1
AGREEMENT AND PLAN OF MERGER
AMONG
LIVING CENTERS OF AMERICA, INC.,
GRANCARE, INC.
AND
APOLLO MANAGEMENT, L.P.
DATED AS OF MAY 7, 1997
[MERGER II]
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TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.01 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.01 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.02 Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.03 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.04 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.05 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.06 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.07 Conversion of Common Stock of the Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.08 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.09 Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.10 Rights Under Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.11 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.12 Formation of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.01 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.02 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.03 Authority for this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.04 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.05 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.06 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.07 Consents and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.08 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.09 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.10 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.12 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.13 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.15 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SUB . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.01 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.02 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.03 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.04 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.05 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.06 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.07 Consents and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.08 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.09 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.10 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.01 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.02 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.03 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.04 Reasonable Efforts, Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.05 Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.06 Employee Plans and Benefits and Employment Contracts . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.07 Proxy Statement and S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.08 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.09 Rights Agreement Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.10 Agreements of Rule 145 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.11 New York Stock Exchange Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.01 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . 31
SECTION 6.02 Additional Conditions to the Company's Obligation to Effect the Merger 32
SECTION 6.03 Additional Conditions to the Parent's and the Sub's Obligations to Effect the Merger . . . . 33
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 7.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 7.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.03 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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SECTION 7.04 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.01 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.02 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.03 Enforcement of the Agreement; Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.04 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.06 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.07 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.08 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.10 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.11 Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.12 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.13 Obligation of the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 7,
1997 among Living Centers of America, Inc., a Delaware corporation (the
"Parent"), GranCare, Inc., a Delaware corporation (the "Company") and Apollo
Management, L.P., a Delaware limited partnership, on behalf of one or more
funds under management (collectively, "Apollo"), and, upon its subsequent
execution and delivery to the other parties of a counterpart hereof, a newly
formed Delaware corporation wholly owned by Parent (the "Sub").
RECITALS
WHEREAS, the Board of Directors of each of the Parent and the Company
has determined that it is in the best interests of their respective
stockholders for the Sub to merge with and into the Company (the "Merger")
pursuant to Section 251 of the Delaware General Corporation Law ("DGCL") upon
the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of each of the Parent and the Company
has adopted resolutions approving the Merger of the Sub with and into the
Company, in accordance with applicable Delaware law upon the terms and subject
to the conditions set forth herein, and each Board of Directors has agreed to
recommend that their respective stockholders approve the Merger;
WHEREAS, the Parent and the Company have agreed (subject to the terms
and conditions of this Agreement), as soon as practicable following the
approval by the stockholders of the Company and the Parent, to effect the
Merger as more fully described herein;
WHEREAS, a condition of the Merger is the successful completion of the
recapitalization of Parent pursuant to the merger of Parent with a wholly owned
subsidiary of Apollo (the "Recapitalization Merger");
WHEREAS, pursuant to the Merger, each issued and outstanding share of
common stock, par value $.001 per share, of the Company ("Company Common
Stock"), will be converted into shares of common stock, par value $.01 per
share, of the Parent ("Parent Common Stock") upon the terms and subject to the
conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Parent, the Sub (upon its becoming a party hereto) and
the Company desire to make certain representations, warranties, covenants and
agreements in connection with this Agreement;
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NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.01 Certain Definitions.
For purposes of this Agreement:
i. "business day" means any day that is not a Saturday, Sunday or
other day on which banking institutions in New York, New York are authorized or
required by law or executive order to close;
ii. "Environmental Law" means any law, regulation, decree,
judgment, permit or authorization relating to worker or public safety and the
indoor and outdoor environment, including, without limitation, pollution,
contamination, cleanup, regulation and protection of the air, water or soils in
the indoor or outdoor environment;
iii. "Environmental Liabilities and Costs" means all damages,
penalties, obligations or clean-up costs assessed or levied pursuant to any
Environmental Law;
iv. "Material Adverse Effect" means, with respect to the Parent or
the Company, as the case may be, any adverse change in the respective business,
prospects, financial condition or results of operations of the Parent or the
Company and their respective subsidiaries that is material to the Parent or the
Company and their respective subsidiaries taken as a whole, excluding any such
adverse change that is due to events, occurrences, facts, conditions, changes,
developments or effects which affect the economy generally; and
v. "Securities Act" means the Securities Act of 1933, as amended
and in effect from time to time.
vi. "Subsidiary" means, when used with reference to an entity, any
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions, or a majority of the outstanding voting
securities of which, are owned directly or indirectly by such entity.
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ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the DGCL,
the Sub shall be merged with and into the Company as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions set
forth in Article VI hereof. The Company shall be the surviving corporation in
the Merger (the "Surviving Corporation") under the name GranCare, Inc. (or such
other name as the parties shall agree) and shall continue its existence under
the laws of Delaware. The separate corporate existence of the Sub shall cease.
SECTION 2.02 Consummation of the Merger. Subject to the provisions
of this Agreement, the parties hereto shall cause the Merger to be consummated
by filing with the Secretary of State of the State of Delaware a duly executed
and verified certificate of merger, as required by the DGCL, and shall take all
such other and further actions as may be required by law to make the Merger
effective as promptly as practicable. Prior to the filing referred to in this
Section, a closing (the "Closing") will be held at the offices of Cleary,
Gottlieb, Xxxxx & Xxxxxxxx, Xxx Xxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx (or such
other place as the parties may agree) for the purpose of confirming all the
foregoing. The time the Merger becomes effective in accordance with applicable
law is referred to as the "Effective Time."
SECTION 2.03 Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL and set forth
herein.
SECTION 2.04 Certificate of Incorporation and Bylaws. The
Certificate of Incorporation and the Bylaws of the Sub, in each case as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation; provided, however, that
Article I of the Certificate of Incorporation of the Surviving Corporation
shall be amended to read in its entirety as follows: "ARTICLE I. The name of
the Corporation is GranCare, Inc." (or such other name as the parties shall
agree).
SECTION 2.05 Directors and Officers. The directors of the Sub
immediately prior to the Effective Time and the officers of the Company
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their respective successors
are duly elected and qualified.
SECTION 2.06 Conversion of Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of Sub, the Company or the
holders of any of the shares of Company Common Stock:
(a) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock owned by the Parent, the
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Sub or any Subsidiary of the Parent or the Sub or held in the treasury of the
Company, all of which shall be canceled and cease to exist, without
consideration being payable therefore, shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted at the
Effective Time into the right to receive 0.2469 (the "Conversion Number")
shares of Parent Common Stock for each share of Company Common Stock. All such
shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive the
shares of Parent Common Stock and cash in lieu of fractional shares of Parent
Common Stock as contemplated by Section 2.10(e), to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance
with Section 2.10 without interest.
(b) Each share of Company Common Stock held in the
treasury of the Company and each share owned by Sub, Parent or any direct or
indirect wholly owned subsidiary of Parent or the Company immediately prior to
the Effective Time shall be canceled without any conversion thereof and no
payment or distribution shall be made with respect thereto.
SECTION 2.07 Conversion of Common Stock of the Sub. Each share of
common stock of the Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and become at the Effective Time
one share of common stock of the Surviving Corporation.
SECTION 2.08 Company Actions. The Company hereby represents and
warrants that (a) its Board of Directors (at a meeting duly called and held),
has (i) determined that the Merger is fair to and in the best interests of the
stockholders of the Company, (ii) resolved to approve the Merger and recommend
(subject to its fiduciary duties as advised by legal counsel) approval and
adoption of this Agreement by such stockholders of the Company, (iii) taken all
necessary steps to render Section 203 of the DGCL inapplicable to the Merger,
and (iv) resolved to elect not to be subject, to the extent permitted by law,
to any state takeover law other than Section 203 of the DGCL that may purport
to be applicable to the Merger, or the transactions contemplated by this
Agreement, and (b) Chase Securities, Inc. and Xxxxx Xxxxxx Inc., the Company's
financial advisors, have rendered their respective opinions to the Company's
Board of Directors to the effect that, as of the date of this Agreement, the
Conversion Number is fair from a financial point of view, to the holders of
Company Common Stock.
SECTION 2.09 Stockholders' Meetings. Subject to applicable law,
each of the Parent and the Company, acting through its respective Board of
Directors, shall, in accordance with applicable law, duly call, give notice of,
convene and hold a special meeting (the "Special Meetings") of its respective
stockholders as soon as practicable for the purpose (in the case of the
Company) of approving and adopting the agreement of merger (within the meaning
of Section 251 of the DGCL) set forth in this Agreement and approving the
Merger (the "Company Stockholder Approval") or (in the case of the Parent) the
issuance of the shares of Parent Common Stock to the stockholders of the
Company in the Merger (the "Parent Stockholder Approval" and together with the
Company
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Stockholder Approval, the "Stockholder Approvals"), and, subject to the
fiduciary duties of their respective Boards of Directors under applicable law
as determined by such directors in good faith after consultation with and based
upon the advice of outside counsel, include in the Proxy Statement (as defined
in Section 5.07) of each of the Company and the Parent for use in connection
with the stockholders meeting of each of the Company and GranCare, the
recommendation of their Boards of Directors that stockholders vote in favor of
the Company Stockholder Approval or the Parent Stockholder Approval, as the
case may be. The Parent, the Sub and the Company agree to use commercially
reasonable efforts to cause the Special Meetings to occur within forty-five
(45) days after the Parent and the Company have responded to all SEC comments
with respect to the preliminary Proxy Statement. The Parent, the Sub and the
Company agree to use commercially reasonable efforts to cause the Special
Meeting to occur within forty-five (45) days after the Parent and the Company
have responded to all SEC comments with respect to the preliminary Proxy
Statement.
SECTION 2.10 Rights Under Stock Plans.
(a) Each option to purchase shares of Company Common
Stock ("Company Options") issued pursuant to the Company's 1996 Replacement
Stock Option Plan, 1996 Stock Incentive Plan or Outside Directors Stock
Incentive Plan (the "Company Plans"), all of which issued and outstanding
Company Options are set forth on Section 3.02(a) of the Company Disclosure
Letter, shall, at the Effective Time, be assumed by Parent and shall constitute
an option to acquire, on the same terms and conditions as were applicable under
such assumed Company Option, a number of shares of Parent Common Stock equal to
the product of the Conversion Number and the number of shares of Company Common
Stock subject to such Company Option, at a price per share equal to the amount
obtained by dividing the exercise price of such Company Option by the
Conversion Number. As soon as practicable following the Effective Time, but in
no event later than 15 days following the Effective Time, Parent shall deliver
to holders of Company Options appropriate option agreements representing the
right to acquire shares of Parent Common Stock on the same terms and conditions
as contained in the outstanding Company Options. Parent shall adopt and comply
with the terms of the Company Plans as they apply to Company Options assumed as
set forth above including, without limitation, provisions regarding changes of
control that may apply with respect to the Merger.
(b) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of its common stock for
delivery upon exercise of the Company Options assumed in accordance with this
Section 2.10. Parent shall file and cause to be effective as of the Effective
Time a registration statement on Form S-8 or other appropriate form, with
respect to shares of Parent Common Stock that will be subject to the Company
Options and use commercially reasonable efforts to maintain the effectiveness
of such registration statement (and maintain the current status of the
prospectus contained therein) for so long as such Company Options remain
outstanding.
