EXECUTION COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
SUN HEALTHCARE GROUP, INC.,
NECTARINE ACQUISITION CORPORATION
and
CONTOUR MEDICAL, INC.
Dated as of February 17, 1997
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE MERGER
SECTION 2.01. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.02. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.03. EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.04. EFFECT OF THE MERGER . . . . . . . . . . . . . . . . . . 10
SECTION 2.05. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND
OFFICERS OF SURVIVING CORPORATION. . . . . . . . . . . 10
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01. CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . 11
SECTION 3.02. EXCHANGE OF SHARES OTHER THAN TREASURY SHARES AND
DISSENTING SHARES. . . . . . . . . . . . . . . . . . . 12
SECTION 3.03. STOCK TRANSFER BOOKS . . . . . . . . . . . . . . . . . . 13
SECTION 3.04 NO FRACTIONAL SHARE CERTIFICATES . . . . . . . . . . . . 14
SECTION 3.05 OPTIONS AND WARRANTS TO PURCHASE COMPANY COMMON STOCK. . 14
SECTION 3.06 CERTAIN ADJUSTMENTS. . . . . . . . . . . . . . . . . . . 15
SECTION 3.07 UNDISTRIBUTED AMOUNTS. . . . . . . . . . . . . . . . . . 15
SECTION 3.08 DISSENTING SHARES. . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES . . . . . . 16
SECTION 4.02. ARTICLES OF INCORPORATION AND BYLAWS . . . . . . . . . . 17
SECTION 4.03. CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.04. AUTHORITY RELATIVE TO THIS AGREEMENT . . . . . . . . . . 18
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . . . . 19
SECTION 4.06. PERMITS; COMPLIANCE WITH LAWS. . . . . . . . . . . . . . 20
SECTION 4.07. SEC FILINGS; FINANCIAL STATEMENTS. . . . . . . . . . . . 21
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . 22
SECTION 4.09. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. . . . . . . . . . 23
SECTION 4.10. CERTAIN TAX MATTERS. . . . . . . . . . . . . . . . . . . 26
SECTION 4.11. CONTRACTS; DEBT INSTRUMENTS. . . . . . . . . . . . . . . 26
SECTION 4.12. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.13. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . 27
SECTION 4.14. INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . 27
SECTION 4.15. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.16. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.17. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.18. RULE 145 AFFILIATES. . . . . . . . . . . . . . . . . . . 30
SECTION 4.19. BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.20. CERTAIN BUSINESS PRACTICES . . . . . . . . . . . . . . . 30
SECTION 4.21. TRANSACTION EXPENSES . . . . . . . . . . . . . . . . . . 30
SECTION 4.22. INTERESTED PARTY TRANSACTIONS. . . . . . . . . . . . . . 30
SECTION 4.23. STATE TAKEOVER STATUTES. . . . . . . . . . . . . . . . . 30
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 5.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES . . . . . . 31
SECTION 5.02. CERTIFICATE OF INCORPORATION AND BYLAWS. . . . . . . . . 32
SECTION 5.03. CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.04. AUTHORITY RELATIVE TO THIS . . . . . . . . . . . . . . . 33
SECTION 5.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . . . . 33
SECTION 5.06. PERMITS; COMPLIANCE WITH LAWS. . . . . . . . . . . . . . 34
SECTION 5.07. SEC FILINGS; FINANCIAL STATEMENTS. . . . . . . . . . . . 36
SECTION 5.08. ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . 37
SECTION 5.09. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. . . . . . . . . . 37
SECTION 5.10. CERTAIN TAX MATTERS. . . . . . . . . . . . . . . . . . . 38
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SECTION 5.11. CONTRACTS; DEBT INSTRUMENTS. . . . . . . . . . . . . . . 38
SECTION 5.12. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.13. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . 39
SECTION 5.14. INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . 39
SECTION 5.15. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.16. BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.17. CERTAIN BUSINESS PRACTICES . . . . . . . . . . . . . . . 40
ARTICLE VI
COVENANTS
SECTION 6.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE CLOSING . 41
SECTION 6.02. CONDUCT OF BUSINESS BY PARENT PENDING THE CLOSING. . . . 44
SECTION 6.03. NOTICES OF CERTAIN EVENTS. . . . . . . . . . . . . . . . 45
SECTION 6.04. ACCESS TO INFORMATION; CONFIDENTIALITY . . . . . . . . . 45
SECTION 6.05. NO SOLICITATION OF TRANSACTIONS. . . . . . . . . . . . . 46
SECTION 6.06. LETTERS OF ACCOUNTANTS . . . . . . . . . . . . . . . . . 46
SECTION 6.07. SUBSEQUENT FINANCIAL STATEMENTS. . . . . . . . . . . . . 47
SECTION 6.08. CONTROL OF OPERATIONS. . . . . . . . . . . . . . . . . . 47
SECTION 6.09. FURTHER ACTION; CONSENTS; FILINGS. . . . . . . . . . . . 47
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. REGISTRATION STATEMENT; PROXY STATEMENT. . . . . . . . . 48
SECTION 7.02. STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . 50
SECTION 7.03. RULE 145 AFFILIATES. . . . . . . . . . . . . . . . . . . 51
SECTION 7.04. DIRECTORS' AND OFFICERS' INDEMNIFICATION . . . . . . . . 51
SECTION 7.05. NO SHELF REGISTRATION. . . . . . . . . . . . . . . . . . 51
SECTION 7.06. PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . 52
SECTION 7.07. STOCK EXCHANGE LISTING . . . . . . . . . . . . . . . . . 52
SECTION 7.08. BLUE SKY . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.09. COMPANY STOCK OPTIONS. . . . . . . . . . . . . . . . . . 52
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ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO
CONSUMMATE THE MERGER. . . . . . . . . . . . . . . . . 53
SECTION 8.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY . . . . . . 54
SECTION 8.03. CONDITIONS TO THE OBLIGATIONS OF PARENT. . . . . . . . . 55
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 9.02. EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . 57
SECTION 9.03. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.04. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.05. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . 59
SECTION 10.02. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 10.03. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . 60
SECTION 10.04. ASSIGNMENT; BINDING EFFECT; BENEFIT . . . . . . . . . . 60
SECTION 10.05. INCORPORATION OF EXHIBITS . . . . . . . . . . . . . . . 60
SECTION 10.06. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . 60
SECTION 10.07. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . 61
SECTION 10.08. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.09. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.10. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . 61
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of
February 17, 1997 (as amended, supplemented or otherwise modified from time to
time, this "AGREEMENT"), among SUN HEALTHCARE GROUP, INC., a corporation
organized and existing under the laws of the State of Delaware ("PARENT"),
NECTARINE ACQUISITION CORPORATION, a corporation organized and existing under
the laws of the State of Nevada ("MERGER SUB") and a direct wholly owned
subsidiary of Parent, and CONTOUR MEDICAL, INC., a corporation organized and
existing under the laws of the State of Nevada (the "COMPANY");
W I T N E S S E T H:
WHEREAS, the boards of directors of Parent, Merger Sub and the Company
have each determined that it is consistent with and in furtherance of their
respective long-term business strategies and fair to and in the best interests
of their respective stockholders to combine the respective businesses of Parent
and the Company by means of a merger (the "MERGER") of Merger Sub with and into
the Company upon the terms and subject to the conditions set forth herein and in
accordance with the General Corporation Law of the State of Nevada (the "GENERAL
CORPORATION LAW");
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent and Merger Sub to enter into this Agreement, Parent has
entered into a stock option and proxy agreement substantially in the form
attached hereto as EXHIBIT 1.00(a), dated as of the date hereof (the
"STOCKHOLDER STOCK OPTION AND PROXY AGREEMENT"), with Retirement Care
Associates, Inc., a corporation organized and existing under the laws of the
State of Colorado ( "PRINCIPAL STOCKHOLDER"), pursuant to which Principal
Stockholder has granted to Parent an option to purchase from Principal
Stockholder, and a proxy to vote, all of the shares of Company Capital Stock (as
hereinafter defined) held by Principal Stockholder, all upon the terms and
subject to the conditions set forth therein;
WHEREAS, concurrently with the execution of this Agreement, Parent,
Principal Stockholder and Peach Acquisition Corporation, a Colorado corporation
and a direct wholly owned subsidiary of Parent ("RCA MERGER SUB"), have entered
into an Agreement and Plan of Merger and Reorganization (the "RCA MERGER
AGREEMENT") pursuant to which RCA Merger Sub will be merged with and into
Principal Stockholder (the "RCA MERGER"), all upon the terms and subject to the
conditions set forth therein; and
WHEREAS, for financial reporting purposes, it is intended that the
Merger be accounted for as a purchase under applicable United States accounting
rules and the accounting standards of the United States Securities and Exchange
Commission (the "SEC");
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NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. Unless the context otherwise
requires, the following terms, when used in this Agreement, shall have the
respective meanings specified below (such meanings to equally applicable to the
singular and plural number of the terms so defined, unless the context otherwise
requires):
"AFFILIATE" shall have the meaning specified in rule 144 promulgated
under the Securities Act.
"AGREEMENT" shall have the meaning specified in the preamble to this
Agreement.
"ARTICLES OF MERGER" shall have the meaning specified in Section 2.03.
"BENEFICIAL OWNER" shall mean, with respect to any shares of capital
stock, a person who shall be deemed to be the beneficial owner of such shares
(i) which such person or any of its affiliates or associates (as such term is
defined in rule 12b-2 promulgated under the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding, or
(iii) which are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or associates or person with whom
such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any such shares of capital stock.
"BLUE SKY LAWS" shall mean state securities or "blue sky" laws.
"BUSINESS DAY" shall mean any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any
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payment is due, any day on which banks are not required or authorized by law,
regulation or executive order to close in New York, New York.
"CASH DEPOSIT" shall have the meaning specified in Section 3.05.
"CLOSING" shall have the meaning specified in Section 2.02.
"CLOSING DATE MARKET PRICE" shall mean the average of the last
reported sales prices of one share of Parent Common Stock on the NYSE during the
period of the 20 most recent trading days ending on the Determination Date.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
together with the rules and regulations promulgated thereunder.
"COMMON EXCHANGE RATIO" shall have the meaning specified in
Section 3.01(a).
"COMPANY" shall have the meaning specified in the preamble to this
Agreement.
"COMPANY 1996 10-K" shall have the meaning specified in Section 4.02.
"COMPANY AFFILIATE AGREEMENT" shall have the meaning specified in
Section 7.05(a).
"COMPANY BENEFIT PLANS" shall have the meaning specified in
Section 4.09(a).
"COMPANY CAPITAL STOCK" shall mean the Company Common Stock and the
Series A Preferred Stock.
"COMPANY COMMON STOCK" shall mean the Common Stock par value $0.001
per share, of the Company.
"COMPANY CONFIDENTIALITY AGREEMENT" shall mean the confidentiality
agreement, dated as of November 12, 1996, between Parent and Principal
Stockholder.
"COMPANY DISCLOSURE SCHEDULE" shall mean the disclosure schedule
delivered by the Company to Parent prior to the execution of this Agreement and
forming a part hereof.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean any change in or effect
on the business of the Company and the Company Subsidiaries that is, or could
reasonably be
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expected to be, materially adverse to the business, prospects, assets (including
intangible assets), liabilities (contingent or otherwise), condition (financial
or otherwise) or results of operations of the Company and the Company
Subsidiaries taken as a whole.
"COMPANY MATERIAL CONTRACT" shall have the meaning specified in
Section 4.11.
"COMPANY PERMITS" shall have the meaning specified in Section 4.06(a).
"COMPANY REPORTS" shall have the meaning specified in Section 4.07(a).
"COMPANY STOCKHOLDERS' MEETING" shall have the meaning specified in
Section 7.01(a).
"COMPANY STOCK OPTION" shall have the meaning specified in
Section 3.06.
"COMPANY STOCK PLANS" shall mean the Company's Non-Qualified Stock
Bonus Plan and the Company's 1996 Stock Option Plan.
"COMPANY SUBSIDIARIES" shall have the meaning specified in
Section 4.01.
"COMPETING TRANSACTION" shall mean any of the following involving the
Company, as the case may be (other than the Merger contemplated by this
Agreement):
(i) any merger, consolidation, share exchange, business
combination or other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 15 percent or more of the assets of such party and its
subsidiaries, taken as a whole, in a single transaction or series of
transactions;
(iii) any tender offer or exchange offer for 15 percent or more
of the outstanding voting securities of such party or the filing of a
registration statement under the Securities Act in connection therewith;
(iv) any person having acquired beneficial ownership or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15
percent or more of the outstanding voting securities of such party;
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(v) any solicitation in opposition to the approval of this
Agreement by the stockholders of the Company; or
(vi) any public announcement of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the
foregoing.
"CONFIDENTIALITY AGREEMENTS" shall mean the Parent Confidentiality
Agreement and the Company Confidentiality Agreement.
"COSTS" shall have the meaning specified in Section 7.04(d).
"DELAWARE GENERAL CORPORATION LAW" shall mean the General Corporation
Law of the State of Delaware.
"DETERMINATION DATE" shall mean the fifth business day prior to the
date on which the Effective Time is expected to occur.
"DISSENTING SHARES" shall have the meaning specified in Section 3.09.
"$" shall mean United States Dollars.
"EFFECTIVE TIME" shall have the meaning specified in Section 2.03.
"ENVIRONMENTAL LAW" shall mean any Law and any enforceable judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Material, as in effect as of the date hereof.
"ENVIRONMENTAL PERMIT" shall mean any permit, approval, identification
number, license or other authorization required under or issued pursuant to any
applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" shall have the meaning specified in Section 3.03.
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"EXCHANGE FUND" shall have the meaning specified in Section 3.03.
"EXPENSES" shall mean, with respect to any party hereto, all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates, but excluding any allocation of overhead)
incurred by such party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of its
obligations pursuant to this Agreement and the consummation of the Merger, the
preparation, printing, filing and mailing of the Registration Statement and the
Proxy Statement, the solicitation of shareholder approvals, the filing of HSR
Act notice, if any, and all other matters related to the closing of the Merger.
"GENERAL CORPORATION LAW" shall have the meaning specified in the
recitals to this Agreement.
"GOVERNMENTAL ENTITY" shall mean any United States Federal, state or
local or any foreign governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or arbitral body.
"GOVERNMENTAL ORDER" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Entity.
"HAZARDOUS MATERIAL" shall mean (i) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any chemical, material or
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
"HSR ACT" shall mean Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, together with the rules and regulations promulgated
thereunder.
"INDEMNIFIED PARTIES" shall have the meaning specified in
Section 7.04(d).
"IRS" shall mean the United States Internal Revenue Service.
"LAW" shall mean any Federal, state, foreign or local statute, law,
ordinance, regulation, rule, code, order, judgment, decree, other requirement or
rule of law of the United States or any other jurisdiction, and any other
similar act or law.
"MEDICAID" shall have the meaning specified in Section 4.06(a).
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"MERGER" shall have the meaning specified in the recitals to this
Agreement.
"MERGER SUB" shall have the meaning specified in the preamble to this
Agreement.
"NYSE" shall mean the New York Stock Exchange, Inc.
"PARENT" shall have the meaning specified in the preamble to this
Agreement.
"PARENT 1995 10-K" shall have the meaning specified in Section 5.02.
"PARENT AFFILIATE AGREEMENT" shall have the meaning specified in
Section 7.03(b).
"PARENT BENEFIT PLANS" shall have the meaning specified in
Section 5.09(a).
"PARENT COMMON STOCK" shall mean the Common Stock, par value $0.01 per
share, of Parent.
"PARENT CONFIDENTIALITY AGREEMENT" shall mean the confidentiality
agreement, dated as of December 20, 1996, between Parent and Principal
Stockholder.
"PARENT DISCLOSURE SCHEDULE" shall mean the disclosure schedule
delivered by Parent to the Company prior to the execution of this Agreement and
forming a part hereof.
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change in or effect on
the business of Parent and the Parent Subsidiaries that is, or could reasonably
be expected to be, materially adverse to the business, prospects, assets
(including intangible assets), liabilities (contingent or otherwise), condition
(financial or otherwise) or results of operations of Parent and the Parent
Subsidiaries taken as a whole.
"PARENT MATERIAL CONTRACT" shall have the meaning specified in
Section 5.11.
"PARENT PERMITS" shall have the meaning specified in Section 5.06(a).
"PARENT PREFERRED STOCK" shall mean the preferred stock of Parent
designated as "Series A Preferred Stock" pursuant to the certificate of
designation of preferences of preferred shares of Parent filed with the
Secretary of State of the State of Delaware on June 2, 1995.
"PARENT REPORTS" shall have the meaning specified in Section 5.07(a).
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"PARENT RIGHTS" shall mean the preferred stock purchase rights issued
pursuant to that certain Rights Agreement, as amended, dated as of June 2, 1995,
between Parent and Boatmens' Trust Company (the "PARENT RIGHTS AGREEMENT").
"PARENT STOCKHOLDERS' MEETING" shall have the meaning specified in
Section 7.01(a).
"PARENT STOCK PLANS" shall mean Parent's 1993 Combined Incentive and
Nonqualified Stock Option Plan, as amended, 1993 Directors Stock Option Plan, as
amended, 1995 Non-Employee Directors' Stock Option Plan, 1996 Combined Incentive
and Nonqualified Stock Option Plan, as amended, and 1997 Stock Incentive Plan
and Employee Stock Purchase Plan.
"PARENT SUBSIDIARIES" shall have the meaning specified in
Section 5.01.
"PERSON" shall mean an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association, entity or government or political subdivision, agency or
instrumentality of a government.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement, dated as of
January 10, 1997, by and between Parent and RCA.
"PRESURRENDER DIVIDENDS" shall have the meaning specified in
Section 3.03.
"PRINCIPAL STOCKHOLDER" shall have the meaning specified in the
recitals to this Agreement.
"PROXY STATEMENT" shall have the meaning specified in Section 7.01(a).
"REGISTRATION STATEMENT" shall have the meaning specified in
Section 7.01(a).
"REPRESENTATIVES" shall have the meaning specified in Section 6.05(a).
"RULE 145 AFFILIATE" shall mean, with respect to any specified person,
any other persons who are "affiliates" of such specified person within the
meaning of rule 145 promulgated under the Securities Act.
"SEC" shall have the meaning specified in the recitals to this
Agreement.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"SERIES A PREFERRED STOCK" shall mean the preferred stock of the
Company designated as "Series A Convertible Preferred Stock" pursuant to
Amendment Number Eight to Articles of Incorporation of the Company filed with
the Secretary of State of the State of Nevada on February 2, 1995.
"STOCKHOLDERS STOCK OPTION AND PROXY AGREEMENT" shall have the meaning
specified in the recitals to this Agreement.
"SUBSIDIARY" shall mean, with respect to any person, any corporation,
limited liability company, partnership, joint venture or other legal entity of
which such person (either alone or through or together with any other subsidiary
of such person) owns, directly or indirectly, a majority of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
"SUPERIOR PROPOSAL" shall have the meaning specified in Section 6.06.
"SURVIVING CORPORATION" shall have the meaning specified in
Section 2.01.
"TAXES" shall mean any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any Governmental Entity or taxing authority, including, without
limitation, taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes; license,
registration and documentation fees; and customers' duties, tariffs and similar
charges.
"TERMINATING COMPANY BREACH" shall have the meaning specified in
Section 9.01(g).
"TERMINATING PARENT BREACH" shall have the meaning specified in
Section 9.01(h).
