EXHIBIT 2.1
EXECUTION COPY
================================================================================
CENTENNIAL HEALTHCARE CORPORATION,
HILLTOPPER HOLDING CORP.
and
HILLTOPPER ACQUISITION CORP.
______________________________
AGREEMENT AND PLAN OF MERGER
______________________________
______________________________
Dated as of February 25, 2000
______________________________
================================================================================
TABLE OF CONTENTS
-----------------
Page No.
--------
ARTICLE I. THE TENDER OFFER................................................................... 2
SECTION 1.1. The Offer.................................................................. 2
SECTION 1.2. Company Action............................................................. 4
SECTION 1.3. Directors.................................................................. 5
ARTICLE II. THE MERGER........................................................................ 7
SECTION 2.1. The Merger................................................................. 7
SECTION 2.2. Effective Time............................................................. 7
SECTION 2.3. Effect of the Merger....................................................... 7
SECTION 2.4. Subsequent Actions......................................................... 7
SECTION 2.5. Articles of Incorporation; By-Laws; Directors and Officers................. 8
SECTION 2.6. Conversion of Securities................................................... 8
SECTION 2.7. Dissenting Shares.......................................................... 9
SECTION 2.8. Surrender of Shares; Stock Transfer Books.................................. 10
SECTION 2.9. Stock Plans................................................................ 12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND PURCHASER....................... 12
SECTION 3.1. Corporate Organization..................................................... 12
SECTION 3.2. Authority Relative to this Agreement....................................... 13
SECTION 3.3. No Conflict; Required Filings and Consents................................. 13
SECTION 3.4. Financing Arrangements..................................................... 14
SECTION 3.5. No Prior Activities........................................................ 14
SECTION 3.6. Brokers.................................................................... 14
SECTION 3.7. Offer Documents; Proxy Statement........................................... 14
SECTION 3.8. Company Stock.............................................................. 15
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................... 15
SECTION 4.1. Organization and Qualification; Subsidiaries............................... 15
SECTION 4.2. Capitalization............................................................. 17
SECTION 4.3. Authority Relative to this Agreement....................................... 18
SECTION 4.4. No Conflict; Required Filings and Consents................................. 18
SECTION 4.5. SEC Filings; Financial Statements.......................................... 19
SECTION 4.6. Absence of Certain Changes or Events....................................... 21
SECTION 4.7. Litigation................................................................. 22
SECTION 4.8. Employee Benefit Plans..................................................... 22
SECTION 4.9. Properties................................................................. 25
SECTION 4.10. Intellectual Property...................................................... 26
SECTION 4.11. Insurance.................................................................. 27
SECTION 4.12. Environmental.............................................................. 27
SECTION 4.13. Governmental Authorizations and Regulations................................ 29
SECTION 4.14. Condition of Facilities.................................................... 31
SECTION 4.15. Material Contracts......................................................... 32
SECTION 4.16. Conduct of Business........................................................ 34
SECTION 4.17. Fraud and Abuse............................................................ 34
(i)
SECTION 4.18. Health Professional's Financial Relationships; Disqualified
Individuals;............................................................. 35
SECTION 4.19. Taxes 36
SECTION 4.20. Labor Relations........................................................... 38
SECTION 4.21. Transactions with Affiliates.............................................. 39
SECTION 4.22. Offer Documents; Proxy Statement.......................................... 39
SECTION 4.23. Brokers................................................................... 40
SECTION 4.24. Control Share Acquisition................................................. 40
SECTION 4.25. Y2K Compliance............................................................ 40
SECTION 4.26. Disclosure................................................................ 41
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER............................................ 41
SECTION 5.1. Conduct of Business by the Company Pending the Closing.................... 41
SECTION 5.2. No Solicitation........................................................... 44
ARTICLE VI. ADDITIONAL AGREEMENTS....................................................... 47
SECTION 6.1. Proxy Statement........................................................... 47
SECTION 6.2. Meeting of Shareholders of the Company.................................... 47
SECTION 6.3. Compliance with Law....................................................... 47
SECTION 6.4. Notification of Certain Matters........................................... 47
SECTION 6.5. Access to Information..................................................... 48
SECTION 6.6. Public Announcements...................................................... 48
SECTION 6.7. Reasonable Best Efforts; Cooperation...................................... 48
SECTION 6.8. Agreement to Defend and Indemnify......................................... 49
SECTION 6.9. State Takeover Laws....................................................... 50
ARTICLE VII. CONDITIONS OF MERGER............................................................ 51
SECTION 7.1. Conditions for Each Party's Obligations to Effect the Merger.............. 51
SECTION 7.2. Conditions for Obligations of Parent and Purchaser........................ 51
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER.............................................. 52
SECTION 8.1. Termination............................................................... 52
SECTION 8.2. Effect of Termination..................................................... 55
ARTICLE IX. GENERAL PROVISIONS............................................................... 55
SECTION 9.1. Non-Survival of Representations, Warranties and Agreements................ 55
SECTION 9.2. Notices................................................................... 56
SECTION 9.3. Expenses.................................................................. 57
SECTION 9.4. Certain Definitions....................................................... 57
SECTION 9.5. Headings.................................................................. 57
SECTION 9.6. Severability.............................................................. 57
SECTION 9.7. Entire Agreement; No Third-Party Beneficiaries............................ 58
SECTION 9.8. Assignment................................................................ 58
SECTION 9.9. Governing Law............................................................. 58
SECTION 9.10. Amendment................................................................. 58
SECTION 9.11. Waiver.................................................................... 58
SECTION 9.12. Counterparts.............................................................. 59
(ii)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 25, 2000 (the
"Agreement"), among Centennial HealthCare Corporation, a Georgia corporation
(the "Company"), Hilltopper Holding Corp., a Delaware corporation ("Parent"),
and Hilltopper Acquisition Corp., a Georgia corporation and an indirect wholly
owned subsidiary of Parent ("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Boards of Directors of the Company and Purchaser have
each determined that it is in the best interests of their respective
shareholders for Purchaser to acquire the Company upon the terms and subject to
the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Purchaser will
make a cash tender offer (the "Offer") to acquire all shares (the "Shares") of
the issued and outstanding common stock, $.01 par value, of the Company (the
"Company Common Stock") for $5.50 per share of Company Common Stock or such
higher price as may be paid in the Offer (the "Per Share Amount"), net to the
seller in cash; and
WHEREAS, also in furtherance of such acquisition, the Boards of
Directors of the Company, Purchaser and Parent have each approved the merger of
Purchaser with and into the Company (the "Merger") following the Offer in
accordance with the Georgia Business Corporation Code (the "Georgia Code") and
upon the terms and subject to the conditions set forth herein; and
WHEREAS, on February 24, 2000, certain shareholders of the Company
(the "Contributing Shareholders") entered into a Subscription and Contribution
Agreement with Parent and certain affiliates of Parent (the "Subscription
Agreement"), pursuant to which each such Contributing Shareholder has, among
other things, agreed to contribute some or all of its Shares to Parent in
exchange for shares of stock of Parent upon the terms set forth in the
Subscription Agreement; and
WHEREAS, as an inducement and a condition to Parent's and Purchaser's
entering into this Agreement, contemporaneously with the execution and delivery
of this Agreement, the Contributing Shareholders have entered into a Voting
Agreement with Parent and Purchaser (the "Voting Agreement"), pursuant to which
each such Contributing Shareholder has, among other things,(x) agreed not to
tender its Shares in the Offer and (y) granted to Parent a proxy with respect to
the voting of such Shares, in each case upon the terms and subject to the
conditions set forth in the Voting Agreement; and
WHEREAS, the Board of Directors of the Company (the "Board of
Directors"), based on the recommendation of a special
committee (the "Special Committee") of the Board of Directors comprised solely
of directors unaffiliated with the Contributing Shareholders, has approved this
Agreement, the Subscription Agreement and the Voting Agreement and has
determined that the consideration to be paid for each Share in the Offer and the
Merger is fair to the holders of such Shares and to recommend that the holders
of such Shares accept the Offer and approve this Agreement and the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company, Parent and Purchaser hereby agree as follows:
ARTICLE I.
THE TENDER OFFER
SECTION 1.1. The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 hereof and none of the events set forth in Annex I
hereto shall have occurred and be existing, Purchaser or a direct or indirect
subsidiary of Parent as designated by Parent shall commence (within the meaning
of Rule 14d-2 under the Securities Exchange Act of 1934 (the "Exchange Act") the
Offer as promptly as reasonably practicable following the execution of this
Agreement, but in any event within 15 business days following the date of this
Agreement. The obligation of Parent to accept for payment any Shares tendered
shall be subject to the satisfaction of those conditions set forth in Annex I.
Parent expressly reserves the right from time to time, subject to Sections
1.1(b) and 1.1(d) hereof, to waive any such condition, to increase the Per Share
Amount, or to make any other changes in the terms and conditions of the Offer.
The Per Share Amount shall be net to the seller in cash, subject to reduction
only for any applicable Federal back-up withholding or stock transfer taxes
payable by the seller. The Company agrees that no Shares held by the Company or
any of its Subsidiaries (as defined below) will be tendered pursuant to the
Offer.
(b) Without the prior written consent of the Company, Parent shall
not (i) decrease the Per Share Amount or change the form of consideration
payable in the Offer, (ii) decrease the number of Shares sought, (iii) amend or
waive satisfaction of the Minimum Condition (as defined in Annex I) or (iv)
impose additional conditions to the Offer or amend any other term of the Offer
in any manner adverse to the holders of Shares. Upon the terms and subject to
the conditions of the Offer, Purchaser will accept for payment and purchase, as
soon as permitted under the terms of the Offer, all Shares validly tendered and
not withdrawn prior to the expiration of the Offer.
-2-
(c) The Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") having only the conditions set forth in Annex I hereto. As
soon as practicable on the date the Offer is commenced, Parent and Purchaser
shall file with the Securities and Exchange Commission (the "SEC") a Tender
Offer Statement on Schedule TO (together with all amendments and supplements
thereto, the "Schedule TO") and, if necessary, jointly file with Target a
Transaction Statement on Schedule 13E-3 (together with all amendments and
supplements thereto, the "Schedule 13E-3") with respect to the Offer that will
comply in all material respects with the provisions of all applicable Federal
securities laws, and will contain (including as an exhibit) or incorporate by
reference the Offer to Purchase and forms of the related letter of transmittal
and summary advertisement (which documents, together with any supplements or
amendments thereto, and any other SEC schedule or form which is filed in
connection with the Offer and related transactions, are referred to collectively
herein as the "Offer Documents"). Parent and Purchaser agree promptly to correct
the Schedule TO and the Offer Documents and to cooperate with Target to amend
the Schedule 13E-3 if and to the extent that such documents shall have become
false or misleading in any material respect (and the Company, with respect to
written information supplied by it specifically for use in the Schedule TO,
Schedule 13E-3 or the Offer Documents, shall promptly notify Parent of any
required corrections of such information and shall cooperate with Parent and
Purchaser with respect to correcting such information) and to supplement the
information provided by it specifically for use in the Schedule TO, Schedule
13E-3 or the Offer Documents to include any information that shall become
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and Parent and Purchaser further
agree to take all steps necessary to cause the Schedule TO or Schedule 13E-3, as
so corrected or supplemented, to be filed with the SEC and the Offer Documents,
as so corrected or supplemented, to be disseminated to holders of Shares, in
each case as and to the extent required by applicable Federal securities laws.
The Company and its counsel shall be given a reasonable opportunity to review
and comment on any Offer Documents before they are filed with the SEC.
(d) The Offer to Purchase shall provide for an initial expiration
date of 20 business days (as defined in Rule 14d-1 under the Exchange Act) from
the date of commencement. Purchaser agrees that it shall not terminate or
withdraw the Offer or extend the expiration date of the Offer unless at the
expiration date of the Offer the conditions to the Offer described in Annex I
hereto shall not have been satisfied or earlier waived. If at the expiration
date of the Offer, the conditions to the Offer described in Annex I hereto shall
not have been satisfied or earlier waived, Parent may, from time to time extend
the expiration date of the Offer until the date such conditions are satisfied or
earlier waived and Parent becomes obligated to accept for payment and pay for
Shares tendered pursuant to the
-3-
Offer, but in no event shall such extensions extend beyond the Termination Date
(as defined below). Notwithstanding the foregoing, Purchaser may, without the
consent of the Company, (i) extend the expiration date of the Offer (as it may
be extended) for any period required by applicable rules and regulations of the
SEC in connection with an increase in the consideration to be paid pursuant to
the Offer and (ii) extend the expiration date of the Offer (as it may be
extended) for up to ten business days, if on such expiration date the conditions
for the Offer described on Annex I hereto shall have been satisfied or earlier
waived, but the number of Shares that have been validly tendered and not
withdrawn, when added to the Shares, if any, beneficially owned by Parent
represents less than 90 percent of the then issued and outstanding Shares on a
fully diluted basis.
SECTION 1.2. Company Action.
--------------
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that the Board of Directors, at a meeting duly called
and held on February 25, 2000, at which all of the Directors were present, and
acting on the unanimous recommendation of the Special Committee, duly and
unanimously: (i) approved and adopted this Agreement, the Subscription Agreement
and the Voting Agreement and the transactions contemplated hereby and thereby,
including the Offer and the Merger; (ii) recommended that the shareholders of
the Company accept the Offer, tender their Shares pursuant to the Offer and
approve this Agreement and the transactions contemplated hereby, including the
Merger; (iii) determined that this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, are fair to and in the best
interests of the shareholders of the Company; and (iv) took all action necessary
to render the limitations on business combinations contained in Part 2 of
Article 11 of the Georgia Code inapplicable to this Agreement, the Subscription
Agreement and the Voting Agreement and the transactions contemplated hereby and
thereby. The Company further represents and warrants that X.X. Xxxxxx Securities
Inc. ("X.X. Xxxxxx") as financial advisor to the Special Committee, delivered to
the Special Committee and the Board of Directors a written opinion, dated as of
February 25, 2000, to the effect that the Per Share Amount to be received by the
shareholders (other than Parent, Purchaser and the Contributing Shareholders) of
the Company pursuant to the Offer and the Merger is fair to such shareholders
from a financial point of view.
(b) The Company hereby agrees to file with the SEC, as promptly as
practicable after the filing by Parent and Purchaser of the Schedule TO with
respect to the Offer, a Tender Offer Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any amendments or supplements thereto, the
"Schedule 14D-9") and the Schedule 13E-3 that (i) will comply in all material
respects with the provisions of all applicable Federal securities laws and (ii)
will include the opinion of X.X. Xxxxxx referred to in Section 1.2(a) hereof.
The Schedule 14D-9 and the Offer
-4-
Documents shall contain the recommendations of the Board of Directors described
in Section 1.2(a) hereof. The Company agrees promptly to correct the Schedule
14D-9 or the Schedule 13E-3 if and to the extent that it shall become false or
misleading in any material respect (and each of Parent and Purchaser, with
respect to written information supplied by it specifically for use in the
Schedule 14D-9 or the Schedule 13E-3, shall promptly notify the Company of any
required corrections of such information and cooperate with the Company with
respect to correcting such information) and to supplement the information
contained in the Schedule 14D-9 or the Schedule 13E-3 to include any information
that shall become necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and the Company
shall take all steps necessary to cause the Schedule 14D-9 or the Schedule 13E-3
as so corrected to be filed with the SEC and disseminated to the Company's
shareholders to the extent required by applicable Federal securities laws.