(c) Certain non-officer employees have been granted awards
of restricted shares
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under the 1996 Stock Incentive Plan that have not yet been issued, all of which
awards of restricted stock are set forth on Section 3.02(a) of the Company
Disclosure Letter (the "Restricted Shares," together with the Company Options,
the "Rights"). All of such Restricted Shares will be issued prior to the
Effective Time pursuant to the Company's standard Restricted Stock Award
Agreement, which provides for acceleration of vesting in the event of a "Change
in Control" (as defined therein), which the Merger constitutes.
SECTION 2.11 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent
shall deposit with a bank or trust company designated by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with this
Article II, through the Exchange Agent, certificates representing the shares of
Parent Common Stock (such shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") issuable pursuant to Section 2.06 in exchange for
outstanding shares of Company Common Stock. The Exchange Agent shall, pursuant
to irrevocable instructions, deliver the Parent Common Stock contemplated to be
issued pursuant hereto out of the Exchange Fund. The Exchange Fund shall not
be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates which, immediately prior to
the Effective Time, represented outstanding shares of Company Common Stock (the
"Certificates"): (i) a letter of transmittal (which shall specify that delivery
shall be effected and risk of loss and title to the Certificates shall pass
only upon delivery of the Certificates to the Exchange Agent, and shall be in
such form and have such other provisions as Parent may reasonably specify); and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, and any other required documents, the holder of
such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive pursuant to the provisions of this
Article II and cash in lieu of fractional shares of Parent Common Stock as
contemplated by Section 2.11(e), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company, a
certificate representing the appropriate number of shares of Parent Common
stock may be issued to a transferee if the Certificate representing such
Company Common Stock is presented to the Exchange Agent accompanied by all
documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.11, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Parent Common Stock and cash
in lieu of any fractional shares of Parent Common Stock as contemplated by this
Section 2.11. The Exchange
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Agent shall not be entitled to vote or exercise any rights of ownership with
respect to the Parent Common Stock held by it from time to time hereunder,
except that it shall receive and hold all dividends or other distributions paid
or distributed with respect thereto for the account of persons entitled
thereto.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock declared
or made after the Effective Time with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the right to receive shares of Parent Common Stock represented thereby and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.11(e) until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the holder
thereof, without interest: (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.11(e) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Parent Common Stock; and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock.
(d) No Further Ownership Rights in Company Common Stock.
All shares of Parent Common Stock issued upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof (including
any cash paid pursuant to Section 2.11(c) or 2.11(e)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time that may have been declared or made by the
Company on such shares of Company Common Stock in accordance with the terms of
this Agreement or prior to the date hereof and which remain unpaid at the
Effective Time, and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article II, and, except
as provided in this Section 2.11(e), no dividend or other distribution, stock
split or interest shall relate to any fractional security, and such fractional
interests shall not entitle the owner thereof to any voting or other rights of
a security holder of Parent. In lieu of any fractional security, each holder
of shares of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article II will be paid an amount in cash (without
interest) equal to such holder's proportionate interest in the sum of (i) the
net proceeds from the sale or sales by the
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Exchange Agent in accordance with the provisions of this Section 2.11(e), on
behalf of all such holders, of the aggregate fractional shares of Parent Common
Stock issued pursuant to this Article II and (ii) the aggregate dividends or
other distributions that are payable with respect to such shares of Parent
Common Stock pursuant to Section 2.11(c) (such dividends and distributions
being herein called the "Fractional Dividends"). As soon as practicable
following the Effective Time, the Exchange Agent shall determine the excess of
(A) the number of full shares of Parent Common Stock delivered to the Exchange
Agent by Parent pursuant to Section 2.11(a) over (B) the aggregate number of
full shares of Parent Common stock to be distributed to holders of Company
Common Stock pursuant to Section 2.11(b) (such excess being herein called the
"Excess Securities") and the Exchange Agent, as agent for the former holders of
Company Common Stock, shall sell the Excess Securities at the prevailing prices
on the NYSE. The sale of the Excess Securities by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. Parent shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of Excess Securities. Until the net proceeds of such
sale of Excess Securities and the Fractional Dividends have been distributed to
the former stockholders of the Company, the Exchange Agent will hold such
proceeds and dividends in trust for such former stockholders. As soon as
practicable after the determination of the amount of cash to be paid to former
stockholders of the Company in lieu of any fractional interests, the Exchange
Agent shall make available in accordance with this Agreement such amounts to
such former stockholders.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund and any cash in lieu of fractional shares of Parent Common Stock
made available to the Exchange Agent that remain undistributed to the former
stockholders of the Company for six months after the Effective Time shall be
delivered to Parent, upon demand, and any stockholders of the Company who have
not theretofore complied with this Article II shall thereafter look only to
Parent for payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions
with respect to Parent Common Stock.
(g) No Liability. Neither Parent nor the Company shall
be liable to any holder of shares of Company Common Stock or Parent Common
Stock, as the case may be, for such shares (or dividends or distributions with
respect thereto) or cash in lieu of fractional shares of Parent Common Stock
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. Any amounts remaining unclaimed by holders of any such
shares one year after the Effective Time (or such earlier date immediately
prior to the time at which such amounts would otherwise escheat to or become
property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of Parent free and clear of any claims or
interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.
SECTION 2.12 Formation of Sub. Promptly after the date hereof,
Parent shall cause Sub to be formed and to become a party to this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants as of the date of this Agreement
to the Parent, the Sub and Apollo as follows:
SECTION 3.01 Organization and Qualification. Each of the Company
and its subsidiaries is a duly organized and validly existing corporation in
good standing under the laws of its jurisdiction of incorporation, with all
requisite corporate power and other authority to own its properties and conduct
its business as it is being conducted on the date hereof and is duly qualified
and in good standing as a foreign corporation authorized to do business in each
of the jurisdictions in which the character of the properties owned or held
under lease by it or the nature of the business transacted by it makes such
qualification necessary. The Company has heretofore made available to the Sub
accurate and complete copies of the Certificates of Incorporation and Bylaws as
currently in effect of the Company and its subsidiaries.
SECTION 3.02 Capitalization. (a) The authorized capital stock of
the Company consists of 50,000,000 shares of Company Common Stock and 2,000,000
shares of preferred stock, par value $0.01 per share. As of the close of
business on May 5, 1997 (the "Capitalization Date"): 23,815,695 shares of
Company Common Stock were issued and outstanding; no shares of Preferred Stock
were issued and outstanding; shares of Company Common Stock were held in the
Company's treasury; and there were outstanding Rights with respect to 2,929,408
shares of Company Common Stock as set forth in Section 3.02(a) of the
disclosure letter, dated the date hereof, delivered by the Company to the
Parent prior to the execution of this Agreement setting forth certain matters
referred to in this Agreement (the "Company Disclosure Letter"). Since the
Capitalization Date, except as set forth in Section 3.02(a) of the Company
Disclosure Letter or in the Company SEC Reports (as defined in Section 3.05),
the Company (i) has not issued any Company Common Stock other than upon the
exercise or vesting of Rights outstanding on such date, (ii) has not granted
any options or rights to purchase or acquire Company Common Stock (under the
Company's Stock Plans or otherwise) and (iii) has not split, combined or
reclassified any of its shares of capital stock. All of the outstanding shares
of Company Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable and are free of preemptive rights. Except as set
forth in this Section 3.02 or in Section 3.02(a) of the Company Disclosure
Letter or in the Company SEC Reports, there are outstanding (i) no shares of
capital stock or other voting securities of the Company, (ii) no securities of
the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company and (iii) no options, warrants, rights, or
other agreements or commitments to acquire from the Company, and no obligation
of the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and no obligation of the Company to grant, extend or enter into any
subscription, warrant, option, right, convertible or exchangeable security or
other similar agreement or commitment (the items in clauses (i), (ii) and (iii)
being referred to collectively as the "Company Securities"). Except as set
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forth in Section 3.02(a) of the Company Disclosure Letter, there are no
outstanding obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Company Securities. There are no voting trusts or
other agreements or understandings to which the Company or any of its
subsidiaries is a party with respect to the voting of capital stock of the
Company or any of its subsidiaries.
(b) Except as set forth in Section 3.02(b) of the Company
Disclosure Letter or in the Company SEC Reports, the Company is, directly or
indirectly, the record and beneficial owner of all the outstanding shares of
capital stock of each of its subsidiaries, free and clear of any lien,
mortgage, pledge, charge, security interest or encumbrance of any kind, and
there are no irrevocable proxies with respect to any such shares. Except as
set forth in Section 3.02(b) of the Company Disclosure Letter or in the Company
SEC Reports, there are no outstanding (i) securities of the Company or any
Subsidiary convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary, or (ii)
options or other rights to acquire from the Company or any of its subsidiaries,
and no other obligation of the Company or any of its subsidiaries to issue, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any of its subsidiaries, or any other
obligation of the Company or any of its subsidiaries to grant, extend or enter
into any subscription, warrant, right, convertible or exchangeable security or
other similar agreement or commitment (the items in clauses (i) and (ii) being
referred to collectively as the "Subsidiary Securities"). There are no
outstanding obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.
SECTION 3.03 Authority for this Agreement. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of the Company and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated, other than the approval and
adoption of the agreement of merger (as such term is used in Section 251 of the
DGCL) contained in this Agreement and the approval of the Merger by the holders
of a majority of the outstanding shares of Company Common Stock. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes a valid and binding obligation of each of
the Parent and the Sub, constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general principles of
equity (whether considered in a proceeding in equity or at law).
SECTION 3.04 Absence of Certain Changes. Except as disclosed in the
Company SEC Reports (as defined in Section 3.05) or in Section 3.04 of the
Company Disclosure Letter, from September 30, 1996 through the date hereof, (i)
the Company and its subsidiaries have not suffered
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any Material Adverse Effect, (ii) the Company and its subsidiaries have, in all
material respects, conducted their respective businesses only in the ordinary
course consistent with past practice, except in connection with the negotiation
and execution and delivery of this Agreement and the solicitation or receipt of
other offers to acquire the Company, and (iii) there has not been (a) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the shares of Company Common Stock or any repurchase, redemption or
other acquisition by the Company or any of its subsidiaries of any Company
Securities or Subsidiary Securities; or (b) any action by the Company which if
taken after the date hereof would constitute a breach of Section 5.01 hereof.
Except as disclosed in the Company SEC Reports or in Section 3.04 of the
Company Disclosure Letter, since September 30, 1996, there has not been any
change by the Company in accounting methods, principles or practices except as
permitted by United States generally accepted accounting principles.
SECTION 3.05 Reports.
(a) Except as disclosed in Section 3.05 of the Company Disclosure
Letter, the Company has timely filed with the SEC all forms, reports and
documents required to be filed by it pursuant to the federal securities laws
and the SEC rules and regulations thereunder, all of which (the "Company SEC
Reports") have complied in form as of their respective filing dates in all
material respects with all applicable requirements of the Exchange Act and the
rules promulgated thereunder applicable thereto. None of the Company SEC
Reports, at the time filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) As of their respective dates, the audited and unaudited
consolidated financial statements of the Company included (or incorporated by
reference) in the Company SEC Reports were prepared in all material respects in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods therein indicated (except as may be
indicated in the notes thereto) and presented fairly the consolidated financial
position of the Company, and the consolidated results of operations and changes
in consolidated financial position or cash flows for the periods presented
therein, subject, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments and any other adjustments described therein
which were not expected to have a Material Adverse Effect.
(c) As of September 30, 1996, to the best of Company's knowledge,
neither the Company or any of its subsidiaries had any liabilities of any
nature, whether accrued, absolute, contingent or otherwise, whether due or to
become due that are required to be recorded or reflected on a balance sheet
under United States generally accepted accounting principles, except as
reflected or reserved against or disclosed in the financial statements of the
Company included in the Company SEC Reports or as otherwise disclosed in the
Company SEC Reports or as set forth in the Company Disclosure Letter.
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SECTION 3.06 Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
the Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger and
as contemplated by Section 2.06(b) (the "S-4") will, at the time the S-4
becomes effective under the Securities Act or at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and none of the information supplied or to be supplied by the
Company and included or incorporated by reference in the Proxy Statement, as
supplemented if necessary, will, at the date mailed to stockholders of the
Company, or at the time of the meeting of such stockholders to be held in
connection with the Merger, 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. If at any time prior to the time of such
meeting, any event with respect to the Company or any of its Subsidiaries, or
with respect to other information supplied by the Company for inclusion in the
Proxy Statement or S-4, shall occur which is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the S-4, such event
shall be so described, and such amendment or supplement shall be promptly filed
with the SEC. The Proxy Statement, insofar as it relates to other information
supplied by the Company for inclusion therein, will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
SECTION 3.07 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Company nor the consummation of
the transactions contemplated hereby will conflict with or result in any breach
of any provision of the respective Certificates of Incorporation or Bylaws (or
other similar governing documents) of the Company or any of its subsidiaries,
and except as disclosed in Section 3.07 of the Company Disclosure Letter and
except for filings, permits, authorizations, notices, consents and approvals as
may be required under, and other applicable requirements of, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act, the Exchange Act, the DGCL, and the "takeover" or
blue sky laws of various states and consents, approvals, authorizations or
filings under laws of jurisdictions outside the United States, and filings,
notices, consents, authorizations and approvals as may be required by local,
state, and federal regulatory agencies, commissions, boards, or public
authorities with jurisdiction over health care facilities and providers, (i)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except where the
failure to obtain such consent, approval, authorization or permit, or to make
such filing or notification, would not in the aggregate have a Material Adverse
Effect or have a material adverse effect on the ability of the Company to
consummate the transactions contemplated hereby; (ii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, license, agreement or other
instrument or obligation to which the Company is a party or by which the
Company or any of its assets or subsidiaries may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) which would
not in the aggregate have a Material Adverse Effect or have a material adverse
effect on the ability of the Company to consummate the transactions
contemplated hereby;
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(iii) result in the creation or imposition of any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind on any asset of the
Company or any of its subsidiaries which, in the aggregate, would have a
Material Adverse Effect or have a material adverse effect on the ability of the
Company to consummate the transactions contemplated hereby; or (iv) violate any
order, writ, injunction, agreement, contract, decree, statute, rule or
regulation applicable to the Company, any of its subsidiaries or by which any
of their respective assets are bound.
SECTION 3.08 Brokers. No broker, finder or investment banker
(except as disclosed to Parent and Apollo) is entitled to receive any
brokerage, finder's or other fee or commission in connection with this
Agreement or the transactions contemplated hereby based upon agreements made by
or on behalf of the Company.
SECTION 3.09 Employee Benefit Matters.
(a) For purposes of this Agreement, the term "Plan" shall refer to
the following maintained by the Company, any of its subsidiaries or any of
their respective ERISA Affiliates (as defined below), or with respect to which
the Company or any of its subsidiaries or any of their respective ERISA
Affiliates contributes or has any obligation to contribute or has any liability
(including, without limitation, a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement): any plan, program,
arrangement, agreement or commitment, whether written or oral, which is an
employment, consulting, deferred compensation or change-in-control agreement,
or an executive compensation, incentive bonus or other bonus, employee pension,
profit-sharing, savings, retirement, stock option, stock purchase, severance
pay, change-in-control, life, health, disability or accident insurance plan, or
other employee benefit plan, program, arrangement, agreement or commitment,
written or oral, including, without limitation, any material "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). Section 3.09(a) of the Company Disclosure
Letter sets forth each employment agreement with a person who is entitled to
receive at least $100,000 per year from the Company or any of its subsidiaries
(other than an employment agreement terminable without material liability (not
otherwise disclosed) on no more than sixty (60) days' notice).
(b) Except as set forth in Section 3.09(b) of the Company
Disclosure Letter, none of the Company, its subsidiaries nor any of their
respective ERISA Affiliates maintains or contributes to, nor have they
maintained or contributed to any:
(A) defined benefit plan subject to Title IV of ERISA; or
(B) "Multiemployer plan" as defined in Section 4001 of
ERISA.
(c) No event has occurred and no condition or circumstance
currently exists in connection with which the Company, any of its subsidiaries,
their respective ERISA Affiliates or any Plan, directly or indirectly, are
likely to be subject to any liability under ERISA, the Code or any
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other law, regulation or governmental order applicable to any Plan which would
be reasonably likely to have a Material Adverse Effect.
(d) With respect to each Plan, (A) all material payments due from
the Company or any of its subsidiaries to date have been made and all material
amounts properly accrued to date or as of the Effective Time as liabilities of
the Company or any of its subsidiaries which have not been paid have been
properly recorded on the books of the Company; (B) each such Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) and
intended to qualify under Section 401 of the Code has either received a
favorable determination letter from the Internal Revenue Service with respect
to such qualification as of the date specified in Section 3.09(d) of the
Disclosure Letter or has filed for such a determination letter with the
Internal Revenue Service within the time permitted under Rev. Proc. 95-12
(December 29, 1994), 1995-3 IRB 24, and nothing has occurred since the date of
such letter that has resulted in or is likely to result in a tax qualification
defect which would have a Material Adverse Effect; and (C) there are no
material actions, suits or claims pending (other than routine claims for
benefits) or, to the best of Company's knowledge, threatened with respect to
such Plan or against the assets of such Plan.
(e) The Company has made available to the Parent, with respect to
each Plan for which the following exists:
(A) a copy of the most recent annual report on Form 5500,
with respect to such Plan including any Schedule B thereto;
(B) a copy of the Summary Plan Description, together with
each Summary of Material Modifications with respect to such Plan and,
unless the Plan is embodied entirely in an insurance policy to which
the Company or any of its subsidiaries is a Party, a true and complete
copy of such Plan; and
(C) if the Plan is funded through a trust or any third
party funding vehicle (other than an insurance policy), a copy of the
trust or other funding agreement and the latest financial statements
thereof.
(f) Except as disclosed in Section 3.09(g) of the Company
Disclosure Letter or in the Company SEC Reports, neither the Company nor any of
its subsidiaries has any announced plan or legally binding commitment to create
any additional material Plans or to make any material amendment or modification
to any existing Plan, except in the ordinary course of business in accordance
with its customary practices or as required by law or as necessary to maintain
tax- qualified status.
(g) For purposes of this Section 3.09, ERISA Affiliates include
each corporation that is a member of the same controlled group as the Company
or any of its subsidiaries within the meaning of Section 414(b) of the Code,
any trade or business, whether or not incorporated, under common control with
the Company or any of its subsidiaries within the meaning of Section 414(c) of
the
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Code and any member of any affiliated service group that includes the Company,
any of its subsidiaries and any of the corporations, trades or businesses
described above, within the meaning of Section 414(m) of the Code.
SECTION 3.10 Litigation, etc. Except as set forth in Section 3.10
of the Company Disclosure Letter or as disclosed in the Company SEC Reports, as
of the date hereof there is no pending audit, claim, action, proceeding,
citizen's suit and, to the knowledge of the Company, no audit, claim, action,
proceeding, citizen's suit or governmental investigation has been threatened
against the Company or any of its subsidiaries before any court or governmental
or regulatory authority which, in the aggregate, (i) would have a Material
Adverse Effect or (ii) would have a material adverse effect on the ability of
the Company to consummate the transactions contemplated by this Agreement.
Except as set forth in Section 3.10 of the Company Disclosure Letter or as
disclosed in the Company SEC Reports, neither the Company nor any Subsidiary of
the Company is subject to any outstanding judicial, administrative or
arbitration order, writ, injunction or decree that (i) has had a Material
Adverse Effect or (ii) would have a material adverse effect on the ability of
the Company to consummate the transactions contemplated by this Agreement.
SECTION 3.11 Tax Matters. The Company and each of its subsidiaries
has duly filed all tax returns and reports required to be filed by it, or
requests for extensions to file such returns or reports have been timely filed
and granted and have not expired, except to the extent that such failures to
file, in the aggregate, would not have a Material Adverse Effect and such
returns and reports are true, correct and complete in all material respects.
The Company and each of its subsidiaries has duly paid in full (or the Company
has paid on its behalf) or made adequate provision in the Company's accounting
records for all taxes for all past and current periods for which the Company or
any of its subsidiaries is liable. The most recent financial statements
contained in the Company SEC Reports reflect adequate reserves for all taxes
payable by the Company and its subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial statements, and no
deficiencies for any taxes have been proposed, asserted or assessed against the
Company or any of its subsidiaries that are not adequately reserved for, except
for inadequately reserved taxes and inadequately reserved deficiencies that
would not, in the aggregate, have a Material Adverse Effect. No requests for
waivers of the time to assess any taxes against the Company or any of its
subsidiaries have been granted or are pending, except for requests with respect
to such taxes that have been adequately reserved for in the most recent
financial statements contained in the Company SEC Reports, or, to the extent
not adequately reserved, the assessment of which would not, in the aggregate,
have a Material Adverse Effect. Except as set forth in Section 3.11 of the
Company Disclosure Letter, neither the Company nor any of its subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code. Neither
the Company nor any of its subsidiaries has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. As
used in this Agreement the term "taxes" includes all federal, state, local and
foreign income, franchise, property, sales, use,
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excise and other taxes, including without limitation obligations for
withholding taxes from payments due or made to any other person and any
interest, penalties or additions to tax.
SECTION 3.12 Compliance with Law. Except as set forth in Section
3.12 of the Company Disclosure Letter or in the Company SEC Reports, neither
the Company nor any of its subsidiaries is in conflict with, or in default or
violation of, any law, rule, regulation, order, judgment or decree applicable
to the Company or any Subsidiary or by which any property or asset of the
Company or any Subsidiary is bound or affected, except for any such conflicts,
defaults or violations that would not in the aggregate have a Material Adverse
Effect. Except as set forth in Section 3.12 of the Company Disclosure Letter
or in the Company SEC Reports, the Company and its subsidiaries have all
permits, licenses, authorizations, consents, approvals and franchises from
governmental agencies required to conduct their businesses as now being
conducted (the "Company Permits"), except for such permits, licenses,
authorizations, consents, approvals and franchises the absence of which would
not in the aggregate have a Material Adverse Effect. Except as set forth in
Section 3.12 of the Company Disclosure Letter or in the Company SEC Reports,
the Company and its subsidiaries are in compliance with the terms of the
Company Permits, except where the failure so to comply would not in the
aggregate have a Material Adverse Effect.
SECTION 3.13 Environmental Compliance. Except as set forth in
Section 3.13 of the Company Disclosure Letter or in the Company SEC Reports,
(i) the assets, properties, businesses and operations of the Company and its
subsidiaries are in compliance with applicable Environmental Laws (as defined
in Section 1.01 hereof), except for such non-compliance which has not had and
will not have a Material Adverse Effect; (ii) the Company and its subsidiaries
have obtained and, as currently operating, are in compliance with all Company
Permits necessary under any Environmental Law for the conduct of the business
and operations of the Company and its subsidiaries in the manner now conducted
except for such non-compliance which has not had and will not have a Material
Adverse Effect; and (iii) neither the Company nor any of its subsidiaries nor
any of their respective assets, properties, businesses or operations has
received or is subject to any outstanding order, decree, judgment, complaint,
agreement, claim, citation, notice, or proceeding indicating that the Company
or any of its subsidiaries is or may be (a) liable for a violation of any
Environmental Law or (b) liable for any Environmental Liabilities and Costs,
where in each case such liability would have a Material Adverse Effect.
SECTION 3.14 Insurance. Except as set forth in the Company SEC
Reports, the Company and each of its Subsidiaries maintains, and through the
Closing Date will maintain, insurance with reputable insurers (or pursuant to
prudent self-insurance programs) in such amounts and covering such risks as are
in accordance with normal industry practice for companies engaged in businesses
similar to those of the Company and each of its Subsidiaries and owning
property in the same general areas in which the Company and each of its
Subsidiaries conducts their businesses. The Company and each of its
Subsidiaries may terminate each of its insurance policies or binders at or
after the Closing and will incur no material penalties or other material costs
in doing so. None of such policies or binders was obtained through the use of
false or misleading information or the failure to provide the insurer with all
information requested in order to evaluate the liabilities and
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risks insured. There is no material default with respect to any provision
contained in any such policy or binder, nor has the Company or any of its
subsidiaries failed to give any material notice or present any material claim
under any such policy or binders in due and timely fashion. There are no
billed but unpaid premiums past due under any such policy or binder, the
failure of which to be paid would result in the cancellation of such policy or
binder. Except as otherwise set forth in the Company SEC Reports or in the
Company Disclosure Letter, (a) there are no outstanding claims in excess of
normal retentions that are not covered under any such policies or binders and,
to the best knowledge of the Company, there has not occurred any event that
might reasonably form the basis of any claim in excess of normal retentions
that are not covered against or relating to the Company or any of its
subsidiaries that is not covered by any of such policies or binders; (b) no
notice of cancellation or non-renewal of any such policies or binders has been
received; and (c) there are no performance bonds outstanding with respect to
the Company or any of its subsidiaries.
SECTION 3.15 Vote Required. The affirmative vote of the holders of
a majority of the outstanding shares of the Company Common Stock is the only
vote of the holders of any class or series of the Company's capital stock or
other voting securities necessary to approve this Agreement, the Merger and the
transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE SUB
The Parent and the Sub (effective upon its becoming a party hereto),
jointly and severally, represent and warrant as of the date of this Agreement
to the Company and Apollo as follows:
SECTION 4.01 Organization and Qualification. Each of the Parent and
the Sub is a duly organized and validly existing corporation in good standing
under the laws of its jurisdiction of organization, with all requisite
corporate power and other authority to own its properties and conduct its
business as it is being conducted on the date hereof and is duly qualified and
in good standing as a foreign corporation authorized to do business in each of
the jurisdictions in which the character of the properties owned or held under
lease by it or the nature of the business transacted by it makes such
qualification necessary. The Parent has heretofore made available to the
Company accurate and complete copies of the Certificates of Incorporation and
Bylaws as currently in effect of the Parent and its subsidiaries. All of the
issued and outstanding capital stock of the Sub is owned directly by the
Parent, free and clear of any lien, mortgage, pledge, charge, security interest
or encumbrance of any kind.
SECTION 4.02 Capitalization. (a) The authorized capital stock of
the Parent consists of 75,000,000 shares of Parent Common Stock and 5,000,000
shares of preferred stock, par value $.01 (the "Preferred Stock"), of which
350,000 shares have been designated as Series A Junior Participating Preferred
Stock (the "Junior Preferred Stock"). As of the Capitalization Date,
19,547,616 shares of Parent Common Stock were issued and outstanding; no shares
of Preferred
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Stock were issued and outstanding; 720,304 shares of Parent Common Stock were
held in the Company's treasury; and there were outstanding Rights with respect
to 1,635,447 shares of Parent Common Stock as set forth in Section 3.02(a) of
the disclosure letter, dated the date hereof, delivered by the Parent to the
Company prior to the execution of this Agreement setting forth certain matters
referred to in this Agreement (the "Parent Disclosure Letter"); and there were
outstanding rights (the "Rights Agreement Rights") under the Rights Agreement
dated November 17, 1994 between the Company and Chemical Bank, as amended by an
amendment dated July 31, 1995 (the "Rights Agreement"). Since the
Capitalization Date, except as set forth in Section 3.02(a) of the Parent
Disclosure Letter or in the Parent SEC Reports (as defined in Section 4.05),
the Company (i) has not issued any shares of Parent Common Stock other than
upon the exercise or vesting of Rights outstanding on such date, (ii) has not
granted any options or rights to purchase or acquire shares of Parent Common
stock (under the Parent's Stock Plans or otherwise) and (iii) has not split,
combined or reclassified any of its shares of capital stock. All of the
outstanding shares of Parent Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and are free of preemptive rights.
Except as set forth in this Section 4.02 or in Section 3.02(a) of the Parent
Disclosure Letter or in the Parent SEC Reports, there are outstanding (i) no
shares of capital stock or other voting securities of the Parent, (ii) no
securities of the Parent convertible into or exchangeable for shares of capital
stock or voting securities of the Parent and (iii) no options, warrants,
rights, or other agreements or commitments to acquire from the Parent, and
except as contemplated by the Recapitalization Merger, (A) no obligation of the
Parent to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of the Parent, and
(B) no obligation of the Parent to grant, extend or enter into any
subscription, warrant, option, right, convertible or exchangeable security or
other similar agreement or commitment (the items in clauses (i), (ii) and (iii)
being referred to collectively as the "Parent Securities"). Except as set
forth in Section 3.02(a) of the Parent Disclosure Letter, there are no
outstanding obligations of the Parent or any Subsidiary to repurchase, redeem
or otherwise acquire any Parent Securities. There are no voting trusts or
other agreements or understandings to which the Parent or any of its
subsidiaries is a party with respect to the voting of capital stock of the
Parent or any of its subsidiaries. Notwithstanding the foregoing, the Parent
has concurrently entered into the agreement and plan of merger setting forth
the terms of the Recapitalization Merger, including the issuance of shares of
Parent Common Stock in connection therewith.
(b) Except as set forth in Section 3.02(b) of the Parent
Disclosure Letter or in the Parent SEC Reports, the Parent is, directly or
indirectly, the record and beneficial owner of all the outstanding shares of
capital stock of each of its subsidiaries, free and clear of any lien,
mortgage, pledge, charge, security interest or encumbrance of any kind, and
there are no irrevocable proxies with respect to any such shares. Except as
set forth in Section 3.02(b) of the Parent Disclosure Letter or in the Parent
SEC Reports, there are no outstanding (i) securities of the Parent or any
Subsidiary convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary, or (ii)
options or other rights to acquire from the Parent or any of its subsidiaries,
and no other obligation of the Parent or any of its subsidiaries to issue, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any of its subsidiaries,
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or any other obligation of the Parent or any of its subsidiaries to grant,
extend or enter into any subscription, warrant, right, convertible or
exchangeable security or other similar agreement or commitment (the items in
clauses (i) and (ii) being referred to collectively as the "Parent Subsidiary
Securities"). There are no outstanding obligations of the Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any outstanding Parent
Subsidiary Securities.
SECTION 4.03 Authority Relative to this Agreement. Each of the
Parent and the Sub has requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Parent and the Sub and the
consummation by the Parent and the Sub of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of the Parent
and the Sub and no other corporate proceedings on the part of the Parent and
the Sub are necessary to authorize this Agreement or consummate the
transactions so contemplated, other than the Company Stockholder Approvals and
Parent Stockholder Approvals. This Agreement has been duly and validly
executed and delivered by the Parent and the Sub and, assuming this Agreement
constitutes the valid and binding obligation of the Company, this Agreement
constitutes a valid and binding agreement of each of the Parent and the Sub,
enforceable against each of the Parent and the Sub in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity (whether considered in a proceeding in equity or
at law).
SECTION 4.04 Absence of Certain Changes. Except as disclosed in the
Parent SEC Reports (as defined in Section 4.05) or in Section 3.04 of the
Parent Disclosure Letter, from September 30, 1996 through the date hereof, (i)
the Parent and its subsidiaries have not, to the best of the Parent's
knowledge, suffered any Material Adverse Effect, (ii) the Parent and its
subsidiaries have, in all material respects, conducted their respective
businesses only in the ordinary course consistent with past practice, except in
connection with the negotiation and execution and delivery of this Agreement,
and (iii) there has not been (a) any declaration, setting aside or payment of
any dividend or other distribution in respect of the Shares or any repurchase,
redemption or other acquisition by the Parent or any of its subsidiaries of any
Parent Securities; or (b) any action by the Parent which if taken after the
date hereof would constitute a breach of Section 5.01(b) hereof. Except as
disclosed in the Parent SEC Reports or in Section 3.04 of the Parent Disclosure
Letter, since September 30, 1996, there has not been any change by the Parent
in accounting methods, principles or practices except as permitted by United
States generally accepted accounting principles.
SECTION 4.05 Reports.
(a) The Parent has filed with the SEC all forms, reports and
documents required to be filed by it pursuant to the federal securities laws
and the SEC rules and regulations thereunder on and after September 30, 1995,
all of which (the "Parent SEC Reports") have complied in form as of their
respective filing dates in all material respects with all applicable
requirements of the Exchange Act and the rules promulgated thereunder
applicable thereto. None of the Parent SEC Reports, at the time filed,
contained any untrue statement of a material fact or omitted to state a
material fact
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required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) As of their respective dates, the audited and unaudited
consolidated financial statements of the Parent included (or incorporated by
reference) in the Parent SEC Reports were prepared in all material respects in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods therein indicated (except as may be
indicated in the notes thereto) and presented fairly the consolidated financial
position of the Parent, and the consolidated results of operations and changes
in consolidated financial position or cash flows for the periods presented
therein, subject, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments and any other adjustments described therein
which were not expected to have a Material Adverse Effect.