"U.S. GAAP" shall mean United States generally accepted accounting
principles.
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ARTICLE II
THE MERGER
SECTION 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the General
Corporation Law, at the Effective Time, Merger Sub shall be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (the "SURVIVING CORPORATION"). Parent may, at its
option, elect to amend this Agreement to provide for a merger of Company with
and into Merger Sub or Parent or one or more other affiliates of Parent (an
"ALTERNATIVE MERGER"); PROVIDED, HOWEVER, that (i) any such Alternative Merger
shall not adversely affect the tax or accounting treatment provided for herein
and shall not materially delay consummation of the transactions contemplated
hereby, (ii) in the event of any such election, the Company shall have the
opportunity to update the Company Disclosure Schedule to reflect additional
items that are required to be set forth therein only as a result of any
differences between the Alternative Merger structure and that of the Merger and
(iii) Parent shall waive any failure to satisfy Section 8.03(a) or 8.03(b) to
the extent such non-compliance results only from any differences between the
Alternative Merger structure and that of the Merger.
SECTION 2.02. CLOSING. Unless this Agreement shall have been
terminated and the Merger shall have been abandoned pursuant to Section 9.01 and
subject to the satisfaction or waiver of the conditions set forth in
Article VIII, the consummation of the Merger shall take place as promptly as
practicable (and in any event within three business days) after satisfaction or
waiver of the conditions set forth in Article VIII, at a closing (the "CLOSING")
to be held at the offices of Shearman & Sterling, 000 Xxxxxxxxxx Xxxxxx, Xxx
Xxxxxxxxx, Xxxxxxxxxx, unless another date, time or place is agreed to by the
Company and Parent.
SECTION 2.03. EFFECTIVE TIME. At the time of the Closing, the
parties shall cause the Merger to be consummated by filing articles of merger
(the "ARTICLES OF MERGER") with the Secretary of State of the State of Nevada in
such form as required by, and executed in accordance with the relevant
provisions of, the General Corporation Law (the date and time of such filing, or
such later time as may be agreed by the parties hereto and specified in the
Articles of Merger, being the "EFFECTIVE TIME").
SECTION 2.04. EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of the
General Corporation Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, except as otherwise provided herein, all
the property, rights, privileges, powers and franchises
11
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 2.05. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND
OFFICERS OF SURVIVING CORPORATION. Unless otherwise agreed by the Company and
Parent prior to the Effective Time, at the Effective Time:
(a) the articles of incorporation and bylaws of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the articles of
incorporation and bylaws of the Surviving Corporation until thereafter
amended as provided by Law and such articles of incorporation or bylaws;
(b) the officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation
until their successors are elected or appointed and qualified or until
their resignation or removal; and
(c) the directors of Merger Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation
until their successors are elected or appointed and qualified or until
their resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01. CONVERSION OF SECURITIES. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Common Stock to be cancelled pursuant to Section 3.01(c) and any Dissenting
Shares) and all rights in respect thereof shall forthwith cease to exist
and shall be converted into and become exchangeable for, at the election of
Parent, which election must be made prior to the date the Proxy Statement
is mailed to the stockholders of the Company, clause (i) to be applicable
in the absence of a timely election (the election of clause (ii) or (iii)
being a "CASH ELECTION"), (i) that number of shares of Parent Common Stock
(the "COMMON EXCHANGE RATIO") equal to the quotient of $8.50 and the
Closing Date Market Price, (ii) $8.50, net in cash, without interest
thereon, or (iii) a combination of
12
shares of of Parent Common Stock (valued at the Closing Date Market Price) and
cash with an aggregate value of $8.50;
(b) Each share of Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than any shares
of Series A Preferred Stock to be cancelled pursuant to Section 3.01(c) and
any Dissenting Shares) and all rights in respect thereof shall forthwith
cease to exist and shall be converted into and become exchangeable for, at
the election of Parent (the selection of clause (ii) or (iii) being a "CASH
ELECTION"), (i) that number of shares of Parent Common Stock equal to the
quotient of $4.00 and the Closing Date Market Price, (ii) $4.00, net in
cash, without interest thereon or (iii) a combination of shares of Parent
Common Stock (valued at the Closing Date Market Price) and cash with an
aggregate value of $4.00;
(c) Each share of Company Capital Stock held in the treasury of
the Company and each share of Company Capital Stock owned by Parent or any
direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be cancelled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto; and
(d) Each share of common stock, par value $.001 per share, of
Merger Sub ("MERGER SUB COMMON STOCK") issued and outstanding immediately
prior to the Effective Time and all rights in respect thereof shall
forthwith cease to exist and shall be converted into and become
exchangeable for one newly and validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
SECTION 3.02. EXCHANGE OF SHARES OTHER THAN TREASURY SHARES AND
DISSENTING SHARES. Subject to the terms and conditions hereof, at or prior to
the Effective Time, Parent shall appoint an exchange agent to effect the
exchange of shares of Company Capital Stock (other than Dissenting Shares) for
Parent Common Stock or cash, as the case may be, in accordance with the
provisions of this Article III (the "EXCHANGE AGENT"). From time to time after
the Effective Time, Parent shall deposit, or cause to be deposited, certificates
representing Parent Common Stock for conversion of shares of Company Capital
Stock (other than Dissenting Shares) or cash, as the case may be, in accordance
with the provisions of Section 3.01 (such certificates or cash, together with
any dividends or distributions with respect thereto, being herein referred to as
the "EXCHANGE FUND"). Commencing immediately after the Effective Time and until
the appointment of the Exchange Agent shall be terminated, each holder of a
certificate or certificates theretofore representing shares of Company Capital
Stock (other than Dissenting Shares) may surrender the same to the Exchange
Agent and, after the appointment of the Exchange Agent shall be terminated, any
such holder may surrender any such certificate to Parent. Such holder shall be
entitled upon such surrender to receive in exchange therefor a certificate or
certificates representing the
13
number of full shares of Parent Common Stock or cash into which the shares of
Company Capital Stock theretofore represented by the certificate or certificates
so surrendered shall have been converted in accordance with the provisions of
Section 3.01, together with a cash payment in lieu of fractional shares, if any,
in accordance with Section 3.04, and any such shares of Parent Common Stock
shall be deemed to have been issued at the Effective Time. Until so surrendered
and exchanged, each outstanding certificate which, prior to the Effective Time,
represented issued and outstanding shares of Company Capital Stock shall be
deemed for all corporate purposes of Parent, other than the payment of dividends
and other distributions, if any, to evidence ownership of the number of full
shares of Parent Common Stock or cash into which the shares of Company Capital
Stock theretofore represented thereby shall have been converted at the Effective
Time. Unless and until any such certificate theretofore representing shares of
Company Capital Stock is so surrendered, no dividend or other distribution, if
any, payable to the holders of record of Parent Common Stock as of any date
subsequent to the Effective Time shall be paid to the holder of such certificate
in respect thereof. Upon the surrender of any such certificate theretofore
representing shares of Company Capital Stock, however, the record holder of the
certificate or certificates representing shares of Parent Common Stock issued in
exchange therefor shall receive from the Exchange Agent or from Parent, as the
case may be, payment of the amount of dividends and other distributions, if any,
which as of any date subsequent to the Effective Time and until such surrender
shall have become payable with respect to such number of shares of Parent Common
Stock ("PRESURRENDER DIVIDENDS"). No interest shall be payable with respect to
the payment of Presurrender Dividends upon the surrender of certificates
theretofore representing shares of Company Capital Stock. After the appointment
of the Exchange Agent shall have been terminated, such holders of Parent Common
Stock which have not received payment of Presurrender Dividends shall look only
to Parent for payment thereof. Notwithstanding the foregoing provisions of this
Section 3.02, risk of loss and title to such certificates representing shares of
Company Capital Stock shall pass only upon proper delivery of such certificates
to the Exchange Agent, and neither the Exchange Agent nor any party hereto shall
be liable to a holder of shares of Company Capital Stock for any Parent Common
Stock or dividends or distributions thereon delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law or to a
transferee pursuant to Section 3.03. In the event that this Agreement shall
have been terminated pursuant to Section 9.01 hereof, the Company and Parent
shall cause the Exchange Agent to use its commercially reasonable efforts to
effect the prompt return of stock certificates representing shares of Company
Capital Stock to the holders thereof.
SECTION 3.03. STOCK TRANSFER BOOKS. (a) At the Effective Time, each
of the stock transfer books of the Company with respect to shares of Company
Capital Stock shall be closed, and there shall be no further registration of
transfers of shares of Company Capital Stock thereafter on the records of any
such stock transfer books. In the event of a transfer of ownership of shares of
Company Capital Stock that is not registered in the stock transfer
14
records of the Company, at the Effective Time, a certificate or certificates
representing the number of full shares of Parent Common Stock into which such
shares of Company Capital Stock shall have been converted shall be issued to the
transferee together with a cash payment in lieu of fractional shares, if any, in
accordance with Section 3.04, and a cash payment in the amount of Presurrender
Dividends, if any, in accordance with Section 3.02, if the certificate or
certificates representing such shares of Company Capital Stock is or are
surrendered as provided in Section 3.02, accompanied by all documents required
to evidence and effect such transfer and by evidence of payment of any
applicable stock transfer tax.
(b) Notwithstanding anything to the contrary herein,
certificates surrendered for exchange by any person constituting a Rule 145
Affiliate of the Company shall not be exchanged until Parent shall have received
from such person an executed Company Affiliate Agreement, as provided in
Section 7.03.
SECTION 3.04 NO FRACTIONAL SHARE CERTIFICATES. Unless Parent
otherwise determines, no scrip or fractional share certificates for Parent
Common Stock shall be issued upon the surrender for exchange of certificates
evidencing shares of Company Capital Stock, and an outstanding fractional share
interest shall not entitle the owner thereof to vote, to receive dividends or to
any rights of a stockholder of Parent or of the Surviving Corporation with
respect to such fractional share interest. In lieu of fractional shares, each
holder of shares of Company Capital Stock who, except for the provisions of this
Section 3.04, would be entitled to receive a fractional share of Parent Common
Stock shall, upon surrender of the certificate or certificates representing
shares of Company Capital Stock, be entitled to receive an amount in cash
(rounded to the nearest whole cent), without interest, equal to the product
obtained by multiplying (a) the fractional share interest to which such holder
would otherwise be entitled (after taking into account all shares of Company
Capital Stock held at the Effective Time by such holder) by (b) the closing
price for a share of Parent Common Stock on the NYSE on the first business day
immediately prior to the Effective Time. At or prior to the Effective Time,
Parent shall pay to the Exchange Agent an amount in cash (the "CASH DEPOSIT")
sufficient for the Exchange Agent to pay each holder of Company Capital Stock
the amount of cash in lieu of fractional shares to which such holder is entitled
pursuant to this Section 3.04. As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of Company Capital Stock
with respect to any fractional share interests, the Exchange Agent shall make
available such amounts, net of any required withholding, to such holders of
Company Capital Stock, subject to and in accordance with the terms of
Section 3.02. In no event shall either (i) the total cash consideration paid to
holders of Company Capital Stock in lieu of fractional shares exceed one percent
(1%) of the value of the total consideration issued to holders of Company
Capital Stock in exchange for their Company Capital Stock or (ii) any holder of
Company Capital Stock, directly or indirectly, receive cash in an amount equal
to or greater than the value of one full share of Parent Company Stock.
15
SECTION 3.05 OPTIONS AND WARRANTS TO PURCHASE COMPANY COMMON STOCK.
At the Effective Time, each option or warrant granted by the Company to purchase
shares of Company Common Stock (each, a "COMPANY STOCK OPTION") which is
outstanding and unexercised immediately prior to the Effective Time shall be
assumed by Parent and converted into an option or warrant to purchase shares of
Parent Common Stock in such number and at such exercise price as provided below
and otherwise having the same terms and conditions as in effect immediately
prior to the Effective Time (except to the extent that such terms, conditions
and restrictions may be altered in accordance with their terms as a result of
the Merger):
(a) the number of shares of Parent Common Stock to be subject to
the new option or warrant shall be equal to the product of (i) the number
of shares of Company Common Stock subject to the original option or warrant
and (ii) the Common Exchange Ratio;
(b) the exercise price per share of Parent Common Stock under
the new option or warrant shall be equal to the quotient of (i) the
exercise price per share of Company Common Stock under the original option
or warrant divided by (ii) the Common Exchange Ratio; and
(c) upon each exercise of options or warrants by a holder
thereof, the aggregate number of shares of Parent Common Stock deliverable
upon such exercise shall be rounded down, if necessary, to the nearest
whole share and the aggregate exercise price shall be rounded up, if
necessary, to the nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code.
SECTION 3.06 CERTAIN ADJUSTMENTS. If between the date of this
Agreement and the Effective Time, the outstanding shares of Company Capital
Stock or Parent Common Stock shall be changed into a different number of shares
by reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities shall
be declared thereon with a record date within such period or the number of
shares of Company Capital Stock on a fully diluted basis is in excess of that
specified in Section 4.03 and disclosed in 4.03 of the Company Disclosure
Schedule (regardless of whether such excess is a result of an additional
issuance of capital stock or a correction to such Sections), but excluding
options permitted to be issued pursuant to Section 6.01(b) hereof, then, the
exchange ratios established pursuant to the provisions of Section 3.01 shall be
adjusted accordingly to provide to the holders of Company Capital Stock the same
16
economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange, dividend or
increase.
SECTION 3.07 UNDISTRIBUTED AMOUNTS. Any portion of the Exchange Fund
or the Cash Deposit which remains undistributed for six months after the
Effective Time shall be delivered to Parent, and any holder of Company Capital
Stock who has not theretofore complied with the provisions of this Article III
shall thereafter look only to Parent for satisfaction of their claims for Parent
Common Stock or any cash in lieu of fractional shares of Parent Common Stock and
any Presurrender Dividends.
SECTION 3.08 DISSENTING SHARES. Notwithstanding any provision of
Section 3.01 hereof to the contrary, shares of Company Capital Stock which are
held by holders of such shares who have not voted in favor of the Merger, who
are entitled to dissent and who have delivered a written notice of intent to
demand payment for such shares in the manner provided in Section 481 et seq. of
the General Corporation Law ("DISSENTING SHARES"), shall not be converted into
or exchanged for or represent the right to receive any shares of Parent Common
Stock, unless such holder fails to perfect or effectively withdraws or loses
such rights to payment. If, after the Effective Time, such holder fails to
perfect or effectively withdraws or loses such right to payment, then such
Dissenting Shares shall thereupon be deemed to have been converted into and
exchanged pursuant to Section 3.01 hereof, as of the Effective Time, for the
right to receive shares of Parent Common Stock issued in the Merger to which the
holder of such shares of Company Capital Stock is entitled, without any interest
thereon. The Company shall give Parent prompt notice of any notices and demands
received by the Company for payment for shares of Company Capital Stock, and
Parent shall have the right to participate in all negotiations and proceedings
with respect to such notices and demands. The Company shall not, except with
the prior written consent of Parent, make any payment with respect to, or settle
or offer to settle, any such demands. Prior to the Effective Time, the Company
shall establish an escrow account with a financial institution and the Company
shall fund such escrow account with cash or cash equivalents in an amount
sufficient to make all payments to holders of Dissenting Shares. Such escrow
account shall survive the Merger. All payments to holders of Dissenting Shares
shall be made out of such escrow account, and no such payments shall be made or
otherwise funded by Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub
that:
17
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) The
Company and each directly and indirectly owned subsidiary of the Company (the
"COMPANY SUBSIDIARIES") has been duly organized and is validly existing and in
good standing (to the extent applicable) under the laws of the jurisdiction of
its incorporation or organization, as the case may be, and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company and each Company Subsidiary is duly
qualified or licensed to do business, and is in good standing (to the extent
applicable), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
(b) Section 4.01 of the Company Disclosure Schedule sets forth,
as of the date of this Agreement, a true and complete list of each Company
Subsidiary, together with (i) the jurisdiction of incorporation or organization
of each Company Subsidiary and the percentage of each Company Subsidiary's
outstanding capital stock or other equity interests owned by the Company or
another Company Subsidiary and (ii) an indication of whether each Company
Subsidiary is a "Significant Subsidiary" as defined in Regulation S-X under the
Exchange Act. Except as set forth in Section 4.01 of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary owns an equity interest
in any partnership or joint venture arrangement or other business entity that is
material to the financial condition, results of operations, business or
prospects of the Company and the Company Subsidiaries, taken as a whole.
SECTION 4.02. ARTICLES OF INCORPORATION AND BYLAWS. Except as set
forth in Section 4.02 of the Company Disclosure Schedule, the copies of the
Company's articles of incorporation and bylaws that are incorporated by
reference as exhibits to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 (the "COMPANY 1996 10-K") are true, complete and
correct copies thereof. Such articles of incorporation and bylaws are in full
force and effect. The Company is not in violation of any of the provisions of
its articles of incorporation or bylaws.
SECTION 4.03. CAPITALIZATION. The authorized capital stock of the
Company consists of 76,000,000 shares of Company Common Stock and 1,265,000
shares of preferred stock, all of which have been designated as Series A
Preferred Stock. As of the date hereof (i) 7,996,793 shares of Company Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable, (ii) no shares of Company Common Stock are
18
held in the treasury of the Company, (iii) no shares of Company Common Stock are
held by the Company Subsidiaries, (iv) 905,250 shares of Company Common Stock
are reserved for future issuance pursuant to employee stock options or stock
incentive rights granted under the Company Stock Plans, (v) 784,815 shares of
Company Common Stock are reserved for future issuance pursuant to outstanding
warrants to purchase shares of Company Common Stock, (vi) 194,250 shares of
Company Common Stock are reserved for issuance upon conversion of the Series A
Preferred Stock, (vii) 1,000,000 shares of Company Common Stock are reserved for
issuance upon conversion of the Company's 9% Convertible Debentures and (viii)
185,000 shares of Series A Preferred Stock are issued and outstanding. Except
for shares of Company Common Stock issuable pursuant to the Company Stock Plans
or pursuant to agreements or arrangements described in Section 4.03 of the
Company Disclosure Schedule, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which the Company is
a party or by which the Company is bound relating to the issued or unissued
capital stock of the Company or any Company Subsidiary or obligating the Company
or any Company Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Company Subsidiary. Section 4.03
of the Company Disclosure Schedule sets forth a complete and correct list as of
the date hereof of (w) the number of options and warrants to purchase Company
Common Stock outstanding and the number of shares of Company Common Stock
issuable thereunder, (x) the exercise price of each such outstanding stock
option and warrant, (y) the vesting schedule of each such outstanding stock
option and (z) the grantee or holder of each such option and warrant. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
prior to the Effective Time on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except in accordance with the
terms of the Series A Preferred Stock, there are no outstanding contractual
obligations of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of Company Capital Stock or any capital stock of
any Company Subsidiary. Each outstanding share of capital stock of each Company
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by the Company or another Company Subsidiary is free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Company's or such other Company
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except where the failure to own such shares free and clear could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth in Section 4.03 of the Company
Disclosure Schedule, there are no material outstanding contractual obligations
of the Company or any Company Subsidiary to provide funds to, or make any
material investment (in the form of a loan, capital contribution or otherwise)
in, any Company Subsidiary or any other person.