Parent and its counsel shall be given a reasonable opportunity to review and
comment on the Schedule 14D-9 before it is filed with the SEC.
(c) In connection with the Offer, the Company shall promptly upon
execution of this Agreement furnish Parent with mailing labels containing the
names and addresses of all record holders of Shares, non-objecting beneficial
owners list and security position listings of Shares held in stock depositories,
each as of a recent date, and shall promptly furnish Parent with such additional
information, including updated lists of shareholders, mailing labels and
security position listings, and such other information and assistance as Parent
or its agents may reasonably request for the purpose of communicating the Offer
to the record and beneficial holders of Shares.
SECTION 1.3. Directors. Promptly upon the purchase by Purchaser of
---------
any Shares pursuant to the Offer, and from time to time thereafter as Shares are
acquired by Purchaser, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors as
will give Parent, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors appointed or elected pursuant to
this sentence and including current directors serving as officers of the
Company) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Parent or any affiliate of Parent (including for purposes
of this Section 1.3 such Shares as are accepted for payment pursuant to the
Offer, but excluding Shares held by the Company or any of its Subsidiaries)
bears to the number of Shares outstanding. At each such time, the Company will
also cause (i) each committee of the Board of Directors, (ii) if requested by
Parent, the board of directors of each of the Subsidiaries and (iii) if
requested by Parent, each committee of such board to include persons designated
by Parent
-5-
constituting the same percentage of each such committee or board as Parent's
designees constitute on the Board of Directors. The Company shall, upon request
by Parent, promptly increase the size of the Board of Directors or exercise its
best efforts to secure the resignations of such number of directors as is
necessary to enable Parent's designees to be elected to the Board of Directors
in accordance with the terms of this Section 1.3 and shall cause Parent's
designees to be so elected; provided, however, that, in the event that Parent's
-------- -------
designees are appointed or elected to the Board of Directors, until the
Effective Time (as defined in Section 2.2 hereof) the Board of Directors shall
have at least two directors who are directors on the date hereof and who are
neither officers of the Company, Contributing Shareholders nor designees,
shareholders, affiliates or associates (within the meaning of the Federal
securities laws) of Parent or any Contributing Shareholder (such directors, the
"Independent Directors"); provided further, that if at any time or from time to
-------- -------
time there are fewer than two Independent Directors, the other directors shall
elect to the Board of Directors such number of persons who shall be neither
officers of the Company, Contributing Shareholders nor designees, shareholders,
affiliates or associates of Parent or any Contributing Shareholder so that the
total of such persons and remaining Independent Directors serving on the Board
of Directors is at least two. Any such person elected to the Board of Directors
pursuant to the second proviso of the preceding sentence shall be deemed to be
an Independent Director for purposes of this Agreement. Subject to applicable
law, the Company shall promptly take all action necessary pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 1.3 and shall include in the Schedule
14D-9 mailed to shareholders promptly after the commencement of the Offer (or an
amendment thereof or an information statement pursuant to Rule 14f-1 if Parent
has not theretofore designated directors) such information with respect to the
Company and its officers and directors as is required under Section 14(f) and
Rule 14f-1 in order to fulfill its obligations under this Section 1.3. Parent
will supply the Company any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
Notwithstanding anything in this Agreement to the contrary, following the time
directors designated by Parent constitute a majority of the Board of Directors
and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required to (i) amend or terminate this Agreement
on behalf of the Company, (ii) exercise or waive any of the Company's rights or
remedies hereunder, (iii) extend the time for performance of Parent's
obligations hereunder or (iv) take any other action by the Company in connection
with this Agreement required to be taken by the Board of Directors.
-6-
ARTICLE II.
THE MERGER
SECTION 2.1. The Merger. At the Effective Time (as defined in
----------
Section 2.2) and subject to and upon the terms and conditions of this Agreement
and the Georgia Code, Purchaser shall be merged with and into the Company, the
separate corporate existence of Purchaser shall cease, and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger hereinafter sometimes is referred to as the "Surviving
Corporation."
SECTION 2.2. Effective Time. As promptly as practicable after the
--------------
satisfaction or waiver of the conditions set forth in Article VII, the parties
-----------
hereto shall cause the Merger to be consummated by filing Articles of Merger, in
accordance with Section 14-2-1105 of the Georgia Code, with the Secretary of
State of the State of Georgia, in such form as required by, and executed in
accordance with the relevant provisions of, the Georgia Code (the time of such
filing being the "Effective Time").
SECTION 2.3. Effect of the Merger. At the Effective Time, the effect
--------------------
of the Merger shall be as provided in the applicable provisions of the Georgia
Code. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 2.4. Subsequent Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Purchaser acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or Purchaser, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
-7-
SECTION 2.5. Articles of Incorporation; By-Laws; Directors and
-------------------------------------------------
Officers.
--------
(a) Unless otherwise determined by Parent before the Effective Time,
at the Effective Time the Articles of Incorporation of Purchaser, as in effect
immediately before the Effective Time, shall be the Articles of Incorporation of
the Surviving Corporation until thereafter amended as provided by law and such
Articles of Incorporation.
(b) The By-Laws of Purchaser, as in effect immediately before the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such By-Laws.
(c) The directors of Purchaser immediately before the Effective Time
will be the initial directors of the Surviving Corporation, and the officers of
the Company immediately before the Effective Time will be the initial officers
of the Surviving Corporation, in each case until their successors are elected or
appointed and qualified. If, at the Effective Time, a vacancy shall exist on the
Board of Directors or in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by law.
SECTION 2.6. Conversion of Securities. At the Effective Time, by
------------------------
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holder of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately before the Effective Time (other than any Shares to be canceled
pursuant to Section 2.6(b) and any Dissenting Shares (as defined in Section
2.7(a)) shall be canceled and extinguished and be converted into the right to
receive the Per Share Amount in cash payable to the holder thereof, without
interest, upon surrender of the certificate representing such Share. Each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Per Share Amount, without
interest, upon the surrender of such certificate in accordance with Section 2.8
hereof.
(b) Each share of Company Common Stock held in the treasury of the
Company and each Share owned by Parent or any direct or indirect wholly owned
subsidiary of Parent or of the Company immediately before the Effective Time
shall be canceled and extinguished and no payment or other consideration shall
be made with respect thereto.
(c) Each share of common stock, $.0l par value, of Purchaser issued
and outstanding immediately before the Effective Time shall thereafter represent
one validly issued, fully paid
-8-
and nonassessable share of common stock, $.0l par value, of the Surviving
Corporation.
SECTION 2.7. Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the contrary,
Shares that are outstanding immediately prior to the Effective Time and that are
held by any shareholder who has delivered to the Company, prior to the vote of
shareholders, if any, required by Section 6.2 hereof, a written notice in
accordance with Article 13 of the Georgia Code of such shareholder's intent to
demand payment for such shareholder's Shares if the Merger is effected and who
shall have not voted such Shares in favor of the approval and adoption of this
Agreement (collectively, the "Dissenting Shares") shall not be converted into
the right to receive cash pursuant to Section 2.6, but the holders of such
Dissenting Shares shall be entitled to payment of the fair value of such
dissenting shares in accordance with the provisions of Article 13 of the Georgia
Code; provided, however, that if such shareholder shall waive such shareholder's
-------- -------
right to demand and obtain payment under Article 13 of the Georgia Code or a
court of competent jurisdiction shall determine that such shareholder is not
entitled to the relief provided by said Article 13, then the right of such
holder of Dissenting Shares to be paid the fair value of such shareholders
Dissenting Shares shall cease and such Dissenting Shares shall thereupon be
deemed to have been converted into, as of the Effective Time, the right to
receive cash pursuant to Section 2.6(a) hereof, without any interest thereon,
upon surrender of the certificate or certificates representing such Shares.
(b) The Company shall give Parent (i) prompt notice of any notice or
other instruments received by the Company pursuant to Article 13 of the Georgia
Code and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for payment for Dissenting Shares. The Company shall not
voluntarily offer to make or make any payment with respect to any demands for
payment for Dissenting Shares and shall not, except with the prior written
consent of Parent, settle or offer to settle any such demands.
(c) Dissenting Shares, if any, shall be canceled after the payment of
fair value in respect thereto has been made to the holder of such shares
pursuant to the Georgia Code.
-9-
SECTION 2.8. Surrender of Shares; Stock Transfer Books.
-----------------------------------------
(a) Before the Effective Time, the Company shall designate a bank or
trust company to act as agent for the holders of Shares (the "Exchange Agent")
to receive the funds necessary to make the payments contemplated by Section 2.6.
Parent shall, from time to time, deposit, or cause to be deposited, in trust
with the Exchange Agent for the benefit of holders of Shares funds in amounts
and at times necessary for the payments under Section 2.8(b) to which such
holders shall be entitled at the Effective Time pursuant to Section 2.6. Such
funds shall be invested by the Exchange Agent as directed by Parent. Any net
profits resulting from, or interest or income produced by, such investments
shall be payable as directed by Parent.
(b) Each holder of a certificate or certificates representing any
Shares canceled upon the Merger pursuant to Section 2.6(a) may thereafter
surrender such certificate or certificates to the Exchange Agent, as agent for
such holder, to effect the surrender of such certificate or certificates on such
holder's behalf for a period ending six months after the Effective Time.
Purchaser agrees that promptly after the Effective Time it shall cause the
distribution to holders of record of Shares as of the Effective Time of
appropriate materials to facilitate such surrender. Upon the surrender of
certificates representing the Shares, Parent shall cause the Exchange Agent to
pay the holder of such certificates in exchange therefor cash in an amount equal
to the Per Share Amount multiplied by the number of Shares represented by such
certificate. Until so surrendered, each such certificate (other than
certificates representing Dissenting Shares and certificates representing Shares
held by Parent or in the treasury of the Company) shall represent solely the
right to receive the aggregate Per Share Amount relating thereto.
(c) If payment of cash in respect of canceled Shares is to be made to
a Person other than the Person in whose name a surrendered certificate or
instrument is registered, it shall be a condition to such payment that the
certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the certificate or
instrument surrendered or shall have established to the satisfaction of Parent
or the Exchange Agent that such tax either has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall not be any further registration of transfers of
shares of any shares of capital stock thereafter on the records of the Company.
If, after the Effective Time, certificates for Shares are presented to the
-10-
Surviving Corporation, they shall be canceled and exchanged for cash as provided
in Section 2.6(a). No interest shall accrue or be paid on any cash payable upon
the surrender of a certificate or certificates which immediately before the
Effective Time represented outstanding Shares.
(e) Promptly following the date which is six months after the
Effective Time, the Exchange Agent shall deliver to Parent all cash,
certificates and other documents in its possession relating to the transactions
contemplated hereby, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a certificate representing Shares (other than
certificates representing Dissenting Shares and certificates representing Shares
held by Parent or in the treasury of the Company) may surrender such certificate
to Parent and (subject to applicable abandoned property, escheat and similar
laws) receive in consideration thereof the aggregate Per Share Amount relating
thereto, without any interest or dividends thereon.
(f) The Per Share Amount paid in the Merger shall be net to the
holder of Shares in cash, subject to reduction only for any applicable federal
back-up withholding or, as set forth in Section 2.8(c), stock transfer taxes
payable by such holder.
SECTION 2.9. Stock Plans.
-----------
(a) The Company shall take all actions necessary to provide that,
prior to or upon consummation of the Merger, each then outstanding option to
purchase shares of Company Common Stock (the "Options") granted under any of the
Company's stock option plans referred to in Section 4.2, each as amended
(collectively, the "Option Plans"), and any and all other outstanding options,
stock warrants and stock rights, whether or not granted pursuant to such stock
option plans, whether or not then exercisable or vested, shall be canceled and
shall be of no further force or effect; provided, however, that with respect to
-------- -------
any Options as to which the Per Share Amount exceeds the applicable per share
exercise price, Parent shall promptly following the Effective Time pay (or cause
to be paid) to the holders of such Options an amount in cash equal to, with
respect to each such Option, the product of (1) the amount by which (x) the Per
Share Amount exceeds (y) the applicable per share exercise price, and (2) the
number of shares subject to the Option at the time of such cancellation. Such
amount shall be subject to reduction by applicable tax withholding.
(b) Except as provided herein or as otherwise agreed to by the
parties, the Company shall cause the Option Plans to terminate as of the
Effective Time and the provisions in any other plan, program or arrangement,
providing for the issuance or grant by the Company or any of its subsidiaries of
any interest in respect of the capital stock of the Company or any of its
Subsidiaries shall be deleted as of the Effective Time.
-11-
(c) The Company represents and warrants that all the Option Plans
provide that either (i) the Company can take the actions described in Section
2.9(a) without obtaining the consent of any holders of Options or (ii) if such
consent is required, the Company will obtain such consents and provide evidence
thereof to Parent at least 10 days prior to the initial expiration of the Offer.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
SECTION 3.1. Corporate Organization. Each of Parent and Purchaser is
----------------------
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority and any necessary governmental authority and approvals to
own, operate or lease the properties that it purports to own, operate or lease
and to carry on its business as it is now being conducted.
SECTION 3.2. Authority Relative to this Agreement. Parent and
------------------------------------
Purchaser have the necessary corporate power and authority to enter into this
Agreement and to carry out their obligations hereunder. The execution and
delivery of this Agreement by Parent and Purchaser and the consummation by
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Purchaser
and no other corporate proceeding is necessary for the execution and delivery of
this Agreement by Parent or Purchaser, the performance by Parent or Purchaser of
their respective obligations hereunder and the consummation by Parent or
Purchaser of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Purchaser and constitutes a legal, valid
and binding obligation of each such corporation, enforceable against each of
them in accordance with its terms.
SECTION 3.3. No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement and the transactions
contemplated hereby by Parent and Purchaser will not, (i) conflict with or
violate any law, regulation, court order, judgment or decree applicable to
Parent or Purchaser or by which any of their property is bound or affected, (ii)
violate or conflict with either the Articles of Incorporation or By-Laws or
other organizational documents of either Parent or Purchaser, or (iii) result in
any breach of or
-12-
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Parent or Purchaser pursuant to, any contract,
instrument, permit, license or franchise to which Parent or Purchaser is a party
or by which Parent or Purchaser or any of its property is bound or affected,
except for, in the case of clause (i), conflicts, violations, breaches or
defaults which would not prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
(b) Except for (i) applicable requirements, if any, of the Exchange
Act, (ii) the pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii) the filing
and recordation of appropriate merger documents as required by the Georgia Code,
and (iv) filings as may be required by any applicable "blue sky" laws and/or the
rules of the National Association of Securities Dealers, Inc., neither Parent
nor Purchaser is required to submit any notice, report or other filing with any
federal, state or local government or any court, administrative or regulatory
agency or commission or other governmental authority or agency, domestic or
foreign (a "Governmental Entity"), in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in Schedule 3.3, no waiver, consent,
approval or authorization of any Governmental Entity, is required to be obtained
or made by either Parent or Purchaser in connection with its execution, delivery
or performance of this Agreement.
SECTION 3.4. Financing Arrangements. Parent has or will have
----------------------
available to it funds sufficient to purchase the Shares in accordance with the
terms of this Agreement, pay the amount to which holders of Shares become
entitled upon consummation of the Offer and the Merger and pay all of the fees
and expenses it will incur in connection therewith.
SECTION 3.5. No Prior Activities. Except for obligations or
-------------------
liabilities incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby (including any financing), Purchaser has not incurred any obligations or
liabilities, and has not engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with any Person
or entity.
SECTION 3.6. Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of Parent or Purchaser.
-13-
SECTION 3.7. Offer Documents; Proxy Statement. None of the
--------------------------------
information supplied by Parent, its officers, directors, representatives, agents
or employees (the "Parent Information"), for inclusion in the Proxy Statement
(as defined in Section 4.22), or in any amendments thereof or supplements
thereto, will, on the date the Proxy Statement is first mailed to shareholders,
at the time of the Company Shareholders' Meeting (as defined in Section 4.22) or
at the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it will be made, will be false or misleading with
respect to any material fact, or will omit to state any material fact necessary
in order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Shareholders' Meeting which has become
false or misleading. Neither the Offer Documents nor any amendments thereof or
supplements thereto will, at any time the Offer Documents or any such amendments
or supplements are filed with the SEC or first published, sent or given to the
Company's shareholders, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, Parent and Purchaser do not make any
representation or warranty with respect to any information that has been
supplied by the Company or its accountants, counsel or other authorized
representatives for use in any of the foregoing documents. The Offer Documents
and any amendments or supplements thereto will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
SECTION 3.8. Company Stock. Prior to the date hereof, neither Parent
-------------
nor Purchaser owns any shares of Company Common Stock.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser as
follows:
SECTION 4.1. Organization and Qualification; Subsidiaries. (a) Each
--------------------------------------------
of the Company and its corporate Subsidiaries (as defined in Section 4.1(d))
(the "Corporate Subsidiaries") is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and any necessary governmental
authority and approvals to own, operate or lease the properties that it purports
to own, operate or lease and to carry on its business as it is now being
conducted, and is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned,
-14-
operated or leased or the nature of its activities makes such qualification or
licensing necessary, except for such failure which, when taken together with all
other such failures, would not have a Material Adverse Effect. For purposes of
this Agreement, "Material Adverse Effect" means any change in or effect on the
business of the Company or any of the Subsidiaries that is or is reasonably
likely to be materially adverse to the business, operations, properties
(including intangible properties and leased, owned or managed properties),
condition (financial or otherwise), prospects, assets, liabilities or regulatory
status of the Company and the Subsidiaries, taken as a whole; provided that a
Material Adverse Effect shall not include any change or effect arising solely
from the public announcement of any matters disclosed in the Schedules hereto.
(b) Each of the Company's partnership Subsidiaries (the "Partnership
Subsidiaries") is a partnership or limited partnership duly organized and
validly existing under the laws of the state of its organization, and is duly
licensed or qualified and, to the extent applicable, in good standing, to do
business as a foreign partnership, and is authorized to do business, in each
other jurisdiction in which the character or location of the properties owned,
leased, managed or operated by such entity or the nature of the business
transacted by it makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified, when taken together with all other
such failures, would not have a Material Adverse Effect.
(c) A true and complete list of all the Subsidiaries, together with
the jurisdiction of incorporation or organization of each Subsidiary, the
jurisdictions in which each Subsidiary is licensed or qualified to do business
and the percentage of each Subsidiary's outstanding capital stock or other
equity interests owned by the Company or another Subsidiary, is set forth in
Schedule 4.1 hereto.
(d) For purposes of this Agreement, (x) "Subsidiary" means any
corporation or other legal entity of which the Company (either alone or through
or together with any other Subsidiary) (i) owns, directly or indirectly, more
than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity, or (ii) in the case of
partnerships, serves as a general partner, or (iii) in the case of a limited
liability company, serves as managing member or owns a majority of the equity
interests, or (iv) otherwise has the ability to elect a majority of the
directors, trustees or managing members thereof, (y) "Provider" means any
nursing home, hospital, home health agency, rehabilitation therapy provider,
subacute care facility or unit, assisted living facility or unit, independent
living facility or unit, or other provider of medical services or products
owned, leased or managed by the Company or any Subsidiary, and (z) "Proprietary
Provider" means each Provider owned or leased (as
-15-
tenant) by the Company or any Subsidiary, and "Managed Provider" means each
Provider managed by the Company or any Subsidiary. Except as expressly otherwise
provided herein, each reference in this Agreement to the Company or a Subsidiary
shall be deemed to include any Proprietary Provider that is owned or leased by
such entity, whether or not so expressed, including, by way of example and not
of limitation, references to contracts and commitments entered into, or
purported to be entered into, in the name of any such Proprietary Provider and
licenses or other property or assets held by, or purported to be held by, any
such Proprietary Provider.
SECTION 4.2. Capitalization. (a) The authorized capital stock of the
--------------
Company consists of: (i) 50,000,000 shares of Company Common Stock and (ii)
50,000,000 shares of preferred stock, $.01 par value per share, of the Company
(the "Company Preferred Stock"). As of the date hereof, (A) 11,923,618 shares of
Company Common Stock were issued and outstanding, all of which were duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, (B) no shares of Company Preferred Stock were outstanding,
(C) 155,948 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding Options under the Company's 1994 Employee Stock Option
Plan, (D) 383,162 shares of Company Common Stock were reserved for issuance upon
the exercise of outstanding Options under the Company's 1996 Executive Stock
Plan and (E) 64,341 shares of Company Common Stock were reserved for issuance
upon the exercise of outstanding Options under the Company's 1996 Employee Stock
Option Plan and (F) 1,390,000 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding Options under the Company's 1997 Stock
Plan. Except as set forth in Schedule 4.2(a) or in this Section 4.2(a): (x)
there are no other options, calls, warrants or rights, agreements, arrangements
or commitments of any character obligating the Company or any of its
Subsidiaries to issue, deliver or sell any shares of capital stock of or other
equity interests in the Company or any of the Subsidiaries; (y) there are no
bonds, debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which shareholders of the Company may vote; and (z)
there are no shareholders agreements, voting trusts or other agreements or
understandings to which the Company is a party or by which it is bound relating
to the voting, registration or disposition of any shares of the capital stock of
the Company (including any such agreements or understandings that may limit in
any way the solicitation of proxies by or on behalf of the Company from, or the
casting of votes by, the shareholders of the Company with respect to the Merger)
or granting to any person or group of persons the right to elect, or to
designate or nominate for election, a director to the Board of Directors. Except
as set forth in Schedule 4.2(a), there are no programs in place or outstanding
contractual obligations of the Company or any of the Subsidiaries (1) to
repurchase, redeem or otherwise acquire any
-16-
shares of capital stock of the Company or (2) to vote or to dispose of any
shares of the capital stock of any of the Subsidiaries.
(b) All the outstanding capital stock of each of the Corporate
Subsidiaries and all the outstanding partnership (general or limited) units or
other interests of each of the Partnership Subsidiaries are duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights and, except as set forth in Schedule 4.1, is owned by the Company or a
Subsidiary free and clear of any liens, security interests, pledges, agreements,
claims, charges or encumbrances of any nature whatsoever. There are no existing
options, calls, warrants or other rights, agreements arrangements or commitments
of any character relating to the issued or unissued capital stock or other
equity interests or securities of any Subsidiary. Except for the Subsidiaries
and except as set forth in Schedule 4.2(b), the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in any
other corporation, partnership, joint venture or other business association or
entity. Except as set forth in Schedule 4.2(b), neither the Company nor any
Subsidiary is under any current or prospective obligation to make a capital
contribution or investment in or loan to, or to assume any liability or
obligation of, any corporation, partnership, joint venture or business
association or entity.
SECTION 4.3. Authority Relative to this Agreement.
------------------------------------
(a) The Company has the necessary corporate power and authority to
enter into this Agreement and, subject to obtaining any necessary shareholder
approval of the Merger, to carry out its obligations hereunder. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company (including without
limitation the unanimous approval of the Special Committee), subject to the
approval of the Merger by the Company's shareholders, if required, in accordance
with the Georgia Code. This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms. The affirmative
vote of the holders of a majority of the shares of Company Common Stock entitled
to vote approving this Agreement, if required, is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve this
Agreement, the Subscription Agreement and the Voting Agreement and the
transactions contemplated hereby.
-17-
SECTION 4.4. No Conflict; Required Filings and Consents.
------------------------------------------
(a) Except as set forth in Schedule 4.4 hereto, the execution and
delivery of this Agreement by the Company does not, and the performance of such
agreement by the Company will not, (i) conflict with or violate any law,
regulation, court order, judgment or decree applicable to the Company or any of
the Subsidiaries or by which its or any of their property is bound or affected,
(ii) violate or conflict with the Articles of Incorporation or By-Laws or
equivalent organizational documents of the Company or any Subsidiary, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or result in any, or
give rise to any rights of termination, cancellation or acceleration of any
obligations or any loss of any material benefit under or, result in the creation
of a lien or encumbrance on any of the properties or assets (whether owned,
leased or managed) of the Company or any of the Subsidiaries pursuant to, any
agreement, contract, instrument, permit, license or franchise to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries or its or any of their property (whether owned, leased or
managed) is bound or affected, except for, in the case of clause (i), conflicts,
violations, breaches or defaults which, individually or in the aggregate, would
not be reasonably likely to (x) have a Material Adverse Effect, (y) impair, in
any material respect, the ability of the Company to perform its obligations
under this Agreement or (z) prevent or materially delay the consummation of the
transactions contemplated by this Agreement, the Subscription Agreement or the
Voting Agreement.
(b) Except for (i) applicable requirements, if any, of the Exchange
Act, (ii) the pre-merger notification requirements of the HSR Act, (iii) the
filing and recordation of appropriate merger or other documents as required by
the Georgia Code, (iv) filings as may be required by any "blue sky" laws of
various states and/or the rules of the National Association of Securities
Dealers, Inc., and (v) as set forth in Schedule 4.4 hereto, the Company and each
of the Subsidiaries are not required to submit any notice, report or other
filing with any Governmental Entity, in connection with the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in Schedule 4.4 hereto, no waiver,
consent, approval or authorization of any Governmental Entity, is required to be
obtained or made by the Company in connection with its execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 4.5. SEC Filings; Financial Statements.
---------------------------------
(a) The Company has filed all forms, reports and documents (including
all exhibits thereto) required to be filed with the SEC since July 2, 1997, and
(except for preliminary
-18-
materials) has made available to Parent, in the form filed with the SEC, its (i)
Annual Reports on Form 10-K for the fiscal years ended December 31, 1998 and
December 31, 1997, respectively, (ii) Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1999, June 30, 1999 and September 30, 1999,
(iii) all proxy statements relating to the Company's meetings of shareholders
(whether annual or special) held since July 2, 1997 and (iv) all other reports
or registration statements filed by the Company with the SEC since July 2, 1997
(collectively, the "SEC Reports"). The SEC Reports (i) at the time filed
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and (ii) did not at the time they were filed contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any statements or reports with the SEC pursuant
to Sections 13(a) or 15(d) of the Exchange Act.
(b) The consolidated financial statements contained in the SEC
Reports were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and fairly presented the consolidated
financial position of the Company and its Subsidiaries as at the respective
dates thereof and the consolidated results of operations and changes in
financial position of the Company and its Subsidiaries for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments (which in the aggregate are
not material in amount) and except as set forth in Schedule 4.5(b).
(c) Set forth in Schedule 4.5(c) is a true and correct copy of the
unaudited consolidated financial statements of the Company and its Subsidiaries
as at December 31, 1999 and for the year then ended (collectively, the "Interim
Financial Statements"). The interim balance sheet included in the Interim
Financial Statements (the "Interim Balance Sheet") was prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved and fairly presented the consolidated financial
position of the Company and its Subsidiaries as at the respective dates thereof
and the consolidated results of operations and changes in financial position of
the Company and its Subsidiaries for the periods indicated.
(d) Except as (i) set forth in Schedule 4.5(d) or (ii) disclosed in
any SEC Report filed prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent consolidated
balance sheet
-19-
included in the SEC Reports filed and publicly available prior to the date of
this Agreement, the Company and the Subsidiaries have no material liabilities of
any nature (whether accrued, absolute, contingent or otherwise).
SECTION 4.6. Absence of Certain Changes or Events. Except (i) as
------------------------------------
expressly permitted or otherwise provided in this Agreement, (ii) as set forth
in the SEC Reports filed prior to the date of this Agreement, (iii) as set forth
in the Interim Financial Statements, or (iv) as set forth in Schedule 4.6
hereto, since December 31, 1998, the business of the Company and the
Subsidiaries has been conducted in the ordinary course consistent with past
practice and there has not been:
(a) any Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) with respect to any of the assets of the Company, any of its
Subsidiaries or any Managed Provider having a Material Adverse Effect;
(c) any redemption or other acquisition of Company Common Stock by
the Company or any of the Subsidiaries or any declaration or payment of any
dividend or other distribution in cash, stock or property with respect to
Company Common Stock, except for purchases heretofore made pursuant to the terms
of the Company's employee benefit plans;
(d) any change by the Company in accounting methods, principles
or practices;
(e) any revaluation by the Company of any asset (including, without
limitation, any writing down of the value of inventory or writing off of notes
or accounts receivable), other than in the ordinary course of business
consistent with past practice;
(f) any entry by the Company, any Subsidiary or, to the knowledge of
the Company, any Managed Provider into any commitment or transaction material to
the Company and the Subsidiaries taken as a whole, other than commitments or
transactions entered into in the ordinary course of business consistent with
past practice;
(g) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards) stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any directors, officers or key
employees of the Company or any Subsidiary, except in the ordinary course of
business consistent with past practice;
-20-
(h) any entry by the Company or any Subsidiary into any employment,
consulting, severance, termination or indemnification agreement with any
director, officer or key employee of the Company or any Subsidiary or any entry
into any such agreement with any other person;
(i) (i) any settlement or compromise by the Company, any Subsidiary
or, to the knowledge of the Company, any Managed Provider of any claim,
litigation or other legal proceeding, other than in the ordinary course of
business consistent with past practice in an amount not involving more than
$100,000 or (ii) any payment, discharge or satisfaction by the Company or any
Subsidiary of any other claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than (A) in the ordinary
course of business and consistent with past practice or (B) with respect to any
other such claims, liabilities or obligations reflected or reserved against in,
or contemplated by, the consolidated financial statements (or the notes thereto)
of the Company; or
(j) any agreement, in writing or otherwise, by the Company or any
Subsidiary to take any of the actions described in this Section 4.6 or, to the
knowledge of the Company, by any Managed Provider to take any of the actions
described in Sections 4.6(b), (f) or (i), except as expressly contemplated by
this Agreement.
SECTION 4.7. Litigation. Except as disclosed in Schedule 4.7 hereto,
----------
there are no claims, actions, suits, proceedings or investigations pending or,
to the knowledge of the Company, threatened against or involving the Company,
any of its Subsidiaries or any Provider, or any properties or rights of the
Company or any of its Subsidiaries, by or before any Governmental Entity or
arbitrator which (i) might result in the loss of any Authorization (as defined
in Section 4.13(a)) necessary to continue the business of any Provider in
substantially the same manner as it has heretofore operated, (ii) might result
in the imposition upon the Company or any Subsidiary of fines, penalties,
judgments or other costs in excess of $100,000 (after giving effect to amounts
covered by insurance), or (iii) are reasonably likely to have a Material Adverse
Effect. Except as set forth in Schedule 4.7, as of the date hereof, neither the
Company nor any of its Subsidiaries or any Provider nor any of their property is
subject to any judgment in excess of $100,000, order, injunction or decree.