(c) As of March 31, 1997, neither the Parent nor any of its
subsidiaries had any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, whether due or to become due that are required to be
recorded or reflected on a balance sheet under United States generally accepted
accounting principles, except as reflected or reserved against or disclosed in
the financial statements of the Parent included in the Parent SEC Reports or
the Parent Disclosure Letter or as otherwise disclosed in the Parent SEC
Reports or the Parent Disclosure Letter.
SECTION 4.06 Information Supplied. None of the information supplied
or to be supplied by the Parent for inclusion or incorporation by reference in
the Registration Statement on Form S-4 to be filed with the SEC jointly by
Parent and Company in connection with the issuance of shares of Parent Common
Stock in the Merger and as contemplated by Section 2.06(b) will, at the time
the S-4 becomes effective under the Securities Act or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and none of the information supplied or to be supplied by the
Parent and included or incorporated by reference in the Proxy Statement, as
supplemented if necessary, will, at the date mailed to stockholders of the
Parent, or at the time of the meeting of such stockholders to be held in
connection with the Merger, 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. If at any time prior to the time of such
meeting, any event with respect to the Parent or any of its Subsidiaries, or
with respect to other information supplied by the Parent for inclusion in the
Proxy Statement or S-4, shall occur which is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the S-4, such event
shall be so described, and such amendment or supplement shall be promptly filed
with the SEC. The Proxy Statement, insofar as it relates to other information
supplied by the Parent for inclusion therein, will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
SECTION 4.07 Consents and Approvals; No Violation. The execution
and delivery of this Agreement by each of the Parent or the Sub and the
consummation of the transactions contemplated
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hereby will not (i) conflict with or result in any breach of any provision of
the respective Certificates of Incorporation or Bylaws (or other similar
governing documents) of the Parent, the Sub or any of their subsidiaries; (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (A) in
connection with the HSR Act, (B) pursuant to the Securities Act, the Exchange
Act, (C) the filing of a certificate of merger pursuant to the DGCL, (D) any
applicable filings under state securities, blue sky or "takeover" laws, (E)
consents, approvals, authorizations or filings under laws of jurisdictions
outside the United States, (F) consents, approvals, authorizations, permits,
filings or notifications required by local, state and federal regulatory
agencies, commissions, boards or public authorities with jurisdiction over
health care facilities and providers or (G) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not in the aggregate have a Material Adverse Effect on the
Parent or the Sub or has a material adverse effect on the ability of the Parent
or the Sub to consummate the transactions contemplated hereby, (iii) result in
a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
license, agreement or other instrument or obligation to which the Parent or the
Sub or any of their subsidiaries is a party or by which any of its subsidiaries
or any of their respective assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or which would not have a Material
Adverse Effect on the Parent or the Sub or has a material adverse effect on the
ability of the Parent or the Sub to consummate the transactions contemplated
hereby; (iv) result in the creation or imposition of any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind on any asset of
the Parent or the Sub or any of their subsidiaries which, individually or in
the aggregate, would have a material adverse effect on the ability of the
Parent or the Sub to consummate the transactions contemplated hereby; or (v)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Parent, the Sub or any of their subsidiaries or any of their
respective assets, except for violations which would not in the aggregate have
a Material Adverse Effect on the Parent or the Sub or have a material adverse
effect on the ability of the Parent or the Sub to consummate the transactions
contemplated hereby.
SECTION 4.08 Brokers. No broker, finder or other investment banker
(other than Credit Suisse First Boston and NationsBanc Capital Markets, Inc.)
is entitled to receive any brokerage, finder's or other fee or commission in
connection with this Agreement or the transactions contemplated hereby based
upon agreements made by or on behalf of the Parent or the Sub.
SECTION 4.09 Litigation, etc. As of the date hereof there is no
claim, action, proceeding or governmental investigation pending or, to the best
knowledge of the Parent or the Sub, threatened against the Parent or any of its
subsidiaries, including the Sub, before any court or governmental or regulatory
authority which, in the aggregate would have a material adverse effect on the
ability of the Parent or the Sub to consummate the transactions contemplated by
this Agreement. Neither the Parent nor any of its subsidiaries, including the
Sub is subject to any outstanding order, writ, injunction or decree that would
have a material adverse effect on the ability of the Parent or the Sub to
consummate the transactions contemplated by this Agreement.
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SECTION 4.10 Ownership of Shares. As of the date hereof, neither
the Parent nor any of its Subsidiaries beneficially owns (within the meaning of
Rule l3d-3 under the Exchange Act) any Company Common Stock.
SECTION 4.11 Tax Matters. The Parent and each of its subsidiaries
has duly filed all tax returns and reports required to be filed by it, or
requests for extensions to file such returns or reports have been timely filed
and granted and have not expired, except to the extent that such failures to
file, in the aggregate, would not have a Material Adverse Effect and such
returns and reports are true, correct and complete in all material respects.
The Parent and each of its subsidiaries has duly paid in full (or the Parent
has paid on its behalf) or made adequate provision in the Company's accounting
records for all taxes for all past and current periods for which the Parent or
any of its subsidiaries is liable. The most recent financial statements
contained in the Parent SEC Reports reflect adequate reserves for all taxes
payable by the Parent and its subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements, and no
deficiencies for any taxes have been proposed, asserted or assessed against the
Parent or any of its subsidiaries that are not adequately reserved for, except
for inadequately reserved taxes and inadequately reserved deficiencies that
would not, in the aggregate, have a Material Adverse Effect. No requests for
waivers of the time to assess any taxes against the Parent or any of its
subsidiaries have been granted or are pending, except for requests with respect
to such taxes that have been adequately reserved for in the most recent
financial statements contained in the Parent SEC Reports, or, to the extent not
adequately reserved, the assessment of which would not, in the aggregate, have
a Material Adverse Effect. Except as set forth in Section 3.11 of the Parent
Disclosure Letter, neither the Parent nor any of its subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Section 280G of the Code. Neither the Parent nor
any of its subsidiaries has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
ARTICLE V
COVENANTS
SECTION 5.01 Conduct of Business.
i. Except as contemplated by this Agreement and in the Company
Disclosure Letter, during the period from the date of this Agreement to the
Effective Date, the Company and its subsidiaries will each conduct its
operations according to its ordinary and usual course of business and
consistent with past practice and will use all commercially reasonable efforts
consistent with prudent business practice to preserve intact the business
organization of the Company and each of its subsidiaries, to keep available the
services of its and their current officers and key employees and to maintain
existing relationships with those having significant business relationships
with the Company and its subsidiaries, in each case in all material respects.
Without limiting the generality of the foregoing, except as set forth in the
Company Disclosure Letter and except as otherwise
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expressly provided in or contemplated by this Agreement or the Company
Disclosure Letter, prior to the time specified in the preceding sentence,
neither the Company nor any of its subsidiaries, as the case may be, will,
without the prior written consent of the Parent (not to be unreasonably
withheld), (i) except for issuances of capital stock of the Company's
subsidiaries to the Company or a wholly owned subsidiary of the Company, issue,
sell or pledge, or authorize or propose the issuance, sale or pledge of (A)
Company Securities or Subsidiary Securities, in each case, other than Company
Common Stock issuable upon exercise or vesting of the Rights or allocations or
issuances pursuant to the Stock Plans or the exercise of rights under any Plan
or any agreement referred to in Section 3.02 of the Company Disclosure Letter,
or (B) any other securities in respect of, in lieu of or in substitution for
Company Common Stock outstanding on the date hereof, (ii) otherwise acquire or
redeem, directly or indirectly, any Company Securities or Subsidiary Securities
(including the Company Common Stock); (iii) split, combine or reclassify its
capital stock or declare, set aside, make or pay any dividend or distribution
(whether in cash, stock or property) on any shares of capital stock of the
Company or any of its subsidiaries (other than cash dividends paid to the
Company by its wholly owned subsidiaries with regard to their capital stock);
(iv) (1) make any acquisition, by means of a merger or otherwise, of assets or
securities, or any sale, lease, encumbrance or other disposition of assets or
securities, in each case involving the payment or receipt of consideration of
$10,000,000 or more outside the ordinary and usual course of business
consistent with past practice in all material respects, or (2) other than in
the ordinary course of business, enter into a material contract or grant any
release or relinquishment of any material contract rights; (v) incur or assume
any long-term debt for borrowed money except for debt incurred in the ordinary
course of business consistent in all material respects with past practice; (vi)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
except wholly owned subsidiaries of the Company, except in the ordinary course
of business consistent in all material respects with past practice; (vii)
except in connection with transactions permitted by (iv) above, make any loans,
advances or capital contributions to, or investments in, any other person
(other than wholly owned subsidiaries of the Company) in the aggregate in
excess of $10,000,000; (viii) change any of the accounting principles or
practices used by it or any of its subsidiaries, except as required by the SEC
or required by United States generally accented accounting principles; (ix)
adopt any amendments to the Restated Certificate of Incorporation or Bylaws (or
similar documents) of the Company or any Subsidiary; (x) except as, may be
required under any previously existing agreement or Plan, grant any stock
related awards; (xi) enter into any new, or amend any existing, employee
benefit, pension or other plan (whether or not subject to ERISA) or employment,
severance, consulting or salary continuation agreements with any officers,
directors or key employees, or grant any increases in the compensation or
benefits to officers, directors and key employees; (xii) enter into, amend, or
extend any material collective bargaining or other labor agreement, except as
required by law and except in the ordinary course of business consistent in all
material respects with past practice; (xiii) adopt, make any material amendment
to or terminate any material employee benefit plan, as required by law or to
maintain tax qualified status or as requested by the Internal Revenue Service
in order to receive a determination letter for such employee benefit plan;
(xiv) merge or consolidate with or transfer all or substantially all of its
assets to another corporation or other business entity or individual; (xv)
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liquidate, wind-up or dissolve (or suffer any liquidation or dissolution); or
(xvi) agree in writing or otherwise to take any of the foregoing actions.
ii. Except as contemplated by this Agreement and in the Parent
Disclosure Letter, during the period from the date of this Agreement to the
Effective Date, the Parent and its subsidiaries will each conduct its
operations according to its ordinary and usual course of business and
consistent with past practice and will use all commercially reasonable efforts
consistent with prudent business practice to preserve intact the business
organization of the Parent and each of its subsidiaries, to keep available the
services of its and their current officers and key employees and to maintain
existing relationships with those having significant business relationships
with the Parent and its subsidiaries, in each case in all material respects.
