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Exhibit 10.2
__________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
EXTENDICARE INC.,
AHC ACQUISITION CORP.
and
ARBOR HEALTH CARE COMPANY
dated as of
September 29, 1997
__________________________________________________
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TABLE OF CONTENTS
ARTICLE I THE OFFER AND MERGER....................................... 1
Section 1.1 The Offer.................................................. 1
Section 1.2 Company Actions............................................ 3
Section 1.3 SEC Documents.............................................. 4
Section 1.4 Directors.................................................. 6
Section 1.5 The Merger................................................. 7
Section 1.6 Effective Time............................................. 8
Section 1.7 Closing.................................................... 8
Section 1.8 Stockholders' Meeting...................................... 8
Section 1.9 Merger Without Meeting of Stockholders..................... 9
ARTICLE II CONVERSION OF SECURITIES................................... 10
Section 2.1 Conversion of Capital Stock................................ 10
Section 2.2 Exchange of Certificates................................... 11
Section 2.3 Dissenters' Rights......................................... 12
Section 2.4 Company Stock Plans........................................ 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 14
Section 3.1 Organization............................................... 14
Section 3.2 Capitalization............................................. 15
Section 3.3 Authorization; Validity of Agreement; Company Action....... 17
Section 3.4 Consents and Approvals; No Violations...................... 18
Section 3.5 SEC Reports and Financial Statements....................... 19
Section 3.6 Absence of Certain Changes................................. 20
Section 3.7 No Undisclosed Liabilities................................. 21
Section 3.8 Litigation................................................. 22
Section 3.9 Information in Proxy Statement............................. 22
Section 3.10 No Default; Compliance with Applicable Laws................ 22
Section 3.11 Intellectual Property...................................... 25
Section 3.12 Taxes...................................................... 25
Section 3.13 Opinion of Financial Adviser............................... 28
Section 3.14 Title to Properties........................................ 28
Section 3.15 Employee Benefit Plan...................................... 28
Section 3.16 Insurance.................................................. 30
Section 3.17 No Excess Parachute Payments............................... 30
Section 3.18 Environmental Matters...................................... 31
Section 3.19 Labor Matters.............................................. 33
Section 3.20 Finders and Investment Bankers............................. 34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER. 34
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Section 4.1 Organization............................................... 34
Section 4.2 Authorization; Validity of Agreement; Necessary Action..... 35
Section 4.3 Consents and Approvals; No Violations...................... 35
Section 4.4 Information in Proxy Statement............................. 36
ARTICLE V COVENANTS.................................................. 36
Section 5.1 Interim Operations of the Company.......................... 36
Section 5.2 Access; Confidentiality.................................... 40
Section 5.3 Additional Agreements...................................... 41
Section 5.4 Consents and Approvals..................................... 41
Section 5.5 No Solicitation............................................ 42
Section 5.6 Publicity.................................................. 44
Section 5.7 Notification of Certain Matters............................ 44
Section 5.8 Indemnification............................................ 45
ARTICLE VI CONDITIONS................................................. 46
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. 46
ARTICLE VII TERMINATION................................................ 47
Section 7.1 Termination................................................ 47
Section 7.2 Effect of Termination...................................... 49
ARTICLE VIII MISCELLANEOUS.............................................. 49
Section 8.1 Fees and Expenses.......................................... 49
Section 8.2 Amendment and Modification................................. 50
Section 8.3 Nonsurvival of Representations and Warranties.............. 50
Section 8.4 Notices.................................................... 50
Section 8.5 Interpretation............................................. 51
Section 8.6 Counterparts............................................... 51
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership.................................................. 51
Section 8.8 Severability............................................... 52
Section 8.9 Governing Law.............................................. 52
Section 8.10 Assignment................................................. 52
Section 8.11 Transfer and Similar Taxes................................. 52
ANNEX A Certain Conditions of the Offer............................ A-1
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Index of Defined Terms
----------------------
Defined Term Section No.
------------- -----------
Acquisition Proposal ........................ 5.5(a)
Appointment Date ............................ 5.1
Balance Sheet ............................... 3.14
By-laws ..................................... 1.5
Certificate of Incorporation ................ 1.5
Certificate of Merger ....................... 1.6
Certificates ................................ 2.2(b)
Closing ..................................... 1.7
Closing Date ................................ 1.7
Company ..................................... Recitals
Company Agreements .......................... 3.4
Company Benefit Plans ....................... 3.6(vii)
Company Disclosure Schedule ................. Art. III
Company Nursing Facilities .................. 3.10(b)
Company Option Plans ........................ 2.4
Company Options ............................. 2.4
Company SEC Documents ....................... 3.5
Confidentiality Agreement ................... 5.2
Current Company SEC Documents................ 3.6
DGCL ........................................ 1.2(a)
Director Option Plan ........................ 2.4
Dissenting Stockholders ..................... 2.1(c)
Effective Time .............................. 1.6
Employee Stock Purchase Plan................. 3.2(a)
Environmental Law ........................... 3.18(ii)
ERISA ....................................... 3.15
Exchange Act ................................ 1.1
Excess parachute payments ................... 8.11
Fully diluted basis ......................... 1.1
GAAP ........................................ 3.5
Governmental Entity ......................... 3.4
Hazardous Substance ......................... 3.18(iii)
HSR Act ..................................... 3.4
Indemnified Party ........................... 5.8
Intellectual Property Rights................. 3.1l
Liens ....................................... 3.2(b)
Merger ...................................... 1.5
Merger Consideration ........................ 2.1(c)
Minimum Condition ........................... 1.1
Offer ....................................... 1.1
Offer Documents ............................. 1.3(a)
Offer Price ................................. 1.1
Offer to Purchase ........................... 1.1
Parent ...................................... Recitals
Paying Agent ................................ 2.2(a)
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Defined Term Section No.
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Permits ..................................... 3.10(b)
Plans ....................................... 3.15
Primary Company Executives .................. 3.17
Preferred Stock ............................. 3.2
Proxy Statement ............................. 1.8(a)(ii)
Purchaser ................................... Recitals
Xxxxxxx Xxxxx ............................... 1.2(a)
Rights ...................................... 3.2
Rights Agreement ............................ 3.2
Schedule 14D-1 .............................. 1.3(a)
Schedule 14D-9 .............................. 1.3(a)
SEC ......................................... 1.3(a)
Secretary of State .......................... 1.6
Securities Act .............................. 3.5
Shares ...................................... 1.1
Special Meeting ............................. 1.8(a)(i)
Stockholder Agreements ...................... Recitals
Subsidiary .................................. 3.1
Superior Proposal ........................... 5.5(a)
Surviving Corporation ....................... 1.5
Taxes ....................................... 3.12(b)(i)(A)
Tax Return .................................. 3.12(b)(i)(B)
Termination Fee ............................. 8.1
Transactions ................................ 1.2(a)
Voting Debt ................................. 3.2
1991 Option Plan ............................ 2.4
1995 Option Plan ............................ 2.4
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 29, 1997 (this
"Agreement"), by and among Extendicare Inc., a corporation existing under the
laws of Canada ("Parent"), AHC Acquisition Corp., a Delaware corporation and an
indirect wholly owned subsidiary of Parent (the "Purchaser"), and Arbor Health
Care Company, a Delaware corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, the Purchaser and the
Company has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to Parent and the Purchaser to enter into this Agreement, certain
stockholders of the Company have each entered into a Stockholder Agreement,
dated as of the date hereof (collectively, the "Stockholder Agreements"), among
Parent, the Purchaser and the stockholder named therein providing, among other
things, that each such stockholder will vote in favor of the Merger (as defined
in Section 1.5 hereof) and will grant a proxy to Parent for that purpose;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. As promptly as practicable (but in no event later
than five business days after the public announcement of the execution hereof),
the Purchaser shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) a tender
offer (the "Offer") for any and all of the outstanding shares of Common Stock,
par value $.03 per share (the "Shares"), of the
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Company at a price of U.S.$45.00 per Share, net to the seller in cash (such
price, or such other price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price") and, subject to there being validly
tendered and not withdrawn prior to the expiration of the Offer, that number of
Shares which represents at least a majority of the Shares outstanding on a
fully diluted basis (the "Minimum Condition") and to the other conditions set
forth in Annex A hereto, shall consummate the Offer in accordance with its
terms ("fully diluted basis" means issued and outstanding Shares and Shares
subject to issuance under Company Option Plans (as defined in Section 2.4) and
Shares subject to issuance upon exercise of outstanding warrants, calls,
subscriptions or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or
securities convertible or exchangeable for such capital stock).
The obligations of the Purchaser to commence the Offer and to accept for
payment and to pay for any Shares validly tendered on or prior to the
expiration of the Offer and not properly withdrawn shall be subject only to the
Minimum Condition and the other conditions set forth in Annex A hereto. The
Offer shall be made by means of an offer to purchase (the "Offer to Purchase")
containing the terms set forth in this Agreement, the Minimum Condition and the
conditions set forth in Annex A hereto.
The Purchaser shall not amend or waive the Minimum Condition and shall not
decrease the Offer Price or decrease the number of Shares sought or amend any
other condition of the Offer in any manner adverse to the holders of the Shares
(other than with respect to insignificant changes or amendments and subject to
the penultimate sentence of this Section 1.1) without the written consent of
the Company (such consent to be authorized by the Board of Directors of the
Company (the "Company Board") or a duly authorized committee thereof);
provided, however, that if on the initial scheduled expiration date of the
Offer, which shall be 20 business days after the date the Offer is commenced,
all conditions to the Offer shall not have been satisfied or waived, the
Purchaser may, from time to time, in its sole discretion, extend the expiration
date; provided, however, that the Purchaser shall, if the Company, Parent and
the Purchaser
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have not obtained the approvals of any Governmental Entity (as defined in
Section 3.4) as required under Section 5.4, extend the expiration date for a
period of the lesser of (i) 2 business days after the date that all such
approvals have been obtained and (ii) 35 days after such initial scheduled
expiration date. In addition, the Offer Price may be increased, and the Offer
may be extended to the extent required by law in connection with such increase
in each case without the consent of the Company. The Purchaser shall, on the
terms and subject to the prior satisfaction or waiver of the conditions of the
Offer, accept for payment and pay for Shares validly tendered as soon as it is
permitted to do so under applicable law; provided, however, that if,
immediately prior to the initial expiration date of the Offer (as it may be
extended), the Shares validly tendered and not withdrawn pursuant to the Offer
equal less than 90% of the outstanding Shares, the Purchaser may extend the
Offer for a period not to exceed 10 business days, notwithstanding that all
conditions to the Offer are satisfied as of such initial expiration date of the
Offer.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Company Board, at a meeting duly called and held, has (i)
unanimously determined that each of this Agreement, the Offer and the Merger (as
defined in Section 1.5) are fair to and in the best interests of the
stockholders of the Company, (ii) received the opinion of Xxxxxxx Xxxxx &
Associates, Inc. ("Xxxxxxx Xxxxx"), financial advisor to the Company, to the
effect that the Offer and the Merger are fair to the stockholders of the Company
from a financial point of view, (iii) approved this Agreement and the
Stockholder Agreements and the transactions contemplated hereby and thereby,
including the Offer and the Merger (collectively, the "Transactions"), and such
approval constitutes approval of the Offer, this Agreement, the Stockholder
Agreements and the Transactions for purposes of Section 203 of the Delaware
General Corporation Law, as amended (the "DGCL"), such that Section 203 of the
DGCL will not apply to the Transactions and (iv) resolved to recommend that the
stockholders of the Company accept the Offer, tender their Shares thereunder to
the Purchaser and approve and adopt this Agreement and the Merger; provided,
that such recommendation may be withdrawn,
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modified or amended if, in the opinion of the Company Board, only after receipt
of written advice from independent legal counsel, failure to withdraw, modify
or amend such recommendation would result in the Company Board violating its
fiduciary duties to the Company's stockholders under applicable law. The
Company represents that the actions set forth in this Section 1.2(a) and all
other actions it has taken in connection herewith and therewith are sufficient
to render the relevant provisions of such Section 203 of the DGCL inapplicable
to the Offer, the Merger and the Stockholders Agreements.
(b) In connection with the Offer, the Company will promptly furnish
or cause to be furnished to the Purchaser mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of all recordholders of the Shares as of a recent date, and shall
furnish the Purchaser with such additional information (including, but not
limited to, updated lists of holders of the Shares and their addresses, mailing
labels and lists of security positions) and assistance as the Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares.
Section 1.3 SEC Documents.
(a) As soon as practicable on the date the Offer is commenced, Parent
and the Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-1") (the Schedule 14D-1, together with
all amendments and supplements thereto and including the exhibits thereto,
including the Offer to Purchase, being collectively the "Offer Documents").
Concurrently with the 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 and including schedules, annexes and the
exhibits thereto, the "Schedule 14D-9"), which shall, subject to the fiduciary
duties of the Company Board under applicable law and to the provisions of this
Agreement, contain the recommendation referred to in clause (iv) of Section
1.2(a) hereof.
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(b) Parent and the Purchaser will take all steps necessary to ensure
that the Offer Documents, and the Company will take all steps necessary to
ensure that the Schedule 14D-9, will comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with the
SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that Parent and the Purchaser make no
representation with respect to information furnished by the Company for
inclusion in the Offer Documents and the Company makes no representation with
respect to information furnished by Parent or the Purchaser for inclusion in the
Schedule 14D-9. The Company agrees that the information supplied in writing by
the Company for inclusion in the Offer Documents will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Parent and the
Purchaser agree that the information supplied in writing by the Parent or the
Purchaser for inclusion in the Schedule 14D-9 will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of Parent
and the Purchaser will take all steps necessary to cause the Offer Documents,
and the Company will take all steps necessary to cause the Schedule 14D-9, to be
filed with the SEC and to be disseminated to holders of the Shares, in each case
as and to the extent required by applicable federal securities laws. Each of
Parent and the Purchaser, on the one hand, and the Company, on the other hand,
will promptly correct any information provided by it for use in the Offer
Documents and the Schedule 14D-9 if and to the extent that it shall have become
false or misleading in any material respect and the Purchaser will take all
steps necessary to cause the Offer Documents, and the Company will take all
steps necessary to cause the Schedule 14D-9, as so corrected to be filed with
the SEC and to be disseminated to holders of the Shares, in each case as and to
the extent required by applicable
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federal securities laws. The Company, on the one hand, and Parent and the
Purchaser on the other hand, and their respective counsel shall be given the
opportunity to review the Offer Documents and the Schedule 14D-9 before they
are filed with the SEC. In addition, each party hereto will provide the other
parties and their counsel in writing with any comments, whether written or
oral, which they may receive from time to time from the SEC or its staff with
respect to the Offer Documents or the Schedule 14D-9 promptly after the receipt
of such comments.
Section 1.4 Directors.
(a) Promptly upon the purchase of, and payment for, any Shares by
Parent or any of its subsidiaries which represents at least a majority of the
outstanding Shares (on a fully diluted basis, as defined in Section 1.1), Parent
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Company Board such that the percentage of its designees on
the Company Board (including persons previously designated by Parent or its
affiliates to the Company Board) shall equal the percentage of the outstanding
Shares beneficially owned by Parent and its affiliates. In furtherance thereof,
the Company shall, upon request of the Parent, use its best efforts promptly to
cause Parent's designees to be so elected to the Company Board, and in
furtherance thereof, to the extent necessary, increase the size of the Company
Board. At such time, the Company shall also cause persons designated by Parent
to constitute at least the same percentage (rounded up to the next whole number)
as is on the Company Board of (i) each committee of the Company Board, (ii) each
board of directors (or similar body) of each subsidiary of the Company and (iii)
each committee (or similar body) of each such board. Notwithstanding the
foregoing, until the Effective Time (as defined in Section 1.6 hereof), the
Company shall use all reasonable efforts to have at least two members of the
Company Board who are neither (i) officers of Parent or the Company, nor (ii)
designees, stockholders or affiliates of Parent. The Company shall promptly
take all actions required pursuant to Section
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14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 1.4(a), including mailing to
stockholders the information required by such Section 14(f) and Rule 14f-1 (or,
at Parent's request, furnishing such information to Parent for inclusion in the
Offer Documents initially filed with the SEC and distributed to the
stockholders of the Company) as is necessary to enable Parent's designees to be
elected to the Company Board. Parent or the Purchaser will supply the Company
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. The
provisions of this Section 1.4(a) are in addition to and shall not limit any
rights which the Purchaser, Parent or any of their affiliates may have as a
holder or beneficial owner of Shares as a matter of law with respect to the
election of directors or otherwise.
(b) From and after the time, if any, that Parent's designees
constitute a majority of the Company Board, any amendment of this Agreement,
any termination of this Agreement by the Company, any extension of time for
performance of any of the obligations of Parent or the Purchaser hereunder, any
waiver of any condition or any of the Company's rights hereunder or other action
by the Company hereunder may be effected only by the action of a majority of the
directors of the Company then in office who were not officers of Parent or
designees, stockholders or affiliates of Parent, which action shall be deemed to
constitute the action of any committee specifically designated by the Company
Board to approve the actions and transactions contemplated hereby and the full
Company Board; provided, that if there shall be no such directors, such actions
may be effected by majority vote of the entire Company Board.
Section 1.5 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.6 hereof), the Company
and the Purchaser shall consummate a merger (the "Merger") pursuant to which (i)
the Purchaser shall be merged with and into the Company and the separate
corporate existence of the Purchaser shall thereupon cease, (ii) the Company
shall be the successor or surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware, and (iii) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall
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continue unaffected by the Merger, except as set forth in this Section 1.5.
Pursuant to the Merger, (x) the Restated Certificate of Incorporation of
the Company (the "Certificate of Incorporation"), as in effect immediately prior
to the Effective Time, shall be the initial certificate of incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation, and (y) the Restated By-laws of the Company (the
"By-laws"), as in effect immediately prior to the Effective Time, shall be the
initial By-laws of the Surviving Corporation until thereafter amended as
provided by law, by the Certificate of Incorporation or by such By-laws. The
Merger shall have the effects specified in the DGCL.
The directors and officers of the Purchaser at the Effective Time shall be
the initial directors and officers, respectively, of the Surviving Corporation
until their successors shall have been duly elected or appointed or qualified or
until their earlier death, resignation or removal in accordance with the
Certificate of Incorporation and the By-laws.
Section 1.6 Effective Time. Parent, the Purchaser and the Company will
cause a Certificate of Merger, or, if applicable, a Certificate of Ownership and
Merger (as applicable, the "Certificate of Merger"), to be executed and filed on
the date of the Closing (as defined in Section 1.7) (or on such other date as
Parent and the Company may agree) with the Secretary of State of the State of
Delaware (the "Secretary of State") as provided in the DGCL. The Merger shall
become effective on the date on which the Certificate of Merger has been duly
filed with the Secretary of State or at such later time as is agreed upon by the
parties and specified in the Certificate of Merger, and such effective time is
hereinafter referred to as the "Effective Time."
Section 1.7 Closing. The closing of the Merger (the "Closing") shall take
place at 9:00 a.m., local time, on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VI hereof (the "Closing Date"), at
the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 919
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Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 unless another date or place is agreed
to in writing by the parties hereto.
Section 1.8 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through the Company Board, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting"), as promptly as practicable
following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer, for the purpose of considering and taking
action upon the approval of the Merger and the adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and this Agreement and use its best
efforts (x) to obtain and furnish the information required to be included
by the SEC in the Proxy Statement(as hereinafter defined) and, after
consultation with Parent, to respond promptly to any comments made by the
SEC with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement, including any amendment
or supplement thereto (the "Proxy Statement") to be mailed to its
stockholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent and
its counsel and (y) to obtain the necessary approvals of the Merger and
this Agreement by its stockholders; and
(iii) subject to the fiduciary obligations of the Company Board under
applicable law as advised by independent counsel, include in the Proxy
Statement the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval of the Merger and the adoption of
this Agreement.
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(b) Parent shall vote, or cause to be voted, all of the Shares then
owned by it, the Purchaser or any of its other subsidiaries and affiliates in
favor of the approval of the Merger and the adoption of this Agreement.
Section 1.9 Merger Without Meeting of Stockholders. Notwithstanding
Section 1.8 hereof, in the event that Parent, the Purchaser and any other
subsidiaries of Parent shall acquire in the aggregate at least 90% of the
outstanding shares of each class of capital stock of the Company, pursuant to
the Offer or otherwise, the parties hereto shall, at the request of Parent and
subject to Article VI hereof, take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
Shares or any shares of capital stock of the Purchaser:
(a) Purchaser Capital Stock. Each issued and outstanding share of
capital stock of the Purchaser shall be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Purchaser-Owned Stock. All
Shares that are owned by the Company or any wholly-owned subsidiary of the
Company and any Shares owned by the Parent or any wholly-owned subsidiary of the
Parent shall be cancelled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding Share (other
than Shares to be cancelled in accordance with Section 2.1(b) and any Shares
which are held by stockholders exercising appraisal rights pursuant
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to Section 262 of the DGCL ("Dissenting Stockholders")) shall be converted into
the right to receive the Offer Price, payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the certificate
formerly representing such Share in the manner provided in Section 2.2. All
such Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance
with Section 2.2.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company to act as agent for the holders of the Shares
in connection with the Merger (the "Paying Agent") to receive in trust the funds
to which holders of the Shares shall become entitled pursuant to Section 2.1(c).
Parent shall, from time to time, make available to the Paying Agent funds in
amounts and at times necessary for the payment of the Merger Consideration as
provided herein. All interest earned on such funds shall be paid to Parent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"), whose Shares were converted
pursuant to Section 2.1 into the right to receive the Merger Consideration (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon receipt of the
Certificates by the Paying Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger
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Consideration for each Share formerly represented by such Certificate and the
Certificate so surrendered shall forthwith be cancelled. 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, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either has been paid or
is not applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration in cash as contemplated by
this Section 2.2. The right of any stockholder to receive the Merger
Consideration shall be subject to and reduced by any applicable withholding
obligation.
(c) Transfer Books; No Further Ownership Rights in the Shares. At
the Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable law. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. 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 (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable
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upon due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation or the
Paying Agent shall be liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 2.3 Dissenters' Rights. If any Dissenting Stockholder shall be
entitled to be paid the "fair value" of such holder's Shares, as provided in
Section 262 of the DGCL, the Company shall give the Parent notice thereof and
the Parent shall have the right to participate in all negotiations and
proceedings with respect to any such demands. Neither the Company nor the
Surviving Corporation shall, except with the prior written consent of the
Parent, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment. If any Dissenting Stockholder shall fail
to perfect or shall have effectively withdrawn or lost the right to dissent, the
Shares held by such Dissenting Stockholder shall thereupon be treated as though
such Shares had been converted into the Merger Consideration pursuant to Section
2.1.
Section 2.4 Company Stock Plans. The Company shall, effective as of the
Effective Time, (i) cause each outstanding employee or director stock option to
purchase Shares (the "Company Options") granted under the Arbor Health Care
Company 1996 Stock Option Plan for Non-Employee Directors (the "Director Option
Plan") the Arbor Health Care Company 1995 Stock Option Plan, as amended by
Amendment No. 1 (the "1995 Option Plan") and the First Amended and Restated
Incentive Stock Option Plan dated November 26, 1991 (the "1991 Option Plan" and,
together with the Director Option Plan and the 1995 Option Plan, the "Company
Option Plans"), whether or not then exercisable or vested, to become fully
exercisable and vested, (ii) cause each Company Option that is then outstanding,
exercisable and vested to be cancelled and (iii) in consideration of such
cancellation, and except to the extent that Parent or the Purchaser and the
holder of any such Company Options otherwise agree, cause the Company (or, at
Parent's option, the Purchaser) to pay to such holders of Company Options an
amount in respect thereof equal to the product of (A) the excess, if any, of the
Offer Price over the exercise price of each such Company
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Option and (B) the number of Shares previously subject to the Company Options
immediately prior to its cancellation (such payment to be net of withholding
taxes). The Company shall take all actions necessary to cause the Company's
employees and directors to consent, to the extent required, to the transactions
contemplated by this Section 2.4 no later than immediately prior to the time
the Purchaser accepts Shares for payment pursuant to the Offer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser that all of
the statements contained in this Article III are true and correct as of the date
of this Agreement (or, if made as of a specified date, as of such date), and
will be true and correct in all material respects as of the Closing Date as
though made on the Closing Date, except as set forth in the schedule attached to
this Agreement setting forth exceptions to the Company's representations and
warranties set forth herein (the "Company Disclosure Schedule"). The Company
Disclosure Schedule will be arranged in sections corresponding to the sections
of this Agreement to be modified by such disclosure schedule, provided that any
disclosure made in any section of the Company Disclosure Schedule shall be
deemed incorporated in all other sections thereof.
Section 3.1 Organization. Each of the Company and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has all requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority, and governmental approvals would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole. As used in this Agreement, a "subsidiary" of any entity shall mean all
corporations or other entities in which such entity owns a majority of the
issued and outstanding capital stock or equity or similar interests. As used in
this Agreement,
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any reference to any event, change or effect being material or having a
material adverse effect on or with respect to any entity (or group of entities
taken as a whole) means such event, change or effect as is materially adverse
to (i) the consolidated financial condition, businesses, prospects or results
of operations of such entity (or, if used with respect thereto, of such group
of entities taken as a whole) or (ii) the ability of such entity (or group) to
consummate the Transactions. The Company and each of its subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not individually or in the aggregate have a material adverse
effect on the Company and its subsidiaries, taken as a whole. Except as set
forth in Section 3.1 of the Company Disclosure Schedule, the Company does not
own (i) any equity interest in any corporation or other entity or (ii)
marketable securities where the Company's equity interest in any entity exceeds
five percent of the outstanding equity of such entity on the date hereof.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 20,000,000 Shares and 2,000,000 shares of preferred stock,
par value $.01 per share, including 10,000 shares of Series A Junior
Participating Cumulative Preferred Stock, par value $.01 per share
(collectively, the Preferred Stock"). As of September 26, 1997, (i) 6,937,161
Shares are issued and outstanding, (ii) no Shares are issued and held in the
treasury of the Company, (iii) no shares of Preferred Stock are issued and
outstanding, (iv) 327,766 Shares are issuable pursuant to options granted under
the Company Option Plans and (v) 2,000 Shares are issuable pursuant to the Arbor
Health Care Company Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan"). All the outstanding shares of the Company's capital stock are, and all
Shares which may be issued pursuant to the exercise of outstanding Company
Options will be, when issued in accordance with the respective terms thereof,
duly authorized, validly issued, fully paid and non-assessable. There are no
bonds, debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting
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Debt") of the Company or any of its subsidiaries issued and outstanding.
Except as set forth above, and except for the rights (the "Rights") issuable
pursuant to the Rights Agreement dated as of November 14, 1996 (the "Rights
Agreement"), between the Company and Keybank, National Association, as rights
agent (a true and complete copy of which has been delivered to Parent), and the
securities issuable upon the exercise of such Rights, (i) there are no shares
of capital stock of the Company authorized, issued or outstanding and (ii)
there are no existing options, warrants, calls, pre-emptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any of its subsidiaries, obligating the Company or any of its subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock or Voting Debt of, or other equity interest in, the Company or
any of its subsidiaries or securities convertible into or exchangeable for such
shares or equity interests, or obligating the Company or any of its
subsidiaries to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement, arrangement or commitment and (iii)
there are no outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Shares, or the
capital stock of the Company, or any subsidiary or affiliate of the Company or
to provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any subsidiary or any other entity.
(b) Section 3.2(b) of the Company Disclosure Schedule lists each
subsidiary of the Company and the ownership interest therein of the Company. All
of the outstanding shares of capital stock of each of the Company's subsidiaries
are beneficially owned by the Company, directly or indirectly, and all such
shares have been validly issued and are fully paid and nonassessable and are
owned by either the Company or one of its subsidiaries free and clear of all
liens, charges, claims or encumbrances ("Liens").
(c) There are no voting trusts or other agreements or understandings
to which the Company or any of its subsidiaries is a party with respect to the
voting
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of the capital stock of the Company or any of the subsidiaries.
(d) None of the Company or its subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock of the Company, or any
of its subsidiaries.
Section 3.3 Authorization; Validity of Agreement; Company Action. (a) The
Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement, and the
consummation by it of the transactions contemplated hereby, have been duly
authorized by the Company Board and, except for obtaining the approval of its
stockholders as contemplated by Section 1.8 hereof, no other corporate action on
the part of the Company is necessary to authorize the execution and delivery by
the Company of this Agreement and the consummation by it of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, subject to the approval of its stockholders as contemplated by
Section 1.8 hereof, and assuming due and valid authorization, execution and
delivery hereof by Parent and the Purchaser, is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms
except as may be limited by (a) bankruptcy, insolvency, reorganization or other
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). The affirmative vote of the holders of a
majority of the outstanding Shares, voting together as a single class, are the
only votes of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
(b) The Company Board has duly and validly approved the transactions
contemplated hereby for the purposes of Section 203 of the DGCL. Accordingly,
the provisions of Section 203 of the DGCL will not apply to the transactions
contemplated by this Agreement. No other state takeover statute or similar
statute or regulation applies or purports to apply to the Offer, the Merger or
the other transactions contemplated hereby.
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(c) The Company Board has taken all necessary action so that (i) the
Rights will not be exercisable, trade separately, or be otherwise affected by
the Offer, the Merger or the other transactions contemplated hereby, (ii) none
of Parent and its affiliates will be deemed to be an "Acquiring Person" for
purposes thereof and (iii) a "Distribution Date" shall not occur by virtue of
the Offer, the Merger or the other transactions contemplated hereby. The
Company will take any action reasonably requested by Parent to ensure and
confirm that the Company, Parent and their respective affiliates will not have
any obligations in connection with the Rights or the Rights Agreement in
connection with the Offer, the Merger and the other transactions contemplated
hereby.
Section 3.4 Consents and Approvals; No Violations. Except for the
notices, filings and consents set forth in Section 3.4 of the Company Disclosure
Schedule (including, if applicable, such notices, filings and consents
applicable to the Company and its subsidiaries as may be required under any
environmental, health or safety law or regulation, under federal and state laws,
rules and regulations applicable to health care providers reimbursed under the
federal Medicare and state Medicaid programs, under any certificate of need law
or regulation, or under any state licensure law or regulation) and the filings,
permits, orders, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), state securities or blue sky laws, and the DGCL, neither the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby nor compliance by the
Company with any of the provisions hereof will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation or the By-laws
or similar organizational documents of the Company or of any of its
subsidiaries, (ii) require any notice to, filing with, or permit, order,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity"), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amend-
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ment, cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, Medicare or Medicaid
provider agreement, license, contract, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which any of them or any of their properties or assets may be bound
(collectively, the "Company Agreements") or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of its subsidiaries or any of their properties or assets, excluding from the
foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults
which would not, individually or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole. Section 3.4 of
the Company Disclosure Schedule sets forth a list of any notices, filings,
consents and approvals required to be obtained under the Company Agreements in
connection with this Agreement prior to the consummation of the transactions
contemplated by this Agreement.
Section 3.5 SEC Reports and Financial Statements. The Company has filed
with the SEC, and has heretofore made available to Parent, true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1995 under the Securities Act of
1933, as amended (the "Securities Act") or the Exchange Act (collectively, the
"Company SEC Documents"). As of their respective dates or, if amended, as of
the date of the last such amendment, the Company SEC Documents, including,
without limitation, any financial statements or schedules included therein (a)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. None of the
Company's subsidiaries is required to file any forms, reports or other documents
with the SEC. The financial statements of the Company included in the Company
SEC Documents have been prepared from, and are in accordance with, the books and
records of the Company and its consolidated subsidiaries, comply in all material
respects with applicable accounting requirements
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and with the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position and the consolidated results of operations
and cash flows (and changes in financial position, if any) of the Company and
its consolidated subsidiaries as of the respective dates and for the respective
periods indicated therein. None of the subsidiaries of the Company is subject
to the informational reporting requirements of Section 13 of the Exchange Act.
Section 3.6 Absence of Certain Changes. Except as disclosed in the
Company SEC Documents filed with the SEC since January 1, 1997 (the "Current
Company SEC Documents") or in Section 3.6 of the Company's Disclosure Schedule,
since December 31, 1996:
(i) the Company and its subsidiaries have conducted their respective
businesses only in the ordinary and usual course;
(ii) neither the Company nor any of its subsidiaries has taken any of
the actions contemplated by Section 5.1 hereof other than in the ordinary
course of business and consistent with past practice;
(iii) there has not been any event, change, effect or development
which, individually or in the aggregate, has had or is, so far as
reasonably can be foreseen, likely to have, a material adverse effect on
the Company and its subsidiaries, taken as a whole (without regard,
however, to changes in conditions generally applicable to the long-term and
subacute care industry, institutional pharmacy and outpatient therapy
clinic business or general economic conditions);
(iv) there has not been any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property)
with respect to any shares of the Company's capital stock;
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(v) there has not been any split, combination or reclassification of
any of the Company's capital stock or any issuance or the authorization of
any issuance of any other securities in exchange or in substitution for
shares of the Company's capital stock;
(vi) there has not been (A) any granting by the Company or any of its
subsidiaries to any executive officer or other key employee of the Company
or any of its subsidiaries of any increase in compensation, except in the
ordinary course of business consistent with prior practice or as required
under employment agreements in effect as of December 31, 1996, (B) any
granting by the Company or any of its subsidiaries to any such executive
officer of any increase in severance or termination pay, except as was
required under any employment, severance or termination agreements in
effect as of December 31, 1996 or (C) any entry by the Company or any of
its subsidiaries into any employment, severance or termination agreement
with any such executive officer or key employee;
(vii) there has not been any adoption or amendment in any material
respect by the Company or any of its subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of the Company or any of
its subsidiaries (collectively, "Company Benefit Plans").
(viii) there has not been any change in accounting methods,
principles or practices by the Company or any of its subsidiaries
materially affecting its assets, liabilities or business, except insofar as
may have been required by a change in GAAP.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed in the
Current Company SEC Docu-
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ments, including any exhibits to the Current Company SEC Documents, and (b) for
liabilities and obligations (x) incurred in the ordinary course of business and
consistent with past practice (y) pursuant to the terms of this Agreement or
(z) as set forth in Section 3.7 of the Company Disclosure Schedule, since
January 1, 1997, neither the Company nor any of its subsidiaries has incurred
any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that have had, or would be reasonably likely to have,
a material adverse effect on the Company and its subsidiaries, taken as a
whole, or would be required by GAAP to be reflected on a consolidated balance
sheet of the Company and its subsidiaries (including the notes thereto).
Section 3.8 Litigation. Except as disclosed in the Current Company SEC
Documents or in Section 3.8 of the Company Disclosure Schedule, there is no
suit, claim, action, proceeding, including, without limitation, arbitration
proceedings or alternative dispute resolution proceedings, or investigation
pending before any Governmental Entity or, to the best knowledge of the Company,
threatened against the Company or any of its subsidiaries that, individually or
in the aggregate, could reasonably be expected to have a material adverse effect
on the Company and its subsidiaries, taken as a whole. Except as disclosed in
the Current Company SEC Documents or in Section 3.8 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is subject to any
outstanding order, judgment, writ, injunction, rule or decree of any
Governmental Entity or arbitrator that, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
Section 3.9 Information in Proxy Statement. The Proxy Statement, if
required by Section 1.8 hereof (or any amendment thereof or supplement thereto),
will, at the date mailed to Company stockholders and at the time of the meeting
of Company stockholders to be held in connection with stockholder approval of
the Merger, not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by the Company with
respect to statements made therein based on
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information supplied by Parent or the Purchaser for inclusion in the Proxy
Statement. The Proxy Statement will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder by the SEC.
Section 3.10 No Default; Compliance with Applicable Laws. (a) Except as
disclosed in Section 3.10 of the Company's Disclosure Schedule, the business of
the Company and each of its subsidiaries is not being conducted in default or
violation of any term, condition or provision of (i) its respective Certificate
of Incorporation or By-laws, (ii) any Company Agreement or (iii) any federal,
state, local or foreign statute, law, ordinance, rule, regulation, judgment,
decree, order, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Company or any of its
subsidiaries, excluding from the foregoing clauses (ii) and (iii), defaults or
violations which would not, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole. Except as
disclosed in Section 3.10 of the Company's Disclosure Schedule, as of the date
of this Agreement, no investigation or review by any Governmental Entity or
other entity with respect to the Company or any of its subsidiaries is pending
or, to the best knowledge of the Company, threatened, nor has any Governmental
Entity or other entity indicated an intention to conduct the same.
(b) Except as set forth in Section 3.10 of the Company Disclosure
Schedule, the Company and each of its subsidiaries possess all certificates,
franchises, licenses, permits, authorizations and approvals issued to or granted
by Governmental Entities (collectively, "Permits") necessary to conduct their
business as such business is currently conducted (including certifications for
participation or enrollment in the Medicare and Medicaid programs for each of
the nursing and subacute care facilities owned or operated by the Company and/or
any of its subsidiaries ("Company Nursing Facilities"), and current and valid
provider contracts with the Medicare and Medicaid programs for each Company
Nursing Facility), except for such Permits, the lack of possession of which
would not reasonably be expected to have a material adverse effect on the
Company and its subsidiaries, taken as a whole. Except as set forth in Section
3.10 of the Compa-
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ny Disclosure Schedule, (i) all such Permits are validly held by the Company or
its subsidiaries, and the Company and each of its subsidiaries have complied in
all respects with all terms and conditions thereof (and in particular, the
Company Nursing Facilities are in substantial compliance with the terms and
conditions of participation of the Medicare and Medicaid programs), except for
such instances where the failure to validly hold such Permits or the failure to
have complied with such Permits has not, and is not reasonably expected to
have, a material adverse effect on the Company and its subsidiaries, taken as a
whole, (ii) none of such Permits will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the Transactions, other than such Permits, the
suspension, modification or nonrenewal of which, in the aggregate, have not had
and would not reasonably be expected to have a material adverse effect on the
Company and its subsidiaries, taken as a whole and (iii) neither the Company
nor any of its subsidiaries has received any written warning, notice, notice of
violation or probable violation, survey report, statement of deficiencies,
notice of revocation, or other written communication from or on behalf of any
Governmental Entity that remains unresolved or which has resulted in any
restriction on the permissible operations of the Company or any of its
subsidiaries, alleging (A) any violation of any such Permit or of any law,
rule, regulation or provider agreement or (B) that the Company or any of its
subsidiaries requires any Permit required for its business, as such business is
currently conducted, that is not currently held by it, which violation or
failure to hold a Permit would have a material adverse effect on the Company
and its subsidiaries, taken as a whole. The Company has delivered to Parent
true and complete copies of the most recent survey reports, statements of
deficiencies and plans of correction filed with any Governmental Entity with
respect to the operations of any Company Nursing Facility. The Company and
each of its subsidiaries have filed all required cost reports with respect to
Medicaid and Medicare. The Company has delivered to Parent all such cost
reports, audits and schedules prepared or issued by, or filed with, any
Governmental Entity or private payor with respect to the operations of each
Company Nursing Facility for the last twelve (12) months and each such report
is complete and accurate in all material respects. Section 3.10 of the
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Company Disclosure Schedule sets forth the status of any open cost reporting
periods, pending reimbursement appeals, and reimbursement payment rates for the
last twelve (12) months with respect to any Governmental Entity or other third
party payor. There is no outstanding claim, and the Company does not know of
any basis for any claims against the Company or any of its subsidiaries by any
third party payors. Neither the Company, nor any of its subsidiaries, have
received any notices that Medicare or Medicaid has any claim or claims against
any of them which could result in consolidated net offsets against future
reimbursements in excess of that provided for in the consolidated financial
statements of the Company. Neither the Company, nor any of its subsidiaries,
nor, to the best knowledge of the Company or its subsidiaries, any person who
provides professional services for or on behalf of the Company and/or any of
its subsidiaries, has engaged in any activities which are prohibited under
federal Medicare or federal and state Medicaid statutes, as amended, or the
regulations promulgated pursuant thereto, or related state or local statutes or
regulations, and, to the knowledge of the Company, no investigations or other
adverse actions are being taken by Medicare and/or Medicaid, and all schedules
and/or reports have been filed with Medicare and Medicaid.
Section 3.11 Intellectual Property. The Company and its subsidiaries own,
or are licensed or otherwise have the rights to use, all patents, trademarks,
trade names, copyrights, technology, trade secrets, know-how and processes
(collectively, "Intellectual Property Rights") material to or necessary for the
conduct of their respective businesses, as presently conducted. No claims are
pending by any person against the Company or any of its subsidiaries as to the
use of any Intellectual Property Rights and, to the Company's best knowledge,
the use by the Company or any of its subsidiaries of all Intellectual Property
Rights does not infringe on the rights of any person. To the Company's best
knowledge, no third person is infringing on the Intellectual Property Rights of
the Company or any of its subsidiaries.
Section 3.12 Taxes. (a) The Company and each of its subsidiaries have
timely filed (or have had timely filed on their behalf) all Tax Returns (as
hereinafter
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defined) required by applicable law to be filed by any of them on or prior to
or as of the Effective Time of the Merger. All such Tax Returns are, or will
be at the time of filing, true, complete and correct in all material respects.
(b) The Company and each of its subsidiaries have paid (or have had
paid on their behalf) or, where payment is not yet due, have established in
accordance with GAAP (or have had established on their behalf and for their sole
benefit and recourse) an adequate accrual for the payment of all Taxes due with
respect to any period ending on or prior to the date hereof. The Company and
each of its subsidiaries have complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes and have,
within the time and manner prescribed by law, withheld and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under applicable laws.
(c) No deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries. There are no
outstanding requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any Taxes or deficiencies
against the Company or any of its subsidiaries, and no power of attorney
granted by either the Company or any of its subsidiaries with respect to any
Taxes is currently in force.
(d) There are no Liens for Taxes upon the assets of the Company or
any of its subsidiaries except Liens for Taxes not yet due.
(e) There are no United States Federal, state, local or foreign
audits or other administrative proceedings or court proceedings presently
pending with regard to any Taxes or Tax Returns of the Company or any of its
subsidiaries.
(f) Except as set forth in Section 3.12 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
agreement or arrangement (written or oral) providing for the allocation or
sharing of Taxes.
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(g) Neither the Company nor any of its subsidiaries has made any
change in accounting methods, received a ruling from any taxing authority or
signed an agreement with any taxing authority likely to have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(h) All transactions that could give rise to an understatement of the
Federal income tax liability of the Company or any of its subsidiaries within
the meaning of Section 6662(d) of the Code are adequately disclosed on Tax
Returns in accordance with Section 6662(d)(2)(B) of the Code if there is or was
no substantial authority for the treatment giving rise to such understatement.
(i) Except as disclosed in Section 3.12 of the Company Disclosure
Schedule, no excess loss accounts or deferred intercompany gains as defined in
the consolidated return regulations promulgated under the Code (the "Treasury
Regulations") exist with respect to the Company or the subsidiaries.
(j) The Federal income tax net operating loss carryovers available to
the Company and its subsidiaries, and their expiration dates, are set forth in
Section 3.12 of the Company Disclosure Schedule. Except as set forth in Section
3.12 of the Company Disclosure Schedule, as of the date of this Agreement, the
net operating loss and credit carryovers are not subject to limitations imposed
by Sections 382, 383 or 384 of the Code (or any predecessor thereto) or
otherwise (including Sections 1.1502-21 and 1502-22 of the Treasury
Regulations).
(k) Neither the Company nor any of its subsidiaries has filed a
consent to application of Section 341 of the Code, or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by the Company or
any of its subsidiaries.
(l) The Company is a corporation within the meaning of Section
7701(a)(3) of the Code.
(m) For purposes of this Agreement, the following terms shall have
the following meanings:
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(A) "Taxes" shall mean any and all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales, withholding, social security,
occupation, use, service, service use, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the
Internal Revenue Service or any taxing authority (whether domestic or
foreign including, without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a United
States possession)), whether computed shall include any interest, fines,
penalties or additional amounts attributable to, or imposed upon, or with
respect to, any such amounts.
(B) "Tax Returns" shall mean any report, return document, declaration
or other information or filing required to be supplied to any taxing
authority or jurisdiction (foreign or domestic) with respect to Taxes,
including, without limitation, information returns, any documents with
respect to or accompanying payments of estimated Taxes, or with respect to
or accompanying requests for the extension of time in which to file any
such report, return, document, declaration or other information.
Section 3.13 Opinion of Financial Adviser. The Company Board has received
the opinion of Xxxxxxx Xxxxx, dated the date of this Agreement, that, as of such
date, the Offer Price and the Merger Consideration are fair from a financial
point of view to the Company's stockholders, a signed copy of which opinion has
been delivered to Parent.
Section 3.14 Title to Properties. The Company and its subsidiaries have
good, valid and marketable title to the properties and assets reflected on the
most recent consolidated balance sheet included in the Current Company SEC
Documents (the "Balance Sheet") (other than properties and assets disposed of in
the ordinary course of business since the date of the Balance Sheet), and all
such properties and assets are free and clear of any Liens, except as described
in the Current Company SEC
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Documents and the financial statements included therein or in Section 3.14 of
the Company Disclosure Schedule and other than Liens for current taxes not yet
due and other Liens or title imperfections that do not have, and are not
reasonably likely to have, a material adverse effect on the Company and its
subsidiaries, taken as a whole.
Section 3.15 Employee Benefit Plan. (a) The Company and each of its
subsidiaries have complied, and currently are in compliance, in all material
respects with the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") the Code and all other applicable
laws with respect to each compensation or benefit plan, agreement, policy,
practice, program or arrangement (whether or not subject to ERISA) maintained by
the Company or any of its subsidiaries for the benefit of any employee, former
employee, independent contractor or director of the Company and its subsidiaries
(including, without limitation, any employment agreements or any pension,
savings, profit-sharing, bonus, medical, insurance, disability, severance,
equity-based or deferred compensation plans) (collectively, the "Plans"). The
Company has provided or made available a current, accurate and complete copy of
each Plan to Parent and, to the extent applicable to the Plans, (A) copies of
any funding instruments, (B) summary plan descriptions (C) Forms 5500 for the
last three years and (D) IRS determination letters.
(b) Each of the Plans that is intended to qualify under Section
401(a) of the Code, does so qualify, is exempt from taxation pursuant to Section
501(a) of the Code and has received a favorable determination letter from the
IRS.
(c) Neither the Company nor any of its subsidiaries has maintained,
adopted or established, contributed or been required to contribute to, or
otherwise participated in or been required to participate in, any employee
benefit plan or other program or arrangement subject to Title IV of ERISA
(including, without limitation, a "multiemployer plan" (as defined in Section
3(37) of ERISA) and a defined benefit plan (as defined in Section 3(35) of
ERISA)).
(d) No Plan, other than a Plan which is an employee pension benefit
plan (within the meaning of
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Section 3(2)(A) of ERISA), provides benefits, including, without limitation,
death, health or medical benefits (whether or not insured), with respect to
current or former employees of the Company beyond their retirement or other
termination of service with the Company (other than (A) coverage mandated by
applicable law, (B) deferred compensation benefits accrued as liabilities on
the books of the Company, or (iii) benefits the full cost of which is borne by
the current or former employee (or his or her beneficiary)).
(e) Except as set forth in Section 3.15 of the Company Disclosure
Schedule, neither the Company nor its subsidiaries has incurred any withdrawal
liability with respect to any Plan that is a multiemployer plan.
(f) No reportable event (within the meaning of Section 4043 of ERISA)
or prohibited transaction (within the meaning of Section 4975 of the Code or
Section 406 of ERISA) has occurred with respect to any Plan that could have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
(g) There are no pending or, to the knowledge of the Company,
threatened actions, claims or lawsuits by any individuals or entities with
respect to any Plan (other than for routine benefit claims) that could have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
(h) Except as set forth in Section 3.15 of the Company Disclosure
Schedule, no payments or benefits (nor acceleration of vesting or exercisability
of any benefits) under any Plan are triggered (in whole or in part) as a result
of the transactions contemplated by this Agreement.
(i) No Plan provides for any stock option that is exercisable into
the stock of any of the subsidiaries of the Company.
Section 3.16 Insurance. The Company maintains, and has maintained,
without interruption, during the past three years, policies or binders of
insurance covering such risks, and events, including personal injury, property
damage and general liability, in amounts
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the Company reasonably believes adequate for its business and operations.
Section 3.17 No Excess Parachute Payments. Other than payments that may
be made to the persons listed in Section 3.17 of the Company Disclosure Schedule
(the "Primary Company Executives"), any amount that could be received (whether
in cash or property or the vesting of property) as a result of any of the
Transactions (whether alone or in combination with a qualifying termination of
employment) by any employee, officer or director of the Company or any of its
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Company Benefit Plan
currently in effect would not be characterized as an "excess parachute payment"
(as such term is defined in Section 280G(b)(1) of the Code). Set forth in
Section 3.17 of the Company Disclosure Schedule is (i) the estimated maximum
amount that could be paid to each Primary Company Executive as a result of the
Transactions under all employment, severance and termination agreements, other
compensation arrangements and Company Benefit Plans currently in effect
(together with a qualifying termination of employment); and (ii) the "base
amount" (as such term is defined in Section 280G(b)(3) of the Code) for each
Primary Company Executive calculated as of the date of this Agreement.
Section 3.18 Environmental Matters. (i) Except as disclosed in the
Current Company SEC Documents or as set forth in Section 3.18 of the
Company Disclosure Schedule, (A) the Company and each of its subsidiaries
have conducted their respective businesses in compliance with all
applicable Environmental Laws (as hereinafter defined) and are currently in
compliance with all such laws, including, without limitation, having all
permits, licenses and other approvals and authorizations necessary for the
operation of their respective businesses as presently conducted, (B) none
of the properties currently or formerly owned or operated by the Company or
any of its subsidiaries contains any Hazardous Substance (as hereinafter
defined) in amounts exceeding the levels permitted by applicable
Environmental Laws, (C) neither the Company nor any of its subsidiaries has
received any notices, demand letters or requests for information from
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any Governmental Entity or third party indicating that the Company or any
of its subsidiaries may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of their
businesses, including, without limitation, liability relating to sites not
owned or operated by the Company or any of its subsidiaries, (D) there are
no civil, criminal or administrative actions, suits, demands, claims,
hearings, investigations or proceedings, pending or threatened, against the
Company or any of its subsidiaries relating to any violation of or
liability under, or alleged violation of or liability under, any
Environmental Law, (E) all reports that are required to be filed by the
Company or any of its subsidiaries concerning the release of any Hazardous
Substance or the threatened or actual violation of any Environmental Law
have been so filed, (F) no Hazardous Substance has been disposed of,
released or transported in violation of or under circumstances that could
create liability under any applicable Environmental Law from any properties
owned by the Company or any of its subsidiaries as a result of any activity
of the Company or any of its subsidiaries during the time such properties
were owned, leased or operated by the Company or any of its subsidiaries,
(G) neither the Company, any of its subsidiaries nor any of their
respective properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim
asserted or arising under any Environmental Law, except for violations of
the foregoing clauses (A) through (G) that, singly or in the aggregate,
would not reasonably be expected to have a material adverse effect on the
Company and its subsidiaries, taken as a whole, and (H) the Company has
provided Parent with each environmental audit, test or analysis performed
within the last three years of any property currently or formerly owned or
operated by the Company or any of its subsidiaries (x) which involves any
condition of environmental impairment which would give rise to a material
adverse effect on the Company and its subsidiaries, taken as a whole and
(y) of which the Company has knowledge.
(ii) As used herein, "Environmental Law" means any United States
Federal, territorial, state, local or foreign law, statute, ordinance,
rule, regulation, code, license, permit, authorization, approval, consent,
legal
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doctrine, order, judgment, decree, injunction, requirement or agreement
with any governmental entity relating to (x) the protection, preservation
or restoration of the environment (including, without limitation, air,
water vapor, surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource)
or to human health or safety or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The
term "Environmental Law" includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the Federal
Occupational Safety and Health Act of 1970, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(iii) As used herein, "Hazardous Substance" means any substance
presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under
any Environmental Law. Hazardous Substance includes any substance to which
exposure is regulated by any government authority or any Environmental Law
including, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste,
industrial substance or petroleum or any derivative or by-product thereof,
radon, radioactive material, asbestos, or asbestos containing material,
urea formaldehyde foam insulation, lead or polychlorinated byphenyls.
Section 3.19 Labor Matters. Except as set forth in Section 3.19 of the
Company Disclosure Schedule,
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neither the Company nor any of its subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. There is no unfair labor practice or
labor arbitration proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries relating to its
business, except for any such proceeding which would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole. To the
knowledge of the executive officers of the Company, there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of the Company or any of its
subsidiaries.
Section 3.20 Finders and Investment Bankers. Neither the Company nor any
of its officers or directors has employed any investment banker, business
consultant, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for Xxxxxxx Xxxxx (the fees
of which will be paid by the Company), or incurred any liability for any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the Transactions, except for
fees payable to Xxxxxxx Xxxxx. The Company has provided Parent with a true and
correct copy of the fee letter between the Company and Xxxxxxx Xxxxx.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company that all of
the statements contained in this Article IV are true and correct as of the date
of this Agreement (or, if made as of a specified date, as of such date), and
will be true and correct in all material respects as of the Closing Date as
though made on the Closing Date.
Section 4.1 Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of Canada and Delaware, respectively, and has all requisite corpo-
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rate or other power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority, and governmental approvals would not
have a material adverse effect on Parent and its subsidiaries, taken as a
whole. Parent and each of its subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not, in the aggregate,
have a material adverse effect on Parent and its subsidiaries, taken as a
whole.
Section 4.2 Authorization; Validity of Agreement; Necessary Action. Each
of Parent and the Purchaser has full corporate power and authority to execute
and deliver this Agreement and to consummate the Transactions. The execution,
delivery and performance by Parent and the Purchaser of this Agreement, and the
consummation of the Merger and of the Transactions, have been duly authorized
by the Board of Directors of Parent and the Board of Directors of the Purchaser
and by Parent as the sole stockholder of the Purchaser and no other corporate
action on the part of Parent and the Purchaser is necessary to authorize the
execution and delivery by Parent and the Purchaser of this Agreement and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by each of the Parent and the Purchaser and, assuming due and valid
authorization, execution and delivery hereof by the Company, is a valid and
binding obligation of each of Parent and the Purchaser, as the case may be,
enforceable against each of them in accordance with its respective terms except
as may be limited by (a) bankruptcy, insolvency, reorganization or other laws
now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the
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HSR Act, state securities or blue sky laws and the DGCL, neither the execution,
delivery or performance of this Agreement by Parent or the Purchaser nor the
consummation by Parent or the Purchaser of the Transactions nor compliance by
Parent or the Purchaser with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the articles of incorporation
or by-laws of Parent or the certificate of incorporation or by-laws of the
Purchaser, (ii) require any filing with, or permit, authorization, consent or
approval of, any Governmental Entity with respect to the business carried on by
Parent or its subsidiaries as of the date hereof, (iii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent, or any of its subsidiaries or the
Purchaser is a party or by which any of them or any of their respective
properties or assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, excluding from the foregoing
clauses (ii),(iii) and (iv) such violations, breaches or defaults which would
not, individually or in the aggregate, have a material adverse effect on
Parent, its subsidiaries and the Purchaser taken as a whole.
Section 4.4 Information in Proxy Statement. None of the information
supplied by Parent or the Purchaser specifically for inclusion or incorporation
by reference in the Proxy Statement, if required by Section 1.8 hereof, will,
at the date mailed to Company stockholders and at the time of the meeting of
Company stockholders to be held in connection with Company stockholder approval
of the Merger, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading.
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ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants and
agrees that, except (i) as expressly contemplated by this Agreement, (ii) as
set forth in Section 5.1 of the Company Disclosure Schedule or (iii) as agreed
in writing by Parent, after the date hereof, and prior to the time the
directors of the Purchaser have been elected to, and shall constitute a
majority of, the Company Board pursuant to Section 1.4 hereof (the "Appointment
Date"):
(a) the business of the Company and its subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent consistent
therewith, each of the Company and its subsidiaries shall use its best efforts
to preserve its business organization intact and maintain its existing relations
with customers, suppliers, employees, creditors and business partners;
(b) the Company shall not, directly or indirectly, amend or propose
to amend its Certificate of Incorporation or By-laws or similar organizational
documents;
(c) the Company shall not, and it shall not permit any of its
subsidiaries to: (i)(A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the Company's
capital stock or that of its subsidiaries, or (B) redeem, purchase or otherwise
acquire directly or indirectly any shares of the capital stock of the Company or
of its subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities; (ii) authorize for
issuance, issue, sell, pledge, deliver or agree to commit to issue, sell, pledge
or deliver (whether through the issuance or granting of any options, warrants,
calls, subscriptions, stock appreciation rights or other rights or other
agreements) or otherwise encumber any shares of capital stock of any class of
the Company or of its subsidiaries or any securities convertible into or
exchangeable for shares of capital stock of any class of the Company or of its
subsidiaries other than Shares issued upon the exercise of Company Options
outstanding on the date hereof in
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accordance with the Company Option Plans as in effect on the date hereof or
Shares for which there are accrued payments through September 30, 1997 in
accordance with the Employee Stock Purchase Plan as in effect on the date
hereof; or (iii) split, combine or reclassify the outstanding capital stock of
the Company or of any of its subsidiaries or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares in the
capital stock of the Company or of any of its subsidiaries;
(d) except for those acquisitions specifically set forth and
described in Section 5.1(d) of the Company Disclosure Schedule, the Company
shall not, and it shall not permit any of its subsidiaries to, acquire or agree
to acquire (i) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, joint venture, association
or other business organization or division thereof or (ii) any assets, outside
of the ordinary course of business, that individually is in excess of $5 million
or in the aggregate in excess of $10 million;
(e) the Company shall not, and it shall not permit any of its
subsidiaries to, sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any assets of the Company or of its
subsidiaries other than (i) sales and dispositions of interests or rights with
respect to property having an aggregate fair market value on the date of this
Agreement of less than $5 million, in each case only if in the ordinary course
of business and consistent with past practice or (ii) encumbrances and Liens
that are incurred in the ordinary course of business and consistent with past
practice;
(f) neither the Company nor any of its subsidiaries shall: (i) grant
any increase in the compensation payable or to become payable by the Company or
any of its subsidiaries to any of its executive officers or key employees or
(ii)(A) adopt any new, or (B) amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing, bonus, incentive compensation, deferred compensation, severance,
profit sharing, stock option, stock purchase, insurance, pension, retirement or
other employ-
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ee benefit plan agreement or arrangement, including without limitation, the
Company Option Plans; or (iii) enter into any employment or severance agreement
with or, except in accordance with the existing written policies of the
Company, grant any severance or termination pay to any officer, director or
employee of the Company or any its subsidiaries;
(g) neither the Company nor any of its subsidiaries shall: (i)
modify, amend or terminate any of its or its subsidiaries' material contracts or
waive, release or assign any material rights or claims, except in the ordinary
course of business and consistent with past practice (ii) enter into any other
agreements, commitments or contracts that are material to the Company and its
subsidiaries taken as a whole, other than in the ordinary course of business and
consistent with past practice, or otherwise make any material change that is
adverse to the Company (including by way of termination) in (A) any existing
agreement, commitment or arrangement that is material to the Company and its
subsidiaries taken as a whole or (B) the conduct of the business or operations
of the Company and its subsidiaries;
(h) neither the Company nor any of its subsidiaries shall: (i) incur
or assume any long-term debt, or except in the ordinary course of business in
amounts consistent with past practice, incur or assume any short-term
indebtedness; (ii) incur or modify any material indebtedness or other liability;
(iii) issue or sell any debt securities or warrants or other rights to acquire
any debt securities of the Company or of any of its subsidiaries; (iv) enter
into any "keep well" or other arrangement to maintain any financial condition of
another person; (v) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, except in the ordinary course of business and consistent with
past practice; (vi) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly owned subsidiaries of the
Company); or (vii) enter into any material commitment or transaction (including,
but not limited to, any material capital expenditure or purchase or lease of
assets or real estate other than the purchase of products for inventory and
supplies in the ordinary course of business); provided that this Section 5.1(h)
shall not
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prevent the financings of the acquisitions described in Section 5.1(d) of the
Company Disclosure Schedule;
(i) neither the Company nor any of its subsidiaries shall change any
of the accounting methods used by it unless required by GAAP;
(j) neither the Company nor any of its subsidiaries shall, without
the prior written consent of Parent, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, in the ordinary course of business
and consistent with past practice, of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company and its consolidated
subsidiaries;
(k) neither the Company nor any of its subsidiaries will take, or
agree to commit to take, any action that would or is reasonably likely to result
in any of the conditions to the Offer set forth in Annex A or any of the
conditions to the Merger set forth in Article VI not being satisfied, or would
make any representation or warranty of the Company contained herein inaccurate
in any respect at, or as of any time prior to, the Effective Time, or that would
materially impair the ability of the Company to consummate the Offer or the
Merger in accordance with the terms hereof or materially delay such
consummation;
(l) neither the Company nor any of its subsidiaries shall make any
Tax election or settle or compromise any Tax liability or refund, except to the
extent already provided in the Current Company SEC Documents;
(m) neither the Company nor any of its subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
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(n) neither the Company nor any of its subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its subsidiaries (other than the Merger); and
(o) neither the Company nor any of its subsidiaries will enter into
an agreement, contract, commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 5.2 Access; Confidentiality. Upon reasonable notice, the Company
shall (and shall cause each of its subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives of
Parent, reasonable access, during normal business hours during the period prior
to the Appointment Date, to all its properties, books, contracts, commitments
and records and, during such period, the Company shall (and shall cause each of
its subsidiaries to) furnish promptly to the Parent (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request. After the Appointment Date the Company shall
provide Parent and such persons as Parent shall designate with all such
information, at such time as Parent shall request. Unless otherwise required by
law and until the Appointment Date, Parent will hold any such information which
is non-public in confidence in accordance with the provisions of a letter
agreement dated September 10, 1997 between the Company and the Parent (the
"Confidentiality Agreement"). The parties agree that the access and assistance
to be provided pursuant to this Section 5.2 shall not be such as to unreasonably
interfere with the operation of the Company's business.
Section 5.3 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto shall use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, legal or otherwise,
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to consummate and make effective the Merger and the other transactions
contemplated by this Agreement. 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 the Company and Parent shall
use all reasonable efforts to take, or cause to be taken, all such necessary
actions.
Section 5.4 Consents and Approvals. (a) Each of the Company, Parent and
the Purchaser will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on it with respect to this Agreement
and the Transactions (which actions shall include, without limitation,
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any other Governmental Entity) and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their subsidiaries in connection
with this Agreement and the Transactions. Each of the Company, Parent and the
Purchaser will, and will cause its subsidiaries to, take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by Parent, the Purchaser, the Company or any of their
subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
(b) The Company and Parent shall take all reasonable actions
necessary to file as soon as practicable notifications under the HSR Act and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any Governmental Entity
in connection with antitrust matters.
Section 5.5 No Solicitation. (a) Neither the Company nor any of its
subsidiaries or affiliates shall (and the Company shall use its best efforts to
cause its officers, directors, employees, representatives and agents, including,
but not limited to, investment bankers, attorneys and accountants, not to),
directly or
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48
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any proposal or offer to acquire all or a
substantial part of the business and properties of the Company or any of its
subsidiaries or any capital stock of the Company or any of its subsidiaries,
whether by merger, tender offer, exchange offer, sale of assets, sale of shares
of capital stock or debt securities or similar transactions involving the
Company or any subsidiary, division or operating or principal business unit of
the Company (collectively, an "Acquisition Proposal"). Notwithstanding the
foregoing, the Company may furnish information concerning its business,
properties or assets to any corporation, partnership, person or other entity or
group pursuant to appropriate confidentiality agreements, and may negotiate and
participate in discussions and negotiations with such entity or group
concerning an Acquisition Proposal (x) if such entity or group has on an
unsolicited basis submitted a bona fide written proposal to the Company Board
relating to any such transaction which the Company Board determines in good
faith represents a superior transaction to the Offer and the Merger and which
is not conditioned upon obtaining additional financing and (y) if, in the
opinion of the Company Board, only after receipt of advice from independent
legal counsel to the Company, the failure to provide such information or access
or to engage in such discussions or negotiations would cause the Company Board
to violate its fiduciary duties to the Company's stockholders under applicable
law (an Acquisition Proposal which satisfies clauses (x) and (y) being referred
to herein as a "Superior Proposal"). The Company will immediately communicate
to Parent the terms of any proposal, discussion, negotiation or inquiry (and
will disclose any written materials received by the Company in connection with
such proposal, discussion negotiation, or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
(b) Except as set forth herein, neither the Company Board nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or the Purchaser, the approval or
recommendation by the Company Board or any such com-
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49
mittee of the Offer, this Agreement or the Merger, (ii) approve or recommend,
or propose to approve or recommend, any Acquisition Proposal or (iii) enter
into any agreement with respect to any Acquisition Proposal. Notwithstanding
the foregoing, prior to the time of acceptance for payment of Shares in the
Offer, the Company Board may (subject to the terms of this and the following
sentence) withdraw or modify its approval or recommendation of the Offer, this
Agreement or the Merger, approve or recommend a Superior Proposal, or enter
into an agreement with respect to a Superior Proposal, in each case at any time
after the second business day following Parent's receipt of written notice
advising Parent that the Company Board has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal; provided that the Company
Board shall have determined, only after receipt of advice from outside legal
counsel to the Company, that the failure to take such action would cause the
Company Board to violate its fiduciary duties to the Company's stockholders
under applicable law; provided further that the Company shall not enter into an
agreement with respect to a Superior Proposal unless the Company shall have
furnished Parent with written notice not later than noon (New York time) one
day in advance of any date that it intends to enter into such agreement and
shall have caused its financial and legal advisors to negotiate with Parent to
make such adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with the transactions contemplated herein on such
adjusted terms. In addition, if the Company proposes to enter into an
agreement with respect to any Acquisition Proposal, it shall concurrently with
entering into such agreement pay, or cause to be paid, to Parent the
Termination Fee (as defined in Section 8.1) subject to the provisions of
Section 8.1.
Section 5.6 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to Parent
and the Company. Thereafter, so long as this Agreement is in effect, neither
the Company, Parent nor any of their respective affiliates shall issue or cause
the publication of any press release or other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without
the prior consultation of the other party, except as may be required by law
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50
or by any listing agreement with a national securities exchange or trading
market.
Section 5.7 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior
to the Effective Time and (ii) any material failure of the Company, Parent or
the Purchaser, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.7
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.8 Indemnification. For six years after the Effective Time,
Parent shall cause the Surviving Corporation (or any successor to the Surviving
Corporation) to indemnify, defend and hold harmless the present and former
officers and directors of the Company and its subsidiaries (each an
"Indemnified Party") against all losses, claims, damages, liabilities, fees and
expenses (including reasonable fees and disbursements of counsel and judgments,
fines, losses, claims, liabilities and amounts paid in settlement (provided
that any such settlement is effected with the written consent of the Parent or
the Surviving Corporation)) arising out of actions or omissions occurring at or
prior to the Effective Time to the full extent permitted under Delaware law,
subject to the terms of the Company's Certificate of Incorporation, By-laws and
indemnification agreements, all as in effect at the date hereof, including
provisions relating to advancement of expenses incurred in the defense of any
action or suit; provided that, in the event any claim or claims are asserted or
made within such six year period, all rights to indemnification in respect of
any such claim or claims shall continue until disposition of any and all such
claims; provided further, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under Delaware law, the Certificate of Incorporation, the By-Laws or
such agreements, as the case may be, shall be made by independent counsel
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51
mutually acceptable to Parent and the Indemnified Party and; provided further,
that nothing herein shall impair any rights or obligations of any present or
former directors or officers of the Company.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or the Purchaser, as the case may be, to the extent permitted
by applicable law:
(a) Stockholder Approval. This Agreement shall have been approved
and adopted by the requisite vote of the stockholders of the Company, if
required by applicable law and the Certificate of Incorporation, in order to
consummate the Merger;
(b) Statutes; Consents. No law, statute, rule, order, decree or
regulation shall have been enacted or promulgated by any Governmental Entity of
competent jurisdiction which declares this Agreement invalid or unenforceable in
any material respect or which prohibits completion of the Offer or consummation
of the Merger, and all governmental consents, orders and approvals (including,
without limitation, those identified in Section 5.4(a) of the Schedule attached
to this Agreement) required for the completion of the Offer or consummation of
the Merger and the other transactions contemplated hereby shall have been
obtained and shall be in effect at the Effective Time;
(c) Injunctions. There shall be no order or injunction of any
Governmental Entity in effect precluding, restraining, enjoining or prohibiting
completion of the Offer or consummation of the Merger;
(d) Purchase of Shares in Offer. Parent, the Purchaser or their
affiliates shall have purchased Shares pursuant to the Offer; and
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52
(e) HSR Approval. The applicable waiting period under the HSR Act
shall have expired or been terminated.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof:
(a) By the mutual written consent of the Board of Directors of Parent
and the Company Board.
(b) By either of the Board of Directors of Parent or the Company
Board:
(i) if the Offer shall have expired without any Shares being
purchased therein; provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(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 of Parent or the Purchaser, as the
case may be, to purchase the Shares pursuant to the Offer on or prior to
the date on which the Offer shall have expired; or
(ii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
Transactions and such order, decree, ruling or other action shall have
become final and non-appealable.