SECTION 4.8. Employee Benefit Plans.
----------------------
(a) (i) Schedule 4.8(a) sets forth a list of all "employee benefit
plans", as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and all other employee benefit or executive
compensation arrangements, perquisite programs or payroll practices, including,
without limitation, any such arrangements
-21-
or payroll practices providing severance pay, sick leave, vacation pay, salary
continuation for disability, retirement benefits, deferred compensation, bonus
pay, incentive pay, stock options (including those held by Directors, employees,
and consultants), hospitalization insurance, medical insurance, life insurance,
scholarships or tuition reimbursements, that are maintained by the Company, any
Subsidiary or any entity within the same "controlled group" as the Company or
Subsidiary, within the meaning of Section 4001(a)(14) of ERISA (a "Company ERISA
Affiliate") or to which the Company, any Subsidiary or Company ERISA Affiliate
is obligated to contribute thereunder for current or former employees of the
Company, any Subsidiary or Company ERISA Affiliate (the "Company Employee
Benefit Plans").
(ii) Schedule 4.8(a)(ii) sets forth, with respect to each
Option that is outstanding under the Option Plans as of the date hereof,
the name of the holder of such Option, the number of shares of Company
Common Stock subject to such Option and the exercise price per share of
such Option.
(b) Neither the Company, any Subsidiary nor any Company ERISA
Affiliate has an obligation to contribute to any "multiemployer plan", as
defined in Section 4001(a)(3) of ERISA that is subject to Title IV of ERISA (a
"Multiemployer Plan"). Neither the Company, any Subsidiary nor any Company
ERISA Affiliate has withdrawn in a complete or partial withdrawal from any
Multiemployer Plan, nor has any of them incurred any liability due to the
termination or reorganization of any Multiemployer Plan.
(c) None of the Company Employee Benefit Plans is a "single employer
plan", as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV
of ERISA. Neither the Company, any Subsidiary nor any Company ERISA Affiliate
has incurred any outstanding liability under Section 4062 of ERISA to the
Pension Benefit Guaranty Corporation or to a trustee appointed under Section
4042 of ERISA. Neither the Company, any Subsidiary nor any Company ERISA
Affiliate has engaged in any transaction described in Section 4069 of ERISA.
Neither the Company nor any Subsidiary maintains, or is required, either
currently or in the future, to provide medical benefits to employees, former
employees or retirees after their termination of employment, other than pursuant
to the Consolidated Omnibus Budget Reconciliation Act of 1985.
(d) Except as set forth in Schedule 4.8(d), each Company Employee
Benefit Plan that is intended to qualify under Section 401 of Internal Revenue
Code of 1986, as amended (the "Code"), and each trust maintained pursuant
thereto, has been determined to be exempt from federal income taxation under
Section 501 of the Code by the IRS, and, to the Company's knowledge, nothing has
occurred with respect to the operation of any such Company Employee Benefit Plan
that would cause the loss
-22-
of such qualification or exemption or the imposition of any material liability,
penalty or tax under ERISA or the Code.
(e) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Company Employee Benefit Plans to any funds or trusts established thereunder
or in connection therewith have been made in all material respects by the due
date thereof.
(f) There has been no material violation of ERISA or the Code with
respect to the filing of applicable reports, documents and notices regarding the
Company Employee Benefit Plans with the Secretary of Labor or the Secretary of
the Treasury or the furnishing of required reports, documents or notices to the
participants or beneficiaries of the Company Employee Benefit Plans.
(g) None of the Company, the Subsidiaries, nor to the Company's
knowledge, the officers of the Company or any of the Subsidiaries or any trustee
or administrator of any Company Employee Benefit Plans, has engaged in a
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) or any other breach of fiduciary responsibility that could subject the
Company, any of the Subsidiaries or any officer of the Company or any of the
Subsidiaries to any material tax or penalty on prohibited transactions imposed
by such Section 4975 or to any material liability under Section 502(i) or (1) of
ERISA.
(h) The Company does not currently have in force any Company-owned
life insurance policies.
(i) Except as set forth in Schedule 4.8(i), neither the Company nor
any of the Subsidiaries is a party to any contract, agreement or other
arrangement which could result in the payment of amounts that could be
nondeductible by reason of Section 162(m) or Section 280G of the Code.
(j) True, correct and complete copies of the following documents,
with respect to each of the Company Benefit Plans, have been delivered or made
available to Parent by the Company: (i) all Company Employee Benefit Plans and
related trust documents, and amendments thereto; (ii) the most recent Forms 5500
and (iii) summary plan descriptions.
(k) There are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Company's knowledge, threatened, against the
Company Employee Benefit Plans, the assets of any of the trusts under such plans
or the plan sponsor or the plan administrator, or against any fiduciary of the
Company Employee Benefit Plans with respect to the operation of such plans
(other than routine benefit claims).
-23-
(l) Except as set forth in Schedule 4.8(l), all Company Employee
Benefit Plans subject to ERISA or the Code have been maintained and
administered, in all material respects, in accordance with their terms and with
all provisions of ERISA and the Code, respectively, (including rules and
regulations thereunder) and other applicable federal and state laws and
regulations and all employees required to be included as participants by the
terms of such plans have been properly included.
SECTION 4.9. Properties
----------
(a) Except as set forth in Schedule 4.9(a), the Company and each of
the Subsidiaries has good and marketable title to, or a valid leasehold interest
in, all its properties and assets, free and clear of all liens and other
encumbrances. All tangible personal property, fixtures and equipment which
comprise the assets of the Company and the Subsidiaries, or are otherwise used
in connection with its respective businesses, are in a good state of repair
sufficient for normal operation (ordinary wear and tear excepted) and operating
condition.
(b) Schedule 4.9(b) sets forth a true and complete list and
description of (i) all real property and interests in real property owned in fee
by the Company or any Subsidiary ("Owned Real Property") and (ii) each lease or
sublease relating to Leased Real Property (as defined below) that involves
annual expenditures by the Company or any Subsidiary of $100,000 or more
(collectively, the "Company Material Leases").
(c) Except as set forth in Schedule 4.9(c), there are no violations
of any law, ordinance or regulation (including, without limitation, any
building, planning or zoning law, ordinance or regulation) relating to any of
the real property or interests in real property leased by the Company or any
Subsidiary, as lessee or lessor (the "Leased Real Property"), or relating to any
of the Owned Real Property, or in any case to any buildings or other
improvements thereon (including, without limitation, plumbing, heating,
ventilation, air conditioning, electrical and lighting systems and equipment)
which are reasonably likely to materially and adversely affect the business of
any Proprietary Provider. Except as set forth in Schedule 4.9(c), neither the
Company nor any Subsidiary has assigned its interest under any Company Material
Lease, or subleased all or any part of the space demised thereby, to any third
party.
(d) The Company has, or has caused to be, made available to Parent
true and complete copies of the Company Material Leases and any and all
ancillary documents pertaining thereto (including, but not limited to, all
amendments, consents for alterations and documents recording variations and
evidence of commencement dates and expiration dates). With respect to each of
the Company Material Leases, (i) such lease or sublease is legal, valid,
binding, enforceable and in full force and
-24-
effect, except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent
transfer, moratorium or other laws relating to or affecting creditors' rights
generally and by general principles of equity, (ii) except as otherwise set
forth in Schedule 4.9(d), such lease or sublease will not cease to be legal,
valid, binding, enforceable and in full force and effect on terms identical to
those currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, the Subscription Agreement or the Voting
Agreement, nor will the consummation of such transactions constitute a breach or
default under such lease or sublease or otherwise give the landlord a right to
terminate such lease or sublease and (iii) neither the Company nor any
Subsidiary knows of, or has given or received notice of, any violation or
default thereunder (nor, to the knowledge of the Company, does there exist any
condition which with the passage of time or the giving of notice or both would
result in such a violation or default thereunder).
(e) All improvements on real property constructed by or on behalf of
the Company or any Subsidiary, to the knowledge of the Company, were constructed
in compliance with applicable laws, ordinances and regulations (including, but
not limited to, any building or zoning laws, ordinances and regulations)
affecting such Owned Real Property or Leased Real Property.
SECTION 4.10. Intellectual Property.
---------------------
(a) Except as set forth in Schedule 4.10, each of the Company and the
Subsidiaries owns, or is licensed or otherwise possesses rights to use all
patents, trademarks and service marks (registered or unregistered), trade names,
domain names, computer software and copyrights and applications and
registrations therefor (collectively, the "Intellectual Property Rights") that
are used in the business of the Company and the Subsidiaries as currently
conducted.
(b) Schedule 4.10 sets forth a list of all patents, patent
applications, trademark and service xxxx applications and registrations,
registered copyrights and material trade names and common law trademarks owned
anywhere in the world by the Company or any of the Subsidiaries.
(c) Schedule 4.10 sets forth a list of all material licensing
agreements to which the Company or any of its Subsidiaries is a party relating
to the ownership or use of the Intellectual Property Rights.
(d) Each of the Company and the Subsidiaries owns or has right to use
the Intellectual Property Rights sufficient to allow it to conduct, and continue
to conduct, its business as currently conducted in all material respects, and
the consummation of the transactions contemplated hereby will not alter or
impair such ability in any respect.
-25-
(e) Except as set forth in Schedule 4.10, (i) to the knowledge of the
Company, there are no pending oppositions, cancellations, invalidity
proceedings, interferences or re-examination proceedings with respect to the
Intellectual Property Rights; (ii) neither the Company nor any of the
Subsidiaries has received notice from any other person or entity pertaining to
or challenging the right of the Company or any of its Subsidiaries to use or
register any of the Intellectual Property Rights; and (iii) to the knowledge of
the Company, neither the Company nor any of the Subsidiaries has any pending
claim, and no Person is violating or infringing the rights of the Company and
the Subsidiaries, in connection with the Intellectual Property Rights.
SECTION 4.11. Insurance. Schedule 4.11 sets forth a true and
---------
complete list of all insurance policies carried by, or covering the Company and
the Subsidiaries with respect to their businesses, assets and properties,
together with, in respect of each such policy, the name of the insurer, the
policy number, the type of policy, the amount of coverage and the deductible.
True and complete copies of each such policy have previously been made available
to Parent. All such policies are in full force and effect, and no notice of
cancellation has been given with respect to any such policy. All premiums due
on such policies have been paid in a timely manner and the Company and the
Subsidiaries have complied in all material respects with the terms and
provisions of such policies. The insurance coverage provided by such policies
is customary for the industries in which the Company and the Subsidiaries
operate.
SECTION 4.12. Environmental.
-------------
Except as set forth in Schedule 4.12:
(a) The Company and the Subsidiaries are and have been in compliance
in all material respects with all applicable Environmental Laws, have obtained
all Environmental Permits and are in compliance with their requirements, and
have resolved all past non-compliance of which the Company is aware with
Environmental Laws and Environmental Permits without any pending, on-going or
future obligation, cost or liability.
(b) Neither the Company nor any of the Subsidiaries has (i) placed,
held, located, released, transported or disposed of any Hazardous Substances on,
under, from or at any of the Company's or any of the Subsidiaries' properties
(whether owned, leased or managed) or any other properties, other than in a
manner that could not, in all such cases taken individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, (ii) any
knowledge or reason to know of the presence or threat of release of any
Hazardous Substances on, under or at any of the Company's or any of the
Subsidiaries' properties or any other property but arising from the Company's or
any of the Subsidiaries' current or former properties or
-26-
operations, other than in a manner that could not reasonably be expected to
result in a Material Adverse Effect, or (iii) received any written notice (A) of
any violation of or liability under any Environmental Laws, (B) of the
institution or pendency of any suit, action, claim, proceeding or investigation
by any Governmental Entity or any third party in connection with any such
violation or liability, (C) requiring the response to or remediation of
Hazardous Substances at or arising from any of the Company's or any of the
Subsidiaries' current or former properties or operations or any other
properties, (D) alleging noncompliance by the Company or any of the Subsidiaries
with the terms of any Environmental Permit in any manner reasonably likely to
require material expenditures or to result in material liability or (E)
demanding payment for response to or remediation of Hazardous Substances at or
arising from any of the Company's or any of the Subsidiaries' current or former
properties or operations or any other properties;
(c) No Environmental Law imposes any obligation upon the Company or
the Subsidiaries arising out of or as a condition to any transaction
contemplated by this Agreement, including any requirement to modify or to
transfer any permit or license, any requirement to file any notice or other
submission with any Governmental Entity, the placement of any notice,
acknowledgment or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order or consent decree. No
lien or other encumbrance has been placed upon any of the Company's or the
Subsidiaries' properties (whether owned, leased or managed) under any
Environmental Law;
(d) The Company and the Subsidiaries have made available to Parent
copies of any environmental assessment or audit report (including all records
maintained for required environmental compliance) or other similar studies or
analyses in the possession of the Company or the Subsidiaries relating to any
real property currently or formerly owned, leased, managed or occupied by the
Company or the Subsidiaries.
(e) As used in this Agreement, the following terms have the
meanings set forth below:
(i) "Environmental Law" means any law, now or hereafter in
effect and as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, relating to pollution or protection of the environment, health or
safety or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal, release
or discharge of Hazardous Substances.
(ii) "Environmental Permit" means any permit, approval,
identification number, license or other
-27-
authorization required under any applicable Environmental Law.
(iii) "Hazardous Substances" means (a) petroleum and petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (b) any
other chemicals, materials or substances regulated as toxic or hazardous or
as a pollutant, contaminant or waste under any applicable Environmental
Law.
SECTION 4.13. Governmental Authorizations and Regulations.
-------------------------------------------
(a) Except as set forth in Schedule 4.13, the Company and each
Subsidiary has complied and are currently in compliance with each law, ordinance
or governmental or regulatory rule or regulation, whether federal, state, local
or foreign to which such entity's business, operations, assets or properties is
subject ("Regulations"), except for items of non-compliance (i) which were
identified on a survey report with respect to such Provider, are being cured by
the applicable Provider pursuant to a plan of correction accepted by the
applicable governmental authority, and will not result in the loss or suspension
of, or other action affecting, any Authorization (as defined below) of the
applicable Provider, (ii) are not reasonably likely to materially and adversely
affect the business of any Provider, and (iii) which would not, individually or
in the aggregate, have a Material Adverse Effect. Except as set forth in
Schedule 4.13, each of the Company and the Subsidiaries (or, where required
under applicable law, to the knowledge of the Company, the Managed Providers)
owns, holds, possesses or lawfully uses in the operation of its business all
applicable Authorizations, other than Authorizations which (i) are not necessary
to continue the operation of the business of such Provider in substantially the
same manner as it currently operates and has operated heretofore, or (ii) if not
owned, held, possessed or lawfully used by the Company or such Subsidiary (or by
the applicable Managed Provider), would not, individually or in the aggregate,
have a Material Adverse Effect. As used herein, "Authorizations" means all
licenses, permits, certificates of need, qualifications, registrations,
certifications, provider agreements and other authorizations of any governmental
authority which are required under applicable Regulations for a Provider to
conduct its business and obtain payment for services and goods provided by it
under the Federal Medicare program, the state Medicaid program for each state in
which such Provider operates (the "Applicable Medicaid Programs"), and any other
governmental programs for payment of health care services or goods in which such
Provider purports to participate, other than any of the foregoing which are not
material to the business and operations of the relevant Provider, the Company or
any Subsidiary.
-28-
Except as set forth in Schedule 4.13, all of the Authorizations owned,
held, possessed or lawfully used by the Company or its Subsidiaries (or, where
required under applicable law, to the knowledge of the Company, the Managed
Providers) are valid and in good standing, non-probationary, non-provisional and
in full force and effect. Except as set forth in Schedule 4.13, none of the
Providers is subject to any governmental restrictions on its operations (e.g.,
due to prior survey deficiencies) which adversely affects the conduct of its
business, other than restrictions which apply to all providers of the services
or goods furnished by such Provider in the relevant jurisdiction. Except as set
forth in Schedule 4.13, there are no actions or proceedings to revoke, withdraw,
terminate or suspend any Authorization, neither the Company nor any of its
Subsidiaries has received any notice or other communication threatening any of
the foregoing (other than notices and communications which have been withdrawn
or otherwise resolved), nor does the Company have any knowledge of any reason
why any Authorization is likely not to be renewed by the applicable governmental
authority in the ordinary course.
(b) Other than as set forth in Schedule 4.13, all claims for payment
for services rendered or products sold or supplied by the Company and its
Subsidiaries which have been made to any third-party payor (including, without
limitation, the Federal Medicare program, the Medicaid programs for the states
in which a Provider operates, and any applicable commercial insurance company,
health maintenance organization or preferred provider organization)
(collectively, "Payors"), have been prepared and filed in accordance with all
applicable Regulations and requirements of the Payor, and all such claims have
been prepared in an accurate and complete manner and timely submitted to the
appropriate Payor, except in each case for items of non-compliance (i) which are
not reasonably likely to result in the loss of any Authorization, (ii) are
reasonably likely not to materially and adversely affect the business of any
Provider, and (iii) which would not, individually or in the aggregate, have a
Material Adverse Effect. The Company and/or the Subsidiaries have paid or made
provision to pay through proper recordation any net liability for overpayments
received from any Payor and any similar obligations with respect to any Payor,
in compliance with all applicable Regulations and the requirements of the Payor,
except for items of non-compliance (i) which are not reasonably likely to result
in the loss of any Authorization, (ii) are reasonably likely not to materially
and adversely affect the business of any Provider, and (iii) which would not,
individually or in the aggregate, have a Material Adverse Effect. Without
limitation of the foregoing, except as set forth in Schedule 4.13 hereto neither
the Company nor any of its Subsidiaries has submitted any claim for payment to
any Payor in violation of any applicable Federal, state or local false claim or
fraud law or regulation, including without limitation the Federal False Claims
Act, 31 U.S.C. (S) 3729.
-29-
The Company and its Subsidiaries have made available to Parent or its
counsel true and complete copies of all cost reports requested by same, together
with all relevant schedules, correspondence, notices of program reimbursement,
audit reports, settlement agreements and similar materials relating thereto. The
Company and its Subsidiaries have timely filed all required cost reports with
respect to the Medicare program and each state Medicaid program in which any of
the Providers participates. Schedule 4.13 sets forth for each Provider the years
for which cost reports remain to be settled, specifying the Payor at issue and
the status of the matter, including identification of any pending reimbursement
appeals.
(c) Schedule 4.13 sets forth a complete and accurate statement, for
each Facility (as defined below), of (i) the bed categories for (e.g., nursing
beds, skilled nursing beds, rehabilitation hospital beds) for which such
Facility is licensed or qualified to participate under the Medicare program and
the Applicable Medicaid Programs, (ii) the number of beds in each such category,
(iii) the number of beds in each such category that are available for use in
such Facility, and (iv) the number of patients as of February 9, 2000 admitted
in each Facility (A) who as of such date qualify for Medicare and whose stay at
the Facility is being paid for under Part A of the Medicare program, (B) who
qualify for the Applicable Medicaid Program and whose stay at the Facility is
being paid for by the Applicable Medicaid Program, (C) whose stay at the
Facility is being paid for by another governmental Payor (e.g., the Veteran's
Administration or CHAMPUS), and (D) whose stay at the Facility is being paid for
by the patient, the patient's relatives or another non-Payor private party. As
used herein "Facility" means each nursing facility, hospital, assisted living
facility, independent living facility or other inpatient Provider owned, leased
or managed by the Company or its Subsidiaries.
SECTION 4.14. Condition of Facilities. Except as set forth in
-----------------------
Schedule 4.14, to the knowledge of the Company, each of the Facilities is in a
good state of repair and condition, there are no dangerous conditions or defects
existing upon or in any of the Facilities, and there are no structural defects
in any Facility that could adversely affect the operation of such Facility as
conducted presently and in the past.
-30-
SECTION 4.15. Material Contracts.
------------------
(a) Except as set forth in the SEC Reports filed prior to the date of
this Agreement, in Schedule 4.15 or otherwise expressly provided in this
Agreement, neither the Company nor any of the Subsidiaries is a party to or
bound by:
(i) any "material contract" (as defined in Item 601(b)(10) of
Regulation S-K of the SEC);
(ii) any contract or agreement for the purchase or lease (as
lessee) of materials or personal property from any supplier or for the
furnishing of services to the Company or any Subsidiary that involves or is
likely to involve future aggregate payments by the Company or any of the
Subsidiaries of more than (x) $300,000 or (y) $100,000 in any year;
(iii) any contract or agreement for the sale, license or lease
(as lessor) by the Company or any Subsidiary of services, materials,
products, supplies or other assets, owned or leased by the Company or the
Subsidiaries, that involves or is likely to involve future aggregate
payments to the Company or any of the Subsidiaries of more than (x)
$300,000 or (y) $100,000 in any year
(iv) any contract, agreement or instrument relating to or
evidencing indebtedness for borrowed money of the Company or any
Subsidiary;
(v) any non-competition agreement or any other agreement or
obligation which purports to limit in any respect the manner in which, or
the localities in which, the business of the Company or the Subsidiaries
may be conducted;
(vi) any agreement with any present or former affiliates of
the Company;
(vii) any partnership, joint venture, strategic alliance or
cooperation agreement (or any agreement similar to any of the foregoing);
(viii) any voting or other agreement governing how any Shares
shall be voted;
(ix) any agreement with any shareholders of the Company;
(x) any agreement with any Managed Provider, including
without limitation any such management agreement, employee lease agreement,
billing services agreement, option agreement or evidence of indebtedness;
or
-31-
(xi) any contract or other agreement which would prohibit or
materially delay the consummation of the Merger or any of the transactions
contemplated by this Agreement.
The foregoing contracts and agreements to which the Company or any Subsidiary
are parties or are bound are collectively referred to herein as "Company
Material Contracts."
(b) Each Company Material Contract is valid and binding on the
Company (or, to the extent a Subsidiary is a party, such Subsidiary) and is in
full force and effect, and the Company and each Subsidiary have performed, in
all material respects, all obligations required to be performed by them to date
under each Company Material Contract, except where such noncompliance,
individually or in the aggregate, would not have a Material Adverse Effect. The
Company has, or has caused to be, made available to Parent or its counsel true
and complete copies of the Company Material Contracts requested by same and any
and all ancillary documents pertaining thereto (including, but not limited to,
all amendments and waivers). Except as otherwise set forth in Schedule 4.15(b),
each Company Material Contract will not cease to be legal, valid, binding,
enforceable and in full force and effect on terms identical to those currently
in effect as a result of the consummation of the transactions contemplated by
this Agreement (except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent
transfer, moratorium or other laws relating to or affecting creditors' rights
generally and by general principles of equity), nor will the consummation of
such transactions constitute a breach or default under such lease or sublease or
otherwise give the landlord a right to terminate such lease or sublease. Except
as set forth in Schedule 4.15(b), neither the Company nor any Subsidiary knows
of, or has given or received notice of, any violation or default under (nor, to
the knowledge of the Company, does there exist any condition which with the
passage of time or the giving of notice or both would result in such a violation
or default under) any Company Material Contract.
(c) Except as disclosed in the SEC Reports filed prior to the date of
this Agreement or in Schedule 4.15 or as expressly provided for in this
Agreement, neither the Company nor any of the Subsidiaries is a party to any
oral or written (i) employment or consulting agreement that cannot be terminated
on thirty days' or less notice, (ii) agreement with any officer or other key
employee of the Company or any of the Subsidiaries the benefits of which are
contingent or vest, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company or any the Subsidiaries of the
nature contemplated by this Agreement, the Subscription Agreement or the Voting
Agreement, (iii) agreement with respect to any officer or other key employee of
the Company or any of the Subsidiaries providing any term of employment or
compensation guarantee or (iv) stock or stock purchase plan (other than the
Option Plans),
-32-
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, the Subscription Agreement or the Voting
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of such transactions.
SECTION 4.16. Conduct of Business.
-------------------
Except as set forth in Schedule 4.16, the business and operations of
the Company and the Subsidiaries are not being conducted in default or violation
of any term, condition or provision of (i) their respective Articles of
Incorporation or By-Laws or similar organizational documents, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease or other instrument or
agreement of any kind to which the Company or any of the Subsidiaries is now a
party or by which the Company or any of the Subsidiaries or any of their
respective properties or assets may be bound, except, with respect to the
foregoing clause (ii), defaults or violations that would not, individually or in
the aggregate, have a Material Adverse Effect.
SECTION 4.17. Fraud and Abuse. Except as set forth in Schedule 4.17,
---------------
neither the Company nor any Subsidiary or affiliate thereof or any of their
respective partners, officers and directors, or, to the knowledge of the
Company, any person who provides professional services on behalf of or under
agreements with the Company, any Subsidiary or any affiliate has engaged in any
activities which are prohibited under the federal Medicare or federal or state
Medicaid statutes, including, without limitation, 42 U.S.C. Sections 1320a-7,
1320a-7a and 1320a-7b, the federal CHAMPUS statute, 10 U.S.C. Section 1071 et
seq., the Federal Civil False Claims Act, 31 U.S.C. Section 3729 et seq., or the
regulations promulgated pursuant to such statutes or which are prohibited by
rules of professional conduct, including but not limited to the following:
(a) knowingly and willfully making or causing to be made false
statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
(c) presenting or causing to be presented a claim for services under
Medicare, any state Medicaid program, CHAMPUS or any other Federal health care
program (as used herein, such term shall have the meaning specified in 42
U.S.C.(S) 1320a-7b(f)) that is for an item or service that is known or could be
known to be (i) not provided as claimed, or (ii) false or fraudulent;
(d) failing to disclose knowledge by a claimant of the occurrence of
any event affecting the initial or continued right
-33-
to any benefit or payment on its own behalf or on behalf of another, with intent
to fraudulently secure such benefit or payment;
(e) knowingly and willfully offering, paying, soliciting or receiving
any remuneration (including any kickback, bribe or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (i) in return for referring
an individual to a person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in party by
CHAMPUS, Medicare, any state Medicaid program, or any other Federal health care
program, or (ii) in return for purchasing, leasing or ordering or arranging for
or recommending purchasing, leasing or ordering any good, Provider, service or
item for which payment may be made in whole or in part by CHAMPUS, Medicare, any
state Medicaid program or any other Federal health care program; or
(f) knowingly and willfully making or causing to be made or inducing
or seeking to induce the making of any false statement or representation (or
omitting to state a fact required to be stated therein or necessary to make the
statements contained therein not misleading) of a material fact with respect to
(i) the conditions or operations of a Provider in order that the Provider may
qualify for certification under CHAMPUS, Medicare, a state Medicaid program or
another Federal health care program, or (ii) information required to be provided
under Section 1124A of the Social Security Act (42 U.S.C. (S) 1320a-3).
SECTION 4.18. Health Professional's Financial Relationships;
----------------------------------------------
Disqualified Individuals. (a) The operations of the Company and the
------------------------
Subsidiaries are and at all times have been in compliance with all applicable
Regulations regarding health professional self-referrals, including without
limitation 42 U.S.C. (S) 1395nn (commonly known as the "Xxxxx Statute") and 42
U.S.C. (S) 1396b.
(b) Except as set forth in Schedule 4.18, none of the Company, any of
its Subsidiaries or, to the knowledge of the Company, any Managed Provider, nor
their respective officers, directors, trustees, partners, members, managers,
employees or contractors, has been charged with or convicted of any Medicare,
Medicaid or other Federal health care program-related offense, or has been
debarred, excluded or suspended from participation in Medicare, Medicaid or any
other Federal health care program, or is currently listed on the General
Services Administration list of parties excluded from Federal procurement
programs and non-procurement programs. Except as set forth in Schedule 4.18, to
the knowledge of the Company and its Subsidiaries, none of the Company, any of
its Subsidiaries or any Managed Provider, nor their respective officers,
directors, trustees, partners, members, managers, employees or contractors, has
been investigated for any Medicare, Medicaid or other Federal health care
program-related offense, or is currently under sanction,
-34-
exclusion or investigation (civil or criminal) by any Federal or state
enforcement, regulatory, administrative or licensing authority.
SECTION 4.19. Taxes.
-----
(a) Except as set forth in Schedule 4.19, all Tax Returns (as defined
below) by or on behalf of the Company or any Subsidiary or any affiliated,
combined or unitary group of which the Company or any Subsidiary is or was a
member have been duly and timely filed with the appropriate taxing authorities
and were, in all material respects, true, complete and correct.
(b) Except as set forth in Schedule 4.19, the Company and each
Subsidiary has paid to the appropriate taxing authority on its behalf, within
the time and in the manner prescribed by law, all material Taxes (as defined
below) for which it is liable.
(c) The Company and each Subsidiary has established on its books and
records adequate reserves for the payment of all Taxes for which it is liable
which are not yet due and payable, and with respect to any such Taxes which have
been proposed, assessed or asserted against them.
(d) The Company and each Subsidiary has complied in all respects with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes for which it is liable (including, without limitation,
withholding of such Taxes pursuant to sections 1441 and 1442 of the Code or
similar provisions under any state, local or foreign laws, and has, within the
time and in the manner prescribed by law, withheld and paid over to the
appropriate taxing authorities all amounts required to be so withheld and paid
over under all applicable domestic and foreign laws.
(e) Except as set forth in Schedule 4.19, neither the Company nor any
Subsidiary has requested any extension of time within which to file any Tax
Return in respect of any taxable year, which Tax Return has not since been
filed.
(f) Except as set forth in Schedule 4.19, there are no outstanding
waivers or comparable consents that have been given by the Company or any
Subsidiary or with respect to any Tax Return of the Company or any Subsidiary
regarding the application of any statute of limitations with respect to any
Taxes or Tax Returns of the Company or any such Subsidiary.
