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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
SUN HEALTHCARE GROUP, INC.,
PEACH ACQUISITION CORPORATION
and
RETIREMENT CARE ASSOCIATES, INC.
Dated as of February 17, 1997
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms................................................................... 2
ARTICLE II
THE MERGER
SECTION 2.01. The Merger.............................................................................. 11
SECTION 2.02. Closing................................................................................. 11
SECTION 2.03. Effective Time.......................................................................... 11
SECTION 2.04. Effect of the Merger.................................................................... 11
SECTION 2.05. Articles of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation................................................................... 12
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01. Conversion of Securities................................................................ 12
SECTION 3.02. Exchange of Shares Other than Treasury Shares and
Dissenting Shares....................................................................... 13
SECTION 3.03. Stock Transfer Books.................................................................... 14
SECTION 3.04. No Fractional Share Certificates........................................................ 15
SECTION 3.05. Options and Warrants to Purchase Company Common Stock................................... 16
SECTION 3.06. Certain Adjustments..................................................................... 16
SECTION 3.07. Undistributed Amounts................................................................... 17
SECTION 3.08. Dissenting Shares....................................................................... 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Organization and Qualification; Subsidiaries............................................ 18
SECTION 4.02. Articles of Incorporation and Bylaws.................................................... 18
SECTION 4.03. Capitalization.......................................................................... 19
SECTION 4.04. Authority Relative to this Agreement.................................................... 20
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SECTION 4.05. No Conflict; Required Filings and Consents.............................................. 20
SECTION 4.06. Permits; Compliance with Laws........................................................... 21
SECTION 4.07. SEC Filings; Financial Statements....................................................... 23
SECTION 4.08. Absence of Certain Changes or Events.................................................... 24
SECTION 4.09. Employee Benefit Plans; Labor Matters................................................... 24
SECTION 4.10. Accounting and Certain Tax Matters...................................................... 27
SECTION 4.11. Contracts; Debt Instruments............................................................. 28
SECTION 4.12. Litigation.............................................................................. 28
SECTION 4.13. Environmental Matters................................................................... 29
SECTION 4.14. Intellectual Property................................................................... 29
SECTION 4.15. Taxes................................................................................... 29
SECTION 4.16. Insurance............................................................................... 30
SECTION 4.17. Properties.............................................................................. 31
SECTION 4.18. Pooling Affiliates...................................................................... 31
SECTION 4.19. Brokers................................................................................. 31
SECTION 4.20. Certain Business Practices.............................................................. 31
SECTION 4.21. Transaction Expenses.................................................................... 32
SECTION 4.22. Interested Party Transactions........................................................... 32
SECTION 4.23. State Takeover Statutes................................................................. 32
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 5.01. Organization and Qualification; Subsidiaries............................................ 32
SECTION 5.02. Certificate of Incorporation and Bylaws................................................. 33
SECTION 5.03. Capitalization.......................................................................... 33
SECTION 5.04. Authority Relative to this Agreement.................................................... 34
SECTION 5.05. No Conflict; Required Filings and Consents.............................................. 35
SECTION 5.06. Permits; Compliance with Laws........................................................... 35
SECTION 5.07. SEC Filings; Financial Statements....................................................... 37
SECTION 5.08. Absence of Certain Changes or Events.................................................... 38
SECTION 5.09. Employee Benefit Plans; Labor Matters................................................... 38
SECTION 5.10. Accounting and Certain Tax Matters...................................................... 40
SECTION 5.11. Contracts; Debt Instruments............................................................. 40
SECTION 5.12. Litigation.............................................................................. 40
SECTION 5.13. Environmental Matters................................................................... 41
SECTION 5.14. Intellectual Property................................................................... 41
SECTION 5.15. Taxes................................................................................... 41
SECTION 5.16. Pooling Affiliates...................................................................... 42
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SECTION 5.17. Opinion of Financial Advisor............................................................ 42
SECTION 5.18. Brokers................................................................................. 42
SECTION 5.19. Certain Business Practices.............................................................. 42
ARTICLE VI
COVENANTS
SECTION 6.01. Conduct of Business by the Company Pending the Closing.................................. 43
SECTION 6.02. Conduct of Business by Parent Pending the Closing....................................... 46
SECTION 6.03. Cooperation............................................................................. 47
SECTION 6.04. Notices of Certain Events............................................................... 47
SECTION 6.05. Access to Information; Confidentiality.................................................. 47
SECTION 6.06. No Solicitation of Transactions......................................................... 48
SECTION 6.07. Pooling................................................................................. 49
SECTION 6.08. Letters of Accountants.................................................................. 49
SECTION 6.09. Plan of Reorganization.................................................................. 49
SECTION 6.10. Subsequent Financial Statements......................................................... 50
SECTION 6.11. Control of Operations................................................................... 50
SECTION 6.12. Further Action; Consents; Filings....................................................... 50
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Registration Statement; Proxy Statement................................................. 51
SECTION 7.02. Stockholders' Meetings.................................................................. 53
SECTION 7.03. Pooling Affiliates...................................................................... 53
SECTION 7.04. Directors' and Officers' Indemnification................................................ 54
SECTION 7.05. No Shelf Registration................................................................... 55
SECTION 7.06. Public Announcements.................................................................... 55
SECTION 7.07. Stock Exchange Listing.................................................................. 55
SECTION 7.08. Blue Sky................................................................................ 55
SECTION 7.09. Company Stock Options................................................................... 55
SECTION 7.10. Perennial Development Corporation....................................................... 56
SECTION 7.11. Management Contracts.................................................................... 56
SECTION 7.12. Note Extension.......................................................................... 57
ARTICLE VIII
CONDITIONS TO THE MERGER
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SECTION 8.01. Conditions to the Obligations of Each Party to Consummate
the Merger.............................................................................. 57
SECTION 8.02. Conditions to the Obligations of the Company............................................ 58
SECTION 8.03. Conditions to the Obligations of Parent................................................. 59
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination............................................................................. 60
SECTION 9.02. Effect of Termination................................................................... 62
SECTION 9.03. Amendment............................................................................... 62
SECTION 9.04. Waiver.................................................................................. 62
SECTION 9.05. Expenses................................................................................ 63
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Non-Survival of Representations and Warranties......................................... 64
SECTION 10.02. Notices................................................................................ 64
SECTION 10.03. Severability........................................................................... 64
SECTION 10.04. Assignment; Binding Effect; Benefit.................................................... 65
SECTION 10.05. Incorporation of Exhibits.............................................................. 65
SECTION 10.06. Governing Law.......................................................................... 65
SECTION 10.07. Waiver of Jury Trial................................................................... 65
SECTION 10.08. Headings............................................................................... 66
SECTION 10.09. Counterparts........................................................................... 66
SECTION 10.10. Entire Agreement....................................................................... 66
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EXHIBITS
Exhibit 1.00(a) Form of Stockholders Stock Option and Proxy Agreement
Exhibit 7.03(a) Form of Company Affiliate Agreement
Exhibit 7.03(b) Form of Parent Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of
February 17, 1997 (as amended, supplemented or otherwise modified from time to
time, this "AGREEMENT"), 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");
W I T N E S S E T H:
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 combine the respective businesses
of Parent and the Company by means of a merger (the "MERGER") of Merger Sub with
and into the Company upon the terms and subject to the conditions set forth
herein and in accordance with the Business Corporation Act of the State of
Colorado (the "BUSINESS CORPORATION ACT");
WHEREAS, concurrently with the execution of this Agreement and
as an inducement to Parent and Merger Sub to enter into this Agreement, Parent
has entered into a stock option and proxy agreement substantially in the form
attached hereto as Exhibit 1.00(a), dated as of the date hereof (the
"STOCKHOLDERS STOCK OPTION AND PROXY AGREEMENT"), with Xxxxx Xxxxxxx, Xxxxxx
Xxxxxxx, Xxxxxx X. Xxxx, Xxxxxxx X. Xxxxxx and Winter Haven Homes, Inc. (each, a
"PRINCIPAL STOCKHOLDER"), pursuant to which each Principal Stockholder has
granted to Parent an option to purchase from such Principal Stockholder, and
proxies to vote, all of the shares of Company Capital Stock (as hereinafter
defined) held by such Principal Stockholder, all upon the terms and subject to
the conditions set forth therein;
WHEREAS, concurrently with the execution of this Agreement,
Parent, Contour Medical Inc., a Nevada corporation and subsidiary of the Company
("CONTOUR"), and Nectarine Acquisition Corporation, a Nevada corporation and a
direct wholly owned subsidiary of Parent ("CONTOUR MERGER SUB"), have entered
into an Agreement and Plan of Merger and Reorganization (the "CONTOUR MERGER
AGREEMENT") pursuant to which Contour Merger Sub will be merged with and into
Contour (the "CONTOUR MERGER") and each share of common stock of Contour (other
than shares owned by the Company) will be converted into the right to receive
that number of shares of Parent Common Stock equal to the quotient of $8.50 and
the Closing Date Market Price (as defined in the Contour Merger Agreement), or
$8.50 in cash, or a combination of Parent Common Stock and cash, all upon the
terms and subject to the conditions set forth therein;
WHEREAS, concurrently with the execution of the Contour Merger
Agreement and as an inducement to Parent and Contour Merger Sub to enter into
the Contour Merger Agreement, Parent has entered into a stock option and proxy
agreement, dated as of the date hereof (the "CONTOUR
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STOCKHOLDER STOCK OPTION AND PROXY AGREEMENT"), with the Company, pursuant to
which the Company has granted to Parent an option to purchase from the Company,
and proxies to vote, all of the shares of capital stock of Contour held by the
Company, all upon the terms and subject to the conditions set forth therein;
WHEREAS, for financial reporting purposes, it is intended that
the Merger be accounted for as a "pooling of interests" under applicable United
States accounting rules and the accounting standards of the United States
Securities and Exchange Commission (the "SEC"); and
WHEREAS, for United States Federal income tax purposes, it is
intended that the Merger qualify as a reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended (together with the
rules and regulations promulgated thereunder, the "CODE");
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:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Unless the context
otherwise requires, the following terms, when used in this Agreement, shall have
the respective meanings specified below (such meanings to be equally applicable
to the singular and plural number of the terms so defined, unless the context
otherwise requires):
"ADJUSTMENT FACTOR" shall mean the quotient of (i) (A) the
aggregate number of shares of Parent Common Stock issuable upon conversion of
the Company Common Stock pursuant to Section 3.01(a) before giving effect to
clause (ii) thereof, minus (B) the product of (1) the aggregate number of shares
of Series AA Redeemable Preferred Stock issued and outstanding immediately prior
to the Effective Time multiplied by (2) the Series AA Exchange Ratio minus
0.714; divided by (ii) the aggregate number of shares of Parent Common Stock
issuable upon conversion of the Company Common Stock pursuant to Section 3.01(a)
before giving effect to clause (ii) thereof.
"AFFILIATE" shall have the meaning specified in Rule 144
promulgated under the Securities Act.
"AGREEMENT" shall have the meaning specified in the preamble
to this Agreement.
"ARTICLES OF MERGER" shall have the meaning specified in
Section 2.03.
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"BENEFICIAL OWNER" shall mean, with respect to any shares of
capital stock, 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 promulgated under the Exchange Act) beneficially
owns, directly or indirectly, (ii) which such person or any of its affiliates or
associates 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
consideration 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 or person 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 such shares of capital stock.
"BLUE SKY LAWS" shall mean state securities or "blue sky"
laws.
"BUSINESS CORPORATION ACT" shall have the meaning specified in
the recitals to this Agreement.
"BUSINESS DAY" shall mean any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on which banks are
not required or authorized by law, regulation or executive order to close in New
York, New York.
"CASH DEPOSIT" shall have the meaning specified in Section
3.04.
"CLOSING" shall have the meaning specified in Section 2.02.
"CLOSING DATE MARKET PRICE" shall mean the average of the last
reported sales prices of one share of Parent Common Stock on the NYSE during the
period of the 20 most recent trading days ending on the Determination Date.
"CODE" shall have the meaning specified in the recitals to
this Agreement.
"COMMON EXCHANGE RATIO" shall have the meaning specified in
Section 3.01(a).
"COMPANY" shall have the meaning specified in the preamble to
this Agreement.
"COMPANY 1996 10-K" shall have the meaning specified in
Section 4.02.
"COMPANY AFFILIATE AGREEMENT" shall have the meaning specified
in Section 7.05(a).
"COMPANY BENEFIT PLANS" shall have the meaning specified in
Section 4.09(a).
"COMPANY CAPITAL STOCK" shall mean the Company Common Stock,
the Series AA Redeemable Preferred Stock and the Series F Preferred Stock.
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"COMPANY COMMON STOCK" shall mean the Common Stock par value
$0.0001 per share, of the Company.
"COMPANY CONFIDENTIALITY AGREEMENT" shall mean the
confidentiality agreement, dated as of November 12, 1996, between Parent and the
Company.
"COMPANY DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by the Company to Parent prior to the execution of this
Agreement and forming a part hereof.
"COMPANY FAIRNESS OPINION" shall mean a written opinion by a
nationally recognized investment banking firm delivered to the board of
directors of the Company (i) to the effect that the exchange ratios to be
offered to the holders of shares of Company Capital Stock in the Merger are fair
to the holders of shares of Company Capital Stock from a financial point of view
and (ii) which has been authorized by such firm for inclusion in the Proxy
Statement.
"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.
"COMPANY MATERIAL CONTRACT" shall have the meaning specified
in Section 4.11.
"COMPANY NOTE" shall mean the promissory note of the Company
dated January 10, 1997 in favor of Parent.
"COMPANY PERMITS" shall have the meaning specified in Section
4.06(a).
"COMPANY REPORTS" shall have the meaning specified in Section
4.07(a).
"COMPANY STOCKHOLDERS' MEETING" shall have the meaning
specified in Section 7.01(a).
"COMPANY STOCK OPTION" shall have the meaning specified in
Section 3.05.
"COMPANY STOCK PLANS" shall mean the Company's 1993 Stock
Option Plan.
"COMPANY SUBSIDIARIES" shall have the meaning specified in
Section 4.01.
"COMPETING TRANSACTION" shall mean any of the following
involving the Company, as the case may be (other than the Merger contemplated by
this Agreement):
(i) any merger, consolidation, share exchange, business
combination or other similar transaction;
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(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 15 percent or more of the assets of
such party and its subsidiaries, taken as a whole, in a single
transaction or series of transactions;
(iii) any tender offer or exchange offer for 15 percent
or more of the outstanding voting securities of such party or the
filing of a registration statement under the Securities Act in
connection therewith;
(iv) any person having acquired beneficial ownership or
the right to acquire beneficial ownership of, or any "group" (as such
term is defined under Section 13(d) of the Exchange Act) having been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 15 percent or more of the outstanding voting securities
of such party;
(v) any solicitation in opposition to the approval of
this Agreement by the stockholders of the Company; or
(vi) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any
of the foregoing.
"CONFIDENTIALITY AGREEMENTS" shall mean the Parent
Confidentiality Agreement and the Company Confidentiality Agreement.
"COSTS" shall have the meaning specified in Section 7.04(d).
"DETERMINATION DATE" shall mean the fifth business day prior
to the date on which the Effective Time is expected to occur.
"DISSENTING SHARES" shall have the meaning specified in
Section 3.08.
"$" shall mean United States Dollars.
"EFFECTIVE TIME" shall have the meaning specified in Section
2.03.
"ENVIRONMENTAL LAW" shall mean any Law and any enforceable
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment or natural resources, including, without
limitation, those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Material, as in effect as
of the date hereof.
"ENVIRONMENTAL PERMIT" shall mean any permit, approval,
identification number, license or other authorization required under or issued
pursuant to any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
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"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, together with the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" shall have the meaning specified in Section
3.02.
"EXCHANGE FUND" shall have the meaning specified in Section
3.02.
"EXPENSES" shall mean, with respect to any party hereto, all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates, but excluding any allocation of overhead)
incurred by such party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of its
obligations pursuant to this Agreement and the consummation of the Merger, the
preparation, printing, filing and mailing of the Registration Statement and the
Proxy Statement, the solicitation of shareholder approvals, the filing of HSR
Act notice, if any, and all other matters related to the closing of the Merger.
"GENERAL CORPORATION LAW" shall mean the General Corporation
Law of the State of Delaware.
"GOVERNMENTAL ENTITY" shall mean any United States Federal,
state or local or any foreign governmental, regulatory or administrative
authority, agency or commission or any court, tribunal or arbitral body.
"GOVERNMENTAL ORDER" shall mean any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Entity.
"HAZARDOUS MATERIAL" shall mean (i) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
"HSR ACT" shall mean Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, together with the rules and regulations promulgated
thereunder.
"INDEMNIFIED PARTIES" shall have the meaning specified in
Section 7.04(d).
"IRS" shall mean the United States Internal Revenue Service.
"X.X. XXXXXX" shall mean X.X. Xxxxxx Securities Inc.,
financial advisor to Parent.
"LAW" shall mean any Federal, state, foreign or local statute,
law, ordinance, regulation, rule, code, order, judgment, decree, other
requirement or rule of law of the United States or any other jurisdiction, and
any other similar act or law.
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"MEDICAID" shall have the meaning specified in Section
4.06(a).
"MERGER" shall have the meaning specified in the recitals to
this Agreement.
"MERGER SUB" shall have the meaning specified in the preamble
to this Agreement.
"NATWEST" shall mean National Westminster Bank Plc, New York
Branch, financial advisor to the Company.
"NYSE" shall mean the New York Stock Exchange, Inc.
"PARENT" shall have the meaning specified in the preamble to
this Agreement.
"PARENT 1995 10-K" shall have the meaning specified in Section
5.02.
"PARENT AFFILIATE AGREEMENT" shall have the meaning specified
in Section 7.03(b).
"PARENT BENEFIT PLANS" shall have the meaning specified in
Section 5.09(a).
"PARENT COMMON STOCK" shall mean the Common Stock, par value
$0.01 per share, of Parent.
"PARENT CONFIDENTIALITY AGREEMENT" shall mean the
confidentiality agreement, dated as of December 20, 1996, between Parent and the
Company.
"PARENT DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by Parent to the Company prior to the execution of this
Agreement and forming a part hereof.
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change in or
effect on the business of Parent and the Parent 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 Parent and the
Parent Subsidiaries taken as a whole.
"PARENT MATERIAL CONTRACT" shall have the meaning specified in
Section 5.11.
"PARENT NEW PREFERRED" shall have the meaning specified in
Section 3.01(c).
"PARENT PERMITS" shall have the meaning specified in Section
5.06(a).
"PARENT PREFERRED STOCK" shall mean the preferred stock of
Parent designated as "Series A Preferred Stock" pursuant to the certificate of
designation of preferences of preferred shares of Parent filed with the
Secretary of State of the State of Delaware on June 2, 1995.
"PARENT REPORTS" shall have the meaning specified in Section
5.07(a).
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"PARENT RIGHTS" shall mean the preferred stock purchase rights
issued pursuant to that certain Rights Agreement, as amended, dated as of June
2, 1995, between Parent and Boatmens' Trust Company (the "PARENT RIGHTS
AGREEMENT").
"PARENT STOCKHOLDERS' MEETING" shall have the meaning
specified in Section 7.01(a).
"PARENT STOCK PLANS" shall mean Parent's 1993 Combined
Incentive and Nonqualified Stock Option Plan, as amended, 1993 Directors Stock
Option Plan, as amended, 1995 Non-Employee Directors' Stock Option Plan, 1996
Combined Incentive and Nonqualified Stock Option Plan, as amended, and 1997
Stock Incentive Plan and Employee Stock Purchase Plan.
"PARENT SUBSIDIARIES" shall have the meaning specified in
Section 5.01.
"PERSON" shall mean an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act), trust, association, entity or government or political subdivision, agency
or instrumentality of a government.
"POOLING AFFILIATE" shall mean, with respect to any specified
person, any other persons who are "affiliates" of such specified person within
the meaning of rule 145 promulgated under the Securities Act or applicable SEC
accounting releases with respect to "pooling of interests" accounting treatment.
"PRESURRENDER DIVIDENDS" shall have the meaning specified in
Section 3.02.
"PRINCIPAL STOCKHOLDER" shall have the meaning specified in
the recitals to this Agreement.
"PROXY STATEMENT" shall have the meaning specified in Section
7.01(a).
"REGISTRATION STATEMENT" shall have the meaning specified in
Section 7.01(a).
"REPRESENTATIVES" shall have the meaning specified in Section
6.05(a).
"SEC" shall have the meaning specified in the recitals to this
Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, together with the rules and regulations promulgated thereunder.
"SERIES AA EXCHANGE RATIO" shall have the meaning specified in
Section 3.01(b).
"SERIES AA REDEEMABLE PREFERRED STOCK" shall mean the
preferred stock of the Company designated as "Series AA Redeemable Convertible
Preferred Stock" pursuant to the Articles
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of Amendment to Articles of Incorporation of the Company filed with the
Secretary of State of the State of Colorado on September 29, 1994.
"SERIES F PREFERRED STOCK" shall mean the preferred stock of
the Company designated as "Series F Convertible Preferred Stock" pursuant to the
Articles of Amendment to Articles of Incorporation of the Company filed with the
Secretary of State of the State of Colorado on September 25, 1996.
"STOCKHOLDERS STOCK OPTION AND PROXY AGREEMENT" shall have the
meaning specified in the recitals to this Agreement.
"SUBSIDIARY" shall mean, with respect to any person, any
corporation, limited liability company, partnership, joint venture or other
legal entity of which such person (either alone or through or together with any
other subsidiary of such person) owns, directly or indirectly, a majority 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.
"SUPERIOR PROPOSAL" shall have the meaning specified in
Section 6.06.
"SURVIVING CORPORATION" shall have the meaning specified in
Section 2.01.
"TAXES" shall mean any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Entity or taxing authority,
including, without limitation, taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation or net worth; taxes or other charges in
the nature of excise, withholding, ad valorem, stamp, transfer, value-added or
gains taxes; license, registration and documentation fees; and customers'
duties, tariffs and similar charges.
"TERMINATING COMPANY BREACH" shall have the meaning specified
in Section 9.01(g).
"TERMINATING PARENT BREACH" shall have the meaning specified
in Section 9.01(h).
"U.S. GAAP" shall mean United States generally accepted
accounting principles.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Business
Corporation Act, at the Effective Time,
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Merger Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"SURVIVING CORPORATION"). Parent may, at its option, elect to amend this
Agreement to provide for a merger of Company with and into Merger Sub or Parent
or one or more other affiliates of Parent (an "ALTERNATIVE MERGER"); provided,
however, that (i) any such Alternative Merger shall not adversely affect the
tax or accounting treatment provided for herein and shall not materially delay
consummation of the transactions contemplated hereby, (ii) in the event of any
such election, the Company shall have the opportunity to update the Company
Disclosure Schedule to reflect additional items that are required to be set
forth therein only as a result of any differences between the Alternative
Merger structure and that of the Merger and (iii) Parent shall waive any
failure to satisfy Section 8.03(a) or 8.03(b) to the extent such non-compliance
results only from any differences between the Alternative Merger structure and
that of the Merger.
SECTION 2.02. Closing. Unless this Agreement shall have been
terminated and the Merger shall have been abandoned pursuant to Section 9.01 and
subject to the satisfaction or waiver of the conditions set forth in Article
VIII, the consummation of the Merger shall take place as promptly as practicable
(and in any event within three business days) after satisfaction or waiver of
the conditions set forth in Article VIII, at a closing (the "CLOSING") to be
held at the offices of Shearman & Sterling, 000 Xxxxxxxxxx Xxxxxx, Xxx
Xxxxxxxxx, Xxxxxxxxxx, unless another date, time or place is agreed to by the
Company and Parent.
SECTION 2.03. Effective Time. At the time of the Closing, the
parties shall cause the Merger to be consummated by filing articles of merger
(the "ARTICLES OF MERGER") with the Secretary of State of the State of Colorado
in such form as required by, and executed in accordance with the relevant
provisions of, the Business Corporation Act (the date and time of such filing,
or such later time as may be agreed by the parties hereto and specified in the
Articles of Merger, being the "EFFECTIVE TIME").
SECTION 2.04. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of the
Business Corporation Act. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, except as otherwise provided herein, 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 2.05. Articles of Incorporation; Bylaws; Directors and
Officers of Surviving Corporation. Unless otherwise agreed by the Company and
Parent prior to the Effective Time, at the Effective Time:
(a) the articles of incorporation and bylaws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation and bylaws of the Surviving Corporation until
thereafter amended as provided by Law and such articles of
incorporation or bylaws;
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(b) the officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation until their successors are elected or appointed and
qualified or until their resignation or removal; and
(c) the directors of Merger Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving
Corporation until their successors are elected or appointed and
qualified or until their resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01. Conversion of Securities. At the Effective
Time, by virtue of the Merger and without any action on the part of Merger Sub,
the Company or the holders of any of the following securities:
(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) 0.6625 shares of Parent
Common Stock and (ii) in the event that the Series AA Exchange Ratio
is greater than 0.714, 0.6625 shares of Parent Common Stock
multiplied by the Adjustment Factor (the lower of such numbers being
the "COMMON EXCHANGE RATIO");
(b) Each share of Series AA Redeemable Preferred Stock
issued and outstanding immediately prior to the Effective Time (other
than any shares of Series AA Redeemable Preferred Stock to be cancelled
pursuant to Section 3.01(e) 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 number of shares of
Parent Common Stock equal to the quotient of $10.00 divided by the
Closing Date Market Price, rounded to three decimal places (the "SERIES
AA EXCHANGE RATIO");
(c) Each share of Series F Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than any
shares of Series F Preferred Stock to be cancelled pursuant to Section
3.01(d) and any Dissenting Shares) and all rights in respect thereof
shall, pursuant to the terms thereof, be assumed by Parent (and amended
so as to provide voting rights on an as-converted basis) and thereafter
be convertible into the number of shares of Parent Common Stock that
such share would have been converted into if converted immediately
prior to the Effective Time (such shares, as so assumed and amended,
being the "PARENT NEW PREFERRED");
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(d) Each share of Company Capital Stock held in the
treasury of the Company and each share of Company Capital Stock owned
by Parent or any direct or indirect wholly owned subsidiary of Parent
or of the Company immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof and no
payment shall be made with respect thereto; and
(e) Each share of common stock, par value $.0001 per
share, of Merger Sub issued and outstanding immediately prior to the
Effective Time and all rights in respect thereof shall forthwith cease
to exist and shall be converted into and become exchangeable for one
newly and validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
SECTION 3.02. Exchange of Shares Other than Treasury Shares
and Dissenting Shares. Subject to the terms and conditions hereof, at or prior
to the Effective Time, Parent shall appoint an exchange agent to effect the
exchange of shares of Company Capital Stock (other than Dissenting Shares) for
Parent Common Stock (and shares of Parent New Preferred) in accordance with the
provisions of this Article III (the "EXCHANGE AGENT"). From time to time after
the Effective Time, Parent shall deposit, or cause to be deposited, certificates
representing Parent Common Stock (and shares of Parent New Preferred) for
conversion of shares of Company Capital Stock (other than Dissenting Shares) in
accordance with the provisions of Section 3.01 (such certificates, together with
any dividends or distributions with respect thereto, being herein referred to as
the "EXCHANGE FUND"). Commencing immediately after the Effective Time and until
the appointment of the Exchange Agent shall be terminated, each holder of a
certificate or certificates theretofore representing shares of Company Capital
Stock (other than Dissenting Shares) may surrender the same to the Exchange
Agent and, after the appointment of the Exchange Agent shall be terminated,
any such holder may surrender any such certificate to Parent. Such holder shall
be entitled upon such surrender to receive in exchange therefor a certificate or
certificates representing the number of full shares of Parent Common Stock (or
shares of Parent New Preferred) into which the shares of Company Capital Stock
theretofore represented by the certificate or certificates so surrendered shall
have been converted in accordance with the provisions of Section 3.01, together
with a cash payment in lieu of fractional shares, if any, in accordance with
Section 3.04, and all such shares of Parent Common Stock (or shares of Parent
New Preferred) shall be deemed to have been issued at the Effective Time. Until
so surrendered and exchanged, each outstanding certificate which, prior to the
Effective Time, represented issued and outstanding shares of Company Capital
Stock shall be deemed for all corporate purposes of Parent, other than the
payment of dividends and other distributions, if any, to evidence ownership of
the number of full shares of Parent Common Stock (or shares of Parent New
Preferred) into which the shares of Company Capital Stock theretofore
represented thereby shall have been converted at the Effective Time. Unless and
until any such certificate theretofore representing shares of Company Capital
Stock is so surrendered, no dividend or other distribution, if any, payable to
the holders of record of Parent Common Stock (or shares of Parent New Preferred)
as of any date subsequent to the Effective Time shall be paid to the holder of
such certificate in respect thereof. Upon the surrender of any such certificate
theretofore representing shares of Company Capital Stock, however, the record
holder of the certificate or certificates representing shares of Parent Common
Stock (or shares of Parent New Preferred) issued in exchange therefor shall
receive from the Exchange Agent or from Parent, as the
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case may be, payment of the amount of dividends and other distributions, if
any, which as of any date subsequent to the Effective Time and until such
surrender shall have become payable with respect to such number of shares of
Parent Common Stock (or shares of Parent New Preferred) ("PRESURRENDER
DIVIDENDS"). No interest shall be payable with respect to the payment of
Presurrender Dividends upon the surrender of certificates theretofore
representing shares of Company Capital Stock. After the appointment of the
Exchange Agent shall have been terminated, such holders of Parent Common Stock
(or shares of Parent New Preferred) which have not received payment of
Presurrender Dividends shall look only to Parent for payment thereof.
Notwithstanding the foregoing provisions of this Section 3.02, risk of loss and
title to such certificates representing shares of Company Capital Stock shall
pass only upon proper delivery of such certificates to the Exchange Agent, and
neither the Exchange Agent nor any party hereto shall be liable to a holder of
shares of Company Capital Stock for any Parent Common Stock (or shares of
Parent New Preferred) or dividends or distributions thereon delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law or to a transferee pursuant to Section 3.03. In the event that this
Agreement shall have been terminated pursuant to Section 9.01 hereof, the
Company and Parent shall cause the Exchange Agent to use its commercially
reasonable efforts to effect the prompt return of stock certificates
representing shares of Company Capital Stock to the holders thereof.
SECTION 3.03. Stock Transfer Books. (a) At the Effective Time,
each of the stock transfer books of the Company with respect to shares of
Company Capital Stock shall be closed, and there shall be no further
registration of transfers of shares of Company Capital Stock thereafter on the
records of any such stock transfer books. In the event of a transfer of
ownership of shares of Company Capital Stock that is not registered in the
stock transfer records of the Company, at the Effective Time, a certificate or
certificates representing the number of full shares of Parent Common Stock (or
shares of Parent New Preferred) into which such shares of Company Capital Stock
shall have been converted shall be issued to the transferee together with a
cash payment in lieu of fractional shares, if any, in accordance with Section
3.04, and a cash payment in the amount of Presurrender Dividends, if any, in
accordance with Section 3.02, if the certificate or certificates representing
such shares of Company Capital Stock is or are surrendered as provided in
Section 3.02, accompanied by all documents required to evidence and effect such
transfer and by evidence of payment of any applicable stock transfer tax.
(b) Notwithstanding anything to the contrary herein,
certificates surrendered for exchange by any person constituting a Pooling
Affiliate of the Company shall not be exchanged until Parent shall have received
from such person an executed Company Affiliate Agreement, as provided in Section
7.03(a).
SECTION 3.04. No Fractional Share Certificates. Unless Parent
otherwise determines, no scrip or fractional share certificates for Parent
Common Stock shall be issued upon the surrender for exchange of certificates
evidencing shares of Company Capital Stock, and an outstanding fractional share
interest shall not entitle the owner thereof to vote, to receive dividends or to
any rights of a stockholder of Parent or of the Surviving Corporation with
respect to such fractional share interest. In lieu of fractional shares, each
holder of shares of Company Capital Stock who, except for the provisions of this
Section 3.04, would be entitled to receive a
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fractional share of Parent Common Stock shall, upon surrender of the
certificate or certificates representing shares of Company Capital Stock, be
entitled to receive an amount in cash (rounded to the nearest whole cent),
without interest, equal to the product obtained by multiplying (a) the
fractional share interest to which such holder would otherwise be entitled
(after taking into account all shares of Company Capital Stock held at the
Effective Time by such holder) by (b) the closing price for a share of Parent
Common Stock on the NYSE on the first business day immediately prior to the
Effective Time. At or prior to the Effective Time, Parent shall pay to the
Exchange Agent an amount in cash (the "CASH DEPOSIT") sufficient for the
Exchange Agent to pay each holder of Company Capital Stock the amount of cash
in lieu of fractional shares to which such holder is entitled pursuant to this
Section 3.04. As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Company Capital Stock with respect to
any fractional share interests, the Exchange Agent shall make available such
amounts, net of any required withholding, to such holders of Company Capital
Stock, subject to and in accordance with the terms of Section 3.02. In no event
shall either (i) the total cash consideration paid to holders of Company
Capital Stock in lieu of fractional shares exceed one percent (1%) of the value
of the total consideration issued to holders of Company Capital Stock in
exchange for their Company Capital Stock or (ii) any holder of Company Capital
Stock, directly or indirectly, receive cash in an amount equal to or greater
than the value of one full share of Parent Company Stock.
SECTION 3.05. Options and Warrants to Purchase Company Common
Stock. At the Effective Time, each option or warrant granted by the Company to
purchase shares of Company Common Stock (each, a "COMPANY STOCK OPTION") which
is outstanding and unexercised immediately prior to the Effective Time shall be
assumed by Parent and converted into an option or warrant to purchase shares of
Parent Common Stock in such number and at such exercise price as provided below
and otherwise having the same terms and conditions as in effect immediately
prior to the Effective Time (except to the extent that such terms, conditions
and restrictions may be altered in accordance with their terms as a result of
the Merger):
(a) the number of shares of Parent Common Stock to be
subject to the new option or warrant shall be equal to the product of
(i) the number of shares of Company Common Stock subject to the
original option or warrant and (ii) the Common Exchange Ratio;
(b) the exercise price per share of Parent Common Stock
under the new option or warrant shall be equal to the quotient of (i)
the exercise price per share of Company Common Stock under the original
option or warrant divided by (ii) the Common Exchange Ratio; and
(c) upon each exercise of options or warrants by a
holder thereof, the aggregate number of shares of Parent Common Stock
deliverable upon such exercise shall be rounded down, if necessary, to
the nearest whole share and the aggregate exercise price shall be
rounded up, if necessary, to the nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code.
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SECTION 3.06. Certain Adjustments. If between the date of this
Agreement and the Effective Time, the outstanding shares of Company Capital
Stock or Parent Common Stock shall be changed into a different number of shares
by reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities shall
be declared thereon with a record date within such period, or the number of
shares of Company Capital Stock on a fully diluted basis is in excess of that
specified in Section 4.03 and disclosed in 4.03 of the Company Disclosure
Schedule (regardless of whether such excess is a result of an additional
issuance of capital stock or a correction to such Sections), but excluding
options permitted to be issued pursuant to Section 6.01(b) hereof, then the
exchange ratios established pursuant to the provisions of Section 3.01 shall be
adjusted accordingly to provide to the holders of Company Capital Stock the same
economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange, dividend or
increase.
SECTION 3.07. Undistributed Amounts. Any portion of the
Exchange Fund or the Cash Deposit which remains undistributed for six months
after the Effective Time shall be delivered to Parent, and any holder of Company
Capital Stock who has not theretofore complied with the provisions of this
Article III shall thereafter look only to Parent for satisfaction of their
claims for Parent Common Stock or Parent New Preferred, as the case may be, or
any cash in lieu of fractional shares of Parent Common Stock and any
Presurrender Dividends.
SECTION 3.08. Dissenting Shares. Notwithstanding any provision
of Section 3.01 hereof to the contrary, shares of Company Capital Stock which
are held by holders of such shares who have not voted in favor of the Merger,
who are entitled to dissent and who have delivered a written notice of intent to
demand payment for such shares in the manner provided in Article 113 of the
Business Corporation Act ("DISSENTING SHARES"), shall not be converted into or
exchanged for or represent the right to receive any shares of Parent Common
Stock (or shares of Parent New Preferred), unless such holder fails to perfect
or effectively withdraws or loses such rights to payment. If, after the
Effective Time, such holder fails to perfect or effectively withdraws or loses
such right to payment, then such Dissenting Shares shall thereupon be deemed to
have been converted into and exchanged pursuant to Section 3.01 hereof, as of
the Effective Time, for the right to receive shares of Parent Common Stock (or
shares of Parent New Preferred) issued in the Merger to which the holder of such
shares of Company Capital Stock is entitled, without any interest thereon. The
Company shall give Parent prompt notice of any notices and demands received by
the Company for payment for shares of Company Capital Stock, and Parent shall
have the right to participate in all negotiations and proceedings with respect
to such notices and demands. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands. Prior to the Effective Time, the Company shall
establish an escrow account with a financial institution and the Company shall
fund such escrow account with cash or cash equivalents in an amount sufficient
to make all payments to holders of Dissenting Shares. Such escrow account shall
survive the Merger. All payments to holders of Dissenting Shares shall be made
out of such escrow account, and no such payments shall be made or otherwise
funded by Parent.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Merger Sub that:
SECTION 4.01. Organization and Qualification; Subsidiaries.
(a) The Company and each directly and indirectly owned subsidiary of the Company
(the "COMPANY SUBSIDIARIES") has been duly organized and is validly existing and
in good standing (to the extent applicable) under the laws of the jurisdiction
of its incorporation or organization, as the case may be, and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company and each Company Subsidiary is duly
qualified or licensed to do business, and is in good standing (to the extent
applicable), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
(b) Section 4.01 of the Company Disclosure Schedule sets
forth, as of the date of this Agreement, a true and complete list of each
Company Subsidiary, together with (i) the jurisdiction of incorporation or
organization of each Company Subsidiary and the percentage of each Company
Subsidiary's outstanding capital stock or other equity interests owned by the
Company or another Company Subsidiary and (ii) an indication of whether each
Company Subsidiary is a "Significant Subsidiary" as defined in Regulation S-X
under the Exchange Act. Except as set forth in Section 4.01 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary owns an
equity interest in any partnership or joint venture arrangement or other
business entity that is material to the financial condition, results of
operations, business or prospects of the Company and the Company Subsidiaries,
taken as a whole.
SECTION 4.02. Articles of Incorporation and Bylaws. Except as
set forth in Section 4.02 of the Company Disclosure Schedule, the copies of the
Company's articles of incorporation and bylaws that are incorporated by
reference as exhibits to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 (the "COMPANY 1996 10-K") are true, complete and
correct copies thereof. Such articles of incorporation and bylaws are in full
force and effect. The Company is not in violation of any of the provisions of
its articles of incorporation or bylaws.
SECTION 4.03. Capitalization. The authorized capital stock of
the Company consists of 300,000,000 shares of Company Common Stock and
40,000,000 shares of preferred stock, 300,000 of which have been designated as
Series AA Redeemable Preferred Stock and 1,000,000 of which have been designated
as Series F Preferred Stock. As of the date hereof (i) 14,869,212 shares of
Company Common Stock are issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) 80,400 shares of Company Common Stock
are held in the treasury of the
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Company, (iii) no shares of Company Common Stock are held by the Company
Subsidiaries, (iv) 2,182,625 shares of Company Common Stock are reserved for
future issuance pursuant to employee stock options or stock incentive rights
granted under the Company Stock Plans, (v) 1,004,315 shares of Company Common
Stock are reserved for future issuance pursuant to outstanding warrants to
purchase shares of Company Common Stock, (vi) 165,375 shares of Company Common
Stock are reserved for issuance upon conversion of the Series AA Redeemable
Preferred Stock, (vii) 1,640,660 shares of Company Common Stock are reserved
for issuance upon conversion of the Series F Preferred Stock, (viii) 180,000
shares of Series AA Redeemable Preferred Stock are issued and outstanding and
(ix) 450,001 shares Series F Preferred Stock are issued and outstanding. Except
for shares of Company Common Stock issuable pursuant to the Company Stock Plans
or pursuant to agreements or arrangements described in Section 4.03 of the
Company Disclosure Schedule, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which the Company
is a party or by which the Company is bound relating to the issued or unissued
capital stock of the Company or any Company Subsidiary or obligating the
Company or any Company Subsidiary to issue or sell any shares of capital stock
of, or other equity interests in, the Company or any Company Subsidiary.
Section 4.03 of the Company Disclosure Schedule sets forth a complete and
correct list as of the date hereof of (w) the number of options and warrants to
purchase Company Common Stock outstanding and the number of shares of Company
Common Stock issuable thereunder, (x) the exercise price of each such
outstanding stock option and warrant, (y) the vesting schedule of each such
outstanding stock option and (z) the grantee or holder of each such option and
warrant. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance prior to the Effective Time on the terms and conditions specified
in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. Except in accordance
with the terms of the Series AA Redeemable Preferred Stock, there are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Capital Stock or
any capital stock of any Company Subsidiary. Each outstanding share of capital
stock of each Company Subsidiary is duly authorized, validly issued, fully paid
and nonassessable and each such share owned by the Company or another Company
Subsidiary is free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on the Company's or
such other Company Subsidiary's voting rights, charges and other encumbrances
of any nature whatsoever, except where the failure to own such shares free and
clear could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Except as set forth in Section
4.03 of the Company Disclosure Schedule, there are no material outstanding
contractual obligations of the Company or any Company Subsidiary to provide
funds to, or make any material investment (in the form of a loan, capital
contribution or otherwise) in, any Company Subsidiary or any other person.
SECTION 4.04. Authority Relative to this Agreement. The
Company has all necessary corporate power and authority to execute and deliver
this Agreement, 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, to the Company's knowledge, no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate such transactions (other than the approval of this
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Agreement and the Merger by the holders of a majority of the outstanding shares
of Company Common Stock and Series AA Redeemable Preferred Stock entitled to
vote with respect thereto at the Company Stockholders' Meeting, voting together
as a single class and the filing and recordation of the Articles of Merger as
required by the Business Corporation Act). The execution and delivery of the
Stockholders Stock Option and Proxy Agreement by the Principal Stockholders and
the consummation by the Principal Stockholders of the transactions contemplated
thereby 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 the Stockholders Stock Option and Proxy Agreement or to
consummate such transactions. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by the Company do not, and the
performance by the Company of its obligations hereunder and the consummation of
the Merger will not, (i) conflict with or violate any provision of the articles
of incorporation or bylaws of the Company or any equivalent organizational
documents of any Company Subsidiary, (ii) assuming that all consents, approvals,
authorizations and permits described in Section 4.05(b) have been obtained and
all filings and notifications described in Section 4.05(b) have been made,
conflict with or violate any Law applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected or (iii) except as set forth in Section 4.05(a)
of the Company Disclosure Schedule, result in any breach of or constitute a
default (or an event which with the giving of notice or lapse of time or both
could reasonably be expected to become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
could not reasonably be expected, individually or in the aggregate, (A) to have
a Company Material Adverse Effect or (B) to prevent or materially delay the
performance by the Company of its obligations pursuant to this Agreement or the
consummation of the Merger.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance by the Company of its obligations hereunder
and the consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing by the Company with or notification by the
Company to, any Governmental Entity, except (i) pursuant to applicable
requirements of the Exchange Act, the Securities Act, Blue Sky Laws, the rules
and regulations of the NYSE, state takeover laws, the premerger notification
requirements of the HSR Act, if any, the filing and recordation of the Articles
of Merger as required by the Business Corporation Act, and as set forth in
Section 4.05(b) of the Company Disclosure Schedule, and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, could not reasonably be expected, individually or in
the aggregate, (A) to have a Company Material Adverse Effect or (B) to prevent
or materially delay the performance by the Company of its obligations pursuant
to this Agreement or the consummation of the Merger.
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SECTION 4.06. Permits; Compliance with Laws. (a) The Company
and the Company Subsidiaries are in possession of (i) all franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, easements, variances, exceptions, consents, certificates,
identification and registration numbers, approvals and orders of any
Governmental Entity necessary for the Company or any Company Subsidiary to own,
lease and operate its properties or to produce, store, distribute and market its
products or otherwise to carry on its business as it is now being conducted and
(ii) agreements from all Federal, state, foreign and local governmental agencies
and accrediting and certifying organizations having jurisdiction over such
facility or facilities that are required to operate the facility or facilities
in the manner in which it or they are currently operated and receive
reimbursement for care provided to patients covered under the Federal Medicare
program ("MEDICARE"), any applicable state Medicaid program ("MEDICAID") or any
comparable foreign medical reimbursement program (collectively, the "COMPANY
PERMITS"), except where the failure to have, or the suspension or cancellation
of, any of the Company Permits could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, and, as of
the date of this Agreement, no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company, threatened, except where
the failure to have, or the suspension or cancellation of, any of the Company
Permits could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Without limiting the generality
of the foregoing, except as set forth in Section 4.06(a) of the Company
Disclosure Schedule, all of the Company's facilities are certified for
participation or enrollment in the Medicare program, have a current and valid
provider contract with the Medicare program and are in substantial compliance
with the conditions of participation of such programs. Neither the Company nor
any Company Subsidiary is in conflict with, or in default or violation of, (i)
any Law applicable to the Company or any Company Subsidiary or by which any
property or asset of the Company or any Company Subsidiary is bound or affected
or (ii) any Company Permits, except in the case of clauses (i) and (ii) for any
such conflicts, defaults or violations that could not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
Neither the Company nor any Company Subsidiary has received notice from the
regulatory authorities that enforce the statutory or regulatory provisions in
respect of either the Medicare or the Medicaid program of any pending or
threatened investigations or surveys, and no such investigations or surveys are
pending or, to the knowledge of the Company, threatened or imminent that could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Section 4.06(a) of the Company Disclosure Schedule
sets forth, as of the date of this Agreement, all actions, proceedings,
investigations or surveys pending or, to the knowledge of the Company,
threatened against the Company or any Company Subsidiary that could reasonably
be expected to result in (i) the loss or revocation of a Company Permit
necessary to operate one or more facilities or for a facility to receive
reimbursement under the Medicare or Medicaid programs or (ii) the suspension or
cancellation of any other Company Permit, except any such Company Permit where
such suspension or cancellation could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Except as
set forth in Section 4.06(a) of the Company Disclosure Schedule, since June 30,
1996, neither the Company nor any Company Subsidiary has received from any
Governmental Entity any written notification with respect to possible
conflicts, defaults or violations of Laws, except for written notices relating
to possible conflicts, defaults or
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violations that could not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
(b) The Company and each Company Subsidiary, as appropriate,
is an approved participating provider in and under all third party payment
programs from which it receives revenues. No action or investigation is pending,
or to the best of its knowledge, threatened to suspend, limit, terminate,
condition, or revoke the status of the Company or any Company Subsidiary as a
provider in any such program, and neither the Company nor any Company Subsidiary
has been provided notice by any third party payor of its intention to suspend,
limit, terminate, revoke, condition or fail to renew in whole or in part or
decrease the amounts payable under any arrangement with the Company or such
Company Subsidiary as a provider, which action, investigation or proceeding
would have, individually or in the aggregate, a Company Material Adverse Effect.
(c) Neither the Company nor any Company Subsidiary is
delinquent with respect to the filing of any claims, cost reports or annual
filings required to be filed to secure payments for services rendered by them
under any third-party payment program from which they receive or expect to
receive revenues. Section 4.06(c) sets forth the date of the most recent such
filing for each of the Company's and the Company's Subsidiaries' facilities.
Except as indicated in its financial statements included in the Company
Reports, the Company or each Company Subsidiary, as applicable, has paid, or
caused to be paid, all refunds, discounts, adjustments, or amounts owing that
have become due to such third party payors pursuant to such claims, reports or
filings, and neither the Company nor any Company Subsidiary has any knowledge
or notice of any material changes required to be made to any cost reports,
claims or filings made by it for any period or of any deficiency in any such
claim, report, or filing, except for changes and deficiencies that in the
aggregate would not have a Company Material Adverse Effect.
SECTION 4.07. SEC Filings; Financial Statements. (a) Except as
disclosed in Section 4.07 of the Company Disclosure Schedule, the Company has
timely filed all forms, reports, statements and documents required to be filed
by it (A) with the SEC and the NYSE since June 30, 1994 through the date of this
Agreement (collectively and as amended, the "COMPANY REPORTS") and (B) with any
other Governmental Entities, including, without limitation, state insurance and
health regulatory authorities. Each Company Report (i) was prepared in
accordance with the requirements of the Securities Act, the Exchange Act or the
rules and regulations of the NYSE, as the case may be, and (ii) did not at the
time it was filed 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 made therein, in the light of the circumstances under which
they were made, not misleading. Each form, report, statement and document
referred to in clause (B) of this paragraph was prepared in all material
respects in accordance with the requirements of applicable Law. Except as
disclosed in Section 4.07 of the Company Disclosure Schedule, no Company
Subsidiary is subject to the periodic reporting requirements of the Exchange Act
or required to file any form, report or other document with the SEC, the NYSE,
any other stock exchange or any other comparable Governmental Entity.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Company Reports was prepared
in accordance with U.S. GAAP applied
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on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each presented fairly, in all material
respects, the consolidated financial position of the Company and the
consolidated Company Subsidiaries as at the respective dates thereof and for
the respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which did not have and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect).
(c) Except as and to the extent set forth or reserved against
on the consolidated balance sheet of the Company and the Company Subsidiaries
as reported in the Company Reports, including the notes thereto, none of the
Company or any Company Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in notes thereto prepared in
accordance with U.S. GAAP, except for liabilities or obligations incurred in
the ordinary course of business consistent with past practice since June 30,
1996 that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
SECTION 4.08. Absence of Certain Changes or Events. Since June
30, 1996, except as contemplated by or as disclosed in this Agreement, as set
forth in Section 4.08 of the Company Disclosure Schedule or as disclosed in any
Company Report filed since June 30, 1996, the Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course
consistent with past practice and, since such date, there has not been (i) any
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, (ii) any event that could reasonably be
expected to prevent or materially delay the performance of its obligations
pursuant to this Agreement and the consummation of the Merger by the Company,
(iii) any material change by the Company in its accounting methods, principles
or practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of Company Capital Stock or any
redemption, purchase or other acquisition of any of the Company's securities or
(v) any increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of the
Company or any Company Subsidiary except in the ordinary course of business
consistent with past practice.
SECTION 4.09. Employee Benefit Plans; Labor Matters.
(a) Section 4.09(a) of the Company Disclosure Schedule lists (i) all employee
benefit plans (as defined in Section 3(3) of ERISA) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements, whether legally enforceable or not, to which the
Company or any Company Subsidiary is a party, with respect to which the Company
or any Company Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Company
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Subsidiary for the benefit of any current or former employee, officer or
director of the Company or any Company Subsidiary, (ii) each employee benefit
plan for which the Company or any Company Subsidiary could incur liability
under Section 4069 of ERISA in the event such plan has been or were to be
terminated, (iii) any plan in respect of which the Company or any Company
Subsidiary could incur liability under Section 4212(c) of ERISA and (iv) any
contracts, arrangements or understandings between the Seller or any of its
affiliates and any employee of the Company or of any Company Subsidiary,
including, without limitation, any contracts, arrangements or understandings
relating to the sale of the Company (collectively, the "COMPANY BENEFIT
PLANS"). With respect to each Company Benefit Plan, the Company has delivered
or made available to Parent a true, complete and correct copy of (i) such
Company Benefit Plan and the most recent summary plan description related to
such Company Benefit Plan, if a summary plan description is required therefor,
(ii) each trust agreement or other funding arrangement relating to such Company
Benefit Plan, (iii) the most recent annual report (Form 5500) filed with the
IRS) with respect to such Company Benefit Plan, (iv) the most recent actuarial
report or financial statement relating to such Company Benefit Plan and (v) the
most recent determination letter issued by the IRS with respect to such Company
Benefit Plan, if it is qualified under Section 401(a) of the Code. Except as
disclosed on Section 4.09(a) of the Company Disclosure Schedule, there are no
other employee benefit plans, programs, arrangements or agreements, whether
formal or informal, whether in writing or not, to which the Company or any
Company Subsidiary is a party, with respect to which the Company or any Company
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Company Subsidiary for the benefit of any
current or former employee, officer or director of the Company or any Company
Subsidiary. Neither the Company nor any Company Subsidiary has any express or
implied commitment, whether legally enforceable or not, (i) to create, incur
liability with respect to or cause to exist any other employee benefit plan,
program or arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual or (iii) to modify, change or
terminate any Company Benefit Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
(b) None of the Company Benefit Plans is a multiemployer plan
(within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "MULTIEMPLOYER
PLAN") or a single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) for which the Company or any Company Subsidiary could
incur liability under Section 4063 or 4064 of ERISA (a "MULTIPLE EMPLOYER
PLAN"). None of the Company Benefit Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary.
(c) Each Company Benefit Plan has been administered in all
material respects in accordance with its terms and all contributions required to
be made under the terms of any of the Company Benefit Plans as of the date of
this Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company
Reports prior to the date of this Agreement. Except as set forth in Section
4.09(c) of the Company Disclosure Schedule, with respect to the Company Benefit
Plans, no event has occurred and, to the knowledge of the Company, there exists
no condition or set of circumstances in connection with which the Company or
any Company Subsidiary could be subject to any liability under the terms of
such Company Benefit Plans, ERISA, the Code or any other applicable Law which
could reasonably be
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expected to have, individually or in the aggregate, a Company Material Adverse
Effect. No legal action, suit or claim is pending or threatened with respect to
any Company Benefit Plan (other than claims for benefits in the ordinary
course).
(d) The Company on behalf of itself and all of the Company
Subsidiaries hereby represents that, other than as disclosed in Section 4.09(d)
of the Company Disclosure Schedule or where the failure of such representation
to be true could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect: (i) each Company Benefit Plan
which is intended to be qualified under Section 401(a) of the Code or Section
401(k) of the Code has received a favorable determination letter from the IRS
that it is so qualified and each trust established in connection with any
Company Benefit Plan which is intended to be exempt from federal income taxation
under Section 501(a) of the Code has received a determination letter from the
IRS that it is so exempt, and no fact or event has occurred since the date of
such determination letter from the IRS to adversely affect the qualified status
of any such Company Benefit Plan or the exempt status of any such trust; (ii)
each trust maintained or contributed to by the Company or any Company Subsidiary
which is intended to be qualified as a voluntary employees' beneficiary
association and which is intended to be exempt from federal income taxation
under Section 501(c)(9) of the Code has received a favorable determination
letter from the IRS that it is so qualified and so exempt, and no fact or event
has occurred since the date of such determination by the IRS to adversely affect
such qualified or exempt status; (iii) there has been no prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) with
respect to any Company Benefit Plan; (iv) neither the Company nor any Company
Subsidiary has incurred any liability for any penalty or tax arising under
Section 4971, 4972, 4980, 4980B or 6652 of the Code or any liability under
Section 502 of ERISA, and no fact or event exists which could give rise to any
such liability; (v) no complete or partial termination has occurred within the
five years preceding the date hereof with respect to any Company Benefit Plan;
(vi) no reportable event (within the meaning of Section 4043 of ERISA) has
occurred or is expected to occur with respect to any Company Benefit Plan
subject to Title IV of ERISA; (vii) no Company Benefit Plan had an accumulated
funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of
the Code), whether or not waived, as of the most recently ended plan year of
such Company Benefit Plan; (viii) none of the assets of the Company or any
Company Subsidiary is the subject of any lien arising under Section 302(f) of
ERISA or Section 412(n) of the Code; neither the Company nor any Company
Subsidiary has been required to post any security under Section 307 of ERISA or
Section 401(a)(29) of the Code; and no fact or event exists which could give
rise to any such lien or requirement to post any such security; (ix) all
contributions, premiums or payments required to be made with respect to any
Company Benefit Plan have been made on or before their due dates; (x) all such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any government entity and no
fact or event exists which could give rise to any such challenge or
disallowance; and (xi) as of the Effective Time, no Company Benefit Plan which
is subject to Title IV of ERISA will have an "unfunded benefit liability"
(within the meaning of Section 4001(a)(18) of ERISA).
(e) Except as set forth in Section 4.09(e) of the Company
Disclosure Schedule, to the Company's knowledge, the Company and the Company
Subsidiaries are in compliance with the requirements of the Americans With
Disabilities Act.
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(f) The Company and the Company Subsidiaries are in compliance
with the requirements of the Workers Adjustment and Retraining Notification Act
("WARN") and have no liabilities pursuant to WARN.
(g) Except as set forth in Section 4.09(g) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to any collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement is being negotiated by the Company or any Company Subsidiary. As of
the date of this Agreement, there is no labor dispute, strike or work stoppage
against the Company or any Company Subsidiary pending or, to the knowledge of
the Company, threatened which may interfere with the respective business
activities of the Company or any Company Subsidiary, except where such dispute,
strike or work stoppage could not reasonably be expected to have a Company
Material Adverse Effect. As of the date of this Agreement, to the knowledge of
the Company, none of the Company, any Company Subsidiary, or any of their
respective representatives or employees has committed any unfair labor practice
in connection with the operation of the respective businesses of the Company or
any Company Subsidiary, and there is no charge or complaint against the Company
or any Company Subsidiary by the National Labor Relations Board or any
comparable Governmental Entity pending or threatened in writing, except where
such unfair labor practice, charge or complaint could not reasonably be expected
to have a Company Material Adverse Effect.
(h) The Company has delivered to Parent true, complete and
correct copies of (i) all employment agreements with officers and all consulting
agreements of the Company and each Company Subsidiary providing for annual
compensation in excess of $100,000, (ii) all severance plans, agreements,
programs and policies of the Company and each Company Subsidiary with or
relating to their respective employees or consultants, and (iii) all plans,
programs, agreements and other arrangements of the Company and each Company
Subsidiary with or relating to their respective employees or consultants which
contain "change of control" provisions.
SECTION 4.10. Accounting and Certain Tax Matters. Except as
disclosed in the Company Reports, neither the Company nor, to the knowledge of
the Company, any of its affiliates has taken or agreed to take any action
(other than actions contemplated by this Agreement) that could reasonably be
expected to prevent the Merger from qualifying for "pooling of interests"
accounting treatment under applicable United States accounting rules,
including, without limitation, applicable SEC accounting standards, or that
could reasonably be expected to prevent the Merger from constituting a
transaction qualifying under Section 368 of the Code. The Company is not aware
of any agreement, plan or other circumstances that could reasonably be expected
to prevent the Merger from so qualifying under Section 368 of the Code.
SECTION 4.11. Contracts; Debt Instruments. Except as disclosed
in the Company Reports or in Section 4.11 of the Company Disclosure Schedule,
there is no contract or agreement that is material to the business, financial
condition or results of operations of the Company and the Company Subsidiaries
taken as a whole (each, a "COMPANY MATERIAL CONTRACT"). Except as disclosed in
the Company Reports or in Section 4.11 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary is in violation of or in default
under (nor does there exist any condition which with the passage of time or the
giving of notice could reasonably be expected to
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cause such a violation of or default under) any loan or credit agreement, note,
bond, mortgage, indenture or lease, or any other contract, license, agreement,
arrangement or understanding to which it is a party or by which it or any of
its properties or assets is bound, except for violations or defaults that could
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Set forth in Section 4.11 of the Company Disclosure
Schedule is a description of any material changes to the amount and terms of
the indebtedness of the Company and its subsidiaries as described in the notes
to the financial statements incorporated in the Company 1996 10-K.
SECTION 4.12. Litigation. Except as disclosed in the Company
Reports or in Section 4.12 of the Company Disclosure Schedule, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary before any
Governmental Entity that could reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect, and, except as disclosed to
Parent, to the knowledge of the Company, there are no existing facts or
circumstances that could reasonably be expected to result in such a suit, claim,
action, proceeding or investigation. Except as disclosed to Parent, the Company
is not aware of any facts or circumstances which could reasonably be expected to
result in the denial of insurance coverage under policies issued to the Company
and the Company Subsidiaries in respect of such suits, claims, actions,
proceedings and investigations, except in any case as could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. Except as disclosed in the Company Reports or in Section 4.12 of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary is
subject to any outstanding order, writ, injunction or decree which could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
SECTION 4.13. Environmental Matters. Except as disclosed in
the Company Reports or in Section 4.13 of the Company Disclosure Schedule, or as
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, (i) the Company and the Company Subsidiaries
are in compliance with all applicable Environmental Laws; (ii) all past
noncompliance of the Company or any Company Subsidiary with Environmental Laws
or Environmental Permits has been resolved without any pending, ongoing or
future obligation, cost or liability; and (iii) neither the Company nor any
Company Subsidiary has released a Hazardous Material at, or transported a
Hazardous Material to or from, any real property currently or formerly owned,
leased or occupied by the Company or any Company Subsidiary, in violation of any
Environmental Law.
SECTION 4.14. Intellectual Property. Except as set forth in
Section 4.14 of the Company Disclosure Schedule, or as could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, the Company and the Company Subsidiaries own or possess adequate
licenses or other valid rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade dress, trade name rights, copyrights,
service marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the respective businesses of the Company and the Company
Subsidiaries as currently conducted, and the Company is unaware of any assertion
or claim challenging the validity of any of the foregoing. Section 4.14 of the
Company Disclosure Schedule lists all material licenses, sublicenses and other
agreements to which the Company or any
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Company Subsidiary is a party and pursuant to which (i) any third party is
authorized to use any intellectual property right of the Company or any Company
Subsidiary and (ii) the Company or any Company Subsidiary is authorized to use
any intellectual property rights (other than pursuant to shrink-wrap licenses
and software licenses) of a third party, and includes the identity of all
parties thereto, a description of the nature and subject matter thereof, the
royalty provisions, if any, therein and the term thereof. Except as set forth
in Section 4.14 of the Company Disclosure Schedule, the conduct of the
respective businesses of the Company and the Company Subsidiaries as currently
conducted does not conflict in any way with any patent, patent right, license,
trademark, trademark right, trade dress, trade name, trade name right, service
xxxx or copyright of any third party that could not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect. To
the knowledge of the Company, there are no infringements of any proprietary
rights owned by or licensed by or to the Company or any Company Subsidiary that
could reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
SECTION 4.15. Taxes. The Company on behalf of itself and all
of the Company Subsidiaries hereby represents that, other than as disclosed in
Section 4.15(a) of the Company Disclosure Schedule or where the failure of such
representation to be true could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect: (a) the
Company and the Company Subsidiaries have filed all United States federal
income tax and all other material tax returns required to be filed by them, and
the Company and the Company Subsidiaries have paid and discharged all Taxes due
in connection with or with respect to the filing of all 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 any such proceedings are
required) and with respect to which the Company is maintaining reserves to the
extent currently required in all material respects adequate for their payment;
(b) neither the IRS nor any other taxing authority or agency is now asserting
or, to the best of the Company's knowledge, threatening to assert against the
Company or any of the Company Subsidiaries any deficiency or claim for
additional Taxes other than additional Taxes with respect to which the Company
is maintaining reserves in all material respects adequate for their payment,
and there are no requests for information currently outstanding that could
affect the Taxes of the Company or any Company Subsidiaries; (c) neither the
Company nor any of the Company Subsidiaries is currently being audited by any
taxing authority; (d) there are no tax liens on any assets of the Company or
any Company Subsidiary; (e) neither the Company nor any of the Company
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; (f) the
accruals and reserves for taxes reflected in the audited balance sheet as of
June 30, 1996 included in the Company 1996 10-K are in all material respects
adequate to cover all Taxes accruable through the date thereof (including
interest and penalties, if any, thereon and Taxes being contested) in
accordance with generally accepted accounting principles; (g) neither the
Company nor any of the Company Subsidiaries is required to include in income
any amount in respect of any adjustment under Section 481 of the Code; (h)
neither the Company nor any of the Company Subsidiaries is a party to any
agreement, contract or arrangement that may result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the meaning
of Section 280G of the Code, determined without regard to Section 280G(b)(4) of
the Code; (i) neither the Company nor any of the Company Subsidiaries owns any
property of a character, the transfer of which would give rise to
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33
(x) a revaluation of such property for purposes of any ad valorem or similar
tax, or (y) any documentary, stamp or other transfer tax; and (j) neither the
Company nor any of the Company Subsidiaries has an "excess loss account" for
purposes of the treasury regulations promulgated under Section 1502 of the
Code. Within ten days after the date hereof, the Company and the Company
Subsidiaries will make available to Parent or its legal counsel for inspection
copies of all income and sales and use tax returns for all periods since the
date of the Company's and the Company Subsidiaries' incorporation.
SECTION 4.16. Insurance. Except as set forth in Section 4.16
of the Company Disclosure Schedule, the Company and each Company Subsidiary is
presently insured, and during each of the past five calendar years has been
insured, against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured. Except as
set forth in Section 4.16 of the Company Disclosure Schedule, the policies of
fire, theft, liability and other insurance maintained with respect to the
assets or businesses of the Company and the Company Subsidiaries provide
adequate coverage against loss.
SECTION 4.17. Properties. Except as set forth in Section 4.17
of the Company Disclosure Schedule or specifically described in the Company
Reports, the Company and the Company Subsidiaries have good and marketable
title, free and clear of all liens, the existence of which could reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, to all their material properties and assets, whether tangible or
intangible, real, personal or mixed, reflected in the Company's consolidated
financial statements contained in the Company 1996 10-K as being owned by the
Company and the Company Subsidiaries as of the date thereof, other than (i) any
properties or assets that have been sold or otherwise disposed of in the
ordinary course of business since the date of such financial statements, (ii)
liens disclosed in the notes to such financial statements and (iii) liens
arising in the ordinary course of business after the date of such financial
statements. All buildings, and all fixtures, equipment and other property and
assets that are material to its business on a consolidated basis, held under
leases or sub-leases by the Company or any Company Subsidiary are held under
valid instruments enforceable in accordance with their respective terms, subject
to applicable laws of bankruptcy, insolvency or similar laws relating to
creditors' rights generally and to general principles of equity (whether applied
in a proceeding in law or equity). Substantially all of the Company's and the
Company Subsidiaries' equipment in regular use has been reasonably maintained
and is in serviceable condition, reasonable wear and tear excepted.
SECTION 4.18. Pooling Affiliates. Section 4.18 of the Company
Disclosure Schedule sets forth the name and address of each person who is, in
the Company's reasonable judgment, a Pooling Affiliate of the Company.
SECTION 4.19. Brokers. No broker, finder or investment banker
(other than NatWest) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of the Company. The Company has heretofore made available to Parent true,
complete and correct copies of all agreements between the Company and NatWest
pursuant to which such firm would be entitled to any payment relating to the
Merger.
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SECTION 4.20. Certain Business Practices. None of the Company,
any Company Subsidiary or any directors, officers, agents or employees of the
Company or any Company Subsidiary (in their capacities as such) has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (iii) consummated any transaction,
made any payment, entered into any agreement or arrangement or taken any other
action in violation of Section 1128B(b) of the Social Security Act, as amended,
or (iv) made any other unlawful payment.
SECTION 4.21. Transaction Expenses. Section 4.21 of the
Company Disclosure Schedule sets forth the Company's current, good faith,
itemized estimate of the fees and expenses the Company will incur in connection
with consummating the Merger and the other transactions contemplated hereby.
SECTION 4.22. Interested Party Transactions. Except as set
forth in Section 4.22 of the Company Disclosure Schedule or in the Company
Reports, since December 11, 1996 no executive officer, director or stockholder
of the Company or any of the Company Subsidiaries has engaged in any business
dealings with the Company or any of the Company Subsidiaries (other than any
such business dealings that would not required to be disclosed in a proxy
statement satisfying the requirements of Regulation 14A promulgated under the
Exchange Act filed on the date hereof).
SECTION 4.23. State Takeover Statutes. To the knowledge of the
Company, no state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement, the Stockholders Stock Option
and Proxy Agreement or the transactions contemplated hereby or thereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent
and warrant to the Company that:
SECTION 5.01. Organization and Qualification; Subsidiaries.
Parent, Merger Sub and each other subsidiary of Parent (the "PARENT
SUBSIDIARIES") has been duly organized and is validly existing and in good
standing (to the extent applicable) under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Parent, Merger Sub and each other Parent Subsidiary is
duly qualified or licensed to do
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business, and is in good standing (to the extent applicable), in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that could not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
(b) Section 5.01 of the Parent Disclosure Schedule sets forth,
as of the date of this Agreement, a true and complete list of each Parent
Subsidiary, together with (i) the jurisdiction of incorporation or organization
of each Parent Subsidiary and the percentage of each Parent Subsidiary's
outstanding capital stock or other equity interests owned by Parent or another
Parent Subsidiary and (ii) an indication of whether each Parent Subsidiary is a
"Significant Subsidiary" as defined in Regulation S-X under the Exchange Act.
Except as set forth in Section 5.01 of the Parent Disclosure Schedule, neither
Parent nor any Parent Subsidiary owns an equity interest in any partnership or
joint venture arrangement or other business entity that is material to the
financial condition, results of operations, business or prospects of Parent and
the Parent Subsidiaries, taken as a whole.
SECTION 5.02. Certificate of Incorporation and Bylaws. The
copies of Parent's certificate of incorporation and bylaws that are incorporated
by reference as exhibits to Parent's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 (the "PARENT 1995 10-K") are true, complete and
correct copies thereof. Parent has heretofore furnished the Company with true,
complete and correct copies of the articles of incorporation and bylaws of
Merger Sub. Such certificate or articles of incorporation, as the case may be,
and bylaws are in full force and effect. Neither Parent nor Merger Sub is in
violation of any of the provisions of its certificate or articles of
incorporation, as the case may be, or bylaws.
SECTION 5.03. Capitalization. The authorized capital stock of
Parent consists of 100,000,000 shares of Parent Common Stock and 5,000,000
shares of preferred stock, 1,000,000 of which have been designated as Parent
Preferred Stock. As of the date hereof (i) 48,104,729 shares of Parent Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable, (ii) 3,008,958 shares of Parent Common Stock are held in a
Grantor Stock Trust, (iii) 2,030,116 shares of Parent Common Stock are held in
the treasury of Parent, (iv) no shares of Parent Common Stock are held by the
Parent Subsidiaries, (v) 3,334,547 shares of Parent Common Stock are reserved
for future issuance pursuant to employee stock options or stock incentive rights
granted under the Parent Stock Plans, (vi) 500,000 shares of Parent Common Stock
are reserved for future issuance pursuant to outstanding warrants to purchase
shares of Parent Common Stock, (vii) 3,814,102 shares of Parent Common Stock are
reserved for issuance upon conversion of Parent's 6% Convertible Subordinated
Xxxxxxxxxx xxx 0000, (xxxx) 899,170 shares of Parent Common Stock are reserved
for issuance upon conversion of Parent's 6-1/2% Convertible Subordinated
Debentures due 2003, (ix) no shares of Parent Preferred Stock are issued and
outstanding and (x) 1,000,000 shares of Parent Preferred Stock are reserved for
future issuance pursuant to the Parent Rights. At or prior to the Effective
Time, Parent shall have designated 450,000 (less the number of shares of Series
F Preferred that are converted after the date hereof) shares of preferred stock
as Parent New Preferred and reserved a sufficient number of shares of Parent
Common Stock for issuance upon conversion of the Parent New Preferred. As of
the date hereof, there are
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no shares of preferred stock of Parent issued and outstanding. Except for the
shares of Parent Common Stock issuable pursuant to the Parent Stock Plans,
pursuant to the Parent Rights or pursuant to agreements or arrangements
described in Section 5.03 of the Parent Disclosure Schedule, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character to which Parent is a party or by which Parent is bound relating
to the issued or unissued capital stock of Parent, Merger Sub or any other
Parent Subsidiary or obligating Parent, Merger Sub or any other Parent
Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, Parent, Merger Sub or any other Parent Subsidiary. All shares of
Parent Common Stock subject to issuance as aforesaid, upon issuance prior to
the Effective Time on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable. Each outstanding share of capital stock of each
Parent Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and each such share owned by Parent or another Parent Subsidiary
is free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on Parent's or such other
Parent Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except where the failure to own such shares free and clear could
not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Except as set forth in Section 5.03 of the Parent
Disclosure Schedule, there are no material outstanding contractual obligations
of Parent, Merger Sub or any other Parent Subsidiary to provide funds to, or
make any material investment (in the form of a loan, capital contribution or
otherwise) in, any Parent Subsidiary or any other person.
SECTION 5.04. Authority Relative to this Agreement. Parent and
Merger Sub have all necessary corporate power and authority to execute and
deliver this Agreement, to perform their respective 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, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate such transactions (other than the approval of this Agreement and
the Merger by the holders of a majority of the outstanding shares of Parent
Common Stock entitled to vote with respect thereto at the Parent Stockholders'
Meeting, if required, and the filing and recordation of the Articles of Merger
as required by the Business Corporation Act). This Agreement 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.
SECTION 5.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by Parent and Merger Sub do not,
and the performance by Parent and Merger Sub of their obligations hereunder and
the consummation of the Merger will not, (i) conflict with or violate any
provision of the certificate or articles of incorporation, as the case may be,
or bylaws of Parent or Merger Sub or any equivalent organizational documents of
any other Parent Subsidiary, (ii) assuming that all consents, approvals,
authorizations and permits described in Section 5.05(b) have been obtained and
all filings and notifications described in Section 5.05(b) have been made,
conflict with or violate any Law applicable to Parent or any other Parent
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Subsidiary or by which any property or asset of Parent, Merger Sub or any other
Parent Subsidiary is bound or affected or (iii) except as set forth in Section
5.05(a) of the Parent Disclosure Schedule, result in any breach of or constitute
a default (or an event which with the giving of notice or lapse of time or both
could reasonably be expected to become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of Parent,
Merger Sub or any other Parent Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
could not reasonably be expected, individually or in the aggregate, (A) to have
a Parent Material Adverse Effect or (B) to prevent or materially delay the
performance by Parent or Merger Sub of its obligations pursuant to this
Agreement or the consummation of the Merger.
(b) The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance by Parent and Merger Sub of their
respective obligations hereunder and the consummation of the Merger will not,
require any consent, approval, authorization or permit of, or filing by Parent
or Merger Sub with or notification by Parent or Merger Sub to, any Governmental
Entity, except (i) pursuant to applicable requirements of the Exchange Act, the
Securities Act, Blue Sky Laws, the rules and regulations of the NYSE, state
takeover laws, the premerger notification requirements of the HSR Act, if any,
and the filing and recordation of the Articles of Merger as required by the
Business Corporation Act and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
could not reasonably be expected, individually or in the aggregate, (A) to have
a Parent Material Adverse Effect or (B) to prevent or materially delay the
performance by Parent or Merger Sub of its obligations pursuant to this
Agreement or the consummation of the Merger.
SECTION 5.06. Permits; Compliance with Laws. (a) Parent,
Merger Sub and each other Parent Subsidiary is in possession of (i) all
franchises, grants, authorizations, licenses, establishment registrations,
product listings, permits, easements, variances, exceptions, consents,
certificates, identification and registration numbers, approvals and orders of
any Governmental Entity necessary for Parent, Merger Sub or any other Parent
Subsidiary to own, lease and operate its properties or to store, distribute and
market its products or otherwise to carry on its business as it is now being
conducted and (ii) agreements from all Federal, state, foreign and local
governmental agencies and accrediting and certifying organizations having
jurisdiction over such facility or facilities that are required to operate the
facility or facilities in the manner in which it or they are currently operated
and receive reimbursement for care provided to patients covered under the
Medicare program, any applicable Medicaid program or any comparable foreign
medical reimbursement program (collectively, the "PARENT PERMITS"), except
where the failure to have, or the suspension or cancellation of, any of the
Parent Permits could not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, and, as of the date of this
Agreement, no suspension or cancellation of any of the Parent Permits is
pending or, to the knowledge of Parent, threatened, except where the failure to
have, or the suspension or cancellation of, any of the Parent Permits could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Without limiting the generality of the foregoing,
except as set forth in Section 5.06(a) of the Parent Disclosure Schedule, all
of
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Parent's facilities are certified for participation or enrollment in the
Medicare program, have a current and valid provider contract with the Medicare
program and are in substantial compliance with the conditions of participation
of such programs. None of Parent, Merger Sub or any other Parent Subsidiary is
in conflict with, or in default or violation of, (i) any Law applicable to
Parent, Merger Sub or any other Parent Subsidiary or by which any property or
asset of Parent, Merger Sub or any other Parent Subsidiary is bound or affected
or (ii) any Parent Permits, except in the case of clauses (i) and (ii) for any
such conflicts, defaults or violations that could not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
Neither Purchaser nor any Purchaser Subsidiary has received notice from the
regulatory authorities that enforce the statutory or regulatory provisions in
respect of either the Medicare or the Medicaid program of any pending or
threatened investigations or surveys, and no such investigations or surveys are
pending or, to the knowledge of Parent, threatened or imminent that could
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Section 5.06(a) of the Parent Disclosure Schedule sets
forth, as of the date of this Agreement, all actions ,proceedings,
investigations or surveys pending or, to the knowledge of Parent, threatened
against Parent or any Parent Subsidiary that could reasonably be expected to
result in (i) the loss or revocation of a Parent Permit necessary to operate
one or more facilities or for a facility to receive reimbursement under the
Medicare or Medicaid program or (ii) the suspension or cancellation of any
other Parent Permit, except any such Parent Permit where such suspension or
cancellation could not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. Except as set forth in Section
5.06(a) of the Parent Disclosure Schedule, since December 31, 1995, neither
Parent nor any Parent Subsidiary has received from any Governmental Entity any
written notification with respect to possible conflicts, defaults or violations
of Laws, except for written notices relating to possible conflicts, defaults or
violations that could not reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect.
(b) Parent and each Parent Subsidiary, as appropriate, is an
approved participating provider in and under all third party payment programs
from which it receives revenues. No action or investigation is pending, or to
the best of its knowledge, threatened to suspend, limit, terminate, condition,
or revoke the status of Parent or any Parent Subsidiary as a provider in any
such program, and neither Parent nor any Parent Subsidiary has been provided
notice by any third party payor of its intention to suspend, limit, terminate,
revoke, condition or fail to renew in whole or in part or decrease the amounts
payable under any arrangement with Parent or such Parent Subsidiary as a
provider, which action, investigation or proceeding would have, individually
or in the aggregate, a Parent Material Adverse Effect.
(c) Parent and each Parent Subsidiary have filed on a timely
basis all claims, cost reports or annual filings required to be filed to secure
payments for services rendered by them under any third-party payment program
from which they receive or expect to receive revenues, except where the failure
to file such claim, report or other filing would not have, individually or in
the aggregate, a Parent Material Adverse Effect. Except as indicated in its
financial statements included in the Parent Reports, Parent or each Parent
Subsidiary, as applicable, has paid, or caused to be paid, all refunds,
discounts, adjustments, or amounts owing that have become due to such third
party payors pursuant to such claims, reports or filings, and neither Parent nor
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any Parent Subsidiary has any knowledge or notice of any material changes
required to made to any cost reports, claims, or filings made by it for any
period or of any deficiency in such claim, report, or filing, except for changes
and deficiencies that in the aggregate would not have a Parent Material Adverse
Effect.
SECTION 5.07. SEC Filings; Financial Statements. (a) Parent
has timely filed all forms, reports, statements and documents required to be
filed by it (A) with the SEC and the NYSE since December 31, 1994 through the
date of this Agreement (collectively and as amended, the "PARENT REPORTS") and
(B) with any other Governmental Entities, including, without limitation, state
insurance and health regulatory authorities. Except as is provided in the Parent
Reports or as disclosed in Section 5.07(a) of the Parent Disclosure Schedule,
each Parent Report (i) was prepared in accordance with the requirements of the
Securities Act, the Exchange Act or the NYSE, as the case may be, and (ii) did
not at the time it was filed 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 made therein, in the light of the circumstances
under which they were made, not misleading. Each form, report, statement and
document referred to in clause (B) of this paragraph was prepared in all
material respects in accordance with the requirements of applicable Law. Except
as disclosed in Section 5.07(a) of the Parent Disclosure Schedule, no Parent
Subsidiary is subject to the periodic reporting requirements of the Exchange
Act or required to file any form, report or other document with the SEC, the
NYSE, any other stock exchange or any other comparable Governmental Entity.
(b) Except as is provided in the Parent Reports or in Section
5.07(b) of the Parent Disclosure Schedule, each of the consolidated financial
statements (including, in each case, any notes thereto) contained in the Parent
Reports was prepared in accordance with U.S. GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each presented fairly, in all material respects, the consolidated
financial position of Parent and the consolidated Parent Subsidiaries as at the
respective dates thereof and for the respective periods indicated therein,
except as otherwise noted therein (subject, in the case of unaudited statements,
to normal and recurring year-end adjustments which were not and are not
expected, individually or in the aggregate, to have a Parent Material Adverse
Effect).
(c) Except as and to the extent set forth or reserved against
on the consolidated balance sheet of Parent and its Subsidiaries as reported in
the Parent Reports, including the notes thereto, or as disclosed in Section
5.07(c) of the Parent Disclosure Schedule, none of Parent or any Parent
Subsidiary has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on a
balance sheet or in notes thereto prepared in accordance with U.S. GAAP, except
for liabilities or obligations incurred in the ordinary course of business
consistent with past practice since December 31, 1995 that have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
SECTION 5.08. Absence of Certain Changes or Events. Since
December 31, 1995, except as contemplated by or as disclosed in this Agreement,
as set forth in Section 5.08 of the Parent Disclosure Schedule or as disclosed
in any Parent Report filed since December 31, 1995,
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Parent and the Parent Subsidiaries have conducted their businesses only in the
ordinary course consistent with past practice and, since such date, there has
not been (i) any Parent 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 Parent
and the Parent Subsidiaries are involved, (ii) any event that could reasonably
be expected to prevent or materially delay the performance of its obligations
pursuant to this Agreement and the consummation of the Merger by Merger Sub,
(iii) any material change by Parent in its accounting methods, principles or
practices or (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of Parent Common Stock or any redemption,
purchase or other acquisition of any of Parent's securities.
SECTION 5.09. Employee Benefit Plans; Labor Matters. (a) With
respect to each employee benefit plan, program, arrangement and contract
(including, without limitation, any "employee benefit plan", as defined in
Section 3(3) of ERISA) maintained or contributed to by Parent or any Parent
Subsidiary, or with respect to which Parent or any Parent Subsidiary could
incur liability under Section 4069, 4212(c) or 4204 of ERISA (the "PARENT
BENEFIT PLANS"), Parent has delivered or made available to the Company a true,
complete and correct copy of (i) such Parent Benefit Plan and the most recent
summary plan description related to such Parent Benefit Plan, if a summary plan
description is required therefor, (ii) each trust agreement or other funding
arrangement relating to such Parent Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the IRS with respect to such Parent Benefit Plan,
(iv) the most recent actuarial report or financial statement relating to such
Parent Benefit Plan and (v) the most recent determination letter issued by the
IRS with respect to such Parent Benefit Plan, if it is qualified under Section
401(a) of the Code.
(b) Each Parent Benefit Plan has been administered in all
material respects in accordance with its terms and all contributions required to
be made under the terms of any of the Parent Benefit Plans as of the date of
this Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Parent
Reports prior to the date of this Agreement. With respect to the Parent Benefit
Plans, no event has occurred and, to the knowledge of Parent, there exists no
condition or set of circumstances in connection with which Parent or any Parent
Subsidiary could be subject to any liability under the terms of such Parent
Benefit Plans, ERISA, the Code or any other applicable Law which could
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(c) Except as set forth in Section 5.09(c) of the Parent
Disclosure Schedule, neither Parent nor any Parent Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by Parent or any Parent Subsidiary and no collective bargaining
agreement is being negotiated by Parent or any Parent Subsidiary. As of the date
of this Agreement, there is no labor dispute, strike or work stoppage against
Parent or any Parent Subsidiary pending or, to the knowledge of Parent,
threatened which may interfere with the respective business activities of Parent
or any Parent Subsidiary, except where such dispute, strike or work stoppage
could not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect. As of the date of this Agreement, to the
knowledge of Parent,
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none of Parent, any Parent Subsidiary, or any of their respective
representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of Parent or any
Parent Subsidiary, and there is no charge or complaint against Parent or any
Parent Subsidiary by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing, except where such unfair
labor practice, charge or complaint could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 5.10. Accounting and Certain Tax Matters. Except as
disclosed in the Parent Reports or in Section 5.10 of the Parent Disclosure
Schedule, neither Parent nor, to the knowledge of Parent, any of its affiliates
has taken or agreed to take any action (other than actions contemplated by this
Agreement) that could reasonably be expected to prevent the Merger from
qualifying for "pooling of interests" accounting treatment under applicable
United States accounting rules, including, without limitation, applicable SEC
accounting standards, or could reasonably be expected to prevent the Merger from
constituting a transaction qualifying under Section 368 of the Code. Parent is
not aware of any agreement, plan or other circumstances that could reasonably be
expected to prevent the Merger from so qualifying under Section 368 of the Code.
SECTION 5.11. Contracts; Debt Instruments. Except as disclosed
in the Parent Reports or in Section 5.11 of the Parent Disclosure Schedule,
there is no contract or agreement that is material to the business, financial
condition or results of operations of Parent and the Parent Subsidiaries taken
as a whole (each, a "PARENT MATERIAL CONTRACT"). Except as disclosed in the
Parent Reports, neither Parent nor any Parent Subsidiary is in violation of or
in default under (nor does there exist any condition which with the passage of
time or the giving of notice could reasonably be expected to cause such a
violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture or lease, or any other contract, license, agreement,
arrangement or understanding to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults that could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Set forth in Section 5.11 of the Parent Disclosure
Schedule is a description of any material changes to the amount and terms of the
indebtedness of Parent and its subsidiaries as described in the notes to the
financial statements incorporated in the Parent 1995 10-K.
SECTION 5.12. Litigation. Except as disclosed in the Parent
Reports or in Section 5.12 of the Parent Disclosure Schedule, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of
Parent, threatened against Parent or any Parent Subsidiary before any
Governmental Entity that could reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect, and, except as disclosed to
the Company, to the knowledge of Parent, there are no existing facts or
circumstances that could reasonably be expected to result in such a suit, claim,
action, proceeding or investigation. Except as disclosed to the Company, Parent
is not aware of any facts or circumstances which could reasonably be expected to
result in the denial of insurance coverage under policies issued to Parent and
the Parent Subsidiaries in respect of such suits, claims, actions, proceedings
and investigations, except in any case as could not reasonably be expected to
have, individually or in the aggregate, a
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Parent Material Adverse Effect. Except as disclosed in the Parent Reports,
neither Parent nor any Parent Subsidiary is subject to any outstanding order,
writ, injunction or decree which could reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 5.13. Environmental Matters. Except as disclosed in
the Parent Reports or as could not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect, (i) Parent and the Parent
Subsidiaries are in compliance with all applicable Environmental Laws; (ii) all
past noncompliance of Parent or any Parent Subsidiary with Environmental Laws or
Environmental Permits has been resolved without any pending, ongoing or future
obligation, cost or liability; and (iii) neither Parent nor any Parent
Subsidiary has released a Hazardous Material at, or transported a Hazardous
Material to or from, any real property currently or formerly owned, leased or
occupied by Parent or any Parent Subsidiary in violation of any Environmental
Law.
SECTION 5.14. Intellectual Property. Except as could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, Parent and the Parent Subsidiaries own or possess
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade dress, trade name rights,
copyrights, service marks, trade secrets, applications for trademarks and for
service marks, know-how and other proprietary rights and information used or
held for use in connection with the respective businesses of Parent and the
Parent Subsidiaries as currently conducted, and Parent is unaware of any
assertion or claim challenging the validity of any of the foregoing. Section
5.14 of the Parent Disclosure Schedule lists all material licenses, sublicenses
and other agreements to which Parent or any Parent Subsidiary is a party and
pursuant to which (i) any third party is authorized to use any intellectual
property right of Parent or any Parent Subsidiary and (ii) Parent or any Parent
Subsidiary is authorized to use any intellectual property rights (other than
pursuant to shrink-wrap licenses and software licenses) of a third party, and
includes the identity of all parties thereto, a description of the nature and
subject matter thereof, the royalty provisions, if any, therein and the term
thereof. Except as set forth in Section 5.14 of the Parent Disclosure Schedule,
the conduct of the respective businesses of Parent and the Parent Subsidiaries
as currently conducted does not conflict in any way with any patent, patent
right, license, trademark, trademark right, trade dress, trade name, trade name
right, service xxxx or copyright of any third party that could reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. To the knowledge of Parent, there are no infringements of any
proprietary rights owned by or licensed by or to Parent or any Parent Subsidiary
that could reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
SECTION 5.15. Taxes. Except as set forth in Section 5.15 of
the Parent Disclosure Schedule and except for such matters that could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, (i) Parent, Merger Sub and each other Parent Subsidiary
has timely filed or shall timely file all returns and reports required to be
filed by it with any taxing authority with respect to Taxes for any period
ending on or before the Effective Time, taking into account any extension of
time to file granted to or obtained on behalf of Parent,
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Merger Sub and the other Parent Subsidiaries, (ii) all Taxes shown to be
payable on such returns or reports that are due prior to the Effective Time
have been or will be paid, (iii) as of the date hereof, no deficiency for any
amount of Tax has been asserted or assessed by a taxing authority against
Parent, Merger Sub or any other Parent Subsidiary and (iv) Parent, Merger Sub
and each other Parent Subsidiary has provided adequate reserves in its
financial statements for any Taxes that have not been paid, whether or not
shown as being due on any returns.
SECTION 5.16. Pooling Affiliates. Section 5.16 of the Parent
Disclosure Schedule sets forth the name and address of each person who is, in
Parent's reasonable judgment, a Pooling Affiliate of Parent.
SECTION 5.17. Opinion of Financial Advisor. X.X. Xxxxxx has
delivered to the board of directors of Parent its written opinion to the effect
that, as of the date hereof, the consideration to be paid by Parent in the
Merger is fair, from a financial point of view, to Parent. X.X. Xxxxxx has
authorized the inclusion of its opinion in the Proxy Statement.
SECTION 5.18. Brokers. No broker, finder or investment banker
(other than X.X. Xxxxxx) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of Parent. Parent has heretofore made available to the Company true,
complete and correct copies of all agreements between Parent and X.X. Xxxxxx
pursuant to which such firm would be entitled to any payment relating to the
Merger.
SECTION 5.19. Certain Business Practices. None of Parent, any
Parent Subsidiary or any directors, officers, agents or employees of Parent or
any Parent Subsidiary (in their capacities as such) has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, (iii) consummated any transaction, made any payment, entered
into any agreement or arrangement or taken any other action in violation of
Section 1128B(b) of the Social Security Act, as amended, or (iv) made any other
unlawful payment.
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ARTICLE VI
COVENANTS
SECTION 6.01. Conduct of Business by the Company Pending the
Closing. The Company agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 6.01 of the Company Disclosure
Schedule or as expressly contemplated by any other provision of this Agreement,
unless Parent shall otherwise agree in writing, (x) the respective businesses of
the Company and the Company Subsidiaries shall be conducted only in, and the
Company and the Company Subsidiaries shall not take any action except in, the
ordinary course of business consistent with past practice and (y) the Company
shall use all reasonable efforts to keep available the services of such of the
current officers, significant employees and consultants of the Company and the
Company Subsidiaries and to preserve the current relationships of the Company
and the Company Subsidiaries with such of the corporate partners, customers,
suppliers and other persons with which the Company or any Company Subsidiary has
significant business relations in order to preserve substantially intact its
business organization. By way of amplification and not limitation, except as set
forth in Section 6.01 of the Company Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, neither the Company nor
any Company Subsidiary shall, between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the following
without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed:
(a) amend or otherwise change its articles of
incorporation or bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer,
lease, license, guarantee or encumber, or authorize the issuance, sale,
pledge, disposition, grant, transfer, lease, license or encumbrance of,
(i) any shares of capital stock of the Company or any Company
Subsidiary of any class, or securities convertible into or exchangeable
or exercisable for any shares of such capital stock, or any options,
warrants or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without
limitation, any phantom interest), of the Company or any Company
Subsidiary except for (A) issues of Company Common Stock pursuant to
options, warrants and convertible Company Capital Stock outstanding on
the date hereof and disclosed as such pursuant to Section 4.03 and (B)
employee stock option grants to non-officers and directors of the
Company; provided, however, that (x) such grants are at fair market
value and at a level consistent with past practice, (y) Parent has
received notice of the Company's intention to grant such options and
has consented thereto in writing (which consent shall not be
unreasonably withheld) and (z) the aggregate amount of such granted
options does not exceed 25,000 shares of Company Common Stock, or
(ii) any property or assets of the Company or any Company Subsidiary;
(c) (i) acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets) any interest
in any corporation, partnership, other business organization or person
or any division thereof; (ii) incur any
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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 for borrowed money or
make any loans or advances; (iii) terminate, cancel or request any
material change in, or agree to any material change in, any Company
Material Contract or enter into any contract or agreement material to
the business, results of operations or financial condition of the
Company and the Company Subsidiaries taken as a whole; (iv) enter
into any contract or agreement relating to the provision or receipt
of pharmacy products or services, therapy or supplies that is not
cancelable without penalty upon not more than 60 days' notice; (v)
make or authorize any capital expenditure, other than capital
expenditures in the ordinary course of business consistent with past
practice that have been budgeted for calendar year 1997 and disclosed
to Parent and that are not, in the aggregate, in excess of $5,000,000
for the Company and the Company Subsidiaries taken as a whole; or
(vi) enter into or amend any contract, agreement, commitment or
arrangement that, if fully performed, would not be permitted under
this Section 6.01(c);
(d) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except that any Company Subsidiary
may pay dividends or make other distributions to the Company or any
other Company Subsidiary;
(e) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(f) amend or change the period (or permit any
acceleration, amendment or change) of exercisability of options granted
under the Company Stock Plans or authorize cash payments in exchange
for any Company Stock Options granted under any of such plans;
(g) amend the terms of, repurchase, redeem or otherwise
acquire, or permit any Company Subsidiary to repurchase, redeem or
otherwise acquire, any of its securities or any securities of any
Company Subsidiary, or propose to do any of the foregoing;
(h) increase the compensation payable or to become
payable to, or pay or enter into any agreement or understanding to pay
any bonus to, its directors, officers, consultants or employees (other
than increases in compensation for non-officer employees that are in
the ordinary course of business consistent with past practice and the
payment of bonuses to non-officer employees that are in the ordinary
course of business consistent with past practice and pursuant to
objective written criteria established by the board of directors of the
Company provided that Parent has received notice of the Company's
intention to implement such increase and has consented thereto in
writing (which consent shall not be unreasonably withheld)), or grant
any rights to severance or termination pay to, or enter into any
employment or severance agreement which provides benefits upon a change
in control of the Company that would be triggered by the Merger with,
any director, officer, consultant or other employee of the Company or
any Company Subsidiary who is not currently entitled to such benefits
from the Merger, establish, adopt, enter into or amend
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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 director, officer, consultant or employee of the Company or
any Company Subsidiary, except to the extent required by applicable
Law or the terms of a collective bargaining agreement, or enter into
or amend any contract, agreement, commitment or arrangement between
the Company or any Company Subsidiary and any of the Company's
directors, officers, consultants or employees;
(i) pay, discharge, settle 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 on the
consolidated balance sheet of the Company and the consolidated the
Company Subsidiaries dated as of June 30, 1996 included in the Company
1996 10-K and only to the extent of such reserves;
(j) take any action with respect to accounting policies
or procedures, other than actions in the ordinary course of business
consistent with past practice or as required by U.S. GAAP;
(k) make any tax election or settle or compromise any
material Federal, state or local United States income tax liability, or
any income tax liability of any other jurisdiction, other than those
made in the ordinary course of business consistent with past practice
and those for which specific reserves have been recorded on the
consolidated balance sheet of the Company and the consolidated the
Company Subsidiaries dated as of June 30, 1996 included in the Company
1996 10-K and only to the extent of such reserves;
(l) enter into or amend any contract, agreement,
commitment or arrangement with, or enter into any transaction with, or
make any payment to or on account or behalf of, other than any such
transactions or payments pursuant to the agreements set forth on
Section 6.01(m) of the Company Disclosure Schedule, any affiliate of
the Company or of any Principal Stockholder, including any of the
following entities: Xxxxxx Xxxxxx Health Care Association, Inc.,
National Assistance Bureau, Inc., Winter Haven Homes, Inc., Chamber
Health Care Society, Inc., Southeastern Cottages, Inc., Senior Care,
Inc., The Atrium Nursing Home, Inc., The Atrium of Jacksonville, Ltd.
and Warner Xxxxxxx X.X.; or
(m) authorize or enter into any formal or informal
agreement or otherwise make any commitment to do any of the foregoing
or to take 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 or result in any of the
conditions to the Merger set forth herein not being satisfied.
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SECTION 6.02. Conduct of Business by Parent Pending the
Closing. Parent agrees that, between the date of this Agreement and the
Effective Time, except (i) as set forth in Section 6.02 of the Parent Disclosure
Schedule, (ii) for any actions taken by Parent relating to any other
acquisitions or business combinations (including, without limitation, the
Nectarine Merger) or (iii) as expressly contemplated by any other provision of
this Agreement, unless the Company shall otherwise agree in writing, (x) the
respective businesses of Parent and the Parent Subsidiaries shall be conducted
only in, and Parent and the Parent Subsidiaries shall not take any action except
in, the ordinary course of business consistent with past practice and (y) Parent
shall use all reasonable efforts to keep available the services of such of the
current officers, significant employees and consultants of Parent and the Parent
Subsidiaries and to preserve the current relationships of Parent and the Parent
Subsidiaries with such of the corporate partners, customers, suppliers and other
persons with which Parent or any Parent Subsidiary has significant business
relations in order to preserve substantially intact its business organization.
By way of amplification and not limitation, except (i) as set forth in Section
6.02 of the Parent Disclosure Schedule, (ii) for any actions taken by Parent
relating to any other acquisitions or business combinations (including, without
limitation, the Nectarine Merger) or (iii) as expressly contemplated by any
other provision of this Agreement, neither Parent nor any Parent Subsidiary
shall, between the date of this Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed:
(a) amend or otherwise change its certificate of
incorporation or bylaws or equivalent organizational documents;
(b) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except that any Parent Subsidiary
may pay dividends or make other distributions to Parent or any other
Parent Subsidiary;
(c) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(e) sell, transfer, license, sublicense or otherwise
dispose of any material assets; or
(f) authorize or enter into any formal or informal
agreement or otherwise make any commitment to do any of the foregoing
or 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 or result in any of the conditions to the Merger
set forth herein not being satisfied.
SECTION 6.03. Cooperation; Steering Committee. Upon the
execution and delivery of this Agreement, Parent and the Company shall establish
a committee (the "STEERING COMMITTEE") for the purpose of, to the extent
permitted by applicable Laws, facilitating the efficient transaction
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and combination of the respective businesses of Parent and the Company as
promptly as practicable following the Effective Time. The Steering Committee
shall consist of individuals to be jointly designated from time to time by the
Chairmen of Parent and the Company and shall be chaired by Parent. The Steering
Committee shall be dissolved as of the Effective Time.
SECTION 6.04. Notices of Certain Events. Each of Parent and
the Company shall give prompt notice to the other of (i) any notice or other
communication from any person alleging that the consent of such person is or may
be required in connection with the Merger; (ii) any notice or other
communication from any Governmental Entity in connection with the Merger; (iii)
any actions, suits, claims, investigations or proceedings commenced or, to its
knowledge, threatened against, relating to or involving or otherwise affecting
Parent, the Company, the Parent Subsidiaries or the Company Subsidiaries that
relate to the consummation of the Merger; (iv) the occurrence of a default or
event that, with the giving of notice or lapse of time or both, will become a
default under any Company Material Contract or Parent Material Contract; and (v)
any change that could reasonably be expected to have a Company Material Adverse
Effect or a Parent Material Adverse Effect or to delay or impede the ability of
either the Company or Parent to perform its obligations pursuant to this
Agreement and to effect the consummation of the Merger.
SECTION 6.05. Access to Information; Confidentiality. (a)
Except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which Parent or the Company or any of the Parent
Subsidiaries or the Company Subsidiaries is a party or pursuant to applicable
Law or the regulations or requirements of any stock exchange or other regulatory
organization with whose rules a party hereto is required to comply, from the
date of this Agreement to the Effective Time, Parent and the Company shall (and
shall cause the Parent Subsidiaries and the Company Subsidiaries, respectively,
to) (i) provide to the other (and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives
(collectively, "REPRESENTATIVES")) access at reasonable times upon prior notice
to its and its subsidiaries' officers, employees, agents, properties, offices
and other facilities and to the books and records thereof, and (ii) furnish
promptly such information concerning its and its subsidiaries' business,
properties, contracts, assets, liabilities and personnel as the other party or
its Representatives may reasonably request. No investigation conducted pursuant
to this Section 6.05 shall affect or be deemed to modify any representation or
warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause
their respective Representatives to comply with, all of their respective
obligations under the Confidentiality Agreements with respect to the information
disclosed pursuant to this Section 6.05.
SECTION 6.06. No Solicitation of Transactions. The Company
shall not, directly or indirectly, and shall instruct its officers, directors,
employees, subsidiaries, agents or advisors or other representatives (including,
without limitation, any investment banker, attorney or accountant retained by
it), not to, directly or indirectly, solicit, initiate or knowingly encourage
(including by way of furnishing nonpublic information), or take any other action
knowingly to facilitate, any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) that
constitutes, or may reasonably be
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expected to lead to, any Competing Transaction, or enter into or maintain or
continue discussions or negotiate with any person in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of the officers, directors or
employees of the Company or any Company Subsidiary, or any investment banker,
financial advisor, attorney, accountant or other representative retained by the
Company or any Company Subsidiary, to take any such action; provided, however,
that nothing contained in this Section 6.06 shall prohibit the board of
directors of the Company from (i) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a tender or exchange offer not made in
violation of this Section 6.06 or (ii) with regard to such an offer, after
receiving the advice of outside counsel to the effect that the board of
directors of the Company is required to do so in order to discharge properly
its fiduciary duties, considering, negotiating and approving and recommending
to the shareholders of the Company an unsolicited bona fide written acquisition
proposal which (A) was not received in violation of this Section 6.06, (B) if
executed or consummated would be a Competing Transaction, (C) is not subject to
financing and (D) the board of directors of the Company determines in good
faith, after receipt of an opinion of its financial advisors to such effect,
would result in a transaction more favorable to the Company's stockholders,
than the transaction contemplated by this Agreement (any such acquisition
proposal, a "SUPERIOR PROPOSAL"). The Company shall notify Parent promptly, and
in no event later than one day after receipt, if any proposal or offer, or any
inquiry or contact with any person with respect thereto, regarding a Competing
Transaction is made. The Company immediately shall cease and cause to be
terminated all existing discussions or negotiations with any parties conducted
heretofore with respect to a Competing Transaction. The Company shall not
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which it is a party. The Company shall use its best
efforts to ensure that its officers, directors, employees, subsidiaries, agents
and advisors or other representatives (including, without limitation, any
investment banker, attorney or accountant retained by it) are aware of the
restrictions described in this Section 6.06.
SECTION 6.07. Pooling. From and after the date of this
Agreement, none of the parties hereto, or any of their respective controlled
affiliates, shall knowingly take or fail to take any action, other than actions
which such party is required to take or abstain from taking pursuant to this
Agreement, which action or failure to act could reasonably be expected to
jeopardize the treatment of the Merger as a "pooling of interests" for
accounting purposes. From and after the date of this Agreement, each of the
parties hereto shall take all reasonable actions necessary to cause the Merger
to be characterized as a "pooling of interests" for accounting purposes.
SECTION 6.08. Letters of Accountants. At the written request
of Parent, each of the Company and Parent shall use all reasonable efforts to
cause to be delivered to the other "comfort" letters of each of Coopers &
Xxxxxxx L.L.P. and BDO Xxxxxxx, LLP and Xxxxxx Xxxxxxxx LLP, respectively, 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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SECTION 6.09. Plan of Reorganization. This Agreement is
intended to constitute a "plan of reorganization" within the meaning of Section
1.368-2(g) of the income tax regulations promulgated under the Code. From and
after the date of this Agreement, each party hereto shall use all reasonable
efforts to cause the Merger to qualify, and shall not, without the prior written
consent of the other parties hereto, knowingly take any actions or cause any
actions to be taken which could reasonably be expected to prevent the Merger
from qualifying as a reorganization under the provisions of Section 368 of the
Code. In the event that the Merger shall fail to qualify as a reorganization
under the provisions of Section 368 of the Code, then the parties hereto agree
to negotiate in good faith to restructure the Merger in order that it shall
qualify as tax-free transaction under the Code. Following the Effective Time,
and consistent with any such consent, neither the Surviving Corporation nor
Parent nor any of their respective affiliates knowingly and voluntarily shall
take any action or cause any action to be taken which could reasonably be
expected to cause the Merger to fail to qualify as a reorganization under
Section 368 of the Code.
SECTION 6.10. Subsequent Financial Statements. Prior to the
Effective Time, each of the Company and Parent (i) shall consult with the other
prior to making publicly available its financial results for any period and (ii)
shall consult with the other prior to the filing of, and shall timely file with
the SEC, each Annual Report on Form 10-K, Quarterly Report on Form 10-Q and
Current Report on Form 8-K required to be filed by such party under the Exchange
Act and shall promptly deliver to the other copies of each such report filed
with the SEC.
SECTION 6.11. Control of Operations. Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right to control or
direct the operations of the Company and the Company Subsidiaries prior to the
Effective Time. Prior to the Effective Time, each of Parent and the Company
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision over its respective operations.
SECTION 6.12. Further Action; Consents; Filings. (a) Upon the
terms and subject to the conditions hereof, each of the parties hereto shall use
all reasonable efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the Merger,
(ii) obtain from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by Parent,
Merger Sub, the Company or the Surviving Corporation or any of their respective
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger and (iii) make all necessary
filings, and thereafter make any other required or appropriate submissions, with
respect to this Agreement and the Merger required under (A) the rules and
regulations of the NYSE, (B) the Securities Act, the Exchange Act and any other
applicable Federal or state securities Laws, (C) the HSR Act, if any, and (D)
any other applicable Law. The parties hereto shall cooperate and consult with
each other in connection with the making of all such filings, including by
providing copies of all such documents to the nonfiling parties and their
advisors prior to filing, and none of the parties shall file any such document
if any of the other parties shall have reasonably objected to the filing of such
document. No party shall consent to any voluntary extension of any statutory
deadline or waiting period or to any voluntary delay of the consummation of the
Merger at the behest of any Governmental Entity without the consent and
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agreement of the other parties hereto, which consent shall not be unreasonably
withheld or delayed.
(b) Each of the parties hereto shall promptly give (or cause
their respective subsidiaries to give) any notices regarding the Merger, this
Agreement or the transactions contemplated hereby or thereby to third parties
required under applicable Law or by any contract, license, lease or other
agreement to which it or any of its subsidiaries is bound, and use, and cause
its subsidiaries to use, all reasonable efforts to obtain any third party
consents required under any such contract, license, lease or other agreement in
connection with the consummation of the Merger or the other transactions
contemplated by this Agreement.
(c) The Company shall use its best efforts to obtain the
Company Fairness Opinion as promptly as practicable.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Registration Statement; Proxy Statement. (a) As
promptly as practicable after the execution of this Agreement, Parent and the
Company shall jointly prepare, and the Company and Parent shall file with the
SEC, a document or documents that will constitute (i) the prospectus forming
part of the registration statement on Form S-4 of Parent (together with all
amendments thereto, the "REGISTRATION STATEMENT"), in connection with the
registration under the Securities Act of the Parent Common Stock to be issued to
the Company's stockholders pursuant to the Merger and (ii) the Proxy Statement
with respect to the Merger relating to the special meeting of the Company's
stockholders (the "COMPANY STOCKHOLDERS' MEETING") and, if required, Parent's
stockholders (the "PARENT STOCKHOLDERS' MEETING"), to be held to consider
approval of this Agreement and the Merger contemplated hereby (together with any
amendments thereto, the "PROXY STATEMENT"). Copies of the Proxy Statement shall
be provided to the NYSE in accordance with its rules. Each of the parties hereto
shall use all reasonable efforts to cause the Registration Statement to become
effective as promptly as practicable after the date hereof, and, prior to the
effective date of the Registration Statement, the parties hereto shall take all
action required under any applicable Laws in connection with the issuance of
shares of Parent Common Stock and Parent New Preferred pursuant to the Merger.
Parent or the Company, as the case may be, shall furnish all information
concerning Parent or the Company as the other party may reasonably request in
connection with such actions and the preparation of the Registration Statement
and Proxy Statement. As promptly as practicable after the effective date of the
Registration Statement, the Proxy Statement shall be mailed to the stockholders
of the Company (subject to the Company's receipt of the Company Fairness
Opinion) and, if required, of Parent. Each of the parties hereto shall cause the
Proxy Statement to comply as to form and substance in all material respects with
the applicable requirements of (i) the Exchange Act, (ii) the Securities Act,
(iii) the rules and regulations of the NYSE, (iv) the Business Corporation Act
and (v) the General Corporation Law.
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(b) The Proxy Statement shall include (i) (A) the approval of
the Merger and recommendation of the board of directors of the Company to the
Company's stockholders that they vote in favor of approval of this Agreement and
the Merger contemplated hereby, and (B) the Company Fairness Opinion, and, if
required, (ii) (A) the approval of the Merger and recommendation of the board of
directors of Parent to Parent's stockholders that they vote in favor of approval
of this Agreement and the Merger contemplated hereby, and (B) the opinion of
X.X. Xxxxxx referred to in Section 5.17.
(c) No amendment or supplement to the Proxy Statement or the
Registration Statement shall be made without the approval of Parent and the
Company, which approval shall not be unreasonably withheld or delayed. Each of
the parties hereto shall advise the other parties hereto, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order, of the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC or the NYSE for amendment of the Proxy Statement or
the Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information.
(d) None of the information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement or the
Proxy Statement shall, at the respective times filed with the SEC or other
regulatory agency and, in addition, (A) in the case of the Proxy Statement, at
the date it or any amendments or supplements thereto are mailed to stockholders
of Parent in connection with the Parent Stockholders' Meeting, if any, and to
stockholders of the Company in connection with the Company Stockholders'
Meeting, at the time of the Company Stockholders' Meeting, at the time of the
Parent Stockholders' Meeting, if any, and at the Effective Time and (B) in the
case of the Registration Statement, when it becomes effective under the
Securities Act and at the Effective Time, 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 light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event or circumstance relating to Company or any Company
Subsidiary, or their respective officers or directors, should be discovered by
the Company that should be set forth in an amendment or a supplement to the
Registration Statement or Proxy Statement, the Company shall promptly inform
Parent. All documents that the Company is responsible for filing with the SEC in
connection with the Merger will comply as to form in all material respects with
the applicable requirements of the rules and regulations of the NYSE, the
Business Corporation Act, the Securities Act and the Exchange Act.
(e) None of the information supplied by Parent for inclusion
or incorporation by reference in the Registration Statement or the Proxy
Statement shall, at the respective times filed with the SEC or other regulatory
agency and, in addition, (A) in the case of the Proxy Statement, at the date it
or any amendments or supplements thereto are mailed to stockholders of Parent
in connection with the Parent Stockholders' meeting, if any, and to
stockholders of the Company in connection with the Company Stockholders'
Meeting, at the time of the Company Stockholders' Meeting, at the time of the
Parent Stockholders' Meeting, if any, and at the Effective Time and (B) in the
case of the Registration Statement, when it becomes effective under
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the Securities Act and at the Effective Time, 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 light of the
circumstances under which they are made, not misleading. If, at any time prior
to the Effective Time, any event or circumstance relating to Parent or any
Parent Subsidiary, or their respective officers or directors, should be
discovered by Parent that should be set forth in an amendment or a supplement
to the Registration Statement or Proxy Statement, Parent shall promptly inform
the Company. All documents that Parent is responsible for filing with the SEC
in connection with the Merger will comply as to form in all material respects
with the applicable requirements of the rules and regulations of the NYSE, the
Business Corporation Act, the General Corporation Law, the Securities Act and
the Exchange Act.
SECTION 7.02. Stockholders' Meetings. The Company shall,
subject to receipt of the Company Fairness Opinion, call and hold the Company
Stockholders' Meeting and, if applicable, Parent shall call and hold the Parent
Stockholders' Meeting, as promptly as practicable after the date hereof for the
purpose of voting upon the approval of this Agreement and the Merger
contemplated hereby pursuant to the Proxy Statement, and the Company and Parent
shall use all reasonable efforts to hold the Parent Stockholders' Meeting, if
any, and the Company Stockholders' Meeting on the same day and as soon as
practicable after the date on which the Registration Statement becomes
effective. The Company shall use all reasonable efforts to solicit from its
stockholders proxies in favor of the approval of this Agreement and the Merger
contemplated hereby pursuant to the Proxy Statement and shall take all other
action necessary or advisable to secure the vote or consent of stockholders
required by the Business Corporation Act or applicable stock exchange
requirements to obtain such approval. If applicable, Parent shall use all
reasonable efforts to solicit from its stockholders proxies in favor of the
approval of this Agreement and the Merger contemplated hereby pursuant to the
Proxy Statement and shall take all other action necessary or advisable to secure
the vote or consent of stockholders required by the General Corporation Law or
applicable stock exchange requirements to obtain such approval. Each of the
parties hereto shall take all other action necessary or, in the opinion of the
other parties hereto, advisable to promptly and expeditiously secure any vote or
consent of stockholders required by applicable Law and such party's articles or
certificate of incorporation, as the case may be, and bylaws to effect the
Merger.
SECTION 7.03. Pooling Affiliates. (a) Not fewer than 45 days
prior to the Effective Time, the Company shall deliver to Parent a list of
names and addresses of each person who was, in the Company's reasonable
judgment, at the record date for the Company Stockholders' Meeting, a Pooling
Affiliate of the Company. The Company shall provide Parent such information and
documents as Parent shall reasonably request for purposes of reviewing such
list. The Company shall use all reasonable efforts to deliver or cause to be
delivered to Parent, prior to the Effective Time, an affiliate agreement in the
form attached hereto as Exhibit 7.03(a) (each, a "COMPANY AFFILIATE
AGREEMENT"), executed by each of the Pooling Affiliates of the Company
identified in the above-referenced list. The foregoing notwithstanding, Parent
shall be entitled to place legends as specified in the Company Affiliate
Agreement on the certificates evidencing any of the Parent Common Stock to be
received by (i) any Pooling Affiliate of the Company or (ii) any person Parent
reasonably identifies (by written notice to the Company) as being a person who
may be deemed an "affiliate" within the meaning of rule 145 promulgated under
the Securities
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Act or applicable SEC accounting releases with respect to "pooling of
interests" accounting treatment, and to issue appropriate stop transfer
instructions to the transfer agent for such Parent Common Stock, consistent
with the terms of the Company Affiliate Agreement, regardless of whether such
person has executed Company Affiliate Agreement and regardless of whether such
person's name and address appear on Section 4.18 of the Company Disclosure
Schedule.
(b) Parent shall use all reasonable efforts to obtain or cause
to be obtained, prior to the Effective Time, an affiliate agreement in the form
attached hereto as Exhibit 7.03(b) (each, a "PARENT AFFILIATE AGREEMENT"),
executed by each person who was, in Parent's reasonable judgment, at the record
date for the Company Stockholders' Meeting, a Pooling Affiliate of Parent.
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, officers, employees, fiduciaries or
agents of the Company.
(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 any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (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 fullest
extent that the Company would have been permitted under Colorado law and its
charter documents (each as in effect on the date hereof) to indemnify such
Indemnified Parties.
SECTION 7.05. No Shelf Registration. Parent shall not be
required to amend or maintain the effectiveness of the Registration Statement
for the purpose of permitting resale of the shares of Parent Common Stock
received pursuant hereto by the persons who may be deemed to be "affiliates" of
the Company or Parent within the meaning of rule 145 promulgated under the
Securities Act.
SECTION 7.06. Public Announcements. Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or the Merger and
shall not issue any such press release or make any such public statement without
the prior written approval of the other, except to the extent required by
applicable Law or the requirements of the rules and regulations of the NYSE, in
which case the issuing party shall use all reasonable efforts to consult with
the other party before issuing any such release or making any such public
statement.
SECTION 7.07. Stock Exchange Listing. Each of the parties
hereto shall use all reasonable efforts to obtain, prior to the Effective Time,
the approval for listing on the NYSE,
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effective upon official notice of issuance, of the shares of Parent Common
Stock into which the shares of Company Capital Stock will be converted pursuant
to Article III and the shares of Parent Common Stock which will be issuable
upon exercise of Company Stock Options pursuant to Section 3.05.
SECTION 7.08. Blue Sky. Each of the parties hereto shall use
all reasonable efforts to obtain prior to the Effective Time all necessary blue
sky permits and approvals required under Blue Sky Laws to permit the
distribution of the shares of Parent Common Stock and of Parent New Preferred to
be issued in accordance with the provisions of this Agreement.
SECTION 7.09. Company Stock Options. (a) At the Effective
Time, Parent shall assume, by virtue of this Agreement and without any further
action on the part of the Company, all of the Company's obligations with respect
to each outstanding Company Stock Option, whether vested or unvested. Unless
otherwise elected by Parent prior to the Effective Time, Parent shall make such
assumption in such manner that Parent (i) is a corporation "assuming a stock
option in a transaction to which Section 424(a) applies" within the meaning of
Section 424 of the Code or (ii) to the extent that Section 424 of the Code does
not apply to such Company Stock Option, would be such a corporation were Section
424 of the Code applicable to such Company Stock Option; and, if not so
otherwise elected, after the Effective Time, all references to the Company in
the Company Stock Plans and the applicable Company Stock Option agreements shall
be deemed to refer to Parent, which shall have assumed the Company Stock Plans
as of the Effective Time by virtue of this Agreement and without any further
action on the part of the Company or Parent. Each Company Stock Option so
assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the applicable Company Stock
Plan and the applicable Company Stock Option as in effect immediately prior to
the Effective Time, except as otherwise provided in Section 3.05. Parent shall
use all reasonable efforts to ensure that Company Stock Options intended to
qualify as incentive stock options under Section 422 of the Code prior to the
Effective Time continue to so qualify after the Effective Time.
(b) With respect to the Company Stock Plans, Parent shall take
all corporate action necessary or appropriate to, as soon as practicable after
the Effective Time, file a registration statement on Form S-8 (or any successor
or other appropriate form) with respect to the shares of Parent Common Stock
subject to such plan to the extent such registration statement is required under
applicable law in order for such shares of Parent Common Stock to be sold
without restriction, and Parent shall use its best efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectuses contained therein) for so long as such benefits and grants
remain payable and such options under such plans remain outstanding.
SECTION 7.10. Perennial Development Corporation. For a period
of 12 months after the Effective Time, Parent shall, upon the written request of
the Principal Stockholders, agree to sell the assets or shares of capital stock
of Perennial Development Corporation owned by the Company at the Effective Time
to the Principal Stockholders or their designees for a negotiated price not to
exceed the book value thereof pursuant to mutually acceptable terms and
conditions.
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SECTION 7.11. Management Contracts. (a) Prior to the Effective
Time, the Company will cause each of its or any of the Company Subsidiaries'
management contracts with related parties, including, without limitation, those
disclosed in Section 7.11(a) of the Company Disclosure Schedule, to be amended
at or prior to the Effective Time so as (i) to be freely assignable after the
Effective Time to Parent or any Parent Subsidiary and (ii) subject to the
applicable limitations of Section 501(c)(3) of the Code, to have a minimum term
of ten years and fees and reimbursement provisions no less favorable than those
in effect on the date hereof.
(c) Prior to the Effective Time, the Company will use its best
efforts to cause each of its or the Company Subsidiaries' management contracts
with unrelated parties, including, without limitation, those disclosed in
Section 7.11(b) of the Company Disclosure Schedule, to be amended at or prior to
the Effective Time so as to (i) be freely assignable after the Effective time to
Parent or any Parent Subsidiary and (ii) subject to the applicable limitations
of Section 501(c)(3) of the Code, to have a minimum term of ten years and fees
and reimbursement provisions no less favorable than those in effect on the date
hereof.
SECTION 7.12. Note Extension. Parent hereby agrees that (a) in
the event it becomes obligated to pay the Company pursuant to Section 9.05(f),
then the Maturity Date (as defined in the Company Note) shall be extended by the
period of time from the date hereof to the date of such termination of this
Agreement and (b) in the event that this Agreement is terminated under
circumstances other than (i) those set forth in Section 7.12(a), (ii) pursuant
to Section 9.01(d), 9.01(f)(i), 9.01(g) or 9.01(i), then the Maturity Date shall
be extended until the later of 30 days after such termination or August 9, 1997.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party to
Consummate the Merger. The obligations of the parties hereto to consummate the
Merger, or to permit the consummation of the Merger, are subject to the
satisfaction or, if permitted by applicable Law, waiver of the following
conditions:
(a) the Registration Statement shall have been declared
effective by the SEC under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceeding for that purpose shall have
been initiated by the SEC and not concluded or withdrawn;
(b) this Agreement and the Merger shall have been duly
approved by the requisite vote of stockholders of each of the Company
and, if applicable, Parent, in accordance with the Business Corporation
Act and the General Corporation Law, respectively;
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(c) no court of competent jurisdiction shall have issued
or entered any order, writ, injunction or decree, and no other
Governmental Entity shall have issued any order, which is then in
effect and has the effect of making the Merger illegal or otherwise
prohibiting its consummation;
(d) any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act or any
other applicable competition, merger control or similar Law shall have
expired or been terminated;
(e) all consents, approvals and authorizations legally
required to be obtained to consummate the Merger shall have been
obtained from all Governmental Entities, except where the failure to
obtain any such consent, approval or authorization could not reasonably
be expected to result in a change in or have an effect on the business
of the Company or Parent that is materially adverse to the
business, assets (including intangible assets), liabilities (contingent
or otherwise), condition (financial or otherwise) or results of
operations of Parent and its subsidiaries, taken as a whole;
(f) Xxxxxx Xxxxxxxx LLP, as the independent public
accountants of Parent, shall have issued an opinion, addressed to each
of Parent and the Company, respectively, that the Merger will qualify
for "pooling of interests" accounting treatment under applicable United
States accounting rules, including, without limitation, applicable SEC
accounting standards; and
(g) the shares of Parent Common Stock into which the
shares of Company Capital Stock will be converted pursuant to Article
III and the shares of Parent Common Stock issuable upon the exercise of
Company Stock Options pursuant to Section 3.05 shall have been
authorized for listing on the NYSE, subject to official notice of
issuance.
SECTION 8.02. Conditions to the Obligations of the Company.
The obligations of the Company to consummate the Merger, or to permit the
consummation of the Merger, are subject to the satisfaction or, if permitted by
applicable Law, waiver of the following further conditions:
(a) each of the representations and warranties of Parent
contained in this Agreement that is qualified by materiality shall be
true, complete and correct on and as of the Effective Time as if made
at and as of the Effective Time (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
Effective Time as if made at and as of the Effective Time (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 this Agreement, and the Company shall have received a
certificate of the Chairman or President and Chief Financial Officer of
Parent to such effect;
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(b) Parent shall have performed or complied in all
material respects with all material agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to
the Effective Time and the Company shall have received a certificate of
the Chairman or President and Chief Financial Officer of Parent to that
effect; and
(c) Xxxxxx & Xxxxxx, special counsel to the Company,
shall have issued its opinion, such opinion dated on or about the date
of the Closing, addressed to the Company, and reasonably
satisfactory to it, based upon customary representations of the
Company and customary assumptions, to the effect that the Merger will
be treated for Federal income tax purposes as a reorganization
qualifying under the provisions of Section 368 of the Code and that
each of the Company, Merger Sub and Parent will be a party to the
reorganization within the meaning of Section 368(b) of the Code,
which opinion shall not have been withdrawn or modified in any
material respect.
SECTION 8.03. Conditions to the Obligations of Parent. The
obligations of Parent to consummate the Merger, or to permit the consummation of
the Merger, are subject to the satisfaction or, if permitted by applicable Law,
waiver of the following further conditions:
(a) each of the representations and warranties of the
Company contained in this Agreement that is qualified by materiality
shall be true, complete and correct on and as of the Effective Time as
if made at and as of the Effective Time (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
Effective Time as if made on and as of such date (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 this Agreement, and Parent shall have received a
certificate of the Chairman or President and Chief Financial Officer of
the Company to such effect;
(b) the Company shall have performed or complied in all
material respects with all material agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to
the Effective Time and Parent shall have received a certificate of the
Chairman or President and Chief Financial Officer of the Company to
that effect;
(c) Shearman & Sterling, special counsel to Parent,
shall have issued its opinion, such opinion dated on or about the date
of the Closing, addressed to Parent, and reasonably satisfactory to it,
based upon customary representations of Parent and customary
assumptions, to the effect that the Merger will be treated for Federal
income tax purposes as a reorganization qualifying under the provisions
of Section 368 of the Code and
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that each of Parent, Merger Sub and the Company will be a party
to the reorganization within the meaning of Section 368(b) of the
Code, which opinion shall not have been withdrawn or modified in any
material respect;
(d) there shall not be pending or threatened any action,
proceeding, claim or counterclaim which seeks to or would, or any
order, decree or injunction (whether preliminary, final or appealable)
which would, require Parent to hold separate or dispose of any of the
stock or assets of the Company or the Company Subsidiaries or imposes
material limitations on the ability of Parent to control in any
material respect the business, assets or operations of either Parent or
the Company; and
(e) Parent shall have obtained any necessary consent
or waiver of NationsBank of Texas, N.A. to consummation of the
Merger on terms and conditions satisfactory to Parent (the
"NATIONSBANK CONSENT").
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite adoption and approval of this Agreement, as
follows:
(a) by mutual written consent duly authorized by the
boards of directors of each of Parent and the Company;
(b) by either Parent or the Company, if the Effective
Time shall not have occurred on or before September 30, 1997; provided,
however, that in the event that the Effective Time has not occurred by
such time 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; provided, further, that the
right to terminate this Agreement under this Section 9.01(b) shall not
be available to any party 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;
(c) by either Parent or the Company, if any Governmental
Order, writ, injunction or decree preventing the consummation of the
Merger shall have been entered by any court of competent jurisdiction
and shall have become final and nonappealable;
(d) by Parent, if (i) the board of directors of the
Company withdraws, modifies or changes its recommendation of this
Agreement or the Merger in a manner adverse to Parent or its
stockholders or shall have resolved to do so, (ii) the board of
directors
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of the Company shall have recommended to the stockholders of the
Company a Competing Transaction or shall have resolved to do so or
(iii) a tender offer or exchange offer for 15 percent or more of the
outstanding shares of capital stock of the Company shall have been
commenced and the board of directors of the Company shall have failed
to recommend against acceptance of such tender offer or exchange
offer by its stockholders (including by taking no position with
respect to the acceptance of such tender offer or exchange offer by
its stockholders);
(e) by the Company, if a Parent Stockholders' Meeting is
to be held and the board of directors of Parent withdraws, modifies or
changes its recommendation of this Agreement or the Merger in a manner
adverse to the Company or its stockholders or shall have resolved to do
so;
(f) by Parent or the Company, (i) if this Agreement and
the Merger shall fail to receive the requisite votes for approval at
the Company Stockholders' Meeting or any adjournment or postponement
thereof or (ii) if this Agreement and the Merger shall fail to receive
the requisite votes for approval at the Parent Stockholders' Meeting or
any adjournment or postponement thereof, if any such vote is required;
(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 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, 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;
(h) by the Company, upon breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have
become untrue, incomplete or incorrect, in either case such that the
conditions set forth in Section 8.02 would not be satisfied (a
"TERMINATING PARENT BREACH"); provided, however, that if such
Terminating Parent Breach is curable by Parent through the exercise of
its reasonable efforts within 30 days and for so long as Parent
continues to exercise such reasonable efforts, the Company may not
terminate this Agreement under this Section 9.01(h); 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;
(i) by Parent, if (x) (A) any Governmental Order, writ,
injunction or decree determining the Stockholders Stock Option and
Proxy Agreement invalid or
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unenforceable shall have been entered by any court of competent
jurisdiction and shall have become final and nonappealable and (B)
the Company or any of the Company Subsidiaries, or any of any of
their officers, directors, employees, agents or other
representatives, instigates or otherwise voluntarily assists,
supports or cooperates with any other party instigating or pursuing
such a legal determination or (y) any of the Principal Stockholders
shall be in material breach of the Stockholders Stock Option and
Proxy Agreement;
(j) by Parent, on March 17, 1997 if the NationsBank
Consent has not been obtained by such time; or
(k) by Parent, upon two days' written notice to the
Company, if the Company has failed to obtain the Company Fairness
Opinion by the close of business (New York City time) on February 18,
1997 and such failure continues until the end of such notice period.
SECTION 9.02. Effect of Termination. Except as provided in
Section 9.05, in the event of termination of this Agreement pursuant to Section
9.01, this Agreement shall forthwith become void, there shall be no liability
under this Agreement on the part of any party hereto or any of its affiliates or
any of its or their officers or directors, and all rights and obligations of
each party hereto shall cease, subject to the remedies of the parties hereto set
forth in Section 9.05(b), (c), (d) and (e); provided, however, that nothing
herein shall relieve any party hereto from liability for the willful or
intentional breach of any of its representations and warranties or the willful
or intentional breach of any of its covenants or agreements set forth in this
Agreement.
SECTION 9.03. 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 the approval of this Agreement by the stockholders of the Company or, if
required, Parent, as the case may be, no amendment may be made, except such
amendments that have received the requisite stockholder approval and such
amendments as are permitted to be made without stockholder approval under the
Business Corporation Act or the General Corporation Law, as applicable. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 9.04. Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for or waive compliance with the
performance of any obligation or other act of any other party hereto or (b)
waive any inaccuracy in the representations and warranties contained herein or
in any document delivered pursuant hereto. Any such extension or waiver shall
be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
SECTION 9.05. Expenses. (a) Except as set forth in this
Section 9.05, all Expenses incurred in connection with this Agreement and the
Merger shall be paid by the party
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incurring such Expenses, whether or not the Merger is consummated, except that
Parent and the Company each shall pay one-half of all Expenses incurred solely
for printing, filing and mailing the Registration Statement and the Proxy
Statement and all SEC and other regulatory filing fees incurred in connection
with the Registration Statement and the Proxy Statement and any fees required
to be paid under the HSR Act.
(b) In the event that (i) Parent shall terminate this
Agreement pursuant to Section 9.01(d); or (ii) (A) Parent shall terminate this
Agreement pursuant to Section 9.01(f), (B) at the time of such failure to so
approve this Agreement, there shall exist or have been proposed a Competing
Transaction with respect to the Company and (C) within 18 months thereafter, the
Company shall enter into a definitive agreement with respect to any Competing
Transaction or any Competing Transaction shall be consummated; then, in the case
of clause (i) of this Section 9.05(b), promptly after such termination, or, in
the case of clause (ii) of this Section 9.05(b), promptly after the execution
and delivery of such agreement or such consummation, the Company shall pay to
Parent an amount equal to $5,000,000 (against which the $1,000,000 fee described
in Section 9.05(e) shall be credited if previously paid).
(c) Any payment required to be made pursuant to Section
9.05(b) shall be made to Parent not later than the date of the entry into an
agreement referred to therein and two business days after delivery to the
Company of notice of demand for payment and shall be made by wire transfer of
immediately available funds to an account designated by Parent in the notice of
demand for payment delivered pursuant to this Section 9.05(c).
(d) In the event that the Company shall terminate this
Agreement pursuant to Section 9.01(f)(ii), Parent shall pay to the Company
within two business days after such termination an amount equal to $1,000,000
plus all of the Company's Expenses, as evidenced by reasonable documentation,
and in an amount no greater than $750,000, by wire transfer of immediately
available funds to an account designated by the Company; provided, however,
that, in the event both the Company and Parent would otherwise be entitled to
payments under this Section 9.05 in connection with the termination of this
Agreement pursuant to both Sections 9.01(f)(i) and (f)(ii), neither party shall
be required to make any payment under this Section 9.05.
(e) In the event that Parent shall terminate this Agreement
pursuant to Section 9.01(f)(i) and Parent is not otherwise entitled to payment
pursuant to Section 9.05(b), the Company shall pay to Parent within two
business days after such termination an amount equal to $1,000,000 plus all of
Parent's Expenses, as evidenced by reasonable documentation, and in an amount
no greater than $750,000, by wire transfer of immediately available funds to an
account designated by Parent; provided, however, that, in the event both the
Company and Parent would otherwise be entitled to payments under this Section
9.05 in connection with the termination of this Agreement pursuant to both
Sections 9.01(f)(i) and (f)(ii), neither party shall be required to make any
payment under this Section 9.05.
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(f) In the event that the Merger shall not be consummated
solely due to the failure by Parent to satisfy or waive Section 8.03(e) (other
than due to termination of this Agreement pursuant to Section 9.01(j)), then
Parent shall pay to the Company within two business days after termination of
the Merger Agreement an amount equal to $250,000 plus all of the Company's
Expenses, as evidenced by reasonable documentation, and in amount no greater
than $750,000, by wire transfer of immediately available funds to an account
designated by the Company.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Non-Survival of Representations and Warranties.
The representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
9.01, as the case may be. Each party agrees that, except for the representations
and warranties contained in this Agreement and the Parent Disclosure Schedule
and the Company Disclosure Schedule, no party hereto has made any other
representations and warranties, and each party hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to the execution and delivery of this Agreement or the Merger
contemplated herein, notwithstanding the delivery or disclosure to any other
party or any party's representatives of any documentation or other information
with respect to any one or more of the foregoing.
SECTION 10.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or facsimile, by registered or certified mail (postage prepaid, return
receipt requested) or by a nationally recognized courier service to the
respective parties at their addresses set forth on the signature pages to this
Agreement (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10.02).
SECTION 10.03. 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 Merger is not affected in any manner
materially 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 faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner to the fullest extent permitted by applicable Law in order
that the Merger may be consummated as originally contemplated to the fullest
extent possible.
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SECTION 10.04. Assignment; Binding Effect; Benefit. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of Law or
otherwise) without the prior written consent of the other parties hereto;
provided, however, that Parent may assign its rights, interests and obligations
hereunder to any successor or parent entity of Parent whose shares are
registered under Section 12 of the Exchange Act (or will be so registered at the
Effective Time). Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Notwithstanding anything contained
in this Agreement to the contrary, other than Section 7.06, nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
SECTION 10.05. Incorporation of Exhibits. The Parent
Disclosure Schedule, the Company Disclosure Schedule and all Exhibits attached
hereto and referred to herein are hereby incorporated herein and made a part of
this Agreement for all purposes as if fully set forth herein.
SECTION 10.06. Governing Law. THIS AGREEMENT 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. PARENT, MERGER SUB AND THE COMPANY EACH HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE CITY
OF NEW YORK, NEW YORK COUNTY, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND PARENT, MERGER SUB AND THE COMPANY EACH HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR SUCH FEDERAL COURT.
PARENT, MERGER SUB AND THE COMPANY EACH HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
SECTION 10.07. Waiver of Jury Trial. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY
HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
SECTION 10.08. Headings. The descriptive headings contained
in this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 10.09. Counterparts. This Agreement may be executed
and delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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SECTION 10.10. Entire Agreement. This Agreement (including the
Exhibits, the Parent Disclosure Schedule and the Company Disclosure Schedule)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SUN HEALTHCARE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name:
Title:
000 Xxx Xxxx, XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Shearman & Sterling
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
PEACH ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name:
Title:
c/o Sun Healthcare Group, Inc.
000 Xxx Xxxx, XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
67
RETIREMENT CARE ASSOCIATES, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
-------------------------------------
Name:
Title: President
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxx
with a copy to:
Xxxxxx & Xxxxxx
0000 Xxxx Xxxxx
Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxx
68
EXHIBIT 1.00(a)
STOCKHOLDERS STOCK OPTION AND PROXY AGREEMENT
STOCKHOLDERS STOCK OPTION AND PROXY AGREEMENT, dated as of February 17,
1997, among SUN HEALTHCARE GROUP INC., a Delaware corporation ("Parent"), and
each other person and entity listed on the signature pages hereof (each, a
"Stockholder").
WHEREAS, as of the date hereof each Stockholder owns (either
beneficially or of record) the number of shares of common stock, par value
$0.0001 per share ("Company Common Stock"), Series AA Redeemable Convertible
Preferred Stock ("AA Preferred"), and Series F Convertible Preferred Stock ("F
Preferred" and, together with the Company Common Stock and AA Preferred, the
"Company Capital Stock"), of Retirement Care Associates, Inc., a Colorado
corporation (the "Company"), set forth opposite such Stockholder's name on
Exhibit A hereto (all such shares of Company Capital Stock owned by the
Stockholders and any shares of Company Capital Stock hereafter acquired by the
Stockholders prior to the termination of this Agreement being referred to herein
as the "Shares");
WHEREAS, Parent and the Company propose to enter into an Agreement and
Plan of Merger and Reorganization, dated as of the date hereof (as the same may
be amended from time to time, the "Merger Agreement"; capitalized terms not
otherwise defined herein being herein with the meanings ascribed thereto in the
Merger Agreement), which provides, upon the terms and subject to the conditions
thereof, for the merger of the Company with and into a subsidiary of Parent (the
"Merger"); and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has requested that each Stockholder agree, and, in
order to induce Parent to enter into the Merger Agreement, each Stockholder has
agreed, severally and not jointly, to grant Parent options to purchase such
Stockholder's Shares and proxies to vote such Stockholder's Shares;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
ARTICLE I
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THE OPTIONS
SECTION 1.01. Grant of Options. Each Stockholder hereby grants to
Parent an irrevocable option (each, an "Option") to purchase such Stockholder's
Shares at (i) a price per share of Company Common Stock equal to $9.27 (the
"Common Purchase Price"), (ii) a price per share of AA Preferred equal to $10.00
(the "AA Purchase Price"), and (iii) a price per share of F Preferred equal to
$9.27 (the "F Purchase Price" and, together with the Common Purchase Price and
the AA Purchase Price, the "Purchase Price"). Each Option shall expire if (i)
such Option is not exercised prior to the close of business on the 120th day
following termination of the Merger Agreement, (ii) if the Merger Agreement is
terminated pursuant to Section 9.01(c) thereof, or (iii) if the Closing Date
Market Price is less than $12.07.
SECTION 1.02. Exercise of Options. (a) Provided that (i) to the extent
necessary, any applicable waiting periods (and any extension thereof) under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act") with respect to the exercise
of an Option shall have expired or been terminated and (ii) no preliminary or
permanent injunction or other order, decree or ruling issued by any court or
governmental or regulatory authority, domestic or foreign, of competent
jurisdiction prohibiting the exercise of an Option or the delivery of Shares
shall be in effect, Parent may exercise any or all of the Options at any time
following the earlier of (i) the termination of the Merger Agreement (other than
a termination pursuant to Section 9.01(c) thereof) and (ii) the first occurrence
of a Competing Transaction until the expiration of such Options. In the event
that Parent wishes to exercise an Option, Parent shall give written notice (the
date of such notice being herein called the "Notice Date"), to the Stockholder
who granted such Option specifying a place and date (not later than ten Business
Days (as defined below) and not earlier than three Business Days following the
Notice Date) for closing such purchase (the "Closing"). For the purposes of this
Agreement, the term "Business Day" shall mean any day on which banks are not
required or authorized by law, regulation or executive order to close in New
York, New York.
(b) If Parent shall exercise any Option in accordance with the
terms of this Agreement, and without additional consideration, the Stockholder
who granted such Option shall execute and deliver further transfers,
assignments, endorsements, consents and other instruments as Parent may
reasonably request
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for the purpose of effectively carrying out the transactions contemplated by
this Agreement and the Merger Agreement, including the transfer of any and all
of such Stockholder's Shares Parent and the release of any and all liens, claims
and encumbrances covering such Shares.
SECTION 1.03. Payment for and Delivery of Certificates. At the Closing,
(a) Parent shall pay the aggregate Purchase Price for the Shares being purchased
from each Stockholder by delivery of that number of shares of Parent Common
Stock (the "Parent Shares") equal to the quotient of the total amount of the
Purchase Price and the Closing Date Market Price (determined as if the Effective
Time had occurred on the Notice Date), (b) each Stockholder whose Shares are
being purchased shall deliver to Parent a certificate or certificates evidencing
such Stockholder's Shares, and such Stockholder agrees that such Shares shall be
transferred free and clear of all liens, and (c) Parent shall deliver to each
Stockholder a certificate or certificates evidencing the Parent Shares to be
received by each Stockholder at the Closing, and Parent agrees that such Parent
Shares shall be transferred free and clear of all liens. All such certificates
representing Shares shall be duly endorsed in blank, or with appropriate stock
powers, duly executed in blank, attached thereto, in proper form for transfer,
with the signature of such Stockholder thereon guaranteed, and with all
applicable taxes paid or provided for.
ARTICLE II
TRANSFER AND VOTING OF SHARES
SECTION 2.01. Transfer of Shares. During the term of the Options, and
except as otherwise provided herein, each Stockholder shall not (a) sell, pledge
or otherwise dispose of any of its Shares, (b) deposit its Shares into a voting
trust or enter into a voting agreement or arrangement with respect to such
Shares or grant any proxy with respect thereto or (c) enter into any contract,
option or other arrangement or undertaking with respect to the direct or
indirect acquisition or sale, assignment, transfer or other disposition of any
the Company Capital Stock.
SECTION 2.02. Voting of Shares; Further Assurances. (a) Each
Stockholder, by this Agreement, with respect to those Shares that it owns of
record, does hereby
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constitute and appoint Parent, or any nominee of Parent, with full power of
substitution, during and for the term of the Option granted by such Stockholder
hereunder (or, following termination of the Merger Agreement, during such
periods as the Options are exercisable), as its true and lawful attorney and
proxy, for and in its name, place and stead, to vote each of such Shares as its
proxy, at every annual, special or adjourned meeting of the stockholders of the
Company (including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to the Company that the law of the State
of Colorado may permit or require) (i) in favor of the adoption of the Merger
Agreement and approval of the Merger and the other transactions contemplated by
the Merger Agreement, (ii) against any proposal for any recapitalization,
merger, sale of assets or other business combination between the Company and any
person or entity (other than the Merger) or any other action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the Merger Agreement or which
could result in any of the conditions to the Company's obligations under the
Merger Agreement not being fulfilled, and (iii) in favor of any other matter
relating to consummation of the transactions contemplated by the Merger
Agreement. Each Stockholder further agrees to cause the Shares owned by it
beneficially to be voted in accordance with the foregoing. Each Stockholder
acknowledges receipt and review of a copy of the Merger Agreement.
(b) Each Stockholder shall perform such further acts and
execute such further documents and instruments as may reasonably be required to
vest in Parent the power to carry out the provisions of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
Each Stockholder, severally and not jointly, hereby represents and
warrants to Parent as follows:
SECTION 3.01. Due Organization, etc. Such Stockholder (if it is a
corporation, partnership or other legal entity) is duly organized and validly
existing under the laws of the jurisdiction of its incorporation or
organization. Such Stockholder has full power and authority (corporate or
otherwise) to execute and deliver this Agreement and to consummate the
transactions
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5
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action (corporate or otherwise) on the part of such
Stockholder. This Agreement has been duly executed and delivered by or on behalf
of such Stockholder and, assuming its due authorization, execution and delivery
by Parent, constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 3.02. No Conflicts; Required Filings and Consents. (a) The
execution and delivery of this Agreement by such Stockholder do not, and the
performance of this Agreement by such Stockholder will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws or similar organizational
document of such Stockholder (in the case of a Stockholder that is a
corporation, partnership or other legal entity), (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to such
Stockholder or by which it or any of its 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 give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the property or assets of
such Stockholder or (if such Stockholder purports to be a corporation) any of
its subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which such Stockholder is a party or by which such Stockholder or any of its
properties is bound or affected, except for any such breaches, defaults or other
occurrences that would not cause or create a material risk of non-performance or
delayed performance by such Stockholder of its obligations under this Agreement.
(b) The execution and delivery of this Agreement by such
Stockholder do not, and the performance of this Agreement by such Stockholder
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
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6
thereunder (the "Exchange Act"), and the HSR Act and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay the performance by such
Stockholder of its obligations under this Agreement.
SECTION 3.03. Title to Shares. Such Stockholder is the record or
beneficial owner of its Shares free and clear of any proxy or voting restriction
other than pursuant to this Agreement. At the Closing such Stockholder will
deliver good and valid title to its Shares free and clear of any pledge, lien,
security interest, charge, claim, equity, option, proxy, voting restriction,
right of first refusal or other limitation on disposition or encumbrance of any
kind, other than pursuant to this Agreement. Such Stockholder has full right,
power and authority to sell, transfer and deliver its Shares pursuant to this
Agreement. Upon delivery of such Shares and payment of the Purchase Price
therefor as contemplated herein, Parent will receive good and valid title to
such Shares, free and clear of any pledge, lien, security interest, charge,
claim, equity, option, proxy, voting restriction or encumbrance of any kind.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to each Stockholder as follows:
SECTION 4.01. Due Organization, etc. Parent is a corporation duly
organized and validly existing under the laws of the State of Delaware. Parent
has all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by Parent have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by Parent and, assuming its due authorization, execution and
delivery by each Stockholder, constitutes a legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms.
SECTION 4.02. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent do not, and the performance
of this Agreement by Parent will not,
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(i) conflict with or violate the Certificate of Incorporation or By-laws of
Parent, (ii) conflict with or violate any law, rule, regulation, order, judgment
or decree applicable to Parent or by which Parent or any of its 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 give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Parent pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent is a party or by which it or any of its
properties is bound or affected, except for any such breaches, defaults or other
occurrences that would not cause or create a material risk of non-performance or
delayed performance by Parent of its obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent do
not, and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act and the HSR Act and
(ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
the performance by Parent of its obligations under this Agreement.
SECTION 4.03. Investment Intent. The purchase of Shares from any
Stockholder pursuant to this Agreement is for the account of Parent for the
purpose of investment and not with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder.
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.01. Shelf Registration. (a) Parent shall, within three months
following the Closing, file with the Securities and Exchange Commission (the
"Commission") a shelf registration statement on an appropriate form under Rule
415 under the Securities Act, or any similar rule that may be adopted by the
Commission (a "Shelf Registration Statement"), relating to
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the resale of the Parent Shares by the Stockholders from time to time in
accordance with the methods of distribution set forth in such Shelf Registration
Statement and shall use its best efforts to cause such Shelf Registration
Statement to be declared effective under the Securities Act as soon as
practicable thereafter; provided, however, that no Stockholder shall be entitled
to have the Parent Shares held by it covered by such Shelf Registration
Statement unless such Stockholder is in compliance with Section 5.02(f) hereof.
(b) Parent shall use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the prospectus forming part
thereof to be usable by the Stockholders until the earliest to occur of the
following: (A) two year anniversary of the Closing; (B) the earliest time at
which all the Parent Shares covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement; and (C) the earliest
time at which, in the written opinion of independent counsel to Parent, all
outstanding Parent Shares held by persons that are not affiliates of Parent may
be resold without registration under the Securities Act pursuant to Rule 144(k)
under the Securities Act or any successor provision thereto (in any such case,
such period being called the "Effectiveness Period"). Parent shall be deemed not
to have used its best efforts to keep the Shelf Registration Statement effective
during the requisite period if Parent voluntarily takes any action that would
result in Stockholders of Parent Shares covered thereby not being able to offer
and sell any such Parent Shares during that period, unless (i) such action is
required by applicable law, (ii) the continued effectiveness of the Shelf
Registration Statement would require Parent to disclose a material financing,
acquisition or other corporate transaction, and the Board of Directors shall
have determined in good faith that such disclosure is not in the best interests
of Parent and its stockholders, or (iii) the Board of Directors shall have
determined in good faith that there is a valid business purpose for such
suspension.
SECTION 5.02. Registration Procedures. In connection with any Shelf
Registration Statement, the following provisions shall apply:
(a) Parent shall take such action as may be necessary so that
(i) any Shelf Registration Statement and any amendment thereto and any
prospectus forming part thereof and any amendment or supplement thereto (and
each report or other document incorporated therein by reference in each case)
complies in all
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material respects with the Securities Act and the Exchange Act, and the
respective rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (iii) any prospectus forming part of any Shelf Registration Statement, and
any amendment or supplement to such prospectus, does not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements, in the light of the circumstances under which they were
made, not misleading.
(b) Parent shall advise the Stockholders:
(i) when a Shelf Registration Statement and any
amendment thereto has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has
become effective;
(ii) upon the issuance by the Commission of any stop
order suspending effectiveness of the Shelf Registration Statement or
the initiation of any proceedings for that purpose;
(iii) upon the receipt by Parent of any notification
with respect to the suspension of the qualification of the securities
included therein for sale in any jurisdiction or the initiation of any
proceeding for such purpose; and
(iv) upon the happening of any event that requires
the making of any changes in the Shelf Registration Statement or the
prospectus so that, as of such date, the Shelf Registration Statement
and the prospectus do not contain an untrue statement of a material
fact and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
prospectus, in light of the circumstances under which they were made)
not misleading (which advice shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been
made).
(c) Parent shall, during the Effectiveness Period,
deliver to each Stockholder with respect to a Shelf Registration Statement,
without charge, as many copies of the prospectus (including each preliminary
prospectus) included in such Shelf
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Registration Statement and any amendment or supplement thereto as such
Stockholder may reasonably request; and Parent consents (except during the
continuance of any event described in Section 5.02(b)(iv)) to the use of the
prospectus or any amendment or supplement thereto by each of the Stockholders in
connection with the offering and sale of the Parent Shares covered by the
prospectus or any amendment or supplement thereto during the Effectiveness
Period.
(d) Prior to any offering of Parent Shares pursuant to any
Shelf Registration Statement, Parent shall register or qualify or cooperate with
the Stockholders and their respective counsel in connection with the
registration or qualification of such Parent Shares for offer and sale under the
securities or blue sky laws of such jurisdictions as any such Stockholders
reasonably request in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the Parent
Shares covered by such Shelf Registration Statement; provided, however, that in
no event shall Parent be obligated to (i) qualify as a foreign corporation or as
a dealer in securities in any jurisdiction where it would not otherwise be
required to so qualify but for this Section 5.02(d), (ii) file any general
consent to service of process in any jurisdiction where it is not as of the date
hereof then so subject or (iii) subject itself to taxation in any jurisdiction
if it is not so subject.
(e) Upon the occurrence of any event contemplated by Section
5.02(b)(iv) above, Parent shall promptly prepare a post-effective amendment to
any Shelf Registration Statement or an amendment or supplement to the related
prospectus or file any other required document so that, as thereafter delivered
to purchasers of the Parent Shares included therein, the prospectus will not
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If Parent notifies the Stockholders
of the occurrence of any event contemplated by Section 5.02(b)(iv) above, the
Stockholders shall suspend the use of the prospectus until the requisite changes
to the prospectus have been made.
(f) Parent may require each Stockholder with respect to a
Shelf Registration Statement to furnish to Parent such information regarding the
Stockholder and the distribution of Parent Shares held by such Stockholder as
may be required by applicable law or regulation for inclusion in such Shelf
Registration Statement and Parent may exclude from such
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registration the Parent Shares of any Stockholder that fails to furnish such
information within a reasonable time after receiving such request.
(g) Parent will use its best efforts to cause the Parent
Shares to be listed on the New York Stock Exchange or other stock exchange or
trading system on which the Parent Common Stock primarily trades on or prior to
the effective date of any Shelf Registration Statement hereunder.
ARTICLE VI
REPURCHASE OPTION
SECTION 6.01. Repurchase Option. For a period of 30 days after the
consummation of a Competing Transaction involving the Company (a "Repurchase
Event"), Parent shall have the right, upon five business days' prior written
notice to the Company (or any successor in interest to the Company by merger,
sale of all or substantially all of the assets, or otherwise) (the "Repurchase
Notice"), to cause the Company (or any successor in interest to the Company by
merger, sale of all or substantially all of the assets, or otherwise) to have a
closing and to pay at such closing (and the Company and such successor, jointly
and severally, shall be obligated to pay) to Parent in consideration for the
cancellation of all or any portion of the Options, and/or the repurchase from
Parent of all or any portion of the Shares acquired by Parent pursuant to
exercise of Options, as the case may be, an aggregate price (the "Repurchase
Price") equal to the sum of the following amounts for each class of Company
Capital Stock: (A) the product of (x) the number of Shares of such class as to
which the Option remains exercisable multiplied by (y) the amount by which (i)
the value of the per share consideration paid for such class in the Competing
Transaction exceeds (ii) the Purchase Price for such class and (B) the product
of (x) the number of Shares of such class that Parent owns as a result of
exercise of an Option and (y) the per share consideration paid for such class in
the Competing Transaction. At any closing contemplated by the Repurchase Notice,
the Company (or any successor in interest to the Company by merger, sale of all
or substantially all of the assets, or otherwise) shall pay to Parent the
Repurchase Price by delivering to Parent a certified or bank check payable to or
on the order of Parent in an amount equal to the Repurchase Price.
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ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. 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 as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like changes of address) or sent by electronic transmission to the telecopier
number specified below:
(a) If to Parent
Sun Healthcare Group Inc.
000 Xxx Xxxx, XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
(b) If to a Stockholder
c/o Retirement Care Associates, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx
0000 Xxxx Xxxxx
Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxx
Telecopier No.: (000) 000-0000
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SECTION 7.02. 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 7.03. 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
materially 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 faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 7.04. Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
SECTION 7.05. Assignment. This,Agreement shall not be assigned by
operation of law or otherwise; provided, however, that Parent may assign its
rights, interests and obligations hereunder to any successor or parent entity of
Parent whose shares are registered under Section 12 of the Exchange Act (or will
be so registered at the Closing).
SECTION 7.06. 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 person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 7.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to
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specific performance of the terms hereof, in addition to any other remedy at law
or in equity.
SECTION 7.08. GOVERNING LAW. EXCEPT TO THE EXTENT THAT COLORADO LAW IS
MANDATORILY APPLICABLE TO THE RIGHTS OF THE STOCKHOLDERS OF THE COMPANY, THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED
ENTIRELY WITHIN THAT STATE. PARENT AND EACH OF THE STOCKHOLDERS EACH HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT
SITTING IN THE CITY OF NEW YORK, NEW YORK COUNTY, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND PARENT AND EACH OF THE
STOCKHOLDERS EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR
SUCH FEDERAL COURT. PARENT AND EACH OF THE STOCKHOLDERS EACH HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
SECTION 7.09. Stock Certificate Legends; Stop Transfer Orders. In the
event that Parent issues shares of Parent Common Stock to the Stockholders, (i)
all certificates representing such shares and any certificates subsequently
issued with respect thereto or in substitution therefor shall bear an
appropriate legend, and (ii) Parent may cause stop transfer orders to be placed
with its transfer agent with respect to such certificates.
SECTION 7.10. 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SUN HEALTHCARE GROUP INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
Name:
Title:
STOCKHOLDERS
/s/ Xxxxxxxxxxx X. Xxxxxxx
---------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
---------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxx X. Xxxx
---------------------------
Xxxxxx X. Xxxx
/s/ Xxxxxxx X. Xxxxxx
---------------------------
Xxxxxxx X. Xxxxxx
WINTER HAVEN HOMES, INC.
By: /s/ Xxxxxx X. Xxxx
------------------------
Name: Xxxxxx X. Xxxx
Title: President
83
EXHIBIT A
List of Stockholders
======================================================================================================================
Number of Shares of Company Capital
Stock
Owned Beneficially and of Record
----------------------------------------------------------------------------------------------------------------------
Company AA F
Name of Stockholder Common Stock Preferred Preferred
----------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxx 927,948 0 0
----------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 1,266,031 0 0
----------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxx 1,933,804 0 0
----------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 382,392 0 0
----------------------------------------------------------------------------------------------------------------------
Winter Haven Homes, 491,462 0 0
Inc.
======================================================================================================================
A-1
84
EXHIBIT 7.03(a)
FORM OF COMPANY AFFILIATE AGREEMENT
, 1997
------------ ----
Sun Healthcare Group Inc.
000 Xxx Xxxx, XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Affiliate Agreement
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger and
Reorganization, dated as of February 17, 1997 (the "Merger Agreement";
capitalized terms used and not otherwise defined herein are used herein as
defined in the Merger Agreement), among Sun Healthcare Group Inc., a
corporation organized under the laws of the State of Delaware ("Parent"), Peach
Acquisition Corporation, a corporation organized 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 under the laws of the
State of Colorado (the "Company").
Pursuant to the terms of the Merger Agreement, at the
Effective Time, outstanding shares of Company Capital Stock will be converted
into and become exchangeable for shares of Parent Common Stock or New Parent
Preferred on the basis set forth in the Merger Agreement.
The undersigned has been advised that as of the date hereof
[it] [he] [she] may be deemed to be an "affiliate" of the Company, as such term
is (i) defined for purposes of paragraphs (c) and (d) of rule 145 ("Rule 145")
of the rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), and/or (ii) used in and for purposes of
Accounting Series Releases 130 and 135, as amended, and Staff Accounting
Bulletins 65 and 76, of the Commission.
The undersigned understands that the representations,
warranties and covenants set forth herein will be relied upon by Parent,
stockholders of Parent, the Company and other stockholders of the Company and
their respective counsel and accounting firms.
85
2
The undersigned hereby represents and warrants to and agrees
with Parent that:
1. The undersigned has full power and authority to execute and
deliver this letter agreement and to make the representations and
warranties set forth herein and to perform [its] [his] [her]
obligations hereunder;
2. The undersigned has carefully read this letter agreement
and the Merger Agreement and, to the extent the undersigned felt
necessary, discussed the requirements of such documents and
other applicable limitations upon [its] [his] [her] ability to
sell, transfer, pledge or otherwise dispose of Parent Common
Stock with [its] [his] [her] counsel or counsel for the Company;
3. The undersigned is the beneficial owner of (has sole or
shared voting or investment power with respect to) the shares of
Company Capital Stock and options or warrants to purchase
Company Capital Stock specified beneath [its] [his] [her] name
on the signature page hereto (the "Company Securities"). Except
for the Company Securities, the undersigned does not own
beneficially any shares of Company Capital Stock or any other
equity securities of the Company or any options, warrants or
other rights to acquire any equity securities of the Company;
4. The undersigned will not make any sale, transfer, pledge
or other disposition of Parent Common Stock in violation of the
Securities Act or the Rules and Regulations;
5. The undersigned has been advised that the issuance of
Parent Common Stock to the undersigned in connection with the
Merger has been or will be registered with the Commission under
the Securities Act on a Registration Statement on Form S-4.
However, the undersigned has also been advised that, since at
the time the Merger was or will be submitted for a vote of the
stockholders of the Company the undersigned may be deemed to be
or have been an affiliate of the Company and the distribution by
the undersigned of any Parent Common Stock has not been
registered under the Securities Act, the undersigned may not
sell, transfer, pledge or otherwise dispose of Parent Common
Stock issued to [it] [him] [her] in the Merger unless (i) such
sale, transfer, pledge or other disposition has been registered
under the Securities Act, (ii) such sale, transfer, pledge or
other disposition is made in conformity with the volume and
other limitations of Rule 145 or (iii) in the opinion of counsel
reasonably acceptable to Parent (it being understood that the
law firms of Xxxxxx & Xxxxxx and Xxxxxxxx & Sterling are deemed
to be reasonably satisfactory to Parent), such sale, transfer,
pledge or other disposition is otherwise exempt from
registration under the Securities Act;
86
3
6. The undersigned understands that, except as provided in
the Merger Agreement, Parent is under no obligation to register
the sale, transfer, pledge or other disposition of Parent Common
Stock by the undersigned or on [its] [his] [her] behalf under
the Securities Act or to take any other action necessary in
order to make compliance with an exemption from such
registration available;
7. The undersigned also understands that stop transfer
instructions will be given to Parent's transfer agents with
respect to Parent Common Stock issued to [it] [him] [her] and
that there will be placed on the certificates for Parent Common
Stock issued to [it] [him] [her], or any substitutions therefor,
a legend stating in substance:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES. THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, AND
NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE
ON THE BOOKS OF THE ISSUER, UNLESS SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSAL IS MADE
IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES LAWS OR IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT, THE RULES AND REGULATIONS IN EFFECT
THEREUNDER AND ANY APPLICABLE STATE SECURITIES LAWS";
8. The undersigned also understands that, unless the sale,
transfer, pledge or other disposition by [it] [him] [her] of
Parent Common Stock issued to [it] [him] [her] has been
registered under the Securities Act or is a sale made in
conformity with the provisions of Rule 145, Parent reserves the
right to put the following legend on the certificates issued to
any transferee of the undersigned:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE
ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, APPLIES, AND WERE NOT
ACQUIRED BY THE HOLDER WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, AND
NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE
ON THE BOOKS OF THE ISSUER, UNLESS SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSAL IS MADE
IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES LAWS OR IS EXEMPT FROM THE REGISTRATION
87
4
REQUIREMENTS OF SUCH ACT, THE RULES AND REGULATIONS IN EFFECT
THEREUNDER AND ANY APPLICABLE STATE SECURITIES LAWS";
9. Any other provisions of this letter agreement
to the contrary notwithstanding, during the 30-day period
immediately preceeding the Effective Time, the undersigned has not
engaged and will not engage, and after the Effective Time until such
time as results covering at least 30 days of combined operations of
the Company and Parent have been published by Parent, in the form of
a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K,
10-Q, or 8-K, or any other public filing or announcement which
includes such combined results of operations, the undersigned will
not engage, in any sale, exchange, transfer, pledge, disposition of
or grant of any option, the establishment of any "short" or
put-equivalent position with respect to or the entry into of any
similar transaction intended to reduce the risk of the undersigned's
ownership of or investment in, any of the following:
a. any shares of Parent Common Stock which the
undersigned may acquire in connection with the Merger, or any
securities which may be paid as a dividend or otherwise
distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefore (all such shares
and other securities being referred to herein, collectively, as
"Restricted Securities"), or any option, right or other interest
with respect to any Restricted Securities;
b. any Company Securities; or
c. any shares of Company Capital Stock or any
other equity securities of the Company which the undersigned
purchases or otherwise acquires after the execution of this
letter agreement;
10. As promptly as practicable after the Effective
Time, Parent will publish results covering at least 30 days of
combined operations of the Company and Parent in the form of a
quarterly earnings report, an effective registration statement filed
with the Commission, a report to the Commission on Form 10-K, 10-Q,
8-K, or any other public filing or announcement which includes such
combined results of operations; provided, however, that Parent will
be under no obligation to publish any such financial information
other than with respect to a fiscal quarter of Parent;
11. The undersigned has no present plan or
intention to engage in a sale, exchange, transfer, distribution
(including a distribution by a partnership to its partners or by a
corporation to its stockholders), redemption or reduction in any way
of the undersigned's risk of ownership by short sale or otherwise, or
other disposition,
88
5
directly or indirectly (such actions being collectively referred
to herein as a "Sale" of any of the shares of Parent Common stock to
be received by the undersigned in the Merger. The undersigned is not
aware of, or participating in, any plan on the part of the
stockholders of the Company to engage in a Sale or Sales of the
Parent Common Stock to be received in the Merger such that the
aggregate fair market value, as of the Effective Time, of the shares
subject to such Sales would exceed 50% of the aggregate fair market
value of all shares of outstanding Company Common Stock on a fully
diluted basis immediately prior to the Merger;
12. Except to the extent written notification to
the contrary is received by Parent from the undersigned prior to
the Merger, the representations contained herein will be true,
complete and correct at all times from the date hereof through the
Closing Date; and
13. The undersigned currently intends to vote all
Company Capital Stock held by [it] [him] [her] in favor of the
Merger.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
89
Execution of this letter should not be considered an
admission on the part of the undersigned that [it] [he] [she] is an affiliate
of the Company as described above, or as a waiver of any rights the undersigned
may have to object to any claim that [it] [he] [she] am such an affiliate on or
after the date of this letter.
Very truly yours,
[
-------------------------
[AFFILIATE]]
[[AFFILIATE]
By:
-----------------------
Name:
Title:]
Number of shares of Company Capital Stock beneficially
owned:
Common Stock:
-----------------------
Series AA Redeemable Convertible
Preferred Stock:
-----------------------
Series F Convertible Preferred Stock:
----------------------
Number of shares of Company Capital Stock subject to
options, warrants or other rights to acquire Company Capital
Stock beneficially owned:
Common Stock:
-----------------------
Series AA Redeemable Convertible
Preferred Stock:
-----------------------
Series F Convertible Preferred Stock:
-----------------------
90
ACCEPTED AND AGREED
as of , 1997:
---------------- -------
SUN HEALTHCARE GROUP INC.
By:
---------------------------------
Name:
Title:
91
EXHIBIT 7.03(b)
FORM OF PARENT AFFILIATE AGREEMENT
, 1997
---------- -----
Sun Healthcare Group Inc.
000 Xxx Xxxx, XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Affiliate Agreement
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger and
Reorganization, dated as of February 17, 1997 (the "Merger Agreement";
capitalized terms used and not otherwise defined herein are used herein as
defined in the Merger Agreement), among Sun Healthcare Group Inc., a
corporation organized under the laws of the State of Delaware ("Parent"), Peach
Acquisition Corporation, a corporation organized 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 under the laws of the
State of Colorado (the "Company").
Pursuant to the terms of the Merger Agreement, at the
Effective Time, outstanding shares of Company Capital Stock will be converted
into and become exchangeable for shares of Parent Common Stock or New Parent
Preferred on the basis set forth in the Merger Agreement.
The undersigned has been advised that as of the date hereof
[it] [he] [she] may be deemed to be an "affiliate" of Parent, as such term is
used in and for purposes of Accounting Series Releases 130 and 135, as amended,
and Staff Accounting Bulletins 65 and 76, of the Commission.
The undersigned understands that the representations,
warranties and covenants set forth herein will be relied upon by Parent,
stockholders of Parent, the Company and other stockholders of the Company and
their respective counsel and accounting firms.
The undersigned hereby represents and warrants to and agrees
with Parent that:
92
2
1. The undersigned has full power and authority to execute and
deliver this letter agreement and to make the representations and
warranties set forth herein and to perform [its] [his] [her]
obligations hereunder;
2. The undersigned has carefully read this letter agreement
and the Merger Agreement and, to the extent the undersigned felt
necessary, discussed the requirements of such documents and
other applicable limitations upon [its] [his] [her] ability to
sell, transfer, pledge or otherwise dispose of Parent Common
Stock with [its] [his] [her] counsel or counsel for Parent;
3. The undersigned is the beneficial owner of (has sole or
shared voting or investment power with respect to) the shares of
Parent Common Stock and options to purchase Parent Common Stock
specified beneath [its] [his] [her] name on the signature page
hereto (the "Parent Securities"). Except for the Parent
Securities, the undersigned does not own beneficially any shares
of Parent Common Stock or any other equity securities of Parent
or any options, warrants or other rights to acquire any equity
securities of Parent;
4. Any other provisions of this letter agreement to the
contrary notwithstanding, during the 30-day period immediately
preceeding the Effective Time, the undersigned has not engaged
and will not engage, and after the Effective Time until such
time as results covering at least 30 days of combined operations
of the Company and Parent have been published by Parent, in the
form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission
on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes such combined results of operations,
the undersigned will not engage, in any sale, exchange,
transfer, pledge, disposition of or grant of any option, the
establishment of any "short" or put-equivalent position with
respect to or the entry into of any similar transaction intended
to reduce the risk of the undersigned's ownership of or
investment in, any of the following:
a. any Parent Securities; or
b. any shares of Parent Common Stock or any other
equity securities of Parent which the undersigned purchases
or otherwise acquires after the execution of this letter
agreement; and
5. As promptly as practicable after the Effective Time,
Parent will publish results covering at least 30 days of
combined operations of the Company and Parent in the form of a
quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form
10-K, 10-Q, 8-K, or any other public filing or announcement
which includes such combined results of operations; provided,
93
3
however, that Parent will be under no obligation to publish any
such financial information other than with respect to a fiscal
quarter of Parent.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
94
4
Execution of this letter agreement should not be considered
an admission on the part of the undersigned that [it] [he] [she] is an
affiliate of Parent as described above, or as a waiver of any rights the
undersigned may have to object to any claim that [it] [he] [she] am such an
affiliate on or after the date of this letter.
Very truly yours,
[
---------------------------------
[AFFILIATE]]
[[AFFILIATE]
By:
-------------------------------
Name:
Title:
Number of shares of Parent
Common Stock beneficially
owned:
------------------------
Number of shares of Parent
Common Stock subject to
options, warrants or other
rights to acquire Parent
Common Stock beneficially
owned:
------------------------
ACCEPTED AND AGREED
as of , 1997:
----------- -----
SUN HEALTHCARE GROUP INC.
By:
---------------------------
Name:
Title:
