EXHIBIT 10
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of May 7, 1997 and amended and restated as of June 12, 1997 (the "Amended
and Restated Agreement") among Living Centers of America, Inc., a Delaware
corporation (the "Parent"), GranCare, Inc., a Delaware corporation (the
"Company") and Apollo Management, L.P., a Delaware limited partnership, on
behalf of one or more funds under management (collectively, "Apollo"), and,
upon its subsequent execution and delivery to the other parties of a
counterpart hereof, a newly formed Delaware corporation wholly owned by Parent
(the "Sub").
RECITALS
WHEREAS, the Parent, the Company and Apollo entered into that certain
Agreement and Plan of Merger dated as of May 7, 1997 (the "Original Merger
Agreement");
WHEREAS, subsequent to the date of the Original Merger Agreement, the Board
of Directors of the Parent, the Company and Apollo has each determined that it
is in the best interests of each of the foregoing entities to enter into this
Agreement which amends and restates the Original Merger Agreement;
WHEREAS, the Board of Directors of the Parent, the Board of Directors of the
Company and Apollo have determined that it is in the best interests of their
respective stockholders for the Company to merge with and into the Sub (the
"Merger") pursuant to Section 251 of the Delaware General Corporation Law
("DGCL") upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of each of the Parent and the Company has
adopted resolutions approving the Merger of the Company with and into the Sub,
in accordance with applicable Delaware law upon the terms and subject to the
conditions set forth herein, and the Parent's Board of Directors has agreed to
recommend that the Parent's stockholders approve the issuance of the Parent
Common Stock pursuant to the this Agreement and the Company's Board of
Directors has agreed to recommend that the Company's stockholders approve the
Merger and this Agreement;
WHEREAS, the Parent and the Company have agreed (subject to the terms and
conditions of this Agreement), as soon as practicable following the approval
by the stockholders of the Company and the Parent, to effect the Merger as
more fully described herein;
WHEREAS, a condition of the Merger is the successful completion of the
recapitalization of Parent pursuant to the merger of Parent with a subsidiary
of Apollo (the "Recapitalization Merger");
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Parent, the Sub (upon its becoming a party hereto) and the
Company desire to make certain representations, warranties, covenants and
agreements in connection with this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Certain Definitions.
For purposes of this Agreement:
"Business Day" means any day that is not a Saturday, Sunday or other day on
which banking institutions in New York, New York are authorized or required by
law or executive order to close;
"Environmental Law" means any law, regulation, decree, judgment, permit or
authorization relating to worker or public safety and the indoor and outdoor
environment, including, without limitation, pollution, contamination, cleanup,
regulation and protection of the air, water or soils in the indoor or outdoor
environment;
"Environmental Liabilities and Costs" means all damages, penalties,
obligations or clean-up costs assessed or levied pursuant to any Environmental
Law;
"Material Adverse Effect" means, with respect to the Parent or the Company,
as the case may be, any adverse change in the respective business, prospects,
financial condition or results of operations of the Parent or the Company and
their respective subsidiaries that is material to the Parent or the Company
and their respective subsidiaries taken as a whole, excluding any such adverse
change that is due to events, occurrences, facts, conditions, changes,
developments or effects which affect the economy generally;
"Securities Act" means the Securities Act of 1933, as amended and in effect
from time to time; and
"Subsidiary" means, when used with reference to an entity, any other entity
of which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions, or a majority of the outstanding voting securities of
which, are owned directly or indirectly by such entity.
ARTICLE II
THE MERGER
Section 2.01 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the DGCL, the
Company shall be merged with and into the Sub as soon as practicable following
the satisfaction or waiver, if permissible, of the conditions set forth in
Article VI hereof. The Sub shall be the surviving corporation in the Merger
(the "Surviving Corporation") under the name GranCare, Inc. (or such other
name as the parties shall agree) and shall continue its existence under the
laws of Delaware. The separate corporate existence of the Company shall cease.
Section 2.02 Consummation of the Merger. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware a duly executed
and verified certificate of merger, as required by the DGCL, and shall take
all such other and further actions as may be required by law to make the
Merger effective as promptly as practicable. Prior to the filing referred to
in this Section, a closing (the "Closing") will be held at the offices of
Cleary, Gottlieb, Xxxxx & Xxxxxxxx, Xxx Xxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx (or
such other place as the parties may agree) for the purpose of confirming all
the foregoing. The time the Merger becomes effective in accordance with
applicable law is referred to as the "Effective Time."
Section 2.03 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL and set forth herein.
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Section 2.04 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and the Bylaws of the Sub, in each case as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation; provided, however, that Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read in its entirety as follows: "ARTICLE I. The name of the Corporation is
GranCare, Inc." (or such other name as the parties shall agree).
Section 2.05 Directors and Officers. The directors of the Sub immediately
prior to the Effective Time and the officers of the Company immediately prior
to the Effective Time shall be the directors and officers, respectively, of
the Surviving Corporation until their respective successors are duly elected
and qualified.
Section 2.06 Conversion of Shares.
(a) Except as otherwise provided herein and subject to Section 2.06(b), each
share of Common Stock, par value $.001 per share, of the Company ("Company
Common Stock") issued and outstanding prior to the Effective Time (other than
the shares of Company Common Stock owned by the Parent, the Sub or any of
their Subsidiaries or held in the treasury of the Company, all of which shall
be cancelled and cease to exist, without consideration being payable therefore
and Dissenting Shares (as defined in Section 2.13)) shall, by virtue of the
Merger, be converted into, exchanged for and represent the right to receive
(without interest), subject to the election and proration procedures described
below, either (i) $10.00 in cash (the "Cash Election Amount") or (ii) 0.2469
(the "Exchange Ratio") of a share of common stock, par value $.01 per share,
of the Parent (the "Parent Common Stock") (the "Stock Consideration"), in
accordance with Section 2.13 (collectively, the "Merger Consideration").
(b) Notwithstanding anything in this Agreement to the contrary, the number
of shares of Company Common Stock (the "Cash Election Number") to be converted
into the right to receive the Cash Election Amount in the Merger shall be
equal to 10% of the issued and outstanding shares of GranCare Common Stock
immediately prior to the Effective Time.
(c) In the event that the aggregate number of shares in respect of which
Cash Elections (as defined in Section 2.13(a)) have been made (the "Cash
Election Shares") exceeds the Cash Election Number, each share of Company
Common Stock in respect of which a Cash Election has not been made shall be
converted into the right to receive the Stock Consideration, and each of the
Cash Election Shares shall be converted into the right to receive the Stock
Consideration or the Cash Election Amount in the following manner:
(i) A proration factor (the "Proration Factor") shall be determined by
dividing the Cash Election Number by the total number of Cash Election
Shares.
(ii) The number of Cash Election Shares as to which each stockholder who
made a Cash Election shall be converted into the right to receive the Cash
Election Amount (on a consistent basis among stockholders who made a Cash
Election pro rata to the number of shares as to which they made such
elections) shall be equal to the product of the Proration Factor multiplied
by the total number of Cash Election Shares beneficially owned by such
stockholder.
(iii) Subject to Section 2.11(e), each Cash Election Share other than
those shares that shall receive the Cash Election Amount in accordance with
Section 2.06(c)(ii), shall be converted into the right to receive the Stock
Consideration.
(d) Subject to Section 2.11(e), if the number of Cash Election Shares is
less than the Cash Election Number, then:
(i) Each Cash Election Share shall be converted into the right to receive
the Cash Election Amount; and
(ii) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time other than Cash Election Shares
(the "Eligible Shares"), shall be converted into the right to receive the
Cash Election Amount or the Stock Consideration in the following manner:
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(A) The number of Eligible Shares to be converted into the right to
receive the Cash Election Amount shall be equal to the excess of the
Cash Election Number over the number of Cash Election Shares (which
shall be allocated on a basis consistent among all stockholders who
beneficially own Eligible Shares pro rata to the number of Eligible
Shares beneficially owned by each such stockholder).
(B) Each other Eligible Share shall be converted into the right to
receive the Stock Consideration.
(e) Each share of Company Common Stock held in the treasury of the Company
and each share owned by Sub, Parent or any direct or indirect wholly owned
subsidiary of Parent or the Company immediately prior to the Effective Time
shall be cancelled without any conversion thereof and no payment or
distribution shall be made with respect thereto.
Section 2.07 Conversion of Common Stock of the Sub. Each share of common
stock of the Sub issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become at the Effective Time one share
of common stock of the Surviving Corporation.
Section 2.08 Company Actions. The Company hereby represents and warrants
that (a) its Board of Directors (at a meeting duly called and held), has (i)
determined that the Merger is fair to and in the best interests of the
stockholders of the Company, (ii) resolved to approve the Merger and recommend
(subject to its fiduciary duties as advised by legal counsel) approval and
adoption of this Agreement by such stockholders of the Company, (iii) taken
all necessary steps to render Section 203 of the DGCL inapplicable to the
Merger, and (iv) resolved to elect not to be subject, to the extent permitted
by law, to any state takeover law other than Section 203 of the DGCL that may
purport to be applicable to the Merger, or the transactions contemplated by
this Agreement, and (b) Chase Securities, Inc. and Xxxxx Xxxxxx Inc., the
Company's financial advisors, have rendered their respective opinions to the
Company's Board of Directors to the effect that, as of the date of this
Amended and Restated Agreement, the Merger Consideration is fair from a
financial point of view, to the holders of Company Common Stock.
Section 2.09 Stockholders' Meetings. Subject to applicable law, each of the
Parent and the Company, acting through its respective Board of Directors,
shall, in accordance with applicable law, duly call, give notice of, convene
and hold a special meeting (which, as may be duly adjourned, shall be referred
to as the "Special Meetings" or "Stockholders Meetings") of its respective
stockholders as soon as practicable for the purpose (in the case of the
Company) of approving and adopting the agreement of merger (within the meaning
of Section 251 of the DGCL) set forth in this Agreement and approving the
Merger (the "Company Stockholder Approval") or (in the case of the Parent) the
issuance of the shares of Parent Common Stock to the stockholders of the
Company in the Merger (the "Parent Stockholder Approval" and together with the
Company Stockholder Approval, the "Stockholder Approvals"), and, subject to
the fiduciary duties of their respective Boards of Directors under applicable
law as determined by such directors in good faith after consultation with and
based upon the advice of outside counsel, include in the Proxy Statement (as
defined in Section 5.07) of each of the Company and the Parent for use in
connection with the Special Meeting of each of the Company and the Parent, the
recommendation of their Boards of Directors that stockholders vote in favor of
the Company Stockholder Approval or the Parent Stockholder Approval, as the
case may be. The Parent, the Sub and the Company agree to use commercially
reasonable efforts to cause the Special Meetings to occur within forty-five
(45) days after the Parent and the Company have responded to all SEC comments
with respect to the preliminary Proxy Statement.
Section 2.10 Rights Under Stock Plans.
(a) Each option to purchase shares of Company Common Stock ("Company
Options") issued pursuant to the Company's 1996 Replacement Stock Option Plan,
1996 Stock Incentive Plan or Outside Directors Stock
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Incentive Plan (the "Company Plans"), all of which issued and outstanding
Company Options are set forth on Section 3.02(a) of the Company Disclosure
Letter, shall, at the Effective Time, be assumed by Parent and shall
constitute an option to acquire, on the same terms and conditions as were
applicable under such assumed Company Option, a number of shares of Parent
Common Stock equal to the product of the Exchange Ratio and the number of
shares of Company Common Stock subject to such Company Option, at a price per
share equal to the amount obtained by dividing the exercise price of such
Company Option by the Exchange Ratio. As soon as practicable following the
Effective Time, but in no event later than 15 days following the Effective
Time, Parent shall deliver to holders of Company Options appropriate option
agreements representing the right to acquire shares of Parent Common Stock on
the same terms and conditions as contained in the outstanding Company Options.
(b) Parent shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of its common stock for delivery upon exercise
of the Company Options assumed in accordance with this Section 2.10. Parent
shall file and cause to be effective as of the Effective Time a registration
statement on Form S-8 or other appropriate form, with respect to shares of
Parent Common Stock that will be subject to the Company Options and use
commercially reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus
contained therein) for so long as such Company Options remain outstanding.
(c) Certain non-officer employees have been granted awards of restricted
shares under the 1996 Stock Incentive Plan that have not yet been issued, all
of which awards of restricted stock are set forth on Section 3.02(a) of the
Company Disclosure Letter (the "Restricted Shares," together with the Company
Options, the "Rights"). All of such Restricted Shares will be issued prior to
the Effective Time pursuant to the Company's standard Restricted Stock Award
Agreement, which provides for acceleration of vesting in the event of a
"Change in Control" (as defined therein), which the Merger constitutes.
Section 2.11 Exchange of Certificates.
(a) As of or promptly after the Effective Time, Parent shall invest in or
lend to the Surviving Corporation sufficient funds to permit the Surviving
Corporation to, and the Surviving Corporation shall deposit with the Paying
Agent (as defined in Section 2.13) for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article II, the
cash portion of the Merger Consideration.
(b) As soon as practicable after the Effective Time, each holder of an
outstanding certificate or certificates which prior thereto represented shares
of Company Common Stock shall, upon surrender to the Paying Agent of such
certificate or certificates and acceptances thereof by the Paying Agent, be
entitled to a certificate or certificates representing the number of full
shares of Parent Common Stock, if any, received and the amount of cash, if
any, into which the number of shares of Company Common Stock previously
represented by such certificate or certificates surrendered shall have been
converted pursuant to this Agreement. The Paying Agent shall accept such
certificates upon compliance with such reasonable terms and conditions as the
Paying Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. After the Effective Time, there shall be no
further transfer on the records of the Company or its transfer agent of
certificates representing shares of Company Common Stock, and if such
certificates are presented to the Surviving Corporation for transfer, they
shall be cancelled against delivery of cash and/or certificates for shares of
Parent Common Stock in accordance with this Agreement. If any certificate for
such shares of Parent Common Stock is to be used in, or if cash is to be
remitted to, a name other than that in which the certificate for shares of
Company Common Stock surrendered for exchange is registered, it shall be a
condition of such exchange that the certificate so surrendered shall be
properly endorsed, with signature guaranteed or otherwise in proper form for
transfer and that the person requesting such exchange shall pay to the
Surviving Corporation or its transfer agent any transfer or other taxes
required by reason of the issuance of certificates for such shares of Parent
Common Stock in a name other than that of the registered holder of the
certificate surrendered, or establish to
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the satisfaction of the Surviving Corporation or its transfer agent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.11(b), each certificate for shares of Company Common Stock
shall be deemed at any time after the Effective Time of the Merger to
represent only the right to receive upon such surrender the Merger
Consideration as contemplated by Section 2.06.
(c) No dividends or other distributions with respect to shares of Parent
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered certificate for shares of Company Common Stock
with respect to the shares of Parent Common Stock represented thereby and no
cash payment in lieu of fractional shares of Parent Common Stock shall be paid
to any such holder pursuant to Section 2.11(e) until the surrender of the
certificate for shares of Company Common Stock with respect to the shares of
Parent Common Stock represented thereby in accordance with this Article II.
Subject to the effect of applicable laws, following surrender of any such
certificates, these shall be paid to the holder of the certificate
representing whole shares of Parent Common Stock issued in connection
therewith, without interest (i) at the time of such surrender the amount of
any cash payable in lieu of a fractional retained share to which such holder
is entitled pursuant to Section 2.11(e) and the proportionate amount of
dividends or other distributions with a record date after the Effective Time
theretofor paid with respect to such shares of Parent Common Stock, and (ii)
at the appropriate payment date, the proportionate amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
(d) All cash paid upon the surrender for exchange of certificates
representing shares of Company Common Stock in accordance with the terms of
this Article II (including any cash paid pursuant to Section 2.11(e)) shall be
deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to the shares of Company Common Stock exchanged for cash
theretofore represented by such certificates.
(e) Notwithstanding any other provision of this Agreement, each holder of
shares of Company Common Stock retained pursuant to the Merger who would
otherwise have been entitled to retain a fraction of a share of Parent Common
Stock (after taking into account all shares of Company Common Stock delivered
by such holder) shall receive, in lieu thereof, a cash payment (without
interest) equal to such fraction multiplied by the Cash Consideration Amount.
(f) Any portion of the Merger Consideration deposited with the Paying Agent
pursuant to this Section 2.11 (the "Exchange Fund") which remains
undistributed to the holders of the certificates representing shares of
Company Common Stock for six months after the Effective Time shall be
delivered to New LCA and any holders of shares of Company Common Stock prior
to the Effective Time who have not theretofore complied with this Article II
shall thereafter look only to New LCA and only as general creditors thereof
for payment of their claim for cash or shares of Parent Common Stock, if any.
(g) None of the Sub or the Company or the Parent or the Paying Agent shall
be liable to any person in respect of any cash or Parent Common Stock from the
Exchange Fund delivered to a public office pursuant to any applicable
abandoned property, escheat or similar law. If any certificates representing
Shares shall not have been surrendered prior to one year after the Effective
Time (or immediately prior to such earlier date on which any cash in respect
of such certificate would otherwise escheat to or become the property of any
Government Authority), any such cash or Parent Common Stock in respect of such
certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(h) The Paying Agent shall invest any cash included in the Exchange Fund, as
directed by the Company, on a daily basis. Any interest and other income
resulting from such investments shall be paid to the Company. To the extent
that there are losses with respect to such investments, or the Exchange Fund
diminishes for other reasons below the level required to make prompt payments
of the Merger Consideration as contemplated hereby, the Parent shall promptly
replace or restore the portion of the Exchange Fund lost through investments
or other events so as to ensure that the Exchange Fund is, at all times,
maintained at a level sufficient to make such payments.
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(i) The Company shall pay all charges and expenses of the Paying Agent.
Section 2.12 Formation of Sub. Promptly after the date of this Amended and
Restated Agreement, Parent shall cause Sub to be formed and to become a party
to this Agreement.
Section 2.13 Elections.
(a) Each person who, on or prior to the Election Date referred to in
paragraph (c) below, is a record holder of shares of Company Common Stock will
be entitled, with respect to all or any portion of his Shares, to make an
unconditional election (a "Cash Election") on or prior to such Election Date
to receive the Cash Consideration (subject to Section 2.06), on the basis
hereinafter set forth.
(b) Prior to the mailing of the Proxy Statement, the Sub shall appoint a
bank or trust company to act as paying agent (the "Paying Agent") for the
payment of the Merger Consideration.
(c) The Company shall prepare and mail a form of election, which form shall
be subject to the reasonable approval of the Sub (the "Form of Election"),
with the Proxy Statement to the record holders of shares of Company Common
Stock as of the record date for the Stockholders Meeting, which Form of
Election shall be used by each record holder of shares of Company Common Stock
who wishes to make a Cash Election for any or all shares of Company Common
Stock held, subject to the provisions of Section 2.06 hereof, by such holder.
The Company will use commercially reasonable efforts to make the Form of
Election and the Proxy Statement available to all persons who become holders
of shares of Company Common Stock during the period between such record date
and the Election Date referred to below. Any such holder's Cash Election shall
have been properly made only if the Paying Agent shall have received at its
designated office, by 5:00 p.m., New York City time on the Business Day (the
"Election Date") next preceding the day on which the vote is taken at the
Stockholders Meeting (or any adjournment thereof) a Form of Election properly
completed and signed and accompanied by certificates for the shares of Company
Common Stock to which such Form of Election relates (or by an appropriate
guarantee of delivery of such certificates as set forth in such Form of
Election from a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the
United States, provided such certificates are in fact delivered to the Paying
Agent within three (3) NYSE trading days after the date of execution of such
guarantee of delivery).
(d) Any Form of Election may be revoked by the stockholder submitting it to
the Paying Agent only by written notice received by the Paying Agent (i) prior
to 5:00 p.m., New York City time, on the Election Date or (ii) after the date
of the Stockholders Meeting, if (and to the extent that) the Paying Agent is
legally required to permit revocations and the Effective Time shall not have
occurred prior to such date. In addition, all Forms of Election shall
automatically be revoked if the Paying Agent is notified in writing by the Sub
and the Company that the Merger has been abandoned. If a Form of Election is
revoked, the certificate or certificates (or guarantees of delivery, as
appropriate) for the shares of Company Common Stock to which such form of
Election relates shall be promptly returned to the stockholder submitting the
same to the Paying Agent.
(e) The determination of the Paying Agent shall be binding whether or not
elections to receive the Cash Consideration have been properly made or revoked
pursuant to this Section 2.13 with respect to shares of Company Common Stock
and when elections and revocations were received by it. If the Paying Agent
determines that any Cash Election was not properly made with respect to shares
of Company Common Stock, such shares of Company Common Stock shall be treated
by the Paying Agent as shares of Company Common Stock which were not Cash
Election Shares at the Effective Time, and such shares of Company Common Stock
shall be exchanged in the Merger for Stock Consideration pursuant to Section
2.06. The Paying Agent shall also make all computations as to the allocation
and the proration contemplated by Section 2.06, and any such computation shall
be conclusive and binding on the holders of shares of Company Common Stock.
The Paying Agent may, with the mutual agreement of the Sub and the Company,
make such rules as are consistent with this Section 2.13 for the
implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections.
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Section 2.14 Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary, shares of
Company Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who did not vote in favor of
the Merger and who comply with all of the relevant provisions of Section 262
of the DGCL (the "Dissenting Shares") shall not be converted into or be
exchangeable for the right to receive the Merger Consideration (but instead
shall be converted into the right to receive payment from the Surviving
Corporation with respect to such Dissenting Shares in accordance with the
DGCL), unless and until such holders shall have failed to perfect or shall
have effectively withdrawn or lost their rights to appraisal under the DGCL.
If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right, such holder's shares of Company Common Stock
shall be treated at the Company's and Apollo's sole discretion as either (i) a
share of Company Common Stock (other than a Cash Election Share) that had been
converted as of the Effective Time of the Merger into the right to receive
Merger Consideration in accordance with Section 2.06 or (ii) a Cash Election
Share. The Company shall give prompt notice to the Sub of any demands received
by the Company for appraisal of shares of Company Common Stock, and the Sub
and Apollo shall have the right to participate in and direct all negotiations
and proceedings with respect to such demands. The Company shall not, except
with the prior written consent of the Sub and Apollo, make any payment with
respect to, or settle or offer to settle, any such demands. Parent agrees to
invest in, or lend to, the Surviving Corporation sufficient funds to permit
any payment with respect to Dissenting Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the date of this Agreement (or
such other date as shall be expressly specified) to the Parent, the Sub and
Apollo as follows:
Section 3.01 Organization and Qualification. Each of the Company and its
subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of its jurisdiction of incorporation, with all
requisite corporate power and other authority to own its properties and
conduct its business as it is being conducted on the date hereof and is duly
qualified and in good standing as a foreign corporation authorized to do
business in each of the jurisdictions in which the character of the properties
owned or held under lease by it or the nature of the business transacted by it
makes such qualification necessary. The Company has heretofore made available
to the Sub accurate and complete copies of the Certificates of Incorporation
and Bylaws as currently in effect of the Company and its subsidiaries.
Section 3.02 Capitalization. (a) The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock and 2,000,000 shares of
preferred stock, par value $0.001 per share. As of the close of business on
May 5, 1997 (the "Capitalization Date"): 23,815,695 shares of Company Common
Stock were issued and outstanding; no shares of Preferred Stock were issued
and outstanding; no shares of Company Common Stock were held in the Company's
treasury; and there were outstanding Rights with respect to 2,929,408 shares
of Company Common Stock as set forth in Section 3.02(a) of the disclosure
letter dated the date hereof and delivered by the Company to the Parent on May
7, 1997 setting forth certain matters referred to in this Agreement (the
"Company Disclosure Letter"). Since the Capitalization Date, except as set
forth in Section 3.02(a) of the Company Disclosure Letter or in the Company
SEC Reports (as defined in Section 3.05), the Company (i) has not issued any
Company Common Stock other than upon the exercise or vesting of Rights
outstanding on such date, (ii) has not granted any options or rights to
purchase or acquire Company Common Stock (under the Company's Stock Plans or
otherwise) and (iii) has not split, combined or reclassified any of its shares
of capital stock. All of the outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable
and are free of preemptive rights. Except as set forth in this Section 3.02 or
in Section 3.02(a) of the Company Disclosure Letter or in the Company SEC
Reports, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the
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Company convertible into or exchangeable for shares of capital stock or voting
securities of the Company and (iii) no options, warrants, rights, or other
agreements or commitments to acquire from the Company, and no obligation of
the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and no obligation of the Company to grant, extend or enter into any
subscription, warrant, option, right, convertible or exchangeable security or
other similar agreement or commitment (the items in clauses (i), (ii) and
(iii) being referred to collectively as the "Company Securities"). Except as
set forth in Section 3.02(a) of the Company Disclosure Letter, there are no
outstanding obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Company Securities. There are no voting trusts or
other agreements or understandings to which the Company or any of its
subsidiaries is a party with respect to the voting of capital stock of the
Company or any of its subsidiaries.
(b) Except as set forth in Section 3.02(b) of the Company Disclosure Letter
or in the Company SEC Reports, the Company is, directly or indirectly, the
record and beneficial owner of all the outstanding shares of capital stock of
each of its subsidiaries, free and clear of any lien, mortgage, pledge,
charge, security interest or encumbrance of any kind, and there are no
irrevocable proxies with respect to any such shares. Except as set forth in
Section 3.02(b) of the Company Disclosure Letter or in the Company SEC
Reports, there are no outstanding (i) securities of the Company or any
Subsidiary convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary, or (ii)
options or other rights to acquire from the Company or any of its
subsidiaries, and no other obligation of the Company or any of its
subsidiaries to issue, any capital stock, voting securities or other ownership
interests in, or any securities convertible into or exchangeable for any
capital stock, voting securities or ownership interests in, any of its
subsidiaries, or any other obligation of the Company or any of its
subsidiaries to grant, extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement or commitment
(the items in clauses (i) and (ii) being referred to collectively as the
"Subsidiary Securities"). There are no outstanding obligations of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.
Section 3.03 Authority for this Agreement. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to consummate
the transactions so contemplated, other than the approval and adoption of the
agreement of merger (as such term is used in Section 251 of the DGCL)
contained in this Agreement and the approval of the Merger by the holders of a
majority of the outstanding shares of Company Common Stock. This Agreement has
been duly and validly executed and delivered by the Company and, assuming this
Agreement constitutes a valid and binding obligation of each of the Parent and
the Sub, constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general principles of equity
(whether considered in a proceeding in equity or at law).
Section 3.04 Absence of Certain Changes. Except as disclosed in the Company
SEC Reports (as defined in Section 3.05) or in Section 3.04 of the Company
Disclosure Letter, from December 31, 1996 through the date hereof, (i) the
Company and its subsidiaries have not suffered any Material Adverse Effect,
(ii) the Company and its subsidiaries have, in all material respects,
conducted their respective businesses only in the ordinary course consistent
with past practice, except in connection with the negotiation and execution
and delivery of this Agreement and the solicitation or receipt of other offers
to acquire the Company, and (iii) there has not been (a) any declaration,
setting aside or payment of any dividend or other distribution in respect of
the shares of Company Common Stock or any repurchase, redemption or other
acquisition by the Company or any of its subsidiaries of any Company
Securities or Subsidiary Securities; or (b) any action by the Company which if
taken after the date hereof would constitute a breach of Section 5.01(a)
hereof. Except as disclosed in the Company SEC Reports or in Section 3.04 of
the Company Disclosure Letter, since December 31, 1996, there
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has not been any change by the Company in accounting methods, principles or
practices except as permitted by United States generally accepted accounting
principles.
Section 3.05 Reports.
(a) Except as disclosed in Section 3.05 of the Company Disclosure Letter,
the Company has timely filed with the SEC all forms, reports and documents
required to be filed by it pursuant to the federal securities laws and the SEC
rules and regulations thereunder, all of which (the "Company SEC Reports")
have complied in form as of their respective filing dates in all material
respects with all applicable requirements of the Exchange Act and the rules
promulgated thereunder applicable thereto. None of the Company SEC Reports, at
the time filed, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) As of their respective dates, the audited and unaudited consolidated
financial statements of the Company included (or incorporated by reference) in
the Company SEC Reports were prepared in all material respects in accordance
with United States generally accepted accounting principles applied on a
consistent basis during the periods therein indicated (except as may be
indicated in the notes thereto) and presented fairly the consolidated
financial position of the Company, and the consolidated results of operations
and changes in consolidated financial position or cash flows for the periods
presented therein, subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments and any other adjustments
described therein which were not expected to have a Material Adverse Effect.
(c) As of December 31, 1996, to the best of Company's knowledge, neither the
Company or any of its subsidiaries had any liabilities of any nature, whether
accrued, absolute, contingent or otherwise, whether due or to become due that
are required to be recorded or reflected on a balance sheet under United
States generally accepted accounting principles, except as reflected or
reserved against or disclosed in the financial statements of the Company
included in the Company SEC Reports or as otherwise disclosed in the Company
SEC Reports or as set forth in the Company Disclosure Letter.
Section 3.06 Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger
and as contemplated by Section 2.06 (the "S-4") will, at the time the S-4
becomes effective under the Securities Act or at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and none of the information supplied or to be supplied by the
Company and included or incorporated by reference in the Proxy Statement, as
supplemented if necessary, will, at the date mailed to stockholders of the
Company, or at the time of the meeting of such stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to the time of such
meeting, any event with respect to the Company or any of its Subsidiaries, or
with respect to other information supplied by the Company for inclusion in the
Proxy Statement or S-4, shall occur which is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the S-4, such event
shall be so described, and such amendment or supplement shall be promptly
filed with the SEC. The Proxy Statement, insofar as it relates to other
information supplied by the Company for inclusion therein, will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
Section 3.07 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will conflict with or result in any breach of
any provision of the respective Certificates of Incorporation or Bylaws (or
other similar governing documents) of the Company or any of its subsidiaries,
and except as disclosed in Section 3.07 of the Company Disclosure Letter and
except for filings, permits, authorizations, notices, consents and approvals
as
II-10
may be required under, and other applicable requirements of, the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
Securities Act, the Exchange Act, the DGCL, and the "takeover" or blue sky
laws of various states and consents, approvals, authorizations or filings
under laws of jurisdictions outside the United States, and filings, notices,
consents, authorizations and approvals as may be required by local, state, and
federal regulatory agencies, commissions, boards, or public authorities with
jurisdiction over health care facilities and providers, (i) require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, except where the failure to
obtain such consent, approval, authorization or permit, or to make such filing
or notification, would not in the aggregate have a Material Adverse Effect or
have a material adverse effect on the ability of the Company to consummate the
transactions contemplated hereby; (ii) result in a default (or give rise to
any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, license, agreement or other
instrument or obligation to which the Company is a party or by which the
Company or any of its assets or subsidiaries may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) which would
not in the aggregate have a Material Adverse Effect or have a material adverse
effect on the ability of the Company to consummate the transactions
contemplated hereby; (iii) result in the creation or imposition of any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
on any asset of the Company or any of its subsidiaries which, in the
aggregate, would have a Material Adverse Effect or have a material adverse
effect on the ability of the Company to consummate the transactions
contemplated hereby; or (iv) violate any order, writ, injunction, agreement,
contract, decree, statute, rule or regulation applicable to the Company, any
of its subsidiaries or by which any of their respective assets are bound.
Section 3.08 Brokers. No broker, finder or investment banker (except as
disclosed to Parent and Apollo) is entitled to receive any brokerage, finder's
or other fee or commission in connection with this Agreement or the
transactions contemplated hereby based upon agreements made by or on behalf of
the Company.
Section 3.09 Employee Benefit Matters.
(a) For purposes of this Agreement, the term "Plan" shall refer to the
following maintained by the Company, any of its subsidiaries or any of their
respective ERISA Affiliates (as defined below), or with respect to which the
Company or any of its subsidiaries or any of their respective ERISA Affiliates
contributes or has any obligation to contribute or has any liability
(including, without limitation, a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement): any plan, program,
arrangement, agreement or commitment, whether written or oral, which is an
employment, consulting, deferred compensation or change-in-control agreement,
or an executive compensation, incentive bonus or other bonus, employee
pension, profit-sharing, savings, retirement, stock option, stock purchase,
severance pay, change-in-control, life, health, disability or accident
insurance plan, or other employee benefit plan, program, arrangement,
agreement or commitment, written or oral, including, without limitation, any
material "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Section 3.09(a)
of the Company Disclosure Letter sets forth each employment agreement with a
person who is entitled to receive at least $100,000 per year from the Company
or any of its subsidiaries (other than an employment agreement terminable
without material liability (not otherwise disclosed) on no more than sixty
(60) days' notice).
(b) Except as set forth in Section 3.09(b) of the Company Disclosure Letter,
none of the Company, its subsidiaries nor any of their respective ERISA
Affiliates maintains or contributes to, nor have they maintained or
contributed to any:
(A) defined benefit plan subject to Title IV of ERISA; or
(B) "Multiemployer plan" as defined in Section 4001 of ERISA.
(c) No event has occurred and no condition or circumstance currently exists
in connection with which the Company, any of its subsidiaries, their
respective ERISA Affiliates or any Plan, directly or indirectly, are likely to
be subject to any liability under ERISA, the Code or any other law, regulation
or governmental order applicable to any Plan which would be reasonably likely
to have a Material Adverse Effect.
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(d) With respect to each Plan, (A) all material payments due from the
Company or any of its subsidiaries to date have been made and all material
amounts properly accrued to date or as of the Effective Time as liabilities of
the Company or any of its subsidiaries which have not been paid have been
properly recorded on the books of the Company; (B) each such Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) and
intended to qualify under Section 401 of the Code has either received a
favorable determination letter from the Internal Revenue Service with respect
to such qualification as of the date specified in Section 3.09(d) of the
Disclosure Letter or has filed for such a determination letter with the
Internal Revenue Service within the time permitted under Rev. Proc. 95-12
(December 29, 1994), 1995-3 IRB 24, and nothing has occurred since the date of
such letter that has resulted in or is likely to result in a tax qualification
defect which would have a Material Adverse Effect; and (C) there are no
material actions, suits or claims pending (other than routine claims for
benefits) or, to the best of Company's knowledge, threatened with respect to
such Plan or against the assets of such Plan.
(e) The Company has made available to the Parent, with respect to each Plan
for which the following exists:
(A) a copy of the most recent annual report on Form 5500, with respect to
such Plan including any Schedule B thereto;
(B) a copy of the Summary Plan Description, together with each Summary of
Material Modifications with respect to such Plan and, unless the Plan is
embodied entirely in an insurance policy to which the Company or any of its
subsidiaries is a Party, a true and complete copy of such Plan; and
(C) if the Plan is funded through a trust or any third party funding
vehicle (other than an insurance policy), a copy of the trust or other
funding agreement and the latest financial statements thereof.
(f) Except as disclosed in Section 3.09(f) of the Company Disclosure Letter
or in the Company SEC Reports, neither the Company nor any of its subsidiaries
has any announced plan or legally binding commitment to create any additional
material Plans or to make any material amendment or modification to any
existing Plan, except in the ordinary course of business in accordance with
its customary practices or as required by law or as necessary to maintain tax-
qualified status.
(g) For purposes of this Section 3.09, ERISA Affiliates include each
corporation that is a member of the same controlled group as the Company or
any of its subsidiaries within the meaning of Section 414(b) of the Code, any
trade or business, whether or not incorporated, under common control with the
Company or any of its subsidiaries within the meaning of Section 414(c) of the
Code and any member of any affiliated service group that includes the Company,
any of its subsidiaries and any of the corporations, trades or businesses
described above, within the meaning of Section 414(m) of the Code.
Section 3.10 Litigation, etc. Except as set forth in Section 3.10 of the
Company Disclosure Letter or as disclosed in the Company SEC Reports, as of
the date hereof there is no pending audit, claim, action, proceeding,
citizen's suit and, to the knowledge of the Company, no audit, claim, action,
proceeding, citizen's suit or governmental investigation has been threatened
against the Company or any of its subsidiaries before any court or
governmental or regulatory authority which, in the aggregate, (i) would have a
Material Adverse Effect or (ii) would have a material adverse effect on the
ability of the Company to consummate the transactions contemplated by this
Agreement. Except as set forth in Section 3.10 of the Company Disclosure
Letter or as disclosed in the Company SEC Reports, neither the Company nor any
Subsidiary of the Company is subject to any outstanding judicial,
administrative or arbitration order, writ, injunction or decree that (i) has
had a Material Adverse Effect or (ii) would have a material adverse effect on
the ability of the Company to consummate the transactions contemplated by this
Agreement.
Section 3.11 Tax Matters. The Company and each of its subsidiaries has duly
filed all tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, except to the extent that such failures to file, in the
aggregate, would not have a Material Adverse Effect and such returns and
reports are true, correct and complete in all material respects.
II-12
The Company and each of its subsidiaries has duly paid in full (or the Company
has paid on its behalf) or made adequate provision in the Company's accounting
records for all taxes for all past and current periods for which the Company
or any of its subsidiaries is liable. The most recent financial statements
contained in the Company SEC Reports reflect adequate reserves for all taxes
payable by the Company and its subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial statements, and no
deficiencies for any taxes have been proposed, asserted or assessed against
the Company or any of its subsidiaries that are not adequately reserved for,
except for inadequately reserved taxes and inadequately reserved deficiencies
that would not, in the aggregate, have a Material Adverse Effect. No requests
for waivers of the time to assess any taxes against the Company or any of its
subsidiaries have been granted or are pending, except for requests with
respect to such taxes that have been adequately reserved for in the most
recent financial statements contained in the Company SEC Reports, or, to the
extent not adequately reserved, the assessment of which would not, in the
aggregate, have a Material Adverse Effect. Except as set forth in Section 3.11
of the Company Disclosure Letter, neither the Company nor any of its
subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 280G of the Code.
Neither the Company nor any of its subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. As used in this Agreement the term "taxes" includes all federal, state,
local and foreign income, franchise, property, sales, use, excise and other
taxes, including without limitation obligations for withholding taxes from
payments due or made to any other person and any interest, penalties or
additions to tax.
Section 3.12 Compliance with Law. Except as set forth in Section 3.12 of the
Company Disclosure Letter or in the Company SEC Reports, neither the Company
nor any of its subsidiaries is in conflict with, or in default or violation
of, any law, rule, regulation, order, judgment or decree applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected, except for any such conflicts, defaults
or violations that would not in the aggregate have a Material Adverse Effect.
Except as set forth in Section 3.12 of the Company Disclosure Letter or in the
Company SEC Reports, the Company and its subsidiaries have all permits,
licenses, authorizations, consents, approvals and franchises from governmental
agencies required to conduct their businesses as now being conducted (the
"Company Permits"), except for such permits, licenses, authorizations,
consents, approvals and franchises the absence of which would not in the
aggregate have a Material Adverse Effect. Except as set forth in Section 3.12
of the Company Disclosure Letter or in the Company SEC Reports, the Company
and its subsidiaries are in compliance with the terms of the Company Permits,
except where the failure so to comply would not in the aggregate have a
Material Adverse Effect.
Section 3.13 Environmental Compliance. Except as set forth in Section 3.13
of the Company Disclosure Letter or in the Company SEC Reports, (i) the
assets, properties, businesses and operations of the Company and its
subsidiaries are in compliance with applicable Environmental Laws (as defined
in Section 1.01 hereof), except for such non-compliance which has not had and
will not have a Material Adverse Effect; (ii) the Company and its subsidiaries
have obtained and, as currently operating, are in compliance with all Company
Permits necessary under any Environmental Law for the conduct of the business
and operations of the Company and its subsidiaries in the manner now conducted
except for such non-compliance which has not had and will not have a Material
Adverse Effect; and (iii) neither the Company nor any of its subsidiaries nor
any of their respective assets, properties, businesses or operations has
received or is subject to any outstanding order, decree, judgment, complaint,
agreement, claim, citation, notice, or proceeding indicating that the Company
or any of its subsidiaries is or may be (a) liable for a violation of any
Environmental Law or (b) liable for any Environmental Liabilities and Costs,
where in each case such liability would have a Material Adverse Effect.
Section 3.14 Insurance. Except as set forth in the Company SEC Reports, the
Company and each of its Subsidiaries maintains, and through the Closing Date
will maintain, insurance with reputable insurers (or pursuant to prudent self-
insurance programs) in such amounts and covering such risks as are in
accordance with normal industry practice for companies engaged in businesses
similar to those of the Company and each of its
II-13
Subsidiaries and owning property in the same general areas in which the
Company and each of its Subsidiaries conducts their businesses. The Company
and each of its Subsidiaries may terminate each of its insurance policies or
binders at or after the Closing and will incur no material penalties or other
material costs in doing so. None of such policies or binders was obtained
through the use of false or misleading information or the failure to provide
the insurer with all information requested in order to evaluate the
liabilities and risks insured. There is no material default with respect to
any provision contained in any such policy or binder, nor has the Company or
any of its subsidiaries failed to give any material notice or present any
material claim under any such policy or binders in due and timely fashion.
There are no billed but unpaid premiums past due under any such policy or
binder, the failure of which to be paid would result in the cancellation of
such policy or binder. Except as otherwise set forth in the Company SEC
Reports or in the Company Disclosure Letter, (a) there are no outstanding
claims in excess of normal retentions that are not covered under any such
policies or binders and, to the best knowledge of the Company, there has not
occurred any event that might reasonably form the basis of any claim in excess
of normal retentions that are not covered against or relating to the Company
or any of its subsidiaries that is not covered by any of such policies or
binders; (b) no notice of cancellation or non-renewal of any such policies or
binders has been received; and (c) there are no performance bonds outstanding
with respect to the Company or any of its subsidiaries.
Section 3.15 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of the Company Common Stock is the only
vote of the holders of any class or series of the Company's capital stock or
other voting securities necessary to approve this Agreement, the Merger and
the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SUB
The Parent and the Sub (effective upon its becoming a party hereto), jointly
and severally, represent and warrant as of the date of this Agreement (or such
other date as shall be expressly specified) to the Company and Apollo as
follows:
Section 4.01 Organization and Qualification. Each of the Parent and the Sub
is a duly organized and validly existing corporation in good standing under
the laws of its jurisdiction of organization, with all requisite corporate
power and other authority to own its properties and conduct its business as it
is being conducted on the date hereof and is duly qualified and in good
standing as a foreign corporation authorized to do business in each of the
jurisdictions in which the character of the properties owned or held under
lease by it or the nature of the business transacted by it makes such
qualification necessary. The Parent has heretofore made available to the
Company accurate and complete copies of the Certificates of Incorporation and
Bylaws as currently in effect of the Parent and its subsidiaries. All of the
issued and outstanding capital stock of the Sub is owned directly by the
Parent, free and clear of any lien, mortgage, pledge, charge, security
interest or encumbrance of any kind.
Section 4.02 Capitalization. (a) The authorized capital stock of the Parent
consists of 75,000,000 shares of Parent Common Stock and 5,000,000 shares of
preferred stock, par value $.01 (the "Preferred Stock"), of which 350,000
shares have been designated as Series A Junior Participating Preferred Stock
(the "Junior Preferred Stock"). As of the Capitalization Date, 19,547,616
shares of Parent Common Stock were issued and outstanding; no shares of
Preferred Stock were issued and outstanding; 720,304 shares of Parent Common
Stock were held in the Company's treasury; and there were outstanding Rights
with respect to 1,635,447 shares of Parent Common Stock as set forth in
Section 3.02(a) of the disclosure letter, dated May 7, 1997, delivered by the
Parent to the Company prior to the execution of this Agreement setting forth
certain matters referred to in this Agreement (the "Parent Disclosure
Letter"); and there were outstanding rights (the "Rights Agreement Rights")
under the Rights Agreement dated November 17, 1994 between the Company and
Chemical Bank, as amended by an amendment dated July 31, 1995 (the "Rights
Agreement"). Since the Capitalization Date, except as set forth in Section
3.02(a) of the Parent Disclosure Letter or in the Parent SEC Reports (as
defined in Section 4.05), the Company (i) has not issued any shares of Parent
Common Stock other than upon the exercise or vesting of Rights outstanding on
such date, (ii) has not granted any options or rights to purchase or acquire
II-14
shares of Parent Common stock (under the Parent's Stock Plans or otherwise)
and (iii) has not split, combined or reclassified any of its shares of capital
stock. All of the outstanding shares of Parent Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable and are
free of preemptive rights. Except as set forth in this Section 4.02 or in
Section 3.02(a) of the Parent Disclosure Letter or in the Parent SEC Reports,
there are outstanding (i) no shares of capital stock or other voting
securities of the Parent, (ii) no securities of the Parent convertible into or
exchangeable for shares of capital stock or voting securities of the Parent
and (iii) no options, warrants, rights, or other agreements or commitments to
acquire from the Parent, and except as contemplated by the Recapitalization
Merger, (A) no obligation of the Parent to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Parent, and (B) no obligation of the Parent to grant,
extend or enter into any subscription, warrant, option, right, convertible or
exchangeable security or other similar agreement or commitment (the items in
clauses (i), (ii) and (iii) being referred to collectively as the "Parent
Securities"). Except as set forth in Section 3.02(a) of the Parent Disclosure
Letter, there are no outstanding obligations of the Parent or any Subsidiary
to repurchase, redeem or otherwise acquire any Parent Securities. There are no
voting trusts or other agreements or understandings to which the Parent or any
of its subsidiaries is a party with respect to the voting of capital stock of
the Parent or any of its subsidiaries. Notwithstanding the foregoing, the
Parent has concurrently entered into the agreement and plan of merger setting
forth the terms of the Recapitalization Merger, including the issuance of
shares of Parent Common Stock in connection therewith.
(b) Except as set forth in Section 3.02(b) of the Parent Disclosure Letter
or in the Parent SEC Reports, the Parent is, directly or indirectly, the
record and beneficial owner of all the outstanding shares of capital stock of
each of its subsidiaries, free and clear of any lien, mortgage, pledge,
charge, security interest or encumbrance of any kind, and there are no
irrevocable proxies with respect to any such shares. Except as set forth in
Section 3.02(b) of the Parent Disclosure Letter or in the Parent SEC Reports,
there are no outstanding (i) securities of the Parent or any Subsidiary
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Subsidiary, or (ii) options or other
rights to acquire from the Parent or any of its subsidiaries, and no other
obligation of the Parent or any of its subsidiaries to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities or
ownership interests in, any of its subsidiaries, or any other obligation of
the Parent or any of its subsidiaries to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other
similar agreement or commitment (the items in clauses (i) and (ii) being
referred to collectively as the "Parent Subsidiary Securities"). There are no
outstanding obligations of the Parent or any of its subsidiaries to
repurchase, redeem or otherwise acquire any outstanding Parent Subsidiary
Securities.