SECTION 4.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its
19
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate such transactions (other than the approval of this Agreement
and the Merger by the holders of a majority of the outstanding shares of Company
Common Stock and Series A Preferred Stock entitled to vote with respect thereto
at the Company Stockholders' Meeting, voting together as a single class and the
filing and recordation of the Articles of Merger as required by the General
Corporation Law). The execution and delivery of the Stockholders Stock Option
and Proxy Agreement by Principal Stockholder and the consummation by Principal
Stockholder of the transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize the Stockholders Stock
Option and Proxy Agreement or to consummate such transactions. This Agreement
has been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance by the Company of its obligations hereunder and the consummation of
the Merger will not, (i) conflict with or violate any provision of the articles
of incorporation or bylaws of the Company or any equivalent organizational
documents of any Company Subsidiary, (ii) assuming that all consents, approvals,
authorizations and permits described in Section 4.05(b) have been obtained and
all filings and notifications described in Section 4.05(b) have been made,
conflict with or violate any Law applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected or (iii) except as set forth in Section 4.05(a)
of the Company Disclosure Schedule, result in any breach of or constitute a
default (or an event which with the giving of notice or lapse of time or both
could reasonably be expected to become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
could not reasonably be expected, individually or in the aggregate, (A) to have
a Company Material Adverse Effect or (B) to prevent or materially delay the
performance by the Company of its obligations pursuant to this Agreement or the
consummation of the Merger.
20
(b) The execution and delivery of this Agreement by the Company
do not, and the performance by the Company of its obligations hereunder and the
consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing by the Company with or notification by the
Company to, any Governmental Entity, except (i) pursuant to applicable
requirements of the Exchange Act, the Securities Act, Blue Sky Laws, the rules
and regulations of the NYSE, state takeover laws, the premerger notification
requirements of the HSR Act, if any, the filing and recordation of the Articles
of Merger as required by the General Corporation Law, and as set forth in
Section 4.05(b) of the Company Disclosure Schedule, and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, could not reasonably be expected, individually or in
the aggregate, (A) to have a Company Material Adverse Effect or (B) to prevent
or materially delay the performance by the Company of its obligations pursuant
to this Agreement or the consummation of the Merger.
SECTION 4.06. PERMITS; COMPLIANCE WITH LAWS. (a) The Company and
the Company Subsidiaries are in possession of (i) all franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, easements, variances, exceptions, consents, certificates,
identification and registration numbers, approvals and orders of any
Governmental Entity necessary for the Company or any Company Subsidiary to own,
lease and operate its properties or to produce, store, distribute and market its
products or otherwise to carry on its business as it is now being conducted.
Neither the Company nor any Company Subsidiary is in conflict with, or in
default or violation of, (i) any Law applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected or (ii) any Company Permits, except in the case
of clauses (i) and (ii) for any such conflicts, defaults or violations that
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. Section 4.06(a) of the Company Disclosure
Schedule sets forth, as of the date of this Agreement, all actions, proceedings,
investigations or surveys pending or, to the knowledge of the Company,
threatened against the Company or any Company Subsidiary that could reasonably
be expected to result in the suspension or cancellation of any Company Permit,
except any such Company Permit where such suspension or cancellation could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth in Section 4.06(a) of the Company
Disclosure Schedule, since June 30, 1996, neither the Company nor any Company
Subsidiary has received from any Governmental Entity any written notification
with respect to possible conflicts, defaults or violations of Laws, except for
written notices relating to possible conflicts, defaults or violations that
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
(b) Except as disclosed on Section 4.06(b) of the Company
Disclosure Schedule, since June 30, 1996, there have been no written notices,
citations or decisions by
21
any governmental or regulatory body that any product produced, manufactured or
marketed at any time by the Company or any of the Company Subsidiaries (the
"COMPANY PRODUCTS"), other than a Company Third Party Product (as defined
below), is defective or fails to meet any applicable standards promulgated by
any such governmental or regulatory body, and no officer of the Company or any
of the Company Subsidiaries knows of any such defect or failure. In the case of
products which are produced or manufactured by third parties and are distributed
by the Company or any of the Company Subsidiaries (the "COMPANY THIRD PARTY
PRODUCTS"), to the knowledge of any of the officers of the Company or any of the
Company Subsidiaries, there have been no written notices, citations or decisions
by any governmental or regulatory body that any Company Third Party Product
distributed at any time by the Company or any of the Company Subsidiaries is
defective or fails to meet any applicable standards promulgated by any such
governmental or regulatory body, and none of the officers of the Company or any
of the Company Subsidiaries knows of any such defect or failure. The Company
and each of the Company Subsidiaries has complied with the laws, regulations,
policies, procedures and specifications applicable to the Company with respect
to the design, manufacture, labelling, testing and inspection of Company
Products in the United States and the operation of manufacturing facilities in
the United States promulgated by the United States Food and Drug Administration
(the "FDA"), and has complied with the laws, regulations, policies, procedures
and specifications applicable to the Company or such Company Subsidiary, as
applicable, in any jurisdiction outside the United States with respect to the
design, manufacture, labelling, testing and inspection of Company Products and
the operation of manufacturing facilities outside of the United States except
for such non-compliance as would not have a Company Material Adverse Effect.
Except as disclosed on Section 4.06(b) of the Company Disclosure Schedule, since
June 30, 1996, there have been no recalls, field notifications or seizures
ordered or, to the knowledge of any of the officers of the Company or any of its
Subsidiaries, threatened by any such governmental or regulatory body with
respect to any of the Company Products, other than Company Third Party Products,
and neither the Company nor any of the Company Subsidiaries has independently
engaged in recalls or field notifications. In the case of Company Third Party
Products distributed by the Company or any of the Company Subsidiaries, neither
Company nor any of the Company Subsidiaries has received any notices or any
recalls, field notifications or seizures ordered or threatened by any such
governmental or regulatory body with respect to any of such Company Third Party
Products, and neither Company nor any of the Company Subsidiaries has
independently engaged in recalls or field notifications. Except as set forth on
Exhibit 4.06(b) to the Company Disclosure Schedule, neither the Company nor any
of the Company Subsidiaries has received, and to the knowledge of any of the
officers of the Company or any of the Company Subsidiaries, there is no
reasonable basis for, any warning letter or Section 305 notices from the FDA.
(c) Except as set forth on Section 4.06(c)(i) of the Company
Disclosure Schedule, the Company or one or more of the Company Subsidiaries has
obtained, in all countries where the Company or such Company Subsidiary, as
applicable, is marketing or has
22
marketed the Company Products, all applicable licenses, registrations,
approvals, clearances and authorizations required to be obtained by it by local,
state or Federal agencies (including the FDA) in such countries regulating the
safety, effectiveness and market clearance of the Company Products in such
countries that are currently marketed by the Company or such Company Subsidiary,
as applicable, except where the failure to obtain such licenses, registrations,
approvals, clearances and authorizations would not have a Company Material
Adverse Effect. Section 4.06(c)(ii) of the Company Disclosure Schedule sets
forth a list of all licenses, registrations, approvals, permits and device
listings relating to Company Products. Section 4.06(c)(iii) of the Company
Disclosure Schedule sets forth a description of all inspections by regulatory
authorities, recalls, product actions and audits of Company Products since
June 30, 1996.
SECTION 4.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Except as
disclosed in Section 4.07 of the Company Disclosure Schedule, the Company has
timely filed all forms, reports, statements and documents required to be filed
by it (A) with the SEC and the NYSE since June 30, 1994 through the date of this
Agreement (collectively and as amended, the "COMPANY REPORTS") and (B) with any
other Governmental Entities, including, without limitation, state insurance and
health regulatory authorities. Each Company Report (i) was prepared in
accordance with the requirements of the Securities Act, the Exchange Act or the
rules and regulations of the NYSE, as the case may be, and (ii) did not at the
time it was filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. Each form, report, statement and document
referred to in clause (B) of this paragraph was prepared in all material
respects in accordance with the requirements of applicable Law. Except as
disclosed in Section 4.07 of the Company Disclosure Schedule, no Company
Subsidiary is subject to the periodic reporting requirements of the Exchange Act
or required to file any form, report or other document with the SEC, the NYSE,
any other stock exchange or any other comparable Governmental Entity.
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Company Reports was prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each presented
fairly, in all material respects, the consolidated financial position of the
Company and the consolidated Company Subsidiaries as at the respective dates
thereof and for the respective periods indicated therein, except as otherwise
noted therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which did not have and could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect).
(c) Except as and to the extent set forth or reserved against on
the consolidated balance sheet of the Company and the Company Subsidiaries as
reported in the
23
Company Reports, including the notes thereto, none of the Company or any Company
Subsidiary has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on a
balance sheet or in notes thereto prepared in accordance with U.S. GAAP, except
for liabilities or obligations incurred in the ordinary course of business
consistent with past practice since June 30, 1996 that have not had and could
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
June 30, 1996, except as contemplated by or as disclosed in this Agreement, as
set forth in Section 4.08 of the Company Disclosure Schedule or as disclosed in
any Company Report filed since June 30, 1996, the Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course
consistent with past practice and, since such date, there has not been (i) any
Company Material Adverse Effect, excluding any changes and effects resulting
from changes in economic, regulatory or political conditions or changes in
conditions generally applicable to the industries in which the Company and the
Company Subsidiaries are involved, (ii) any event that could reasonably be
expected to prevent or materially delay the performance of its obligations
pursuant to this Agreement and the consummation of the Merger by the Company,
(iii) any material change by the Company in its accounting methods, principles
or practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of Company Capital Stock or any
redemption, purchase or other acquisition of any of the Company's securities or
(v) any increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of the
Company or any Company Subsidiary except in the ordinary course of business
consistent with past practice.
SECTION 4.09. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Section 4.09(a) of the Company Disclosure Schedule lists (i) all employee
benefit plans as defined in Section 3(3) of ERISA) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements, whether legally enforceable or not, to which the
Company or any Company Subsidiary is a party, with respect to which the Company
or any Company Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Company Subsidiary for the
benefit of any current or former employee, officer or director of the Company or
any Company Subsidiary, (ii) each employee benefit plan for which the Company or
any Company Subsidiary could incur liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated, (iii) any plan
24
in respect of which the Company or any Company Subsidiary could incur liability
under Section 4212(c) of ERISA and (iv) any contracts, arrangements or
understandings between the Seller or any of its affiliates and any employee of
the Company or of any Company Subsidiary, including, without limitation, any
contracts, arrangements or understandings relating to the sale of the Company
(collectively, the "COMPANY BENEFIT PLANS"). With respect to each Company
Benefit Plans, the Company has delivered or made available to Parent a true,
complete and correct copy of (i) such Company Benefit Plan and the most recent
summary plan description related to such Company Benefit Plan, if a summary plan
description is required therefor, (ii) each trust agreement or other funding
arrangement relating to such Company Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the IRS) with respect to such Company Benefit
Plan, (iv) the most recent actuarial report or financial statement relating to
such Company Benefit Plan and (v) the most recent determination letter issued by
the IRS with respect to such Company Benefit Plan, if it is qualified under
Section 401(a) of the Code. Except as disclosed on Section 4.09(a) of the
Company Disclosure Schedule, there are no other employee benefit plans,
programs, arrangements or agreements, whether formal or informal, whether in
writing or not, to which the Company or any Company Subsidiary is a party, with
respect to which the Company or any Company Subsidiary has any obligation or
which are maintained, contributed to or sponsored by the Company or any Company
Subsidiary for the benefit of any current or former employee, officer or
director of the Company or any Company Subsidiary. Neither the Company nor any
Company Subsidiary has any express or implied commitment, whether legally
enforceable or not, (i) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, (ii) to enter
into any contract or agreement to provide compensation or benefits to any
individual or (iii) to modify, change or terminate any Company Benefit Plan,
other than with respect to a modification, change or termination required by
ERISA or the Code.
(b) None of the Company Benefit Plans is a multiemployer plan
(within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "MULTIEMPLOYER
PLAN") or a single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) for which the Company or any Company Subsidiary
could incur liability under Section 4063 or 4064 of ERISA (a "MULTIPLE EMPLOYER
PLAN"). None of the Company Benefit Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary.
(c) Each Company Benefit Plan has been administered in all
material respects in accordance with its terms and all contributions required to
be made under the terms of any of the Company Benefit Plans as of the date of
this Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company
Reports prior to the date of this Agreement. Except as set forth in
Section 4.09(c) of the Company Disclosure Schedule, with respect to the Company
Benefit
25
Plans, no event has occurred and, to the knowledge of the Company, there exists
no condition or set of circumstances in connection with which the Company or any
Company Subsidiary could be subject to any liability under the terms of such
Company Benefit Plans, ERISA, the Code or any other applicable Law which could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. No legal action, suit or claim is pending or
threatened with respect to any Company Benefit Plan (other than claims for
benefits in the ordinary course).
(d) The Company on behalf of itself and all of the Company
Subsidiaries hereby represents that, other than as disclosed in Section 4.09(d)
of the Company Disclosure Schedule or where the failure of such representation
to be true could not reasonably be expected to have, individual or in the
aggregate, a Company Material Adverse Effect: (i) each Company Benefit Plan
which is intended to be qualified under Section 401(a) of the Code or
Section 401(k) of the Code has received a favorable determination letter from
the IRS that it is so qualified and each trust established in connection with
any Company Benefit Plan which is intended to be exempt from federal income
taxation under Section 501(a) of the Code has received a determination letter
from the IRS that it is so exempt, and no fact or event has occurred since the
date of such determination letter from the IRS to adversely affect the qualified
status of any such Company Benefit Plan or the exempt status of any such trust;
(ii) each trust maintained or contributed to by the Company or any Company
Subsidiary which is intended to be qualified as a voluntary employees'
beneficiary association and which is intended to be exempt from federal income
taxation under Section 501(c)(9) of the Code has received a favorable
determination letter from the IRS that it is so qualified and so exempt, and no
fact or event has occurred since the date of such determination by the IRS to
adversely affect such qualified or exempt status; (iii) there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) with respect to any Company Benefit Plan; (iv) neither
the Company nor any Company Subsidiary has incurred any liability for any
penalty or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the Code
or any liability under Section 502 of ERISA, and no fact or event exists which
could give rise to any such liability; (v) no complete or partial termination
has occurred within the five years preceding the date hereof with respect to any
Company Benefit Plan; (vi) no reportable event (within the meaning of
Section 4043 of ERISA) has occurred or is expected to occur with respect to any
Company Benefit Plan subject to Title IV of ERISA; (vii) no Company Benefit Plan
had an accumulated funding deficiency (within the meaning of Section 302 of
ERISA or Section 412 of the Code), whether or not waived, as of the most
recently ended plan year of such Company Benefit Plan; (viii) none of the assets
of the Company or any Company Subsidiary is the subject of any lien arising
under Section 302(f) of ERISA or Section 412(n) of the Code; neither the Company
nor any Company Subsidiary has been required to post any security under
Section 307 of ERISA or Section 401(a)(29) of the Code; and no fact or event
exists which could give rise to any such lien or requirement to post any such
security; (ix) all contributions, premiums or payments required to be made with
respect to any Company
26
Benefit Plan have been made on or before their due dates; (x) all such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any government entity and no fact
or event exists which could give rise to any such challenge or disallowance; and
(xi) as of the Effective Time, no Company Benefit Plan which is subject to
Title IV of ERISA will have an "unfunded benefit liability" (within the meaning
of Section 4001(a)(18) of ERISA).
(e) Except as set forth in Section 4.09(e) of the Company
Disclosure Schedule, to the Company's knowledge, the Company and the Company
Subsidiaries are in compliance with the requirements of the Americans With
Disabilities Act.
(f) The Company and the Company Subsidiaries are in compliance
with the requirements of the Workers Adjustment and Retraining Notification Act
("WARN") and have no liabilities pursuant to WARN.
(g) Except as set forth in Section 4.09(g) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to any collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement is being negotiated by the Company or any Company Subsidiary. As of
the date of this Agreement, there is no labor dispute, strike or work stoppage
against the Company or any Company Subsidiary pending or, to the knowledge of
the Company, threatened which may interfere with the respective business
activities of the Company or any Company Subsidiary, except where such dispute,
strike or work stoppage could not reasonably be expected to have a Company
Material Adverse Effect. As of the date of this Agreement, to the knowledge of
the Company, none of the Company, any Company Subsidiary, or any of their
respective representatives or employees has committed any unfair labor practice
in connection with the operation of the respective businesses of the Company or
any Company Subsidiary, and there is no charge or complaint against the Company
or any Company Subsidiary by the National Labor Relations Board or any
comparable Governmental Entity pending or threatened in writing, except where
such unfair labor practice, charge or complaint could not reasonably be expected
to have a Company Material Adverse Effect.
(h) The Company has delivered to Parent true, complete and
correct copies of (i) all employment agreements with officers and all consulting
agreements of the Company and each Company Subsidiary providing for annual
compensation in excess of $100,000, (ii) all severance plans, agreements,
programs and policies of the Company and each Company Subsidiary with or
relating to their respective employees or consultants, and (iii) all plans,
programs, agreements and other arrangements of the Company and each Company
Subsidiary with or relating to their respective employees or consultants which
contain "change of control" provisions.
27
SECTION 4.10. CERTAIN TAX MATTERS. Except as disclosed in the
Company Reports, neither the Company nor, to the knowledge of the Company, any
of its affiliates has taken or agreed to take any action (other than actions
contemplated by this Agreement) that could reasonably be expected to prevent the
Merger from constituting a transaction qualifying under Section 368 of the Code.
The Company is not aware of any agreement, plan or other circumstances that
could reasonably be expected to prevent the Merger from so qualifying under
Section 368 of the Code.
SECTION 4.11. CONTRACTS; DEBT INSTRUMENTS. Except as disclosed in
the Company Reports or in Section 4.11 of the Company Disclosure Schedule, there
is no contract or agreement that is material to the business, financial
condition or results of operations of the Company and the Company Subsidiaries
taken as a whole (each, a "COMPANY MATERIAL CONTRACT"). Except as disclosed in
the Company Reports or in Section 4.11 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary is in violation of or in default
under (nor does there exist any condition which with the passage of time or the
giving of notice could reasonably be expected to cause such a violation of or
default under) any loan or credit agreement, note, bond, mortgage, indenture or
lease, or any other contract, license, agreement, arrangement or understanding
to which it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that could not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
Set forth in Section 4.11 of the Company Disclosure Schedule is a description of
any material changes to the amount and terms of the indebtedness of the Company
and its subsidiaries as described in the notes to the financial statements
incorporated in the Company 1996 10-K.
SECTION 4.12. LITIGATION. Except as disclosed in the Company Reports
or in Section 4.12 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any Company Subsidiary before any Governmental
Entity that could reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, and, except as disclosed to
Parent, to the knowledge of the Company, there are no existing facts or
circumstances that could reasonably be expected to result in such a suit, claim,
action, proceeding or investigation. Except as disclosed to Parent, the Company
is not aware of any facts or circumstances which could reasonably be expected to
result in the denial of insurance coverage under policies issued to the Company
and the Company Subsidiaries in respect of such suits, claims, actions,
proceedings and investigations, except in any case as could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. Except as disclosed in the Company Reports or in Section 4.12 of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary is
subject to any outstanding order, writ, injunction or decree which could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
28
SECTION 4.13. ENVIRONMENTAL MATTERS. Except as disclosed in the
Company Reports or in Section 4.13 of the Company Disclosure Schedule, or as
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, (i) the Company and the Company Subsidiaries
are in compliance with all applicable Environmental Laws; (ii) all past
noncompliance of the Company or any Company Subsidiary with Environmental Laws
or Environmental Permits has been resolved without any pending, ongoing or
future obligation, cost or liability; and (iii) neither the Company nor any
Company Subsidiary has released a Hazardous Material at, or transported a
Hazardous Material to or from, any real property currently or formerly owned,
leased or occupied by the Company or any Company Subsidiary, in violation of any
Environmental Law.
SECTION 4.14. INTELLECTUAL PROPERTY. Except as set forth in
Section 4.14 of the Company Disclosure Schedule, or as could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, the Company and the Company Subsidiaries own or possess adequate
licenses or other valid rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade dress, trade name rights, copyrights,
service marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the respective businesses of the Company and the Company
Subsidiaries as currently conducted, and the Company is unaware of any assertion
or claim challenging the validity of any of the foregoing. Section 4.14 of the
Company Disclosure Schedule lists all material licenses, sublicenses and other
agreements to which the Company or any Company Subsidiary is a party and
pursuant to which (i) any third party is authorized to use any intellectual
property right of the Company or any Company Subsidiary and (ii) the Company or
any Company Subsidiary is authorized to use any intellectual property rights
(other than pursuant to shrink-wrap licenses and software licenses) of a third
party, and includes the identity of all parties thereto, a description of the
nature and subject matter thereof, the royalty provisions, if any, therein and
the term thereof. Except as set forth in Section 4.14 of the Company Disclosure
Schedule, the conduct of the respective businesses of the Company and the
Company Subsidiaries as currently conducted does not conflict in any way with
any patent, patent right, license, trademark, trademark right, trade dress,
trade name, trade name right, service xxxx or copyright of any third party that
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. To the knowledge of the Company, there are no
infringements of any proprietary rights owned by or licensed by or to the
Company or any Company Subsidiary that could reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
SECTION 4.15. TAXES. The Company on behalf of itself and all of the
Company Subsidiaries hereby represents that, other than as disclosed in Section
4.15(a) of the Company Disclosure Schedule or where the failure of such
representation to be true could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse
29
Effect: (a) the Company and the Company Subsidiaries have filed all United
States federal income tax and all other material tax returns required to be
filed by them, and the Company and the Company Subsidiaries have paid and
discharged all Taxes due in connection with or with respect to the filing of all
Tax Returns and have paid all other Taxes as are due, except such as are being
contested in good faith by appropriate proceedings (to the extent any such
proceedings are required) and with respect to which the Company is maintaining
reserves to the extent currently required in all material respects adequate for
their payment; (b) neither the IRS nor any other taxing authority or agency is
now asserting or, to the best of the Company's knowledge, threatening to assert
against the Company or any of the Company Subsidiaries any deficiency or claim
for additional Taxes other than additional Taxes with respect to which the
Company is maintaining reserves in all material respects adequate for their
payment, and there are no requests for information currently outstanding that
could affect the Taxes of the Company or any Company Subsidiaries; (c) neither
the Company nor any of the Company Subsidiaries is currently being audited by
any taxing authority; (d) there are no tax liens on any assets of the Company or
any Company Subsidiary; (e) neither the Company nor any of the Company
Subsidiaries has granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any Tax; (f) the
accruals and reserves for taxes reflected in the audited balance sheet as of
June 30, 1996 included in the Company 1996 10-K are in all material respects
adequate to cover all Taxes accruable through the date thereof (including
interest and penalties, if any, thereon and Taxes being contested) in accordance
with generally accepted accounting principles; (g) neither the Company nor any
of the Company Subsidiaries is required to include in income any amount in
respect of any adjustment under Section 481 of the Code; (h) neither the Company
nor any of the Company Subsidiaries is a party to any agreement, contract or
arrangement that may result, separately or in the aggregate, in the payment of
any "excess parachute payment" within the meaning of Section 280G of the Code,
determined without regard to Section 280G(b)(4) of the Code; (i) neither the
Company nor any of the Company Subsidiaries owns any property of a character,
the transfer of which would give rise to (x) a revaluation of such property for
purposes of any AD VALOREM or similar tax, or (y) any documentary, stamp or
other transfer tax; and (j) neither the Company nor any of the Company
Subsidiaries has an "excess loss account" for purposes of the treasury
regulations promulgated under Section 1502 of the Code. Within ten days after
the date hereof, the Company and the Company Subsidiaries will make available to
Parent or its legal counsel for inspection copies of all income and sales and
use tax returns for all periods since the date of the Company's and the Company
Subsidiaries' incorporation.
SECTION 4.16. INSURANCE. Except as set forth in Section 4.16 of the
Company Disclosure Schedule, the Company and each Company Subsidiary is
presently insured, and during each of the past five calendar years has been
insured, against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. Except as set
forth in Section 4.16 of the Company Disclosure Schedule, the policies of fire,
theft, liability and other insurance maintained with respect to the
30
assets or businesses of the Company and the Company Subsidiaries provide
adequate coverage against loss.
SECTION 4.17. PROPERTIES. Except as set forth in Section 4.17 of the
Company Disclosure Schedule or specifically described in the Company Reports,
the Company and the Company Subsidiaries have good and marketable title, free
and clear of all liens, the existence of which could reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, to
all their material properties and assets, whether tangible or intangible, real,
personal or mixed, reflected in the Company's consolidated financial statements
contained in the Company 1996 10-K as being owned by the Company and the Company
Subsidiaries as of the date thereof, other than (i) any properties or assets
that have been sold or otherwise disposed of in the ordinary course of business
since the date of such financial statements, (ii) liens disclosed in the notes
to such financial statements and (iii) liens arising in the ordinary course of
business after the date of such financial statements. All buildings, and all
fixtures, equipment and other property and assets that are material to its
business on a consolidated basis, held under leases or sub-leases by the Company
or any Company Subsidiary are held under valid instruments enforceable in
accordance with their respective terms, subject to applicable laws of
bankruptcy, insolvency or similar laws relating to creditors' rights generally
and to general principles of equity (whether applied in a proceeding in law or
equity). Substantially all of the Company's and the Company Subsidiaries'
equipment in regular use has been reasonably maintained and is in serviceable
condition, reasonable wear and tear excepted.
SECTION 4.18. RULE 145 AFFILIATES. Section 4.18 of the Company
Disclosure Schedule sets forth the name and address of each person who is, in
the Company's reasonable judgment, a Rule 145 Affiliate of the Company.
SECTION 4.19. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of the Company.
SECTION 4.20. CERTAIN BUSINESS PRACTICES. None of the Company, any
Company Subsidiary or any directors, officers, agents or employees of the
Company or any Company Subsidiary (in their capacities as such) has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, (iii) consummated any transaction, made any
payment, entered into any agreement or arrangement or taken any other action in
violation of Section 1128B(b) of the Social Security Act, as amended, or (iv)
made any other unlawful payment.
31
SECTION 4.21. TRANSACTION EXPENSES. Section 4.21 of the Company
Disclosure Schedule sets forth the Company's current, good faith, itemized
estimate of the fees and expenses the Company will incur in connection with
consummating the Merger and the other transactions contemplated hereby.
SECTION 4.22. INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 4.22 of the Company Disclosure Schedule or in the Company Reports, since
December 19, 1996, no executive officer, director or stockholder of the Company
or any of the Company Subsidiaries has engaged in any business dealings with the
Company or any of the Company Subsidiaries (other than any such business
dealings that would not required to be disclosed in a proxy statement satisfying
the requirements of Regulation 14A promulgated under the Exchange Act filed on
the date hereof).
SECTION 4.23. STATE TAKEOVER STATUTES. The board of directors of the
Company has approved the Merger, this Agreement, the Stockholders Stock Option
and Proxy Agreement, the Pledge Agreement and the transactions contemplated
hereby and thereby, and such approval is sufficient to render inapplicable to
the Merger, this Agreement, the Stockholder Stock Option and Proxy Agreement,
the Pledge Agreement and the transactions contemplated hereby and thereby the
provisions of Sections 78.378 through 78-3793, inclusive, and Sections 78.411
through 78.444, inclusive of the General Corporation Law. To the knowledge of
the Company, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, this Agreement, the Stockholder
Stock Option and Proxy Agreement, the Pledge Agreement or the transactions
contemplated hereby or thereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that:
SECTION 5.0 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Parent,
Merger Sub and each other subsidiary of Parent (the "PARENT SUBSIDIARIES") has
been duly organized and is validly existing and in good standing (to the extent
applicable) under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite corporate power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals could not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. Parent, Merger Sub and each other Parent
32
Subsidiary is duly qualified or licensed to do business, and is in good standing
(to the extent applicable), in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that could not reasonably be expected
to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) Section 5.01 of the Parent Disclosure Schedule sets forth,
as of the date of this Agreement, a true and complete list of each Parent
Subsidiary, together with (i) the jurisdiction of incorporation or organization
of each Parent Subsidiary and the percentage of each Parent Subsidiary's
outstanding capital stock or other equity interests owned by Parent or another
Parent Subsidiary and (ii) an indication of whether each Parent Subsidiary is a
"Significant Subsidiary" as defined in Regulation S-X under the Exchange Act.
Except as set forth in Section 5.01 of the Parent Disclosure Schedule, neither
Parent nor any Parent Subsidiary owns an equity interest in any partnership or
joint venture arrangement or other business entity that is material to the
financial condition, results of operations, business or prospects of Parent and
the Parent Subsidiaries, taken as a whole.
SECTION 5.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The copies of
Parent's certificate of incorporation and bylaws that are incorporated by
reference as exhibits to Parent's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "PARENT 1995 10-K") are true, complete and correct
copies thereof. Parent has heretofore furnished the Company with true, complete
and correct copies of the articles of incorporation and bylaws of Merger Sub.
Such certificate or articles of incorporation, as the case may be, and bylaws
are in full force and effect. Neither Parent nor Merger Sub is in violation of
any of the provisions of its certificate or articles of incorporation, as the
case may be, or bylaws.
SECTION 5.03. CAPITALIZATION. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock and 5,000,000 shares of
preferred stock, 1,000,000 of which have been designated as Parent Preferred
Stock. As of the date hereof (i) 48,104,729 shares of Parent Common Stock are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) 3,008,958 shares of Parent Common Stock are held in a
Grantor Stock Trust, (iii) 2,030,116 shares of Parent Common Stock are held in
the treasury of Parent, (iv) no shares of Parent Common Stock are held by the
Parent Subsidiaries, (v) 3,334,547 shares of Parent Common Stock are reserved
for future issuance pursuant to employee stock options or stock incentive rights
granted under the Parent Stock Plans, (vi) 500,000 shares of Parent Common Stock
are reserved for future issuance pursuant to outstanding warrants to purchase
shares of Parent Common Stock, (vii) 3,814,102 shares of Parent Common Stock are
reserved for issuance upon conversion of Parent's 6% Convertible Subordinated
Xxxxxxxxxx xxx 0000, (xxxx) 899,170 shares of Parent Common Stock are reserved
for issuance upon conversion of Parent's 6-1/2% Convertible Subordinated
33
Debentures due 2003, (ix) no shares of Parent Preferred Stock are issued and
outstanding and (x) 1,000,000 shares of Parent Preferred Stock are reserved for
future issuance pursuant to the Parent Rights. As of the date hereof, there are
no shares of preferred stock of Parent issued and outstanding. Except for the
shares of Parent Common Stock issuable pursuant to the Parent Stock Plans,
pursuant to the Parent Rights or pursuant to agreements or arrangements
described in Section 5.03 of the Parent Disclosure Schedule, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character to which Parent is a party or by which Parent is bound relating to
the issued or unissued capital stock of Parent, Merger Sub or any other Parent
Subsidiary or obligating Parent, Merger Sub or any other Parent Subsidiary to
issue or sell any shares of capital stock of, or other equity interests in,
Parent, Merger Sub or any other Parent Subsidiary. All shares of Parent Common
Stock subject to issuance as aforesaid, upon issuance prior to the Effective
Time on the terms and conditions specified in the instruments pursuant to which
they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Each outstanding share of capital stock of each Parent
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by Parent or another Parent Subsidiary is free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on Parent's or such other Parent Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever, except
where the failure to own such shares free and clear could not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. Except as set forth in Section 5.03 of the Parent Disclosure Schedule,
there are no material outstanding contractual obligations of Parent, Merger Sub
or any other Parent Subsidiary to provide funds to, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any
Parent Subsidiary or any other person.
SECTION 5.04. AUTHORITY RELATIVE TO THIS AGREEMENT. Parent and
Merger Sub have all necessary corporate power and authority to execute and
deliver this Agreement, to perform their respective obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate such transactions (other than the approval of this Agreement and
the Merger by the holders of a majority of the outstanding shares of Parent
Common Stock entitled to vote with respect thereto at the Parent Stockholders'
Meeting, if required, and the filing and recordation of the Articles of Merger
as required by the General Corporation Law). This Agreement has been duly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of Parent and Merger Sub, enforceable against
Parent and Merger Sub in accordance with its terms.
34
SECTION 5.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance by Parent and Merger Sub of their obligations hereunder and the
consummation of the Merger will not, (i) conflict with or violate any provision
of the certificate or articles of incorporation, as the case may be, or bylaws
of Parent or Merger Sub or any equivalent organizational documents of any other
Parent Subsidiary, (ii) assuming that all consents, approvals, authorizations
and permits described in Section 5.05(b) have been obtained and all filings and
notifications described in Section 5.05(b) have been made, conflict with or
violate any Law applicable to Parent or any other Parent Subsidiary or by which
any property or asset of Parent, Merger Sub or any other Parent Subsidiary is
bound or affected or (iii) except as set forth in Section 5.05(a) of the Parent
Disclosure Schedule, result in any breach of or constitute a default (or an
event which with the giving of notice or lapse of time or both could reasonably
be expected to become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Parent,
Merger Sub or any other Parent Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
could not reasonably be expected, individually or in the aggregate, (A) to have
a Parent Material Adverse Effect or (B) to prevent or materially delay the
performance by Parent or Merger Sub of its obligations pursuant to this
Agreement or the consummation of the Merger.
(b) The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance by Parent and Merger Sub of their
respective obligations hereunder and the consummation of the Merger will not,
require any consent, approval, authorization or permit of, or filing by Parent
or Merger Sub with or notification by Parent or Merger Sub to, any Governmental
Entity, except (i) pursuant to applicable requirements of the Exchange Act, the
Securities Act, Blue Sky Laws, the rules and regulations of the NYSE, state
takeover laws, the premerger notification requirements of the HSR Act, if any,
and the filing and recordation of the Articles of Merger as required by the
General Corporation Law and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
could not reasonably be expected, individually or in the aggregate, (A) to have
a Parent Material Adverse Effect or (B) to prevent or materially delay the
performance by Parent or Merger Sub of its obligations pursuant to this
Agreement or the consummation of the Merger.
SECTION 5.06. PERMITS; COMPLIANCE WITH LAWS. (a) Parent, Merger Sub
and each other Parent Subsidiary is in possession of (i) all franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, easements, variances, exceptions, consents, certificates,
identification and registration numbers, approvals and orders of any
Governmental Entity necessary for Parent, Merger Sub or any other Parent
Subsidiary
35
to own, lease and operate its properties or to store, distribute and market its
products or otherwise to carry on its business as it is now being conducted and
(ii) agreements from all Federal, state, foreign and local governmental
agencies and accrediting and certifying organizations having jurisdiction over
such facility or facilities that are required to operate the facility or
facilities in the manner in which it or they are currently operated and receive
reimbursement for care provided to patients covered under the Medicare program,
any applicable Medicaid program or any comparable foreign medical reimbursement
program (collectively, the "PARENT PERMITS"), except where the failure to have,
or the suspension or cancellation of, any of the Parent Permits could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, and, as of the date of this Agreement, no suspension or
cancellation of any of the Parent Permits is pending or, to the knowledge of
Parent, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Parent Permits could not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth in
Section 5.06(a) of the Parent Disclosure Schedule, all of Parent's facilities
are certified for participation or enrollment in the Medicare program, have a
current and valid provider contract with the Medicare program and are in
substantial compliance with the conditions of participation of such programs.
None of Parent, Merger Sub or any other Parent Subsidiary is in conflict with,
or in default or violation of, (i) any Law applicable to Parent, Merger Sub or
any other Parent Subsidiary or by which any property or asset of Parent, Merger
Sub or any other Parent Subsidiary is bound or affected or (ii) any Parent
Permits, except in the case of clauses (i) and (ii) for any such conflicts,
defaults or violations that could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Neither
Purchaser nor any Purchaser Subsidiary has received notice from the regulatory
authorities that enforce the statutory or regulatory provisions in respect of
either the Medicare or the Medicaid program of any pending or threatened
investigations or surveys, and no such investigations or surveys are pending or,
to the knowledge of Parent, threatened or imminent that could reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. Section 5.06(a) of the Parent Disclosure Schedule sets forth, as of the
date of this Agreement, all actions ,proceedings, investigations or surveys
pending or, to the knowledge of Parent, threatened against Parent or any Parent
Subsidiary that could reasonably be expected to result in (i) the loss or
revocation of a Parent Permit necessary to operate one or more facilities or for
a facility to receive reimbursement under the Medicare or Medicaid program or
(ii) the suspension or cancellation of any other Parent Permit, except any such
Parent Permit where such suspension or cancellation could not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. Except as set forth in Section 5.06(a) of the Parent Disclosure
Schedule, since December 31, 1995, neither Parent nor any Parent Subsidiary has
received from any Governmental Entity any written notification with respect to
possible
36
conflicts, defaults or violations of Laws, except for written notices relating
to possible conflicts, defaults or violations that could not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
(b) Parent and each Parent Subsidiary, as appropriate, is an
approved participating provider in and under all third party payment programs
from which it receives revenues. No action or investigation is pending, or to
the best of its knowledge, threatened to suspend, limit, terminate, condition,
or revoke the status of Parent or any Parent Subsidiary as a provider in any
such program, and neither Parent nor any Parent Subsidiary has been provided
notice by any third party payor of its intention to suspend, limit, terminate,
revoke, condition or fail to renew in whole or in part or decrease the amounts
payable under any arrangement with Parent or such Parent Subsidiary as a
provider, which action, investigation or proceeding would have, individually or
in the aggregate, a Parent Material Adverse Effect.
(c) Parent and each Parent Subsidiary have filed on a timely
basis all claims, cost reports or annual filings required to be filed to secure
payments for services rendered by them under any third-party payment program
from which they receive or expect to receive revenues, except where the failure
to file such claim, report or other filing would not have, individually or in
the aggregate, a Parent Material Adverse Effect. Except as indicated in its
financial statements included in the Parent Reports, Parent or each Parent
Subsidiary, as applicable, has paid, or caused to be paid, all refunds,
discounts, adjustments, or amounts owing that have become due to such third
party payors pursuant to such claims, reports or filings, and neither Parent nor
any Parent Subsidiary has any knowledge or notice of any material changes
required to made to any cost reports, claims, or filings made by it for any
period or of any deficiency in such claim, report, or filing, except for changes
and deficiencies that in the aggregate would not have a Parent Material Adverse
Effect.
SECTION 5.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Parent has
timely filed all forms, reports, statements and documents required to be filed
by it (A) with the SEC and the NYSE since December 31, 1994 through the date of
this Agreement (collectively and as amended, the "PARENT REPORTS") and (B) with
any other Governmental Entities, including, without limitation, state insurance
and health regulatory authorities. Except as is provided in the Parent Reports
or as disclosed in Section 5.07(a) of the Parent Disclosure Schedule, each
Parent Report (i) was prepared in accordance with the requirements of the
Securities Act, the Exchange Act or the NYSE, as the case may be, and (ii) did
not at the time it was filed contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each form, report, statement and
document referred to in clause (B) of this paragraph was prepared in all
material respects in accordance with the requirements of applicable Law. Except
as disclosed in Section 5.07(a) of the Parent Disclosure Schedule, no Parent
Subsidiary is subject to the periodic reporting
37
requirements of the Exchange Act or required to file any form, report or other
document with the SEC, the NYSE, any other stock exchange or any other
comparable Governmental Entity.
