EXHIBIT 1
DRAFT OF 5/28/98
INTEGRATED HEALTH SERVICES, INC.
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2003
STANDBY AGREEMENT
New York, New York
May 29, 1998
Xxxxx Xxxxxx Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Integrated Health Services, Inc., a Delaware corporation (the
"Company"), intends to call for redemption on June 29, 1998 (the "Redemption
Date") all of its 6% Convertible Subordinated Debentures due 2003 (the
"Debentures") at a total redemption price of $1,059.83 per $1,000 principal
amount of Debentures (which amount includes accrued interest to the date of
redemption and the required redemption premium) (the "Redemption Price"). The
Debentures are convertible into shares of the Common Stock, $.001 par value, of
the Company ("Common Stock"), at any time prior to the close of business (5:00
P.M., New York City time) on the Redemption Date.
In order to ensure that the Company will have available
sufficient funds to redeem any Debentures not converted prior to or on the
Redemption Date, the Company desires to make arrangements pursuant to which
Xxxxx Xxxxxx Inc. (the "Purchaser") will, following the Redemption Date,
purchase shares of Common Stock that would have been issuable upon the
conversion of the Debentures that have not been surrendered for conversion prior
to 5:00 P.M., New York City time, on the Redemption Date.
Any reference herein to the Registration Statement, a
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Form S-3 which were
filed under the Exchange Act on or before the Effective Date of the Registration
Statement or the issue date of such Preliminary Prospectus or the Prospectus, as
the case may be; and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the filing
of any document under the Exchange Act after the Effective Date of the
Registration Statement, or the issue date of any Preliminary Prospectus or the
Prospectus, as the case may be, deemed to be incorporated therein by reference.
Certain terms used herein are defined in Section 17 hereof.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to, and agrees with, the Purchaser as set forth below in this Section
1.
(a) The Company meets the requirements for use of Form S-3
under the Act and has prepared and filed with the Commission a
registration statement (file number 333- ) on Form S-3, including a
related preliminary prospectus, for the registration under the Act of
the issuance by the Company of the shares of Common Stock issuable upon
conversion of Debentures and the sale by the Purchaser of any shares of
Common Stock that may be acquired by it hereunder. The Company may have
filed one or more amendments thereto, including a related preliminary
prospectus, each of which has previously been furnished to you. The
Company will next file with the Commission one of the following: either
(1) prior to the Effective Date of such registration statement, a
further amendment to such registration statement, including the form of
final prospectus or (2) after the Effective Date of such registration
statement, a final prospectus in accordance with Rule 424(b). In the
case of clause (2), the Company has included in such registration
statement, as amended at the Effective Date, all information required
by the Act and the rules thereunder to be included in such registration
statement and the Prospectus; provided, however, that the Company makes
no representations or warranties as to the information contained in or
omitted from the Registration Statement or the Prospectus (or any
supplement thereto) in reliance upon and in conformity with information
furnished herein or in writing to the Company by or on behalf of the
Purchaser specifically for inclusion in the Registration Statement or
the Prospectus (or any supplement thereto). As filed, such amendment
and form of final prospectus, or such final prospectus, shall contain
all such required material information, and, except to the extent the
Purchaser shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other
changes (beyond those contained in the latest Preliminary Prospectus)
as the Company has advised you, prior to the Execution Time, will be
included or made therein. If the Registration Statement contains the
undertaking specified by Regulation S-K Item 512(a), the Registration
Statement, at the Execution Time, meets the requirements set forth in
Rule 415(a)(1)(x).
(b) On the Effective Date, the Registration Statement did
or will, and when the Prospectus is first filed (if required) in
accordance with Rule 424(b) and, on the Redemption Date and on the
Closing Date (as defined herein), the Prospectus (and any supplements
thereto) will, comply in all material respects with the applicable
requirements of the Act and the Exchange Act and the respective rules
thereunder; on the Effective Date and at the Execution Time, the
Registration Statement did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus, if not filed
pursuant to Rule 424(b), did not or will
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not, and on the date of any filing pursuant to Rule 424(b), on the
Redemption Date and on the Closing Date, the Prospectus (together with
any supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to the information
contained in or omitted from the Registration Statement or the
Prospectus (or any supplement thereto) in reliance upon and in
conformity with information furnished herein or in writing to the
Company by or on behalf of the Purchaser specifically for inclusion in
the Registration Statement or the Prospectus (or any supplement
thereto).
(c) The Debentures are convertible into Common Stock at a
conversion price of $32.125 per $1,000 principal amount of Debentures.
At the Execution Time, there was outstanding $115,000,000 aggregate
principal amount of Debentures. The redemption of all the outstanding
Debentures has been duly authorized by the Company. By the close of
business on the Business Day following the date of execution hereof,
all of the Debentures will have been duly called for redemption in
accordance with the terms of that certain Indenture dated as of
December 1, 1992 between the Company and The Bank of New York (as
successor to Signet Trust Company) (the "Indenture"); and the right to
convert the Debentures into shares of Common Stock will, as a result of
such calls, expire at 5:00 P.M., New York City time, on the Redemption
Date. Copies of the form of notice of redemption and the related
letter of transmittal (collectively, the "Notice of Redemption") with
respect to the Debentures have been heretofore delivered to you by the
Company. The Debentures have been duly and validly authorized and
issued and constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture, enforceable in accordance
with their terms except as enforcement thereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other laws affecting the enforcement of creditors'
rights generally and by general equitable principles.
(d) The Company has neither taken nor will take, directly
or indirectly, any action designed to cause or result in, or that has
constituted or that might be reasonably expected to cause or result in,
stabilization or manipulation of the price of any security of the
Company to facilitate the conversion of the Debentures (provided that
the Company does not make any representation as to any actions that may
be taken by the Purchaser); and the Company has not distributed and
will not distribute any prospectus or other offering material in
connection with the issue and sale of the Securities (as defined
herein) other than the Registration Statement, any preliminary
prospectus filed with the Commission or the Prospectus or other
material permitted by the Act.
(e) The Registration Statement has become effective; no
stop order suspending the effectiveness of the Registration Statement
is in effect; and
3
no proceedings for such purpose are pending before or, to the knowledge
of the Company, threatened by the Commission.
(f) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, (A) there has been no material adverse change
in the condition (financial or other), business, business prospects,
properties, net worth or results of operations of the Company and its
Subsidiaries (as defined herein) taken as a whole (a "Material Adverse
Effect"), and (B) there have been no transactions entered into by the
Company or any of its Subsidiaries, other than those in the ordinary
course of business, which are material with respect to the Company and
its Subsidiaries taken as a whole.
(g) This Agreement has been duly authorized, executed and
delivered by the Company.
(h) All the outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid
and nonassessable and are free of any preemptive or, except as set
forth in the Prospectus, similar rights and were issued and sold in
compliance with all applicable federal and state securities laws; and
the authorized capital stock of the Company conforms in all material
respects to the description thereof in the Prospectus.
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus,
and is duly registered and qualified to conduct its business and is in
good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does
not have a Material Adverse Effect.
(j) All the Company's subsidiaries (as defined in the Act) included in
Exhibit 21 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, other than those indicated as inactive in such
Exhibit 21, are referred to herein individually as a "Subsidiary" and
collectively as the "Subsidiaries." Each Subsidiary is a corporation or
limited partnership duly organized, validly existing and in good
standing in the jurisdiction of its organization, with full corporate
or partnership power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus,
and is duly registered and qualified to conduct its business and is in
good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or be
in good standing does not have a Material Adverse Effect. None of the
subsidiaries of the Company other than the Subsidiaries is engaged in
any business activities or operations or has any material
4
assets or liabilities. All the outstanding shares of capital stock of
each of the Subsidiaries which is a corporation have been duly
authorized and validly issued, are fully paid and nonassessable, and
are wholly owned by the Company directly or indirectly through one of
the other Subsidiaries, free and clear of any lien, adverse claim,
security interest, equity or other encumbrance, except as described in
the Prospectus and except for the shares of capital stock of certain
Subsidiaries pledged to Citibank, N.A., as administrative agent
("Citibank"), in connection with the Company's Revolving Credit and
Term Loan Agreement dated as of September 15, 1997, as amended, with
Citibank and the lenders from time to time party thereto (the "Credit
Agreement") and/or to Meditrust Mortgage Investments, Inc. and/or any
of its affiliates (collectively, "Meditrust"). Each limited
partnership agreement pursuant to which the Company or a Subsidiary
holds a general partnership interest in a limited partnership which is
a Subsidiary is in full force and effect and constitutes the legal,
valid and binding agreement of the parties thereto, enforceable
against such parties in accordance with the terms thereof, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles; and there has been no material
breach of or default under, and no event which with notice or lapse of
time would constitute a material breach of or default under, such
agreements by the Company or any Subsidiary or, to the Company's best
knowledge, any other party to such agreements.
(k) There are no legal or governmental proceedings pending
or, to the knowledge of the Company, threatened, against the Company or
any of the Subsidiaries, or to which the Company or any of the
Subsidiaries, or to which any of their respective properties, is
subject, that are not disclosed in the Prospectus and which, if
adversely decided, are reasonably likely to cause a Material Adverse
Effect or materially affect the consummation of the transactions
contemplated hereby. There are no material agreements, contracts,
indentures, leases or other instruments that are not described in the
Prospectus or that are required to be filed as an exhibit to the
Registration Statement or any document incorporated by reference
therein that are not so filed. Neither the Company nor any Subsidiary
is involved in any strike, job action or labor dispute with any group
of employees, and, to the Company's knowledge, no such action or
dispute is threatened, which is reasonably likely to have a Material
Adverse Effect.
(l) Neither the Company nor any of the Subsidiaries is (i)
in violation of its certificate or articles of incorporation or by-laws
or other organizational documents, or of any law, ordinance,
administrative or governmental rule or regulation applicable to the
Company or any of the Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any
of the Subsidiaries, except where any such violation or violations in
the aggregate would not have a Material Adverse Effect or (ii) in
default in any material respect in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any
other
5
evidence of indebtedness or in any material agreement, indenture, lease
or other instrument to which the Company or any of the Subsidiaries is
a party or by which any of them or any of their respective properties
may be bound, except as may be disclosed in the Prospectus.
(m) None of the call of the Debentures for redemption, the
conversion or redemption thereof, the issue and sale of the Securities,
the execution, delivery and performance by the Company of this
Agreement or the consummation by the Company of the transactions
contemplated herein and compliance by the Company with its obligations
hereunder (i) requires any consent, approval, authorization or other
order of or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official
(except such as may be required for the registration of the Securities
under the Act, the listing of the Purchased Securities on the New York
Stock Exchange and compliance with the securities or Blue Sky laws of
various jurisdictions, all of which have been or will be effected in
accordance with this Agreement), (ii) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation or bylaws or other
organizational documents of the Company or any of its Subsidiaries,
(iii) conflicts or will conflict with or constitutes or will constitute
a breach of, or a default under, any agreement, indenture, lease or
other instrument to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their respective properties may
be bound, except for such conflicts, breaches or defaults which would
not, individually or in the aggregate, have a Material Adverse Effect,
(iv) violates or will violate any statute, law, regulation or judgment,
injunction, order or decree applicable to the Company or any of its
Subsidiaries, except for such violations which would not, individually
or in the aggregate, have a Material Adverse Effect, or (v) will result
in the creation or imposition of any lien, adverse claim, security
interest, equity or other encumbrance (each a "Lien") upon any property
or assets of the Company or any of its Subsidiaries pursuant to the
terms of any agreement or instrument to which any of them is a party or
by which any of them may be bound or to which any of the property or
assets of any of them is subject, except for such Liens which would
not, individually or in the aggregate, have a Material Adverse Effect.
(n) The accountants, KPMG Peat Marwick LLP, Deloitte &
Touche LLP and Xxxxxx Xxxxxxxx LLP, who have certified or shall certify
the financial statements incorporated by reference in the Registration
Statement and the Prospectus (or any amendment or supplement thereto),
are independent certified public accountants as required by the Act.
(o) The historical financial statements, together
with the related schedules and notes forming part of the Registration
Statement and the Prospectus (and any amendment or supplement thereto),
comply as to form with the requirements of the Act and present fairly
in all material respects the consolidated financial position, results
of operations and changes in stockholders' equity and
6
cash flows of each of the Company and its Subsidiaries, First American
Health Care of Georgia, Inc. ("First American"), Community Care of
America, Inc. ("CCA"), RoTech Medical Corporation ("RoTech") and the
selected facilities operated by Horizon/CMS Healthcare Corporation
("Horizon/CMS") to be sold to Integrated Health Services, Inc. on the
basis stated in the Registration Statement at the respective dates or
for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto) is accurately presented and, to the extent such
information and data is derived from the financial books and records of
the Company and its Subsidiaries, First American, CCA, RoTech or
Horizon/CMS, as the case may be, is prepared on a basis consistent with
such financial statements and books and records. The pro forma
financial statements and other pro forma financial information included
or incorporated by reference in the Registration Statement have been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial information and have been properly
compiled on the basis described therein, and the assumptions used in
the preparation thereof are, in the Company's opinion, reasonable.
(p) Each of the Company and the Subsidiaries has good and
marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except such as are described
in the Prospectus or in a document incorporated by reference therein,
and all the property described in the Prospectus as being held under
lease by each of the Company and the Subsidiaries is held by it under
valid, subsisting and enforceable leases, with only such exceptions as
in the aggregate are not materially burdensome and do not interfere in
any material respect with the conduct of the business of the Company
and the Subsidiaries taken as a whole.
(q) Each of the Company and the Subsidiaries and, to the
Company's knowledge, the owners of the facilities and other businesses
managed by the Company or any Subsidiary have such permits, licenses,
franchises, certificates and other approvals or authorizations of
governmental or regulatory authorities ("Permits") as are necessary
under applicable law to own their respective properties and to conduct
their respective business in the manner described in the Prospectus
(including, without limitation, such Permits as are required under such
federal, state and other health care laws, and under such HMO or
similar licensure laws and such insurance laws and regulations, as are
applicable thereto), and with respect to those facilities and other
businesses that participate in Medicare and/or Medicaid, to receive
reimbursement under Medicare and Medicaid, subject in each case to such
qualifications as may be set forth in the Prospectus and except to the
extent that the failure to have such Permits would not have a Material
Adverse Effect; the Company and each of the
7
Subsidiaries have fulfilled and performed in all material respects all
their respective material obligations with respect to the Permits, and
no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such Permit,
subject in each case to such qualifications as may be set forth in the
Prospectus and except to the extent that any such revocation or
termination would not have a Material Adverse Effect; and, except as
described in the Prospectus, none of the Permits contains any
restriction that is materially burdensome to the Company or any of the
Subsidiaries.
(r) The business practices of the Company and each of its
Subsidiaries do not violate in any material respect any applicable
provisions of federal or state law governing Medicare or any state
Medicaid program, including without limitation, Sections 1320a-7a and
1320a-7b of Title 42 of the United States Code, and no individual with
an ownership or control interest, as defined in 42 U.S.C.
ss.1320a-3(a)(3), in the Company or any of its Subsidiaries, or who is
an officer, director, or managing employee, as defined in 42 U.S.C.
ss.1320a-5(b), of the Company or any of its Subsidiaries is a person
described in 42 U.S.C. ss.1320a-7(b)(8)(B), and the Company's and each
of its Subsidiaries' business practices do not violate in any material
respect any applicable provisions of federal or state law regarding
physician ownership of, or financial relationship with, or referral to
entities providing health care related goods or services, or laws
requiring disclosure of financial interests held by physicians in
entities to which they may refer patients for the provision of health
care related goods or services.
(s) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(t) Neither the Company nor any of the Subsidiaries nor, to
the Company's knowledge, any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any
Subsidiary or received or retained any funds in violation of any law,
rule or regulation, which violation would have a Material Adverse
Effect.
(u) Except as disclosed in the Prospectus, the Company and
each of the Subsidiaries have filed all tax returns required to be
filed, which returns are true and correct in all material respects, and
neither the Company nor any Subsidiary is in default in the payment of
any taxes which were payable pursuant to said returns or any
assessments with respect thereto, except where the
8
failure to file such returns and make such payments would not have a
Material Adverse Effect.
(v) The Company and the Subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks, service
mark registrations, trade names, copyrights, licenses, inventions,
trade secrets and rights (collectively, "Intellectual Property")
described in the Prospectus as being owned by any of them or necessary
for the conduct of their respective businesses, except where the
failure to own or possess any such Intellectual Property would not,
individually or in the aggregate, have a Material Adverse Effect, and
the Company is not aware of any claim to the contrary or any challenge
by any other person to the rights of the Company and the Subsidiaries
with respect to any Intellectual Property, except for any such claims
or challenges as would not, individually or in the aggregate, have a
Material Adverse Effect.
(w) The Company is not and, upon consummation of the
transactions contemplated hereby, will not be an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(x) The documents incorporated by reference in the
Registration Statement and the Prospectus and heretofore filed were
filed in a timely manner and, when they were filed (or, if any
amendment with respect to any such document was filed, when such
amendment was filed), conformed in all material respects to the
requirements of the Exchange Act and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents incorporated by reference in the
Registration Statement and the Prospectus will, when so filed, be filed
in a timely manner and conform in all material respects to the
requirements of the Exchange Act and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
(y) Except as disclosed in the Prospectus or as could not
be reasonably expected to materially and adversely affect consummation
of the transactions contemplated by this Agreement, no holder of any
security of the Company has any right to require registration of shares
of Common Stock or any other security of the Company because of the
filing of the Registration Statement or consummation of the
transactions contemplated by this Agreement. Except as described in the
Prospectus, there are no outstanding options, warrants or other rights
calling for the issuance of, and, except in connection with
acquisitions of healthcare facilities or businesses disclosed in the
Prospectus, there are no commitments, plans or arrangements to issue,
any shares of Common Stock of the Company or any security convertible
into or exchangeable or exerciseable for Common Stock of the Company.
9
(z) The Company has received the consent of the lenders
party to the Credit Agreement in connection with the consummation of
the transactions contemplated hereby, a copy of which has been
previously furnished to the Purchaser.
2. Purchase and Conversion of Debentures. Subject to the terms
and conditions and in reliance upon the representations and warranties herein
set forth:
(a) The Purchaser agrees to surrender for conversion into
Common Stock at or prior to 5:00 P.M., New York City time, on the
Redemption Date all Debentures then held by the Purchaser and purchased
by the Purchaser pursuant to Section 4 hereof or otherwise acquired by
the Purchaser. The shares of Common Stock issued to the Purchaser upon
the conversion of Debentures are herein referred to as the "Conversion
Securities."
(b) If any Debentures have not been surrendered for
conversion prior to 5:00 P.M., New York City time, on the Redemption
Date, at the option of the Company, exercisable by giving notice in
writing to the Purchaser not later than 8:00 P.M., New York City time,
on the Redemption Date, the Company shall sell to the Purchaser, and
the Purchaser shall purchase from the Company, at a purchase price of
$34.05 per share of Common Stock that would have been issuable upon
conversion of Debentures not surrendered for conversion, such number of
shares of Common Stock as shall be specified in such notice (but, in
each case, not in excess of such number of shares of Common Stock as
would have been issuable upon the conversion of all Debentures not
surrendered for conversion). The shares of Common Stock to be purchased
pursuant to this Section 2(b) are herein referred to as the "Purchased
Securities" and, together with the Conversion Securities, the
"Securities."
(c) It is understood that the Purchaser intends to resell
the Securities from time to time at prices prevailing in the open
market. On or prior to the fifteenth day after the Redemption Date, the
Purchaser shall remit to the Company 50% of the excess, if any, of (i)
the aggregate proceeds received by the Purchaser from the sale of
Purchased Securities (net of selling concessions, transfer taxes and
other expenses of sale) over (ii) an amount equal to the average cost
to the Purchaser of purchasing the Purchased Securities pursuant to
paragraph (b) above multiplied by the number of Purchased Securities.
Upon completion of the sale of the Purchased Securities, the Purchaser
shall furnish to the Company a statement setting forth the aggregate
proceeds received on the sale thereof and the applicable selling
concessions, transfer taxes and other expenses of sale. For purposes of
the foregoing determination, any Purchased Securities not sold by or
for the account of the Purchaser prior to the close of business on the
tenth day after the Redemption Date shall be deemed to have been sold
on such tenth day for an amount equal to the last reported sale price
of the Common Stock on such day. Nothing contained herein shall limit
the right of the Purchaser, in its discretion, to determine the price
or prices at which, or the time or times when,
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any Securities shall be sold, whether or not prior to the Redemption
Date and whether or not for long or short account.
(d) Delivery of and payment for the Purchased Securities
shall be made at 10:00 A.M., New York City time, on July 2, 1998, which
date and time may be postponed by agreement between the Purchaser and
the Company (such date and time of delivery and payment for the
Purchased Securities being herein called the "Closing Date"). Delivery
of the Purchased Securities shall be made to the Purchaser against
payment by the Purchaser of the purchase price thereof to or upon the
order of the Company by wire transfer payable in same-day funds to an
account specified by the Company. Delivery of the Purchased Securities
shall be made through the facilities of The Depository Trust Company
unless the Purchaser shall otherwise instruct. The closing of the
purchase and sale of the Purchased Securities shall be made at the
office of Fulbright & Xxxxxxxx L.L.P., New York, New York.
3. Compensation. As compensation for the commitment of the
Purchaser hereunder, the Company will pay to the Purchaser an amount equal to
the sum of (a) $1,828,213 plus (b) an additional $1.36 per share for each
Purchased Security and Compensible Conversion Security, but no amount shall be
payable pursuant to this clause (b) unless the number of Purchased Securities
and Compensible Conversion Securities in the aggregate exceeds 178,988 shares
(the "Take-up Threshold") and then only with respect to that number of Purchased
Securities and Compensible Conversion Securities that in the aggregate exceed
the Take-up Threshold. "Compensible Conversion Security" means any Conversion
Security that is acquired by the Purchaser or that the Purchaser obtained the
right to acquire on a date when the last reported sale price of the Common Stock
on the New York Stock Exchange was less than or equal to $34.05.
Such compensation shall be paid to the Purchaser by wire
transfer payable in same-day funds to an account specified by the Purchaser, on
(A) if the Purchaser is required to purchase any Purchased Securities, the
Closing Date, or (B) otherwise, as soon as practicable after the Redemption Date
(but in no event later than two Business Days thereafter).
4. Additional Purchases. The Purchaser may purchase
Debentures, in the open market or otherwise, in such amounts and at such prices
as the Purchaser may deem advisable. All Debentures so purchased will be
converted by the Purchaser into Common Stock in accordance with Section 2(a)
hereof. The Common Stock acquired by the Purchaser upon conversion of any
Debentures acquired pursuant to this Section 4 may be sold at any time or from
time to time by the Purchaser. It is understood that, for the purpose of
stabilizing the price of the Common Stock or otherwise, the Purchaser may make
purchases and sales of Common Stock, in the open market or otherwise, for long
or short account, on such terms as it may deem advisable and it may overallot in
arranging sales.
5. Agreements. The Company agrees with the Purchaser that:
11
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of
the Registration Statement or supplement to the Prospectus unless the
Company has furnished you a copy for your review prior to filing and
will not file any such proposed amendment or supplement to which you
reasonably object in writing; provided, however, that the preceding
clause shall not apply to the filing of any document required to be
filed by the Company under the Exchange Act that upon filing is deemed
to be incorporated by reference in the Registration Statement, except
that the Company shall furnish you a copy of any such document a
reasonable time prior to filing. Subject to the foregoing sentence, if
filing of the Prospectus is required under Rule 424(b), the Company
will cause the Prospectus, properly completed, and any supplement
thereto to be filed with the Commission pursuant to the applicable
paragraph of Rule 424(b) within the time period prescribed and will
provide evidence satisfactory to the Purchaser of such timely filing.
The Company will promptly advise the Purchaser (1) when the
Registration Statement (and any amendment thereto), if not effective at
the Execution Time, shall have become effective, (2) when the
Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b), (3) when, prior
to termination of the offering of the Securities, any amendment to the
Registration Statement shall have been filed or become effective, (4)
of any request by the Commission or its staff for any amendment of the
Registration Statement or for any supplement to the Prospectus or for
any additional information, (5) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that
purpose and (6) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for
sale in any jurisdiction or the institution or threatening of any
proceeding for such purpose. The Company will use its best efforts to
prevent the issuance of any such stop order or the suspension of any
such qualification and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Act or the Exchange Act or the respective
rules thereunder, the Company promptly will (1) notify the Purchaser of
such event, (2) prepare and file with the Commission, subject to the
second sentence of paragraph (a) of this Section 5, an amendment or
supplement which will correct such statement or omission or effect such
compliance and (3) supply any supplemented Prospectus to you in such
quantities as you may reasonably request.
12
(c) As soon as practicable, the Company will make generally
available to its security holders an earnings statement or statements
of the Company and its subsidiaries which will satisfy the provisions
of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to each of the Purchaser and
counsel for the Purchaser, without charge, copies of manually executed
signature pages to the Registration Statement, it being understood that
the originals of such pages will be retained in the Company's files as
required by the rules of the Commission, and copies of the Registration
Statement (including exhibits thereto) and, so long as delivery of a
prospectus by the Purchaser or dealer may be required by the Act, as
many copies of each Preliminary Prospectus and the Prospectus and any
supplement thereto as the Purchaser may reasonably request. The Company
will pay the expenses of printing or other production of all documents
relating to the transactions contemplated hereby. The Company will pay
all transfer taxes as may be imposed on the Purchaser in connection
with its purchase of Purchased Securities pursuant hereto.
(e) The Company will use its best efforts to qualify the
Securities for sale under the laws of such jurisdictions as the
Purchaser may designate and will maintain such qualifications in effect
so long as required for the distribution of the Securities; provided
that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to
execute a general consent to service of process in any state or to
otherwise subject itself to taxation (other than stock transfer taxes)
in connection with any such qualification.
(f) The Company will mail or cause to be mailed not later
than the Business Day following the date of execution hereof the Notice
of Redemption by first class mail to the registered holders of the
Debentures as of the close of business on the date of execution hereof,
which mailing will conform to the requirements of the Indenture. The
Company will not withdraw or revoke the Notice of Redemption or attempt
to do so.
(g) The Company will advise the Purchaser daily of the
amount of Debentures surrendered in the previous day for redemption or
for conversion.
(h) The Company will not take any action the effect of
which would be to require an adjustment in the conversion price of the
Debentures.
(i) The Company will not, prior to the Redemption Date and,
if the aggregate number of the Securities exceeds 450,000 shares, for
an additional period of 90 days following the Redemption Date (the
"Lock-up Period"), without the prior written consent of Xxxxx Xxxxxx
Inc., offer, sell or contract to sell, or otherwise dispose of (or
enter into any transaction which is designed to, or might reasonably be
expected to, result in the disposition (whether by actual disposition
13
or effective economic disposition due to cash settlement or otherwise)
by the Company) directly or indirectly, or announce the offering of,
any other shares of Common Stock (other than the Securities) or any
securities convertible into, or exercisable or exchangeable for, shares
of Common Stock, except for (i) grants of options to employees of and
consultants to the Company pursuant to the Company's option plans and
stock purchase plans, (ii) issuances of shares of Common Stock upon
exercise of outstanding options and warrants, (iii) issuances of Common
Stock (or any securities convertible into or exercisable or
exchangeable for Common Stock) in connection with the acquisition of
any related business or geriatric care facility (including a leasehold
interest therein or a management agreement therefor), (iv) issuances of
securities pursuant to the Company's Rights Plan (as defined in the
Registration Statement) and (v) issuances of shares of Common Stock
upon conversion of the Debentures; provided, however, that in the case
of any securities issued pursuant to the foregoing clause (iii), such
securities and the underlying Common Stock shall, until expiration of
the Lock-up Period, not be registered under the Act unless registration
under the Act within the Lock-up Period is required pursuant to the
terms of any written agreement to which the Company is a party and
which written agreement was in existence prior to the date of this
Agreement
(j) The Company will apply the net proceeds from the
sale of Securities substantially in accordance with the description set
forth in the Prospectus.
(k) The Company will have the Securities listed,
subject to notice of issuance, on the New York Stock Exchange on or
before the Closing Date.
6. Conditions to the Obligations of the Purchaser. The
obligations of the Purchaser to convert Debentures and to purchase any Purchased
Securities shall be subject to the accuracy of the representations and
warranties on the part of the Company contained herein as of the Execution Time,
each Effective Date occurring after the Execution Time, the Redemption Date and,
as to the purchase of the Purchased Securities, the Closing Date, to the
accuracy of the statements of the Company made in any certificates pursuant to
the provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) If the Registration Statement has not become
effective prior to the Execution Time, unless the Purchaser agrees in
writing to a later time, the Registration Statement shall have become
effective not later than 6:00 P.M., New York City time, on the date of
execution hereof; if filing of the Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), the Prospectus, and any
14
such supplement, shall have been filed in the manner and within the
time period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been instituted or
threatened.
(b) On the date of this Agreement (after the
Effective Time and prior to the mailing of the Notice of Redemption)
and on the Closing Date, the Company shall have furnished to the
Purchaser the opinion of Fulbright & Xxxxxxxx L.L.P., counsel for the
Company, dated the date of this Agreement and the Closing Date,
respectively, to the effect that:
(i) The Company is a corporation duly incorporated
and validly existing in good standing under the laws of the
State of Delaware with full corporate power and authority to
own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto);
(ii) Each Significant Subsidiary (as defined in
Section 1.02(w) of Regulation S-X promulgated under the Act)
is a corporation validly existing and in good standing under
the laws of the jurisdiction of its organization, with full
corporate power and authority to own, lease, and operate its
properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment
or supplement thereto); and all the outstanding shares of
capital stock of each of the Significant Subsidiaries have
been duly authorized and validly issued, are fully paid and
nonassessable, and to the knowledge of such counsel, are
wholly owned by the Company directly, or indirectly through
one of the other Subsidiaries, free and clear of any security
interest, lien, adverse claim, equity or other encumbrance,
except as described in the Prospectus and except for the
shares of capital stock of certain Significant Subsidiaries
pledged to Citibank as agent in connection with the Credit
Agreement and/or to Meditrust;
(iii) The authorized capital stock of the Company is
as set forth under the caption "Capitalization" in the
Prospectus; and the authorized capital stock of the Company
conforms in all material respects as to legal matters to the
description thereof contained in the Prospectus under the
caption "Description of Capital Stock";
(iv) The Company has corporate power and authority to
enter into this Agreement, and this Agreement has been duly
authorized, executed and delivered by the Company;
(v) The Debentures have been duly and validly
authorized by the Company and constitute valid and binding
obligations of the Company entitled to the benefits of the
Indenture, subject to the qualification that the
15
enforceability of the Company's obligations thereunder may be
limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or
affecting creditors' rights generally and by general equitable
principles;
(vi) Assuming the mailing of the Notice of Redemption
in accordance with Section 1(c) hereof, all the Debentures
will have been duly called for redemption by the close of
business on the Business Day following the date of execution
hereof and the right to convert the Debentures into shares of
Common Stock will expire at 5:00 P.M., New York City time, on
June 29, 1998; the shares of Common Stock issuable upon
conversion of the Debentures have been duly and validly
authorized and, when issued and delivered upon conversion of
any Debentures pursuant to this Agreement, will be fully paid
and nonassessable; the Purchased Securities have been duly and
validly authorized and, when issued and delivered to and paid
for by the Purchaser pursuant to this Agreement, will be fully
paid and nonassessable; the Conversion Securities (and, for
the opinion to be delivered on the Closing Date only, the
Purchased Securities) are duly listed, and admitted and
authorized for trading, subject to official notice of
issuance, on the New York Stock Exchange; the certificates for
the Securities conform in all material respects to the
requirements of the Delaware General Corporation Law (the
"DGCL"); and the holders of outstanding shares of capital
stock of the Company are not entitled to preemptive rights
under the Company's Certificate of Incorporation or the DGCL
or, to the knowledge of such counsel, other rights to
subscribe for the Securities or the shares of Common Stock
issuable upon conversion of the Debentures;
(vii) None of the call of the Debentures for
redemption, the conversion or redemption thereof, the issue
and sale of the Securities or the execution, delivery and
performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated
herein constitutes or will constitute a breach or violation
of, or a default under, in any material respect, the
certificate or articles of incorporation or bylaws or other
organizational documents of the Company or any of the
Significant Subsidiaries or any material agreement, indenture,
lease or other instrument to which the Company or any of the
Significant Subsidiaries is a party or by which any of them or
any of their respective properties is bound that is an exhibit
to the
16
Registration Statement or any document incorporated by
reference therein or is otherwise known to such counsel, or
will result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or
any of the Significant Subsidiaries pursuant to the terms of
any material agreement or instrument to which any of them is a
party or by which any of them may be bound or to which any of
the property or assets of any of them is subject that is an
exhibit to the Registration Statement or any document
incorporated by reference therein or is otherwise known to
such counsel, nor will any such action result in any violation
(assuming compliance with all applicable state securities and
Blue Sky laws), in any material respect of any existing law,
or any regulation, ruling, judgment, injunction, order or
decree known to such counsel to be applicable to the Company
or the Significant Subsidiaries or any of their respective
properties;
(viii) No consent, approval, authorization or other
order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental
body, agency, or official is required on the part of the
Company (except as have been obtained under the Act, the
listing of the Purchased Securities on the New York Stock
Exchange or such as may be required under state securities or
Blue Sky laws governing the purchase and distribution of the
Securities, as to which such counsel need not express an
opinion) for the redemption by the Company of the Debentures
and the valid issuance and sale of the Securities to you as
contemplated by this Agreement;
(ix) Such counsel has been advised by the staff of
the Commission that the Registration Statement and all
post-effective amendments, if any, have become effective under
the Act and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose are pending
before or contemplated by the Commission; and any required
filing of the Prospectus pursuant to Rule 424(b) has been made
in accordance with Rule 424(b);
(x) The Registration Statement and the Prospectus and
any supplements or amendments thereto (except for the
financial statements and the notes thereto and the schedules
and other financial and statistical data included or
incorporated by reference therein, as to which such counsel
need not express any opinion) appear on their face to comply
as to form in all material respects with the requirements of
the Act;
(xi) The documents incorporated by reference in the
Registration Statement (except for the financial statements
and the notes thereto and the schedules and other financial
and statistical data included or incorporated by reference
therein, as to which such counsel need not express any
opinion), at the time they were filed, appeared on their face
to have complied as to form in all material respects with the
requirements of the Exchange Act;
(xii) To the knowledge of such counsel, (A) there are
no legal or governmental proceedings pending or threatened
against the Company or any of the Subsidiaries, or to which
the Company or any of the
17
Subsidiaries, or any of their property, are subject, which are
not disclosed in the Prospectus and which, if adversely
decided, are reasonably likely to cause a Material Adverse
Effect or materially affect the consummation of the
transactions contemplated hereby and (B) there are no material
agreements, contracts, indentures, leases or other instruments
of a character required to be described in the Registration
Statement and the Prospectus (or any amendment or supplement
thereto) or that are required to be filed as an exhibit to the
Registration Statement or any document incorporated by
reference therein that are not described or filed as required;
(xiii) The statements in the Registration Statement
and the Prospectus, insofar as they are descriptions of
contracts, agreements or other legal documents, or refer to
statements of law or legal conclusions, are accurate in all
material respects and present fairly the information described
therein;
(xiv) The Company is not and, after giving effect to
the issue and sale of the Securities and the application of
the proceeds thereof as described in the Prospectus, will not
be, an "investment company" as defined in the Investment
Company Act of 1940, as amended;
(xv) To the knowledge of such counsel, except as
disclosed in the Prospectus or as could not be reasonably
expected to materially and adversely affect consummation of
the transactions contemplated by this Agreement, no holders of
securities of the Company have rights to the registration of
such securities under the Registration Statement;
(xvi) The statements in the Prospectus under the
caption "Certain Federal Income Tax Considerations" and in the
Notice of Redemption under the caption "Federal Income Tax
Considerations," in each case insofar as such statements
constitute summaries of the legal matters referred to therein,
fairly present the information called for with respect to such
legal matters and fairly summarize the matters referred to
therein; and
(xvii) Although such counsel has not undertaken,
except as otherwise indicated in its opinion, to determine
independently, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements in the
Registration Statement and the Prospectus, such counsel has
participated in the preparation of the Registration Statement
and the Prospectus, including review and discussion of the
contents thereof, and has reviewed the documents incorporated
by reference therein, and, relying as to materiality to a
large extent upon the opinions of officers and other
representatives of the Company, nothing has come to the
attention of such counsel that has caused such counsel to
believe that the Registration Statement on the Effective Date
contained an untrue
18
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, as
of its date and as of the Closing Date, contained an untrue
statement of a material fact or omitted 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 (it being
understood that such counsel need express no opinion with
respect to the financial statements and the notes thereto and
the schedules and other financial and statistical data
included or incorporated by reference in the Registration
Statement or the Prospectus and information furnished by or on
behalf of the Purchaser).
The opinion of such counsel shall be limited to the laws of
the United States, the State of New York and the internal corporation
law of the State of Delaware. In delivering their opinion pursuant to
clause (ii) above and clause (vii) above with respect to organizational
documents such counsel may rely on the opinion of Florida councel with
respect to RoTech Medical Corporation, a Florida Corporation, provided,
that (A) each such local counsel is acceptable to the Purchaser, (B)
such reliance is expressly authorized by each opinion so relied upon
and a copy of each such opinion is delivered to the Purchaser and is,
in form and substance, reasonably satisfactory to it and its counsel,
and (C) counsel shall state in their opinion that they have no reason
to believe that such counsel and the Purchaser are not justified in
relying thereon.
(c) On the date of this Agreement (after the
Effective Time and prior to the mailing of the Notice of Redemption)
and on the Closing Date, the Company shall have furnished to the
Purchaser the opinion of Xxxxxxxx X. Xxxxxx, Esq., General Counsel of
the Company, dated the date of this Agreement and the Closing Date,
respectively, to the effect that:
(i) The Company is duly registered and qualified to
conduct its business and is in good standing as a foreign
corporation in each jurisdiction or place where the nature of
its properties or the conduct of its business requires such
registration or qualification, except where the failure so to
register or qualify or to be in good standing would not have a
Material Adverse Effect;
(ii) All the outstanding shares of capital stock of
the Company have been duly authorized and validly issued, are
fully paid and nonassessable;
(iii) Each Subsidiary is duly registered and
qualified to conduct its business and is in good standing as a
foreign corporation or limited partnership in each
jurisdiction or place where the nature of its properties or
the conduct of its business requires such registration or
qualification,
19
except where the failure so to register or qualify or to be in
good standing would not have a Material Adverse Effect;
(iv) Neither the Company nor any of the Subsidiaries
is in violation in any material respect of its respective
certificate or articles of incorporation or bylaws, or other
organizational documents, or to the best knowledge of such
counsel after reasonable inquiry, is in default in any
material respect in the performance of any material
obligation, agreement or condition contained in any bond,
debenture, note or other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by
which any of them or any of their respective properties may be
bound, except as disclosed in the Prospectus and except to the
extent that any such violation or default would not have a
Material Adverse Effect;
(v) Such counsel has no reason to believe that the
Company and its Subsidiaries do not have all Permits
(including, without limitation, such Permits as are necessary
under such federal and state health care laws and under such
HMO and similar licensure laws and such insurance laws and
regulations as are applicable to the Company and its
Subsidiaries) as are necessary to own, lease and operate its
properties and conduct its business, except to the extent that
the failure to have such Permits would not have a Material
Adverse Effect; and to the best knowledge of such counsel
after reasonable inquiry there are no proceedings pending or
threatened against the Company or any of its Subsidiaries that
may cause any such Permit that is material to the conduct of
the business of the Company or any of its Subsidiaries to be
revoked, withdrawn, cancelled, suspended or not renewed;
(vi) Such counsel has no reason to believe that (a)
the business practices of the Company or any of its
Subsidiaries violate in any material respect any applicable
provisions of federal or state law governing Medicare or any
state Medicaid program, including without limitation, Sections
1320a-7a and 1320a-7b of Title 42 of the United States Code,
or that any individual with an ownership or control interest,
as defined in 42 U.S.C. ss.1320a-3(a)(3), in the Company or
any of its Subsidiaries or who is an officer, director, or
managing employee as defined in 42 U.S.C. ss.1320a-5(b), of
the Company or any of its Subsidiaries is a person described
in 42 U.S.C. ss.1320a-7(b)(8)(B), or that (b) the Company's or
any Subsidiary's business practices violate in any material
respect any applicable provisions of federal or state law
regarding physician ownership of, or financial relationship
with, or referral to entities providing health care related
goods or services, or laws requiring disclosure of financial
interests held by physicians in entities to which they may
refer patients for the provision of health care related goods
or services; and to the best knowledge of such counsel after
reasonable inquiry, neither the Company
20
nor any of its Subsidiaries is in violation of any other law,
ordinance, administrative or governmental rule or regulation
applicable to the Company or any of its Subsidiaries or of any
decree of any court or governmental agency or body having
jurisdiction over the Company or any of its Subsidiaries,
except to the extent that any such violation would not have a
Material Adverse Effect; and
(vii) Although such counsel has not undertaken,
except as otherwise indicated in such counsel's opinion, to
determine independently, and does not assume any
responsibility for, the accuracy, completeness or fairness of
the statements in the Registration Statement and the
Prospectus, such counsel has participated in the preparation
of the Registration Statement and the Prospectus and the
documents incorporated by reference therein, and nothing has
come to the attention of such counsel that has caused such
counsel to believe that the Registration Statement, on the
Effective Date or at the Execution Time, contained an untrue
statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, as
of its date and as of the Closing Date, contained any untrue
statement of a material fact or omitted 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 (it being
understood that such counsel need express no opinion with
respect to the financial statements and the notes thereto and
the schedules and other financial and statistical data
included or incorporated by reference in the Registration
Statement or the Prospectus and information furnished by or on
behalf of the Purchaser).
(d) On the date of this Agreement (after the
Effective Time and prior to the mailing of the Notice of Redemption)
and on the Closing Date, the Purchaser shall have received from Xxxxx
Xxxxxxxxxx LLP, counsel for the Purchaser, such opinion or opinions,
dated the date of this Agreement and the Closing Date, respectively,
and addressed to the Purchaser, with respect to this Agreement, the
Registration Statement, the Prospectus and such other related matters
as the Purchaser may reasonably require, and the Company shall have
furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(e) On the date of this Agreement (after the Effective Time and prior
to the mailing of the Notice of Redemption), on each Effective Date
occurring after the Execution Time and on the Closing Date, the Company
shall have furnished to the Purchaser a certificate of the Company,
signed by the Chief Executive Officer (or the Chief Operating Officer)
and Chief Financial Officer of the Company (or such other officers as
are acceptable to the Purchaser), dated the date of delivery, to the
effect that the signers of such certificate have carefully
21
examined the Registration Statement, the Prospectus, any supplements to
the Prospectus and this Agreement and to the effect that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the date of such certificate as if made
on the date of such certificate and the Company has complied
with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the date
of such certificate;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectus (exclusive of any
supplement thereto), there has been no material adverse change
or development involving a prospective material adverse change
in the condition (financial or other), business, business
prospects, properties, net worth or results of operations of
the Company and the Subsidiaries, taken as a whole, whether or
not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto).
(f) On the date of this Agreement (after the
Effective Time and prior to the mailing of the Notice of Redemption),
on each Effective Date occurring after the Execution Time on which
financial information is included or incorporated in the Registration
Statement or the Prospectus and on the Closing Date, each of KPMG Peat
Marwick LLP, Deloitte & Touche LLP and Xxxxxx Xxxxxxxx LLP shall have
furnished to the Purchaser a letter, dated respectively as of the
Execution Time, each such Effective Date and as of the Closing Date, in
form and substance satisfactory to the Purchaser, confirming that they
are independent accountants within the meaning of the Act and the
Exchange Act and the respective applicable published rules and
regulations thereunder and containing statements and information of the
type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information contained in or incorporated by reference in the
Registration Statement and Prospectus.
(g) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto), there shall not have been (i) any change in
the capital stock, increase in long-term debt or any decreases in
consolidated net current assets or stockholders' equity of the Company
and its subsidiaries on a consolidated basis as compared with amounts
shown in the most recent balance sheet incorporated by
22
reference in the Prospectus or, for the period commencing on the date
following the end of the most recent period for which a consolidated
income statement of the Company is incorporated by reference in the
Prospectus, any decreases, as compared with the corresponding period in
the preceding year, in consolidated net revenues or in the total or
per-share consolidated amounts of earnings before extraordinary items
or of net earnings specified in the letters referred to in paragraph
(f) of this Section 6 or (ii) any change, or any development involving
a prospective change, in or affecting the condition (financial or
other), business, business prospects, properties, net worth or results
of operations of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto), the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the sole judgment of
the Purchaser, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities
as contemplated by the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement
thereto).
(h) Subsequent to the Execution Time, there shall not
have been any decrease in the rating of any of the Company's debt
securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act) or
any notice given of any intended or potential decrease in any such
rating or of a possible change in any such rating that does not
indicate the direction of the possible change.
(i) The Securities shall have been approved for
listing on the New York Stock Exchange, subject to official notice of
issuance, and satisfactory evidence of such action shall have been
provided to the Purchaser.
(j) At the Execution Time, the Company shall have
furnished to the Purchaser a letter substantially in the form of
Exhibit A hereto addressed to the Purchaser from each of the executive
officers of the Company.
(k) On the date of this Agreement (after the
Effective Time and prior to the mailing of the Notice of Redemption),
on each Effective Date occurring after the Execution Time and on the
Closing Date, the Purchaser shall have received a certificate signed by
the Chief Accounting Officer of the Company substantially in the form
heretofore approved by the Purchaser, respecting the Company's
compliance with the financial covenants set forth in each of the
Company's indentures, the Credit Agreement and certain other agreements
of the Company.
(l) The Company shall have furnished to the Purchaser
such further information, certificates and documents as the Purchaser
may reasonably request.
23
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions, letters and certificates mentioned above
or elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Purchaser and counsel for the
Purchaser, this Agreement and all obligations of the Purchaser hereunder may be
canceled at, or at any time prior to, the Closing Date by the Purchaser. Notice
of such cancellation shall be given to the Company in writing or by telephone or
facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Fulbright & Xxxxxxxx L.L.P., counsel for the
Company, at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, on the due date for delivery
thereof.
7. Reimbursement of Purchaser's Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Purchaser set forth in Section 6 hereof is not satisfied
other than by reason of a breach by the Purchaser, because of any termination
pursuant to Section 10 hereof or because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or comply with any
provision hereof other than by reason of a default by the Purchaser, the Company
will reimburse the Purchaser on demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
it in connection with the proposed purchase and sale of the Securities.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless
the Purchaser, the directors, officers, employees and agents of the
Purchaser and each person who controls the Purchaser within the meaning
of either the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the registration statement for the registration of the Securities as
originally filed or in any amendment thereof, or in any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees
to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in
reliance upon and in conformity
24
with written information furnished to the Company by or on behalf of
the Purchaser specifically for inclusion therein; provided, further,
that with respect to any untrue statement or omission of material fact
made in any Preliminary Prospectus, the indemnity agreement contained
in this Section 8(a) shall not inure to the benefit of the Purchaser to
the extent that any such loss, claim, damage or liability occurs under
the circumstance where it shall have been determined by a court of
competent jurisdiction by final and nonappealable judgment that (w) the
Company had previously furnished copies of the Prospectus to the
Purchaser, (x) delivery of the Prospectus was required by the Act to be
made to the person asserting the loss, claim, damage or liability, (y)
the untrue statement or omission of a material fact contained in the
Preliminary Prospectus was corrected in the Prospectus and (z) there
was not sent or given to such person, at or prior to the written
confirmation of the sale of such securities to such person, a copy of
the Prospectus. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) The Purchaser agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who
signs the Registration Statement and each person who controls the
Company within the meaning of either the Act or the Exchange Act, to
the same extent as the foregoing indemnity from the Company to the
Purchaser, but only to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
omission, or alleged untrue statement or omission or alleged omission
made in the documents referred to in the foregoing indemnity in
reliance upon and in conformity with written information relating to
the Purchaser furnished to the Company by or on behalf of the Purchaser
specifically for inclusion in the documents referred to in the
foregoing indemnity, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be in
addition to any liability which the Purchaser may otherwise have. The
Company acknowledges that (i) the legend in block capital letters on
the cover page related to stabilization and (ii) the third and last
paragraphs under the heading "Standby Arrangements" in any Preliminary
Prospectus and the Prospectus constitute the only information furnished
in writing by or on behalf of the Purchaser for inclusion in any
Preliminary Prospectus or the Prospectus, and you confirm that such
statements are correct in all material respects.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it
from liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will
25
not, in any event, relieve the indemnifying party from any obligations
to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be
entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or
parties except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local
counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual
or potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified
party shall have been advised by its counsel that representation of
such indemnified party and any indemnifying party by the same counsel
would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between
them, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such
action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying
party. It is understood, however, that the Company shall, in connection
with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of local counsel at any time for
the Purchaser and all controlling persons, which firm shall be
designated in writing by Xxxxx Xxxxxx Inc. An indemnifying party will
not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding
in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or
potential parties to
26
such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and
does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified
party. An indemnifying party shall not be liable under this Section 8
to any indemnified party regarding any settlement or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim
or action) unless such settlement, compromise or consent is consented
to by such indemnifying party, which consent shall not be unreasonably
withheld.
(d) In the event that the indemnity provided in
paragraph (a) or (b) of this Section 8 is unavailable to or
insufficient to hold harmless an indemnified party for any reason, the
Company and the Purchaser agree to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and the Purchaser may be
subject in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and by the Purchaser
on the other from the offering of the Securities; provided, however,
that in no case shall the Purchaser be responsible for any amount in
excess of the fees payable by the Company to the Purchaser pursuant to
Section 3 hereof. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the
Purchaser shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of
the Company on the one hand and of the Purchaser on the other in
connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the sum of (i)
the aggregate Redemption Price for the Debentures converted by the
Purchaser pursuant to Section 2(a) hereof and (ii) the amount paid by
the Purchaser to the Company pursuant to Section 2(b) hereof (less the
total fees payable by the Company to the Purchaser pursuant to Section
3 hereof), and benefits received by the Purchaser shall be deemed to be
equal to the total fees payable by the Company to the Purchaser
pursuant to Section 3 hereof. Relative fault shall be determined by
reference to, among other things, whether any untrue or any alleged
untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company
on the one hand or the Purchaser on the other, the intent of the
parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The Company and the Purchaser agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Promptly after receipt by a party
entitled to contribution under this Section 8 of notice of the
commencement of any action, such party will, if a claim for
contribution in respect thereof is to be made against another party or
parties under this paragraph (d), notify such party or parties in
writing of the commencement thereof; but the failure so to notify such
party or parties (i) will not relieve such party or parties from
liability under this paragraph (d) unless and to the extent it or they
did not otherwise learn of such action and such failure results in the
forfeiture by such party or parties of substantial rights and defenses
and (ii) will not, in any event, relieve such party or parties from any
obligations to any party entitled to contribution other than the
contribution obligation provided in this paragraph (d). Notwithstanding
the
27
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 8, each
person who controls the Purchaser within the meaning of either the Act
or the Exchange Act and each director, officer, employee and agent of
the Purchaser shall have the same rights to contribution as the
Purchaser, and each person who controls the Company within the meaning
of either the Act or the Exchange Act, each officer of the Company who
shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this
paragraph (d).
9. Soliciting Conversions. The Purchaser may assist the
Company in soliciting conversion of the Debentures by the holders thereof but
shall not be entitled to compensation by the Company for any such assistance.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Purchaser, by notice given to the
Company at any time prior to the Closing Date, if at any time prior to such time
(i) trading in the Company's Common Stock or the Debentures shall have been
suspended by the Commission or the New York Stock Exchange or trading in
securities generally on the New York Stock Exchange shall have been suspended or
limited or minimum prices shall have been established on such Exchange, (ii) a
banking moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the sole judgment of the Purchaser, impracticable or inadvisable to
proceed with the offering or delivery of the Securities as contemplated by the
Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Purchaser set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Purchaser or the Company or any of the
officers, directors or controlling persons referred to in Section 8 hereof, and
will survive the conversion of any Debentures and the delivery of and payment
for any Securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Purchaser, will be mailed,
delivered or telefaxed to the Xxxxx Xxxxxx Inc. General Counsel (fax no.: (212)
000-0000) and confirmed to the General Counsel, Xxxxx Xxxxxx Inc., at 000
Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or, if sent to the
Company, will be mailed, delivered or telefaxed to Integrated Health Services,
Inc., 00000 Xxx Xxx Xxxxxxxxx, Xxxxxx Xxxxx, Xxxxxxxx 00000 (fax no.: (410)
000-0000), attention of the General Counsel.
28
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.
17. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York
City.
"Commission" shall mean the Securities and Exchange
Commission.
"Effective Date" shall mean each date and time that the
Registration Statement and any post-effective amendment or amendments
thereto became or become effective under the Act and each date after
the date hereof on which a document incorporated by reference in the
Registration Statement is filed under the Exchange Act.
"Effective Time" shall mean the time the Registration
Statement is initially declared effective by the Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(a) above.
29
"Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing pursuant to Rule 424(b) is required,
shall mean the form of final prospectus relating to the Securities
included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at
the Execution Time, in the form in which it shall become effective)
and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date, shall also mean such registration
statement as so amended.
"Rule 415" and "Rule 424" refer to such rules under the Act.
30
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
between the Company and the Purchaser.
Very truly yours,
Integrated Health Services, Inc.
By:
------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Xxxxx Xxxxxx Inc.
By:
------------------------------
Name:
Title:
31
EXHIBIT A
Integrated Health Services, Inc.
Standby Underwriting of Common Stock
, 1998
Xxxxx Xxxxxx Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed Standby Agreement (the "Standby Agreement") between Integrated Health
Services, Inc., a Delaware corporation (the "Company"), and you (the
"Purchaser"), relating to a call for redemption by the Company of all of its
outstanding 6% Convertible Subordinated Debentures due 2003. Such Debentures are
convertible into shares of the Common Stock, $.001 par value, of the Company
("Common Stock"), at any time prior to 5:00 P.M., New York City time, on the
Redemption Date (as defined in the Standby Agreement).
In order to induce the Purchaser to enter into the Standby
Agreement, the undersigned hereby agrees that, without the prior written consent
of Xxxxx Xxxxxx Inc. (which will not be unreasonably withheld), the undersigned
will not, prior to or on the Redemption Date (and, if the aggregate number of
the Securities (as defined in the Standby Agreement) exceeds 450,000 shares, for
an additional period of 90 days following the Redemption Date), offer, sell,
contract to sell, pledge or otherwise dispose of, or file (or participate in the
filing of) a registration statement with the Securities and Exchange Commission
which the Company has agreed not to file pursuant to the Standby Agreement in
respect of, or establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission promulgated thereunder with respect to,
any shares of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for such capital stock, or publicly announce an
intention to effect any such transaction, other than shares of Common Stock
disposed of as bona fide gifts approved by Xxxxx Xxxxxx Inc., which approval
will not be unreasonably withheld.
A-1
If for any reason the Standby Agreement shall be terminated
prior to the Closing Date (as defined in the Standby Agreement), the agreement
set forth above shall likewise be terminated.
Yours very truly,
---------------------------
[Name]