Section 4.03 Authority Relative to this Agreement. Each of the Parent and
the Sub has requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Parent and the Sub and the
consummation by the Parent and the Sub of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of the Parent
and the Sub and no other corporate proceedings on the part of the Parent and
the Sub are necessary to authorize this Agreement or consummate the
transactions so contemplated, other than the Company Stockholder Approvals and
Parent Stockholder Approvals. This Agreement has been duly and validly
executed and delivered by the Parent and the Sub and, assuming this Agreement
constitutes the valid and binding obligation of the Company, this Agreement
constitutes a valid and binding agreement of each of the Parent and the Sub,
enforceable against each of the Parent and the Sub in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity (whether considered in a proceeding in equity or
at law).
Section 4.04 Absence of Certain Changes. Except as disclosed in the Parent
SEC Reports (as defined in Section 4.05) or in Section 3.04 of the Parent
Disclosure Letter, from September 30, 1996 through the date hereof, (i) the
Parent and its subsidiaries have not, to the best of the Parent's knowledge,
suffered any Material Adverse Effect, (ii) the Parent and its subsidiaries
have, in all material respects, conducted their respective businesses only in
the ordinary course consistent with past practice, except in connection with
the negotiation
II-15
and execution and delivery of this Agreement, and (iii) there has not been (a)
any declaration, setting aside or payment of any dividend or other
distribution in respect of the Shares or any repurchase, redemption or other
acquisition by the Parent or any of its subsidiaries of any Parent Securities;
or (b) any action by the Parent which if taken after the date hereof would
constitute a breach of Section 5.01(b) hereof. Except as disclosed in the
Parent SEC Reports or in Section 3.04 of the Parent Disclosure Letter, since
September 30, 1996, there has not been any change by the Parent in accounting
methods, principles or practices except as permitted by United States
generally accepted accounting principles.
Section 4.05 Reports.
(a) The Parent has filed with the SEC all forms, reports and documents
required to be filed by it pursuant to the federal securities laws and the SEC
rules and regulations thereunder on and after September 30, 1995, all of which
(the "Parent SEC Reports") have complied in form as of their respective filing
dates in all material respects with all applicable requirements of the
Exchange Act and the rules promulgated thereunder applicable thereto. None of
the Parent SEC Reports, at the time filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) As of their respective dates, the audited and unaudited consolidated
financial statements of the Parent included (or incorporated by reference) in
the Parent SEC Reports were prepared in all material respects in accordance
with United States generally accepted accounting principles applied on a
consistent basis during the periods therein indicated (except as may be
indicated in the notes thereto) and presented fairly the consolidated
financial position of the Parent, and the consolidated results of operations
and changes in consolidated financial position or cash flows for the periods
presented therein, subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments and any other adjustments
described therein which were not expected to have a Material Adverse Effect.
(c) As of March 31, 1997, neither the Parent nor any of its subsidiaries had
any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, whether due or to become due that are required to be recorded or
reflected on a balance sheet under United States generally accepted accounting
principles, except as reflected or reserved against or disclosed in the
financial statements of the Parent included in the Parent SEC Reports or the
Parent Disclosure Letter or as otherwise disclosed in the Parent SEC Reports
or the Parent Disclosure Letter.
Section 4.06 Information Supplied. None of the information supplied or to be
supplied by the Parent for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC jointly by Parent
and Company in connection with the issuance of shares of Parent Common Stock
in the Merger and as contemplated by Section 2.06 will, at the time the S-4
becomes effective under the Securities Act or at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and none of the information supplied or to be supplied by the
Parent and included or incorporated by reference in the Proxy Statement, as
supplemented if necessary, will, at the date mailed to stockholders of the
Parent, or at the time of the meeting of such stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to the time of such
meeting, any event with respect to the Parent or any of its Subsidiaries, or
with respect to other information supplied by the Parent for inclusion in the
Proxy Statement or S-4, shall occur which is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the S-4, such event
shall be so described, and such amendment or supplement shall be promptly
filed with the SEC. The Proxy Statement, insofar as it relates to other
information supplied by the Parent for inclusion therein, will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
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Section 4.07 Consents and Approvals; No Violation. The execution and
delivery of this Agreement by each of the Parent or the Sub and the
consummation of the transactions contemplated hereby will not (i) conflict
with or result in any breach of any provision of the respective Certificates
of Incorporation or Bylaws (or other similar governing documents) of the
Parent, the Sub or any of their subsidiaries; (ii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (A) in connection with the HSR
Act, (B) pursuant to the Securities Act, the Exchange Act, (C) the filing of a
certificate of merger pursuant to the DGCL, (D) any applicable filings under
state securities, blue sky or "takeover" laws, (E) consents, approvals,
authorizations or filings under laws of jurisdictions outside the United
States, (F) consents, approvals, authorizations, permits, filings or
notifications required by local, state and federal regulatory agencies,
commissions, boards or public authorities with jurisdiction over health care
facilities and providers or (G) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification,
would not in the aggregate have a Material Adverse Effect on the Parent or the
Sub or has a material adverse effect on the ability of the Parent or the Sub
to consummate the transactions contemplated hereby, (iii) result in a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, license, agreement or
other instrument or obligation to which the Parent or the Sub or any of their
subsidiaries is a party or by which any of its subsidiaries or any of their
respective assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or which would not have a Material Adverse Effect
on the Parent or the Sub or has a material adverse effect on the ability of
the Parent or the Sub to consummate the transactions contemplated hereby; (iv)
result in the creation or imposition of any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind on any asset of the Parent or the
Sub or any of their subsidiaries which, individually or in the aggregate,
would have a material adverse effect on the ability of the Parent or the Sub
to consummate the transactions contemplated hereby; or (v) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the
Parent, the Sub or any of their subsidiaries or any of their respective
assets, except for violations which would not in the aggregate have a Material
Adverse Effect on the Parent or the Sub or have a material adverse effect on
the ability of the Parent or the Sub to consummate the transactions
contemplated hereby.
Section 4.08 Brokers. No broker, finder or other investment banker (other
than Credit Suisse First Boston Corporation and NationsBanc Capital Markets,
Inc.) is entitled to receive any brokerage, finder's or other fee or
commission in connection with this Agreement or the transactions contemplated
hereby based upon agreements made by or on behalf of the Parent or the Sub.
Section 4.09 Litigation, etc. As of the date hereof there is no claim,
action, proceeding or governmental investigation pending or, to the best
knowledge of the Parent or the Sub, threatened against the Parent or any of
its subsidiaries, including the Sub, before any court or governmental or
regulatory authority which, in the aggregate would have a material adverse
effect on the ability of the Parent or the Sub to consummate the transactions
contemplated by this Agreement. Neither the Parent nor any of its
subsidiaries, including the Sub, is subject to any outstanding order, writ,
injunction or decree that would have a material adverse effect on the ability
of the Parent or the Sub to consummate the transactions contemplated by this
Agreement.
Section 4.10 Ownership of Shares. As of the date hereof, neither the Parent
nor any of its Subsidiaries beneficially owns (within the meaning of Rule l3d-
3 under the Exchange Act) any Company Common Stock.
Section 4.11 Tax Matters. The Parent and each of its Subsidiaries has duly
filed all tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, except to the extent that such failures to file, in the
aggregate, would not have a Material Adverse Effect and such returns and
reports are true, correct and complete in all material respects. The Parent
and each of its Subsidiaries has duly paid in full (or the Parent has paid on
its behalf) or made adequate provision in the Company's accounting records for
all taxes for all past and current periods for which the Parent or any of its
Subsidiaries is liable. The most recent financial statements contained in the
Parent SEC Reports reflect adequate reserves for all taxes payable by the
Parent and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements, and no deficiencies for
any taxes have
II-17
been proposed, asserted or assessed against the Parent or any of its
Subsidiaries that are not adequately reserved for, except for inadequately
reserved taxes and inadequately reserved deficiencies that would not, in the
aggregate, have a Material Adverse Effect. No requests for waivers of the time
to assess any taxes against the Parent or any of its Subsidiaries have been
granted or are pending, except for requests with respect to such taxes that
have been adequately reserved for in the most recent financial statements
contained in the Parent SEC Reports, or, to the extent not adequately
reserved, the assessment of which would not, in the aggregate, have a Material
Adverse Effect. Except as set forth in Section 3.11 of the Parent Disclosure
Letter, neither the Parent nor any of its Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code. Neither the Parent nor any of its
Subsidiaries has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
ARTICLE V
COVENANTS
Section 5.01 Conduct of Business.
(a) Except as contemplated by this Agreement and in the Company Disclosure
Letter, during the period from the date of this Agreement to the Effective
Date, the Company and its subsidiaries will each conduct its operations
according to its ordinary and usual course of business and consistent with
past practice and will use all commercially reasonable efforts consistent with
prudent business practice to preserve intact the business organization of the
Company and each of its Subsidiaries, to keep available the services of its
and their current officers and key employees and to maintain existing
relationships with those having significant business relationships with the
Company and its Subsidiaries, in each case in all material respects. Without
limiting the generality of the foregoing, except as set forth in the Company
Disclosure Letter and except as otherwise expressly provided in or
contemplated by this Agreement or the Company Disclosure Letter, prior to the
time specified in the preceding sentence, neither the Company nor any of its
Subsidiaries, as the case may be, will, without the prior written consent of
the Parent (not to be unreasonably withheld), (i) except for issuances of
capital stock of the Company's Subsidiaries to the Company or a wholly owned
subsidiary of the Company, issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of (A) Company Securities or Subsidiary Securities,
in each case, other than Company Common Stock issuable upon exercise or
vesting of the Rights or allocations or issuances pursuant to the Stock Plans
or the exercise of rights under any Plan or any agreement referred to in
Section 3.02 of the Company Disclosure Letter, or (B) any other securities in
respect of, in lieu of or in substitution for Company Common Stock outstanding
on the date hereof, (ii) otherwise acquire or redeem, directly or indirectly,
any Company Securities or Subsidiary Securities (including the Company Common
Stock); (iii) split, combine or reclassify its capital stock or declare, set
aside, make or pay any dividend or distribution (whether in cash, stock or
property) on any shares of capital stock of the Company or any of its
Subsidiaries (other than cash dividends paid to the Company by its wholly
owned subsidiaries with regard to their capital stock); (iv) (1) make any
acquisition, by means of a merger or otherwise, of assets or securities, or
any sale, lease, encumbrance or other disposition of assets or securities, in
each case involving the payment or receipt of consideration of $10,000,000 or
more outside the ordinary and usual course of business consistent with past
practice in all material respects, or (2) other than in the ordinary course of
business, enter into a material contract or grant any release or
relinquishment of any material contract rights; (v) incur or assume any long-
term debt for borrowed money except for debt incurred in the ordinary course
of business consistent in all material respects with past practice; (vi)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
except wholly owned subsidiaries of the Company, except in the ordinary course
of business consistent in all material respects with past practice;
(vii) except in connection with transactions permitted by (iv) above, make any
loans, advances or capital contributions to, or investments in, any other
person (other than wholly owned subsidiaries of the Company) in the aggregate
in excess of $10,000,000; (viii) change any of the accounting principles or
practices used by it or
II-18
any of its Subsidiaries, except as required by the SEC or required by United
States generally accepted accounting principles; (ix) adopt any amendments to
the Restated Certificate of Incorporation or Bylaws (or similar documents) of
the Company or any Subsidiary; (x) except as, may be required under any
previously existing agreement or Plan, grant any stock related awards; (xi)
enter into any new, or amend any existing, employee benefit, pension or other
plan (whether or not subject to ERISA) or employment, severance, consulting or
salary continuation agreements with any officers, directors or key employees,
or grant any increases in the compensation or benefits to officers, directors
and key employees; (xii) enter into, amend, or extend any material collective
bargaining or other labor agreement, except as required by law and except in
the ordinary course of business consistent in all material respects with past
practice; (xiii) adopt, make any material amendment to or terminate any
material employee benefit plan, as required by law or to maintain tax
qualified status or as requested by the Internal Revenue Service in order to
receive a determination letter for such employee benefit plan; (xiv) merge or
consolidate with or transfer all or substantially all of its assets to another
corporation or other business entity or individual; (xv) liquidate, wind-up or
dissolve (or suffer any liquidation or dissolution); or (xvi) agree in writing
or otherwise to take any of the foregoing actions.