(b) Except as is provided in the Parent Reports or in Section
5.07(b) of the Parent Disclosure Schedule, each of the consolidated financial
statements (including, in each case, any notes thereto) contained in the Parent
Reports was prepared in accordance with U.S. GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each presented fairly, in all material respects, the consolidated
financial position of Parent and the consolidated Parent Subsidiaries as at the
respective dates thereof and for the respective periods indicated therein,
except as otherwise noted therein (subject, in the case of unaudited statements,
to normal and recurring year-end adjustments which were not and are not
expected, individually or in the aggregate, to have a Parent Material Adverse
Effect).
(c) Except as and to the extent set forth or reserved against on
the consolidated balance sheet of Parent and its Subsidiaries as reported in the
Parent Reports, including the notes thereto, or as disclosed in Section 5.07(c)
of the Parent Disclosure Schedule, none of Parent or any Parent Subsidiary has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on a balance
sheet or in notes thereto prepared in accordance with U.S. GAAP, except for
liabilities or obligations incurred in the ordinary course of business
consistent with past practice since December 31, 1995 that have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
SECTION 5.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
December 31, 1995, except as contemplated by or as disclosed in this Agreement,
as set forth in Section 5.08 of the Parent Disclosure Schedule or as disclosed
in any Parent Report filed since December 31, 1995, Parent and the Parent
Subsidiaries have conducted their businesses only in the ordinary course
consistent with past practice and, since such date, there has not been (i) any
Parent Material Adverse Effect, excluding any changes and effects resulting from
changes in economic, regulatory or political conditions or changes in conditions
generally applicable to the industries in which Parent and the Parent
Subsidiaries are involved, (ii) any event that could reasonably be expected to
prevent or materially delay the performance of its obligations pursuant to this
Agreement and the consummation of the Merger by Merger Sub, (iii) any material
change by Parent in its accounting methods, principles or practices or (iv) any
declaration, setting aside or payment of any dividend or distribution in respect
of the shares of Parent Common Stock or any redemption, purchase or other
acquisition of any of Parent's securities.
SECTION 5.09. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a) With
respect to each employee benefit plan, program, arrangement and contract
(including, without limitation,
38
any "employee benefit plan", as defined in Section 3(3) of ERISA) maintained or
contributed to by Parent or any Parent Subsidiary, or with respect to which
Parent or any Parent Subsidiary could incur liability under Section 4069,
4212(c) or 4204 of ERISA (the "PARENT BENEFIT PLANS"), Parent has delivered or
made available to the Company a true, complete and correct copy of (i) such
Parent Benefit Plan and the most recent summary plan description related to such
Parent Benefit Plan, if a summary plan description is required therefor,
(ii) each trust agreement or other funding arrangement relating to such Parent
Benefit Plan, (iii) the most recent annual report (Form 5500) filed with the IRS
with respect to such Parent Benefit Plan, (iv) the most recent actuarial report
or financial statement relating to such Parent Benefit Plan and (v) the most
recent determination letter issued by the IRS with respect to such Parent
Benefit Plan, if it is qualified under Section 401(a) of the Code.
(b) Each Parent Benefit Plan has been administered in all
material respects in accordance with its terms and all contributions required to
be made under the terms of any of the Parent Benefit Plans as of the date of
this Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Parent
Reports prior to the date of this Agreement. With respect to the Parent Benefit
Plans, no event has occurred and, to the knowledge of Parent, there exists no
condition or set of circumstances in connection with which Parent or any Parent
Subsidiary could be subject to any liability under the terms of such Parent
Benefit Plans, ERISA, the Code or any other applicable Law which could
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(c) Except as set forth in Section 5.09(c) of the Parent
Disclosure Schedule, neither Parent nor any Parent Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by Parent or any Parent Subsidiary and no collective bargaining
agreement is being negotiated by Parent or any Parent Subsidiary. As of the
date of this Agreement, there is no labor dispute, strike or work stoppage
against Parent or any Parent Subsidiary pending or, to the knowledge of Parent,
threatened which may interfere with the respective business activities of Parent
or any Parent Subsidiary, except where such dispute, strike or work stoppage
could not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect. As of the date of this Agreement, to the
knowledge of Parent, none of Parent, any Parent Subsidiary, or any of their
respective representatives or employees has committed any unfair labor practice
in connection with the operation of the respective businesses of Parent or any
Parent Subsidiary, and there is no charge or complaint against Parent or any
Parent Subsidiary by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing, except where such unfair
labor practice, charge or complaint could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
39
SECTION 5.10. CERTAIN TAX MATTERS. Except as disclosed in the Parent
Reports, neither Parent nor, to the knowledge of Parent, any of its affiliates
has taken or agreed to take any action (other than actions contemplated by this
Agreement including, without limitation, any Cash Election) that could
reasonably be expected to prevent the Merger from constituting a transaction
qualifying under Section 368 of the Code. Parent is not aware of any agreement,
plan or other circumstances that could reasonably be expected to prevent the
Merger from so qualifying under Section 368 of the Code.
SECTION 5.11. CONTRACTS; DEBT INSTRUMENTS. Except as disclosed in
the Parent Reports or in Section 5.11 of the Parent Disclosure Schedule, there
is no contract or agreement that is material to the business, financial
condition or results of operations of Parent and the Parent Subsidiaries taken
as a whole (each, a "PARENT MATERIAL CONTRACT"). Except as disclosed in the
Parent Reports, neither Parent nor any Parent Subsidiary is in violation of or
in default under (nor does there exist any condition which with the passage of
time or the giving of notice could reasonably be expected to cause such a
violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture or lease, or any other contract, license, agreement,
arrangement or understanding to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults that could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Set forth in Section 5.11 of the Parent Disclosure
Schedule is a description of any material changes to the amount and terms of the
indebtedness of Parent and its subsidiaries as described in the notes to the
financial statements incorporated in the Parent 1995 10-K.
SECTION 5.12. LITIGATION. Except as disclosed in the Parent Reports
or in Section 5.12 of the Parent Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of Parent,
threatened against Parent or any Parent Subsidiary before any Governmental
Entity that could reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, and, except as disclosed to the
Company, to the knowledge of Parent, there are no existing facts or
circumstances that could reasonably be expected to result in such a suit, claim,
action, proceeding or investigation. Except as disclosed to the Company, Parent
is not aware of any facts or circumstances which could reasonably be expected to
result in the denial of insurance coverage under policies issued to Parent and
the Parent Subsidiaries in respect of such suits, claims, actions, proceedings
and investigations, except in any case as could not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
Except as disclosed in the Parent Reports, neither Parent nor any Parent
Subsidiary is subject to any outstanding order, writ, injunction or decree which
could reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
SECTION 5.13. ENVIRONMENTAL MATTERS. Except as disclosed in the
Parent Reports or as could not reasonably be expected to have, individually or
in the aggregate, a
40
Parent Material Adverse Effect, (i) Parent and the Parent Subsidiaries are in
compliance with all applicable Environmental Laws; (ii) all past noncompliance
of Parent or any Parent Subsidiary with Environmental Laws or Environmental
Permits has been resolved without any pending, ongoing or future obligation,
cost or liability; and (iii) neither Parent nor any Parent Subsidiary has
released a Hazardous Material at, or transported a Hazardous Material to or
from, any real property currently or formerly owned, leased or occupied by
Parent or any Parent Subsidiary in violation of any Environmental Law.
SECTION 5.14. INTELLECTUAL PROPERTY. Except as could not reasonably
be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, Parent and the Parent Subsidiaries own or possess adequate licenses or
other valid rights to use all patents, patent rights, trademarks, trademark
rights, trade names, trade dress, trade name rights, copyrights, service marks,
trade secrets, applications for trademarks and for service marks, know-how and
other proprietary rights and information used or held for use in connection with
the respective businesses of Parent and the Parent Subsidiaries as currently
conducted, and Parent is unaware of any assertion or claim challenging the
validity of any of the foregoing. Section 5.14 of the Parent Disclosure
Schedule lists all material licenses, sublicenses and other agreements to which
Parent or any Parent Subsidiary is a party and pursuant to which (i) any third
party is authorized to use any intellectual property right of Parent or any
Parent Subsidiary and (ii) Parent or any Parent Subsidiary is authorized to use
any intellectual property rights (other than pursuant to shrink-wrap licenses
and software licenses) of a third party, and includes the identity of all
parties thereto, a description of the nature and subject matter thereof, the
royalty provisions, if any, therein and the term thereof. Except as set forth
in Section 5.14 of the Parent Disclosure Schedule, the conduct of the respective
businesses of Parent and the Parent Subsidiaries as currently conducted does not
conflict in any way with any patent, patent right, license, trademark, trademark
right, trade dress, trade name, trade name right, service xxxx or copyright of
any third party that could reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect. To the knowledge of Parent,
there are no infringements of any proprietary rights owned by or licensed by or
to Parent or any Parent Subsidiary that could reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 5.15. TAXES. Except as set forth in Section 5.15 of the
Parent Disclosure Schedule and except for such matters that could not reasonably
be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, (i) Parent, Merger Sub and each other Parent Subsidiary has timely filed
or shall timely file all returns and reports required to be filed by it with any
taxing authority with respect to Taxes for any period ending on or before the
Effective Time, taking into account any extension of time to file granted to or
obtained on behalf of Parent, Merger Sub and the other Parent Subsidiaries,
(ii) all Taxes shown to be payable on such returns or reports that are due prior
to the Effective Time have been or will be paid, (iii) as of the date hereof, no
deficiency for any amount of
41
Tax has been asserted or assessed by a taxing authority against Parent, Merger
Sub or any other Parent Subsidiary and (iv) Parent, Merger Sub and each other
Parent Subsidiary has provided adequate reserves in its financial statements for
any Taxes that have not been paid, whether or not shown as being due on any
returns.
SECTION 5.16. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Parent.
SECTION 5.17. CERTAIN BUSINESS PRACTICES. None of Parent, any Parent
Subsidiary or any directors, officers, agents or employees of Parent or any
Parent Subsidiary (in their capacities as such) has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, (iii) consummated any transaction, made any payment, entered
into any agreement or arrangement or taken any other action in violation of
Section 1128B(b) of the Social Security Act, as amended, or (iv) made any other
unlawful payment.
42
ARTICLE VI
COVENANTS
SECTION 6.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE CLOSING.
The Company agrees that, between the date of this Agreement and the Effective
Time, except as set forth in Section 6.01 of the Company Disclosure Schedule or
as expressly contemplated by any other provision of this Agreement, unless
Parent shall otherwise agree in writing, (x) the respective businesses of the
Company and the Company Subsidiaries shall be conducted only in, and the Company
and the Company Subsidiaries shall not take any action except in, the ordinary
course of business consistent with past practice and (y) the Company shall use
all reasonable efforts to keep available the services of such of the current
officers, significant employees and consultants of the Company and the Company
Subsidiaries and to preserve the current relationships of the Company and the
Company Subsidiaries with such of the corporate partners, customers, suppliers
and other persons with which the Company or any Company Subsidiary has
significant business relations in order to preserve substantially intact its
business organization. By way of amplification and not limitation, except as
set forth in Section 6.01 of the Company Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, neither the Company nor
any Company Subsidiary shall, between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the following
without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed:
(a) amend or otherwise change its articles of incorporation or
bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any
shares of capital stock of the Company or any Company Subsidiary of any
class, or securities convertible into or exchangeable or exercisable for
any shares of such capital stock, or any options, warrants or other rights
of any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest),
of the Company or any Company Subsidiary except for (A) issues of Company
Common Stock pursuant to options, warrants and convertible Company Capital
Stock outstanding on the date hereof and disclosed as such pursuant to
Section 4.03 and (B) employee stock option grants to non-officers and
directors of the Company; PROVIDED, HOWEVER, that (x) such grants are at
fair market value and at a level consistent with past practice, (y) Parent
has received notice of the Company's intention to grant such options and
has consented thereto in writing (which consent shall not be unreasonably
withheld) and (z) the aggregate amount of such granted options does not
exceed 10,000 shares of
43
Company Common Stock, or (ii) any property or assets of the Company or any
Company Subsidiary;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any
division thereof; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person for
borrowed money or make any loans or advances; (iii) terminate, cancel or
request any material change in, or agree to any material change in, any
Company Material Contract or enter into any contract or agreement material
to the business, results of operations or financial condition of the
Company and the Company Subsidiaries taken as a whole; (iv) enter into any
contract or agreement relating to the provision or receipt of pharmacy
products or services, therapy or supplies that is not cancelable without
penalty upon not more than 60 days' notice; (v) make or authorize any
capital expenditure, other than capital expenditures in the ordinary course
of business consistent with past practice that have been budgeted for
calendar year 1997 and disclosed to Parent and that are not, in the
aggregate, in excess of $100,000 for the Company and the Company
Subsidiaries taken as a whole; or (vi) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would not be
permitted under this Section 6.01(c);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that any Company Subsidiary may pay
dividends or make other distributions to the Company or any other Company
Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) amend or change the period (or permit any acceleration,
amendment or change) of exercisability of options granted under the Company
Stock Plans or authorize cash payments in exchange for any Company Stock
Options granted under any of such plans;
(g) amend the terms of, repurchase, redeem or otherwise acquire,
or permit any Company Subsidiary to repurchase, redeem or otherwise
acquire, any of its securities or any securities of any Company Subsidiary,
or propose to do any of the foregoing, except for the mandatory redemption
of any Series A Preferred Stock outstanding on the date hereof;
44
(h) increase the compensation payable or to become payable to,
or pay or enter into any agreement or understanding to pay any bonus to,
its directors, officers, consultants or employees (other than increases in
compensation for non-officer employees that are in the ordinary course of
business consistent with past practice and the payment of bonuses to non-
officer employees that are in the ordinary course of business consistent
with past practice and pursuant to objective written criteria established
by the board of directors of the Company PROVIDED that Parent has received
notice of the Company's intention to implement such increase and has
consented thereto in writing (which consent shall not be unreasonably
withheld)), or grant any rights to severance or termination pay to, or
enter into any employment or severance agreement which provides benefits
upon a change in control of the Company that would be triggered by the
Merger with, any director, officer, consultant or other employee of the
Company or any Company Subsidiary who is not currently entitled to such
benefits from the Merger, establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer, consultant
or employee of the Company or any Company Subsidiary, except to the extent
required by applicable Law or the terms of a collective bargaining
agreement, or enter into or amend any contract, agreement, commitment or
arrangement between the Company or any Company Subsidiary and any of the
Company's directors, officers, consultants or employees;
(i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of
liabilities reflected or reserved against on the consolidated balance sheet
of the Company and the consolidated the Company Subsidiaries dated as of
June 30, 1996 included in the Company 1996 10-K and only to the extent of
such reserves;
(j) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business
consistent with past practice or as required by U.S. GAAP;
(k) make any tax election or settle or compromise any material
Federal, state or local United States income tax liability, or any income
tax liability of any other jurisdiction, other than those made in the
ordinary course of business consistent with past practice and those for
which specific reserves have been recorded on the consolidated balance
sheet of the Company and the consolidated the Company
45
Subsidiaries dated as of June 30, 1996 included in the Company 1996 10-K
and only to the extent of such reserves;
(l) enter into or amend any contract, agreement, commitment or
arrangement with, or enter into any transaction with, or make any payment
to or on account or behalf of, other than any such transactions or payments
pursuant to the agreements set forth on Section 6.01(m) of the Company
Disclosure Schedule any affiliate of the Company or of Principal
Stockholder; or
(m) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any
action which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect or prevent the
Company from performing or cause the Company not to perform its covenants
hereunder or result in any of the conditions to the Merger set forth herein
not being satisfied.
SECTION 6.02. CONDUCT OF BUSINESS BY PARENT PENDING THE CLOSING.
Parent agrees that, between the date of this Agreement and the Effective Time,
except (i) as set forth in Section 6.02 of the Parent Disclosure Schedule,
(ii) for any actions taken by Parent relating to any other acquisitions or
business combinations (including, without limitation, the RCA Merger) or
(iii) as expressly contemplated by any other provision of this Agreement, unless
the Company shall otherwise agree in writing, (x) the respective businesses of
Parent and the Parent Subsidiaries shall be conducted only in, and Parent and
the Parent Subsidiaries shall not take any action except in, the ordinary course
of business consistent with past practice and (y) Parent shall use all
reasonable efforts to keep available the services of such of the current
officers, significant employees and consultants of Parent and the Parent
Subsidiaries and to preserve the current relationships of Parent and the Parent
Subsidiaries with such of the corporate partners, customers, suppliers and other
persons with which Parent or any Parent Subsidiary has significant business
relations in order to preserve substantially intact its business organization.
By way of amplification and not limitation, except (i) as set forth in
Section 6.02 of the Parent Disclosure Schedule, (ii) for any actions taken by
Parent relating to any other acquisitions or business combinations (including,
without limitation, the RCA Merger) or (iii) as expressly contemplated by any
other provision of this Agreement, neither Parent nor any Parent Subsidiary
shall, between the date of this Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed:
(a) amend or otherwise change its certificate of incorporation
or bylaws or equivalent organizational documents;
46
(b) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that any Parent Subsidiary may pay
dividends or make other distributions to Parent or any other Parent
Subsidiary;
(c) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) sell, transfer, license, sublicense or otherwise dispose of
any material assets; or
(f) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any
action which would make any of the representations or warranties of Parent
contained in this Agreement untrue or incorrect or prevent Parent from
performing or cause Parent not to perform its covenants hereunder or result
in any of the conditions to the Merger set forth herein not being
satisfied.
SECTION 6.03. NOTICES OF CERTAIN EVENTS. Each of Parent and the
Company shall give prompt notice to the other of (i) any notice or other
communication from any person alleging that the consent of such person is or may
be required in connection with the Merger; (ii) any notice or other
communication from any Governmental Entity in connection with the Merger;
(iii) any actions, suits, claims, investigations or proceedings commenced or, to
its knowledge, threatened against, relating to or involving or otherwise
affecting Parent, the Company, the Parent Subsidiaries or the Company
Subsidiaries that relate to the consummation of the Merger; (iv) the occurrence
of a default or event that, with the giving of notice or lapse of time or both,
will become a default under any Company Material Contract or Parent Material
Contract; and (v) any change that could reasonably be expected to have a Company
Material Adverse Effect or a Parent Material Adverse Effect or to delay or
impede the ability of either the Company or Parent to perform its obligations
pursuant to this Agreement and to effect the consummation of the Merger.
SECTION 6.04. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which Parent or the Company or any of the Parent Subsidiaries or
the Company Subsidiaries is a party or pursuant to applicable Law or the
regulations or requirements of any stock exchange or other regulatory
organization with whose rules a party hereto is required to comply, from the
date of this Agreement to the Effective Time, Parent and the Company shall (and
shall cause the Parent Subsidiaries and the Company Subsidiaries, respectively,
to) (i) provide to the other (and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives
(collectively, "REPRESENTATIVES")) access at reasonable times upon
47
prior notice to its and its subsidiaries' officers, employees, agents,
properties, offices and other facilities and to the books and records thereof,
and (ii) furnish promptly such information concerning its and its subsidiaries'
business, properties, contracts, assets, liabilities and personnel as the other
party or its Representatives may reasonably request. No investigation conducted
pursuant to this Section 6.05 shall affect or be deemed to modify any
representation or warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreements with respect to the information disclosed
pursuant to this Section 6.04.
SECTION 6.05. NO SOLICITATION OF TRANSACTIONS. The Company shall
not, directly or indirectly, and shall instruct its officers, directors,
employees, subsidiaries, agents or advisors or other representatives (including,
without limitation, any investment banker, attorney or accountant retained by
it), not to, directly or indirectly, solicit, initiate or knowingly encourage
(including by way of furnishing nonpublic information), or take any other action
knowingly to facilitate, any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) that
constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or enter into or maintain or continue discussions or negotiate with
any person in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
permit any of the officers, directors or employees of the Company or any Company
Subsidiary, or any investment banker, financial advisor, attorney, accountant or
other representative retained by the Company or any Company Subsidiary, to take
any such action; PROVIDED, HOWEVER, that nothing contained in this Section 6.05
shall prohibit the board of directors of the Company from (i) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer not made in violation of this Section 6.05 or (ii) with regard to
such an offer, after receiving the advice of outside counsel to the effect that
the board of directors of the Company is required to do so in order to discharge
properly its fiduciary duties, considering, negotiating and approving and
recommending to the shareholders of the Company an unsolicited bona fide written
acquisition proposal which (A) was not received in violation of this Section
6.06, (B) if executed or consummated would be a Competing Transaction, (C) is
not subject to financing and (D) the board of directors of the Company
determines in good faith, after receipt of an opinion of its financial advisor
to such effect, would result in a transaction more favorable to the Company's
stockholders, than the transaction contemplated by this Agreement (any such
acquisition proposal, a "SUPERIOR PROPOSAL"). The Company shall notify Parent
promptly, and in no event later than one day after receipt, if any proposal or
offer, or any inquiry or contact with any person with respect thereto, regarding
a Competing Transaction is made. The Company immediately shall cease and cause
to be terminated all existing discussions or negotiations with any parties
conducted heretofore with respect to a Competing Transaction. The Company shall
not release any third
48
party from, or waive any provision of, any confidentiality or standstill
agreement to which it is a party. The Company shall use its best efforts to
ensure that its officers, directors, employees, subsidiaries, agents and
advisors or other representatives (including, without limitation, any investment
banker, attorney or accountant retained by it) are aware of the restrictions
described in this Section 6.05.
SECTION 6.06. LETTERS OF ACCOUNTANTS. At the written request of
Parent, each of the Company and Parent shall use all reasonable efforts to cause
to be delivered to the other "comfort" letters of each of Coopers & Xxxxxxx
L.L.P., BDO Xxxxxxx LLP and Xxxxxx Xxxxxxx & Company, and Xxxxxx Xxxxxxxx LLP,
respectively, each such letter dated and delivered as of the date the
Registration Statement shall have become effective and as of the Effective Time,
and addressed to Parent and the Company, respectively, in form and substance
reasonably satisfactory to the recipient thereof and reasonably customary in
scope and substance for letters delivered by independent public accountants in
connection with mergers such as the Merger contemplated hereby.
SECTION 6.07. SUBSEQUENT FINANCIAL STATEMENTS. Prior to the
Effective Time, each of the Company and Parent (i) shall consult with the other
prior to making publicly available its financial results for any period and
(ii) shall consult with the other prior to the filing of, and shall timely file
with the SEC, each Annual Report on Form 10-K, Quarterly Report on Form 10-Q and
Current Report on Form 8-K required to be filed by such party under the Exchange
Act and shall promptly deliver to the other copies of each such report filed
with the SEC.
SECTION 6.08. CONTROL OF OPERATIONS. Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right to control or
direct the operations of the Company and the Company Subsidiaries prior to the
Effective Time. Prior to the Effective Time, each of Parent and the Company
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision over its respective operations.
SECTION 6.09. FURTHER ACTION; CONSENTS; FILINGS. (a) Upon the terms
and subject to the conditions hereof, each of the parties hereto shall use all
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the Merger,
(ii) obtain from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by Parent,
Merger Sub, the Company or the Surviving Corporation or any of their respective
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger and (iii) make all necessary
filings, and thereafter make any other required or appropriate submissions, with
respect to this Agreement and the Merger required under (A) the rules and
regulations of the NYSE, (B) the Securities Act, the
49
Exchange Act and any other applicable Federal or state securities Laws, (C) the
HSR Act, if any, and (D) any other applicable Law. The parties hereto shall
cooperate and consult with each other in connection with the making of all such
filings, including by providing copies of all such documents to the nonfiling
parties and their advisors prior to filing, and none of the parties shall file
any such document if any of the other parties shall have reasonably objected to
the filing of such document. No party shall consent to any voluntary extension
of any statutory deadline or waiting period or to any voluntary delay of the
consummation of the Merger at the behest of any Governmental Entity without the
consent and agreement of the other parties hereto, which consent shall not be
unreasonably withheld or delayed.
(b) Each of the parties hereto shall promptly give (or cause
their respective subsidiaries to give) any notices regarding the Merger, this
Agreement or the transactions contemplated hereby or thereby to third parties
required under applicable Law or by any contract, license, lease or other
agreement to which it or any of its subsidiaries is bound, and use, and cause
its subsidiaries to use, all reasonable efforts to obtain any third party
consents required under any such contract, license, lease or other agreement in
connection with the consummation of the Merger or the other transactions
contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. REGISTRATION STATEMENT; PROXY STATEMENT. (a) As
promptly as practicable after the execution of this Agreement, Parent and the
Company shall jointly prepare, and the Company and Parent shall file with the
SEC, a document or documents that will constitute (i) if Parent Common Stock is
to be issued in the Merger, the prospectus forming part of the registration
statement on Form S-4 of Parent (together with all amendments thereto, the
"REGISTRATION STATEMENT"), in connection with the registration under the
Securities Act of the Parent Common Stock to be issued to the Company's
stockholders pursuant to the Merger and (ii) the proxy statement or information
statement with respect to the Merger relating to the special meeting of, or the
taking of action by written consent by, the Company's stockholders (in either
case, the "COMPANY STOCKHOLDERS' MEETING") and, if required, Parent's
Stockholders (the "PARENT STOCKHOLDERS' MEETING"), to be held to consider
approval of this Agreement and the Merger contemplated hereby (together with any
amendments thereto, the "PROXY STATEMENT"). Copies of the Proxy Statement shall
be provided to the NYSE in accordance with its rules. If applicable, each of
the parties hereto shall use all reasonable efforts to cause the Registration
Statement to become effective as promptly as practicable after the date hereof,
and, prior to the effective date of the Registration Statement, the parties
hereto shall take all action required under any applicable Laws in
50
connection with the issuance of shares of Parent Common Stock pursuant to the
Merger. Parent or the Company, as the case may be, shall furnish all
information concerning Parent or the Company as the other party may reasonably
request in connection with such actions and the preparation of the Registration
Statement, if applicable, and Proxy Statement. As promptly as practicable after
the effective date of the Registration Statement, if applicable, the Proxy
Statement shall be mailed to the stockholders of the Company and, if required,
of Parent. Each of the parties hereto shall cause the Proxy Statement to comply
as to form and substance in all material respects with the applicable
requirements of (i) the Exchange Act, (ii) the Securities Act, (iii) the rules
and regulations of the NYSE, (iv) the General Corporation Law and (v) the
Delaware General Corporation Law.
(b) The Proxy Statement shall include (i) the approval of the
Merger and, if the Company solicits proxies from the Company's stockholders, the
recommendation of the board of directors of the Company to the Company's
stockholders that they vote in favor of approval of this Agreement and the
Merger contemplated hereby, and, if required, (ii) the approval of the Merger
and recommendation of the board of directors of Parent to Parent's stockholders
that they vote in favor of approval of this Agreement and the Merger
contemplated hereby.
(c) No amendment or supplement to the Proxy Statement, if
applicable, or the Registration Statement shall be made without the approval of
Parent and the Company, which approval shall not be unreasonably withheld or
delayed. If applicable, each of the parties hereto shall advise the other
parties hereto, promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, of the issuance of any stop order, of the suspension of the
qualification of the Parent Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or of any request by the SEC or the
NYSE for amendment of the Proxy Statement or the Registration Statement or
comments thereon and responses thereto or requests by the SEC for additional
information.
(d) None of the information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement, if
applicable, or the Proxy Statement shall, at the respective times filed with the
SEC or other regulatory agency and, in addition, (A) in the case of the Proxy
Statement, at the date it or any amendments or supplements thereto are mailed to
stockholders of Parent in connection with the Parent Stockholders' Meeting, if
any, and to stockholders of the Company in connection with the Company
Stockholders' Meeting, at the time of the Company Stockholders' Meeting, at the
time of the Parent Stockholders' Meeting, if any, and at the Effective Time and
(B) if applicable, in the case of the Registration Statement, when it becomes
effective under the Securities Act and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein,
51
in light of the circumstances under which they are made, not misleading. If at
any time prior to the Effective Time any event or circumstance relating to
Company or any Company Subsidiary, or their respective officers or directors,
should be discovered by the Company that should be set forth in an amendment or
a supplement to the Registration Statement, if applicable, or Proxy Statement,
the Company shall promptly inform Parent. All documents that the Company is
responsible for filing with the SEC in connection with the Merger will comply as
to form in all material respects with the applicable requirements of the rules
and regulations of the NYSE, the General Corporation Law, the Securities Act and
the Exchange Act.
(e) None of the information supplied by Parent for inclusion or
incorporation by reference in the Registration Statement, if applicable, or the
Proxy Statement shall, at the respective times filed with the SEC or other
regulatory agency and, in addition, (A) in the case of the Proxy Statement, at
the date it or any amendments or supplements thereto are mailed to stockholders
of Parent in connection with the Parent Stockholders' meeting, if any, and to
stockholders of the Company in connection with the Company Stockholders'
Meeting, at the time of the Company Stockholders' Meeting, at the time of the
Parent Stockholders' Meeting, if any, and at the Effective Time and (B) if
applicable, in the case of the Registration Statement, when it becomes effective
under the Securities Act and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If, at any time prior
to the Effective Time, any event or circumstance relating to Parent or any
Parent Subsidiary, or their respective officers or directors, should be
discovered by Parent that should be set forth in an amendment or a supplement to
the Registration Statement or Proxy Statement, Parent shall promptly inform the
Company. All documents that Parent is responsible for filing with the SEC in
connection with the Merger will comply as to form in all material respects with
the applicable requirements of the rules and regulations of the NYSE, the
General Corporation Law, the General Corporation Law, the Securities Act and the
Exchange Act.
SECTION 7.02. STOCKHOLDERS' MEETINGS. The Company shall call and
hold the Company Stockholders' Meeting and, if applicable, Parent shall call and
hold the Parent Stockholders' Meeting, as promptly as practicable after the date
hereof for the purpose of voting upon the approval of this Agreement and the
Merger contemplated hereby pursuant to the Proxy Statement, and the Company and
Parent shall use all reasonable efforts to hold the Company Stockholders'
Meeting and the Parent Stockholders' Meeting, if any, on the same day and as
soon as practicable after the date on which the Registration Statement becomes
effective. If applicable, the Company shall use all reasonable efforts to
solicit from its stockholders proxies in favor of the approval of this Agreement
and the Merger contemplated hereby pursuant to the Proxy Statement and shall
take all other action necessary or advisable to secure the vote or consent of
stockholders required by the General Corporation Law or
52
applicable stock exchange requirements to obtain such approval. If applicable,
Parent shall use all reasonable efforts to solicit from its stockholders proxies
in favor of the approval of this Agreement and the Merger contemplated hereby
pursuant to the Proxy Statement and shall take all other action necessary or
advisable to secure the vote or consent of stockholders required by the General
Corporation Law or applicable stock exchange requirements to obtain such
approval, if required. Each of the parties hereto shall take all other action
necessary or, in the opinion of the other parties hereto, advisable to promptly
and expeditiously secure any vote or consent of stockholders required by
applicable Law and such party's articles or certificate of incorporation, as the
case may be, and bylaws to effect the Merger.
SECTION 7.03. RULE 145 AFFILIATES. If Parent has not previously made
a Cash Election, not fewer than 45 days prior to the Effective Time, the Company
shall deliver to Parent a list of names and addresses of each person who was, in
the Company's reasonable judgment, at the record date for the Company
Stockholders' Meeting, a Rule 145 Affiliate of the Company. The Company shall
provide Parent such information and documents as Parent shall reasonably request
for purposes of reviewing such list. The Company shall use all reasonable
efforts to deliver or cause to be delivered to Parent, prior to the Effective
Time, an affiliate agreement in the form attached hereto as EXHIBIT 7.03 (each,
a "COMPANY AFFILIATE AGREEMENT"), executed by each of the Pooling Affiliates of
the Company identified in the above-referenced list. The foregoing
notwithstanding, Parent shall be entitled to place legends as specified in the
Company Affiliate Agreement on the certificates evidencing any of the Parent
Common Stock to be received by (i) any Rule 145 Affiliate of the Company or
(ii) any person Parent reasonably identifies (by written notice to the Company)
as being a person who may be deemed an "affiliate" within the meaning of rule
145 promulgated under the Securities Act, and to issue appropriate stop transfer
instructions to the transfer agent for such Parent Common Stock, consistent with
the terms of the Company Affiliate Agreement, regardless of whether such person
has executed Company Affiliate Agreement and regardless of whether such person's
name and address appear on Section 4.18 of the Company Disclosure Schedule.
SECTION 7.04. DIRECTORS' AND OFFICERS' INDEMNIFICATION. (a) The
articles of incorporation and bylaws of the Surviving Corporation shall contain
the provisions with respect to indemnification that are set forth, as of the
date of this Agreement, in the articles of incorporation and bylaws of the
Company, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
affect adversely the rights thereunder of individuals who at or at any time
prior to the Effective Time were directors, officers, employees, fiduciaries or
agents of the Company.
(b) From and after the Effective Time, Parent and the Surviving
Corporation shall indemnify and hold harmless each present and former director
and officer of the Company (the "INDEMNIFIED PARTIES"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "COSTS")
53
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that the Company would have been permitted under
Colorado law and its charter documents (each as in effect on the date hereof) to
indemnify such Indemnified Parties.
SECTION 7.05. NO SHELF REGISTRATION. Parent shall not be required to
amend or maintain the effectiveness of the Registration Statement for the
purpose of permitting resale of the shares of Parent Common Stock received
pursuant hereto by the persons who may be deemed to be "affiliates" of the
Company or Parent within the meaning of rule 145 promulgated under the
Securities Act.
SECTION 7.06. PUBLIC ANNOUNCEMENTS. Parent and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the Merger and shall not
issue any such press release or make any such public statement without the prior
written approval of the other, except to the extent required by applicable Law
or the requirements of the rules and regulations of the NYSE, in which case the
issuing party shall use all reasonable efforts to consult with the other party
before issuing any such release or making any such public statement.
SECTION 7.07. STOCK EXCHANGE LISTING. If Parent has not previously
made a Cash Election, each of the parties hereto shall use all reasonable
efforts to obtain, prior to the Effective Time, the approval for listing on the
NYSE, effective upon official notice of issuance, of the shares of Parent Common
Stock into which the shares of Company Capital Stock will be converted pursuant
to Article III and the shares of Parent Common Stock which will be issuable upon
exercise of Company Stock Options pursuant to Section 3.05.
SECTION 7.08. BLUE SKY. If Parent has previously made a Cash
Election, each of the parties hereto shall use all reasonable efforts to obtain
prior to the Effective Time all necessary blue sky permits and approvals
required under Blue Sky Laws to permit the distribution of the shares of Parent
Common Stock to be issued in accordance with the provisions of this Agreement.
SECTION 7.09. COMPANY STOCK OPTIONS. (a) At the Effective Time,
Parent shall assume, by virtue of this Agreement and without any further action
on the part of the Company, all of the Company's obligations with respect to
each outstanding Company Stock Option, whether vested or unvested. Unless
otherwise elected by Parent prior to the Effective Time, Parent shall make such
assumption in such manner that Parent (i) is a corporation "assuming a stock
option in a transaction to which Section 424(a) applies" within the meaning of
Section 424 of the Code or (ii) to the extent that Section 424 of the Code does
not apply to
54
such Company Stock Option, would be such a corporation were Section 424 of the
Code applicable to such Company Stock Option; and, if not so otherwise elected,
after the Effective Time, all references to the Company in the Company Stock
Plans and the applicable Company Stock Option agreements shall be deemed to
refer to Parent, which shall have assumed the Company Stock Plans as of the
Effective Time by virtue of this Agreement and without any further action on the
part of the Company or Parent. Each Company Stock Option so assumed by Parent
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the applicable Company Stock Plan and the applicable
Company Stock Option as in effect immediately prior to the Effective Time,
except as otherwise provided in Section 3.05. Parent shall use all reasonable
efforts to ensure that Company Stock Options intended to qualify as incentive
stock options under Section 422 of the Code prior to the Effective Time continue
to so qualify after the Effective Time.
(b) With respect to the Company Stock Plans, Parent shall take
all corporate action necessary or appropriate to, as soon as practicable after
the Effective Time, file a registration statement on Form S-8 (or any successor
or other appropriate form) with respect to the shares of Parent Common Stock
subject to such plan to the extent such registration statement is required under
applicable law in order for such shares of Parent Common Stock to be sold
without restriction, and Parent shall use its best efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectuses contained therein) for so long as such benefits and grants
remain payable and such options under such plans remain outstanding.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO
CONSUMMATE THE MERGER. The obligations of the parties hereto to consummate the
Merger, or to permit the consummation of the Merger, are subject to the
satisfaction or, if permitted by applicable Law, waiver of the following
conditions:
(a) the Registration Statement shall have been declared
effective by the SEC under the Securities Act and no stop order suspending
the effectiveness of the Registration Statement shall have been issued by
the SEC and no proceeding for that purpose shall have been initiated by the
SEC and not concluded or withdrawn;
(b) this Agreement and the Merger shall have been duly approved
by the requisite vote of stockholders of each of the Company and, if
applicable, Parent in
55
accordance with the General Corporation Law and the Delaware General
Corporation Law, respectively;
(c) no court of competent jurisdiction shall have issued or
entered any order, writ, injunction or decree, and no other Governmental
Entity shall have issued any order, which is then in effect and has the
effect of making the Merger illegal or otherwise prohibiting its
consummation;
(d) any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act or any other applicable
competition, merger control or similar Law shall have expired or been
terminated;
(e) all consents, approvals and authorizations legally required
to be obtained to consummate the Merger shall have been obtained from all
Governmental Entities, except where the failure to obtain any such consent,
approval or authorization could not reasonably be expected to result in a
change in or have an effect on the business of the Company or Parent that
is materially adverse to the business, assets (including intangible
assets), liabilities (contingent or otherwise), condition (financial or
otherwise) or results of operations of Parent and its subsidiaries, taken
as a whole; and
(f) the shares of Parent Common Stock into which the shares of
Company Capital Stock will be converted pursuant to Article III and the
shares of Parent Common Stock issuable upon the exercise of Company Stock
Options pursuant to Section 3.06 shall have been authorized for listing on
the NYSE, subject to official notice of issuance.