Without limiting the generality of the foregoing, except as set forth in the
Parent Disclosure Letter and except as otherwise expressly provided in or
contemplated by this Agreement or the Parent Disclosure Letter, prior to the
time specified in the preceding sentence, neither the Parent nor any of its
subsidiaries, as the case may be, will, without the prior written consent of
the Company (not to be unreasonably withheld), (i) except for issuances of
capital stock of the Parent's subsidiaries to the Parent or a wholly owned
subsidiary of the Parent, issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of (A) Parent Securities or Subsidiary Securities, in
each case, other than Parent Common Stock issuable upon exercise or vesting of
the Rights or allocations or issuances pursuant to the Stock Plans or the
exercise of rights under any Plan or any agreement referred to in Section 3.02
of the Parent Disclosure Letter, or (B) any other securities in respect of, in
lieu of or in substitution for Parent Common Stock outstanding on the date
hereof, (ii) otherwise acquire or redeem, directly or indirectly, any Parent
Securities or Subsidiary Securities (including the Parent Common Stock); (iii)
split, combine or reclassify its capital stock or declare, set aside, make or
pay any dividend or distribution (whether in cash, stock or property) on any
shares of capital stock of the Parent or any of its subsidiaries (other than
cash dividends paid to the Parent by its wholly owned subsidiaries with regard
to their capital stock); (iv) (1) make any acquisition, by means of a merger or
otherwise, of assets or securities, or any sale, lease, encumbrance or other
disposition of assets or securities, in each case involving the payment or
receipt of consideration of $10,000,000 or more outside the ordinary and usual
course of business consistent with past practice in all material respects, or
(2) other than in the ordinary course of business, enter into a material
contract or grant any release or relinquishment of any material contract
rights; (v) incur or assume any long-term debt for borrowed money except for
debt incurred in the ordinary course of business consistent in all material
respects with past practice; (vi) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except wholly owned subsidiaries of the
Parent, except in the ordinary course of business consistent in all material
respects with past practice; (vii) except in connection with transactions
permitted by (iv) above, make any loans, advances or capital contributions to,
or investments in, any other person (other than wholly owned subsidiaries of
the Parent) in the aggregate in excess of $10,000,000; (viii) change any of the
accounting principles or practices used by it or any of its subsidiaries,
except as required by the SEC or required by United States generally accented
accounting principles; (ix) adopt any amendments to the Restated Certificate of
Incorporation or Bylaws (or similar documents) of the Parent or any Subsidiary;
(x) except as, may be required under any previously existing agreement or Plan,
grant any stock
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related awards; (xi) enter into any new, or amend any existing, employee
benefit, pension or other plan (whether or not subject to ERISA) or employment,
severance, consulting or salary continuation agreements with any officers,
directors or key employees, or grant any increases in the compensation or
benefits to officers, directors and key employees; (xii) enter into, amend, or
extend any material collective bargaining or other labor agreement, except as
required by law and except in the ordinary course of business consistent in all
material respects with past practice; (xiii) adopt, make any material amendment
to or terminate any material employee benefit plan, as required by law or to
maintain tax qualified status or as requested by the Internal Revenue Service
in order to receive a determination letter for such employee benefit plan;
(xiv) merge or consolidate with or transfer all or substantially all of its
assets to another corporation or other business entity or individual; (xv)
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution); or
(xvi) agree in writing or otherwise to take any of the foregoing actions.
SECTION 5.02 No Solicitation.
i. Immediately following the execution of this Agreement, the
Company will terminate any and all existing activities, discussions and
negotiations with third parties (other than the Parent) with respect to any
possible Acquisition Transaction (as defined below). The Company and its
subsidiaries and their respective officers, directors and employees shall not,
and the Company and its subsidiaries will use all reasonable efforts to cause
their representatives, agents or affiliates not to, directly or indirectly,
knowingly encourage, solicit, or initiate any discussions or negotiations with,
any corporation, partnership, person or other entity or group (other than the
Parent or the Sub or any affiliate or associate of the Parent or the Sub or any
of their respective directors, officers, employees, representatives or agents)
concerning any merger, consolidation, business combination, liquidation,
reorganization, sale of substantial assets, sale of shares of capital stock or
similar transactions involving the Company or any material Subsidiary of the
Company (each an "Acquisition Transaction"); provided, however, that if
Company's Board of Directors determines after consultation with counsel, that
it is required to do so in the exercise of the fiduciary duties of the
Company's directors to the Company or its stockholders, the Board of Directors
may respond to, or engage in discussions with respect to, a written offer for
an Acquisition Transaction; and provided further that nothing contained in this
Section 5.02(a) shall prohibit the Company or its Board of Directors from
taking and disclosing to the Company's stockholders a position with respect to
a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such other disclosure to the
Company's stockholders which, as advised by outside counsel, is required under
applicable law. The Company will promptly communicate to Parent the terms and
conditions of any proposal for an Acquisition Transaction that it may receive
and will keep Parent informed as to the status of any action, including any
discussions, taken pursuant to such proposed or contemplated Acquisition
Transaction.
ii. Immediately following the execution of this Agreement, the
Parent will terminate any and all existing activities, discussions and
negotiations with third parties (other than the Company and Apollo) with
respect to any possible Acquisition Transaction. The Parent and its
subsidiaries and their respective officers, directors and employees shall not,
and the Parent and its subsidiaries
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will use all reasonable efforts to cause their representatives, agents or
affiliates not to, directly or indirectly, knowingly encourage, solicit, or
initiate any discussions or negotiations with, any corporation, partnership,
person or other entity or group (other than the Company and Apollo or any
affiliate or associate of the Company and Apollo or any of their respective
directors, officers, employees, representatives or agents) concerning any
Acquisition Transaction; provided, however, that if during the 45 days
following the date of this Agreement the Parent's Board of Directors
determines, after consultation with counsel, that it is required to do so in
the exercise of the fiduciary duties of the Parent's directors to the Parent or
its stockholders, the Board of Directors may respond to, or engage in
discussions with respect to, a written offer for an Acquisition Transaction
during such 45 day period; and provided further that nothing contained in this
Section 5.02(b) shall prohibit the Parent or its Board of Directors from taking
and disclosing to the Parent's stockholders a position with respect to a tender
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act or from making such other disclosure to the Parent's
stockholders which, as advised by outside counsel, is required under applicable
law. The Parent will promptly communicate to the Company the terms and
conditions of any proposal for an Acquisition Transaction that it may receive
and will keep the Company informed as to the status of any action, including
any discussions, taken pursuant to such proposed or contemplated Acquisition
Transaction.
SECTION 5.03 Access to Information.
(a) Between the date of this Agreement and the Effective Time, the
Company will, upon reasonable notice to an executive officer of the Company,
(i) give the Parent, the Sub and Apollo and their respective authorized
representatives access (during regular business hours), in a manner so as not
to interfere with the normal operations of the Company and its subsidiaries and
subject to reasonable restrictions imposed by an executive officer of the
Company, to all key employees, plants, offices, warehouses and other facilities
and to all books and records of the Company and its subsidiaries and cause the
Company's and its subsidiaries' independent public accountants to provide
access to their work papers and such other information as the Parent, the Sub
or Apollo may reasonably request, (ii) permit the Parent, the Sub and Apollo to
make such inspections as they may reasonably require and (iii) cause its
officers and those of its subsidiaries to furnish the Parent, the Sub or Apollo
with such financial and operating data and other information with respect to
the business, properties and personnel of the Company and its subsidiaries as
the Parent, the Sub or Apollo may from time to time reasonably request.
(b) Information obtained by the Parent or the Sub or their
respective representatives pursuant to this Section 5.03 shall be subject to
the provisions of the letter agreement between the Parent and the Company (the
"Confidentiality Agreement") the terms of which are incorporated herein by
reference.
SECTION 5.04 Reasonable Efforts, Filings. Subject to the terms and
conditions herein provided for and to the fiduciary duties of the Board of
Directors of each of the Company and the Parent under applicable law as advised
by legal counsel, each of the parties hereto agrees to use commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and
to do, or
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cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective, as soon as practicable,
the transactions contemplated by this Agreement. In connection with and
without limiting the foregoing, (a) (i) the Company, the Parent and the Sub
shall use all reasonable efforts to make promptly any required submissions
under the HSR Act which the Company and the Parent or the Sub determine should
be made, in each case, with respect to the Merger, and the transactions
contemplated by this Agreement (ii) the Company, the Parent and the Sub shall
use all reasonable efforts to respond as promptly as practicable to all
inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters,
and (iii) if required by the FTC, the Antitrust Division, any State Attorney
General or any other governmental authority, or if otherwise necessary or
required in order to consummate the Merger, Parent agrees promptly to take all
commercially reasonable steps (including executing agreements and submitting to
judicial or administrative orders) to effect the sale or other disposition of,
or to hold separate assets or businesses of Parent or the Company or any of
their respective subsidiaries or affiliates (including, without limitation,
pursuant to arrangements which limit or prohibit access to such assets or
businesses), unless such sale or other disposition would have a Material
Adverse Effect on the Company (b) the Parent, the Sub and the Company will take
all such action as may be necessary under federal and state securities laws
applicable or necessary for, and will file and, if appropriate, use all
reasonable efforts to have declared effective or approved all documents and
notifications with the SEC and other governmental or regulating bodies which
the Parent, the Sub and the Company determines, in each case, is necessary for
the consummation of the Merger and the transactions contemplated hereby and
each party shall give the other information requested by it which is reasonably
necessary to enable it to take such action, (c) the Parent, the Sub and the
Company will, and will cause each of their respective subsidiaries to, use
commercially reasonable efforts to obtain consents of all third parties and
governmental bodies (other than with respect to healthcare regulatory licenses,
certifications or permits or provider agreements) necessary or, in the
reasonable opinion of the Parent or the Company, advisable to consummate the
Merger and the transactions contemplated by this Agreement and (d) prior to the
Effective Time, the Parent, Sub and the Company will take, and cause their
respective subsidiaries to take, such actions to apply for such governmental
approvals or consents, or make filings with governmental bodies, with respect
to healthcare regulatory licenses, certifications, or permits or provider
agreements as may be required by applicable law. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the Parent shall cause the proper officers and
directors of the Surviving Corporation, the Parent or the Sub, as the case may
be to take all such necessary action.
SECTION 5.05 Indemnification and Insurance.
(a) The Parent and the Sub agree that all rights to
indemnification existing in favor of the present or former directors, officers
and employees of the Company (as such) or any of its subsidiaries or present or
former directors of the Company or any of its subsidiaries serving or who
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served at the Company's or any of its subsidiaries' request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, as provided in the Company's
Certificate of Incorporation or Bylaws, or the articles of incorporation,
bylaws or similar documents of any of the Company's subsidiaries and the
indemnification agreements with such present and former directors, officers and
employees as in effect as of the date hereof with respect to matters occurring
at or prior to the Effective Time shall survive the Merger and shall continue
in full force and effect and without modification (other than modifications
which would enlarge the indemnification rights) for a period of not less than
the statutes of limitations applicable to such matters, and the Surviving
Corporation shall comply fully with its obligations hereunder and thereunder.
Without limiting the foregoing, the Company shall, and after the Effective
Time, the Surviving Corporation shall periodically advance expenses as incurred
with respect to the foregoing (including with respect to any action to enforce
rights to indemnification or the advancement of expenses) to the fullest extent
permitted under applicable law; provided, however, that the person to whom the
expenses are advanced provides an undertaking (without delivering a bond or
other security) to repay such advance if it is ultimately determined that such
person is not entitled to indemnification.
(b) For a period of six (6) years after the Effective Time, the
Surviving Corporation shall maintain officers' and directors' liability
insurance and fiduciary liability insurance covering the persons described in
paragraph (a) of this Section 5.05 (whether or not they are entitled to
indemnification thereunder) who are currently covered by the Company's existing
officers' and directors' or fiduciary liability insurance policies on terms no
less advantageous to such indemnified parties than such existing insurance.
(c) The Surviving Corporation shall indemnify and hold harmless
(and shall advance expenses to), to the fullest extent permitted under
applicable law, each director, officer, employee, fiduciary and agent of the
Company or any Subsidiary of the Company including, without limitation,
officers and directors, serving as such on the date hereof against any costs
and expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation relating to any of the
transactions contemplated hereby, and in the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Surviving Corporation shall pay the reasonable fees
and expenses of counsel selected by the indemnified parties, promptly as
statements therefor are received and (ii) the parties hereto will cooperate in
the defense of any such matter, provided, however, that the Surviving
Corporation shall not be liable for any settlement effected without its prior
written consent, which consent shall not unreasonably be withheld.
(d) The Surviving Corporation shall pay all reasonable costs and
expenses, including attorneys' fees, that may be incurred by any indemnified
parties in enforcing the indemnity and other obligations provided for in this
Section 5.05.
(e) In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation
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or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, proper provisions
shall be made so that the successors and assigns of the Surviving Corporation
assume the obligations set forth in this Section 5.05.
(f) This Section 5.05, which shall survive the consummation of the
Merger at the Effective Time and shall continue for the periods specified
herein, is intended to benefit the Company, the Surviving Corporation, and any
person or entity referenced in this Section 5.05 or indemnified hereunder each
of whom may enforce the provisions of this Section 5.05 (whether or not parties
to this Agreement).
SECTION 5.06 Employee Plans and Benefits and Employment Contracts.
(a) From and after the Effective Time, the Surviving Corporation
and its subsidiaries will honor in accordance with their terms all existing
employment, severance, consulting and salary continuation agreements between
the Company or any of its subsidiaries and any current or former officer,
director, employee or consultant of the Company or any of its subsidiaries or
group of such officers, directors, employees or consultants described in
Section 5.06(a) of the Company Disclosure Letter.
(b) In addition to honoring the agreements referred to in Section
5.06(a), until the first anniversary of the Effective Time, the Surviving
Corporation and its subsidiaries will provide or will cause to be provided to
each current or former employee (presently entitled to benefits) of the Company
or its subsidiaries (excluding employees covered by collective bargaining
agreements) (i) employee compensation, benefit plans, programs, policies and
arrangements, that are in the aggregate no less favorable than those currently
provided by the Company and its subsidiaries to each such employees and former
employee; and (ii) severance benefits that are in the aggregate no less
favorable to any employee of the Company or any of its subsidiaries than those
currently provided to each such employee. Nothing in this Section 5.06(b)
shall be deemed to prevent the Surviving Corporation or any of its subsidiaries
from making any change required by law.
(c) To the extent permitted under applicable law, each employee of
the Company or its subsidiaries shall be given credit for all service with the
Company or its Subsidiaries (or service credited by the Company or its
subsidiaries) under all employee benefit plans, programs, policies and
arrangements maintained by the Surviving Corporation in which they participate
or in which they become participants for purposes of eligibility, vesting and
benefit accrual including, without limitation, for purposes of determining (i)
short-term and long-term disability benefits, (ii) severance benefits, (iii)
vacation benefits and (iv) benefits under any retirement plan.
(d) This Section 5.06, which shall survive the consummation of the
Merger at the Effective Time and shall continue without limit, is intended to
benefit and bind the Company, the Surviving Corporation and any person or
entity referenced in this Section 5.06, each of whom may enforce the provisions
of this Section 5.06 (whether or not parties to this Agreement). Except as
provided in clause (a) above, nothing contained in this Section 5.06 shall
create any beneficiary
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rights in any employee or former employee (including any dependent thereof) of
the Company, any of its subsidiaries or the Surviving Corporation in respect of
continued employment for any specified period of any nature or kind whatsoever.
SECTION 5.07 Proxy Statement and S-4. The Company and the Parent
shall promptly prepare and file with the SEC, as soon as practicable, a
preliminary joint proxy statement (the "Proxy Statement") and S-4 relating to
the Recapitalization Merger and the Merger as required by the Exchange Act and
the rules and regulations thereunder. Each of the Parent and the Company shall
use commercially reasonable efforts to have the S-4 declared effective under
the Securities Act as promptly as practicable after such filing. The Company,
the Parent and the Sub will cooperate with each other in the preparation of the
Proxy Statement. The Company and the Parent shall use all reasonable efforts
to respond promptly to any comments made by the SEC with respect to the Proxy
Statement, and to cause the Proxy Statement to be mailed to the Company's and
the Parent's stockholders at the earliest practicable date.
SECTION 5.08 Notification of Certain Matters. The Company shall
give prompt notice to the Parent and the Sub, and the Parent or the Sub, as the
case may be, shall give prompt notice to the Company, of (i) the occurrence, or
non-occurrence, of any event the effect of which is likely to cause any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to the Effective Time
and (ii) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.08 shall not limit or otherwise affect the remedies available
hereunder to any of the parties receiving such notice.
SECTION 5.09 Rights Agreement Amendment. Subject to the terms and
conditions of this Agreement, the Parent shall promptly enter into an amendment
to the Rights Agreement (the "Rights Agreement Amendment") pursuant to which
the Rights Agreement and the Rights Agreement Rights will not be applicable to
the Merger shall not result in a "Distribution Date" under the Rights Agreement
and consummation of the Merger shall not result in the Company or its
affiliates being an "Acquiring Person" or result in the occurrence of a
"Flip-In Event" or a "Flip-Over Event" thereunder.
SECTION 5.10 Agreements of Rule 145 Affiliates. Prior to the
Effective Time, the Company shall cause to be prepared and delivered to Parent
a list identifying all persons who, at the time of the Company stockholder
meeting, may be deemed to be "affiliates" of the Company, as that term is used
in paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). The Company shall use its commercially reasonable efforts to
cause each person who is identified as a Rule 145 Affiliate in such list to
deliver to Parent, at or prior to the Effective Time, a written agreement, in
the form to be approved by the parties hereto, that such Rule 145 Affiliate
will not sell, pledge, transfer or otherwise dispose of any shares of Parent
Common Stock issued to such Rule 145 Affiliate pursuant to the Merger, except
pursuant to an effective registration statement or in compliance with Rule 145
or an exemption from the registration requirements of the Securities Act.
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SECTION 5.11 New York Stock Exchange Listing. Each party agrees to
use commercially reasonable efforts to retain the listing of the shares of
Parent Common Stock issued in connection with the Merger on the New York Stock
Exchange following the Effective Time.
SECTION 5.12 Election to the Parent's Board of Directors. At the
Effective Time of the Merger, the Parent shall cause its board of directors to
consist of four nominees of the Company (the "Company Nominees"), four nominees
of Apollo (the "Apollo Nominees") and two of the current directors of the
Parent.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, by each party hereto
prior to the proposed Effective Time, of the following conditions:
(a) the agreement of merger (as such term is used in
Section 251 of the DGCL) contained in this Agreement and the Merger,
and the issuance of the Parent Common Stock pursuant to the Merger,
shall have been approved and adopted by the affirmative vote of the
stockholders of each of the Company and the Parent, respectively,
required by and in accordance with applicable law and the Restated
Certificates of Incorporation and Bylaws thereof (if applicable);
(b) the Recapitalization Merger and the related agreement
of merger (as such term is used in section 251 of the DGCL) contained
in the agreement and plan of merger setting forth the terms of the
Recapitalization Merger and the issuance of the Parent Common Stock
pursuant to the Merger shall have been approved by the affirmative
vote of the stockholders of the Parent required by and in accordance
with applicable law and the Parent's Restated Certificate of
Incorporation, and the Recapitalization Merger shall have been
consummated;
(c) no statute, rule, regulation, executive order, decree
or injunction shall have been enacted, entered, promulgated or
enforced by any court or governmental authority against the Parent,
the Sub or the Company and be in effect that prohibits or restricts
the consummation of the Merger or makes such consummation illegal
(each party agreeing to use all reasonable efforts to have any such
prohibition lifted);
(d) the S-4 shall have become effective, and any required
post-effective amendment shall have become effective, under the
Securities Act, and shall not be the subject of any stop order or
proceedings seeking a stop order, and any material "blue sky" and
other state securities laws applicable to the registration of the
Parent Common Stock shall have been complied with;
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(e) the conditions to each party's obligations to effect
the Recapitalization Merger other than the consummation of the Merger
shall have been satisfied or waived; and
(f) the waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and all
filings required to be made prior to the Effective Time with, and all
consents, approvals, authorizations and permits required to be
obtained prior to the Effective Time from, any governmental authority
in connection with the consummation of the Merger shall have been made
or obtained (as the case may be), except where the failure to obtain
such consents, approvals, authorizations and permits would not be
reasonably likely to result in a Material Adverse Effect on the
Company or to materially adversely affect the consummation of the
Merger.
SECTION 6.02 Additional Conditions to the Company's Obligation to
Effect the Merger.
The obligations of the Company to effect the Merger shall be subject
to the satisfaction or waiver by the Company and Apollo, prior to the proposed
Effective Time, of the following conditions:
(a) no action shall have been taken and be continuing,
and no statute, rule, regulation, judgment, administrative
interpretation, order or injunction shall have been enacted,
promulgated, entered, enforced or deemed applicable to the Merger,
which would (i) make illegal or prohibit the consummation of the
Merger or (ii) render Company unable to effect the Merger;
(b) no action or proceeding brought by any governmental,
regulatory or administrative agency, authority or commission shall
have been instituted and be pending that would be reasonably likely to
result in any of the consequences referred to in clauses (i) or (ii)
of Section 6.02(a) above; and there shall be no proceeding or other
action (including without limitation, relating to health care,
regulatory, environmental and pension matters) pending or threatened
against the Parent or its Subsidiaries which is reasonably likely to
have a Material Adverse Effect;
(c) during the 30 day period ending on the date of the
Closing, there shall not have occurred and be continuing (i) any
general suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market in the United States, (ii) the declaration of
any banking moratorium or any suspension of payments in respect of
banks or any material limitation (whether or not mandatory) on the
extension of credit by lending institutions in the United States,
(iii) the commencement of a war, material armed hostilities or any
other material international or national calamity involving the United
States having a significant adverse effect on the functioning of the
financial markets in the United States, or (iv) in the case of any of
the foregoing existing at the time of the execution of the Merger
Agreement, a material acceleration or worsening thereof;
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(d) the Company shall have received an opinion from its
counsel, reasonably acceptable to the Company, to the effect that (i)
the Merger will qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code; and (ii) the Company, the
Parent and the Sub will each be a "party to a reorganization" within
the meaning of Section 368(b) of the Code with respect to the Merger;
(e) the representations and warranties of the Parent and
the Sub set forth in Article IV shall be true and correct in all
material respects as of the Effective Time as though made on and as of
that time, and the Parent and the Sub shall have performed in all
material respects all covenants and agreements required to be
performed by them under this Agreement at or prior to the Effective
Time; and
(f) since September 30, 1996, no change shall have
occurred or been threatened in the business, operations, prospects,
properties or condition (financial or other) of the Parent or any of
its Subsidiaries that would have or would be reasonably expected to
have a Material Adverse Effect; provided, that the transactions
contemplated by the Recapitalization Agreement and the Merger
Agreement shall not be deemed to have caused Material Adverse Effect.
