure Letter or in the exhibits hereto as of the date of
execution of this Agreement, or that are hereafter disclosed to Purchaser in
updates to the Company Disclosure Letter, without Purchaser's objecting thereto
pursuant to Paragraph 10.08), that (after taking into account any event or
series of events which will have a positive effect on the Company) will have an
adverse effect on the Company's earnings before interest, taxes, depreciation
and amortization on an annualized basis, calculated as of the Closing Date, in
excess of $800,000.
(b) Except to the extent failure to do so would not have a Company
Material Adverse Effect, the Company shall have performed all of its material
obligations under this Agreement that are to be performed by it prior to or as
of the Closing Date, including but not limited to the delivery of the documents
provided for in Paragraph 5.02, including, but not limited to the Employment
Agreements, and the redemption of all of the Redeemed Preferred Stock and of the
GECC Preferred Stock, the issuance of the Common Stock and New Preferred Stock
to Purchaser and/or its designee; provided, however, that in the event this
condition is not satisfied as of the Closing Date and the obligation which the
Company has not performed is capable of being cured, the Closing Date shall be
extended in order to allow the Company to satisfy this condition; provided,
however, in no event shall the Closing Date be extended beyond the Outside
Closing Date. The Company shall be deemed to have performed its obligations
under this condition in the event all of the documents necessary for said
performance have, as of the Closing Date, been delivered to such agent as may be
agreed upon by the Company and Purchaser.
(c) Except to the extent failure to do so would not have a Company
Material Adverse Effect, the Company and Purchaser shall have received the
Third Party Consents designated in Section 3.04 of the Company Disclosure
Letter and in Section 4.03 of the Purchaser Disclosure Letter and shall have
received the Regulatory Approvals and shall have satisfied any and all
conditions to the effectiveness thereof.
(d) The filing and waiting period requirements under the HSR Act shall
have been complied with and shall have expired or terminated.
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(e) The Preferred Stock Repurchase Agreement shall be in full force and
effect, neither party thereto shall have breached any of its obligations
thereunder and all conditions necessary to the consummation of the transaction
contemplated thereby (other than the consummation of the transaction
contemplated hereby) shall have been satisfied.
(f) The Excluded Assets Transaction shall have been consummated.
(g) The Senior Living Transaction shall have been consummated,
including the payment of all intercompany loans owing to or from BSL to the
Company.
(h) Since June 30, 1996, no Company Material Adverse Effect shall have
occurred.
(i) No order shall be in effect restraining, enjoining or otherwise
preventing the Closing.
(j) Except to the extent approved by Purchaser pursuant to Paragraph
10.O8, there shall be no changes in the Company's Disclosure Letter between the
date hereof and the Closing Date reflecting a Company Material Adverse Effect,
which Disclosure Letter may be updated from time to time by the Company in
accordance with Paragraph 10.08.
(k) The Amended and Restated Brim, Inc. Shareholders Agreement and the
Shareholders Agreement between the Company and the holder of the GECC Preferred
Stock shall have been terminated.
(1) The Company and First Union shall have entered into the Credit
Facility providing for loans to the Company of up to $54 million, which loans
are described more fully in the First Union Commitment Letter and which Credit
Facility shall be in form and substance reasonably satisfactory to the
Purchaser, the Bank Agreement shall be in full force and effect as of the
Closing and the Bank shall have advanced or be prepared to advance not less than
$54 million to the Company under the Bank Agreement upon confirmation that the
other parties to the Transactions provided for herein are prepared to consummate
the same.
(m) The Company and Purchaser's designee shall have entered into a
stock purchase agreement and related documents (collectively, as such agreement
and documents are amended, modified or waived from time to time in accordance
with this Agreement, the "Senior Preferred Purchase Agreement") providing for
the purchase by Purchaser's designee of not less than $20 million of the Senior
Preferred Stock, which purchase shall be as described more fully in the
Investment Commitment Letter and which Senior Preferred Purchase Agreement shall
be in form and substance reasonably satisfactory to the Purchaser, the Senior
Preferred Purchase Agreement shall be in full force and effect as of the Closing
and Purchaser's designee shall have consummated the transaction pursuant to the
terms of the Senior Preferred Purchase Agreement or shall be prepared to
consummate the same upon confirmation that the other parties to the Transactions
provided for herein are prepared to consummate the same.
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(n) The holders of no more than 5% of the Redeemed Preferred Stock
shall have exercised their dissenter's rights under ORS ss.60.551, et seq. or
under such resolutions of the Board of Directors of the Company as may be
adopted at the time of the approval of the Transactions granting such dissenters
rights to the extent the provisions of ORS ss.60.551, et seq. do not provide for
such rights and the Board of Directors of the Company in the exercise of its
fiduciary duties determines that it would be in the best interest of the Company
to grant such rights.
(o) The Carryco Merger shall have been consummated.
(p) Purchaser shall have completed and shall be satisfied with the
results of its due diligence review of the Excluded Assets Transaction and the
Senior Living Transaction, regarding the assignment, assumption of satisfaction
of the liabilities of the Company and its affiliates related to or arising in
connection with the entities, assets or operations being sold or transferred
thereby, and the existence, nature and scope of any continuing liability of the
Company or its affiliates with respect to such entities, assets or operations
following the closing of such transactions; provided, however, this condition
shall be deemed satisfied unless by the close of third business day following
Purchaser's receipt from the Company of the BSL Merger Agreement, Excluded
Assets Purchase Agreement, the MSL Purchase Agreement LP Purchase Agreement and
all exhibits and schedules thereto requested by Purchaser, in the form in which
the Company and the purchasers identified therein are prepared to execute,
Purchaser has specified in writing its objections thereto, which objections
shall state with specificity the sections to which Purchaser objects and the
reasons for its objection.
8.02. Company Conditions. All obligations of the Company under this
Agreement are subject to the fulfillment, prior to or as of the Closing Date, of
each of the following conditions any one or more of which may be waived by the
Company in writing:
(a) The representations and warranties of Purchaser contained in this
Agreement or in any certificate or document prepared by Purchaser and delivered
in connection with this Agreement or the Transactions contemplated herein shall
be true in all material respects at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof; provided, however, that in
the event this condition is not satisfied as of the Closing Date and the
representation or warranty which is untrue is capable of being cured, the
Closing Date shall be extended in order to allow Purchaser to satisfy this
condition; provided, however, in no event shall the Closing Date be extended
beyond the Outside Closing Date.
(b) Purchaser and/or its designees shall have performed all of its or
their material obligations under this Agreement that are to be performed by it
or them prior to or as of the Closing Date, including, but not limited to the
delivery of the documents provided for in Paragraph 6.02 and the delivery of the
cash consideration due from it or them under Article I with respect to the
Common Stock and New Preferred Stock issued to Purchaser and/or its designees;
provided,
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however, that in the event this condition is not satisfied as of the Closing
Date and the obligation which Purchaser and/or its designees has not performed
is capable of being cured, the Closing Date shall be extended in order to allow
Purchaser and/or its designee to satisfy this condition; provided, however, in
no event shall the Closing Date be extended beyond the Outside Closing Date.
Purchaser and/or its designees shall be deemed to have performed its or their
obligations under this condition in the event all of the documents necessary for
said performance have, as of the Closing Date, been delivered to such agent as
may be agreed upon by the Company and Purchaser.
(c) Except to the extent the failure to do so would not have a Company
Material Adverse Effect, the Company and Purchaser shall have received the Third
Party Consents designated in Section 3.04 of the Company Disclosure Letter and
shall have received the Regulatory Approvals and shall have satisfied any and
all conditions to the effectiveness thereof.
(d) The filing and waiting period requirements under the HSR Act shall
have been complied with and shall have expired or terminated.
(e) The Preferred Stock Repurchase Agreement shall be in full force and
effect, neither party thereto shall have breached any of its obligations
thereunder and all conditions necessary to the consummation of the transaction
contemplated thereby (other than the consummation of the transaction
contemplated hereby) shall have been satisfied.
(f) The Excluded Assets Transaction shall have been consummated.
(g) The Senior Living Transaction shall have been consummated,
including the payment of all intercompany loans owing to or from BSL to the
Company.
(h) The Carryover Merger shall have been consummated.
(i) The Carryover Shareholders and the Purchaser shall have entered
into a shareholder agreement on terms and conditions acceptable to each party
thereto addressing the rights and obligations of the parties after the Closing
Date as shareholders of the Company, including, but not limited to, their right
to acquire additional shares of the Company's common or preferred stock and the
affect of the issuance of additional shares of the Company's common or preferred
stock on their percentage ownership interest in the Company, all as described
more fully in the Term Sheet attached hereto as Exhibit N (the "Shareholders
Agreement").
ARTICLE IX
TERMINATION/INDEMNIFICATION
9.01. Termination. This Agreement may be terminated by the parties
hereto upon the following conditions:
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(a) By mutual consent of the parties;
(b) By Purchaser, if the conditions to Closing set forth in Paragraph
8.01 have not been satisfied or waived by the Outside Closing Date or any
extension thereof provided for in Paragraph 8.01; provided, however, the
Purchaser shall have no right to terminate the Agreement under this Paragraph
9.01(b) if the condition has not been satisfied or waived as a result of the
breach by the Purchaser of its obligations hereunder;
(c) By the Company if the conditions to Closing set forth in Paragraph
8.02 have not been satisfied or waived by the Outside Closing Date or any
extension thereof provided for in Paragraph 8.02; provided, however, the Company
shall have no right to terminate the Agreement under this Paragraph 9.01 (c) if
the condition has not been satisfied or waived as a result of the breach by the
Company of its obligations hereunder;
(d) By either party if the United States Department of Justice or the
Federal Trade Commission requires any of the actions described in Paragraph
7.02.
9.02. Effect of Termination. In the event of the termination of this
Agreement by either party in accordance with Paragraph 9.01, this Agreement
shall be null and void and of no further force and effect and no party shall
have any further rights or obligations hereunder, other than the following:
(a) The obligations of the Company, the Purchaser and Principal to
return any documents as set forth in the Confidentiality Agreement dated June
25, 1996 executed by the Company and Principal (the "Confidentiality Agreement")
and to which the Purchaser agreed to be bound by that Letter of Intent dated
September 25, 1996 (as the same may be amended from time to time, the "Letter of
Intent"), and to keep confidential any Confidential Information (as defined
therein) obtained in furtherance thereof;
(b) The right of either party to seek specific performance or damages
or to pursue any other remedy which may be available to it at law or in equity
for the breach of any covenant or agreement of any other party hereto, in the
event of a termination pursuant to Paragraphs 9.01(b) or 9.01(c) resulting from
a failure of the conditions set forth in Paragraphs 8.01(b) or 8.02 (b),
respectively.
9.03. Indemnification. Provided that this Agreement has not been
terminated pursuant to Paragraph 9.01, from and after the Closing Date, the
Company shall indemnify the Purchaser, its partners and affiliates, Purchaser's
designees and their respective partners, officers, directors, employees and
affiliates from and against any and all claims, damages, losses, expenses, costs
(including reasonable attorneys fees), deficiencies, penalties, interest, fines,
obligations or liabilities of any kind and claims brought by third parties
(collectively "Losses") suffered or incurred by the Purchaser its partners and
affiliates, Purchaser's designees and their respective partners, officers,
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directors, employees and affiliates or by the Company or its officers,
directors, employees or affiliates in the event of a breach by the Company of
its representations, warranties or covenants set forth in this Agreement;
provided, however, that the Purchaser's recourse for any and all such Losses
shall be limited to the funds on deposit in the Escrow Account (excluding the
funds in the Agent/Legal Fees Expense Account) described in Paragraph 1.04
hereof and shall be further limited by the provisions of Paragraph 9.06 below.
9.04. Indemnification Procedures.
(a) In the event that any circumstances exist or any claim is made
against Purchaser, its partners or affiliates, Purchaser's designees and their
respective partners, officers, directors, employees and affiliates or against
the Company, its directors, officers, employees or affiliates, after the Closing
Date (hereinafter the "Indemnified Party") which the Indemnified Party believes
will result in the Indemnified Party incurring a Loss, or in the event the
Indemnified Party believes it has incurred a Loss, it will promptly deliver to
the Escrow Agent and to the Agent written notice (the "Loss Notice") setting
forth a reasonable summary of the nature of the Loss and the facts giving rise
thereto and specifying the section of this Agreement to which such Loss relates
and the amount thereof.
(b) in the event the Loss Notice involves a claim made by a third
party, in the form of a demand letter or lawsuit, against the Indemnified Party
which the Purchaser believes represents a breach of representation, warranty or
covenant by the Company, it shall include a copy of such claim in the Loss
Notice and the Indemnified Party's reasonable estimate of the amount sought
under the terms thereof (the "Third Party Claim").
(c) The Agent shall have the right to dispute the Loss on behalf of the
former holders of the Redeemed Preferred Stock and the former holder of the
GECC Preferred Stock by the delivery of written notice (the "Dispute Notice") to
the Escrow Agent and to the Indemnified Party and the Company within twenty (20)
business days of the delivery to Escrow Agent and the Agent of the Loss Notice.
In the event of a Loss which relates to a Third Party Claim, the Agent shall
have the following options:
(i) The Agent may submit a Dispute Notice with respect to such Third
Party Claim, in which case the Agent shall be deemed to have waived its right,
on behalf of the former holders of the Redeemed Preferred Stock and the former
holder of the GECC Preferred Stock, to defend such Third Party Claim on behalf
of the Indemnified Party; or
(ii) The Agent may submit notice to the Purchaser, the Company and the
Escrow Agent within the twenty (20) day period in which a Dispute Notice would
otherwise be due that it has elected to retain counsel to defend the Third Party
Claim on behalf of the Indemnified Party (the "Defense Notice"), in which case
such election shall be deemed to be a waiver of any and all rights which the
Agent may have on behalf of the former holders of the Redeemed Preferred Stock
and the
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former holder of the GECC Preferred Stock to contest the Purchaser's right to
seek indemnity from the Escrow Account should the Company's liability be
established with respect to said Third Party Claim.
(iii) In the event a Dispute Notice is submitted with respect to any
such Third Party Claim, the matter submitted to arbitration shall be limited to
whether the Third Party Claim represents the breach of a representation,
warranty or covenant hereunder.
(iv) In no event shall the Agent have the right to defend any such
Third Party Claim in the event the Purchaser reasonably determines that the
amount which is the subject of said Third Party Claim, when taken together with
any other matters which are then the subject of pending Loss Notices, will
exceed the then available proceeds in the Escrow Account, it being understood
and agreed that the Indemnified Party shall retain the sole right to defend such
Third Party Claim; provided, however, that in event the Indemnified Party settle
any such Third Party Claim without the prior consent of the Agent, which consent
shall not be unreasonably withheld, the reasonableness of the amount of such
settlement and/or the portion thereof which should be paid from the Escrow
Account may be submitted by the Agent to arbitration in accordance with the
provisions hereof.
(d) In the event the Agent submits a Dispute Notice within the twenty
(20) business day period provided for herein, the Agent and the Purchaser shall
submit the matters which are the subject of the Loss Notice to arbitration in
accordance with the provisions of Paragraph 9.05 hereof and the Escrow Agent,
the Agent, the Company and the Purchaser shall be bound by and shall act in
accordance with the determination of the arbitrator.
(e) In the event the Agent fails to deliver a Dispute Notice or a
Defense Notice within such twenty (20) business day period, the Escrow Agent
shall be authorized without further action by or approval of any party hereto to
disburse from the Escrow Account the amount which is the subject of the Loss
Notice to, or as directed by, the Indemnified Party which submitted the same
and, in the case of a Loss Notice which relates to a Third Party Claim, the
Indemnified Party shall be required to remit the same to the person or entity
which brought the Third Party Claim and to provide the Agent with evidence
thereof; provided, however, that the Indemnified Party shall have the right to
elect, in lieu of immediately remitting said funds to the party which brought
the Third Party Claim, to defend such Third Party Claim and to use the funds in
the Escrow Account to cover the cost of such defense and of any liability which
the Company is determined to have with respect thereto by a court of competent
jurisdiction or any settlement amount agreed upon by the parties provided that
in the event the amount so expended for legal fees and liability or settlement
payments shall exceed the amount originally sought in the Third Party Claim, the
Indemnified Party shall be solely responsible therefor and shall have no right
to seek additional indemnity from the Escrow Account with respect to such excess
amounts; and provided, further, that in the event the amount so expended for
legal fees and liability or settlement payments is less than the amount
originally sought in the Third Party Claim and released from the Escrow Account,
the Indemnified Party shall be required to return the excess to the Escrow Agent
for deposit in the Escrow Account.
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(f) The Agent shall have the right from time to time to draw on the
Agent/Legal Fees Expense Account to pay any costs incurred by him in arbitrating
a claim which is the subject of a Dispute Notice or defending a Third Party
Claim or any fees due to him under the terms of any agreements between the Agent
and the former holder of the GECC Preferred Stock and the former holders of the
Redeemed Preferred Stock and the Indemnified Party shall have no right to
control or otherwise object to the disbursement of the funds from the
Agent/Legal Fees Expense Account.
