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Exhibit 2.9
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RENAL CARE GROUP, INC.,
RCG THREE CORP.,
RCG NINE CORP.,
RCG FOUR CORP.,
RENALWEST, L.C.,
3-CO., INC.,
9-CO., INC.
AND
4-CO., INC.
DATED AS OF AUGUST 7, 1996
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 7, 1996, by and among RENAL CARE GROUP, INC. ("RCG"), a
Delaware corporation; RCG THREE CORP. ("RCG Three"), an Arizona corporation,
RCG NINE CORP. ("RCG Nine"), an Arizona corporation, RCG FOUR CORP. ("RCG
Four"), an Arizona corporation; RENALWEST, L.C., an Arizona limited liability
company ("RenalWest"); 3-CO., Inc., an Arizona corporation ("Three Co"); 9-CO.,
Inc., an Arizona corporation ("Nine Co"), 4-CO., Inc., an Arizona corporation
("Four Co"), and those parties listed on the signature pages hereto as the
shareholders of Three Co, Nine Co and Four Co (the "Owners") (RCG Three, RCG
Nine, and RCG Four together the "Merger Corps" and individually a "Merger
Corp.;" Three Co., Nine Co. and Four Co together the "Members" and
individually a "Member"; the Members and RenalWest together the "Companies" and
individually a "Company").
PREAMBLE
The Merger Corps are wholly-owned subsidiaries of RCG and the Members are
the sole owners of RenalWest. The Boards of Directors of RCG, the Merger
Corps, and the Members, and RenalWest and the Owners are of the opinion that
the transactions described herein are in the best interests of the parties and
their respective shareholders, as applicable. This Agreement provides for the
acquisition of the Companies by RCG pursuant to the simultaneous mergers of (i)
RCG Three with and into Three Co, (ii) RCG Nine with and into Nine Co and (iii)
RCG Four with and into Four Co. At the Effective Time of such mergers, the
outstanding shares of the capital stock of each of Three Co, Nine Co and Four
Co shall be converted into the right to receive shares of the common stock of
RCG (except as provided herein). As a result, the Owners shall become
shareholders of RCG and each of Three Co, Nine Co and Four Co shall continue
to conduct its business and operations as a wholly owned subsidiary of RCG, and
RenalWest shall continue to be owned by Three Co, Nine Co and Four Co. It is
the intention of the parties to this Agreement that the mergers qualify (i) as
a "reorganization" within the meaning of Section 368(a) of the Code for federal
income tax purposes, and (ii) for treatment as a pooling of interests for
accounting purposes.
Certain terms used in this Agreement are defined in Article 14 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 The Mergers. Subject to the terms and conditions of this Agreement,
at the Effective Time, (i) RCG Three shall be merged with and into Three Co,
(ii) RCG Nine shall be merged with and into Nine Co, and (iii) RCG Four shall
be merged with and into Four Co, in each case in accordance with the applicable
provisions of ABCA (together the "Mergers" and individually a "Merger"). Each
of Three Co, Nine Co and Four Co shall be the Surviving Corporation resulting
from the Mergers and shall continue in existence as a wholly owned Subsidiary
of RCG and shall continue to be governed by the Laws of the State of Arizona.
The Mergers shall be consummated pursuant to the terms of this Agreement, which
has been approved and adopted by the respective Boards of Directors of RCG, the
Merger Corps and the Members.
1.2 Time and Place of Closing. The closing (the "Closing") will take
place as soon as practicable after the satisfaction or waiver of all conditions
in Articles 9 and 10 hereof and at such location or on such other date as may
be mutually agreed upon by RCG and RenalWest (such actual date of Closing the
"Closing Date").
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1.3 Effective Time. Subject to the provisions of this Agreement, the
parties shall file Articles of Merger executed in accordance with the relevant
provisions of the ABCA and shall make all other filings or recordings required
under the ABCA as soon as practicable on or after the Closing Date. The
Mergers and other transactions contemplated by this Agreement shall become
effective on the date and at the time the Articles of Merger reflecting the
Mergers become effective with the Secretary of State of the State of Arizona
(the "Effective Time").
ARTICLE 2
TERMS OF MERGERS
2.1 Charter. The Articles of Incorporation of the Members in effect
immediately prior to the Effective Time shall be amended and restated,
effective at the Effective Time, in a manner satisfactory to RCG. The Articles
of Incorporation of the Members, as so amended and restated, shall be the
Articles of Incorporation of the Surviving Corporations until otherwise amended
or repealed.
2.2 Bylaws. The Bylaws of Merger Corps. in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporations until
otherwise amended or repealed.
2.3 Tax-Free Reorganization. The parties hereby adopt this Agreement as
a tax-free "plan of reorganization" within the meaning of Sections 1.368-2(g)
and 1.368-3(a) of the United States Treasury Regulations.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Mergers and without any action on the part
of the parties hereto or the shareholders of any of the parties, the shares of
the constituent corporations of the Mergers shall be converted as follows:
(a) Each share of each Merger Corp. Common Stock issued and outstanding at
the Effective Time shall cease to be outstanding and shall (after giving effect
to Section 3.1(b) below) be converted into one share of Member Common Stock.
(b) All of the shares of Member Common Stock (excluding treasury shares)
issued and outstanding at the Effective Time shall cease to be outstanding and
shall be converted into and exchanged for the right to receive an aggregate of
2,400,000 shares of RCG Common Stock to be distributed to Owners as set forth
on Schedule 3.1(b) hereto (the "Merger Consideration").
3.2 Anti-Dilution Provisions. In the event RCG changes the number of
shares of RCG Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, combination of shares or other
similar recapitalization with respect to such stock (an "Anti-Dilution Event")
and the record date therefor or, if there is no record date, the effective date
thereof, shall be prior to the Effective Time, then the Average Trading Prices
and the numbers of shares specified in Section 3.1 shall be adjusted to
appropriately and proportionately adjust the number of shares of RCG Common
Stock into which the shares of Member Common Stock will be converted pursuant
to Section 3.1.
3.3 Shares Held by the Company. Each share of Member Common Stock held in
treasury by the Members, shall be canceled and retired at the Effective Time
and no consideration shall be issued in exchange therefor.
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3.4 Fractional Shares. No certificates representing fractional shares of
RCG Common Stock will be issued as a result of the Mergers. Any fractional
share interest to which a Company shareholder would otherwise be entitled to
receive shall be rounded up to the nearest whole share if such fraction is .5
or greater and shall be rounded down to the nearest whole share if such
fraction is less than .5.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly (and in no event more than five (5)
calendar days) after the Effective Time, RCG and the Company shall cause the
exchange agent selected by RCG (the "Exchange Agent") to mail to the former
holders of Member Common Stock appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Member Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After
the Effective Time, each holder of shares of Member Common Stock (other than
shares to be canceled pursuant to Section 3.3 of this Agreement) issued and
outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1 of this Agreement. RCG shall not be obligated to deliver the
consideration to which any former holder of Member Common Stock is entitled as
a result of the Merger until such holder surrenders his certificate or
certificates representing the shares of Member Common Stock for exchange as
provided in this Section 4.1 or such holder provides an appropriate affidavit
regarding loss of such certificate and an indemnification for loss in favor of
RCG. The certificate or certificates of Member Common Stock so surrendered
shall be duly endorsed as the Exchange Agent may require. Any other provision
of this Agreement notwithstanding, neither RCG, the Surviving Corporation nor
the Exchange Agent shall be liable to a holder of Member Common Stock for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property Law.
4.2 Rights of Former Member Shareholders. At the Effective Time, the
stock transfer books of the Members shall be closed and no transfer of Member
Common Stock by any such holder shall thereafter be made or recognized. Until
surrendered in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of Member Common Stock (other
than shares to be canceled pursuant to Section 3.3 of this Agreement) shall
from and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Section 3.1 of this Agreement in exchange
therefor. To the extent permitted by Law, former shareholders of record of the
Members shall be entitled to vote after the Effective Time at any meeting of
RCG shareholders the number of whole shares of RCG Common Stock into which
their respective shares of Member Common Stock are converted. Whenever a
dividend or other distribution is declared by RCG on the RCG Common Stock, the
record date for which is at or after the Effective Time, the declaration shall
include dividends or other distributions on all shares issuable pursuant to
this Agreement, but no dividend or other distribution payable to the holders of
record of RCG Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any certificate representing shares of
Member Common Stock issued and outstanding at the Effective Time until such
holder surrenders such certificate for exchange as provided in Section 4.1 of
this Agreement. However, upon surrender of such certificate, the RCG Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest) shall be delivered and paid with respect to
each share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE OWNERS
Each Company and the Owners jointly and severally represent and warrant
the following to RCG:
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5.1 Organization, Authority and Capacity. Each Member is a corporation
and RenalWest is a limited liability company, duly organized, validly existing,
and in good standing under the laws of the State of Arizona, and has the full
power and authority necessary to (i) execute, deliver and perform its
obligations under this Agreement and the other documents and instruments to be
delivered by it pursuant to this Agreement (collectively, the "Merger
Documents") and (ii) carry on its business as it has been and is now being
conducted and to own and lease the properties and assets which it now owns or
leases. Each Company is duly qualified to do business and is in good standing
in the jurisdictions set forth with respect to that Company in Schedule 5.1,
which includes every jurisdiction in which the failure to be so qualified or in
good standing would have a material adverse effect on (i) such Company's
ability to perform its obligations under the Merger Documents or (ii) the
assets, results of operations or prospects of the Companies taken as a whole.
5.2 Authorization and Validity. The execution, delivery and performance
of the Merger Documents have been duly authorized by all necessary corporate
action on the part of each Company. The Merger Documents to be executed and
delivered by the Companies have been or will be, as the case may be, duly
executed and delivered by each Company and constitute or will constitute the
legal, valid and binding obligations of each Company, enforceable in accordance
with their respective terms, except as may be limited by bankruptcy,
insolvency, or other laws affecting creditors' rights generally, or as may be
modified by a court of equity.
5.3 Absence of Conflicting Agreements or Required Consents. Except as set
forth on Schedule 5.3, the execution, delivery and performance by each Company
of the Merger Documents to be executed and delivered by each Company: (i) do
not require the consent of or notice to any governmental or regulatory
authority or any other third party; (ii) will not conflict with any provision
of such Company's organizational documents; (iii) will not conflict with or
result in a violation of any law, ordinance, regulation, ruling, judgment,
order or injunction of any court or governmental instrumentality to which such
Company is subject or by which such Company or any of its properties are bound;
(iv) will not conflict with, constitute grounds for termination of, result in a
breach of, constitute a default under, require any notice under, or accelerate
or permit the acceleration of any performance required by the terms of any
agreement, instrument, license or permit to which such Company is a party or by
which such Company or any of its properties are bound; and (v) will not create
any lien, encumbrance or restriction upon any of the assets or properties of
such Company.
5.4 Governing Documents of the Company. True and correct copies of the
organizational documents and all amendments thereto of each Company (certified
by the Secretary of State of the State of Arizona) have been provided to RCG.
RCG has previously been provided with access to each Company's minutes, and
such minutes accurately reflect in all material respects the proceedings of the
board of directors (or other similar body) of each Company (and all committees
thereof). The record books of each Company, which have been made available to
RCG for review, contain true, complete and accurate records of the ownership of
each Company.
5.5 Outstanding and Authorized Capitalization. All authorized and
outstanding Company Equity Securities are accurately described on Schedule 5.5.
No shares of capital stock are held in the treasury of any Company except as
set forth on Schedule 5.5. All outstanding Company Equity Securities are
listed and held of record as indicated on Schedule 5.5 and have been duly and
validly issued, are fully paid and nonassessable. None of such Company Equity
Securities were issued in violation of preemptive rights of any past or present
holder of any Company Equity Security. There are no outstanding warrants,
options, rights, calls or other commitments of any nature relating to Company
Equity Securities and there are no outstanding securities of any Company
convertible into or exchangeable for any Company Equity Securities. Except as
set forth on Schedule 5.5, no Company is obligated to issue or repurchase any
of its Company Equity Securities for any reason and no person or entity has any
right or privilege (whether preemptive or contractual) for the purchase,
subscription or issuance of any unissued Company Equity Securities. There are
no outstanding rights to demand registration of securities of any Company or to
sell securities of any Company in connection with a registration by such
Company under the 1933 Act. Except
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as set forth in Schedule 5.5, to the knowledge of each Company and the Owners,
there has been no transaction or action taken with respect to any Company
Equity Securities in contemplation of the Merger that would prevent RCG from
accounting for the Merger on a "pooling of interests" basis.
5.6 Subsidiaries, Investments and Predecessors. Except as set forth on
Schedule 5.6, no Company has owned and does not currently own, directly or
indirectly, of record, beneficially or equitably, any capital stock or other
equity, ownership or proprietary interest in any corporation, partnership,
limited liability company, association, trust, joint venture or other entity.
Set forth on Schedule 5.6 is a listing of all predecessor companies of each
Company, including the names of any entities from whom each Company previously
acquired material assets, and any other entity of which such Company has been a
subsidiary or division. Except as listed on Schedule 5.6, no Company has sold
or disposed of, by way of asset sale, stock sale, spin-off or otherwise, any
material assets or business.
5.7 Financial Statements. Attached hereto as Schedule 5.7 are the audited
financial statements of the Companies on a combined basis for the years ended
December 31, 1994 and 1995 prepared by Ernst & Young, LLP and interim financial
statements for the interim period ending June 30, 1996, which reflect the
results of operations and financial condition of the Companies on a combined
basis for such periods and at such dates (collectively, the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied, except for (i)
the omission of notes to unaudited Financial Statements, (ii) the fact that
interim Financial Statement are subject to normal and customary year-end
adjustments which will not, in the aggregate, be material and (iii) any
exceptions that may be indicated in the notes to such Financial Statements.
The Financial Statements present fairly in all material respects the financial
position of the Company as of the dates indicated and present fairly in all
material respects the results of the Companies' operations on a combined basis
for the periods then ended, and are in accordance with the books and records of
the Companies, which have been properly maintained and are complete and correct
in all material respects.
5.8 Absence of Changes. Except as set forth on Schedule 5.8, and except
as contemplated by this Agreement, since December 31, 1995, the Companies have
conducted their business only in the ordinary course and have not:
(i) suffered any material adverse change in their working capital,
condition (financial or otherwise), assets, liabilities, reserves, business or
operations;
(ii) paid, discharged or satisfied any material liability other than in
the ordinary course of business;
(iii) written off as uncollectible any account receivable other than in
the ordinary course of business;
(iv) compromised any debts, claims or rights or disposed of any of its
properties or assets other than in the ordinary course of business;
(v) entered into any commitments or transactions not in the ordinary
course of business involving aggregate value in excess of $250,000 or made
aggregate capital expenditures or commitments in excess of $250,000;
(vi) made any material change in any method of accounting or accounting
practice;
(vii) subjected any of their assets, tangible or intangible, to any lien,
encumbrance or restriction of any nature whatsoever, except for liens for
current property taxes not yet due and payable;
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(viii) increased any salaries, wages or employee benefits for any employee
of the Company other than in the ordinary course of business;
(ix) hired, committed to hire or terminated any employee or medical
director other than in the ordinary course of business;
(x) except for payments, dividends or distributions consistent with past
practices for prior periods, declared, set aside or made any payment, dividend
or other distribution to any holder of a Company Equity Security or purchased,
redeemed or otherwise acquired, directly or indirectly, any Company Equity
Security;
(xi) terminated or amended any material contract, license or other
instrument to which any Company is a party or suffered any loss or termination
or threatened loss or termination of any existing material business arrangement
or supplier, the termination or loss of which, in the aggregate, could
materially and adversely affect the Companies;
(xii) effected any change in its capital structure; or
(xiii) agreed, whether in writing or otherwise, to take any action
described in this Section 5.8.
5.9 No Undisclosed Liabilities. Except as listed on Schedule 5.9 hereto,
or otherwise disclosed herein or in the Schedules hereto, the Companies have no
material Liabilities or obligations, whether accrued, absolute, contingent or
otherwise, except for liabilities and obligations reflected in the Financial
Statements or incurred in the ordinary course of its business since the date of
the Companies' most recent balance sheet included in the Financial Statements.
5.10 Litigation, etc. Except as listed on Schedule 5.10 hereto, there are
no claims, lawsuits, actions, arbitrations, administrative or other proceedings
pending against any Company. Except as listed on Schedule 5.10, to the
knowledge of the Companies and the Owners, (i) no such matter described in the
previous sentence is threatened and there is no basis for any such action, and
(ii) there are no governmental or administrative investigations or inquiries
pending that involve any Company, except in either case for any such matter
that could not reasonably be expected to have a material adverse effect on the
business of the Companies taken as a whole, financial or otherwise. Except as
listed on Schedule 5.10, there are no judgments against or consent decrees
binding on any Company or its assets or, to the knowledge of the Companies and
its Owners, any licensed professional relating to the business of the
Companies.
5.11 No Violation of Law. Except as set forth on Schedule 5.11, to the
knowledge of the Companies and the Owners, no Company has been or is currently
in violation of any applicable local, state or federal law, ordinance,
regulation, order, injunction or decree, or any other requirement of any
governmental body, agency or authority or court binding on it, or relating to
its property or business or its advertising, sales or pricing practices, except
for any such violations as would not individually or in the aggregate have a
material adverse effect on the Companies taken as a whole, financial or
otherwise.
5.12 Real and Personal Property. (a) Schedule 5.12(a) sets forth a list
of all items of personal and mixed, tangible and intangible property, rights
and assets of each Company having an original or replacement cost or value
greater than $10,000. Except as set forth on Schedule 5.12(a), each Company
(i) has good and valid title to all of the personal and mixed, tangible and
intangible property, rights and assets which it purports to own, including all
the personal property and assets reflected in the Financial Statements; and
(ii) owns such rights, assets and personal property free and clear of all
liens, encumbrances or restrictions of any nature whatsoever (except for
current year ad valorem taxes).
(b) The Company does not own any real property. Schedule 5.12(b) contains
a true and correct description of all real property leased by each Company,
including all improvements located thereon. RCG has been furnished with true,
correct and complete copies of all leases, deeds, easements and
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other documents and instruments concerning the matters listed on Schedule
5.12(b). No condemnation or similar actions are currently in effect or, to the
knowledge of the Companies and the Owners, pending or threatened against any
part of any real property leased by any Company. To the knowledge of the
Company and the Owners, there are no encroachments, leases, easements,
covenants, restrictions, reservations or other burdens of any nature which
might impair in any material respect the use of any leased real property in a
manner consistent with past practices nor does any part of any building
structure or any other improvement thereon encroach on any other property.
(c) The present zoning, subdivision, building and other ordinances and
regulations applicable to the leased real property permit the continued
operation, use, occupancy and enjoyment of such real property consistent with
past practices, and each Company is in compliance with, and has received no
notices of violations of, any applicable zoning, subdivision or building
regulation, ordinance or other law, regulation, or requirement. Each Company
has all rights and easements necessary for public ingress thereto and egress
therefrom and for the provision of all utility services thereto, including any
required curb cut or street opening permits or licenses for vehicular access
over presently existing roads and driveways.
(d) Each Company's assets (including all buildings and improvements in
connection therewith) are in good operating condition and repair, ordinary wear
and tear excepted (and except where the failure to be in such condition and
repair, either individually or in the aggregate, would not have a material
adverse effect on the Companies taken as a whole, financial or otherwise), and
such assets include all rights, properties, interests in properties, and assets
necessary to permit the Companies to continue their business after the Closing
Date as presently conducted, with the Members becoming wholly owned
subsidiaries of RCG.
(e) Schedule 5.12(e) contains a complete and correct list of all
trademarks, trade names, service marks, service names, brand names, copyrights,
technology rights and licenses, know-how, software and patents, registrations
thereof and applications therefor, and any other intellectual property used in
the business of each Company, together with a complete list of all licenses
granted by or to each Company with respect to any of the foregoing. Neither
the Company nor any of the Owners is currently in receipt of any notice of any
violation of, and each has no reason to believe that the Company's operations
are violating, the rights of others with respect to any such matter, and the
Company has taken reasonable measures to protect its rights with respect to any
such matters as are proprietary to the Company.
5.13 Contracts and Commitments. (a) Schedule 5.13 contains a complete
and accurate list of all contracts, agreements, commitments, instruments and
obligations (whether written or oral, contingent or otherwise) of each Company
of or concerning the following matters (the "Company Agreements"):
(i) the lease, as lessee or lessor (except for leases of machines and
equipment, the aggregate annual rental payments by the Companies for which do
not exceed $25,000), or license, as licensee or licensor, of any real or
personal property (tangible or intangible);
(ii) the employment or engagement of any officer, director, employee,
consultant or agent, other than those terminable at will without material
severance obligation;
(iii) any relationship that requires financial payments, or performance
over a period of more than 90 days, with any Owner, or any person or entity
affiliated with or related to any Owner or any officer or director;
(iv) any arrangement limiting the freedom of such Company to compete in
any manner in any line of business or requiring such Company to share profits;
(v) any arrangement that could reasonably be anticipated to have a
material adverse effect on such Company, financial or otherwise;
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(vi) any material arrangement not in the ordinary course of business;
(vii) any power of attorney, whether limited or general, granted by or to
such Company; and
(viii) any other arrangement that requires performance for a period of
more than 90 days or that requires payments in excess of $50,000.
(b) Each Company has delivered to RCG true and complete copies of all of
its Company Agreements. Except as indicated on Schedule 5.13, the Company
Agreements are valid and effective in accordance with their terms, and there is
not under any of such Company Agreements (i) any existing or claimed default by
any Company or event which with the notice or lapse of time, or both, would
constitute a material default by such Company or (ii) to the knowledge of the
Companies and the Owners, any existing or claimed default by any other party or
event which with notice or lapse of time, or both, would constitute a material
default by any such party. Except as indicated on Schedule 5.13, the
continuation, validity and effectiveness of the Company Agreements will not be
affected by the Mergers and the Mergers will not result in a breach of or
default under, or require the consent of any other party to, any of the Company
Agreements. There is no actual or, to the knowledge of the Companies and the
Owners, threatened termination, cancellation or limitation of any Company
Agreements that would have a material adverse effect on the Companies taken as
a whole, financial or otherwise. To the knowledge of the Companies and the
Owners, there is no pending or threatened bankruptcy, insolvency or similar
proceeding with respect to any other party to the Company Agreements.
5.14 Employment and Labor Matters. (a) Schedule 5.14(a) sets forth (i)
the number of full-time and part-time employees of each Company and (ii) the
name and compensation (including benefits) paid to each employee of or
consultant to each Company who received salary and bonuses for either of such
Company's two most recently ended fiscal years in excess of $50,000.
(b) Each Company is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and health,
including laws concerning unfair labor practices within the meaning of Section
8 of the National Labor Relations Act, and the employment of non-residents
under the Immigration Reform and Control Act of 1986.
(c) Except as disclosed on Schedule 5.14(c),
(i) there are no charges, governmental audits, investigations,
administrative proceedings or complaints concerning any Company's employment
practices pending or, to the knowledge of the Companies and the Owners,
threatened before any federal, state or local agency or court that could
reasonably be expected to have a material adverse effect on the Companies taken
as a whole, financial or otherwise, and, to the knowledge of the Companies and
the Owners, no basis for any such matter exists;
(ii) to the knowledge of the Companies and the Owners, there are no
inquiries, investigations or monitoring of activities of any licensed,
registered, or certified professional personnel employed by, credentialed or
privileged by, or otherwise affiliated with any Company pending or threatened
by any state professional board or agency charged with regulating the
professional activities of health care practitioners;
(iii) no Company is a party to any union or collective bargaining
agreement, and, to the knowledge of the Companies and the Owners, no union
attempts to organize the employees of any Company have been made, nor are any
such attempts now threatened; and
(iv) no Company has experienced any organized slowdown, work interruption,
strike, or work stoppage by its employees.
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5.15 Employee Benefit Matters .
(a) The Companies currently maintain only the employee pension benefit
plans, as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), as are listed on Schedule 5.15(a) (the
"Pension Plans"). The Companies have never maintained or contributed to any
other employee pension benefit plan, as defined in Section 3(2) of ERISA.
(b) The Companies currently maintain only the employee welfare benefit
plans, as defined in Section 3(1) of ERISA (including but not limited to, life
insurance, medical, hospitalization, holiday, vacation, disability dental and
vision plans) as are listed on Schedule 5.15(b) (the "Welfare Plans").
(c) The Companies currently maintain, or have entered into, only the
compensation programs and/or employment arrangements, (including but not
limited to, any written or unwritten incentive compensation, fringe benefit,
payroll or employment practice, bonus, severance, sick pay, salary
continuation, deferred compensation, supplemental executive compensation plans,
employment agreements and consulting agreements for the benefit of their
officers, directors, employees, former employees, or independent contractors)
as are listed on Schedule 5.15(c) (the "Compensation Programs").
(d) No Company or an ERISA Affiliate contributes or has contributed within
the last five years to any multiemployer plan, as defined by Section 3(37) of
ERISA.
(e) Each Pension Plan and Welfare Plan has been operated and administered
in substantial compliance with ERISA and the Code; each Pension Plan which is
intended to be qualified under Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified or a request for such
determination has been timely filed with the Internal Revenue Service (and no
Company has any knowledge that any event has occurred between the date of the
last such determination and the Closing Date that would cause the Internal
Revenue Service to revoke such determination).
(f) Each Pension Plan and Welfare Plan designed to satisfy the
requirements of Section 125, Section 401, Section 401(k), Section 409, Section
501(c)(9), Section 4975(e)(7), and/or Section 4980B of the Code, satisfies such
section.
(g) No accumulated funding deficiency, as defined in Section 302(a)(2) of
ERISA, exists (whether or not waived) with respect to any Pension Plan as of
the date hereof.
(h) All amounts required to be paid by the Companies with respect to each
Pension Plan, Welfare Plan and Compensation Program on or before the Closing
Date have been paid.
(i) Neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated hereby will (i) result in
any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any current or
former employee, (ii) increase any benefits otherwise payable under any Pension
Plan, Welfare Plan or Compensation Program, or (iii) result in any acceleration
of the time of payment or vesting of any such benefits.
(j) Neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated hereby will result in a
material increase in the premium costs of any Welfare Plan for which benefits
are insured or a material increase in benefit costs of any Welfare Plan which
provides self-insured benefits.
(k) No Pension Plan is subject to a lien (or expected to be subject to a
lien) under Code Section 412(n) or ERISA Section 302(f) or to tax under Code
Section 4971. No Pension Plan has a "liquidity shortfall" as defined in Code
Section 412(m)(5). No event has occurred in connection with a
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Pension Plan that could result in liability under Title IV of ERISA. None of
the Companies has incurred any liability to the Pension Benefit Guaranty
Corporation in connection with any Pension Plan.
(l) The assets of each Pension Plan are sufficient to provide all "benefit
liabilities" (as defined in ERISA Section 4001(a)(16)) under such Pension Plan
if such Pension Plan is terminated, and are also sufficient to provide all
other benefits due under the Pension Plan (including, but not limited to,
ancillary, disability, shutdown, early retirement and welfare benefits).
(m) None of the Pension Plans or a Company or any party in interest or
disqualified person has engaged in any non-exempt "prohibited transactions" as
defined in Section 406 of ERISA or Section 4975 of the Code.
(n) Except as disclosed in Schedule 5.15(n), no Pension Plan or Welfare
Plan provides benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former employees beyond
their retirement or other termination of service other than (i) coverage
mandated by applicable law, (ii) retirement benefits under a Pension Plan,
(iii) death benefits under a Welfare Plan, (iv) deferred compensation accrued
on the books of the Company or a Subsidiary, or (v) benefits the full cost of
which is borne by the current or former employer (or his or her beneficiary).
(o) No "leased employee," as that term is defined in Section 414(n) of the
Code, performs services for a Company.
(p) No liability has been, or is expected by a Company to be, incurred by
a Company under Section 4062 of ERISA with respect to any Pension Plan.
(q) No reportable event within the meaning of Title IV of ERISA has
occurred with respect to any Pension Plan.
(r) The Companies have furnished RCG with correct and complete copies of
each Pension Plan, Welfare Plan, and Compensation Program, together with any
trust agreements, summary plan descriptions, employee informational material,
IRS Forms 5500, the most recent actuarial valuation for any Pension Plan,
financial statements relating thereto and participant listings.
5.16 Insurance Policies. Except as described on Schedule 5.16, all of the
assets and business of each Company are insured in such amounts and against
such losses, casualties or risks as are customary for similar properties and
businesses, and the Company has maintained such insurance continuously from the
earlier of (i) the date of its inception and (ii) the date of inception of any
of its predecessors. Schedule 5.16 sets forth a complete and accurate list and
description of all insurance policies in force naming each Company, or any
employee thereof, as an insured or beneficiary or as a loss payee or for which
the Company has paid or is obligated to pay all or part of the premiums,
including, without limitation, all liability, malpractice, fire, health and
life insurance policies. All such policies are in full force and effect and
the premiums due thereon have been timely paid. No Company has received notice
of any pending or threatened termination or premium increase (retroactive or
otherwise) with respect thereto, and, to the knowledge of the Companies and the
Owners, each Company is in compliance with all conditions contained therein.
Except as set forth on Schedule 5.16, there are no pending claims against such
insurance by any Company as to which insurers are defending under reservation
of rights or have denied liability, and except as set forth on Schedule 5.16,
there exists no claim under such insurance that has not been properly filed by
any Company. To the knowledge of the Companies and the Owners, there are no
outstanding or unfulfilled requirements or recommendations of any insurance
company insuring any Company regarding any repairs to or work to be performed
with respect to the assets of such Company. Each Company has complied with any
such requirements and recommendations as to which the Company has received
notice. Schedule 5.16 contains a listing of all claims made and loss histories
in respect of any insurance maintained by each Company or any predecessor
during the past three (3) years.
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5.17 Environmental Matters. Except as set forth in Schedule 5.17, to the
knowledge of the Companies and the Owners, there are no present or past
Environmental Conditions in any way relating to the business, properties or
assets of any Company. For the purposes of this Agreement, "Environmental
Condition" means (a) the introduction into the environment of any pollution,
including without limitation any contaminant, irritant or pollutant or other
toxic or hazardous substance, in violation of any federal, state or local law,
ordinance or governmental rule or regulations, as a result of any spill,
discharge, leak, emission, escape, injection, dumping or release of any kind
whatsoever of any substance or exposure of any type in any work places or to
any medium, including without limitation air, land, surface waters or ground
waters, or from any generation, transportation, treatment, discharge, storage
or disposal of waste materials, raw materials, hazardous materials, toxic
materials or products of any kind or from the storage, use or handling of any
hazardous or toxic materials or other substances, as a result of which any
Company has or may become liable to any person or by any reason of which any of
the assets of any Company may suffer or be subjected to any lien, encumbrance
or restriction of any nature, or (b) any noncompliance with any federal, state
or local environmental law, rule, regulation or order as a result of or in
connection with any of the foregoing.
5.18 Accounts Receivable and Payable. To the knowledge of the Companies
and the Owners, except as set forth on Schedule 5.18.1, the accounts receivable
outstanding as of the Effective Time will be subject to no defenses,
counterclaims, or rights of setoff other than those arising in the ordinary
course of business and for which adequate reserves have been established. No
accounts payable of any Company are, at this date, over 45 days old and no
accounts payable of any Company will be over 45 days old at any Closing Date,
except as listed on Schedule 5.18.2.
5.19 Taxes. (a) Except as listed in Schedule 5.19 or as reflected in the
Financial Statements, there does not exist any material liability for taxes
which may be asserted by any taxing authority against, and no lien or other
encumbrance for taxes will attach to, any Company or any of its assets other
than taxes due in respect of periods for which tax returns are not yet due and
for which adequate accruals have been made in the Financial Statements. All
federal, state and local tax returns and tax reports required to be filed prior
to the date hereof with respect to any Company have been filed (other than
returns for which extensions to file have been granted) with the appropriate
governmental agencies in all jurisdictions in which such returns and reports
are required to be filed, all of which are true, correct and complete, and all
amounts shown as owing thereon have been paid.
(b) Except as listed on Schedule 5.19, no Company has received notice of
any tax claims being asserted or any proposed assessment by any taxing
authority and no tax returns of any Company have been audited by the Internal
Revenue Service (the "IRS") or the appropriate state agencies for any fiscal
year or period ended prior to the date hereof, and no Company is presently
under, nor has received notice of any, contemplated investigation or audit by
the IRS or any state agency concerning any fiscal year or period ended prior to
the date hereof. Except as listed on Schedule 5.19, no Company has executed
any extension or waivers of any statute of limitations on the assessment or
collection of any tax due that is currently in effect.
(c) Each Company and any of its predecessors in interest have withheld or
collected from each payment made to each of their employees the amount of all
taxes required to be withheld or collected therefrom and each Company and any
of its predecessors in interest have paid the same to the proper tax
depositories or collecting authorities.
(d) From its inception, each Member has been a validly electing S
corporation as defined in Section 1361 of the Code and corresponding provisions
of state and local income tax law in all jurisdictions in which it is required
to report its business operations. No Member or Owner has received any notice
from the IRS challenging such status and no Member or Owner is aware of any
circumstances that would be a basis for challenging such status.
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(e) From its inception, each of RenalWest and its ninety-nine percent
owned subsidiary, Renal West Health Supply L.C., has been a limited liability
company formed under Arizona law and taxable as a partnership under Section
7701 of the Code and in all states in which it has conducted business.
(f) The Owners shall cause to be prepared and filed, at their expense, a
short period tax return of each Company ending on the Closing Date. Such
returns shall be provided for RCG's prior review and approval, which approval
shall not be unreasonably withheld or delayed. The Owners shall file as an "S"
corporation for that short period for each Member and as a partnership for
RenalWest. RCG shall make available any information in its or the Companies'
possession which is reasonably required by the Owners to complete such returns
at no cost to the Owners.
(g) Except as disclosed on Schedule 5.19, there is no liability for taxes
on the part of any Company or any of their subsidiaries (excluding transactions
for which the financial reporting gain would exceed applicable income tax
liability related to such transaction) (i) that will arise with respect to a
current or a future taxable period, (ii) that is wholly or partly a consequence
of a transaction or occurrence, or transactions or occurrences, one or more of
which occurred before the date hereof, and (iii) that is not fully reserved on
the Financial Statements. In addition, except as disclosed on Schedule 5.19,
there are no joint venture, partnership or other arrangements or contracts to
which any Company or any of their subsidiaries is a party and that could be
treated as a partnership for federal income tax purposes.
(h) For purposes hereof, "taxes" shall mean any federal, state, county,
local, foreign or other tax, charge, imposition or other levy (including
interest or penalties thereon) including without limitation, income taxes
estimated taxes, excise taxes, sales taxes, use taxes, gross receipts taxes,
franchise taxes, taxes on earnings and profits, employment and payroll related
taxes, property taxes, real property transfer taxes, Federal Insurance
Contributions Act taxes, taxes on value added and import duties, whether or not
measured in whole or in part by net income, imposed by the United States or any
political subdivision thereof or by any jurisdiction other than the United
States or any political subdivision thereof.
5.20 Licenses, Authorizations and Provider Programs. (a) Each Company is
the holder of all valid licenses and other rights and authorizations required
by law, ordinance, regulation or ruling of any governmental regulatory
authority necessary to operate its business. RenalWest is certified for
participation and reimbursement under Titles XVIII and XIX of the Social
Security Act (the "Medicare and Medicaid programs") (Medicare and Medicaid
programs and such other similar federal, state or local reimbursement or
governmental programs for which the Company is eligible are hereinafter
referred to collectively as the "Government Programs") and has current provider
agreements for such Government Programs and with such private non-governmental
programs, including without limitation any private insurance program, under
which the Company directly or indirectly is presently receiving payments (such
non-governmental programs herein referred to as "Private Programs"). Set forth
on Schedule 5.20.1, as to each facility, is a correct and complete list of such
licenses, permits and other authorizations, and provider agreements under all
Government and Private Programs, complete and correct copies of which have been
provided to RCG. True, complete and correct copies of all surveys of each
Company or its facilities conducted in connection with any Government Program,
Private Program or licensing or accrediting body during the past two (2) years
have been provided to RCG.
(b) To the knowledge of the Companies and the Owners, no material
violation, default, order or deficiency exists with respect to any of the items
listed on Schedule 5.20.1. None of the Companies or the Owners has received
any notice of any action pending or recommended by any state or federal
agencies having jurisdiction over the items listed on Schedule 5.20.1, either
to revoke, withdraw or suspend any license, right or authorization, or to
terminate the participation of any Company in any Government or Private
Program. To the knowledge of the Companies and the Owners, no event has
occurred which, with the giving of notice, the passage of time, or both, would
constitute grounds for a material violation, order or deficiency with respect
to any of the items listed on Schedule 5.20.1 or to revoke, withdraw or suspend
any such license, or to terminate or modify the participation of any Company
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in any Government or Private Program. To the knowledge of the Companies and
the Owners, there has been no decision not to renew any provider or
third-party payor agreement of any Company. Except as listed on Schedule
5.20.2, no consent or approval of, prior filing with or notice to, or any
action by, any governmental body or agency or any other third party is required
in connection with any such license, right or authorization, or Government or
Private Program, by reason of the consummation of the Mergers, and the
continued operation of the business of the Companies thereafter on a basis
consistent with past practices.
(c) Each Company has timely filed all cost reports and other reports
required to be filed by it prior to the date hereof with respect to the
Government and Private Programs, all fiscal intermediaries and other insurance
carriers and all such reports are complete and accurate in all material
respects and have been prepared in material compliance with all applicable
laws, regulations, and principles governing reimbursement and payment claims.
True and complete copies of such cost reports filed by each Company for the
most recent cost-reporting year, if applicable, have heretofore been delivered
to RCG. Each Company has paid or caused to be paid or has properly reflected
in the Financial Statements all known and undisputed refunds, overpayments,
discounts or adjustments which have become due pursuant to such reports and has
no liability under any Government or Private Program (known or unknown,
contingent or otherwise) for any refund, overpayment, discount or adjustment
other than in the ordinary course, and no interest or penalties accruing with
respect thereto, except as has been specifically reserved for in the Financial
Statements or disclosed herein or in the Schedules hereto. To the knowledge of
the Companies and Owners, except as set forth on Schedule 5.20.3, there are no
pending appeals, adjustments, challenges, audits, litigation, or notices of
intent to reopen any closed cost reports. There are no other reports required
to be filed by any Company in order to be paid under any Government or Private
Program for services rendered, except for cost reports not yet due.
5.21 Inspections and Investigations. Except as set forth and described in
Schedule 5.21, (i) neither any of the Company's right nor, to the knowledge of
the Companies and the Owners, the right of any licensed professional or other
individual affiliated with any Company to receive reimbursements pursuant to
any Government or Private Program has been terminated or otherwise adversely
affected as a result of any investigation or action whether by any federal or
state governmental regulatory authority or other third party, (ii) no Company,
or, to the knowledge of the Companies and the Owners, any licensed professional
or other individual affiliated with any Company has, during the past three (3)
years, been the subject of any inspection, investigation, survey, audit,
monitoring or other form of review by any governmental regulatory entity, trade
association, professional review organization, accrediting organization or
certifying agency based upon any alleged improper activity on the part of such
individual, nor has any Company received any notice of deficiency during the
past three years in connection with its operations, (iii) there are not
presently, and at the Effective Time there will not be, any outstanding
deficiencies or work orders of any governmental authority having jurisdiction
over any Company, or other third party, requiring conformity to any applicable
agreement, statute, regulation, ordinance or bylaw, including but not limited
to, the Government and Private Programs, and (iv) there is not any notice of
any claim, requirement or demand of any licensing or certifying agency or other
third party supervising or having authority over any Company or their
operations to rework or redesign any part thereof or to provide additional
furniture, fixtures, equipment, appliances or inventory so as to conform to or
comply with any existing law, code, rule, regulation or standard. Attached as
part of Schedule 5.21 are copies of all reports, correspondence, notices and
other documents relating to any matter described or referenced therein.
5.22 Certain Relationships. (a) Except as set forth on Schedule 5.22(a),
no Company has:
(i) offered, paid, solicited or received anything of value, paid directly
or indirectly, overtly or covertly, in cash or in kind ("Remuneration") to or
from any physician, family member of a physician, or an entity in which a
physician or physician family member has an ownership or investment interest,
including, but not limited to:
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(A) payments for personal or management services pursuant to a
medical director agreement, consulting agreement, management contract,
personal services agreement, or otherwise;
(B) payments for the use of premises leased to or from a physician,
a family member of a physician or an entity in which a physician or
family member has an ownership or investment interest;
(C) payments for the acquisition or lease of equipment, goods or
supplies from a physician, a family member of a physician or an entity in
which a physician or family member has an ownership or investment
interest; or
(ii) offered, paid, solicited or received any Remuneration (excluding fair
market value payments for equipment or supplies) to or from any healthcare
provider, pharmacy, drug or equipment supplier, distributor or manufacturer,
including, but not limited to:
(A) payments or exchanges of anything of value under a warranty
provided by a manufacturer or supplier of an item to the Company; or
(B) discounts, rebates, or other reductions in price on a good or
service received by the Company;
(iii) offered, paid, solicited or received any Remuneration to or from any
person or entity in order to induce business, including, but not limited to,
payments intended not only to induce referrals of patients, but also to induce
the purchasing, leasing, ordering or arrangement for any good, facility,
service or item;
(iv) entered into any joint venture, partnership, co-ownership or other
arrangement involving any ownership or investment interest by any physician, or
family member of a physician, or an entity in which physician or physician
family member has an ownership or investment interest, directly or indirectly,
through equity, debt, or other means, including, but not limited to, an
interest in an entity providing goods or services to such Company;
(v) entered into any joint venture, partnership, co-ownership or other
arrangement involving any ownership or investment interest by any person or
entity including, but not limited to, a hospital, pharmacy, drug or equipment
supplier, distributor or manufacturer, that is or was in a position to make or
influence referrals, furnish items or services to, or otherwise generate
business for the Company; or
(vi) entered into any agreement providing for the referral of any patient
for the provision of goods or services by such Company, or payments by such
Company as a result of any referrals of patients to the Company.
(b) Set forth on Schedule 5.22(b) is a list of all affiliated practices or
physicians who have privileges to use any Company's dialysis facilities or who
are otherwise involved with the use or operation of or referral of patients to
any Company's dialysis facilities.
5.23 Statements True and Correct. No representation or warranty made
herein by the Companies or any of the Owners, nor in any statement, certificate
or instrument to be furnished to RCG by the Companies or any of the Owners
pursuant to any Merger Document, contains or will contain any untrue statement
of material fact or omits or will omit to state a material fact necessary to
make these statements contained herein and therein not misleading.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE OWNERS
Each Owner, severally and not jointly, represents and warrants the
following to RCG:
6.1 Ownership Interest Held and Conveyed. Owner is the owner of all
right, title and interest (legal, record and beneficial) in and to the Company
Equity Securities as set forth on Schedule 6.1, free and clear of any and all
liens, encumbrances or restrictions of any nature whatsoever (except for any
restrictions on transfer imposed by securities laws), and Owner holds no other
interest in any Company. Except as provided in Schedule 6.1 or as specifically
contemplated by this Agreement, no person or entity has any right or privilege
(whether preemptive or contractual) for the purchase of any Company Equity
Securities from Owner. Schedule 6.1 contains a complete list of all agreements
or arrangements, whether written or oral, to which Owner is a party that relate
in any way to the Company Equity Securities.
6.2 Organization, Authority and Capacity. Owner has the full authority
and capacity necessary to execute, deliver and perform his or her obligations
under the Merger Documents to be executed and delivered by Owner.
6.3 Authorization and Validity. Owner has the legal capacity required
for executing, delivering and performing the Merger Documents to be executed
and delivered by Owner. If Owner is married and Owner's interest in the
Company constitutes community property, the Merger Documents to be executed and
delivered by Owner's spouse have been or will be, as the case may be, duly
executed and delivered by Owner's spouse and constitute or will constitute the
legal, valid and binding obligations of Owner's spouse, enforceable in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency or other laws affecting creditors' rights generally, or as may be
modified by a court of equity.
6.4 Absence of Conflicting Agreements or Required Consents. Except as set
forth on Schedule 6.4, the execution, delivery and performance by Owner of the
Merger Documents to be executed and delivered by Owner (i) do not require the
consent of or notice to any governmental or regulatory authority or any other
third party; (ii) will not conflict with or result in a violation of any law,
ordinance, regulation, ruling, judgment, order or injunction of any court or
governmental instrumentality to which Owner is subject or by which Owner is
bound; (iii) will not conflict with, constitute grounds for termination of,
result in a breach of, constitute a default under, require any notice under, or
accelerate or permit the acceleration of any performance required by the terms
of any agreement, instrument, license or permit material to the Merger and (v)
will not create any encumbrance or restriction upon the Company Equity
Securities.
6.5 Interested Transactions. Except as set forth on Schedule 6.5, Owner
is not a party to any contract, loan or other transaction with any Company and
does not have any direct or indirect interest in or affiliation with any party
to any such a contract, loan or other transaction. Except as set forth on
Schedule 6.5, Owner is not an employee, consultant, partner, principal,
director or owner of, and does not have any other direct or indirect interest
in or affiliation with, any person or business entity that is engaged in a
business that competes with or is similar to the business of any Company.
6.6 Purchase for Investment, Etc. (a) Such Owner is acquiring the RCG
Common Stock for such Owner's own account and not with a view to or for sale in
connection with any public distribution thereof within the meaning of the 1933
Act;
(b) such Owner (i) has sufficient knowledge and experience in financial
and business matters to enable him, her or it to evaluate the merits and risks
of an investment in the RCG Common Stock, (ii) has the ability to bear the
economic risk of acquiring the RCG Common Stock, (iii) has received and
reviewed the RCG Documents identified in Section 7.8 below, and (iv) has had an
opportunity to ask
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questions of and to receive answers from the officers of RCG and to obtain
additional information in writing as requested, which has been made available
to and examined by such Owner or such Owner's advisors;
(c) such Owner (i) acknowledges that the RCG Common Stock has not been
registered under any securities laws and cannot be resold without registration
thereunder or exemption therefrom, (ii) agrees not to transfer all or any of
the RCG Common Stock received by such Owner unless such transfer has been
registered or is exempt from registration under applicable securities laws and
(iii) acknowledges that the certificate(s) representing the RCG Common Stock
shall bear a prominent legend with respect to the restrictions on transfer
under applicable securities laws; and
(d) such Owner has accurately completed the Investor Questionnaire
required by RCG contemporaneous with the execution of this Agreement and the
statements therein are true and correct.
6.7 Pooling and Tax-Free Reorganization Restrictions. (a) Except as
disclosed on Schedule 6.7(a) during the 30 days immediately preceding the
Effective Time of the Merger, such Owner represents, warrants and covenants
that he has not and will not have sold, transferred, or otherwise disposed of
his interests in, or reduced his risk relative to, any of the shares of Member
Common Stock beneficially owned by the undersigned, except for any pledges of
such Member Common Stock existing prior to such 30-day period as disclosed on
Schedule 6.7(a) hereto. In the event of any such pledge, each Owner will use
his commercially reasonable efforts to obtain an agreement from any such
pledgee to abide by the terms of this Agreement.
(b) Each Owner is aware that the Merger is intended to qualify as a
tax-free reorganization under Section 368 of the Internal Revenue Code ("Code")
for federal income tax purposes. Each Owner acknowledges that Section
1.368-1(b) of the Income Tax Regulations requires "continuity of interest" in
order for the Merger to be treated as tax-free under Section 368 of the Code.
Such Owner represents that he has no pre-arrangement, plan or intention to sell
or otherwise dispose of an amount of his RCG Common Stock to be received in the
Merger which would cause the foregoing requirement not to be satisfied. Each
Owner represents that he has consulted with counsel of his choosing regarding
this and other requirements for such a tax-free reorganization and that he
understands such requirements and the risk that his receipt of RCG Common Stock
could be a taxable event if such requirements are not met. Each Owner further
represents that he is not relying on RCG or its advisors concerning the tax
treatment or consequences of this Agreement or the transactions contemplated
hereby.
6.8 Statements True and Correct. No representation or warranty made
herein by Owner, nor in any statement, certificate or instrument furnished or
to be furnished to RCG by Owner pursuant to any Merger Document, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein and
therein not misleading.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF RCG AND MERGER CORPS.
RCG and each Merger Corp. hereby represent and warrant to the Company and
the Owners as follows:
7.1 Organization, Authority and Capacity. RCG is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and each Merger Corp. is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona. RCG and
each Merger Corp. have the full power and authority necessary to (i) execute,
deliver and perform their obligations under the Merger Documents to be executed
and delivered by them, and (ii) carry on their business as they have been and
are now being conducted and to own and lease the properties and assets which
they now own or lease. RCG and each Merger Corp. are duly qualified to do
business and are in
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good standing in each jurisdiction in which a failure to be so qualified
or in good standing would have a material adverse effect on (i) their
ability to perform their obligations under the Merger Documents to be executed
and delivered by them or, (ii) the assets, results of operations or prospects
of RCG.
7.2 Authorization and Validity. The execution, delivery and performance
of the Merger Documents to be executed and delivered by RCG and each Merger
Corp. have been duly authorized by all necessary action by RCG and each Merger
Corp. The Merger Documents to be executed and delivered by RCG and each Merger
Corp. have been or will be, as the case may be, duly executed and delivered by
RCG and each Merger Corp. and constitute or will constitute the legal, valid
and binding obligations of RCG and each Merger Corp., enforceable in accordance
with their respective terms, except as may be limited by bankruptcy,
insolvency, or other laws affecting creditors' rights generally, or as may be
modified by a court of equity.
7.3 Absence of Conflicting Agreements or Required Consents. The
execution, delivery and performance by RCG and each Merger Corp. of the Merger
Documents to be executed and delivered by it: (i) do not require the consent of
or notice to any governmental or regulatory authority or any other third party;
(ii) will not conflict with any provision of RCG's or such Merger Corp.'s
articles of incorporation or bylaws; (iii) will not conflict with or result in
a violation of any law, ordinance, regulation, ruling, judgment, order or
injunction of any court or governmental instrumentality to which RCG or such
Merger Corp. is a party or by which RCG or such Merger Corp. or any of their
respective properties is bound; (iv) will not conflict with, constitute grounds
for termination of, result in a breach of, constitute a default under, require
any notice under, or accelerate or permit the acceleration of any performance
required by the terms of any agreement, instrument, license or permit to which
RCG or such Merger Corp. is a party or by which any of its properties are
bound; and (v) will not create any lien, encumbrance or restriction upon any of
the assets or properties of RCG or such Merger Corp.
7.4 Governing Documents. True and correct copies of the organizational
documents and all amendments thereto of RCG (certified by the Secretary of
State of the State of Delaware) and copies of the bylaws of RCG have been
provided to the Company and the Owners. The Company and the Owners have
previously been provided with access to RCG's minutes, and such minutes
accurately reflect all material proceedings of the shareholders and board of
directors of RCG (and all committees thereof). True and correct copies of the
organizational documents and all amendments thereto of each Merger Corp.
(certified by the Secretary of State of the State of Arizona) and copies of the
Bylaws of each Merger Corp. have been provided to the Company and the Owners.
The Company and the Owners have previously been provided with access to the
minutes of each Merger Corp., and such minutes accurately reflect all material
proceedings of the shareholder and Board of Directors of each Merger Corp.
7.5 Outstanding and Authorized Capitalization. (a) The authorized
capital stock of each Merger Corp. consists of 1,000 shares of common stock, of
which 100 shares are issued and outstanding. All of the issued and outstanding
shares of capital stock of each Merger Corp. have been duly and validly issued,
are fully paid and non-assessable. There are no outstanding warrants, options,
rights, calls or other commitments of any nature relating to capital stock of
any Merger Corp., and there are no outstanding securities of any Merger Corp.
convertible into or exchangeable for any securities of any Merger Corp. or RCG.
(b) The authorized capital stock of RCG consists of 22,000,000 shares of
RCG Common Stock and 10,000,000 shares of $.01 par value Preferred Stock. As
of the date hereof, RCG has 10,146,020 shares of RCG Common Stock and no shares
of Preferred Stock issued and outstanding. All issued and outstanding shares
of RCG Common Stock have been duly and validly issued, are fully paid and
non-assessable. Except for (i) options to purchase 1,433,948 shares of common
stock, (ii) warrants to purchase 220,000 shares of common stock and (iii)
promissory notes that are convertible into 184,000 shares of common stock,
there are no outstanding warrants, options, rights, calls or other commitments
of any nature relating to shares of capital stock of RCG, no outstanding
securities convertible into or exchangeable for shares of capital stock of RCG,
and, RCG is not obligated to issue or repurchase any of its
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19
shares of capital stock for any reason and no person or entity has any
right or privilege (whether preemptive or contractual) for the purchase,
subscription or issuance of any unissued shares of capital stock of RCG.
Except for rights with respect to 5,661,020 shares outstanding, 220,000 shares
under warrants and 184,000 shares under convertible notes, there are no
outstanding rights to demand registration of any shares of capital stock of RCG
or to sell any securities in connection with a registration by RCG under the
1933 Act. No shares of Common Stock are held in RCG's treasury. All RCG
Common Stock to be issued in connection with the Merger will be duly and
validly issued, fully paid and nonassessable, and, based on the representations
of the Companies and the Owners herein and in documents delivered pursuant
hereto, will be issued pursuant to a valid exemption from registration under
the 1933 Act and all applicable state securities laws.
7.6 Litigation and Claims. There are no claims, lawsuits, actions,
arbitrations, administrative or other proceedings, governmental investigations
or inquiries pending or threatened against RCG or the Merger Corps. which could
(i) affect the performance by RCG or the Merger Corps. of the Merger Documents,
or (ii) adversely affect the condition of RCG or the Merger Corps. (financial
or otherwise), and there is no basis for any such action or any state of facts
or occurrence of any event which might give rise to the foregoing.
7.7 Statements True and Correct. No representation or warranty made
herein by RCG and the Merger Corps., nor in any statement, certificate or
instrument to be furnished to the Company or any of the Owners by RCG or the
Merger Corps. pursuant to any Merger Document, nor in any RCG Document,
contains or will contain any untrue statement of material fact or omits or will
omit to state a material fact necessary to make these statements contained and
therein not misleading.
7.8 RCG Documents. RCG has heretofore furnished the following documents
to the Company:
(a) Confidential Private Placement Memorandum, dated November 15, 1995;
(b) Final Prospectus, dated February 6, 1996, contained in its
Registration Statement on Form S-1 (Registration No. 33-80221);
(c) Current Report on Form 8-K, dated March 22, 1996 (Commission File No.
0-2764);
(d) Press release, dated April 1, 1996;
(e) Registration Statement on Form S-8, dated April 22, 1996;
(f) Press release, dated April 29, 1996;
(g) current report on Form 8-K/A, dated May 3, 1996;
(h) Form 12b-25, dated May 3, 1996;
(i) Press release, dated May 6, 1996;
(j) Form 12b-25, dated May 13, 1996;
(k) Form SR, dated May 17, 1996;
(l) Form 10-Q, dated May 20, 1996;
(m) Form 10-K, dated May 21, 1996;
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20
(n) Form 10-K/A, dated June 7, 1996;
(o) Press Release, dated July 1, 1996;
(p) Press Release, dated July 18, 1996;
(q) Agreement and Plan of Merger, dated April 26, 1996, among RCG and Main
Line Suburban Dialysis Centers, Inc., et al.;
(r) Merger Agreement, dated June 20, 1996, among RCG and The Nephrology
Center, Inc., et al.;
(s) Loan Agreement, dated May 30, 1996, among RCG, et al. and NationsBank
of Tennessee, N.A.; and
(t) Press Release, dated August 6, 1996.
The foregoing documents together with the exhibits thereto (which will be
made available upon written request), are collectively referred to herein as
the "RCG Documents." The RCG Documents include accurate and complete copies of
each and every (i) report and registration statement filed with the SEC ("SEC
Documents") and (ii) publicly disseminated press release of RCG during the past
twelve months ("Press Releases"). As of the time each SEC Document was filed
with the SEC, such SEC Document did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
7.9 Absence of Changes. Except as set forth on Schedule 7.9, since March
31, 1996 (the date of last financial statements), RCG has not suffered any
material adverse change in its working capital, condition (financial or
otherwise), assets, liabilities, reserves, business or operations.
7.10 No Undisclosed Liabilities. Except as listed on Schedule 7.10, and
except for liabilities and obligations reflected in the most recent financial
statements of RCG contained in the RCG Documents or incurred in the ordinary
course of its business since the date of RCG's most recent balance sheet
included in the RCG Documents, RCG has no material liabilities or obligations,
whether accrued, absolute, contingent or otherwise.
7.11. No Liabilities of Merger Corps. Except for the obligations
hereunder, the Merger Corps. are not subject to any liabilities, obligations or
claims, whether accrued, absolute, contingent, liquidated or unliquidated, or
otherwise. Each Merger Corp. was formed solely for the purpose of consummating
the Mergers contemplated by this Agreement and each Merger Corp. has not
engaged in any business or other activity for any other purpose.
7.12 Compliance with Legal Requirements. To the knowledge of RCG, RCG and
each Merger Corp. are in compliance with all applicable legal requirements,
except where the failure to comply with such legal requirements has not had and
could not reasonably be expected to have a material adverse effect on RCG or
the Company. RCG has not received any notice or any communication from any
governmental authority regarding any actual or possible violation of, or
failure to comply with, any legal requirement, except where failure to comply
with such legal requirement has not had and could not reasonably be expected to
have a material adverse effect on RCG.
7.13 Employee Benefits. RCG agrees that after the Mergers it will cause
the Members to cause RenalWest to credit RenalWest employees with service for
eligibility and vesting purposes, as applicable,
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21
under the benefit plans in which they participate after the Closing Date
and that such employees will receive such RCG benefits as are provided to
similarly situated employees of RCG.
7.14 Taxes. (a) Except as reflected in RCG's financial statements
included in the RCG Documents (the "RCG Financial Statements"), there does not
exist any material liability for taxes that may be asserted by any taxing
authority against, and no lien or other encumbrance for any such taxes will
attach to, RCG, any subsidiary ("Subsidiary") of RCG, or any assets of RCG or
any Subsidiary, other than taxes due in respect of periods for which tax
returns are not yet due and for which adequate accruals have been made in the
RCG Financial Statements. All federal, foreign, state, county, and local tax
returns and tax reports required to be filed prior to the date hereof with
respect to RCG or any Subsidiary have been timely filed (other than returns for
which extensions to file have been granted) with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed, all of which are true, correct, and complete, and all amounts shown
as owing thereon have been timely paid.
(b) Neither RCG nor any Subsidiary has received notice of any tax claims
being asserted or any proposed assessment by any taxing authority and neither
RCG nor any Subsidiary is presently under, nor has received notice of, any
contemplated investigation or audit by the IRS or any other taxing authority
concerning any fiscal year or period ended prior to the date hereof. Neither
RCG nor any Subsidiary has executed any extensions or waivers of any statute of
limitations on the assessment or collection of any tax due that is currently in
effect.
(c) RCG and each Subsidiary, as well as any of their predecessors in
interest, have withheld or collected from each payment made to each of their
employees the amount of all taxes required to be withheld or collected
therefrom and have paid the same to the proper tax depositories or collecting
authorities.
(d) Neither RCG nor any Subsidiary is or has ever been an includible
corporation in an affiliated group of corporations, within the meaning of
Section 1504 of the Code, other than in the affiliated group of which RCG is
the common parent corporation.
(e) Neither RCG nor any Subsidiary is now or has ever been a party to any
tax-sharing agreements or similar arrangements, other than with respect to the
federal income tax returns for the affiliated group of which RCG is the common
parent corporation.
(f) For purposes hereof, "tax" or "taxes" shall have the meaning
prescribed for "taxes" in section 5.19(g) of this Agreement.
(g) RCG has no intention to cause or permit the liquidation or merging out
of existence of the Members.
(h) RCG has no intention following the Mergers to sell or otherwise
dispose of its ownership of the Members, except for transfers of stock to
corporations controlled by RCG, as "control" is defined in section 368(c) of
the Code, or to cause the Members to sell or otherwise dispose of any of their
assets or of any of the assets acquired from any of the Merger Corps, except
for dispositions made in the ordinary course of business or transfers of assets
to a corporation controlled by RCG, as "control" is defined in section 368(c)
of the Code.
(i) Except as disclosed on Schedule 7.14, there is no liability for taxes
on the part of RCG or any Subsidiary (excluding transactions for which the
financial reporting gain would exceed applicable income tax liability related
to such transaction) (i) that will arise with respect to a current or a future
taxable period, (ii) that is wholly or partly a consequence of a transaction or
occurrence, or transactions or occurrences, one or more of which occurred
before the date hereof, and (iii) that is not fully reserved on the RCG
Financial Statements. In addition, except as disclosed on Schedule 7.14, there
are no
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joint venture, partnership or other arrangements or contracts to which
RCG or any Subsidiary is a party and that could be treated as a partnership for
federal income tax purposes.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Access to Company Information. At all times prior to the Closing, the
Companies and the Owners will afford the officers and authorized
representatives of RCG access upon reasonable notice to all of the Companies'
properties, books and records that may relate to or concern the Mergers and
will furnish such parties with such additional financial, operating and other
information as to the business and properties of the Companies as such parties
may from time to time reasonably request. Such parties shall also be allowed
access, upon reasonable notice, to consult with the officers, employees,
accountants, counsel and agents of the Companies in connection with such
investigation of the properties and business of the Companies. In addition, at
all times prior to the Closing, RCG will afford to the Companies and the
Owners, and their representatives, access, upon reasonable notice, to all of
RCG's and its affiliate's properties, books and records as the Companies and
the Owners may reasonably request. No such investigation shall diminish or
otherwise affect any of the representations, warranties, covenants or
agreements of any party under this Agreement.
8.2 No-Shop. Unless and until this Agreement is terminated pursuant to
Article 11 hereof, neither any of the Companies nor any Owner shall directly or
indirectly, through any officer, director, employee, agent, intermediary or
otherwise: (i) solicit, initiate or encourage submission of proposals or offers
from any person or other entity relating to any purchase of an equity interest
in any of the Companies, or any merger, sale of substantial assets or any
similar transaction whether or not resulting in a change of control of any of
the Companies; (ii) participate in any discussions or negotiations regarding,
or furnish to any other person or other entity, any information with respect
to, or otherwise respond to, cooperate or encourage, any effort or attempt by
any other person or other entity to purchase any equity interest in the
Companies, or engage in a merger, purchase of substantial assets or any similar
transaction whether or not such transaction contemplates a change of control of
any of the Companies; or (iii) approve or undertake any such transaction. The
Companies and the Owners shall promptly communicate to RCG the terms of any
such oral or written proposal or offer upon knowledge or receipt of such
proposal or offer.
8.3 Affirmative Covenants of the Companies and the Owners. From the date
hereof until the earlier of the Effective Time or the termination of this
Agreement, the Companies and the Owners covenant and agree that, unless the
prior written consent of RCG shall have been obtained, and except as otherwise
expressly contemplated herein, each Company shall:
(i) operate its business only in the usual, regular, and ordinary course
of business, consistent with past practices;
(ii) use reasonable commercial efforts to preserve intact its business
organization, licenses, permits, government programs, private programs and
customers;
(iii) use reasonable commercial efforts to retain the services of its
employees, agents and consultants on terms and conditions not less favorable
than those existing prior to the date hereof and to ensure that there are no
material or adverse changes to employee relations;
(iv) keep and maintain its assets in their present condition, repair and
working order, except for normal depreciation and wear and tear, and maintain
its insurance, rights and licenses;
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(v) pay all accounts payable of the Company in accordance with past
practice and collect all accounts receivable in accordance with past practice,
but not less than in accordance with prudent business practices;
(vi) consult with RCG prior to undertaking any new business opportunity
outside the ordinary course of business;
(vii) confer on a regular and frequent basis with one or more designated
representatives of RCG to report material operational matters and to report the
general status of ongoing business operations;
(viii) make available to RCG true and correct copies of all internal
management and control reports (including aging of accounts receivable,
listings of accounts payable, and inventory control reports) and financial
statements related to the Company and furnished to management of the Company;
(ix) cause all tax returns that are due and have not been filed prior to
the date hereof or which become due prior to the Effective Time, to be prepared
and filed on or before the date such tax return is required to be filed (taking
into account any extensions of the filing deadlines granted); provided,
however, that any such tax return shall not be filed without a reasonable
opportunity for prior review and comment by RCG;
(x) as soon as reasonably practicable after they become available, but in
no event more than thirty (30) days following the end of each calendar month,
deliver to RCG true and complete copies of its monthly financial statements for
each calendar month ending subsequent to the date hereof in the format
historically utilized by the Company;
(xi) perform in all material respects all obligations under agreements
relating to or affecting its assets, properties or rights, except for the
failure of which performance would not have a material adverse effect on the
business of the Companies taken as a whole, financial or otherwise;
(xii) keep in full force and effect present insurance policies or other
comparable insurance coverage; and
(xiii) notify RCG of (i) any event or circumstance which is reasonably
likely to have a material adverse effect on the Company or would cause or
constitute a breach of any of the Company's representations, warranties or
covenants contained herein; or (ii) any unexpected change in the normal course
of business or in the operation of the Company's assets, and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), adjudicatory proceedings, budget
meetings or submissions involving any material property. Each Company agrees
to keep RCG fully informed of such events and to permit RCG's representatives
prompt access to all materials prepared in connection therewith.
8.4 Negative Covenants of the Company and the Owners. From the date
hereof until the earlier of the Effective Time or the termination of this
Agreement, the Companies and the Owners covenant and agree that no Company will
do any of the following without the prior written consent of the RCG:
(i) take any action which would (a) adversely affect the ability of any
party to the Merger Documents to obtain any consents required for the
transactions contemplated thereby, or (b) adversely affect the ability of any
party hereto to perform its covenants and agreements under the Merger
Documents;
(ii) amend any of its organizational or governing documents, except as
provided herein or for the purpose of accomplishing the transactions
contemplated by this Agreement;
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(iii) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $100,000 except in the
ordinary course of the business of the Company consistent with past practices,
or impose, or suffer the imposition, on any material asset of the Company of
any lien or permit any such lien to exist;
(iv) repurchase, redeem, or otherwise acquire or exchange, directly or
indirectly, any Company Equity Securities, or any securities convertible into
any Company Equity Securities, or declare or pay any dividend or make any other
distribution in respect of Company Equity Securities, other than such dividends
or distributions as are described in Section 8.19 below.
(v) other than pursuant to the Merger Documents, issue, sell, pledge,
encumber, authorize the issuance of, enter into any contract to issue, sell,
pledge, encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional Company Equity Securities or any rights with
respect to any Company Equity Securities;
(vi) purchase or acquire any assets or properties, whether real or
personal, tangible or intangible, or sell or dispose of any assets or
properties, whether real or personal, tangible or intangible, except in the
ordinary course of business and consistent with past practices;
(vii) adjust, split, combine or reclassify any Company Equity Securities
or issue or authorize the issuance of any other securities in respect of or in
substitution for Company Equity Securities, or sell, lease, mortgage or
otherwise dispose of or otherwise encumber any asset having a book value in
excess of $50,000 other than in the ordinary course of business for reasonable
and adequate consideration;
(viii) purchase any securities or make any material investment, either by
purchase of stock or other securities, contributions to capital, asset
transfers, or purchase of any assets, in any entity, or otherwise acquire
direct or indirect control over any other entity;
(ix) grant any increase in compensation or benefits to the employees or
officers of the Company, except in accordance with past practice; pay any
severance or termination pay or any bonus other than pursuant to written
policies or written contracts in effect as of the date hereof and disclosed on
the Schedules hereto; enter into or amend any severance agreements with
officers of the Company; or grant any material increase in fees or other
increases in compensation or other benefits to directors of the Company except
in accordance with past practice;
(x) enter into or amend any employment contract between the Company and
any person or entity (unless such amendment is required by law) that the
Company does not have the unconditional right to terminate without liability
(other than liability for services already rendered), at any time on or after
the Effective Time;
(xi) adopt any new employee benefit plan or make any material change in or
to any existing employee benefit plans other than any such change that is
required by law or that, in the opinion of counsel, is necessary or advisable
to maintain the tax qualified status of any such plan;
(xii) make any significant change in any tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in tax laws or regulatory accounting requirements or GAAP;
(xiii) commence any litigation other than in accordance with past
practice, settle any litigation involving any liability of the Company for
material money damages or restrictions upon the operations of the Company;
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25
(xiv) except in the ordinary course of business and which is not material,
modify, amend or terminate any material contract or waive, release, compromise
or assign any material rights or claims;
(xv) except in the ordinary course of business and, even if in the
ordinary course of business, then not in an amount to exceed $300,000 in the
aggregate, make or commit to make any capital expenditure, or enter into any
lease of capital equipment as lessee or lessor;
(xvi) take any action, or omit to take any action, which would cause any
of the representations and warranties contained in Article 5 to be untrue or
incorrect; or
(xvii) make any loan to any person or increase the aggregate amount of any
loan currently outstanding to any person.
8.5 Affirmative Covenants of RCG. From the date hereof until the earlier
of the Effective Time or the termination of this Agreement, RCG covenants and
agrees that, unless the prior written consent of RenalWest shall have been
obtained, and except as expressly contemplated herein, RCG shall
(i) consult with RenalWest prior to making a new material business
opportunity outside the ordinary course of business;
(ii) as soon as reasonably practicable after they become available,
deliver to RenalWest true and complete copies of its monthly financial
statements for each calendar month ending subsequent to the date hereof, in the
format historically utilized by RCG;
(iii) perform in all material respects all obligations under agreements
relating to or affecting its assets, property or rights, except for the failure
of which performance would not have a material adverse effect on the business
of RCG, financial or otherwise; and
(iv) notify RenalWest of (i) any event or circumstance which is reasonably
likely to have a material adverse effect on RCG or would cause or constitute a
breach of any of RCG's representations, warranties or covenants contained
herein; or (ii) any unexpected change in the normal course of business or in
the operation of RCG's assets, and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), adjudicatory proceedings, budget meetings or submissions
involving any material property. RCG agrees to keep RenalWest fully informed
of such events and to permit RenalWest's representatives prompt access to all
materials prepared in connection therewith.
8.6 Negative Covenants of RCG. (a) From the date hereof until the
earlier of the Effective Time or the termination of this Agreement, RCG
covenants and agrees that it will not do any of the following without the prior
written consent of RenalWest:
(i) take any action that would (a) adverse affect the ability of any
party to the Merger Documents to obtain any consents required for the
transactions contemplated thereby, or (b) adversely affect the ability of any
party hereto to perform its covenants and agreements under the Merger
Documents; or
(ii) amend any of its organizational or governing documents, except for
the purpose of accomplishing the transactions contemplated by this Agreement.
(b) From the date hereof until the earlier of the Effective Time or the
termination of this Agreement, RCG covenants and agrees that it will not do any
of the following without first notifying RenalWest of its intent:
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26
(i) other than pursuant to the Merger Documents, issue, sell, pledge,
encumber or enter into any contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional capital stock of RCG, except for the granting of stock options to
employees and consultants in the ordinary course;
(ii) adjust, split or reclassify any outstanding capital stock of RCG
or authorize the issuance of any other securities in respect of, or in
substitution for, or in addition to, any outstanding capital stock of RCG, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any asset
having a book value in excess of $100,000 other than in the ordinary course of
business for reasonable and adequate consideration;
(iii) except for normal and customary cash management activities,
purchase any securities or make any material investment, either by purchase of
stock or other securities, contributions to capital, asset transfers, or
purchase of any assets, in any entity, or otherwise acquire direct or indirect
control over any other entity; or
(iv) take any action, or omit to take any action, which would cause any
of the representations and warranties contained in Article 7 to be untrue or
incorrect.
8.7 Confidentiality, Public Announcements. The parties hereby affirm and
ratify the terms of that certain letter agreement, dated June 27, 1996, among
them concerning confidentiality, public announcements and related matters,
which agreement remains valid and binding among the parties notwithstanding
Section 15.9 hereof.
8.8 Confidentiality, Noncompetition and Nonsolicitation. (a) Each Owner
agrees that, for a period of ten (10) years after the Effective Time, Owner
will not in any manner, directly or indirectly, by himself or herself or in
conjunction with any other person, conduct activities that are competitive with
the business of the Companies or acquire, establish or own any financial,
beneficial or other interest in (other than an interest consisting of less than
one percent (1%) of a class of publicly traded security), make any loan to or
for the benefit of, or render any managerial, marketing or other business
advice, to any entity that is then conducting activities that are competitive
with the business of the Companies, in either case within a geographic
territory defined as the seventy-five (75) mile radius of the Companies'
current locations (the "Territory"). For purposes of this Section the
"business of the Companies" shall mean owning or operating a renal dialysis
center, unit or facility or providing renal dialysis supplies or services to
any other center, unit or facility or any acute care facility or any home renal
dialysis patient, including the provision of pharmaceuticals or laboratory
services.
(b) Each Owner further agrees that, for a period of ten (10) years after
the Effective Time, Owner will keep confidential and not directly or indirectly
divulge to anyone or use or otherwise appropriate for Owner's own benefit or
for the benefit of others, any knowledge or information of a confidential
nature with respect to the business of the Companies, RCG, or any of their
affiliates, including all trade secrets, pricing information, marketing
information or technical information (hereinafter referred to as the
"Confidential Data"), except for (i) a disclosure that is required by law; or
(ii) information that has been made generally available to the public by the
act of one who has the right to disclose such information. Each Owner hereby
acknowledges and agrees that the prohibitions against disclosure of
Confidential Data recited herein are in addition to, and not in lieu of, any
rights or remedies which RCG may have available pursuant to the laws of any
jurisdiction or at common law to prevent the disclosure of confidential
information, and the enforcement by RCG of its rights and remedies pursuant
hereto shall not be construed as a waiver of any other rights or available
remedies which RCG may possess in law or equity. Each Owner acknowledges that
RCG has taken reasonable and appropriate steps to ensure the confidentiality
and non-disclosure of all such Confidential Data.
(c) Each Owner also agrees that, for a period of ten (10) years after the
Effective Time, Owner will not, for his or her own benefit or the benefit of
others, solicit any person or entity that has
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27
had, or disrupt or attempt to disrupt, any relationship, contractual or
otherwise (including with any patient, payor, physician, provider, managed care
organization or supplier), with RCG or any of its affiliates (including the
Companies), for the purpose of assisting, or creating such a relationship for,
any business entity that is conducting activities competitive with the business
of the Companies within the Territory.
(d) Each Owner further agrees that, for a period of ten (10) years after
the Effective Time, Owner shall not induce, nor attempt to induce, any employee
of RCG, or any of its affiliates (including the Companies), to terminate his or
her association with any such party.
(e) The covenants contained in this Section 8.8 are considered by the
parties hereto to be fair, reasonable and necessary for the protection of RCG
and the Companies. The parties mutually agree that if a violation of any
covenant contained in this Section 8.8 occurs, such violation or threatened
violation will cause irreparable injury to RCG and the Companies and the remedy
at law for any such violation or threatened violation will be inadequate. Each
Owner therefore agrees that RCG shall be entitled to appropriate equitable
relief, including but not limited to a temporary restraining order or a
preliminary injunction, in addition to any other remedy that might be available
at law or in equity.
(f) Nothing in this Section 8.8 shall be deemed to prohibit any Owner who
is a physician from exercising his or her medical judgment concerning the
treatment of his or her patient in any manner whatsoever in any location
whatsoever, and shall not be deemed to require the referral of any such patient
to any facility of RCG or any of its affiliates.
(g) The foregoing ten (10) year periods in this Section 8.8 are subject to
RCG obtaining from its physician stockholders owning at least sixty percent
(60%) of the RCG Common Stock issued to its physician stockholders in
connection with the acquisition by RCG of their dialysis centers (the "Required
Physicians"), revisions where needed to similar agreements with such Required
Physician extending their corresponding periods of coverage to ten (10) years
from their original starting date. In the event that the Required Physicians
are not subject to such ten year periods prior to or at the Closing, then the
foregoing ten (10) year periods in this Section 8.8 shall be reduced to the
longest corresponding period of time to which the Required Physicians are or
become subject.
8.9 Medical Director Agreements. The parties hereto agree that the
Company and each affiliated physician practice that has a physician member or
employee involved with the use, operation of or referral of patients to the
Company's dialysis facilities (the "Practices"), shall enter into a Medical
Director Agreement at Closing under which the Practices shall provide medical
director services to the Company for the dialysis facilities operated by the
Company. Such Medical Director Agreement shall have an initial term of seven
(7) years with renewal terms for additional three year periods and shall
provide for (i) an aggregate annual fee to be paid by RCG to the Practices of
$840,000 (subject to agreed upon modifications) to be divided among the
Practices at the Practices' discretion, (ii) certain restrictive covenants,
including but not limited to a covenant not to compete with a duration of the
term of the Medical Director Agreement and three (3) years after termination of
the Medical Director Agreement, and (iii) other customary terms and conditions.
The Owners agree that a Medical Director Agreement substantially in the form
of Exhibit 8.9 attached hereto will be entered into at the Closing by them and
their practices.
8.10 Right of First Refusal. The Owners recognize the opportunities to
provide care for End Stage Renal Disease in an integrated manner and agree to
work in good faith with RCG to pursue opportunities for RCG and its affiliates
to offer the full range of dialysis services, including physician and
transplant services, to payors, health maintenance and other managed care
organizations. Furthermore, the Owners agree to work in good faith with RCG or
any of its affiliates for the provision of medical director services for
dialysis treatment and for the provision of nephrology physician services at
the facilities of RCG acquired from or operated through the Company after the
Closing, and agree that for a period of three years from the Closing Date, the
Owners will allow RCG to have a right of first refusal with respect to any
proposed contract or other arrangement with a third party for the sale or
management of the Owner's medical practice on the same terms and conditions as
proposed by such third party, provided that such offer
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shall not apply to any a transaction in which the Owner's medical practice
would join the multispecialty physician group from which the Owner's
practice has received substantially all of its patient referrals. RCG or any
of its affiliates may accept the offer by giving written notice of such
acceptance at any time within 20 days following receipt of written notice of
the offer. No activities of any Owner under this Section 8.10 shall be deemed a
violation of Section 8.8 hereof.
8.11 Delivery of Schedules. As soon as reasonably practical following the
execution hereof, the Companies and the Owners shall deliver all Schedules to
be delivered by them to RCG and its counsel accompanied by a certificate,
executed by the Companies and the Owners stating that all Schedules required to
be delivered by them hereunder have been delivered. The Companies and the
Owners understand and acknowledge that RCG's obligation to consummate the
Closing is subject to its satisfactory review of said Schedules as contemplated
by Section 9.6 hereof. After receipt of all such Schedules and the
certificate, RCG shall complete its review of said Schedules and notify the
Company of its satisfaction with said Schedules at least ten (10) days prior to
Closing.
8.12 Availability of Rule 144 Information. For so long as RCG is subject
to the 1934 Act, RCG shall take all actions necessary to enable the Owners to
sell any shares of RCG Stock received by them without registration under the
1933 Act within the limitations of the exemption provided by Rule 144 under the
1933 Act, as such rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission,
including filing on a timely basis all reports required to be filed by the 1934
Act. Upon the request of an Owner, RCG shall deliver to such Owner a written
statement as to whether it has complied with such requirements.
8.13 Approval of Transactions. Subject to Article 11 hereof, each Owner,
through the execution and delivery of this Agreement, irrevocably votes for and
approves the Merger in its capacity as a holder of Company Equity Securities
and each such Owner does hereby waive any required notice for any meeting
concerning such matters. Subject to Article 11 hereof, at any further meeting
of the Owners of the Company called to vote on the Mergers or in any other
circumstances upon which a vote, consent or other approval with respect to the
Mergers is sought, such Owner shall vote (or cause to be voted), such Owner's
Company Equity Securities in favor of the Mergers and the execution, delivery
and performance by the Companies of the Merger Documents. Each Owner
acknowledges and agrees that he, she or it has had adequate opportunity to
review the terms and conditions of the Mergers and to seek independent legal,
tax and financial advice.
8.14 Accounting and Tax Treatment. Each of the parties undertakes and
agrees to use its reasonable efforts to cause the Mergers, and to take no
action which would cause the Mergers not, to qualify for pooling-of-interests
accounting treatment and treatment as a "reorganization" within the meaning of
Section 368(a) of the Code for federal income tax purposes. Each Owner agrees
that he will not sell, transfer, or otherwise dispose of his interests in, or
reduce his risk relative to, any of the shares of RCG Common Stock into which
his shares of Company Common Stock are converted upon consummation of the
Merger until such time as the requirements of SEC Accounting Series Release
Nos. 130 and 135 ("ASR 130 and 135") have been met. Each Owner understands
that ASR 130 and 135 relate to publication of financial results of post-Merger
combined operations of RCG and the Companies. RCG agrees to promptly notify
the Owners following satisfaction of the requirements of ASR 130 and 135.
8.15 Resignation and Releases. Simultaneously with the execution and
delivery of this Agreement, each officer, director and Owner of the Companies
shall deliver a Resignation and Release, to be effective as of the Closing, in
the form of Exhibit 8.15 to this Agreement.
8.16 Representations on RCG Board of Directors and Medical Advisory Board.
RCG agrees that it shall at the Closing increase the number of members to its
Board of Directors by one and add an individual specified by the Companies as a
new member, with such member subject to the reasonable approval of RCG, to
serve an initial term ending on the date of RCG's 1999 Annual Meeting of its
stockholders. Further, RCG shall recommend to its stockholders at such 1999
Annual Meeting that such
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designee, or such other designee reasonably approved by RCG, serve for
an additional three (3) year term as a member of the Board of Directors of
RCG. Furthermore, RCG agrees to name a physician specified by the Companies,
who shall be subject to the reasonable approval of RCG, as a member of RCG's
Medical Advisory Board.
8.17 Grant of Options. At Closing, RCG shall grant options to purchase an
aggregate of 270,000 shares of RCG Common Stock to employees of the Companies.
Such options shall (i) to the extent possible be granted under RCG's 1996 Stock
Option Plan, (ii) be non-qualified stock options for tax purposes, (iii) be
allocated among the employees or consultants of the Companies in a manner
mutually agreed with RCG prior to the Closing, (iv) vest over a five-year
period, and (v) have exercise prices equal to the closing price of the RCG
Common Stock on the Nasdaq National Market on the Closing Date. The additional
terms of said options shall be commensurate with similar stock options granted
generally by RCG to similarly situated employees and affiliates of RCG.
8.18 Arizona Operations. RCG agrees that the main office of RenalWest in
Mesa, Arizona, will serve as the executive headquarters of RCG's southwest
region, which will include the existing operations of the Companies in Mesa
plus all centers newly developed or acquired in the states of Arizona, New
Mexico, Colorado, Utah, Nevada and California (the "Southwest Region"), and
that Xxxx Xxxxxx, the current Chief Executive Officer of RenalWest, will serve
as the Chief Operating Officer of the Southwest Region while he is employed
with RCG. The foregoing covenant shall expire upon the later to occur of the
fifth anniversary of the Closing Date or the date on which Xxx X. Xxxxxx, Xx.
ceases to serve as the Chief Executive Officer of RCG.
8.19 Pre-Closing Distributions to Members. The parties intend and agree
that, solely in a manner consistent with prior practices, the income of
RenalWest earned prior to the Closing shall be distributed to the Members and
that the Members shall distribute such income to the Owners. Such
distributions by RenalWest shall be made in accordance with the respective
ownership interests therein of the Members and such distributions to the Owners
shall be made in accordance with their respective ownership of the Members, all
of which shall be consistent with past practices. The Owners agree that they
shall be responsible for their personal income tax liability resulting from
such distributions. RCG agrees to provide reasonable cooperation to assist
with the accounting and completion of such distributions.
8.20 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, the Members and the Merger Corps. shall execute
and file Articles of Merger with the Secretary of State of Arizona in
connection with the Closing.
8.21 Availability of Books and Records. RCG agrees to cause the Companies
to make available in a reasonable manner the books and records of the Companies
to enable the Owners to complete the tax returns and other matters described in
Section 5.19 and for general review by the Owners for a period of three (3)
years following the Closing.
8.22 Conditions to Closing. The Owners, the Companies and RCG agree to
use their commercially reasonable efforts to satisfy the closing conditions set
forth in Articles 9 and 10 of this Agreement by September 30, 1996, and if not
by such time, as soon thereafter as possible.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF RCG AND MERGER CORP.
The obligation of RCG and the Merger Corps. to consummate the Mergers is
subject to the satisfaction or waiver, at or prior to Closing, of each of the
following conditions:
9.1 Representations and Warranties. The representations and warranties of
the Companies and the Owners set forth in this Agreement, or any document or
instrument delivered to RCG hereunder,
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shall be true and correct as of the Effective Time with the same force
and effect as if such representations and warranties had been made at and as of
the Effective Time, except with respect to any of such representations and
warranties referring to a state of facts existing on a specified date prior to
the Closing Date, it shall be sufficient if at the Effective Time such
representation and warranty continues to describe accurately the state of facts
existing on the date so specified.
9.2 Performance; Covenants. All of the terms, covenants and conditions of
the Merger Documents to be complied with or performed by the Companies or the
Owners at or prior to Closing shall have been complied with and performed in
all material respects including, but not limited to, the delivery of the
following documents:
(a) A good standing certificate regarding the Companies, certified by the
Secretary of State of Arizona dated within fifteen (15) business days of the
Closing;
(b) A certificate dated as of the Closing Date signed by the duly
authorized officers of the Companies and by the Owners certifying the
satisfaction of the condition in Section 9.1 and that the Companies and each of
the Owners have fulfilled all of the conditions of this Article 9;
(c) Written consents of all third parties necessary for the consummation
of the transactions contemplated by the Merger Documents;
(d) Resolutions of the Companies (Board and shareholder) in form and
substance reasonably satisfactory to RCG approving the execution, delivery and
performance of this Agreement and the consummation of the Mergers, certified by
an appropriate officer of the Companies;
(e) An incumbency certificate certifying the identity of the officers of
the Companies; and
(f) Resignations and Release of each of the officers, directors and Owners
of the Companies (as applicable) effective as of the Effective Time;
(g) The Medical Director Agreements entered into by the Practices as
described in Section 8.9;
(h) All books and records of the Companies, including all corporate and
other records, minute books, stock record books, stock registers, books of
accounts, contracts, agreements and such other documents or certificates as
shall be reasonably requested by RCG; and
(i) All agreements or arrangements, whether written or oral, among the
Owners and/or the Companies that relate in any manner to the Company Equity
Securities shall have been terminated.
9.3 Necessary Consents and Approvals. RCG, the Companies and the Owners
shall have obtained all licenses, consents and permits, provided all notices,
and all waiting periods required by Law shall have expired, necessary in order
for RCG, the Merger Corps. and the Companies to consummate the Mergers and for
the continued operation of the business of the Company after the Effective Time
consistent with their operation prior to the Effective Time, including all
consents and approvals listed on the Schedules hereto.
9.4 No Material Adverse Change. There shall not have occurred any
material adverse change in the business, assets, liabilities or condition,
financial or otherwise, of the Companies, taken a whole, between the date
hereof and the Effective Time, and a certificate shall have been delivered to
RCG to such effect signed by each of the Owners and such executive officers of
the Companies as RCG may request.
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9.5 No Injunction, Etc. No action, proceeding, investigation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency, or legislative body to enjoin, restrain, prohibit
or obtain substantial damages in respect of, or which is related to, arises out
of, this Agreement or the consummation of the Mergers, or which is related to
or arises out of the business or operations of the Companies, if such action,
proceeding, investigation or legislation, in the reasonable judgment of RCG or
its counsel, would make it inadvisable to consummate such transactions.
9.6 Satisfactory Due Diligence. RCG shall in all respects be reasonably
satisfied with the results of its due diligence investigation of the Company,
including its continuing review of matters contained or not contained in the
Schedules.
9.7 Legal Opinion. RCG shall have received an opinion of counsel to the
Company and Owners in form and substance reasonably satisfactory to RCG .
9.8 Pooling Letter. RCG shall have received, from Ernst & Young LLP,
assurances in form and substance reasonably acceptable to RCG to the effect
that the Mergers will qualify for pooling-of-interests accounting treatment.
9.9 Stockholder Approval. The Mergers shall have been approved by the
stockholders of RCG.
9.10 Employment Agreements. Each of Xxxx Xxxxxx, Xxxx Xxxxxxxxx and Xxx
Xxxxxx shall have entered into an Employment Agreement in form and substance
reasonably satisfactory to RCG.
9.11 Dissenter's Rights. No Owner shall have exercised dissenter's or
appraisal rights under any applicable law in respect of the Mergers.
ARTICLE 10
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE OWNERS
The obligations of the Companies and the Owners to close the Mergers are
subject to the satisfaction or waiver, at or prior to Closing, of each of the
following conditions:
10.1 Representations and Warranties. The representations and warranties
of RCG and the Merger Corp. set forth in this Agreement, or any document or
instrument delivered to any party hereunder, shall be true and correct as of
the Effective Time with the same force and effect as if such representations
and warranties had been made at and as of the Effective Time, except with
respect to any of such representations and warranties referring to a state of
facts existing at a specified date prior to the Closing Date, it shall be
sufficient if at the Effective Time such representation and warranty continues
to describe accurately the state of facts existing on the date so specified.
10.2 Performance; Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by RCG at or prior to the
Closing shall have been complied with and performed in all material respects,
including, but not limited to delivery of the following documents:
(a) A good standing certificate regarding the Merger Corps. certified
by the Secretary of State of Arizona, each dated within 15 days prior to
Closing;
(b) A certificate dated as of the Closing Date signed by a duly
authorized officer of RCG and the Merger Corps. certifying the satisfaction of
the condition in Section 10.1 and that RCG and the Merger Corps. have fulfilled
all of the conditions of this Article 10;
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(c) Resolutions adopted by the Board of Directors of RCG and the Board
of Directors and shareholder of the Merger Corps. in form and substance
satisfactory to the Companies and the Owners approving the execution, delivery
and performance of this Agreement and the consummation of the Mergers,
certified by the Secretary of RCG and the Merger Corps., respectively;
(d) The Medical Director Agreement entered into by RCG as described in
Section 8.9; and
(e) An incumbency certificate certifying the identity of the officers of
RCG.
10.3 Necessary Consents and Approvals. RCG, the Companies and the Owners
shall have obtained all licenses, consents and permits, provided all notices,
and all waiting periods required by Law shall have expired, necessary in order
for RCG, the Merger Corps. and the Companies to consummate the Mergers and for
the continued operation of the business of the Company after the Effective Time
consistent with their operation prior to the Effective Time, including all
consents and approvals listed on the Schedules hereto.
10.4 No Material Adverse Change. There shall not have occurred any
material adverse change in the business, assets, liabilities or condition,
financial or otherwise, of RCG between the date hereof and the Effective Time,
and a certificate shall have been delivered to the Companies and the Owners to
such effect signed by an authorized officer of RCG.
10.5 No Injunction, Etc. No action, proceeding, investigation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency, or legislative body to enjoin, restrain, prohibit
or obtain substantial damages in respect of, or which is related to, arises out
of, this Agreement or the consummation of the Mergers, or which is related to
or arises out of the business or operations of RCG, if such action, proceeding,
investigation or legislation, in the reasonable judgment of the Companies or
their counsel, would make it inadvisable to consummate such transactions.
10.6 Legal Opinion. The Owners shall have received an opinion of counsel
to RCG in form and substance reasonably satisfactory to the Owners.
10.7 SEC and Exchange Approval. RCG shall have taken all actions and
complied in all material respects with requirements necessary to notify and
obtain any consents from the SEC, Nasdaq and any state securities law
regulatory agency of all actions contemplated by this Agreement.
10.8 Approval of Registration Rights. RCG shall have obtained the
requisite approval of its stockholders currently holding registration rights
for the grant of the registration rights provided to the Owners in Article 13
hereof.
10.9 Satisfactory Due Diligence. The Owners shall in all respects be
reasonably satisfied with the results of the due diligence investigation of
RCG.
10.10 Pooling Letter. RCG shall not have waived the condition in Section
9.8.
10.11 Employment Agreements. RCG shall have caused RenalWest to enter
into an employment agreement with each of Xxxx Xxxxxx, Xxxx Xxxxxxxxx and Xxx
Xxxxxx on terms and conditions reasonably satisfactory to and approved by
RenalWest prior to the Closing.
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ARTICLE 11
TERMINATION
11.1 Right of Termination. This Agreement and the Mergers may be
terminated at any time prior to the Closing Date:
(a) By the mutual written consent of RCG and each Company.
(b) By RCG or the Companies as contemplated in Section 3.1(b)(iii) and
(v).
(c) By RCG in the event that the conditions set forth in Article 9 of this
Agreement shall not have been satisfied or waived by October 31, 1996, unless
such satisfaction shall have been frustrated or made impossible by any act or
failure to act of RCG.
(d) By the Companies in the event that the conditions set forth in Article
10 of this Agreement shall not have been satisfied or waived by October 31,
1996, unless such satisfaction shall have been frustrated or made impossible by
any act or failure to act of any Company or one or more of the Owners.
(e) By the Companies or RCG if the Closing shall not have occurred by
November 30, 1996.
11.2 Effect of Termination. In the event of termination in accordance
with Section 11.1, this Agreement shall become void and of no further force or
effect, without any liability on the part of any of the parties hereto or their
respective owners, directors, officers or employees, except the obligations of
each party to preserve the confidentiality of documents, certificates and
information furnished to such party pursuant thereto and for any obligation or
liability of any party based on or arising from any breach or default by such
party with respect to its representations, warranties, covenants or agreements
contained in the Merger Documents.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnification by Owners. (a) Subject to Sections 12.3 through
12.6, each Owner shall, severally and not jointly, indemnify and hold harmless
RCG, the Surviving Corporations and their respective officers, directors,
agents or affiliates, from and against any and all demands, claims, actions or
causes of action, assessments, losses, diminution in value, damages (including
special and consequential damages), liabilities, costs and expenses, including
but not limited to reasonable attorneys' fees ("Losses"), suffered or incurred
by any such party by reason of or arising out of any of the following:
(i) the breach of any representation or warranty contained in Article 6
hereof or in any document or instrument delivered by such Owner in connection
with the Merger Documents; and
(ii) the non-fulfillment of any covenant or agreement of such Owner
contained in the Merger Documents.
(b) Subject to Sections 12.3 through 12.6, the Owners shall jointly and
severally indemnify and hold harmless RCG, the Surviving Corporations and their
respective officers, directors, agents or affiliates, from and against any and
all demands, claims, actions or causes of action, assessments, losses,
diminution in value, damages (including special and consequential damages),
liabilities, costs and
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expenses, including but not limited to reasonable attorneys' fees
("Losses"), suffered or incurred by any such party by reason of or arising out
of any of the following:
(i) the breach of any representation or warranty contained in Article 5
hereof or in any document or instrument delivered by the Companies in
connection with the Merger Documents; and
(ii) the non-fulfillment of any covenant or agreement of the Companies
contained in the Merger Documents.
(c) No claim for indemnification with respect to any alleged
misrepresentation or breach of warranty may be made (i) thirty days after the
first publication by RCG of audited consolidated financial statements covering
an accounting period after the Closing Date for those items that would be
expected to be encountered in the audit process or (ii) one (1) year after the
Closing Date for all other items; provided, however, that the right to
indemnification shall extend beyond such period with respect to any specific
claim for indemnification for which written notice was given to the Owners
during such period but shall expire on the expiration of the applicable
statutes of limitations unless an action has been brought with respect thereto.
12.2 Indemnification by RCG. (a) Subject to Sections 12.3 through 12.6,
RCG shall indemnify and hold harmless the Owners, and any of their officers,
directors, agents and affiliates, at all times after the date hereof from and
against any and all Losses suffered or incurred by any such party by reason of,
or arising out of any of the following:
(i) any misrepresentation, breach of warranty or breach or
non-fulfillment of any agreement of RCG contained in any Merger Document or any
document or instrument delivered by RCG in connection therewith; and
(ii) the non-fulfillment of any covenant or agreement of RCG contained
in the Merger Documents hereof.
(b) No claim for indemnification with respect to any alleged
misrepresentation or breach of warranty may be made (i) thirty days after first
publication by RCG of audited consolidated financial statements covering an
accounting period after the Closing Date for those items that would be expected
to be encountered in the audit process or (ii) one (1) year after the Closing
Date for all other items; provided, however, that the right to indemnification
shall extend beyond such period with respect to any specific claim for
indemnification for which written notice was given to RCG during such period
but shall expire on the expiration of the applicable statutes of limitations
unless an action has been brought with respect thereto.
12.3 Notice and Opportunity to Defend. The party indemnified under this
Article 12 (the "Indemnified Party") shall promptly notify in writing the
indemnifying party (the "Indemnifying Party") of any matter giving rise to an
obligation to indemnify and the Indemnifying Party shall defend such claim at
its expense with counsel reasonably acceptable to the Indemnified Party,
provided that the Indemnifying Party may not settle any such claim without the
consent of the Indemnified Party. The Indemnified Party agrees to cooperate
with the Indemnifying Party and to make reasonably available to the
Indemnifying Party any necessary records or documents in the possession of the
Indemnified Party which are necessary to defend such claim. If the
Indemnifying Party does not defend or settle such claim, the Indemnified Party
may do so without the Indemnifying Party's participation, in which case the
Indemnifying Party shall pay the expenses of such defense, and the Indemnified
Party may settle or compromise such claim without the Indemnifying Party's
consent. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations hereunder
except to the extent that the Indemnifying Party is actually prejudiced by such
failure to give notice.
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12.4 Indemnification Deductible. Except with respect to any
indemnification claim under Sections 12.1(a)(ii), 12.1(b)(ii) or 12.2(a)(ii),
no Indemnifying Party (with the Owners as a group deemed as a single
Indemnifying Party for this purpose) shall be required to indemnify the
Indemnified Party (with the Owners as a group deemed as a single Indemnifying
Party for this purpose) unless the amount of the loss or claim for which
indemnification is sought, when aggregated with all other losses and claims for
which indemnification is sought by the Indemnified Party (with the Owners as a
group deemed as a single Indemnifying Party for this purpose), exceeds
$200,000, at which time rights to indemnification for losses and claims may be
asserted for any amounts in excess of $200,000.
12.5 Indemnification Limit.
(a) In no event shall any Owner be required to satisfy an indemnification
obligation in excess of one hundred percent (100%) of the aggregate value of
the shares of RCG Common Stock (valued at the Average Trading Price) to be
received by such Owner and in no event shall RCG be required to satisfy an
indemnification obligation in excess of one hundred percent (100%) of the
aggregate value of all of the shares of RCG Common Stock (valued at the Average
Trading Price) issued as consideration hereunder.
(b) The obligations to indemnify under this Article 12 shall be satisfied
solely and exclusively by means of delivery by the Indemnifying Party to the
Indemnified Party of shares of RCG Common Stock whose Average Trading Price
equals the amount for which the Indemnified Party is entitled to be
indemnified, provided that the Owners shall be obligated to satisfy their
indemnification obligation in cash to the extent that they no longer hold a
sufficient number of shares of RCG Common Stock to satisfy their obligation.
12.6 Survival, Exclusivity and Insurance. The representations and
warranties of the parties contained in the Merger Documents or in any document
or instrument delivered in connection therewith shall survive the Closing and
shall not be extinguished thereby notwithstanding any investigation or other
examination by any party, provided that from and after the Closing the remedies
set forth in this Article 12 shall constitute the sole and exclusive remedy for
any inaccuracy or breach of any such representation or warranty. The
limitations contained in this Article 12 shall not apply to fraud or
intentional misrepresentation.
ARTICLE 13
REGISTRATION RIGHTS
13.1 General.
(a) For purposes of this Article 13, (i) the term "Registrable Securities"
means (1) the RCG Common Stock issued to the Owners pursuant to this Agreement
and (2) any security issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of (pursuant
to any reorganization, recapitalization, business combination or otherwise),
such RCG Common Stock and (ii) the term "Holder" means the Owners or a
transferee of Registrable Securities to which the Owners may transfer their
registration rights pursuant hereto, but not a transferee of any such
transferee.
(b) RCG hereby grants to the Holders the right to include their
Registrable Securities in a registration for resale upon the same terms and
conditions as granted by RCG to its existing stockholders (the "Founding
Stockholders"), a copy of which registration rights is attached hereto as
Appendix A and which are hereby granted and made applicable to the Owners with
the following modifications:
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(i) RCG will undertake reasonable commercial efforts to file a
registration statement for the Secondary Offering described in Section 1.2(a)
of Appendix A with the SEC by November 30, 1996 and thereafter to take
reasonable commercial efforts to have said registration statement declared
effective by the SEC as soon as practicable.
(ii) To the extent permissible under the "pooling of interests" rules
described in Section 8.14 of this Agreement, the Owners shall have the right to
include up to forty percent (40%) of their aggregate Registrable Securities in
any such Secondary Offering, provided that said Registrable Securities are
allocated among the Owners in a manner reasonably acceptable to RCG.
(iii) The Owners, acting by a majority in interest, shall have the
right independently to elect the demand registration rights described in
Section 1.2(a) of Appendix A and shall have the right to include up to twenty
percent (20%) of their Registrable Securities in any such demand registration.
(iv) Notwithstanding Section 1.11 of Appendix A, the rights granted in
this Article 13 shall not expire until the expiration of the holding period
specified in paragraph (d) of Rule 144 under the 1933 Act with respect to the
Registrable Securities, as said Rule may be amended after the date hereof.
(v) Notwithstanding Section 1.2(c) of Appendix A, if Holders (i.e.,
Owners and their transferees as defined in this Agreement) proposing to
distribute their Registrable Securities shall be prevented from including at
least eighty percent (80%) of the Registrable Securities proposed to be
distributed by them, then RCG shall be obligated to effect one (1) additional
demand registration pursuant to Section 1.2 upon the request of Holders.
(vi) Notwithstanding Section 1.3 of Appendix A, the Holders shall have
the right to include up to forty percent (40%) of their aggregate Registrable
Securities in any such Piggy-Back Registration.
(vii) Notwithstanding Section 1.9 of Appendix A, any Holder's
registration rights hereunder may be assigned to a permitted transferee or
assignee of Registrable Securities, provided that RCG is given written notice
by such Holder at the time of or within a reasonable time of after such
transfer, stating the name and address of said transferee or assignee and
identifying the Registrable Securities with respect to which such registration
rights are being assigned. Any transferee shall, as a condition of such
transfer, agree that all transferred Registrable Securities are subject to the
terms, conditions, provisions and agreement of this Agreement.
(c) The foregoing rights in Section 13.1(b) are subject to RCG obtaining
the written consent of the Founding Stockholders as required by Section 1.10 of
Appendix A.
(d) RCG agrees to undertake reasonable commercial efforts to satisfy the
reporting requirements described in Section 8.14 in a manner to enable the
Owners to participate in the Secondary Offering described above and to take
other reasonable and appropriate actions to enable the owners to participate in
such Secondary Offering. In the event that such Secondary Offering occurs and
the Owners are not able to participate through no fault of them or the
Companies, then RCG agrees to provide reasonable assistance to the Owners to
aid them in obtaining a loan or loans from a third party (such loan secured by
an adequate amount of their shares of Common Stock) until June 30, 1997 (the
"Maturity Date"), including, if necessary, a guaranty by RCG to such third
party lender of up to an aggregate of $1,500,000 of such loan or loans (such
guaranty by RCG to be secured by an adequate number of the Owners' shares of
RCG Common Stock and allocated among such Owner loans at their discretion). If
such loan or loans are not available on terms and conditions otherwise
reasonably acceptable to the Owners, RCG agrees to provide a loan or loans
directly to the Owners of up to an aggregate amount of $1,500,000 (to be
allocated among the Owners at their discretion) which (i) mature on the
Maturity Date (ii) contain terms and
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conditions to the Owners no less favorable than are available to RCG
from its third party lenders, and (iii) are secured by an adequate number of
shares of RCG Common Stock. Either of the loan or loans described in this
Section 13.1(d) shall be paid prior to the Maturity Date to the extent of the
first available proceeds from any resale of the Owner's shares of RCG Common
Stock under the registration rights provided herein.
ARTICLE 14
CERTAIN DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth below
shall have the following meanings:
"ABCA" shall mean the Arizona Business Corporation Act.
"Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits and Schedules delivered pursuant hereto and incorporated herein by
reference.
"Articles of Merger" shall mean the Articles of Merger to be executed by
the Merger Corps. and the Members and filed with the Secretary of State of
Arizona relating to the Mergers as contemplated by Section 1.1 of this
Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company Equity Securities" shall mean the equity securities of each
Company of any type, including but not limited to common stock, preferred
stock, options to purchase the foregoing and securities convertible into any of
the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean, with respect to any entity, any other
entity, which, together with such entity, would be treated as a single employer
(i) under Section 414(b) or (c) of the Code or (ii) for purposes of any Benefit
Plan subject to Title IV of ERISA, under Section 414(b), (c), (m) or (o) of the
Code.
"Exhibits" shall mean the Exhibits so marked, copies of which are attached
to this Agreement. Such Exhibits are hereby incorporated by reference herein
and made a part hereof, and may be referred to in this Agreement and any other
related instrument or document without being attached hereto.
"HSR Act" shall mean Section 7A of the Xxxxxxx Act, as added by Title II
of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a person or its assets,
Liabilities or business, including those promulgated, interpreted or enforced
by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course
of business) of any type, whether accrued, absolute or contingent, liquidated
or unliquidated, matured or unmatured, or otherwise.
"Member Common Stock" shall mean the common stock of the Members.
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"Merger Corp. Common Stock" shall mean the $0.01 par value common
stock of each Merger Corp.
"Merger Documents" shall mean the Merger Agreement, including these
terms and conditions, and all other agreements, instruments and documents to be
executed and delivered in connection with the Merger Agreement and the
transactions contemplated hereby.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"RCG Common Stock" shall mean the $0.01 par value common stock of RCG.
"Regulatory Authorities" shall mean, collectively, all federal and
state regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, including the NASD, and the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"Surviving Corporations" shall mean the Members as the surviving
corporations resulting from the Mergers.
(b) In addition to the terms defined in Section 14.1 (a) above, the
terms set forth below shall have the meanings ascribed thereto in the referenced
sections:
Anti-Dilution Event - Section 3.2 Indemnified Party - Section 12.3
Benefit Plans - Section 5.15 Indemnifying Party - Section 12.3
Closing - Section 1.2 IRS - Section 5.19
Closing Date - Section 1.2 Losses - Section 12.1
Company Agreements - Section 5.13 Medicare and Medicaid programs - Section 5.20
Confidential Data - Section 8.7(b) Merger - Section 1.1
Effective Time - Section 1.3 Merger Consideration - Section 3.1(b)
Environmental Condition - Section 5.17 Merger Documents - Section 5.1
Exchange Agent - Section 4.1 Private Programs - Section 5.20
Financial Statements - Section 5.7 RCG Documents - Section 7.8
Government Programs - Section 5.20 Remuneration - Section 5.22
(c) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
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ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1 Notices. (a) Any notice sent in accordance with the provisions of
this Section 15.1 shall be deemed to have been received (even if delivery is
refused or unclaimed) on the date which is: (i) the date of proper posting, if
sent by certified U.S. mail or by Express U.S. mail or private overnight
courier; or (ii) the date on which sent, if sent by facsimile transmission,
with confirmation and with the original to be sent by certified U.S. mail,
addressed as follows:
If to the Owners: c/o Xxxx Xxxxxxxxx
------------------------------
------------------------------
------------------------------
Telecopy Number:
--------------
Copy to Counsel: Squire, Xxxxxxx & Xxxxxxx
Two Renaissance Square
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: 000-000-0000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
If to RCG: Renal Care Group, Inc.
0000 Xxxx Xxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xx. Xxx X. Xxxxxx
Copy to Counsel: Xxxxxx & Bird
One Atlantic Center
0000 X. Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
(b) Any party hereto may change its address specified for notices
herein by designating a new address by notice in accordance with this Section
15.1.
15.2 Owner's Representative. (a) The Owners have and do hereby
irrevocably make, constitute and appoint Xxxx Xxxxxxxxx as their agent (the
"Owner's Representative") and authorize and empower him to fulfill the role of
Owner's Representative hereunder. In the event of the resignation of the
Owner's Representative, the resigning Owner's Representative shall appoint a
successor from among the Owners and who shall agree in writing to accept such
appointment. If the Owner's Representative should die or become incapacitated,
his successor shall be appointed within 15 days of his death or incapacity by a
majority of the Owners, and such successor shall be a Owner. The choice of a
successor Owner's Representative appointed in any manner permitted above shall
be final and binding upon all of the Owners. The decisions and actions of any
successor Owner's Representative shall be, for all purposes, those of a Owner's
Representative as if originally named herein.
(b) Each Owner has made, constituted and appointed and by the execution
of this Agreement hereby irrevocably makes, constitutes and appoints the
Owner's Representative as such person's true and lawful attorney in fact and
agent, for such person and in such person's name, place and stead for all
purposes necessary or desirable in order for the Owner's Representative to take
the actions contemplated by
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the Merger Documents on behalf of the Owners, with the ability to execute and
deliver all instruments, certificates and other documents of every kind
incident to the foregoing to all intents and purposes and with the same effect
as such Owner could do personally, and each such Owner hereby ratifies and
confirms as his, her, or its own act, all that the Owner's Representative shall
do or cause to be done pursuant to the provisions hereof. All Claim Notices
and all other notices and communications directed to Owners under this
Agreement shall be given to the Owner's Representative.
(c) The death or incapacity of any Owner shall not terminate the
authority and agency of the Owner's Representative.
(d) The Owners hereby agree to indemnify the Owner's Representative and
to hold him or her harmless against any and all loss, liability or expense
incurred without bad faith on the part of the Owner's Representative and
arising out of or in connection with his or her duties as Owner's
Representative, including the reasonable costs and expenses incurred by the
Owner's Representative in defending against any claim or liability in
connection herewith.
15.3 Expenses. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, provided, however, all legal, accounting
and other fees and expenses incurred by the Companies and the Owners concerning
the transactions contemplated hereby in excess of $150,000 shall be paid by the
Owners at the Closing or thereafter when due.
15.4 Further Assurances. Each party covenants that at any time, and from
time to time, after the Closing, it will execute such additional instruments
and take such actions as may be reasonably requested by the other parties to
confirm or perfect or otherwise to carry out the intent and purposes of this
Agreement.
15.5 Waiver. Any failure on the part of any party to comply with any of
its obligations, agreements or conditions hereunder may be waived by any other
party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver.
15.6 Assignment. This Agreement shall not be assignable by any of the
parties hereto without the written consent of all other parties.
15.7 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, executors, administrators, successors and assigns. This
Agreement shall survive the Closing and not be merged therein.
15.8 Headings. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a
part of this Agreement.
15.9 Entire Agreement. This Agreement and the Exhibits, Schedules,
certificates and other documents delivered pursuant hereto or incorporated
herein by reference, contain and constitute the entire agreement among the
parties and supersede and cancel any prior agreements, representations,
warranties, or communications, whether oral or written, among the parties
relating to the transactions contemplated by this Agreement. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
15.10 Governing Law; Severability. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Delaware, without
regard to any applicable conflicts of Laws; provided, however, that the
effectiveness and validity of the Mergers and Section 8.7 hereof shall be
governed by the Laws of the State of Arizona. The provisions of this Agreement
are severable and the
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invalidity of one or more of the provisions herein shall not have any effect
upon the validity or enforceability of any other provision.
15.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.12 No Brokers. The Owners, the Companies and RCG each represent to the
others that no broker or finder has been employed in connection with the
transactions hereunder.
15.13 Schedules and Exhibits. All Schedules and Exhibits attached to this
Agreement are by reference made a part hereof.
[Signatures appear on next page]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
ATTEST: RENAL CARE GROUP, INC.
By:
----------------------- ----------------------------
Secretary Title:
--------------------------
[CORPORATE SEAL]
ATTEST: RENAL THREE CORP.
By:
----------------------- ----------------------------
Secretary Title:
--------------------------
[CORPORATE SEAL]
ATTEST: RCG NINE CORP.
By:
----------------------- ----------------------------
Secretary Title:
--------------------------
[CORPORATE SEAL]
ATTEST: RCG FOUR CORP.
By:
----------------------- ----------------------------
Secretary Title:
--------------------------
[CORPORATE SEAL]
ATTEST: RENALWEST, L.C.
By:
----------------------- ----------------------------
Secretary Title:
--------------------------
[CORPORATE SEAL]
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ATTEST: 3-CO.,INC.
By:
----------------------- ----------------------------
Secretary Title:
--------------------------
[CORPORATE SEAL]
ATTEST: 9-CO.,INC.
By:
----------------------- ----------------------------
Secretary Title:
--------------------------
[CORPORATE SEAL]
ATTEST: 4-CO.,INC.
By:
----------------------- ----------------------------
Secretary Title:
--------------------------
[CORPORATE SEAL]
OWNERS:
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