AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated as
of February 9, 1997, among TheraTx, Incorporated a Delaware corporation (the
"Company"), Vencor, Inc., a Delaware corporation ("Purchaser"), and Peach
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Purchaser ("Merger Sub"), the Company and Merger Sub sometimes being
hereinafter collectively referred to as the "Constituent Corporations."
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company each have
unanimously approved of this Agreement, the Offer (as defined herein) and the
Merger (as defined herein) and determined that it is in the best interests of
their respective companies and stockholders for Purchaser to acquire the
Company upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Company, Purchaser and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the representation,
warranties, covenants and agreements contained herein the parties hereto
hereby agree as follows:
ARTICLE I
THE TENDER OFFER
1.1. Tender Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article IX hereof and none of the events set forth in Annex A
hereto shall have occurred or be existing, within five business days of the
date hereof, Merger Sub will commence a tender offer (the "Offer") for all of
the outstanding shares of Common Stock, par value $0.001 per share of the
Company (the "Shares"), together with the associated rights to purchase (the
"Rights") Series A Junior Participating Preferred Stock of the Company (the
"Series A Preferred") at a price of $17.10 per Share in cash, net to the
seller, subject only to the conditions set forth in Annex A hereto. Subject to
the terms and conditions of the Offer, Purchaser will promptly pay for all
Shares duly tendered. The Company's Board of Directors shall recommend
acceptance of the Offer to its stockholders in a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to be filed with the
Securities and Exchange Commission (the "SEC") upon commencement of the Offer.
(b) Purchaser agrees, as to the Offer to Purchase and related Letter of
Transmittal (which together constitute the "Offer Documents") and the Company
agrees, as to the Schedule 14D-9, that such documents shall, in all material
respects, comply with the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the rules and regulations thereunder and
other applicable laws. The Company and its counsel, as to the Offer Documents,
and Merger Sub and its counsel, as to the Schedule 14D-9, shall be given an
opportunity to review such documents prior to their being filed with the SEC.
(c) In connection with the Offer, the Company will cause its Transfer Agent
to furnish promptly to Merger Sub a list, as of a recent date, of the record
holders of Shares and their addresses, as well as mailing labels containing
the names and addresses of all record holders of Shares and lists of security
positions of Shares held in stock depositories. The Company will furnish
Merger Sub with such additional information (including, but not limited to,
updated lists of holders of Shares and their addresses, mailing labels and
lists of security positions) and such other assistance as Purchaser or Merger
Sub or their agents may reasonably request in communicating the Offer to the
record and beneficial holders of Shares.
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ARTICLE II
THE MERGER; CLOSING; EFFECTIVE TIME
2.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 2.3) Merger Sub shall be merged with
and into the Company and the separate corporate existence of Merger Sub shall
thereupon cease (the "Merger"). The Company shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger, except as set forth in Section 3.1. The Merger shall
have the effects specified in the Delaware General Corporation Law
(the "DGCL").
2.2. Closing. The closing of the Merger (the "Closing") shall take place (i)
at the offices of Xxxxxxxx & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at
10:00 A.M. on the first business day on which the last to be fulfilled or
waived of the conditions set forth in Article VIII hereof shall be fulfilled
or waived in accordance with this Agreement or (ii) at such other place and
time and/or on such other date as the Company and Purchaser may agree.
2.3. Effective Time. As soon as practicable following the Closing, and
provided that this Agreement has not been terminated or abandoned pursuant to
Article IX hereof, the Company and the Purchaser will cause a Certificate of
Merger (the "Delaware Certificate of Merger") to be executed and filed with
the Secretary of State of Delaware as provided in Section 251 of the DGCL (or,
if permitted, Section 253 of the DGCL). The Merger shall become effective on
the date on which the Delaware Certificate of Merger has been duly filed with
the Secretary of State of Delaware, and such time is hereinafter referred to
as the "Effective Time."
ARTICLE III
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
3.1. The Certificate of Incorporation. The Certificate of Incorporation of
the Company (the "Certificate") in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended
in accordance with the terms thereof and the DGCL, except that Article IV
of the Certificate shall be amended to read in its entirety as follows unless
the event contemplated by Section 7.14(iii) shall have occurred, in which case
Article IV of the Certificate shall not be amended at the Effective Time:
"The aggregate number of shares which the Corporation shall
have the authority to issue is 1,000 shares of Common Stock,
par value $0.001 per share."
3.2. The Bylaws. The Bylaws of Merger Sub in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the DGCL.
ARTICLE IV
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
4.1. Officers and Directors. The directors of Merger Sub and the officers of
the Company at the Effective Time shall, from and after the Effective Time, be
the directors and officers, respectively, of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
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4.2. Board of Directors; Committees.
(a) If requested by Purchaser, the Company will, promptly following the
purchase by Merger Sub of Shares pursuant to the Offer, take all actions
necessary to cause persons
designated by Purchaser to become directors of the Company so that the total
number of such persons equals that number of directors, rounded up to the next
whole number, which represents the product of (x) the total number of
directors on the board of directors of the Company (the "Board of Directors")
multiplied by (y) the percentage that the number of Shares so accepted for
payment plus any Shares beneficially owned by Purchaser or its affiliates on
the date hereof bears to the number of Shares outstanding at the time of such
acceptance for payment. In furtherance thereof, the Company will increase the
size of the Board of Directors, or use its reasonable efforts to secure the
resignation of directors, or both, as is necessary to permit Purchaser's
designees to be elected to the Board of Directors; provided, however, that
prior to the Effective Time, the Board of Directors shall always have at least
two members who are neither officers of Purchaser nor designees, shareholders
or affiliates of Purchaser ("Purchaser Insiders"). At such time, the Company,
if so requested, will use its reasonable efforts to cause persons designated
by Purchaser to constitute the same percentage of each committee of the Board
of Directors, each board of directors of each subsidiary of the Company and
each committee of each such board (in each case to the extent of the Company's
ability to elect such persons). The Company's obligations to appoint designees
to the Board of Directors shall be subject to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder. The Company shall promptly take all actions
required pursuant to such Section and Rule in order to fulfill its obligations
under this Section 4.2 and shall include in the Schedule 14D-9 such
information as is required under such Section and Schedule.
4.3. Actions by Directors. For purposes of Article IX and Sections 10.3 and
10.4, no action taken by the Board of Directors prior to the Merger shall be
effective unless such action is approved by the affirmative vote of at least a
majority of the directors of the Company who are not Purchaser Insiders.
ARTICLE V
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
5.1. Conversion or Cancellation of Shares. The manner of converting or
canceling shares of the Company and Merger Sub in the Merger shall be as
follows:
(a) At the Effective Time, each Share issued and outstanding immediately
prior to the Effective Time (other than Shares owned by Purchaser, Merger Sub
or any other subsidiary of Purchaser (collectively, the "Purchaser Companies")
or Shares which are held by stockholders ("Dissenting Stockholders")
exercising appraisal rights pursuant to Section 262 of the DGCL) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive, without interest, an amount in cash
equal to $17.10 or such greater amount which may be paid pursuant to the Offer
(the "Merger Consideration"). All such Shares, by virtue of the Merger and
without any action on the part of the holders thereof, shall no longer be
outstanding and shall be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Shares shall thereafter
cease to have any rights with respect to such Shares, except the right to
receive the Merger Consideration for such Shares upon the surrender of such
certificate in accordance with Section 5.2 or the right, if any, to receive
payment from the Surviving Corporation of the "fair value" of such Shares as
determined in accordance with Section 262 of the DGCL.
(b) At the Effective Time, each Share issued and outstanding at the
Effective Time and owned by any of the Purchaser Companies, and each Share
issued and held at the Effective Time in the Company's treasury, shall, by
virtue of the Merger and without any action on the part of the holder thereof,
cease to be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(c) At the Effective Time, each share of Common Stock, par value $0.25 per
share of Merger Sub issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of
Merger Sub or the holders of such shares, be converted into one Share.
5.2. Payment for Shares. Purchaser shall make available or cause to be made
available to a bank or trust company appointed by Purchaser with the Company's
prior approval (the "Paying Agent") amounts sufficient
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in the aggregate to provide all funds necessary for the Paying Agent to make
payments pursuant to Section 5.1(a) hereof to holders of Shares issued and
outstanding immediately prior to the Effective Time. Promptly after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
person who was, at the Effective Time, a holder of record (other than any of
the Purchaser Companies) of issued and outstanding Shares a form (mutually
agreed to by Purchaser and the Company) of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any of such Shares in
exchange for payment therefor. Upon surrender to the Paying Agent of such
certificates, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the Surviving
Corporation shall promptly cause to be paid to the persons entitled thereto a
check in the amount to which such persons are entitled, after giving effect to
any required tax withholdings. No interest will be paid or will accrue on the
amount payable upon the surrender of any such certificate. If payment is to be
made to a person other than the registered holder of the certificate
surrendered, it shall be a condition of such payment that the certificate so
surrendered shall be properly endorsed or otherwise in proper form for
transfer and that the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of the certificate surrendered or establish to the
satisfaction of the Surviving Corporation or the Paying Agent that such tax
has been paid or is not applicable. One hundred and eighty days following the
Effective Time, the Surviving Corporation shall be entitled to cause the
Paying Agent to deliver to it any funds (including any interest received with
respect thereto) made available to the Paying Agent which have not been
disbursed to holders of certificates formerly representing Shares outstanding
on the Effective Time, and thereafter such holders shall be entitled to look
to the Surviving Corporation only as general creditors thereof with respect to
the cash payable upon due surrender of their certificates. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall be liable to
any holder of certificates formerly representing Shares for any amount paid to
a public official pursuant to any applicable abandoned property, escheat or
similar law. The Surviving Corporation shall pay all charges and expenses,
including those of the Paying Agent, in connection with the exchange of cash
for Shares and Purchaser shall reimburse the Surviving Corporation for such
charges and expenses.
5.3. Dissenters' Rights. If any Dissenting Stockholder shall be entitled to
or shall assert entitlement to be paid the "fair value" of his or her Shares,
as provided in Section 262 of the DGCL, the Company shall give Purchaser
notice thereof and Purchaser shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of Purchaser, voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the Shares held by such Dissenting Stockholder shall thereupon be
treated as though such Shares had been converted into the Merger Consideration
pursuant to Section 5.1.
