REORGANIZATION AGREEMENT
This Reorganization Agreement is made to be effective as of May 8,
1996, by and among JMAC, Inc., an Ohio corporation ("JMAC"), Richard R. Slager
("Slager"), Alan B. Satterwhite ("Satterwhite") and Gregory M. Barrows
("Barrows") (each sometimes hereinafter an "INVESTOR" and collectively the
"INVESTORS"), and Karrington Health, Inc., an Ohio corporation ("ISSUER");
WITNESSETH:
WHEREAS, JMAC is the sole shareholder of JMAC Properties, Inc. ("JMAC
Properties"), an Ohio corporation and the holder of two-thirds of the equity
interests in Karrington Operating Company, an Ohio general partnership
("Karrington Operating"); and
WHEREAS, Slager, Satterwhite and Barrows are all of the shareholders
of DevelopMed Associates, Inc. ("DMA"), an Ohio corporation and the holder of
one-third of the equity interests in Karrington Operating; and
WHEREAS, Satterwhite is a party to a Subscription Agreement dated
April 10, 1996 (the "Subscription Agreement") pursuant to which he has
subscribed for and agreed to purchase one Common Share of ISSUER; and
WHEREAS, the parties hereto have agreed, subject to the terms and
conditions set forth herein, that ISSUER shall acquire from the INVESTORS all of
the issued and outstanding securities of JMAC Properties and DMA in exchange
for 4,350,000 common shares of ISSUER, in a transaction satisfying the
requirements of Section 351 of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises contained herein, the
INVESTORS and the ISSUER hereby make the following agreement, intending to be
legally bound thereby:
(1) Immediately prior to the effectiveness of a registration
statement relating to an initial public offering of the common shares of ISSUER,
the undersigned INVESTORS shall transfer and convey to ISSUER all of the issued
and outstanding common shares of JMAC Properties and DMA owned by them in
exchange for the number of common shares of ISSUER set forth opposite each
INVESTOR'S signature below (the "SHARES") on the terms and subject to the
conditions set forth herein. Upon delivery of certificates evidencing the common
shares of JMAC Properties and DMA, duly endorsed for transfer to ISSUER at its
principal executive offices, ISSUER shall cause its transfer agent to issue
certificates to the INVESTORS representing the SHARES.
(2) Contemporaneously with the share exchange contemplated by Section
(1), the Subscription Agreement shall terminate.
(3) JMAC hereby represents and warrants to ISSUER that:
(A) It owns all of the issued and outstanding common shares
of JMAC Properties, of record and beneficially, and is transferring
such common shares to ISSUER free and clear of all liens, claims,
encumbrances and rights of others;
(B) JMAC Properties owns two-thirds of the equity interests
in Karrington Operating, of record and beneficially, free and clear of
all liens, claims, encumbrances and rights of others;
(C) There are no outstanding subscriptions, options,
warrants, convertible rights or other rights to purchase or acquire
any additional securities of JMAC Properties or Karrington Operating;
and
(D) It has full power and authority to enter into this
Reorganization Agreement and to transfer the common shares of JMAC
Properties to ISSUER.
(4) Slager, Satterwhite and Barrows represent and warrant that:
(A) They own all of the issued and outstanding common
shares of DMA, of record and beneficially, and are transferring such
common shares to ISSUER free and clear of all liens, claims,
encumbrances and rights of others;
(B) DMA owns one-third of the equity interests in
Karrington Operating, of record and beneficially, free and clear of
all liens, claims, encumbrances and rights of others;
(C) There are no outstanding subscriptions, options,
warrants, convertible rights or other rights to purchase or acquire
any additional securities of DMA or Karrington Operating; and
(D) Each of them has full power and authority to enter into
this Reorganization Agreement and to transfer the common shares of DMA
owned by him to ISSUER.
(5) Each INVESTOR hereby acknowledges, represents and warrants to
ISSUER that:
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(A) INVESTOR is purchasing the SHARES for the purpose of
investment and has no present intention of selling, transferring or
otherwise distributing the SHARES, except in compliance with
applicable securities laws;
(B) INVESTOR has such knowledge and experience in financial
and business matters that it (or he) is capable of evaluating the
merits and risks of its (or his) investment in the SHARES;
(C) INVESTOR is aware that (i) the SHARES have not been
registered under the Securities Act of 1933 (the "Act") and (ii) the
SHARES cannot be sold, transferred, pledged or otherwise distributed
by INVESTOR unless a registration statement registering the SHARES
under the Act has been filed with the Securities and Exchange
Commission and has become effective or unless the SHARES are sold or
otherwise distributed in a transaction in respect of which ISSUER has
previously received an opinion of counsel, satisfactory to ISSUER,
stating that such registration is not required; and
(D) ISSUER may prevent transfer and registration of
transfer of the SHARES unless ISSUER shall have received an opinion
from counsel satisfactory to it to the effect that any such transfer
would not violate the Act or the applicable laws of any state. ISSUER
may cause each certificate evidencing the SHARES to bear a legend
reflecting all applicable restrictions on transfer.
(6) This Reorganization Agreement shall terminate only upon the
occurrence of either of the following events: (A) consummation of the share
exchange contemplated by Section 1 hereof or (B) failure of a registration
statement for an initial public offering of common shares to become effective
by December 31, 1996.
(7) This Reorganization Agreement shall be construed in accordance
with and governed in all respects by the laws of the State of Ohio.
(8) This Reorganization Agreement may not be assigned by any party.
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IN WITNESS WHEREOF, this Reorganization Agreement has been executed as
of the date first above written.
ISSUER:
KARRINGTON HEALTH, INC.
By /S/Alan B. Satterwhite
----------------------
Alan B. Satterwhite
Chief Operating Officer and
Chief Financial Officer
INVESTORS: NUMBER OF SHARES:
JMAC, Inc. 2,900,000
By /S/Michael H. Thomas
--------------------
Michael H. Thomas,
Executive Vice President and Treasurer
/S/Richard R. Slater
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Richard R. Slager 717,750
/S/Alan B. Satterwhite
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Alan B. Satterwhite 717,750
/S/Gregory M. Barrows
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Gregory M. Barrows 14,500
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