SECTION 8.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger, or to permit the
consummation of the Merger, are subject to the satisfaction or, if permitted by
applicable Law, waiver of the following further conditions:
(a) each of the representations and warranties of Parent
contained in this Agreement that is qualified by materiality shall be true,
complete and correct on and as of the Effective Time as if made at and as
of the Effective Time (other than representations and warranties which
address matters only as of a certain date which shall be true, complete and
correct as of such certain date) and each of the representations and
warranties that is not so qualified shall be true, complete and correct in
all material respects on and as of the Effective Time as if made at and as
of the Effective Time (other than representations and warranties which
address matters only as of a certain date which shall be true, complete and
correct in all material respects as of such certain date), in each case
except as contemplated or permitted by
56
this Agreement, and the Company shall have received a certificate of the
Chairman or President and Chief Financial Officer of Parent to such effect;
and
(b) Parent shall have performed or complied in all material
respects with all material agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time and the Company shall have received a certificate of the
Chairman or President and Chief Financial Officer of Parent to that effect.
SECTION 8.03. CONDITIONS TO THE OBLIGATIONS OF PARENT. The
obligations of Parent to consummate the Merger, or to permit the consummation of
the Merger, are subject to the satisfaction or, if permitted by applicable Law,
waiver of the following further conditions:
(a) each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality shall be true,
complete and correct on and as of the Effective Time as if made at and as
of the Effective Time (other than representations and warranties which
address matters only as of a certain date which shall be true, complete and
correct as of such certain date) and each of the representations and
warranties that is not so qualified shall be true, complete and correct in
all material respects on and as of the Effective Time as if made on and as
of such date (other than representations and warranties which address
matters only as of a certain date which shall be true, complete and correct
in all material respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and Parent shall have received
a certificate of the Chairman or President and Chief Financial Officer of
the Company to such effect;
(b) the Company shall have performed or complied in all material
respects with all material agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time and Parent shall have received a certificate of the Chairman
or President and Chief Financial Officer of the Company to that effect;
(c) there shall not be pending or threatened any action,
proceeding, claim or counterclaim which seeks to or would, or any order,
decree or injunction (whether preliminary, final or appealable) which
would, require Parent to hold separate or dispose of any of the stock or
assets of the Company or the Company Subsidiaries or imposes material
limitations on the ability of Parent to control in any material respect the
business, assets or operations of either Parent or the Company; and
57
(d) Parent shall have obtained any necessary consent or waiver
of NationsBank of Texas, N.A. to consummation of the Merger on terms and
conditions satisfactory to Parent.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite adoption and approval of this Agreement, as follows:
(a) by mutual written consent duly authorized by the boards of
directors of each of Parent and the Company;
(b) by either Parent or the Company, if the Effective Time shall
not have occurred on or before September 30, 1997; PROVIDED, HOWEVER, that
in the event that the Effective Time has not occurred by such time solely
due to the failure to satisfy the condition specified in Section 8.01(d) or
8.01(e), then such date may be extended, at the option of Parent, until
December 31, 1997; PROVIDED, FURTHER, that the right to terminate this
Agreement under this Section 9.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement shall have
caused, or resulted in, the failure of the Effective Time to occur on or
before such date;
(c) by either Parent or the Company, if any Governmental Order,
writ, injunction or decree preventing the consummation of the Merger shall
have been entered by any court of competent jurisdiction and shall have
become final and nonappealable;
(d) by the Company, if a Parent Stockholders' Meeting is to
beheld and the board of directors of Parent withdraws, modifies or changes
its recommendation of this Agreement or the Merger in a manner adverse to
the Company or its stockholders or shall have resolved to do so;
(e) by Parent, if (i) the board of directors of the Company
withdraws, modifies or changes its recommendation of this Agreement or the
Merger in a manner adverse to Parent or its stockholders or shall have
resolved to do so, (ii) the board of directors of the Company shall have
recommended to the stockholders of the Company a Competing Transaction or
shall have resolved to do so or (iii) a
58
tender offer or exchange offer for 15 percent or more of the outstanding
shares of capital stock of the Company shall have been commenced and the
board of directors of the Company shall have failed to recommend against
acceptance of such tender offer or exchange offer by its stockholders
(including by taking no position with respect to the acceptance of such
tender offer or exchange offer by its stockholders);
(f) (i) by Parent or the Company, if this Agreement and the
Merger shall fail to receive the requisite votes for approval at the
Company Stockholders' Meeting or any adjournment or postponement thereof
and (ii) by Parent, if this Agreement and the Merger shall fail to receive
the requisite votes for approval at the Parent Stockholders' Meeting or any
adjournment or postponement thereof, if any such vote is required;
(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, incomplete or incorrect, in either case such that the
conditions set forth in Section 8.03 would not be satisfied (a "TERMINATING
COMPANY BREACH"); PROVIDED, HOWEVER, that if such Terminating Company
Breach is curable by the Company through the exercise of its reasonable
efforts within 30 days and for so long as the Company continues to exercise
such reasonable efforts, Parent may not terminate this Agreement under this
Section 9.01(g); and PROVIDED FURTHER that the preceding proviso shall not
in any event be deemed to extend any date set forth in paragraph (b) of
this Section 9.01;
(h) by the Company, upon breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or
if any representation or warranty of Parent shall have become untrue,
incomplete or incorrect, in either case such that the conditions set forth
in Section 8.02 would not be satisfied (a "TERMINATING PARENT BREACH");
PROVIDED, HOWEVER, that if such Terminating Parent Breach is curable by
Parent through the exercise of its reasonable efforts within 30 days and
for so long as Parent continues to exercise such reasonable efforts, the
Company may not terminate this Agreement under this Section 9.01(h); and
PROVIDED FURTHER that the preceding proviso shall not in any event be
deemed to extend any date set forth in paragraph (b) of this Section 9.01;
or
(i) by Parent, if (x) (A) any Governmental Order, writ,
injunction or decree determining the Stockholders Stock Option and Proxy
Agreement invalid or unenforceable shall have been entered by any court of
competent jurisdiction and shall have become final and nonappealable and
(B) the Company, any of the Company Subsidiaries or the Principal
Stockholder, or any of any of their officers, directors, employees, agents
or other representatives, instigates or otherwise voluntarily assists,
59
supports or cooperates with any other party instigating or pursuing such a
legal determination or (y) the Principal Stockholder shall be in material
breach of the Stockholders Stock Option and Proxy Agreement.
SECTION 9.02. EFFECT OF TERMINATION. Except as provided in
Section 9.05, in the event of termination of this Agreement pursuant to
Section 9.01, this Agreement shall forthwith become void, there shall be no
liability under this Agreement on the part of any party hereto or any of its
affiliates or any of its or their officers or directors, and all rights and
obligations of each party hereto shall cease, subject to the remedies of the
parties hereto set forth in Section 9.05(b), (c), (d) and (e); PROVIDED,
HOWEVER, that nothing herein shall relieve any party hereto from liability for
the willful or intentional breach of any of its representations and warranties
or the willful or intentional breach of any of its covenants or agreements set
forth in this Agreement.
SECTION 9.03. AMENDMENT. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective boards of
directors at any time prior to the Effective Time; PROVIDED, HOWEVER, that,
after the approval of this Agreement by the stockholders of the Company or, if
required, Parent, as the case may be, no amendment may be made, except such
amendments that have received the requisite stockholder approval and such
amendments as are permitted to be made without stockholder approval under the
General Corporation Law or the Delaware General Corporation Law, as applicable.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 9.04. WAIVER. At any time prior to the Effective Time, any
party hereto may (a) extend the time for or waive compliance with the
performance of any obligation or other act of any other party hereto or
(b) waive any inaccuracy in the representations and warranties contained herein
or in any document delivered pursuant hereto. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
SECTION 9.05. EXPENSES. (a) Except as set forth in this
Section 9.05, all Expenses incurred in connection with this Agreement and the
Merger shall be paid by the party incurring such Expenses, whether or not the
Merger is consummated, except that Parent and the Company each shall pay one-
half of all Expenses incurred solely for printing, filing and mailing the
Registration Statement and the Proxy Statement and all SEC and other regulatory
filing fees incurred in connection with the Registration Statement and the Proxy
Statement and any fees required to be paid under the HSR Act.
(b) In the event that (i) Parent shall terminate this Agreement
pursuant to Section 9.01(d); or (ii) (A) Parent shall terminate this Agreement
pursuant to Section 9.01(e), (B) at the time of such failure to so approve this
Agreement, there shall exist or have been
60
proposed a Competing Transaction with respect to the Company and (C) within 18
months thereafter, the Company shall enter into a definitive agreement with
respect to any Competing Transaction or any Competing Transaction shall be
consummated; then, in the case of clause (i) of this Section 9.05(b), promptly
after such termination, or, in the case of clause (ii) of this Section 9.05(b),
promptly after the execution and delivery of such agreement or such
consummation, the Company shall pay to Parent an amount equal to $1,500,000 plus
all of Parent's Expenses, as evidenced by reasonable documentation, in an amount
not greater than $300,000.
(c) Any payment required to be made pursuant to Section 9.05(b)
shall be made to Parent not later than the date of the entry into an agreement
referred to therein and two business days after delivery to the Company of
notice of demand for payment and shall be made by wire transfer of immediately
available funds to an account designated by Parent in the notice of demand for
payment delivered pursuant to this Section 9.05(c).
(d) In the event that the Merger shall not be consummated solely
due to the failure by Parent to satisfy or waive Section 8.03(d), then Parent
shall pay to the Company within two business days after termination of the
Merger Agreement an amount equal to all of the Company's Expenses, as evidenced
by reasonable documentation, and in amount no greater than $150,000, by wire
transfer of immediately available funds to an account designated by the Company.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to
Section 9.01, as the case may be. Each party agrees that, except for the
representations and warranties contained in this Agreement and the Parent
Disclosure Schedule and the Company Disclosure Schedule, no party hereto has
made any other representations and warranties, and each party hereby disclaims
any other representations and warranties made by itself or any of its officers,
directors, employees, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement or
the Merger contemplated herein, notwithstanding the delivery or disclosure to
any other party or any party's representatives of any documentation or other
information with respect to any one or more of the foregoing.
61
SECTION 10.02. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or facsimile, by registered or certified mail (postage prepaid, return
receipt requested) or by a nationally recognized courier service to the
respective parties at their addresses set forth on the signature pages to this
Agreement (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10.02).
SECTION 10.03. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner to the fullest
extent permitted by applicable Law in order that the Merger may be consummated
as originally contemplated to the fullest extent possible.
SECTION 10.04. ASSIGNMENT; BINDING EFFECT; BENEFIT. 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 hereto; PROVIDED,
HOWEVER, that Parent may assign its rights, interests and obligations hereunder
to any successor or parent entity of Parent whose shares are registered under
Section 12 of the Exchange Act (or will be so registered at the Effective Time);
PROVIDED, FURTHER, that in the event that the RCA Merger is consummated at or
prior to the Effective Time, then Parent shall have the right to contribute all
of the capital stock of Merger Sub to RCA. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, other than
Section 7.06, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and permitted assigns any rights or remedies under or by reason of
this Agreement.
SECTION 10.05. INCORPORATION OF EXHIBITS. The Parent Disclosure
Schedule, the Company Disclosure Schedule and all Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part of this
Agreement for all purposes as if fully set forth herein.
SECTION 10.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
62
LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES
OTHER THAN THOSE DIRECTING NEW YORK LAW) EXCEPT TO THE EXTENT MANDATORILY
GOVERNED BY THE LAWS OF THE STATE OF NEVADA. PARENT, MERGER SUB AND THE COMPANY
EACH HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE CITY OF NEW YORK, NEW YORK COUNTY, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND PARENT, MERGER SUB
AND THE COMPANY EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE
COURT OR SUCH FEDERAL COURT. PARENT, MERGER SUB AND THE COMPANY EACH HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
SECTION 10.07. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY
HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
SECTION 10.08. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.09. COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.10. ENTIRE AGREEMENT. This Agreement (including the
Exhibits, the Parent Disclosure Schedule and the Company Disclosure Schedule)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision
of this Agreement shall be binding upon any party hereto unless made in writing
and signed by all parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
SUN HEALTHCARE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title:
000 Xxx Xxxx, XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Shearman & Sterling
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
NECTARINE ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title:
c/o SUN HEALTHCARE GROUP, INC.
000 Xxx Xxxx, XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
CONTOUR MEDICAL, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------
Name: Xxxxx Xxxxxxx
Title: Chairman
0000-X Xxxxxxx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxx
with a copy to:
Xxxxxx & Xxxxxx
0000 Xxxx Xxxxx
Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxx
EXHIBITS
Exhibit 1.00(a) Form of Stockholder Stock Option and Proxy Agreement
Exhibit 7.03 Form of Company Affiliate Agreement
v
EXHIBIT 1.00(a)
STOCKHOLDERS STOCK OPTION AND PROXY AGREEMENT
STOCKHOLDERS STOCK OPTION AND PROXY AGREEMENT, dated as of February 17,
1997, among SUN HEALTHCARE GROUP INC., a Delaware corporation ("PARENT"), and
each other person and entity listed on the signature pages hereof (each, a
"STOCKHOLDER").
WHEREAS, as of the date hereof each Stockholder owns (either beneficially
or of record) the number of shares of common stock, par value $0.0001 per share
("COMPANY COMMON STOCK"), Series AA Redeemable Convertible Preferred Stock ("AA
PREFERRED"), and Series F Convertible Preferred Stock ("F PREFERRED" and,
together with the Company Common Stock and AA Preferred, the "COMPANY CAPITAL
STOCK"), of Retirement Care Associates, Inc., a Colorado corporation (the
"COMPANY"), set forth opposite such Stockholder's name on Exhibit A hereto (all
such shares of Company Capital Stock owned by the Stockholders and any shares of
Company Capital Stock hereafter acquired by the Stockholders prior to the
termination of this Agreement being referred to herein as the "SHARES");
WHEREAS, Parent and the Company propose to enter into an Agreement and Plan
of Merger and Reorganization, dated as of the date hereof (as the same may be
amended from time to time, the "MERGER AGREEMENT"; capitalized terms not
otherwise defined herein being herein with the meanings ascribed thereto in the
Merger Agreement), which provides, upon the terms and subject to the conditions
thereof, for the merger of the Company with and into a subsidiary of Parent (the
"MERGER"); and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has requested that each Stockholder agree, and, in
order to induce Parent to enter into the Merger Agreement, each Stockholder has
agreed, severally and not jointly, to grant Parent options to purchase such
Stockholder's Shares and proxies to vote such Stockholder's Shares;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
ARTICLE I
2
THE OPTIONS
SECTION 1.01. GRANT OF OPTIONS. Each Stockholder hereby grants to Parent
an irrevocable option (each, an "OPTION") to purchase such Stockholder's Shares
at (i) a price per share of Company Common Stock equal to $9.27 (the "COMMON
PURCHASE PRICE"), (ii) a price per share of AA Preferred equal to $10.00 (the
"AA PURCHASE PRICE"), and (iii) a price per share of F Preferred equal to $9.27
(the "F PURCHASE PRICE" and, together with the Common Purchase Price and the AA
Purchase Price, the "PURCHASE PRICE"). Each Option shall expire if (i) such
Option is not exercised prior to the close of business on the 120th day
following termination of the Merger Agreement, (ii) if the Merger Agreement is
terminated pursuant to Section 9.01(c) thereof, or (iii) if the Closing Date
Market Price is less than $12.07.
SECTION 1.02. EXERCISE OF OPTIONS. (a) Provided that (i) to the extent
necessary, any applicable waiting periods (and any extension thereof) under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR ACT") with respect to the exercise
of an Option shall have expired or been terminated and (ii) no preliminary or
permanent injunction or other order, decree or ruling issued by any court or
governmental or regulatory authority, domestic or foreign, of competent
jurisdiction prohibiting the exercise of an Option or the delivery of Shares
shall be in effect, Parent may exercise any or all of the Options at any time
following the earlier of (i) the termination of the Merger Agreement (other than
a termination pursuant to Section 9.01(c) thereof) and (ii) the first occurrence
of a Competing Transaction until the expiration of such Options. In the event
that Parent wishes to exercise an Option, Parent shall give written notice (the
date of such notice being herein called the "NOTICE DATE"), to the Stockholder
who granted such Option specifying a place and date (not later than ten Business
Days (as defined below) and not earlier than three Business Days following the
Notice Date) for closing such purchase (the "CLOSING"). For the purposes of
this Agreement, the term "BUSINESS DAY" shall mean any day on which banks are
not required or authorized by law, regulation or executive order to close in New
York, New York.
(b) If Parent shall exercise any Option in accordance with the terms
of this Agreement, and without additional consideration, the Stockholder who
granted such Option shall execute and deliver further transfers, assignments,
endorsements, consents and other instruments as Parent may reasonably request
for the purpose of effectively carrying out the transactions contemplated by
this Agreement and the Merger Agreement, including the transfer of any and all
of such Stockholder's Shares Parent and the release of any and all liens, claims
and encumbrances covering such Shares.
SECTION 1.03. PAYMENT FOR AND DELIVERY OF CERTIFICATES. At the Closing,
(a) Parent shall pay the aggregate Purchase Price for the Shares being purchased
from each Stockholder by delivery of that number of shares of Parent Common
Stock (the "PARENT SHARES") equal to
3
the quotient of the total amount of the Purchase Price and the Closing Date
Market Price (determined as if the Effective Time had occurred on the Notice
Date), (b) each Stockholder whose Shares are being purchased shall deliver to
Parent a certificate or certificates evidencing such Stockholder's Shares, and
such Stockholder agrees that such Shares shall be transferred free and clear of
all liens, and (c) Parent shall deliver to each Stockholder a certificate or
certificates evidencing the Parent Shares to be received by each Stockholder at
the Closing, and Parent agrees that such Parent Shares shall be transferred free
and clear of all liens. All such certificates representing Shares shall be duly
endorsed in blank, or with appropriate stock powers, duly executed in blank,
attached thereto, in proper form for transfer, with the signature of such
Stockholder thereon guaranteed, and with all applicable taxes paid or provided
for.
ARTICLE II
TRANSFER AND VOTING OF SHARES
SECTION 2.01. TRANSFER OF SHARES. During the term of the Options, and
except as otherwise provided herein, each Stockholder shall not (a) sell, pledge
or otherwise dispose of any of its Shares, (b) deposit its Shares into a voting
trust or enter into a voting agreement or arrangement with respect to such
Shares or grant any proxy with respect thereto or (c) enter into any contract,
option or other arrangement or undertaking with respect to the direct or
indirect acquisition or sale, assignment, transfer or other disposition of any
the Company Capital Stock.
SECTION 2.02. VOTING OF SHARES; FURTHER ASSURANCES. (a) Each
Stockholder, by this Agreement, with respect to those Shares that it owns of
record, does hereby constitute and appoint Parent, or any nominee of Parent,
with full power of substitution, during and for the term of the Option
granted by such Stockholder hereunder (or, following termination of the
Merger Agreement, during such periods as the Options are exercisable), as its
true and lawful attorney and proxy, for and in its name, place and stead, to
vote each of such Shares as its proxy, at every annual, special or adjourned
meeting of the stockholders of the Company (including the right to sign its
name (as stockholder) to any consent, certificate or other document relating
to the Company that the law of the State of Colorado may permit or require)
(i) in favor of the adoption of the Merger Agreement and approval of the
Merger and the other transactions contemplated by the Merger Agreement, (ii)
against any proposal for any recapitalization, merger, sale of assets or
other business combination between the Company and any person or entity
(other than the Merger) or any other action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or which could result
in any of the conditions to the Company's obligations under the Merger
Agreement not being
4
fulfilled, and (iii) in favor of any other matter relating to consummation of
the transactions contemplated by the Merger Agreement. Each Stockholder further
agrees to cause the Shares owned by it beneficially to be voted in accordance
with the foregoing. Each Stockholder acknowledges receipt and review of a copy
of the Merger Agreement.
(b) Each Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in
Parent the power to carry out the provisions of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
Each Stockholder, severally and not jointly, hereby represents and warrants
to Parent as follows:
SECTION 3.01. DUE ORGANIZATION, ETC. Such Stockholder (if it is a
corporation, partnership or other legal entity) is duly organized and validly
existing under the laws of the jurisdiction of its incorporation or
organization. Such Stockholder has full power and authority (corporate or
otherwise) to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action (corporate or otherwise) on the part of such
Stockholder. This Agreement has been duly executed and delivered by or on
behalf of such Stockholder and, assuming its due authorization, execution and
delivery by Parent, constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 3.02. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by such Stockholder do not, and the
performance of this Agreement by such Stockholder will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws or similar organizational
document of such Stockholder (in the case of a Stockholder that is a
corporation, partnership or other legal entity), (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to such
Stockholder or by which it or any of its properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a
5
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of such Stockholder or (if such
Stockholder purports to be a corporation) any of its subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which such Stockholder is
a party or by which such Stockholder or any of its properties is bound or
affected, except for any such breaches, defaults or other occurrences that would
not cause or create a material risk of non-performance or delayed performance by
such Stockholder of its obligations under this Agreement.
(b) The execution and delivery of this Agreement by such Stockholder
do not, and the performance of this Agreement by such Stockholder will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE
ACT"), and the HSR Act and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by such Stockholder of its
obligations under this Agreement.
SECTION 3.03. TITLE TO SHARES. Such Stockholder is the record or
beneficial owner of its Shares free and clear of any proxy or voting restriction
other than pursuant to this Agreement. At the Closing such Stockholder will
deliver good and valid title to its Shares free and clear of any pledge, lien,
security interest, charge, claim, equity, option, proxy, voting restriction,
right of first refusal or other limitation on disposition or encumbrance of any
kind, other than pursuant to this Agreement. Such Stockholder has full right,
power and authority to sell, transfer and deliver its Shares pursuant to this
Agreement. Upon delivery of such Shares and payment of the Purchase Price
therefor as contemplated herein, Parent will receive good and valid title to
such Shares, free and clear of any pledge, lien, security interest, charge,
claim, equity, option, proxy, voting restriction or encumbrance of any kind.
6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to each Stockholder as follows:
SECTION 4.01. DUE ORGANIZATION, ETC. Parent is a corporation duly
organized and validly existing under the laws of the State of Delaware. Parent
has all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by Parent have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by Parent and, assuming its due authorization, execution and
delivery by each Stockholder, constitutes a legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms.
SECTION 4.02. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Parent do not, and the performance
of this Agreement by Parent will not, (i) conflict with or violate the
Certificate of Incorporation or By-laws of Parent, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Parent or by
which Parent or any of its properties is bound or affected, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of Parent
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent is
a party or by which it or any of its properties is bound or affected, except for
any such breaches, defaults or other occurrences that would not cause or create
a material risk of non-performance or delayed performance by Parent of its
obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent do not,
and the performance of this Agreement by Parent will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the Exchange Act and the HSR Act and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not prevent or delay the
performance by Parent of its obligations under this Agreement.
SECTION 4.03. INVESTMENT INTENT. The purchase of Shares from any
Stockholder pursuant to this Agreement is for the account of Parent for the
purpose of investment and not
7
with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and the rules and regulations promulgated thereunder.
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.01. SHELF REGISTRATION. (a) Parent shall, within three months
following the Closing, file with the Securities and Exchange Commission (the
"COMMISSION") a shelf registration statement on an appropriate form under
Rule 415 under the Securities Act, or any similar rule that may be adopted by
the Commission (a "SHELF REGISTRATION STATEMENT"), relating to the resale of the
Parent Shares by the Stockholders from time to time in accordance with the
methods of distribution set forth in such Shelf Registration Statement and shall
use its best efforts to cause such Shelf Registration Statement to be declared
effective under the Securities Act as soon as practicable thereafter; PROVIDED,
HOWEVER, that no Stockholder shall be entitled to have the Parent Shares held by
it covered by such Shelf Registration Statement unless such Stockholder is in
compliance with Section 5.02(f) hereof.
(b) Parent shall use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the prospectus forming part
thereof to be usable by the Stockholders until the earliest to occur of the
following: (A) two year anniversary of the Closing; (B) the earliest time at
which all the Parent Shares covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement; and (C) the earliest
time at which, in the written opinion of independent counsel to Parent, all
outstanding Parent Shares held by persons that are not affiliates of Parent may
be resold without registration under the Securities Act pursuant to Rule 144(k)
under the Securities Act or any successor provision thereto (in any such case,
such period being called the "EFFECTIVENESS PERIOD"). Parent shall be deemed
not to have used its best efforts to keep the Shelf Registration Statement
effective during the requisite period if Parent voluntarily takes any action
that would result in Stockholders of Parent Shares covered thereby not being
able to offer and sell any such Parent Shares during that period, unless
(i) such action is required by applicable law, (ii) the continued effectiveness
of the Shelf Registration Statement would require Parent to disclose a material
financing, acquisition or other corporate transaction, and the Board of
Directors shall have determined in good faith that such disclosure is not in the
best interests of Parent and its stockholders, or (iii) the Board of Directors
shall have determined in good faith that there is a valid business purpose for
such suspension.
SECTION 5.02. REGISTRATION PROCEDURES. In connection with any Shelf
Registration Statement, the following provisions shall apply:
8
(a) Parent shall take such action as may be necessary so that (i) any
Shelf Registration Statement and any amendment thereto and any prospectus
forming part thereof and any amendment or supplement thereto (and each report or
other document incorporated therein by reference in each case) complies in all
material respects with the Securities Act and the Exchange Act, and the
respective rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (iii) any prospectus forming part of any Shelf Registration Statement, and
any amendment or supplement to such prospectus, does not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements, in the light of the circumstances under which they were
made, not misleading.
(b) Parent shall advise the Stockholders:
(i) when a Shelf Registration Statement and any amendment
thereto has been filed with the Commission and when the Shelf Registration
Statement or any post-effective amendment thereto has become effective;
(ii) upon the issuance by the Commission of any stop order
suspending effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for that purpose;
(iii) upon the receipt by Parent of any notification with
respect to the suspension of the qualification of the securities included
therein for sale in any jurisdiction or the initiation of any proceeding
for such purpose; and
(iv) upon the happening of any event that requires the making of
any changes in the Shelf Registration Statement or the prospectus so that,
as of such date, the Shelf Registration Statement and the prospectus do not
contain an untrue statement of a material fact and do not omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading (which advice
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made).
(c) Parent shall, during the Effectiveness Period, deliver to each
Stockholder with respect to a Shelf Registration Statement, without charge, as
many copies of the prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement thereto as
such Stockholder may reasonably request; and Parent consents (except during the
continuance of any event described in Section
9
5.02(b)(iv)) to the use of the prospectus or any amendment or supplement thereto
by each of the Stockholders in connection with the offering and sale of the
Parent Shares covered by the prospectus or any amendment or supplement thereto
during the Effectiveness Period.
(d) Prior to any offering of Parent Shares pursuant to any Shelf
Registration Statement, Parent shall register or qualify or cooperate with the
Stockholders and their respective counsel in connection with the registration or
qualification of such Parent Shares for offer and sale under the securities or
blue sky laws of such jurisdictions as any such Stockholders reasonably request
in writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Parent Shares covered by
such Shelf Registration Statement; PROVIDED, HOWEVER, that in no event shall
Parent be obligated to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to so
qualify but for this Section 5.02(d), (ii) file any general consent to service
of process in any jurisdiction where it is not as of the date hereof then so
subject or (iii) subject itself to taxation in any jurisdiction if it is not so
subject.
(e) Upon the occurrence of any event contemplated by Section
5.02(b)(iv) above, Parent shall promptly prepare a post-effective amendment to
any Shelf Registration Statement or an amendment or supplement to the related
prospectus or file any other required document so that, as thereafter delivered
to purchasers of the Parent Shares included therein, the prospectus will not
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If Parent notifies the Stockholders
of the occurrence of any event contemplated by Section 5.02(b)(iv) above, the
Stockholders shall suspend the use of the prospectus until the requisite changes
to the prospectus have been made.
(f) Parent may require each Stockholder with respect to a Shelf
Registration Statement to furnish to Parent such information regarding the
Stockholder and the distribution of Parent Shares held by such Stockholder as
may be required by applicable law or regulation for inclusion in such Shelf
Registration Statement and Parent may exclude from such registration the Parent
Shares of any Stockholder that fails to furnish such information within a
reasonable time after receiving such request.
(g) Parent will use its best efforts to cause the Parent Shares to be
listed on the New York Stock Exchange or other stock exchange or trading system
on which the Parent Common Stock primarily trades on or prior to the effective
date of any Shelf Registration Statement hereunder.
ARTICLE VI
10
REPURCHASE OPTION
SECTION 6.01. REPURCHASE OPTION. For a period of 30 days after the
consummation of a Competing Transaction involving the Company (a "REPURCHASE
EVENT"), Parent shall have the right, upon five business days' prior written
notice to the Company (or any successor in interest to the Company by merger,
sale of all or substantially all of the assets, or otherwise) (the "REPURCHASE
NOTICE"), to cause the Company (or any successor in interest to the Company by
merger, sale of all or substantially all of the assets, or otherwise) to have a
closing and to pay at such closing (and the Company and such successor, jointly
and severally, shall be obligated to pay) to Parent in consideration for the
cancellation of all or any portion of the Options, and/or the repurchase from
Parent of all or any portion of the Shares acquired by Parent pursuant to
exercise of Options, as the case may be, an aggregate price (the "REPURCHASE
PRICE") equal to the sum of the following amounts for each class of Company
Capital Stock: (A) the product of (x) the number of Shares of such class as to
which the Option remains exercisable multiplied by (y) the amount by which (i)
the value of the per share consideration paid for such class in the Competing
Transaction exceeds (ii) the Purchase Price for such class and (B) the product
of (x) the number of Shares of such class that Parent owns as a result of
exercise of an Option and (y) the per share consideration paid for such class in
the Competing Transaction. At any closing contemplated by the Repurchase
Notice, the Company (or any successor in interest to the Company by merger, sale
of all or substantially all of the assets, or otherwise) shall pay to Parent the
Repurchase Price by delivering to Parent a certified or bank check payable to or
on the order of Parent in an amount equal to the Repurchase Price.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to Parent
Sun Healthcare Group Inc.
000 Xxx Xxxx, XX
00
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
(b) If to a Stockholder
c/o Retirement Care Associates, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx
0000 Xxxx Xxxxx
Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxx
Telecopier No.: (000) 000-0000
SECTION 7.02. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 7.03. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
12
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 7.04. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
SECTION 7.05. ASSIGNMENT. This,Agreement shall not be assigned by
operation of law or otherwise; PROVIDED, HOWEVER, that Parent may assign its
rights, interests and obligations hereunder to any successor or parent entity of
Parent whose shares are registered under Section 12 of the Exchange Act (or will
be so registered at the Closing).
SECTION 7.06. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 7.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 7.08. GOVERNING LAW. EXCEPT TO THE EXTENT THAT COLORADO LAW IS
MANDATORILY APPLICABLE TO THE RIGHTS OF THE STOCKHOLDERS OF THE COMPANY, THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED
ENTIRELY WITHIN THAT STATE. PARENT AND EACH OF THE STOCKHOLDERS EACH HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT
SITTING IN THE CITY OF NEW YORK, NEW YORK COUNTY, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND PARENT AND EACH OF THE
STOCKHOLDERS EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR
SUCH FEDERAL COURT. PARENT AND EACH OF THE STOCKHOLDERS EACH HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
13
SECTION 7.09. STOCK CERTIFICATE LEGENDS; STOP TRANSFER ORDERS. In the
event that Parent issues shares of Parent Common Stock to the Stockholders, (i)
all certificates representing such shares and any certificates subsequently
issued with respect thereto or in substitution therefor shall bear an
appropriate legend, and (ii) Parent may cause stop transfer orders to be placed
with its transfer agent with respect to such certificates.
SECTION 7.10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SUN HEALTHCARE GROUP INC.
By:
------------------------------
Name:
Title:
STOCKHOLDERS
------------------------------
Xxxxx Xxxxxxx
------------------------------
Xxxxxx Xxxxxxx
------------------------------
Xxxxxx X. Xxxx
------------------------------
Xxxxxxx X. Xxxxxx
WINTER HAVEN HOMES, INC.
By:
------------------------------
Name:
Title:
EXHIBIT A
List of Stockholders
--------------------
--------------------------------------------------------------------------------
Number of Shares of Company Capital Stock
Owned Beneficially and of Record
--------------------------------------------------------------------------------
Company Common
Name of Stockholder Stock AA Preferred F Preferred
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx 927,948 0 0
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 1,266,031 0 0
--------------------------------------------------------------------------------
Xxxxxx X. Xxxx 1,933,804 0 0
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 382,392 0 0
--------------------------------------------------------------------------------
Winter Haven Homes, Inc. 491,462 0 0
--------------------------------------------------------------------------------
A-1
EXHIBIT 7.03
FORM OF COMPANY AFFILIATE AGREEMENT
, 1997
---------------------- -----
Sun Healthcare Group Inc.
000 Xxx Xxxx, XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
AFFILIATE AGREEMENT
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger and
Reorganization, dated as of February 17, 1997 (the "Merger Agreement";
capitalized terms used and not otherwise defined herein are used herein as
defined in the Merger Agreement), among Sun Healthcare Group Inc., a corporation
organized under the laws of the State of Delaware ("Parent"), Nectarine
Acquisition Corporation, a corporation organized under the laws of the State of
Nevada ("Merger Sub") and a direct wholly owned subsidiary of Parent, and
Contour Medical, Inc., a corporation organized under the laws of the State of
Nevada (the "Company").
Pursuant to the terms of the Merger Agreement, at the Effective Time,
outstanding shares of Company Capital Stock will be converted into and become
exchangeable for shares of Parent Common Stock and/or cash on the basis set
forth in the Merger Agreement.
The undersigned has been advised that as of the date hereof [it] [he]
[she] may be deemed to be an "affiliate" of the Company, as such term is defined
for purposes of paragraphs (c) and (d) of rule 145 ("Rule 145") of the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act").
The undersigned understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, stockholders of
Parent, the Company and other stockholders of the Company and their respective
counsel and accounting firms.
The undersigned hereby represents and warrants to and agrees with
Parent that:
2
1. The undersigned has full power and authority to execute and
deliver this letter agreement and to make the representations and
warranties set forth herein and to perform [its] [his] [her] obligations
hereunder;
2. The undersigned has carefully read this letter agreement and
the Merger Agreement and, to the extent the undersigned felt necessary,
discussed the requirements of such documents and other applicable
limitations upon [its] [his] [her] ability to sell, transfer, pledge or
otherwise dispose of Parent Common Stock with [its] [his] [her] counsel or
counsel for the Company;
3. The undersigned is the beneficial owner of (has sole or
shared voting or investment power with respect to) the shares of Company
Capital Stock and options or warrants to purchase Company Capital Stock
specified beneath [its] [his] [her] name on the signature page hereto (the
"Company Securities"). Except for the Company Securities, the undersigned
does not own beneficially any shares of Company Capital Stock or any other
equity securities of the Company or any options, warrants or other rights
to acquire any equity securities of the Company;
4. The undersigned will not make any sale, transfer, pledge or
other disposition of Parent Common Stock in violation of the Securities Act
or the Rules and Regulations;
5. The undersigned has been advised that the issuance of Parent
Common Stock to the undersigned in connection with the Merger has been or
will be registered with the Commission under the Securities Act on a
Registration Statement on Form S-4. However, the undersigned has also been
advised that, since at the time the Merger was or will be submitted for a
vote of the stockholders of the Company the undersigned may be deemed to be
or have been an affiliate of the Company and the distribution by the
undersigned of any Parent Common Stock has not been registered under the
Securities Act, the undersigned may not sell, transfer, pledge or otherwise
dispose of Parent Common Stock issued to [it] [him] [her] in the Merger
unless (i) such sale, transfer, pledge or other disposition has been
registered under the Securities Act, (ii) such sale, transfer, pledge or
other disposition is made in conformity with the volume and other
limitations of Rule 145 or (iii) in the opinion of counsel reasonably
acceptable to Parent (it being understood that the law firms of Xxxxxx &
Xxxxxx and Xxxxxxxx & Sterling are deemed to be reasonably satisfactory to
Parent), such sale, transfer, pledge or other disposition is otherwise
exempt from registration under the Securities Act;
6. The undersigned understands that, except as provided in the
Merger Agreement, Parent is under no obligation to register the sale,
transfer, pledge
3
or other disposition of Parent Common Stock by the undersigned or on [its]
[his] [her] behalf under the Securities Act or to take any other action
necessary in order to make compliance with an exemption from such
registration available;
7. The undersigned also understands that stop transfer
instructions will be given to Parent's transfer agents with respect to
Parent Common Stock issued to [it] [him] [her] and that there will be
placed on the certificates for Parent Common Stock issued to [it] [him]
[her], or any substitutions therefor, a legend stating in substance:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES. THE SECURITIES EVIDENCED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, AND NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS
OF THE ISSUER, UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSAL IS MADE IN CONNECTION WITH AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT, THE RULES AND REGULATIONS
IN EFFECT THEREUNDER AND ANY APPLICABLE STATE SECURITIES LAWS";
8. The undersigned also understands that, unless the sale,
transfer, pledge or other disposition by [it] [him] [her] of Parent Common
Stock issued to [it] [him] [her] has been registered under the Securities
Act or is a sale made in conformity with the provisions of Rule 145, Parent
reserves the right to put the following legend on the certificates issued
to any transferee of the undersigned:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ACQUIRED FROM
A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES, AND
WERE NOT ACQUIRED BY THE HOLDER WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933, AS AMENDED. THE
4
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, AND NO REGISTRATION OF TRANSFER
OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER, UNLESS
SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSAL IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS OR IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT, THE RULES AND REGULATIONS IN EFFECT
THEREUNDER AND ANY APPLICABLE STATE SECURITIES LAWS";
9. Except to the extent written notification to the contrary is
received by Parent from the undersigned prior to the Merger, the
representations contained herein will be true, complete and correct at all
times from the date hereof through the Closing Date; and
10. The undersigned currently intends to vote all Company
Capital Stock held by [it] [him] [her] in favor of the Merger.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Execution of this letter should not be considered an admission on the
part of the undersigned that [it] [he] [she] is an affiliate of the Company as
described above, or as a waiver of any rights the undersigned may have to object
to any claim that [it] [he] [she] am such an affiliate on or after the date of
this letter.
Very truly yours,
[
------------------------
[AFFILIATE]]
[[AFFILIATE]
By:
----------------------
Name:
Title:]
Number of shares of Company Capital Stock beneficially
owned:
Common Stock:
-------------------------
Series A Preferred Stock:
-------------------------
Number of shares of Company Capital Stock subject to
options, warrants or other rights to acquire Company Capital
Stock beneficially owned:
Common Stock:
-------------------------
Series A Preferred Stock:
-------------------------
ACCEPTED AND AGREED
as of , 1997:
--------------------- -----
SUN HEALTHCARE GROUP INC.
By:
-------------------------------
Name:
Title:
