PARAGON HEALTH NETWORK, INC. SCHEDULE 13D EXHIBIT I
ANNEX I
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of May 7, 1997, amended as of June 12, 1997 and September 9, 1997 and
amended and restated as of September 17, 1997 (this "Amended and Restated
Agreement") among Apollo Management, L.P., a Delaware limited partnership on
behalf of one or more managed investment funds (the "Parent"), Apollo LCA
Acquisition Corp., a Delaware corporation and a subsidiary of Parent (the
"Sub"), and Living Centers of America, Inc., a Delaware corporation (the
"Company").
RECITALS
WHEREAS, the Parent, the Sub and the Company entered into that certain
Agreement and Plan of Merger dated as of May 7, 1997 (the "Original Merger
Agreement" and as amended and restated as of June 12, 1997 and further amended
as of September 9, 1997, the "Amended Original Merger Agreement");
WHEREAS, subsequent to the date of the Amended Original Merger Agreement,
the Parent, the Sub and the Company have each determined that it is in the
best interests of each of the foregoing entities to enter into this Agreement,
which amends and restates the Amended Original Merger Agreement;
WHEREAS, the Board of Directors of each of the Sub and the Company has
determined that it is fair and in the best interests of their respective
stockholders for the Sub to merge with and into the Company (the "Merger")
pursuant to Section 251 of the Delaware General Corporation Law ("DGCL") upon
the terms and subject to the conditions set forth herein;
WHEREAS, a condition of the Merger is satisfaction of all other conditions
to a merger (the "GranCare Merger") of a wholly-owned subsidiary of the
Company with and into GranCare, Inc., a Delaware corporation ("GranCare") ;
WHEREAS, the Board of Directors of the Company has adopted resolutions
approving the Merger, this Agreement, the issuance of shares of common stock
of the Company, $.01 par value (the "Shares") in connection with the GranCare
Merger, certain amendments to the Company's Certificate of Incoporation and
the transactions contemplated hereby, and has agreed to recommend that the
Company's stockholders approve the Merger, this Agreement, such issuance of
Shares, and such amendments;
WHEREAS, the Sub and the Company have agreed (subject to the terms and
conditions of this Agreement), as soon as practicable following the approval
by the stockholders of the Company, to effect the Merger, as more fully
described herein;
WHEREAS, the Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement; and
WHEREAS, it is intended that the Merger be recorded as a recapitalization
for financial reporting purposes;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01 The Merger.
Upon the terms and subject to the conditions hereof, and in accordance with
the relevant provisions of the DGCL, the Sub shall be merged with and into the
Company as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Article VI hereof.
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The Company shall be the surviving corporation in the Merger (in such
capacity, sometimes referred to herein as the "Surviving Corporation") under
the name Living Centers of America, Inc. (or such other name as the parties
shall agree) and shall continue its existence under the laws of Delaware. The
separate corporate existence of the Sub shall cease.
Section 1.02 Consummation of the Merger.
Subject to the provisions of this Agreement, the parties hereto shall cause
the Merger to be consummated by filing with the Secretary of State of the
State of Delaware a duly executed and verified certificate of merger, as
required by the DGCL, and shall take all such other and further actions as may
be required by law to make the Merger effective as promptly as practicable.
Prior to the filing referred to in this Section, a closing (the "Closing")
will be held at the offices of Cleary, Gottlieb, Xxxxx & Xxxxxxxx, Xxx Xxxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx (or such other place as the parties may agree) for
the purpose of confirming all the foregoing. The time the Merger becomes
effective in accordance with applicable law is referred to as the "Effective
Time."
Section 1.03 Effects of the Merger.
The Merger shall have the effects set forth in the applicable provisions of
the DGCL and set forth herein.
Section 1.04 Certificate of Incorporation and Bylaws.
At the Effective Time, the Certificate of Incorporation of the Company shall
be amended and restated to read in its entirety as set forth in Exhibit A (and
the amendments effected thereby shall be submitted to the stockholders of the
Company as contemplated by Section 1.06) and, as so amended, shall be the
Certificate of Incorporation of the Surviving Corporation. At the Effective
Time, the Bylaws of the Sub, as in effect immediately prior thereto (after
giving effect to Section 5.15 hereof), shall be the Bylaws of the Surviving
Corporation.
Section 1.05 Directors and Officers.
The directors of the Sub immediately prior to the Effective Time (after
giving effect to Section 5.12 hereof) and the officers of the Company
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their respective successors
are duly elected and qualified.
Section 1.06 Company Actions.
The Company hereby represents and warrants that (a) its Board of Directors
(at a meeting duly called and held), has (i) determined that the Merger is
fair to and in the best interests of the stockholders of the Company, (ii)
resolved to approve (A) this Agreement, the Merger, the issuance of Shares to
the stockholders of the Sub in connection with the Merger (B) the amendment of
the Company's Certificate of Incorporation as contemplated by Section 1.04
(the "Amendment Proposal"), and (C) the issuance of Shares (the "Stock
Issuance Proposal") pursuant to the GranCare Merger contemplated by the
amended and restated agreement and plan of merger (the "GranCare Merger
Agreement") by and among GranCare, the Company, a wholly-owned subsidiary of
the Company ("Merger Sub") and the Parent, and to recommend (subject to its
fiduciary duties as advised by legal counsel) approval of this Agreement, the
Amendment Proposal and the Stock Issuance Proposal (collectively, the
"Stockholder Approvals") by the stockholders of the Company, (iii) taken all
necessary steps to render Section 203 of the DGCL and Article Tenth of the
Company's Restated Certificate of Incorporation inapplicable to the Merger,
(iv) resolved to elect not to be subject, to the extent permitted by law, to
any state takeover law other than Section 203 of the DGCL that may purport to
be applicable to the Merger, or the transactions contemplated by this
Agreement and (v) approved the Rights Agreement Amendment (as defined below),
and (b) Credit Suisse First Boston ("CSFB") and NationsBanc Capital Markets,
Inc. ("NationsBanc"), the Company's financial advisors, have advised the
Company's Board of Directors that, in their opinion, the consideration to be
paid to or retained by the Company's stockholders in the Merger and the
GranCare Merger is fair, from a financial point of view, to such stockholders.
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ARTICLE II
EFFECTS OF THE MERGER
Section 2.01 Conversion of Shares.
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares owned by the Parent, the Sub or any subsidiary of the
Parent or the Sub or held in the treasury of the Company (collectively
"Excluded Shares"), all of which shall be canceled and cease to exist, without
consideration being payable therefore and Dissenting Shares (as defined in
Section 2.06)) shall, by virtue of the Merger, remain outstanding or be
converted at the Effective Time into the following (the "Merger
Consideration"), upon the surrender of the certificate representing such
Shares as provided in Section 2.07 and subject to Section 2.03 hereof:
(i) for each Share with respect to which an election to retain such Share
has been effectively made and not revoked or lost, pursuant to Sections
2.02(c), (d) and (e) ("Electing Shares"), the right to retain one fully
paid and nonassessable share of Common Stock of the Surviving Corporation
(a "Retained LCA Share"); and
(ii) for each such Share (other than Retained LCA Shares), the right to
receive in cash from the Company following the Merger an amount equal to
$40.50 (the "Cash Election Price").
(b) As of the Effective Time of the Merger, all Shares (other than Excluded
Shares and Retained LCA Shares) issued and outstanding immediately prior to
the Effective Time of the Merger, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist and each holder
of a certificate representing any such Shares shall, to the extent such
certificate represents such Shares, cease to have any rights with respect
thereto, except the right to receive cash, including such in lieu of
fractional shares to be issued or paid in consideration therefor upon
surrender of such certificate in accordance with Section 2.07 and except for
the rights of Dissenting Shares as provided in Section 262 of the DGCL.
Section 2.02 Elections.
(a) Each person who, on or prior to the Election Date referred to in
paragraph (c) below, is a record holder of Shares will be entitled, with
respect to all or any portion of his Shares, to make an unconditional election
(an "LCA Stock Election") on or prior to such Election Date to retain Retained
LCA Shares (subject to Section 2.03), on the basis hereinafter set forth.
(b) Prior to the mailing of the Proxy Statement (as defined below), the Sub
shall appoint a bank or trust company to act as paying agent (the "Paying
Agent") for the payment of the Merger Consideration.
(c) The Company shall prepare and mail a form of election, which form shall
be subject to the reasonable approval of the Sub (the "Form of Election"),
with the Proxy Statement to the record holders of Shares as of the record date
for the Stockholders Meeting (as defined below), which Form of Election shall
be used by each record holder of Shares who wishes to make an LCA Stock
Election for any or all Shares held, subject to the provisions of Section 2.03
hereof, by such holder. The Company will use commercially reasonable efforts
to make the Form of Election and the Proxy Statement available to all persons
who become holders of Shares during the period between such record date and
the Election Date referred to below. Any such holder's election to retain
Retained LCA Shares shall have been properly made only if the Paying Agent
shall have received at its designated office, by 5:00 p.m., New York City time
on the business day (the "Election Date") next preceding the day on which the
vote on the Stockholder Approvals is taken at the Stockholders Meeting a Form
of Election properly completed and signed and accompanied by certificates for
the Shares to which such Form of Election relates (or by an appropriate
guarantee of delivery of such certificates as set forth in such Form of
Election from a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the
United States, provided such certificates are in fact delivered to the Paying
Agent within three (3) NYSE trading days after the date of execution of such
guarantee of delivery).
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(d) Any Form of Election may be revoked by the stockholder submitting it to
the Paying Agent only by written notice received by the Paying Agent (i) prior
to 5:00 p.m., New York City time on the Election Date or (ii) after the date
of the Stockholders Meeting, if (and to the extent that) the Paying Agent is
legally required to permit revocations and the Effective Time of the Merger
shall not have occurred prior to such date. In addition, all Forms of Election
shall automatically be revoked if the Paying Agent is notified in writing by
the Sub and the Company that the Merger has been abandoned. If a Form of
Election is revoked, the certificate or certificates (or guarantees of
delivery, as appropriate) for the Shares to which such form of Election
relates shall be promptly returned to the stockholder submitting the same to
the Paying Agent.
(e) The determination of the Paying Agent shall be binding whether or not
elections to retain Retained LCA Shares have been properly made or revoked
pursuant to this Section 2.02 with respect to Shares and when elections and
revocations were received by it. If the Paying Agent determines that any
election to retain Retained LCA Shares was not properly made with respect to
Shares, such Shares shall be treated by the Paying Agent as Shares which were
not Electing Shares at the Effective Time of the Merger, and such Shares shall
be exchanged in the Merger for cash pursuant to Section 2.01(a)(ii). The
Paying Agent shall also make all computations as to the allocation and the
proration contemplated by Section 2.03, and any such computation shall be
conclusive and binding on the holders of Shares. The Paying Agent may, with
the mutual agreement of the Sub and the Company, make such rules as are
consistent with this Section 2.02 for the implementation of the elections
provided for herein as shall be necessary or desirable fully to effect such
elections.
Section 2.03 Proration.
(a) Notwithstanding anything in this Agreement to the contrary, the
aggregate number of Shares to remain outstanding as Retained LCA Shares in the
Surviving Corporation at the Effective Time of the Merger shall be equal to
1,905,748, (the "Retained Share Number").
(b) If the number of Electing Shares exceeds the Retained Share Number, then
each Electing Share shall be converted into the right to retain Retained LCA
Shares or receive cash in accordance with the terms of Section 2.01(a) in the
following manner:
(i) A proration factor (the "Non-Cash Proration Factor") shall be
determined by dividing the Retained Share Number by the total number of
Electing Shares.
(ii) Subject to Section 2.07(e), the number of Electing Shares covered by
each LCA Stock Election to be retained (on a consistent basis among
stockholders who made the election referred to in Section 2.01(a)(i) pro
rata to the number of shares as to which they made such elections) shall be
equal to the product of the Non-Cash Proration Factor multiplied by the
total number of Electing Shares.
(iii) Subject to Section 2.07(e), each Electing Share other than those
shares retained as Retained LCA Shares in accordance with Section
2.03(b)(ii), shall be converted into the right to receive the cash price
(on a consistent basis among stockholders who made the election referred to
in Section 2.01(a)(i), pro rata to the number of shares as to which they
made such election) as if such shares were not Electing Shares in
accordance with the terms of Section 2.01(a)(ii).
(c) If the number of Electing Shares is less than the Retained Share Number,
then:
(i) All Electing Shares shall remain outstanding as Retained LCA Shares
in New LCA in accordance with the terms of Section 2.01(a))(i);
(ii) Subject to Section 2.07(e), additional Shares other than Electing
Shares shall be retained (on a consistent basis among stockholders who held
Shares as to which they did not make the election referred to in Section
2.01(a)(i) pro rata to the number of such Shares as to which no such
election had been made) as Retained LCA Shares in accordance with the terms
of Section 2.01(a) in the following manner: the number of Shares in
addition to Electing Shares to be retained as Retained LCA Shares (the
"Non-Electing Retained LCA Shares") (on a basis consistent among
stockholders who held Shares as to which they did not make the election
referred to in Section 2.01(a)(i) pro rata to the number of such Shares as
to which no such election had been made) shall be equal to the excess of
the Retained Share Number over the number of Electing Shares.
(iii) Each other Share shall be converted into the right to receive the
cash price.
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Section 2.04 Conversion of Common Stock of the Sub.
Each share of common stock, par value $.01 per share, of the Sub issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become at the Effective Time one share of common stock of the
Surviving Corporation.
Section 2.05 Stockholders' Meeting.
Subject to applicable law, the Company, acting through its Board of
Directors, shall, in accordance with applicable law, duly call, give notice
of, convene and hold a special meeting (which, as may be duly adjourned, shall
be referred to as the "Special Meeting" or the "Stockholders Meeting") of its
stockholders as soon as practicable for the purpose of obtaining the
Stockholder Approvals and, subject to the fiduciary duties of its Board of
Directors under applicable law as determined by such directors in good faith
after consultation with and based upon the advice of Cleary, Gottlieb, Xxxxx &
Xxxxxxxx, as legal counsel to the Company, include in the joint proxy
statement (the "Proxy Statement") of each of the Company and GranCare for use
in connection with the stockholders meeting of each of the Company and
GranCare, the recommendation of the Company's Board of Directors that
stockholders of the Company vote in favor of the Stockholder Approvals. The
Parent, the Sub and the Company agree to use commercially reasonable efforts
to cause the Special Meeting to occur within forty-five (45) days after the
Company has responded to all SEC comments with respect to the preliminary
Proxy Statement as provided in Section 5.07.
Section 2.06 Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary, Shares which are
issued and outstanding immediately prior to the Effective Time and which are
held by stockholders who did not vote in favor of the Merger and who comply
with all of the relevant provisions of Section 262 of the DGCL (the
"Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the Merger Consideration (but instead shall be converted into
the right to receive payment from the Surviving Corporation with respect to
such Dissenting Shares in accordance with the DGCL), unless and until such
holders shall have failed to perfect or shall have effectively withdrawn or
lost their rights to appraisal under the DGCL. If any such holder shall have
failed to perfect or shall have effectively withdrawn or lost such right, such
holder's Shares shall be treated at the Company's sole discretion as either
(i) a Share (other than an Electing Share) that had been converted as of the
Effective Time of the Merger into the right to receive Merger Consideration in
accordance with Section 2.01(a) or (ii) an Electing Share. The Company shall
give prompt notice to the Sub of any demands received by the Company for
appraisal of Shares, and the Sub and Parent shall have the right to
participate in and direct all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written consent of
the Sub and Parent, make any payment with respect to, or settle or offer to
settle, any such demands.
Section 2.07 Exchange of Certificates.
(a) As soon as reasonably practicable as of or after the Effective Time of
the Merger, the Corporation shall deposit with the Paying Agent, for the
benefit of the holders of Shares, for exchange in accordance with this Article
II, the cash portion of the Merger Consideration.
(b) As of or promptly after the Effective Time of the Merger, each holder of
an outstanding certificate or certificates which prior thereto represented
Shares shall, upon surrender to the Paying Agent of such certificate or
certificates and acceptance thereof by the Paying Agent, be entitled to a
certificate or certificates representing the number of full shares in the
Surviving Corporation, if any, to be retained by the holder thereof as
Retained LCA Shares pursuant to this Agreement and the amount of cash, if any,
into which the number of Shares previously represented by such certificate or
certificates surrendered shall have been converted pursuant to this Agreement.
The Paying Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Paying Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. After
the Effective Time of the Merger, there shall be no further transfer on the
records of the Company or its transfer agent of certificates representing (i)
Shares which have been converted, in whole or in part, pursuant to this
Agreement into the right to receive cash, and if such certificates are
presented to the Company for transfer, they shall be canceled against delivery
of cash and, if appropriate, certificates for Retained
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LCA Shares. If any certificate for such Retained LCA Shares is to be issued
in, or if cash is to be remitted to, a name other than that in which the
certificate for Shares surrendered for exchange is registered, it shall be a
condition of such exchange that the certificate so surrendered shall be
properly endorsed, with signature guaranteed or otherwise in proper form for
transfer and that the person requesting such exchange shall pay to the Company
or its transfer agent any transfer or other taxes required by reason of the
issuance of certificates for such Retained LCA Shares in a name other than
that of the registered holder of the certificate surrendered, or establish to
the satisfaction of the Company or its transfer agent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
2.07(b), each certificate for Shares shall be deemed at any time after the
Effective Time of the Merger to represent only the right to receive upon such
surrender the Merger Consideration as contemplated by Section 2.01.
(c) No dividends or other distributions with respect to Retained LCA Shares
with a record date after the Effective Time of the Merger shall be paid to the
holder of any unsurrendered certificate for Shares with respect to the
Retained LCA Shares represented thereby and no cash payment in lieu of
fractional Shares shall be paid to any such holder pursuant to Section 2.07(e)
until the surrender of such certificate in accordance with this Article II.
Subject to the effect of applicable laws, following surrender of any such
certificate, there shall be paid to the holder of the certificate representing
whole Retained LCA Shares issued in connection therewith, without interest (i)
at the time of such surrender, the amount of any cash payable in lieu of a
fraction of a Retained LCA Share to which such holder is entitled pursuant to
Section 2.07(e) and the proportionate amount of dividends or other
distributions with a record date after the Effective Time of the Merger
therefor paid with respect to such Retained LCA Shares, and (ii) at the
appropriate payment date, the proportionate amount of dividends or other
distributions with a record date after the Effective Time of the Merger but
prior to such surrender and a payment date subsequent to such surrender
payable with respect to such whole Retained LCA Shares.
(d) All cash paid upon the surrender for exchange of certificates
representing Shares in accordance with the terms of this Article II (including
any cash paid pursuant to Section 2.07(e) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the Shares
exchanged for cash theretofore represented by such certificates.
(e) Notwithstanding any other provision of this Agreement, each holder of
Retained LCA Shares retained pursuant to the Merger who would otherwise have
been entitled to retain a fraction of a Retained LCA Share (after taking into
account all Shares delivered by such holder) shall receive, in lieu thereof, a
cash payment (without interest) equal to such fraction multiplied by $40.50.
(f) Any portion of the Merger Consideration deposited with the Paying Agent
pursuant to this Section 2.07 (the "Exchange Fund") which remains
undistributed to the holders of the certificates representing Shares for six
months after the Effective Time of the Merger shall be delivered to the
Surviving Corporation and any holders of Shares prior to the Merger who have
not theretofore complied with this Article II shall thereafter look only to
the Surviving Corporation and only as general creditors thereof for payment of
their claim for cash, if any.
(g) None of the Sub or the Company or the Paying Agent shall be liable to
any person in respect of any cash from the Exchange Fund delivered to a public
office pursuant to any applicable abandoned property, escheat or similar law.
If any certificates representing Shares shall not have been surrendered prior
to one year after the Effective Time of the Merger (or immediately prior to
such earlier date on which any cash in respect of such certificate would
otherwise escheat to or become the property of any Governmental Authority),
any such cash in respect of such certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interest of any person previously entitled thereto.
(h) The Paying Agent shall invest any cash included in the Exchange Fund, as
directed by the Company, on a daily basis. Any interest and other income
resulting from such investments shall be paid to the Company. To the extent
that there are losses with respect to such investments, or the Exchange Fund
diminishes for other reasons below the level required to make prompt payments
of the Merger Consideration as contemplated hereby, the Parent shall promptly
replace or restore the portion of the Exchange Fund lost through investments
or other events so as to ensure that the Exchange Fund is, at all times,
maintained at a level sufficient to make such payments.
(i) The Company shall pay all charges and expenses of the Paying Agent.
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Section 2.08 Rights Under Stock Right Plans.
Immediately prior to the Effective Time, the Company shall take such action
as may be necessary so that each then outstanding option, warrant, or right
(including stock purchase rights and options granted to outside directors) to
purchase Shares, each holder of any other right to receive Shares subject to
vesting, settlement or other conditions (whether or not conditioned upon the
payment of consideration by such holder), each employee who has made an
election on or before the date hereof to purchase Shares under a stock
purchase arrangement in effect on or before the date hereof (regardless of
whether such Shares have been purchased or have been allocated from treasury
stock in response to such election or whether the settlement or allocation of
such Shares is subject to vesting or other conditions, but, in the case of the
salary reduction plans, only with respect to Shares to be allocated with
respect to reductions in salary if such salary reduction relates to the period
prior to the Effective Time), and each holder of Shares subject to vesting or
other restrictions pursuant to any employee benefit or stock plan (including,
without limitation, any stock option, stock purchase, restricted stock or
other plan) (all of the options, warrants, rights, elections to purchase,
whether through salary reduction or otherwise, and plans referred to above
being defined as the "Stock Right Plans"), whether or not such options or
rights are then vested or exercisable, or such elections have been fulfilled
or honored or such restrictions have lapsed or terminated (the "Rights"),
shall be cancelled by the Company, and each holder of a Right to be cancelled
shall be entitled to receive that number of Shares as is equal to the product
of (i) the total number of Shares subject to such holder's Rights, and (ii)
the excess, if any, of (x) $40.50 over (y) the exercise price per Share
previously subject to each such Right, and (iii) 0.02469 (the "Right
Consideration") upon cancellation of such Rights immediately prior to the
Effective Time, and such holder shall be given the opportunity to make the
elections described in Section 2.02 (subject to proration as provided in
Section 2.03) with respect to the Shares to be issued as such Right
Consideration; provided, however, that with respect to any person subject to
Section 16 of the Exchange Act, to the extent that the payment or the right to
receive payment with respect to the Rights (or the Shares relating thereto)
would cause such person to have any liability under Section 16 of the Exchange
Act, any such amount shall be paid on (and shall not be payable until) the
first business day following the expiration of six months after any such Right
was granted and shall not be due and payable prior thereto (and the Parent,
the Sub and the Company agree, for the benefit of such persons, not to assert
that any such person has any liability pursuant to Section 16(b) of the
Exchange Act with respect to any such amount). In all other instances, the
Parent and the Surviving Corporation shall cause the Right Consideration to be
paid within five business days after the Effective Time. The surrender of a
Right to the Company in exchange for the Right Consideration shall be deemed a
release of any and all rights the holder had or may have had in respect of
such Right. Prior to the Effective Time, the Company shall use all reasonable
efforts to obtain all necessary consents or releases from holders of Rights
under the Stock Right Plans or otherwise and take all such other action
requested by the Sub, consistent with applicable law and the terms of the
Stock Right Plans and the Rights as may be necessary to give effect to the
transactions contemplated by this Section 2.08. The foregoing shall not limit
or affect any provision of a Stock Right Plan that would accelerate the
vesting of any Right or prevent the acceleration, settlement, or exercise of
any Right that would otherwise be required or permitted pursuant to the terms
of a Stock Right Plan (whether by reason of the consummation of the Offer or
otherwise). No salaries shall be reduced with respect to employment subsequent
to the Effective Time pursuant to stock purchase elections under the salary
reduction plan.
Section 2.09 Nonqualified Deferred Compensation Plan.
At the Effective Time, each participant in the Living Centers of America,
Inc. Deferred Retirement Income Plan and each participant in the Company's
Retirement Savings 401(k) Plan (the "Deferred Plans") shall become vested in
his or her entire account balances under each Deferred Plan including, without
limitation, any portion of such account balance maintained in Shares or Shares
Units as provided under such Deferred Plans. Prior to the Effective Time, the
Company may continue to match deferrals of compensation with Shares as
provided pursuant to the Deferred Plans. Subject to Section 5.6, after the
Effective Time, the Surviving Corporation may discontinue contributions or
otherwise amend the Deferred Plans; provided that the Surviving Corporation
shall continue to maintain in full force and effect, or otherwise preserve the
tax benefits provided by, such Deferred Plans.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the date hereof (or such other
date as shall be expressly specified) to the Parent and the Sub as follows:
Section 3.01 Organization and Qualification.
Each of the Company and its subsidiaries is a duly organized and validly
existing corporation in good standing under the laws of its jurisdiction of
incorporation, with all requisite corporate power and other authority to own
its properties and conduct its business as it is being conducted on the date
hereof, and is duly qualified and in good standing as a foreign corporation
authorized to do business in each of the jurisdictions in which the character
of the properties owned or held under lease by it or the nature of the
business transacted by it makes such qualification necessary. The Company has
heretofore made available to the Sub accurate and complete copies of the
Certificates of Incorporation and Bylaws as currently in effect of the Company
and its subsidiaries.
Section 3.02 Capitalization.
(a) The authorized capital stock of the Company consists of 75,000,000
Shares and 5,000,000 shares of preferred stock, par value $.01 (the "Preferred
Stock"), of which 350,000 shares have been designated as Series A Junior
Participating Preferred Stock (the "Junior Preferred Stock"). As of the close
of business on March 31, 1997 (the "Capitalization Date"): 19,547,616 Shares
were issued and outstanding; no shares of Preferred Stock were issued and
outstanding; 720,304 Shares were held in the Company's treasury; and there
were outstanding Rights with respect to 1,635,447 Shares as set forth in
Section 3.02(a) of the disclosure letter, dated the date hereof, delivered by
the Company to the Parent on May 7, 1997 setting forth certain matters
referred to in this Agreement (the "Disclosure Letter"); and there were
outstanding rights (the "Rights Agreement Rights") under the Rights Agreement
dated November 17, 1994 between the Company and Chemical Bank, as amended by
an amendment dated as of July 31, 1995 (the "Rights Agreement"). Since the
Capitalization Date, except as set forth in Section 3.02(a) of the Disclosure
Letter or in the SEC Reports (as defined in Section 3.05) filed prior to May
7, 1997, the Company (i) has not issued any Shares other than upon the
exercise or vesting of Rights outstanding on such date, (ii) has not granted
any options or rights to purchase or acquire Shares (under the Stock Right
Plans or otherwise) and (iii) has not split, combined or reclassified any of
its shares of capital stock. All of the outstanding Shares have been duly
authorized and validly issued and are fully paid and nonassessable and are
free of preemptive rights. Except as set forth in this Section 3.02 or in
Section 3.02(a) of the Disclosure Letter or in the SEC Reports filed prior to
May 7, 1997, there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company
convertible into or exchangeable for shares of capital stock or voting
securities of the Company and (iii) no options, warrants, rights, or other
agreements or commitments to acquire from the Company, and no obligation of
the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and no obligation of the Company to grant, extend or enter into any
subscription, warrant, option, right, convertible or exchangeable security or
other similar agreement or commitment (the items in clauses (i), (ii) and
(iii) being referred to collectively as the "Company Securities"). Except as
set forth in Section 3.02(a) of the Disclosure Letter, there are no
outstanding obligations of the Company or any subsidiary to repurchase, redeem
or otherwise acquire any Company Securities. There are no voting trusts or
other agreements or understandings to which the Company or any of its
subsidiaries is a party with respect to the voting of capital stock of the
Company or any of its subsidiaries. Notwithstanding the foregoing, the Company
will issue Shares pursuant to the Equity Commitment (as hereinafter defined)
and also will issue shares pursuant to the GranCare Merger.
(b) Except as set forth in Section 3.02(b) of the Disclosure Letter or in
the SEC Reports filed prior to May 7, 1997, the Company is, directly or
indirectly, the record and beneficial owner of all the outstanding shares of
capital stock of each of its subsidiaries, free and clear of any lien,
mortgage, pledge, charge, security interest or encumbrance of any kind, and
there are no irrevocable proxies with respect to any such shares. Except as
set forth in Section 3.02(b) of the Disclosure Letter or in the SEC Reports
filed prior to May 7, 1997, there are no
I-8
outstanding (i) securities of the Company or any subsidiary convertible into
or exchangeable for shares of capital stock or other voting securities or
ownership interests in any subsidiary, or (ii) options or other rights to
acquire from the Company or any of its subsidiaries, and no other obligation
of the Company or any of its subsidiaries to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable for any capital stock, voting securities or ownership
interests in, any of its subsidiaries, or any other obligation of the Company
or any of its subsidiaries to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other similar
agreement or commitment (the items in clauses (i) and (ii) being referred to
collectively as the "Subsidiary Securities"). There are no outstanding
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding Subsidiary Securities.
Section 3.03 Authority for this Agreement.
The Company has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated,
other than the approval and adoption of the agreement of merger (as such term
is used in Section 251 of the DGCL) contained in this Agreement and the
approval of the Merger by the holders of a majority of the outstanding Shares.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming this Agreement constitutes a valid and binding obligation of
each of the Parent and the Sub, constitutes a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity (whether considered in a proceeding in equity or
at law).
Section 3.04 Absence of Certain Changes.
Except as disclosed in the SEC Reports filed prior to May 7, 1997 or as set
forth in the capitalization information set forth in Section 3.02 of the
Disclosure Letter from September 30, 1996 through the date hereof, (i) the
Company and its subsidiaries have not suffered any Material Adverse Effect (as
defined in Section 5.11), (ii) the Company and its subsidiaries have, in all
material respects, conducted their respective businesses only in the ordinary
course consistent with past practice, except in connection with the
negotiation and execution and delivery of this Agreement and the solicitation
or receipt of other offers to acquire the Company, and (iii) there has not
been (a) any declaration, setting aside or payment of any dividend or other
distribution in respect of the Shares or any repurchase, redemption or other
acquisition by the Company or any of its subsidiaries of any Company
Securities or Subsidiary Securities; or (b) any action by the Company which if
taken after the date hereof, would constitute a breach of Section 5.01 hereof.
Except as disclosed in the SEC Reports filed prior to May 7, 1997 or in
Section 3.04 of the Disclosure Letter, since September 30, 1996, there has not
been any change by the Company in accounting methods, principles or practices
except as permitted by United States generally accepted accounting principles.
Section 3.05 Reports.
(a) The Company has timely filed with the SEC all forms, reports and
documents required to be filed by it pursuant to the federal securities laws
and the SEC rules and regulations thereunder on and after September 30, 1995,
all of which have heretofor been filed or are hereafter filed (the "SEC
Reports") have complied or will comply in form as of their respective filing
dates in all material respects with all applicable requirements of the
Exchange Act and the rules promulgated thereunder applicable thereto. None of
the SEC Reports, at the time filed, contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) As of their respective dates, the audited and unaudited consolidated
financial statements of the Company included (or incorporated by reference) in
the SEC Reports were prepared (or will have been prepared) in all
I-9
material respects in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods therein
indicated (except as may be indicated in the notes thereto) and presented
fairly the consolidated financial position of the Company, and the
consolidated results of operations and changes in consolidated financial
position or cash flows for the periods presented therein, subject, in the case
of the unaudited interim financial statements, to normal year-end audit
adjustments and any other adjustments described therein which were not
expected to have a Material Adverse Effect.
(c) As of March 31, 1997, neither the Company nor any of its subsidiaries
had any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, whether due or to become due that are required to be recorded or
reflected on a balance sheet under United States generally accepted accounting
principles, except as reflected or reserved against or disclosed in the
financial statements of the Company included in the SEC Reports filed prior to
May 7, 1997 or the Disclosure Letter or as otherwise disclosed in the SEC
Reports filed prior to May 7, 1997 or the Disclosure Letter.
Section 3.06 Information Supplied.
Any documents to be filed by the Company with the SEC or any other
governmental or regulatory authority in connection with the Merger and the
other transactions contemplated hereby will not, on the date of its filing or,
with respect to the Proxy Statement, as supplemented if necessary, on the date
it is sent or given to stockholders, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to information supplied in
writing by or on behalf of the Parent, the Sub or GranCare expressly for
inclusion therein and information incorporated by reference therein from
documents filed by GranCare with the SEC. The Proxy Statement and any such
other documents filed by the Company with the SEC under the Exchange Act or
with any other governmental or regulatory authority under applicable law will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder.
Section 3.07 Consents and Approvals; No Violation.