(g) Except as set forth in Schedule 4.19 (which shall set forth the
nature of the proceeding, the type of return, the deficiencies claimed,
asserted, proposed or assessed and the amount thereof, and the taxable year in
question), no United States federal, state, local or foreign audits,
investigations, other administrative proceedings or court proceedings are
-35-
presently pending against the Company or any Subsidiary that could materially
affect the liability for Taxes of the Company or any Subsidiary or against the
Company or any Subsidiary with regard to any Taxes or Tax Returns of the Company
or any Subsidiary and no notification has been received by the Company or any
Subsidiary that such an audit, investigation or other proceeding is pending or
threatened.
(h) The Company and each Subsidiary (i)are members of an affiliated
group of corporations within the meaning of section 1504(a) of the Code; and
such affiliated group filed a consolidated return with respect to United States
federal income taxes and (ii) neither the Company nor any Subsidiary has
liability for the Taxes of any person (other than members of the affiliated
group described in clause (i) of this Section 4.19(h)) under Treasury
Regulations section 1.1502-6 (or a similar or corresponding provision of state,
local, or foreign law);
(i) Except as set forth in Schedule 4.19, there are no encumbrances
for Taxes upon the assets or properties of the Company or any Subsidiary except
for statutory encumbrances for Taxes not yet due.
(j) Neither the Company or any Subsidiary is a party to, is bound by
or has an obligation under any Tax sharing agreement, Tax indemnification
agreement, Tax allocation agreement or similar contract or arrangement
(including any agreement, contract or arrangement providing for the sharing or
ceding of credits or losses) or has a potential liability or obligation to any
person as a result of or pursuant to any such agreement, contract, arrangement
or commitment.
(k) Except as set forth in Schedule 4.19, neither the Company nor any
Subsidiary is a party to any agreement, plan, contract or arrangement that would
result, individually or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of section 280G of the Code or similar
provision or other law.
(l) Except as set forth in Schedule 4.19, no jurisdiction where the
Company or any Subsidiary has not filed a Tax Return has made a claim that the
Company or such Subsidiary is required to file a Tax Return in such
jurisdiction.
(m) The Company and each Subsidiary have previously delivered or made
available to Purchaser complete and accurate copies of each of (i) all audit
reports, letter rulings and technical advice memoranda relating to United States
federal, state, local or foreign Taxes due with respect to the income or
business of the Company or any Subsidiary, (ii) all income Tax Returns filed
with any taxing authority (or the relevant portions of any combined,
consolidated, or unitary Tax Return filed in any jurisdiction of which the
Company or any Subsidiary is a member, including, without limitation,
information relating to the
-36-
computation of taxable income) filed by or on behalf of the Company or any
Subsidiary in the last six years, (iii) any closing agreement, settlement
agreement or similar agreement or arrangement entered into by or on behalf of
the Company or any Subsidiary with any taxing authority, and (iv) any Tax
sharing agreement, Tax indemnification agreement or similar contract or
arrangement entered into by or on behalf of the Company or any Subsidiary.
(n) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, goods and
-- -------
services, capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, severance, stamp, occupation, real and
personal property, social security, estimated, recording, gift, value assessed,
windfall profits or other taxes, customs duties, fees, assessments or charges of
any kind whatsoever, whether computed on a separate, consolidated, unitary,
combined or other basis, together with any interest, fines, penalties, additions
to tax or other additional amounts imposed by any taxing authority (domestic or
foreign). For purposes of this Agreement, "Tax Return" shall mean any return,
declaration, report, estimate, information or other document (including any
documents, statements or schedules attached thereto) required to be filed with
any federal, state, local or foreign tax authority with respect to Taxes.
SECTION 4.20. Labor Relations. Except as set forth in the SEC
---------------
Reports or Schedule 4.20: (i) each of the Company and the Subsidiaries is, and
has at all times been, in material compliance with all applicable laws, rules,
regulations and orders respecting employment and employment practices, terms and
conditions of employment, wages, hours or work and occupational safety and
health, and is not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law; (ii) there is no labor
grievance, arbitration, strike, slowdown, stoppage or lockout pending, or, to
the knowledge of the Company, threatened against or affecting the Company or any
of the Subsidiaries; (iii) neither the Company nor any of its Subsidiaries is a
party to or bound by any collective bargaining or similar agreement with any
union or other labor organization or is engaged in any labor negotiations with
any labor union; (iv) there are no proceedings pending between the Company and
any of the Subsidiaries or any of their respective employees before any federal
or state agency; and (v) to the knowledge of the Company, there are no
activities or proceedings of any labor union to organize any non-union employees
of the Company or any of the Subsidiaries.
SECTION 4.21. Transactions with Affiliates. Except as disclosed in
----------------------------
Schedule 4.21 or the SEC reports filed prior to the date of this Agreement, no
present or former affiliate of the Company has, or since December 31, 1998 has
had, (i) any interest
-37-
in any property (whether real, personal or mixed and whether tangible or
intangible) used in or pertaining to any of the businesses of the Company or any
of the Subsidiaries, (ii) has had business dealings or a material financial
interest in any transaction with the Company or any of the Subsidiaries (other
than compensation and benefits received in the ordinary course of business as an
employee or director of the Company or any of the Subsidiaries) or (iii) an
equity interest or any other financial or profit interest in any Person that has
had business dealings or a material financial interest in any transaction with
the Company or any of the Subsidiaries.
SECTION 4.22. Offer Documents; Proxy Statement. The Schedule 14D-9
--------------------------------
and the Schedule 13E-3 will comply in all material respects with the Exchange
Act and the rules and regulations thereunder. Neither the Schedule 14D-9, the
Schedule 13E-3 nor any of the information relating to the Company or its
affiliates provided by or on behalf of the Company specifically for inclusion in
the Schedule TO, the Schedule 13E-3 or the Offer Documents will, at the
respective times the Schedule 14D-9, the Schedule TO and the Offer Documents or
any amendments or supplements thereto are filed with the SEC and are first
published, sent or given to shareholders of the Company, 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 made therein, in
light of the circumstances under which they were made, not misleading. No
representation is made by the Company with respect to written information
supplied by Parent or Purchaser specifically for inclusion in the Schedule 14D-9
or the Schedule 13E-3. The proxy statement to be sent to the shareholders of the
Company in connection with the meeting of the Company's shareholders to consider
the Merger (the "Company Shareholders' Meeting") or the information statement to
be sent to such shareholders, as appropriate (such proxy statement or
information statement, as amended or supplemented, is herein referred to as the
"Proxy Statement"), will comply in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is being made by the Company with
respect to Parent Information. The Proxy Statement will not, at the time the
Proxy Statement (or any amendment or supplement thereto) is filed with the SEC
or first sent to shareholders, at the time of the Company Shareholders Meeting
or at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 4.23. Brokers. No broker, finder or investment banker (other
-------
than SunTrust Equitable Securities and X.X. Xxxxxx) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of
-38-
the Company. The Company has heretofore furnished to Parent true and complete
copies of all agreements and other arrangements between the Company and SunTrust
Equitable Securities and X.X. Xxxxxx.
SECTION 4.24. Control Share Acquisition. Neither Parts 2 nor 3 of
-------------------------
Article 11 of the Georgia Code nor any other "fair price", "moratorium",
"control share acquisition", "interested shareholder" or similar antitakeover
statute or regulation enacted under Georgia law applicable to the Company or any
of its Subsidiaries is applicable to the Offer, the Merger, this Agreement, the
Subscription Agreement or the Voting Agreement or any of the transactions
contemplated by this Agreement, the Subscription Agreement or the Voting
Agreement.
SECTION 4.25. Y2K Compliance. Except as set forth in the SEC
--------------
Reports, all items, products, software, components and systems used in and
material to the operation of the business of the Company and the Subsidiaries,
which incorporate the processing of dates or date-related data (including, but
not limited to, representing, calculating, comparing and sequencing), including,
but not limited to, computer systems, infrastructure items, software
applications, hardware and related equipment and utilities, developed, in whole
or part, by the Company or any of the Subsidiaries are currently Y2K-compliant.
Except as set forth in Schedule 4.22, the Company has obtained commitments that
all vendors that are material to the Company and the Subsidiaries are Y2K-
compliant.
SECTION 4.26. Disclosure. No representation or warranty by the
----------
Company in this Agreement and no statement contained in any document (including,
without limitation, the Schedules hereto), certificate, or other writing
furnished or to be furnished by the Company to Parent pursuant to the provisions
hereof or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of material facts or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.
-39-
ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1. Conduct of Business by the Company Pending the Closing.
------------------------------------------------------
From the date of this Agreement to the Effective Time, except as expressly
contemplated by this Agreement, the Company shall, and shall cause each of the
Subsidiaries to (i) carry on its respective businesses in the ordinary course,
(ii) use all reasonable best efforts to preserve intact its current business
organizations and keep available the services of its current officers and key
employees, (iii) use all reasonable best efforts to preserve its relationships
with customers, suppliers, third party payors and other Persons with which it
has business dealings, (iv) comply in all material respects with all laws and
regulations applicable to it or any of its properties, assets or business and
(v) maintain in full force and effect all Authorizations necessary for such
business. Without limiting the generality of the foregoing, except as (x)
expressly contemplated by this Agreement or (y) set forth in Schedule 5.1, the
Company shall not, and shall cause each of the Subsidiaries not to:
(a) amend its Articles of Incorporation or By-Laws or similar
organizational documents or change the number of directors constituting its
entire board of directors;
(b) (i)(A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock or other equity interests, except that a wholly owned Subsidiary may
declare and pay a dividend or make advances to its parent or the Company or (B)
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock or other securities; (ii) issue, sell, pledge, dispose of or
encumber any (A) additional shares of its capital stock or other equity
interests, (B) securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of its
capital stock or other equity interests, or (C) of its other securities, other
than Shares issued upon the exercise of Options outstanding on the date hereof
in accordance with the Option Plans as in effect on the date hereof; or (iii)
split, combine or reclassify any of its outstanding capital stock or other
equity interests;
(c) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, joint venture, association or
other business organization or division thereof (including entities which are
Subsidiaries) or (B) any assets, including real estate, in excess of $100,000,
except purchases in the ordinary course of business consistent with past
practice;
-40-
(d) authorize or make any single capital expenditure in excess of
$50,000 or capital expenditures in excess of $500,000 in the aggregate;
(e) except in the ordinary course of business, amend or terminate any
Company Material Contract, or waive, release or assign any material rights or
claims;
(f) transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber any property or assets other than in the ordinary course of business
and consistent with past practice;
(g) (i) enter into or amend any employment or severance agreement
with or, except in accordance with the existing policies of the Company, grant
any severance or termination pay to any officer, director or key employee of the
Company or any Subsidiary; or (ii) hire or agree to hire any new or additional
key employees or officers;
(h) except as required to comply with applicable law, (A) adopt,
enter into, terminate, amend or increase the amount or accelerate the payment or
vesting of any benefit or award or amount payable under any Company Employee
Benefit Plan or other arrangement for the current or future benefit or welfare
of any director, officer or current or former employee, (B) increase in any
manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or, other than in the ordinary course of business consistent
with past practice, employee, (C) pay any benefit not provided for under any
Benefit Plan, (D) grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or Company Employee Benefit Plan
(including the grant of stock options, stock appreciation rights, stock based or
stock related awards, performance units or restricted stock, or the removal of
existing restrictions in any Company Employee Benefit Plans or agreements or
awards made thereunder) or (E) take any action to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Company Employee Benefit Plan;
(i) (i) incur or assume any long-term debt, or except in the ordinary
course of business in amounts consistent with past practice, incur or assume any
short-term indebtedness; (ii) incur or modify any material indebtedness or other
liability; (iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person, except in the ordinary course of business and consistent with
past practice; (iv) make any loans, advances or capital contributions to, or
investments in, any other Person (other than to wholly owned Subsidiaries or
customary loans or advances to employees in accordance with past practice); (v)
settle any claims other than in the ordinary course of business, in accordance
with past practice, and without
-41-
admission of liability; or (vi) enter into any material commitment or
transaction;
(j) make, revoke or change the accounting methods, including
accounting methods with respect to Taxes, used by it unless required by
generally accepted accounting principles;
(k) make any Tax election or settle or compromise any Tax
liability;
(l) (i) settle or compromise any claim, litigation or other legal
proceeding, other than in the ordinary course of business consistent with past
practice in an amount not involving more than $100,000 or (ii) pay, discharge or
satisfy any other claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of (A) any such other claims, liabilities or
obligations, in the ordinary course of business and consistent with past
practice, or (B) of any such other claims, liabilities or obligations reflected
or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company;
(m) except in the ordinary course of business consistent with past
practice, waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or any
Subsidiary is a party;
(n) permit any insurance policy naming the Company or any Subsidiary
as a beneficiary or a loss payable payee to be canceled or terminated without
notice to Parent, except in the ordinary course of business and consistent with
past practice;
(o) take or omit to take any action which would make any of the
representations or warranties of the Company contained in this Agreement untrue
and incorrect in any material respect as of the date when made if such action
had then been taken or omitted, or would result in any of the conditions set
forth in Annex I hereto or the conditions set forth in Article VII hereof not
being satisfied; or
(p) enter into an agreement, contract, commitment or arrangement to
do any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
SECTION 5.2. No Solicitation. (a) The Company shall not, and it
---------------
shall cause the Subsidiaries and the officers, directors, employees, agents and
representatives of the Company or any of the Subsidiaries (collectively, the
"Company Representatives") not to, (i) solicit or initiate, or encourage,
directly or indirectly, any inquiries regarding or the submission of, any
Takeover Proposal (as defined below), (ii) participate in any discussions or
negotiations regarding, or furnish to any
-42-
Person any information or data with respect to, or take any other action to
knowingly facilitate the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal or (iii) enter into any
agreement with respect to any Takeover Proposal or approve or resolve to approve
any Takeover Proposal; provided, however, that nothing contained in this Section
-------- -------
5.2 or any other provision hereof shall prohibit the Company or the Board of
Directors from (A) taking and disclosing to the Company's shareholders a
position with respect to a tender or exchange offer by a third party pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act or (B) making such
disclosure to the Company's shareholders as, in the good faith judgment of the
Board of Directors, after receiving advice from outside counsel, is required
under applicable law, provided that the Company may not, except as permitted by
Section 5.2(b), withdraw or modify, or propose to withdraw or modify, its
approval or recommendation of this Agreement, the Subscription Agreement or the
Voting Agreement or the transactions contemplated hereby or thereby, including
the Offer or the Merger, or approve or recommend, or propose to approve or
recommend any Takeover Proposal, or enter into any agreement with respect to any
Takeover Proposal. Upon execution of this Agreement, the Company shall, and it
shall cause the Company Representatives to, immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and it shall promptly request that each
Person who has heretofore executed a confidentiality agreement in connection
with such Person's consideration of a Takeover Proposal return all confidential
information heretofore furnished to such Person by or on behalf of the Company.
Notwithstanding the foregoing, prior to the time of acceptance of Shares for
payment pursuant to the Offer, the Company may furnish information concerning
its business, properties or assets to any Person or group pursuant to
confidentiality agreements with terms and conditions similar to the
Confidentiality Agreement, dated April 27, 1999 (the "Confidentiality
Agreement"), between the Company and X.X. Xxxxxxx, Xxxxxx & Co., LLC ("Warburg")
(provided that such confidentiality agreements may not include any provision
granting any such Person or group an exclusive right to negotiate with the
Company), and may negotiate and participate in discussions and negotiations with
such Person or group concerning a Takeover Proposal if: (x) such Person or group
has submitted an unsolicited bona fide written proposal which is, or is
reasonably likely to result in, a Superior Proposal; and (y) the Board of
Directors determines in good faith, based upon advice of outside counsel, that
such action is required to discharge the Board's fiduciary duties to the
Company's shareholders under the Georgia Code. The Company shall not release any
third party from, or waive any provision of, any such confidentiality agreement
or any other confidentiality or standstill agreement to which the Company is a
party.
-43-
The Company will promptly notify Parent of the existence of any
proposal, discussion, negotiation or inquiry received by the Company, and the
Company will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry which it may receive (and will promptly
provide to Parent copies of any written materials received by the Company in
connection with such proposal, discussion, negotiation or inquiry) and the
identity of the Person making such proposal or inquiry or engaging in such
discussion or negotiation. The Company will promptly provide to Parent any non-
public information concerning the Company provided to any other Person which was
not previously provided to Parent. The Company will keep Parent fully informed
of the status and details (including amendments or proposed amendments) to any
such Takeover Proposal.
As used in this Agreement, the following terms have the meanings set
forth below:
"Superior Proposal" means an unsolicited bona fide written proposal by
a Third Party to acquire, directly or indirectly, for consideration consisting
solely of cash and/or marketable securities, all the Shares then outstanding or
all or substantially all of the assets of the Company, and (i) otherwise on
terms which the Board of Directors determines in good faith to be more favorable
to the Company's shareholders than the Offer and the Merger (based on a written
opinion of the Company's independent financial advisor that the value of the
consideration provided for in such proposal exceeds the value of the
consideration provided for in the Offer and the Merger), (ii) for which
financing, to the extent required, is then committed, (iii) which, in the good
faith reasonable judgment of the Board of Directors of the Company, is
reasonably likely to be consummated without undue delay and (iv) which is
subject to no more conditions than those set forth in Annex I hereto.
"Takeover Proposal" means any inquiry, proposal or offer, whether in
writing or otherwise, from a Third Party to acquire beneficial ownership (as
determined under Rule 13d-3 of the Exchange Act) of all or a material portion of
the assets of the Company or any of its Subsidiaries or 15% or more of any class
of equity securities of the Company or any of the Subsidiaries pursuant to a
merger, consolidation or other business combination, sale of shares of capital
stock, sale of assets, tender offer, exchange offer or similar transaction with
respect to either the Company or any of the Subsidiaries, including any single
or multi-step transaction or series of related transactions, which is structured
to permit such Third Party to acquire beneficial ownership of any material
portion of the assets of, or 15% or more of the equity interest in either the
Company or any of the Subsidiaries.
"Third Party" means any Person or group other than Parent, Purchaser
or any affiliate thereof.
-44-
(b) Except as set forth in this Section 5.2(b), neither the Board of
Directors nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or
recommendation by the Board of Directors or any such committee of this
Agreement, the Subscription Agreement or the Voting Agreement or the
transactions contemplated hereby or thereby, including the Offer or the Merger,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, prior to the time of acceptance for
payment of Shares pursuant to the Offer, the Board of Directors may withdraw or
modify its approval or recommendation of this Agreement or the Subscription
Agreement or the transactions contemplated hereby or thereby, including the
Offer or the Merger, approve or recommend a Superior Proposal, or enter into an
agreement with respect to a Superior Proposal, in each case if (A) the Company
shall have received a Superior Proposal which is pending at the time the Company
determines to take such action, (B) the Board of Directors shall have determined
in good faith, based upon advice of outside counsel, that such action is
required to discharge the Board of Director's fiduciary duties to the Company's
stockholders under the Georgia Code, (C) at least five business days shall have
passed following Parent's receipt of written notice from the Company advising
Parent that the Board of Directors has received a Superior Proposal which it
intends to accept, specifying the material terms and conditions of such Superior
Proposal, identifying the Person making such Superior Proposal, but only if the
Company shall have caused its financial and legal advisors to negotiate in good
faith with Parent to make such adjustments to the terms and conditions of this
Agreement as would enable the Company to proceed with the transactions
contemplated herein on such adjusted terms and (D) concurrently with taking such
action the Company shall have terminated this Agreement pursuant to and in
accordance with Section 8.1(c)(i) hereof.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1. Proxy Statement. As promptly as practicable after the
---------------
consummation of the Offer and if required by the Exchange Act, the Company shall
prepare and file with the SEC, and shall use all reasonable efforts to have
cleared by the SEC, and promptly thereafter shall mail to shareholders, the
Proxy Statement. The Proxy Statement shall contain the recommendation of the
Board of Directors that the Company's shareholders approve this Agreement and
the Merger. Parent will cooperate with the Company in preparing such Proxy
Statement.
SECTION 6.2. Meeting of Shareholders of the Company. Following the
--------------------------------------
consummation of the Offer, the Company shall promptly take all action necessary
in accordance with the Georgia
-45-
Code and its Articles of Incorporation and By-Laws to convene the Company
Shareholders' Meeting, if such meeting is required. The shareholder vote
required for approval of the Merger will be no greater than that set forth in
the Georgia Code. The Company shall use its best efforts to solicit from
shareholders of the Company proxies in favor of the Merger and shall take all
other action necessary or, in the reasonable opinion of Parent, advisable to
secure any vote of shareholders required by the Georgia Code to effect the
Merger. Notwithstanding the foregoing, if Purchaser or any other subsidiary of
Parent shall acquire at least 90 percent of the outstanding Shares on a fully
diluted basis, and provided that the conditions set forth in Article VII shall
have been satisfied or waived, the Company shall, at the request of Parent, take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable after such acquisition, without the approval of the
shareholders of the Company, in accordance with Section 14-2-1104 of the Georgia
Code.
SECTION 6.3. Compliance with Law. Each of the Company, Parent and
-------------------
Purchaser will comply in all material respects with all applicable laws and with
all applicable rules and regulations of any Governmental Entity in connection
with its execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
SECTION 6.4. Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Parent of (i) the occurrence, or non-occurrence of any event
whose occurrence, or non-occurrence would be likely to cause either (A) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any respect at any time from the date hereof to the Effective Time
or (B) any condition set forth in Annex I to be unsatisfied in any material
respect at any time from the date hereof to the date Parent purchases Shares
pursuant to the Offer and (ii) any failure of the Company, or any of its
officers, directors, employees or agents, 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 6.4 shall not limit or otherwise affect the remedies available hereunder
to Parent.
SECTION 6.5. Access to Information. From the date hereof to the
---------------------
Effective Time, the Company shall, and shall cause its Subsidiaries, officers,
directors, employees, auditors and agents to, afford the officers, employees and
agents of Parent and Purchaser reasonable access at all reasonable times to its
officers, employees, agents, properties, offices and other facilities and to all
books and records, and shall promptly furnish Parent and Purchaser with (a) all
financial, operating and other data and information as Parent or Purchaser,
through its officers, employees or agents, may reasonably request and (b) a copy
of each report, schedule and other document filed or received by the Company or
any of the Subsidiaries during such
-46-
period pursuant to the requirements of applicable securities laws.
SECTION 6.6. Public Announcements. So long as this Agreement is in
--------------------
effect, Parent and the Company shall consult with each other before issuing any
press release or otherwise making any public statements with respect to the
Offer or the Merger and shall not issue, or permit their affiliates to issue,
any such press release or make any such public statement before such
consultation, except as may be required by law. Notwithstanding the foregoing,
the Company may issue a press release describing Section 5.2 of this Agreement
in a form approved by Parent prior to its issue.
SECTION 6.7. Reasonable Best Efforts; Cooperation. Upon the terms
------------------------------------
and subject to the conditions hereof, each of the parties hereto shall use all
reasonable best efforts to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and filings,
and to use all reasonable best efforts to take, or cause to be taken, all other
actions and to do, or cause to be done, all other things necessary, proper or
advisable to cause all conditions to the Offer to be satisfied and to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement, including, without limitation, (i) cooperating in responding to
inquiries from, and making presentations to, regulatory authorities and (ii)
defending against and responding to any action, suit, proceeding, or
investigation, whether judicial or administrative, challenging or relating to
this Agreement, the Subscription Agreement or the Voting Agreement or the
transactions contemplated hereby or thereby, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed. Notwithstanding anything herein to the contrary, in
connection with any filing or submission or other action required to be made or
taken by any party to effect the Merger and all other transactions contemplated
hereby, the Company shall not, without the prior written consent of Parent,
commit to any divestiture transaction, and Parent shall not be required to
divest or hold separate or otherwise take or commence to take any action that,
in the reasonable discretion of Parent, limits its freedom of action with
respect to, or its ability to retain, the Company or any of Parent's affiliates
or any material portion of the Company's assets or such affiliates' assets.
SECTION 6.8. Agreement to Defend and Indemnify.
---------------------------------
(a) It is understood and agreed that, subject to the limitations on
indemnification contained in the Georgia Code, the Company shall, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and after the Effective Time,
the Surviving Corporation shall for a period of six years following the
Effective Time, to the fullest extent permitted under
-47-
applicable law, indemnify and hold harmless, each director, officer, employee,
fiduciary and agent of the Company or any Subsidiary and their respective
subsidiaries and affiliates including, without limitation, officers and
directors serving as such on the date hereof (collectively, the "Indemnified
Parties") against any costs or 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 arising out of or pertaining to any of the transactions
contemplated hereby, including without limitation liabilities arising under the
Securities Act or the Exchange Act in connection with the Offer or the Merger,
and in the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) the Company or the
Surviving Corporation shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company or the Surviving Corporation, promptly as statements
therefor are received, and (ii) the Company and the Surviving Corporation will
cooperate in the defense of any such matter; provided, however, that neither the
-------- -------
Company nor the Surviving Corporation shall be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld); and provided further, that neither the Company nor the
-------- -------
Surviving Corporation shall be obliged pursuant to this Section 6.8 to pay the
fees and disbursements of more than one counsel for all Indemnified Parties in
any single action except to the extent that, in the opinion of counsel for the
Indemnified Parties, two or more of such Indemnified Parties have conflicting
interests in the outcome of such action. For two years after the Effective Time,
the Surviving Corporation shall be required to maintain or obtain officers' and
directors' liability insurance covering the Indemnified Parties who are
currently covered by the Company's officers and directors liability insurance
policy on terms not less favorable than those in effect on the date hereof in
terms of coverage and amounts; provided, however, that if the aggregate annual
-------- -------
premiums for such insurance at any time during such period exceed the per annum
rate of premium paid by the Company for such insurance as of the date of this
Agreement, then the Surviving Corporation shall provide the maximum coverage
that will then be available at an annual premium equal to 150% of such per annum
rate as of the date of this Agreement. The Surviving Corporation shall continue
in effect the indemnification provisions currently provided by the Third Amended
and Restated Articles of Incorporation and By-Laws of the Company for a period
of not less than six years following the Effective Time. This Section 6.8 shall
survive the consummation of the Merger. Notwithstanding anything in this Section
6.8 to the contrary, neither the Company nor the Surviving Corporation shall
have any obligation under this Section 6.8 to indemnify any Indemnified Party
against any cost, expense, judgment, fine, loss, claim, damage, liability or
settlement amount found to have resulted solely from such Indemnified Person's
own gross negligence or willful misconduct.
-48-
This covenant shall survive any termination of this Agreement pursuant to
Section 8.1 hereof. Notwithstanding Section 9.7 hereof, this Section 6.8 is
intended to be for the benefit of and to grant third-party rights to Indemnified
Parties whether or not parties to this Agreement, and each of the Indemnified
Parties shall be entitled to enforce the covenants contained herein.
(b) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation assume the obligations set
forth in this Section 6.8.
SECTION 6.9. State Takeover Laws. If any state takeover statute or
-------------------
other similar statute or regulation becomes or is deemed to become applicable to
the Offer, the Merger, this Agreement, the Subscription Agreement or the Voting
Agreement or any of the transactions contemplated by this Agreement, the
Subscription Agreement or the Voting Agreement, the Company shall promptly take
all reasonable action necessary to render such statute or regulation
inapplicable to all of the foregoing.
ARTICLE VII.
CONDITIONS OF MERGER
SECTION 7.1. Conditions for Each Party's Obligations to Effect the
-----------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
------
subject to the satisfaction on or prior to the Effective Time of the following
conditions:
(a) Purchaser shall have made, or caused to be made, the Offer and
shall have purchased, or caused to be purchased, the Shares pursuant to the
Offer;
(b) The Merger and this Agreement shall have been approved and
adopted by the requisite vote of the shareholders of the Company, if required by
the Georgia Code or the Company's Third Amended and Restated Articles of
Incorporation;
(c) No statute, rule, regulation, judgment, writ, decree, order or
injunction shall have been promulgated, enacted, entered or enforced, and no
other action shall have been taken, by any Governmental Entity that in any of
the foregoing cases has the effect of making illegal or directly or indirectly
restraining, prohibiting or restricting the consummation of the Merger; and
(d) Any waiting period applicable to the Merger under the HSR
Act shall have expired or have been terminated.
-49-
SECTION 7.2. Conditions for Obligations of Parent and Purchaser. The
--------------------------------------------------
obligations of Parent and Purchaser to effect the Merger shall be further
subject to the satisfaction on or prior to the Effective Time of the following
additional conditions:
(a) The representations and warranties of the Company set forth in
this Agreement that are qualified by reference to materiality or a Material
Adverse Effect shall be true and correct, and any such representations and
warranties that are not so qualified shall be true and correct in all material
respects, in each case as if such representations and warranties were made at
the Effective Time;
(b) The Company shall have performed in all material respects all
obligations and complied in all material respects with all agreements and
covenants of the Company to be performed or complied with by it under this
Agreement at or prior to the Effective Time; and
(c) All governmental consents, orders and approvals required for the
consummation of the Merger (including, without limitation, all such consents,
orders and approvals as are necessary to prevent any Authorization from being
revoked, suspended or otherwise adversely affected, and to prevent any penalty
from being imposed) shall have been obtained and shall be in effect.
SECTION 7.3. Conditions for Obligations of the Company. The
-----------------------------------------
obligations of the Company to effect the Merger shall be further subject to the
satisfaction on or prior to the Effective Time of the following additional
conditions:
(a) The representations and warranties of Parent and Purchaser set
forth in this Agreement that are qualified by reference to materiality or a
Material Adverse Effect shall be true and correct, and any such representations
and warranties that are not so qualified shall be true and correct in all
material respects, in each case as if such representations and warranties were
made at the Effective Time; and
(b) Parent and Purchaser shall have performed in all material
respects all obligations and complied in all material respects with all
agreements and covenants of each of Parent and Purchaser to be performed or
complied with by it under this Agreement at or prior to the Effective Time.
-50-
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of matters presented in connection with the Merger by the
shareholders of the Company:
(a) By the mutual written consent of Parent and the Company; or
(b) By either of Parent or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling or other action each party hereto shall use its
reasonable best efforts to have vacated or reversed), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and non-appealable.
(c) By the Company:
(i) if the Company has approved a Superior Proposal in
accordance with Section 5.2(b), provided the Company has complied with all
provisions thereof, including the notice provisions therein, and that it
makes simultaneous payment of the Expenses and the Termination Fee (as
defined below); or
(ii) if Parent or Purchaser shall have terminated the Offer or
the Offer expires without Parent or Purchaser, as the case may be,
purchasing any shares pursuant thereto; provided that the Company may not
terminate this Agreement pursuant to this Section 8.1(c)(ii) if the Company
is in material breach of this Agreement; or
(iii) if Parent, Purchaser or any of their affiliates shall have
failed to commence the Offer on or prior to 15 business days following the
date of the initial public announcement of the Offer; provided that the
Company may not terminate this Agreement pursuant to this Section
8.1(c)(iii) if the Company is in material breach of this Agreement; or
(iv) if Parent or Purchaser shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement which breach or failure to perform
is incapable of being cured or has not been cured by the earlier of (x) ten
business days following written notice thereof to Parent from the Company
and (y) the scheduled expiration of the Offer; or
-51-
(v) if the Offer shall not have expired or been terminated on
or before June 30, 2000; provided, however, that if on such date any
-------- -------
applicable waiting period under the HSR Act shall not have expired or been
terminated, or any of the conditions in clauses (f), (g) or (h) in Annex I
hereto exist such date shall be extended to July 30, 2000 (such date, as it
may be extended, the "Termination Date"); provided further that the Company
may not terminate this Agreement pursuant to this Section 8.1(c)(v) if the
Company is in material breach of this Agreement.
(d) By Parent or Purchaser:
(i) if prior to the purchase of the Shares pursuant to the
Offer, the Board of Directors shall have withdrawn, or modified or changed
in a manner adverse to Parent or Purchaser its approval or recommendation
of the Offer, this Agreement, the Merger, the Subscription Agreement or the
Voting Agreement or shall have approved a Takeover Proposal; or
(ii) if Parent or Purchaser shall have terminated the Offer
without Parent or Purchaser purchasing any Shares thereunder, provided that
Parent or Purchaser may not terminate this Agreement pursuant to this
Section 8.1(d)(ii) if Parent or Purchaser is in material breach of this
Agreement; or
(iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex I hereto, Parent, Purchaser, or any of their
affiliates shall have failed to commence the Offer on or prior to 15
business days following the date of the initial public announcement of the
Offer; or
(iv) any Person or "group" (as defined in Section 13(d)(3) of
the Exchange Act), other than Parent, Purchaser or their affiliates or any
group of which any of them is a member shall have acquired beneficial
ownership (as determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of 15% or more of the Shares; or
(v) if the Company receives a Takeover Proposal from any Person
(other than Parent or Purchaser), and the Board of Directors takes a
neutral position or makes no recommendation with respect to such Takeover
Proposal after a reasonable amount of time (and in no event more than 30
days following such receipt) has elapsed for the Board of Directors to
review and make a recommendation with respect to such Takeover Proposal; or
(vi) if the Company, or any of the Company Representatives,
shall take any of the actions described in
-52-
clauses (i) or (ii) of Section 5.2(a) hereof, and such action is not
permitted by this Agreement; or
(vii) if the Company shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement (other than the covenants and
agreements in clauses (i) and (ii) of Section 5.2(a)) which breach or
failure to perform is incapable of being cured or has not been cured by the
earlier of (x) ten business days following written notice thereof to the
Company from Parent and (y) the scheduled expiration of the Offer; or
(viii) if the Offer shall not have expired or been terminated on
or before the Termination Date; provided that Parent or Purchaser may not
terminate this Agreement pursuant to this Section 8.1(d)(viii) if the
Parent or Purchaser is in material breach of this Agreement.
SECTION 8.2. Effect of Termination. (a) In the event of termination
---------------------
of this Agreement by either the Company or Parent or Purchaser as provided in
Section 8.1, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Purchaser or the
Company, other than the provisions of this Article VIII and as provided in
Section 9.1 and except that nothing herein shall relieve any party for breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
(b) If (x) Parent or Purchaser terminates this Agreement pursuant to
Section 8.1(d)(i), 8.1(v) or 8.1(d)(vi) or (y) the Company terminates this
Agreement pursuant to Section 8.1(c)(i), then in each case, the Company shall
pay, or cause to be paid to Parent, at the time of termination, an amount equal
to $2 million (the "Termination Fee") plus an amount equal to the actual and
reasonably documented out-of-pocket expenses of Parent, Purchaser or Warburg or
any affiliate of Warburg incurred by any such person in connection with the
Offer, the Merger, this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, the fees and expenses of any
such person's counsel and accountants as well as all fees and expenses payable
to all banks, investment banking firms, and other financial institutions and
Persons and their respective agents and counsel incurred in connection with
acting as any such person's financial advisor with respect to, or arranging or
committing to provide or providing any financing for, the transactions
contemplated hereby (the "Expenses"); provided that in no event shall the
Company be obligated to pay more than $1 million in Expenses. In addition, if
this Agreement is terminated by Parent pursuant to Section 8.1(d)(ii) or Section
8.1(d)(viii) or by the Company pursuant to Section 8.1(c)(ii) or Section
8.1(c)(v) and at the time of such termination, Parent is not in material breach
of this Agreement and the Minimum Condition has not been satisfied, then the
Company shall pay to
-53-
Parent, at the time of termination, the Expenses, and, if the Company shall
thereafter, within 12 months after such termination, enter into an agreement
with respect to a Takeover Proposal, then the Company shall pay the Termination
Fee concurrently with entering into any such agreement.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1. Non-Survival of Representations, Warranties and
-----------------------------------------------
Agreements. The representations, warranties and agreements in this Agreement
----------
shall terminate at the Effective Time or the termination of this Agreement
pursuant to Section 8.1, as the case may be, except as provided in Section 8.2
and except that the agreements set forth in Article II and Sections 6.8 and 9.3
shall survive the Effective Time indefinitely and those set forth in Article
VIII and Section 9.3 shall survive termination indefinitely.
SECTION 9.2. Notices. All notices and other communications given or
-------
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made (i) as of the date delivered or sent by facsimile if delivered
personally or by facsimile, and (ii) on the third business day after deposit in
the U.S. mail, if mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(a) if to Parent or Purchaser
Hilltopper Holding Corp.
Hilltopper Acquisition Corp.
c/o Warburg, Xxxxxx & Co.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
-54-
(b) if to the Company:
Centennial HealthCare Corporation
000 Xxxxxxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
With copies to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Xxxxxxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 9.3. Expenses. Except as set forth in Section 8.2(b) or the
--------
following sentence, all fees, costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such fees, costs and expenses. Promptly following the Effective
Time, the Company shall pay or, to the extent previously paid, reimburse Parent,
Purchaser or Warburg or any affiliate of Warburg, as applicable, for, all fees,
costs and expenses incurred by any such person in connection with the Merger
Agreement and the transactions contemplated by that Agreement.
SECTION 9.4. Certain Definitions. For purposes of this Agreement,
-------------------
the term:
(a) "affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise; and
(c) "Person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
entity.
-55-
SECTION 9.5. Headings. The headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.6. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.
SECTION 9.7. Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement and the Confidentiality Agreement constitute the entire agreement and
supersede any and all other prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof. This Agreement is not intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder, except as otherwise provided
herein and except that Sections 8.2(b) and 9.3 are intended to be for the
benefit of and to grant third-party rights to Warburg, and Warburg shall be
entitled to enforce the covenants contained in such sections.
SECTION 9.8. Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise, except that Parent and Purchaser may assign all
or any of their rights hereunder to any affiliate of Parent provided that no
such assignment shall relieve the assigning party of its obligations hereunder.
SECTION 9.9. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Georgia applicable to
contracts executed in and to be performed entirely within that State.
SECTION 9.10. Amendment. This Agreement may be amended by the
---------
parties hereto by action taken by Parent and Purchaser, and by action taken by
the Special Committee of the Board of Directors at any time before the Effective
Time; provided, however, that, after approval of the Merger by the shareholders
-------- -------
of the Company, no amendment may be made which would reduce the amount or change
the type of consideration into which each Share will be converted upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 9.11. Waiver. At any time before the Effective Time, any
------
party hereto may (a) extend the time for the
-56-
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered pursuant hereto and
(c) waive compliance by the other parties hereto with any of their agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only as against such party and only if
set forth in an instrument in writing signed by such party. The failure of any
party hereto to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
SECTION 9.12. Counterparts. This Agreement may be executed in one or
------------
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
shall constitute one and the same agreement.
-57-
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CENTENNIAL HEALTHCARE CORPORATION
By:____________________________
HILLTOPPER HOLDING CORP.
By:____________________________
HILLTOPPER ACQUISITION CORP.
By:____________________________
-58-
ANNEX I
Conditions to the Offer. Notwithstanding any other provision of the
-----------------------
Offer, Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated
under the Exchange Act (relating to Parent's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for,
and (subject to any such rules or regulations) may delay the acceptance for
payment of any tendered Shares and (except as provided in this Agreement) amend
or terminate the Offer as to any Shares not then paid for if (i) there shall not
have been validly tendered and not withdrawn prior to the expiration of the
Offer a number of shares of Company Common Stock which, when taken together with
the Shares, if any, beneficially owned by Parent, represents more than 68.5% of
the number of shares of Company Common Stock outstanding on a fully diluted
basis (the "Minimum Condition") or (ii) any applicable waiting period under the
HSR Act shall not have expired or been terminated prior to the expiration of the
Offer or (iii) at any time after the date of this Agreement and before the time
of payment for any such Shares (whether or not any Shares have theretofore been
accepted for payment or paid for pursuant to the Offer), any of the following
events shall occur and be continuing or conditions exists:
(a) there shall be an injunction or other order, decree, judgment or
ruling issued or threatened by a Governmental Entity of competent jurisdiction
or a statute, rule, regulation, executive order or other action shall have been
enacted, promulgated, taken or threatened by a Governmental Entity of competent
jurisdiction which in any such case (i) restrains or prohibits or seeks to
restrain or prohibit the making or consummation of the Offer or the consummation
of the Merger or the performance of the other transactions contemplated by this
Agreement, the Subscription Agreement or the Voting Agreement, (ii) prohibits or
restricts or seeks to prohibit or restrict the ownership or operation by Parent
(or any of its affiliates or subsidiaries) of any portion of its or the
Company's business or assets which is material to the business of all such
entities taken as a whole, or compels Parent (or any of its affiliates or
subsidiaries) to dispose of or hold separate any portion of its or the Company's
business or assets which is material to the business of all such entities taken
as a whole, (iii) imposes or seeks to impose material limitations on the ability
of Parent effectively to acquire or to hold or to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote the
Shares purchased by Purchaser or acquired by Parent under the Subscription
Agreement on all matters properly presented to the shareholders of the Company,
(iv) imposes or seeks to impose any material limitations on the ability of
Parent or any of their respective affiliates or subsidiaries effectively to
control in any material respect the business and operations of
the Company and any of the Subsidiaries, or (v) which otherwise is reasonably
likely to have a Material Adverse Effect; or
(b) this Agreement shall have been terminated by the Company or
Parent in accordance with its terms; or
(c) there shall have occurred or been discovered any event, change or
development that, individually or when considered together with any other
matter, has had or is reasonably likely to have a Material Adverse Effect; or
(d) any of the representations and warranties of the Company set
forth in this Agreement that are qualified by reference to materiality or
Material Adverse Effect shall not be true and correct, or any such
representations and warranties that are not so qualified shall not be true and
correct in any material respects, in each case as if such representations and
warranties were made at the time of such determination; or
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement; or
(f) the Company shall have not obtained consents of third parties
listed in Schedule 4.4 to this Agreement (the terms of which consents shall be
reasonably satisfactory to Parent) and delivered evidence of such consents to
Parent; or
(g) the Company's credit agreement shall have not been amended
on terms reasonably satisfactory to Parent; or
(h) all notices, applications, approvals, licenses, consents,
certifications and waivers ("Approvals") required to be furnished to or obtained
from any governmental or regulatory authority or accreditation or certification
agency, including any Approvals in respect of Authorizations, provider numbers,
and program participation rights possessed by the Company and the Subsidiaries,
necessary in order for the Company and the Subsidiaries to conduct their
business following the consummation of the transactions contemplated by this
Agreement in the manner as such business is now and has heretofore been
conducted shall not have been obtained or furnished and any applicable waiting
period or periods shall not have expired (or, if there be no time limit for
waiver or objection, a notice of no-objection or equivalent with respect thereto
shall not have been received by the Company); or
(i) any suit, action, claim, proceeding or investigation shall have
been commenced or be pending by or before any Governmental Entity or arbitrator,
or shall have been, to the Company's knowledge, threatened by any Governmental
Entity, or any qui tam action shall have been filed or, to the Company's
--- ---
knowledge, threatened, relating to any billing or
-2-
claims made or submitted by the Company or any Subsidiary of or to any
Governmental Entity (including any federal or state healthcare or health benefit
program) or any insurance carrier, health maintenance or other managed care
organization, independent physician association or any other third party payor
which, in the case of any of the foregoing taken separately or together, in the
reasonable judgment of Parent either (i) materially adversely affects the value
of the equity of the Company to Parent or (ii) presents a risk reasonably
unacceptable to Parent of subjecting the Company or any Subsidiary to a material
liability or a material amount of damages or, on a going-forward basis, imposing
material limitations on the business of the Company and the Subsidiaries and/or
methods of operation (including any limitations on the ability of the Company
and the Subsidiaries to be reimbursed by any Governmental Entity, including any
federal or state healthcare or health benefit program); or
(j) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or the over-the-counter market, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iii) any limitation (whether or not mandatory) by an government or
Governmental Entity, on the extension of credit by banks or other lending
institutions, (iv) a commencement of a war or armed hostilities or other
national calamity directly involving the United States or (v) in the case of any
of the foregoing existing at the time of the execution of this Agreement, a
material acceleration or worsening thereof; or
(k) the Board of Directors (i) shall have withdrawn, or modified or
changed in a manner adverse to Parent or Purchaser (including by amendment of
the Schedule 14D-9) its approval or recommendation of this Agreement, the
Subscription Agreement or the Voting Agreement or the transactions contemplated
hereby or thereby, including the Offer or the Merger, (ii) recommended a
Takeover Proposal, (iii) shall have adopted any resolution to effect any of the
foregoing, or (iv) upon request of Purchaser, shall fail to reaffirm its
approval or recommendation of the Offer, this Agreement or the Merger; or
(l) any Person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser or their affiliates or any group of
which any of them is a member, shall have acquired beneficial ownership (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 15% or
more of the Shares; or
(m) any party to the Subscription Agreement or the Voting Agreement
other than the Purchaser, Parent or Warburg shall have breached or failed to
perform any of its agreements under such agreement or breached any of its
representations and warranties in such agreement or any such agreement shall not
be
-3-
valid, binding and enforceable, except for such breaches or failures or failures
to be valid, binding and enforceable that would result in the Minimum Condition
not being satisfied;
which, in the judgment of Parent with respect to each and every matter referred
to above and regardless of the circumstances giving rise to any such condition,
makes it inadvisable to proceed with the Offer or with such acceptance for
payment of or payment for Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of Parent and may be
asserted by Purchaser regardless of the circumstances (including any action or
inaction by Purchaser) giving rise to any such conditions and may be waived by
Purchaser in whole or in part at any time and from time to time, in each case,
in the exercise of the good faith judgment of Purchaser and subject to the terms
of this Agreement. The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
-4-
