AMENDMENT NO. 2 TO THE
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AMENDMENT NO. 2 (this "Amendment") to the AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION, dated as of February 17, 1997, as amended by
Amendment No. 1 thereto dated as of May 27, 1997 (as so amended, the "MERGER
AGREEMENT," capitalized terms used but not otherwise defined herein are used
herein as therein defined), among SUN HEALTHCARE GROUP, INC., a corporation
organized and existing under the laws of the State of Delaware ("PARENT"), PEACH
ACQUISITION CORPORATION, a corporation organized and existing under the laws of
the State of Colorado ("MERGER SUB") and a direct wholly owned subsidiary of
Parent, and RETIREMENT CARE ASSOCIATES, INC., a corporation organized and
existing under the laws of the State of Colorado (the "COMPANY"), is made this
21st day of August, 1997 by and among Parent, Merger Sub and the Company.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Parent, Merger Sub and the Company have entered into the
Merger Agreement which provides, upon the terms and subject to the conditions
set forth therein, for the Merger of Merger Sub with and into the Company; and
WHEREAS, the boards of directors of Parent, Merger Sub and the Company
have each determined that it is consistent with and in furtherance of their
respective long-term business strategies and fair to and in the best interests
of their respective stockholders to amend the Merger Agreement as provided
herein.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO MERGER AGREEMENT. The Merger Agreement is
hereby amended as follows:
(a) The definition of "COMPANY DISCLOSURE SCHEDULE" included in
Section 1.01 of the Merger Agreement is hereby amended and restated in its
entirety to read as follows:
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""COMPANY DISCLOSURE SCHEDULE" shall mean the disclosure schedule
entitled "Company Disclosure Schedules of Retirement Care Associates, Inc.
Re: Project Peach" dated February 17, 1997, delivered by the Company to
Parent prior to the execution of this Agreement, as amended by Schedules I,
II, and III to Amendment No. 1 to this Agreement, and as further
supplemented by Schedule I to Amendment No. 2 to this Agreement, and
forming a part hereof."
(b) The definition of "COMPANY MATERIAL ADVERSE EFFECT" included in
Section 1.01 of the Merger Agreement is hereby amended and restated in its
entirety to read as follows:
""COMPANY MATERIAL ADVERSE EFFECT" shall mean any change in or effect
on the business of the Company and the Company Subsidiaries that is, or
could reasonably be expected to be, materially adverse to the business,
prospects, assets (including intangible assets), liabilities (contingent or
otherwise), condition (financial or otherwise) or results of operations of
the Company and the Company Subsidiaries taken as a whole; PROVIDED,
HOWEVER, that no such change in or effect on the business of the Company
and the Company Subsidiaries shall constitute a "Company Material Adverse
Effect" unless such change or effect has, or could reasonably be expected
to have, individually or in the aggregate, an effect of more than
$10,000,000 on the assets, liabilities or results of operations of the
Company for one or more financial reporting periods, exclusive of any
change or effect that results from any of the matters described in the
Company Disclosure Schedule."
(c) Section 3.01(a) of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
"(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Common Stock to be cancelled pursuant to Section 3.01(d) and any Dissenting
Shares) and all rights in respect thereof shall forthwith cease to exist
and shall be converted into and become exchangeable for the lower of
(i) 0.520 shares of Parent Common Stock and (ii) in the event that the
Series AA Exchange Ratio is greater than 0.714, 0.520 shares of Parent
Common Stock multiplied by the Adjustment Factor (the lower of such
numbers, calculated to three decimal places, being the "COMMON EXCHANGE
RATIO")."
(d) Section 4.07(a) of the Merger Agreement is hereby amended by
deleting clause (A) thereof and adding the following clause (A) in place
thereof:
"(A) with the SEC and the NYSE since June 30, 1994 through the date of
Amendment No. 2 to this Agreement (collectively and as amended (including
any amendment filed after the date of this Agreement pursuant to Section
6.13 hereof), the "COMPANY REPORTS") and".
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(e) Section 4.08 of the Merger Agreement is hereby amended by
deleting clause (i) thereof and adding the following clause (i) in place
thereof:
"(i) any event or events which, individually or in the aggregate,
constitute a Company Material Adverse Effect, excluding any changes and
effects resulting from changes in economic, regulatory or political
conditions or changes in conditions generally applicable to the industries
in which the Company and the Company Subsidiaries are involved,"
(f) Section 6.01 of the Merger Agreement is hereby amended by
deleting the word "or" immediately preceding clause (m) thereof and adding the
following immediately after clause (m) thereof:
";
(n) institute, file or commence any claim, action, suit or
proceeding".
(g) Section 6.03 of the Merger Agreement is hereby amended by adding
the following sentence immediately following the third sentence thereof:
"In addition, the Company shall give Parent prompt notice of any suit,
claim, action, proceeding or investigation pending or, to the knowledge of
the Company, threatened, against the Company, any Company Subsidiary or any
Indemnified Party which could reasonably be expected to be materially
adverse to the business, prospects, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise)
or results of operations of the Company and the Company Subsidiaries, taken
as a whole, or to such Indemnified Party, as the case may be, and the
Parent shall have the right to participate in all negotiations and
proceedings with respect to any such suit, claim, action, proceeding or
investigation."
(h) Section 6.08 of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
"SECTION 6.08. LETTERS OF ACCOUNTANTS. At the written request of
Parent, each of the Company and/or Parent shall use all reasonable efforts
to cause to be delivered to the other "comfort" letters of their respective
independent public accountants, each such letter dated and delivered as of
the date the Registration Statement shall have become effective and as of
the Effective Time, and addressed to Parent and the Company, respectively,
in form and substance reasonably satisfactory to the recipient thereof and
reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with mergers such as the
Merger contemplated hereby."
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(i) Article VI of the Merger Agreement is hereby amended by adding
the following Sections 6.13 and 6.14 immediately following Section 6.12 thereto:
"SECTION 6.13. AMENDED COMPANY REPORTS. Not later than August 25,
1997, the Company shall file with the SEC amendments to its Quarterly
Reports on Form 10-Q for the fiscal quarters ended September 30, 1996,
December 31, 1996, and March 31, 1997, containing financial statements
reflecting all of the adjustments described in Section 4.07(a) of Schedule
I to Amendment No. 2 to this Agreement, and shall promptly deliver to
Parent copies of each such amended Form 10-Q filed with the SEC. The
disclosure included in the form of amended Forms 10-Q that will be filed
with the SEC pertaining to the matters described in Section 4.07(a) of
Schedule I to Amendment No. 2 to this Agreement shall not differ in any
respect from the information included in Section 4.07(a) of Schedule I to
Amendment No. 2 to this Agreement without the prior written consent of
Parent. The Company shall not file with the SEC any amendment to any
Company Report without the prior written consent of Parent unless such
amendment is permitted by this Section 6.13.
SECTION 6.14. CONSENT OF ACCOUNTANTS; WORK PAPERS. (a) The Company
shall use its best efforts to cause Coopers & Xxxxxxx L.L.P. to consent to
the use in the Registration Statement and the Proxy Statement of their
report on the consolidated financial statements of the Company appearing in
the Company 1996 10-K; PROVIDED, HOWEVER, that the Company shall not be
required under this Section 6.14(a) to pay any amounts claimed by Coopers &
Xxxxxxx L.L.P. which, in the Company's good faith exercise of its
reasonable judgment, are subject to valid claims of set-off or other
defenses or counterclaims.
(b) The Company shall use its best efforts to cause Coopers & Xxxxxxx
L.L.P. to make available to Xxxxxx Xxxxxxxx LLP copies of all materials in
Coopers & Xxxxxxx L.L.P.'s possession relating to (i) Coopers & Xxxxxxx
L.L.P.'s audit of the Company's financial statements for the year ended
June 30, 1997, including all work papers, computer files and other
materials prepared by Coopers & Xxxxxxx L.L.P. in connection with such
audit, and (ii) Coopers & Xxxxxxx L.L.P.'s analysis as to whether any
condition exists with respect to the Company that will preclude "pooling of
interests" accounting treatment for the Merger under applicable United
States accounting rules, including all computer files and other material
prepared by Coopers & Xxxxxxx L.L.P. in connection with such analysis;
PROVIDED, HOWEVER, that the Company shall not be required under this
Section 6.14(b) to pay any amounts claimed by Coopers & Xxxxxxx L.L.P.
which, in the Company's good faith exercise of its reasonable judgment, are
subject to valid claims of set-off or other defenses or counterclaims."
(j) Section 7.04 of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
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"SECTION 7.04. DIRECTORS' AND OFFICERS' INDEMNIFICATION. (a) The
articles of incorporation and bylaws of the Surviving Corporation shall
contain the provisions with respect to indemnification that are set forth,
as of the date of this Agreement, in the articles of incorporation and
bylaws of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who
at or at any time prior to the Effective Time were directors or officers of
the Company; PROVIDED, HOWEVER, that the Surviving Corporation may amend or
otherwise modify the provisions with respect to indemnification that are
set forth in its articles of incorporation and bylaws to exclude any right
to indemnification thereunder with respect to any civil or criminal
penalties, damages, fines, disgorgement or other similar personal
liabilities, or any injunctions or consent decrees, incurred, imposed or
entered into in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
brought or assessed by any Governmental Entity or any settlement thereof
("EXCLUDED ITEMS").
(b) From and after the Effective Time, Parent and the Surviving
Corporation shall indemnify and hold harmless each present and former
director and officer of the Company (the "INDEMNIFIED PARTIES"), against
(i) any costs or expenses (including reasonable attorneys' fees) and (ii)
judgments, fines, losses, claims, damages or liabilities, but excluding
from this clause (ii) Excluded Items (collectively, "COSTS"), incurred in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of or
pertaining to matters existing or occurring at or prior to the Effective
Time, whether asserted or claimed prior to, at or after the Effective Time,
to the extent permitted under the articles of incorporation and bylaws of
the Company or Parent (each as in effect on the Effective Date).
(c) If any Indemnified Party shall seek indemnification pursuant to
this Section 7.04, such Indemnified Party shall give prompt notice to
Parent and the Surviving Corporation, stating the amount of the Costs, if
known, and method of computation thereof. The obligations and liabilities
of Parent and the Surviving Corporation under this Section 7.04 with
respect to Costs arising from any claims, actions, suits, proceedings or
investigations of any third party, including any Governmental Entity, which
are subject to the indemnification provided for in this Section 7.04
("THIRD PARTY CLAIMS") shall be governed by and contingent upon the
following additional terms and conditions: if an Indemnified Party shall
receive notice of any Third Party Claim, the Indemnified Party shall give
Parent and the Surviving Corporation notice of such Third Party Claim
within 10 days of the receipt by the Indemnified Party of such notice;
PROVIDED, HOWEVER, that the failure to provide such notice shall not
release Parent and the Surviving Corporation from any of its obligations
under this Section 7.04 except to the extent Parent and the Surviving
Corporation are materially prejudiced by such failure. Upon receipt of
notice from an Indemnified Party as provided in this Section 7.04(c),
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Parent and the Surviving Corporation shall be entitled to assume and
control the defense of such Third Party Claim at their expense and through
counsel of their choice if they give notice of their intention to do so to
the Indemnified Party within 30 days of the receipt of such notice from the
Indemnified Party. In the event that any Indemnified Party shall seek
indemnification as provided herein, the Indemnified Party shall make
available to Parent and the Surviving Corporation, at Parent's and the
Surviving Corporation's expense, all witnesses, pertinent records,
materials and information in the Indemnified Party's possession or under
the Indemnified Party's control relating thereto as is reasonably required
by Parent and the Surviving Corporation;
(d) Notwithstanding anything set forth in this Section 7.04 to the
contrary, (i) if there exists a conflict of interest that would make it
inappropriate for the same counsel to represent both the Indemnified Party
and Parent and the Surviving Corporation in connection with any Third Party
Claim (other than an Excluded Item), then the Indemnified Party shall be
entitled to retain its own counsel that is reasonably satisfactory to
Parent and the Surviving Corporation at the expense of Parent and the
Surviving Corporation, (ii) if there exists or is reasonably likely to
exist a conflict of interest that would make it inappropriate in the
judgment of the Indemnified Party for the same counsel to represent both
the Indemnified Party and Parent and the Surviving Corporation in
connection with any Excluded Item, then the Indemnified Party shall be
entitled to retain its own counsel at its own expense, and (iii) if there
exists or is reasonably likely to exist a conflict of interest that would
make it inappropriate in the judgment of the counsel selected by Parent to
defend an Excluded Item for the same counsel to represent both the
Indemnified Party and Parent and the Surviving Corporation in connection
with such Excluded Item, then the Indemnified Party shall retain its own
counsel at its own expense."
(k) Section 9.01(b) of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
"(b) by either Parent or the Company, if the Effective Time shall not
have occurred on or before November 30, 1997; PROVIDED, HOWEVER, that in
the event that the Effective Time has not occurred by such time (i) due to
the failure to satisfy the condition specified in Section 8.01(b), and as
of such time (A) the condition specified in Section 8.01(a) shall have been
satisfied, (B) neither the Company Stockholders' Meeting nor, if
applicable, the Parent Stockholders' Meeting, shall have been held, and
(C) neither Parent nor the Company shall be entitled to terminate this
Agreement under any other paragraph of this Section 9.01, then such date
shall be extended, without any action on the part of any party hereto,
until December 31, 1997; or (ii) solely due to the failure to satisfy the
condition specified in Section 8.01(d) or 8.01(e), then such date may be
extended, at the option of Parent, until December 31, 1997; and PROVIDED,
FURTHER, that the right to terminate this Agreement under this Section
9.01(b) shall not be available to any party
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whose failure to fulfill any obligation under this Agreement shall have
caused, or resulted in, the failure of the Effective Time to occur on or
before such date."
(l) Section 9.01(g) of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
"(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, incomplete or incorrect, in either case such that the
conditions set forth in Section 8.03 would not be satisfied (a "TERMINATING
COMPANY BREACH"); PROVIDED, HOWEVER, that if such Terminating Company
Breach (i) is curable by the Company through the exercise of its reasonable
efforts within 30 days and for so long as the Company continues to exercise
such reasonable efforts, or (ii) has been disclosed on Schedule I, II or
III to Amendment No. 1 to this Agreement or on Schedule I to Amendment No.
2 to this Agreement, Parent may not terminate this Agreement under this
Section 9.01(g); and PROVIDED FURTHER that the preceding proviso shall not
in any event be deemed to extend any date set forth in paragraph (b) of
this Section 9.01;"
(m) Section 9.01(k) of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
"(k) by the Company, if the Company shall have failed to obtain the
Company Fairness Opinion by the close of business (New York City time) on
August 27, 1997; PROVIDED, HOWEVER, that Parent may extend such date by up
to ten business days by delivering written notice thereof to the Company;
and PROVIDED, FURTHER that such termination shall not be effective unless
and until the Company shall have paid to Parent an amount equal to all of
Parent's Expenses, as evidenced by reasonable documentation, in an amount
no greater than $750,000, by wire transfer of immediately available funds
to an account designated by Parent; or".
(n) Section 9.01 of the Merger Agreement is hereby amended by
deleting the word "or" immediately preceding clause (k) thereof and adding the
following clause (l) immediately following clause (k) thereof:
"(l) by Parent, if the letter of Coopers & Xxxxxxx L.L.P. required by
Item 304(a)(3) of Regulation S-K expresses any material disagreement with
the contents of the Current Report on Form 8-K filed by the Company with
the SEC on August 21, 1997."
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SECTION 2. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Parent and Merger Sub that: The board of
directors of the Company has determined that it is consistent with and in
furtherance of the Company's long-term business strategy and fair to and in the
best interests of the Company's stockholders to amend the Merger Agreement as
provided herein. The Company has all necessary corporate power and authority to
execute and deliver this Amendment, to perform its obligations under the Merger
Agreement as amended hereby and to consummate the transactions contemplated
hereby. The execution and delivery of this Amendment by the Company and the
consummation by the Company of the transactions contemplated by the Merger
Agreement as amended hereby have been duly and validly authorized by all
necessary corporate action (other than stockholder approval as described in the
Merger Agreement). This Amendment has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent
and Merger Sub, constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. After
giving effect to Section 1(a) of this Amendment and the amendment of certain
Company Reports pursuant to Section 6.13 of the Merger Agreement, as amended
hereby, each of the representations and warranties of the Company contained in
the Merger Agreement that is qualified by materiality is true, complete and
correct on and as of the date hereof as if made at and as of the date hereof
(other than representations and warranties which address matters only as of a
certain date which shall be true, complete and correct as of such certain date)
and each of the representations and warranties that is not so qualified shall be
true, complete and correct in all material respects on and as of the date hereof
as if made at and as of the date hereof (other than representations and
warranties which address matters only as of a certain date which shall be true,
complete and correct in all material respects as of such certain date), in each
case except as contemplated or permitted by the Merger Agreement.
(b) REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent
and Merger Sub hereby jointly and severally represent and warrant to the Company
that: Parent and Merger Sub have all necessary corporate power and authority to
execute and deliver this Amendment, to perform their respective obligations
under the Merger Agreement as amended hereby and to consummate the transactions
contemplated hereby. The execution and delivery of this Amendment by Parent and
Merger Sub and the consummation by Parent and Merger Sub of the transactions
contemplated by the Merger Agreement as amended hereby have been duly and
validly authorized by all necessary corporate action (other than stockholder
approval as described in the Merger Agreement). This Amendment has been duly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of Parent and Merger Sub, enforceable against
Parent and Merger Sub in accordance with its terms. Each of the representations
and warranties of Parent and Merger Sub contained in the Merger Agreement that
is qualified by materiality is true, complete and correct on and as of the date
hereof as if made at and as of the date hereof
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(other than representations and warranties which address matters only as of a
certain date which shall be true, complete and correct as of such certain date)
and each of the representations and warranties that is not so qualified shall be
true, complete and correct in all material respects on and as of the date hereof
as if made at and as of the date hereof (other than representations and
warranties which address matters only as of a certain date which shall be true,
complete and correct in all material respects as of such certain date), in each
case except as contemplated or permitted by the Merger Agreement.
SECTION 3. EFFECT ON MERGER AGREEMENT. Except as otherwise
specifically provided herein, the Merger Agreement shall not be amended but
shall remain in full force and effect.
SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REFERENCE TO CONTRACT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING NEW
YORK LAW) EXCEPT TO THE EXTENT MANDATORILY GOVERNED BY THE LAWS OF THE STATE OF
COLORADO.
SECTION 5. COUNTERPARTS. This Amendment may be signed in one or more
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
SUN HEALTHCARE GROUP, INC.
By:
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President for Financial
Services and Chief Financial Officer
PEACH ACQUISITION CORPORATION
By:
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
RETIREMENT CARE ASSOCIATES, INC.
By:
---------------------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
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Schedule I - Attach Supplement to Company Disclosure Schedule
11
