Exhibit (c)(1)
Agreement and Plan of Merger, dated as of November 9, 1998, by and among Parent,
Purchaser and the Company.
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AGREEMENT AND PLAN OF MERGER
By and Among
SELECT MEDICAL CORPORATION
SELECT MEDICAL OF MECHANICSBURG, INC.
and
INTENSIVA HEALTHCARE CORPORATION
----------------------------
Dated as of November 9, 1998
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TABLE OF CONTENTS
Page
ARTICLE I. THE OFFER.....................................................1
1.1. The Offer.....................................................1
1.2. Conditions to the Offer.......................................2
1.3. Waivers of Conditions.........................................3
1.4. Schedule 14D-1................................................4
1.5. Company Action................................................5
ARTICLE II. THE MERGER...................................................6
2.1. The Merger....................................................6
2.2. Effective Time; Closing.......................................6
2.3. Effect of the Merger..........................................6
2.4. Certificate of Incorporation; By-laws.........................7
2.5. Directors and Officers........................................7
2.6. Conversion of Securities......................................7
2.7. Dissenting Shares.............................................7
2.8. Employee Stock Options........................................8
2.9. Surrender of Shares; Stock Transfer Books.....................8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............10
3.1. Organization and Qualification; Subsidiaries.................10
3.2. Certificate of Incorporation and By-laws.....................10
3.3. Capitalization...............................................10
3.4. Authority Relating to this Agreement.........................11
3.5. No Conflict; Required Filings and Consents...................11
3.6. SEC Filings; Financial Statements............................12
3.7. Absence of Certain Changes or Events.........................13
3.8. Absence of Litigation........................................13
3.9. Labor Matters; Employee Benefit Plans........................13
3.10. Offer Documents; Schedule 14D-9; Proxy Statement.............15
3.11. Taxes........................................................15
3.12. Compliance with Laws.........................................16
3.13. Exclusion....................................................17
3.14. Accounts Receivable..........................................18
3.15. Brokers......................................................18
3.16. Real Property and Leases.....................................18
3.17. Environmental Matters........................................19
3.18. State Takeover Statutes......................................19
3.19. Vote Required................................................20
3.20. Certain Contracts............................................20
3.21. Intellectual Property........................................20
3.22. Opinion of Financial Advisor.................................21
3.23. Affiliate Transactions.......................................21
3.24. Prior Negotiations...........................................21
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER.....21
4.1. Corporate Organization.......................................21
4.2. Authority Relating to this Agreement.........................21
4.3. No Conflict; Required Filings and Consents...................22
4.4. Financing....................................................22
4.5. Offer Documents; Proxy Statement.............................23
4.6. Brokers......................................................23
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER......................23
5.1. Conduct of Business by the Company Pending the Merger........23
5.2. Additional Covenants.........................................26
ARTICLE VI. ADDITIONAL AGREEMENTS......................................26
6.1. Stockholders Meeting.........................................26
6.2. Proxy Statement..............................................27
6.3. Company Board Representation; Section 14(f)..................27
6.4. Access to Information; Confidentiality.......................28
6.5. No Solicitation of Transactions..............................28
6.6. Employee Matters.............................................30
6.7. Directors' and Officers' Indemnification and Insurance.......30
6.8. Further Action; Reasonable Best Efforts......................32
6.9. Public Announcements.........................................32
6.10. SEC and Stockholder Filings..................................32
6.11. Takeover Statutes............................................32
6.12. Advice of Breaches...........................................33
ARTICLE VII. CONDITIONS TO THE MERGER..................................33
7.1. Conditions to the Merger.....................................33
7.2. Parent and Purchaser Conditions to the Merger................33
7.3. Company Conditions to the Merger.............................34
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER........................35
8.1. Termination..................................................35
8.2. Effect of Termination........................................36
8.3. Fees and Expenses............................................37
8.4. Amendment....................................................38
8.5. Waiver.......................................................38
ARTICLE IX. GENERAL PROVISIONS.........................................38
9.1. Non-Survival of Representations, Warranties and Agreements...38
9.2. Notices......................................................38
9.3. Definitions..................................................39
9.4. Severability.................................................42
9.5. Entire Agreement; Assignment.................................42
9.6. Parties in Interest..........................................43
9.7. Governing Law................................................43
9.8. Headings.....................................................43
9.9. Counterparts.................................................43
9.10. Specific Performance.........................................43
9.11. Costs of Enforcement.........................................43
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THIS AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1998 (the
"Agreement"), is by and among SELECT MEDICAL CORPORATION, a Delaware corporation
("Parent"), SELECT MEDICAL OF MECHANICSBURG, INC., a Delaware corporation and a
wholly owned subsidiary of Parent ("Purchaser"), and INTENSIVA HEALTHCARE
CORPORATION, a Delaware corporation (the "Company").
Background
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(a) The Boards of Directors of Parent, Purchaser and the Company have each
determined that it is in the best interests of their respective stockholders for
Parent to acquire the Company upon the terms and subject to the conditions set
forth herein.
(b) In furtherance of such acquisition, Parent, Purchaser and the Company have
agreed that Purchaser shall make a cash tender offer to acquire all the
outstanding shares of common stock of the Company, on the terms and subject to
the conditions of this Agreement.
(c) The Board of Directors of the Company has approved the making of such
offer and has agreed to recommend that holders of Shares tender their Shares
under such offer.
(d) The Boards of Directors of Parent, Purchaser and the Company have approved
the merger of Purchaser with and into the Company following the consummation of
the Offer and on the terms and subject to the conditions set forth herein.
(e) Parent and Purchaser have entered into agreements with certain holders of
the Shares under which such holders agree to tender such Shares in the Offer
and/or vote in favor of the Offer and the Merger (the "Stockholder Agreements").
(f) Certain capitalized terms used herein are defined in Section 9.3.
Agreement
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In consideration of the foregoing and the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, Parent, Purchaser
and the Company hereby agree as follows:
ARTICLE I.
THE OFFER
1.1. The Offer.
Upon the terms and subject to the conditions of this Agreement, Purchaser
shall commence a cash tender offer (the "Offer") to acquire all the issued and
outstanding shares (the "Shares") of Common Stock, par value $0.001 per share,
of the Company ("Common Stock"). The purchase price under the Offer shall be
$9.625 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being hereinafter referred to as the "Per Share Amount"), net to the
seller in cash, on the terms and subject to the conditions set forth herein.
Purchaser shall commence the Offer as promptly as reasonably practicable after
the date hereof, but in no event later than five Business Days after the initial
public announcement of Purchaser's intention to commence the Offer. Subject to
the terms and conditions of the Offer and in accordance with the terms of this
Agreement, Purchaser shall accept for payment and pay for, as promptly as
practicable after expiration of the Offer, all Shares validly tendered and not
withdrawn.
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1.2. Conditions to the Offer.
The obligation of the Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer shall be subject to the following conditions:
(a) At least the number of Shares that, when added to the Shares already owned
by Parent, shall constitute 90% of the then outstanding Shares on a fully
diluted basis (including, without limitation, all Shares issuable upon the
conversion of any convertible securities or upon the exercise of any options,
warrants or rights), shall have been validly tendered and not withdrawn prior to
the expiration of the Offer (the "Minimum Condition");
(b) any applicable (i) waiting period under the HSR Act or (ii) period during
which Parent or Purchaser shall have consented or otherwise be barred from
purchasing Shares pursuant to the Offer as part of any agreement or other
arrangement with any Governmental Authority involving the HSR Act or any other
applicable antitrust laws has expired or been terminated prior to the expiration
of the Offer (as it may be extended hereunder);
(c) the Company shall have received any required consent or approval of any
Governmental Authority and there shall not be pending or threatened any action
or proceeding before any court or Governmental Authority, domestic or foreign,
(i) challenging or seeking to directly or indirectly restrain or prohibit, the
transactions contemplated hereby including the Merger, the Offer and the
Stockholders Agreements (the "Transactions"); (ii) seeking to prohibit or limit
materially the ownership or operation by the Company, Parent or any of their
Subsidiaries of all or any material portion of the business or assets of the
Company, (iii) seeking to impose limitations on the ability of the Parent, the
Purchaser or any other Affiliate of Parent to exercise effectively full rights
of ownership of any Shares, (iv) seeking to require divestiture by Parent,
Purchaser or any other Affiliate of Parent of any Shares, (v) seeking to
prohibit Parent or any of its Subsidiaries from effectively controlling in any
material respect the business or operations of the Company or its Subsidiaries,
(vi) seeking to obtain from the Company, Parent or Purchaser any damages or
otherwise imposing financial burdens, penalties or fines that are material in
relation to the Company and its Subsidiaries, or Parent and its Subsidiaries, in
each case taken as a whole, or (vii) which is otherwise reasonably likely to
have a Material Adverse Effect on the Company;
(d) there shall not have been any statute, rule, regulation, judgment, order
or injunction enacted, entered, issued, enforced, promulgated or deemed
applicable, or any other action taken, by any Government Authority other than
the routine application of the waiting period provisions of the HSR Act to the
Offer, or the Merger, which is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through (vii)
of the preceding paragraph;
(e) there shall not have occurred, and be continuing, any change, condition,
event or other development that has had a Material Adverse Effect;
(f) the representations and warranties of the Company in this Agreement shall
be true and correct (for all purposes of this paragraph (f) without giving
effect to any material or Material Adverse Effect qualifiers or other qualifiers
based on materiality that are contained in this Agreement) as of such time
(except to the extent such representations and warranties expressly relate to an
earlier date, in which case such representations and warranties shall be true
and
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correct as of such earlier date), except to the extent that the failure or
failures to be true or correct do not, in the aggregate, have a Material Adverse
Effect;
(g) the Company shall have performed in all material respects its obligations
under this Agreement which, by their terms, are to be performed prior to such
date;
(h) this Agreement shall not have been terminated in accordance with its
terms; and
(i) all of the holders of outstanding Company Stock Options which have not
been exercised or tendered in the Offer shall have agreed to the cancellation of
such Company Stock Options as described in Section 2.8 in consideration for the
receipt of the Option Spread.
The obligations of the Purchaser to purchase shares pursuant to the Offer
and engage in the Merger are not contingent upon the obtaining of financing by
the Parent or Purchaser, and no such condition shall be implied by the
conditions contained in this Section 1.2.
1.3. Waivers of Conditions.
(a) The conditions in Section 1.2 are for the sole benefit of Purchaser and
Parent and may be waived by Purchaser or Parent in whole or in part at any time
and from time to time in their sole discretion and Purchaser expressly reserves
the right to modify the terms of the Offer, except that, without the prior
written consent of the Company:
(i) the Minimum Condition may not be waived, provided that Parent and
Purchaser may reduce the Minimum Condition to 66-2/3% of the
outstanding Shares on a fully-diluted basis;
(ii) no change may be made which (A) decreases the price per Share
payable in the Offer, (B) reduces the maximum number of Shares to be
purchased in the Offer, (C) imposes conditions to the Offer other than as
set forth above, or (D) is otherwise materially adverse to the Company's
stockholders.
(b) The Purchaser may, without the consent of the Company, (i) extend the
Offer on one or more occasions beyond the then scheduled expiration date (the
initial scheduled expiration date being 20 Business Days following the
commencement of the Offer computed in accordance with SEC Rules) if, at the then
scheduled expiration date of the Offer, any of the conditions to Purchaser's
obligation to accept for payment, and to pay for, the Shares, shall not be
satisfied or waived, (ii) extend the Offer for the minimum period required by
the SEC Rules applicable to the Offer including in connection with any increase
in consideration or waiver of a condition which is permitted to be waived under
Section 1.3(a), (iii) extend the Offer as provided in Section 1.3(c) or (iv)
extend the Offer on one or more occasions for an aggregate period of not more
than 10 Business Days beyond the initial expiration date or the latest
expiration date that would otherwise be permitted (or, in the case of clause
(iii), required) under clause (i), (ii) or (iii) of this sentence; provided,
that, in the case of such an extension under clause (iv), the Purchaser and the
Parent shall have irrevocably waived the conditions contained in Section 1.2
other than the conditions set forth in Section 1.2(a), 1.2(h) and, with respect
to willful breaches, Section 1.2(g).
(c) If on the then scheduled expiration date of the Offer, any condition to
the Offer set forth in Section 1.2(b)-(d) is not satisfied or waived, and all of
the conditions to the Offer other than those set forth in Section 1.2(b)-(d)
have been satisfied or waived, the Purchaser shall, if requested by the Company
in writing prior to the then scheduled expiration date (which notice shall
describe in
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reasonable detail the circumstances resulting in the failure of such condition
to be satisfied), extend the Offer to the extent necessary to permit such
condition to be satisfied, provided that Purchaser shall not be required to
extend the Offer under this Section 1.3(c) beyond the date specified in Section
8.1(b)(i) or (ii) if the conditions to the Offer specified herein cannot be
satisfied on or prior to such date.