SECTION 6.03 Additional Conditions to the Parent's and the Sub's
Obligations to Effect the Merger.
The obligations of the Parent and the Sub to effect the Merger shall
be subject to the satisfaction or waiver by the Parent, the Sub and Apollo,
prior to the proposed Effective Time, of the following conditions:
(a) no action shall have been taken and be continuing,
and no statute, rule, regulation, judgment, administrative
interpretation, order or injunction shall have been enacted,
promulgated, entered, enforced or deemed applicable to the Merger,
which would (i) make illegal or prohibit the consummation of the
Merger or (ii) render Parent unable to effect the Merger;
(b) no action or proceeding brought by any governmental,
regulatory or administrative agency, authority or commission shall
have been instituted and be pending that would be reasonably likely to
result in any of the consequences referred to in clauses (i) or (ii)
of Section 6.03(a) above; and there shall be no proceeding or other
action (including, without limitation, relating to health care,
regulatory, environmental and pension matters) pending or threatened
against the Company or its Subsidiaries which is reasonably likely to
have a Material Adverse Effect;
(c) there shall not have occurred (i) any general
suspension of trading in, or limitation on prices for, securities on
any national securities exchange or in the over-the-
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counter market in the United States, (ii) the declaration of any
banking moratorium or any suspension of payments in respect of banks
or any material limitation (whether or not mandatory) on the extension
of credit by lending institutions in the United States, (iii) the
commencement of a war, material armed hostilities or any other
material international or national calamity involving the United
States having a significant adverse effect on the functioning of the
financial markets in the United States, or (iv) in the case of any of
the foregoing existing at the time of the execution of the Merger
Agreement, a material acceleration or worsening thereof;
(d) since December 31, 1996, no change shall have
occurred or have been threatened in the business, operations,
prospects, properties or condition (financial or other) of GranCare or
any of its Subsidiaries that would have or would be reasonably
expected to have a Material Adverse Effect; provided, that the
transactions contemplated by the Recapitalization Agreement and the
Merger Agreement shall not be deemed to be such a materially adverse
change;
(e) the agreements of Rule 145 Affiliates required to be
delivered to Parent pursuant to Section 5.10 shall have been furnished
as required by Section 5.10; and
(f) the representations and warranties of the Company
set forth in Article III shall be true and correct in all material
respects as of the Effective Time as though made on and as of that
time, and the Company shall have performed in all material respects
all covenants and agreements required to be performed by it under this
Agreement at or prior to the Effective Time.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time notwithstanding approval thereof by the
stockholders of each of the Company and the Parent, but prior to the Effective
Time:
(a) by mutual written consent of the Boards of Directors
of the Company and the Parent;
(b) by the Parent or the Company if the Effective Time
shall not have occurred on or before September 30, 1997 (provided that
the right to terminate this Agreement under this Section 7.01(b) shall
not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure
of the Effective Time to occur on or before such date);
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(c) by the Parent or the Company if any court of
competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling, or
taken any other action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action shall have
become final and non-appealable;
(d) by the Company if (i) any of the representations and
warranties of the Parent or the Sub contained in this Agreement were
untrue in any material respect when made or have since become, and at
the time of termination remain, untrue in any material respect, or
(ii) the Parent or the Sub shall have breached or failed to comply in
any material respect with any of its obligations under this Agreement
and, with respect to a representation or warranty, such breach shall
continue unremedied for ten (10) days after the Parent or the Sub has
received written notice from the Company of the occurrence of such
breach of failure;
(e) prior to Stockholder Approval by the Parent if the
Board of Directors of the Company withdraws or modifies in a manner
adverse to the Parent or the Sub its favorable recommendation of the
Merger or shall have recommended an Acquisition Transaction with a
party other than the Parent or any of its affiliates;
(f) prior to Stockholder Approval by the Company if the
Company receives a written offer with respect to any Acquisition
Transaction with a party other than the Parent or its affiliates or
such other party has commenced a tender offer which, in either case,
the Board of Directors of the Company believes in good faith is more
favorable to the Company's stockholders than the transactions
contemplated by this Agreement;
(g) by the Parent, if (i) any of the representations and
warranties of the Company contained in this Agreement shall fail to be
true and correct in any material respect, in each case when made or
have since become, and of the time of termination remain, untrue in
any material respect, (ii) the Company shall have breached or failed
to comply in any material respect with any of its obligations under
this Agreement (other than as a result of a breach by the Parent or
the Sub of any of their obligations under this Agreement) and, with
respect to a representation or warranty, such breach shall continue
unremedied for ten (10) days after the Company has received written
notice from the Parent or the Sub of the occurrence of such breach or
failure; or
(h) by the Parent or the Company if the Recapitalization
Merger Agreement is terminated; or
(i) (x) by the Parent if the Company fails to obtain its
stockholders' approval of the Merger at the meeting held for such
purpose (or any adjournment thereof) or (y) by the Company if the
Parent fails to obtain its stockholders' approval of the issuance of
Parent Common Stock to be issued as part of the Merger at the meeting
held for such purpose (or any adjournment thereof).
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SECTION 7.02 Effect of Termination. If this Agreement is terminated
and the Merger is abandoned pursuant to Section 7.01 hereof, this Agreement,
except for the provisions of Section 5.03(b), this Section 7.02 and Section
8.10 hereof, shall forthwith become void and have no effect, without any
liability on the part of any party or its directors, officers or stockholders.
The Confidentiality Agreement shall remain in full force and effect following
any termination of this Agreement. If this Agreement is terminated pursuant to
Section 7.01(e) or (f), the Company promptly, but in no event later than one
business day after termination of this Agreement will pay to the Parent a fee
(the "Termination Fee") equal to $20 million in same day funds, plus interest
on such amount from the date payable until paid at a rate equal to 9% per
annum. If this Agreement is terminated pursuant to Section 7.01(i)(x) and, at
the time of the stockholder vote referred to therein, any person has made (or
publicly disclosed an intention to make) a proposal to effect an Acquisition
Transaction with respect to the Company (and shall not have irrevocably
withdrawn such proposal), and within 180 days after such termination an
Acquisition Transaction shall be consummated with respect to the Company, the
Company shall promptly (but in no event later than one business day) after such
consummation, pay the Termination Fee. If this Agreement is terminated
pursuant to Section 7.01(e), (f), (g) or (i)(x), the Company shall also pay the
out-of-pocket fees and expenses reasonably incurred by the Parent and the Sub
in connection with this Agreement. Nothing in this Section 7.02 shall relieve
any party to this Agreement of liability for breach of this Agreement.
SECTION 7.03 Amendment. To the extent permitted by applicable law,
this Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, the Parent, the Sub and Apollo, at any time before or
after adoption of this Agreement by the stockholders of each of the Company,
the Parent and Apollo but, after any such stockholder approval, no amendment
shall be made which decreases the Conversion Number or which adversely affects
the rights of the Company's stockholders hereunder without the approval of the
stockholders of the Company. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties.
SECTION 7.04 Extension; Waiver At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company, the Parent and the Sub may (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein by any other applicable party or in any document,
certificate or writing delivered pursuant hereto by any other applicable party
or (iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Survival of Representations and Warranties. The
representations and warranties made in Articles III and IV shall not survive
beyond the Effective Time. This Section 8.01 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time.
SECTION 8.02 Entire Agreement; Assignment. Except for the
Confidentiality Agreement and the Disclosure Letter, this Agreement (a)
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise; provided, however, that the Parent or the Sub may assign any of its
rights and obligations to any wholly-owned subsidiary of the Parent or the Sub
incorporated in Delaware, but no such assignment shall relieve the Parent or
the Sub, as the case may be, of its obligations hereunder.
SECTION 8.03 Enforcement of the Agreement; Jurisdiction. The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof
in any federal or state court located in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in equity.
The parties hereto consent and agree that the state or federal courts
located in Delaware shall have exclusive jurisdiction to hear and determine any
claims or disputes pertaining to this Agreement or to any matter arising out of
or related to this Agreement and each party hereto waives any objection that it
may have based upon lack of personal jurisdiction, improper venue or forum non
conveniens and hereby consents to the granting of such legal or equitable
relief as is deemed appropriate by such court.
SECTION 8.04 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 8.05 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by facsimile transmission with
confirmation of receipt, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
if to the Parent or the Sub:
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Living Centers of America, Inc.
00000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxx Xxxxxxx, Esq., General Counsel
Sydney X. Xxxxx, Xx., Esq.,
Associate General Counsel
with copies to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Mayor, Day, Xxxxxxxx & Xxxxxx L.L.P.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
if to the Company:
GranCare, Inc.
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxx, Executive Vice President
with a copy to:
Xxxxxxx & Xxxxx L.L.P.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
if to Apollo:
Apollo Management, L.P.
1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
with a copy to:
Sidley & Austin
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
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or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 8.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of
the laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
SECTION 8.07 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 8.08 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement except for Sections 2.13, 5.05 and 5.06 (which are intended to be for
the benefit of the persons referred to therein, and may be enforced by any such
persons).
SECTION 8.09 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 8.10 Fees and Expenses. Whether or not the Offer or the
Merger is consummated, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, except as provided expressly to the contrary herein.
SECTION 8.11 Disclosure Letter. Any disclosure under one section of
the Disclosure Letter shall be deemed disclosure under all sections of the
Disclosure Letter. Disclosure of any matter in the Disclosure Letter shall not
constitute an expression of a view that such matter is material or is required
to be disclosed pursuant to this Agreement.
SECTION 8.12 Press Releases. Subject to the proviso to this
sentence, the Parent, the Sub and the Company will consult with each other
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or by obligations pursuant to the rules of The
New York Stock Exchange, Inc. and any other appropriate exchange.
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SECTION 8.13 Obligation of the Parent. Whenever this Agreement
requires Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of Parent to cause Sub to take such action.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all at or
on the day and year first above written.
LIVING CENTERS OF AMERICA, INC.
By: /s/ SYDNEY X. XXXXX, XX.
----------------------------------
Name: Sydney X. Xxxxx, Xx.
-----------------------------
Title: Vice President
----------------------------
GRANCARE, INC.
By: /s/ XXXXXX X. XXXXXX
----------------------------------
Name: Xxxxxx X. Xxxxxx
-----------------------------
Title: Executive Vice President
----------------------------
APOLLO MANAGEMENT, L.P.
By: AIF III Management, Inc.
Its General Partner
By: /s/ XXXXX X. XXXXXX
----------------------------------
Vice President
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