CONFORMED COPY
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
TABLE OF CONTENTS
PAGE
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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PAGE
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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PAGE
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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PAGE
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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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;
2
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 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.
3
"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.
"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.
4
"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.
"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.
5
"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;
(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.
6
"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.
"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,
7
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.
"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.
8
"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).
9
"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.
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"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 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).
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"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, 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
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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;
(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
13
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");
(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,
14
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 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
15
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 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
16
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.
17
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.
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
18
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.
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.
19
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 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
20
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 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
21
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.
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
22
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 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,
23
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.
24
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 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
25
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 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
26
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 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
27
(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.
(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
28
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 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
29
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 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
30
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
31
the Company nor any of the Company Subsidiaries owns any property of a
character, the transfer of which would give rise to (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.
32
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.
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.
33
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 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,
34
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 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
35
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 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
36
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
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,
37
(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
38
owing that have become due to such third party payors pursuant to such claims,
reports or filings, and neither Parent nor 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
39
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, 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 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
40
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, 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
41
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 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
42
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, 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
43
between Parent and X.X. Xxxxxx pursuant to which such firm would be entitled to
any payment relating to the Merger.
SECTION 5.1 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.
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
44
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 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;
45
(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 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;
46
(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.
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
47
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 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
48
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 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
49
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
50
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.
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
51
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 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
52
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.
(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
53
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 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
54
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 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.
55
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, 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.
56
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
57
their designees for a negotiated price not to exceed the book value thereof
pursuant to mutually acceptable terms and conditions.
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
58
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;
(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:
59
(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;
(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
60
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 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:
61
(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 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;
62
(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 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
63
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 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).
64
(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.
(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
65
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.
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.
66
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.
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
67
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]
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: Xxxxxx X. Xxxxxx
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: Xxxxxx X. Xxxxxx
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
RETIREMENT CARE ASSOCIATES, INC.
By: /s/ Xxxxx Xxxxxxx
------------------------------
Name: Xxxxx Xxxxxxx
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
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
EXHIBIT 1.00(a)
STOCKHOLDER STOCK OPTION AND PROXY AGREEMENT
STOCKHOLDER STOCK OPTION AND PROXY AGREEMENT, dated as of February 17,
1997, among SUN HEALTHCARE GROUP INC., a Delaware corporation ("PARENT"), and
RETIREMENT CARE ASSOCIATES, INC., a Colorado corporation ("STOCKHOLDER").
WHEREAS, as of the date hereof Stockholder owns (either beneficially or of
record) 5,222,003 shares of common stock, par value $0.001 per share ("COMPANY
COMMON STOCK"), and 89,250 shares of Series A Preferred Stock ("A PREFERRED"
and, together with the Company Common Stock, the "COMPANY CAPITAL STOCK"), of
Contour Medical, Inc., a Nevada corporation (the "COMPANY") (all such shares of
Company Capital Stock owned by Stockholder and any shares of Company Capital
Stock hereafter acquired by Stockholder 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 Stockholder agree, and, in order to
induce Parent to enter into the Merger Agreement, Stockholder has agreed, to
grant Parent an option to purchase Stockholder's Shares and proxies to vote
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:
2
ARTICLE I
THE OPTIONS
SECTION 1.01. GRANT OF OPTIONS. Stockholder hereby grants to Parent an
irrevocable option (each, an "OPTION") to purchase Stockholder's Shares at (i) a
price per share of Company Common Stock equal to $8.50 (the "COMMON PURCHASE
PRICE") and (ii) a price per share of A Preferred equal to $4.00 (the "A
PURCHASE PRICE" and, together with the Common 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 or (ii) if the Merger Agreement is terminated pursuant to Section
9.01(c) thereof.
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 Stockholder
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, Stockholder shall
execute and deliver further transfers, assignments, endorsements, consents and
other instruments as Parent may reasonably request 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 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 Stockholder by (i) wire transfer in immediately available funds of the
total amount of the Purchase Price for such Shares to an account designated by
Stockholder by written notice to Parent or (ii) delivery of
3
that number of shares of Parent Common Stock 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) Stockholder shall
deliver to Parent a certificate or certificates evidencing Stockholder's Shares,
and Stockholder agrees that such Shares shall be transferred free and clear of
all liens and (c) in the event that Parent has elected to pay the exercise price
with shares of Parent Common Stock, Parent shall deliver to Stockholder a
certificate or certificates evidencing such shares, and Parent agrees that such
shares of Parent Common Stock 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, 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, 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) Stockholder, by
this Agreement, with respect to those Shares that it owns of record, does hereby
constitute and appoint Parent, or any nominee of Parent, with full power of
substitution, during and for the term of the Option granted by 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
4
fulfilled, and (iii) in favor of any other matter relating to consummation of
the transactions contemplated by the Merger Agreement. Stockholder further
agrees to cause the Shares owned by it beneficially to be voted in accordance
with the foregoing. Stockholder acknowledges receipt and review of a copy of
the Merger Agreement.
(b) 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
STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
SECTION 3.01. DUE ORGANIZATION, ETC. Stockholder is duly organized and
validly existing under the laws of Colorado. Stockholder has full power and
authority (corporate or otherwise) 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 have
been duly authorized by all necessary action (corporate or otherwise) on the
part of Stockholder. This Agreement has been duly executed and delivered by or
on behalf of Stockholder and, assuming its due authorization, execution and
delivery by Parent, constitutes a legal, valid and binding obligation of
Stockholder, enforceable against 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 Stockholder do not, and the
performance of this Agreement by Stockholder will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws of Stockholder, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to 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 Stockholder or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument
5
or obligation to which Stockholder is a party or by which 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 Stockholder of its obligations under this
Agreement.
(b) The execution and delivery of this Agreement by Stockholder do
not, and the performance of this Agreement by 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 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 Stockholder of its obligations under this
Agreement.
SECTION 3.03. TITLE TO SHARES. 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 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. 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 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 Stockholder, constitutes a legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms.
6
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, (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, and the rules and regulations promulgated thereunder.
ARTICLE V
GENERAL PROVISIONS
SECTION 5.01. 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
7
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 Stockholder.
Retirement Care Associates, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopier No.: (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
SECTION 5.02. 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 5.03. 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
8
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 5.04. 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 5.05. 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 5.06. 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 5.07. 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 specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 5.08. GOVERNING LAW. EXCEPT TO THE EXTENT THAT NEVADA 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
9
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
SECTION 5.09. STOCK CERTIFICATE LEGENDS; STOP TRANSFER ORDERS. In the
event that Parent issues shares of Parent Common Stock to Stockholder, (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 5.10. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SUN HEALTHCARE GROUP INC.
By:
-------------------------------------
Name:
Title:
RETIREMENT CARE ASSOCIATES, INC.
By:
-------------------------------------
Name:
Title:
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.
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;
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
4
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 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
5
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, 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]
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:
---------------------------
ACCEPTED AND AGREED
as of , 1997:
------------------ -----
SUN HEALTHCARE GROUP INC.
By:
---------------------
Name:
Title:
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:
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
3
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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: