AGREEMENT AND PLAN OF MERGER
Among
COUGAR HOLDINGS CORPORATION,
COUGAR ACQUISITION CORP.
and
CENTENNIAL HEALTHCARE CORPORATION
Dated as of October 22, 1998
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER
SECTION 1.01 The Merger.................................................................................2
SECTION 1.02 Effect of the Merger.......................................................................2
SECTION 1.03 Consummation of the Merger.................................................................2
SECTION 1.04 Closing....................................................................................2
SECTION 1.05 Articles of Incorporation; By-Laws; and Directors and Officers
of the Surviving Corporation......................................................2
SECTION 1.06 Further Assurances.........................................................................3
SECTION 1.07 Company Actions............................................................................3
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities...................................................................3
SECTION 2.02 Stock Options..............................................................................4
SECTION 2.03 Payment for Shares.........................................................................5
SECTION 2.04 Dissenting Shares..........................................................................6
SECTION 2.05 Dissenting Shares After Payment of Fair Value..............................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01 Organization and Qualification.............................................................7
SECTION 3.02 Authorization and Validity of Agreement....................................................8
SECTION 3.03 Non-Contravention..........................................................................9
SECTION 3.04 Capital Stock; Subsidiaries...............................................................10
SECTION 3.05 SEC Filings...............................................................................11
SECTION 3.06 Financial Statements......................................................................11
SECTION 3.07 Absence of Undisclosed Liabilities........................................................12
SECTION 3.08 Governmental Approvals....................................................................12
SECTION 3.09 Absence of Certain Changes or Events......................................................12
SECTION 3.10 Title to Properties, Absence of Liens and
Encumbrances...................................................................................14
SECTION 3.11 List of Properties, Contracts and Other Data..............................................14
SECTION 3.12 Intangible Rights.........................................................................16
SECTION 3.13 Software..................................................................................16
SECTION 3.14 Litigation................................................................................17
SECTION 3.15 Governmental Authorizations and Regulations...............................................18
SECTION 3.16 Condition of Facilities...................................................................19
SECTION 3.17 Labor Matters.............................................................................19
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SECTION 3.18 Insurance.................................................................................20
SECTION 3.19 Use of Real Property......................................................................20
SECTION 3.20 Conditions of Assets......................................................................21
SECTION 3.21 Employee Benefit Plans....................................................................21
SECTION 3.22 Environmental Matters.....................................................................22
SECTION 3.23 Information In Proxy Statement............................................................22
SECTION 3.24 Fraud and Abuse...........................................................................23
SECTION 3.25 Health Professional's Financial Relationships.............................................24
SECTION 3.26 Tax Matters...............................................................................24
SECTION 3.27 Transactions With Affiliates..............................................................25
SECTION 3.28 Brokers and Finders.......................................................................25
SECTION 3.29 Opinion of Financial Advisor..............................................................25
SECTION 3.30 Statements True and Correct...............................................................26
SECTION 3.31 Knowledge of the Company..................................................................26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 4.01 Organization and Qualification............................................................26
SECTION 4.02 Authority Relative to Agreement...........................................................26
SECTION 4.03 Non-Contravention.........................................................................27
SECTION 4.04 Governmental Approvals....................................................................27
SECTION 4.05 Proxy and Schedule 13E-3 Information......................................................27
SECTION 4.06 Brokers and Finders.......................................................................28
SECTION 4.07 Sufficient Funds..........................................................................28
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUB
SECTION 5.01 Organization and Qualification............................................................28
SECTION 5.02 Authorization and Validity of Agreement...................................................29
SECTION 5.03 Non-Contravention.........................................................................29
SECTION 5.04 Governmental Approvals....................................................................29
ARTICLE VI
CERTAIN AGREEMENTS
SECTION 6.01 Conduct of the Company's Business.........................................................30
SECTION 6.02 Stockholder Approval......................................................................31
SECTION 6.03 Access to Information.....................................................................32
SECTION 6.04 Further Assurances........................................................................32
SECTION 6.05 Inquiries and Negotiations; Certain Payments..............................................32
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SECTION 6.06 Notification of Certain Matters...........................................................34
SECTION 6.07 Indemnification...........................................................................34
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Merger Relating to Parent
and Acquisition Sub............................................................................35
SECTION 7.02 Conditions to the Merger Relating to the
Company........................................................................................37
ARTICLE VIII
TERMINATION AND ABANDONMENT
SECTION 8.01 Termination and Abandonment...............................................................38
SECTION 8.02 Effect of Termination.....................................................................39
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Nonsurvival of Representations and Warranties.............................................39
SECTION 9.02 Expenses, Etc.............................................................................40
SECTION 9.03 Publicity.................................................................................40
SECTION 9.04 Execution in Counterparts.................................................................40
SECTION 9.05 Notices...................................................................................40
SECTION 9.06 Waivers...................................................................................41
SECTION 9.07 Headings; Interpretation..................................................................42
SECTION 9.08 Entire Agreement..........................................................................42
SECTION 9.09 Governing Law.............................................................................42
SECTION 9.10 Severability..............................................................................42
SECTION 9.11 Binding Effect, Benefits..................................................................43
SECTION 9.12 Assignability.............................................................................43
SECTION 9.13 Amendments................................................................................43
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INDEX TO EXHIBIT AND DISCLOSURE SCHEDULE
Exhibit Description
------- -----------
A Form of Opinion of King & Spalding
B Form of Opinion of Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
Disclosure
Schedule
Section Description
----------- -----------
3.01 Qualifications to do Business
3.03 Non-Contravention
3.04(a) Stock of Company and Corporate Subsidiaries
3.04(b) Options, Warrants, etc. of Company and Corporate Subsidiaries
3.04(c) Options, Warrants, etc. of Partnership Subsidiaries
3.04(d) Other Investments
3.08 Governmental Approvals (Company)
3.09 Certain Changes
3.10 Liens and Encumbrances
3.11 Properties, Contracts, etc.
3.12 Intangible Rights
3.14 Litigation
3.15 Governmental Authorizations
3.16 Condition of Facilities
3.17 Labor Matters
3.18 Insurance
3.19 Use of Real Property
3.20 Condition of Assets
3.21 Employee Benefits
3.22 Environmental Matters
3.26 Tax Matters
3.28 Transactions with Affiliates
3.31 Knowledge of the Company
4.04 Governmental Approvals (Parent)
5.04 Governmental Approvals (Acquisition Sub)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of October 22, 1998, by
and among COUGAR HOLDINGS CORPORATION, a Delaware corporation ("Parent"), COUGAR
ACQUISITION CORP., a Georgia corporation and a wholly-owned subsidiary of Parent
("Acquisition Sub"), and CENTENNIAL HEALTHCARE CORPORATION, a Georgia
corporation (the "Company"). The Company and Acquisition Sub are hereinafter
sometimes referred to as the "Constituent Corporations" and the Company as the
"Surviving Corporation".
WHEREAS a special committee (the "Special Committee")
comprised of three independent directors of the Board of Directors of the
Company (the "Company Board") has unanimously determined that the terms of the
proposed acquisition of the Company by Parent pursuant to a merger of
Acquisition Sub with and into the Company, upon the terms and subject to the
conditions hereinafter provided, are fair to, and in the best interest of, the
Company and the shareholders of the Company (the "shareholders" or the "Public
Shareholders"); and
WHEREAS the Special Committee has unanimously approved this
Agreement and Plan of Merger (the "Agreement") and has unanimously recommended
that the Company Board approve this Agreement and the merger, which
recommendation is based in part on a fairness opinion issued by X.X. Xxxxxx
Securities Inc. (the "Independent Advisor"), independent financial advisors to
the Special Committee, that, as of the date of such opinion and based on the
assump tions, qualifications and limitations contained therein, the
consideration to be received by the Public Shareholders for their shares in the
merger is fair to the Public Shareholders from a financial point of view; and
WHEREAS the Company Board has granted full responsibility and
authority on behalf of the Company and the Board to the Special Committee to
modify, amend or otherwise change this Agreement, or any of its terms or
provisions (including modifications, amendments or changes subsequent to the
Closing), to take all action and to execute all documents necessary or desirable
to consummate the transactions contemplated by this Agreement, and to take all
actions and to execute all documents which may be necessary or desirable in
connection therewith, to give and receive consents and all notices on behalf of
the Company hereunder, to negotiate and settle claims on behalf of the Company
hereunder, and to perform any other act arising under or pertaining to this
Agreement and the transactions contemplated hereby on behalf of the Company; and
WHEREAS, the respective Boards of Directors of Parent and
Acquisition Sub and the Company Board have each (i) approved, upon the terms and
subject to the conditions hereinafter provided, and (ii) determined that the
merger is fair to, and deem it advisable and in the best interest of their
respective shareholders to consummate, the acquisition of the Company by Parent
pursuant to a merger of Acquisition Sub with and into the Company;
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants, agreements and conditions contained
herein, and in order to set forth the terms and conditions of the Merger (as
hereinafter defined) and the mode of carrying the same into effect, the parties
hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as hereinafter defined), in
accordance with this Agreement and the Georgia Business Corporation Code (the
"Georgia Code"), Acquisition Sub shall be merged with and into the Company (the
"Merger"), the separate existence of Acquisition Sub (except as it may be
continued by operation of law) shall cease, and the Company shall continue as
the surviving corporation in the Merger.
SECTION 1.02 Effect of the Merger. Upon the effectiveness of
the Merger, the Surviving Corporation shall succeed to and assume all the rights
and obligations of the Company and Acquisition Sub in accordance with the
Georgia Code and the Merger shall otherwise have the effects set forth in
Section 14-2-1101 et seq. of the Georgia Code.
SECTION 1.03 Consummation of the Merger. As soon as
practicable (and in any event within five (5) business days) after the
satisfaction or waiver of the conditions to the obligations of the parties to
effect the Merger set forth herein, provided that this Agreement has not been
terminated previously, the parties to this Agreement will cause the Merger to be
consummated by filing with the Secretary of State of the State of Georgia a
properly executed certificate of merger in accordance with Section 14-2-1105 of
the Georgia Code, which shall be effective upon filing or on such later date and
time as the parties hereto agree shall be specified in the Certificate of Merger
(the time of such effectiveness being hereinafter referred to as the "Effective
Time").
SECTION 1.04 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place, at a location
mutually agreed upon by Parent and the Company, at 10:00 a.m. (local time) on
the day on which the Certificate of Merger is filed pursuant to Section 1.03
(the "Closing Date").
SECTION 1.05 Articles of Incorporation; By-Laws; and Directors
and Officers of the Surviving Corporation. Subject to Section 6.07, the Articles
of Incorporation of Acquisition Sub in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation, until thereafter amended
in accordance with the provisions thereof and as provided by the Georgia Code.
The By-Laws of Acquisition Sub in effect at the Effective Time shall be the
By-Laws of the Surviving Corporation, until thereafter amended in accordance
with the
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provisions thereof and the Articles of Incorporation of the Surviving
Corporation and as provided by the Georgia Code. From and after the Effective
Time and until their respective successors are duly elected or appointed and
qualified, (a) the directors of Acquisition Sub at the Effective Time shall be
the directors of the Surviving Corporation and (b) the officers of the Company
at the Effective Time shall be the officers of the Surviving Corporation.
SECTION 1.06 Further Assurances. If at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of such Constituent
Corporations, all other acts and things necessary, desirable or proper to vest,
perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of such Constituent
Corporation or otherwise to carry out the purposes of this Agreement.
SECTION 1.07 Company Actions. The Company hereby approves of
and consents to the Merger and represents and warrants that its Board of
Directors, at a meeting duly called and held, and acting on the unanimous
recommendation of the Special Committee, has (i) unanimously determined that
each of this Agreement and the transactions contemplated hereby, including the
Merger, are fair to and in the best interests of the shareholders of the
Company, (ii) unanimously adopted this Agreement and the transactions
contemplated hereby, including the Merger and (iii) unanimously resolved to
recommend that the shareholders of the Company adopt this Agreement and the
Merger, provided, however, that such recommendation may be with drawn, modified
or amended if, in the opinion of the Board of Directors, after receipt of advice
from outside legal counsel, failure to withdraw, modify or amend such
recommendation would result in the Board of Directors violating its fiduciary
duties to the Company's shareholders under applicable law. The Company further
represents that the Independent Advisor has delivered to the Company's Board of
Directors its written opinion that the Merger Consideration (as hereinaf ter
defined) is fair to the holders of Shares (as hereinafter defined) from a
financial point of view.
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ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities. By virtue of the Merger
and without any action on the part of either Constituent Corporation or any
holder of the capital stock thereof, at the Effective Time:
(a) each share of Common Stock, par value $.01 per
share, of Acquisi tion Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and become one validly
issued, fully paid and nonassessable share of Common Stock, par value
$.01 per share, of the Surviving Corporation;
(b) each share of Common Stock, par value $.01 per
share, of the Company ("Company Common Stock") that is held in the
treasury of the Company or of any Subsidiary, or by Parent or any of
its subsidiaries, shall be canceled and retired and no consideration
shall be paid or delivered in exchange therefor; and
(c) each remaining share (each a "Share") of Company
Common Stock issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares) shall be converted into the right
to receive an amount in cash, without interest, equal to Sixteen
Dollars ($16.00) per Share (the "Merger Consideration").
SECTION 2.02 Stock Options.
(a) At the Effective Time, each stock option outstanding under
the Company's 1994 Employee Stock Option Plan, the Company's 1996 Executive
Stock Plan, the Company's 1996 Employee Stock Option Plan and/or the Company's
1997 Stock Plan (collectively, the "Company Stock Option Plans") shall, to the
extent not theretofore vested, become vested and shall terminate as of the
Effective Time. Each holder of any such stock option having an exercise price
less than the Merger Consideration shall be entitled to receive from the
Company, in cancellation and settlement of such stock option, an amount in cash
determined by multiplying (x) the excess, if any, of the Merger Consideration
over the per share exercise price of each such option by (y) the number of
shares of Company Common Stock issuable upon exercise of such option, subject to
applicable withholding taxes, if any; and each holder of any such stock option
having an exercise price equal to or greater than the Merger Consideration shall
not receive any consideration in cancellation and settlement of such stock
option.
(b) Prior to the Effective Time, the Company (x) shall not,
without first obtaining the consent of Parent, grant any additional stock
options or modify the provisions thereof or of any of the Company Stock Option
Plans (except as provided in this Section 2.02) and (y) shall take all necessary
actions to ensure that (1) the Company Stock Option Plans and all
4
options issued and outstanding thereunder shall terminate and be canceled as of
the Effective Time, (2) the provisions in any other plan, program, agreement or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any Subsidiary, shall be canceled as of
the Effective Time and (3) all Company options that are not exercised prior to
the Effective time will terminate and expire as of the Effective Time.
SECTION 2.03 Payment for Shares.
(a) Prior to the Effective Time, Parent shall designate a bank
or trust company to act as exchange agent (the "Exchange Agent") for the purpose
of exchanging certificates representing Shares for the Merger Consideration. At
the Effective Time, Parent and Acquisition Sub shall cause such funds as are
required for the conversion of the Shares pursuant to Section 2.01(c) (the
"Exchange Fund") to be deposited with the Exchange Agent.
(b) Promptly after the Effective Time, Parent shall instruct
the Exchange Agent to mail to each holder of record of one or more Shares (i) a
letter of transmittal, which shall specify that delivery shall be effected, and
risk of loss and title to the certificates that immediately prior to the
Effective Time represented outstanding Shares (each, a "Certificate") shall
pass, only upon proper delivery of such Certificates to the Exchange Agent and
have such other provisions as Parent shall specify and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Until surrendered as contemplated by this Section 2.03, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration. No interest will be paid or
accrued on the Merger Consideration.
(c) Upon surrender of a Certificate (duly endorsed as the
Exchange Agent may require) for cancellation to the Exchange Agent, together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, and such other documents as may be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration payable in respect of the Shares
previously represented by such Certificate, after giving effect to any
applicable withholding tax, and the Certificate so surrendered shall forthwith
be canceled. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate.
(d) If the Merger Consideration is to be paid to any person
other than the person in whose name the Certificates surrendered for conversion
are registered, it shall be a condition of payment that such Certificates be
properly endorsed and the signatures thereon properly guaranteed and otherwise
in proper form for transfer and that the person requesting such payment shall
pay to the Exchange Agent any transfer or other taxes required by reason of the
delivery of such consideration to a person other than the registered holder of
such Certificate, or
5
shall establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable.
(e) If any Certificate shall have been lost, stolen, mislaid
or destroyed, upon receipt of (i) an affidavit of that fact from the holder
claiming such Certificate to be lost, stolen, mislaid or destroyed, (ii) such
bond, security or indemnity as Parent and/or the Exchange Agent may require and
(iii) any other documents necessary to evidence and effect the bona fide
exchange thereof, the Exchange Agent shall deliver to such holder the Merger
Consideration into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate have been converted.
(f) Any portion of the Exchange Fund held by the Exchange
Agent for delivery pursuant to this Section 2.03 and unclaimed at the end of six
months after the Effective Time shall be repaid or redelivered to Parent, upon
demand, and any holders of Certificates who have not theretofore complied with
this Section 2.03 shall, subject to applicable law, thereafter look only to the
Surviving Corporation for payment of the Merger Consideration in respect of such
holders' Shares. Notwithstanding the foregoing, none of Parent, the Surviving
Corporation or the Exchange Agent shall be liable to any holder of Shares for
any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law. Any amounts unclaimed by holders of Shares two
years after the Effective Time (or such earlier date immedi ately prior to such
time as such amounts would otherwise escheat to or become the property of any
governmental entity) shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation free and clear of any claims or
interest of any person previously entitled thereto.
(g) At and after the Effective Time, the stock transfer books
of the Company shall be closed, and there shall be no further registrations of
transfers of shares of Company Common Stock thereafter on the records of the
Company. If, after the Effective Time, Certifi xxxxx are presented to the
Surviving Corporation, Parent or the Exchange Agent for any reason, they shall
be canceled and exchanged for Merger Consideration as provided in this Section
2.03.
SECTION 2.04 Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the
contrary, Shares that are outstanding immediately prior to the Effective Time
and that are held by any shareholder who has delivered to the Company, prior to
the vote of shareholders required by Section 6.02 hereof, a written notice in
accordance with Article 13 of the Georgia Code of such shareholder's intent to
demand payment for such shareholder's Shares if the Merger is effected and who
shall have not voted such Shares in favor of the approval and adoption of this
Agreement (collectively, the "Dissenting Shares") shall not be converted into
the right to receive the Merger Consideration, but the holders of such
Dissenting Shares shall be entitled to payment of the fair value of such
Dissenting Shares in accordance with the provisions of Article 13 of the Georgia
Code,
6
provided, however, that if such shareholder shall waive such shareholder's right
to demand payment under Article 13 of the Georgia Code or a court of competent
jurisdiction shall determine that such shareholder is not entitled to the relief
provided by said Article 13, then the right of such holder of Dissenting Shares
to be paid the fair value of such shareholders Dissenting Shares shall cease and
such Dissenting Shares shall thereupon be deemed to have been converted into, as
of the Effective Time, the right to receive the Merger Consideration, without
any interest thereon.
(b) The Company shall give Parent and Acquisition Sub (i)
prompt notice of any notices or other instruments received by the Company
pursuant to Article 13 of the Georgia Code and (ii) the opportunity to direct
all negotiations and proceedings with respect to demands for payment for
Dissenting Shares. The Company shall not, except with the prior written consent
of Parent and Acquisition Sub, voluntarily offer to make or make any payment
with respect to any demands for payment for Dissenting Shares or settle or offer
to settle any such demands.
SECTION 2.05 Dissenting Shares After Payment of Fair Value.
Dissenting Shares, if any, shall be canceled after payments of fair value in
respect thereto have been made to dissenting shareholders of the Company
pursuant to the Georgia Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Acquisition Sub as follows:
SECTION 3.01 Organization and Qualification.
(a) The Company and each of its corporate Subsidiaries (the
"Corporate Subsidiaries") is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, and is duly
licensed or qualified and in good standing to do business as a foreign
corporation, and is authorized to do business, in each other jurisdiction in
which the character or location of the properties owned, leased, managed or
operated by such entity or the nature of the business transacted by it makes
such licensing or qualification neces sary, except where the failure to be so
licensed or qualified could not reasonably be expected to have a Material
Adverse Effect (as hereinafter defined). The Company has heretofore delivered to
Parent accurate and complete copies of its Articles of Incorporation and By-laws
and the charter and By-laws of each of the Corporate Subsidiaries, all as
currently in effect. The Company and each Corporate Subsidiary has the requisite
corporate power and authority to own or lease and operate its properties and
assets and to carry on its business as currently conducted. As used in this
Agreement, "Material Adverse Effect" shall mean a material adverse effect on the
7
business, properties, results of operation or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole.
(b) Each of the Company's partnership Subsidiaries (the
"Partnership Subsidiaries") is a partnership or limited partnership duly
organized and validly existing under the laws of the state of its organization,
and is duly licensed or qualified and, to the extent applicable, in good
standing, to do business as a foreign partnership, and is authorized to do
business, in each other jurisdiction in which the character or location of the
properties owned, leased, managed or operated by such entity or the nature of
the business transacted by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified could not reason ably be
expected to have a Material Adverse Effect. The Company has heretofore delivered
to Parent accurate and complete copies of the partnership agreement (and other
organizational documents) of each of the Partnership Subsidiaries, all as
currently in effect. The Partnership Subsidiaries have the requisite partnership
power and authority to own or lease and operate their respective assets and
properties and to carry on their respective businesses as currently conducted.
(c) Section 3.01 of the Disclosure Schedule sets forth a
complete list of the jurisdictions in which the Company and each of the
Subsidiaries is licensed or qualified to do business.
(d) As used herein, (x) the term "Subsidiaries" means all
those corporations and other business entities of which the Company (i) owns or
controls 50% or more of the outstanding equity securities either directly or
through an unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its parent, or
(ii) in the case of partnerships, serves as a general partner, or (iii) in the
case of a limited liability company, serves as a managing member or (iv)
otherwise has the ability to elect a majority of the directors, trustees or
managing members thereof, and (y) the term "Facility" means any nursing home or
other medical facility owned or leased (a "Proprietary Facility") or managed (a
"Managed Facility") by the Company or any Subsidiary. Except as expressly
provided herein, each reference in this Agreement to the Company or a Subsidiary
shall be deemed to include any Proprietary Facility that is owned or leased by
such entity, whether so expressed or not, including, by way of example and not
of limitation, references to contracts and commitments entered into, or
purported to be entered into, in the name of any such Proprietary Facility and
licenses or other property or assets held by, or purported to be held by, any
such Proprietary Facility.
SECTION 3.02 Authorization and Validity of Agreement.
(a) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance by the Company of this
Agreement, and the consummation of the transactions
8
contemplated hereby have been duly authorized and approved by all requisite
corporate action (including without limitation the unanimous approval of the
Special Committee), subject to the adoption of this Agreement by the holders of
a majority of the outstanding shares of Company Common Stock, which is the only
shareholder vote required for approval of this Agreement and the consummation of
the Merger. This Agreement has been duly executed and delivered by the Company
and, assuming due execution and delivery by the other parties hereto and
assuming that this Agreement constitutes a valid and binding obligation of
Parent and Acquisition Sub, constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
(b) At a Special Committee meeting duly called and held on
October 21, 1998, the Special Committee, based in part upon the opinion of the
Independent Advisor, unanimously (i) determined that this Agreement and the
Merger contemplated hereby are fair to and in the best interest of the Public
Shareholders, (ii) approved, authorized and adopted this Agreement, the Merger
and the other transactions contemplated hereby, and (iii) resolved to recommend
the approval and adoption of this Agreement and the Merger by the shareholders
of the Company.
(c) At a Company Board meeting duly called and held on October
22, 1998, the Company Board, based in part upon the approval and recommendation
of the Special Committee described in Section 3.02(b), (i) determined that this
Agreement and the Merger contemplated hereby are fair to and in the best
interest of the Public Shareholders, (ii) approved, authorized and adopted this
Agreement, the Offer, the Merger and the other transactions contemplated hereby,
and (iii) resolved to recommend the approval and adoption of this Agreement and
the Merger by the shareholders of the Company.
(d) The Independent Advisor has delivered to the Special
Committee and to the Company Board its written opinion, dated prior to or as of
the date of this Agreement, that based on the assumptions, qualifications and
limitations contained therein, the cash consideration to be received by the
Public Shareholders in the Merger is fair to such holders from a financial point
of view.
SECTION 3.03 Non-Contravention. Neither the execution and
delivery of this Agreement by the Company, nor the consummation of the
transactions contemplated hereby, nor compliance by the Company with any of the
terms and provisions hereof, will (i) violate, contravene, conflict with or
result in a breach of any provision of the Company's Articles of Incorporation
or By-laws or the Articles or Certificate of Incorporation or By-laws (or other
equivalent organizational documents) of any Subsidiary, (ii) except as set forth
on Section 3.03 of the Disclosure Schedule, result in any material respects in
any breach or violation of, conflict with, or constitute or result in a default
or event of default or event which, with notice or lapse of time or both, would
constitute such a default or event of default (or give rise to any right of
termina tion, cancellation, payment or acceleration, or any other right to
materially diminish the
9
rights of, or materially increase the obligations or costs to, the Company or
any Subsidiary) under, or require any consent pursuant to, or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever on any of the properties or assets owned, leased or managed by the
Company and/or any Subsidiary under the terms or provisions of, any material
note, bond, mortgage, license, franchise, permit, lease, indenture, agreement,
contract or other instrument or obligation to which the Company and/or any
Subsidiary is a party or to which any of the material properties or assets
owned, leased or managed by the Company or any Subsidiary are bound or otherwise
affected or (iii) contravene or violate in any material respects any law, rule,
regulation, licensing requirement, permit, order or decree of any court,
arbitrator or any other agency of government or authority by which the Company
or any Subsidiary is bound or by which any material properties or assets owned,
leased or managed by the Company or any Subsidiary are bound or otherwise
affected.
SECTION 3.04 Capital Stock; Subsidiaries.
(a) The total number and par value of authorized shares of
capital stock of the Company and each of the Corporate Subsidiaries and the
total number of issued and outstanding shares of capital stock of the Company
and each of the Corporate Subsidiaries is set forth on Section 3.04(a) of the
Disclosure Schedule. All shares of capital stock of the Company and each of the
Corporate Subsidiaries are validly issued and outstanding, fully paid and
nonassessable. The total number of partnership (general or limited) units or
other interests authorized, and the total number of partnership (general or
limited) units or other interests outstanding of the Partnership Subsidiaries is
set forth on Section 3.04(a) of the Disclosure Schedule. All of such partnership
units or other interests are validly issued and outstanding, fully paid and
nonassessable. All of the outstanding shares of capital stock or partnership
(general or limited) units of each Subsidiary are directly owned, of record and
beneficially, by the persons (and in the relative ownership percentages) listed
on Section 3.04(a) of the Disclosure Schedule, free and clear of all pledges,
security interests, liens, claims, charges or other encumbrances of any nature
whatsoever, except for those pledges, security interests, liens, claims, charges
or other encumbrances set forth on Section 3.04(a) of the Disclosure Schedule.
None of the outstanding shares of capital stock or partnership units or other
interests of the Company or any Subsidiary are subject to, nor were any of them
issued in violation of, any pre-emptive or similar rights or any right of first
refusal or first offer or other similar right in favor of any person and there
are no proxies outstanding or restrictions on or agreements with respect to the
voting or transferability any of such shares or units or other interests.
(b) Except as set forth on Section 3.04(b) of the Disclosure
Schedule, (i) no subscription, warrant, option, convertible security or other
right (contingent or other) to purchase or acquire any shares of any class of
capital stock of the Company or any Corporate Subsidiary is authorized or
outstanding, (ii) there are no outstanding stock appreciation rights or phantom
stock plans of the Company, (iii) there is not any commitment on the part of the
Company or of any Corporate Subsidiary to issue any shares, warrants, options or
other such rights or to
10
distribute to holders of any class of its capital stock any evidences of
indebtedness or assets and (iv) neither the Company nor any Corporate Subsidiary
has any obligation (contingent or other) to purchase, redeem or otherwise
acquire any shares of the capital stock of the Company or the Corporate
Subsidiaries or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
(c) Except as set forth on Section 3.04(c) of the Disclosure
Schedule, (i) no subscription, warrant, option, convertible security or other
right (contingent or other) to purchase or acquire any interest in any
Partnership Subsidiary is authorized or outstanding, (ii) there is not any
commitment of any Partnership Subsidiary to issue any partnership interests or
other rights or to distribute to its partners any evidences of indebtedness or
assets and (iii) no Partnership Subsidiary has any obligation (contingent or
other) to purchase, redeem or otherwise acquire any partnership interests or to
pay or make any other distribution in respect thereof.
(d) Other than the capital stock of the Corporate Subsidiaries
and the partnership (general or limited) units of the Partnership Subsidiaries,
and except as set forth on Section 3.04(d) of the Disclosure Schedule, neither
the Company nor any Subsidiary owns of record or beneficially, or has any right
or obligation to acquire, directly or indirectly, (i) any shares of outstanding
capital stock or securities convertible into or exchangeable for capital stock
of any other corporation or (ii) any participating interests in any partnership,
joint venture or other non-corporate business enterprise.
SECTION 3.05 SEC Filings
(a) The Company has timely filed and (except for preliminary
materials) made available to Parent all reports, statements, registration
statements and other documents (including all exhibits thereto) filed or
required to be filed by the Company with the Securities Exchange Commission (the
"SEC") (such reports, registration statements and other documents being referred
to herein collectively as the "Company SEC Filings"), including without
limitation, (i) the Company's Registration Statement on Form S-1 dated July 2,
1997, (ii) the Annual Report of the Company on Form 10-K for the year ended
1997, (iii) the Quarterly Reports of the Company on Form 10-Q for the three
months ended March 31, 1998 and June 30, 1998, and (iv) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
shareholders of the Company. The Company SEC Filings, including, without
limitation, any financial statements or schedules including therein or
incorporated therein by reference, (i) at the time filed, complied in all
material respects with applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and other applicable laws,
rules and regulations and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date hereof, then on the date of
such later filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Company SEC Filings or
necessary in order to make the statements in such Company SEC Filings, in light
of the circumstances under
11
which they were made, not misleading. No Subsidiary is, or has been, required to
file any forms, reports or other documents with the SEC.
SECTION 3.06 Financial Statements. The financial statements of
the Company and its Subsidiaries contained in the Company SEC Filings or
otherwise furnished to Parent and Acquisition Sub, including (i) the
consolidated balance sheets of the Company and its Subsidiaries as of December
31, 1997 (the "Audited Balance Sheet") and as of each of December 31, 1996 and
December 31, 1995 and the related statements of income, shareholders' equity and
cash flows for the respective years then ended, in each case certified by
PricewaterhouseCoopers LLP, the independent public accountants retained by the
Company and (ii) the unaudited consolidated balance sheets of the Company as of
June 30, 1998 (the "Interim Balance Sheet") and June 30, 1997, and the related
statements of operations, shareholders' equity and cash flows for the respective
six-month periods then ended, certified by the Chief Financial Officer of the
Company, are in accordance with the books and records of the Company and its
Subsidiaries (except as may be indicated in the notes thereto or in the case of
unaudited statements, as permitted by Rule 10- 01 of Regulation S-X promulgated
by the SEC) and present fairly (subject, in the case of unaudited statements, to
normal, recurring accruals, none of which individually or in the aggre gate will
be material), in all material respects, the consolidated financial position of
the Company as of such respective dates and the consolidated results of its
operations for the respective periods then ended in accordance with generally
accepted accounting principles ("GAAP"), applied on a consistent basis
throughout the periods involved.
SECTION 3.07 Absence of Undisclosed Liabilities. Except as set
forth on, and to the extent reflected in, the Interim Balance Sheet or the
Company SEC Filings or as may have been incurred since June 30, 1998 in the
ordinary course of business and consistent with past practice, neither the
Company nor any Subsidiary has incurred any liabilities or obligations of any
kind or nature, whether known or unknown or secured or unsecured (whether
absolute, accrued, contingent or otherwise, and whether due or to become due) of
a nature customarily accrued, reserved against or disclosed in a corporate
balance sheet (including the notes thereto) prepared in conformity with GAAP,
including without limitation any tax liabilities due or to become due.
SECTION 3.08 Governmental Approvals. Except as set forth in
Section 3.08 of the Disclosure Schedule, no order, authorization, approval or
consent from, or filing with, any federal or state governmental or public body
or other authority having jurisdiction over the Company, any Subsidiary or any
Facility is required for the execution, delivery and performance of this
Agreement by the Company or is necessary in order to ensure the legality,
validity, binding effect or enforceability of this Agreement, other than (i)
filings in connection or compliance with the provisions of any federal or state
securities laws and/or the rules of the National Association of Securities
Dealers, Inc. ("NASD"), (ii) filings with the Federal Trade Commission and with
the Antitrust Division of the United States Department of Justice pursuant to
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act), and
12
the rules promulgated thereunder, (iii) the filing of a Certificate of Merger
with the Secretary of State of the State of Georgia and related informational
filings under applicable laws of other states in which the Company is qualified
to do or is doing business, and (iv) such consents, approvals, orders or
authorizations which if not obtained, or registrations, declarations or filings
which if not made, would not, individually or in the aggregate, have a Material
Adverse Effect or materially delay or materially adversely affect the ability of
the Company to consummate the transactions contemplated hereby.
SECTION 3.09 Absence of Certain Changes or Events.
(a) Since June 30, 1998, except (x) as otherwise set forth in
Section 3.09 of the Disclosure Schedule, (y) as specifically disclosed in the
Company SEC Filings or (z) as otherwise specifically contemplated by this
Agreement, neither the Company nor any Subsidiary (excluding any Managed
Facility) has:
(i) changed or amended its Articles or Certificate of
Incorporation or By-laws (or other governing documents); (ii) incurred
any indebtedness for borrowed money or guaranteed any indebtedness for
borrowed money or incurred any other material obliga tion or liability
(whether fixed or contingent), except normal trade or business
obligations incurred in the ordinary course of business and consistent
with past practice; (iii) discharged or satisfied any lien, security
interest, charge or other encumbrance or paid any obligation or
liability (fixed or contingent), other than in the ordinary course of
business and consistent with past practice; (iv) mortgaged, pledged or
subjected to any lien, security interest, charge or other encumbrance
(other than Permitted Liens) any of its assets or properties; (v)
transferred, leased or otherwise disposed of any of its assets or
properties except for a fair consideration in the ordinary course of
business and consistent with past practice or, except for a fair
consideration in the ordinary course of business and consistent with
past practice, acquired any assets or properties; (vi) declared, set
aside or paid any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its
capital stock or otherwise acquired any of its capital stock or split,
combined or otherwise altered its capital stock or authorized the
creation or issuance of or issued or sold any shares of its capital
stock or any securities or obligations convertible into or exchangeable
for its capital stock or issued to any person any other right to
acquire any shares of its capital stock or any stock appreciation or
similar rights; (vii) made any investment of a capital nature either by
purchase of stock or securities, contributions to capital, property
transfers or otherwise, or by the purchase of any material property or
assets of any other individual, firm or corporation (other than
transactions between or among the Company and/or the Subsidiaries);
(viii) canceled or compromised any debt or claim other than in the
ordinary course of business, consistent with past practice; (ix)
increased the rate or terms of compensation payable or to become
payable by the Company or the Subsidiaries to their directors, officers
or employees, or increased the rates or terms of any bonus, insurance,
pension, or other employee benefit
13
plan, payment or arrangement; (x) waived or released any rights of
material value, including without limitation, any Intangible
Rights, except in the ordinary course of business and consistent with
past practice; (xi) transferred or granted any rights under or with
respect to any Intangible Rights, or permitted any license, permit or
other form of authorization relating to an Intangible Right to lapse,
except in the ordinary course of business and consistent with past
practice; (xii) made or granted any wage or salary increase applicable
to any group or classification of employees generally, entered into any
employment contract with, or made any loan to, or entered into any
material transaction of any other nature with, any officer or employee
of the Company or any Subsidiary; (xiii) entered into any transaction,
contract or commitment that, individually or in the aggregate, are
material to the Company and its Subsidiaries taken as a whole, except
(x) contracts listed, or which pursuant to the terms hereof are not
required to be listed, on Section 3.11 of the Disclosure Schedule, (y)
this Agreement and the transactions contemplated hereby and (z) as
permitted by Section 6.01; (xiv) suffered any casualty loss or damage
(whether or not such loss or damage shall have been covered by
insurance) which affects in any material respect its ability to conduct
its business; or (xv) agreed in writing or otherwise to take any of the
actions listed in clauses (i) through (xiv) of this Section 3.09 or
caused or allowed any Managed Facility to take any of the actions
listed in clauses (ii) through (xiv) of this Section 3.09.
(b) Since June 30, 1998, the Company and its Subsidiaries have
not suffered a Material Adverse Effect.
SECTION 3.10 Title to Properties, Absence of Liens and
Encumbrances. Except as reflected in the Audited Balance Sheet (including any
related notes thereto), as set forth in Section 3.10 of the Disclosure Schedule
or with respect to assets disposed of since December 31, 1997 in the ordinary
course of business and consistent with past practice, each of the Company and
the Subsidiaries (i) has good and marketable fee simple title to all real
property owned by it and (ii) has good and valid title to all its other assets
and properties, in each case free and clear of all liens, claims, charges,
security interests or other encumbrances, other than (x) liens for taxes not yet
delinquent, (y) mechanics, materialmen's and similar liens and encumbrances
which may have arisen in the ordinary course of business and which, in the
aggregate, would not be material to the assets, business, financial condition or
results of operations of the Company and the Subsidiaries taken as a whole, or
(z) security interests securing indebtedness not in default for the purchase
price of or lease rental payments on property purchased or leased under capital
lease arrangements in the ordinary course of business (the liens, charges,
security interests and other encumbrances described in clauses (x), (y) and (z)
above being referred to herein as "Permitted Liens"). Any real property and
buildings held under lease by the Company or any of the Subsid iaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and would not individually or in the aggregate have a Material
Adverse Effect on the Company and the Subsidiaries and do not interfere with the
use made and proposed to be made of such property and buildings.
14
SECTION 3.11 List of Properties, Contracts and Other Data.
(a) Annexed hereto as Section 3.11 of the Disclosure Schedule
is a list setting forth the following:
(i) a description of all real property owned by the Company or
any Subsidiary and (ii) all leases of real or personal property
involving payments in excess of $100,000 per annum (x) to which the
Company or any Subsidiary is a party, either as lessee or lessor or (y)
that relate to any real or personal property used in the business of
the Company and/or the Subsidiaries (the "Business"), in each case
including a description of the property to which each such lease
relates;
(ii) all collective bargaining agreements, employment and
consulting agree ments, executive compensation plans, bonus plans or
arrangements, severance plans or arrangements, deferred compensation
agreements, employee pension plains or retirement plans, employee
profit sharing plans, employee stock purchase and stock option plans,
group life insurance, hospitalization insurance or other similar plans
or arrangements providing for benefits to employees of, or independent
contractors or other agents for, the Company or any Subsidiary which
have not been filed as exhibits to the Company SEC Filings and which
exceed $100,000 per annum; and
(iii) all contracts, understandings and commitments (including
without limitation mortgages, indentures and loan agreements) to which
the Company or any Subsidiary is a party, or to which the Company or
any Subsidiary or any of the assets or properties owned, leased or
managed by the Company or any of the Subsidiaries are subject and which
are not specifically referred to in clause (a)(i) or (a)(ii) above,
provided that there need not be listed in Section 3.11 of the
Disclosure Schedule pursuant to this clause (a)(iii) any contracts,
understandings, or commitments filed as exhibits to the Company SEC
Filings or which are incurred in the ordinary course of business and
consistent with past practice, other than any such contract,
understanding or commitment which (A) is a contract or group of related
contracts which exceeds $100,000 in amount, (B) contains warranties by
the Company or any Subsidiary materially more burdensome than those
customary in the Business or (C) cannot be performed in the normal
course within 365 days after the Effective Time or canceled within such
period by the Company or any Subsidiary or its assignee, without breach
or penalty.
(b) Except as set forth on Section 3.11 of the Disclosure
Schedule or disclosed in the Company SEC Filings, neither the Company nor any
Subsidiary is party to any agreement with any employee (i) the benefits of which
(including, without limitation, severance benefits) are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company or any Subsidiary of the nature of any of the transactions
contemplated by this Agreement or (ii) providing severance benefits in excess of
those generally available under the Company's severance policies as in effect on
the date hereof (which are described in
15
Section 3.11 of the Disclosure Schedule), or which are conditioned upon a change
of control, after the termination of employment of such employees regardless of
the reason for such termination of employment. Except as set forth on Section
3.11 of the Disclosure Schedule or disclosed in the Company SEC Filings, neither
the Company nor any Subsidiary is a party to any employment agreement or
compensation guarantee extending for a period longer than one year from the date
hereof.
True and complete copies of all documents and complete
descriptions of all oral understandings (if any) referred to in Section 3.11 of
the Disclosure Schedule have been provided or made available to Parent and its
counsel. Except as disclosed in Section 3.11 of the Disclosure Schedule, to its
knowledge, neither the Company nor any Subsidiary has been notified in writing
of any claim that any contract referred to in Section 3.11 of the Disclosure
Schedule is not valid and enforceable in accordance with its terms for the
periods stated therein, or that there is under any such contract any existing
default or event of default or event which with notice or lapse of time or both
would constitute such a default or event of default or that the consummation of
the transactions contemplated hereby would result in a default or any such
condition which, in either case, could reasonably be expected have a Material
Adverse Effect.
16
SECTION 3.12 Intangible Rights.
(a) Section 3.12 of the Disclosure Schedule lists (i) all
patents, trademarks and trade names, trademark and trade name registrations,
logos, service marks registrations, copy rights and copyright registrations, all
applications pending on the date hereof for patent or for trademark, trade name,
service xxxx or copyright registrations, and all other proprietary rights
(collectively "Intangible Rights") owned by the Company or any Subsidiary or
used by them in connection with the Business specifying the nature of its rights
therein, and (ii) all licenses granted by or to the Company or any Subsidiary
and all other agreements to which the Company or any Subsidiary is a party which
relate, in whole or in part, to any Intangible Rights mentioned in clause (i)
above, whether owned b) the Company or any Subsidiary or otherwise. Except as
set forth in Section 3.12 of the Disclosure Schedule and except where such
noncompliance, absence of rights or other failure, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect on
the Company and the Subsidiaries, (w) the Company and the Subsidiaries have
complied with their respective contractual obligations relating to the
protection of such of the Intangible Rights used by them pursuant to licenses or
other contracts, (x) the Company and each of the Subsidiaries has the right to
use the Intangible Rights to provide, sell and produce the services and products
provided, sold and produced by it, and to conduct its business as heretofore
conducted, and the consummation of the transactions contemplated hereby will not
alter or impair any such rights, (y) all such Intangible Rights are valid,
enforceable and in good standing and no claims have been asserted with respect
to the use by the Company or the Subsidiaries of any of the Intangible Rights or
otherwise for patent, copyright or trademark infringement, and (z) to the
knowledge of the Company, no person is infringing on or violating the Intangible
Rights or know-how used by the Company or any Subsidiary.
(b) Upon consummation of the transactions contemplated by this
Agreement, the Company and its Subsidiaries will continue to own and have the
right to use the Intangible Rights necessary to conduct the Business of the
Company and the Subsidiaries (other than any such rights, the absence of which
would not have a Material Adverse Effect, free and clear of all material claims,
liens, encumbrances, obligations and liabilities and, with respect to any agree
ments for the license of any licensed Intangible Rights which require consents
or other actions as a result of the consummation of the transactions
contemplated by this Agreement in order for the Company and its Subsidiaries to
continue to use and operate such Intangible Rights, the Company will have
obtained such consents or taken such other actions so required.
SECTION 3.13 Software.
17
(a) The Company and each of the Subsidiaries has valid
licenses to all copies of all software that is not owned by it and is used by it
in connection with the conduct of its business ("Third Party Software"), and the
use by the Company or such Subsidiary of such Third Party Software, including
without limitation all modifications and enhancements thereto (whether or not
created by the Company), complies with such license (except for such
noncompliance as could not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect). The Company owns all right, title
and interest in and to all software or has obtained a third party license to all
software that is marketed or licensed by the Company and the Subsid iaries to
customers or held for use or in development for marketing and licensing to
customers (collectively, the "Proprietary Software").
(b) No claim or demand with respect to any such infringement
or violation has been made or, to the knowledge of the Company, threatened, with
respect to either the Proprietary Software or the Third Party Software.
(c) To the knowledge of the Company, there are no viruses in
the Proprietary Software and there are no defects in the Proprietary Software
that would prevent such software from performing in all material respects the
tasks and functions that it was intended to perform except those that can be
cured without a Material Adverse Effect.
(d) The Company has conducted an inventory of the Proprietary
Software, as well as the hardware and embedded microcontrollers in noncomputer
equipment (collectively, the "Computer Systems") used by the Company and its
Subsidiaries in connection with their respective Businesses in order to
determine which parts of the Computer Systems are not Year 2000 Compatible (as
defined below) and to estimate the cost of rendering such Computer Systems Year
2000 Compatible prior to January 1, 2000 or such earlier date on which the
Computer Systems may shut down or produce incorrect calculations or otherwise
malfunction without becoming totally inoperable. "Year 2000 Compatible" means
that the Computer Systems (i) correctly perform date data century recognition,
and calculations that accommodate same century and multi-century formulas and
date values; (ii) operate or will operate in accordance with their
specifications prior to, during and after the calendar year 2000 A.D.,
including, but not limited to, leap years; and (iii) shall not end abnormally or
provide invalid or incorrect results as a result of date data, specifically
including date data which represents or references different centuries or more
than one century. The Company has delivered to the Parent a copy of its findings
regarding "Year 2000 Compatible".
SECTION 3.14 Litigation.
(a) Section 3.14 of the Disclosure Schedule sets forth a
complete list and an accurate description of all claims, actions, suits,
proceedings and (to the knowledge of the Company) investigations pending or, to
the knowledge of the Company, threatened, by or against or involving the Company
or any Subsidiary or any Facility or any of the properties, rights or
18
businesses owned, leased or managed by the Company or any Subsidiary. Except as
set forth in Section 3.14 of the Disclosure Schedule, no such claims, actions,
suits, proceedings or investigations, if adversely determined, could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
(b) There are no actions, suits, proceedings or claims pending
before or by any court, arbitrator or government agency against or affecting the
Company, any Subsidiary or any Facility which seek to enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
19
SECTION 3.15 Governmental Authorizations and Regulations.
(a) To the knowledge of the Company, and except as set forth
in Section 3.15 of the Disclosure Schedule, the Company and each Subsidiary has
complied and is currently in compliance with each, and is not in violation of
any, law, ordinance, or governmental or xxxxxx xxxx rule or regulation, whether
federal, state, local or foreign, to which such entity's business, operations,
assets or properties is subject ("Regulations"), except where such noncompliance
could not reasonably be expected to have a Material Adverse Effect. Except as
set forth in Section 3.15 of the Disclosure Schedule, the Company and each
Subsidiary owns, holds, possesses or lawfully uses in the operation of its
business all material franchises, licenses, permits, certificates of need
("CON"), provider agreements and certifications under Subchapters XVIII and XIX
of the Social Security Act (the "Social Security Act"; the reimbursement
programs promulgated under such Subchapters are hereinafter referred to as the
"Medicare and Medicaid Programs") and any other applicable laws for
reimbursement for long-term, skilled and intermedi ate nursing care, or other
type of care provided at each Facility, easements, rights, applications,
filings, registrations and other authorizations ("Authorizations") which are in
any manner necessary for it to conduct its business as now or previously
conducted or for the ownership and use of the assets owned or used by the
Company and such Subsidiary or any Professional in the conduct of the Business,
free and clear of all liens, claims, charges, restrictions and encumbrances and
in substantial compliance with all Regulations, other than any such
Authorizations which, if not owned, held, possessed or lawfully used by the
Company and each Subsidiary, would not individually or in the aggregate have a
Material Adverse Effect. Neither the Company nor any Subsidiary is in default,
nor has the Company or any Subsidiary received any notice of any claim of
default, with respect to any such Authorization. Except as set forth in Section
3.15 of the Disclosure Schedule, neither the Company nor any Subsidiary has been
informed in writing that any action currently is pending by any governmental or
regulatory official, body or authority, either to revoke, withdraw or suspend
any CON or any license to operate any of the Facilities, or to terminate or
decertify any participation of any of the Facilities or Professionals in the
Medicare and Medicaid Programs, nor, to the knowledge of the Company, is there
any decision not to renew any provider agreement related to any Facility. As
used herein, the term "Professional" means any individual who is employed by or
under contract with the Company or any Subsidiary to provide health care
services for which a license or permit is required by any federal, state or
local law.
(b) All cost reports ("Cost Reports") required to be filed by
the Company or any Subsidiary with respect to the Facilities under Subchapters
XVIII and IX of the Social Security Act, or any, other applicable governmental
or private provider regulations for periods ended on or prior to the date of
this Agreement have been prepared and have been filed in accordance with
applicable laws, rules and regulations, and the Company and/or the Subsidiaries
have paid or made provision to pay through proper recordation of any net
liability reflected on or contained in all Notices of Program Reimbursement
received from the Medicare and Medicaid Programs and tentative settlements for
periods ended on or prior to the date of this Agreement
20
and any similar obligations with respect to the Medicare and Medicaid Programs.
Section 3.15 of the Disclosure Schedule sets forth for each Facility the years
for which Cost Reports remain to be settled.
(c) Consistent with the Company's record keeping practices,
Section 3.15 of the Disclosure Schedule sets forth a complete and accurate
statement of (i) the bed categories for which each Facility is licensed or
qualified to participate under the Medicare and Medicaid Programs, (ii) the
number of beds in each such category, (iii) the number of beds in each such
category that are available for use in such Facility, and (iv) the number of
patients as of October 16, 1998 admitted in each Facility (A) who qualify for
Medicare, (B) who qualify for Medicaid, (C) who qualify for neither Medicare nor
Medicaid, (D) who qualify for other governmental programs, including, but not
limited to, programs administered by the Veterans Administration, and (E) for
whom reimbursement may be obtained from a non-governmental third-party or from
the patient.
SECTION 3.16 Condition of Facilities. Except as set forth in
Section 3.16 of the Disclosure Schedule, and to the knowledge of the Company,
each of the Facilities is in a good state of repair and condition, there are no
dangerous conditions or defects existing upon or in any of the Facilities, and
there are no (a) structural defects in any Facility that could adversely affect
the operation of such Facility as presently conducted and (b) life safety code
deficiency or other survey requirements which are not (i) subject to waiver or
(ii) currently the subject of a plan of correction which is being implemented.
SECTION 3.17 Labor Matters.
21
(a) Except as set forth on Section 3.17 of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party to any collective
bargaining agreement, and no such agreement is applicable to any employees of
the Company or any Subsidiary. Except as set forth in Section 3.17 of the
Disclosure Schedule, there are no controversies between the Company or any
Subsidiary on the one hand, and any of such employees, on the other hand, that
could reasonably be expected to have a Material Adverse Effect. To the knowledge
of the Company the Company and each of the Subsidiaries is in compliance in all
material respects with all federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions of
employment and wages and hours, and no such entity has or is engaged in any
unfair labor practice. Except as set forth on Section 3.17 of the Disclosure
Schedule, there are no unresolved labor union grievances or unfair labor
practice or labor arbitration proceedings pending, or to the knowledge of the
Company, threatened, relating to the Business that could reasonably be expected
to have a Material Adverse Effect. To the knowledge of the Company, except as
set forth on Section 3.17 of the Disclosure Schedule, there are no
organizational efforts presently being made in respect of any of the employees
referred to above. Except as set forth in Section 3.17 of the Disclosure
Schedule, neither the Company nor any Subsidiary has received written notice of
any claim that the Company or any Subsidiary has failed to comply with any laws
relating to the employment of labor, including any provisions thereof relating
to wages, hours, collective bargaining, the payment of social security and
similar taxes, equal employment opportunity, employment discrimination and
employment safety, or that the Company or any Subsidiary is liable for any
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing.
(b) Except as set forth in Section 3.17 of the Disclosure
Schedule, there are no proceedings pending before the National Labor Relations
Board with respect to any employees of the Company or any Subsidiary, nor are
there any discrimination charges (relating to sex, age, religion, race, national
origin, ethnicity, handicap or veteran status) pending before any federal or
state agency or authority against the Company or any Subsidiary, which,
individually or, in the aggregate could reasonably be expect to have a Material
Adverse Effect.
(c) No third party has claimed or notified the Company or any
Subsidiary in writing that any person employed by or otherwise affiliated with
the Company or any Subsidiary has, in respect of his or her activities to date,
violated any of the terms or conditions of his or her employment contract with
any third party, or disclosed or utilized any trade secrets or proprietary
information or documentation of any third party, or interfered in the employment
relationship between any third party and any of its employees, and to the
knowledge of the Company, no person employed by or otherwise affiliated with the
Company or any Subsidiary has employed any trade secrets or any information or
documentation proprietary to any former employer, or violated any confidential
relationship which such person may have had with any third party, in connection
with the development or sale of any products of the Company or any Subsidiary.
22
SECTION 3.18 Insurance. All policies of fire, liability,
workers' compensation, and other forms of insurance providing insurance coverage
to or for the Company or any Subsidiary or any Facility are listed in Section
3.18 of the Disclosure Schedule and, except as set forth in said Section 3.18 of
the Disclosure Schedule, all premiums with respect thereto covering all periods
up to and including the date as of which this representation is being made have
been paid, and no notice of cancellation or termination has been received with
respect to any such policy. All such policies are in full force and effect and
provide insurance, including without limitation liability insurance, in such
amounts and against such risks or as disclosed in Section 3.18 of the Disclosure
Schedule to protect the employees, properties, assets and operations of the
Company and the Subsidiaries. Except as shown in Section 3.18 of the Disclosure
Schedule, all such policies will remain in full force and effect and will not in
any way be affected by, or terminate or lapse by reason of, any of the
transactions contemplated hereby.
SECTION 3.19 Use of Real Property. Except as set forth in
Section 3.19 of the Disclosure Schedule and except to the extent that
non-compliance would not be reasonably likely to have a Material Adverse Effect,
the owned and leased real properties listed in Section 3.11 of the Disclosure
Schedule are used and operated in material compliance with all applicable
leases, contracts, commitments, licenses and permits. Neither the Company nor
any Subsidiary has received written notice of any violation of any applicable
zoning or building regulation, ordinance or other law, order, regulation or
requirement relating to its operations or assets which violation could
reasonably be expected to have a Material Adverse Effect. To the knowledge of
the Company, except as set forth in Section 3.19 of the Disclosure Schedule, all
buildings that are covered by leases listed in Section 3.11 of the Disclosure
Schedule conform in all material respects with all applicable ordinances, codes,
regulations and requirements, and no law presently in effect or condition
precludes or materially restricts continuation of the present use of such
properties.
SECTION 3.20 Conditions of Assets. To the knowledge of the
Company, except as set forth in Section 3.20 of the Disclosure Schedule, all
tangible personal property, fixtures and equipment which comprise the assets of
the Company and the Subsidiaries, or are otherwise used in connection with the
Business, are in a good state of repair (ordinary wear and tear excepted) and
operating condition.
SECTION 3.21 Employee Benefit Plans. Except as otherwise set
forth in Section 3.21 of the Disclosure Schedule:
(a) Section 3.21 of the Disclosure Schedule lists each
"employee pension benefit plan" (as such term is defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
maintained by the Company or any Subsidiary or to which the Company or any
Subsidiary contributes or is required to contribute or in which any employee of
the Company or any Subsidiary participates (a "Plan"). The Company and each
Subsidiary have complied and currently are in compliance, both as to form and
operation in all
23
material respects, with the applicable provisions of ERISA and the Internal
Revenue Code of 1986, as amended (the "Code"), respectively, with respect to
each Plan.
(b) Each of the Plans which is intended to be "qualified" with
the meaning of Section 401(a) of the Code does so qualify and is exempt from
taxation pursuant to Section 501(a) of the Code.
(c) Neither the Company nor any Subsidiary has maintained,
contributed to or been required to contribute to a "multi-employer plan" (as
defined in Section 3(37) of ERISA). No amount is due or owing from the Company
or any Subsidiary on account of a "multi-employer plan" (as defined in Section
3(37) of ERISA) or on account of any withdrawal therefrom.
(d) Other than normal claims for benefits, there is no claim
pending against the Company or any Subsidiary under the Code, ERISA or other
applicable law with respect to any of the Plans. Full payment has been made, or
will be made in accordance with Section 404(a)(6) of the Code, of all amounts
that are required to be paid under the terms of each Plan and Section 412 of the
Code; and none of the Plans nor any trust established thereunder has incurred
any "accumulated funding deficiency" (as defined n Section 302 of ERISA and 412
of the Code) whether or not waived. The Company and the Subsidiaries have no
current liability for plan termination or withdrawal under Title IV of ERISA.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or officer of
either of the Company or any Subsidiary to severance pay, unemployment
compensation or any other payment or (ii) accelerate the time of payment or
vesting (except as provided in Section 2.02), or increase the amount of
compensation due any such employee or officer.
(f) The Company has provided (or made available to) Parent
with true and complete copies of (i) summary plan descriptions for each of the
Plans; (ii) each trust agreement, insurance policy or other instrument relating
to the funding of each of the Plans; (iii) the two most recent Annual Reports
(Form 5500 series) and accompanying schedules filed with the Internal Revenue
Service or United States Department of Labor with respect to each of the Plans
and (iv) the most recent audited financial statement for each of the Plans.
SECTION 3.22 Environmental Matters. Except as set forth in
Section 3.22 of the Disclosure Schedule, (i) the Company and the Subsidiaries
conduct the Business in material compliance with all applicable environmental
laws, ordinances and regulations, (ii) neither the Company nor any Subsidiary
has knowledge of or has received written notice of any claim, action, suit,
proceeding, hearing or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, or
24
hazardous or toxic material or waste (collectively, an "Environmental Event")
relating to the Business and (iii) to the knowledge of the Company, no notice of
any Environmental Event was given to any person or entity that occupied the
offices of the Company and the Subsidiaries or any Facility prior to the date
such offices or Facility were occupied or used in the Business. Without limiting
the generality of the foregoing, to the knowledge of the Company, neither the
Company nor any Subsidiary has disposed of or placed on or in such offices or
Facility any waste materials, hazardous materials or hazardous substances in
violation of law.
SECTION 3.23 Information In Proxy Statement. None of the
information included or incorporated by reference in the Proxy Statement (as
hereinafter defined), including any amendments or supplements thereto, will at
the time the Proxy Statement is first mailed to the shareholders of the Company
or at the time of the Special Meeting, contain any statement which, at such time
and in light of the circumstances under which it is made, is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not false or misleading. Notwithstanding
the foregoing, the Company does not make any representation or warranty with
respect to the information that has been or will be supplied by Parent or
Acquisition Sub or their respective representatives or Affiliates, for inclusion
or incorporation by reference into the Proxy Statement. The Proxy Statement and
any amendments or supplements thereto will comply in all material respects with
the applicable provisions of the Exchange Act and the rules and regulations
thereunder.
SECTION 3.24 Fraud and Abuse. Neither the Company nor any
Subsidiary or affiliate thereof or any of their respective partners, officers
and directors, or, to the best knowledge of the Company, any person (including
without limitation Professionals) who provides professional services under
agreements with the Company, any Subsidiary or any affiliate has engaged in any
activities which are prohibited under federal Medicare and Medicaid statutes,
including, without limitation, 42 U.S.C. SectionSection 1320a-7, 1320a-7a and
1320a-7b, the federal CHAMPUS statute, 10 U.S.C. Section1071 et seq., the
Federal Civil False Claims Act, 31 U.S.C. Section3729 et seq., or the
regulations promulgated pursuant to such statutes or related state or local
statutes or regulations or which are prohibited by rules of professional
conduct, including but not limited to the following:
(a) knowingly and willfully making or causing to be made false
statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment;
(c) presenting or causing to be presented a claim for services
under Medicare, Medicaid, CHAMPUS or other state health care program that is for
an item or service that is known or should be known to be (i) not provided as
claimed, or (ii) false or fraudulent;
25
(d) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment;
(e) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind (i) in return for
referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part by CHAMPUS, Medicare or Medicaid, or other state health care program, or
(ii) in return for purchasing, leasing, or ordering or arranging for or
recommending purchasing, leasing, or ordering any good, facility, service, or
item for which payment may be made in whole or in part by CHAMPUS, Medicare or
Medicaid or other state health care program; or
(f) knowingly and willfully making or causing to be made or
inducing or seeking to induce the making of any false statement or
representation (or omit to state a fact required to be stated therein or
necessary to make the statements contained therein not mislead ing) of a
material fact with respect to (i) the conditions or operations of a facility in
order that the facility may qualify for CHAMPUS, Medicare, Medicaid or other
state health care program certification, or (ii) information required to be
provided under Section 1124A of the Social Security Act (42 U.S.C. Section
1320a-3).
SECTION 3.25 Health Professional's Financial Relationships.
The operations of the Company and the Subsidiaries are in compliance with and do
not otherwise violate the federal Medicare and Medicaid statutes regarding
health professional self-referrals, 42 U.S.C. Section 1395nn and 42 U.S.C.
Section 1396b, or the regulations promulgated pursuant to such statute, or
similar state or local statutes or regulations.
SECTION 3.26 Tax Matters.
(a) Except as set forth in Section 3.26 of the Disclosure
Schedule, the Company and the Subsidiaries have duly and timely filed or caused
to be filed all federal, state, local and foreign returns, declarations,
reports, estimates, information returns and statements (collectively, "Tax
Returns") required to be filed by them in respect of any Taxes (as hereinafter
defined) for all years and periods for which such Tax Returns have become due.
All such Tax Returns were correct as filed in all material respects and were not
delinquent. Except as set forth in Section 3.26 of the Disclosure Schedule, the
Company and the Subsidiaries have paid all taxes shown as due on such Tax
Returns. Where payment of any Taxes of the Company or the Subsidiaries with
respect to any taxable period ending on or prior to the Effective Time is not
yet due, the Company and the Subsidiaries have established, or will establish,
consistent with past practice, an adequate reserve on each such entity's books
and records for the payment of all such Taxes. For purposes of this Agreement,
"Taxes" shall mean all federal, state, local, foreign or other taxing authority
net income, franchise, sales, use, ad valorem, property, payroll, withhold-
26
ing, excise, severance, transfer, employment, alternative or add-on minimum,
stamp, occupation, premium, environmental or windfall profits taxes, and other
taxes, charges, fees, levies, imposts, customs, duties, licenses or other
assessments, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority.
(b) Except as set forth in Section 3.26 of the Disclosure
Schedule, (i) no extensions of time have been granted to the Company or any
Subsidiary to file any Tax Return required by applicable law to be filed by it
prior to or on the Effective Time which have expired, or will expire, on or
before the Effective Time without such Tax Return having been filed, (ii) no
deficiency or adjustment for any Taxes has been proposed, asserted, or assessed
against the Company or any Subsidiary and no federal, state or local audits or
other administrative proceedings or court proceedings are presently pending
with regard to any Taxes and (iii) no waiver or consent extending any statute of
limitation for the assessment or collection of any Taxes, which waiver or
consent remains in effect, has been executed by the Company or any Subsidiary or
on behalf of the Company or any Subsidiary, nor are any requests for such waiver
or consent pending.
(c) Each Corporate Subsidiary has been an includible member of
an "affiliated group" (within the meaning of Section 1504 of the Code) in which
either the Company or Transitional Health Services, Inc. ("THS") is (in the case
of the Company) or was (in the case of THS (to the knowledge of the Company))
the parent since the date of such Corporate Subsidiary's incorporation; and for
all taxable periods following each such Corporate Subsidiary's incorporation,
each of either the Company or THS (to the knowledge of the Company), on the one
hand, and the Corporate Subsidiary, on the other hand, was entitled to report
its income on consolidated federal income Tax Returns filed on behalf of such
affiliated group. All federal income Tax Returns required to be filed by the
Company, THS (to the knowledge of the Company) and the Corporate Subsidiaries
have been duly and timely filed on behalf of the Company, THS (to the knowledge
of the Company) and the Subsidiaries on a consolidated basis. Except as shown on
Section 3.26 of the Disclosure Schedule, all other Tax Returns of the Company
and the Corporate Subsidiaries have been filed on a separate company,
non-combined, non-consolidated and non-unitary basis.
(d) Except as set forth on Section 3.26 of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party to any tax-sharing
or allocation agreements.
(e) Except as set forth on Section 3.26 of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party to any agreement,
contract, or arrangement that would result, by reason of the consummation of any
of the transactions contemplated herein, separately or in the aggregate, in the
payment of any "excess parachute payment" within the meaning of Section 280G of
the Code.
27
SECTION 3.27 Transactions With Affiliates. Except as described
in Section 3.28 of the Disclosure Schedule or in the Company SEC Filings, no
shareholder, director, officer or employee of the Company or any Subsidiary, or
any member of his or her immediate family or any other of its, his or her
affiliates, (i) is or was during the period from July 2, 1997 through the date
hereof the subject of any material contract, agreement or understanding,
business arrangement or relationship with the Company or any Subsidiary (an
"Affiliate Contract") or (ii) owns or has a five percent or greater ownership
interest in any corporation or other entity which is or was during the three
years preceding the date hereof the subject of any Affiliate Contract.
SECTION 3.28 Brokers and Finders. Except for BT Alex. Xxxxx
and the fees owed to X.X. Xxxxxx Securities Inc. and Suntrust Equitable
Securities in connection with its engagement by the Company, neither the
Company, nor any of its officers, directors, employees, Subsidiaries or
Affiliates has employed any broker or finder or incurred any liability for any
financial advisory fees, investment bankers' fees, brokerage fees, commissions,
finders' fees or similar payments in connection with this Agreement or the
transactions contemplated hereby. True and correct signed copies of all
agreements and engagement letters between the Company and each of BT Alex.
Xxxxx, X.X. Xxxxxx Securities Inc. and Suntrust Equitable Securities have been
delivered to Parent, which engagement letters establish the total amount owed to
each of them in connection with the transactions contemplated hereby.
SECTION 3.29 Opinion of Financial Advisor. The Special
Committee has received the opinion of X.X. Xxxxxx Securities Inc. on October 21,
1998 to the effect that, as of such date, the consideration to be received in
the Merger by the Public Shareholders is fair to such holders, from a financial
point of view, a signed copy of which has been delivered to Parent.
SECTION 3.30 Statements True and Correct. No representation or
warranty or statement contained in this Agreement or any certificate, exhibit,
annex, schedule, instrument or other writing furnished or to be furnished by the
Company or any Subsidiary or Affiliate of the Company to Parent pursuant to this
Agreement or any other documents, agreement or instrument referred to herein
contains or will contain any untrue statement of material fact or omits or will
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 3.31 Knowledge of the Company. Whenever used in this
Article III, "to the knowledge of the Company" (or similar language) shall mean
the actual knowledge of the senior managers of the Company listed on Section
3.31 of the Disclosure Schedule after reasonable inquiry.
28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
SECTION 4.01 Organization and Qualification.
(a) Parent is a corporation duly incorporated and organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly licensed or qualified and in good standing to do business as a
foreign corporation, and is authorized to do business, in each other
jurisdiction in which the character or location of the properties owned or
leased and operated by it or the nature of the business transacted by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified could not reasonably be expected to have a material
adverse effect on the business, properties or condition (financial or other) of
Parent and Acquisition Sub. Parent has the requisite corporate power and
authority to own or lease and operate its properties and assets and to carry on
its business as currently conducted.
(b) Since the date of its incorporation, Parent has not
engaged in any activity other than in connection with or as contemplated by this
Agreement and the Merger or in connection with arranging financing in connection
the transactions contemplated hereby.
SECTION 4.02 Authority Relative to Agreement. Parent has the
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and performance by
Parent of this Agreement, and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all requisite corporate action
(including, without limitation, all necessary action of the Board of Directors
and shareholders of Parent) and no other action of the part of such persons is
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by Parent and,
assuming due execution and delivery by the other parties hereto, constitutes the
legal, valid and binding obligation of Parent, enforceable against Parent in
accordance with its terms.
SECTION 4.03 Non-Contravention. Neither the execution and
delivery of this Agreement by Parent, nor the consummation of the transactions
contemplated hereby, nor compliance by Parent with any of the terms and
provisions hereof, will (i) violate, contravene, conflict with or result in a
breach of any provision of Parent's Certificate of Incorporation or By-laws or
any resolution adopted by the Board of Directors or shareholders of Parent, or
(ii) result in any breach or violation of, conflict with, or constitute or
result in a default or event of default or event which with notice or lapse of
time or both would constitute such a default or event of default under, or give
rise to any right of termination, cancellation, payment or acceleration, or
29
require any consent pursuant to, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever on any of the properties or
assets owned, leased or managed by Parent under the terms or provisions of any
note, bond, mortgage, license, franchise, permit, lease, indenture, agreement,
contract or other instrument or obligation to which Parent is a party or to
which any of the properties or assets owned or leased by Parent is bound or
otherwise affected or (iii) contravene or violate any law, rule, regulation,
licensing requirement, permit, order or decree of any court, arbitrator or any
other agency of government or authority by which Parent is bound or by which any
properties or assets owned or leased by Parent is bound or otherwise affected.
SECTION 4.04 Governmental Approvals. Except as set forth in
Section 4.04 of the Disclosure Schedule, no order, authorization, approval or
consent from, or filing with, any federal or state governmental or public body
or other authority having jurisdiction over Parent is required for the
execution, delivery and performance of this Agreement by Parent or is necessary
in order to ensure the legality, validity, binding effect or enforceability of
this Agreement other than (i) filings with the Federal Trade Commission and with
the Antitrust Division of the United States Department of Justice pursuant to
the HSR Act, and the rules promulgated thereunder, (ii) the filing of a
Certificate of Merger with the Secretary of State of the State of Georgia and
(iii) such consents, approvals, orders or authorizations which if not obtained,
or registrations, declarations or filings which if not made, would not
materially delay or materially adversely affect the ability of Parent to
consummate the transactions contemplated hereby.
SECTION 4.05 Proxy and Schedule 13E-3 Information. None of the
information supplied or to be supplied by Parent or Acquisition Sub, or any of
their respective officers, directors, employees, representatives or agents for
inclusion or incorporation by reference in the Proxy Statement or the Schedule
13E-3 will (i) in the case of the definitive Proxy Statement, at the time such
definitive Proxy Statement is mailed to the Company's shareholders or at the
time of the Special Meeting and (ii) with respect to the Schedule 13E-3, at the
time of filing with the SEC and at the time of the Special Meeting, contain any
statement which, at such time and in light of the circumstances under which it
is made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
false or misleading. Notwithstanding the foregoing, neither Parent or
Acquisition Sub is making any representation or warranty with respect to the
information that has been supplied by the Company or any Subsidiary to its
officers, directors, employees, representatives or agents for inclusion or
incorporation by reference in the Proxy Statement or the Schedule 13E-3.
SECTION 4.06 Brokers and Finders. No person is entitled to any
brokerage or finder's fee or commission in connection with the transactions
contemplated by this Agreement as a result of any action taken by or on behalf
of Parent or Acquisition Sub.
SECTION 4.07 Sufficient Funds. The Company has received a copy
of the commitment letter dated October 22, 1998, from Welsh, Carson, Xxxxxxxx &
Xxxxx VIII, L.P.
30
("WCAS VIII") and certain affiliates of WCAS VIII (collectively, the "Financing
Entities"), pursuant to which the Financing Entities have committed, subject to
the terms and conditions set forth herein, to provide Parent with up to an
aggregate $210 million of financing (the "Financing") and, subject to the terms
and conditions of this Agreement, to ensure the performance of Parent's and
Acquisition Sub's obligations hereunder. The aggregate proceeds of the Financing
should be sufficient to pay all amounts required to be paid pursuant to the
Merger, to pay all amounts required to be paid hereunder in respect of
outstanding options under the Company Stock Option Plans and to pay all related
fees and expenses required to be paid by Parent, Acquisition Sub and, together
with funds of the Company, the Company pursuant to this Agreement. Such commit
ment letter has not been withdrawn as of the date hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUB
Acquisition Sub represents and warrants to the Company as
follows:
SECTION 5.01 Organization and Qualification.
(a) Acquisition Sub is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Georgia, and is duly licensed or qualified and in good standing to do business
as a foreign corporation, and is authorized to do business, in each other
jurisdiction in which the character or location of the properties owned or
leased and operated by it or the nature of the business transacted by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified could not reasonably be expected to have a material
adverse effect on the business, properties or condition (financial or other) of
Parent and Acquisition Sub. Acquisition Sub has the requisite corporate power
and authority to own or lease and operate its properties and assets and to carry
on its business as currently conducted.
(b) Since the date of its incorporation, Acquisition Sub has
not engaged in any activity other than in connection with or as contemplated by
this Agreement and the Merger or in connection with arranging financing in
connection the transactions contemplated hereby.
SECTION 5.02 Authorization and Validity of Agreement.
Acquisition Sub has the requisite power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution, delivery
and performance by Acquisition Sub of this Agreement, and the consummation of
the transactions contemplated hereby have been duly authorized and approved by
all requisite corporate action (including, without limitation, all necessary
action of the Board of Directors and shareholders of Acquisition Sub) and no
other action of the part of such persons is necessary to authorize the
execution, delivery and perfor-
31
xxxxx of this Agreement. This Agreement has been duly executed and delivered by
Acquisition Sub and, assuming due execution and delivery by the other parties
hereto, constitutes the legal, valid and binding obligation of Acquisition Sub,
enforceable against Acquisition Sub in accor dance with its terms.
SECTION 5.03 Non-Contravention. Neither the execution and
delivery of this Agreement by Acquisition Sub, nor the consummation of the
transactions contemplated hereby, nor compliance by Acquisition Sub with any of
the terms and provisions hereof, will (i) violate, contravene, conflict with or
result in a breach of any provision of the Articles of Incorporation or By-laws
of Acquisition Sub or any resolution adopted by the Board of Directors or
shareholders of Acquisition Sub, or (ii) result in any breach or violation of,
conflict with, or constitute or result in a default or event of default or event
which with notice or lapse of time or both would constitute such a default or
event of default under, or give rise to any right of termination, cancellation,
payment or acceleration, or require any consent pursuant to, or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever on any of the properties or assets owned, leased or managed by
Acquisition Sub under the terms or provisions of any note, bond, mortgage,
license, franchise, permit, lease, indenture, agreement, contract or other
instrument or obligation to which Acquisition Sub is a party or to which any of
the properties or assets owned or leased by Acquisition Sub is bound or
otherwise affected or (iii) contravene or violate any law, rule, regulation,
licensing requirement, permit, order or decree of any court, arbitrator or any
other agency of government or authority by which Acquisition Sub is bound or by
which any properties or assets owned or leased by Acquisition Sub is bound or
otherwise affected.
SECTION 5.04 Governmental Approvals. Except as set forth in
Section 5.04 of the Disclosure Schedule, no order, authorization, approval or
consent from, or filing with, any federal or state governmental or public body
or other authority having jurisdiction over Acquisition Sub is required for the
execution, delivery and performance of this Agreement by Acquisition Sub or is
necessary in order to ensure the legality, validity, binding effect or
enforceability of this Agreement other than (i) filings with the Federal Trade
Commission and with the Antitrust Division of the United States Department of
Justice pursuant to the HSR Act, and the rules promulgated thereunder, (ii) the
filing of a Certificate of Merger with the Secretary of State of the State of
Georgia and (iii) such consents, approvals, orders or authorizations which if
not obtained, or registrations, declarations or filings which if not made, would
not materially adversely affect the ability of Acquisition Sub to consummate the
transactions contemplated hereby.
ARTICLE VI
CERTAIN AGREEMENTS
32
SECTION 6.01 Conduct of the Company's Business. The Company
covenants and agrees that, after the date of this Agreement but prior to the
Effective Time, unless Parent shall otherwise consent in writing or as otherwise
expressly contemplated by this Agreement:
(a) neither the Company nor any Subsidiary shall take (or
agree in writing to take) any of the actions listed in clauses (i)
through (xiv) of Section 3.09 or cause or allow any Managed Facility to
take (or agree in writing to take) any of the actions listed in clauses
(i) through (xiv) of Section 3.09;
(b) neither the Company nor any Subsidiary shall take any
action that would make any representation or warranty of the Company
hereunder inaccurate in any material respect at, or as of any time
prior to, the Effective Time, or omit to take any action necessary to
prevent any such representation or warranty from being inaccurate in
any material respect at any such time;
(c) each of the Company and the Subsidiaries shall use its
best efforts, to the extent not prohibited by the foregoing provisions
of this Section 6.01, to maintain its relationships with its suppliers,
customers and third party payors, and if and as requested by Parent or
Acquisition Sub, (i) the Company shall use its reasonable efforts to
make reasonable arrangements for representatives of Parent or
Acquisition Sub to meet with suppliers, customers and third party
payors of the Company or any Subsidiary and (ii) the Company shall
schedule, and the management of the Company shall participate in,
meetings of representatives of Parent or Acquisition Sub with employees
of the Company or any Subsidiary; and
(d) the Company and its Subsidiaries shall properly complete
and file all reports required to be filed by them with the SEC and all
other federal, state or local governmental or regulatory authorities
(including self-regulatory authorities) having jurisdiction over the
Company and/or the Subsidiaries and shall deliver or make available to
Parent copies of all such reports promptly after the same are filed. If
financial state ments are contained in any such reports filed with the
SEC, such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows for the periods then ended in
accordance with GAAP. As of their respective dates, such reports
filed with the SEC will comply in all material respects with the
federal securities laws and will not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were
made, not misleading. Any financial statements contained in any other
reports to another regulatory authority shall be prepared in accordance
with all laws applicable to such reports.
SECTION 6.02 Stockholder Approval.
33
(a) As promptly as practicable after the execution of this
Agreement, the Company shall, subject to its fiduciary duties as advised by
counsel, take all action necessary in accordance with all applicable laws and
its Articles of Incorporation and By-laws, to duly call, give notice of, convene
and hold a special meeting (the "Special Meeting") of its shareholders to
consider and vote upon the approval and adoption of this Agreement and the
Merger and for such other purposes as may be necessary or desirable. The Board
of Directors of the Company has determined that the Merger is advisable and in
the best interests of the shareholders of the Company and shall, subject to its
fiduciary duties as advised by counsel, recommend that the shareholders of the
Company vote to approve and adopt this Agreement and the Merger and any other
matters to be submitted to shareholders in connection therewith.
(b) As promptly as practicable following the date hereof, the
Company shall file with the SEC a preliminary proxy or information statement
pertaining to the Merger and this Agreement and use its best efforts (x) to
obtain and furnish the information required to be included by the SEC in the
Proxy Statement (as hereinafter defined) and, after consultation with Parent, to
respond promptly to any comments made by the SEC with respect to the preliminary
proxy or information statement (it being understood and agreed that the Company
shall notify Parent of the receipt of any such comments and of any requests by
the SEC for amendments or supplements to the Proxy Statement or for additional
information, and shall promptly supply Parent with copies of all correspondence
between the Company (or its representatives) and the SEC (or its staff) with
respect thereto) and cause a definitive proxy or information statement,
including any amendment or supplement thereto (the "Proxy Statement"), to be
mailed to its shareholders entitled to vote upon the Merger as promptly as
practicable thereafter, provided, that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent and its
counsel, and (y) to obtain the necessary approvals of the Merger and this
Agreement by its shareholders.
(c) The Company, Parent and any person that may be deemed to
be an affiliate of the Company shall prepare and file with the SEC concurrently
with the filing of the preliminary proxy or information statement described in
the first sentence of Section 6.02(c) above a Statement on Schedule 13E-3
("Schedule 13E-3") under the Exchange Act. If at any time prior to the Special
Meeting any event should occur which is required by applicable law to be set
forth in an amendment of, or supplement to, said Schedule 13E-3, the Company and
such person shall file such amendments or supplements.
(d) Each of the parties hereto agrees that if, at any time
prior to the Special Meeting, any event should occur relating to or affecting
the Company, Parent or Acquisition Sub, or to their respective officers or
directors, which event should be described in an amendment or supplement to the
Proxy Statement, the parties shall promptly inform one another and shall
cooperate in promptly preparing, filing and clearing with the SEC and, if
required by applicable law, distributing to the Company's shareholders such
amendment or supplement.
34
SECTION 6.03 Access to Information.
(a) The Company shall, and shall cause the Subsidiaries and
its and their respective officers, directors, employees, representatives and
agents to, afford, from the date hereof to the Effective Time, the officers,
employees, representatives and agents of Parent reasonable access to its
officers, employees, agents, properties, books, records and workpapers, and
shall promptly furnish Parent all financial, operating and other information and
data as Parent, through its officers, employees or agents, may reasonably
request.
(b) Except as required by law, Parent shall hold, and will
cause its respective officers, employees, representatives and agents to hold,
any confidential information in accordance with the Confidentiality Agreement
dated July 10, 1998 between the Company and WCAS VIII (the "Confidentiality
Agreement").
(c) No investigation pursuant to this Section 6.03 shall
affect, add to or subtract from any representations or warranties of the parties
hereto or the conditions to the obligations of the parties hereto to effect the
Merger.
SECTION 6.04 Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, including, without limitation, using all reasonable efforts to obtain
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings (including without limitation any necessary filings
under the HSR Act).
SECTION 6.05 Inquiries and Negotiations; Certain Payments.
(a) From and after the date of this Agreement until the
termination of this Agreement pursuant to Section 8.01, the Company, the
Subsidiaries and their respective officers, directors, employees,
representatives and other agents will not, directly or indirectly, solicit or
initiate any discussions, submissions of proposals or offers or negotiations
with (it being understood that the issuance of the press release issued by the
Company upon the execution of this Agreement shall not be deemed to violate this
provision) or, subject to the fiduciary duties of the Company's Board of
Directors as advised by counsel, continue or participate in any negotiations or
discussions with, or provide any information or data of any nature whatsoever
to, or otherwise cooperate in any other way with, any Third Party in connection
with any proposed merger, consolidation, sale of any Subsidiary or division that
is material to the business of the Company and the Subsidiaries, sale of shares
of capital stock or other equity securities, tender or exchange offer,
recapitalization, debt restructuring or similar transaction involving the
Company (such transactions being hereinafter referred to as "Alternative
Transactions").
35
(b) From and after the date of this Agreement until the
termination of this Agreement pursuant to Section 8.01, the Company shall
immediately notify Parent if any proposal, offer, inquiry or other contact is
made or received by, any information is requested from, or any discussions or
negotiations are sought to be initiated or continued with, the Company in
respect of an Alternative Transaction, and shall, in any such notice to Parent,
indicate the identity of the Third Party and the terms and conditions of any
proposals or offers or the nature of any inquiries or contacts, and thereafter
shall keep Parent informed, on a current basis, of the status and terms of any
such proposals or offers and the status of any such discussions or negotiations.
Without limiting the generality of the foregoing, the Company shall provide
Parent with not less then (i) two business days' notice prior to the execution
by the Company of any definitive agreement with respect to any Alternative
Transaction and (ii) two days' notice (or the longest notice legally permissible
in the reasonable determination of counsel for the Company, if less than two
days) of any public announcement relating to any Alternative Transaction. Prior
to furnishing any non-public information to, or entering into negotiations or
discussions with, any Third Party, the Company will obtain an executed
confidentiality agreement from such Third Party on terms substantially the same
as, or no less favorable to the Company in any material respect than, those
contained in the Confidentiality Agreement. The Company shall not release any
Third Party from, or waive any provision of, any such confidentiality agreement
or any other confidentiality or standstill agreement to which the Company is a
party.
(c) If a Payment Event (as hereinafter defined) occurs, the
Company shall pay to Parent, within two business days following such Payment
Event, a fee of Three Million Dollars ($3,000,000) in cash. "Payment Event"
means (i) the termination of this Agreement by Parent pursuant to Section
8.01(d); (ii) the termination of this Agreement by the Company pursuant to
Section 8.01(f) or (iii) the occurrence of any of the following events within
twelve months after the date of termination of this Agreement (other than a
termination pursuant to Section 8.01(c) or (e)) whereby shareholders of the
Company receive, pursuant to such event, cash, securities or other consideration
having an aggregate value, when taken together with the value of any securities
of the Company or its subsidiaries otherwise held by the shareholders of the
Company after such event, in excess of Sixteen Dollars ($16.00) per Share: (w)
the Company is acquired by merger or otherwise by a Third Party; (x) a Third
Party acquires more than 50% of the total assets of the Company and the
Subsidiaries, taken as a whole; (y) a Third Party acquires more than 50% of the
outstanding Shares or (z) the Company adopts and implements a plan of
liquidation or share repurchase relating to more than 50% of the outstanding
Shares or an extraordinary dividend relating to more than 50% of the assets of
the Company and the Subsidiaries, taken as a whole.
(d) The Company acknowledges that the agreements contained in
this Section 6.05 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent and Acquisition Sub would
not enter into this Agreement; accordingly, if the Company fails to promptly pay
any amount due pursuant to this Section 6.05, and, in order
36
to obtain such payment, Parent and/or Acquisition Sub commences a suit which
results in a judgment against the Company for the fee set forth in this Section
6.05, the Company shall also pay to Parent and Acquisition Sub their costs and
expenses incurred in connection with such litigation. Notwithstanding the
foregoing, each party shall bear its own costs and expenses incurred in
connection with any litigation over the reasonableness and/or documentation of
any expenses submitted for reimbursement hereunder.
(e) This Section 6.05 shall survive any termination of this
Agreement, however caused.
SECTION 6.06 Notification of Certain Matters. The Company
shall give notice as promptly as practicable to Parent and Acquisition Sub, and
Parent and Acquisition Sub shall give prompt notice to the Company, of (i) the
occurrence, or failure to occur, of any event that such party believes would be
likely to cause any of its representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Effective Time and (ii) any material failure of the
Company, Parent or Acquisition Sub, as the case may be, or any officer,
director, employee, representative or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder, provided, however, that failure to give such notice shall not
constitute a waiver of any defense that may be validly asserted.
SECTION 6.07 Indemnification.
(a) The Articles of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's Articles of Incorporation
and By-laws as in effect on the date hereof, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who, on or prior to the Effective Time, were directors, officers,
employees or agents of the Company (collectively, the "Indemnified Parties"),
unless such modification is required by law. Parent shall guarantee the
obligations of the Surviving Corporation with respect to indemnification of the
Indemnified Parties under such provisions and under the Company's
indemnification agreements with its directors and officers.
(b) For a period of six years after the expiration date of
the Company's current policy, the Surviving Corporation shall maintain
officers' and directors' liability insurance for periods prior to the
Effective Time covering those Indemnified Parties who are currently covered
by the Company's directors' and officers' liability insurance policy, a copy
of which has heretofore been delivered to Parent, on terms no less favorable
than the terms of such current insurance coverage, provided, however, that in
no event shall the Surviving Corporation be required to expend in any one
year an amount in excess of 200% of the annual premiums currently payable by
the Company for such insurance, provided, further, however, that if the
37
annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall obtain a policy with the greatest coverage available for a
cost not exceeding such amount.
(c) Following the Merger, if the Company or the Surviving
Corporation or any of their respective successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of the Company or the Surviving Corporation, as the case
may be, or at Parent's option, Parent, shall assume the obligations set forth in
this Section 6.07.
(d) This Section 6.07 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company, Parent, the
Surviving Corporation and the Indemnified Parties, and shall be binding on the
successors and assigns of the Surviving Corporation.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Merger Relating to Parent and
Acquisition Sub. The obligation of Parent and Acquisition Sub to effect the
Merger shall be subject, at their option, to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) this Agreement and the Merger shall have been
approved and adopted by (i) a majority of the shares voted with respect
to the Merger that are owned by persons not affiliated with, or owning
equity in, Parent or Acquisition Sub and (ii) the requisite vote of the
shareholders of the Company under the Georgia Code;
(b) the expiration or earlier termination of any
waiting period under the HSR Act shall have occurred, and no action
shall have been instituted by the United States Department of Justice
or Federal Trade Commission challenging or seeking to enjoin the
consummation of this transaction, which action shall not have been
withdrawn or terminated;
(c) no preliminary or permanent injunction or other
order, decree or ruling issued by any court of competent jurisdiction
nor any statute, rule, regulation or order entered, promulgated or
enacted by any governmental, regulatory or administrative agency or
authority shall be in effect that would (i) restrain the effective
operation of the business of the Company and the Subsidiaries from
and after the Effective Time or (ii) prevent the consummation of the
Merger as contemplated hereby;
38
(d) other than the filing of the Merger Certificate
in accordance with the Georgia Code, all authorizations, consents,
waivers, orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any governmen tal or
regulatory entity, the failure of which to obtain, make or occur could
reasonably be expected to have a material adverse effect on the
business, properties, results of operation or condition (financial or
other) at or after the Effective Time of the Surviving Corporation or
its Subsidiaries, shall have been obtained, been filed or have
occurred;
(e) all representations and warranties of the Company
that are qualified with reference to a Material Adverse Effect or
materiality shall be true and correct in all respects and all
representations and warranties that are not so qualified shall be true
and correct in all material respects, in each case (i) as of the date
of this Agreement and (ii) as of the Effective Time, except to the
extent such representations and warranties speak as of an earlier date,
and Parent shall have received a certificate signed on behalf of the
Com pany by a proper officer of the Company to such effect;
(f) each of the Company and its Subsidiaries shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and Parent shall have received a certificate signed on behalf of the
Company by a proper officer of the Company to such effect;
(g) Parent shall have received an opinion of King &
Spalding, counsel to the Company in the form attached hereto as Exhibit
A;
(h) the aggregate number of Dissenting Shares shall
not constitute more than 15% of the number of shares of Company Common
Stock outstanding as of immediately prior to the Effective Time
(calculated on a fully diluted basis);
(i) since the date of this Agreement, neither the
Company nor any of its Subsidiaries shall have suffered a Material
Adverse Effect; and
(j) there shall be no action, suit, investigation,
proceeding or claim pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or their
respective properties or rights or any Facility, before any
governmental body or arbitration board or tribunal, the outcome of
which, either alone or together with similar actions, could reasonably
be expected to have a Material Adverse Effect.
39
SECTION 7.02 Conditions to the Merger Relating to the Company.
The obligation of the Company to effect the Merger shall be subject, at its
option, to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) this Agreement and the Merger shall have been
approved and adopted by the requisite vote of the shareholders of the
Company and by Parent and Acquisition Sub;
(b) the expiration or earlier termination of any
waiting period under the HSR Act shall have occurred, and no action
shall have been instituted by the United States Department of Justice
or Federal Trade Commission challenging or seeking to enjoin the
consummation of this transaction, which action shall not have been
withdrawn or terminated;
(c) no preliminary or permanent injunction or other
order, decree or ruling issued by any court of competent jurisdiction
nor any statute, rule, regulation or order entered, promulgated or
enacted by any governmental, regulatory or administrative agency or
authority shall be in effect that would prevent the consummation of the
Merger as contemplated hereby;
(d) all representations and warranties of Parent and
Acquisition Sub that are qualified with reference to a material adverse
effect or materiality shall be true and correct in all respects and all
representations and warranties that are not so qualified shall be true
and correct in all material respects, in each case (i) as of the date
of this Agreement and (ii) as of the Effective Time, except to the
extent such representations and warranties speak as of an earlier date,
and the Company shall have received a certificate signed on behalf of
Parent and Acquisition Sub by a proper officer of Parent and
Acquisition Sub to such effect;
(e) each of Parent and Acquisition Sub shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and the Company shall have received a certificate signed on behalf of
Parent and Acquisition Sub by a proper officer of Parent and
Acquisition Sub to such effect;
(f) the Company shall have received an opinion of
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol, counsel to Parent and
Acquisition Sub, in the form attached hereto as Exhibit B; and
(g) there shall be no action, suit, investigation,
proceeding or claim pending or, to the knowledge of Parent, threatened
against or affecting Parent or Acquisition Sub or their respective
properties or rights, before any governmental body or
40
arbitration board or tribunal, the outcome of which, either alone or
together with similar actions, could reasonably be expected to have a
material adverse effect on the business, properties, results of
operation or condition (financial or other) of Parent and Acquisition
Sub taken as a whole.
ARTICLE VIII
TERMINATION AND ABANDONMENT
SECTION 8.01 Termination and Abandonment. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval by the shareholders of the Company:
(a) by mutual action of the Boards of Directors of Parent and
the Company;
(b) by either Parent or the Company, if (i) the conditions to
its obligations under Section 7.01 or Section 7.02, as the case may be,
shall not have been complied with or performed in any material respect
and such noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) by the
other party on or before March 31, 1999, including, without limitation
(provided that there shall not have occurred any event giving Parent
the right of termination under Section 8.01(d)(iii) or (iv)) by reason
of a vote of shareholders disapproving the Merger or (ii) the Merger
shall not have been effected on or prior to the close of business on
March 31, 1999, provided, however, that the right to terminate this
Agreement pursuant to this Section 8.01(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 before such date;
(c) by either Parent or the Company, if any permanent
injunction or action by any court or other governmental entity or
regulatory authority of competent jurisdiction preventing the
consummation of the Merger shall have become final and nonappealable,
provided, however, that the party seeking to terminate this Agreement
pursuant to this Section 8.01(c) shall have used all reasonable efforts
to remove such injunction or overturn such action; or
(d) by 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 either as of when made or
at any time thereafter, (ii) there has been a breach in any material
respect of any of the covenants or agreements set forth in this
Agreement on the part of the Company, (iii) the Board of Directors of
the Company (x) withdraws or amends or modifies in a manner adverse to
Parent or Acquisition Sub its recommendation
41
or approval in respect of this Agreement or the Merger, (y) makes
any recommendation with respect to an Alternative Transaction
(including making no recommendation or stating an inability to make a
recommendation), other than a recommendation to reject such Alternative
Transaction, or (z) takes any material action that would be prohibited
by Section 6.05 or (iv) the Company enters into a definitive written
agreement relating to an Alternative Transaction; or
(e) by the Company, if (i) there has been a breach of any
representations or warranties of Parent set forth herein the effect of
which breach could reasonably be expected to have a material adverse
effect on the ability of Parent and Acquisition Sub to consummate the
transactions contemplated by this Agreement or (ii) there has been a
breach in any material respect of any of the covenants or agreements
set forth in this Agreement on the part of Parent, which breach is not
curable or, if curable, is not cured within 30 days after written
notice of such breach is given by the Company to Parent; or
(f) by the Company, if such termination is necessary to allow
the Company to enter into an Alternative Transaction that its Board of
Directors has determined in good faith, by a majority vote after
consultation with its financial advisors and based upon the advice of
outside legal counsel to the Company, is more favorable to the
shareholders of the Company than the Merger contemplated by this
Agreement (provided that the termination described in this Section
8.01(f) shall not be effective unless and until the Company shall have
paid to Parent in full the fee described in Section 6.05).
Any party desiring to terminate this Agreement pursuant to this Section 8.01
shall give notice to the other party in accordance with Section 9.05.
SECTION 8.02 Effect of Termination. Except as provided in
Sections 6.05 and 9.02 hereof, in the event of the termination of this Agreement
and the abandonment of the Merger pursuant to Section 8.01, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to any other party hereto or its shareholders or directors or officers
in respect thereof, except that nothing herein shall relieve any party from
liability for any willful breach hereof.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant hereto shall survive the Effective Time, provided
that this Section 9.01 shall not limit any covenant or agreement of the parties
that by its terms contemplates performance after the Effective Time.
42
SECTION 9.02 Expenses, Etc.
(a) In the event that the transactions contemplated by this
Agreement are not consummated, then, except as set forth in Section 6.05,
neither the Company, on the one hand, nor Parent and Acquisition Sub, on the
other hand, shall have any obligation to pay any of the fees and expenses of the
other incident to the negotiation, preparation and execution of this Agree ment,
including the fees and expenses of counsel, accountants, consultants, investment
bankers and other advisors and experts.
(b) In the event that the transactions contemplated by this
Agreement are consummated, the Company shall pay, at the Effective Time, all of
its fees and expenses incident to the negotiation, preparation and execution of
this Agreement, including the fees and expenses of counsel, accountants,
consultants, investment bankers and other advisors and experts, and the Company
shall pay all such fees and expenses incurred by Parent and Acquisition Sub.
SECTION 9.03 Publicity. The Company and Parent agree that they
will not issue any press release or make any other public announcement
concerning this Agreement or the transactions contemplated hereby without the
prior consent of the other party, which consent shall not be unreasonably
withheld, except that the Company or Parent may make such public disclosure that
it believes in good faith to be required by law (in which event such party shall
consult, to the extent possible, with the other prior to making such
disclosure).
SECTION 9.04 Execution in Counterparts. For the convenience of
the parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument, and may be delivered in person or by facsimile
transmission.
SECTION 9.05 Notices. All notices that are required or may be
given pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by telecopy or mailed by registered or
certified mail, postage prepaid, as follows:
If to Parent or Acquisition Sub to it:
In care of Welsh, Carson, Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx
with a copy to:
43
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to the Company, to:
Centennial Healthcare Corporation
000 Xxxxxxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
Facsimile No: (000) 000-0000
Attention: J. Xxxxxxx Xxxxx
Chairman of the Board, President
and Chief Executive Officer
Xxxxxx Xxxxxx
Chairman of the Special Committee
of the Board of Directors of
Centennial Healthcare Corporation
00 Xxxx Xxxxx Xxx
Xxxxxxxx, Xxxxxxx 00000
with copies to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Xxxxxxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
44
SECTION 9.06 Waivers. The Company, on the one hand, and Parent
and Acquisition Sub, on the other hand, may, (i) extend the time for the
performance of any of the bligations or other actions of the other under this
Agreement; (ii) waive any inaccuracies in the representations or warranties of
the other contained in this Agreement or in any document delivered pursuant to
this Agreement; (iii) waive compliance with any of the conditions of the other
contained in this Agreement; or (iv) waive performance of any of the obligations
of the other under this Agreement. Any such extension or waiver shall be valid
only if set forth in an instrument in writing specifically referring to this
Agreement and signed on behalf of such party. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 9.07 Headings; Interpretation. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
why the meaning or interpretation of this Agreement. References in this
Agreement to Sections, Schedules, Exhibits or Articles mean a Section, Schedule,
Exhibit or Article of this Agreement or the Disclosure Schedule unless otherwise
indicated. References to this Agreement shall be deemed to include all Exhibits
and Sections of the Disclosure Schedule, unless the context otherwise requires.
The term "person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a governmental entity or an unincorporated
organization.
SECTION 9.08 Entire Agreement. This Agreement (including the
Disclosure Schedule and Exhibits hereto and other documents and instruments
executed at the Effective Time in connection herewith) and the Confidentiality
Agreement constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof.
SECTION 9.09 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Georgia, without
regard to principles of conflict of laws.
SECTION 9.10 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby and such invalidity, illegality or
unenforceability shall only apply as to such party in the specific jurisdiction
where such judgment shall be made.
45
SECTION 9.11 Binding Effect, Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective permitted successors and assigns. Notwithstanding anything contained
in this Agreement to the contrary, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective permitted successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, provided,
however, that the provisions of Section 6.07 hereof shall accrue to the benefit
of, and shall be enforceable by, each of the current and former directors and
officers of the Company.
SECTION 9.12 Assignability. Neither this Agreement nor any of
the parties' rights hereunder shall be assignable by any party hereto without
the prior written consent of the other parties hereto.
SECTION 9.13 Amendments. At any time prior to the Effective
Time, this Agreement may be amended, modified or supplemented only by written
agreement (referring specifically to this Agreement) of Parent, Acquisition Sub
and the Company with respect to any of the terms contained herein, provided,
however, that after any approval and adoption of this Agreement by the
shareholders of the Company, no such amendment, modification or supplementation
shall be made which under applicable law requires the approval of such
shareholders, without the further approval of such shareholders.
46
IN WITNESS WHEREOF, the parties have executed and delivered
this Agree ment and Plan of Merger as of the day and year first above written.
COUGAR HOLDINGS CORPORATION
By
-------------------------------------
Name:
Title:
COUGAR ACQUISITION CORP.
By
-------------------------------------
Name:
Title:
CENTENNIAL HEALTHCARE CORPORATION
By
-------------------------------------
Name:
Title:
47
INDEX TO DEFINED TERMS
THIS INDEX IS INCLUDED FOR CONVENIENCE ONLY AND
DOES NOT CONSTITUTE A PART OF THE AGREEMENT
Term Section Reference
----------- -----------------
"Acquisition Sub" Recitals
"Affiliate Contract" 3.28
"Agreement" Recitals
"Alternative Transactions" 6.05(a)
"Audited Balance Sheet" 3.05
"Authorizations" 3.15(a)
"Business" 3.11(a)(i)
"Certificate" 2.03(b)
"Closing" 1.04
"Closing Date" 1.04
"Code" 3.21(a)
"Company" Recitals
"Company Board" Recitals
"Company Common Stock" 2.01(b)
"Company SEC Filings" 3.06(a)
"Company Stock Option Plans" 2.02
"Computer Systems" 3.13(d)
"CON" 3.15(a)
"Confidentiality Agreement" 6.03(b)
"Constituent Corporations" Recitals
"Corporate Subsidiaries" 3.01(a)
"Cost Reports" 3.15(b)
"Dissenting Shares" 2.04(a)
"Effective Time" 1.03
"Environmental Event" 3.22
"ERISA" 3.21a)
"Exchange Act" 3.06(a)
"Exchange Agent" 2.03(a)
"Exchange Fund" 2.03(a)
"Facility" 3.01(d)
"Financing" 4.07
"Financing Entities" 4.07
"GAAP" 3.06
"Georgia Code" 1.01
"HSR Act" 3.08
Term Section Reference
---------- -----------------
"Indemnified Parties" 6.07(a)
"Independent Advisor" Recitals
"Intangible Rights" 3.12
"Interim Balance Sheet" 3.05
"Managed Facility" 3.01(d)
"Medicare and Medicaid Programs" 3.15(a)
"Material Adverse Effect" 3.01(a)
"Merger" 1.01
"Merger Consideration" 2.01(c)
"NASD" 3.08
"Parent" Recitals
"Partnership Subsidiaries" 3.01(b)
"Payment Event" 6.05(c)
"Permitted Liens" 3.10
"Plans" 3.21(a)
"Professional" 3.15(a)
"Proprietary Facility" 3.01(d)
"Proprietary Software" 3.13(a)
"Proxy Statement" 6.02(b)
"Public Shareholders" Recitals
"Regulations" 3.15(a)
"SEC" 3.06(a)
"Securities Act" 3.06(a)
"Schedule 13E-3" 6.02(c)
"Schedule 14D-9" 1.02(b)
"shareholders" Recitals
"Shares" 2.01(c)
"Social Security Act" 3.15(a)
"Special Committee" Recitals
"Special Meeting" 6.02(a)
"Subsidiary" 3.01(d)
"Surviving Corporation" Recitals
"Third Party" 6.05(a)
"Third Party Software" 3.13(a)
"Taxes" 3.26(a)
"Tax Returns" 3.26(a)
"THS" 3.26(c)
"WCAS VIII" 4.07
"Year 2000 Compatible" 3.13(d)