Neither the execution and delivery of this Agreement by the Company nor the
consummation of the transactions contemplated hereby will conflict with or
result in any breach of any provision of the respective Certificate of
Incorporation or Bylaws (or other similar governing documents) of the Company
or any of its subsidiaries and except as disclosed in Section 3.07 of the
Disclosure Letter and except for filings, permits, authorizations, notices,
consents and approvals as may be required under, and other applicable
requirements of, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Exchange Act, the DGCL, and the "takeover" or
blue sky laws of various states and consents, approvals, authorizations or
filings under laws of jurisdictions outside the United States, and filings,
notices, consents, authorizations and approvals as may be required by local,
state, and federal regulatory agencies, commissions, boards, or public
authorities with jurisdiction over health care facilities and providers, (i)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental or regulatory authority, except where the
failure to obtain such consent, approval, authorization or permit, or to make
such filing or notification, would not in the aggregate have a Material
Adverse Effect or have a material adverse effect on the ability of the Company
to consummate the transactions contemplated hereby; (ii) result in a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, license, agreement or
other instrument or obligation to which the Company is a party or by which the
Company or any of its assets or subsidiaries may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) which would
not in the aggregate have a Material Adverse Effect or have a material adverse
effect on the ability of the Company to consummate the transactions
contemplated hereby, (iii) result in the creation or imposition of any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
on any asset of the Company or any of its subsidiaries which, in the
aggregate, would have a Material Adverse Effect or have a material adverse
effect on the ability of the Company to consummate the transactions
contemplated hereby; or (iv) violate any order, writ, injunction, agreement,
contract, decree, statute, rule or regulation applicable to the
I-10
Company, any of its subsidiaries or by which any of their respective assets
are bound, except for violations which would not in the aggregate have a
Material Adverse Effect or have a material adverse effect on the ability of
the Company to consummate the transactions contemplated by this Agreement.
Section 3.08 Brokers.
No broker, finder or other investment banker (other than CSFB and
NationsBanc, a copy of whose engagement letters have been furnished to the
Parent) is entitled to receive any brokerage, finder's or other fee or
commission in connection with this Agreement or the transactions contemplated
hereby based upon agreements made by or on behalf of the Company.
Section 3.09 Employee Benefit Matters.
(a) For purposes of this Agreement, the term "Plan" shall refer to the
following maintained by the Company, any of its subsidiaries or any of their
respective ERISA Affiliates (as defined below), or with respect to which the
Company, any of its subsidiaries or any of their respective ERISA Affiliates
contributes or has any obligation to contribute or has any liability
(including, without limitation, a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement): any plan, program,
arrangement, agreement or commitment, whether written or oral, which is an
employment, consulting, deferred compensation or change-in-control agreement,
or an executive compensation, incentive bonus or other bonus, employee
pension, profit-sharing, savings, retirement, stock option, stock purchase,
severance pay, change-in-control, life, health, disability or accident
insurance plan, or other employee benefit plan, program, arrangement,
agreement or commitment, whether written or oral, including, without
limitation, any "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Section
3.09(a) of the Disclosure Letter sets forth each employment agreement with a
person who is entitled to receive at least $100,000 per year from the Company
or any of its subsidiaries (other than an employment agreement terminable
without material liability (not otherwise disclosed) on no more than sixty
(60) days' notice).
(b) Except as set forth in Section 3.09(b) of the Disclosure Letter, none of
the Company, its subsidiaries nor any of their respective ERISA Affiliates
maintains or contributes to, nor have they maintained or contributed to, any:
(A) defined benefit plan subject to Title IV of ERISA; or
(B) "Multiemployer plan" as defined in Section 4001 of ERISA.
(c) No event has occurred and no condition or circumstance currently exists,
in connection with which the Company, any of its subsidiaries, their
respective ERISA Affiliates or any Plan, directly or indirectly, are likely to
be subject to any liability under ERISA, the Code or any other law, regulation
or governmental order applicable to any Plan which would be reasonably likely
to have a Material Adverse Effect.
(d) With respect to each Plan, (A) all material payments due from the
Company or any of its subsidiaries to date have been made and all material
amounts properly accrued to date or as of the Effective Time as liabilities of
the Company or any of its subsidiaries which have not been paid have been
properly recorded on the books of the Company; (B) each such Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) and
intended to qualify under Section 401 of the Code has either received a
favorable determination letter from the Internal Revenue Service with respect
to such qualification as of the date specified in Section 3.09(d) of the
Disclosure Letter or has filed for such a determination letter with the
Internal Revenue Service within the time permitted under Rev. Proc. 95-12
(December 29, 1994), 1995-3 IRB 24, and nothing has occurred since the date of
such letter that has resulted in or is likely to result in a tax qualification
defect which would have a Material Adverse Effect; and (C) there are no
material actions, suits or claims pending (other than routine claims for
benefits) or, to the best of the Company's knowledge, threatened with respect
to such Plan or against the assets of such Plan.
I-11
(e) The Company has made available to the Parent, with respect to each Plan
for which the following exists:
(A) a copy of the most recent annual report on Form 5500, with respect to
such Plan including any Schedule B thereto;
(B) a copy of the Summary Plan Description, together with each Summary of
Material Modifications with respect to such Plan and, unless the Plan is
embodied entirely in an insurance policy to which the Company or any of its
subsidiaries is a Party, a true and complete copy of such Plan; and
(C) if the Plan is funded through a trust or any third party funding
vehicle (other than an insurance policy), a copy of the trust or other
funding agreement and the latest financial statements thereof.
(f) Except as disclosed in Section 3.09(g) of the Disclosure Letter or in
the SEC Reports filed prior to May 7, 1997, neither the Company nor any of its
subsidiaries has any announced plan or legally binding commitment to create
any additional material Plans or to make any material amendment or
modification to any existing Plan, except in the ordinary course of business
in accordance with its customary practices or as required by law or as
necessary to maintain tax-qualified status.
(g) For purposes of this Section 3.09, ERISA Affiliates include each
corporation that is a member of the same controlled group as the Company or
any of its subsidiaries within the meaning of Section 414(b) of the Code, any
trade or business, whether or not incorporated, under common control with the
Company or any of its subsidiaries within the meaning of Section 414(c) of the
Code and any member of an affiliated service group that includes the Company,
any of its subsidiaries and any of the corporations, trades or business
described above, within the meaning of Section 414(m) of the Code.
Section 3.10 Litigation, etc.
Except as set forth in Section 3.10 of the Disclosure Letter or as disclosed
in the SEC Reports filed prior to May 7, 1997, as of the date hereof there is
no pending audit, claim, action, proceeding or citizen's suit and, to the
knowledge of the Company, no audit, claim, action, proceeding or citizen's
suit or governmental investigation has been threatened against the Company or
any of its subsidiaries before any court or governmental or regulatory
authority which, in the aggregate, (i) would have a Material Adverse Effect or
(ii) would have a material adverse effect on the ability of the Company to
consummate the transactions contemplated by this Agreement. Except as set
forth in Section 3.10 of the Disclosure Letter or as disclosed in the SEC
Reports, filed prior to May 7, 1997 neither the Company nor any subsidiary of
the Company is subject to any outstanding judicial, administrative or
arbitration order, writ, injunction or decree that (i) has had a Material
Adverse Effect or (ii) would have a material adverse effect on the ability of
the Company to consummate the transactions contemplated by this Agreement.
Section 3.11 Tax Matters.
The Company and each of its subsidiaries has duly filed all tax returns and
reports required to be filed by it, or requests for extensions to file such
returns or reports have been timely filed and granted and have not expired,
except to the extent that such failures to file, in the aggregate, would not
have a Material Adverse Effect, and such returns and reports are true, correct
and complete in all material respects. The Company and each of its
subsidiaries has duly paid in full (or the Company has paid on its behalf) or
made adequate provision in the Company's accounting records for all taxes for
all past and current periods for which the Company or any of its Subsidiaries
is liable. The most recent financial statements contained in the SEC Reports
filed prior to May 7, 1997 reflect adequate reserves for all taxes payable by
the Company and its subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements, and no deficiencies for
any taxes have been proposed, asserted or assessed against the Company or any
of its subsidiaries that are not adequately reserved for, except for
inadequately reserved taxes and inadequately reserved deficiencies that would
not, in the aggregate, have a Material Adverse Effect. No requests for waivers
of the time to assess any taxes against the Company or any of its subsidiaries
have been granted or are pending, except for requests with respect to such
taxes that have been adequately reserved for in the most recent financial
statements contained in the SEC
I-12
Reports filed prior to May 7, 1997, or, to the extent not adequately reserved,
the assessment of which would not, in the aggregate, have a Material Adverse
Effect. Except as set forth in Section 3.11 of the Disclosure Letter, neither
the Company nor any of its subsidiaries has made any payments, or is obligated
to make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Internal Revenue Code. Neither the
Company nor any of its subsidiaries has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Internal
Revenue Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Internal Revenue Code. As used in this Agreement the
term "taxes" includes all federal, state, local and foreign income, franchise,
property, sales, use, excise and other taxes, including without limitation
obligations for withholding taxes from payments due or made to any other
person and any interest, penalties or additions to tax.
Section 3.12 Compliance with Law.
Except as set forth in Section 3.12 of the Disclosure Letter or in the SEC
Reports filed prior to May 7, 1997, neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, any law,
rule, regulation, order, judgment or decree applicable to the Company or any
subsidiary or by which any property or asset of the Company or any subsidiary
is bound or affected, except for any such conflicts, defaults or violations
that would not in the aggregate have a Material Adverse Effect. Except as set
forth in Section 3.12 of the Disclosure Letter or in the SEC Reports filed
prior to May 7, 1997, the Company and its subsidiaries have all permits,
licenses, authorizations, consents, approvals and franchises from governmental
agencies required to conduct their businesses as now being conducted (the
"Company Permits"), except for such permits, licenses, authorizations,
consents, approvals and franchises the absence of which would not in the
aggregate have a Material Adverse Effect. Except as set forth in Section 3.12
of the Disclosure Letter or in the SEC Reports filed prior to May 7, 1997, the
Company and its subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply would not in the aggregate have
a Material Adverse Effect.
Section 3.13 Environmental Compliance.
Except as set forth in Section 3.13 of the Disclosure Letter or in the SEC
Reports filed prior to May 7, 1997, (i) the assets, properties, businesses and
operations of the Company and its subsidiaries are in compliance with
applicable Environmental Laws (as defined in Section 8.11 hereof), except for
such non-compliance which has not had and will not have a Material Adverse
Effect; (ii) the Company and its subsidiaries have obtained and, as currently
operating, are in compliance with all Company Permits necessary under any
Environmental Law for the conduct of the business and operations of the
Company and its subsidiaries in the manner now conducted except for such non-
compliance which has not had and will not have a Material Adverse Effect; and
(iii) neither the Company nor any of its subsidiaries nor any of their
respective assets, properties, businesses or operations has received or is
subject to any outstanding order, decree, judgment, complaint, agreement,
claim, citation, notice, or proceeding indicating that the Company or any of
its subsidiaries is or may be (a) liable for a violation of any Environmental
Law or (b) liable for any Environmental Liabilities and Costs, where in each
case such liability would have a Material Adverse Effect.
Section 3.14 Insurance.
Except as set forth in the SEC Reports filed prior to May 7, 1997, the
Company and each of its Subsidiaries maintains, and through the Closing Date
will maintain, insurance with reputable insurers (or pursuant to prudent self-
insurance programs) in such amounts and covering such risks as are in
accordance with normal industry practice for companies engaged in businesses
similar to those of the Company and each of its Subsidiaries and owning
property in the same general areas in which the Company and each of its
Subsidiaries conducts their businesses. The Company and each of its
Subsidiaries may terminate each of its insurance policies or binders at or
after the closing and will incur no material penalties or other material costs
in doing so. None of such policies or binders was obtained through the use of
false or misleading information or the failure to provide the insurer with all
information requested in order to evaluate the liabilities and risks insured.
There is no material default
I-13
with respect to any provision contained in any such policy or binder, nor has
the Company or any of its Subsidiaries failed to give any material notice or
present any material claim under any such policy or binders in due and timely
fashion. There are no billed but unpaid premiums past due under any such
policy or binder, the failure of which to be paid would result in the
cancellation of such policy or binder. Except as otherwise set forth in the
SEC Reports filed prior to May 7, 1997 or the Disclosure Letter, (a) there are
no outstanding claims (in excess of normal retentions) that are not covered
under any such policies or binders and, to the best knowledge of the Company,
there has not occurred any event that might reasonably form the basis of any
claim (in excess of normal retentions) that are not covered against or
relating to the Company or any of its Subsidiaries that is not covered by any
of such policies or binders; (b) no notice of cancellation or non-renewal of
any such policies or binders has been received; and (c) there are no
performance bonds outstanding with respect to the Company or any of its
Subsidiaries.
Section 3.15 Vote Required.
Assuming the accuracy of the representations by the Parent and the Sub in
Section 4.08, the affirmative vote of holders of a majority of the outstanding
Shares is the only vote of the holders of any class or series of the Company's
capital stock or other voting securities necessary to approve this Agreement
and the Merger; approval of the Stock Issuance Proposal requires the
affirmative vote of the majority of the Shares actually present and voting at
the Special Meeting at which such proposal is submitted (provided that at
least 50% of the issued and outstanding Shares are actually voted on the Stock
Issuance Proposal at such special meeting); and approval of the Amendment
Proposal requires the affirmative vote of not less than 66 2/3% of the
outstanding Shares, which vote with respect to the amendments to Articles
Tenth and Eleventh of the Certificate of Incorporation must also include the
affirmative vote of not less than 66 2/3% of the issued and outstanding Shares
excluding those shares beneficially owned by any "Related Person" (as defined
in the Certificate of Incorporation).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SUB
The Parent and the Sub, jointly and severally, represent and warrant to the
Company as of the date hereof (or such other date as shall be expressly
specified) as follows:
Section 4.01 Organization and Qualification.
Each of the Parent and the Sub is duly organized and validly existing in
good standing under the laws of the state of its organization, with all
requisite power and authority to own its properties and conduct its business.
All of the current issued and outstanding capital stock of the Sub is owned
directly by the Parent, free and clear of any lien, mortgage, pledge, charge,
security interest or encumbrance of any kind, and at the Effective Time the
Sub will be a direct or indirect subsidiary of Parent.
Section 4.02 Authority Relative to this Agreement.
Each of the Parent and the Sub has full power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Parent and the Sub and the
consummation by the Parent and the Sub of the transactions contemplated hereby
have been duly and validly authorized by all necessary action. This Agreement
has been duly and validly executed and delivered by the Parent and the Sub
and, assuming this Agreement constitutes the valid and binding obligation of
the Company, this Agreement constitutes a valid and binding agreement of each
of the Parent and the Sub, enforceable against each of the Parent and the Sub
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general principles of equity (whether considered in a
proceeding in equity or at law).
Section 4.03 Consents and Approvals; No Violation.
The execution and delivery of this Agreement by each of the Parent or the
Sub and the consummation of the transactions contemplated hereby will not (i)
conflict with or result in any breach of any provision of the respective
Certificates of Incorporation or Bylaws (or other similar governing documents)
of the Parent, the Sub or any of their subsidiaries; (ii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (A) in connection with the HSR
Act,
I-14
(B) pursuant to the Exchange Act, (C) the filing of a certificate of merger
pursuant to the DGCL, (D) any applicable filings under state securities, blue
sky or "takeover" laws, (E) consents, approvals, authorizations or filings
under laws of jurisdictions outside the United States, (F) filings, notices,
consents, authorizations and approvals as may be required by local, state and
federal regulatory agencies, commissions, boards or public authorities with
jurisdiction over health care facilities and providers or (G) where the
failure to obtain such consent, approval, authorization or permit, or to make
such filing or notification, would not in the aggregate have an adverse effect
on the financial condition, business or results of operation of the Parent or
the Sub and their subsidiaries which is material to the Parent and its
subsidiaries taken as a whole or has a material adverse effect on the ability
of the Parent or the Sub to consummate the transactions contemplated hereby,
(iii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, license, agreement or other instrument or obligation to which the
Parent or the Sub or any of their subsidiaries is a party or by which any of
its subsidiaries or any of their respective assets may be bound, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or which would not in
the aggregate have an adverse effect on the financial condition, business or
results of operations of the Parent or the Sub and their subsidiaries which is
material to the Parent and its subsidiaries taken as a whole or has a material
adverse effect on the ability of the Parent or the Sub to consummate the
transactions contemplated hereby; (iv) result in the creation or imposition of
any mortgage, lien, pledge, charge, security interest or encumbrance of any
kind on any asset of the Parent or the Sub or any of their subsidiaries which,
individually or in the aggregate, would have a material adverse effect on the
ability of the Parent or the Sub to consummate the transactions contemplated
hereby; or (v) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Parent, the Sub or any of their subsidiaries or
any of their respective assets, except for violations which would not in the
aggregate have an adverse effect on the financial condition, business or
results of operations of the Parent or the Sub and their subsidiaries which is
material to the Parent and its subsidiaries taken as a whole or has a material
adverse effect on the ability of the Parent or the Sub to consummate the
transactions contemplated hereby.
Section 4.04 Financing.
Subject to the conditions set forth in Sections 6.01 and 6.03, the Parent
will make, or cause a subsidiary to make, the Sub Equity Contribution
described in Section 5.14 (the "Equity Commitment"). The Parent has received a
binding written commitment, addressed to the Parent, the Sub and the Company
from Chase Securities, Inc. and The Chase Manhattan Bank (the "Debt
Commitment"), a true and correct copy of which was furnished to the Company,
to obtain, subject to the terms and conditions of the Debt Commitment, the
financing necessary (together with the Sub Equity Contribution (as defined in
Section 5.14)) to pay the Cash Election Price pursuant to the Merger, to pay
(or provide the funds for the Company to pay) all amounts contemplated by
Section 2.08 and Section 5.06 when due, to refinance any indebtedness or other
obligation of the Company, GranCare and their respective subsidiaries which
may become due as a result of this Agreement, the GranCare Merger Agreement or
any of the transactions contemplated hereby or thereby, and to pay all related
fees and expenses, which Debt Commitment is in full force and affect as of the
date hereof. Such Debt Commitment has been affirmed in writing as of
September , 1997 (and the term "Debt Commitment" refers to such commitment
as so affirmed). It is the good faith belief of Parent and its affiliates, as
of the date of this Amended and Restated Agreement, that the financing
contemplated by the Debt Commitment will be obtained, and the Parent shall use
commercially reasonable efforts to obtain such financing, including using
commercially reasonable efforts to fulfill or cause the fulfillment of any of
the conditions thereto. If such financing is not available, the Parent shall
(notwithstanding the provisions of Section 6.03(e)) use commercially
reasonable efforts to obtain other financing.
Section 4.05 Brokers.
No broker, finder or other investment banker is entitled to receive any
brokerage, finder's or other fee or commission in connection with this
Agreement or the transactions contemplated hereby based upon agreements made
by or on behalf of the Parent or the Sub.
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Section 4.06 Litigation, etc.
As of the date hereof there is no claim, action, proceeding or governmental
investigation pending or, to the best knowledge of the Parent or the Sub,
threatened against the Parent or any of its subsidiaries, including the Sub,
before any court or governmental or regulatory authority which, in the
aggregate would have a material adverse effect on the ability of the Parent or
the Sub to consummate the transactions contemplated by this Agreement. Neither
the Parent nor any of its subsidiaries, including the Sub is subject to any
outstanding order, writ, injunction or decree that would have a material
adverse effect on the ability of the Parent or the Sub to consummate the
transactions contemplated by this Agreement.
Section 4.07 Information Supplied.
The information supplied in writing by or on behalf of the Parent and the
Sub expressly for inclusion in the Proxy Statement, as supplemented if
necessary, and any other documents to be filed by the Company with the SEC or
any other governmental or regulatory authority in connection with the Merger
or the GranCare Merger and the other transactions contemplated hereby will
not, on the date of its filing or, with respect to the Proxy Statement, on the
date first sent or given to stockholders of the Company and stockholders of
GranCare contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading.
Section 4.08 Ownership of Shares.
As of the date hereof, none of the Parent, the Sub or their affiliates
beneficially owns (within the meaning of Rule l3d-3 under the Exchange Act)
any Shares.
ARTICLE V
COVENANTS
Section 5.01 Conduct of Business of the Company.
Except as contemplated by this Agreement and in the Disclosure Letter,
during the period from the date of this Agreement to the Effective Date, the
Company and its subsidiaries will each conduct its operations according to its
ordinary and usual course of business and consistent with past practice and
will use all commercially reasonable efforts consistent with prudent business
practice to preserve intact the business organization of the Company and each
of its subsidiaries, to keep available the services of its and their current
officers and key employees and to maintain existing relationships with those
having significant business relationships with the Company and its
subsidiaries, in each case in all material respects. Without limiting the
generality of the foregoing, except as set forth in Section 5.01 of the
Disclosure Letter and except as otherwise expressly provided in or
contemplated by this Agreement or the Disclosure Letter, prior to the time
specified in the preceding sentence, neither the Company nor any of its
subsidiaries, as the case may be, will, without the prior written consent of
the Parent (not to be unreasonably withheld), (i) except for issuances of
capital stock of the Company's subsidiaries to the Company or a wholly-owned
subsidiary of the Company, issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of (A) Company Securities or Subsidiary Securities,
in each case, other than Shares issuable upon exercise or vesting of the
Rights or allocations or issuances pursuant to the Stock Plans or the exercise
of rights under any Plan or any agreement referred to in Section 3.02 of the
Disclosure Letter, or (B) any other securities in respect of, in lieu of or in
substitution for Shares outstanding on the date hereof; (ii) otherwise acquire
or redeem, directly or indirectly, any Company Securities or Subsidiary
Securities (including the Shares); (iii) split, combine or reclassify its
capital stock or declare, set aside, make or pay any dividend or distribution
(whether in cash, stock or property) on any shares of capital stock of the
Company or any of its subsidiaries (other than cash dividends paid to the
Company by its wholly-owned subsidiaries with regard to their capital stock);
(iv) (A) make any acquisition, by means of a merger or otherwise, of assets or
securities, or any sale, lease, encumbrance or other disposition of assets or
securities, in each case involving the payment or receipt of consideration of
$10,000,000 or more outside the ordinary and usual course of business
consistent with past practice in all material respects, or (B) other than in
the ordinary course of
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business, enter into a material contract or grant any release or
relinquishment of any material contract rights; (v) incur or assume any long-
term debt for borrowed money except for debt incurred in the ordinary course
of business consistent in all material respects with past practice; (vi)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
except wholly-owned subsidiaries of the Company, except in the ordinary course
of business consistent in all material respects with past practice; (vii)
except in connection with transactions permitted by (iv) above, make any
loans, advances or capital contributions to, or investments in, any other
person (other than wholly-owned subsidiaries of the Company) the aggregate in
excess of $10,000,000, except in the ordinary course of business consistent in
all material respects with past practice; (viii) change any of the accounting
principles or practices used by it or any of its subsidiaries, except as
required by the SEC or required by United States generally accented accounting
principles; (ix) adopt any amendments to the Certificate of Incorporation or
Bylaws (or similar documents) of the Company or any subsidiary; (x) except as,
may be required under any previously existing agreement or Plan, grant any
stock related awards; (xi) enter into any new, or amend any existing, employee
benefit, pension or other plan (whether or not subject to ERISA), employment,
severance, consulting or salary continuation agreements with any officers,
directors or key employees, or grant any increases in the compensation or
benefits to officers, directors and key employees; (xii) enter into, amend, or
extend any material collective bargaining or other labor agreement, except as
required by law; (xiii) adopt, make any material amendment to or terminate any
material employee benefit plan except as required by law or to maintain tax
qualified status or as requested by the Internal Revenue Service in order to
receive a determination letter for such employee benefit plan; (xiv) merge or
consolidate with or transfer all or substantially all of its assets to another
corporation or other business entity or individual, (xv) liquidate, wind-up or
dissolve (or suffer any liquidation or dissolution); or (xvi) agree in writing
or otherwise to take any of the foregoing actions.
Section 5.02 No Solicitation.
Immediately following the execution of this Agreement, the Company will
terminate any and all existing activities, discussions and negotiations with
third parties (other than Parent and GranCare) with respect to any possible
Acquisition Transaction (as defined below). The Company and its subsidiaries
and their respective officers, directors and employees shall not, and the
Company and its subsidiaries will use all reasonable efforts to cause their
representatives, agents or affiliates not to, directly or indirectly,
knowingly encourage, solicit, or initiate any discussions or negotiations
with, any corporation, partnership, person or other entity or group (other
than the Parent, the Sub and GranCare and any affiliate or associate of the
Parent, the Sub and GranCare and any of their respective directors, officers,
employees, representatives and agents) concerning any merger, consolidation,
business combination, liquidation, reorganization, sale of substantial assets,
sale of shares of capital stock or similar transactions involving the Company
or any material subsidiary of the Company (each an "Acquisition Transaction");
provided, however, that if during the 45 days following the date of this
Agreement, the Company's Board of Directors determines, after consultation
with counsel, that it is required to do so in the exercise of its fiduciary
duties to the Company or its stockholders, the Board of Directors may respond
to, or engage in discussions with respect to, a written offer for an
Acquisition Transaction during such 45 day period; and provided further that
nothing contained in this Section 5.02 shall prohibit the Company or its Board
of Directors from taking and disclosing to the Company's stockholders a
position with respect to a tender offer by a third party pursuant to Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making such
other disclosure to the Company's stockholders which, as advised by outside
counsel, is required under applicable law. The Company will promptly
communicate to Parent the terms and conditions of any proposal for an
Acquisition Transaction that it may receive and will keep Parent informed as
to the status of any actions, including any discussions, taken pursuant to
such proposed or contemplated Acquisition Transaction.
Section 5.03 Access to Information.
(a) Between the date of this Agreement and the Effective Time, the Company
will, upon reasonable notice to an executive officer of the Company, (i) give
the Parent and the Sub and their authorized representatives access (during
regular business hours), in a manner so as not to interfere with the normal
operations of the Company and its subsidiaries and subject to reasonable
restrictions imposed by an executive officer of the Company, to all
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key employees, offices and other facilities and to all books and records of
the Company and its subsidiaries and cause the Company's and its subsidiaries'
independent public accountants to provide access to their work papers and such
other information as the Parent or the Sub may reasonably request, (ii) permit
the Parent and the Sub to make such inspections as they may reasonably require
and (iii) cause its officers and those of its subsidiaries to furnish the
Parent and the Sub with such financial and operating data and other
information with respect to the business, properties and personnel of the
Company and its subsidiaries as the Parent or the Sub may from time to time
reasonably request.
(b) Information obtained by the Parent or the Sub or their respective
representatives pursuant to this Section 5.03 shall be subject to the
provisions of the letter agreement between GranCare and the Company (the
"Confidentiality Agreement") the terms of which are incorporated herein by
reference.
Section 5.04 Reasonable Efforts, Filings.
Subject to the terms and conditions herein provided for and to the fiduciary
duties of the Board of Directors of the Company under applicable law as
advised by legal counsel each of the parties hereto agrees to use commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, as soon as
practicable, the transactions contemplated by this Agreement. In connection
with and without limiting the foregoing, (a) (i) the Company, the Parent and
the Sub shall use all reasonable efforts to make promptly any required
submissions under the HSR Act which the Company and the Parent or the Sub
determines should be made, in each case, with respect to the Merger, and the
transactions contemplated by this Agreement (ii) the Company, the Parent and
the Sub shall use all reasonable efforts to respond as promptly as practicable
to all inquiries received from the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "Antitrust Division")
for additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters,
and (iii) if required by the FTC, the Antitrust Division, any State Attorney
General or any other governmental authority, or if otherwise necessary or
required in order to consummate the Merger, Parent agrees promptly to take all
commercially reasonable steps (including executing agreements and submitting
to judicial or administrative orders) to effect the sale or other disposition
of, or to hold separate assets or businesses of Parent or the Company or any
of their respective subsidiaries or affiliates (including, without limitation,
pursuant to arrangements which limit or prohibit access to such assets or
businesses) unless such sale or other disposition would have a Material
Adverse Effect on the Company, (b) the Parent, the Sub and the Company will
take all such action as may be necessary under federal and state securities
laws applicable or necessary for, and will file and, if appropriate, use all
reasonable efforts to have declared effective or approved all documents and
notifications with the SEC and other governmental or regulating bodies which
the Parent, the Sub and the Company determines, in each case, is necessary for
the consummation of the Merger and the transactions contemplated hereby and
each party shall give the other information requested by it which is
reasonably necessary to enable it to take such action, (c) the Parent, the Sub
and the Company will, and will cause each of their respective subsidiaries to,
use commercially reasonable efforts to obtain consents of all third parties
and governmental bodies (other than with respect to healthcare regulatory
licenses, certifications or permits or provider agreements) necessary or, in
the reasonable opinion of the Parent or the Company, advisable to consummate
the Merger and the transactions contemplated by this Agreement and (d) prior
to the Effective Time, the Parent, Sub and the Company will take, and cause
their respective subsidiaries to take, such actions to apply for such
governmental approvals or consents, or make filings with governmental bodies,
with respect to healthcare regulatory licenses, certifications, or permits or
provider agreements as may be required by applicable law. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the Parent shall cause the proper officers
and directors of the Surviving Corporation, the Parent or the Sub, as the case
may be to take all such necessary action.
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Section 5.05 Indemnification and Insurance.
(a) The Sub agrees that all rights to indemnification existing in favor of
the present or former directors, officers and employees of the Company (as
such) or any of its subsidiaries or present or former directors of the Company
or any of its subsidiaries serving or who served at the Company's or any of
its subsidiaries' request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, as provided in the Company's Certificate of Incorporation or
Bylaws, or the articles of incorporation, bylaws or similar documents of any
of the Company's subsidiaries and the indemnification agreements with such
present and former directors, officers and employees as in effect as of the
date hereof with respect to matters occurring at or prior to the Effective
Time shall survive the Merger and shall continue in full force and effect and
without modification (other than modifications which would enlarge the
indemnification rights) for a period of not less than the statutes of
limitations applicable to such matters, and the Surviving Corporation shall
comply fully with its obligations hereunder and thereunder. Without limiting
the foregoing, the Company shall, and after the Effective Time, the Surviving
Corporation shall periodically advance expenses as incurred with respect to
the foregoing (including with respect to any action to enforce rights to
indemnification or the advancement of expenses) to the fullest extent
permitted under applicable law; provided, however, that the person to whom the
expenses are advanced provides an undertaking (without delivering a bond or
other security) to repay such advance if it is ultimately determined that such
person is not entitled to indemnification.
(b) For a period of six (6) years after the Effective Time, the Surviving
Corporation shall maintain officers' and directors' liability insurance and
fiduciary liability insurance covering the persons described in paragraph (a)
of this Section 5.05 (whether or not they are entitled to indemnification
thereunder) who are currently covered by the Company's existing officers' and
directors' or fiduciary liability insurance policies on terms no less
advantageous to such indemnified parties than such existing insurance.
(c) The Surviving Corporation shall indemnify and hold harmless (and shall
advance expenses to), to the fullest extent permitted under applicable law,
each director, officer, employee, fiduciary and agent of the Company or any
subsidiary of the Company including, without limitation, officers and
directors, serving as such on the date hereof against any costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation relating to any of the
transactions contemplated hereby, and in the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Surviving Corporation shall pay the reasonable fees
and expenses of counsel selected by the indemnified parties, promptly as
statements therefor are received and (ii) the parties hereto will cooperate in
the defense of any such matter; provided, however, that the Surviving
Corporation shall not be liable for any settlement effected without its prior
written consent, which consent shall not unreasonably be withheld.
(d) The Surviving Corporation shall pay all reasonable costs and expenses,
including attorneys' fees, that may be incurred by any indemnified parties in
enforcing the indemnity and other obligations provided for in this Section
5.05.
(e) In the event the Surviving Corporation or any of its respective
successors or assigns (i) consolidates with or merges into any other person
and is not 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, proper provisions shall be made so that
the successors and assigns of the Surviving Corporation assumes the
obligations set forth in this Section 5.05.
(f) This Section 5.05, which shall survive the consummation of the Merger at
the Effective Time and shall continue for the periods specified herein, is
intended to benefit the Company, the Surviving Corporation, and any person or
entity referenced in this Section 5.05 or indemnified hereunder each of whom
may enforce the provisions of this Section 5.05 (whether or not parties to
this Agreement).
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Section 5.06 Employee Plans and Benefits and Employment Contracts.
(a) From and after the Effective Time, the Surviving Corporation and its
subsidiaries will honor in accordance with their terms all existing
employment, severance, consulting and salary continuation agreements between
the Company or any of its subsidiaries and any current or former officer,
director, employee or consultant of the Company or any of its subsidiaries or
group of such officers, directors, employees or consultants described in
Sections 3.09 and 5.06(a) of the Disclosure Letter.
(b) In addition to honoring the agreements referred to in Section 5.06(a),
until the first anniversary of the Effective Time, the Surviving Corporation
and its subsidiaries will provide or will cause to be provided to each current
or former employee (presently entitled to benefits) of the Company or its
subsidiaries (excluding employees covered by collective bargaining agreements)
(i) employee compensation, benefit plans, programs, policies and arrangements,
that are no less favorable in the aggregate than those currently provided by
the Company and its subsidiaries to each such employees and former employee;
and (ii) severance benefits that are in the aggregate no less favorable to any
employee of the Company or any of its subsidiaries than those currently
provided to each such employee. Nothing in this Section 5.06(b) shall be
deemed to prevent the Surviving Corporation or any of its subsidiaries from
making any change required by law.
(c) To the extent permitted under applicable law, each employee of the
Company or its subsidiaries shall be given credit for all service with the
Company or its Subsidiaries (or service credited by the Company or its
subsidiaries) under all employee benefit plans, programs, policies and
arrangements maintained by the Surviving Corporation in which they participate
or in which they become participants for purposes of eligibility, vesting and
benefit accrual including, without limitation, for purposes of determining (i)
short-term and long-term disability benefits, (ii) severance benefits, (iii)
vacation benefits and (iv) benefits under any retirement plan.
(d) This Section 5.06, which shall survive the consummation of the Merger at
the Effective Time and shall continue without limit, is intended to benefit
and bind the Company, the Surviving Corporation and any person or entity
referenced in this Section 5.06, each of whom may enforce the provisions of
this Section 5.06 whether or not parties to this Agreement. Except as provided
in clause (a) above, nothing contained in this Section 5.06 shall create any
beneficiary rights in any employee or former employee (including any dependent
thereof) of the Company, any of its subsidiaries or the Surviving Corporation
in respect of continued employment for any specified period of any nature or
kind whatsoever.
Section 5.07 Proxy Statement.
The Company shall prepare and file with the SEC, as soon as practicable, a
preliminary Proxy Statement relating to the Stockholder Approvals as required
by the Exchange Act and the rules and regulations thereunder. The Company,
GranCare, the Parent and the Sub will cooperate with each other in the
preparation of the preliminary Proxy Statement. The Company shall use all
reasonable efforts to respond promptly, together with GranCare, to any
comments made by the SEC with respect to the preliminary Proxy Statement, and
to cause the Proxy Statement to be mailed to the Company's stockholders and
GranCare's stockholders at the earliest practicable date.
Section 5.08 Notification of Certain Matters.
The Company shall give prompt notice to the Parent and the Sub, and the
Parent or the Sub, as the case may be, shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence, of any event the effect of
which is likely to cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Effective Time and (ii) any material failure of such party
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.08 shall not limit or otherwise affect the
remedies available hereunder to any of the parties receiving such notice.
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Section 5.09 Rights Agreement Amendment.
Subject to the terms and conditions of this Agreement, (a) the Company shall
promptly enter into an amendment to the Rights Agreement (the "Rights
Agreement Amendment") pursuant to which the Rights Agreement and the Rights
Agreement Rights will not be applicable to the Merger, shall not result in a
"Distribution Date" under the Rights Agreement and consummation of the Merger
shall not result in the Parent or the Sub or their affiliates being an
"Acquiring Person" or result in the occurrence of a "Flip-In Event" or a
"Flip-Over Event" thereunder, and (b) the Company shall cause the Rights
Agreement to be further amended at or prior to the Effective Time to provide
that the Effective Date shall constitute the "Expiration Date" thereunder.
Section 5.10 Solvency Letter.
(a) The Parent shall use commercially reasonable efforts to deliver to the
Board of Directors of the Company prior to the consummation of the Merger, a
letter (the "Solvency Letter") from an independent third party selected by the
Parent and reasonably satisfactory to the Company (the "Appraiser") attesting
that, immediately after the Effective Time, the Surviving Corporation: (i)
will be solvent (in that both the fair value of its assets is not less than
the sum of its debts and that the present fair saleable value of its assets
will not be less than the amount required to pay its probable liability on its
debts as they become absolute and matured), (ii) will have adequate capital
with which to engage in its business; and (iii) will not have incurred and
does not plan to incur debts beyond its ability to pay as they become absolute
and matured, based upon the proposed financing structure for the Mergers and
certain other financial information to be provided to the Appraiser by the
Parent and the Company and after giving effect to any changes in the Company's
assets and liabilities as a result of the Merger, the GranCare Merger and the
financing relating thereto. Subject to the foregoing, the Solvency Letter
shall be in form and substance reasonably satisfactory to the Company. Except
with the prior written consent of the Company's Board of Directors, the Parent
will not consummate the Merger unless and until such Board shall have received
the Solvency Letter (the "Solvency Letter Conditions").
(b) The Parent will request the Appraiser to deliver the Solvency Letter as
promptly as practicable. The parties agree to cooperate with the Appraiser in
connection with the preparation of the Solvency Letter, including, without
limitations providing the Appraiser with any information reasonably available
to them necessary for the Appraiser's preparation of such letter.
(c) The Sub shall provide to the Board any appraisals, opinions or other
statements relating to the solvency and adequate capitalization of the
Surviving Corporation and the Surviving Corporation's ability to pay its
debts, at the same time that such materials are given to any banks or other
lenders in connection with the Merger.
Section 5.11 New York Stock Exchange Listing.
Each party agrees to use commercially reasonable efforts to retain the
listing of the Retained LCA Shares on the New York Stock Exchange following
the Effective Time.
Section 5.12 Election to the Company's Board of Directors; Stockholders
Agreement.
Prior to the Effective Time of the Merger, the Sub shall increase the size
of its board of directors to eleven and cause to be elected as directors of
Sub (and to be in office immediately prior to the Effective Time) six nominees
of Parent (in compliance with the requirements of the Stockholders Agreement
referred to below), three nominees of GranCare, one of the current directors
of the Company (mutually satisfactory to Parent and the Company) and Xxxxx X.
Xxxxx, the Chief Executive Officer of the Surviving Corporation. In addition,
at the Effective Time, the Surviving Corporation and the Parent shall enter
into a stockholders agreement substantially in the form of Exhibit C hereto
(the "Stockholders Agreement").
Section 5.13 Registration Rights Agreement.
Prior to the Effective Time, the Company shall execute and deliver to Parent
a registration rights agreement (the "Registration Rights Agreement") in a
form mutually acceptable to Parent and the Company, such agreement to provide
Parent with two demand registration rights and ancillary registration rights
for its Shares all subject to customary terms and provisions.
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Section 5.14 Capitalization of Sub.
Subject to the terms and conditions of this Agreement, the Parent agrees to
contribute, or cause to be contributed, to Sub not less than $240 million and,
at Parent's sole election, up to $250 million (the total amount actually so
contributed being referred to as the "Sub Equity Contribution") in exchange
for shares of the Sub at a price of $40.50 per share (and such shares of the
Sub shall be converted into shares of the Surviving Corporation pursuant to
Section 2.04). As of the date hereof, and at all times on and before the
Effective Time, the Sub (i) has not issued and will not issue any shares
(except for a minimal number of shares for minimal consideration, which shares
shall be cancelled prior to the Effective Time); (ii) has not granted and will
not grant any options or rights to purchase or acquire shares; (iii) has not
granted or entered into and will not grant or enter into any options,
warrants, rights, or other agreements or commitments to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Sub; and (iv) does not have and will
not have any obligation to grant, extend or enter into any subscription,
warrant, option, right, convertible or exchangeable security or other similar
agreement or commitment, other than that number of shares of common stock of
the Sub as is equal to the Sub Equity Contribution divided by $40.50.
Section 5.15 Sub Bylaws.
The Sub shall, prior to the Effective Time, amend its Bylaws to read in
their entirety as set forth in Exhibit B hereto, with such changes as shall be
approved in advance by the Parent, GranCare and the Company.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger are subject to
the satisfaction or waiver, where permissible, prior to the proposed Effective
Time, of the following conditions:
(a) Company stockholder approval of this Agreement and the Stock Issuance
Proposal shall have been obtained as required by and in accordance with
applicable law and the Company's Certificate of Incorporation;
(b) no statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority against the Parent, the Sub or the Company and be in
effect that prohibits or restricts the consummation of the Merger or makes
such consummation illegal (each party agreeing to use commercially
reasonable efforts to have any such prohibition lifted);
(c) the conditions to each party's obligations to effect the GranCare
Merger (other than the consummation of the Merger) shall have been
satisfied or waived; provided, however, that neither the Company nor the
Surviving Corporation may waive any such condition or modify or amend the
terms of such merger agreement without the prior written consent of Parent;
and
(d) the waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated and all filings required
to be made prior to the Effective Time with, and all consents, approvals,
authorizations and permits required to be obtained prior to the Effective
Time from, any Governmental Authority in connection with the consummation
of the Merger shall have been made or obtained (as the case may be), except
where the failure to obtain such consents, approvals, authorizations and
permits would not be reasonably likely to result in a Material Adverse
Effect on the Company or to materially adversely affect the consummation of
the Merger.
(e) no action shall have been taken and be continuing, and no statute,
rule, regulation, judgment, administrative interpretation, order or
injunction shall have been enacted, promulgated, entered, enforced or
deemed applicable to the Merger, which would make illegal or prohibit the
consummation of the Merger; and
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(f) the conditions set forth in the Debt Commitment shall have been
satisfied or waived (other than the conditions relating to the consummation
of the Merger and the GranCare Merger);
Section 6.02 Additional Condition to the Company's Obligation to Effect the
Merger.
The obligation of the Company to effect the Merger is subject to the
satisfaction or waiver by the Company, prior to the proposed Effective Time,
of the following conditions:
(a) the Solvency Letter Condition; and
(b) the representations and warranties of the Parent and the Sub set
forth in Article III shall be true and correct in all material respects as
of the Effective Time as though made on and as of that time, and the Parent
and the Sub shall have (i) executed and delivered the Stockholders
Agreement, (ii) amended its Bylaws as contemplated by Section 5.15, and
(iii) performed in all material respects all other covenants and agreements
required to be performed by it under this Agreement at or prior to the
Effective Time.
Section 6.03 Additional Conditions to the Parent's and the Sub's Obligations
to Effect the Merger.
The obligations of the Parent and the Sub to effect the Merger shall be
subject to the satisfaction or waiver by the Parent and the Sub, prior to the
proposed Effective Time, of the following conditions:
(a) no action or proceeding brought by any governmental, regulatory or
administrative agency, authority or commission shall have been instituted
and be pending that would be reasonably likely to result in any of the
consequences referred to in clauses (b) or (e) of Section 6.01 above and
there shall be no proceeding or other action (including, without
limitation, relating to health care, regulatory, environmental and pension
matters) pending or threatened against the Company, GranCare or their
respective subsidiaries brought by any governmental, regulatory or
administrative agency, authority or commission which is reasonably likely
to have a Material Adverse Effect;
(b) during the 30 calendar day period ending on the date of the Closing,
there shall not have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, (ii) the declaration
of any banking moratorium or any suspension of payments in respect of banks
or any material limitation (whether or not mandatory) on the extension of
credit by lending institutions in the United States, (iii) the commencement
of a war, material armed hostilities or any other material international or
national calamity involving the United States having a significant adverse
effect on the functioning of the financial markets in the United States, or
(iv) in the case of any of the foregoing existing at the time of the
execution of the Merger Agreement, a material acceleration or worsening
thereof;
(c) since September 30, 1996, with respect to the Company, and December
31, 1996, with respect to GranCare, no change shall have occurred or have
been threatened in the business, operations, prospects, properties or
condition (financial or other) of the Company, GranCare or any of their
respective subsidiaries that would have or would be reasonably likely to
have a Material Adverse Effect provided, that the transactions contemplated
by the Recapitalization Agreement and the Merger Agreement shall not be
deemed to be such a materially adverse change;
(d) the representations and warranties of the Company set forth in
Article IV shall be true and correct in all material respects as of the
Effective Time as though made on and as of that time, and the Company shall
have (i) executed and delivered the Stockholders Agreement, (ii) amended
the Rights Agreement as contemplated by clause (b) of Section 5.09, and
(iii) performed in all material respects all other covenants and agreements
required to be performed by them under this Agreement at or prior to the
Effective Time;
(e) the transactions contemplated by the Debt Commitment shall have been
consummated pursuant to definitive agreements in form and substance
reflecting the terms of the Debt Commitment and otherwise reasonably
satisfactory to Parent; any other refinancings, or amendments or consents
relating to existing financing of the Company or GranCare made or obtained
in connection with the Merger or the GranCare
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Merger shall be reasonably satisfactory to Parent; and all proceeds
received by the Surviving Corporation on the Closing Date under or as a
result of the transactions contemplated by the Debt Commitment and as a
result of the Merger shall be used (or shall be usable) solely to
consummate the transactions contemplated by this Agreement and the GranCare
Merger Agreement, including payment of fees and expenses thereof, the
refinancing of existing indebtedness and to provide working capital to the
Surviving Corporation and its subsidiaries;
(f) the Company's stockholders shall have approved the Amendment
Proposal, including specifically the affirmative vote of not less than 66
2/3% of the outstanding Shares as of the record date (including as to the
amendments to Articles Tenth and Eleventh of the Company's Certificate of
Corporation, as in effect prior to such vote, the affirmative vote of not
less than 66 2/3% of such shares excluding Shares owned by a "Related
Person" as defined in such Company Certificate of Incorporation).
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.01 Termination.
This Agreement may be terminated and the Merger may be abandoned at any time
notwithstanding approval thereof by the stockholders of the Company, but prior
to the Effective Time:
(a) by mutual written consent of the Boards of Directors of the Company
and the Parent;
(b) by the Parent or the Company if the Effective Time shall not have
occurred on or before November 17, 1997 (provided that the right to
terminate this Agreement under this Section 7.01(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of or resulted in the failure of the Effective Time to
occur on or before such date);
(c) by the Parent or the Company if any court of competent jurisdiction
in the United States or other United States governmental body shall have
issued an order, decree or ruling, or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and non-appealable;
(d) prior to obtaining the Stockholder Approvals, by the Parent if the
Board of Directors of the Company withdraws or modifies in a manner adverse
to the Parent or the Sub its favorable recommendation with respect to the
Stockholder Approvals or shall have recommended an Acquisition Transaction
with a party other than the Parent or any of its affiliates;
(e) by the Company if (i) any of the representations and warranties of
the Parent or the Sub contained in this Agreement were untrue in any
material respect when made or have since become, and at the time of
termination remain, untrue in any material respect, or (ii) the Parent or
the Sub shall have breached or failed to comply in any material respect
with any of its obligations under this Agreement and such breach or failure
shall continue unremedied for ten (10) business days after the Parent or
the Sub has received written notice from the Company of the occurrence of
such breach or failure;
(f) prior to obtaining Stockholder Approvals, by the Company if the
Company receives a written offer with respect to any Acquisition
Transaction with a party other than the Parent or its affiliates or such
other party has commenced a tender offer which, in either case, the Board
of Directors of the Company believes in good faith is more favorable to the
Company's stockholders than the transactions contemplated by this
Agreement;
(g) by the Parent, if (x) 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 have since
become, and at the time of termination remain, untrue in any material
respect, or (y) the Company shall have breached or failed to comply in any
material respect with any of its obligations under this Agreement (other
than as a result of a breach by the Parent or the Sub of any of their
obligations under this Agreement) and, with respect to a representation or
warranty, such breach shall continue unremedied for ten (10) days after the
Company has received written notice from the Parent or the Sub of the
occurrence of such breach or failure;
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(h) by the Parent or the Company if the GranCare Merger Agreement is
terminated; or
(i) by the Parent or the Company if the Company fails to obtain approval
of its stockholders of this Agreement or the Stock Issuance Proposal, or by
the Parent, if the Company fails to obtain approval of its stockholders of
the Amendment Proposal, in either case at the meeting held for such purpose
(or any adjournment thereof).
Section 7.02 Effect of Termination.
If this Agreement is terminated and the Merger is abandoned pursuant to
Section 7.01 hereof, this Agreement, except for the provisions of Sections
5.03(b), this Section 7.02 and 8.10 hereof, shall forthwith become void and
have no effect, without any liability on the part of any party or its
directors, officers or stockholders. The Confidentiality Agreement shall
remain in full force and effect following any termination of this Agreement.
If this Agreement is terminated pursuant to Section 7.01(d) or (f), the
Company promptly, but in no event later than one business day after
termination of this Agreement will pay to the Parent a fee (the "Termination
Fee") equal to $20 million in same day funds, plus interest on such amount
from the date payable until paid at a rate equal to 9% per annum. If this
Agreement is terminated pursuant to Section 7.01(i) and, at the time of the
stockholder vote referred to herein, any person has made (or publicly
disclosed an intention to make) a proposal to effect an Acquisition
Transaction (and shall not have irrevocably withdrawn such proposal), and
within 180 days after such termination an Acquisition Transaction shall be
consummated, the Company shall promptly, but in no event later than one
business day after such consummation, pay the Termination Fee. If this
Agreement is terminated pursuant to Section 7.01(d), (f), (g) or (i), the
Company shall also pay the out-of-pocket fees and expenses reasonably incurred
by the Parent and the Sub in connection with this Agreement, provided that
such fees and expenses shall not exceed $6,000,000 expenses (plus reasonable
fees and of up to $1,000,000 in connection with any litigation with respect to
this Agreement). Nothing in this Section 7.02 shall relieve any party to this
Agreement of liability for breach of this Agreement.
Section 7.03 Amendment.
To the extent permitted by applicable law, this Agreement may be amended by
action taken by or on behalf of the Boards of Directors of the Company, the
Parent and the Sub at any time before or after adoption of this Agreement by
the stockholders of the Company but, after any such stockholder approval, no
amendment shall be made which decreases the Merger Consideration or which
adversely affects the rights of the Company's stockholders hereunder without
the approval of the stockholders of the Company. This Agreement may not be
amended except by an instrument in writing signed on behalf of all of the
parties.
Section 7.04 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action taken
by or on behalf of the respective Boards of Directors of the Company, the
Parent and the Sub may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein by any
other applicable party or in any document, certificate or writing delivered
pursuant hereto by any other applicable party or (iii) waive compliance with
any of the agreements or conditions contained herein. Any agreement on the
part of any party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
I-25
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Survival of Representations and Warranties.
The representations and warranties made in Articles III and IV shall not
survive beyond the Effective Time. This Section 8.01 shall not limit any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Effective Time.
Section 8.02 Entire Agreement; Assignment.
Except for the Confidentiality Agreement and the Disclosure Letter, this
Agreement (a) constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and (b) shall not be assigned by operation of law or
otherwise; provided, however, that the Parent or the Sub may assign any of its
rights and obligations (i) to any subsidiary of the Parent or the Sub
incorporated in Delaware, or (ii) the right to purchase, directly or
indirectly, up to 40% of the issued and outstanding shares of the Sub
immediately prior to the Effective Time, but no such assignment shall relieve
the Parent or the Sub, as the case may be, of its obligations hereunder.
Section 8.03 Enforcement of the Agreement; Jurisdiction.
The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any federal or state court located in the State of
Delaware, this being in addition to any other remedy to which they are
entitled at law or in equity.
The parties hereto consent and agree that the state or federal courts
located in Delaware shall have exclusive jurisdiction to hear and determine
any claims or disputes pertaining to this Agreement or to any matter arising
out of or related to this Agreement and each party hereto waives any objection
that it may have based upon lack of personal jurisdiction, improper venue or
forum non conveniens and hereby consents to the granting of such legal or
equitable relief as is deemed appropriate by such court.
Section 8.04 Validity.
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.
Section 8.05 Notices.
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by facsimile transmission with confirmation of receipt, or by
registered or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
if to the Parent or the Sub:
c/o Apollo Management, L.P.
1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
I-26
with a copy to:
Sidley & Austin
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
if to the Company:
Living Centers of America, Inc.
00000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxx Xxxxxxx, Esq., General Counsel
Sydney X. Xxxxx, Xx., Esq., Associate General Counsel
with copies to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Mayor, Day, Xxxxxxxx & Xxxxxx L.L.P.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Section 8.06 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware regardless of the laws that might otherwise
govern under principles of conflicts of laws applicable thereto.
Section 8.07 Descriptive Headings.
The descriptive headings herein are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
Section 8.08 Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended
to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement except for Sections 2.08, 5.05
and 5.06 (which are intended to be for the benefit of the persons referred to
therein, and may be enforced by any such persons).
Section 8.09 Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one and the same
agreement.
I-27
Section 8.10 Fees and Expenses.
If the Merger is not consummated, all costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid
by the party incurring such expenses, except as provided expressly to the
contrary herein. If the Merger is consummated, the Surviving Corporation shall
reimburse Parent for all such costs and expenses.
Section 8.11 Certain Definitions; Interpretation.
(a) "business day" shall mean any day that is not a Saturday, Sunday or
other day on which banking institutions in New York, New York are authorized
or required by law or executive order to close;
(b) "Environmental Law" means any law, regulation, decree, judgment, permit
or authorization relating to works or public safety and the indoor and outdoor
environment, including, without limitation, pollution, contamination, clean-
up, regulation and protection of the air, water or soils in the indoor or
outdoor environment;
(c) "Environmental Liabilities and Costs" means all damages, penalties,
obligations or clean-up costs assessed or levied pursuant to any Environmental
Law;
(d) "Material Adverse Effect" shall mean any adverse change in the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries that is material to the Company and its subsidiaries taken as a
whole, excluding any such adverse change that is due to events, occurrences,
facts, conditions, changes, developments or effects which affect the economy
generally; and
(e) "subsidiary" shall mean, when used with reference to an entity, any
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions, or a majority of the outstanding voting
securities of which, are owned directly or indirectly by such entity.
Section 8.12 Disclosure Letter.
Any disclosure under one section of the Disclosure Letter shall be deemed
disclosure under all sections of the Disclosure Letter. Disclosure of any
matter in the Disclosure Letter shall not constitute an expression of a view
that such matter is material or is required to be disclosed pursuant to this
Agreement.
Section 8.13 Press Releases.
Subject to the proviso to this sentence, the Parent, the Sub and the Company
will consult with each other before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or by
obligations pursuant to the rules of The New York Stock Exchange, Inc. and any
other appropriate exchange.
Section 8.14 Obligation of the Parent.
Whenever this Agreement requires Sub to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause Sub
to take such action.
Section 8.15. No Waiver.
Any reference in this Agreement to the "date hereof," the "date of this
Agreement" or the "date of execution of this Agreement" shall be deemed to
refer to May 7, 1997, the date of the Original Merger Agreement, but any
reference to the "date of this Amended and Restated Agreement" or the "date of
execution of this Amended and Restated Agreement" shall refer to September 17,
1997. The parties' execution and delivery of this Amended and Restated
Agreement (or any previously executed and delivered amendment and/or
restatement of the Original Merger Agreement) shall not constitute a waiver of
any rights that any of the parties hereto may have by reason of any event,
condition, misrepresentation or breach of covenant of the Original Merger
Agreement having occurred prior to the date of execution and delivery of this
Amended and Restated Agreement (or any previously executed and delivered
amendment and/or restatement of the Original Merger Agreement), whether or not
known to any or all of the parties hereto. No representation or warranty of
any party in this Agreement shall be affected or limited by reason of the
knowledge of any other party at any time that such representation or warranty
is not, or may not be, true and correct.
I-28
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized.
APOLLO MANAGEMENT, L.P.
By: AIF III Management, Inc.
Its General Partner
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
APOLLO LCA ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
LIVING CENTERS OF AMERICA, INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
I-29