(c) By the Company Board:
(i) if, prior to the purchase of the Shares pursuant to the Offer,
Parent or the Purchaser breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements
contained herein or breaches its
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53
representations and warranties in any material respect; or
(ii) in connection with entering into a definitive agreement in
accordance with Section 5.5(b), provided it has complied with all
provisions thereof, including the notice provisions therein, and that it
makes simultaneous payment of the Termination Fee; or
(iii) if Parent or the Purchaser shall have terminated the Offer
without Parent or the Purchaser, as the case may be, purchasing any Shares
pursuant thereto; provided that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(iii) if the Company is in
material breach of this Agreement; or
(iv) if Parent, the Purchaser or any of their affiliates shall have
failed to commence the Offer on or prior to the fifth business day
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate this Agreement pursuant to
this Section 7.1(c)(iv) if the Company is in material breach of this
Agreement.
(d) By the Board of Directors of the Parent or the Board of Directors of
the Purchaser:
(i) if prior to the purchase of the Shares pursuant to the Offer, the
Company Board (A) shall have withdrawn, or modified or changed in a manner
adverse to Parent or the Purchaser, its approval or recommendation of the
Offer, this Agreement or the Merger, or (B) shall have approved or
recommended an Acquisition Proposal, or (C) shall have executed an
agreement in principle (or similar agreement) or definitive agreement
providing for a tender offer or exchange offer for any shares of capital
stock of the Company, or a merger, consolidation or other business
combination with a person or entity other than Parent, the Purchaser or
their affiliates (or the Company Board resolves to do any of the
foregoing); or
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54
(ii) if Parent or the Purchaser shall have terminated the Offer
without Parent or the Purchaser purchasing any Shares thereunder, provided
that Parent or the Purchaser may not terminate this Agreement pursuant to
this Section 7.1(d)(ii) if Parent or the Purchaser has failed to purchase
the Shares in the Offer in violation of the material terms thereof; or
(iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, the Purchaser, or any of
their affiliates shall have failed to commence the Offer on or prior to the
fifth business day following the date of the initial public announcement of
the Offer.
Section 7.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 7.1, written notice thereof by the
terminating party shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void, and there shall be no
liability on the part of Parent, the Company, their respective stockholders and
affiliates, or the respective officers and directors thereof, except as set
forth in Section 8.1 and pursuant to the Confidentiality Agreement; provided,
however, that nothing herein shall relieve any party from liability for fraud or
for any material breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the Transactions shall be
paid by the party incurring such expenses. Notwithstanding the foregoing, if
(x) this Agreement is terminated pursuant to Section 7.1(c)(ii) or 7.1(d)(i)
hereof or (y) prior to the termination of this Agreement an Acquisition Proposal
shall have been made and within 12 months of such termination an Acquisition
Proposal shall have been consummat-
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55
ed or the Company shall have entered into an agreement with respect to, or
shall have approved or recommended, an Acquisition Proposal, then the Company
shall pay to Parent (concurrently with such termination, in the case of clause
(x) above, and not later than the consummation of such later Acquisition
Proposal, in the case of clause (y) above) an amount equal to U.S.$10 million
(the "Termination Fee"). In addition, if the Offer is terminated pursuant to
paragraph (g) of Annex A hereto, Parent will pay to the Company an amount equal
to all out-of-pocket fees and expenses of the Company incurred in connection
with this Agreement and the Offer (including legal and investment banking fees
and expenses) to a maximum of U.S. $1 million.
Section 8.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto (which in the
case of the Company shall include approvals as contemplated in Section 1.4(b)),
at any time prior to the Closing Date with respect to any of the terms
contained herein; provided, however, that after the approval of this Agreement
by the stockholders of the Company, no such amendment, modification or
supplement shall reduce the amount, or change the form, of the Merger
Consideration.
Section 8.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time.
Section 8.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such
as Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
Extendicare Inc.
0000 Xxxxxxx Xxxxxx Xxxx
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Suite 700
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b) if to the Company, to:
Arbor Health Care Company
0000 Xxxxxxx Xxxx
Xxx 000
Xxxx, Xxxx 00000
Attention: Pier X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx, Loop & Xxxxxxxx, LLP
Xxxxxxx Xxxxx - Xxxxx 0000
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Section 8.5 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation". As used in this Agreement, the term "affiliate(s)" shall
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57
have the meaning set forth in Rule l2b-2 promulgated under the Exchange Act.
Section 8.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitute
the entire agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.8 and Schedule 3.15 hereto, is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
Section 8.8 Severability. Any term or provision of this Agreement that
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction or other authority declares that any term or provision
hereof is invalid, void or unenforceable, the parties agree that the court
making such determination shall have the power to reduce the scope, duration,
area or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term or provision.
Section 8.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
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Section 8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 8.11 Transfer and Similar Taxes. Notwithstanding any other
provision of this Agreement to the contrary, each of the Company's stockholders
shall be responsible for the payment of any sales, use, privilege, transfer,
documentary, gains, stamp, duties, recording and similar Taxes and fees
(including any penalties, interest and additions to such fees), except for
taxes relating to "excess parachute payments" with respect to persons referred
to in Schedule 3.17 of the Company Disclosure Schedule, incurred in connection
with such stockholder's sale of Shares to the Purchaser pursuant to this
Agreement and for the accurate filing of all necessary Tax Returns and other
documentation with respect to any transfer Tax.
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IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
EXTENDICARE INC.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President, Finance
AHC ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President &
Chief Financial Officer
ARBOR HEALTH CARE COMPANY
By: /s/ Pier X. Xxxxx
------------------------------------------
Name: Pier. X. Xxxxx
Title: Chairman, President and
Chief Executive Officer
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ANNEX A
Certain Conditions of the Offer. Notwithstanding any other provisions of
the Offer, and in addition to (and not in limitation of) the Purchaser's rights
to extend and amend the Offer at any time in its sole discretion (subject to
the provisions of this Agreement), the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate or amend the Offer as to any Shares
not then paid for, if (i) any applicable waiting period under the HSR Act has
not expired or terminated, (ii) the Minimum Condition has not been satisfied,
(iii) the Company, the Parent and the Purchaser, as required, have not obtained
all necessary material consents, approvals, orders, authorizations,
registrations, declarations, permits or filings required to be obtained by it
in connection with this Agreement and the transactions contemplated hereby or
(iv) at any time on or after the date of the Merger Agreement and before the
time of payment for any such Shares, any of the following events shall occur or
shall be determined by the Purchaser to have occurred:
(a) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity against the Purchaser, Parent, the Company
or any subsidiary of the Company (i) seeking to prohibit or impose any material
limitations on Parent's or the Purchaser's ownership or operation (or that of
any of their respective subsidiaries or affiliates) of all or a material portion
of their or the Company's businesses or assets, or to compel Parent or the
Purchaser or their respective subsidiaries and affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or Parent
and their respective subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or the
X-0
00
Xxxxxxxxx of any Shares under the Offer, the Merger or pursuant to the
Stockholder Agreements, seeking to restrain or prohibit the making or
consummation of the Offer or the Merger or the performance of any of the other
Transactions (including the voting provisions thereunder), or seeking to
obtain from the Company, Parent or the Purchaser any damages that are
material in relation to the Company and its subsidiaries taken as a whole,
(iii) seeking to impose material limitations on the ability of the Purchaser,
or render the Purchaser unable, to accept for payment, pay for or purchase
some or all of the Shares pursuant to the Offer and the Merger, (iv) seeking
to impose material limitations on the ability of the Purchaser or Parent
effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's stockholders, or (v) which
otherwise is reasonably likely to have a material adverse affect on the
Company and its subsidiaries, taken as a whole;
(b) there shall be any statute, rule, regulation, judgment, order
or injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Government
Entity, to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under HSR Act, that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses (i)
through (iv) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
The Toronto Stock Exchange or in the Nasdaq Stock Market, for a period in
excess of 24 hours (excluding suspensions or limitations resulting solely
from physical damage or interference with such exchanges not related to
market conditions), (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or Canada
(whether or not mandatory), (iii) a commencement of a war directly or
indirectly involving the United States or Canada, (iv) any limitation
(whether or not mandatory) by any United States or Canadian governmental
authority on the extension of credit generally by banks or other financial
institutions, (v) a change in general financial, bank or capital market
conditions which materially adversely affects the ability of financial
institutions in the United States or Canada to extend credit or syndicate
loans or (vi) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
X-0
00
(x) (x) the representations and warranties of the Company set forth
in this Agreement shall not be true and correct in any material respect as of
the date of this Agreement and as of consummation of the Offer as though made
on or as of such date, (ii) the Company shall have failed to comply with its
covenants and agreements under this Agreement in all material respects or (iii)
there shall have occurred any events or changes which have had or will have a
material adverse effect on the Company and its subsidiaries taken as a whole;
(e) (i) the Company Board shall have withdrawn, or modified or
changed in a manner adverse to Parent or the Purchaser (including by amendment
of the Schedule 14D-9) its approval or recommendation of the Offer, this
Agreement, or the Merger, or approved or recommended any Acquisition Proposal,
(ii) the Company shall have entered into any agreement with respect to any
Superior Proposal in accordance with Section 5.5(b) of this Agreement or (iii)
the Company Board, upon request of the Purchaser, shall fail to reaffirm its
recommendation of the Offer, this Agreement or the Merger;
(f) this Agreement shall have terminated in accordance with its terms;
or
(g) there shall have occurred after the date hereof any material
adverse change in the business, assets, liabilities (actual or contingent),
operations, condition, financial or otherwise) or prospects of Extendicare
Health Services, Inc., an indirect wholly owned subsidiary of Parent ("EHSI"),
and its subsidiaries, taken as a whole, and Nationsbank, N.A. or Nationsbanc
Capital Markets, Inc. shall have declined to participate in the financing to be
provided to EHSI as set forth in their letter to Parent dated September 29,
1997.
which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser) giving rise to such condition makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be waived by Parent or the Purchaser, in whole or in part at
any time and from time
A-3
63
to time in the sole discretion of Parent or the Purchaser. The failure by
Parent or the Purchaser at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to
time.
A-4