9.05. Arbitration.
(a) Any matters which are the subject of a Loss Notice and a Dispute
Notice shall be submitted for resolution to arbitration in such location as may
be agreed upon by the Purchaser and the Agent or, in the event the Purchaser and
the Agent are unable to agree upon a location within ten (10) days after the
date of a Dispute Notice, in Denver, Colorado, under the Commercial Arbitration
Rules of the American Arbitration Association before a single arbitrator
selected by mutual agreement of the Purchaser and the Agent to which shall be
added the provisions of the Federal Rules of Civil Procedure relating to the
production of evidence and the parties agree that the arbitrator may impose
sanctions in his/her discretion to enforce compliance with discovery and other
obligations.
(b) If the Purchaser, on the one hand, and the Agent, on the other
hand, do not agree on the arbitrator within twenty (20) business days after the
delivery by Agent of a Dispute Notice, the arbitrator shall be selected by them
from a list of five potential arbitrators provided by the American Arbitration
Association. Such list shall be provided within ten (10) davs of the expiration
of said twenty (20) business day period. The Purchaser shall first delete one
name from the list and then the Agent shall delete one name from the list. This
process shall continue in the same order until the last remaining person on the
list shall be the arbitrator. This selection process shall take place within two
business days following both parties' receipt of the list of five potential
arbitrators.
(c) Hearings in such arbitration shall commence within twenty (20)
business days of the selection of the arbitrator or as soon thereafter as the
arbitrator is available. The arbitrator shall deliver his/her opinion within
twenty (20) business days after completion of the arbitration hearing. The
arbitrator's decision shall be final and binding upon the parties and may be
entered and enforced in any court of competent jurisdiction by either of the
parties.
(d) Unless otherwise ordered by the arbitrator, the non-prevailing
party shall be responsible for the arbitrator's expenses.
(e) In the event the arbitrator determines that a Loss Notice which
relates to a Third Party Claim is the subject of an indemnifiable loss under the
terms of this Paragraph 9, the Indemnified Party shall have the right to make a
demand on the Escrow Account in an amount equal to any and all costs and
expenses incurred to the date of said determination and/or thereafter incurred
in defending such Third Party Claim but shall not have the right to make a
demand for any other
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portion of any Losses related thereto unless and until the liability of the
Company is determined on a final non-appealable basis in the action which is the
subject of such Third Party Claim or is otherwise determined by a settlement
agreement to which the Company is a party. In the event the arbitrator
determines that a Loss Notice which relates to a Third Party Claim is not the
subject of an indemnifiable loss, the Indemnified Party shall have no access to
the Escrow Account with respect to any Losses incurred in connection therewith
and shall be required to reimburse the Agent for any and all costs and expenses
incurred by him in successfully defending against such Loss Notice.
9.06. Limitation on Claims.
(a) Purchaser shall have no right to recover with respect to any Losses
until the amount of all such Losses is equal to or greater than Five Hundred
Thousand and no/100 Dollars ($500,000) individually or in the aggregate (the
"Loss Threshold") and thereafter Purchaser shall only be entitled to recover
Losses suffered or incurred by it or the Company in excess of the Loss
Threshold. In addition and subject to the further limitation set forth in
Paragraph 9.06(c), any and ail claims for the recovery of Losses must be brought
by Purchaser within eighteen (18) months after the Closing Date (the "Limitation
Period").
