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EXHIBIT 2.2
Amended and Restated Agreement
and Plan of Merger
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ANNEX II
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
11
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
12
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.
13
(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.
14
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
15
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
16
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
17
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.
18
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 13d-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
19
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
20
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
21
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
22
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,
23
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
24
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
25
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;
26
(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;
27
(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.
28
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
29
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.
30
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.
31
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.
32
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:
