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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN MEDICAL RESPONSE, INC.
SHI ACQUISITION CORP.
AND
STAT HEALTHCARE, INC.
DATED AS OF OCTOBER 7, 1996
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TABLE OF CONTENTS
ARTICLE I -- THE MERGER.................................................... 1
SECTION 1.1 The Merger................................................ 1
SECTION 1.2 Effective Time............................................ 2
SECTION 1.3 Effect of the Merger...................................... 2
SECTION 1.4 Certificate of Incorporation, By-Laws..................... 2
SECTION 1.5 Directors and Officers.................................... 2
SECTION 1.6 Effect on Capital Stock................................... 2
SECTION 1.7 Exchange of Certificates.................................. 4
SECTION 1.8 Stock Transfer Books...................................... 5
SECTION 1.9 No Further Ownership Rights in Company Common Stock....... 5
SECTION 1.10 Lost, Stolen or Destroyed Certificates.................... 5
SECTION 1.11 Tax and Accounting Consequences........................... 5
SECTION 1.12 Taking of Necessary Action; Further Action................ 5
SECTION 1.13 Material Adverse Effect................................... 5
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 6
SECTION 2.1 Organization and Qualification; Subsidiaries.............. 6
SECTION 2.2 Certificate of Incorporation and By-Laws.................. 6
SECTION 2.3 Capitalization............................................ 6
SECTION 2.4 Authority Relative to this Agreement...................... 7
SECTION 2.5 No Conflict; Required Filings and Consents................ 7
SECTION 2.6 Compliance, Permits....................................... 8
SECTION 2.7 SEC Filings; Financial Statements......................... 8
SECTION 2.8 Absence of Certain Changes or Events...................... 9
SECTION 2.9 No Undisclosed Liabilities................................ 9
SECTION 2.10 Absence of Litigation..................................... 9
SECTION 2.11 Employee Benefit Plans, Employment Agreements............. 9
SECTION 2.12 Labor Matters............................................. 10
SECTION 2.13 Registration Statement, Proxy Statement/Prospectus........ 11
SECTION 2.14 Restrictions on Business Activitie........................ 11
SECTION 2.15 Title to Property......................................... 11
SECTION 2.16 Taxes..................................................... 11
SECTION 2.17 Environmental Matters..................................... 12
SECTION 2.18 Intellectual Property..................................... 13
SECTION 2.19 Interested Party Transactions............................. 13
SECTION 2.20 Insurance................................................. 13
SECTION 2.21 Accounts Receivable....................................... 13
SECTION 2.22 Pooling Matters........................................... 13
SECTION 2.23 Opinion of Financial Advisor.............................. 13
SECTION 2.24 Brokers................................................... 13
SECTION 2.25 Section 203 of the DGCL Not Applicable.................... 14
SECTION 2.26 Change in Control Payments................................ 14
SECTION 2.27 Expenses.................................................. 14
SECTION 2.28 Healthcare Regulatory Compliance.......................... 14
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..... 14
SECTION 3.1 Organization and Qualification; Subsidiaries.............. 14
SECTION 3.2 Charter and By-Laws....................................... 15
SECTION 3.3 Capitalization............................................ 15
SECTION 3.4 Authority Relative to this Agreement...................... 15
SECTION 3.5 No Conflict, Required Filings and Consents................ 16
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SECTION 3.6 Compliance; Permits.......................................................... 16
SECTION 3.7 SEC Filings; Financial Statements............................................ 17
SECTION 3.8 Absence of Certain Changes or Events......................................... 17
SECTION 3.9 Registration Statement; Proxy Statement/Prospectus........................... 17
SECTION 3.10 Pooling Matters.............................................................. 18
SECTION 3.11 No Undisclosed Liabilities................................................... 18
SECTION 3.12 Absence of Litigation........................................................ 18
SECTION 3.13 Ownership of Merger Sub; No Prior Activities................................. 18
ARTICLE IV -- CONDUCT OF BUSINESS PENDING THE MERGER........................................ 18
SECTION 4.1 Conduct of Business by the Company Pending the Merger........................ 18
SECTION 4.2 No Solicitation.............................................................. 20
SECTION 4.3 Conduct of Business by Parent Pending the Merger............................. 21
ARTICLE V -- ADDITIONAL AGREEMENTS.......................................................... 21
SECTION 5.1 HSR Act...................................................................... 21
SECTION 5.2 Proxy Statement Prospectus; Registration Statement........................... 21
SECTION 5.3 Stockholders Meeting......................................................... 22
SECTION 5.4 Access to Information; Confidentiality....................................... 22
SECTION 5.5 Consents; Approvals.......................................................... 22
SECTION 5.6 Agreements with Respect to Affiliates........................................ 22
SECTION 5.7 Indemnification and Insurance................................................ 22
SECTION 5.8 Notification of Certain Matters.............................................. 23
SECTION 5.9 Further Action/Tax Treatment................................................. 23
SECTION 5.10 Public Announcements......................................................... 24
SECTION 5.11 Conveyance Taxes............................................................. 24
SECTION 5.12 Accountants' Letters......................................................... 24
SECTION 5.13 Pooling Accounting Treatment................................................. 24
SECTION 5.14 Nasdaq Listing............................................................... 24
SECTION 5.15 Listing of Parent Shares..................................................... 24
ARTICLE VI -- CONDITIONS TO THE MERGER...................................................... 24
SECTION 6.1 Conditions to Obligation of Each Party to Effect the Merger.................. 24
SECTION 6.2 Additional Conditions to Obligations of Parent and Merger Sub................ 25
SECTION 6.3 Additional Conditions to Obligation of the Company........................... 26
ARTICLE VII -- TERMINATION.................................................................. 27
SECTION 7.1 Termination.................................................................. 27
SECTION 7.2 Effect of Termination........................................................ 28
SECTION 7.3 Fees and Expenses............................................................ 28
ARTICLE VIII -- GENERAL PROVISIONS.......................................................... 28
SECTION 8.1 Effectiveness of Representations, Warranties and Agreements; Knowledge, Etc.. 28
SECTION 8.2 Notices...................................................................... 29
SECTION 8.3 Certain Definitions.......................................................... 29
SECTION 8.4 Amendment.................................................................... 30
SECTION 8.5 Waiver....................................................................... 30
SECTION 8.6 Headings..................................................................... 30
SECTION 8.7 Severability................................................................. 30
SECTION 8.8 Entire Agreement............................................................. 31
SECTION 8.9 Assignment; Guarantee of Merger Sub.......................................... 31
SECTION 8.10 Parties in Interest.......................................................... 31
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative........................ 31
SECTION 8.12 Governing Law................................................................ 31
SECTION 8.13 Counterparts................................................................. 31
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 7, 1996 (this
"Agreement"), among American Medical Response, Inc., a Delaware corporation
("Parent"), SHI Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and STAT Healthcare, Inc., a Delaware
corporation (the "Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective stockholders for Parent to enter into a business combination with
the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger (the
"Merger") of Merger Sub with and into the Company in accordance with the
applicable provisions of the Delaware General Corporation Law (the "DGCL"),
and upon the terms and subject to the conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder;
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests under both generally accepted
accounting principles and regulations of the Securities and Exchange
Commission (the "SEC");
WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of the
Company's common stock, $.01 par value (the "Company Common Stock"), shall be
converted into the right to receive the Merger Consideration (as defined in
Section 1.7(b)), upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
The Merger
Section 1.1 The Merger.
(a) Effective Time. At the Effective Time (as defined in Section 1.2), and
subject to and upon the terms and conditions of this Agreement and the DGCL,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1 and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the consummation of the Merger will take place as promptly as
practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Article VI, at the offices of Ropes &
Xxxx, Xxx Xxxxxxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx, unless another date,
time or place is agreed to in writing by the parties hereto.
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Section 1.2 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger as contemplated by the DGCL (the "Certificate of Merger"), together
with any required related certificates, with the Secretary of State of the
State of Delaware, in such form as required by, and executed in accordance
with the relevant provisions of, the DGCL (the time of such filing being the
"Effective Time").
Section 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
the Company and Merger Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
Section 1.4 Certificate of Incorporation, By-Laws.
(a) Certificate of Incorporation. Unless otherwise determined by Parent
prior to the Effective Time, but in all cases subject to Section 5.7(a), at
the Effective Time the Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the DGCL and such Certificate of Incorporation.
(b) By-Laws. Unless otherwise determined by Parent prior to the Effective
Time, but in all cases subject to Section 5.7(a), the By-Laws of the Company,
as in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended in accordance with the
DGCL, the Certificate of Incorporation of the Surviving Corporation and such
By-Laws; provided, however, that the Company shall take such actions as may be
necessary to ensure that, at the Effective Time, the authorized number of
directors of the Surviving Corporation shall consist of the same number of
directors as the number of directors of Merger Sub at the Effective Time.
Section 1.5 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the persons listed
on Schedule 1.5 shall serve as the initial officers of the Surviving
Corporation in the capacity or capacities specified on Schedule 1.5, in each
case until their respective successors are duly elected or appointed and
qualified.
Section 1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the Parent, Merger Sub, the
Company or the holders of any of the following securities:
(a) Conversion of Securities. Each Share issued and outstanding
immediately prior to the Effective Time (excluding any Shares to be
canceled pursuant to Section 1.6(b)) shall be converted, subject to
Section 1.6(f), into the right to receive 0.25 of a share (the "Exchange
Ratio") of validly issued, fully paid and nonassessable shares ("Parent
Shares") of the Common Stock, $.01 par value, of Parent ("Parent Common
Stock").
(b) Cancellation. Each Share held in the treasury of the Company and each
Share owned by Parent, Merger Sub or any direct or indirect wholly owned
subsidiary of the Company or Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, cease to be outstanding, be canceled and retired without
payment of any consideration therefor and cease to exist.
(c) Stock Options and Warrants.
(i) At the Effective Time, (A) each outstanding option to purchase
Company Common Stock granted under the Company's 1996 Stock Incentive
Plan, (the "Company Stock Option Plan") and (B) each outstanding option
to purchase Company Common Stock described in Section 1.6(c) of the
Company Disclosure Schedule (collectively with the options described in
clause (A) ("Stock
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Options")), whether vested or unvested, shall be deemed assumed by
Parent and deemed to constitute an option to acquire, on the same terms
and conditions as were applicable under such Stock Option prior to the
Effective Time, the number (rounded to the nearest whole number) of
Parent Shares as the holder of such Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time (not taking
into account whether or not such option was in fact exercisable), at a
price per share equal to (x) the aggregate exercise price for Company
Common Stock otherwise purchasable pursuant to such Stock Option
divided by (y) the number of Parent Shares deemed purchasable pursuant
to such Stock Option. It is intended that the foregoing provisions
shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 425 of the Code, as to any Stock
Option which is an "incentive stock option."
(ii) As soon as practicable after the Effective Time, Parent shall
deliver to each holder of an outstanding Stock Option an appropriate
notice setting forth such holder's rights pursuant thereto, and such
Stock Option shall continue in effect on the same terms and conditions
(including antidilution provisions).
(iii) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of Parent Shares for delivery pursuant to
the terms set forth in this Section 1.6(c).
(iv) Subject to any applicable limitations under the Securities Act
of 1933, as amended, and the rules and regulations thereunder (the
"Securities Act"), Parent shall either (in consultation with the
Company and its advisors) (A) file a Registration Statement on Form S-8
(or any successor form), effective as of the Effective Time, with
respect to the shares of Parent Common Stock issuable upon exercise of
the Stock Options, or (B) file any necessary amendments to the
Company's previously-filed Registration Statement(s) on Form S-8 in
order that the Parent will be deemed a "successor registrant"
thereunder, and, in either event the Parent shall use all reasonable
efforts to maintain the effectiveness of such registration statement(s)
(and maintain the current status of the prospectus or prospectuses
relating thereto) for so long as such options shall remain outstanding.
(v) At the Effective Time, each of the 599,726 Class A redeemable
common stock purchase warrant expiring April 19, 1998 (the "Class A
Warrants") to purchase one share of Company Common Stock at a purchase
price of $4.50 and each of the 62,500 warrants expiring April 19, 2000
(the "Other Warrants") to purchase two shares of Company Common Stock
and one Class A Warrant at a purchase price of $10.875 (the Class A
Warrants and the Other Warrants are hereinafter known collectively as,
the "Warrants"), shall be deemed to constitute a warrant to acquire, on
the same terms and conditions as were applicable under such Warrant
prior to the Effective Time (including anti-dilution provisions), the
number (rounded to the nearest whole number) of Parent Shares as the
holder of such Warrant would have been entitled to receive pursuant to
the Merger had such holder exercised such Warrant in full immediately
prior to the Effective Time, at a price per share equal to (x) the
aggregate exercise price for Company Common Stock otherwise purchasable
pursuant to such Warrant divided by (y) the number of Parent Shares
deemed purchasable pursuant to such Warrant.
(d) Capital Stock of Merger Sub. Each share of common stock, $.01 par
value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly
issued, fully paid and nonassessable share of common stock, $.01 par value,
of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible
into Parent Common Stock), reorganization, recapitalization or other like
change with respect to Parent Common Stock occurring after the date hereof
and prior to the Effective Time.
(f) No Fractional Shares. No certificates or scrip representing less than
one Parent Share shall be issued upon the surrender for exchange of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"). In lieu of any such
fractional share,
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each holder of Shares who would otherwise have been entitled to a fraction
of a Parent Share upon surrender of Certificates for exchange shall be paid
upon such surrender (without interest) cash equal to the product of (i)
such fraction, multiplied by (ii) the average closing price per share of
Parent Common Stock as reported in the Wall Street Journal for the twenty
trading days on the New York Stock Exchange ending on the fifth day prior
to the date on which the Effective Time occurs.
Section 1.7 Exchange of Certificates.
(a) Exchange Agent. Parent shall supply, or shall cause to be supplied, to
or for the account of The First National Bank of Boston, or such other bank or
trust company as shall be designated by Parent (the "Exchange Agent"), in
trust for the benefit of the holders of Company Common Stock, for exchange in
accordance with this Section 1.7, through the Exchange Agent, certificates
evidencing the Parent Shares issuable pursuant to Section 1.6 in exchange for
outstanding Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of Certificates (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify), and (ii) instructions to effect the surrender
of the Certificates in exchange for the certificates evidencing Parent Shares.
Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor
(A) certificates evidencing that number of whole Parent Shares which such
holder has the right to receive in accordance with the Exchange Ratio in
respect of the Shares formerly evidenced by such Certificate, (B) any
dividends or other distributions to which such holder is entitled pursuant to
Section 1.7(c), and (C) cash in respect of fractional shares as provided in
Section 1.6(f) (the Parent Shares and the cash described in clauses (B) and
(C) being, collectively, the "Merger Consideration"), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Company as of the Effective Time, Parent Shares, dividends and distributions
may be issued and paid in accordance with this Article I to a transferee if
the Certificate evidencing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
pursuant to this Section 1.7(b) and by evidence that any applicable stock
transfer taxes have been paid. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented Shares of Company
Common Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends and subject to Section
1.6(f), to evidence only the right to receive the number of full Parent Shares
into which such shares of Company Common Stock shall have been so converted.
(c) Distributions With Respect to Unexchanged Parent Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Parent Shares they
are entitled to receive until the holder of such Certificate shall surrender
such Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole Parent Shares issued in exchange therefor, without
interest, at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole Parent Shares.
(d) Transfers of Ownership. If any certificate for Parent Shares is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition to the issuance
thereof that the Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer
or other taxes required by reason of the issuance of a certificate for Parent
Shares in any name other than that of the registered holder of the certificate
surrendered, or have established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
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(e) No Liability. Neither Parent, Merger Sub nor the Company shall be liable
to any holder of Company Common Stock for any Merger Consideration delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Withholding Rights. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant
to this Agreement to any holder of Company Common Stock such amounts as Parent
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the Shares in respect of
which such deduction and withholding was made by Parent or the Exchange Agent.
Section 1.8 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further
registration of transfers of Company Common Stock thereafter on the records of
the Company.
Section 1.9 No Further Ownership Rights in Company Common Stock. The Merger
Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation
of Shares which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in this Article I.
Section 1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, such Parent
Shares as may be required pursuant to Section 1.6; provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent or the Exchange Agent with respect
to the Certificates alleged to have been lost, stolen or destroyed.
Section 1.11 Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the
meaning of Section 368 of the Code and (ii) qualify for accounting treatment
as a pooling of interests. The parties hereto hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-
3(a) of the United States Treasury Regulations.
Section 1.12 Taking of Necessary Action; Further Action. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in
accordance with this Agreement as promptly as possible. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and
directors of the Company and Merger Sub immediately prior to the Effective
Time are fully authorized in the name of their respective corporations to
take, and will take, all such lawful and necessary action.
Section 1.13 Material Adverse Effect. When used in connection with the
Company or any of its subsidiaries, or Parent or any of its subsidiaries, as
the case may be, the term "Material Adverse Effect" means any change, effect
or circumstance that, individually or when taken together with all other such
changes, effects or circumstances that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, (a) is or
would be materially adverse to the business, assets (including intangible
assets), prospects, financial condition or results of operations of the
Company and its subsidiaries or Parent and its subsidiaries, as the case may
be, in each case taken as a whole or (b) is or would materially delay or
prevent the consummation of the transactions contemplated hereby.
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ARTICLE II
Representations and Warranties of the Company
The Company hereby represents and warrants to Parent and Merger Sub that,
except as set forth in the written disclosure schedule delivered on or prior
to the date hereof by the Company to Parent that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Article II and discloses the exception to the representation or warranty with
reasonable particularity (the "Company Disclosure Schedule"):
Section 2.1 Organization and Qualification; Subsidiaries. Each of the
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
("Approvals") necessary to own, lease and operate the properties it purports
to own, operate or lease and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority and Approvals would not have a
Material Adverse Effect. Each of the Company and each of its subsidiaries is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not have a Material
Adverse Effect. A true and complete list of all of the Company's subsidiaries,
together with the jurisdiction of incorporation of each subsidiary, the
authorized capitalization of each subsidiary, and the percentage of each
subsidiary's outstanding capital stock owned by the Company or another
subsidiary, is set forth in Section 2.1 of the Company Disclosure Schedule.
Except as set forth in Section 2.1 of the Company Disclosure Schedule, the
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity, with respect to which interest the
Company or any of its subsidiaries has invested or is required to invest
$50,000 or more, excluding securities in any publicly traded company held for
investment by the Company and comprising less than five percent of the
outstanding stock of such company.
Section 2.2 Certificate of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of its Certificate
of Incorporation and By-Laws as most recently restated and subsequently
amended to date, and has furnished or made available to Parent the Certificate
of Incorporation and By-Laws (or equivalent organizational documents) of each
of its subsidiaries (the "Subsidiary Documents"). Such Certificate of
Incorporation, By-Laws and Subsidiary Documents are in full force and effect.
Neither the Company nor any of its subsidiaries is in violation of any of the
provisions of its Certificate of Incorporation or By-Laws or Subsidiary
Documents, except for immaterial violations of the Subsidiary Documents which
may exist.
Section 2.3 Capitalization. The authorized capital stock of the Company
consists of (1) 40,000,000 shares of Company Common Stock and (ii) 5,000,000
shares of preferred stock, $.01 par value per share, none of which is issued
and outstanding and none of which is held in treasury. As of September 30,
1996, (i) 14,975,412 shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable,
and no shares were held in treasury, (ii) no shares of Company Common Stock
were held by subsidiaries of the Company, (iii) 344,500 shares of Company
Common Stock were reserved for future issuance pursuant to outstanding stock
options granted under the Company Stock Option Plan, (iv) 10,000 shares of
Company Common Stock were reserved for future issuance pursuant to the options
described in Section 1.6(c) of the Company Disclosure Schedule, (v) 598,726
shares of Company Common Stock were reserved for future issuance upon exercise
of the Class A Warrants and (vi) 187,500 shares of Company Common Stock were
reserved for future issuance upon exercise of the Other Warrants (including
the Class A Warrants underlying the Other Warrants). No material change in
such capitalization has occurred between September 30, 1996 and the date
hereof. Except as set forth in Section 2.3 or Section 2.11 of the Company
Disclosure Schedule, there are no
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options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of the Company
or any of its subsidiaries or obligating the Company or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any of its subsidiaries. All shares of Company
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid and nonassessable. Except
as disclosed in Section 2.3 of the Company Disclosure Schedule, there are no
obligations, contingent or otherwise, of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or the capital stock of any subsidiary or to provide funds to or
make any investment (in the form of a loan, capital contribution, guaranty or
otherwise) in any such subsidiary or any other entity. Except as set forth in
Sections 2.1 and 2.3 of the Company Disclosure Schedule, all of the
outstanding shares of capital stock of each of the Company's subsidiaries are
duly authorized, validly issued, fully paid and nonassessable, and all such
shares are owned by the Company or another subsidiary of the Company free and
clear of all security interests, liens, claims, pledges, agreements,
limitations in voting rights, charges or other encumbrances of any nature
whatsoever (collectively, "Liens").
Section 2.4 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and, subject to the required approval of its stockholders, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions so contemplated (other than
the adoption of this Agreement by the holders of at least a majority of the
outstanding shares of Company Common Stock entitled to vote in accordance with
the DGCL and the Company's Certificate of Incorporation and By-Laws). The
Board of Directors of the Company has determined that it is advisable and in
the best interest of the Company's stockholders for the Company to enter into
a business combination with Parent upon the terms and subject to the
conditions of this Agreement, and has recommended that the Company's
stockholders approve and adopt this Agreement and the Merger. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Parent and Merger Sub, as
applicable, constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
Section 2.5 No Conflict; Required Filings and Consents.
(a) Section 2.5(a) of the Company Disclosure Schedule includes a list of (i)
all loan agreements, indentures, mortgages, notes, pledges, conditional sale
or title retention agreements, security agreements, equipment obligations,
guaranties, standby letters of credit, equipment leases or lease purchase
agreements to which the Company or any of its subsidiaries is a party or by
which any of them is bound each in an amount equal to or exceeding $50,000,
but excluding any such agreement between the Company and its wholly owned
subsidiaries or between two or more wholly owned subsidiaries of the Company;
and (ii) all contracts, agreements, commitments or other understandings or
arrangements to which the Company or any of its subsidiaries is a party or by
which any of them or any of their respective properties or assets are bound or
affected, but excluding contracts, agreements, commitments or other
understandings or arrangements entered into in the ordinary course of business
and involving, in each case, payments or receipts by the Company or any of its
subsidiaries of less than $50,000 in any single instance but not more than
$250,000 in the aggregate; and (iii) all agreements which, as of the date
hereof, are required to be filed as "material contracts" with the SEC pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, and
the SEC's rules and regulations thereunder (the "Exchange Act").
(b) Except as disclosed in Section 2.5(b) of the Company Disclosure
Schedule, (i) neither the Company nor any of its subsidiaries has breached, is
in default under, or has received written notice of any breach of or default
under, any of the agreements, contracts or other instruments referred to in
clauses (i), (ii) or (iii) of Section 2.5(a), (ii) to the best knowledge of
the Company, no other party to any of the agreements, contracts or other
instruments referred to in clauses (i), (ii) or (iii) of Section 2.5 (a) has
breached or is in default of any of
7
its obligations thereunder, and (iii) each of the agreements, contracts and
other instruments referred to in clauses (i), (ii) or (iii) of Section 2.5(a)
is in full force and effect, except in any such case for breaches, defaults or
failures to be in full force and effect that would not have a Material Adverse
Effect.
(c) Except as set forth in Section 2.5(c) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does
not, and, assuming that the conditions described in Sections 6.1(a), (b) and
(c) are satisfied, the performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby will not, (i) conflict
with or violate the Certificate of Incorporation or By-Laws of the Company,
(ii) conflict with or violate any federal, foreign, state or provincial law,
rule, regulation, order, judgment or decree (collectively, "Laws") applicable
to the Company or any of its subsidiaries or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under or impair the Company's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties
or assets of the Company or any of its subsidiaries pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective properties is bound or affected, except in any
such case for any such conflicts, violations, breaches, defaults or other
occurrences that would not have a Material Adverse Effect.
(d) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, state
securities laws ("Blue Sky Laws"), the pre-merger notification requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the filing and recordation of appropriate merger or other documents
as required by the DGCL, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or materially delay the Company from
performing its obligations under this Agreement, or would not otherwise have a
Material Adverse Effect.
Section 2.6 Compliance, Permits.
(a) Except as disclosed in Section 2.6(a) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is in conflict with,
or in default or violation of, (i) any Law applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties is
bound or affected or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective
properties is bound or affected, except for any such conflicts, defaults or
violations which would not have a Material Adverse Effect.
(b) The Company and its subsidiaries are in compliance with the terms of all
Approvals from governmental authorities, except where the failure to so comply
would not have a Material Adverse Effect.
Section 2.7 SEC Filings; Financial Statements.
(a) The Company has filed and has made available to Parent all forms,
reports and documents required to be filed by the Company with the SEC since
September 1, 1994 (collectively, the "Company SEC Reports"). Except as
disclosed in Section 2.7 of the Company Disclosure Schedule, the Company SEC
Reports (i) were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
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 the light of the circumstances under which they were
made, not misleading. None of the Company's subsidiaries is required to file
any forms, reports or other documents with the SEC.
8
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes thereto), and each fairly presents in all material respects the
consolidated financial position of the Company and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and
cash flows and changes in stockholders' equity for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected
to be material in amount and the addition of footnotes.
Section 2.8 Absence of Certain Changes or Events. Except as set forth in
Section 2.8 of the Company Disclosure Schedule or the Company SEC Reports
filed with the SEC prior to the date hereof, since January 1, 1996, the
Company has conducted its business in the ordinary course and there has not
occurred: (a) any Material Adverse Effect; (b) any amendments or changes in
the Certificate of Incorporation or By-laws of the Company; (c) any damage to,
destruction or loss of any asset of the Company or any of its subsidiaries
(whether or not covered by insurance) that would have a Material Adverse
Effect; (d) any material change by the Company in its accounting methods,
principles or practices; (e) any material revaluation by the Company of any of
its assets, including, without limitation, writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary course
of business; (f) any other action or event that would have required the
consent of Parent pursuant to Section 4.1 had such action or event occurred
after the date of this Agreement; or (g) any sale of a material amount of
assets of the Company or any of its subsidiaries, except in the ordinary
course of business.
Section 2.9 No Undisclosed Liabilities. Except as is disclosed in Section
2.9 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise),
except liabilities (a) in the aggregate adequately provided for in the
Company's audited balance sheet (including any related notes thereto) for the
fiscal year ended December 31, 1995 (the "1995 Company Balance Sheet")
included in the Company's S-1 Registration Statement dated August 29, 1996,
(b) incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected on the 1995 Company
Balance Sheet, (c) incurred since December 31, 1995 in the ordinary course of
business consistent with past practice, (d) incurred in connection with this
Agreement, or (e) which would not have a Material Adverse Effect.
Section 2.10 Absence of Litigation. Except as set forth in Section 2.10 of
the Company Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties
or rights of the Company or any of its subsidiaries, before any federal,
foreign, state or provincial court, arbitrator or administrative, governmental
or regulatory authority or body that would have a Material Adverse Effect.
Section 2.11 Employee Benefit Plans, Employment Agreements.
(a) Section 2.11 (a) of the Company Disclosure Schedule lists all employee
pension plans (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), all material employee welfare
plans (as defined in Section 3(1) of ERISA), and all other material bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements, and any material current or former employment,
executive compensation, consulting or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of or consultant
to the Company, any trade or business (whether or not incorporated) which is a
member of a controlled group including the Company or which is under common
control with the Company (an "ERISA Affiliate") within the meaning of Section
414 of the Code, or any subsidiary of the Company, as well as each plan with
respect to which the Company or an ERISA Affiliate could incur liability under
Section 4069 (if such plan has been or were terminated) or Section 4212(c) of
ERISA (all such plans, practices and programs are referred to as the "Company
Employee Plans"). There have been made available to Parent copies of (i) each
such written Company Employee Plan (other than those referred to in Section
4(b)(4) of ERISA), (ii) the most
9
recent annual report on Form 5500 series, with accompanying schedules and
attachments, filed with respect to each Company Employee Plan required to make
such a filing, and (iii) the most recent actuarial valuation for each Company
Employee Plan subject to Title IV of ERISA. For purposes of this Section 2.11
(a), the term "material," used with respect to any Company Employee Plan,
shall mean that the Company or an ERISA Affiliate has incurred or may incur
obligations in an annual amount exceeding $50,000 with respect to such Company
Employee Plan.
(b) (i) Except in each case as set forth in Section 2.11(b) of the Company
Disclosure Schedule, none of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person, and none of
the Company Employee Plans is a "multiemployer plan" as such term is defined
in Section 3(37) of ERISA; (ii) there has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code,
with respect to any Company Employee Plan, which could result in any material
liability of the Company or any of its subsidiaries; (iii) all Company
Employee Plans are in compliance in all material respects with the
requirements prescribed by any and all Laws (including ERISA and the Code),
currently in effect with respect thereto (including all applicable
requirements for notification to participants or the Department of Labor,
Pension Benefit Guaranty Corporation (the "PBGC"), Internal Revenue Service
(the "IRS") or Secretary of the Treasury), and the Company and each of its
subsidiaries have performed all material obligations required to be performed
by them under, are not in any material respect in default under or violation
of, and have no knowledge of any default or violation by any other party to,
any of the Company Employee Plans; (iv) each Company Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code is the subject of a favorable determination
letter from the IRS, and nothing has occurred which may reasonably be expected
to impair such determination; (v) all contributions required to be made to any
Company Employee Plan pursuant to Section 412 of the Code, or the terms of the
Company Employee Plan or any collective bargaining agreement, have been made
on or before their due dates; (vi) with respect to each Company Employee Plan,
no "reportable event" within the meaning of Section 4043 of ERISA (excluding
any such event for which the 30 day notice requirement has been waived under
the regulations to Section 4043 of ERISA) nor any event described in Section
4062, 4063 or 4041 of ERISA has occurred; and (vii) neither the Company nor
any ERISA Affiliate has incurred, nor reasonably expects to incur, any
liability under Title IV of ERISA (other than liability for premium payments
to the PBGC arising in the ordinary course).
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true and
complete list of each current or former employee, officer or director of the
Company or any of its subsidiaries who holds (i) any option to purchase
Company Common Stock as of the date hereof, together with the number of shares
of Company Common Stock subject to such option, the option price of such
option (to the extent determined as of the date hereof), whether such option
is intended to qualify as an incentive stock option within the meaning of
Section 422(b) of the Code (an "ISO"), and the expiration date of such option;
(ii) any other right, directly or indirectly, to acquire Company Common Stock
(other than the Warrants), together with the number of shares of Company
Common Stock subject to such right. Section 2.11(c) of the Company Disclosure
Schedule also sets forth the total number of such ISOs, such nonqualified
options and such other rights.
(d) Section 2.11(d) of the Company Disclosure Schedule sets forth a true and
complete list of: (i) all employment agreements with officers of the Company
or any of its subsidiaries; (ii) all agreements with consultants who are
individuals obligating the Company or any of its subsidiaries to make annual
cash payments in an amount exceeding $25,000; (iii) all employees of, or
consultants to, the Company or any of its subsidiaries who have executed a
non-competition agreement with the Company or any of its subsidiaries; (iv)
all severance agreements, programs and policies of the Company or any of its
subsidiaries with or relating to its employees, in each case with outstanding
commitments exceeding $25,000, excluding programs and policies required to be
maintained by law; and (v) all plans, programs, agreements and other
arrangements of the Company or any of its subsidiaries with or relating to its
employees which contain change in control provisions.
Section 2.12 Labor Matters. Except as set forth in Section 2.12 of the
Company Disclosure Schedule: (i) there are no claims or proceedings pending
or, to the knowledge of the Company or any of its subsidiaries,
10
threatened, between the Company or any of its subsidiaries and any of their
respective employees, asserting that the Company has committed an unfair labor
practice which claims or proceedings have or would have a Material Adverse
Effect; (ii) neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or its subsidiaries, nor does the Company or
any of its subsidiaries know of any activities or proceedings of any labor
union to organize any such employees; and (iii) neither the Company nor any of
its subsidiaries has any knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of the
Company or any of its subsidiaries.
Section 2.13 Registration Statement, Proxy Statement/Prospectus. The
information supplied by the Company for inclusion in the Registration
Statement (as defined in Section 3.9) shall not at the time the Registration
Statement is declared effective by the SEC contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The information
supplied by the Company for inclusion in the proxy statement/prospectus (such
proxy statement/prospectus as amended or supplemented is referred to herein as
the "Proxy Statement/Prospectus") to be sent to the stockholders of the
Company in connection with the meeting of the stockholders of the Company to
consider the Merger (the "Stockholders Meeting"), will not, on the date the
Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) is
first mailed to stockholders, at the time of the Stockholders Meetings, or at
the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or shall omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances in which they were made, not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders
Meeting which has become false or misleading. If at any time prior to the
Effective Time any event relating to the Company or any of its respective
affiliates, officers or directors should be discovered by the Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement/Prospectus, the Company shall promptly
inform Parent and Merger Sub. Notwithstanding the foregoing, the Company makes
no representation or warranty with respect to any information supplied by
Parent or Merger Sub which is contained in any of the foregoing documents.
Section 2.14 Restrictions on Business Activities. Except for this Agreement
or as set forth in Section 2.14 of the Company Disclosure Schedule, to the
best of the Company's knowledge, there is no agreement, judgement, injunction,
order or decree binding upon the Company or any of its subsidiaries which has
or would have the effect of prohibiting or impairing any business practice of
the Company or any of its subsidiaries, acquisition of property by the Company
or any of its subsidiaries or the conduct of business by the Company or any of
its subsidiaries as currently conducted or as proposed to be conducted by the
Company, except for any prohibition or impairment as would not have a Material
Adverse Effect.
Section 2.15 Title to Property. Except as set forth in Section 2.15 of the
Company Disclosure Schedule, the Company and each of its subsidiaries have
good and defensible title to all of their properties and assets, free and
clear of all liens, charges and encumbrances, except liens for taxes not yet
due and payable and such liens or other imperfections of title, which would
not have a Material Adverse Effect; and, to the knowledge of the Company, all
leases pursuant to which the Company or any of its subsidiaries lease from
others material amounts of real or personal property, are in good standing,
valid and effective in accordance with their respective terms, and there is
not, to the knowledge of the Company, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default), except where the lack of such good
standing, validity and effectiveness or the existence of such default or event
of default would not have a Material Adverse Effect.
Section 2.16 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes, fees,
levies, duties, tariffs, imposts, and governmental impositions or charges of
any kind in the nature of (or similar to) taxes, payable to
11
any federal, state, local or foreign taxing authority, including (without
limitation) (i) income, franchise, profits, gross receipts, ad valorem, net
worth, value added, sales, use, service, real or personal property, special
assessments, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premiums, windfall profits,
transfer and gains taxes, and (ii) interest, penalties, additional taxes and
additions to tax imposed with respect thereto; and "Tax Returns" shall mean
returns, reports, and information statements with respect to Taxes required to
be filed with the IRS or any other federal, foreign, state or provincial
taxing authority, domestic or foreign, including, without limitation,
consolidated, combined and unitary tax returns.
(b) Other than as disclosed in Section 2.16(b) of the Company Disclosure
Schedule, (i) the Company and its subsidiaries have filed all Tax Returns
required to be filed by them, (ii) the Company and its subsidiaries have paid
and discharged all Taxes due in connection with or with respect to the periods
or transactions covered by such Tax Returns and have paid all other Taxes as
are due, except such as are being contested in good faith by appropriate
proceedings (to the extent that any such proceedings are required) and with
respect to which the Company is maintaining adequate reserves, and (iii) there
are no other Taxes that would be due if asserted by a taxing authority, except
with respect to which the Company is maintaining reserves to the extent
currently required unless the failure to do so would not have a Material
Adverse Effect. Except as does not involve or would not result in liability to
the Company or any of its subsidiaries that would have a Material Adverse
Effect: (i) there are no tax liens on any assets of the Company or any
subsidiary thereof; and (ii) neither the Company nor any of its subsidiaries
has granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax. The accruals and
reserves for Taxes (including deferred taxes) reflected in the 1995 Company
Balance Sheet are in all material respects adequate to cover all Taxes
required to be accrued through the date thereof (including interest and
penalties, if any, thereon and Taxes being contested) in accordance with
generally accepted accounting principles.
(c) Neither the Company nor any of its subsidiaries is, or has been, a
United States real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. To the best knowledge of the Company, neither
the Company nor any of its subsidiaries owns any property of a character, the
indirect transfer of which, pursuant to this Agreement, would give rise to any
material documentary, stamp or other transfer tax.
Section 2.17 Environmental Matters. Except as set forth in Section 2.17 of
the Company Disclosure Schedule, and except in all cases as, in the aggregate,
have not had and would not have a Material Adverse Effect, the Company and
each of its subsidiaries: (i) have obtained all Approvals which are required
to be obtained under all applicable federal, state, foreign or local laws or
any regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder relating to pollution or
protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
hazardous or toxic materials or wastes into ambient air, surface water, ground
water, or land or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials or wastes by the
Company or its subsidiaries or their respective agents ("Environmental Laws");
(ii) are in compliance with all terms and conditions of such required
Approvals, and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws; (iii) as
of the date hereof, are not aware of nor have received notice of any past or
present violations of Environmental Laws or any event, condition,
circumstance, activity, practice, incident, action or plan which is reasonably
likely to interfere with or prevent continued compliance with or which would
give rise to any common law or statutory liability, or otherwise form the
basis of any claim, action, suit or proceeding, against the Company or any of
its subsidiaries based on or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any pollutant,
contaminant or hazardous or toxic material or waste; and (iv) have taken all
actions necessary under applicable Environmental Laws to register any products
or materials required to be registered by the Company or its subsidiaries (or
any of their respective agents) thereunder.
12
Section 2.18 Intellectual Property.
(a) The Company, directly or indirectly, owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, technology,
know-how, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material that are material to the business of the Company and its subsidiaries
as currently conducted or as proposed to be conducted by the Company or its
subsidiaries (the "Company Intellectual Property Rights").
(b) Section 2.18(b) of the Company Disclosure Schedule sets forth a complete
list of all patents, trademarks, registered copyrights, trade names and
service marks, and any applications therefor, included in the Company
Intellectual Property Rights. All registered trademarks, service marks and
copyrights held by the Company are valid and subsisting.
Section 2.19 Interested Party Transactions. Except as set forth in Section
2.19 of the Company Disclosure Schedule or in the Company SEC Reports filed
with the SEC prior to the date hereof, no event has occurred that would be
required to be reported as a Certain Relationship or Related Transaction,
pursuant to Item 404 of Regulation S-K promulgated by the SEC.
Section 2.20 Insurance. Section 2.20 of the Company Disclosure Schedule sets
forth a complete list of all material fire and casualty, general liability,
business interruption, product liability, professional liability and sprinkler
and water damage insurance policies maintained by the Company or any of its
subsidiaries. All such policies are with reputable insurance carriers, provide
full and adequate coverage for all normal risks incident to the business of
the Company and its subsidiaries and their respective properties and assets
and are in character and amount at least equivalent to that carried by persons
engaged in similar businesses and subject to the same or similar perils or
hazards, except as would not have a Material Adverse Effect.
Section 2.21 Accounts Receivable. The accounts receivable of the Company and
its subsidiaries as reflected in the most recent financial statements
contained in the Company SEC Reports, to the extent uncollected on the date
hereof and the accounts receivable reflected on the books of the Company and
its subsidiaries are valid and existing and represent monies due, and the
Company has made reserves reasonably considered adequate for receivables not
collectible in the ordinary course of business, and (subject to the aforesaid
reserves) are subject to no refunds or other adjustments and to no defenses,
rights of setoff, assignments, restrictions, encumbrances or conditions
enforceable by third parties on or affecting any thereof, except for such
refunds, adjustments, defenses, rights of setoff, assignments, restrictions,
encumbrances or conditions as would not have a Material Adverse Effect.
Section 2.22 Pooling Matters. Neither the Company nor any of its affiliates
has, to the best of the Company's knowledge and based upon consultation with
its independent accountants, taken or agreed to take any action that could
affect the ability of Parent to account for the business combination to be
effected by the Merger as a pooling of interests. The failure of this
representation to be true and correct, shall, if the Merger is not able to be
accounted for as a pooling of interests, constitute a breach of this Agreement
by the Company for the purposes of Section 7.1(f).
Section 2.23 Opinion of Financial Advisor. The Company has been advised by
its financial advisor, Pacific Growth Equities, Inc., that in its opinion, as
of the date hereof, the Exchange Ratio set forth herein is fair to the holders
of Shares from a financial point of view.
Section 2.24 Brokers. No broker, finder or investment banker (other than
Pacific Growth Equities, Inc., the fees and expenses of whom will be paid by
the Company) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or its subsidiaries. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and Pacific Growth Equities, Inc. pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereunder.
13
Section 2.25 Section 203 of the DGCL Not Applicable. The Board of Directors
of the Company has taken all actions so that the restrictions contained in
Section 203 of the DGCL applicable to a "business combination" (as defined in
Section 203) will not apply to the execution, delivery or performance of this
Agreement or the respective Stockholders Agreements dated as of the date
hereof between Parent and certain stockholders of the Company (collectively,
the "Stockholders Agreements") or the consummation of the Merger or the other
transactions contemplated by this Agreement or by the Stockholders Agreements.
Section 2.26 Change in Control Payments. Except as set forth in Section
2.11(d) or Section 2.26 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries have any plans, programs or agreements to
which they are parties, or to which they are subject, pursuant to which
payments may be required or acceleration of benefits may be required upon a
change of control of the Company.
Section 2.27 Expenses. The Company has provided to Parent a good faith
estimate and description of the expenses of the Company and its subsidiaries
which the Company expects to incur, or has incurred, in connection with the
transactions contemplated by this Agreement.
Section 2.28 Healthcare Regulatory Compliance. (a) The relationships among
the Company, its subsidiaries and third parties are in compliance with all
applicable Laws and the rules of ethical conduct of applicable medical
societies and accrediting bodies, except where the failure to be in compliance
would not have a Material Adverse Effect.
(b) To the best knowledge of the Company, the Company and its subsidiaries
have not engaged knowingly and willfully in any activities which are
prohibited under federal Medicare and Medicaid statutes, including, without
limitation, 42 U.S.C. 1395 nn et seq., 42 U.S.C. (S) 1320a-7b et seq. and
related state or local statutes or regulations or which otherwise constitutes
fraud or false claims, including, without limitation, the following: (i)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (ii) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (iii) failing to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any
benefit or payment on its behalf or on behalf of another, with intent to
secure such benefit or payment fraudulently; and (iv) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or in kind or
offering to pay such remuneration (A) in return for referring an individual to
a person for the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part by Medicare or
Medicaid or (B) in return for purchasing, leasing, or ordering or arranging
for or recommending purchasing, leasing or ordering any good, facility,
service or item for which payment may be made in whole or in part by Medicare
or Medicaid.
ARTICLE III
Representation and Warrants of Parent and Merger Sub
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that, except as set forth in the written disclosure schedule
delivered on or prior to the date hereof by Parent to the Company that is
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article III and discloses the exception to the
representation or warranty with reasonable particularity (the "Parent
Disclosure Schedule"):
Section 3.1 Organization and Qualification; Subsidiaries. Each of Parent and
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority and is in possession of all Approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such
14
power, authority and Approvals would not have a Material Adverse Effect. Each
of Parent and each of its subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated
by it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not have a Material Adverse Effect. A true and
complete list as of the date hereof of all of Parent's subsidiaries, together
with the jurisdiction of incorporation of each subsidiary and the percentage
of each subsidiary's outstanding capital stock owned by Parent or another
subsidiary, is set forth in Section 3.1 of the Parent Disclosure Schedule.
Except as set forth in Section 3.1 of the Parent Disclosure Schedule as of the
date hereof, Parent does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity, with respect to which Parent
has invested or is required to invest $250,000 or more, excluding securities
in any publicly traded Company held for investment by Parent and comprising
less than five percent of the outstanding capital stock of such company.
Section 3.2 Charter and By-Laws. Parent has heretofore furnished to the
Company a complete and correct copy of the Certificates of Incorporation and
By-Laws, as amended to date, of each of Parent and Merger Sub. Such
Certificate of Incorporation and By-Laws are in full force and effect. Neither
Parent nor Merger Sub is in violation of any of the provisions of its
Certificate of Incorporation or By-Laws.
Section 3.3 Capitalization. As of September 30, 1996, the authorized capital
stock of Parent consisted of (i) 75,000,000 shares of Parent Common Stock, of
which 21,029,705 shares were issued and outstanding, all of which are validly
issued, fully paid and non-assessable, no shares were held in treasury,
2,579,709 shares were reserved for future issuance under Parent's stock plans
and arrangements and 3,311,258 were reserved for issuance upon exercise of
Parent's 5 1/4% Convertible Subordinated Notes due February 1, 2001 and (ii)
500,000 shares of preferred stock, $.01 par value per share, none of which was
issued and outstanding and none of which was held in treasury. No material
change in such capitalization has occurred between September 30, 1996 and the
date hereof. Except as set forth in Section 3.3 of the Parent Disclosure
Schedule, as of the date hereof there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to
the issued or unissued capital stock of Parent or any of its subsidiaries or
obligating Parent or any of its subsidiaries to issue or sell any shares of
capital stock of, or other equity interests in, Parent or any of its
subsidiaries. Except as set forth in Section 3.3 of the Parent Disclosure
Schedule as of the date hereof, there are no obligations, contingent or
otherwise, of Parent or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Parent Common Stock or the capital stock of
any subsidiary or to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any such subsidiary other than
guarantees of bank obligations of subsidiaries entered into in the ordinary
course of business. Except as set forth in Section 3.1 or 3.3 of the Parent
Disclosure Schedule, all of the outstanding shares of capital stock of each of
Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by Parent or another subsidiary of
Parent free and clear of all security interests, liens, claims, pledges,
agreements, limitations in Parent's voting rights, charges or other
encumbrances of any nature whatsoever.
Section 3.4 Authority Relative to this Agreement. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Sub, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby. The Board of Directors of Parent has determined that it is advisable
and in the best interest of Parent's stockholders for Parent to enter into a
business combination with the Company upon the terms and subject to the
conditions of this Agreement. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of Parent and Merger Sub enforceable against each
of them in accordance with its terms.
15
Section 3.5 No Conflict, Required Filings and Consents.
(a) Section 3.5(a) of the Parent Disclosure Schedule includes a list as of
the date hereof (or such other date specified in Section 3.5(a) of the Parent
Disclosure Schedule) of: (i) all loan agreements, indentures, mortgages,
notes, pledges, conditional sale or title retention agreements, security
agreements, equipment obligations, guaranties, standby letters of credit,
equipment leases or lease purchase agreements to which Parent or any of its
subsidiaries is a party or by which any of them is bound, each in an amount
equal to or exceeding $500,000, but excluding any such agreement between
Parent and its wholly-owned subsidiaries or between two or more wholly-owned
subsidiaries of Parent; (ii) all contracts, agreements, commitments or other
understandings or arrangements to which Parent or any of its subsidiaries is a
party or by which any of them or any of their respective property or assets
are bound or affected, but excluding contracts, agreements, commitments or
other understandings or arrangements entered into in the ordinary course of
business and involving, in each case, payments or receipts by Parent or any of
its subsidiaries of less than $1,000,000 in any single instance but not more
than $2,000,000 in the aggregate; and (iii) all agreements which, as of the
date hereof, are required to be filed with the SEC pursuant to the
requirements of the Exchange Act as "material contracts."
(b) Except as disclosed in Section 3.5(b) of the Parent Disclosure Schedule,
(i) neither the Parent nor any of its subsidiaries has breached, is in default
under, or has received written notice of any breach of or default under, any
of the agreements, contracts or other instruments referred to in clauses (i),
(ii) or (iii) of Section 3.5(a), (ii) to the best knowledge of Parent, no
other party to any of the agreements, contracts or other instrument referred
to in clauses (i), (ii) or (iii) of Section 3.5(a) has breached or is in
default of any of its obligations thereunder, and (iii) each of the
agreements, contracts and other instruments referred to in clauses (i), (ii)
or (iii) of Section 3.5(a) is in full force and effect, except in any such
case for breaches, defaults or failures to be in full force and effect that
would not have a Material Adverse Effect.
(c) Except as set forth in Section 3.5(c) of the Parent Disclosure Schedule,
the execution and delivery of this Agreement by Parent and Merger Sub do not,
and assuming that the conditions described in Sections 6.1(b) and (c) are
satisfied, the performance of this Agreement by Parent and Merger Sub will
not, (i) conflict with or violate the Certificate of Incorporation or By-Laws
of Parent or Merger Sub, (ii) conflict with or violate any Law applicable to
Parent or any of its subsidiaries or by which its or their respective
properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or impair Parent's or any of its subsidiaries'
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a Lien on any of the properties or assets of
Parent or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or any of its subsidiaries is a party
or by which Parent or any of its subsidiaries or its or any of their
respective properties are bound or affected, except in any such case for any
such conflicts, violations, breaches, defaults or other occurrences that would
not have a Material Adverse Effect.
(d) The execution and delivery of this Agreement by Parent and Merger Sub
does not, and the performance of this Agreement by Parent and Merger Sub will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, except (i) for
applicable requirements, if any, of the Securities Act, the Exchange Act, the
Blue Sky Laws, the pre-merger notification requirements of the HSR Act, and
the filing and recordation of appropriate merger or other documents as
required by the DGCL, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or materially delay Parent or Merger Sub from
performing their respective obligations under this Agreement or would not
otherwise have a Material Adverse Effect.
Section 3.6 Compliance; Permits.
(a) Except as disclosed in Section 3.6(a) of the Parent Disclosure Schedule,
neither Parent nor any of its subsidiaries is in conflict with, or in default
or violation of, (i) any law, rule, regulation, order, judgment or decree
applicable to Parent or any of its subsidiaries or by which its or any of
their respective properties is bound or
16
affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Parent or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties is bound or
affected, except for any such conflicts, defaults or violations which would
not have a Material Adverse Effect.
(b) Parent and its subsidiaries are in compliance with the terms of all
Approvals from governmental authorities, except where the failure to so comply
would not have a Material Adverse Effect.
Section 3.7 SEC Filings; Financial Statements.
(a) Parent has filed and has made available to the Company all forms,
reports and documents required to be filed by Parent with the SEC since
January 1, 1994 (collectively, the "Parent SEC Reports"). The Parent SEC
Reports (i) were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
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 the light of the circumstances under which they were
made, not misleading. None of Parent's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports has been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and each fairly presents in all material
respects the consolidated financial position of Parent and its subsidiaries as
at the respective dates thereof and the consolidated results of its operations
and cash flows and changes in stockholders' equity for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected
to be material in amount and the addition of footnotes.
Section 3.8 Absence of Certain Changes or Events. Except as set forth in
Section 3.8 of the Parent Disclosure Schedule or in the Parent SEC Reports
filed with the SEC prior to the date hereof, since January 1, 1996, Parent has
conducted its business in the ordinary course and there has not occurred: (i)
any Material Adverse Effect; (ii) any amendments or changes in the Certificate
of Incorporation or By-Laws of Parent; (iii) any damage to, destruction or
loss of any assets of the Parent or any of its subsidiaries (whether or not
covered by insurance) that would have a Material Adverse Effect; (iv) any
material change by Parent in its accounting methods, principles or practices;
(v) any material revaluation by Parent of any of its assets, including without
limitation, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business; (vi) any
other action or event that would have required the consent of the Company
pursuant to Section 4.3 had such action or event occurred after the date of
this Agreement; or (vii) any sale of a material amount of assets of Parent or
any of its subsidiaries except in the ordinary course of business.
Section 3.9 Registration Statement; Proxy Statement/Prospectus. Subject to
the accuracy of the representations of the Company in Section 2.13, the
registration statement (the "Registration Statement") pursuant to which the
Parent Common Stock to be issued in the Merger will be registered with the SEC
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements included therein not false or misleading. The
information supplied by Parent for inclusion in the Proxy Statement/Prospectus
will not, on the date the Proxy Statement/Prospectus is first mailed to
stockholders, at the time of the Stockholders Meeting and at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with
respect to any material fact, or will omit to state any material fact
necessary in order to make the statements therein not false or misleading; or
omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Stockholders Meeting which has become false or misleading. If at any time
prior to the Effective Time any event relating to Parent, Merger Sub or any of
their
17
respective affiliates, officers or directors should be discovered by Parent or
Merger Sub which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement/Prospectus, Parent or Merger
Sub will promptly inform the Company. Notwithstanding the foregoing, Parent
and Merger Sub make no representation or warranty with respect to any
information supplied by the Company which is contained in any of the foregoing
documents. The Registration Statement and Proxy Statement/Prospectus shall
comply in all material respects as to form and substance with the requirements
of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, Parent makes no representation or
warranty with respect to any information supplied by the Company which is
contained in, or furnished in connection with the preparation of, the
Registration Statement.
Section 3.10 Pooling Matters. Neither Parent nor any of its affiliates has,
to Parent's knowledge and based upon consultation with its independent
accountants, taken or agreed to take any action that could affect the ability
of Parent to account for the business combination to be effected by the Merger
as a pooling of interests. The failure of this representation to be true and
correct, shall, if the Merger is not able to be accounted for as a pooling of
interests, constitute a breach of the Agreement by Parent for the purposes of
Section 7.1(f).
Section 3.11 No Undisclosed Liabilities. Except as is disclosed in Section
3.11 of the Parent Disclosure Schedule, neither Parent nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise),
except liabilities (a) in the aggregate adequately provided for in the
Parent's audited balance sheet (including any related notes thereto) for the
fiscal year ended December 31, 1995 (the "1995 Parent Balance Sheet") included
in Parent's Annual Report on Form 10-K for the year ended December 31, 1995,
(b) incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected on the 1995 Parent
Balance Sheet, (c) incurred since December 31, 1995 in the ordinary course of
business consistent with past practice, (d) incurred in connection with this
Agreement, or (e) which would not have a Material Adverse Effect.
Section 3.12 Absence of Litigation. Except as set forth in Section 3.12 of
the Parent Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Parent,
threatened against Parent or any of its subsidiaries, or any properties or
rights of the Parent or any of its subsidiaries, before any federal, foreign,
state or provincial court, arbitrator or administrative, governmental or
regulatory authority or body that would have a Material Adverse Effect.
Section 3.13 Ownership of Merger Sub; No Prior Activities.
(a) Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
(b) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement and except for this Agreement
and any other agreements or arrangements contemplated by this Agreement,
Merger Sub has not and will not have incurred, directly or indirectly, through
any subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
ARTICLE IV
Conduct of Business Pending the Merger
Section 4.1 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless Parent shall otherwise agree in
writing, the Company shall conduct its business and shall cause the businesses
of its subsidiaries to be conducted only in, and the Company and its
subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent
18
with prudent industry practice; and the Company shall use all reasonable
commercial efforts to preserve substantially intact the business organization
of the Company and its subsidiaries, to keep available the services of the
present officers, employees and consultants of the Company and its
subsidiaries and to preserve the present relationships of the Company and its
subsidiaries with customers, suppliers and other persons with which the
Company or any of its subsidiaries has significant business relations. By way
of amplification and not limitation, except as contemplated by this Agreement,
neither the Company nor any of its subsidiaries shall, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, directly or indirectly do, or propose
to do, any of the following without the prior written consent of Parent:
(a) amend or otherwise change the Certificate of Incorporation or By-Laws
of the Company or any of its subsidiaries;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of
capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including, without limitation, any
phantom interest) in the Company, any of its subsidiaries or affiliates
(except for the issuance of shares of Company Common Stock issuable (i)
pursuant to Stock Options which were granted under the Company Stock Option
Plan and are outstanding on the date hereof, (ii) pursuant to options
described in Section 1.6(c) of the Company Disclosure Schedule outstanding
on the date hereof and (iii) pursuant to the Warrants).
(c) sell, pledge, dispose of or encumber any assets of the Company or any
of its subsidiaries (except for (i) sales of assets in the ordinary course
of business and in a manner consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) sales of immaterial
assets not in excess of $50,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock, except that a wholly owned
subsidiary of the Company may declare and pay a dividend to its parent,
(ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or (iii) amend
the terms or change the period of exercisability of, accelerate the vesting
of, purchase, repurchase, redeem or otherwise acquire, or permit any
subsidiary to purchase, repurchase, redeem or otherwise acquire, any of its
securities or any securities of its subsidiaries, including, without
limitation, shares of Company Common Stock or any option, warrant or right,
directly or indirectly, to acquire shares of Company Common Stock, or
propose to do any of the foregoing;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof, except that the Company may (1) acquire complementary
businesses or finance the acquisition by its affiliated physician groups of
hospital medical service contracts in an amount not to exceed $1,000,000 in
any single case and $2,750,000 in the aggregate, (2) with the prior written
consent of Parent (which consent will not be unreasonably withheld or
delayed) acquire the businesses described on Section 4.1(e) of the Company
Disclosure Schedule and (3) finance the acquisition by its affiliated
physician groups of the hospital medical service contracts described in
Section 4.1(e) of the Company Disclosure Schedule not to exceed in the
aggregate the amount previously specified in writing by the Company to
Parent; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person or, except in the
ordinary course of business consistent with past practice, make any loans
or advances; (iii) enter into or amend any material contract or agreement,
except that the Company may amend its existing $6,500,000 bank credit
agreement to increase the amount of credit available thereunder to up to
$25,000,000; (iv) authorize any capital expenditures or purchase of fixed
assets which are, in the aggregate, in excess of $100,000 for the Company
and its subsidiaries taken as a whole (except for purchases and leases of
equipment not to exceed $1,000,000 in aggregate payments required for the
development of new hyperbaric oxygen therapy and dialysis treatment
facilities); or (v) enter into or amend any contract, agreement, commitment
or arrangement to effect any of the matters prohibited by this Section
4.1(e);
19
(f) increase the compensation payable or to become payable to its
officers or employees (except for increases in compensation of employees
without employment agreements in amounts consistent with past practices),
or grant any severance or termination pay to, or enter into any employment
or severance agreement with any director, officer or other employee of the
Company or any of its subsidiaries, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any current or former
directors, officers or employees, except, in each case, as may be required
by law;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(h) make any material tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign tax
liability or agree to an extension of a statute of limitations;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in the financial statements contained in the Company SEC
Reports filed prior to the date of this Agreement or incurred in the
ordinary course of business and consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1 (a) through (i) above, or any action which would
make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect or prevent the Company from performing
or cause the Company not to perform its covenants hereunder.
Section 4.2 No Solicitation.
(a) The Company shall not, directly or indirectly, through any officer,
director, employee, representative or agent of the Company or any of its
subsidiaries, (i) solicit, initiate or knowingly encourage the initiation of
any inquiries or proposals regarding any merger, sale of substantial assets,
sale of shares of capital stock (including without limitation by way of a
tender offer) or similar transactions involving the Company or any
subsidiaries of the Company other than the Merger (any of the foregoing
inquiries or proposals being referred to herein as an "Acquisition Proposal"),
(ii) engage in negotiations or discussions concerning, or provide any
nonpublic information to any person relating to, any Acquisition Proposal or
(iii) agree to, approve or recommend any Acquisition Proposal. Nothing
contained in this Section 4.2(a) shall prevent the Board of Directors of the
Company from considering, negotiating, approving and recommending to the
stockholders of the Company a bona fide Acquisition Proposal not solicited in
violation of this Agreement, provided the Board of Directors of the Company
determines in good faith (upon advice of independent counsel) that it is
required to do so in order to discharge properly its fiduciary duties.
(b) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any of its subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company or any subsidiary by
any person or entity that informs the Board of Directors of the Company or
such subsidiary that it is considering making, or has made, an Acquisition
Proposal. Such notice to Parent shall be made orally and in writing, and shall
indicate whether the Company is providing or intends to provide the person
making the Acquisition Proposal with access to information concerning the
Company as provided in Section 4.2(c).
(c) If the Board of Directors of the Company receives a request for material
nonpublic information by a person who makes, or indicates that it is
considering making, a bona fide Acquisition Proposal, and the Board of
Directors determines in good faith and upon the advice of independent counsel
that it is required to cause the Company to act as provided in this Section
4.2(c) in order to discharge properly the directors' fiduciary duties,
20
then, provided the person making the Acquisition Proposal has executed a
confidentiality agreement substantially similar to the one then in effect
between the Company and Parent, the Company may provide such person with
access to information regarding the Company.
(d) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Parent and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from the confidentiality
provisions of any confidentiality agreement to which the Company is a party.
(e) The Company shall ensure that the officers, directors and employees of
the Company and its subsidiaries and any investment banker or other advisor or
representative retained by the Company are aware of the restrictions described
in this Section 4.2.
Section 4.3 Conduct of Business by Parent Pending the Merger. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Parent covenants and
agrees that, unless the Company shall otherwise agree in writing, Parent shall
conduct its business, and cause the businesses of its subsidiaries to be
conducted, only in the ordinary course of business and in a manner consistent
with past practices, other than actions taken by Parent or its subsidiaries in
contemplation of the Merger, and shall not directly or indirectly do, or
propose to do, any of the following without the prior written consent of the
Company:
(a) amend or otherwise change Parent's Certificate of Incorporation or
By-Laws;
(b) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of any of its capital stock, except that a wholly owned subsidiary of
Parent may declare and pay a dividend to its parent; or
(c) take or agree in writing or otherwise to take any action which would
make any of the representations or warranties of Parent contained in this
Agreement untrue or incorrect or prevent Parent from performing or cause
Parent not to perform its covenants hereunder.
ARTICLE V
Additional Agreements
Section 5.1 HSR Act. As promptly as practicable after the date of the
execution of this Agreement, the Company and Parent shall file notifications
under and in accordance with the HSR Act in connection with the Merger and the
transactions contemplated hereby and to respond as promptly as practicable to
any inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters.
Section 5.2 Proxy Statement Prospectus; Registration Statement. As promptly
as practicable after the execution of this Agreement, the Company and Parent
shall prepare and file with the SEC preliminary proxy materials which shall
constitute the Proxy Statement/Prospectus and the Registration Statement of
the Parent with respect to the Parent Common Stock to be issued in connection
with the Merger. As promptly as practicable after comments are received from
the SEC thereon and after the furnishing by the Company and Parent of all
information required to be contained therein, the Company and Parent shall
file with the SEC a combined proxy and Registration Statement on Form S-4 (or
on such other form as shall be appropriate) (the "S-4 Registration Statement")
relating to the adoption of this Agreement and approval of the transactions
contemplated hereby by the stockholders of the Company, and shall use all
reasonable efforts to cause the Registration Statement to become effective,
and to mail the Proxy Statement/Prospectus to the stockholders of the Company
as soon thereafter as practicable. The Proxy Statement/Prospectus shall
include the recommendation of the Board of Directors of the Company in favor
of the Merger, subject to the last sentence of Section 5.3.
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Section 5.3 Stockholders Meeting. The Company shall call and hold a
Stockholders Meeting as promptly as practicable and in accordance with
applicable laws for the purpose of voting upon the approval of the Merger, and
the Company shall use its reasonable best efforts to hold the Stockholders
Meeting as soon as practicable after the date on which the Registration
Statement becomes effective. Unless otherwise required under the applicable
fiduciary duties of the directors of the Company, as determined by such
directors in good faith after consultation with and based upon the advice of
independent counsel, the Company shall use all reasonable efforts to solicit
from its stockholders proxies in favor of adoption of this Agreement and
approval of the transactions contemplated hereby and shall take all other
action necessary or advisable to secure the vote or consent of stockholders to
obtain such approvals.
Section 5.4 Access to Information; Confidentiality. Upon reasonable notice
and subject to restrictions contained in confidentiality agreements to which
such party is subject (from which such party shall use reasonable efforts to
be released), the Company and Parent shall each (and shall cause each of their
subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other, reasonable access, during the period to
the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, the Company and Parent each shall (and shall
cause each of their subsidiaries to) furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request, and each shall make available to the other the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and
personnel as either Parent or the Company may reasonably request. Each party
shall keep such information confidential in accordance with the terms of the
confidentiality letter dated September 13, 1996 as amended as of October 1,
1996 (the "Confidentiality Letter"), between Parent and the Company.
Section 5.5 Consents; Approvals. The Company and Parent shall each use all
reasonable efforts to obtain all consents, waivers, approvals, authorizations
or orders (including, without limitation, all United States and foreign
governmental and regulatory rulings and approvals), and the Company and Parent
shall make all filings (including, without limitation, all filings with United
States and foreign governmental or regulatory agencies) required in connection
with the authorization, execution and delivery of this Agreement by the
Company and Parent and the consummation by them of the transactions
contemplated hereby, in each case as promptly as practicable. The Company and
Parent shall furnish promptly all information required to be included in the
Proxy Statement/Prospectus and the Registration Statement, or for any
application or other filing to be made pursuant to the rules and regulations
of any United States or foreign governmental body in connection with the
transactions contemplated by this Agreement.
Section 5.6 Agreements with Respect to Affiliates. Each of Parent and the
Company shall deliver to the other, prior to the date the Registration
Statement becomes effective under the Securities Act, a letter (the "Affiliate
Letters") identifying all persons who are "affiliates" of the Parent or the
Company, respectively, for purposes of Rule 145 under the Securities Act
("Rule 145"). Each of Parent and the Company shall use its reasonable best
efforts to cause each person who is identified as an "affiliate" in its
Affiliate Letter to deliver, prior to the Effective Time, a written agreement
(an "Affiliate Agreement") in connection with restrictions on affiliates under
Rule 145 and pooling of interests accounting treatment, in substantially the
form of Exhibit 5.6.
Section 5.7 Indemnification and Insurance.
(a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Certificate of Incorporation and By-Laws of the Company,
respectively, which provisions shall not be amended, repealed or otherwise
modified for a period of five years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors, officers, employees or agents of
the Company, unless such modification is required by law.
(b) The Company shall, to the fullest extent permitted under applicable law
or under the Company's Certificate of Incorporation or By-Laws and regardless
of whether the Merger becomes effective, indemnify and
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hold harmless, and, after the Effective Time, Parent and the Surviving
Corporation shall, to the fullest extent permitted under applicable law or
under the Surviving Corporation's Certificate of Incorporation or By-Laws,
indemnify and hold harmless, each present and former director, officer or
employee of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, (x)
arising out of or pertaining to the transactions contemplated by this
Agreement or (y) otherwise with respect to any acts or omissions occurring at
or prior to the Effective Time, to the same extent as provided in the
Company's Certificate of Incorporation or By-Laws or any applicable contract
or agreement as in effect on the date hereof, in each case for a period of
five years after the date hereof. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) any counsel retained by the Indemnified Parties for any
period after the Effective Time shall be reasonably satisfactory to the
Surviving Corporation, (ii) after the Effective Time, Parent or the Surviving
Corporation shall pay the reasonable fees and expenses of such counsel,
promptly after statements therefor are received, and (iii) Parent and the
Surviving Corporation will cooperate in the defense of any such matter;
provided, however, that neither Parent nor the Surviving Corporation shall be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld); and provided, further, that, in the event
that any claim or claims for indemnification are asserted or made within such
five-year period, all rights to indemnification in respect of any such claim
or claims shall continue until the disposition of any and all such claims. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to any single action unless there is, under applicable standards
of professional conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties.
(c) Parent and the Surviving Corporation shall honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements
with the Company's directors and officers existing at or before the Effective
Time.
(d) For a period of three years after the Effective Time, Parent shall cause
the Surviving Corporation to maintain in effect, if available, directors' and
officers' liability insurance covering those persons who are currently covered
by the Company's directors' and officers' liability insurance policy (a copy
of which has been made available to Parent) on terms comparable to those now
applicable to directors and officers of the Company; provided, however, that
in no event shall Parent or the Surviving Corporation be required to expend in
excess of 150% of the annual premium currently paid by the Company for such
coverage; and provided further, that if the annual premium would exceed such
amount, Parent shall cause the Surviving Corporation to obtain a policy with
the maximum coverage available at a cost not exceeding such amount.
(e) This Section shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties, shall be binding, jointly and severally, on all
successors and assigns of Parent and the Surviving Corporation and shall be
enforceable by the Indemnified Parties.
Section 5.8 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i)
the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty contained in
this Agreement to become materially untrue or inaccurate, or (ii) any failure
of the Company, Parent or Merger Sub, as the case may be, materially to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and provided further
that failure to give such notice shall not be treated as a breach of covenant
for the purposes of Sections 6.2(a) or 6.3(a) unless the failure to give such
notice results in material prejudice to the other party.
Section 5.9 Further Action/Tax Treatment. Upon the terms and subject to the
conditions hereof each of the parties hereto shall use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause
23
to be done, all other things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by
this Agreement, to obtain in a timely manner all necessary waivers, consents
and approvals and to effect all necessary registrations and filings, and
otherwise to satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement. The foregoing covenant shall not include any
obligation by Parent to agree to divest, abandon, license or take similar
action with respect to any assets (tangible or intangible) of Parent or the
Company. Each of Parent, Merger Sub and the Company shall use its best efforts
to cause the Merger to qualify, and will not (both before and after
consummation of the Merger) take any actions which to its knowledge could
reasonably be expected to prevent the Merger from qualifying, as a
reorganization under the provisions of Section 368 of the Code.
Section 5.10 Public Announcements. Parent and the Company shall consult with
each other before issuing any press release with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may upon the advice of counsel be required by law or the rules
and regulations of the New York Stock Exchange ("NYSE") or Nasdaq National
Market System ("Nasdaq"), if it has used all reasonable efforts to consult
with the other party prior thereto.
Section 5.11 Conveyance Taxes. Parent and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar taxes which
become payable in connection with the transactions contemplated hereby that
are required or permitted to be filed at or before the Effective Time.
Section 5.12 Accountants' Letters. Upon reasonable notice from the other,
the Company and Parent shall use their respective best efforts to cause KPMG
Peat Marwick LLP to deliver to Parent and the Company a letter, dated within 2
business days of the Effective Date of the S-4 Registration Statement covering
such matters as are requested by Parent or the Company, as the case may be,
and as are customarily addressed in accountant's "comfort" letters.
Section 5.13 Pooling Accounting Treatment. Each of Parent and the Company
agrees not to take any action that to its knowledge could reasonably be
expected to adversely affect the ability of Parent to treat the Merger as a
pooling of interests, and each of Parent and the Company agrees to take such
action as may be reasonably required to negate the impact of any past actions
which to its knowledge could reasonably be expected to adversely impact the
ability of Parent to treat the Merger as a pooling of interests. The taking by
Parent or the Company of any action prohibited by the previous sentence, or
the failure of Parent or the Company to take any action required by the
previous sentence, shall, if the Merger is not able to be accounted for as a
pooling of interests, constitute a breach of this Agreement by Parent or the
Company, as the case may be, for the purposes of Section 7.1(f).
Section 5.14 Nasdaq Listing. The Company shall use its best efforts to
continue the quotation of the Company Common Stock on the Nasdaq National
Market during the term of this Agreement.
Section 5.15 Listing of Parent Shares. Parent shall use its best efforts to
cause the Parent Shares to be issued in the Merger to be approved for listing,
upon official notice of issuance, on the NYSE.
ARTICLE VI
Conditions to the Merger
Section 6.1 Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
24
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings
for that purpose and no similar proceeding in respect of the Joint Proxy
Statement/Prospectus shall have been initiated by the SEC;
(b) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the
Company;
(c) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated;
(d) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by any administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any
of the foregoing be pending; and there shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger
illegal; and
(e) Governmental Actions. There shall not have been instituted, pending
or overtly threatened any action or proceeding having a reasonable
possibility of success by any governmental authority or administrative
agency before any governmental authority, administrative agency or court of
competent jurisdiction, nor shall there be in effect any judgment, decree
or order of any governmental authority, administrative agency or court of
competent jurisdiction, in either case, seeking to prohibit or limit Parent
from exercising all material rights and privileges pertaining to its
ownership of the Surviving Corporation or the ownership or operation by
Parent or any of its subsidiaries of all or a material portion of the
business or assets of Parent or any of its subsidiaries, or seeking to
compel Parent or any of its subsidiaries to dispose of or hold separate all
or any material portion of the business or assets of Parent or any of its
subsidiaries (including the Surviving Corporation and its subsidiaries), as
a result of the Merger or the transactions contemplated by this Agreement.
Section 6.2 Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct in all
respects at and as of the Effective Time as if made at and as of such time,
except for (i) changes contemplated by this Agreement, (ii) those
representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date,
subject to clause (iii)), and (iii) where the failure to be true and
correct would not have a Material Adverse Effect, with the same force and
effect as if made at and as of the Effective Time, and Parent and Merger
Sub shall have received a certificate to such effect signed by the
President and the Chief Financial Officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Effective Time, and Parent and Merger Sub shall have received
a certificate to such effect signed by the President and the Chief
Financial Officer of the Company;
(c) Consents Obtained. All consents, waivers, approvals, permits,
licenses, authorizations or orders required to be obtained, and all filings
required to be made, by the Company for the due authorization, execution
and delivery of this Agreement and the consummation by it of the
transactions contemplated hereby shall have been obtained and made by the
Company, except where the failure to receive such consents, etc. would not
(i) have a Material Adverse Effect on the Company or Parent, or (ii)
materially delay or prevent the consummation of the Merger;
(d) Opinion of Counsel. Parent shall have received a written opinion from
Ropes & Xxxx, in form and substance reasonably satisfactory to Parent, to
the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code;
25
(e) Opinion of Accountant. Parent shall have received an opinion (the
fees and expenses of which shall be borne by Parent) of KPMG Peat Marwick
LLP, independent certified public accountants, to the effect that the
Merger qualifies for pooling of interests accounting treatment if
consummated in accordance with this Agreement;
(f) Affiliate Agreements. Parent shall have received from each person who
is identified in the Affiliate Letter as an "affiliate" of the Company, an
Affiliate Agreement, and such Affiliate Agreement shall be in full force
and effect.
(g) Stockholders Agreement. The Stockholders Agreement shall be in full
force and effective at and as of the Effective Time; and
(h) Employment Agreements. Each of Xxxxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxx,
Xxxxxx X. Xxxxx and Xxxxx Xxxxx shall have executed and delivered to the
Company and Parent an Employment Agreement in the form of Exhibit A
providing for such salaries and severance benefits and specifying the
number of Parent Shares that will be owned by each such person, as are
specified for such person in Schedule 6.2(h), and each of Xxxxxxx X. Xxxx
and Xxxxxx X. Xxxxxxx shall have executed and delivered to the Company and
Parent an Employment Agreement in the form of Exhibit B providing for such
salaries and severance benefits and specify the number of Parent Shares
that will be subject to options held by such person as are specified for
such person in Schedule 6.2(h), and all such Employment Agreements shall be
in full force and effect.
Section 6.3 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the
following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall be true and correct
in all respects on and as of the Effective Time, except for (i) changes
contemplated by this Agreement, (ii) those representations and warranties
which address matters only as of a particular date (which shall have been
true and correct as of such date, subject to clause (iii)), and (iii) where
the failure to be true and correct would not have a Material Adverse
Effect, with the same force and effect as if made on and as of the
Effective Time, and the Company shall have received a certificate to such
effect signed by the President and the Chief Financial Officer of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and the Company shall have received a
certificate to such effect signed by the President and the Chief Financial
Officer of Parent;
(c) Consents Obtained. All consents, waivers, approvals, permits,
licenses, authorizations or orders required to be obtained, and all filings
required to be made, by Parent and Merger Sub for the authorization,
execution and delivery of this Agreement and the consummation by them of
the transactions contemplated hereby shall have been obtained and made by
Parent and Merger Sub, except where the failure to receive such consents,
etc. would not have a Material Adverse Effect on the Company or Parent;
(d) Tax Opinions. The Company shall have received a written opinion of
KPMG Peat Marwick LLP, in form and substance reasonably satisfactory to the
Company, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368 of the Code;
(e) Opinion of Accountant. The Company shall have received a copy of the
opinions referred to in Section 6.2(e) above;
(f) NYSE. The Parent Shares to be issued in the Merger shall have been
approved, upon official notice of issuance, for listing on the NYSE;
(g) Affiliate Agreements. Parent shall have received from each person who
is identified in the Affiliate Letter as an "affiliate" of Parent, an
Affiliate Agreement, and such Affiliate Agreement shall be in full force
and effect; and
(h) Parent Board Seat. Parent shall have taken all actions necessary to
nominate and elect Xxxxxxx X. Xxxxxxxxx as a member of its Board of
Directors.
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ARTICLE VII
Termination
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, notwithstanding approval thereof by the stockholders of
the Company:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by March 31, 1997 (provided that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before
such date); or
(c) by either Parent or the Company if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall
have issued a nonappealable final order, decree or ruling or taken any
other action having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger (provided that the right to terminate this
Agreement under this Section 7.1(c) shall not be available to any party who
has not complied with any obligation under this Agreement and such
noncompliance materially contributed to the issuance of any such order,
decree or ruling or the taking of such action); or
(d) by Parent, if the requisite vote of the stockholders of the Company
shall not have been obtained by March 31, 1997; or
(e) by Parent or the Company, if: (i) the Board of Directors of the
Company shall withdraw, modify or change its approval or recommendation of
this Agreement or the Merger in a manner adverse to Parent or shall have
resolved to do so in accordance with Section 5.3 hereof; (ii) after the
receipt by the Company of an Acquisition Proposal, Parent requests in
writing that the Board of Directors of the Company reconfirm its
recommendation of this Agreement and the Merger and the Board of Directors
of the Company fails to do so within 10 business days; (iii) the Board of
Directors of the Company shall have recommended to the stockholders of the
Company an Alternative Transaction (as defined below); or (iv) a tender
offer or exchange offer for 25% or more of the outstanding shares of
Company Common Stock is commenced (other than by Parent or an affiliate of
Parent) and the Board of Directors of the Company recommends that the
stockholders of the Company tender their shares in such tender or exchange
offer; provided, that, the Company shall not be entitled to exercise any
termination rights under this Section 7.1(e) unless (x) any action of the
Board of Directors of the Company referred to in either such clause is
required to be taken by the Board of Directors in order to properly
discharge its fiduciary duties and (y) the Company has complied with its
obligations in Section 4.2; or
(f) by Parent or the Company, (i) if any representation or warranty of
the Company or Parent, respectively, set forth in this Agreement shall be
untrue when made, or (ii) upon a breach of any covenant or agreement on the
part of the Company or Parent, respectively, set forth in this Agreement
and, in the case of any such breach that is curable, if such breach shall
not have been cured within 10 days after the nonbreaching party gives the
breaching written notice of such breach, in each case such that the
conditions set forth in Section 6.2(a) or 6.2(b), or Section 6.3(a) or
6.3(b), as the case may be, would not be satisfied (either (i) or (ii)
above being a "Terminating Breach"), provided, that, if such Terminating
Breach is curable prior to March 31, 1997 by the Company or Parent, as the
case may be, through the exercise of its reasonable best efforts and for so
long as the Company or Parent, as the case may be, continues to exercise
such reasonable best efforts, neither Parent nor the Company, respectively,
may terminate this Agreement under this Section 7.1(f); or
(g) by Parent, if any representation or warranty of the Company shall
have become untrue such that the condition set forth in Section 6.2(a)
would not be satisfied, or by the Company, if any representation or
warranty of Parent shall have become untrue such that the condition set
forth in Section 6.3(a) would not be satisfied, in either case other than
by reason of a Terminating Breach.
27
As used herein, "Alternative Transaction" means any of (i) a transaction
pursuant to which any person (or group of persons) other than Parent or its
affiliates (a "Third Party") acquires or would acquire more than 25% of the
outstanding Shares, whether from the Company or pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or other business combination
involving the Company pursuant to which any Third Party acquires more than 25%
of the outstanding equity securities of the Company or the entity surviving
such merger or business combination, or (iii) any other transaction pursuant
to which any Third Party acquires or would acquire control of assets
(including for this purpose the outstanding equity securities of subsidiaries
of the Company, and the entity surviving any merger or business combination
including any of them) of the Company or any of its subsidiaries having a fair
market value (as determined by the Board of Directors of the Company in good
faith) equal to more than 25% of the fair market value of all the assets of
the Company and its subsidiaries, taken as a whole, immediately prior to such
transaction.
Section 7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or any of its
affiliates, directors, officers or stockholders except (i) as set forth in
Section 7.3 and Section 8.1 hereof, and (ii) nothing herein shall relieve any
party from liability for any breach hereof.
Section 7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the Merger
is consummated.
(b) The Company shall pay Parent a fee of $4,500,000 (the "Company Fee"),
plus actual, documented and reasonable out-of-pocket expenses of Parent (not
to exceed $500,000 in the aggregate) relating to the transactions contemplated
by this Agreement (including, but not limited to, fees and expenses of
Parent's counsel, accountants and financial advisers), upon the first to occur
of the following events:
(i) the termination of this Agreement by Parent pursuant to Section
7.1(d) if a proposal for an Alternative Transaction shall have been made
prior to the Stockholders Meeting; or
(ii) the termination of this Agreement by Parent or the Company pursuant
to Section 7.1(e); or
(iii) the termination of this Agreement by Parent pursuant to Section
7.1(f) on account of a Terminating Breach by the Company.
(c) Parent shall pay the Company a fee of $4,500,000 (the "Parent Fee"),
plus actual, documented and reasonable out-of-pocket expenses of the Company
(not to exceed $500,000 in the aggregate) relating to the transactions
contemplated by this Agreement (including, but not limited to, fees and
expenses of the Company's counsel, accountants and financial advisers) if the
Company terminates this Agreement pursuant to Section 7.1(f) on account of a
Terminating Breach by Parent.
(d) The Company Fee and related expenses payable pursuant to Section 7.3(b)
and the Parent Fee and related expenses payable pursuant to Section 7.3(c), as
the case may be, shall be paid within one business day after the first to
occur of any of the events described in Sections 7.3(b)(i), (ii) or (iii) or
7.3(c); provided, that, in no event shall the Company or Parent be required to
pay such Fee and expenses to the other if, immediately prior to the
termination of this Agreement, the party that was otherwise entitled to such
Fee was in material breach of its obligations under this Agreement.
ARTICLE VIII
General Provisions
Section 8.1 Effectiveness of Representations, Warranties and Agreements;
Knowledge, Etc.
(a) Except as otherwise provided in this Section 8.1, the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on
28
behalf of any other party hereto, any person controlling any such party or any
of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this
Agreement shall terminate at the Effective Time or upon the termination of
this Agreement pursuant to Section 7.1, as the case may be, except that the
agreements set forth in Article I and Section 5.7 shall survive the Effective
Time indefinitely and those set forth in Section 7.3 shall survive such
termination indefinitely. The Confidentiality Letter shall survive termination
of this Agreement as provided therein.
(b) Any disclosure made with reference to one or more sections of the
Company Disclosure Schedule or the Parent Disclosure Schedule shall be deemed
disclosed only with respect to such section.
Section 8.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally or by overnight courier to the
parties at the following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or at such
other address or telecopy number for a party as shall be specified by like
notice):
(a) If to Parent or Merger Sub:
American Medical Response, Inc.
0000 X. Xxxxxx Xxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: General Counsel
With a copy to:
Xxx X. Xxxxxx, Esq.
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) If to the Company:
00000 Xxxxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: President
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Chairman
With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx, Phleger & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Section 8.3 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliates" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without
29
limitation, any partnership or joint venture in which the first mentioned
person (either alone, or through or together with any other subsidiary)
has, directly or indirectly, an interest of 10% or more;
(b) "beneficial owner" with respect to any shares of Company Common Stock
means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 of the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates
orassociates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding, or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares;
(c) "business day" means any day other than a day on which banks in the
State of Colorado and the State of Texas are required or authorized to be
closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock,
as trustee or executor, by contract or credit arrangement or otherwise;
(e) "generally accepted accounting principles" shall mean United States
generally accepted accounting principles.
(f) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, Parent or any other
person means any corporation, partnership, joint venture or other legal
entity of which the Company, the Surviving Corporation, Parent or such
other person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, more than 50% of the
stock or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing body
of such corporation or other legal entity.
Section 8.4 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval of
the Merger by the stockholders of the Company, no amendment may be made which
by law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
Section 8.5 Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
Section 8.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good
30
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
Section 8.8 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letters), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof.
Section 8.9 Assignment; Guarantee of Merger Sub Obligations. This Agreement
shall not be assigned by operation of law or otherwise, except that Parent and
Merger Sub may assign all or any of their rights hereunder to any affiliate
thereof provided that no such assignment shall relieve the assigning party of
its obligations hereunder. Parent guarantees the full and punctual performance
by Merger Sub of all the obligations hereunder of Merger Sub or any such
assignees.
Section 8.10 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, including, without limitation, by way of
subrogation, other than Section 5.6 (which is intended to be for the benefit
of the Indemnified Parties and may be enforced by such Indemnified Parties).
Section 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available; provided, however, that if
this Agreement shall be terminated in accordance with Sections 7.1(d), (e) or
(f) by Parent, then the Company Fee and related expenses provided for in
Section 7.3 shall be deemed liquidated damages to Parent for the loss of its
bargain hereunder, and shall be Parent's sole and exclusive remedy in the
event of termination of this Agreement by the Parent pursuant to Sections
7.1(d), (e) or (f); and provided further, that if this Agreement is terminated
in accordance with Section 7.1(f) by the Company, then the Parent Fee and
related expenses provided for in Section 7.3 shall be deemed liquidated
damages to the Company for the loss of its bargain hereunder, and shall be the
Company's sole and exclusive remedy in the event of termination of this
Agreement by the Company pursuant to Section 7.1(f).
Section 8.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware.
Section 8.13 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
[This space intentionally left blank.]
31
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
AMERICAN MEDICAL RESPONSE, INC.
/s/ Xxxx X. Xxxxxxx
By: _________________________________
Name: Xxxx X. Xxxxxxx
Title: President
SHI ACQUISITION CORP.
/s/ Xxxx X. Xxxxxxx
By: _________________________________
Name: Xxxx X. Xxxxxxx
Title: President
STAT HEALTHCARE, INC.
/s/ Xxxxxxx X. Xxxxxxxxx
By: _________________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
32
LIST OF OMITTED SCHEDULES AND EXHIBITS
--------------------------------------
Agreement and Plan of Merger
Schedules
---------
1.5 Officers of the Surviving Corporation
6.2(h) Salary and Severance under Employment Agreements and Shares and
Options subject to Employment Agreements
Exhibits
--------
5.6 Form of Affiliate Agreement
A Form of Employment Agreement
B Form of Employment Agreement
Parent Disclosure Statement
Schedules
---------
3.1 Subsidiaries
3.3 Capitalization
3.5(a) Loan Agreements/Contracts
3.5(b) Breach of Contract
3.5(c) Breach/Default
3.6 Compliance; Permits
3.8 Absence of Certain Changes or Events
3.11 Undisclosed Liabilities
3.12 Litigation
Company Disclosure Schedule
Schedules
---------
1.6(c) Other Stock Options
2.1 Subsidiaries
2.3 Capitalization
2.5(a) Agreements
2.5(b) Defaults
2.5(c) Conflicts
2.5(d) Required Consents
2.6(a) Compliance; Permits
2.7 SEC Filings; Financial Statements
2.8 Changes or Events
2.9 Undisclosed Liabilities
2.10 Material Litigation
2.11(a) Employee Plans
2.11(b) ERISA Matters
2.11(c) Outstanding Options
2.11(d) Employment Agreements
2.12 Labor Claims and Union Activities
2.14 Restrictions on Business Activities
2.15 Liens on and Encumbrances to Property
2.16(a) Taxes
2.16(b) Taxes
2.17 Environmental Matters
2.18(b) Intellectual Property
2.19 Interested Party Transactions
2.20 Insurance
2.26 Change in Control Payments
4.1(e) Proposed Acquisitions
Exhibits
--------
1. Form of Indemnification Agreement
2. Form of Independent Contractor Agreement
3. Form of Independent Contractor Agreement
4. Form of Medical Director Agreement
5. Form of Medical Director Agreement