(b) Except as contemplated by this Agreement and in the Parent Disclosure
Letter, during the period from the date of this Agreement to the Effective
Date, the Parent and its subsidiaries will each conduct its operations
according to its ordinary and usual course of business and consistent with
past practice and will use all commercially reasonable efforts consistent with
prudent business practice to preserve intact the business organization of the
Parent and each of its subsidiaries, to keep available the services of its and
their current officers and key employees and to maintain existing
relationships with those having significant business relationships with the
Parent and its subsidiaries, in each case in all material respects. Without
limiting the generality of the foregoing, except as set forth in the Parent
Disclosure Letter and except as otherwise expressly provided in or
contemplated by this Agreement or the Parent Disclosure Letter, prior to the
time specified in the preceding sentence, neither the Parent nor any of its
subsidiaries, as the case may be, will, without the prior written consent of
the Company (not to be unreasonably withheld), (i) except for issuances of
capital stock of the Parent's subsidiaries to the Parent or a wholly owned
subsidiary of the Parent, issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of (A) Parent Securities or Subsidiary Securities, in
each case, other than Parent Common Stock issuable upon exercise or vesting of
the Rights or allocations or issuances pursuant to the Stock Plans or the
exercise of rights under any Plan or any agreement referred to in Section 3.02
of the Parent Disclosure Letter, or (B) any other securities in respect of, in
lieu of or in substitution for Parent Common Stock outstanding on the date
hereof, (ii) otherwise acquire or redeem, directly or indirectly, any Parent
Securities or Subsidiary Securities (including the Parent Common Stock); (iii)
split, combine or reclassify its capital stock or declare, set aside, make or
pay any dividend or distribution (whether in cash, stock or property) on any
shares of capital stock of the Parent or any of its subsidiaries (other than
cash dividends paid to the Parent by its wholly owned subsidiaries with regard
to their capital stock); (iv) (1) make any acquisition, by means of a merger
or otherwise, of assets or securities, or any sale, lease, encumbrance or
other disposition of assets or securities, in each case involving the payment
or receipt of consideration of $10,000,000 or more outside the ordinary and
usual course of business consistent with past practice in all material
respects, or (2) other than in the ordinary course of business, enter into a
material contract or grant any release or relinquishment of any material
contract rights; (v) incur or assume any long-term debt for borrowed money
except for debt incurred in the ordinary course of business consistent in all
material respects with past practice; (vi) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except wholly owned
subsidiaries of the Parent, except in the ordinary course of business
consistent in all material respects with past practice; (vii) except in
connection with transactions permitted by (iv) above, make any loans, advances
or capital contributions to, or investments in, any other person (other than
wholly owned subsidiaries of the Parent) in the aggregate in excess of
$10,000,000; (viii) change any of the accounting principles or practices used
by it or any of its Subsidiaries, except as required by the SEC or required by
United States generally accepted accounting principles; (ix) adopt any
amendments to the Restated Certificate of Incorporation or Bylaws (or similar
documents) of the Parent or any Subsidiary; (x) except as, may be required
under any previously existing agreement or Plan, grant any stock related
awards; (xi) enter into any new, or amend any existing, employee benefit,
pension or other plan (whether or not subject to ERISA) or
II-19
employment, severance, consulting or salary continuation agreements with any
officers, directors or key employees, or grant any increases in the
compensation or benefits to officers, directors and key employees; (xii) enter
into, amend, or extend any material collective bargaining or other labor
agreement, except as required by law and except in the ordinary course of
business consistent in all material respects with past practice; (xiii) adopt,
make any material amendment to or terminate any material employee benefit
plan, as required by law or to maintain tax qualified status or as requested
by the Internal Revenue Service in order to receive a determination letter for
such employee benefit plan; (xiv) merge or consolidate with or transfer all or
substantially all of its assets to another corporation or other business
entity or individual; (xv) liquidate, wind-up or dissolve (or suffer any
liquidation or dissolution); or (xvi) agree in writing or otherwise to take
any of the foregoing actions.
Section 5.02 No Solicitation.
(a) Immediately following the execution of this Agreement, the Company will
terminate any and all existing activities, discussions and negotiations with
third parties (other than the Parent) with respect to any possible Acquisition
Transaction (as defined below). The Company and its subsidiaries and their
respective officers, directors and employees shall not, and the Company and
its subsidiaries will use all reasonable efforts to cause their
representatives, agents or affiliates not to, directly or indirectly,
knowingly encourage, solicit, or initiate any discussions or negotiations
with, any corporation, partnership, person or other entity or group (other
than the Parent or the Sub or any affiliate or associate of the Parent or the
Sub or any of their respective directors, officers, employees, representatives
or agents) concerning any merger, consolidation, business combination,
liquidation, reorganization, sale of substantial assets, sale of shares of
capital stock or similar transactions involving the Company or any material
Subsidiary of the Company (each an "Acquisition Transaction"); provided,
however, that if Company's Board of Directors determines after consultation
with counsel, that it is required to do so in the exercise of the fiduciary
duties of the Company's directors to the Company or its stockholders, the
Board of Directors may respond to, or engage in discussions with respect to, a
written offer for an Acquisition Transaction; and provided further that
nothing contained in this Section 5.02(a) shall prohibit the Company or its
Board of Directors from taking and disclosing to the Company's stockholders a
position with respect to a tender offer by a third party pursuant to Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making such
other disclosure to the Company's stockholders which, as advised by outside
counsel, is required under applicable law. The Company will promptly
communicate to Parent the terms and conditions of any proposal for an
Acquisition Transaction that it may receive and will keep Parent informed as
to the status of any action, including any discussions, taken pursuant to such
proposed or contemplated Acquisition Transaction.
(b) Immediately following the execution of this Agreement, the Parent will
terminate any and all existing activities, discussions and negotiations with
third parties (other than the Company and Apollo) with respect to any possible
Acquisition Transaction. The Parent and its subsidiaries and their respective
officers, directors and employees shall not, and the Parent and its
subsidiaries will use all reasonable efforts to cause their representatives,
agents or affiliates not to, directly or indirectly, knowingly encourage,
solicit, or initiate any discussions or negotiations with, any corporation,
partnership, person or other entity or group (other than the Company and
Apollo or any affiliate or associate of the Company and Apollo or any of their
respective directors, officers, employees, representatives or agents)
concerning any Acquisition Transaction; provided, however, that if during the
45 days following the date of this Agreement the Parent's Board of Directors
determines, after consultation with counsel, that it is required to do so in
the exercise of the fiduciary duties of the Parent's directors to the Parent
or its stockholders, the Board of Directors may respond to, or engage in
discussions with respect to, a written offer for an Acquisition Transaction
during such 45 day period; and provided further that nothing contained in this
Section 5.02(b) shall prohibit the Parent or its Board of Directors from
taking and disclosing to the Parent's stockholders a position with respect to
a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such other disclosure to the
Parent's stockholders which, as advised by outside counsel, is required under
applicable law. The Parent will promptly communicate to the Company the terms
and conditions of any proposal for an Acquisition Transaction
II-20
that it may receive and will keep the Company informed as to the status of any
action, including any discussions, taken pursuant to such proposed or
contemplated Acquisition Transaction.
Section 5.03 Access to Information.
(a) Between the date of this Agreement and the Effective Time, the Company
will, upon reasonable notice to an executive officer of the Company, (i) give
the Parent, the Sub and Apollo and their respective authorized representatives
access (during regular business hours), in a manner so as not to interfere
with the normal operations of the Company and its subsidiaries and subject to
reasonable restrictions imposed by an executive officer of the Company, to all
key employees, plants, offices, warehouses and other facilities and to all
books and records of the Company and its subsidiaries and cause the Company's
and its subsidiaries' independent public accountants to provide access to
their work papers and such other information as the Parent, the Sub or Apollo
may reasonably request, (ii) permit the Parent, the Sub and Apollo to make
such inspections as they may reasonably require and (iii) cause its officers
and those of its subsidiaries to furnish the Parent, the Sub or Apollo with
such financial and operating data and other information with respect to the
business, properties and personnel of the Company and its subsidiaries as the
Parent, the Sub or Apollo may from time to time reasonably request.
(b) Information obtained by the Parent or the Sub or their respective
representatives pursuant to this Section 5.03 shall be subject to the
provisions of the letter agreement between the Parent and the Company (the
"Confidentiality Agreement") the terms of which are incorporated herein by
reference.
Section 5.04 Reasonable Efforts, Filings. Subject to the terms and
conditions herein provided for and to the fiduciary duties of the Board of
Directors of each of the Company and the Parent under applicable law as
advised by legal counsel, each of the parties hereto agrees to use
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective, as soon as practicable, the transactions contemplated by this
Agreement. In connection with and without limiting the foregoing, (a) (i) the
Company, the Parent and the Sub shall use all reasonable efforts to make
promptly any required submissions under the HSR Act which the Company and the
Parent or the Sub determine should be made, in each case, with respect to the
Merger, and the transactions contemplated by this Agreement, (ii) the Company,
the Parent and the Sub shall use all reasonable efforts to respond as promptly
as practicable to all inquiries received from the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the
"Antitrust Division") for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received from
any State Attorney General or other governmental authority in connection with
antitrust matters, and (iii) if required by the FTC, the Antitrust Division,
any State Attorney General or any other governmental authority, or if
otherwise necessary or required in order to consummate the Merger, Parent
agrees promptly to take all commercially reasonable steps (including executing
agreements and submitting to judicial or administrative orders) to effect the
sale or other disposition of, or to hold separate assets or businesses of
Parent or the Company or any of their respective subsidiaries or affiliates
(including, without limitation, pursuant to arrangements which limit or
prohibit access to such assets or businesses), unless such sale or other
disposition would have a Material Adverse Effect on the Company, (b) the
Parent, the Sub and the Company will take all such action as may be necessary
under federal and state securities laws applicable or necessary for, and will
file and, if appropriate, use all reasonable efforts to have declared
effective or approved all documents and notifications with the SEC and other
governmental or regulating bodies which the Parent, the Sub and the Company
determines, in each case, is necessary for the consummation of the Merger and
the transactions contemplated hereby and each party shall give the other
information requested by it which is reasonably necessary to enable it to take
such action, (c) the Parent, the Sub and the Company will, and will cause each
of their respective subsidiaries to, use commercially reasonable efforts to
obtain consents of all third parties and governmental bodies (other than with
respect to healthcare regulatory licenses, certifications or permits or
provider agreements) necessary or, in the reasonable opinion of the Parent or
the Company, advisable to consummate the Merger and the transactions
contemplated by this Agreement and (d) prior to the Effective Time,
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the Parent, Sub and the Company will take, and cause their respective
subsidiaries to take, such actions to apply for such governmental approvals or
consents, or make filings with governmental bodies, with respect to healthcare
regulatory licenses, certifications, or permits or provider agreements as may
be required by applicable law. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the Parent shall cause the proper officers and directors of the
Surviving Corporation, the Parent or the Sub, as the case may be to take all
such necessary action.
Section 5.05 Indemnification and Insurance.
(a) The Parent and the Sub agree that all rights to indemnification existing
in favor of the present or former directors, officers and employees of the
Company (as such) or any of its subsidiaries or present or former directors of
the Company or any of its subsidiaries serving or who served at the Company's
or any of its subsidiaries' request as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, as provided in the Company's Certificate of
Incorporation or Bylaws, or the articles of incorporation, bylaws or similar
documents of any of the Company's subsidiaries and the indemnification
agreements with such present and former directors, officers and employees as
in effect as of the date hereof with respect to matters occurring at or prior
to the Effective Time shall survive the Merger and shall continue in full
force and effect and without modification (other than modifications which
would enlarge the indemnification rights) for a period of not less than the
statutes of limitations applicable to such matters, and the Surviving
Corporation shall comply fully with its obligations hereunder and thereunder.
Without limiting the foregoing, the Company shall, and after the Effective
Time, the Surviving Corporation shall periodically advance expenses as
incurred with respect to the foregoing (including with respect to any action
to enforce rights to indemnification or the advancement of expenses) to the
fullest extent permitted under applicable law; provided, however, that the
person to whom the expenses are advanced provides an undertaking (without
delivering a bond or other security) to repay such advance if it is ultimately
determined that such person is not entitled to indemnification.
(b) For a period of six (6) years after the Effective Time, the Surviving
Corporation shall maintain officers' and directors' liability insurance and
fiduciary liability insurance covering the persons described in paragraph (a)
of this Section 5.05 (whether or not they are entitled to indemnification
thereunder) who are currently covered by the Company's existing officers' and
directors' or fiduciary liability insurance policies on terms no less
advantageous to such indemnified parties than such existing insurance.
(c) The Surviving Corporation shall indemnify and hold harmless (and shall
advance expenses to), to the fullest extent permitted under applicable law,
each director, officer, employee, fiduciary and agent of the Company or any
Subsidiary of the Company including, without limitation, officers and
directors, serving as such on the date hereof against any costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation relating to any of the
transactions contemplated hereby, and in the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Surviving Corporation shall pay the reasonable fees
and expenses of counsel selected by the indemnified parties, promptly as
statements therefor are received and (ii) the parties hereto will cooperate in
the defense of any such matter, provided, however, that the Surviving
Corporation shall not be liable for any settlement effected without its prior
written consent, which consent shall not unreasonably be withheld.
(d) The Surviving Corporation shall pay all reasonable costs and expenses,
including attorneys' fees, that may be incurred by any indemnified parties in
enforcing the indemnity and other obligations provided for in this Section
5.05.
(e) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
person, proper provisions shall be made
II-22
so that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 5.05.
(f) This Section 5.05, which shall survive the consummation of the Merger at
the Effective Time and shall continue for the periods specified herein, is
intended to benefit the Company, the Surviving Corporation, and any person or
entity referenced in this Section 5.05 or indemnified hereunder each of whom
may enforce the provisions of this Section 5.05 (whether or not parties to
this Agreement).
Section 5.06 Employee Plans and Benefits and Employment Contracts.
(a) From and after the Effective Time, the Surviving Corporation and its
subsidiaries will honor in accordance with their terms all existing
employment, severance, consulting and salary continuation agreements between
the Company or any of its subsidiaries and any current or former officer,
director, employee or consultant of the Company or any of its subsidiaries or
group of such officers, directors, employees or consultants described in
Section 5.06(a) of the Company Disclosure Letter.
(b) In addition to honoring the agreements referred to in Section 5.06(a),
until the first anniversary of the Effective Time, the Surviving Corporation
and its subsidiaries will provide or will cause to be provided to each current
or former employee (presently entitled to benefits) of the Company or its
subsidiaries (excluding employees covered by collective bargaining agreements)
(i) employee compensation, benefit plans, programs, policies and arrangements,
that are in the aggregate no less favorable than those currently provided by
the Company and its subsidiaries to each such employee and former employee;
and (ii) severance benefits that are in the aggregate no less favorable to any
employee of the Company or any of its subsidiaries than those currently
provided to each such employee. Nothing in this Section 5.06(b) shall be
deemed to prevent the Surviving Corporation or any of its subsidiaries from
making any change required by law.
(c) To the extent permitted under applicable law, each employee of the
Company or its subsidiaries shall be given credit for all service with the
Company or its Subsidiaries (or service credited by the Company or its
subsidiaries) under all employee benefit plans, programs, policies and
arrangements maintained by the Surviving Corporation in which they participate
or in which they become participants for purposes of eligibility, vesting and
benefit accrual including, without limitation, for purposes of determining (i)
short-term and long-term disability benefits, (ii) severance benefits, (iii)
vacation benefits and (iv) benefits under any retirement plan.
(d) This Section 5.06, which shall survive the consummation of the Merger at
the Effective Time and shall continue without limit, is intended to benefit
and bind the Company, the Surviving Corporation and any person or entity
referenced in this Section 5.06, each of whom may enforce the provisions of
this Section 5.06 (whether or not parties to this Agreement). Except as
provided in clause (a) above, nothing contained in this Section 5.06 shall
create any beneficiary rights in any employee or former employee (including
any dependent thereof) of the Company, any of its subsidiaries or the
Surviving Corporation in respect of continued employment for any specified
period of any nature or kind whatsoever.
Section 5.07 Proxy Statement and S-4. The Company and the Parent shall
promptly prepare and file with the SEC, as soon as practicable, a preliminary
joint proxy statement (the "Proxy Statement") and S-4 relating to the
Recapitalization Merger and the Merger as required by the Exchange Act and the
rules and regulations thereunder. Each of the Parent and the Company shall use
commercially reasonable efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing. The Company, the
Parent and the Sub will cooperate with each other in the preparation of the
Proxy Statement. The Company and the Parent shall use all reasonable efforts
to respond promptly to any comments made by the SEC with respect to the Proxy
Statement, and to cause the Proxy Statement to be mailed to the Company's and
the Parent's stockholders at the earliest practicable date.
Section 5.08 Notification of Certain Matters. The Company shall give prompt
notice to the Parent and the Sub, and the Parent or the Sub, as the case may
be, shall give prompt notice to the Company, of (i) the
II-23
occurrence, or non-occurrence, of any event the effect of which is likely to
cause any representation or warranty of such party contained in this Agreement
to be untrue or inaccurate in any material respect at or prior to the
Effective Time and (ii) any material failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant
to this Section 5.08 shall not limit or otherwise affect the remedies
available hereunder to any of the parties receiving such notice.
Section 5.09 Rights Agreement Amendment. Subject to the terms and conditions
of this Agreement, the Parent shall promptly enter into an amendment to the
Rights Agreement (the "Rights Agreement Amendment") pursuant to which the
Rights Agreement and the Rights Agreement Rights will not be applicable to the
Merger, shall not result in a "Distribution Date" under the Rights Agreement
and consummation of the Merger shall not result in the Company or its
affiliates being an "Acquiring Person" or result in the occurrence of a "Flip-
In Event" or a "Flip-Over Event" thereunder.
Section 5.10 Agreements of Rule 145 Affiliates. Prior to the Effective Time,
the Company shall cause to be prepared and delivered to Parent a list
identifying all persons who, at the time of the Company stockholder meeting,
may be deemed to be "affiliates" of the Company, as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). The Company shall use its commercially reasonable efforts to
cause each person who is identified as a Rule 145 Affiliate in such list to
deliver to Parent, at or prior to the Effective Time, a written agreement, in
the form to be approved by the parties hereto, that such Rule 145 Affiliate
will not sell, pledge, transfer or otherwise dispose of any shares of Parent
Common Stock issued to such Rule 145 Affiliate pursuant to the Merger, except
pursuant to an effective registration statement or in compliance with Rule 145
or an exemption from the registration requirements of the Securities Act.
Section 5.11 New York Stock Exchange Listing. Each party agrees to use
commercially reasonable efforts to retain the listing of the shares of Parent
Common Stock issued in connection with the Merger on the New York Stock
Exchange following the Effective Time.
Section 5.12 Election to the Parent's Board of Directors. At the Effective
Time of the Merger, the Parent shall cause its board of directors to be
constituted as contemplated by Section 5.12 of the Recapitalization Merger
Agreement.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, where permissible, by each party hereto prior to the
proposed Effective Time, of the following conditions:
(a) the agreement of merger (as such term is used in Section 251 of the
DGCL) contained in this Agreement and the Merger, and the issuance of the
Parent Common Stock pursuant to the Merger, shall have been approved and
adopted by the affirmative vote of the stockholders of each of the Company
and the Parent, respectively, required by and in accordance with applicable
law and the Restated Certificates of Incorporation and Bylaws thereof (if
applicable);
(b) the Recapitalization Merger and the related agreement of merger (as
such term is used in section 251 of the DGCL) contained in the agreement
and plan of merger setting forth the terms of the Recapitalization Merger
and the issuance of the Parent Common Stock pursuant to the Merger shall
have been approved by the affirmative vote of the stockholders of the
Parent required by and in accordance with applicable law and the Parent's
Restated Certificate of Incorporation, and the Recapitalization Merger
shall have been consummated;
II-24
(c) no statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority against the Parent, the Sub or the Company and be in
effect that prohibits or restricts the consummation of the Merger or makes
such consummation illegal (each party agreeing to use all reasonable
efforts to have any such prohibition lifted);
(d) the S-4 shall have become effective, and any required post-effective
amendment shall have become effective, under the Securities Act, and shall
not be the subject of any stop order or proceedings seeking a stop order,
and any material "blue sky" and other state securities laws applicable to
the registration of the Parent Common Stock shall have been complied with;
(e) the conditions to each party's obligations to effect the
Recapitalization Merger other than the consummation of the Merger shall
have been satisfied or waived; and
(f) the waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated and all filings required
to be made prior to the Effective Time with, and all consents, approvals,
authorizations and permits required to be obtained prior to the Effective
Time from, any governmental authority in connection with the consummation
of the Merger shall have been made or obtained (as the case may be), except
where the failure to obtain such consents, approvals, authorizations and
permits would not be reasonably likely to result in a Material Adverse
Effect on the Company or to materially adversely affect the consummation of
the Merger.
(g) the Company and Parent shall have received an opinion from the
Company's counsel, reasonably acceptable to the Company and the Parent, to
the effect that (i) the Merger will qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Code; and (ii) the Company, the
Parent and the Sub will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code with respect to the Merger.
Section 6.02 Additional Conditions to the Company's Obligation to Effect the
Merger. The obligations of the Company to effect the Merger shall be subject
to the satisfaction or waiver by each of the Company and Apollo, except that
with respect to the conditions set forth in Section 6.02(f), such conditions
shall be subject to satisfaction or waiver by Apollo only) prior to the
proposed Effective Time, of the following conditions:
(a) no action shall have been taken and be continuing, and no statute,
rule, regulation, judgment, administrative interpretation, order or
injunction shall have been enacted, promulgated, entered, enforced or
deemed applicable to the Merger, which would (i) make illegal or prohibit
the consummation of the Merger or (ii) render the Company unable to effect
the Merger;
(b) no action or proceeding brought by any governmental, regulatory or
administrative agency, authority or commission shall have been instituted
and be pending that would be reasonably likely to result in any of the
consequences referred to in clauses (i) or (ii) of Section 6.02(a) above;
and there shall be no proceeding or other action (including without
limitation, relating to health care, regulatory, environmental and pension
matters) pending or threatened against the Parent or its Subsidiaries which
is reasonably likely to have a Material Adverse Effect;
(c) during the 30 day period ending on the date of the Closing, there
shall not have occurred and be continuing (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United States,
(ii) the declaration of any banking moratorium or any suspension of
payments in respect of banks or any material limitation (whether or not
mandatory) on the extension of credit by lending institutions in the United
States, (iii) the commencement of a war, material armed hostilities or any
other material international or national calamity involving the United
States having a significant adverse effect on the functioning of the
financial markets in the United States, or (iv) in the case of any of the
foregoing existing at the time of the execution of the Merger Agreement, a
material acceleration or worsening thereof;
II-25
(d) the representations and warranties of the Parent and the Sub set
forth in Article IV shall be true and correct in all material respects as
of the Effective Time as though made on and as of that time, and the Parent
and the Sub shall have performed in all material respects all covenants and
agreements required to be performed by them under this Agreement at or
prior to the Effective Time;
(e) since September 30, 1996, no change shall have occurred or been
threatened in the business, operations, prospects, properties or condition
(financial or other) of the Parent or any of its Subsidiaries that would
have or would be reasonably expected to have a Material Adverse Effect;
provided, that the transactions contemplated by the Recapitalization
Agreement and this Agreement shall not be deemed to have caused Material
Adverse Effect; and
(f) the maximum number of Dissenting Shares shall not exceed 10% of the
shares of Company Common Stock which are issued and outstanding immediately
prior to the Effective Time.
Section 6.03 Additional Conditions to the Parent's and the Sub's Obligations
to Effect the Merger. The obligations of the Parent and the Sub to effect the
Merger shall be subject to the satisfaction or waiver by the Parent, the Sub
and Apollo, prior to the proposed Effective Time, of the following conditions:
(a) no action shall have been taken and be continuing, and no statute,
rule, regulation, judgment, administrative interpretation, order or
injunction shall have been enacted, promulgated, entered, enforced or
deemed applicable to the Merger, which would (i) make illegal or prohibit
the consummation of the Merger or (ii) render Parent unable to effect the
Merger;
(b) no action or proceeding brought by any governmental, regulatory or
administrative agency, authority or commission shall have been instituted
and be pending that would be reasonably likely to result in any of the
consequences referred to in clauses (i) or (ii) of Section 6.02(a) above;
and there shall be no proceeding or other action (including, without
limitation, relating to health care, regulatory, environmental and pension
matters) pending or threatened against the Company or its Subsidiaries
which is reasonably likely to have a Material Adverse Effect;
(c) during the 30 day period ending on the date of the Closing, there
shall not have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, (ii) the declaration
of any banking moratorium or any suspension of payments in respect of banks
or any material limitation (whether or not mandatory) on the extension of
credit by lending institutions in the United States, (iii) the commencement
of a war, material armed hostilities or any other material international or
national calamity involving the United States having a significant adverse
effect on the functioning of the financial markets in the United States, or
(iv) in the case of any of the foregoing existing at the time of the
execution of the Merger Agreement, a material acceleration or worsening
thereof;
(d) since December 31, 1996, no change shall have occurred or have been
threatened in the business, operations, prospects, properties or condition
(financial or other) of GranCare or any of its Subsidiaries that would have
or would be reasonably expected to have a Material Adverse Effect;
provided, that the transactions contemplated by the Recapitalization
Agreement and the Merger Agreement shall not be deemed to be such a
materially adverse change;
(e) the agreements of Rule 145 Affiliates required to be delivered to
Parent pursuant to Section 5.10 shall have been furnished as required by
Section 5.10; and
(f) the representations and warranties of the Company set forth in
Article III shall be true and correct in all material respects as of the
Effective Time as though made on and as of that time, and the Company shall
have performed in all material respects all covenants and agreements
required to be performed by it under this Agreement at or prior to the
Effective Time.
II-26
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time notwithstanding approval thereof by the
stockholders of each of the Company and the Parent, but prior to the Effective
Time:
(a) by mutual written consent of the Boards of Directors of the Company
and the Parent;
(b) by the Parent or the Company if the Effective Time shall not have
occurred on or before November 3, 1997 (provided that the right to
terminate this Agreement under this Section 7.01(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of or resulted in the failure of the Effective Time to
occur on or before such date);
(c) by the Parent or the Company if any court of competent jurisdiction
in the United States or other United States governmental body shall have
issued an order, decree or ruling, or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and non-appealable;
(d) by the Company if (i) any of the representations and warranties of
the Parent or the Sub contained in this Agreement were untrue in any
material respect when made or have since become, and at the time of
termination remain, untrue in any material respect, or (ii) the Parent or
the Sub shall have breached or failed to comply in any material respect
with any of its obligations under this Agreement and, with respect to a
representation or warranty, such breach shall continue unremedied for ten
(10) days after the Parent or the Sub has received written notice from the
Company of the occurrence of such breach of failure;
(e) prior to Stockholder Approval by the Parent if the Board of Directors
of the Company withdraws or modifies in a manner adverse to the Parent or
the Sub its favorable recommendation of the Merger or shall have
recommended an Acquisition Transaction with a party other than the Parent
or any of its affiliates;
(f) prior to Stockholder Approval by the Company if the Company receives
a written offer with respect to any Acquisition Transaction with a party
other than the Parent or its affiliates or such other party has commenced a
tender offer which, in either case, the Board of Directors of the Company
believes in good faith is more favorable to the Company's stockholders than
the transactions contemplated by this Agreement;
(g) by the Parent, if (i) any of the representations and warranties of
the Company contained in this Agreement shall fail to be true and correct
in any material respect, in each case when made or have since become, and
of the time of termination remain, untrue in any material respect, (ii) the
Company shall have breached or failed to comply in any material respect
with any of its obligations under this Agreement (other than as a result of
a breach by the Parent or the Sub of any of their obligations under this
Agreement) and, with respect to a representation or warranty, such breach
shall continue unremedied for ten (10) days after the Company has received
written notice from the Parent or the Sub of the occurrence of such breach
or failure;
(h) by the Parent or the Company if the Recapitalization Merger Agreement
is terminated;
(i)(x) by the Parent if the Company fails to obtain its stockholders'
approval of the Merger at the meeting held for such purpose (or any
adjournment thereof) or (y) by the Company if the Parent fails to obtain
its stockholders' approval of the issuance of Parent Common Stock to be
issued as part of the Merger at the meeting held for such purpose (or any
adjournment thereof); or
(j) by Apollo, if, as of the holding of the vote of the Company's
stockholders, the maximum number of Dissenting Shares exceeds 10% of the
outstanding shares of Company Common Stock.
Section 7.02 Effect of Termination. If this Agreement is terminated and the
Merger is abandoned pursuant to Section 7.01 hereof, this Agreement, except
for the provisions of Section 5.03(b), this Section 7.02 and Section 8.10
hereof, shall forthwith become void and have no effect, without any liability
on the part of any party or its directors, officers or stockholders. The
Confidentiality Agreement shall remain in full force and effect following any
termination of this Agreement. If this Agreement is terminated pursuant to
Section 7.01(e) or (f), the
II-27
Company promptly, but in no event later than one business day after
termination of this Agreement will pay to the Parent a fee (the "Termination
Fee") equal to $20 million in same day funds, plus interest on such amount
from the date payable until paid at a rate equal to 9% per annum. If this
Agreement is terminated pursuant to Section 7.01(i)(x) or Section 7.01(j) and,
at the time of the stockholder vote referred to therein, any person has made
(or publicly disclosed an intention to make) a proposal to effect an
Acquisition Transaction with respect to the Company (and shall not have
irrevocably withdrawn such proposal), or, if this Agreement is terminated
pursuant to Section 7.01(b) and, as of November 3, 1997, the Company shall not
have held a stockholder vote and a proposal to effect an Acquisition
Transaction with respect to the Company shall have been in effect at any time
between October 15 and November 3, 1997 (a "No Vote Termination") and, in
either case, within 180 days after such termination an Acquisition Transaction
shall be consummated with respect to the Company, the Company shall promptly
(but in no event later than one business day) after such consummation, pay the
Termination Fee. If this Agreement is terminated pursuant to Section 7.01(e),
(f), (g), (i)(x) or (j) or in a No Vote Termination, the Company shall also
pay the out-of-pocket fees and expenses reasonably incurred by the Parent and
the Sub in connection with this Agreement. Nothing in this Section 7.02 shall
relieve any party to this Agreement of liability for breach of this Agreement.
Section 7.03 Amendment. To the extent permitted by applicable law, this
Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, the Parent, the Sub and Apollo, at any time before
or after adoption of this Agreement by the stockholders of each of the
Company, the Parent and Apollo but, after any such stockholder approval, no
amendment shall be made which decreases the Exchange Ratio or which adversely
affects the rights of the Company's stockholders hereunder without the
approval of the stockholders of the Company. This Agreement may not be amended
except by an instrument in writing signed on behalf of all of the parties.
Section 7.04 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, the Parent and the Sub may (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (iii)
waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of any party to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Survival of Representations and Warranties. The representations
and warranties made in Articles III and IV shall not survive beyond the
Effective Time. This Section 8.01 shall not limit any covenant or agreement of
the parties hereto which by its terms contemplates performance after the
Effective Time.
Section 8.02 Entire Agreement; Assignment. Except for the Confidentiality
Agreement and the Disclosure Letter, this Agreement (a) constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise; provided, however,
that the Parent or the Sub may assign any of its rights and obligations to any
wholly-owned subsidiary of the Parent or the Sub incorporated in Delaware, but
no such assignment shall relieve the Parent or the Sub, as the case may be, of
its obligations hereunder.
Section 8.03 Enforcement of the Agreement; Jurisdiction. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof
in any federal or state court located in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in equity.
II-28
The parties hereto consent and agree that the state or federal courts
located in Delaware shall have exclusive jurisdiction to hear and determine
any claims or disputes pertaining to this Agreement or to any matter arising
out of or related to this Agreement and each party hereto waives any objection
that it may have based upon lack of personal jurisdiction, improper venue or
forum non conveniens and hereby consents to the granting of such legal or
equitable relief as is deemed appropriate by such court.
Section 8.04 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
Section 8.05 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by facsimile transmission with
confirmation of receipt, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
if to the Parent or the Sub:
Living Centers of America, Inc.
00000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxx Xxxxxxx, Esq., General Counsel
Sydney X. Xxxxx, Xx., Esq., Associate General Counsel
with copies to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Mayor, Day, Xxxxxxxx & Xxxxxx L.L.P.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
if to the Company:
GranCare, Inc.
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxx, Executive Vice President
with a copy to:
Xxxxxxx & Xxxxx L.L.P.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
if to Apollo:
Apollo Management, L.P.
1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
with a copy to:
Sidley & Austin
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
II-29
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Section 8.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of
the laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
Section 8.07 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
Section 8.08 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement except for Sections 2.13, 5.05 and 5.06 (which are intended to be
for the benefit of the persons referred to therein, and may be enforced by any
such persons).
Section 8.09 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
Section 8.10 Fees and Expenses. Whether or not the Offer or the Merger is
consummated, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, except as provided expressly to the contrary herein.
Section 8.11 Disclosure Letter. Any disclosure under one section of the
Disclosure Letter shall be deemed disclosure under all sections of the
Disclosure Letter. Disclosure of any matter in the Disclosure Letter shall not
constitute an expression of a view that such matter is material or is required
to be disclosed pursuant to this Agreement.
Section 8.12 Press Releases. Subject to the proviso to this sentence, the
Parent, the Sub and the Company will consult with each other before issuing
any press release or otherwise making any public statements with respect to
the transactions contemplated hereby and shall not issue any such press
release or make any such public statement prior to such consultation, except
as may be required by law or by obligations pursuant to the rules of The New
York Stock Exchange, Inc. and any other appropriate exchange.
Section 8.13 Obligation of the Parent. Whenever this Agreement requires Sub
to take any action, such requirement shall be deemed to include an undertaking
on the part of Parent to cause Sub to take such action.
Section 8.14. Reference; No Waiver. Any reference in this Agreement to the
"date hereof," the "date of this Agreement" or the "date of execution of this
Agreement" shall be deemed to refer to May 7, 1997, the date of the Original
Merger Agreement, but any reference to the "date of this Amended and Restated
Agreement" or the "date of execution of this Amended and Restated Agreement"
shall refer to June 13, 1997. The parties' execution and delivery of this
Amended and Restated Agreement shall not constitute a waiver of any rights
that any of the parties hereto may have by reason of any event, condition,
misrepresentation or breach of covenant of the Original Merger Agreement
having occurred prior to the date of such execution and delivery of this
Amended and Restated Agreement whether or not known to any or all of the
parties hereto. No representation or warranty of any party in this Agreement
shall be affected or limited by reason of the knowledge of any other party at
any time that such representation or warranty is not, or may not be, true and
correct.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized.
LIVING CENTERS OF AMERICA, INC.
By:
___________________________________
Name:
Title:
GRANCARE, INC.
By:
___________________________________
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
APOLLO MANAGEMENT, L.P.
By: AIF III Management, Inc.
Its General Partner
By:
___________________________________
Name:
Title:
II-31