5.4. Transfer of Shares After the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Surviving Corporation at or
after the Effective Time.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser and Merger Sub that, except as set forth
in the correspondingly numbered Section of the letter, dated the date hereof,
from the Company to Purchaser (the "Disclosure Letter") to the extent
specifically disclosed with respect to the representation to which such
exception applies:
(a) Corporate Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation or
organization and is in good standing as a foreign corporation in each
jurisdiction where the properties and assets owned, leased or operated, or the
business conducted, by it require such qualification, except for such failure
to so qualify or be in such good standing, which, when taken together with all
other such failures, would
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not be reasonably likely to have a material adverse effect on the financial
condition, operations, properties, business or results of operations of the
Company and its subsidiaries taken as a whole (a "Company Material Adverse
Effect"). Each of the Company and its Significant Subsidiaries has the
requisite corporate power and authority to carry on its respective businesses
as they are now being conducted. The Company has made available to Purchaser a
complete and correct copy of the Certificate and the Amended and Restated
Bylaws of the Company (the "Bylaws"), each as amended to date and the
certificates of incorporation and Bylaws or similar governing instrument of
each of the Company's subsidiaries, each as amended to date. The Certificate
and the Bylaws and the certificates of incorporation, bylaws or similar
governing instruments of each of the Company's subsidiaries so made available
are in full force and effect.
(b) Authorized Capital. The authorized capital stock of the Company consists
of 50,000,000 Shares, of which 20,765,592 Shares were outstanding on February
5, 1997 and 5,000,000 shares of Preferred Stock par value $0.001 per share
(the "Preferred Shares"), of which no shares are outstanding. All of the
outstanding Shares have been duly authorized and are validly issued, fully
paid and nonassessable. The Company has no Shares or Preferred Shares reserved
for issuance or subject to issuance, except that, as of February 5, 1997,
there were (i) 6,495,467 Shares reserved for issuance pursuant to the
Company's Restated 1994 Stock Option/Stock Issuance Plan and the Company's
1996 Stock Option/Stock Issuance Plan (the "TheraTx Plans") of which 4,534,275
options to purchase Shares have been issued, (ii) 145,225 options to purchase
Shares issued pursuant to the 1989 Amended and Restated Stock Option Plan of
Helian Health Group, Inc., PersonaCare Inc.'s 1992 Stock Option Plan (the
"Additional Plans"), (iii) 1,000,000 Shares reserved for issuance pursuant to
the Company's Employee Stock Purchase Plan (together with the TheraTx Plans
and the Additional Plans the "Stock Plans"), (iv) 4,166,667 Shares subject to
issuance pursuant to the Company's 8% Convertible Subordinated Notes due 2002
(the "Notes"), (v) 78,925 Shares subject to issuance pursuant to the warrants
(the "Warrants") issued to the persons set forth on Section 6.1(b) of the
Disclosure Letter and (vi) 500,000 shares of Series A Preferred Stock reserved
for issuance pursuant to the Rights Agreement, dated as of July 28, 1995,
between the Company and U.S. Stock Transfer Corporation (as amended, the
"Rights Agreement"). Since February 5, 1997, no Shares have been issued except
pursuant to the exercise of options under the Stock Plans. Each of the
outstanding shares of capital stock of each of the Company's subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and owned,
either directly or indirectly, by the Company free and clear of all liens,
pledges, security interests, claims or other encumbrances. Except as set forth
above, there are no shares of capital stock of the Company authorized, issued
or outstanding and except as set forth above, there are no preemptive rights
nor any outstanding subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of any character relating to the
Shares or other issued or unissued capital stock or other securities of the
Company or any of its subsidiaries. Immediately prior to the consummation of
the Offer, no Shares, Preferred Shares, Series A Preferred Stock or any other
securities of the Company will be subject to issuance pursuant to the Rights
Agreement, and after the Effective Time the Surviving Corporation will have no
obligation to issue, transfer or sell any Shares or other capital stock or
other securities of the Surviving Corporation pursuant to any Compensation and
Benefit Plan (as defined in Section 6.1(h)(i)) or pursuant to any
subscription, option, warrant, right, convertible security or other agreement
or commitment. Other than the Notes, the Company does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or are convertible into or exercisable for securities having
the right to vote) with the Stockholders of the Company on any matter.
(c) Corporate Authority. Subject only to approval of this Agreement by the
holders of a majority of the outstanding Shares, the Company has the requisite
corporate power and authority and has taken all corporate action necessary in
order to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement is a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity. The Board of Directors (A) has unanimously approved this
Agreement, the Offer and the Merger and the other transactions contemplated
hereby and (B) has received the opinion of its financial advisor, The Beacon
Group, to the effect
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that the consideration to be received by holders of Shares pursuant to the
Offer and the Merger is fair from a financial point of view to such holders.
(d) Governmental Filings; No Violations; Contracts.
(i) Other than the filings provided for in Section 2.3, as required under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and required under any healthcare licensure and certificate of
need laws and regulations, change of ownership filings pursuant to Medicare
and Medicaid laws, rules or regulations and the Exchange Act (the
"Regulatory Filings"), no notices, reports or other filings are required to
be made by the Company with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by the Company
from, any governmental or regulatory authority, agency, commission or other
governmental entity, domestic or foreign ("Governmental Entity"), in
connection with the execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
hereby, the failure to make or obtain any or all of which would be
reasonably likely to have a Company Material Adverse Effect, or could
prevent or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement.
(ii) The execution and delivery of this Agreement by the Company does
not, and the consummation by the Company of the transactions contemplated
by this Agreement will not, constitute or result in (i) a breach or
violation of, or a default under, the Certificate or the Bylaws or the
comparable governing instruments of the Company or any of its subsidiaries,
(ii) except as disclosed in the Company Reports filed prior to the date
hereof, a breach or violation of, a default under or the triggering of any
payment or other material obligations pursuant to, any of the Company's
existing Benefit Plans or any grant or award made under any of the
foregoing, (iii) a breach or violation of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on assets (with or without the giving of
notice or the lapse of time) pursuant to, any provision of any agreement,
lease, contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") of the Company or any of its subsidiaries or any law, rule,
ordinance or regulation or judgment, decree, order, award or governmental
or non-governmental permit or license to which the Company or any of its
subsidiaries is subject or (iv) any change in the rights or obligations of
any party under any of the Contracts, except, in the case of clause (iii)
or (iv) above for Contracts other than those for the provision of
rehabilitation services or management, for such breaches, violations,
defaults, accelerations or changes that, alone or in the aggregate, would
not be reasonably likely to have a Company Material Adverse Effect or that
would not prevent or materially delay the ability of the Company to
consummate the transactions contemplated by this Agreement and, except in
the case of Contracts for the provision of rehabilitation services or
management, for such breaches, violations, defaults, accelerations or
changes that, alone or in the aggregate, are immaterial to the financial
condition, properties, operations, business or results of operations of the
Company and its subsidiaries taken as a whole or that would not prevent or
materially delay the ability of the Company to consummate the transactions
contemplated by this Agreement.
(iii) (x) No party to any rehabilitation therapy services or management
Contract with the Company or any if its subsidiaries has indicated in
writing to the Company or any of its subsidiaries or, to the knowledge of
Xxxx Xxxxxxxxx, Xxxx Xxxxx or Xxxx Xxxxxxx, otherwise indicated any
intention to terminate, fail to renew or seek to amend in any manner
adverse to the Company, any such Contract and (y) neither the Company nor
any of its subsidiaries is a party to or bound by any Contract prohibiting
or limiting its or any of its affiliate's ability to engage in any line of
business, compete with any person or carry on or expand the nature or
geographic scope of its business, except for such prohibitions, or
limitations on the Company or its subsidiaries that would not be reasonably
likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
(e) Company Reports; Financial Statements. The Company has made available to
Purchaser each registration statement, schedule, report, proxy statement or
information statement prepared by it since December 31, 1995 (the "Audit
Date"), including, without limitation, (i) the Company's Annual Report on
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Form 10-K for the year ended December 31, 1995 and (ii) the Company's
Quarterly Reports on Form 10-Q for the periods ended March 31, 1996, June 30,
1996 and September 30, 1996 each in the form (including exhibits and any
amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (collectively, including any subsequently filed reports, the "Company
Reports"). As of their respective dates, the Company Reports did not, and any
Company Reports filed with the SEC subsequent to the date hereof will not,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related
notes and schedules and the consolidated balance sheets and schedules of
PersonaCare, Inc. ("PersonaCare")) fairly presents the consolidated financial
position of the Company and its subsidiaries including, without limitation,
PersonaCare as of its date and each of the consolidated statements of income
and of changes in financial position included in or incorporated by reference
into the Company Reports (including any related notes and schedules and
including the statements of income and changes in financial position of
PersonaCare and any related notes and schedules) fairly presents the results
of operations, retained earnings and changes in financial position, as the
case may be, of the Company and its subsidiaries including, without
limitation, PersonaCare for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which will
not be material in amount or effect), in each case in accordance with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except as may be noted therein. Other than the Company
Reports, the Company has not filed any other definitive reports or statements
with the SEC since December 31, 1995.
(f) Absence of Certain Changes. Except as disclosed in the Company Reports
filed with the SEC prior to the date hereof, since September 30, 1996 in the
case of clauses (i), (ii) and (iii) below and December 31, 1995, in the case
of clause (iv) below, the Company and its subsidiaries have conducted their
respective businesses only in, and have not engaged in any material
transaction other than according to, the ordinary and usual course of such
businesses and there has not been (i) any change that would be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect other than any such change arising out of or relating to the proposal,
adoption or implementation after the date hereof of any law, statute, rule or
regulation relating to healthcare, Medicaid or Medicare, including without
limitation the proposal, adoption or implementation of "salary equivalency"
rates (including amendments to any salary equivalency rates currently in
effect) relating to the delivery of physical therapy, occupational therapy,
respiratory therapy or speech language pathology services; (ii) any material
damage or loss to any material asset or property, regardless of insurance;
(iii) any declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of the Company; or (iv) any
change by the Company in accounting principles, practices or methods. Since
December 31, 1995, except as disclosed in the Company Reports filed with the
SEC prior to the date hereof and other than in the ordinary course, there has
not been any increase in the compensation payable or which could become
payable by the Company or its subsidiaries to their officers or key employees,
or any amendment of any Benefit Plans.
(g) Litigation and Liabilities. Except as disclosed in the Company Reports
filed with the SEC prior to the date hereof, there are no (i) civil, criminal
or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or (ii) obligations or liabilities,
whether or not accrued, contingent or otherwise and whether or not required to
be disclosed, including, without limitation, those relating to matters
involving any Environmental Law (as hereinafter defined), or any other facts
or circumstances of which the management of the Company has knowledge that
could result in any claims against or obligations or liabilities of the
Company or any of its subsidiaries, that, alone or in the aggregate, would be
reasonably likely to have a Company Material Adverse Effect.
(h) Employee Benefits.
(i) Section 6.1(h)(i) of the Disclosure Letter contains a complete and
accurate list of all existing bonus, incentive, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
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ownership, stock bonus, stock purchase, restricted stock, stock option,
severance, welfare and fringe benefit plans, employment or severance
agreements and all similar practices, policies and arrangements in which
any employee or former employee (the "Employees"), consultant or former
consultant (the "Consultants") or director or former director (the
"Directors") of the Company or any of its subsidiaries participates or to
which any such Employees, Consultants or Directors are a party (the
"Compensation and Benefit Plans"). Neither the Company nor any of its
subsidiaries has any commitment to create any additional material
Compensation and Benefit Plan or to modify or change any existing
Compensation and Benefit Plan in any material respect.
(ii) To the best of the Company's knowledge, each Compensation and
Benefit Plan has been operated and administered in all material respects in
accordance with its terms and with applicable law, including, but not
limited to, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code (as defined in Section 6.1(o)), the Securities Act of
1933, as amended (the "Securities Act") and the Exchange Act, or any
regulations or rules promulgated thereunder, and all filings, disclosures
and notices required by ERISA, the Code, the Securities Act, the Exchange
Act or any other applicable law have been timely made. Each Compensation
and Benefit Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA (a "Pension Plan") and which is intended
to be qualified under Section 401(a) of the Code has received a favorable
determination letter (including a determination that the related trust
under such Compensation and Benefit Plan is exempt from tax under Section
501(a) of the Code) from the Internal Revenue Service ("IRS") for "TRA" (as
defined in Rev. Proc. 93-39), or will file for such determination letter
prior to the expiration of the remedial amendment period for such
Compensation and Benefit Plan, and the Company is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. There is no material pending or, to the knowledge of
the Company, threatened legal action, suit or claim relating to the
Compensation and Benefit Plans. Neither the Company nor any of its
subsidiaries has engaged in a transaction, or omitted to take any action,
with respect to any Compensation and Benefit Plan that would reasonably be
expected to subject the Company or any of its subsidiaries to a tax or
penalty imposed by either Section 511 or 4975 of the Code or Section
502(c), 502(i), 502(l) or 4071 of ERISA in an amount which would be
reasonably likely to have a Company Material Adverse Effect, assuming for
purposes of Section 4975 of the Code that the taxable period of any such
transaction expired as of the date hereof.
(iii) Neither the Company nor any entity (an "ERISA Affiliate") which is
considered one employer with the Company under Section 4001(b) of ERISA or
Section 414(b) or (c) of the Code has sponsored, maintained or incurred any
liability under Title IV of ERISA with respect to any ongoing, frozen or
terminated "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA or any Compensation and Benefit Plan subject to
Section 412 of the Code or Section 302 of ERISA. None of the Company, any
of its subsidiaries or any ERISA Affiliate has contributed, or has been
obligated to contribute, to a multiemployer plan under Subtitle E of ERISA
at any time since September 26, 1980. To the knowledge of the Company,
there is no pending investigation or enforcement action by the Department
of Labor (the "DOL") or IRS or any other governmental agency with respect
to any Compensation and Benefit Plan.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA or any employee benefit arrangements
under any collective bargaining agreement to which the Company or any of
its subsidiaries is a party have been timely made or have been reflected on
the Company's financial statements.
(v) Neither the Company nor any of its subsidiaries has any obligations
to provide retiree health and life insurance or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code, and each such Compensation and
Benefit Plan may be amended or terminated without incurring liability
thereunder. There has been no communication to Employees by the Company or
any of its subsidiaries that would reasonably be expected to promise or
guarantee such Employees retiree health or life insurance or other retiree
death benefits on a permanent basis.
8
(vi) The Company and its subsidiaries do not maintain any Compensation
and Benefit Plans covering Employees outside of the United States.
(vii) With respect to each Compensation and Benefit Plan, if applicable,
the Company has provided, made available, or will make available upon
request, to Purchaser, true and complete copies of existing:
(A) Compensation and Benefit Plan documents and amendments thereto; (B)
trust instruments and insurance contracts; (C) two most recent Forms 5500
filed with the IRS; (D) the most recent summary plan description; (E) most
recent determination letter issued by the IRS; (F) any Form 5310 or Form
5330 filed with the IRS; and (G) most recent nondiscrimination tests
performed under ERISA and the Code (including 401(k) and 401(m) tests).
(viii) The consummation of the transactions contemplated by this
Agreement would not, directly or indirectly (including, without limitation,
as a result of any termination of employment prior to or following the
Effective Time) reasonably be expected to (A) entitle any Employee,
Consultant or Director to any payment (including severance pay or similar
compensation) or any increase in compensation, (B) result in the vesting or
acceleration of any benefits under any Compensation and Benefit Plan or (C)
result in any material increase in benefits payable under any Compensation
and Benefit Plan.
(ix) Neither the Company nor any of its subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would
not reasonably be expected to be deductible as a result of the limitations
under Section 162(m) of the Code and the regulations issued thereunder.
(x) As a result, directly or indirectly, of the transactions contemplated
by this Agreement (including, without limitation, as a result of any
termination of employment prior to or following the Effective Time), none
of the Purchaser, Merger Sub, the Company or the Surviving Corporation, or
any of their respective subsidiaries will be obligated to make a payment
that would be characterized as an "excess parachute payment" to an
individual who is a "disqualified individual" (as such terms are defined in
Section 280G of the Code), without regard to whether such payment is
reasonable compensation for personal services performed or to be performed
in the future.
(i) Brokers and Finders. Neither the Company nor any of its subsidiaries has
employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders fees in connection with the transactions
contemplated herein, except that the Company has employed The Beacon Group as
its financial advisor, the arrangements with which have been disclosed in
writing to Purchaser prior to the date hereof.
(j) Rights Agreement.
(i) The Company has amended the Rights Agreement to provide that none of
Purchaser, Merger Sub or any of their respective affiliates or associates
will be deemed to be an Acquiring Person (as defined in the Rights
Agreement) and that the Distribution Date (as defined in the Rights
Agreement) shall not be deemed to occur, and the Rights will not separate
from the Shares, as a result of the commencement of the Offer or as a
result of consummation of the transactions contemplated hereby.
(ii) The Company has taken all necessary action with respect to the
Rights Agreement to ensure that the Rights Agreement will expire at the
Effective Time pursuant to Section 7(a)(iv) of the Rights Agreement.
(k) Takeover Statutes. The Board of Directors has taken all necessary action
to approve the transactions contemplated by this Agreement such that the
restrictions on transactions with "interested stockholders" set forth in
Section 203 of the DGCL shall not apply to such transactions. No other state
or federal "fair price", "moratorium", "control share acquisition" or other
similar antitakeover statute or regulation (each a "Takeover Statute") is
applicable to the Company, the Shares, the Offer, the Merger or the
transactions contemplated thereby or hereby.
9
(l) Environmental Matters. As of the date hereof, except as disclosed in the
Company Reports filed with the SEC prior to the date hereof, to the knowledge
of the Company, (i) the Company and its subsidiaries have complied with all
applicable Environmental Laws; (ii) the properties presently or formerly owned
or operated by the Company or its subsidiaries (including, without limitation,
soil, groundwater or surface water on, under or adjacent to the properties,
and buildings thereon) (the "Properties") do not contain any Hazardous
Substance (as hereinafter defined) other than as permitted under applicable
Environmental Laws, do not, and have not, contained any underground storage
tanks, do not have any asbestos present (and have not had any asbestos removed
therefrom) and have not been used as a sanitary landfill or hazardous waste
disposal site (provided, however, that with respect to Properties formerly
owned or operated by the Company, such representation is limited to the period
during which period the Company or one of its subsidiaries owned or operated
such Properties); (iii) neither the Company nor any of its subsidiaries has
received any notices, demand letters or request for information from any
Governmental Entity or any third party alleging that the Company may be in
violation of, or liable under, any Environmental Law and none of the Company,
its subsidiaries or the Properties are subject to any court order,
administrative order or decree arising under any Environmental Law and (iv) no
Hazardous Substance has been disposed of, released or transported from any of
the Properties during the time such Property was owned or operated by the
Company or one of its subsidiaries, other than as permitted under applicable
Environmental Law. Following the date hereof, except as would not reasonably
be expected to have a Company Material Adverse Effect, the representation in
Section 6.1(l) is true and correct without regard to any limitation as to the
date hereof or the knowledge of the Company.
"Environmental Law" means (i) any Federal, state, foreign or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, common law, order, judgment, decree, injunction,
requirement or agreement with any governmental entity, (x) relating to the
protection, preservation or restoration of the environment, (including,
without limitation, air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life or any
other natural resource), or to human health or safety, or (y) the exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as now in effect. "Hazardous
Substance" means any substance presently listed, defined, designated or
classified as hazardous, toxic or radioactive (including petroleum and
regulated medical waste), under any Environmental Law, whether by type or by
quantity, including any substance containing any such substance as a
component.
(m) Real Property and Leases.
(i) The Company and its subsidiaries have sufficient title or leasehold
interests to all of their properties to conduct their respective businesses
as currently conducted or as contemplated to be conducted, except where the
failure to have such sufficient title or leasehold interest would not be
reasonably likely to have, either individually or in the aggregate, a
Company Material Adverse Effect. Section 6.1(m) of the Disclosure Letter
sets forth a true and complete list of each lease, sublease or other
agreement relating to the possession of real property to which the Company
or any of its subsidiaries is a party.
(ii) All leases of real property leased for the use or benefit of the
Company or any of its subsidiaries to which the Company or any such
subsidiary is a party and all amendments and modifications thereto are in
full force and effect except for defaults which would, in the aggregate, be
immaterial to the financial condition, operations, properties, business or
results of operations of the Company and its subsidiaries taken as a whole.
(n) Medicare and Medicaid. Except as disclosed in any state health
department surveys for 1995 or 1996, copies of which have been made available
to Purchaser, the Company and its subsidiaries have complied with all Medicare
and Medicaid laws, rules and regulations and have filed all returns, cost
reports and other filings in any manner prescribed thereby except where the
failure to so comply, together with all other such failures, would be
immaterial to the financial condition, operations, properties, business or
results of operations of the Company and its subsidiaries taken as a whole.
All returns, cost reports and other filings made by the Company and its
subsidiaries since January 1, 1992 to Medicare, Medicaid or any other
governmental health or
10
welfare related entity or third party payor are true and complete except where
the failure to be so true and complete, together with all other such failures,
would be immaterial to the financial condition, operations, properties,
business or results of operations of the Company and its subsidiaries taken as
a whole. Since January 1, 1992, no deficiency in any such returns, cost
reports and other filings, including deficiencies for late filings, has been
asserted or to the best of the Company's knowledge, after reasonable
investigation, threatened by any Federal or state agency or instrumentality or
other provider reimbursement entities relating to Medicare or Medicaid or
third party payor claims and to the best of the Company's knowledge, after
reasonable investigation, there is no basis for any successful claims or
requests for reimbursement from any such agency, instrumentality, entity or
third party payor except for any deficiencies, together with all other such
deficiencies, which would be immaterial to the financial condition,
operations, properties, business or results of operations of the Company and
its subsidiaries taken as a whole. Since January 1, 1992, neither the Company
nor any of its subsidiaries has been subject to any audit or investigation
relating to fraudulent Medicare or Medicaid procedure or practices except
audits or investigations which, together with all other such audits, would be
immaterial to the financial condition, operations, properties, business or
results of operations of the Company and its subsidiaries taken as a whole.
(o) Taxes.
(i) All Tax Returns that are required to be filed by or with respect to the
Company and its subsidiaries have been duly filed, (ii) all Taxes shown to be
due on the Tax Returns referred to in clause (i) have been paid in full, (iii)
none of the Tax Returns referred to in clause (i) have been examined by the
Internal Revenue Service or the appropriate state, local or foreign taxing
authority, and the period for assessment of the Taxes in respect of which such
Tax Returns were required to be filed has expired, (iv) no deficiencies have
been asserted or have been assessed by any Taxing Authority and (v) no waivers
of statutes of limitation have been given by or requested with respect to any
Taxes of the Company or its subsidiaries. The Company has made available to
Purchaser true and correct copies of the United States federal income Tax
Returns filed by the Company and its subsidiaries for each of the three most
recent fiscal years ended on or before December 31, 1995. Neither the Company
nor any of its subsidiaries has any liability with respect to income,
franchise or similar Taxes that accrued on or before the end of the most
recent period covered by the Company Reports in excess of the amounts accrued
with respect thereto that are reflected in the financial statements included
in the Company Reports filed on or prior to the date hereof, except where the
failure to be so accrued would not be reasonably likely to have a Company
Material Adverse Effect.
(ii) No Tax is required to be withheld pursuant to Section 1445 of the Code
as a result of the transfer contemplated by this Agreement.
As used in this Agreement, the following terms shall have the indicated
meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with respect to any Tax.
"Taxes" means all federal, state, local or foreign taxes, including, without
limitation, income, gross receipts, windfall profits, gains, excise,
severance, property, production, sales, use, transfer, license, franchise,
employment, withholding, environmental, customs duty, capital stock, stamp,
payroll, unemployment, disability, production, value added, occupancy and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additional imposed with respect to such amounts and
any interest in respect of such penalties and additions.
(p) Labor Matters; Non-Competition.
(i) Neither the Company nor any of its subsidiaries is a party to or
otherwise bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
the Company or any of its subsidiaries the subject of any material proceeding
asserting that the Company or any of its subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any
11
labor union or labor organization nor is there pending or, to the knowledge of
the Company, threatened, nor has there been for the past five years, any labor
strike, dispute, walkout, work stoppage, slow-down or lockout involving the
Company or any of its subsidiaries.
(ii) The Company has entered into Non-Competition Agreements, dated the date
hereof (the "Non-Competes"), with each of Xxxx X. Xxxxxx, Xxxx X. Xxxxxxxxx,
Xxxxxx X. Xxxx, Xxxxx X. Xxxxxxx, III, Xxxxx X. Xxxxx and Xxxxxxx X. Xxxxxx,
Ph.D. in the form set forth on Section 6.1(p) of the Disclosure Letter. Each
of the Non-Competes is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity.
(q) Intellectual Property.
(i) The Company and/or each of its subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications,
and tangible or intangible proprietary information or materials that are
used in the business of the Company and its subsidiaries as currently
conducted, except for any such failures to own, be licensed or possess that
would not be reasonably likely to have, either individually or in the
aggregate, a Company Material Adverse Effect and to the knowledge of the
Company all patents, trademarks, trade names, service marks and copyrights
held by the Company and/or its subsidiaries are valid and subsisting.
(ii) The Company or one of its wholly-owned subsidiaries owns the entire
right, title and interest in and to all intellectual property subsisting in
the computer programs, software, applications (including all copies,
versions and derivative works) and related hardware used by the Company in
connection with the Company's clinical and management information system
known as "TheraSys" (the "TheraSys Program"), including all patents,
trademarks, tradenames, service marks, trade secrets and copyrights
(including, without limitation, the exclusive right to use and convey the
same) and there are no liens, security interests, licenses or other
encumbrances on the TheraSys Program or any intellectual property
subsisting therein. The Company has the right to use the TheraSys Program
and convey and disclose the TheraSys Program without violation of any law
or third party right. Copyright in the TheraSys Program has been duly
registered with the Copyright Office of the Library of Congress (Reg. No.
Txu 638-676) and such registration remains in full force and effect. No
affiliates, employees or independent contractors will, as of and after the
Closing, retain or obtain ownership of, or any rights over, any patents,
trade names, trademarks, trade secrets, services marks, or copyrights
relating to the TheraSys Program, all of which are owned solely by the
Company or one of its wholly-owned subsidiaries. To the Company's
knowledge, (i) there have been and are no claims by any person contesting
the Company's ownership of the intellectual property subsisting in the
TheraSys Program, and the use of the TheraSys Program by the Company does
not infringe on the rights of any person and no suits or proceedings are
pending or threatened against the Company or any of its respective
subsidiaries with respect to the foregoing; and (ii) no third party is
infringing the Company's intellectual property rights in the TheraSys
Program.
(r) Visitation Rights. Other than the current directors of the Company, no
person is contractually or otherwise entitled to attend any regular or special
meeting of the Board of Directors.
6.2. Representations and Warranties of Purchaser and Merger Sub. Purchaser
and Merger Sub represent and warrant to the Company that except as set forth
in the correspondingly numbered Section of the letter, dated the date hereof,
from Purchaser to the Company (the "Purchaser Disclosure Letter"):
(a) Corporate Organization and Qualification. Each of Purchaser and Merger
Sub is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation and is in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification except for such failure to so qualify or to be in such good
standing, which, when taken together with all other such failures, would not
be reasonably likely to have a material adverse effect on the financial
condition, operations, properties, business or results of operations of
Purchaser and its subsidiaries, taken as a whole.
12
(b) Corporate Authority. Purchaser and Merger Sub each has the requisite
corporate power and authority and has taken all corporate action necessary in
order to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement is a valid and binding agreement of
Purchaser and Merger Sub enforceable against Purchaser and Merger Sub in
accordance with its terms subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity.
(c) Governmental Filings; No Violations.
(i) Other than the Regulatory Filings, no notices, reports or other
filings are required to be made by Purchaser or Merger Sub with, nor are
any consents, registrations, approvals, permits or authorizations required
to be obtained by Purchaser or Merger Sub from, any Governmental Entity in
connection with the execution and delivery of this Agreement by Purchaser
and Merger Sub and the consummation of the transactions contemplated hereby
by Purchaser and Merger Sub, the failure to make or obtain any or all of
which would be reasonably likely to prevent or materially delay the ability
of Purchaser or Merger Sub to consummate the transactions contemplated by
this Agreement.
(ii) The execution and delivery of this Agreement by Purchaser and Merger
Sub do not, and the consummation of the transactions contemplated hereby by
Purchaser and Merger Sub will not, constitute or result in (i) a breach or
violation of, or a default under, the certificate of incorporation or by-
laws of Purchaser or Merger Sub or (ii) a breach or violation of, a default
under, the acceleration of or the creation of a lien, pledge, security
interest or other encumbrance on assets (with or without the giving of
notice or the lapse of time) pursuant to, any provision of any Contract of
Purchaser or Merger Sub or any law, ordinance, rule or regulation or
judgment, decree, order, award or governmental or non-governmental permit
or license to which Purchaser or Merger Sub is subject, except, in the case
of clause (ii) above, for such breaches, violations, defaults or
accelerations that, alone or in the aggregate, would not prevent or
materially delay the transactions contemplated by this Agreement.
ARTICLE VII
COVENANTS
7.1. Interim Operations of the Company. The Company covenants and agrees
that, prior to the Effective Time (unless Purchaser shall otherwise agree in
writing and except as otherwise expressly contemplated by this Agreement or in
the Disclosure Letter):
(a) the business of the Company and its subsidiaries shall be conducted only
in the ordinary and usual course and, to the extent consistent therewith, each
of the Company and its subsidiaries shall use its reasonable best efforts to
preserve its business organization intact and maintain its existing relations
with customers, suppliers, employees and business associates;
(b) the Company shall not (i) sell or pledge or agree to sell or pledge any
stock owned by it in any of its subsidiaries; (ii) amend the Certificate or
the Bylaws or, except as otherwise contemplated herein (including Section
7.2), amend, modify or terminate the Rights Agreement; (iii) split, combine or
reclassify the outstanding Shares; or (iv) declare, set aside or pay any
dividend payable in cash, stock or property with respect to the Shares or
Preferred Shares;
(c) except as set forth in Section 7.1(c) of the Disclosure Letter, neither
the Company nor any of its subsidiaries shall (i) issue, sell, pledge, dispose
of or encumber any additional shares of, or securities convertible or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of its capital stock of any class of the Company
or its subsidiaries or any other property or assets other than, in the case of
the Company, Shares issuable pursuant to options outstanding on the date
hereof under the Stock Plans or upon conversion of the Notes or Warrants; (ii)
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any assets or incur or modify any indebtedness or other liability
other than in the ordinary
13
and usual course of business; (iii) license or otherwise transfer to any third
party any rights to the TheraSys Program or related software; (iv) acquire
directly or indirectly by redemption or otherwise any shares of the capital
stock of the Company; or (v) authorize capital expenditures in excess of
$1,000,000 in the aggregate not disclosed in the Disclosure Letter or make any
acquisition of, or investment in, assets or stock of any other person or
entity other than ordinary course acquisitions of supplies used in the day-to-
day operations of the Company;
(d) neither the Company nor any of its subsidiaries shall increase in any
manner the compensation of, grant any severance or termination pay to, or
enter into or amend or renew any employment or severance agreement with, any
Director, Consultant or employee, provided, that, the Company and its
subsidiaries may in the ordinary course of business consistent with past
practice (including, without limitation, as to timing), grant increases in the
compensation of non-officer employees and increases of not more than 10% or
$15,000 in compensation of officers of the Company who are not executive
officers of the Company;
(e) neither the Company nor any of its subsidiaries shall establish, adopt,
enter into, make any Compensation and Benefit Plans, or voluntarily accelerate
the vesting of any stock options, restricted stock or other compensation or
benefit;
(f) neither the Company nor any of its subsidiaries shall settle or
compromise any claims or litigation involving payments by the Company of
$100,000 in any single instance or related instances, or that otherwise are
material or, except in the ordinary and usual course of business, modify,
amend or terminate any of its material Contracts or waive, release or assign
any material rights or claims;
(g) neither the Company nor any subsidiary shall make any Tax election or
permit any insurance policy naming it as a beneficiary or a loss payable payee
to be canceled or terminated without notice to Purchaser, except in the
ordinary and usual course of business;
(h) neither the Company nor any of its subsidiaries will authorize or enter
into an agreement to do any of the foregoing; and
(i) neither the Company nor any of its subsidiaries will amend any of the
Non-Competes.
7.2. Acquisition Proposals. The Company agrees that neither it nor any of
its subsidiaries nor any of its executive officers or directors shall, and
that it shall direct and use its best efforts to cause its non-executive
officers and its subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its subsidiaries) not to, directly or indirectly, (a) initiate, solicit,
knowingly encourage or otherwise facilitate any inquiries or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or 5% or more of the equity securities of,
the Company or any of its subsidiaries (any such transaction or purchase being
hereinafter referred to as an "Acquisition Transaction") that, in any such
case, could reasonably be expected to lead to a breach of this Agreement or
otherwise interfere with the completion of the Offer or Merger contemplated by
this Agreement (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or (b) have any discussion with or provide any
confidential information or data to any person relating to an Acquisition
Proposal or engage in any negotiations concerning an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent the Company or the Board of Directors from (A) complying with Rule
14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal; (B) engaging in any discussions or negotiations with or providing
any information to, any person in response to an unsolicited bona fide written
Acquisition Proposal by any such person (including a new and unsolicited
Acquisition Proposal received by the Company after execution of this Agreement
from a person or entity whose initial contact with the Company may have been
solicited by the Company prior to the execution of this Agreement); or (C)
recommending such an unsolicited bona fide written Acquisition Proposal to the
stockholders of the Company, if and only to the extent that, in such case
referred to in clause (B) or (C), (i) the Board of Directors concludes in good
faith (after consultation with its financial advisors) that such Acquisition
14
Proposal is reasonably capable of being completed, taking into account all
legal, financial and other aspects of the proposal and the person making the
proposal, and would, if consummated, result in a transaction more favorable to
the Company's stockholders from a financial point of view than the transaction
contemplated by this Agreement (any such more favorable Acquisition Proposal
being referred to in this Agreement as a "Superior Proposal"), (ii) the Board
of Directors determines in good faith after consultation with outside legal
counsel that such action is necessary for the Board of Directors to comply
with its fiduciary duties under applicable law and (iii) prior to providing
any non-public information or data to any person in connection with an
Acquisition Proposal by any such person, the Board of Directors receives from
such person an executed confidentiality agreement on terms substantially
similar to those contained in the Confidentiality Agreement (as defined
below). The Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Company agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 7.2. The Company agrees that it will
notify Purchaser promptly if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such discussions
or negotiations are sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
person and the terms and conditions of any proposals or offers and thereafter
shall keep Purchaser informed, on a current basis, of the status and terms of
any such proposals or offers and the status of any such discussions or
negotiations. The Company also agrees that it will promptly request that each
person that has heretofore executed a confidentiality agreement in connection
with its consideration of any Acquisition Proposal to return all confidential
information heretofore furnished to such Person by or on behalf of the Company
or any of its subsidiaries.
7.3. Meetings of the Company's Stockholders. If required following
termination of the Offer, the Company will take, consistent with applicable
law and the Certificate and the Bylaws, all action necessary to convene a
meeting of holders of Shares as promptly as practicable to consider and vote
upon the approval of this Agreement and the Merger. Subject to fiduciary
requirements of applicable law, the Board of Directors shall recommend such
approval and the Company shall take all lawful action to solicit such
approval. At any such meeting of the Company all of the Shares then owned by
the Purchaser Companies will be voted in favor of this Agreement. The
Company's proxy or information statement with respect to such meeting of
shareholders (the "Proxy Statement"), at the date thereof and at the date of
such meeting, will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing shall not apply to
the extent that any such untrue statement of a material fact or omission to
state a material fact was made by the Company in reliance upon and in
conformity with written information concerning the Purchaser Companies
furnished to the Company by Purchaser specifically for use in the Proxy
Statement. The Proxy Statement shall not be filed, and no amendment or
supplement to the Proxy Statement will be made by the Company, without
consultation with Purchaser and its counsel.
7.4. Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and Purchaser shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
and required under healthcare licensure and certificate of need laws and
regulations with respect to the Offer and the Merger; (b) with respect to
Purchaser, use its reasonable best efforts and with respect to the Company
commercially reasonable efforts (which shall include, among other things,
delivery of customary officers certificates and legal opinions) to obtain the
financing necessary for Purchaser and Merger Sub to purchase all Shares
pursuant to the Offer and the Merger and pay related fees and expenses, pay
for all of the outstanding Notes at the face value thereof, refinance
Purchaser's outstanding obligations under Purchaser's existing $1 Billion
Credit Agreement dated as of September 11, 1995 and the Company's outstanding
obligations under the Company's existing Amended and Restated Financing and
Security Agreement dated May 8, 1995; and (c) use reasonable best efforts to
promptly take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement as soon as practicable.
15
7.5. Access. Upon reasonable notice, the Company shall (and shall cause each
of its subsidiaries to) afford Purchaser's officers, employees, counsel,
accountants and other authorized representatives ("Representatives") access,
during normal business hours throughout the period prior to the Effective
Time, to its properties, books, Contracts and records and, during such period,
the Company shall (and shall cause each of its subsidiaries to) furnish
promptly to Purchaser all information concerning its business, properties and
personnel as Purchaser or its Representatives may reasonably request, provided
that no investigation pursuant to this Section 7.5 shall affect or be deemed
to modify any representation or warranty made by the Company and provided,
further, that the foregoing shall not require the Company to permit any
inspection, or to disclose any information, which in the reasonable judgment
of the Company (a) would result in the disclosure of any trade secrets of
third parties if the Company shall have unsuccessfully used reasonable efforts
to obtain the consent of such third party to such inspection or disclosure,
(b) would be in violation of applicable law, rules or regulation or (c)
constitutes information protected by attorney-client privilege, but only to
the extent that disclosure would impair the Company's ability to assert such
attorney-client privilege. Upon any termination of this Agreement, Purchaser
will treat all documents obtained by it or any of its Representatives in
accordance with the terms of the Confidentiality Agreement, dated as of
September 17, 1996 (the "Confidentiality Agreement") between the Company and
Purchaser.
7.6. Notification of Certain Matters. The Company shall give prompt notice
to Purchaser of: (a) any notice of, or other communication relating to, any
environmental matter, a default or event that, with notice or lapse of time or
both, would become a default, received by the Company or any of its
subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any Contract to which the Company or any of its
subsidiaries is a party or is subject except for defaults or events which
individually or in the aggregate would be immaterial to the financial
condition, operations, properties, business or results of operations of the
Company and its subsidiaries taken as a whole; (b) any material adverse change
in the financial condition, operations, properties, business or results of
operations of the Company and its subsidiaries taken as a whole or the
occurrence of any event which, so far as reasonably can be foreseen at the
time of its occurrence, would result in any such change. Each of the Company
and Purchaser shall give prompt notice to the other party of any notice or
other communication from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement and (c) the occurrence or failure to occur of
an event that would, or, with the lapse of time could reasonably be expected
to cause any representation or warranty of the Company or its subsidiaries
made by the Company in this Agreement to become inaccurate in any material
respect.
7.7. Publicity. The initial press release shall be a joint press release and
thereafter the Company and Purchaser shall consult with each other prior to
issuing any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and prior to making any filings with
any Governmental Entity, with any national securities exchange or with the
National Association of Securities Dealers, Inc. with respect thereto.