(d) If on the then scheduled expiration date of the Offer, the Minimum
Condition shall not have been satisfied or waived but more than 66-2/3% of the
outstanding Shares on a fully-diluted basis have been tendered and not
withdrawn, then Purchaser may, in addition to or in lieu of extending the Offer
pursuant to Section 1.3(b), deliver to the Company a written notice (the "Merger
Notice") directing the Company to proceed with the Merger and to call and hold
the Stockholders Meeting and disseminate the Proxy Statement as soon as
reasonably practicable. In the event (i) Purchaser elects not to deliver a
Merger Notice to the Company pursuant to the preceding sentence, (ii) the
Minimum Condition shall not have been satisfied or waived but more than 66-2/3%
of the outstanding Shares on a fully-diluted basis have been tendered and not
withdrawn and (iii) all of the conditions to the Offer other than the Minimum
Condition and those conditions set forth in Section 1.2(b)-(d) have been
satisfied or waived, Purchaser shall extend the Offer for one or more periods of
time to permit the Minimum Condition and the other conditions to be satisfied as
provided in Section 1.3(b); provided that Purchaser shall not be required to
extend the Offer under this Section 1.3(d) (x) beyond the date specified in
Section 8.1(b)(i) or (y) if the conditions to the Offer specified herein cannot
be satisfied on or prior to such date.
(e) If at any time on or after January 15, 1999, (i) the Offer shall not have
expired or terminated in accordance with its terms, (ii) the Minimum Condition
shall not have been satisfied or waived but more than 66-2/3% of the outstanding
Shares on a fully-diluted basis have been tendered and not withdrawn, and (iii)
all of the conditions to the Offer other than the Minimum Condition and those
conditions set forth in Section 1.2(b)-(d) have been satisfied or waived, then
at such time the Company may deliver to Parent and Purchaser a written Merger
Notice informing Parent and Purchaser that the Company has elected to call and
hold the Stockholders Meeting and disseminate the Proxy Statement as soon as
reasonably practicable.
(f) The Per Share Amount has been calculated based on the information set
forth in Section 3.3. If the number of outstanding Shares or Shares issuable
upon the exercise of, or subject to, options or other agreements is, at the date
of acceptance of Shares under the Offer, more or less than the amounts specified
in Section 3.3 by more than 10,000 Shares (including, without limitation, as a
result of any stock split, reverse stock split, stock dividend, including any
dividend or distribution of securities convertible into Shares, recapitalization
or other like change occurring after the date of this Agreement), the Per Share
Amount shall be appropriately adjusted. The provisions of this subsection (f)
shall not, however, be deemed to modify the representation set forth in Section
3.3.
1.4. Schedule 14D-1.
On the date of commencement of the Offer, Parent and Purchaser shall file
with the SEC a Tender Offer Statement on Schedule 14D-1 (together with all
amendments and supplements thereto, the "Schedule 14D-1") with respect to the
Offer, which shall contain or shall incorporate by reference an offer to
purchase (the "Offer to Purchase") and forms of the related letter of
transmittal and any related summary advertisement (the Schedule 14D-1, the Offer
to Purchase
4
and such other documents, together with all supplements and amendments thereto,
being referred to herein collectively as the "Offer Documents"). The Offer
Documents will comply in all material respects with the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and other applicable laws and will
contain (or will be amended in a timely manner so as to contain) all information
which is required to be included therein in accordance with the Exchange Act and
the rules and regulations thereunder and other applicable laws. Parent,
Purchaser and the Company agree to correct promptly any information provided by
any of them for use in the Offer Documents which were or shall have become false
or misleading, and Parent and Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and Purchaser will afford the Company and its counsel a
reasonable opportunity to review and comment on the Offer Documents and any
amendments thereto prior to the filing thereof with the SEC. Parent and
Purchaser will provide the Company and its counsel in writing any comments that
they or their counsel may receive from the SEC or its staff with respect to the
Offer Documents promptly after receipt thereof.
1.5. Company Action.
(a) The Company hereby consents to the Offer and represents and warrants that
(i) the Board, at a meeting duly called and held on November 9, 1998, by
unanimous action has (A) determined that this Agreement and the Transactions,
including the Offer and the Merger, are fair to and in the best interests of the
holders of Shares, (B) approved and adopted this Agreement and the Transactions
(such approval and adoption having been made in accordance with the provisions
of (S) 203 of Delaware Law) and (C) resolved to recommend that the stockholders
of the Company accept the Offer and approve and adopt this Agreement and the
Merger, and (ii) Xxxxxxxxxxx Xxxxxxx & Co. Inc. ("WP&Co.") has delivered to the
Board its oral opinion (to be confirmed in writing promptly following execution
of this Agreement) that, based on, and subject to, the various assumptions and
qualifications set forth in such opinion, as of the date thereof, the
consideration to be received by the holders of Shares pursuant to each of the
Offer and the Merger is fair to the holders of Shares from a financial point of
view. Unless the recommendation of the Board has been withdrawn in accordance
with Section 6.5, the Company consents to the inclusion in the Offer Documents
of the recommendation of the Board and the written opinion described in the
immediately preceding sentence and agrees to request WP&Co. to consent to the
inclusion of its written opinion in the offering documents forming a part of the
Schedule 14D-9.
(b) On the date of commencement of the Offer, the Company shall file with the
SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the Schedule 14D-9") containing, unless the
recommendation of the Board has been withdrawn in accordance with Section 6.5,
the recommendation of the Board described in Section 1.5(a) and shall
disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated
under the Exchange Act, and any other applicable federal securities laws. The
Company will afford the Parent and its counsel a reasonable opportunity to
review and comment on the Schedule 14D-9 and its exhibits prior to the filing
thereof with the SEC or dissemination to stockholders of the Company. The
Company will provide Parent and its counsel in writing any comments that the
Company or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after receipt thereof. The Company represents and
warrants that
5
Schedule 14D-9 will comply in all material respects with the Exchange Act and
any other applicable laws and will contain (or will be amended in a timely
manner so as to contain) all information which is required to be included
therein in accordance with the Exchange Act and the rules and regulations
thereunder and other applicable laws. The Company, Parent and Purchaser agree to
correct promptly any information provided by any of them for use in the Schedule
14D-9 which has or shall have become false or misleading, and the Company
further agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to holders of Shares, in
each case as and to the extent required by applicable federal securities laws.
(c) The Company shall promptly furnish Purchaser with mailing labels and any
available listing or computer file containing the names and addresses of all
record holders of Shares and with security position listings of Shares held in
stock depositories, each as of a recent date, and furnish Purchaser with such
information and assistance as Purchaser or its agents may reasonably request in
communicating the Offer to the holders of Shares. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer or the
Merger, Parent and Purchaser shall hold in strict confidence the information
contained in such labels, listings and files, shall use such information only in
connection with the Offer and the Merger, and, if this Agreement shall be
terminated in accordance with Section 8.1, shall promptly deliver to the Company
all copies of such information then in their possession.
ARTICLE II.
THE MERGER
2.1. The Merger.
Upon the terms and subject to the conditions set forth in Article VII, and
in accordance with Delaware Law, at the Effective Time (as hereinafter defined),
Purchaser shall be merged with and into the Company (the "Merger"). As a result
of the Merger, the separate corporate existence of Purchaser shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
2.2. Effective Time; Closing.
As promptly as practicable after the satisfaction or, if permissible,
waiver of the conditions set forth in Article VII, the parties hereto shall
cause the Merger to be consummated by filing a certificate of merger or
certificate of ownership and merger (in either case, the "Certificate of
Merger") with the Secretary of State of the State of Delaware, in such form as
is required by, and executed in accordance with the relevant provisions of,
Delaware Law. The Merger shall become effective at the time of such filing or
such later time as may be specified in the Certificate of Merger (the date and
time when the Merger shall become effective being the "Effective Time").
2.3. Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law. 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,
6
obligations, restrictions, disabilities and duties of the Company and Purchaser
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
2.4. Certificate of Incorporation; By-laws.
(a) At the Effective Time, the Certificate of Incorporation of Purchaser shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation;
provided, that such Certificate of Incorporation shall be in accordance with the
provisions of Section 6.7 hereof.
(b) The By-laws of Purchaser, as in effect immediately prior to the Effective
Time, shall be the By-laws of the Surviving Corporation until thereafter amended
as provided by law, the Certificate of Incorporation of the Surviving
Corporation and such By-laws.
2.5. Directors and Officers.
The directors of Purchaser immediately prior to the Effective Time shall be
the directors of the Surviving Corporation at and after the Effective Time, each
to hold office in accordance with the Certificate of Incorporation and By-laws
of the Surviving Corporation, and the officers of the Purchaser at the Effective
Time shall be the officers of the Surviving Corporation at and after the
Effective Time, in each case until their respective successors are duly elected
or appointed and qualified.
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 holders of any of the following
securities:
(a) Each Share issued and outstanding immediately prior to the Effective Time
(other than any Shares to be canceled pursuant to Section 2.6(b)) shall be
converted automatically into the right to receive an amount equal to the Per
Share Amount in cash (the "Merger Consideration") payable after reduction for
any applicable tax withholding, without interest, to the holder of such Share,
upon surrender, in the manner provided in Section 2.9, of the certificate that
formerly evidenced such Share;
(b) Each Share held in the treasury of the Company and each Share owned by
Purchaser, Parent or any direct or indirect wholly owned Subsidiary of Parent or
of the Company immediately prior to the Effective Time shall be canceled and
retired and shall cease to exist without any conversion thereof and no payment
or distribution shall be made with respect thereto; and
(c) Each share of common stock of Purchaser issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of Common Stock, par value
$.001 per share, of the Surviving Corporation.
2.7. Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary, those Shares
which are held by stockholders who have properly complied with the provisions of
Section 262 of the Delaware Law with respect to appraisal rights ("Dissenting
Shares") shall not be converted into the right to receive the Merger
Consideration as provided in Section 2.6(a) hereof, but the holders of
Dissenting Shares shall be entitled to receive such consideration as shall be
determined pursuant
7
to Section 262 of the Delaware Law; provided, that, if, pursuant to the Delaware
Law, any such holder shall have failed to perfect or shall withdraw or lose such
holder's right to appraisal and payment in accordance with the Delaware Law,
such holder's Shares shall thereupon be deemed to have been converted as of the
Effective Time into the right to receive the Merger Consideration, without any
interest thereon, as provided in Section 2.6(a), and such Shares shall no longer
be Dissenting Shares. The Company (and after the Effective Time, the Surviving
Corporation) shall give Parent and Purchaser (A) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
related instruments received by the Company or the Surviving Corporation, as the
case may be, and (B) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal. The Company (and, after the Effective
Time, the Surviving Corporation) will not voluntarily make any payment with
respect to any demands for appraisals and will not, without the prior written
consent of Parent, settle or offer to settle any such demand.
2.8. Employee Stock Options.
The Company will use its reasonable best efforts to obtain from each holder
of a stock option (a "Company Stock Option") outstanding, whether or not
exercisable at the Effective Time under the Company's Stock Option Plan and
Directors Stock Option Plan (the "Company Stock Option Plans"), such holder's
agreement that such option shall be canceled by the Company immediately prior to
the Effective Time. Each holder of a canceled Company Stock Option shall be
entitled to receive at the Effective Time or as soon as practicable thereafter
from the Company in consideration for the cancellation of such Company Stock
Option an amount (the "Option Spread") equal to the product of (i) the number of
Shares previously subject to such Company Stock Option and (ii) the excess, if
any, of the Per Share Amount over the exercise price per share of Company Common
Stock previously subject to such Company Stock Option. Each holder of a Company
Stock Option shall also be given the right to tender such options, whether or
not exercisable, pursuant to the Offer and to receive the Option Spread pursuant
to the Offer; and each holder of Warrants referred to in Section 3.3 shall also
be given the right to tender such Warrants pursuant to the Offer and to receive
an amount equal to the product of (i) the number of Shares which may be
purchased on exercise of the Warrants and (ii) the excess, if any, of the Per
Share Amount over the per share exercise price of the Warrants. In any such
case, such payment, after reduction for applicable tax withholding, if any,
shall be made in cash. Each holder of a Company Stock Option or Warrants shall
be given an opportunity to submit a Form W-9 and/or whatever other forms may be
necessary to prevent any tax from being withheld from the amounts otherwise
payable to such holder hereunder. The Company shall take all actions necessary
and appropriate so that all stock option or other equity based plans maintained
with respect to the Shares, including the Company Plans, shall terminate as of
the Effective Time and the provisions in any other Benefit Plan providing for
the issuance, transfer or grant of any capital stock of the Company shall be
deleted as of the Effective Time.
2.9. Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, Purchaser shall designate a bank to act as
its paying agent, who shall be reasonably satisfactory to the Company (the
"Paying Agent"), who shall also act as agent for the holders of Shares in
connection with the Merger to receive the funds to which holders of Shares shall
become entitled pursuant to Section 2.6(a). Prior to the Effective Time,
Purchaser shall deposit with the Paying Agent sufficient funds to pay the Merger
Consideration in
8
respect of all of the Shares. Such funds may be invested by the Paying Agent as
directed by the Surviving Corporation only in overnight or other investments
which are available on demand, which are obligations of or guaranteed by the
United States of America or of any agency thereof and backed by the full faith
and credit of the United States of America, or in funds the assets of which
consist only of such investments.
(b) Promptly after the Effective Time, the Surviving Corporation shall cause
to be mailed to each person who was, at the Effective Time, a holder of record
of Shares entitled to receive the Merger Consideration pursuant to Section
2.6(a) a form of letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Paying Agent) and instructions
for use in effecting the surrender of the certificates evidencing the
certificates evidencing the Shares (the "Certificates") pursuant to such letter
of transmittal. Upon surrender to the Paying Agent of a Certificate, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required pursuant to such instructions in accordance with standard market
practices, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each Share formerly evidenced by
such Certificate, after reduction of any applicable withholding tax and such
Certificate shall then be canceled. No interest shall accrue or be paid on the
Merger Consideration payable upon the surrender of any Certificate for the
benefit of the holder of such Certificate as long as the Merger Consideration is
made available as provided in this Section. If payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered on the stock transfer books of the
Company, it shall be a condition of payment that the Certificate so surrendered
shall be endorsed properly or otherwise be in proper form for transfer and that
the person requesting such payment shall have paid all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the reasonable satisfaction of the Surviving Corporation that
such taxes either have been paid or are not applicable.
(c) At any time following six months after the Effective Time, the Surviving
Corporation shall be entitled to require the Paying Agent to deliver to it any
funds which were deposited with the Paying Agent and not disbursed to holders of
Shares (including interest and other income received by the Paying Agent in
respect of all funds made available to it), and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat and other similar laws) only as general creditors thereof with respect
to any Merger Consideration that may be payable upon due surrender of the
Certificates held by them. Notwithstanding the foregoing, none of Parent, the
Surviving Corporation or the Paying Agent shall be liable to any holder of a
Share for any Merger Consideration delivered in respect of such Share to a
public official pursuant to any abandoned property, escheat or other similar
law.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers of Shares on the records of the Company. From
and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
9
(e) Parent and/or the Surviving Corporation shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Company Common Stock such amounts, if any, as Parent
and/or the Surviving Corporation is required to deduct and withhold with respect
to the making of such payment under the Code, or any provision of state or local
tax law. To the extent that amounts are so withheld by Parent and/or the
Surviving Corporation and properly paid over to the appropriate tax authorities,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by Parent and/or the Surviving
Corporation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser that,
except as set forth in a disclosure schedule of the Company dated as of the date
hereof and referencing this Agreement ("Company Disclosure Schedule"):
3.1. Organization and Qualification; Subsidiaries.
Each of the Company and each Subsidiary of the Company is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has the requisite power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted. Each
of the Company and each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Material Adverse Effect. A true and
complete list of all the Subsidiaries, together with the jurisdiction of
incorporation of each Subsidiary and the percentage of the outstanding capital
stock of each Subsidiary owned by the Company and each other Subsidiary, is set
forth in the Company Disclosure Schedule. Except as disclosed in such Schedule,
the Company and its Subsidiaries do 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 corporation, partnership,
joint venture or other business association or entity.
3.2. Certificate of Incorporation and By-laws.
The Company has heretofore furnished to Parent a complete and correct
copy of the Certificate of Incorporation and the By-laws or equivalent
organizational documents, each as amended to date, of the Company and each
Subsidiary. Such Certificates of Incorporation and By-Laws or equivalent
organizational documents are in full force and effect, and neither the Company
nor any Subsidiary is in violation of any provision thereof.
3.3. Capitalization.
The authorized capital stock of the Company consists of 70,000,000 Shares
of common stock and 30,000,000 shares of undesignated preferred stock. As of the
date hereof, (i) 10,078,838 Shares are issued and outstanding, all of which are
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights, (ii) no shares of preferred stock of the Company are
10
issued or outstanding and (iii) 692,358 shares of Common Stock are issuable on
exercise of outstanding stock options granted pursuant to the Company's Plans,
and (iv) 15,950 shares of Common Stock are issuable upon exercise of warrants
(the "Warrants"). Except as set forth above, no shares of capital stock or other
equity securities of the Company are issued or outstanding. There are no bonds,
debentures, notes or other indebtedness or other securities 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 stockholders of the Company
may vote. Except as contemplated by this Agreement, there are no shareholder,
voting trust, or other agreements or understandings to which the Company or any
of its Subsidiaries is a party or to which any of them are bound, or, to the
knowledge of the Company, any irrevocable proxies, relating to the voting of any
shares of the capital stock or other equity securities of the Company or any of
its Subsidiaries. Except as set forth in this Section or in the Company
Disclosure Schedule, there are no options, warrants or other rights relating to
the capital stock of the Company or any Subsidiary obligating the Company or any
Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any Subsidiary. All shares of Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no commitments,
understandings, restrictions or arrangements obligating the Company to purchase,
redeem or acquire, nor is the Company party to any agreement granting preemptive
or registration rights relating to, shares of capital stock of the Company.
3.4. Authority Relating to this Agreement.
The Company has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement and to
consummate the Transactions (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of two-thirds of the then
outstanding Shares if and to the extent required by applicable law, and the
filing and recording of appropriate merger documents as required by Delaware
Law). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent
and Purchaser, constitutes the legal, valid and binding obligation of the
Company.
3.5. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement and the consummation of the Transactions by
the Company will not, (i) conflict with or violate the Certificate of
Incorporation or By-laws or equivalent organizational documents of the Company
or any Subsidiary, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or any Subsidiary or by
which any property or asset of the Company or any Subsidiary is bound or
affected 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
give to others any right of termination, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of the Company or any Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, license, permit, franchise or other instrument
or obligation, other than any such
11
conflicts, violations, breaches or defaults that would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement and the consummation of the Transactions by
the Company will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority, except for
applicable requirements, if any, of (i) the Exchange Act (including the filing
of a Schedule 14d-9), (ii) state securities or "blue sky" laws ("Blue Sky
Laws"), (iii) the pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), (iv) filing and recording of appropriate merger
documents as required by Delaware Law, and (v) other filings, consents,
approvals, authorizations or permits, the absence of which will not materially
affect the ability of the parties to carry out the Transactions on the terms
contemplated hereby or otherwise prevent the Company from performing its
obligations under this Agreement or result in a Material Adverse Effect.
3.6. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents required to be
filed by it with the SEC since December 31, 1996 and has heretofore made
available to Parent, in the form filed with the SEC, (i) its Annual Reports on
Form 10-K for the fiscal years ended December 31, 1996 and 1997, (ii) all proxy
statements relating to the Company's meetings of stockholders (whether annual or
special) held since December 31, 1996 and (iii) all other forms and reports
filed by the Company with the SEC since December 31, 1996 (the forms, reports
and other documents referred to in clauses (i), (ii) and (iii) above being
referred to herein, collectively, as the "SEC Reports"). The SEC Reports filed
prior to the date of this Agreement complied, and the SEC Reports filed with the
SEC on or after the date of this Agreement (the "Subsequent SEC Reports") will
comply, with the requirements of the Exchange Act, as applicable, and the rules
and regulations thereunder. None of the SEC Reports (including the financial
statements included therein) as of such dates contained, and none of the
Subsequent SEC Reports (including the financial statements to be included
therein) will contain, any untrue statement of a material fact or omitted 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. No Subsidiary is required to file any
form, report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the SEC Reports comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and each fairly presented the
consolidated financial position, results of operations and changes in financial
position of the Company and the Subsidiaries as at the respective dates thereof
and for the respective periods indicated therein (except as otherwise noted
therein and subject, in the case of unaudited statements, to the absence of
footnotes and normal and recurring year-end adjustments).
(c) Except as and to the extent set forth on the consolidated balance sheet
of the Company and its Subsidiaries as at December 31, 1997, including the notes
thereto (the "1997 Balance Sheet"), or the interim unaudited balance sheet of
the Company and its Subsidiaries as at June 30,
12
1998 (the "Interim Balance Sheet"), the Company nor any Subsidiary has any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), whether or not required to be reflected on a balance sheet and the
notes thereto prepared in accordance with generally accepted accounting
principles, except for liabilities and obligations (i) incurred in the ordinary
course of business consistent with past practice since June 30, 1998 and not in
contravention of this Agreement or (ii) that would not, individually or in the
aggregate, have a Material Adverse Effect.
3.7. Absence of Certain Changes or Events.
From December 31, 1997 through the date hereof, except as disclosed in any
SEC Report or reflected in the Interim Balance Sheet, there has not been (i) a
Material Adverse Effect, (ii) any material change by the Company in its
accounting methods, principles or practices, except as may have been required by
a change in generally accepted accounting principles, (iii) any entry by the
Company or any Subsidiary into any contract material to the Company and the
Subsidiaries, taken as a whole, except for contracts relating to the
establishment of new locations by the Company, copies of which have been made
available to the Purchaser, or contracts otherwise entered into in the ordinary
course of business consistent with past practice, (iv) any declaration, setting
aside or payment of any dividend or distribution in respect of any capital stock
of the Company or any redemption, purchase or other acquisition of any of its
securities, (v) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option, stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any officers or key employees
of the Company or any Subsidiary, except in the ordinary course of business
consistent with past practice, (vi) any adjustment, split, combination or
reclassification any of its capital stock or issuance or authorization for the
issuance of any other securities as a dividend on, in lieu of or in substitution
for shares of its capital stock; (vii) any event, any condition, event or
occurrence which, individually or in the aggregate, would have a Material
Adverse Effect, (viii) any condition, event or occurrence in respect of the
Company which could reasonably be expected to prevent the Company from
consummating the transactions contemplated by this Agreement; (ix) any event
which, if it had taken place following the execution of this Agreement, would
not otherwise have been permitted by Section 5.1 without the prior consent of
Parent.
3.8. Absence of Litigation.
Except as disclosed in the SEC Reports, as of the date hereof, there is no
claim, action, proceeding or investigation pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary, or any property or
asset of the Company or any Subsidiary, before any court, arbitrator or
administrative, governmental or regulatory authority or body that, individually
or in the aggregate, is reasonably likely to have a Material Adverse Effect or
prevent the Company from consummating the transactions contemplated by this
Agreement. Neither the Company nor any Subsidiary nor any property or asset of
the Company or any Subsidiary is subject to any order, writ, judgment,
injunction, decree, determination or award having, individually or in the
aggregate, a Material Adverse Effect.
3.9. Labor Matters; Employee Benefit Plans.
(a) Except as disclosed in the Company Disclosure Schedule, (1) neither the
Company nor any of its Subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or
13
other agreement or understanding with a labor union or labor organization
representing any of its employees, (2) there is no (A) arbitration, unfair labor
practice, investigation, employment discrimination or other labor or employment
related charge, complaint or claim against the Company or any of its
Subsidiaries pending or, to the knowledge of the Company, threatened before any
Governmental Authority that would have a Material Adverse Effect, or (B)
adjudication on such matters by any Governmental Authority that has or would
have a Material Adverse Effect, and (3) there is no labor strike, dispute,
slowdown or stoppage, or, to the knowledge of the Company, any union
organizational efforts pending or threatened against or involving any employees
of the Company or any of its Subsidiaries.
(b) The Company Disclosure Schedule sets forth each agreement, arrangement,
plan, or policy maintained or required to be contributed to by the Company or
any Subsidiary that involves (i) any pension, retirement, deferred compensation,
bonus, stock option, restricted stock, stock purchase, health, welfare, or
incentive plan, or (ii) welfare or "fringe" benefits, including vacation,
severance, disability, medical, dental, life and other insurance, sick leave or
family leave, or other employee benefits (the "Plans"). Copies of all documents
creating or evidencing such Plans have been delivered to Purchaser.
(c) Each Plan has been administered in material compliance with its terms
and, to the extent applicable, with the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or other law applicable to any Plan. Each Plan
that is intended to qualify under Section 401(a) or Section 501(c)(9) of the
Code has received a favorable determination letter from the Internal Revenue
Service or is a standardized prototype plan which has received a verification
letter from the Internal Revenue Service (a copy of which has been provided to
Purchaser) and related trusts have been determined to be exempt from taxation.
Nothing has occurred that would cause and no action or proceeding is pending or
threatened which, to the knowledge of Company, would be likely to result in the
loss of such exemption or qualification.
(d) There has been no prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) with respect to any Plan that could
reasonably be expected to result in a material liability to the Company or any
Subsidiary. Neither the Company nor any Subsidiary is currently liable or has
previously incurred any liability for any material tax or penalty arising under
Section 4971, 4972, 4979, 4980 or 4980B of the Code or Section 502(c) of ERISA,
and no fact or event exists which could reasonably be expected to give rise to
any such liability. The Company has not incurred any material liability under,
arising out of or by operation of Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course), including any material liability in connection with the termination or
reorganization of any employee pension benefit plan subject to Title IV of
ERISA, and no fact or event exists which is reasonably expected to give rise to
any such liability. No complete or partial termination has occurred within the
five years preceding the date hereof with respect to any Plan. No reportable
event (within the meaning of Section 4043 of ERISA) has occurred or is expected
to occur with respect to any Plan subject to Title IV of ERISA (other than a
reportable event with respect to which the 30 day notice requirement has been
waived.)
(e) No Plan is or at any time within the seven calendar years preceding the
date of this Agreement has been a "multiemployer plan" within the meaning of
Section 3(37) of ERISA. No Plan has been subject to Title IV of ERISA.
14
(f) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company or any Subsidiary that, individually
or collectively, (i) may give rise to the payment of any amount that would not
be deductible pursuant to the terms of Section 280G of the Code, or (ii) which
creates or accrues benefits or payments by virtue of a change of control of the
Company or any Subsidiary, including, without limitation, as a result of the
transactions contemplated by this Agreement, except, in the case of clause (ii)
of this subparagraph, as provided in the Company Stock Option Plans.
3.10. Offer Documents; Schedule 14D-9; Proxy Statement.
The information to be included in the Schedule 14D-9 and any information
supplied by the Company in writing expressly for inclusion or incorporation by
reference in the Offer Documents shall not, at the respective times the Schedule
14D-9, the Offer Documents or any amendments or supplements thereto are filed
with the SEC or are first published, sent or given to stockholders of the
Company or at the expiration date or the date of purchase, 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 the
light of the circumstances under which they are made, not misleading. The
information included or incorporated by reference in the proxy statement to be
sent to the stockholders of the Company in connection with the Stockholders
Meeting (as hereinafter defined) will not, and the information statement to be
sent to such stockholders, as appropriate (such proxy statement or information
statement, as amended or supplemented, being referred to herein as the "Proxy
Statement"), will not, at the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of the Company, at the time
of the Stockholders Meeting and at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omit to state any
material fact required to be stated therein or 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
Stockholders Meeting which shall have become false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to information supplied by Parent or Purchaser in writing expressly
for inclusion in the Schedule 14D-9 or Proxy Statement. The Schedule 14D-9 and
the Proxy Statement shall comply in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder.
3.11. Taxes.
(a) The Company and each Subsidiary and any consolidated, combined, unitary
or aggregate group for Tax purposes of which the Company or a Subsidiary is or
has been a member (a "Consolidated Group") (i) has filed or caused to be filed
with the appropriate Government entity all income Tax Returns and all other
material Tax Returns which have been required to be filed prior to the date of
this Agreement (taking into account any extensions of the time for filing such
tax returns) and (ii) has paid in full all material Taxes due and payable
(whether or not shown on such Tax Returns), except to the extent such
liabilities are reflected on the Interim Balance Sheet. All income and other Tax
Returns filed or caused to be filed by the Company or a Subsidiary or a
Consolidated Group are correct and complete, and accurately reflect taxable
income (or other measure of Tax), in all material respects.
15
(b) The Company and each Subsidiary has complied with all laws relating to
the withholding of Taxes and the payment thereof and has timely and properly
withheld from employee wages and paid over to the proper government entity all
amounts required to be withheld and paid over under applicable law, except to
the extent that failure to do so would not have a Material Adverse Effect.
(c) Neither the Company nor any Subsidiary has waived any statute of
limitations in respect of any material Tax Returns or agreed to any extension of
time with respect to a material Tax assessment or deficiency.
(d) True, correct and complete copies of the federal and state income Tax
Returns of the Company and the Subsidiaries for each of the fiscal years ended
December 31, 1994 through December 31, 1997 have been delivered to Parent.
(e) The accruals for Taxes reflected in the Interim Balance Sheet
adequately reflect, in accordance with generally accepted accounting principles,
the Company's estimates of the liability of the Company and the Subsidiaries for
Taxes for periods prior to the date of such Interim Balance Sheet.
(f) Except as disclosed in the Company Disclosure Schedule:
(i) no material claim for unpaid Taxes has become a lien against
the property of the Company or any of its Subsidiaries or is being
asserted against the Company or any of its Subsidiaries.
(ii) no audit, examination or similar proceeding with respect to
Taxes or Tax Returns (a "Tax Proceeding") of the Company or any of its
Subsidiaries is being conducted by a Tax authority and neither the
Company nor any Subsidiary has received any notice of any threatened
Tax Proceeding;
(iii) no consent under Section 341(f) of the Code has been filed with
respect to the Company or any of its Subsidiaries;
(iv) neither the Company nor any of its Subsidiaries has made a
payment, is obligated to make a payment or is a party to any agreement,
option or arrangement that would result, separately or in the
aggregate, in the actual or deemed payment (or other compensatory
event) by the Company or a Subsidiary that would be classified as an
"excess parachute payments" within the meaning of Section 280G of the
Code;
(v) none of the Company or its Subsidiaries has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code; and
(vi) neither the Company nor any Subsidiary is a party to any
agreement providing for the allocation or sharing of Taxes with any
person other than the Company or a Subsidiary;
3.12. Compliance with Laws.
(a) Each of the Company and its Subsidiaries holds or has received such
certificates (including certificates of need), provider agreements,
certifications, permits, consents, approvals, orders, clearances, licenses and
authorizations (the "Company Licenses") as are necessary to conduct
16
their respective businesses in the manner currently conducted, all of which are
valid and in full force and effect, except to the extent that failure to so have
or to maintain in full force and effect would not have, individually or in the
aggregate, a Material Adverse Effect. The Company and its Subsidiaries are in
compliance with their respective obligations under the Company Licenses, with
only such exceptions as, individually or in the aggregate, would not have a
Material Adverse Effect.
(b) The Company and its Subsidiaries are, to the extent applicable to their
operations, (i) eligible to receive payment under Titles XVIII and XIX of the
Social Security Act, (ii) providers under existing provider agreements with the
Medicare program through applicable intermediaries and with each state Medicaid
program under which they have been providers at any time since December 31, 1996
and (iii) in compliance with the conditions of participation in the Medicare
program, except where such inability in the case of either items (i) or (ii) or
non-compliance in item (iii) does not have a Material Adverse Effect.
(c) The Company and each of its Subsidiaries have filed all required cost
reports and other required claims and governmental filings with respect to
Medicare and each state Medicaid program in which they participate, all of which
were, when filed or as they have been subsequently amended, complete and
correct, except to the extent that such failure to file or failure to be
complete and correct would not have a Material Adverse Effect. The Company has
made available to Parent complete and correct copies of all such cost reports,
claims, governmental filings, audits and schedules prepared or issued by, or
filed with, any Governmental Authority or private payor with respect to the
operations of the Company and its Subsidiaries since December 31, 1996.
(d) Except as set forth in the Company Disclosure Schedule, there is no
suit, proceeding, investigation or review pending or, to the knowledge of the
Company, threatened, by any Governmental Authority or any other Person
(including, without limitation, any qui tam suit) which relates to or which, if
determined adversely to the Company, would adversely affect any Company License
or which alleges any violation by the Company or any of its Subsidiaries of any
law, ordinance, regulation or court ruling governing the operation of the
Company and its Subsidiaries as health care providers.
(e) To the knowledge of the Company, the businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation or court ruling of any Governmental Authority (including, without
limitation, laws, rules and manual provisions pertaining to reimbursement of the
Company and it Subsidiaries for services rendered, the federal False Claims Act
(31 U.S.C. (S)3729) or any other applicable federal or state false claim or
fraud law, the federal anti-kickback statute (42 U.S.C. (S)1320a-7b(b)), any
applicable state anti-kickback law, the federal Ethics in Patient Referrals Act
(42 U.S.C. (S)1395nn, commonly known as the Xxxxx Act) or any applicable state
self-referral law), except for violations which would not, individually or in
the aggregate, have a Material Adverse Effect.
3.13. Exclusion.
To the knowledge of the Company, neither the Company nor any of its
Subsidiaries employs or contracts with any Person who or which has been excluded
from participation in a Federal Health Care Program (as defined in 42 U.S.C.
(S)1320a-7b(f)) where such action could reasonably
17
serve as a basis for the Company's or any of its Subsidiaries' suspension or
exclusion from the Medicare or any state Medicaid program.
3.14. Accounts Receivable.
Since December 31, 1997, the Company has not changed any material principle
or practice with respect to the recordation of accounts receivable or the
calculation of reserves therefor, or any material collection, discount or
write-off policy or procedure.
3.15. Brokers.
No broker, finder or investment banker (other than WP&Co.) is entitled to
any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company. The
fees and expenses of WP&Co. will be paid by the Company pursuant to a fee
agreement between the Company and WP&Co., a copy of which has been provided to
the Parent.
3.16. Real Property and Leases.
Except for any matters which would not have a Material Adverse Effect:
(a) The Company and its Subsidiaries have good, valid and marketable title
to, or valid leasehold interests in, all of their properties and assets as
reflected on the Interim Balance Sheet or acquired thereafter, except for assets
sold in the ordinary course of business since the date of the such Balance
Sheet, free and clear of all mortgages, pledges, liens, security interests,
conditional and installment sale agreements, encumbrances, charges or other
claims of third parties of any kind (collectively, "Liens"), other than (A)
Liens for current taxes and assessments not yet past due, (B) inchoate
mechanics' and materialmen's Liens for construction in progress, (C) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business of the Company or such Subsidiary consistent with such practice, and
(D) all immaterial matters of record, Liens and other imperfections of title and
encumbrances (collectively, "Permitted Liens"). To the Company's knowledge, no
such real property leased by the Company or any Subsidiary is subject to any
governmental decree or order to be sold nor is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the best knowledge of the Company, has any such condemnation,
expropriation or taking been proposed.
(b) The Company has provided to the Parent true and complete copies of each
of its Long Term Acute Care Hospital Leases, as in effect on the date of this
agreement pursuant to which it operates its health care facilities (the "LTAC
Leases"), all of which are in full force and effect. To the knowledge of the
Company, the Company is in compliance with all of its obligations under each of
the LTAC Leases.
(c) All other leases of real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party
requiring rental payments in excess of $150,000 during any calendar year, and
all amendments and modifications thereto, are in full force and effect and have
not been modified or amended, and there exists no default under any such lease
by the Company or any Subsidiary, nor any event which with notice or lapse of
time or both would constitute a default hereunder by the Company or any
Subsidiary.
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(d) Each of the Company and its Subsidiaries has all permits necessary to
own or operate its properties, and no such permits will be required, as a result
of the Merger or the other transactions contemplated hereby, to be issued after
the Closing in order to permit the Company, following the Merger, to continue to
own or operate such properties, other than any such permits which are
ministerial in nature.
3.17. Environmental Matters.
Except for such matters as would not individually or in the aggregate have
a Material Adverse Effect, to the knowledge of the Company:
(a) the Company is in compliance with all applicable Environmental Laws,
and the Company has not received any formal notice or demand from a government
entity, citizens' group or other Person which is currently pending, alleging a
violation of or liability or responsibility under any Environmental Law;
(b) the Company has all permits and other authorizations required under
Environmental Laws, and the Company is in compliance with such permits and other
authorizations;
(c) no conditions were created by the Company at any facility currently or
formerly owned, leased or operated by the Company during the period of the
Company's ownership, lease or operation of such facility that require
remediation under any Environmental Law;
(d) the Company has not received any formal notice, demand or request for
information which is currently pending under any Environmental Law as a result
of the offsite disposal of any hazardous material or waste by the Company;
(e) the Company has not entered into or agreed to any consent decree, order
or agreement under any Environmental Law, and the Company is not subject to any
material judgment, decree, order or other material requirement relating to
compliance with any Environmental Law or to investigation, cleanup, remediation
or removal of regulated substances under any Environmental Law;
(f) the Company has provided Parent and Purchaser copies of all
environmental inspections, investigations, studies, audits, tests, reviews or
other analysis conducted in relation to the Company and any properties now or
previously-owned or leased by tile Company or its Subsidiaries or the operation
of its respective businesses which are in the possession or control of the
Company.
3.18. State Takeover Statutes.
The Board of Directors of the Company has approved the Offer, the Merger,
this Agreement and other Transactions including agreements with certain holders
of Shares as described in Subsection (e) under "Background" above, and no
provision of any Takeover Statute will prevent, impair, impede or prevent, any
Transaction. Section 203 of Delaware Law is and shall be inapplicable to the
Offer, the Merger and, this Agreement and other Transactions, including the
Stockholder Agreements.
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3.19. Vote Required.
The affirmative vote of the holders of two-thirds of the outstanding Common
Stock is the only vote of the holders of any class or series of Company capital
stock necessary to approve the Merger, this Agreement or any of the other
Transactions, including the Stockholder Agreements.
3.20. Certain Contracts.
(a) The Company Disclosure Schedule includes a list of each contract,
agreement, lease, indenture or evidence of indebtedness to which the Company or
any Subsidiary is a party (the "Material Contracts") which involves outstanding,
contingent, or continuing liability or obligation of or to the Company or a
Subsidiary and which (i) involves (A) a guarantee or indemnity involving an
obligation in excess of $1,000,000, (B) a power of attorney, (C) a sharing of
payments or joint venture, (D) material limitations on the ability of the
Company directly or through any of its Subsidiaries to compete in or enter into
any line of business or with any person in any geographic area during any period
of time (other than limitations set forth in the LTAC Leases), (E) collective
bargaining or union representation, (F) a payment obligation in excess of
$500,000, or (ii) is not in the ordinary course of business.