(b) Any and all funds remaining in the Escrow Account at the end of the
Limitation Period (the "Remaining Escrowed Funds"), along with the accrued
interest thereon, shall be released by the Escrow Agent to the former holders of
the Redeemed Preferred Stock, the former holders of the Accelerated Options
and/or the Purchased Options, the former holder of the GECC Preferred Stock and
to the Carryover Shareholders as follows: (i) 64.15% of the Remaining Escrowed
Funds, along with 64.15% of the accrued interest thereon, shall be disbursed to
the former holders of the Redeemed Preferred Stock, the former holders of the
Accelerated Options and/or Purchased Options and the Carryover Shareholders
based on the percentage of the Company's fully diluted common stock owned by
each such stockholder or option holder on November 6, 1996, as set forth in
Exhibit O hereto and (ii) 35.85% of the Remaining Escrowed Funds, along with
35.85% of the accrued interest thereon, shall be disbursed to the former holder
of the GECC Preferred Stock; provided, however, that as to any Loss Notices
submitted prior to the expiration of the Limitation Period in excess of the Loss
Threshold which do not involve a Third Party Claim and which remain unresolved
at the end of the Limitation Period, sufficient funds to cover the Losses which
are the subject thereof shall be retained by Escrow Agent in the Escrow Account
until the final resolution thereof between the Agent, on the one hand, and the
Company or the Purchaser, as applicable, on the other hand, in accordance with
the arbitration procedures set forth in Paragraph 9.05 or, in the event of a
Loss Notice which relates to a Third Party Claim which is admitted by the Agent
to be, or is determined by the arbitrator to, represent a breach of a
representation, warranty or covenant of the Company hereunder, until the final
resolution of such Third Party Claim however effected including by the decision
of a court of competentjurisdiction, by decision made upon administrative or
other non-judicial proceeding or by agreement of the parties thereto, at which
time the funds which are the subject of any such Loss Notice(s) shall be
disbursed in accordance with the order of the arbitrator, such court of
competent jurisdiction or such settlement agreement, as applicable, and,
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in the event any portion thereof is to be disbursed to the former shareholders
of the Company, such sum shall be disbursed in accordance with the percentages
reflected in this Paragraph 9.06(b).
(c) Notwithstanding anything to the contrary contained herein,
Purchaser acknowledges and agrees that the indemnity and escrow provisions
provided for herein are personal to Purchaser and accordingly that in the event
of a transaction involving the Company, other than one or more public offerings
of the stock of the Company, which results in a change in the controlling
shareholders thereof such that the shareholders immediately after the Closing
Date provided for herein own less than 50% of the stock of the Company (the
"Early Release Date"), any amounts then held in the Escrow Account which are not
the subject of a pending Loss Notice shall immediately upon the consummation of
such transaction be released to the former holders of the Redeemed Preferred
Stock and the former holder of the GECC Preferred Stock in the manner and
according to the percentages set forth in Paragraph 9.06(b) whether or not the
Limitation Period has expired as of such date. Any amounts remaining in the
Escrow Account after such Early Release Date shall be retained by Escrow Agent
in the Escrow Account until the final resolution thereof in accordance with the
procedures set forth in Paragraphs 9.04 and 9.05, at which time the funds which
are the subject of any such Loss Notice(s) shall be disbursed in accordance
with the provisions of Paragraph 9.06(b).
9.07. Escrow Agents' Fees. Any fees or expenses charged by the Escrow
Agent shall be shared by the Purchaser, on the one hand, and the Agent on behalf
of the former holders of the Redeemed Preferred Stock and the former holder of
the GECC Preferred Stock, on the other hand, on a 50-50 basis, and shall be paid
from any disbursements which the parties are entitled to receive from the Escrow
Account or from any interest earnings thereon.
9.08. Resignation or Removal of Escrow Agent. The parties acknowledge
and agree that the Escrow Agent shall have the right to resign or to be removed
by mutual agreement of the parties and the parties agree to negotiate in good
faith with respect to the designation of a replacement Escrow Agent in the event
of such resignation or replacement; provided, however, that in the event the
parties are unable to so agree prior to the effective date of said resignation
or removal, the Escrow Agent shall deposit any amounts then held by it in the
Escrow Account with a court of competent jurisdiction which shall hold the same
until the parties are able to agree upon a replacement Escrow Agent or one is
otherwise appointed by said court.
9.09. Indemnity of Escrow Agent. The parties acknowledge and agree that
the Escrow Agent shall not have any liability hereunder with respect to the
protection or disbursement of the funds in the Escrow Account absent gross
negligence or wilful misconduct by the Escrow Agent in performing its duties
hereunder and accordingly the parties do hereby agree to indemnify, defend and
hold harmless the Escrow Agent from and against any and all Losses which it may
incur as a result of the performance of its duties hereunder absent gross
negligence or wilful misconduct of the Escrow Agent.
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9.10. Further Assurances. The parties agree to execute and to deliver
any and all documents as may be reasonably requested by the Escrow Agent to
evidence its assumption of the duties and obligations provided for herein, the
limitation on its liability as provided for herein, and its right to indemnity
and to reimbursement by the parties in accordance with the terms hereof.
9.11. Adjustment of Investment Proceeds. Amounts paid for
indemnification under Article IX shall be deemed to be an adjustment to the
amount of the Investment Proceeds paid under Paragraph 1.04(b).
9.12. Access to Books and Records. From the Closing Date until the
final determination of any matters which are the subject of a Loss Notice and a
Dispute Notice, the Agent and his representatives will have access to the books,
records and accounts of the Purchaser and the Company and its and their
employees.
ARTICLE X
MISCELLANEOUS
10.01. Notices. Any notice, request or other communication to be given
by any party hereunder shall be in writing and shall be sent by registered or
certified mail, postage prepaid, by overnight delivery, hand delivery or
facsimile transmission to the following address:
To the Company Brim, Inc.
Prior to Closing: ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇. ▇. ▇▇▇▇, President
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With copy to: The ▇▇▇▇▇▇▇▇▇ Group
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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To Purchaser: Golder, Thoma, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Fund IV. L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
And with copies to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To the Agent: ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To the Company
after Closing: c/o Principal Hospital Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇-▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇, President
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
10.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
parties; provided, however, that, unless specifically agreed by the parties, no
such assignment shall release the assignor of its rights and obligations
hereunder. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns,
including successors by operation of law pursuant to any merger, consolidation
or sale of assets involving either party. Nothing herein shall be construed as
prohibiting Purchaser from granting to its designees the right to participate in
the Investment in accordance with the provisions of Article I hereof.
10.03. Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter delivered pursuant hereto, the
documents executed and delivered pursuant hereto and the Confidentiality
Agreements, constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior negotiations,
discussions, writings and agreements between them, including but not limited to
the Letter of Intent.
10.04. Captions. The captions of this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
10.05. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Oregon.
10.06. Severability. Should any one or more of the provisions of this
Agreement be determined to be invalid, unlawful or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby.
10.07. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
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10.08. Company Disclosure Letter. Anything disclosed in this Agreement
or in the Company Disclosure Letter delivered pursuant to this Agreement or in
the Company Financial Statements shall be deemed to have been disclosed for any
and all purposes to which said information relates; provided, however, that the
disclosure in any section of the Company Disclosure Letter shall qualify any
other section of this Agreement only to the extent that it is reasonably
apparent from a reading of such disclosure that it also qualifies or applies to
such other section. Any updates or revisions to the Disclosure Letter delivered
by the Company after the date hereof shall for all purposes be deemed to be
incorporated into and made a part of the Company Disclosure Letter. The
Disclosure Letter may be updated from time to time prior to Closing and will be
updated as of, and at the Closing Date, if and to the extent necessary to
reflect changes in information disclosed therein, provided, however, that no
such additional disclosure shall be deemed to be accepted by Purchaser if such
disclosure reflects an event or series of events which would otherwise permit
Purchaser to terminate this Agreement for the failure of the conditions to
closing set forth in Paragraphs 8.01(a), (b) or (c) unless Purchaser
specifically accepts such disclosure in writing.
10.09. Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "the Company has no knowledge of" or "Purchaser has no
knowledge of" or words or phrases of similar import, the same in the case of the
Company and the Subsidiaries, shall mean to the actual knowledge of Messrs.
K. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇, ▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, after a diligent review of any documents or other information in their
possession or under their control and after making written inquiries of the
Chief Executive Officer, Chief Financial Officer and Director of Nursing of each
of the Leased Company Facilities, and in the case of Purchaser, shall mean to
the actual knowledge of ▇▇▇▇▇▇ ▇▇▇▇▇ after a diligent review of any documents or
other information in his possession or under his control and in the case of
Principal shall mean to the actual knowledge of ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇
after a diligent review of any documents or other information in their
possession or under their control. To the extent that any of the representations
and warranties contained in this Agreement refer to verbal notice to a party
such notice shall be deemed to have been received if delivered to any officer of
such party or to an officer of one of its subsidiaries.
10.10. Third Party Beneficiary. Except as provided in Paragraphs 1.08
and 9.06(b), with respect to the former common and preferred shareholders of the
Company, the former holders of the Purchased Options and/or Accelerated Options
and the Carryover Shareholders, and in Paragraph 5.03(g), with respect to the
employees described therein, and in Paragraphs 5.03(h), (i) and (j), with
respect to the persons who were officers or directors of the Company on or prior
to the Closing Date, nothing in this Agreement express or implied is intended to
and shall not be construed to confer upon or create in any person, other than
the parties hereto, which parties shall include Purchaser's designees who
execute a counterpart of this Agreement or separate certificate pursuant to
Paragraph 4.08(f), any rights or remedies under or by reason of this Agreement,
including without limitation, any right to enforce this Agreement.
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10.11. Waiver of Jury Trial. EACH OF THE PARTIES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION BROUGHT ON OR WITH RESPECT TO
THIS AGREEMENT, INCLUDING TO ENFORCE OR DEFEND ANY RIGHTS HEREUNDER AND AGREES
THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
10.12. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
▇▇.▇▇.▇▇▇▇▇▇▇▇▇▇▇▇. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." In any instance in which
the consent of Purchaser is required, it shall be deemed to have been granted if
provided by ▇▇▇ ▇▇▇▇▇ and in any instance in which the consent of Principal is
required, it shall be deemed to have been granted if provided by ▇▇▇▇▇▇▇ ▇▇▇▇ or
▇▇▇▇▇▇ ▇▇▇▇.
10.14. Expenses. Except as otherwise provided in Paragraph 9.05, each
party shall bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby; provided, however, that Principal shall be solely responsible for any
HSR Act filing fee and the Company shall be solely responsible for any fee due
to ▇▇▇▇▇ ▇▇▇▇▇▇ with respect to the Transactions. In addition, the Company shall
also bear the first $200,000 of any costs and expenses associated with the
Senior Living Transaction or the Excluded Assets Transaction, with any costs
related to the Senior Living Transaction and the Excluded Assets Transaction in
excess thereof being deducted from the redemption proceeds due to the holders of
the Redeemed Preferred Stock and the Redeemed GECC Preferred Stock prior to the
distribution thereof to said stockholders.
10.15. Survival. The representations and warranties of the Company
shall survive for a period of eighteen (18) months after the Closing and shall
be subject to the escrow and indemnity provisions of Article IX hereof. The
covenants of Purchaser set forth in Paragraph 6.03(a) and of Principal set forth
in Paragraphs 6.01A(a) and 6.03(b) shall survive the termination of this
Agreement for a period of three years and, except as modified by the terms of
Paragraphs 6.01A(a), 6.03(a) and 6.03(b), the covenants in the Confidentiality
Agreement by which the Purchaser and Principal agreed to be bound under the
terms of the Letter of Intent shall survive termination for the three year
period stated therein.
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IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day
and year first set forth therein.
BRIM, INC.
By: /s/ ▇. ▇. ▇▇▇▇
------------------------------------
Its: President
GOLDER, THOMA, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ FUND IV, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Its: Principal
Principal Hospital Company does hereby sign this Agreement for the sole purpose
of being bound by Paragraphs 4.01A, 4.02A, 5.01, 6.01A, 6.03(b), 7.02(a), 7.06,
9.02(a), 10.09, 10.13, 10.14 and 10.15 of the Investment Agreement.
PRINCIPAL HOSPITAL COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Its: President
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EXHIBIT INDEX
A First Union Commitment Letter and Investment Commitment Letter
B Carryover Shareholders: Names and Percentage Ownership in Carryco
C Form of Carryco/Brim Merger Agreement
D Senior Preferred Rights and Preferences
E Junior Preferred Rights and Preferences
F GE Stock Purchase Agreement
G Senior Living Assets
H Employment Agreements
I Resigning Officers and Directors
J Certain Officers Subject to Post Closing Covenants
K Office Lease
L Shared Services Agreement
M Brim/PHC Merger Agreement
N Shareholder Agreement Term Sheet
O Pre Closing Shareholders: Names and Percentage Interests
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AGENT'S ACKNOWLEDGMENT
The undersigned does hereby execute this Agreement for the sole purpose
of acknowledging his agreement on the terms and subject to the conditions set
forth in an Agency Agreement to be executed between him and representatives of
the former holders of the Redeemed Preferred Stock and the GECC Preferred Stock
(the "Agency Agreement") to act as the agent for the former holders of the
Redeemed Preferred Stock and the GECC Preferred Stock with respect to any claims
for Losses made by the Purchaser under Article IX of this Investment Agreement.
The undersigned does not hereby assume any liability for the acts or omissions
of any party to this Investment Agreement nor for any errors or omissions in
serving as the Agent except as otherwise provided in the Agency Agreement.
/s/ ▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇ ▇▇▇▇▇▇, Agent
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