7.8. Stocks Plans and Options. (a) Unless Purchaser shall provide the
Company with the notice contemplated by Section 7.8(b) below, then, at the
Effective Time, each outstanding option to purchase Shares under the Stock
Plans, other than any option granted under the Company's Employee Stock
Purchase Plan (collectively, the "Options"), whether vested or unvested, shall
be converted into an option to acquire, on the same terms and conditions as
were applicable under such Option, the number of shares of Common Stock, par
value $0.25 per share of Purchaser (the "Purchaser Common Stock") equal to (a)
the number of Shares subject to the Option, multiplied by (b) (i) the Merger
Consideration, divided by (ii) the average of the high and low price of
Purchaser Common Stock on the trading day immediately preceding the date of
the Effective Time as reported in the New York City edition of The Wall Street
Journal (rounded down to the nearest whole number) (a "Replacement Option"),
at an exercise price per share (rounded up to the nearest whole cent) equal to
(y) the aggregate exercise price for the Shares which were purchasable
pursuant to such Option divided by (z) the number of full shares of Purchaser
Common Stock subject to such Replacement Option in accordance with the
foregoing. At or prior to the Effective Time, the Company shall take all
action necessary with respect to the
16
Stock Plans to permit the replacement of the outstanding Options by Purchaser
pursuant to this Section and as soon as practicable after the Effective Time
Purchaser shall use its reasonable best efforts to register under the
Securities Act on Form S-8 or other appropriate form (and use its reasonable
best efforts to maintain the effectiveness thereof) shares of Purchaser Common
Stock issuable pursuant to all Replacement Options. The Company shall take all
action necessary, including obtaining any required consents from optionees, to
provide that following the Effective Time no participant in any Stock Plan or
other plans, programs or arrangements shall have any right thereunder to
acquire equity securities of the Company, the Surviving Corporation or any
subsidiary thereof and to permit Purchaser to assume the Stock Plans (other
than the Company's Employee Stock Purchase Plan, with respect to which the
Company shall take all action necessary to terminate such plan immediately
prior to the Effective Time). The Company shall further take all action
necessary to amend the Stock Plans, to eliminate automatic grants or awards
thereunder following the Effective Time. At the Effective Time, Purchaser
shall assume the Stock Plans (other than the Company's Employee Stock Purchase
Plan); provided, that such assumption shall be only in respect of the
Replacement Options and that Purchaser shall have no obligation with respect
to any awards under the Stock Plans other than the Replacement Options or to
make any additional grants or awards under such assumed Stock Plans.
(b) If Purchaser shall provide written notice to the Company by February 24,
1997 of its election to treat the Options in accordance with the provisions of
this Section 7.8(b), then, at the Effective Time, each then outstanding
Option, whether vested or unvested, shall be cancelled and the holder thereof
shall be entitled to receive an amount of cash equal to the product of (x) the
amount, if any, by which the Merger Consideration exceeds the exercise price
per Share subject to such Option (whether vested or unvested) and (y) the
number of Shares issuable pursuant to the unexercised portion of such Option,
less any required withholding of taxes (such amount being hereinafter referred
to as the "Option Consideration"). The Option Consideration shall be paid as
soon as practicable following the Effective Time, but in any event within five
(5) days following the Effective Time. Prior to the Effective Time, the
Company shall take such actions as may be necessary to effectuate the
foregoing, including without limitation obtaining all applicable consents. The
cancellation of an Option in exchange for the Option Consideration shall be
deemed a release of any and all rights the holder had or may have had in
respect of such Option, and any required consents received from Option holders
shall so provide. All Stock Plans and Options shall terminate as of the
Effective Time and the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any subsidiary thereof, shall be canceled as
of the Effective Time, and the Company shall take all action necessary,
including receiving applicable consents from optionees, to terminate all such
plans and to ensure that following the Effective Time no participant in any
Stock Plan or other plans, programs or arrangements shall have any right
thereunder to acquire equity securities of the Purchaser, the Company, the
Surviving Corporation or any subsidiary thereof. If Purchaser does not provide
the written notice referred to in the first sentence of Section 7.8(b), this
Section 7.8(b) shall be inapplicable.
Section 7.9. Indemnification; Directors' and Officers' Insurance.
(a) The bylaws and the certificate of incorporation of the Surviving
Corporation shall not be amended, repealed or otherwise modified for a period
of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who immediately prior to the
Effective Time were directors, officers, or otherwise entitled to
indemnification thereunder or under the Bylaws or indemnification agreements
(the "Indemnified Parties"). Purchaser and the Surviving Corporation shall
jointly and severally indemnify, defend and hold harmless the Indemnified
Parties (in the case of Purchaser, subject to the provisions of subsection (b)
below) as provided in the Certificate, Bylaws or indemnification agreements,
as in effect as of the date hereof, with respect to matters occurring through
the Effective Time to the fullest extent the Company would have been permitted
to do so under Delaware law, the Certificate and Bylaws as in effect as of the
date hereof. Purchaser shall cause Surviving Corporation to maintain in effect
for not less than six years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by the Company with
respect to matters occurring prior to the Effective Time; provided, however,
that (i) the Surviving Corporation may substitute therefor policies of at
least the same coverage (with carriers comparable to the Company's existing
carriers) containing terms and conditions which are no less advantageous to
the officers, directors and employees
17
of the Company and (ii) the Surviving Corporation shall not be required to pay
an annual premium for such insurance in excess of two times the last annual
premium paid prior to the date hereof, but in such case shall purchase as much
coverage as possible for such amount. Purchaser shall cause the Surviving
Corporation to reimburse all expenses including reasonable attorney's fees,
incurred by any person to enforce successfully the obligations of Purchaser
and the Surviving Corporation under this Section 7.9.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of Section 7.9 from Purchaser, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Purchaser thereof. In
the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) Purchaser or the
Surviving Corporation shall have the right to assume the defense thereof and
Purchaser and the Surviving Corporation shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof unless counsel for the Indemnified Parties reasonably
advises the Indemnified Parties that there are issues that raise conflicts of
interest between Purchaser and the Indemnified Parties that make such
assumption unadvisable, in which case the Indemnified Parties may retain
counsel, reasonably satisfactory to Purchaser and Purchaser shall pay the
reasonable legal expenses of such Indemnified Party, (ii) the Indemnified
Parties will cooperate in the defense of any such matter and (iii) Purchaser
shall not be liable for any settlement effected without its prior written
consent; and provided further that Purchaser shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
7.10. Notes. If Merger Sub or any other Purchaser Company shall have
purchased Shares pursuant to the Offer, the Company shall take all necessary
action prior to the Effective Time, to enter into a supplemental indenture
with the Trustee pursuant to the Indenture under which the Notes were issued,
to provide, among other things, that on and after the Effective Time the Notes
will be convertible only into the Merger Consideration.
7.11. Benefit Plans. It is the intention of Purchaser that within a
reasonable period of time following the Effective Time (a) it will provide
employees of the Surviving Corporation with employee benefit plans
substantially similar in the aggregate to those provided to similarly situated
employees of Purchaser, (b) any such employees will receive credit for years
of service with the Company or any or its subsidiaries prior to the Effective
Time for the purpose of eligibility and vesting and (c) Purchaser shall cause
any and all pre-existing condition limitations (to the extent such limitations
did not apply to a pre-existing condition under the Compensation and Benefit
Plans) and eligibility waiting periods under group health plans to be waived
with respect to such participants and their eligible dependents. All
discretionary awards and benefits under any employee benefit plans of
Purchaser or the Surviving Corporation shall be subject to the discretion of
the persons or committee administering such plans.
7.12. Takeover Statute. If any Takeover Statute shall become applicable to
the transactions contemplated hereby, the Company and the members of the Board
of Directors shall grant such approvals and take such actions as are necessary
so that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of such statute or regulation on the transactions
contemplated hereby.
7.13. 1996 10-K. The Company will periodically provide Purchaser with
current draft versions of the Company's Annual Report on Form 10-K, including
documents incorporated therein by reference, for the year ended December 31,
1996. The consolidated balance sheets included in or incorporated by reference
into the Company's Annual Report on Form 10-K for the year ended December 31,
1996 (the "1996 10-K") (including the related notes and schedules) will fairly
present the consolidated financial position of the Company and its
subsidiaries as of their respective dates and each of the consolidated
statements of income and of changes in financial position included in or
incorporated by reference into the 1996 10-K (including any related notes and
schedules) will fairly present the results of operations, retained earnings
and changes in financial position, as the case may be, of the Company and its
subsidiaries for the periods set forth therein in each case in accordance with
GAAP consistently applied during the periods involved.
18
7.14. Warrants. Prior to the Effective Time, the Company shall cause any one
or more of the following events to occur: (i) the exercise or conversion of
all of the outstanding Warrants for or into Shares in accordance with the
terms of the applicable Warrants, (ii) the entry into agreements between the
Company and the holders of each of the outstanding Warrants providing that
each Warrant shall, following the Merger, be exercisable for, at the exercise
price of such Warrant, the securities, property or other consideration which a
holder of such Warrant would have received had the holder exchanged or
converted such Warrant for Shares immediately prior to the Effective Time or
(iii) a reclassification of the Company's Shares in accordance with the DGCL,
so that each Share shall be redeemable at any time at the option of the
Company for an amount per share equal to the Merger Consideration and
simultaneously with the effectiveness of such reclassification issue to
Purchaser or Merger Sub, at Purchaser's election, 1,000 shares (constituting
all of the authorized shares of such class) of a new class of Company non-
redeemable common stock, par value 0.25 per share (or, any combination of the
events referred to in clauses (i), (ii) or (iii) above, which when taken
together apply to all of the outstanding Warrants so that no Warrants may be
exercised for any Shares which are not redeemable at the Company's election).
7.15 Orders. In the event that any Order (as defined in Section 8.1(d))
shall come into effect, the parties shall use their reasonable best efforts to
cause any such Order to be lifted.
ARTICLE VIII
CONDITIONS
8.1. Conditions to Obligations of Purchaser and Merger Sub. The respective
obligations of Purchaser and Merger Sub to consummate the Merger are subject
to the fulfillment of each of the following conditions, any or all of which
may be waived in whole or in part by Purchaser or Merger Sub, as the case may
be, to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement shall have been duly approved by
the holders of a majority of the Shares, in accordance with applicable law and
the Certificate and the Bylaws and, if necessary, the reclassification shall
have been effected in accordance with Section 7.14;
(b) Purchase of Shares. Merger Sub (or one of the Purchaser Companies) shall
have purchased Shares pursuant to the Offer;
(c) Governmental and Regulatory Consents. The waiting period applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated, all necessary approvals under healthcare licensure and certificate
of need laws and regulations shall have been received and, other than the
filings provided for in Section 2.3, all filings required to be made prior to
the Effective Time by the Company with, and all consents, approvals and
authorizations required to be obtained prior to the Effective Time by the
Company from, any Governmental Entity in connection with the execution and
delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby by the Company, Purchaser and Merger Sub
shall have been made or obtained (as the case may be), except where the
failure to be so obtained would be immaterial to the financial condition,
operations, properties, business or results of operations of each of Purchaser
and the Company and their respective subsidiaries, in each case, taken as a
whole;
(d) Litigation. No court or other Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement or imposes
material restrictions on Purchaser or the Company in connection with
consummation of the Merger or with respect to their business operations,
either prior to or subsequent to the Merger (collectively, an "Order");
provided, that, Purchaser and Merger Sub shall have complied with Section
7.15;
19
(e) Compliance; Consents. The representations and warranties contained in
Section 6.1 shall be true in all material respects as of the Effective Time as
though made at and as of the Effective Time, except for changes contemplated
by this Agreement; and
(f) Rights Agreement. The Rights Agreement shall have expired.
8.2. Conditions to Obligations of the Company. The obligations of the
Company to consummate the Merger are subject to the fulfillment of each of the
following conditions, any or all of which may be waived in whole or in part by
the Company to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement shall have been duly approved by
the holders of a majority of the Shares, in accordance with applicable law and
the Certificate and By-Laws of the Company;
(b) Purchase of Shares. Merger Sub (or one of the Purchaser Companies) shall
have purchased Shares pursuant to the Offer;
(c) Governmental Consents. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated and,
other than the filings provided for in Section 2.3, all filings required to be
made prior to the Effective Time by Purchaser and Merger Sub with, and all
consents, approvals, permits and authorizations required to be obtained prior
to the Effective Time by Purchaser and Merger Sub from, any Governmental
Entity in connection with the execution and delivery of this Agreement by
Purchaser and Merger Sub and the consummation of the transactions contemplated
hereby by Purchaser, Merger Sub and the Company shall have been made or
obtained (as the case may be); and
(d) Order. There shall be in effect no Order.
ARTICLE IX
TERMINATION
9.1. Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of Shares, by the mutual consent of Purchaser,
Merger Sub and the Company, by action of their respective Boards of Directors.
9.2. Termination by either Purchaser or the Company. This Agreement may be
terminated and the Merger may be abandoned by action of either the board of
directors of Purchaser or the Board of Directors if (i) Merger Sub, or any
Purchaser Company, shall have terminated the Offer without purchasing any
Shares pursuant thereto; provided, in the case of termination of this
Agreement by Purchaser, such termination of the Offer is not in violation of
the terms of the Offer or (ii) the Merger shall not have been consummated by
September 30, 1997 whether or not such date is before or after the approval by
holders of Shares or (iii) the approval of shareholders required by Section
8.1(a) shall not have been obtained at a meeting duly convened therefor.
9.3. Termination by Purchaser. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of Shares, by action of the board of directors
of Purchaser, if (x) the Company shall have failed to comply in any material
respect with any of the covenants or agreements contained in this Agreement to
be complied with or performed by the Company at or prior to such date of
termination which failure is incapable of being cured or has not been cured by
the earlier to occur of 10 days after the giving of written notice to the
Company and the scheduled expiration date of the Offer, (y) the Board of
Directors shall have withdrawn or modified in a manner adverse to Purchaser or
Merger Sub its approval or recommendation of the Offer, this Agreement or the
Merger or the Board of Directors shall fail to reaffirm such approval or
recommendation within 10 business days after a request by Purchaser to do so,
or shall have resolved to do any of the foregoing, or (z) if the Company or
any of the other persons or entities described in Section 7.2 shall take any
actions that would be proscribed by Section 7.2 but for the exception
contained in the proviso to the first sentence of Section 7.2 allowing certain
actions to be taken in response to an unsolicited bona fide Acquisition
Proposal.
20
9.4. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of Shares by action of the Board of Directors,
(a) if Purchaser or Merger Sub (or another Purchaser Company) (i) shall have
failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or performed by
Purchaser or Merger Sub at or prior to such date of termination which failure
is incapable of being cured or has not been cured by the earlier to occur of
10 days after the giving of written notice to Purchaser or the scheduled
expiration date of the Offer or (ii) shall have failed to commence the Offer
within the time required in Section 1.1 or (b) if the Board of Directors
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies Parent in writing
that it intends to enter into such an agreement, attaching the most current
version of such agreement to such notice, and Purchaser does not make, within
five days of receipt of the Company's written notification of its intention to
enter into a binding agreement for a Superior Proposal an offer that is at
least as favorable, from a financial point of view, to the stockholders of the
Company as the Superior Proposal; provided that the Company has complied with
all provisions of Section 7.2 and that it complies with all applicable
provisions of Section 9.5. The Company agrees (i) that it will not enter into
a binding agreement referred to in clause (b) above until at least the sixth
day after it has provided the notice to Parent required thereby and (ii) to
notify Purchaser promptly if its intention to enter into the written agreement
referred to in its notification shall change at any time after giving such
notification.
9.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and abandonment of the
Merger pursuant to this Article IX, no party hereto (or any of its directors,
officers, employees, agents or advisors (financial, legal or accounting) shall
have any liability or further obligation to any other party to this Agreement,
except as provided in Section 9.5(b) below and Section 10.2 and except that
nothing herein will relieve any party from liability for any breach of this
Agreement.
(b) If this Agreement is terminated (x) by the Company pursuant to Section
9.4(b) then the Company shall at or prior to the time of such termination, pay
Purchaser a fee of $10,000,000 (the "Termination Fee"), which amount shall be
payable in same day funds, plus an amount equal to Purchaser's out-of-pocket
expenses, including fees and expenses paid to investment bankers, lawyers and
financing sources, incurred in connection with the transactions contemplated
by this Agreement in an amount not to exceed $1,500,000 (the "Purchaser
Expenses") or (y) by the Company or Purchaser at any time after (i) the Offer
shall have remained open for a minimum of at least 20 business days, (ii)
after the date hereof any corporation, partnership, person, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act) other than
Purchaser or Merger Sub or any of their respective subsidiaries or affiliates
(collectively, a "Person") shall have become the beneficial owner of 15% or
more of the outstanding Shares or any Person shall have commenced, or shall
have publicly announced an intention to commence, a tender offer or exchange
offer for 15% or more of the outstanding Shares, and (iii) the Minimum
Condition (as defined in Annex A) shall not have been satisfied and the Offer
is terminated without the purchase of any Shares thereunder, or by Purchaser
pursuant to Section 9.3 then, if terminated pursuant to Section 9.3, the
Company shall promptly pay to Purchaser the Purchaser Expenses and, if within
18 months of the date of any termination referred to in clause (y) of this
Section 9.5(b), the Company or any of its subsidiaries shall consummate an
Acquisition Transaction, the Company shall, promptly, but in no event later
than two days after the entry into such agreement, pay Purchaser the
Termination Fee and shall also pay to Purchaser the Purchaser Expenses, if not
previously paid. The Company agrees that it will not structure any transaction
or agreement for the purpose of avoiding payment of the Termination Fee. The
Company acknowledges that the agreements contained in this Section 9.5(b) are
an integral part of the transactions contemplated in this Agreement, and that,
without these agreements, Purchaser and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 9.5(b), and, in order to obtain such payment,
Purchaser or Merger Sub commences a suit which results in a judgment against
the Company for the fee set forth in this paragraph (b), the Company shall pay
to Purchaser or Merger Sub its costs and expenses (including attorneys' fees)
in connection with such suit, together with interest on the amount of the fee
at the prime rate of Citibank, N.A. on the date such payment was required to
be made.
21
(c) If this Agreement is terminated by the Company pursuant to Section
9.4(a)(i) or (ii) then Purchaser shall promptly pay to the Company an amount
equal to the Company's out-of-pocket expenses, including fees and expenses
paid to investment bankers and lawyers incurred in connection with the
transactions contemplated by this Agreement in an amount not to exceed
$1,500,000. If, solely as a result of the occurrence of any of the events
specified in paragraph (h) of Annex A, Merger Sub and Purchaser (i) terminate
the Offer without paying for Shares or (ii) extend the expiration date of the
Offer beyond September 30, 1997, then Purchaser shall, prior to or at the time
of such termination in the case of clause (i) above or on September 30, 1997
in the case of clause (ii) above, pay to the Company a fee of $40,000,000 in
same day funds, less any amounts paid pursuant to the preceding sentence.
Purchaser acknowledges that the agreements contained in this Section 9.5(c)
are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, the Company would not enter into this
Agreement; accordingly, if Purchaser fails to promptly pay the amount due
pursuant to this Section 9.5(c), and, in order to obtain such payment, the
Company commences a suit which results in a judgment against Purchaser for the
fee set forth in this paragraph (c), Purchaser shall pay to the Company its
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest on the amount of such payment at the prime rate of
Citibank, N.A. on the date such payment was required to be made.
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1. Payment of Expenses. Except as otherwise set forth in Section 9.5,
whether or not the Merger shall be consummated, each party hereto shall pay
its own expenses incident to preparing for, entering into and carrying out
this Agreement and the consummation of the Merger.
10.2. Survival. The agreements of the Company, Purchaser and Merger Sub
contained in Sections 5.2 (but only to the extent that such Section expressly
relates to actions to be taken after the Effective Time), 5.3, 5.4 ,7.8, 7.9,
7.10, 7.11 and 10.1 shall survive the consummation of the Merger. The
agreements of the Company, Purchaser and Merger Sub contained in Sections 7.5,
9.5 and 10.1 shall survive the termination of this Agreement. Except as
provided in Section 9.5(a), all other representations, warranties, agreements
and covenants in this Agreement shall not survive the consummation of the
Merger or the termination of this Agreement.
10.3. Modification or Amendment. Subject to the applicable provisions of the
DGCL, at any time prior to the Effective Time, the parties hereto may modify
or amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
10.4. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party
and may be waived by such party in whole or in part to the extent permitted by
applicable law.
10.5. Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
10.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
10.7. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, if to
Purchaser or Merger Sub, addressed to Purchaser or Merger Sub, as the case may
be, at Vencor, Inc., 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxxxxx
00000, Attention: President (with a copy to Xxxxxx X. Xxxxxxx, Esq., Xxxxxxxx
& Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000); and if to the
Company, addressed to the Company at TheraTx, Incorporated, 0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000, Attention: President (with a
copy to Xxxxxx X. Xxxxxxx, Esq., Xxxxxxx Xxxx & Xxxxxxxxx, 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 10022), or to such other persons or addresses as
may be designated in writing by the party to receive such notice.
22
10.8. Entire Agreement, etc. This Agreement (including any schedules,
exhibits or Annexes hereto) and the Confidentiality Agreement (a) constitute
the entire agreement, and supersedes all other prior agreements,
understandings, representations and warranties both written and oral, among
the parties, with respect to the subject matter hereof, and (b) shall not be
assignable by operation of law or otherwise and is not intended to create any
obligations to, or rights in respect of, any persons other than the parties
hereto, except as provided in Section 7.9); provided, however, that Purchaser
may designate, by written notice to the Company, another wholly-owned direct
or indirect subsidiary to be a Constituent Corporation in lieu of Merger Sub,
in the event of which, all references herein to Merger Sub shall be deemed
references to such other subsidiary except that all representations and
warranties made herein with respect to Merger Sub as of the date of this
Agreement shall be deemed representations and warranties made with respect to
such other subsidiary as of the date of such designation.
10.9. Definition of "Subsidiary" and "Significant Subsidiary". When a
reference is made in this Agreement to a subsidiary of a party, the word
"subsidiary" means any corporation or other organization whether incorporated
or unincorporated of which at least a majority of the securities or interests
having by the terms thereof ordinary voting power to elect at least a majority
of the board of directors or others performing similar functions with respect
to such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its subsidiaries, or by such
party and one or more of its subsidiaries. When a reference is made in this
Agreement to a "Significant Subsidiary," the term "Significant Subsidiary"
shall have the meaning set forth in Rule 1-02 of Regulation S-X.
10.10. Obligation of Purchaser. Whenever this Agreement requires Merger Sub
to take any action, such requirement shall be deemed to include an undertaking
on the part of Purchaser to cause Merger Sub to take such action.
10.11. Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto on the date first
hereinabove written.
VENCOR, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxx, Xx.
-------------------------------
Name: Xxxxx X. Xxxxxxxxxxx, Xx.
Title: Senior Vice President
PEACH ACQUISITION CORP.
By: /s/ W. Xxxx Xxxx, III.
-------------------------------
Name: W. Xxxx Xxxx, III.
Title: Vice President
THERATX, INCORPORATED
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: President and C.E.O.
23
ANNEX A
Certain Conditions of the Offer. Notwithstanding any other provision of the
Offer, until (i) expiration or termination of all applicable waiting periods
under the HSR Act and (ii) receipt of all necessary approvals under change of
ownership, healthcare licensure and certificate of need laws and regulations,
Merger Sub shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c)
promulgated under the Exchange Act (relating to Purchaser's obligation to pay
for or return tendered shares promptly after termination or withdrawal of the
Offer), Merger Sub shall not be required to pay for, or may delay the
acceptance for payment of or payment for, any tendered Shares, or may, in its
sole discretion (subject to the Merger Agreement), terminate or amend the
Offer as to any Shares not then accepted for payment if a majority of the
total Shares outstanding on a fully diluted basis shall not have been properly
and validly tendered pursuant to the Offer and not withdrawn prior to the
expiration of the Offer (the "Minimum Condition"), or, if on or after February
9, 1997, and at or before the time of acceptance for payment for any of such
Shares, any of the following events shall occur:
(a) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on the New York Stock Exchange or Nasdaq
or in the over-the-counter market, (ii) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States, (iii)
any limitation (whether or not mandatory) by any governmental or regulatory
authority, agency, commission or other entity, domestic or foreign
("Governmental Entity"), on, or any other event which might adversely affect,
the extension of credit by banks or other lending institutions or (iv) or in
the case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof;
(b) the Company shall have breached or failed to perform in any material
respect any of its obligations, covenants or agreements under the Merger
Agreement which failure is incapable of being cured or has not been cured by
the earlier to occur of 10 days after the giving of written notice to the
Company and the scheduled expiration date of the Offer or any representation
or warranty of the Company set forth in the Merger Agreement shall have been
inaccurate or incomplete in any material respect when made or thereafter shall
become inaccurate or incomplete in any material respect;
(c) there shall be threatened, instituted or pending any action, litigation,
proceeding, investigation or other application (hereinafter, an "Action")
before any court or other Governmental Entity by any Governmental Entity: (i)
challenging the acquisition by Purchaser or Merger Sub of Shares, seeking to
restrain or prohibit the consummation of the transactions contemplated by the
Offer or the Merger, seeking to obtain any material damages or otherwise
directly or indirectly relating to the transactions contemplated by the Offer
or the Merger; (ii) seeking to prohibit, or impose any material limitations
on, Purchaser's or Merger Sub's ownership or operation of all or any material
portion of their or the Company's business or assets (including the business
or assets of their respective affiliates and subsidiaries), or to compel
Purchaser or Merger Sub to dispose of or hold separate all or any material
portion of Purchaser's or Merger Sub's or the Company's business or assets
(including the business or assets of their respective affiliates and
subsidiaries) as a result of the transactions contemplated by the Offer or the
Merger; (iii) seeking to make the acceptance for payment, purchase of, or
payment for, some or all of the Shares illegal or render Merger Sub unable to,
or restrict, the ability of Merger Sub to accept for payment, purchase or pay
for some or all of the Shares; (iv) seeking to impose material limitations on
the ability of Purchaser or Merger Sub effectively to acquire or hold or to
exercise full rights of ownership of the Shares including, without limitation,
the right to vote the Shares purchased by them on an equal basis with all
other Shares on all matters properly presented to the stockholders; or (v)
that, in any event, in the judgment of Purchaser, would be reasonably likely
to have, individually or in the aggregate, a Company Material Adverse Effect
as a result of consummation of the transactions contemplated by the Offer and
the Merger, other than any such effect arising out of or relating to the
proposal, adoption or implementation after the date of the Merger Agreement of
any law, statute, rule or regulation relating to healthcare, Medicaid or
Medicare, including without limitation the proposal, adoption or
implementation of "salary equivalency" rates (including amendments to any
salary equivalency rates currently in effect) relating to the delivery of
physical therapy, occupational therapy, respiratory therapy or speech language
pathology services;
(d) any statute, rule, regulation, order or injunction shall be sought,
proposed, enacted, promulgated, entered, enforced or deemed or become
applicable to the Offer or the Merger by any Governmental Entity that results
in any of the effects of, or have any of the consequences referred to in
clauses (i) through (v) of paragraph (c) above, other than any such effect or
consequence arising out of or relating to the proposal, adoption or
implementation after the date of the Merger Agreement of any law, statute,
rule or regulation relating to healthcare, Medicaid or Medicare, including
without limitation the proposal, adoption or implementation of "salary
equivalency" rates (including amendments to any salary equivalency rates
currently in effect) relating to the delivery of physical therapy,
occupational therapy, respiratory therapy or speech language pathology
services;
(e) any person, entity or group shall have entered into a definitive
agreement with the Company with respect to a tender offer or exchange offer
for some portion or all of the Shares or a merger, consolidation or other
business combination with or involving the Company;
(f) any court or other Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any Order, provided,
that, Purchaser shall have used reasonable best efforts to cause any such
Order to be lifted;
(g) any event, change or development shall have occurred or been discovered
that would reasonably be expected to have a Company Material Adverse Effect,
other than any such Company Material Adverse Effect arising out of any law,
statute, rule or regulation relating to healthcare, Medicaid or Medicare,
including without limitation the proposal, adoption or implementation after
the date of the Merger Agreement of "salary equivalency" rates (including
amendments to any salary equivalency rates currently in effect) relating to
the delivery of physical therapy, occupational therapy, respiratory therapy or
speech language pathology services;
(h) (i) any event, change or development shall have occurred or been
discovered that would reasonably be expected to have a material adverse effect
(a "Purchaser Material Adverse Effect") on the financial condition,
operations, properties, business or results of operations of Purchaser and its
subsidiaries, taken as a whole, other than any such material adverse effect
arising out of or relating to (a) the proposal, adoption or implementation
after the date of the Merger Agreement of "salary equivalency" rates
(including amendments to any salary equivalency rates currently in effect)
relating to the delivery of physical therapy, occupational therapy,
respiratory therapy or speech language pathology services, or (b) any breach
by Purchaser of the Merger Agreement and (ii) as a result of such Purchaser
Material Adverse Effect, Purchaser is not permitted to borrow funds necessary
to consummate the Offer under its credit facilities then in effect.
(i) the Board of Directors (or a committee thereof) shall have amended,
modified or withdrawn its recommendation of the Offer or the Merger, or shall
have failed to publicly reconfirm such recommendation within ten business days
upon request by Purchaser or Merger Sub, or shall have endorsed, approved or
recommended any other Acquisition Proposal, or shall have resolved to do any
of the foregoing; or
(j) the Merger Agreement shall have been terminated by the Company or
Purchaser or Merger Sub in accordance with its terms or Purchaser or Merger
Sub shall have reached an agreement or understanding in writing with the
Company providing for termination or amendment of the Offer or delay in
payment for the Shares;
which, in the reasonable judgment of Purchaser and Merger Sub, in any such
case, and regardless of the circumstances (including any action or inaction by
Purchaser or Merger Sub) giving rise to any such conditions, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment
of or payment for Shares.
2
The foregoing conditions are for the sole benefit of Purchaser and Merger
Sub and may be asserted by Purchaser or Merger Sub regardless of the
circumstances (including any action or inaction by Purchaser or Merger Sub)
giving rise to such condition or may be waived by Purchaser or Merger Sub, by
express and specific action to that effect, in whole or in part at any time
and from time to time in its sole discretion. Any determination by Purchaser
and Merger Sub concerning any event described in this Annex A shall be final
and binding upon all parties except to the extent not permitted under the
Merger Agreement.
3