(b) Each of the Material Contracts is a valid, binding and enforceable
obligation of the Company and, to the knowledge of the Company, the other
parties thereto. Except as indicated on the Company Disclosure Schedule, (i) the
Company and its Subsidiaries are not, and (ii) to the knowledge of Company, no
other party to a Material Contract is, in material default under or in material
breach or violation of any Material Contract, and no event has occurred that,
through the passage of time or the giving of notice, or both, would constitute,
such a material default, breach or violation.
3.21. Intellectual Property.
(a) The Company Disclosure Schedule includes a list of all registered
trademarks, service marks, copyrights and patents, and all applications
therefor, included in the Intellectual Property of the Company and its
Subsidiaries, specifying as to each, as applicable: (i) the nature of such
Intellectual Property; (ii) the owner of such Intellectual Property; and (iii)
the jurisdictions by or in which such Intellectual Property has been issued or
registered or in which an application for such issuance or registration has been
filed, including the respective registration or application numbers. Such
Schedule contains a list of all material licenses, sublicenses and other
agreements as to which the Company or its Subsidiaries is a party and pursuant
to which any Person is authorized to use the Intellectual Property or any other
material rights of the Company or its Subsidiaries with respect to intellectual
property.
(b) Except as disclosed on the Company Disclosure Schedule, (i) there has
been no claim made against the Company or any of its Subsidiaries or, to the
Company and its Subsidiaries' knowledge, threatened asserting the invalidity,
misuse or unenforceability of any of the Intellectual Property; (ii) the Company
is not aware of any infringement or misappropriation of any of the Intellectual
Property; and (iii) to its knowledge, the Company has not infringed or
misappropriated any intellectual property or proprietary right of any other
entity.
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3.22. Opinion of Financial Advisor.
The Company has received the opinion of WP&Co. dated the date of this
Agreement, to the effect that, based on, and subject to, the various assumptions
and qualifications set forth in such opinion, as of the date thereof, the
consideration to be received by the holders of Shares pursuant to each of the
Offer and the Merger is fair to the holders of Shares from a financial point of
view. The Company has delivered a copy of such opinion to the Parent.
3.23. Affiliate Transactions.
Except as disclosed in the Company Disclosure Schedule, no Related Party
has borrowed money from or loaned money to the Company which remains outstanding
in an aggregate amount in excess of $50,000, or entered into any material
contractual arrangements with the Company which remains in effect. As used
herein, a "Related Party" means any of the officers or directors of the Company,
or any business or entity in which the Company or, to the knowledge of the
Company, any such person or any affiliate or associate of any such persons has
any direct or indirect material interest.
3.24. Prior Negotiations.
The Company, WP&Co. and the Company's other advisors and representatives
have not been involved in substantive discussions with any group or person (or
any of their respective affiliates or associates) or their representatives, or
furnished material confidential information to any such group or persons (or any
of their respective affiliates or associates) or their representatives, in
connection with a possible takeover proposal except for such groups or persons
which have executed and delivered to the Company a customary confidentiality
agreement. The Company will not waive its rights under any standstill agreements
entered into with any such persons except in connection with actions taken in
accordance with Section 6.5(b).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and warrant
to the Company that:
4.1. Corporate Organization.
Each of Parent and Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
material adverse effect on the ability of Parent or Purchaser to perform their
obligations hereunder, or prevent or materially delay the consummation of the
Transactions.
4.2. Authority Relating to this Agreement.
Each of Parent and Purchaser has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Transactions.
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The execution and delivery of this Agreement by Parent and Purchaser and the
consummation by Parent and Purchaser of the Transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent or Purchaser are necessary to authorize this
Agreement or to consummate the Transactions (other than, with respect to the
Merger, the filing and recording of appropriate merger documents as required by
Delaware Law). This Agreement has been duly and validly executed and delivered
by Parent and Purchaser and, assuming the due authorization, execution and
delivery by the Company, constitutes the legal, valid and binding obligations of
each of Parent and Purchaser enforceable against each of Parent and Purchaser in
accordance with their terms.
4.3. 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 by Parent and Purchaser will not, (i)
conflict with or violate the Certificate of Incorporation or By-laws of either
Parent or Purchaser, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or Purchaser or by which any
property or asset of either of them is bound or affected, 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 give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Parent or
Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Parent or Purchaser is a party or by which Parent or Purchaser or any property
or asset of either of them is bound or affected, except for any such violations,
breaches, defaults or other occurrences which would not, individually or in the
aggregate, have a material adverse effect on the ability of Parent or Purchaser
to perform their obligations hereunder, or prevent or materially delay the
consummation of the Transactions.
(b) The execution and delivery of this Agreement by Parent and Purchaser do
not, and the performance of this Agreement by Parent and Purchaser will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except for applicable
requirements, if any, of (i) the Exchange Act and rules and regulations
thereunder, (ii) Blue Sky Laws (iii) the pre-merger notification requirements of
the HSR Act, (iv) filing and recording of appropriate merger documents as
required by Delaware Law and (v) other filings, consents, approvals,
authorizations or permits, the absence of which will not materially effect the
ability of Parent or Purchaser to carry out the transactions on the terms
contemplated hereby or otherwise prevent Parent or Purchaser from performing
their obligations hereunder.
4.4. Financing.
Purchaser has sufficient cash or other sources of available funds to enable
it to make payment of the aggregate Per Share Amount, Merger Consideration and
any other amounts to be paid by it hereunder. The Purchaser has provided to the
Company a written commitment confirming the availability of such funds. At the
request of the Company from time to time, the Purchaser will provide to the
Company further written confirmation of the availability of such funds and such
related information as the Company may reasonably request.
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4.5. Offer Documents; Proxy Statement.
The information to be included in the Offer Documents and any information
supplied by Parent and Purchaser in writing expressly for inclusion in the
Schedule 14D-9, shall not, at the time the Offer Documents, the Schedule 14D-9
or any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company or at the expiration
date or date of purchase, as the case may be, 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 the light of the
circumstances under which they are made, not misleading. The information
supplied by Parent for inclusion in the Proxy Statement will not, on the date
the Proxy Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company, at the time of the Stockholders Meeting and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact, or omits to state any material fact required to be stated therein
or 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 Stockholders Meeting which shall have become
false or misleading. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to information supplied by the Company
in writing expressly for inclusion in, or information derived from the Company's
public SEC filings which is incorporated by reference in, the Offer Documents.
The Offer Documents shall comply in all material respects as to form with the
requirements of the Exchange Act and the rules and regulations thereunder.
4.6. Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of Parent or Purchaser.
4.7 Ownership of Company Common Stock.
Except for Shares owned by Plans maintained by Parent or contributed to by
Parent to any of its subsidiaries (the "Parent Benefit Plans"), neither Parent
nor, to its knowledge, any of its affiliates (i) beneficially owns (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or
(ii) is party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of capital
stock of the Company.
ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
5.1. Conduct of Business by the Company Pending the Merger.
Except as contemplated by this Agreement, neither the Company nor any
Subsidiary shall, between the date of this Agreement and the Effective Time do
any of the following without the prior written consent of Parent:
(a) amend or otherwise change its Certificate of Incorporation or By-laws or
equivalent organizational documents;
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(b) issue any shares of capital stock of any class of the Company or any
Subsidiary, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock of the Company or any
Subsidiary (except for the issuance of Shares issuable pursuant to employee
stock options outstanding on the date hereof and except in connection with the
establishment of new wholly owned subsidiaries for new locations by the
Company);
(c) sell, transfer or encumber in any material respect any assets of the
Company or any Subsidiary for consideration in excess of $1,000,000 in the
aggregate except for transactions relating to the establishment of new locations
or modifications or improvements to its existing locations by the Company in the
ordinary course of its business, and except for other transactions in the
ordinary course of business consistent with past practice provided, however,
that the Company shall not sell, transfer or encumber any assets for
consideration which, in the opinion of the board, is less than fair value;
(d) declare or pay any dividend or other distribution with respect to any of
its capital stock;
(e) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire any of its capital stock;
(f) (i) acquire any corporation, partnership, other business organization or
any division thereof, except for the establishment of new wholly owned
subsidiaries for new locations by the Company; (ii) except for borrowings under
existing credit facilities, incur any indebtedness for borrowed money or issue
any debt securities, guarantee any indebtedness for borrowed money or debt
securities of another person, issue or sell any warrants or other rights to
acquire any debt securities of the Company or any of its Subsidiaries, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person (except a Subsidiary) or enter into any arrangement
having the economic effect of any of the foregoing, except in the ordinary
course of business consistent with past practice, or make any loans, advances or
capital contributions to, or investments in, any other person, other than to the
Company or any Subsidiary; (iii) authorize capital expenditures which are, in
the aggregate, in excess of $500,000 for the Company and the Subsidiaries,
except for capital expenditures relating to the establishment of new locations
by the Company in the ordinary course of its business, and other capital
expenditures in the ordinary course of business consistent with past practice;
or (iv) enter into any agreement with respect to any matter set forth in this
Section;
(g) except as provided in Section 2.8, increase the compensation payable or
to become payable to its current and former officers, directors or employees,
except for increases in compensation (including bonuses) of employees of the
Company or any Subsidiary of the Company in accordance with past practices, or,
other than in accordance with past practices and policies, grant any severance
or termination pay to, or enter into any employment or severance agreement with,
any current or former director, officer or other employee of the Company or any
Subsidiary, or establish, adopt, enter into or materially amend any collective
bargaining agreement or benefit plans;
(h) other than as required by generally accepted accounting principles, make
any material change to its accounting policies or procedures;
(i) make any material elections or changes in elections for Tax purposes
except in accordance with past practice;
24
(j) pay, discharge or satisfy any claims (including claims of stockholders),
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), except for the payment, discharge or satisfaction (x)
of liabilities or obligations in the ordinary course of business consistent with
past practice or in accordance with their terms as in effect on the date hereof
or (y) of claims settled or compromised to the extent permitted by Section
5.1(k), or waive, release, grant, or transfer any rights of material value or
modify or change in any material respect any existing license, lease, contract
or other document, other than in the ordinary course of business consistent with
past practice;
(k) settle or compromise any litigation (whether or not commenced prior to
the date of this Agreement) other than settlements or compromises of litigation
(i) where the amount paid in settlement or compromise does not exceed $100,000
and (ii) potential settlements or compromises which are described in the Company
Disclosure Schedule;
(l) establish any new lines of credit or other credit facilities or replace
any existing credit facilities;
(m) take any action which would make any representation or warranty of the
Company in this Agreement subject to a material qualifier untrue or incorrect
and any representation or warranty of the Company in this Agreement that is not
so qualified untrue or incorrect in any material respect;
(n) adopt a plan of complete or partial liquidation or resolutions providing
for or authorizing such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or reorganization (subject to the Company's
right to take action specifically permitted by Section 6.5(b));
(o) enter into any new collective bargaining agreement or any successor
collective bargaining agreement to any collective bargaining agreement disclosed
in the Company Disclosure Schedule except in the ordinary course of business;
(p) agree to any modifications to any of the LTAC Leases, or waive any rights
under the LTAC Leases, in any respect which would materially and adversely
affect the rights of the Company thereunder;
(q) take any action to exempt under or make not subject to (x) Section 203 of
Delaware Law or (y) any other Takeover Statute or state law that purports to
limit or restrict business combinations or the ability to acquire or vote
shares, any person or entity (other than Parent, Purchaser and their affiliates)
or any action taken thereby, which person, entity or action would have otherwise
been subject to the restrictive provisions thereof and not exempt therefrom
except to the extent specifically permitted pursuant to Section 6.5(b);
(r) authorize any of, or commit or agree to take any of, the foregoing
actions; or
(s) take any action which would result in the conditions to the Offer or the
merger not being satisfied, subject to the Company's right to take such actions
specifically permitted by Section 6.5(b).
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5.2. Additional Covenants.
After the date hereof and prior to the Effective Time or the earlier
termination of this Agreement, unless Parent shall otherwise agree, the Company
shall, and shall cause each of its Subsidiaries to:
(a) Conduct their respective businesses in the ordinary and usual course of
business consistent with past practice;
(b) Confer with Parent's designated representatives on a regular basis during
normal business hours regarding operational matters of a material nature and the
general status of the ongoing business of the Company, including matters
relating to billing and collections;
(c) Promptly notify Parent of any significant changes in the business,
financial condition or results of operation of the Company or its Subsidiaries
taken as a whole;
(d) Maintain, with financially responsible insurance companies, insurance on
its tangible assets and its business in such amounts and against such risks and
losses as are consistent with past practice; and
(e) Use all reasonable best efforts to preserve the business of the Company
and its Subsidiaries and preserve the current relationships of the Company and
its Subsidiaries with customers, employees, suppliers and other persons with
which the Company or any Subsidiary has material business relations.
ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1. Stockholders Meeting.
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through the Board, shall, promptly after consummation of the
Offer (or promptly after delivery of a Merger Notice as provided in Section
1.3(d) or (e), in accordance with applicable law and the Company's Certificate
of Incorporation and By-laws, (i) hold an annual or special meeting of its
stockholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on this Agreement and the Merger (the
"Stockholders Meeting") and (ii) in the event a Merger Notice has been delivered
and, otherwise, subject to its fiduciary duties under applicable law after
receiving the advice of independent counsel, include in the Proxy Statement the
recommendation of the Board that the stockholders of the Company approve and
adopt this Agreement and the Merger, and use its best efforts to solicit from
holders of Shares proxies in favor of this Agreement and the Merger, and take
all other appropriate action to request the vote of the holders of Shares
required by Delaware Law to effect the Merger. At the Stockholders Meeting,
Parent and Purchaser shall cause all Shares then owned by them and their
Subsidiaries to be voted in favor of the approval and adoption of this Agreement
and the Merger.
(b) Notwithstanding the foregoing, if the Purchaser shall acquire at least 90
percent of the then outstanding Shares, the parties shall, at the request of
Purchaser, subject to Article VII, take all necessary and appropriate action to
cause the Merger to become effective, in accordance with Section 253 of Delaware
Law, as soon as reasonably practicable after such acquisition, without a meeting
of the stockholders of the Company.
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6.2. Proxy Statement.
If required by applicable law, as soon as practicable following
consummation of the Offer (or the delivery of a Merger Notice as provided in
Section 1.3(d) or (e)), the Company shall file the Proxy Statement with the SEC
under the Exchange Act, and shall use all reasonable efforts to have the Proxy
Statement cleared by the SEC. Parent, Purchaser and the Company shall cooperate
in the preparation of the Proxy Statement, and the Company shall notify Parent
of the receipt of any comments of the SEC with respect to the Proxy Statement
and of any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall (i) give Parent and its counsel the opportunity to review
the Proxy Statement prior to its being filed with the SEC; (ii) give Parent and
its counsel the opportunity to review all amendments and supplements to the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC; and
(iii) consider in good faith the comments and information provided by Parent,
Purchaser and their counsel with respect thereto. Each of the Company, Parent
and Purchaser shall use all reasonable efforts, after consultation with the
other parties hereto, to respond promptly to all such comments of and requests
by the SEC and to cause the Proxy Statement and all required amendments and
supplements thereto to be mailed to the holders of Shares entitled to vote at
the Stockholders Meeting at the earliest practicable time.
6.3. Company Board Representation; Section 14(f).
(a) Concurrently with the purchase by Purchaser of Shares pursuant to the
Offer, and from time to time thereafter, Purchaser shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Board of the Company as shall give Purchaser representation on the Board
of the Company equal to the product of the total number of directors on the
Board of the Company (giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
purchased by Purchaser in the Offer bears to the total number of Shares then
outstanding, and the Company shall, at such time, promptly take all actions
necessary to cause Purchaser's designees to be appointed as directors of the
Company, including increasing the size of the Board of the Company or securing
the resignations of incumbent directors or both.
(b) The Company shall promptly take all actions required pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 6.3 and shall include in the Schedule
14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Purchaser shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and Affiliates required by such Section 14(f) and
Rule 14f-1. In conjunction with the foregoing, the Company will, at the request
the Parent, either increase the size of the Board and/or obtain the resignation
of such number of its current directors as is necessary to enable Purchaser's
designees to be elected or appointed to the Board.
(c) Following the election of designees of Purchaser pursuant to this Section
6.3, prior to the Effective Time, any amendment of this Agreement or the
Certificate of Incorporation or By-laws of the Company, any termination of this
Agreement by the Company, any extension by the
27
Company of the time for the performance of any of the obligations or other acts
of Parent or Purchaser or waiver of any of the Company's rights hereunder shall
require the concurrence of a majority of the directors of the Company then in
office who neither were designated by Purchaser nor are employees of the Company
(the "Independent Directors"), or if there is only one Independent Director, the
concurrence of such Independent Director. The Company shall use its best efforts
to ensure that at least one Independent Director shall remain on the Board until
the Effective Time.
6.4. Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, subject to compliance by the
Parent and the Purchaser with paragraph (c) below, the Company shall, and shall
cause the Subsidiaries and the officers, directors, employees, auditors and
agents of the Company and the Subsidiaries to, afford the officers, employees
and agents of Parent and Purchaser, and (subject to such confidentiality
arrangements) representatives of entities which have committed or are being
asked to commit to provide financing for the Transactions reasonable access at
all reasonable times during normal business hours to the officers, employees,
agents, properties, offices, plants and other facilities, books and records of
the Company and each Subsidiary, and permit Parent and Purchaser to make such
inspections as it may reasonably request (including environmental inspections),
and shall furnish Parent and Purchaser all financial, operating and other data
and information as Parent or Purchaser, through its officers, employees or
agents, may reasonably request.
(b) The Company, Parent and Purchaser each agree to promptly advise each
other of any information required to update or correct any documents filed,
published or issued by such parties pursuant to the Offer or pursuant to
Sections 6.1 or 6.2.
(c) All requests for information and access pursuant to this Section 6.4
shall be directed to Xxxxx X. Xxxxx, President and Chief Executive Officer of
the Company, or to such other persons as he shall specify.
(d) All information obtained by Parent or Purchaser pursuant to this Section
6.4 shall be kept confidential in accordance with the confidentiality agreement,
executed October 7, 1998 (the "Confidentiality Agreement"), between Parent and
the Company, which Confidentiality Agreement shall terminate upon the earlier to
occur of the acceptance for payment of the shares pursuant to the Offer or the
Effective Time.
6.5. No Solicitation of Transactions.
(a) The Company shall, and shall direct and cause its officers, directors,
employees, representatives and agents to, immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to an Acquisition
Proposal (as hereinafter defined). The Company shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any representative retained by it or any of
its Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action designed
or reasonably likely to facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal or (ii) participate in any discussions or negotiations regarding any
Acquisition Proposal, provided, that, at any time prior to the earlier to occur
of (1) the acceptance for payment of the Shares pursuant to the Offer or (2) the
Stockholders Meeting, the Company
28
may, upon receipt by the Company of a written Acquisition Proposal which was not
solicited after the date hereof and after consulting with outside counsel,
subject to compliance with Section 6.5(b) and (c),
(x) furnish information with respect to the Company to any person
pursuant to a customary confidentiality agreement (as determined by the
Company after receipt of written advice from its outside counsel), and
(y) participate in negotiations regarding an Acquisition Proposal,
if the Board determines in good faith that such Acquisition Proposal is
reasonably likely to result in a Superior Proposal and the Company notifies the
Parent and Purchaser in writing that it is taking such action.
(b) Except as set forth in this Section 6.5, neither the Board nor any
committee thereof shall (i) withdraw or modify in a manner adverse to Parent or
Purchaser, or publicly propose or announce an intention to withdraw or modify
adversely, or fail to make the approval or recommendation by the Board or such
committee of the Offer, the Merger, the Transactions or this Agreement, (ii)
approve or recommend any Acquisition Proposal or (iii) cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement related to any Acquisition Proposal with any Person
other than the Parent or its Affiliates. Notwithstanding the foregoing, if,
prior to the Stockholders Meeting, the Board determines in good faith (after
consulting with outside counsel) that the fiduciary duties of the Board require
it to do so, in respect of an Acquisition Proposal, which is unsolicited and
received following the date hereof, the Board may (A) withdraw or modify its
recommendation of the Offer, the Merger, the Transactions or this Agreement, or
(B) approve or recommend a Superior Proposal or (C) terminate this Agreement
and, if it so chooses, cause the Company to enter into any agreement with
respect to such Acquisition Proposal. The Company may take any of the foregoing
actions pursuant to the preceding sentence only if (i) Purchaser shall not have
accepted Shares for payment pursuant to the Offer, (ii) the Company is not in
material breach of its obligations under this Section 6.5, (iii) the Company
shall have terminated this Agreement pursuant to Section 8.1(f)(ii) and (iv) the
Company has paid to Parent the amounts required under Section 8.3(a). Any
withdrawal or modification of the recommendation of this Agreement by the Board
shall not change the approval of the Board for purposes of causing Section 203
of the Delaware Code or any other Takeover Statute to be inapplicable to the
Offer, the Merger, the Shareholder Agreements or the purchase of shares under
this Agreement.
(c) Subject to compliance with subsection (b) above, nothing contained in
this Section 6.5 shall prohibit the Company from complying with Rule 14e-2
promulgated under the Exchange Act.
(d) If the Board receives an Acquisition Proposal or any inquiry regarding
the making of an Acquisition Proposal including any request for information,
then the Company shall promptly inform Parent and Purchaser, orally and in
writing, of the terms and conditions of such proposal request or inquiry and the
identity of the Person making it. The Company will keep Parent and Purchaser
informed of the status and principal terms of any such Acquisition Proposal
request, or inquiry in a manner that will provide Parent and Purchaser with
sufficient and timely knowledge of such status and terms and permit Parent and
Purchaser to respond meaningfully thereto.
29
(e) Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in this Section 6.5 by any director or officer of the
Company or by any of its Subsidiaries or by any investment banker, financial
advisor, attorney, accountant or other representative of the Company and its
Subsidiaries acting on behalf of the Company of its Subsidiaries, shall be
deemed to be a breach of this Section by the Company
(f) (i) "Acquisition Proposal" means any inquiry, proposal or offer from any
Person relating to any direct or indirect acquisition or purchase of 25% or more
of the assets of the Company and its Subsidiaries taken as a whole or 25% or
more of any class of equity securities of the Company, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 25% or more of any class of equity securities of the Company, or any
merger, consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company, other
than the Transactions; and (ii) "Superior Proposal" means any bona fide
Acquisition Proposal made by a third party to acquire, directly or indirectly,
for consideration consisting of cash and/or securities (and without any
financing contingency), all of the shares of the Company's Common Stock then
outstanding or all or substantially all the assets of the Company and its
Affiliates, which proposal the Board determines in its good faith judgment
(following consultation with WP& Co. or other financial advisor of nationally
recognized reputation) to be materially more favorable to the Company's
stockholders than the Offer and the Merger.
6.6. Employee Matters.
(a) For a period of at least one year following the Effective Time, Parent
shall, or shall cause the Surviving Corporation and its Subsidiaries to,
maintain employee benefit and welfare plans, programs, contracts, agreements,
severance plans, policies and executive perquisites, for the benefit of active
and retired employees of the Company and its Subsidiaries which in the aggregate
provide benefits that are at least equal, on an overall basis, to those provided
by Parent's Subsidiaries to their other employees of comparable status and
seniority.
(b) Parent and Purchaser shall honor, without modification, and after the
purchase of Shares pursuant to the Offer Parent shall cause the Company and its
Subsidiaries to honor, all contracts, agreements, arrangements, policies, plans
and commitments of the Company (or any of its Subsidiaries) in effect as of the
date hereof which are applicable to any employee or former employee or any
director or former director of the Company (or any of its Subsidiaries) set
forth in the Company Disclosure Schedule, including the agreements of the
Company (whether or not in writing) to pay commissions to employees or
representatives of the Company, in accordance with the Company's prior practice,
in respect of LTAC Leases which may be entered into following the date of this
Agreement and which are scheduled on the Company's development plan as of
October 30, 1998 (a copy of which has been provided to Parent by the Company) in
respect of which such employees or representatives have provided services to the
Company prior to the Effective Time.
6.7. Directors' and Officers' Indemnification and Insurance.
(a) The Certificate of Incorporation of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in Article VII of the Certificate of Incorporation of the Company,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would materially
30
and adversely affect the rights thereunder of individuals who at the Effective
Time were directors, officers, employees, fiduciaries or agents of the Company,
unless such modification shall be required by law.
(b) 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, Parent and the Surviving Corporation
shall, jointly and severally, to the fullest extent permitted under applicable
law, indemnify and hold harmless, each present and former director, officer,
employee, fiduciary and agent of the Company and each Subsidiary (collectively,
the "Indemnified Parties") against all costs and expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages, liabilities and
settlement amounts paid in connection with any claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time), whether
civil, administrative or investigative, arising out of or pertaining to any
action or omission in their capacity as an officer, director, employee,
fiduciary or agent, whether occurring before or after the Effective Time, for a
period of six years after the date hereof ( a "Claim"), provided, however, that
no Indemnified Party shall be entitled to payment of any amount in respect of
any Claim arising from willful misconduct, self dealing or the commission of an
intentional tort by such Indemnified Person. In the event of any such claim,
action, suit, proceeding or investigation, Parent or the Surviving Corporation,
as the case may be, shall assume the defense thereof, and neither Parent nor the
Surviving Corporation will be liable to such Indemnified Parties for any legal
expenses of other counsel incurred subsequent to such assumption by such
Indemnified Parties in connection with the defense thereof, provided, that (i)
the Parent and the Surviving Corporation shall have acknowledged in writing that
their indemnity obligations hereunder are applicable in respect of the matter in
issue unless and until a court of competent jurisdiction ultimately determines,
and such determination becomes final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by law, (ii)
no settlement shall be effected without the written consent of an Indemnified
Party which does not include a full and unconditional release of such
Indemnified Party and (iii) the Indemnified Parties shall cooperate in the
defense of any such matter. None of the Company, Parent or the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld). None of the Company,
Parent nor the Surviving Corporation shall be obligated pursuant to this Section
6.7(b) to pay the fees and expenses of more than one counsel for all Indemnified
Parties (who shall in any event be reasonably acceptable to the Parent) in any
single action except to the extent that the named parties to any such proceeding
include both the Indemnified Party and the Company or Parent, or their
respective successors, and the representation of such parties by the same
counsel would be proscribed under applicable standards of professional conduct
and provided further that, in the event that any claim for indemnification is
asserted or made within such six-year period, all rights to indemnification in
respect of such claim shall continue until the disposition of such claim.
(c) Parent and the Surviving Corporation shall use their respective
reasonable best efforts to maintain in effect for six years from the Effective
Time, if available, the current directors' and officers' liability insurance
policies maintained by the Company (provided that Parent and the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less favorable) with
respect to matters occurring prior to the Effective Time; provided, that (1) if
the existing policies expire, are terminated or
31
canceled during such period Parent or the Surviving Corporation will use its
reasonable best efforts to obtain substantially similar policies and (2) Parent
or the Surviving Corporation shall not be required to spend as an annual premium
therefor an amount in excess of $280,000.
6.8. Further Action; Reasonable Best Efforts.
Upon the terms and subject to the conditions hereof, each of the parties
hereto shall (i) make promptly its respective filings, and thereafter make any
other required submissions, under the HSR Act with respect to the Transactions,
provided that no material divestiture or undertaking to make such a material
divestiture shall be made without the consent of the Parent, which will not
unreasonably be withheld, and (ii) use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using all reasonable efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Authorities
and parties to contracts with the Company and the Subsidiaries as are necessary
for the consummation of the Transactions and to fulfill the conditions to the
Offer and the Merger. The filing fee payable under the HSR Act shall be paid by
the Purchaser. In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall use their
reasonable best efforts to take all such action. In furtherance of its agreement
in this Section, Parent shall retain a nationally-recognized information agent
to assist in soliciting the shareholders of the Company to tender their Shares
in the offer and/or, in the event a Merger Notice has been delivered pursuant to
Section 1.3, to vote in favor of the Merger.
6.9. Public Announcements.
Parent and the Company shall consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or any Transaction and shall not issue any such press release or make
any such public statement without the prior consent of the other parties, except
as may be required by law or any listing agreement with a national securities
exchange to which Parent or the Company is a party.
6.10. SEC and Stockholder Filings.
The Company shall deliver to Parent a copy of all material public reports
and materials as and when it sends the same to its stockholders, the SEC or any
state or foreign securities commission.
6.11. Takeover Statutes.
The Company and the Board shall take all reasonable action necessary to
ensure that no "fair price," "moratorium," "control share acquisition" or other
similar antitakeover statute or regulation enacted under state or federal laws
in the United States (each a "Takeover Statute"), including, without limitation,
Section 203 of the Delaware Code, is or becomes applicable to the Offer, the
Merger, this Agreement, or any Transaction, the Company and the members of its
Board of Directors (or any required and duly constituted Committee thereof) will
grant such approvals, and take such actions as are necessary so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
eliminate or minimize the effects of any Takeover Statute on any of the
transactions contemplated hereby or thereby.
32
6.12. Advice of Breaches.
Parent and Purchaser, on the one hand, and the Company, on the other, shall
promptly advise each other if they become aware of breaches or any event or
occurrence which would be likely to cause a breach of its own representations,
warranties or covenants herein.
ARTICLE VII.
CONDITIONS TO THE MERGER
7.1. Conditions to the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement and the transactions contemplated
--------------------
hereby shall have been approved and adopted by the affirmative vote of the
stockholders of the Company to the extent required by Delaware Law;
(b) No Order. No Governmental Authority or foreign, federal or state court of
--------
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of making the Merger illegal or otherwise preventing consummation
of the Merger; provided, that the parties shall use their best efforts to have
any such injunction, order, restraint or prohibition vacated; and
(c) Offer. Purchaser or its permitted assignee shall have purchased all
-----
Shares validly tendered and not withdrawn pursuant to the Offer; provided, that
this condition shall not be applicable to the obligations of Parent or Purchaser
if Purchaser fails to purchase any Shares validly tendered and not withdrawn
pursuant to the Offer, in breach of this Agreement or the terms of the Offer.
7.2. Parent and Purchaser Conditions to the Merger.
The obligations of the Parent and Purchaser to effect the Merger shall be
subject to the condition that, at or prior to the Effective Time, the Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement, or such performance shall have been
waived; provided, that this condition shall not apply in respect of any
obligation of the Company arising after designees or representatives of Parent
or Purchaser shall represent a majority of the Board. After such designees or
representatives so constitute a majority of the Board, the obligations of the
Parent and the Purchaser to proceed with the Transactions may not be waived,
terminated or modified except as expressly permitted under the other provisions
of this Agreement.
If a Merger Notice is delivered pursuant to Section 1.3(d) or (e), the
obligations of Parent and Purchaser to effect the Merger shall also be subject
to the satisfaction or waiver, at the Effective Time, of the following
conditions:
(a) any applicable (i) waiting period under the HSR Act or (ii) period during
which Parent or Purchaser shall have consented or otherwise be barred from
consummating the Merger as part of any agreement or other arrangement with any
Governmental Authority involving the HSR Act or any other applicable antitrust
laws has expired or been terminated prior to the Effective Time;
33
(b) the Company shall have received any required consent or approval of any
Governmental Authority and there shall not be pending or threatened any action
or proceeding before any court or Governmental Authority, domestic or foreign,
having any of the consequences referred to in clauses (i) through (vii) of
Section 1.2(c);
(c) there shall not have been any statute, rule, regulation, judgment, order
or injunction enacted, entered, issued, enforced, promulgated or deemed
applicable, or any other action taken, by any Governmental Authority other than
the routine application of the waiting period provisions of the HSR Act to the
Merger, which is reasonably likely to result, directly or indirectly, in any of
the consequences referred to in clauses (i) through (vii) of Section 1.2(c);
(d) there shall not have occurred, and be continuing, any change, condition,
event or other development that has had a Material Adverse Effect;
(e) the representations and warranties of the Company in this Agreement shall
be true and correct (for all purposes of this paragraph (e) without giving
effect to any material or Material Adverse Effect qualifiers or other qualifiers
based on materiality that are contained in this Agreement) as of such time
(except to the extent such representations and warranties expressly relate to an
earlier date, in which case such representations and warranties shall be true
and correct as of such earlier date), except to the extent that the failure or
failures to be true or correct do not, in the aggregate, have a Material Adverse
Effect;
(f) the number of Dissenting Shares shall not exceed 10% of the outstanding
Shares.
7.3. Company Conditions to the Merger.
The obligation of the Company to effect the Merger shall be subject to the
condition that, at or prior to the Effective Time, the Parent and Purchaser
shall have performed in all material respects all obligations required to be
performed by them under this Agreement, or such performance shall have been
waived by a majority of the members of the Board of Directors of the Company who
are not designees or representatives of Parent or Purchaser.
If a Merger Notice is delivered pursuant to Section 1.3(d) or (e), the
obligations of the Company to effect the Merger shall also be subject to the
satisfaction or waiver, at the Effective Time, of the following conditions:
(a) any applicable (i) waiting period under the HSR Act or (ii) period during
which Parent or Purchaser shall have consented or otherwise be barred from
consummating the Merger as part of any agreement or other arrangement with any
Governmental Authority involving the HSR Act or any other applicable antitrust
laws has expired or been terminated prior to the Effective Time;
(b) the Company shall have received any required consent or approval of any
Governmental Authority, the absence of which could subject any of the directors,
officers or other representatives of the Company to any personal liability;
(c) the representations and warranties of the Parent and the Purchaser in
this Agreement shall be true and correct in all material respects as of such
time (except to the extent such representations and warranties expressly relate
to an earlier date, in which case such representations and warranties shall be
true and correct as of such earlier date), except to the extent that failure or
failures to be true and correct do not, in the aggregate, materially impair the
ability of Parent and Purchaser to consummate the Merger.
34
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
8.1. Termination.
This Agreement may be terminated and the Merger and the other Transactions
may be abandoned at any time prior to the Effective Time, notwithstanding any
approval and adoption of this Agreement and the Transactions by the stockholders
of the Company:
(a) By mutual written consent duly authorized by the Boards of Directors of
Parent, Purchaser and the Company, provided, that any such consent by the Board
of the Company shall include at least a majority of the members of the Board who
are not designees or representatives of the Parent or the Purchaser; or
(b) By either Parent, Purchaser or the Company by written notice to the
other parties if
(i) The Offer (x) shall be terminated or expire in accordance with its
terms without the purchase of any Shares pursuant thereto or (y) Purchaser
shall not have accepted for payment any Shares pursuant to the Offer on or
before January 31, 1999; provided, that the right to terminate this
Agreement under this clause (i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure to complete the Offer on or before such
date and provided further that the right to terminate this Agreement under
this clause (i) shall not be available to any of the parties to this
Agreement if a Merger Notice has been delivered pursuant to Sections 1.3(d)
or (e);
(ii) the Effective Time shall not have occurred on or before May 31,
1999; provided, that the right to terminate this Agreement under this
clause (ii) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date; or
(iii) any court of competent jurisdiction or other Governmental
Authority shall have issued an order, decree, ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Offer or Merger
and such order, decree, ruling or other action shall have become final and
nonappealable;
(c) By Parent or Purchaser, by written notice to the Company, if (i) the
Board or any committee thereof shall have (1) withdrawn or modified in a manner
adverse to Purchaser or Parent its approval or recommendation of the Offer, this
Agreement, the Merger or any other Transaction or (2) shall have approved or
recommended any Acquisition Proposal or (ii) WP&Co. shall have withdrawn,
revoked, amended or modified its opinion referred to in Section 3.22 in any
manner adverse to Parent or Purchaser, unless (A) at the time of or promptly
following such withdrawal, revocation, amendment or modification the Board shall
have publicly reaffirmed its approval and recommendation of the Transactions and
(B) within 10 Business Days following such withdrawal, revocation, amendment or
modification the Board shall have received a written opinion, from another
financial advisor of nationally recognized reputation reasonably acceptable to
Parent and Purchaser, that the Offer is fair to the shareholders of the Company
from a financial point of view, a copy of which shall have been delivered to the
Parent;
(d) By Parent and Purchaser, by written notice to the Company, if the
Company shall have (i) exercised a right specified in Section 6.5(a) with
respect to any Acquisition Proposal and the
35
Board of Directors shall not, within 10 Business Days following a written
request from the Parent to do so, have reaffirmed its recommendation of the
Transactions; (ii) taken any action described in Section 6.5(b), or (iii)(1) an
Acquisition Proposal that is publicly disclosed shall have been commenced,
publicly proposed or communicated to the Company which contains a proposal as to
price (without regard to the specificity of such price proposal) and (2) the
Company shall not have rejected such proposal within 10 business days of its
receipt or the date its existence first becomes publicly disclosed, if sooner;
(e) By Parent and Purchaser, by written notice to the Company:
(i) if the Company shall have breached or failed to perform in any
material respect any of its representations, warranties or covenants
required to be performed by it under this Agreement or the Offer, and,
in the case of any breach other than an intentional material breach,
such breach or failure to perform has continued unremedied for 30 days
or is not reasonably capable of being cured by the expiration date of
the Offer; or
(ii) if the Company shall violate its obligations under Section 6.5;
or
(f) By the Company by written notice to the Parent and the Purchaser:
(i) if Purchaser shall have failed to publicly announce and commence
the Offer (within the meaning of Rule 14d-2 under the Exchange Act)
within five Business Days following the date of this Agreement;
provided, that the Company may not terminate this Agreement pursuant to
this subparagraph (i) if the Company is in material breach under this
Agreement;
(ii) in accordance with Section 6.5 and subject to the limitations
set forth therein, provided that Parent or Purchaser does not make,
within 3 Business Days of receipt of the notice of termination required
to be delivered pursuant to Section 6.5, an offer that the Company's
Board believes in good faith, after consultation with its legal counsel
and financial advisors, is at least as favorable to the holders of the
Shares as such other bidder's offer, and provided, further, that no
termination under this subparagraph (ii) shall be effective unless the
termination fee and expense fee required under Section 8.3 is paid at
the time notice of such termination is delivered;
(iii) if Parent or Purchaser shall have breached or failed to
perform in any material respect any of its representations, warranties
or covenants required to be performed by them under this Agreement at
or prior to such date, and, in the case of any breach other than an
intentional material breach, such breach or failure to perform has
continued unremedied for 30 days or is not reasonably capable of being
cured by the expiration date of the Offer.
8.2. Effect of Termination.
In the event of the termination of this Agreement pursuant to Section 8.1,
this Agreement shall forthwith become void, and there shall be no liability on
the part of any party hereto, except (i) as set forth in Sections 6.4, 8.3 and
9.1 and (ii) nothing herein shall relieve any party from liability for any
breach hereof. Any attempted termination of this Agreement not in accordance
with Section 8.1 shall not be effective and shall not affect the rights or
obligations of the parties set forth herein.
36
8.3. Fees and Expenses.
(a) If this Agreement is terminated pursuant to Section 8.1(c)(i), 8.1(c)(ii)
(when Parent or Purchaser's right to terminate arises as a result of the failure
of the Board to publicly reaffirm its approval and recommendation of the
Transactions), 8.1(d), 8.1(e)(ii) or 8.1(f)(ii), then the Company shall pay
Parent $4,000,000 plus up to $1,000,000 in reimbursement of actual, verifiable
expenses (the "Expenses") incurred by the Parent in connection with the
negotiation, execution and delivery of this Agreement and the other documents
contemplated hereby and the anticipated completion of the Transactions.
(b) If this Agreement is terminated pursuant to Section 8.1(b) (on account of
the failure of the Company to satisfy the condition set forth in Section
1.2(f)), 8.1(c)(ii) (except in the case where Parent or Purchaser's right to
terminate arises as a result of the failure of the Board to publicly reaffirm
its approval and recommendation of the Transactions) or 8.1(e)(i), then the
Company shall pay Parent up to $1,000,000 in reimbursement of Expenses, and if,
at any time within one year of the date of such termination, the Company enters
into an agreement with respect to or consummates any direct or indirect
acquisition or purchase by any person of 25% or more of the assets of the
Company and its Subsidiaries taken as a whole or the issuance of 25% or more of
any class of equity securities of the Company, any tender offer or exchange
offer that if consummated would result in any person beneficially owning 25% or
more of any class of equity securities of the Company, or any merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company, other
than the Transactions (collectively, a "Subsequent Transaction"), the Company
shall pay Parent $4,000,000.
(c) If this Agreement is terminated by the Parent or the Purchaser pursuant
to Section 8.1(b) on account of the failure of the Company to satisfy the
condition set forth in Section 1.2(i), then the Company shall pay Parent, in
consideration for the expenses incurred in anticipation of the completion of the
Transactions, up to $1,000,000 in reimbursement of Expenses.
(d) If this Agreement is terminated by the Parent or the Purchaser pursuant
to Section 8.1(b) (other than on account of the failure of the Company to
satisfy the condition set forth in Section 1.2(f) or 1.2(i), which are addressed
in subparagraphs (b) and (c) above), and if the Company enters into an agreement
with respect to or consummates a Subsequent Transaction within six months
following such termination, then the Company shall pay Parent $4,000,000 plus up
to $1,000,000 in reimbursement of Expenses.
(e) Any amounts payable under paragraphs (a)-(d) above shall be paid within
five Business Days after demand by the Parent or the Purchaser or at such
earlier time as may be required under Section 6.5 or Section 8.1(f)(ii).
(f) The payment called for in paragraphs (a)-(d) above shall be in lieu of
any other claims by the Parent or the Purchaser in respect of its costs,
expenses, damages and losses incurred by the Parent or the Purchaser in respect
of the matters referred to in such paragraphs. The Company acknowledges that the
agreements contained in this Section 8.3 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent and Purchaser would not enter into this Agreement.
37
(g) Except as set forth in this Section 8.3, all fees and expenses incurred
in connection with the Offer, the Merger, this Agreement and the Transactions
will be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated.
8.4. Amendment.
Subject to Section 6.3, this Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, that, after the approval and
adoption of this Agreement and the Transactions by the stockholders of the
Company, no amendment may be made which would reduce the amount or change the
type of consideration into which each Share shall be converted upon consummation
of the Merger. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
8.5. Waiver.
At any time prior to the Effective Time, any party hereto may (i) extend
the time for the performance of any obligation or other act of any other party
hereto, (ii) waive any inaccuracy in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any agreement or condition contained herein.
ARTICLE IX.
GENERAL PROVISIONS
9.1. Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, except that the agreements set forth in Article II and
Sections 6.6 and 6.7 shall survive the Effective Time indefinitely, and those
set forth in Sections 6.4(c), 6.7 and 8.3 and in the last clause of Section
1.5(d), shall survive termination of this Agreement indefinitely. The expiration
of a representation, warranty or agreement in this Agreement pursuant to this
Section 9.1 shall not affect the rights or remedies of any party arising from a
breach thereof occurring prior to such expiration.
9.2. Notices.
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by fax or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties at
the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section):
if to Parent or Purchaser:
Select Medical Corporation
0000 Xxx Xxxxxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx
Chairman and Chief Executive Officer
38
with a copy to:
Dechert Price & Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Nassau
if to the Company:
Intensiva HealthCare Corporation
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xx. Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxx
President and Chief Executive Officer
with a copy to:
Suelthaus & Xxxxx, P.C.
0000 Xxxxxxx Xxxxxxxxx, Xxxxxxx Xxxxx,
Xx. Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxx
and
Xxxxx Xxxx LLP
000 Xxxxx Xxxxxxxx
Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxx X. XxXxxxxx
9.3. Definitions.
For purposes of this Agreement, the term:
(1) "Acquisition Proposal" is defined in Section 6.5(f).
(2) "Affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;
(3) "Beneficial Owner" with respect to any Shares means a person who shall be
deemed to be the beneficial owner of such Shares (i) which such person or any of
its Affiliates or associates (as such term is defined in Rule 12b-2 promulgated
under the Exchange Act) beneficially owns, directly or indirectly, (ii) which
such person or any of its Affiliates or associates has, directly or indirectly,
(A) the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights, exchange rights,
warrants or options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding or (iii) which are beneficially owned,
directly or indirectly, by any other persons with whom such person or any of its
Affiliates or associates or person with whom such person or any of its
Affiliates or associates
39
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any Shares;
(4) "Blue Sky Laws" is defined in Section 3.5(b).
(5) "Business Day" means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in the City of New York.
(6) "Board" means the Board of Directors of the Company.
(7) "Claim" shall have the meaning set forth in Section 6.7.
(8) "Code" means the Internal Revenue Code of 1986, as amended.
(9) "Common Stock" is defined in Section 1.1.
(10) "Company Disclosure Schedule" is defined in the first paragraph of
Article III.
(11) "Confidentiality Agreement" is defined in Section 6.4(c).
(12) "Control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
(13) "Delaware Law" means the General Corporation Law of the State of
Delaware.
(14) "Dissenting Shares" is defined in Section 2.7.
(15) "Effective Time" is defined in Section 2.2
(16) "Environmental Laws" means any federal, state, or local statute, rule,
regulation or order, as in effect on the date of this Agreement, relating to the
protection of the environment or to the regulation of any toxic, radioactive,
ignitable, corrosive, reactive, biomedical or otherwise hazardous substances,
materials, contaminants, pollutants or wastes.
(17) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(18) "Governmental Authority" means any agency, instrumentality, department,
commission, court, tribunal or board of any government, whether foreign or
domestic and whether national, federal, state, provincial or local.
(19) "HSR Act" is defined in Section 3.5(b).
(20) "Indemnified Parties" is defined in Section 6.7(b).
(21) "Intellectual Property" means all of the following (in whatever form or
medium) which are owned by or licensed to the Company or any of its Subsidiaries
for use in connection with the operation of its business: (i) patents,
trademarks, service marks, tradedress, logos, designs and copyrights, (ii)
applications for patents and for registration of trademarks, service marks and
copyrights, (iii) trade secrets and trade names, and (iv) all other items of
proprietary know-how or intellectual property.
(22) "Interim Balance Sheet" is defined in Section 3.6(c).
40
(23) "knowledge" means, in respect of the Company, the actual knowledge of the
persons listed on Exhibit A hereto.
(24) "Liens" is defined in Section 3.16(a).
(25) "LTAC Leases" is defined in Section 3.16(b).
(26) "Material Adverse Effect" means any change, effect, condition, event or
circumstance that is, or is reasonably likely to be, materially adverse to the
business, financial condition, assets, properties, or results of operations of
the Company and the Subsidiaries, taken as a whole; provided, that "Material
Adverse Effect" shall not include any change, effect, condition, event or
circumstance arising out of or attributable to (i) any decrease in the market
price of the Shares (but not any change, effect, condition, event or
circumstance underlying such decrease to the extent that it would otherwise
constitute a Material Adverse Effect), (ii) changes, effects, conditions, events
or circumstances that generally affect the industries in which the Company
operates (including legal and regulatory changes), (iii) general economic
conditions or change, effects, conditions or circumstances affecting the
securities markets generally, (iv) changes arising from the consummation of the
Transactions or the announcement of the execution of this Agreement, including
changes resulting from the exercise by other parties to the LTAC Leases of any
contractual rights they may have (if any) under the express terms of the LTAC
Leases as a result of the Transactions or the announcement of the Transactions;
or (v) any matter expressly disclosed in this Agreement or the Company's
Disclosure Schedule; and provided, further that, subject to the foregoing, a
Material Adverse Effect shall be deemed to have occurred if the Company and its
Subsidiaries shall have lost their accreditation to continue participation in
the Medicare and Medicaid programs in respect of one or more of the Company's
locations which represented, in the aggregate, in excess of 15% of the Company's
net revenues for the most recent four fiscal quarters preceding the date of such
event.
(27) "Merger" is defined in Section 2.1.
(28) "Merger Consideration" is defined in Section 2.6(a).
(29) "Merger Notice" is defined in Section 1.3(d).
(30) "1997 Balance Sheet" is defined in Section 3.6(c).
(31) "Per Share Amount" is defined in Section 1.1
(32) "Person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government.
(33) "Plans" is defined in Section 3.9.
(34) "Proxy Statement" is defined in Section 3.10.
(35) "Returns" shall mean all returns, declarations, reports, statements, and
other documents required to be filed with any government or taxing authority in
respect of Taxes, and the term "Return" shall mean any one of the foregoing
Returns.
(36) "SEC" means the Securities and Exchange Commission.
41
(37) "SEC Rules" means the rules, regulations or interpretations of the SEC or
the staff thereof.
(38) "Stockholders Meeting" is defined in Section 6.1.
(39) "Subsidiary" or "Subsidiaries" of the Company, the Surviving Corporation,
Parent or any other person means an Affiliate controlled by such person,
directly or indirectly, through one or more intermediaries.
(40) "Superior Proposal" is defined in Section 6.5(f).
(41) "Surviving Corporation" is defined in Section 2.1.
(42) "Takeover Statute" is defined in Section 6.11.
(43) "Tax" or "Taxes" shall mean (A) all federal, state and local and foreign
taxes and assessments of any nature whatsoever, based on the laws and
regulations in effect from time to time through the Closing Date, including,
without limitation, all income, profits, franchise, gross receipts, capital,
sales, use, withholding, value added, ad valorem, transfer, employment, social
security, disability, occupation, property, severance, production, excise,
environmental and other taxes, duties and other similar governmental charges and
assessments imposed by or on behalf of any government or taxing authority,
including all interest, penalties and additions imposed with respect to such
amounts, and (B) any obligations under any agreements or arrangements with
respect to any Taxes described in clause (A) above.
(44) "Tax Returns" means any returns required to be filed with Federal, state
or other applicable taxing authorities in respect of any Taxes.
(45) "Transactions" is defined in Section 1.2(c).
(46) "Warrants" is defined in Section 3.3.
9.4. 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
is not affected in any manner materially 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 a mutually acceptable manner in order that the Transactions be
consummated as originally contemplated to the fullest extent possible. The
parties confirm that, if they are unable to reach such agreement, it is their
intention that the provisions of this Agreement be enforced to the maximum
extent permissible.
9.5. Entire Agreement; Assignment.
Except for the Confidentiality Agreement and the Letter Agreement, this
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes, all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof. 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 and obligations thereunder to any wholly-owned Subsidiary of Parent
provided that no such
42
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
9.6. Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement (including, without limitation,
Section 6.6), express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.7 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
9.7. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware.
9.8. Headings.
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.9. 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 taken together shall
constitute one and the same agreement.
9.10. Specific Performance.
Nothing in this Agreement shall preclude a party from seeking specific
performance, injunctive relief or any other remedies not involving the payment
of monetary damages in the event of any breach or violation (or threatened
breach or violation) of any provision of this Agreement by the other party and
each party acknowledges that, in light of the unique benefit to it of its rights
under this Agreement, such remedies shall be available in respect of any such
breach or violation by it in any suit properly instituted in a court of
competent jurisdiction and shall be in addition to any other remedies available
at law or in equity to such party.
9.11. Costs of Enforcement.
In any action, claim, suit or proceeding to enforce its rights under this
Agreement, the prevailing party shall be entitled to prompt reimbursement of its
reasonable costs and expenses of obtaining such enforcement, including
attorneys' fees.
43
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.
SELECT MEDICAL CORPORATION
By /s/ XXXXX X. XXXXXXXX
----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chief Executive Officer
SELECT MEDICAL OF
MECHANICSBURG, INC
By /s/ XXXXX X. XXXXXXXX
-----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Director
INTENSIVA HEALTHCARE
CORPORATION
By /s/ XXXXX X. XXXXX
-----------------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief
Executive Officer
44
Exhibit A
---------
"knowledge" means, in respect of the Company, knowledge by Xxxxx X. Xxxxx,
Xxxx X. Xxxxx, Xxxx X. Xxxxx and Xxxxxxx Xxxxxxxxxxxxx.
45
