ANNEX B
AGREEMENT AND PLAN
OF MERGER
BY AND BETWEEN
VITALINK PHARMACY SERVICES, INC.
AND
GRANCARE, INC.
DATED AS OF SEPTEMBER 3, 1996 (AS AMENDED)
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
Section 1.01. The Merger.............................................. B-7
Section 1.02. Effective Time.......................................... B-7
Certificate of Incorporation and By-Laws of Surviving
Section 1.03. Corporation............................................ B-7
Section 1.04. Directors and Officers of Surviving Corporation......... B-7
Section 1.05. Stockholders' Meeting................................... B-7
Section 1.06. Filing of Certificate of Merger......................... B-8
Section 1.07. Further Assurances...................................... B-8
ARTICLE II
CONVERSION OF SHARES
Section 2.01. Shares.................................................. B-8
Section 2.02. Exchange of Shares...................................... B-9
Section 2.03. Effect on GranCare Options.............................. B-9
Section 2.04. Fractional Shares....................................... B-10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VITALINK
Section 3.01. Organization and Qualification.......................... B-10
Section 3.02. Authority Relative to This Agreement.................... B-11
Section 3.03. Consents, No Conflicts.................................. B-11
Section 3.04. Board Recommendation.................................... B-12
Section 3.05. State Antitakeover Statutes............................. B-12
Section 3.06. No Existing Violation, Default, Etc..................... B-12
Section 3.07. Licenses and Permits.................................... B-12
Section 3.08. Registration Statement; Information Statement........... B-12
Section 3.09. Finders or Brokers...................................... B-13
Section 3.10. SEC Filings............................................. B-13
Section 3.11. Financial Statements.................................... B-13
Section 3.12. Absence of Undisclosed Liabilities...................... B-14
Section 3.13. Absence of Changes or Events............................ B-14
Section 3.14. Capitalization.......................................... B-14
Section 3.15. Capital Stock of Subsidiaries........................... B-15
Section 3.16. Litigation.............................................. B-15
Section 3.17. Insurance............................................... B-15
Section 3.18. Title to and Condition of Properties.................... B-16
Section 3.19. Leases.................................................. B-16
Section 3.20. Contracts and Commitments............................... B-16
Section 3.21. Labor Matters........................................... B-17
Section 3.22. No Change of Control Puts............................... B-17
Section 3.23. Employment and Labor Contracts.......................... B-17
Section 3.24. Intellectual Property Rights............................ B-18
Section 3.25. Taxes................................................... B-18
Section 3.26. Employee Benefit Plans; ERISA........................... B-19
Section 3.27. Environmental Matters................................... B-21
Section 3.28. Directors, Officers and Compensation of Employees....... B-23
Section 3.29. Banks................................................... B-23
Section 3.30. Disclosure.............................................. B-23
Section 3.31. Institutional Pharmacy Business......................... B-23
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GRANCARE
Section 4.01. Organization and Qualification.......................... B-24
Section 4.02. Authority Relative to This Agreement.................... B-25
Section 4.03. Consents, No Conflicts.................................. B-25
Section 4.04. Board Recommendation.................................... B-26
Section 4.05. State Antitakeover Statutes............................. B-26
Section 4.06. No Existing Violation, Default, Etc..................... B-26
Section 4.07. Affiliates.............................................. B-26
Section 4.08. Licenses and Permits.................................... B-26
Section 4.09. Registration Statement; Proxy Statement; SNFCo
Registration Documents................................. B-27
Section 4.10. Finders or Brokers...................................... B-27
Section 4.11. SEC Filings............................................. B-27
Section 4.12. Financial Statements.................................... B-28
Section 4.13. Absence of Undisclosed Liabilities...................... B-28
Section 4.14. Absence of Changes or Events............................ B-28
Section 4.15. Capitalization.......................................... B-28
Section 4.16. Capital Stock of Subsidiaries........................... B-29
Section 4.17. Litigation.............................................. B-30
Section 4.18. Insurance............................................... B-30
Section 4.19. Title to and Condition of Properties.................... B-30
Section 4.20. Leases.................................................. B-31
Section 4.21. Contracts and Commitments............................... B-31
Section 4.22. Labor Matters........................................... B-32
Section 4.23. No Change of Control Puts............................... B-32
Section 4.24. Employment and Labor Contracts.......................... B-32
Section 4.25. Intellectual Property Rights............................ B-32
Section 4.26. Taxes................................................... B-33
Section 4.27. Employee Benefit Plans; ERISA........................... B-33
Section 4.28. Environmental Matters................................... B-36
Section 4.29. Directors, Officers and Compensation of Employees....... B-37
Section 4.30. Banks................................................... B-37
Section 4.31. Disclosure.............................................. B-37
Section 4.32. Institutional Pharmacy Business......................... B-37
Section 4.33. Fairness Opinion........................................ B-38
Section 4.34. Sufficiency of Assets................................... B-38
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business of GranCare......................... B-38
Section 5.02. Conduct of Business of Vitalink......................... B-40
Section 5.03. No Solicitation by GranCare............................. B-42
Section 5.04. No Solicitation by Vitalink............................. B-42
Section 5.05. Access to Information................................... B-43
Section 5.06. Registration Statement and Proxy Statement.............. B-43
Section 5.07. Commercially Reasonable Efforts; Other Actions.......... B-43
Section 5.08. Public Announcements.................................... B-44
Section 5.09. Notification of Certain Matters......................... B-44
Section 5.10. Indemnification......................................... B-44
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Section 5.11. Expenses.................................................. B-45
Section 5.12. Stock Exchange Listings................................... B-45
Section 5.13. GranCare and Subsidiary Actions........................... B-45
Section 5.14. Vitalink and Subsidiary Actions........................... B-45
Section 5.15. Environmental Matters..................................... B-45
Section 5.16. Actions Regarding Outstanding Debt........................ B-46
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS
OF VITALINK AND GRANCARE
Section 6.01. Registration Statements................................... B-46
Section 6.02. Stockholder Approval...................................... B-46
Section 6.03. Listings.................................................. B-46
Section 6.04. Certain Proceedings....................................... B-46
Section 6.05. Consents and Approvals.................................... B-46
Section 6.06. Distribution.............................................. B-47
Section 6.07. Dissenting Shares......................................... B-47
Section 6.08. Opinions.................................................. B-47
Section 6.09. Existing Indebtedness..................................... B-47
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF VITALINK
Section 7.01. Representations and Warranties True....................... B-47
Section 7.02. Performance............................................... B-48
Section 7.03. Certificates.............................................. B-48
Section 7.04. Material Adverse Change................................... B-48
Section 7.05. Pharmacy Financial Statements............................. B-48
Section 7.06. Auditors' Letter.......................................... B-48
Section 7.07. Letter of Credit.......................................... B-48
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF GRANCARE
Section 8.01. Representations and Warranties True....................... B-48
Section 8.02. Performance............................................... B-48
Section 8.03. Certificates.............................................. B-49
Section 8.04. Material Adverse Change................................... B-49
Section 8.05. Shareholders' Agreement................................... B-49
Section 8.06. Auditors' Letter.......................................... B-49
ARTICLE IX
CLOSING
Section 9.01. Time and Place............................................ B-49
Section 9.02. Filings at the Closing.................................... B-49
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.01. Termination............................................... B-49
Section 10.02. Termination by Vitalink................................... B-50
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Section 10.03. Termination by GranCare................................... B-50
Section 10.04. Procedure for Termination................................. B-51
Section 10.05. Effect of Termination and Abandonment..................... B-51
ARTICLE XI
DEFINITIONS
Section 11.01. Terms Defined in This Agreement........................... B-53
ARTICLE XII
MISCELLANEOUS
Section 12.01. Amendment and Modification................................ B-55
Section 12.02. Waiver of Compliance; Consents............................ B-55
Section 12.03. Survivability; Investigations............................. B-55
Section 12.04. Notices................................................... B-55
Section 12.05. Assignment................................................ B-56
Section 12.06. Governing Law............................................. B-56
Section 12.07. Counterparts.............................................. B-56
Section 12.08. Severability.............................................. B-56
Section 12.09. Interpretation............................................ B-57
Section 12.10. Entire Agreement.......................................... B-57
Signatures................................................................ B-57
EXHIBITS
Exhibit A Form of Distribution Agreement
Exhibit B Form of Voting Agreement
Exhibit C Form of Affiliate Letter
Exhibit D Shareholders Agreement
Exhibit E List of Directors
Exhibit F List of Officers
Exhibit G Opinions
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 3, 1996 (the
"Agreement"), by and between Vitalink Pharmacy Services, Inc., a Delaware
corporation ("Vitalink"), and GranCare, Inc., a California corporation
("GranCare"). Vitalink and GranCare are hereinafter sometimes collectively
referred to as the "Constituent Corporations."
RECITALS
WHEREAS, Vitalink and GranCare desire to combine their respective pharmacy
businesses, and Vitalink does not want to own the Skilled Nursing Businesses
(as hereinafter defined) of GranCare;
WHEREAS, prior to the Merger (as hereinafter defined), GranCare and its
Subsidiaries (as hereinafter defined) will transfer on the terms and subject
to the conditions set forth in the Distribution Agreement between GranCare and
a previously existing corporation ("SNFCo") in the form attached hereto as
Exhibit A (including the Ancillary Agreements as defined therein, the
"Distribution Agreement"), all of the Skilled Nursing Assets and Skilled
Nursing Liabilities of GranCare and its Subsidiaries (each as defined in the
Distribution Agreement) to SNFCo (the "Restructuring"); following which all of
the capital stock of SNFCo (the "SNFCo Stock") will be distributed (the
"Distribution") immediately prior to the Merger to the shareholders of
GranCare.
WHEREAS, after the Distribution GranCare will own only the Institutional
Pharmacy Assets, and be subject only to the Institutional Pharmacy Liabilities
(each as defined in the Distribution Agreement);
WHEREAS, the Board of Directors of GranCare has determined that the Merger
and the Distribution are advisable on the terms and conditions contained in
this Agreement and the Distribution Agreement, and that each of the other
transactions contemplated herein or in the Distribution Agreement is
consistent with and in furtherance of the long-term business strategy of
GranCare and is fair to, and in the best interests of, GranCare and GranCare's
shareholders, and has approved and adopted this Agreement and the Distribution
Agreement and each of the other transactions contemplated herein and intends
to recommend the approval and adoption of this Agreement and the Distribution
Agreement by the shareholders of GranCare;
WHEREAS, the Board of Directors of Vitalink has determined that the Merger
is advisable on the terms and conditions contained in this Agreement and that
each of the other transactions contemplated herein is consistent with and in
furtherance of the long-term business strategy of Vitalink and is fair to, and
in the best interests of, Vitalink and Vitalink's shareholders, and has
approved and adopted this Agreement and each of the other transactions
contemplated herein and intends to recommend the approval and adoption of this
Agreement by the shareholders of Vitalink;
WHEREAS, Manor Care, Inc., a Delaware corporation, and Vitalink's majority
stockholder ("Parent"), has committed to vote in favor of approving this
Agreement and the transactions contemplated hereby and has agreed not to
approve or support any competing transaction, all as provided in the form
attached hereto as Exhibit B (the "Voting Agreement");
WHEREAS, Vitalink and GranCare intend that at the Effective Time (as
hereinafter defined) the Board of Directors of Vitalink shall consist equally
of individuals designated by Vitalink and by GranCare and that the Chief
Executive Officer of GranCare shall become the Chief Executive Officer of
Vitalink; and
WHEREAS, Vitalink and GranCare desire to make certain representations,
warranties, covenants and agreements in connection with the merger of Vitalink
and GranCare and the Distribution by GranCare.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
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ARTICLE I.
THE MERGER
Section 1.01 The Merger. (a) In accordance with the provisions of this
Agreement, the General Corporation Law of the State of Delaware (the "Delaware
Act") and the General Corporation Law of the State of California (the
"California Act"), at the Effective Time, GranCare shall be merged (the
"Merger") with and into Vitalink, and Vitalink shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") and
shall continue its corporate existence under the laws of the State of
Delaware. At the Effective Time, the separate existence of GranCare shall
cease.
(b) The Merger shall have the effects on Vitalink and GranCare as
constituent corporations of the Merger as provided under the Delaware Act and
the California Act.
Section 1.02 Effective Time. Following filing of the certificate of
satisfaction with the Franchise Tax Board in accordance with the provisions of
(S) 1103 of the California Act and the Bank and Corporation Tax Law, the
filing of a certified copy of this Agreement, in the form required by and
executed in accordance with the California Act, with the Secretary of State of
the State of California in accordance with the provisions of (S) 1108 of the
California Act (the "Certified Agreement"), the Merger shall become effective
at the time of filing of, or at such later time specified in, a certificate of
merger, in the form required by and executed in accordance with the Delaware
Act, with the Secretary of State of the State of Delaware in accordance with
the provisions of (S) 252 of the Delaware Act (the "Certificate of Merger").
The date and time when the Merger shall become effective is herein referred to
as the "Effective Time."
Section 1.03 Certificate of Incorporation and By-Laws of Surviving
Corporation. (a) The Certificate of Incorporation of Vitalink, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as
provided by law; provided, however, that if prior to the Effective Time the
stockholders of Vitalink shall have approved an increase in the number of
authorized shares of Common Stock from 30,000,000 to 80,000,000, then Article
4 of the Certificate of Incorporation shall read as follows: "4. The total
number of shares which this corporation shall have authority to issue is
90,000,000 shares, consisting of 10,000,000 shares of Preferred Stock, par
value $.01 per share (the "Preferred Stock") and 80,000,000 shares of Common
Stock, par value $.01 per share (the "Common Stock")" (the "Amendment").
(b) The By-Laws of Vitalink, as in effect immediately prior to the Effective
Time, shall be the By-Laws of the Surviving Corporation until thereafter
amended as provided by law.
Section 1.04 Directors and Officers of Surviving Corporation. The
individuals identified on Exhibit E shall comprise all of the members of the
Board of Directors of the Surviving Corporation at the Effective Time. The
individuals identified on Exhibit F shall comprise all of the senior officers
of the Surviving Corporation at the Effective Time and shall hold the
positions set forth opposite their names.
Section 1.05 Stockholders' Meeting. (a) GranCare will take all action
necessary in accordance with applicable law and its Restated Articles of
Incorporation and By-Laws to convene a special meeting of its stockholders
(the "Special Meeting") as soon as practicable to consider and vote upon the
approval of this Agreement, the Distribution Agreement and the other
transactions contemplated by this Agreement and the Distribution Agreement.
GranCare, through its Board of Directors, shall recommend to its stockholders
approval of this Agreement, the Distribution Agreement and the other
transactions contemplated by this Agreement and the Distribution Agreement
(which recommendation shall be contained in the Proxy Statement (as
hereinafter defined)) and shall use all commercially reasonable efforts to
solicit from its stockholders proxies in favor of approval and adoption of
this Agreement, the Distribution Agreement and the other transactions
contemplated by this Agreement and the Distribution Agreement. GranCare's
Board of Directors shall not withdraw, change, modify in any manner or take
action inconsistent with its recommendation of the Distribution, the
Distribution
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Agreement, the Merger, this Agreement or the other transactions contemplated
hereby or thereby and shall not resolve to do any of the foregoing and
publicly disclose such resolution; provided, however, that GranCare's Board of
Directors may withdraw, change, modify in any manner or take action
inconsistent with such recommendation or resolve to do any of the foregoing
and publicly disclose such resolution in the event that there is an
unsolicited written proposal for a GranCare Acquisition Transaction from a
bona fide financially capable third party only if (i) three business days'
written notice shall have been given to Vitalink; (ii) GranCare's Board of
Directors shall have been advised (A) in writing by its investment banker that
such third party is financially capable of consummating a GranCare Acquisition
Transaction that would yield a higher value to GranCare's stockholders than
will the Merger and (B) by the written opinion of outside counsel to GranCare
that recommending this Agreement to the stockholders of GranCare or failing to
take the action proposed would be inconsistent with GranCare's Board of
Directors' fiduciary duties to such stockholders (in providing such opinion
GranCare's counsel may assume that California law is not materially different
from Delaware law); and (iii) after weighing such advice, GranCare's Board of
Directors shall determine that failure to take the proposed action would be
inconsistent with such Board of Directors' fiduciary duties.
(b) Vitalink will take all action necessary in accordance with applicable
law and its Certificate of Incorporation and By-Laws to obtain as soon as
practicable the approval of its stockholders of this Agreement and the
transactions contemplated hereby through, at the election of Vitalink, written
consents or a stockholders meeting (the "Stockholder Approval"). Vitalink,
through its Board of Directors, shall recommend to its stockholders approval
of this Agreement (which recommendation shall be contained in the Vitalink
Information Statement (as hereinafter defined)) and the transactions
contemplated hereby, including the Amendment.
Section 1.06 Filing of Certificate of Merger. At the Closing (as hereinafter
defined), Vitalink and GranCare shall cause a Certificate of Merger to be
executed and filed with the Secretary of State of the State of Delaware as
provided in (S) 252 of the Delaware Act and the Certified Agreement to be
executed and filed with the Secretary of State of the State of California as
provided in (S) 1108 of the California Act, and shall take any and all other
lawful actions and do any and all other lawful things to cause the Merger to
become effective.
Section 1.07 Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things are necessary
or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of each of the Constituent
Corporations or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of the
Constituent Corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II.
CONVERSION OF SHARES
Section 2.01 Shares. (a) Each share of common stock, without par value, of
GranCare (the "GranCare Common Stock") issued and outstanding immediately
prior to the Effective Time (except for Dissenting Shares (as hereinafter
defined), shares owned by GranCare as treasury stock or shares owned by any
Subsidiary of GranCare) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the right to receive .478
of one share (the "Exchange Ratio") of common stock, par value $.01 per share,
of Vitalink ("Vitalink Common Stock"). The shares of Vitalink Common Stock
delivered in exchange for shares of GranCare Common Stock pursuant to this
Section 2.01(a) are hereinafter sometimes called the "Closing
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Consideration." In the event of any change in Vitalink Common Stock or
GranCare Common Stock by reason of any stock split, readjustment, stock
dividend, exchange of shares, reclassification, recapitalization or otherwise
(other than the Distribution), the Exchange Ratio shall be correspondingly
adjusted.
(b) All shares of GranCare Common Stock, by virtue of the Merger and without
any action on the part of the holders thereof, shall no longer be outstanding
and shall be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of GranCare Common Stock shall
thereafter cease to have any rights with respect to such shares of GranCare
Common Stock, except the right to receive the Closing Consideration for such
shares of GranCare Common Stock as specified in the foregoing clause (a) upon
the surrender of such certificate in accordance with Section 2.02 and the
right to receive the SNFCo capital stock distributed with respect to such
shares of GranCare Common Stock in accordance with the terms of the
Distribution Agreement.
(c) Notwithstanding anything in this Agreement to the contrary, shares of
GranCare Common Stock which are outstanding immediately prior to the Effective
Time and which are held by stockholders who (i) shall not have voted such
shares in favor of the Merger and the Distribution and (ii) shall have
delivered the certificates representing such shares marked to indicate such
shares are dissenting shares or a written demand for appraisal of such shares
in the manner provided in Sections 1300 and 1302 of the California Act (the
"Dissenting Shares") shall not be converted as described in Section 2.01(a),
but instead the holders thereof shall be entitled to payment of the appraised
value of such shares in accordance with the provisions of such Section 1300.
Section 2.02 Exchange of Shares. (a) Promptly after the Effective Time,
Vitalink shall mail to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the
Effective Time represented shares of GranCare Common Stock (the
"Certificates") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to Vitalink) and
instructions for use in effecting the surrender of the Certificates for
exchange thereof. Upon surrender to Vitalink of a Certificate, together with
such letter of transmittal duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor that number of shares of Vitalink
Common Stock which such holder has the right to receive under this Article II,
and such Certificate shall forthwith be cancelled. If any shares of Vitalink
Common Stock are to be issued to a person other than the person in whose name
the Certificate surrendered is registered, it shall be a condition of exchange
that the Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such exchange shall
pay any transfer or other taxes required by reason of the exchange of the
Certificate surrendered to a person other than the registered holder or such
person shall establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 2.02, each Certificate shall represent,
for all purposes, the right to receive the Closing Consideration in respect of
the number of shares of GranCare Common Stock evidenced by such Certificate,
without any interest thereon.
(b) From and after the Effective Time there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of GranCare
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged as provided in this Article
II.
(c) The Surviving Corporation shall not be liable to any holder of shares of
GranCare Common Stock delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Section 2.03 Effect on GranCare Options. (a) As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders
thereof, each option to purchase shares of GranCare Common Stock that is
outstanding under the GranCare Plans (as hereinafter defined) immediately
prior to the Effective Time, whether or not exercisable, shall be assumed by
Vitalink and each such option shall be exercisable upon the same terms and
conditions as under the applicable GranCare Plan and the applicable option
agreement issued thereunder, except that (i) each such option shall be
exercisable for that number of shares of Vitalink Common
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Stock (rounded in accordance with established mathematical convention to the
nearest whole share) into which the number of shares of GranCare Common Stock
subject to such option immediately prior to the Effective Time determined
after giving effect to the adjustments set forth in the Employee Benefit
Agreement (as defined in the Distribution Agreement), would be converted under
Section 2.01(a) if such option were exercised prior to the Effective Time, and
(ii) the option price per share of Vitalink Common Stock determined after
giving effect to the adjustments set forth in the Employee Benefit Matters
Agreement (as defined in the Distribution Agreement), shall be an amount equal
to such adjusted option price per share of GranCare Common Stock subject to
such option in effect immediately prior to the Effective Time divided by the
Exchange Ratio (rounded in accordance with established mathematical convention
to the nearest whole cent).
(b) Prior to the Effective Time, GranCare shall (i) obtain any consents from
holders of outstanding options to purchase GranCare Common Stock granted under
the GranCare Plans and (ii) make any amendments to the terms of the GranCare
Plans or any award granted thereunder that are necessary to give effect to the
transactions contemplated by this Section 2.03 and the Employee Benefits
Matters Agreement referred to in clause (a) above.
Section 2.04 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of GranCare Common Stock who upon surrender
of Certificates would be entitled to receive a fraction of a share of Vitalink
Common Stock shall not be entitled to receive any dividends on or vote such
fractional share and shall receive, in lieu of such fractional share, cash in
an amount equal to such fraction multiplied by the Average Market Value.
"Average Market Value" shall mean the arithmetic average of the last reported
sale price per share of Vitalink Common Stock as reported on the National
Association of Securities Dealers Automated Quotation System (NASDAQ)
("Nasdaq") for the fifteen (15) consecutive trading days ending with the last
trading day prior to the scheduled date of the Special Meeting specified in
the Proxy Statement. The fractional share interests of each GranCare
stockholder will be aggregated, and no GranCare stockholder will receive cash
in an amount equal to or greater than the value of one full share of Vitalink
Common Stock. All references in this Agreement to shares of Vitalink Common
Stock to be issued as Closing Consideration shall be deemed to include any
cash in lieu of fractional shares payable pursuant to this Section 2.04.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF VITALINK
Except as set forth in the Vitalink Disclosure Statement delivered by
Vitalink to GranCare at or prior to the execution of this Agreement (the
"Vitalink Disclosure Statement") (each section of which qualifies the
correspondingly numbered representation and warranty and covenant), Vitalink
represents and warrants to GranCare as follows:
Section 3.01 Organization and Qualification. Each of Vitalink and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Vitalink SEC Reports (as hereinafter
defined). Each of Vitalink and its Subsidiaries is duly qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which the conduct of its business or the ownership, leasing or operation of
its property requires such qualification, except for failures to be so
qualified or in good standing which would not, singly or in the aggregate with
all such other failures, have an Vitalink Material Adverse Effect. "Vitalink
Material Adverse Effect" means, (i) with respect to any event, occurrence,
failure of event or occurrence, change, effect, state of affairs, breach,
default, violation, fine, penalty or failure to comply (each, a
"circumstance"), individually or taken together with all other circumstances
contemplated by or in connection with any or all of the representations and
warranties made in this Agreement, a material adverse effect on the business,
properties, assets, condition (financial or otherwise), results of operations
or prospects of Vitalink and its Subsidiaries, taken as a whole or (ii)
circumstances resulting in the impairment of Vitalink's ability to perform its
obligations under this Agreement and to consummate the
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transactions contemplated hereby. Neither Vitalink nor any of its Subsidiaries
is in violation of any of the provisions of its certificate of incorporation
(or other applicable charter document) or By-Laws. True and complete copies of
the Certificate of Incorporation and By-Laws, as currently in effect, of
Vitalink and of each Subsidiary of Vitalink have been previously delivered or
made available to GranCare. No amendments to the articles of incorporation (or
other similar charter documents) and By-Laws of Vitalink have been authorized
since December 31, 1995.
Section 3.02 Authority Relative to This Agreement. Vitalink has full
corporate power and authority to execute and deliver this Agreement and, upon
obtaining the approval of a majority of the outstanding shares of Vitalink
Common Stock through the Stockholder Approval to consummate the Merger and the
other transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Vitalink and no other corporate proceedings on the part of
Vitalink are necessary to authorize this Agreement or to consummate the Merger
and the other transactions contemplated hereby (other than, with respect to
the Merger, the Amendment and the issuance of the additional Vitalink Common
Stock at the Effective Time, the approval of a majority of the outstanding
shares of Vitalink Common Stock). This Agreement has been duly and validly
executed and delivered by Vitalink and, assuming the due authorization,
execution and delivery hereof by GranCare, constitutes a valid and binding
agreement of Vitalink, enforceable against Vitalink in accordance with its
terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general
equitable principles.
Section 3.03 Consents, No Conflicts. (a) Except for the filings of the
Certificate of Merger, the Certified Agreement and the Vitalink Information
Statement (as hereinafter defined), the filing and effectiveness of the
Registration Statement (as hereinafter defined) and the filings required under
and in connection with the applicable requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and filings
required pursuant to any state securities or "blue sky" laws, no filing or
registration with, notification or disclosure to, or permit, authorization,
consent or approval of, (i) any court, (ii) any government agency or body or
(iii) any third party, whether acting in an individual, fiduciary or other
capacity, is required for the consummation by Vitalink of the Merger, the
adoption of the Amendment or the other transactions contemplated hereby except
such as are set forth in Section 3.03(a) of the Vitalink Disclosure Statement,
which will have been obtained or made prior to the Effective Time and will
then be in full force and effect or which would not, singly or in the
aggregate with all other such consents which have not been obtained, have an
Vitalink Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement, the
consummation of the Merger, the adoption of the Amendment and the other
transactions contemplated hereby and compliance by Vitalink with any of the
provisions hereof do not and will not (i) subject to obtaining the approval of
a majority of the outstanding shares of Vitalink Common Stock, conflict with
or result in any breach or violation of any provision of the Certificate of
Incorporation (or other comparable charter documents) or By-Laws of Vitalink
or any of its Subsidiaries, (ii) result in (1) a breach or violation of, a
default under or an event triggering any payment or other obligation pursuant
to any of Vitalink's existing pension plans, welfare plans, multiemployer
plans, employee benefit plans, benefit arrangements or similar plans,
arrangements or policies including bonus, incentive, deferred compensation,
stock purchase, stock option, stock appreciation right, health or group
insurance, severance pay, retirement or other benefit plans, and all similar
arrangements or policies of Vitalink and its Subsidiaries (the "Vitalink
Compensation and Benefit Plans") or any grant or award made under any of the
foregoing, (2) a breach, violation or event triggering a right of termination
of, a default under, or the acceleration of any obligation or the creation of
a lien, pledge, security interest or other encumbrance on assets (with or
without the giving of notice or the lapse of time or both) pursuant to any
provision of, any agreement, lease of real or personal property, marketing
agreement, contract, note, mortgage, indenture, arrangement or other
obligation of Vitalink or any of its Subsidiaries ("Vitalink Contracts") or
any law, rule, ordinance or regulation or judgment, decree, order or award to
which Vitalink or any of its Subsidiaries is subject or any governmental
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or non-governmental authorization, consent, approval, registration, franchise,
license or permit under which Vitalink or any of its Subsidiaries conducts any
of its business, or (3) any other change in the rights or obligations of any
party under any of the Vitalink Contracts.
Section 3.04 Board Recommendation. The Board of Directors of Vitalink has,
by a unanimous vote at a meeting of such Board duly held on September 3, 1996,
approved and adopted this Agreement, the Merger, the Amendment and the other
transactions contemplated hereby. At such meeting, the Board of Directors of
Vitalink determined that the consideration to be paid by Vitalink pursuant to
the Merger is fair to the holders of shares of Vitalink Common Stock and
recommended that the holders of such shares approve and adopt this Agreement,
the Merger, the Amendment and the other transactions contemplated hereby.
Section 3.05 State Antitakeover Statutes. Vitalink has granted all approvals
and taken all other steps necessary to exempt the Merger and the other
transactions contemplated hereby from the requirements and provisions of (S)
203 of the Delaware Act and any other state antitakeover statute or regulation
such that none of the other provisions of such "business combination,"
"moratorium," "control share" or other state antitakeover statute or
regulation (x) prohibits or restricts either Vitalink's ability to perform its
obligations under this Agreement or its ability to consummate the Merger and
the other transactions contemplated hereby, (y) would have the effect of
invalidating or voiding this Agreement or any provision hereof, or (z) would
subject GranCare to any material impediment or condition in connection with
the exercise of any of its rights under this Agreement.
Section 3.06 No Existing Violation, Default, Etc. None of Vitalink or its
Subsidiaries is in violation (except for any violations which would not,
singly or in the aggregate with all such other violations, have an Vitalink
Material Adverse Effect) of (A) any applicable law, ordinance, administrative
or governmental rule or regulation or (B) any order, decree or judgment of any
court or governmental agency or body having jurisdiction over Vitalink or any
of its Subsidiaries. No event of default or event that, but for the giving of
notice or the lapse of time or both, would constitute an event of default
exists under any Vitalink Contract or any lease, permit, license or other
agreement or instrument to which Vitalink or any of its Subsidiaries is a
party or by which any of them is bound or to which any of the properties,
assets or operations of Vitalink or any of its Subsidiaries is subject (except
for any events of default or other defaults which would not, singly or in the
aggregate with all such other defaults, have an Vitalink Material Adverse
Effect).
Section 3.07 Licenses and Permits. Each of Vitalink and its Subsidiaries has
such certificates, permits, licenses, franchises, consents, approvals, orders,
authorizations and clearances from appropriate governmental agencies and
bodies ("Vitalink Licenses") as are necessary to own, lease or operate its
properties and to conduct its business in the manner described in the Vitalink
SEC Reports and as presently conducted and all such Vitalink Licenses are
valid and in full force and effect, other than any failure to have any such
Vitalink License or any failure of any such Vitalink License to be valid and
in full force and effect as would not, singly or in the aggregate with all
such other failures, have an Vitalink Material Adverse Effect. Each of
Vitalink and its Subsidiaries is and, within the period of all applicable
statutes of limitation, has been in compliance with its obligations under such
Vitalink Licenses and no event has occurred that allows, or after notice or
lapse of time would allow, revocation or termination of such Vitalink
Licenses, other than any such failure to be in compliance with such
obligations or any such revocation or termination as would not, singly or in
the aggregate with all such other failures, revocations or terminations, have
an Vitalink Material Adverse Effect. Vitalink has no knowledge of any facts or
circumstances that could reasonably be expected to result in an inability of
Vitalink or any of its Subsidiaries to renew any Vitalink License. Neither the
execution and delivery by Vitalink of this Agreement nor the consummation of
any of the transactions contemplated herein will result in any revocation or
termination of any Vitalink License. Set forth in Section 3.07 of the Vitalink
Disclosure Statement is a true and complete list of all Vitalink Licenses
which are necessary for the conduct of the business presently conducted by
Vitalink and its Subsidiaries.
Section 3.08 Registration Statement; Information Statement. None of the
information supplied by Vitalink for inclusion or incorporation by reference
in (i) the registration statement registering under the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act") the Vitalink Common Stock to be issued at the Effective Time
(such registration statement as amended by any
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amendments thereto being referred to herein as the "Registration Statement")
or (ii) the information statement or proxy statement to be sent to the
stockholders of Vitalink in connection with the Stockholder Approval,
including all amendments and supplements thereto (the "Vitalink Information
Statement"), shall, in the case of the Registration Statement, at (i) the time
the Registration Statement becomes effective and (ii) the Effective Time, and
in the case of the Vitalink Information Statement, on the date the Vitalink
Information Statement is first mailed to stockholders, at the date of the
Stockholder Approval and at the Effective Time, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
If at any time prior to the Effective Time any event with respect to Vitalink
or any of its Subsidiaries shall occur which is required to be described in
the Registration Statement, the Vitalink Information Statement or the Proxy
Statement (as hereinafter defined), such event shall be so described, and an
amendment or supplement shall be promptly filed with the Securities and
Exchange Commission (the "SEC") and, as required by law, disseminated to the
stockholders of Vitalink and GranCare. The Registration Statement and the
Vitalink Information Statement will (with respect to Vitalink) comply as to
form in all material respects with the applicable provisions of the Securities
Act and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), as the case may be.
Section 3.09 Finders or Brokers. Neither Vitalink nor any Subsidiary of
Vitalink has employed any investment banker, broker, finder or intermediary in
connection with the transactions contemplated hereby who might be entitled to
a fee or any commission the receipt of which is conditioned upon consummation
of the Merger.
Section 3.10 SEC Filings. (a) Vitalink has filed with the SEC all required
forms, reports and documents required to be filed by it with the SEC since May
31, 1992 (collectively, the "Vitalink SEC Reports"), all of which complied as
to form when filed in all material respects with the applicable provisions of
the Securities Act and the Exchange Act, as the case may be. As of their
respective dates the Vitalink SEC Reports (including documents incorporated by
reference therein) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Vitalink will deliver to GranCare as soon as they become available true
and complete copies of any report or statement mailed by Vitalink to its
securityholders generally or filed by it with the SEC, in each case subsequent
to the date hereof and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information therein provided
by GranCare, as to which Vitalink makes no representation) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. The
audited consolidated financial statements and unaudited consolidated interim
financial statements of Vitalink and its Subsidiaries to be included or
incorporated by reference in such reports and statements will be prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved and will fairly present the
consolidated financial position of Vitalink and its Subsidiaries as of the
dates thereof and the consolidated results of operations and consolidated cash
flow for the periods then ended (subject, in the case of any unaudited interim
financial statements, to normal year-end adjustments and to the extent they
may not include footnotes or may be condensed or summary statements).
Section 3.11 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Vitalink
and its Subsidiaries included or incorporated by reference in the Vitalink SEC
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved, and
fairly presented the consolidated financial position of Vitalink and its
Subsidiaries as of the dates thereof and the consolidated results of
operations and consolidated cash flows for the periods then ended (subject, in
the case of any unaudited interim financial statements, to normal year-end
adjustments and to the extent they may not include footnotes or may be
condensed or summary statements) and such audited financial statements have
been certified as such (without exception) by Vitalink's independent
accountants.
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Section 3.12 Absence of Undisclosed Liabilities. Neither Vitalink nor any of
its Subsidiaries has any liabilities or obligations of any nature, whether
absolute, accrued, unmatured, contingent or otherwise, or any unsatisfied
judgments or any leases of personalty or realty or unusual or extraordinary
commitments, except the liabilities recorded on the Vitalink Balance Sheet (as
hereinafter defined) and the notes thereto, and except for liabilities or
obligations incurred in the ordinary course of business and consistent with
past practice since May 31, 1996 that would not, singly or in the aggregate,
be reasonably expected to have an Vitalink Material Adverse Effect.
Section 3.13 Absence of Changes or Events. (a) Since May 31, 1996 (i)
Vitalink and its Subsidiaries have conducted their business in the ordinary
course and have not incurred any material liability or obligation (indirect,
direct or contingent) or entered into any material oral or written agreement
or other transaction that is not in the ordinary course of business (other
than the Voting Agreement, the Shareholders Agreement (as hereinafter defined)
and this Agreement) or that could reasonably be expected to result in any
Vitalink Material Adverse Effect; (ii) neither Vitalink nor its Subsidiaries
have sustained any material loss or interference with their business or
properties from fire, flood, windstorm, accident, strike or other calamity
(whether or not covered by insurance); (iii) there has been no material change
in the indebtedness of Vitalink and its Subsidiaries, no change in the capital
stock of Vitalink and no dividend or distribution of any kind declared, paid
or made by Vitalink on any class of its capital stock; (iv) there has been no
event or condition which has caused an Vitalink Material Adverse Effect, nor
any development, occurrence or state of facts or circumstances that could,
singly or in the aggregate, reasonably be expected to result in an Vitalink
Material Adverse Effect; (v) there has been no amendment, modification or
supplement to any material term of any Vitalink Contract required to be
identified in Section 3.20 of the Vitalink Disclosure Statement or any equity
security; and (vi) there has been no material change by Vitalink in its
accounting principles, practices or methods.
(b) Since May 31, 1996, other than in the ordinary course of business
consistent with past practice, there has not been any increase in the
compensation or other benefits payable, or which could become payable, by
Vitalink, to its officers or key employees, or any amendment of any of the
Vitalink Compensation and Benefit Plans.
Section 3.14 Capitalization. (a) The authorized capital stock of Vitalink
consists of 30,000,000 shares of Vitalink Common Stock and 10,000,000 shares
of Preferred Stock (the "Vitalink Preferred Stock"). As of August 26, 1996,
there were 13,979,700 shares of Vitalink Common Stock and no shares of
Vitalink Preferred Stock outstanding and no shares of Vitalink Common Stock
were held in Vitalink's treasury; and except for shares which were reserved
for issuance and which may have been issued pursuant to the following sentence
there have been no issuances of capital stock of Vitalink since August 26,
1996. As of August 26, 1996, 1,070,300 shares of Vitalink Common Stock were
reserved for issuance upon the exercise of outstanding options and options
(the "Vitalink Options") which may be granted under the stock option plans of
Vitalink (the "Vitalink Option Plans"), 100,000 shares of Vitalink Common
Stock were reserved for issuance to four former shareholders of an acquired
business, and no other shares of Vitalink Common Stock are reserved for any
purpose. Except for the Vitalink Common Stock reserved for issuance upon
exercise of the Vitalink Options and as contemplated by this Agreement, there
are not any existing options, warrants, calls, subscriptions, or other rights
or other agreements or commitments obligating Vitalink to issue, transfer or
sell any shares of capital stock of Vitalink or any of its Subsidiaries or any
other securities convertible into or evidencing the right to subscribe for any
such shares. There are no outstanding stock appreciation rights with respect
to the capital stock of Vitalink or any of its Subsidiaries. All issued and
outstanding shares of Vitalink Common Stock are duly authorized and validly
issued, fully paid and nonassessable and have not been issued in violation of
(nor are any of the authorized shares of capital stock of, or other equity
interests in, Vitalink subject to) any preemptive or similar rights created by
statute, the Certificate of Incorporation or By-Laws of Vitalink or any
agreement to which Vitalink is a party or bound. The Vitalink Common Stock to
be issued in accordance with Section 2.01 of this Agreement, when so issued,
will be duly authorized and validly issued, fully paid and nonassessable.
(b) There are no obligations, contingent or otherwise, of Vitalink to (i)
repurchase, redeem or otherwise acquire any shares of Vitalink Common Stock;
or (ii) provide funds to, or make any investment in (in the form
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of a loan, capital contribution or otherwise), or provide any guarantee with
respect to the obligations of, any other person. There are no agreements,
arrangements or commitments of any character (contingent or otherwise)
pursuant to which any person is or may be entitled to receive any payment
based on the revenues or earnings, or calculated in accordance therewith, of
Vitalink. Except for the Voting Agreement and the Shareholders Agreement (as
hereinafter defined), there are no voting trusts, proxies or other agreements
or understandings to which Vitalink is a party or by which Vitalink is bound
with respect to the voting of any shares of capital stock of Vitalink.
(c) Vitalink has delivered or made available to GranCare complete and
correct copies of each of the Vitalink Option Plans, including all amendments
thereto. Section 3.14(c) of the Vitalink Disclosure Statement sets forth a
complete and correct list of all outstanding options, setting forth (i) the
exercise price of each outstanding Vitalink Option, (ii) the number of
Vitalink Options, (iii) the date of grant of each such Vitalink Option.
Section 3.14(c) of the Vitalink Disclosure Statement sets forth a complete and
correct list of all restricted stock awards including the recipients and the
number of shares of Vitalink Common Stock received or to be received by each.
Section 3.15 Capital Stock of Subsidiaries. The only direct or indirect
Subsidiaries of Vitalink are those listed in Section 3.15 of the Vitalink
Disclosure Statement. Vitalink is directly or indirectly the record (except
for directors' qualifying shares as reflected in such Section 3.15) and
beneficial owner (including all such qualifying shares) of all of the
outstanding shares of capital stock of each of its Subsidiaries, there are no
proxies with respect to such shares, and there are not any existing options,
warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating Vitalink or any of such Subsidiaries to issue, transfer
or sell any shares of capital stock of such Subsidiary or any other securities
convertible into or evidencing the right to subscribe for any such shares. All
of such shares beneficially owned by Vitalink are duly authorized and validly
issued, fully paid, nonassessable and free of preemptive rights with respect
thereto and are owned by Vitalink free and clear of any claim, lien or
encumbrance of any kind with respect thereto. Vitalink does not directly or
indirectly own any interest in any corporation, partnership, joint venture or
other business association or entity.
Section 3.16 Litigation. There are no pending actions, suits, proceedings
or, to the best knowledge of Vitalink after due inquiry, investigations by,
against or affecting Vitalink, any of its Subsidiaries or any of their
properties, assets or operations, or with respect to which Vitalink or any of
its Subsidiaries is responsible by way of indemnity or otherwise. No pending
or, to the knowledge of Vitalink, threatened actions, suits, proceedings or
investigations by, against or affecting Vitalink, any of its Subsidiaries or
any of their properties, assets or operations, or with respect to which they
are responsible by way of indemnity or otherwise, whether or not disclosed in
such Vitalink SEC Reports, would, singly or in the aggregate with all such
other actions, suits, investigations or proceedings, reasonably be expected to
have an Vitalink Material Adverse Effect; and, to the best knowledge of
Vitalink after due inquiry, no such actions, suits, proceedings or
investigations which would reasonably be expected to have an Vitalink Material
Adverse Effect are threatened or contemplated and there is no reasonable
basis, to the best knowledge of Vitalink after due inquiry, for any such
action, suit, proceeding or investigation whether or not threatened or
contemplated.
Section 3.17 Insurance. Vitalink has insurance policies and fidelity bonds
covering it and its Subsidiaries' assets, business, equipment, properties,
operations, employees, officers and directors of the type and in amounts
customarily carried by persons conducting business similar to that of Vitalink
and such Subsidiaries. All premiums due and payable under all such policies
and bonds have been paid, and Vitalink is otherwise in full compliance with
the terms and conditions of all such policies and bonds, except where the
failure to have made payment or to be in full compliance would not, singularly
or in the aggregate with all such other failures, have an Vitalink Material
Adverse Effect. The reserves established by Vitalink in respect of all matters
as to which Vitalink self-insures or carries retention and/or deductibles,
including for workers' medical coverage and workers' compensation, are
adequate and appropriate in light of Vitalink's experience since May 31, 1992
with respect thereto and Vitalink is not aware, after due inquiry, of any
facts or circumstances existing as of the date hereof that could reasonably be
expected to cause such reserves to be inadequate or inappropriate. Section
3.17 of the Vitalink Disclosure Statement sets forth a true and complete list
of all insurance policies, including retention and/or deductible programs, and
fidelity bonds of Vitalink.
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Section 3.18 Title to and Condition of Properties. Vitalink and its
Subsidiaries have good title to all of the real property and personal property
reflected on Vitalink's May 31, 1996 audited consolidated balance sheet
contained in Vitalink's Form 10-K for the fiscal year ended May 31, 1996 filed
with the SEC (the "Vitalink Balance Sheet") except for property since sold or
otherwise disposed of in the ordinary course of business and consistent with
past practice. Set forth in Section 3.18(a) of the Vitalink Disclosure
Statement is a true and complete list of all real properties owned by Vitalink
and its Subsidiaries, all of which real properties are reflected on the
Vitalink Balance Sheet. No such real or personal property is subject to
claims, liens or other encumbrances of any kind or character, including,
without limitation, mortgages, pledges, liens, conditional sale agreements,
charges, security interests, easements, restrictive covenants, rights of way
or options, except for (i) liens for taxes not yet delinquent or which are
being contested in good faith by appropriate proceedings and in respect of
which Vitalink or its appropriate Subsidiary has set aside on its books
adequate reserves in accordance with generally accepted accounting principles;
(ii) mechanics', carriers', workers', repairers', materialmen's and other
similar statutory liens incurred in the ordinary course of business for
obligations not yet delinquent or the validity of which is being contested in
good faith by appropriate proceedings and in respect of which Vitalink or its
appropriate Subsidiary has set aside on its books adequate reserves in
accordance with generally accepted accounting principles; (iii) in the case of
real property, easements, rights of way, restrictions, minor defects or
irregularities in title that do not individually or in the aggregate have a
material adverse effect on the value or use of the real property encumbered
thereby as currently used in the operation of the business of Vitalink or its
Subsidiaries; or (iv) those which would not materially interfere with the
conduct of the business of Vitalink and its Subsidiaries or impair Vitalink's
ability to perform its obligations under this Agreement and to consummate the
transactions contemplated hereby (the encumbrances described in clauses (i)
through (iv) of this sentence, collectively, the "Vitalink Permitted
Encumbrances"). There are no eminent domain proceedings pending or, to
Vitalink's knowledge, threatened against any owned property or any material
portion thereof which proceedings (if resulting in a taking) could reasonably
be expected to have a material adverse effect on the value or use of such
property as currently used in the operation of the business of Vitalink or its
Subsidiaries. To the knowledge of Vitalink, (i) the real properties and the
improvements located thereon (including the roof and structural portions of
each building) are in good operating order and condition, subject to ordinary
wear and tear, (ii) there are no structural, mechanical or other defects of a
material nature in any improvements located on the real properties, (iii) all
building systems in respect of the real properties are in all material
respects in good condition and working order, subject to ordinary wear and
tear, and (iv) the real properties are served by all utilities required or
necessary for the present use thereof. Vitalink has made available to GranCare
true and correct copies of all title insurance commitments, title insurance
policies and surveys in the possession of Vitalink or its Subsidiaries
relating to its real properties set forth in Section 3.18(a) of the Vitalink
Disclosure Statement.
Section 3.19 Leases. There have been delivered or made available to GranCare
true and complete copies of each lease requiring the payment of rentals
aggregating, or pursuant to which the annual rentals are reasonably expected
to be, at least $100,000 per annum pursuant to which real or personal property
is held under lease by Vitalink or any of its Subsidiaries, and true and
complete copies of each lease pursuant to which Vitalink or any of its
Subsidiaries leases real or personal property to others. Section 3.19 of the
Vitalink Disclosure Statement sets forth a true and complete list of all such
leases and such leases are the only leases that are material to the business
conducted by Vitalink and its Subsidiaries. All of the leases so listed are
valid and subsisting and in full force and effect with respect to Vitalink and
its Subsidiaries, as the case may be, and, to Vitalink's knowledge, with
respect to any other party thereto and Vitalink or its Subsidiaries, as the
case may be, have valid leasehold interests in all properties leased
thereunder free and clear of all liens created by, through or under Vitalink
or its Subsidiaries other than Vitalink Permitted Encumbrances. The leased
real properties are in good operating order and condition, subject to ordinary
wear and tear.
Section 3.20 Contracts and Commitments. Neither Vitalink nor any of its
Subsidiaries is a party to any existing contract, obligation or commitment of
any type in any of the following categories:
(a) contracts for the purchase by Vitalink or any of its Subsidiaries of
medicines, materials, supplies or equipment which are not cancellable upon
30 days' or less notice and which either (i) have not been
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entered into in the ordinary course of business and consistent with past
practice or (ii) provide for purchase prices substantially greater than
those presently prevailing for such materials, supplies or equipment, or
(iii) contracts obligating Vitalink or its Subsidiaries to make capital
expenditures in excess of $200,000;
(b) contracts under which Vitalink has, except by way of endorsement of
negotiable instruments for collection in the ordinary course of business
and consistent with past practice, become absolutely or contingently or
otherwise liable for (i) the performance of any other person, firm or
corporation under a contract, or (ii) the whole or any part of the
indebtedness or liabilities of any other person, firm or corporation;
(c) powers of attorney outstanding from Vitalink other than as issued in
the ordinary course of business and consistent with past practice with
respect to customs, insurance, patent, trademark or tax matters, or to
agents for service of process;
(d) contracts under which any amount payable by Vitalink is dependent
upon, or calculated in accordance with, the revenues or profits of Vitalink
or any of its Subsidiaries;
(e) contracts with any director, officer or employee of Vitalink other
than in such person's capacity as a director, officer or employee of
Vitalink;
(f) contracts which limit or restrict where Vitalink or any of its
Subsidiaries may conduct its business or the type or line of business which
Vitalink or any of its Subsidiaries may engage in;
(g) contracts with any party for the loan of money or availability of
credit to or from Vitalink or any of its Subsidiaries (except credit
extended by Vitalink or any of its Subsidiaries to its customers in the
ordinary course of business and consistent with past practice); or
(h) any hedging, option, derivative or other similar transaction.
True and complete copies of all contracts, obligations and commitments
listed in Section 3.20 of the Vitalink Disclosure Statement have been
delivered or made available to GranCare. All such contracts are in full force
and effect. None of Vitalink or its Subsidiaries or, to the best of Vitalink's
knowledge, any other party is in breach of or default under any such contracts
(and no facts or circumstances exist which could reasonably support the
assertion of any such breach or default) except for breaches and defaults by
parties other than Vitalink and its Subsidiaries which would not, singly or in
the aggregate with all other such breaches, have an Vitalink Material Adverse
Effect.
Section 3.21 Labor Matters. None of Vitalink or its Subsidiaries is a party
to any union contract or other collective bargaining agreement. Each of
Vitalink and its Subsidiaries is in compliance in all material respects with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, safety, wages and hours, and neither Vitalink nor
any of its Subsidiaries is engaged in any unfair labor practice. There is no
labor strike, slowdown or stoppage pending (or, to the best knowledge of
Vitalink, any labor strike or stoppage threatened) against or affecting
Vitalink or any of its Subsidiaries. To the best of Vitalink's knowledge, no
union organizing activities with respect to any of its or its Subsidiaries'
employees are occurring or threatened.
Section 3.22 No Change of Control Puts. Neither the execution and delivery
by Vitalink of this Agreement nor the consummation of any of the transactions
contemplated hereby gives rise to any obligation of Vitalink or any of its
Subsidiaries to, or any right of any holder of any security of Vitalink or any
of its Subsidiaries to, require Vitalink to purchase, offer to purchase,
redeem or otherwise prepay or repay any such security, or deposit any funds to
effect the same.
Section 3.23 Employment and Labor Contracts. Neither Vitalink nor any of its
Subsidiaries is a party to any employment, management services, consultation
or other contract or agreement with any past or present officer, director or
employee or, to the best of Vitalink's knowledge, any entity affiliated with
any past or present officer, director or employee, other than the agreements
executed by employees generally, the forms of which have been provided to
GranCare.
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Section 3.24 Intellectual Property Rights. Vitalink or its Subsidiaries own
or have the right to use all Intellectual Property Rights (as hereinafter
defined) necessary to the conduct of their respective businesses. Section 3.24
of the Vitalink Disclosure Statement contains a worldwide list of all patents,
trade names, registered and unregistered copyrights, trademarks and service
marks, mask works and applications for the foregoing owned by Vitalink or its
Subsidiaries. Vitalink and/or its Subsidiaries have clear and unencumbered
title to the Intellectual Property Rights set forth in such Section 3.24 and
such title has not been challenged (pending or threatened) by others except
for the encumbrances listed therein. Such Section 3.24 also contains a list of
unpatented inventions used or planned for use by Vitalink or its Subsidiaries.
No rights or licenses to use Intellectual Property Rights have been granted or
acquired by Vitalink or its Subsidiaries. There have been no claims or
assertions made by others that Vitalink has infringed any Intellectual
Property Rights of others by the sale of products or any other activity in the
preceding six-year period and, to the knowledge of Vitalink, there has been no
such infringement by Vitalink or any of its Subsidiaries during this period.
Vitalink has no knowledge of any infringement of Intellectual Property Rights
of Vitalink or any of its Subsidiaries by others. All such patents, registered
trademarks, service marks and copyrights owned by Vitalink or its Subsidiaries
are in good standing, and are recorded on the public record in the name of
Vitalink or its Subsidiaries. True and complete copies of all material listed
in Section 3.24 of the Vitalink Disclosure Statement have been delivered or
made available to GranCare.
"Intellectual Property Rights" shall mean and include rights relating to
patents, trademarks, service marks, trade names, copyrights, mask works,
inventions, processes, trade secrets, know-how, confidentiality agreements,
consulting agreements, software and any documentation relating to the
manufacture, marketing and maintenance of products.
Section 3.25 Taxes. (i) Vitalink and its Subsidiaries have prepared and
timely filed or will timely file with the appropriate governmental agencies
all franchise, income and all other Tax (as hereinafter defined) returns and
reports (Tax returns and reports are hereinafter collectively referred to as
"Tax Returns") required to be filed by them on or before the Effective Time,
taking into account any extension of time to file granted to or obtained on
behalf of Vitalink and/or its Subsidiaries (copies of which for the past three
fiscal years have been delivered or made available to GranCare); (ii) all
Taxes of Vitalink and its Subsidiaries have been paid in full to the proper
authorities or fully accrued for with respect to fiscal periods for which
there are publicly available financial statements and otherwise on the books
of Vitalink, other than such Taxes as are being contested in good faith by
appropriate proceedings and are adequately reserved for in accordance with
generally accepted accounting principles; (iii) all deficiencies asserted in
writing as a result of Tax examinations of federal, state and foreign income,
sales and franchise and all other Tax Returns filed by Vitalink and its
Subsidiaries have either been paid or adequately reserved for in accordance
with generally accepted accounting principles; (iv) to the best knowledge of
Vitalink, no unpaid deficiency has been asserted or assessed against Vitalink
or any of its Subsidiaries, and no examination of Vitalink or any of its
Subsidiaries is pending or threatened for any material amount of Tax by any
taxing authority (with respect to any such action, Section 3.25 of the
Vitalink Disclosure Statement sets forth the periods at issue and the category
of Tax, and the examining authority's and any corresponding revenue agents'
reports relating to the issue have been delivered or made available to
GranCare); (v) no extension of the period for assessment or collection of any
Tax of Vitalink or any of its Subsidiaries is currently in effect and no
extension of time within which to file any Tax Return of Vitalink or any of
its Subsidiaries has been requested, which Tax Return has not since been
filed; (vi) no Tax liens have been filed with respect to any Taxes of Vitalink
or any of its Subsidiaries except for property taxes which have accrued but
with respect to which penalty for nonpayment has not occurred; (vii) neither
Vitalink nor any of its Subsidiaries has agreed to make any adjustment by
reason of a change in its accounting methods that would affect the taxable
income or deductions of Vitalink or any of its Subsidiaries for any period
ending after the Effective Time; (viii) Vitalink and its Subsidiaries have
made timely payments of the Taxes required to be deducted and withheld from
the wages paid to their employees; (ix) there are no Tax sharing agreements or
arrangements under which Vitalink or any Subsidiary will have any obligation
or liability on or after the Effective Time; (x) Vitalink and its Subsidiaries
have no foreign losses as defined in Section 904(f)(2) of the Internal Revenue
Code of 1986, as amended (the "Code"); (xi) to the best knowledge of Vitalink,
there are no
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transfer pricing agreements made by or on behalf of Vitalink or any of its
Subsidiaries with any taxation authority; (xii) no asset of Vitalink or any of
its Subsidiaries is held in an arrangement for which partnership Tax Returns
are being filed and neither Vitalink nor any of its Subsidiaries is a partner
in any partnership; (xiii) neither Vitalink nor any of its Subsidiaries owns
any interest in any "controlled foreign corporation" (within the meaning of
Section 957 of the Code), "passive foreign investment company" (within the
meaning of Section 1296 of the Code) or other entity the income of which is
required to be included in the income of Vitalink or such Subsidiary; (xiv)
neither Vitalink nor any of its Subsidiaries has made an election under
Section 341(f) of the Code; and (xv) neither Vitalink nor any of its
Subsidiaries is obligated to make any payments that would constitute excess
parachute payments within the meaning of Section 280G of the Code.
"Tax" or "Taxes" shall mean all federal, state, local and foreign taxes,
duties, levies, charges and assessments of any nature, including social
security payments and deductibles relating to wages, salaries and benefits and
payments to subcontractors (to the extent required under applicable Tax law),
and also including all interest, penalties and additions imposed with respect
to such amounts.
Section 3.26 Employee Benefit Plans; ERISA. (a) There are no "employee
pension benefit plans" as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), covering employees (or
former employees) employed in the United States, maintained or contributed to
by Vitalink or any of its Subsidiaries or any of their ERISA Affiliates (as
hereinafter defined), or to which Vitalink or any of its Subsidiaries or any
of their ERISA Affiliates contributes or is obligated to make payments
thereunder or otherwise may have any liability ("Vitalink Pension Benefit
Plans"). For purposes of this Agreement, "ERISA Affiliate" shall mean any
person (as defined in Section 3(9) of ERISA) that is a member of any group of
persons described in Section 414(b), (c), (m) or (o) of the Code which
includes the referent person or its Subsidiaries.
(b) Vitalink has delivered or made available to GranCare true and complete
copies of all "welfare benefit plans" (as defined in Section 3(1) of ERISA)
covering employees (or former employees) employed in the United States,
maintained or contributed to by Vitalink or any of its Subsidiaries ("Vitalink
Welfare Plans"), all multiemployer plans (as defined in Section 3(37) of
ERISA) covering employees (or former employees) employed in the United States
to which Vitalink or any of its Subsidiaries or any of their ERISA Affiliates
is required to make contributions or otherwise may have any liability, and, to
the extent covering employees (or former employees) employed in the United
States, all stock bonus, stock option, restricted stock, stock appreciation
right, stock purchase, bonus, incentive, deferred compensation, severance and
vacation plans maintained or contributed to by Vitalink or a Subsidiary of
Vitalink.
(c) Vitalink and each of its Subsidiaries, and each of the Vitalink Pension
Benefit Plans and Vitalink Welfare Plans, are in compliance with the
applicable provisions of ERISA and other applicable laws except where the
failure to comply would not, singly or in the aggregate, reasonably be
expected to have an Vitalink Material Adverse Effect.
(d) All contributions to, and payments from, the Vitalink Pension Benefit
Plans which are required to have been made in accordance with the Vitalink
Pension Benefit Plans and, when applicable, Section 302 of ERISA or Section
412 of the Code have been timely made except where the failure to make such
contributions or payments on a timely basis would not, singly or in the
aggregate, reasonably be expected to have an Vitalink Material Adverse Effect.
(e) The Vitalink Pension Benefit Plans intended to qualify under Section 401
of the Code have been determined by the Internal Revenue Service ("IRS") to be
so qualified and nothing has occurred with respect to the operation of such
Vitalink Pension Benefit Plans which would cause the loss of such
qualification or exemption or the imposition of any material liability,
penalty or tax under ERISA or the Code. Such plans have been or will be
amended on a timely basis to comply with changes to the Code made by the Tax
Reform Act of 1986 and other applicable legislative, regulatory or
administrative requirements.
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(f) There are (i) no investigations pending, to the best knowledge of
Vitalink, by any governmental entity involving the Vitalink Pension Benefit
Plans or Vitalink Welfare Plans, (ii) no termination proceedings involving the
Vitalink Pension Benefit Plans and (iii) no pending or, to the best of
Vitalink's knowledge, threatened claims (other than routine claims for
benefits), suits or proceedings against any Vitalink Pension Benefit Plan or
Vitalink Welfare Plan, against the assets of any of the trusts under any
Vitalink Pension Benefit Plan or Vitalink Welfare Plan or against any
fiduciary of any Vitalink Pension Benefit or Vitalink Welfare Plan with
respect to the operation of such plan or asserting any rights or claims to
benefits under any Vitalink Pension Benefit Plan or against the assets of any
trust under such plan, except for those which would not, singly or in the
aggregate, give rise to any liability which would reasonably be expected to
have an Vitalink Material Adverse Effect, nor, to the best of Vitalink's
knowledge, are there any facts which would give rise to any liability except
for those which would not, singly or in the aggregate, reasonably be expected
to have an Vitalink Material Adverse Effect in the event of any such
investigation, claim, suit or proceeding.
(g) None of Vitalink, any of its Subsidiaries or any employee of the
foregoing, nor any trustee, administrator, other fiduciary or any other "party
in interest" or "disqualified person" with respect to the Vitalink Pension
Benefit Plans or Vitalink Welfare Plans, has engaged in a "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section
406 of ERISA) which would be reasonably likely to result in a tax or penalty
on Vitalink or any of its Subsidiaries under Section 4975 of the Code or
Section 502(i) of ERISA, except any such event which would not, singly or in
the aggregate, reasonably be expected to have an Vitalink Material Adverse
Effect.
(h) Neither the Vitalink Pension Benefit Plans subject to Title IV of ERISA
nor any trust created thereunder has been terminated nor have there been any
"reportable events" (as defined in Section 4043 of ERISA and the regulations
thereunder) with respect to either thereof, except any such event which would
not, singly or in the aggregate, reasonably be expected to have an Vitalink
Material Adverse Effect nor has there been any event with respect to any
Vitalink Pension Benefit Plan requiring disclosure under Section 4063(a) of
ERISA or any event with respect to any Vitalink Pension Benefit Plan requiring
disclosure under Section 4041(c)(3)(C) of ERISA, except any such event which
would not, singly or in the aggregate, reasonably be expected to have an
Vitalink Material Adverse Effect.
(i) Neither Vitalink nor any Subsidiary of Vitalink nor any ERISA Affiliate
has incurred any currently outstanding liability to the Pension Benefit
Guaranty Corporation (the "PBGC") or to a trustee appointed under Section
4042(b) or (c) of ERISA other than for the payment of premiums, all of which
have been paid when due. No Vitalink Pension Benefit Plan has applied for, or
received, a waiver of the minimum funding standards imposed by Section 412 of
the Code. The information supplied to the actuary by Vitalink or any of its
Subsidiaries for use in preparing the most recent actuarial report for the
Vitalink Pension Benefit Plans is complete and accurate in all material
respects.
(j) Neither Vitalink, any of its Subsidiaries nor any of their ERISA
Affiliates has any liability (including any contingent liability under Section
4204 of ERISA) with respect to any multiemployer plan, within the meaning of
Section 3(37) of ERISA, covering employees (or former employees) employed in
the United States.
(k) With respect to each of the Vitalink Pension Benefit Plans and Vitalink
Welfare Plans, true, correct and complete copies of the following documents
have been delivered or made available to GranCare: (i) the current plans and
related trust documents, including amendments thereto, (ii) any current
summary plan descriptions, (iii) the most recent Forms 5500, financial
statements and actuarial reports, if applicable, and (iv) the most recent IRS
determination letter, if applicable.
(l) Neither Vitalink, any of its Subsidiaries, any organization to which
Vitalink is a successor or parent corporation, within the meaning of Section
4069(b) of ERISA, nor any of their ERISA Affiliates has engaged in any
transaction, within the meaning of Section 4069(a) of ERISA, except where the
liability therefor would not, singly or in the aggregate, reasonably be
expected to have an Vitalink Material Adverse Effect.
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(m) None of the Vitalink Welfare Plans maintained by Vitalink or any of its
Subsidiaries are retiree life or retiree health insurance plans which provide
for continuing benefits or coverage for any participant or any beneficiary of
a participant following termination of employment, except as may be required
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), or except at the expense of the participant or the participant's
beneficiary. Vitalink and each of its Subsidiaries which maintain a "group
health plan" within the meaning of Section 5000(b)(1) of the Code have
complied with the notice and continuation requirements of Section 4980B of the
Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder except where the failure to comply would not, singly or in the
aggregate, reasonably be expected to have an Vitalink Material Adverse Effect.
(n) No liability under any Vitalink Pension Benefit Plan or Vitalink Welfare
Plan has been funded nor has any such obligation been satisfied with the
purchase of a contract from an insurance company as to which Vitalink or any
of its Subsidiaries has received notice that such insurance company is in
rehabilitation.
(o) The consummation of the transactions contemplated by this Agreement will
not result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or compensation
payable to or in respect of any employee of Vitalink or any of its
Subsidiaries.
(p) Vitalink has disclosed to GranCare in Section 3.26 of the Vitalink
Disclosure Statement each of Vitalink's material Foreign Plans (as hereinafter
defined) to the extent the benefits provided thereunder are not mandated by
the laws of the applicable foreign jurisdiction. Vitalink and each of its
Subsidiaries and each of such Foreign Plans are in compliance with applicable
laws and all required contributions have been made to the Foreign Plans,
except where the failure to comply or make contributions would not, singly or
in the aggregate, reasonably be expected to have an Vitalink Material Adverse
Effect. For purposes of this Agreement, the term "Foreign Plan" shall mean any
plan, program, policy, arrangement or agreement maintained or contributed to
by, or entered into with, a person or any of its Subsidiaries with respect to
employees (or former employees) employed outside the United States.
Section 3.27 Environmental Matters. (a) Except as would not, singly or in
the aggregate with all other such non-compliances, have an Vitalink Material
Adverse Effect, Vitalink and its Subsidiaries are, and within the period of
all applicable statutes of limitation have been, in compliance with all
applicable Environmental Laws (as hereinafter defined), which compliance
includes, without limitation, the possession of all licenses, permits,
registrations and other governmental authorizations (collectively,
"Environmental Authorizations") required under applicable Environmental Laws,
and compliance with the terms and conditions thereof, and there are no
circumstances of which Vitalink is aware which may materially prevent or
interfere with compliance in the future. To Vitalink's knowledge, all
Environmental Authorizations currently held by Vitalink and its Subsidiaries
pursuant to Environmental Laws are identified in Section 3.27(a)(1) of the
Vitalink Disclosure Statement and represent all Environmental Authorizations
necessary for the conduct of the businesses of Vitalink and its Subsidiaries
as currently conducted. Neither Vitalink nor any of its Subsidiaries has been
notified, or has any reasonable basis to believe, that any such Environmental
Authorizations will be modified, suspended or revoked or cannot be renewed or
otherwise maintained in the ordinary course of business. To Vitalink's
knowledge after due inquiry, the execution and delivery of this Agreement and
the consummation by Vitalink of the transactions contemplated hereby will not
affect the validity or require the transfer of any Environmental
Authorizations, and will not require any notification, registration,
reporting, filing, investigation or remediation under any Environmental Law.
(b) There are no Environmental Notices (as hereinafter defined) that,
singularly or in the aggregate, reasonably could be expected to have an
Vitalink Material Adverse Effect (i) pending or, to the best knowledge of
Vitalink, threatened against Vitalink or any of its Subsidiaries, (ii) to
Vitalink's knowledge pending or threatened against any person or entity whose
liability for such Environmental Notice may have been retained or assumed by
or could reasonably be imputed or attributed by law or contract to Vitalink or
any of its Subsidiaries, (iii) that to Vitalink's knowledge could subject
Vitalink to any material risk of liability, loss or damages, or (iv) that to
Vitalink's knowledge could reasonably be expected to require investigation,
removal or remedial or
B-21
corrective action by Vitalink or any of its Subsidiaries. Since May 31, 1996,
neither Vitalink nor any of its Subsidiaries has received any Environmental
Notice alleging that Vitalink or any of its Subsidiaries is subject to
liability under any Environmental Law or that Vitalink or any of its
Subsidiaries is not in full compliance with Environmental Laws.
(c) There is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, notice or demand letter or request for
information or, to the best knowledge of Vitalink, investigation pending or
threatened under any Environmental Law (i) against Vitalink or any of its
Subsidiaries, or (ii) to the knowledge of Vitalink against any person or
entity in connection with which liability could reasonably be imputed or
attributed by law or contract to Vitalink or any of its Subsidiaries, except
with respect to each of clause (i) and (ii) for such demands, claims, notices
of violation, notice or demand letters or requests for information which
singly or in the aggregate could not reasonably be expected to have a GranCare
Material Adverse Effect.
(d) No property or facility presently or to the knowledge of Vitalink
formerly owned, operated or leased by Vitalink or any of its present
Subsidiaries, or to the knowledge of Vitalink any of its former Subsidiaries,
or any of their respective predecessors in interest, is listed or proposed for
listing on the National Priorities List or the Comprehensive Environmental
Response, Compensation and Liability Information System, both promulgated
under the Comprehensive Environmental Response, Compensation and Liability
Act, as amended ("CERCLA"), or on any comparable list established under any
Environmental Law, nor has Vitalink or any of its Subsidiaries received any
written notification of potential or actual liability or any request for
information under CERCLA or any comparable foreign, state or local law.
(e) There has been no disposal, spill, discharge or release of any Hazardous
Materials (as hereinafter defined) generated, used, owned, stored or
controlled by Vitalink, or to Vitalink's knowledge any of its Subsidiaries or
any of their respective predecessors in interest, on, at or under any property
presently or formerly owned, leased or operated by Vitalink, or to Vitalink's
knowledge its Subsidiaries, or any predecessors in interest, and to Vitalink's
knowledge there are no Hazardous Materials located in, at, on or under, or in
the vicinity of, any such facility or property, or at any other location, that
(i) could reasonably be expected to subject Vitalink to a material risk of
liability, loss or damages, or result in the incurrence by Vitalink of costs
under Environmental Laws, (ii) could reasonably be expected to form the basis
of any Environmental Notice against or with respect to Vitalink or any of its
Subsidiaries, or against any person or entity whose liability for any
Environmental Notice may have been retained or assumed by or could be imputed
or attributed by law or contract to Vitalink or any of its Subsidiaries or
(iii) could reasonably be expected to require investigation, removal or
remedial or corrective action by Vitalink or any of its Subsidiaries, that in
any case singularly or in the aggregate, reasonably could be expected to have
an Vitalink Material Adverse Effect.
(f) Without in any way limiting the generality of the foregoing, to
Vitalink's knowledge (i) there are and have been no underground or aboveground
storage tanks or other storage receptacles, or related piping or other
disposal areas containing Hazardous Materials, located on, at or under
property owned, operated or leased by Vitalink, any of its Subsidiaries or any
of their respective predecessors in interest, (ii) there are and have been no
polychlorinated biphenyls located on any properties owned, operated or leased
by Vitalink or any of its Subsidiaries, and (iii) there is no asbestos
contained in or forming part of any building, building component, structure or
office space owned, operated or leased by Vitalink or any of its Subsidiaries.
(g) To Vitalink's knowledge no lien has been recorded under Environmental
Laws with respect to any properties, assets or facilities owned, operated or
leased by Vitalink or any of its Subsidiaries.
(h) In accordance with Section 5.05, Vitalink has given GranCare and its
authorized representatives access to all records and files in its possession
or control relating to actual or potential compliance or liability issues of
Vitalink or its Subsidiaries and any of their respective predecessors in
interest under Environmental Laws, including, without limitation, all reports,
studies, analyses, tests or monitoring results pertaining to the existence of
Hazardous Material or any other environmental concern relating to properties,
assets or facilities currently or formerly owned, operated, managed, leased,
used or controlled by Vitalink or any of its Subsidiaries, or otherwise
concerning compliance with or liability under Environmental Laws.
B-22
For purposes of this Agreement:
(i) "Environment" shall mean any surface water, groundwater or drinking
water supply, land surface or subsurface strata or ambient air and
includes, without limitation, any indoor location.
(ii) "Environmental Laws" shall mean CERCLA, the Resource Conservation
and Recovery Act of 1976, as amended, and any other federal, state, local
or foreign statute, rule, regulation, order, judgment, directive, decree or
common law, as now or previously in effect and regulating, relating to or
imposing liability or standards of conduct concerning air emissions, water
discharges, noise emissions, the release or threatened release or discharge
of any Hazardous Material into the environment, the generation, handling,
treatment, storage, transport or disposal of any Hazardous Material or
otherwise concerning pollution or the protection of the outdoor or indoor
environment, or employee health or safety. The term shall also include laws
governing the transfer of real property that require notification,
registration, reporting, filing, investigation or remediation prior to,
concurrent with or following sale or transfer of control of any property,
facility or establishment in connection with the actual or threatened
presence or release of Hazardous Materials at such property, facility or
establishment.
(iii) "Environmental Notice" shall mean any written communication, notice
or claim by any Governmental Authority or other third party alleging civil
or criminal liability (including, without limitation, liability for
investigatory costs, cleanup costs, governmental costs, compliance costs or
harm, injuries or damages to any person, property, natural resources, or
any fines or penalties) or alleging noncompliance arising out of, based
upon, resulting from or relating to any Environmental Law.
(iv) "Hazardous Material" shall mean any pollutant, contaminant or
hazardous, toxic or dangerous waste, substance, constituent or material
defined or regulated as such in, or for purposes of, any Environmental Law,
including, without limitation, any medical waste, any biochemical waste,
any asbestos, radon, any petroleum, oil (including crude oil or any
fraction thereof), any radioactive substance, any polychlorinated
biphenyls, any toxin, chemical, virus, infectious disease agent and any
other substance that can give rise to liability under any Environmental
Law.
Section 3.28 Directors, Officers and Compensation of Employees. There is set
forth in Section 3.28 of the Vitalink Disclosure Statement a true and complete
list showing (a) the names and addresses of all directors and officers of
Vitalink and its Subsidiaries and (b) the names of all salaried persons whose
aggregate compensation for purposes of federal income tax reporting from
Vitalink and its Subsidiaries in the fiscal year ended May 31, 1996 was, or in
the fiscal year ending May 31, 1997 is expected to be, U.S. $100,000 or more
per year, together with a statement of the full amount expected to be paid to
such person for services in all capacities to be rendered in the fiscal year
ending May 31, 1997, and the basis thereof, separately including the amounts
paid or payable, or expected to be paid or payable during such fiscal years,
under bonus or incentive arrangements, if any.
Section 3.29 Banks. There is set forth in Section 3.29 of the Vitalink
Disclosure Statement a true and complete list showing the account numbers and
name of each bank in which Vitalink or any of its Subsidiaries has an account
or safe deposit box and the names of all persons authorized to draw thereon or
to have access thereto.
Section 3.30 Disclosure. No representation or warranty by Vitalink and no
statement or information relating to Vitalink or any of its Subsidiaries
contained herein, or in any certificate furnished by or on behalf of Vitalink
to GranCare in connection herewith contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
Section 3.31 Institutional Pharmacy Business. (a) Section 3.31 of the
Vitalink Disclosure Statement lists each Pharmacy utilized by Vitalink in
connection with its pharmacy business and indicates (i) the location of each
such Pharmacy and (ii) whether such Pharmacy is owned or held pursuant to a
leasehold interest. No other
B-23
person or entity has any beneficial ownership or interest in or to any such
Pharmacy nor does any other person or entity have any right or option to
acquire any beneficial ownership or interest in or to any such Pharmacy.
(b) Section 3.31 of the Vitalink Disclosure Statement lists all of the
customers to which Vitalink and its Subsidiaries provide pharmacy services
pursuant to oral or written contracts. Vitalink has not been informed and has
no reason to believe that any Vitalink Pharmacy Contract will be terminated
for or without cause.
(c) Vitalink has not violated, and is not now in violation of, the Medicare
and Medicaid fraud and abuse provisions of the Social Security Act, the Civil
Monetary Penalties Law of the Social Security Act, or any other federal or
state law, statute, rule or regulation relating to Vitalink and its
Subsidiaries.
(d) Vitalink is duly licensed to provide pharmacy services in all states in
which it does business, and is also a participant in the Medicare program and
the Medicaid programs of the states listed in Section 3.07 of the Vitalink
Disclosure Statement. Vitalink is in compliance with all laws, rules and
regulations affecting or in connection with the Pharmacies, Vitalink and their
licenses with respect thereto and their participation in the Medicare and
Medicaid programs.
(e) Vitalink has delivered or made available true and correct billing
requests for reimbursement and underlying information to all governmental
programs, including but not limited to the Medicare and Medicaid programs, in
compliance with all rules, regulations, policies and procedures of such
governmental programs and of the fiscal intermediaries of such programs. To
the best of Vitalink's knowledge all such xxxxxxxx were for goods actually
provided, and at appropriate charges or costs, and Vitalink has appropriate
documentation to support such billing requests.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF GRANCARE
Except as set forth in the GranCare Disclosure Statement delivered by
GranCare to Vitalink at or prior to the execution of this Agreement (the
"GranCare Disclosure Statement") (each section of which qualifies the
correspondingly numbered representation and warranty and covenant), GranCare
represents and warrants to Vitalink as follows:
Section 4.01 Organization and Qualification. Each of GranCare and its
Pharmacy Subsidiaries (as defined in the Distribution Agreement) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the GranCare SEC Reports (as hereinafter defined). Each of
GranCare and its Pharmacy Subsidiaries is duly qualified to transact business
as a foreign corporation and is in good standing in each jurisdiction in which
the conduct of its business or the ownership, leasing or operation of its
property requires such qualification, except for failures to be so qualified
or in good standing which would not, singly or in the aggregate with all such
other failures, have a GranCare Material Adverse Effect. "GranCare Material
Adverse Effect" means (i) with respect to any event, occurrence, failure of
event or occurrence, change, effect, state of affairs, breach, default,
violation, fine, penalty or failure to comply (each, a "circumstance"),
individually or taken together with all other circumstances contemplated by or
in connection with any or all of the representations and warranties made in
this Agreement, (a) a material adverse effect on the business, properties,
assets, condition (financial or otherwise), results of operations or prospects
of the Institutional Pharmacy Business, taken as a whole, or (b) an impairment
on the ability of SNFCo to conduct as a going concern the Skilled Nursing
Business (as defined in the Distribution Agreement) subsequent to the
Distribution or (ii) circumstances resulting in the impairment of GranCare's
ability to perform its obligations under this Agreement or the Distribution
Agreement and to consummate the transactions contemplated hereby and thereby.
Neither GranCare nor any of its Pharmacy Subsidiaries is in violation of any
of the provisions of its articles of incorporation (or other applicable
charter document) or by-laws. True and complete copies of the Restated
Articles of Incorporation and By-Laws, as currently in effect, of GranCare and
of each Pharmacy
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Subsidiary of GranCare have been previously delivered or made available to
Vitalink. No amendments to the articles of incorporation (or other similar
charter documents) and By-Laws of GranCare have been authorized since December
31, 1995.
Section 4.02 Authority Relative to This Agreement. GranCare has full
corporate power and authority to execute and deliver this Agreement and the
Distribution Agreement and, upon obtaining the approval of a majority of the
outstanding shares of GranCare Common Stock at the Special Meeting or
adjournment thereof, as may be required by the California Act to consummate
the Merger, the Distribution and complete the other transactions contemplated
hereby. The execution and delivery of this Agreement and the Distribution
Agreement and the consummation of the Merger, the Distribution and the other
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of GranCare and no other corporate proceedings on the part
of GranCare are necessary to authorize this Agreement and the Distribution
Agreement or to consummate the Merger, the Distribution and the other
transactions contemplated hereby (other than, with respect to the Merger and
the Distribution, the approval of a majority of the outstanding shares of
GranCare Common Stock at the Special Meeting or any adjournment thereof as
required by the California Act and, with respect to the Distribution, the
declaration by the GranCare Board of Directors of the Distribution). This
Agreement and the Distribution Agreement have been duly and validly executed
and delivered by GranCare and, assuming, in the case of this Agreement and the
Distribution Agreement, the due authorization, execution and delivery of each
such agreement by Vitalink, constitute valid and binding agreements of
GranCare, enforceable against GranCare in accordance with their terms, except
to the extent that their enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
Section 4.03 Consents, No Conflicts. (a) Except for the filings of the
Certificate of Merger, the Certified Agreement and the Proxy Statement, the
filing and effectiveness of the Registration Statement and the SNFCo
Registration Document (as hereinafter defined) and the filings required under
and in connection with the applicable requirements of the HSR Act, and filings
required pursuant to any state securities or "blue sky" laws, no filing or
registration with, notification or disclosure to, or permit, authorization,
consent or approval of, (i) any court, (ii) any government agency or body or
(iii) any third party, whether acting in an individual, fiduciary or other
capacity, is required for the consummation by GranCare of the Merger, the
Distribution or the other transactions contemplated hereby or by the
Distribution Agreement except such as are set forth in Section 4.03(a) of the
GranCare Disclosure Statement, which will have been obtained or made prior to
the Effective Time and will then be in full force and effect or which would
not, singly or in the aggregate with all other such consents which have not
been obtained, have a GranCare Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement, the
Distribution Agreement, the consummation of the Distribution, the Merger and
the other transactions contemplated hereby (or thereby) and compliance by
GranCare with any of the provisions hereof (or thereof) do not and will not
(i) subject to obtaining the approval of a majority of the outstanding shares
of GranCare Common Stock at the Special Meeting or any adjournment thereof as
required by the California Act, conflict with or result in any breach or
violation of any provision of the Restated Articles of Incorporation (or other
comparable charter documents) or By-Laws of GranCare or any of its Pharmacy
Subsidiaries, (ii) result in (1) a breach or violation of, a default under or
an event triggering any payment or other obligation pursuant to any of
GranCare's existing pension plans, welfare plans, multiemployer plans,
employee benefit plans, benefit arrangements or similar plans, arrangements or
policies, including bonus, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, health or group insurance, severance
pay, retirement or other benefit plans, and all similar arrangements or
policies of GranCare and its Subsidiaries (the "GranCare Compensation and
Benefit Plans") or any grant or award made under any of the foregoing in any
case for which GranCare or any of the Pharmacy Subsidiaries would be
responsible after the Distribution, (2) a breach, violation or event
triggering a right of termination of, a default under, the acceleration of any
obligation, or the creation of a lien, pledge, security interest or other
encumbrance on assets (with or without the giving of notice or the lapse of
time or both) pursuant to any provision of any agreement, lease of real or
personal property, marketing agreement, contract, note, mortgage,
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indenture, arrangement or other obligation of GranCare or any of its Pharmacy
Subsidiaries ("GranCare Contracts") or any law, rule, ordinance or regulation
or judgment, decree, order or award to which GranCare or any of its Pharmacy
Subsidiaries is subject or any governmental or non-governmental authorization,
consent, approval, registration, franchise, license or permit under which
GranCare or any of its Pharmacy Subsidiaries conducts the Institutional
Pharmacy Business, or (3) any other change in the rights or obligations of any
party under any of the GranCare Contracts.
Section 4.04 Board Recommendation. The Board of Directors of GranCare has,
by a unanimous vote at a meeting of such Board duly held on September 3, 1996,
approved and adopted this Agreement, the Distribution Agreement, the Merger
and the other transactions contemplated hereby or by the Distribution
Agreement, determined that the consideration to be received by the holders of
shares of GranCare Common Stock pursuant to the Merger is fair to the holders
of such shares and recommended that the holders of such shares approve and
adopt this Agreement, the Distribution Agreement, the Merger and the other
transactions contemplated hereby.
Section 4.05 State Antitakeover Statutes. GranCare has granted all approvals
and taken all other steps necessary to exempt the Merger and the other
transactions contemplated hereby from the requirements and provisions of any
state antitakeover statute or regulation such that none of the provisions of
such "business combination," "moratorium," "control share," or other state
antitakeover statute or regulation (x) prohibits or restricts GranCare's
ability to perform its obligations under this Agreement or its ability to
consummate the Merger and the other transactions contemplated hereby, (y)
would have the effect of invalidating or voiding this Agreement or any
provision hereof, or (z) would subject Vitalink to any material impediment or
condition in connection with the exercise of any of their respective rights
under this Agreement.
Section 4.06 No Existing Violation, Default, Etc. None of GranCare or any of
its Subsidiaries is in violation (except for any violations which would not,
singly or in the aggregate with all such other violations, have a GranCare
Material Adverse Effect) of (A) any applicable law, ordinance, administrative
or governmental rule or regulation or (B) any order, decree or judgment of any
court or governmental agency or body having jurisdiction over GranCare or any
of its Subsidiaries. No event of default or event that, but for the giving of
notice or the lapse of time or both, would constitute an event of default
exists under any GranCare Contract or any lease, permit, license or other
agreement or instrument to which GranCare or any of its Subsidiaries is a
party or by which any of them is bound or to which any of the properties,
assets or operations of GranCare or any of its Subsidiaries is subject (except
for any events of default or other defaults which would not, singly or in the
aggregate with all such other defaults, have a GranCare Material Adverse
Effect).
Section 4.07 Affiliates. GranCare has delivered to Vitalink a letter
identifying all persons who, as of the date hereof, may be deemed to be
"affiliates" of GranCare for purposes of Rule 145 under the Securities Act
("Affiliates") and the written agreement of each such person, substantially in
the form of Exhibit C hereto.
Section 4.08 Licenses and Permits. Each of GranCare and its Subsidiaries has
such certificates, permits, licenses, franchises, consents, approvals, orders,
authorizations and clearances from appropriate governmental agencies and
bodies ("GranCare Licenses") as are necessary to own, lease or operate its
properties and to conduct its business in the manner described in the GranCare
SEC Reports and as presently conducted and all such GranCare Licenses are
valid and in full force and effect, other than any failure to have any such
GranCare License or any failure of any such GranCare License to be valid and
in full force and effect as would not, singly or in the aggregate with all
such other failures, have a GranCare Material Adverse Effect. Each of GranCare
and its Subsidiaries is, and within the period of all applicable statutes of
limitation has been, in compliance with its obligations under such GranCare
Licenses and no event has occurred that allows, or after notice or lapse of
time would allow, revocation or termination of such GranCare Licenses, other
than any such failure to be in compliance with such obligations or any such
revocation or termination as would not, singly or in the aggregate with all
such other failures, revocations or terminations, have a GranCare Material
Adverse Effect. GranCare has no knowledge of any facts or circumstances that
could reasonably be expected to result in an inability of GranCare or any of
its Pharmacy Subsidiaries to renew any GranCare License. Neither the execution
and delivery by GranCare of this Agreement or the Distribution Agreement nor
the consummation of the Distribution, the
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Merger or any of the other transactions contemplated herein will result in any
revocation or termination of any GranCare License or any requirement that the
Surviving Corporation be licensed in respect of any of the GranCare Licenses.
Set forth in Section 4.08 of the GranCare Disclosure Statement is a true and
complete list of all GranCare Licenses which are necessary for the conduct of
the Institutional Pharmacy Business as presently conducted by GranCare and its
Subsidiaries and which are, or will subsequent to the Reorganization be, held
by GranCare and the Pharmacy Subsidiaries.
Section 4.09 Registration Statement; Proxy Statement; SNFCo Registration
Documents. (a) None of the information supplied by GranCare for inclusion or
incorporation by reference in (i) the Registration Statement, (ii) the proxy
statement/prospectus to be sent to the shareholders of GranCare in connection
with the Special Meeting, including all amendments and supplements thereto
(the "Proxy Statement"), or (iii) the Vitalink Information Statement,
including all amendments and supplements thereto, shall, in the case of the
Registration Statement, at (i) the time the Registration Statement becomes
effective and (ii) the Effective Time and, in the case of the Proxy Statement
or the Vitalink Information Statement, on the date the Proxy Statement or the
Vitalink Information Statement is first mailed to stockholders, at the time of
the Special Meeting 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 not misleading.
If at any time prior to the Effective Time any event with respect to GranCare
or any of its Subsidiaries shall occur which is required to be described in
the Registration Statement, the Proxy Statement or the Vitalink Information
Statement, such event shall be so described, and an amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the shareholders of GranCare and Vitalink. The Registration Statement and
Proxy Statement will (with respect to GranCare and its Subsidiaries) comply as
to form in all material respects with the applicable provisions of the
Exchange Act.
(b) The Form S-1 or 10 or other appropriate filing to be made to register
the SNFCo Common Stock under the Securities Act or the Exchange Act, as
appropriate, as such filing may be, amended or supplemented (the "SNFCo
Registration Document"), will not, at the date the SNFCo Registration Document
(or any amendment or supplement thereto), at the time that the SNFCo
Registration Document becomes effective, at the time of the Special Meeting
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 made therein not misleading. The SNFCo
Registration Document will comply as to form in all material respects with the
applicable provisions of the Securities Act or the Exchange Act, as the case
may be.
Section 4.10 Finders or Brokers. Except for PaineWebber Incorporated,
neither GranCare nor any Subsidiary of GranCare has employed any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who might be entitled to a fee or any commission the
receipt of which is conditioned upon consummation of the Merger or the
Distribution.
Section 4.11 SEC Filings. (a) GranCare has filed with the SEC all required
forms, reports and documents required to be filed by it with the SEC since
December 31, 1992 (collectively, the "GranCare SEC Reports"), all of which
complied as to form when filed in all material respects with the applicable
provisions of the Securities Act and the Exchange Act, as the case may be. As
of their respective dates the GranCare SEC Reports (including documents
incorporated by reference therein) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) GranCare will deliver to Vitalink as soon as they become available true
and complete copies of any report or statement mailed by GranCare to its
securityholders generally or filed by it with the SEC, in each case subsequent
to the date hereof and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information therein provided
by Vitalink, as to which GranCare makes no representation) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. The
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audited consolidated financial statements and unaudited consolidated interim
financial statements of GranCare and its Subsidiaries to be included or
incorporated by reference in such reports and statements will be prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved and will fairly present the
consolidated financial position of GranCare and its Subsidiaries as of the
dates thereof and the consolidated results of operations and consolidated cash
flow for the periods then ended (subject, in the case of any unaudited interim
financial statements, to normal year-end adjustments and to the extent they
may not include footnotes or may be condensed or summary statements).
Section 4.12 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of GranCare
and its Subsidiaries included or incorporated by reference in the GranCare SEC
Reports and the unaudited Institutional Pharmacy Business Financial Statements
as set forth in Section 4.12 of the GranCare Disclosure Schedule have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved, and fairly presented the
consolidated financial position of GranCare and its Subsidiaries and the
Institutional Pharmacy Business, respectively, as of the dates thereof and the
consolidated results of operations and consolidated cash flows for the periods
then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments and to the extent they may not
include footnotes or may be condensed or summary statements) and such audited
financial statements have been certified as such (without exception) by
GranCare's independent accountants.
Section 4.13 Absence of Undisclosed Liabilities. Neither GranCare nor its
Subsidiaries has any liabilities or obligations of any nature, whether
absolute, accrued, unmatured, contingent or otherwise, or any unsatisfied
judgments or any leases of personalty or realty or unusual or extraordinary
commitments, except the liabilities recorded on the GranCare Balance Sheet (as
hereinafter defined) and the notes thereto, and except for liabilities or
obligations incurred in the ordinary course of business and consistent with
past practice since December 31, 1995 that would not, singly or in the
aggregate, be reasonably expected to have a GranCare Material Adverse Effect.
Section 4.14 Absence of Changes or Events. (a) Since December 31, 1995 (i)
GranCare and its Subsidiaries have conducted their business in the ordinary
course and have not incurred any material liability or obligation (indirect,
direct or contingent) or entered into any material oral or written agreement
or other transaction that is not in the ordinary course of business (other
than the Distribution Agreement and this Agreement) or that could reasonably
be expected to result in any GranCare Material Adverse Effect; (ii) neither
GranCare nor its Pharmacy Subsidiaries have sustained any material loss or
interference with their business or properties from fire, flood, windstorm,
accident, strike or other calamity (whether or not covered by insurance);
(iii) there has been no material change in the indebtedness of GranCare and
its Pharmacy Subsidiaries, no change in the authorized capital stock of
GranCare and no dividend or distribution of any kind declared, paid or made by
GranCare on any class of its capital stock other than the Distribution; (iv)
there has been no event or condition which has caused a GranCare Material
Adverse Effect, nor any development, occurrence or state of facts or
circumstances that could, singly or in the aggregate, reasonably be expected
to result in a GranCare Material Adverse Effect; (v) there has been no
amendment, modification or supplement to any material term of any GranCare
Contract to which a Pharmacy Subsidiary is a party required to be identified
in Section 4.21 of the GranCare Disclosure Statement or any equity security;
and (vi) there has been no material change by GranCare in its accounting
principles, practices or methods.
(b) Since December 31, 1995, other than in the ordinary course of business
consistent with past practice, there has not been any increase in the
compensation or other benefits payable, or which could become payable, by
GranCare, to its officers or key employees, or any amendment of any of the
GranCare Compensation and Benefit Plans.
Section 4.15 Capitalization. (a) The authorized capital stock of GranCare
consists of 50,000,000 shares of GranCare Common Stock and 2,000,000 shares of
Preferred Stock (the "GranCare Preferred Stock"), of which (i) 390,000 shares
have been authorized as Series A Convertible Preferred, (ii) 175,000 shares
have been
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authorized as Series B Mandatorily Redeemable Preferred Stock, (iii) 665,000
shares have been authorized as Series C Convertible Preferred Stock and (iv)
4,500 shares have been authorized as Series D Exchangeable Preferred Stock. As
of August 26, 1996, there are 23,370,693 shares of GranCare Common Stock
(including shares in respect of Evergreen Healthcare, Inc. common stock and
National Heritage, Inc. common stock for which certificates have not been
tendered for exchange), no shares of GranCare Preferred Stock outstanding and
200,100 shares of GranCare Common Stock owned by a wholly-owned subsidiary of
GranCare; and except for shares which were reserved for issuance and which may
have been issued pursuant to the following sentence there have been no
issuances of capital stock of GranCare since August 26, 1996. As of August 26,
1996, 2,355,250 shares of GranCare Common Stock were reserved for issuance
upon the exercise of outstanding options (the "GranCare Options") granted
under the stock option plans of GranCare (the "GranCare Option Plans"),
2,210,351 shares were reserved for issuance upon conversion of GranCare's 6-
1/2% Convertible Subordinated Debentures due 2003 (the "Convertible
Debentures"), 2,500 shares were committed to be issued to employees of
GranCare and its subsidiaries in recognition of 25 years of service, 304,803
shares were reserved for issuance upon the exercise of GranCare's Series D, E
and F warrants and no other shares of GranCare Common Stock are reserved for
any purpose. Except for the foregoing, there are not any existing options,
warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating GranCare to issue, transfer or sell any shares of
capital stock of GranCare or any of its Subsidiaries or any other securities
convertible into or evidencing the right to subscribe for any such shares.
There are no outstanding stock appreciation rights with respect to the capital
stock of GranCare or any of its Subsidiaries. All issued and outstanding
shares of GranCare Common Stock are duly authorized and validly issued, fully
paid and non-assessable and have not been issued in violation of (nor are any
of the authorized shares of capital stock of, or other equity interests in,
GranCare subject to) any preemptive or similar rights created by statute, the
Restated Articles of Incorporation or By-Laws of GranCare or any agreement to
which GranCare is a party or bound.
(b) There are no obligations, contingent or otherwise, of GranCare to (i)
repurchase, redeem or otherwise acquire any shares of GranCare Common Stock;
or (ii) provide funds to, or make any investment in (in the form of a loan,
capital contribution or otherwise except for transactions described in Exhibit
A to the Distribution Agreement), or provide any guarantee with respect to the
obligations of, any other person. There are no agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person is or may be entitled to receive any payment based on the revenues or
earnings, or calculated in accordance therewith, of GranCare. There are no
voting trusts, proxies or other agreements or understandings to which GranCare
is a party or by which GranCare is bound with respect to the voting of any
shares of capital stock of GranCare.
(c) GranCare has delivered or made available to Vitalink complete and
correct copies of each of the GranCare Option Plans, including all amendments
thereto. Section 4.15(c) of the GranCare Disclosure Statement sets forth a
complete and correct list of all outstanding options setting forth (i) the
exercise price of each outstanding GranCare Option, (ii) the number of
GranCare Options, (iii) the date of grant of each such GranCare Option.
Section 4.15(c) of the GranCare Disclosure Statement sets forth a complete and
correct list of all restricted stock awards including the recipients and the
number of shares of GranCare Common Stock received or to be received by each.
Section 4.16 Capital Stock of Subsidiaries. The only direct or indirect
Subsidiaries of GranCare are those listed in Section 4.16 of the GranCare
Disclosure Statement, which Section 4.16 separately sets forth the Pharmacy
Subsidiaries. GranCare is directly or indirectly the record (except for
directors' qualifying shares as reflected in such Section 4.16) and beneficial
owner (including all such qualifying shares) of all of the outstanding shares
of capital stock of each of its Pharmacy Subsidiaries, there are no proxies
with respect to such shares, and there are not any existing options, warrants,
calls, subscriptions, or other rights or other agreements or commitments
obligating GranCare or any of such Subsidiaries to issue, transfer or sell any
shares of capital stock of such Subsidiary or any other securities convertible
into or evidencing the right to subscribe for any such shares. All of such
shares beneficially owned by GranCare are duly authorized and validly issued,
fully paid, nonassessable and free of preemptive rights with respect thereto
and are owned by GranCare free and
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clear of any claim, lien or encumbrance of any kind with respect thereto.
GranCare does not directly or indirectly own any interest in any corporation,
partnership, joint venture or other business association or entity.
Section 4.17 Litigation. There are no pending actions, suits, proceedings
or, to the best knowledge of GranCare after due inquiry, investigations by,
against or affecting GranCare, any of its Pharmacy Subsidiaries or any of
their properties, assets or operations, or with respect to which GranCare or
any of its Pharmacy Subsidiaries is responsible by way of indemnity or
otherwise. No pending or, to the knowledge of GranCare, threatened actions,
suits, proceedings or investigations by, against or affecting GranCare, any of
its Subsidiaries or any of their properties, assets or operations, or with
respect to which they are responsible by way of indemnity or otherwise,
whether or not disclosed in such GranCare SEC Reports, would, singly or in the
aggregate with all such other actions, suits, investigations or proceedings,
reasonably be expected to have a GranCare Material Adverse Effect; and, to the
best knowledge of GranCare after due inquiry, no actions, suits, proceedings
or investigations which would reasonably be expected to have a GranCare
Material Adverse Effect are threatened or contemplated and there is no
reasonable basis, to the best knowledge of GranCare after due inquiry, for any
such action, suit, proceeding or investigation, whether or not threatened or
contemplated.
Section 4.18 Insurance. GranCare has insurance policies and fidelity bonds
covering it and its Subsidiaries' assets, business, equipment, properties,
operations, employees, officers and directors of the type and in amounts
customarily carried by persons conducting business similar to that of GranCare
and such Subsidiaries. All premiums due and payable under all such policies
and bonds have been paid, and GranCare is otherwise in full compliance with
the terms and conditions of all such policies and bonds, except where the
failure to have made payment or to be in full compliance would not, singly or
in the aggregate with all such other failures, have a GranCare Material
Adverse Effect. The reserves established by GranCare in respect of all matters
as to which GranCare self-insures or carries retentions and/or deductibles,
including for workers' medical coverage and workers' compensation, are
adequate and appropriate in light of GranCare's experience since December 31,
1992 with respect thereto and GranCare is not aware, after due inquiry, of any
facts or circumstances existing as of the date hereof that could reasonably be
expected to cause such reserves to be inadequate or inappropriate. Section
4.18 of the GranCare Disclosure Statement sets forth a true and complete list
of all insurance policies including retention and/or deductible programs, and
fidelity bonds of GranCare.
Section 4.19 Title to and Condition of Properties. GranCare and its Pharmacy
Subsidiaries have good title to all of the real property and personal property
which is reflected on GranCare's December 31, 1995 audited consolidated
balance sheet contained in GranCare's Form 10-K for the fiscal year ended
December 31, 1995 filed with the SEC (the "GranCare Balance Sheet") except for
property since sold or otherwise disposed of in the ordinary course of
business and consistent with past practice. Set forth in Section 4.19(a) of
the GranCare Disclosure Statement is a true and complete list of all real
properties owned by GranCare and its Pharmacy Subsidiaries and used in
connection with the Institutional Pharmacy Business, all of which real
properties are reflected on the GranCare Balance Sheet. No such real or
personal property is subject to claims, liens or other encumbrances of any
kind or character, including, without limitation, mortgages, pledges, liens,
conditional sale agreements, charges, security interests, easements,
restrictive covenants, rights of way or options, except for (i) liens for
taxes not yet delinquent or which are being contested in good faith by
appropriate proceedings and in respect of which GranCare or its appropriate
Subsidiary has set aside on its books adequate reserves in accordance with
generally accepted accounting principles; (ii) mechanics', carriers',
workers', repairers', materialmen's and other similar statutory liens incurred
in the ordinary course of business for obligations not yet delinquent or the
validity of which are being contested in good faith by appropriate proceedings
and in respect of which GranCare or its appropriate Subsidiary has set aside
on its books adequate reserves in accordance with generally accepted
accounting principles; (iii) in the case of real property, easements, rights
of way, restrictions, minor defects or irregularities in title that do not
individually or in the aggregate have a material adverse effect on the value
or use of the real property encumbered thereby as currently used in the
operation of the business of GranCare or its Subsidiaries; or (iv) those which
would not materially interfere with the conduct of the business of GranCare
and its Pharmacy Subsidiaries or impair GranCare's ability to perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby (the encumbrances described in clauses (i)
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through (iv) of this sentence, collectively, the "GranCare Permitted
Encumbrances"). There are no eminent domain proceedings pending or, to the
knowledge of GranCare, threatened against any owned property or any material
portion thereof which proceedings (if resulting in a taking) could reasonably
be expected to have a material adverse effect on the value or use of such
property as currently used in the operation of the pharmacy business of
GranCare or its Subsidiaries. To the knowledge of GranCare, (i) the real
properties and the improvements located thereon (including the roof and
structural portions of each building) are in good operating order and
condition, subject to ordinary wear and tear, (ii) there are no structural,
mechanical or other defects of a material nature in any improvements located
on the real properties, (iii) all building systems in respect of the real
properties are in all material respects in good condition and working order,
subject to ordinary wear and tear, and (iv) the real properties are served by
all utilities required or necessary for the present use thereof. GranCare has
made available to Vitalink true and correct copies of all title insurance
commitments, title insurance policies and surveys in the possession of
GranCare or its Subsidiaries relating to the real properties set forth in
Section 4.19(a) of the GranCare Disclosure Statement.
Section 4.20 Leases. There have been delivered or made available to Vitalink
true and complete copies of each lease requiring the payment of rentals
aggregating, or pursuant to which the annual rentals are reasonably expected
to be, at least $100,000 per annum pursuant to which real or personal property
is held under lease by GranCare (other than those properties held by GranCare
and utilized solely with respect to the Skilled Nursing Business) or any of
its Pharmacy Subsidiaries, and true and complete copies of each lease pursuant
to which GranCare or any of its Pharmacy Subsidiaries leases real or personal
property to others for use in a pharmacy related business. Section 4.20 of the
GranCare Disclosure Statement sets forth a true and complete list of all such
leases and such leases are the only leases that are material to the current
operations of the Institutional Pharmacy Business. All of the leases so listed
are valid and subsisting and in full force and effect with respect to GranCare
and the Pharmacy Subsidiaries, as the case may be, and, to GranCare's
knowledge, with respect to any other party thereto and GranCare or its
Pharmacy Subsidiaries, as the case may be, have valid leasehold interests in
all properties leased thereunder free and clear of all liens created by,
through or under GranCare or its Pharmacy Subsidiaries other than GranCare
Permitted Encumbrances. The leased real properties are in good operating order
and condition, subject to ordinary wear and tear.
Section 4.21 Contracts and Commitments. Neither GranCare nor the Pharmacy
Subsidiaries are a party to any existing contract, obligation or commitment of
any type in any of the following categories:
(a) contracts for the purchase by GranCare or any of its Pharmacy
Subsidiaries of medicine, materials, supplies or equipment which are not
cancellable upon 30 days' or less notice and which either (i) have not been
entered into in the ordinary course of business and consistent with past
practice or (ii) provide for purchase prices substantially greater than
those presently prevailing for such materials, supplies or equipment, or
(iii) contracts obligating GranCare or any of its Pharmacy Subsidiaries to
make capital expenditures in excess of $200,000;
(b) contracts under which GranCare or any Pharmacy Subsidiary has, except
by way of endorsement of negotiable instruments for collection in the
ordinary course of business and consistent with past practice, become
absolutely or contingently or otherwise liable for (i) the performance of
any other person, firm or corporation under a contract, or (ii) the whole
or any part of the indebtedness or liabilities of any other person, firm or
corporation, except in either case for any such contracts for which
GranCare and its Pharmacy Subsidiaries would not be responsible after the
Distribution;
(c) powers of attorney outstanding from GranCare other than as issued in
the ordinary course of business and consistent with past practice with
respect to customs, insurance, patent, trademark or tax matters, or to
agents for service of process;
(d) contracts under which any amount payable by GranCare is dependent
upon, or calculated in accordance with, the revenues or profits of
GranCare, any of its Subsidiaries or SNFCo;
(e) contracts with any director, officer or employee of GranCare other
than in such person's capacity as a director, officer or employee of
GranCare;
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(f) contracts which limit or restrict where GranCare or any of its
Pharmacy Subsidiaries may conduct its or their business or the type or line
of business which GranCare or any of its Subsidiaries may engage in;
(g) other than attached as exhibits to the Distribution Agreement, any
contracts, obligations or commitments which will exist following the
Distribution between GranCare or the Pharmacy Subsidiaries on the one hand,
and the Non-Institutional Pharmacy Business on the other;
(h) contracts with any party for the loan of money or availability of
credit to or from GranCare or any of its Pharmacy Subsidiaries (except
credit extended by GranCare or any of its Pharmacy Subsidiaries to its or
their customers in the ordinary course of business and consistent with past
practice); or
(i) any hedging, option, derivative or other similar transaction.
True and complete copies of all contracts, obligations and commitments listed
in Section 4.21 of the GranCare Disclosure Statement have been delivered or
made available to Vitalink. All such contracts are in full force and effect.
None of GranCare or its Pharmacy Subsidiaries or, to the best of GranCare's
knowledge, any other party is in breach of or default under any such contracts
(and no facts or circumstances exist which could reasonably support the
assertion of any such breach or default) except for breaches and defaults by
parties other than GranCare and its Pharmacy Subsidiaries which would not,
singly or in the aggregate with all other such breaches, have a GranCare
Material Adverse Effect.
Section 4.22 Labor Matters. None of GranCare or any of its Pharmacy
Subsidiaries is a party to any union contract or other collective bargaining
agreement, true and complete copies of which contracts have been delivered to
Vitalink. Each of GranCare and its Pharmacy Subsidiaries is in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment, safety, wages and
hours, and neither GranCare nor any of its Pharmacy Subsidiaries is engaged in
any unfair labor practice. There is no labor strike, slowdown or stoppage
pending (or, to the best knowledge of GranCare, any labor strike or stoppage
threatened) against or affecting GranCare or any of its Pharmacy Subsidiaries.
To the best of GranCare's knowledge, no union organizing activities with
respect to any of its or its Pharmacy Subsidiaries' employees are occurring or
threatened.
Section 4.23 No Change of Control Puts. Neither the execution and delivery
by GranCare of this Agreement or the Distribution Agreement nor the
consummation of the Distribution, the Merger or any of the other transactions
contemplated hereby gives rise to any obligation of GranCare or any of its
Subsidiaries to, or any right of any holder of any security of GranCare or any
of its Subsidiaries to, require GranCare to purchase, offer to purchase,
redeem or otherwise prepay or repay any such security, or deposit any funds to
effect the same.
Section 4.24 Employment and Labor Contracts. Neither GranCare nor any of its
Pharmacy Subsidiaries is a party to any employment, management services,
consultation or other contract or agreement (except for any such contracts or
agreements for which GranCare would not be responsible after the Distribution)
with any past or present officer, director or employee or, to the best of
GranCare's knowledge, any entity affiliated with any past or present officer,
director or employee, in each case true and complete copies of which contracts
have been delivered to Vitalink, and other than the agreements executed by
employees generally, the forms of which have been provided to Vitalink.
Section 4.25 Intellectual Property Rights. GranCare or its Pharmacy
Subsidiaries own or have the right to use all Intellectual Property Rights
necessary to the conduct of their respective businesses. Section 4.25 of the
GranCare Disclosure Statement contains a worldwide list of all patents, trade
names, registered and unregistered copyrights, trademarks and service marks,
mask works and applications for the foregoing owned by GranCare or its
Pharmacy Subsidiaries. GranCare and/or its Pharmacy Subsidiaries have clear
and unencumbered title to the Intellectual Property Rights set forth in such
Section 4.25 and such title has not been challenged (pending or threatened) by
others except for the encumbrances listed therein. Such Section 4.25 also
contains a list of unpatented inventions used or planned for use by GranCare
or its Pharmacy Subsidiaries. No rights or licenses
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to use Intellectual Property Rights have been granted or acquired by GranCare
or its Pharmacy Subsidiaries. There have been no claims or assertions made by
others that GranCare has infringed any Intellectual Property Rights of others
by the sale of products or any other activity in the preceding six year period
and, to the knowledge of GranCare, there has been no such infringement by
GranCare or any of its Pharmacy Subsidiaries during this period. GranCare has
no knowledge of any infringement of Intellectual Property Rights of GranCare
or any of its Pharmacy Subsidiaries by others. All such patents, registered
trademarks, service marks, and copyrights owned by GranCare or its Pharmacy
Subsidiaries are in good standing, and are recorded on the public record in
the name of GranCare or its Pharmacy Subsidiaries. True and complete copies of
all material listed in Section 4.25 of the GranCare Disclosure Statement have
been delivered or made available to Vitalink.
Section 4.26 Taxes. (i) GranCare and its Subsidiaries have prepared and
timely filed or will timely file with the appropriate governmental agencies
all franchise, income and all other Tax Returns required to be filed by them
on or before the Effective Time, taking into account any extension of time to
file granted to or obtained on behalf of GranCare and/or its Subsidiaries
(copies of which for the past three fiscal years have been delivered or made
available to Vitalink); (ii) all Taxes of GranCare and its Subsidiaries have
been paid in full to the proper authorities or fully accrued for with respect
to fiscal periods for which there are publicly available financial statements
and otherwise on the books of GranCare, other than such Taxes as are being
contested in good faith by appropriate proceedings and are adequately reserved
for in accordance with generally accepted accounting principles; (iii) all
deficiencies asserted in writing as a result of Tax examinations of federal,
state and foreign income, sales and franchise and all other Tax Returns filed
by GranCare and its Subsidiaries have either been paid or adequately reserved
for in accordance with generally accepted accounting principles; (iv) to the
best knowledge of GranCare, no unpaid deficiency has been asserted or assessed
against GranCare or any of its Subsidiaries, and no examination of GranCare or
any of its Subsidiaries is pending or threatened for any material amount of
Tax by any taxing authority (with respect to any such action, Section 4.26 of
the GranCare Disclosure Statement sets forth the periods at issue and the
category of Tax, and the examining authority's and any corresponding revenue
agents' reports relating to the issue have been delivered or made available to
Vitalink); (v) no extension of the period for assessment or collection of any
Tax of GranCare or any of its Subsidiaries is currently in effect and no
extension of time within which to file any Tax Return of GranCare or any of
its Subsidiaries has been requested, which Tax Return has not since been
filed; (vi) no Tax liens have been filed with respect to any Taxes of GranCare
or any of its Subsidiaries except for property taxes which have accrued but
with respect to which penalty for non-payment has not occurred; (vii) neither
GranCare nor any of its Subsidiaries has agreed to make any adjustment by
reason of a change in their accounting methods that would affect the taxable
income or deductions of GranCare or any of its Subsidiaries for any period
ending after the Effective Time; (viii) GranCare and its Subsidiaries have
made timely payments of the Taxes required to be deducted and withheld from
the wages paid to their employees; (ix) there are no Tax sharing agreements or
arrangements under which GranCare or any Subsidiary will have any obligation
or liability on or after the Effective Time; (x) GranCare and its Subsidiaries
have no foreign losses as defined in Section 904(f)(2) of the Code; (xi) to
the best knowledge of GranCare, there are no transfer pricing agreements made
by or on behalf of GranCare or any of its Subsidiaries with any taxation
authority; (xii) no assets of GranCare or any of its Subsidiaries is held in
an arrangement for which partnership Tax Returns are being filed and neither
GranCare nor any of its Subsidiaries is a partner in any partnership; (xiii)
neither GranCare nor any of its Subsidiaries owns any interest in any
"controlled foreign corporation" (within the meaning of Section 957 of the
Code), "passive foreign investment company" (within the meaning of Section
1296 of the Code) or other entity the income of which is required to be
included in the income of GranCare or such Subsidiary; (xiv) neither GranCare
nor any of its Subsidiaries has made an election under Section 341(f) of the
Code; and (xv) neither GranCare nor any of its Subsidiaries is obligated to
make any payments that would constitute excess parachute payments within the
meaning of Section 280G of the Code.
Section 4.27 Employee Benefit Plans; ERISA. (a) There are no "employee
pension benefit plans" as defined in Section 3(2) of ERISA covering employees
(or former employees) employed in the United States, maintained or contributed
to by GranCare or any of its Subsidiaries or any of their ERISA Affiliates, or
to which GranCare or any of its Subsidiaries or any of their ERISA Affiliates
contributes or is obligated to make payments thereunder or otherwise may have
any liability ("GranCare Pension Benefit Plans").
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(b) GranCare has delivered or made available to Vitalink true and complete
copies of all "welfare benefit plans" (as defined in Section 3(1) of ERISA)
covering employees (or former employees) employed in the United States,
maintained or contributed to by GranCare or any of its Subsidiaries (other
than fully insured welfare benefit plans that will be assumed by SNFCo)
("GranCare Welfare Plans"), all multiemployer plans (as defined in Section
3(37) of ERISA) covering employees (or former employees) employed in the
United States to which GranCare or any of its Subsidiaries or any of their
ERISA Affiliates is required to make contributions or otherwise may have any
liability, and, to the extent covering employees (or former employees)
employed in the United States, all stock bonus, stock option, restricted
stock, stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance and vacation plans maintained or contributed to by
GranCare or a Subsidiary of GranCare.
(c) GranCare and each of its Subsidiaries, and each of the GranCare Pension
Benefit Plans and GranCare Welfare Plans, are in compliance with the
applicable provisions of ERISA and other applicable laws except where the
failure to comply would not, singly or in the aggregate, reasonably be
expected to have a GranCare Material Adverse Effect.
(d) All contributions to, and payments from, the GranCare Pension Benefit
Plans which are required to have been made in accordance with the GranCare
Pension Benefit Plans and, when applicable, Section 302 of ERISA or Section
412 of the Code have been timely made except where the failure to make such
contributions or payments on a timely basis would not, singly or in the
aggregate, reasonably be expected to have a GranCare Material Adverse Effect.
(e) The GranCare Pension Benefit Plans intended to qualify under Section 401
of the Code have been determined by the IRS to be so qualified and nothing has
occurred with respect to the operation of such GranCare Pension Benefit Plans
which would cause the loss of such qualification or exemption or the
imposition of any material liability, penalty or tax under ERISA or the Code.
Such plans have been or will be amended on a timely basis to comply with
changes to the Code made by the Tax Reform Act of 1986 and other applicable
legislative, regulatory or administrative requirements.
(f) There are (i) no investigations pending, to the best knowledge of
GranCare, by any governmental entity involving the GranCare Pension Benefit
Plans or GranCare Welfare Plans, (ii) no termination proceedings involving the
GranCare Pension Benefit Plans and (iii) no pending or, to the best of
GranCare's knowledge, threatened claims (other than routine claims for
benefits), suits or proceedings against any GranCare Pension Benefit Plan or
GranCare Welfare Plan, against the assets of any of the trusts under any
GranCare Pension Benefit Plan or GranCare Welfare Plan or against any
fiduciary of any GranCare Pension Benefit Plan or GranCare Welfare Plan with
respect to the operation of such plan or asserting any rights or claims to
benefits under any GranCare Pension Benefit Plan or against the assets of any
trust under such plan, except for those which would not, singly or in the
aggregate, give rise to any liability which would reasonably be expected to
have a GranCare Material Adverse Effect, nor, to the best of GranCare's
knowledge, are there any facts which would give rise to any liability except
for those which would not, singly or in the aggregate, reasonably be expected
to have a GranCare Material Adverse Effect in the event of any such
investigation, claim, suit or proceeding.
(g) None of GranCare, any of its Subsidiaries or any employee of the
foregoing, nor any trustee, administrator, other fiduciary or any other "party
in interest" or "disqualified person" with respect to the GranCare Pension
Benefit Plans or GranCare Welfare Plans, has engaged in a "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section
406 of ERISA) which would be reasonably likely to result in a tax or penalty
on GranCare or any of its Subsidiaries under Section 4975 of the Code or
Section 502(i) of ERISA, except any such event which would not, singly or in
the aggregate, reasonably be expected to have a GranCare Material Adverse
Effect.
(h) Neither the GranCare Pension Benefit Plans subject to Title IV of ERISA
nor any trust created thereunder has been terminated nor have there been any
"reportable events" (as defined in Section 4043 of
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ERISA and the regulations thereunder) with respect to either thereof, except
any such event which would not, singly or in the aggregate, reasonably be
expected to have a GranCare Material Adverse Effect nor has there been any
event with respect to any GranCare Pension Benefit Plan requiring disclosure
under Section 4063(a) of ERISA or any event with respect to any GranCare
Pension Benefit Plan requiring disclosure under Section 4041(c)(3)(C) of
ERISA, except any such event which would not, singly or in the aggregate,
reasonably be expected to have a GranCare Material Adverse Effect.
(i) Neither GranCare nor any Subsidiary of GranCare nor any ERISA Affiliate
has incurred any currently outstanding liability to the PBGC or to a trustee
appointed under Section 4042(b) or (c) of ERISA other than for the payment of
premiums, all of which have been paid when due. No GranCare Pension Benefit
Plan has applied for, or received, a waiver of the minimum funding standards
imposed by Section 412 of the Code. The information supplied to the actuary by
GranCare or any of its Subsidiaries for use in preparing the most recent
actuarial report for the GranCare Pension Benefit Plans is complete and
accurate in all material respects.
(j) Neither GranCare, any of its Subsidiaries nor any of their ERISA
Affiliates has any liability (including any contingent liability under Section
4204 of ERISA) with respect to any multiemployer plan, within the meaning of
Section 3(37) of ERISA, covering employees (or former employees) employed in
the United States.
(k) With respect to each of the GranCare Pension Benefit Plans and GranCare
Welfare Plans, true, correct and complete copies of the following documents
have been delivered or made available to Vitalink: (i) the current plans and
related trust documents, including amendments thereto, (ii) any current
summary plan descriptions, (iii) the most recent Forms 5500, financial
statements and actuarial reports, if applicable, and (iv) the most recent IRS
determination letter, if applicable.
(l) Neither GranCare, any of its Subsidiaries, any organization to which
GranCare is a successor or parent corporation, within the meaning of Section
4069(b) of ERISA, nor any of their ERISA Affiliates has engaged in any
transaction, within the meaning of Section 4069(a) of ERISA, except where the
liability for which would not, singly or in the aggregate, reasonably be
expected to have a GranCare Material Adverse Effect.
(m) None of the GranCare Welfare Plans maintained by GranCare or any of its
Subsidiaries are retiree life or retiree health insurance plans which provide
for continuing benefits or coverage for any participant or any beneficiary of
a participant following termination of employment, except as may be required
under COBRA or except at the expense of the participant or the participant's
beneficiary. GranCare and each of its Subsidiaries which maintain a "group
health plan" within the meaning of Section 5000(b)(1) of the Code have
complied with the notice and continuation requirements of Section 4980B of the
Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder except where the failure to comply would not, singly or in the
aggregate, reasonably be expected to have a GranCare Material Adverse Effect.
(n) No liability under any GranCare Pension Benefit Plan or GranCare Welfare
Plan has been funded nor has any such obligation been satisfied with the
purchase of a contract from an insurance company as to which GranCare or any
of its Subsidiaries has received notice that such insurance company is in
rehabilitation.
(o) The consummation of the transactions contemplated by this Agreement will
not result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or compensation
payable to or in respect of any employee of GranCare or any of its
Subsidiaries.
(p) GranCare has disclosed to Vitalink in Section 4.27 of the GranCare
Disclosure Statement each of GranCare's material Foreign Plans to the extent
the benefits provided thereunder are not mandated by the laws of the
applicable foreign jurisdiction. GranCare and each of its Subsidiaries and
each of such Foreign Plans are in compliance with applicable laws and all
required contributions have been made to such Foreign Plans, except where the
failure to comply or make contributions would not, singly or in the aggregate,
reasonably be expected to have a GranCare Material Adverse Effect.
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Section 4.28 Environmental Matters. (a) Except as would not, singly or in
the aggregate with all other such non-compliances, have a GranCare Material
Adverse Effect, GranCare and its Subsidiaries are, and within the period of
all applicable statutes of limitation have been, in compliance with all
applicable Environmental Laws, which compliance includes, without limitation,
the possession of all Environmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof, and
there are no circumstances of which GranCare is aware which may materially
prevent or interfere with compliance in the future. To GranCare's knowledge
GranCare and its Subsidiaries have all Environmental Authorizations necessary
for the conduct of the businesses of GranCare and its Subsidiaries as
currently conducted. Neither GranCare nor any of its Subsidiaries has been
notified, or has any reasonable basis to believe, that any such Environmental
Authorizations will be modified, suspended or revoked or cannot be renewed or
otherwise maintained in the ordinary course of business. To GranCare's
knowledge after due inquiry, the execution and delivery of this Agreement and
the consummation by GranCare of the Merger, the Distribution and the other
transactions contemplated hereby will not affect the validity or require the
transfer of any Environmental Authorizations associated with the Institutional
Pharmacy Business, and will not require any notification, registration,
reporting, filing, investigation or remediation under any Environmental Law.
(b) There are no Environmental Notices that, singularly or in the aggregate,
could reasonably be expected to have a GranCare Material Adverse Effect (i)
pending or, to the best knowledge of GranCare, threatened against GranCare or
any of its Subsidiaries, (ii) to GranCare's knowledge pending or threatened
against any person or entity whose liability for such Environmental Notice may
have been retained or assumed by or could reasonably be imputed or attributed
by law or contract to GranCare or any of its Subsidiaries, (iii) that to
GranCare's knowledge could subject GranCare to any material risk of liability,
loss or damages, or (iv) that to GranCare's knowledge could reasonably be
expected to require investigation, removal or remedial or corrective action by
GranCare or any of its Subsidiaries. Since May 31, 1996, neither GranCare nor
any of its Subsidiaries has received any Environmental Notice alleging that
GranCare or any of its Subsidiaries is subject to liability under any
Environmental Law or that GranCare or any of its Subsidiaries is not in full
compliance with Environmental Laws.
(c) There is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, notice or demand letter or request for
information or to the best knowledge of GranCare, investigation pending or
threatened under any Environmental Law (i) against GranCare or any of its
Subsidiaries, or (ii) to the knowledge of GranCare, against any person or
entity in connection with which liability could reasonably be imputed or
attributed by law or contract to GranCare or any of its Subsidiaries except
with respect to each of clause (i) and (ii) for such demands, claims, notices
of violation, notice or demand letters or requests for information which
singly or in the aggregate could not reasonably be expected to have a GranCare
Material Adverse Effect.
(d) No property or facility presently or to the knowledge of GranCare
formerly owned, operated or leased by GranCare or any of its present
Subsidiaries, or to the knowledge of GranCare any of its former Subsidiaries,
or any of their respective predecessors in interest, is listed or proposed for
listing on the National Priorities List or the Comprehensive Environmental
Response, Compensation and Liability Information System, both promulgated
under CERCLA, or on any comparable list established under any Environmental
Law, nor has GranCare or any of its Subsidiaries received any written
notification of potential or actual liability or any request for information
under CERCLA or any comparable foreign, state or local law.
(e) There has been no disposal, spill, discharge or release of any Hazardous
Materials generated, used, owned, stored or controlled by GranCare, or to
GranCare's knowledge any of its Subsidiaries, or any of their respective
predecessors in interest, on, at or under any property presently or formerly
owned, leased or operated by GranCare, or to GranCare's knowledge its
Subsidiaries, or any predecessors in interest, and to GranCare's knowledge
there are no Hazardous Materials located in, at, on or under, or in the
vicinity of, any such facility or property, or at any other location, that (i)
could reasonably be expected to subject GranCare to a material risk of
liability, loss or damages, or result in the incurrence by GranCare of costs
under Environmental Laws, (ii) could
B-36
reasonably be expected to form the basis of any Environmental Notice against
or with respect to GranCare or any of its Subsidiaries, or against any person
or entity whose liability for any Environmental Notice may have been retained
or assumed by or could be imputed or attributed by law or contract to GranCare
or any of its Subsidiaries or (iii) could reasonably be expected to require
investigation, removal or remedial or corrective action by GranCare or any of
its Subsidiaries, that in any case singularly or in the aggregate reasonably
could be expected to have a GranCare Material Adverse Effect.
(f) Without in any way limiting the generality of the foregoing, to
GranCare's knowledge (i) there are and have been no underground or aboveground
storage tanks or other storage receptacles, or related piping or other
disposal areas containing Hazardous Materials, located on, at or under
property owned, operated or leased by GranCare, any of its Subsidiaries or any
of their respective predecessors in interest, (ii) there are and have been no
polychlorinated biphenyls located on any properties owned, operated or leased
by GranCare or any of its Subsidiaries, and (iii) there is no asbestos
contained in or forming part of any building, building component, structure or
office space owned, operated or leased by GranCare or any of its Subsidiaries.
(g) To GranCare's knowledge no lien has been recorded under Environmental
Laws with respect to any properties, assets or facilities owned, operated or
leased by GranCare or any of its Subsidiaries.
(h) In accordance with Section 5.05, GranCare has given Vitalink and its
authorized representatives access to all records and files in its possession
or control relating to actual or potential compliance or liability issues of
GranCare or its Subsidiaries and any of their respective predecessors in
interest under Environmental Laws, including, without limitation, all reports,
studies, analyses, tests or monitoring results pertaining to the existence of
Hazardous Material or any other environmental concern relating to properties,
assets or facilities currently or formerly owned, operated, managed, leased,
used or controlled by GranCare any of its Subsidiaries, or otherwise
concerning compliance with or liability under Environmental Laws.
Section 4.29 Directors, Officers and Compensation of Employees. There is set
forth in Section 4.29 of the GranCare Disclosure Statement a true and complete
list showing, to the extent they are expected to become directors, officers or
employees of Vitalink subsequent to the Effective Date, (a) the names and
addresses of all such directors and officers of GranCare and its Pharmacy
Subsidiaries and (b) the names of all salaried persons whose aggregate
compensation for purposes of Federal income tax reporting from GranCare and
its Pharmacy Subsidiaries in the fiscal year ended December 31, 1995 was, or
in the fiscal year ending December 31, 1996 is expected to be, U.S. $100,000
or more per year, together with a statement of the full amount expected to be
paid to such person for services in all capacities to be rendered in the
fiscal year ending December 31, 1996, and the basis thereof, separately
including the amounts paid or payable during such fiscal years, or expected to
be paid or payable, under bonus or incentive arrangements, if any.
Section 4.30 Banks. There is set forth in Section 4.30 of the GranCare
Disclosure Statement a true and complete list showing the account numbers and
name of each bank in which any of the Pharmacy Subsidiaries has an account or
safe deposit box and the names of all persons authorized to draw thereon or to
have access thereto.
Section 4.31 Disclosure. No representation or warranty by GranCare and no
statement or information relating to GranCare or any of its Subsidiaries
contained herein, or in any certificate furnished by or on behalf of GranCare
to Vitalink in connection herewith contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
Section 4.32 Institutional Pharmacy Business. (a) Section 4.32 of the
GranCare Disclosure Statement lists each Pharmacy utilized by GranCare in
connection with its pharmacy business and indicates (i) the location of such
Pharmacy and (ii) whether such Pharmacy is owned or held pursuant to a
leasehold interest. No other person or entity has any beneficial ownership or
interest in or to any such Pharmacy nor does any other person or entity have
any right or option to acquire any beneficial ownership or interest in or to
any such Pharmacy.
B-37
(b) Section 4.32 of the GranCare Disclosure Statement lists all of the
customers to which GranCare and its Subsidiaries provide pharmacy services
pursuant to oral or written contracts ("GranCare Pharmacy Contracts").
GranCare has not been informed and has no reason to believe that any GranCare
Pharmacy Contract will be terminated for or without cause. Each of the
Subsidiaries of GranCare involved in the Skilled Nursing Business listed on
Schedule 4.16 of the GranCare Disclosure Schedule has agreements for the
provision of institutional pharmacy services in form and substance equivalent
to the form of agreement set forth in Section 4.32 of the GranCare Disclosure
Schedule (each a "Pharmacy Agreement").
(c) GranCare has not violated, and is not now in violation of, the Medicare
and Medicaid fraud and abuse provisions of the Social Security Act, the Civil
Monetary Penalties Law of the Social Security Act, or any other Federal or
State law, statute, rule or regulation relating to GranCare and its
Subsidiaries.
(d) GranCare is duly licensed to provide pharmacy services in all states in
which it does business, and is also a participant in the Medicare program and
the Medicaid programs of the states listed in Section 4.08 of the GranCare
Disclosure Statement. GranCare is in compliance with all laws, rules and
regulations affecting or in connection with the Pharmacies, GranCare and their
licenses with respect thereto and their participation in the Medicare and
Medicaid programs.
(e) GranCare has delivered or made available true and correct billing
requests for reimbursement and underlying information to all governmental
programs, including but not limited to the Medicare and Medicaid programs, in
compliance with all rules, regulations, policies and procedures of such
governmental programs and of the fiscal intermediaries of such programs. To
the best of GranCare's knowledge all such xxxxxxxx were for goods actually
provided, and at appropriate charges or costs, and GranCare has appropriate
documentation to support such billing requests.
Section 4.33 Fairness Opinion. GranCare has received the opinion of
PaineWebber Incorporated to the effect that as of the date hereof the
financial terms of the Merger are fair to GranCare's stockholders from a
financial point of view.
Section 4.34 Sufficiency of Assets. Subsequent to the Restructuring,
GranCare and its Pharmacy Subsidiaries will own, lease, hold or otherwise have
the right to use all of the assets, properties, Intellectual Property Rights
and GranCare Licenses which are material to the conduct of the Institutional
Pharmacy Business as presently conducted by GranCare and its Subsidiaries.
ARTICLE V.
COVENANTS
Section 5.01 Conduct of Business of GranCare. Except as contemplated by this
Agreement, the Distribution Agreement and the GranCare Disclosure Statement or
as expressly agreed to in writing by Vitalink, during the period from the date
of this Agreement to the Effective Time, GranCare will and will cause its
Subsidiaries each to conduct its operations according to its ordinary and
usual course of business consistent with past practice, and will use all
commercially reasonable efforts to preserve intact its business organization,
to keep available the services of its officers and employees and to maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it and will take no action which would
adversely affect its ability to consummate the Merger, the Distribution or the
other transactions contemplated hereby. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agreement,
the Distribution Agreement or the GranCare Disclosure Statement, prior to the
Effective Time, neither GranCare nor any of its Subsidiaries will, without the
prior written consent of Vitalink which shall not be unreasonably withheld:
(a) amend its Restated Articles of Incorporation (or other applicable
charter document) or By-Laws, other than the charter and by-laws of SNFCo;
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(b) authorize for issuance, issue, sell, deliver, grant any options for,
or otherwise agree or commit to issue, sell or deliver any shares of any
class of capital stock of GranCare or its Subsidiaries or any securities
convertible into or exchangeable or exercisable for shares of any class of
capital stock of GranCare or its Subsidiaries, other than (i) pursuant to
and in accordance with the terms of GranCare Options outstanding on the
date hereof under the GranCare Option Plans listed in Section 4.15 of the
GranCare Disclosure Statement or (ii) except as set forth in Schedule
5.01(b) of the GranCare Disclosure Schedule;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or purchase, redeem or otherwise acquire any shares of its
own capital stock or that of any of its Subsidiaries except as may be
necessary to consummate the Restructuring or the Distribution;
(d) except in the ordinary course of business and consistent with past
practice (i) create, incur, assume, maintain or permit to exist any long-
term debt or any short-term debt for borrowed money other than under
existing lines of credit; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person except wholly owned Pharmacy
Subsidiaries in the ordinary course of business and consistent with past
practices; or (iii) make any loans, advances or capital contributions to,
or investments in, any other person, other than indebtedness, obligations,
loans, advances or investments in any other person that are to be assigned
to and assumed by SNFCo prior to the Effective Time and as to which
GranCare will be relieved of liability with respect thereto prior to the
Effective Time;
(e) with respect to GranCare and its Pharmacy Subsidiaries, (i) increase
in any manner the compensation of any of its directors or officers, except
in the ordinary course of business and consistent with past practice or
increase in any manner the compensation of any of its other employees; (ii)
pay or agree to pay any pension, retirement allowance or other employee
benefit not required, or enter into or agree to enter into any agreement or
arrangement with any of its past or present employees relating to any such
pension, retirement allowance or other employee benefit, except as required
under currently existing agreements, plans or arrangements; (iii) grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any of its past or present employees; (iv) except to the
extent permitted by the foregoing clause (i), enter into any contract,
agreement or understanding with any of its past or present directors or
officers; or (v) except in the ordinary course of business and consistent
with past practice or as may be required to comply with applicable law,
become obligated (other than pursuant to any new or renewed collective
bargaining agreement) under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, benefit arrangement, or similar
plan, arrangement or policy which was not in existence on the date hereof,
including any bonus, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, health or group insurance,
severance pay, retirement or other benefit plan, agreement or arrangement,
or employment or consulting agreement with or for the benefit of any
person, or amend any of such plans or any of such agreements in existence
on the date hereof other than as contemplated by the Employee Benefits
Matters Agreement (as defined in the Distribution Agreement);
(f) except in the ordinary course of business and consistent with past
practice, as disclosed in Section 5.01(f) of the GranCare Disclosure
Statement or as otherwise expressly contemplated hereby or the Distribution
Agreement, with respect to GranCare and its Pharmacy Subsidiaries sell,
transfer, lease, license, pledge, mortgage, or otherwise dispose of, or
encumber, or agree to sell, transfer, lease, license, pledge, mortgage or
otherwise dispose of or encumber, any material properties, real, personal
or mixed;
(g) except as otherwise expressly contemplated hereby, with respect to
GranCare and its Pharmacy Subsidiaries enter into any other agreements,
commitments or contracts, except agreements, commitments or contracts for
the purchase, sale or lease of goods or services in the ordinary course of
business and consistent with past practice and having a term of no more
than one year;
(h) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any plan of liquidation or dissolution,
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any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities or any material
change in its capitalization, or any entry into a material contract or any
amendment or modification of any material contract or any release or
relinquishment of any material contract rights not in the ordinary course
of business and consistent with past practice except as expressly
contemplated by this Agreement or the Distribution Agreement;
(i) except as previously approved by GranCare prior to the date hereof
and as identified to Vitalink prior to the date hereof, authorize or commit
to make capital expenditures in excess of $200,000 for which GranCare or
any of its Pharmacy Subsidiaries would be responsible subsequent to the
Merger;
(j) permit any insurance policy naming it as a beneficiary or a loss
payee to be cancelled, terminated or materially altered, except in the
ordinary course of business and consistent with past practice and following
written notice to Vitalink;
(k) maintain its books and records in a manner not in the ordinary course
of business and consistent with past practice;
(l) enter into any hedging, option, derivative or other similar
transaction;
(m) change any assumption underlying, or method of calculating, any bad
debt, contingency, provision or other reserve;
(n) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), other than the payment,
discharge or satisfaction of liabilities (including accounts payable) in
the ordinary course of business and consistent with past practice, or
collect, or accelerate the collection of, any amounts owed (including
accounts receivable) other than the collection in the ordinary course of
business;
(o) make any changes in their prior practices of allocating interest,
corporate overhead, cost of legal, insurance and other staff functions or
other inter-company charges; (p) make any changes in their current cash
management practices; (q) cancel, compromise, settle or reduce any inter-
company accounts except by the payment of cash for the full amount thereof;
(r) permit any cash paid as the exercise price of outstanding GranCare
Options to be retained by SNFCo or any of its Subsidiaries;
(p) cancel any Pharmacy Agreement or amend, alter, waive or otherwise
modify the terms thereof; and
(q) agree to do any of the foregoing.
Section 5.02 Conduct of Business of Vitalink. Except as contemplated by this
Agreement, the Voting Agreement, the Shareholder Agreement (as hereinafter
defined) or the Vitalink Disclosure Statement or as expressly agreed to in
writing by GranCare, during the period from the date of this Agreement to the
Effective Time, Vitalink and its Subsidiaries will each conduct its operations
according to its ordinary and usual course of business consistent with past
practice, and will use all commercially reasonable efforts to preserve intact
its business organization, to keep available the services of its officers and
employees and to maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with it and
will take no action which would adversely affect its ability to consummate the
Merger or the other transactions contemplated hereby. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement or the Vitalink Disclosure Statement, prior to the Effective
Time, neither Vitalink nor any of its Subsidiaries will, without the prior
written consent of GranCare which shall not be unreasonably withheld:
(a) amend its Certificate of Incorporation (or other applicable charter
document) or By-Laws;
(b) authorize for issuance, issue, sell, deliver, grant any options for,
or otherwise agree or commit to issue, sell or deliver any shares of any
class of capital stock of Vitalink or its Subsidiaries or any securities
convertible into or exchangeable or exercisable for shares of any class of
capital stock of Vitalink or its Subsidiaries, other than pursuant to and
in accordance with the terms of the Vitalink Option Plans listed in Section
3.14 of the Vitalink Disclosure Statement;
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(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or purchase, redeem or otherwise acquire any shares of its
own capital stock or that of any of its Subsidiaries;
(d) except in the ordinary course of business and consistent with past
practice (i) create, incur, assume, maintain or permit to exist any long-
term debt or any short-term debt for borrowed money other than under
existing lines of credit; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person except wholly owned Subsidiaries of
Vitalink in the ordinary course of business and consistent with past
practices; or (iii) make any loans, advances or capital contributions to,
or investments in, any other person;
(e) (i) increase in any manner the compensation of any of its directors
or officers, except in the ordinary course of business and consistent with
past practice or increase in any manner the compensation of any of its
other employees; (ii) pay or agree to pay any pension, retirement allowance
or other employee benefit not required, or enter into or agree to enter
into any agreement or arrangement with any of its past or present employees
relating to any such pension, retirement allowance or other employee
benefit, except as required under currently existing agreements, plans or
arrangements; (iii) grant any severance or termination pay to, or enter
into any employment or severance agreement with, any of its past or present
employees; (iv) except to the extent permitted by the foregoing clause (i),
enter into any contract, agreement or understanding with any of its past or
present directors or officers; or (v) except in the ordinary course of
business and consistent with past practice or as may be required to comply
with applicable law, become obligated (other than pursuant to any new or
renewed collective bargaining agreement) under any new pension plan,
welfare plan, multiemployer plan, employee benefit plan, benefit
arrangement, or similar plan, arrangement or policy which was not in
existence on the date hereof, including any bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right,
health or group insurance, severance pay, retirement or other benefit plan,
agreement or arrangement, or employment or consulting agreement with or for
the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof;
(f) except in the ordinary course of business and consistent with past
practice or as otherwise expressly contemplated hereby, sell, transfer,
lease, license, pledge, mortgage, or otherwise dispose of, or encumber, or
agree to sell, transfer, lease, license, pledge, mortgage or otherwise
dispose of or encumber, any material properties, real, personal or mixed;
(g) except as otherwise expressly contemplated hereby, enter into any
other agreements, commitments or contracts, except agreements, commitments
or contracts for the purchase, sale or lease of goods or services in the
ordinary course of business and consistent with past practice and having a
term of no more than one year;
(h) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any plan of liquidation or dissolution, any
acquisition of a material amount of assets or securities, any disposition
of a material amount of assets or securities or any material change in its
capitalization, or any entry into a material contract or any amendment or
modification of any material contract or any release or relinquishment of
any material contract rights not in the ordinary course of business and
consistent with past practice except as expressly contemplated by this
Agreement;
(i) except as previously approved by the Board of Directors of Vitalink
prior to the date hereof and as identified to GranCare prior to the date
hereof, authorize or commit to make capital expenditures in excess of
$200,000;
(j) permit any insurance policy naming it as a beneficiary or a loss
payee to be cancelled, terminated or materially altered, except in the
ordinary course of business and consistent with past practice and following
written notice to Vitalink;
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(k) maintain its books and records in a manner not in the ordinary course
of business and consistent with past practice;
(l) enter into any hedging, option, derivative or other similar
transaction;
(m) change any assumption underlying, or method of calculating, any bad
debt, contingency, provision or other reserve;
(n) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), other than the payment,
discharge or satisfaction of liabilities (including accounts payable) in
the ordinary course of business and consistent with past practice, or
collect, or accelerate the collection of, any amounts owed (including
accounts receivable) other than the collection in the ordinary course of
business; or
(o) agree to do any of the foregoing.
Section 5.03 No Solicitation by GranCare. (a) GranCare agrees that, prior to
the Effective Time, it shall not, and shall not authorize or permit any of its
Subsidiaries or any of its or its Subsidiaries' directors, officers,
employees, agents or representatives to, directly or indirectly, solicit,
initiate, facilitate or encourage (including by way of furnishing or
disclosing information) any merger, consolidation, other business combination
involving GranCare or its Subsidiaries (except to the extent such merger,
consolidation or other business combination relates exclusively to GranCare's
Skilled Nursing Business), acquisition of all or a substantial portion of the
assets or capital stock of GranCare and its Subsidiaries (except to the extent
such acquisition relates exclusively to GranCare's Skilled Nursing Business)
or inquiries or proposals concerning or which may reasonably be expected to
lead to, any of the foregoing (a "GranCare Acquisition Transaction") or
negotiate, explore or otherwise communicate in any way with any third party
(other than Vitalink or its affiliates) with respect to any GranCare
Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement. GranCare
shall immediately advise Vitalink of any inquiries or proposals relating to a
GranCare Acquisition Transaction.
(b) Notwithstanding the foregoing, in the event that there is an unsolicited
written proposal for a GranCare Acquisition Transaction from a bona fide
financially capable third party, GranCare may furnish non-public information
to, and negotiate with, such third party only if (i) three business days'
written notice shall have been given to Vitalink; and (ii)(A) GranCare's Board
of Directors shall have been advised in writing by its investment banker that
such third party is financially capable of consummating a GranCare Acquisition
Transaction that would yield a higher value to GranCare's stockholders than
will the Merger, (B) GranCare's Board of Directors shall have been advised, by
the written opinion of outside counsel to GranCare, that any failure to
provide such non-public information to, or negotiate with, such party would be
inconsistent with GranCare's Board of Directors' fiduciary duties to the
stockholders of GranCare (in providing such opinion GranCare's counsel may
assume that California law is not materially different from Delaware law) and
(C) GranCare's Board of Directors in good faith, after weighing such advice,
determines that taking such action is more likely than not to lead to a
GranCare Acquisition Transaction with such third party that would yield a
higher value to GranCare's stockholders than will the Merger and that failing
to furnish such information, or to commence negotiations would be inconsistent
with the Board's fiduciary duties.
Section 5.04 No Solicitation by Vitalink. (a) Vitalink agrees that, prior to
the Effective Time, it shall not, and shall not authorize or permit any of its
Subsidiaries or any of its or its Subsidiaries' directors, officers,
employees, agents or representatives to, directly or indirectly, solicit,
initiate, facilitate or encourage (including by way of furnishing or
disclosing information) any merger, consolidation, other business combination
involving Vitalink or its Subsidiaries, acquisition of all or any substantial
portion of the assets or capital stock of Vitalink and its Subsidiaries taken
as a whole, or inquiries or proposals concerning or which may reasonably be
expected to lead to, any of the foregoing (a "Vitalink Acquisition
Transaction") or negotiate, explore or otherwise communicate in any way with
any third party (other than GranCare or its affiliates) with respect to any
Vitalink
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Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement. Vitalink
shall immediately advise GranCare of any inquiries or proposals relating to a
Vitalink Acquisition Transaction.
(b) Notwithstanding the foregoing, in the event that there is an unsolicited
written proposal for a Vitalink Acquisition Transaction from a bona fide
financially capable third party, Vitalink may furnish non-public information
to, and negotiate with, such third party only if (i) three business days'
written notice shall have been given to GranCare; and (ii)(A) Vitalink's Board
of Directors shall have been advised in writing by its investment banker that
such third party is financially capable of consummating a Vitalink Acquisition
Transaction that would yield a higher value to Vitalink's stockholders than
will the Merger, (B) Vitalink's Board of Directors shall have been advised, by
the written opinion of outside counsel to Vitalink, that any failure to
provide such non-public information to, or negotiate with, such party would be
inconsistent with GranCare's Board of Directors' fiduciary duties to the
stockholders of Vitalink and (C) Vitalink's Board of Directors in good faith,
after weighing such advice, determines that taking such action is more likely
than not to lead to an Vitalink Acquisition Transaction with such third party
that would yield a higher value to Vitalink's stockholders than will the
Merger and that failing to furnish such information, or to commence
negotiations would be inconsistent with the Board's fiduciary duties.
Section 5.05 Access to Information. (a) From the date of this Agreement
until the Effective Time, GranCare will give Vitalink and its authorized
representatives (including counsel, environmental and other consultants,
accountants, auditors, and intellectual property counsel and agents)
reasonable access in light of the terms of this Agreement during normal
business hours to all facilities, personnel and operations and to all books
and records of GranCare and its Subsidiaries, will permit Vitalink to make
such inspections as it may reasonably require (including without limitation
any air, water or soil testing or sampling deemed necessary by it) and will
cause its officers and those of its Subsidiaries to furnish Vitalink with such
financial and operating data and other information with respect to the
businesses and properties of GranCare and its Subsidiaries as Vitalink may
from time to time reasonably request.
(b) From the date of this Agreement until the Effective Time, Vitalink will
give GranCare and its authorized representatives (including counsel,
environmental and other consultants, accountants, auditors, and intellectual
property counsel and agents) reasonable access in light of the terms of this
Agreement during normal business hours to all facilities, personnel and
operations and to all books and records of Vitalink and its Subsidiaries, will
permit GranCare to make such inspections as it may reasonably require
(including without limitation any air, water or soil testing or sampling
deemed necessary by them) and will cause its officers and those of its
Subsidiaries to furnish GranCare with such financial and operating data and
other information with respect to the businesses and properties of Vitalink
and its Subsidiaries as GranCare may from time to time reasonably request.
Section 5.06 Registration Statement and Proxy Statement. GranCare shall file
with the SEC as soon as is reasonably practicable after the date hereof the
SNFCo Registration Document and the Proxy Statement and Vitalink shall file
with the SEC the Vitalink Information Statement and the Registration Statement
in which the Proxy Statement shall be included. Vitalink and GranCare shall
use all commercially reasonable efforts to have the Registration Statement
declared effective by the SEC and the Proxy Statement and the Vitalink
Information Statement cleared by the staff of the SEC as promptly as
practicable. GranCare shall use all commercially reasonable efforts to have
the SNFCo Registration Document declared effective by the SEC. Vitalink shall
also take any action required to be taken under applicable state blue sky or
securities laws in connection with shares of Vitalink Common Stock to be
issued as Closing Consideration. Vitalink and GranCare shall promptly furnish
to each other all information, and take such other actions (including without
limitation using all commercially reasonable efforts to provide any required
consents of their respective independent auditors and investment banking
advisors), as may reasonably be requested in connection with any action by any
of them in connection with the preceding sentences of this Section 5.06.
Section 5.07 Commercially Reasonable Efforts; Other Actions. (a) Subject to
the terms and conditions provided in this Agreement and the Distribution
Agreement, Vitalink and GranCare shall use all commercially reasonable efforts
to take, or cause to be taken, all other actions and do, or cause to be done,
all other things
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necessary, proper or appropriate under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Distribution Agreement, including, without limitation, (i) the filing
of Notification and Report Forms under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and using all commercially reasonable efforts to
respond as promptly as practicable to all inquiries received from the FTC or
the Antitrust Division for additional information or documentation, (ii) the
obtaining of all necessary consents, approvals or waivers, and (iii) the
lifting of any legal bar to the Merger or the Distribution. Vitalink shall not
take any action which would cause GranCare to fail to perform its obligations
hereunder or under the Distribution Agreement. GranCare shall not take any
action which would cause Vitalink to fail to perform its obligations hereunder
or under the Distribution Agreement.
(b) GranCare shall use all commercially reasonable efforts to cause to be
delivered to Vitalink a comfort letter of its independent auditors, dated a
date within two business days of the effective date of the Registration
Statement, in form reasonably satisfactory to Vitalink and customary in scope
and substance for such letters in connection with similar registration
statements.
(c) Vitalink shall use all commercially reasonable efforts to cause to be
delivered to GranCare a comfort letter of its independent auditors, dated a
date within two business days of the effective date of the Registration
Statement, in form reasonably satisfactory to GranCare and customary in scope
and substance for such letters in connection with similar registration
statements.
Section 5.08 Public Announcements. Before issuing any press release or
otherwise making any public statement with respect to the Merger, the
Distribution or any of the other transactions contemplated hereby, Vitalink
and GranCare will consult with, and obtain the consent of, each other as to
its form and substance and shall not issue any such press release or make any
such public statement prior to obtaining such consent, except as may be
required by law or pursuant to any order of any court or governmental agency,
tribunal or regulatory authority.
Section 5.09 Notification of Certain Matters. Each of GranCare and Vitalink
shall give prompt notice to the other party of any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by GranCare, Vitalink or any of
their respective Subsidiaries subsequent to the date of this Agreement and
prior to the Effective Time, which could be reasonably expected to have a
GranCare Material Adverse Effect or Vitalink Material Adverse Effect. Each of
GranCare and Vitalink shall give prompt notice to the other party of (a) any
notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the Merger, the
Distribution or any other transactions contemplated by this Agreement or the
Distribution Agreement, or (b) any GranCare Material Adverse Effect or
Vitalink Material Adverse Effect.
Section 5.10 Indemnification. (a) Vitalink shall cause the Surviving
Corporation to indemnify, defend and hold harmless the present and former
directors and officers of GranCare against all losses, claims, damages,
expenses or liabilities arising out of actions or omissions or alleged actions
or omissions occurring at or prior to the Effective Time to the same extent
and on the same terms and conditions (including with respect to advancement of
expenses) permitted or required under applicable law and GranCare's Restated
Articles of Incorporation and By-Laws in effect at the date hereof.
(b) For a period of three years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by GranCare (provided
that the Surviving Corporation may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time; provided, however, that if the premiums
with respect to such insurance exceed 150% of the annual premiums paid as of
the date hereof by GranCare for such insurance, the Surviving Corporation
shall be obligated to purchase directors' and officers' liability insurance
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with the maximum coverage as can be obtained at an annual premium equal to
150% of the annual premiums paid by GranCare as of the date hereof.
Section 5.11 Expenses. Except as set forth in Section 10.05, Vitalink, on
the one hand, and GranCare, on the other hand, shall bear their respective
expenses incurred in connection with the Merger and the Distribution,
including, without limitation, the preparation, execution and performance of
this Agreement, the Distribution Agreement and the transactions contemplated
hereby and all fees and expenses of investment bankers, finders, brokers,
agents, representatives, counsel and accountants, except that expenses
incurred in printing, mailing and filing (including without limitation, SEC
filing fees, fees related to any state securities or "blue sky" laws and stock
exchange listing application fees) the Proxy Statement, the Vitalink
Information Statement, the SNFCo Reorganization Document and the Registration
Statement shall be shared equally by GranCare and Vitalink; provided, however,
that SNFCo will bear one half of the premiums associated with the directors'
and officers' insurance referred to in Section 5.10(b) hereof and all of
GranCare's legal fees and expenses and the fees and expenses associated with
obtaining the fairness opinion referred to in Section 4.33 hereof.
Section 5.12 Stock Exchange Listings. Vitalink shall use all commercially
reasonable efforts to have the Vitalink Common Stock to be issued in
connection with the Merger authorized for quotation on NASDAQ or listed on the
New York Stock Exchange subject to notice of issuance.
Section 5.13 GranCare and Subsidiary Actions. (a) GranCare shall not take or
omit to take, and shall not cause or permit any of its subsidiaries to take or
omit to take, any action which would cause a breach of any representation or
warranty of GranCare contained in this Agreement or the Distribution Agreement
such that the Closing condition set forth in Section 7.01 would not be
satisfied.
(b) GranCare shall not and shall not authorize or permit any of its
Subsidiaries or any of its Subsidiaries' directors, officers, employees,
agents or representatives to amend, modify, waive or withdraw any term of, the
Distribution Agreement prior to the Effective Time which amendment,
modification, waiver or withdrawal could, directly or indirectly, reasonably
be expected to have an adverse effect on the business, operations, assets,
condition (financial or otherwise) or prospects of the Surviving Corporation
following the Merger without the prior written consent of Vitalink.
Section 5.14 Vitalink and Subsidiary Actions. Vitalink shall not take or
omit to take, and shall not cause or permit any of its subsidiaries to take or
omit to take, any action which would cause a breach of any representation or
warranty of Vitalink contained in this Agreement such that the Closing
condition set forth in Section 8.01 would not be satisfied.
Section 5.15 Environmental Matters. (a) GranCare shall promptly provide
Vitalink with any Environmental Notices it receives and shall make all filings
and take all actions necessary to materially comply with all Environmental
Laws, including but not limited to those applicable to the Merger and other
non-routine transactions contemplated hereby. GranCare shall keep Vitalink
informed of all actions taken in connection with the foregoing and all such
actions shall be on terms and conditions satisfactory to Vitalink whose
consent to such actions shall not be unreasonably withheld.
(b) Vitalink shall promptly provide GranCare with any Environmental Notices
it receives and shall make all filings and take all actions necessary to
materially comply with all Environmental Laws, including but not limited to
those applicable to the Merger and other transactions contemplated hereby.
Vitalink shall keep GranCare informed of all non-routine actions taken in
connection with the foregoing and all such actions shall be on terms and
conditions satisfactory to GranCare whose consent to such actions shall not be
unreasonably withheld.
Section 5.16 Actions Regarding Outstanding Debt. Prior to the Effective
Time, GranCare agrees to use all commercially reasonable efforts to (i) call
for redemption all of the outstanding 6 1/2% Convertible
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Subordinated Debentures due 2003 (the "Debentures") that are issued and
outstanding immediately prior to the Effective Time in accordance with the
terms of the Indenture dated January 29, 1993 between GranCare and First
Fidelity Trust Company, New York (the "Indenture"), (ii) consummate a tender
offer (the "Tender Offer") for GranCare's outstanding 9 3/8% Senior
Subordinated Notes due 2005 (the "Notes") which Tender Offer shall include a
consent (the "Consent") to certain amendments to the Indenture, dated as of
September 15, 1995, between GranCare and Marine Midland Bank, governing the
Notes (the "Note Indenture") including a deletion of certain covenants and a
consent to the Restructuring and the Merger (including the assumption by the
Surviving Corporation of GranCare's obligations under the Notes and the Note
Indenture) as well as the other transactions contemplated hereby, which Tender
Offer and Consent shall be in form and substance reasonably satisfactory to
Vitalink, and (iii) obtain all necessary consents, approvals, waivers or other
agreements by the holders of other indebtedness of GranCare to the assignment
to and the assumption by SNFCo of such indebtedness at the time of the
Distribution.
ARTICLE VI.
CONDITIONS TO THE OBLIGATIONS OF VITALINK AND GRANCARE
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions:
Section 6.01 Registration Statements. The Registration Statement and the
SNFCo Registration Statement shall have become effective in accordance with
the provisions of the Securities Act. No stop order suspending the
effectiveness of the Registration Statement and the SNFCo Registration
Statement shall have been issued by the SEC and remain in effect. All
necessary state securities or blue sky authorizations for the Merger and the
Distribution shall have been received.
Section 6.02 Stockholder Approval. The approval of the Merger and the
Distribution, including the execution and performance of this Agreement, the
Distribution Agreement and all of the transactions contemplated hereby or
thereby shall be approved by a majority of the outstanding shares of GranCare
Common Stock cast at the Special Meeting or any adjournment thereof shall have
been obtained.
Section 6.03 Listings. The Vitalink Common Stock issuable in the Merger
shall have been authorized for quotation on NASDAQ or listed on the New York
Stock Exchange subject to official notice of issuance.
Section 6.04 Certain Proceedings. No writ, order, decree or injunction of a
court of competent jurisdiction or governmental entity shall have been entered
against Vitalink or GranCare which, and no proceedings therefor shall have
been threatened or commenced by any governmental entity which seek to,
prohibit or restrict the consummation of the Merger or the Distribution or
would otherwise restrict Vitalink's or the Surviving Corporation's exercise of
full rights to own and operate the Institutional Pharmacy Business of
GranCare.
Section 6.05 Consents and Approvals. All necessary consents and approvals
of, and notifications and disclosures to, and filings and registrations with,
any United States or any other governmental authority or any other third party
required for the consummation of the Merger and the other transactions
contemplated hereby (including without limitation any consents, approvals,
notifications, disclosures, filings and registrations required under any
Environmental Law) shall have been obtained except where failure to obtain
such consents or approvals would not, singly or in the aggregate with all such
other failures, have an Vitalink Material Adverse Effect, and any waiting
period applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
Section 6.06 Distribution. (i) The Distribution Agreement shall have been
approved by a majority of GranCare's shareholders at the Special Meeting; (ii)
the Distribution Agreement shall have been executed and
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shall be in full force and effect on and as of the Effective Time; and (iii)
the Distribution shall have been completed.
Section 6.07 Dissenting Shares. Holders of not more than 5% of the GranCare
Common Stock issued and outstanding as of the record date for the Special
Meeting shall have demanded payment pursuant to the provisions of Section 1300
of the California Act.
Section 6.08 Opinions. (a) GranCare and Vitalink shall have received
opinions of Powell, Goldstein, Xxxxxx & Xxxxxx and Xxxxxx Xxxxxx & Xxxxxxx,
reasonably acceptable to GranCare and Vitalink, to the effect that:
(i) the distribution of the SNFCo Common Stock will be tax-free for
federal income tax purposes to GranCare under Section 355(c)(1) of the Code
and to the stockholders of GranCare under Section 355(a) of the Code;
(ii) the Restructuring will be tax-free for federal income tax purposes
under Sections 361(a)l and 368(a)(1)(D) of the Code;
(iii) the Merger will qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code; and
(iv) Vitalink and GranCare will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code with respect to the
Merger.
(b) The respective counsels of GranCare and Vitalink shall have each
delivered an opinion covering the matters set forth on Exhibit G hereto.
Section 6.09 Existing Indebtedness. The Debentures shall have been called
for redemption in accordance with the Indenture, GranCare shall have obtained
the Consent in form and substance reasonably satisfactory to GranCare and
Vitalink and GranCare shall have obtained the Consent and consummated the
Tender Offer at a price not in excess of $1,090 per $1,000 principal amount of
Notes.
ARTICLE VII.
CONDITIONS TO THE OBLIGATIONS OF VITALINK
The obligation of Vitalink to effect the Merger and to perform its other
obligations to be performed at or subsequent to the Closing shall be subject
to the fulfillment at or prior to the Closing of the following additional
conditions, any one or more of which may be waived by Vitalink:
Section 7.01 Representations and Warranties True. The representations and
warranties of GranCare contained herein and in the Distribution Agreement
(without regard to any materiality exceptions or provisos contained in this
Agreement or the Distribution Agreement) shall be true and correct in all
respects on the date of this Agreement, the date of the Distribution Agreement
and the Closing Date as though such representations and warranties were made
at and on such date, except (i) for those untruths or inaccuracies which would
not, singly or in the aggregate, reasonably be expected to have a GranCare
Material Adverse Effect and (ii) for changes expressly permitted or
contemplated by this Agreement or the Distribution Agreement.
Section 7.02 Performance. GranCare shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement and the Distribution Agreement to be performed or complied with
by it on or prior to the Closing Date except for those failures to so perform
or comply which would not, singly or in the aggregate, reasonably be expected
to have a GranCare Material Adverse Effect.
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Section 7.03 Certificates. GranCare shall furnish such certificates of its
officers to evidence compliance with the conditions set forth in Sections
7.01, 7.02 and 7.04 as may be reasonably requested by Vitalink.
Section 7.04 Material Adverse Change. There shall not have occurred since
December 31, 1995 any event, condition, change, occurrence or circumstance
which has had or is reasonably likely to have, singly or in the aggregate, a
GranCare Material Adverse Effect.
Section 7.05 Pharmacy Financial Statements. GranCare shall have delivered
audited financial statements of the Institutional Pharmacy Business audited by
GranCares existing independent auditors which financial statements do not
reflect (i) reductions in the carrying values of assets, or increases in the
carrying values of the liabilities, as at May 31, 1996, of the Institutional
Pharmacy Business on a pro forma basis, in the aggregate of more than
$2,000,000 as compared to such carrying values as shown on the balance sheet
of the Institutional Pharmacy Business as at May 31, 1996 included in the
GranCare Disclosure Statement, (ii) a decrease of more than $500,000 in
earnings before interest, taxes, depreciation and amortization (as such terms
are defined in generally accepted accounting principles consistently applied
by GranCare, "EBITDA") for the twelve-month period ending December 31, 1995,
or a decrease of more than $250,000 in the EBITDA for the five-month period
ending May 31, 1996, on a pro forma basis as compared to the EBITDAs for the
same periods shown on the unaudited statements of income included in the
GranCare Disclosure Statement.
Section 7.06 Auditors' Letter. Vitalink shall have received from GranCare's
independent auditors a letter dated the Closing Date confirming the matters
set forth in the letter contemplated by Section 5.07(b).
Section 7.07 Letter of Credit. Vitalink shall have received an irrevocable
standby letter of credit issued by a bank reasonably satisfactory to Vitalink
as support for Vitalink entering into a guarantee arrangement concerning
Health and Rehabilitation Properties Trust in an amount of not less than
$15,000,000 which letter of credit shall be in form and substance satisfactory
to Vitalink.
ARTICLE VIII.
CONDITIONS TO THE OBLIGATIONS OF GRANCARE
The obligations of GranCare under this Agreement to effect the Merger shall
be subject to the fulfillment on or before the Closing Date of each of the
following additional conditions, any one or more of which may be waived by
GranCare:
Section 8.01 Representations and Warranties True. The representations and
warranties of Vitalink contained herein (without regard to any materiality
exceptions or provisos therein) shall be true and correct in all material
respects on the date of this Agreement and the Closing Date as though such
representations and warranties were made at and on such date, except (i) for
those untruths or inaccuracies which would not, singly or in the aggregate,
reasonably be expected to have an Vitalink Material Adverse Effect and (ii)
for changes permitted or contemplated by this Agreement.
Section 8.02 Performance. Vitalink shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to the
Closing Date except for those failures to so perform or comply which would
not, singly or in the aggregate, reasonably be expected to have an Vitalink
Material Adverse Effect.
Section 8.03 Certificates. Vitalink shall furnish such certificates of its
officers to evidence compliance with the conditions set forth in Sections
8.01, 8.02 and 8.04 as may be reasonably requested by GranCare.
Section 8.04 Material Adverse Change. There shall not have occurred since
May 31, 1996 any event, condition, change, occurrence or circumstance which
has had or is reasonably likely to have, singly or in the aggregate, an
Vitalink Material Adverse Effect.
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Section 8.05 Shareholders Agreement. Parent and Vitalink shall have executed
the Shareholder's Agreement in the form attached hereto as Exhibit D and each
such party shall have performed and complied with its obligations under the
Shareholders Agreement.
Section 8.06 Auditors' Letter. GranCare shall have received from Vitalink's
independent auditors a letter dated the Closing Date confirming the matters
set forth in the letter contemplated by Section 5.07(c).
ARTICLE IX.
CLOSING
Section 9.01 Time And Place. Subject to the provisions of Articles VI, VII,
VIII and X, the closing of the Merger (the "Closing") shall take place at the
offices of Xxxxxx Xxxxxx & Xxxxxxx, as soon as practicable but in no event
later than 9:30 A.M., local time, on the first business day after the date on
which each of the conditions set forth in Articles VI, VII and VIII have been
satisfied or waived by the party or parties entitled to the benefit of such
conditions; or at such other place, at such other time, or on such other date
as Vitalink and GranCare may mutually agree. The date on which the Closing
actually occurs is herein referred to as the "Closing Date."
Section 9.02 Filings at the Closing. Subject to the provisions of Articles
VI, VII, VIII and X hereof, GranCare, and Vitalink shall cause to be executed
at the Closing the Certificate of Merger and the Certified Agreement and shall
cause the Certificate of Merger to be filed and recorded in accordance with
the applicable provisions of the Delaware Act and shall cause the Certified
Agreement to be filed in accordance with the applicable provisions of the
California Act and shall take any and all other lawful actions and do any and
all other lawful things necessary to cause the Merger to become effective.
ARTICLE X.
TERMINATION AND ABANDONMENT
Section 10.01 Termination. This Agreement may be terminated and the Merger
may be abandoned any time prior to the Effective Time, whether before or after
approval by the stockholders of GranCare:
(a) by mutual consent of the Boards of Directors of Vitalink and
GranCare;
(b) by either Vitalink or GranCare if, without fault of such terminating
party, the Merger shall not have been consummated on or before December 31,
1996, which date may be extended by mutual consent of the parties hereto;
(c) by either Vitalink or GranCare, if any court of competent
jurisdiction in the United States or other governmental body in the United
States shall have issued an order (other than a temporary restraining
order), decree or ruling or taken any other action restraining, enjoining
or otherwise prohibiting the Merger or the Distribution, and such order,
decree, ruling or other action shall have become final and nonappealable;
or
(d) by either Vitalink or GranCare, if the approval of a majority of the
outstanding shares of GranCare Common Stock cast at the Special Meeting or
any adjournment thereof is not obtained with respect to each of the Merger
and the Distribution.
Notwithstanding anything contained in clause (b) of this Section 10.01, in
the event the Registration Statement or the SNFCo Registration Document has
not been declared effective by the SEC by November 1, 1996, then the date
referred to in clause (b) of this Section shall be automatically extended for
a period of two months from the later of the declaration of effectiveness by
the SEC of the Registration Statement or SNFCo Registration Document but in no
event shall such date be extended to a date later than three months from the
date referenced in clause (b) of this section.
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Section 10.02 Termination by Vitalink. This Agreement may be terminated and
the Merger may be abandoned by action of the Board of Directors of Vitalink,
at any time prior to the Effective Time, before or after the approval by the
stockholders of Vitalink, if (a) GranCare shall have failed to comply in any
material respect with any of the covenants or agreements contained in Articles
I and V of this Agreement to be complied with or performed by GranCare at or
prior to such date of termination, (b) there exists a breach or breaches of
any representation or warranty of GranCare contained in this Agreement or the
Distribution Agreement such that the Closing condition set forth in Section
7.01 would not be satisfied; provided, however, that if such breach or
breaches are capable of being cured prior to the Effective Time, such breaches
shall not have been cured within 15 calendar days of delivery to GranCare of
written notice of such breach or breaches, (c) GranCare shall have furnished
or disclosed non-public information to, or commenced negotiations with, a
third party with respect to a GranCare Acquisition Transaction or shall have
resolved to do either of the foregoing and publicly disclosed such resolution,
(d) the Board of Directors of GranCare shall have withdrawn, changed, modified
in any manner or taken action inconsistent with its recommendation of the
Distribution Agreement, the Distribution, this Agreement, the Merger or the
other transactions contemplated hereby or thereby or shall have resolved to do
any of the foregoing and publicly disclosed such resolution; or (e) a
definitive agreement with respect to an Vitalink Business Combination
Transaction (as hereinafter defined) shall have been negotiated and Vitalink's
Board of Directors (i) shall have been advised (A) in writing by its
investment banker that such Vitalink Business Combination Transaction (as
hereinafter defined) would yield a higher value to Vitalink's stockholders
than would the Merger and the other party to such agreement is financially
capable of consummating such Vitalink Business Combination Transaction (as
hereinafter defined) and (B) by the written opinion of outside counsel to
Vitalink that failure to terminate this Agreement would be inconsistent with
such Board's fiduciary duties to the stockholders of Vitalink, and (ii) after
weighing such advice, shall determine in good faith that failure to terminate
this Agreement would be inconsistent with such Board's fiduciary duties;
provided, however, that five business days prior written notice shall have
been given to GranCare (which notice shall include the material terms and
conditions and financing arrangements of, and the identity of the third party
proposing, the Vitalink Business Combination Transaction (as hereinafter
defined)) and that prior to terminating this Agreement Vitalink shall have
made all the Vitalink Payments required by the terms of Section 10.05(c)
hereof.
Section 10.03 Termination by GranCare. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the stockholders of GranCare, by action of the Board of
the Directors of GranCare, if (a) Vitalink shall have failed to comply in any
material respect with any of the covenants or agreements contained in Articles
I and V of this Agreement to be complied with or performed by Vitalink at or
prior to such date of termination, (b) there exists a breach or breaches of
any representation or warranty of Vitalink contained in this Agreement such
that the Closing condition set forth in Section 8.01 would not be satisfied;
provided, however, that if such breach or breaches are capable of being cured
prior to the Effective Time, such breaches shall not be cured within 15
calendar days of delivery to Vitalink of written notice of such breach or
breaches, (c) Vitalink shall have furnished or disclosed non-public
information to, or commenced negotiations with, a third party with respect to
a Vitalink Acquisition Transaction or shall have resolved to do either of the
foregoing and publicly disclosed such resolution or (d) the Board of Directors
of Vitalink shall have withdrawn, changed, modified in any manner or taken
action inconsistent with its recommendation of the Distribution Agreement, the
Distribution, this Agreement, the Merger or the other transactions
contemplated hereby or thereby or shall have resolved to do any of the
foregoing and publicly disclosed such resolution, (e) a definitive agreement
with respect to a GranCare Business Combination Transaction (as hereinafter
defined) shall have been negotiated and GranCare's Board of Directors (i)
shall have been advised (A) in writing by its investment banker that such
GranCare Business Combination Transaction (as hereinafter defined) could yield
a higher value to GranCare's stockholders than will the Merger and the other
party to such agreement is financially capable of consummating such GranCare
Business Combination Transaction (as hereinafter defined) and (B) by the
written opinion of outside counsel to GranCare that failure to terminate this
agreement would be inconsistent with the Board's fiduciary duties to the
stockholders of GranCare (in providing such opinion outside counsel to
GranCare may assume that California law is not materially different from
Delaware law), and (ii) after weighing such advice, shall determine in good
faith that failure to terminate this Agreement would be inconsistent with the
Board's fiduciary duties; provided, however, that five business
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days prior written notice shall have been given to Vitalink (which notice
shall include the material terms and conditions, and financing arrangements
of, and the identity of the third party proposing, the GranCare Business
Combination Transaction (as hereinafter defined)) and that prior to
terminating this Agreement GranCare shall have made all the GranCare Payments
required by the terms of Section 10.05(b) hereof, or (f) Parent shall have
breached its obligations pursuant to Section 1.2 of the Voting Agreement.
Section 10.04 Procedure for Termination. In the event of termination and
abandonment of the Merger by Vitalink or GranCare pursuant to this Article X,
written notice thereof shall forthwith be given to the other.
Section 10.05 Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article X, no party hereto (or any of its directors or officers) shall have
any liability or further obligation to any other party to this Agreement,
except as provided in Section 5.11 and this Section 10.05 and except that
nothing herein shall relieve any party from liability for any breach of this
Agreement.
(b) In the event of (i) a termination of this Agreement pursuant to Section
10.01(b), (c) or (d) and if prior thereto any person shall have made a bona
fide proposal concerning a GranCare Business Combination Transaction (as
hereinafter defined) or (ii) any termination of this Agreement by Vitalink
pursuant to Section 10.02(a), (b), (c) or (d) or any termination of this
Agreement by GranCare pursuant to Section 10.03(e), then GranCare shall
promptly pay Vitalink by wire transfer of immediately available funds to an
account specified by Vitalink up to $2.5 million for all documented fees and
expenses incurred by Vitalink (including the fees and expenses of counsel,
accountants, consultants and advisors) in connection with this Agreement and
the transactions contemplated hereby. In the event of a termination of this
Agreement pursuant to Section 10.03(e), GranCare shall be obligated to pay
Vitalink an additional fee of $17.5 million (the "GranCare Termination
Payment") payable prior to and as a condition of such termination as follows:
(i) $7.5 million promptly by wire transfer of immediately available funds to
an account specified by Vitalink and (ii) $10 million by either, at GranCare's
discretion, (x) delivery to Vitalink of an irrevocable letter of credit for
$10 million or (y) deposit of $10 million in immediately available funds to an
escrow, in the case of each of clause (x) and (y) on terms satisfactory to
Vitalink with payment of such $10 million to be made to Vitalink in
immediately available funds immediately prior to and as a condition of
effecting the GranCare Business Combination Transaction contemplated by such
definitive agreement (the amount of such payments and the manner specified
herein for making such payments, the "GranCare Payments"). To the extent a
GranCare Termination Payment has not already become payable and been paid and
if, prior to any termination pursuant to Section 10.01(b), (c) or (d) or
10.02(a), (b), (c) or (d), any person shall have submitted a bona fide
proposal concerning a GranCare Business Combination Transaction and within
eighteen months after the termination of this Agreement, GranCare or any of
its Subsidiaries proposes to enter into a definitive agreement with a third
party with respect to a GranCare Business Combination Transaction or a
GranCare Business Combination Transaction is proposed to be effected, then
GranCare, prior to entering into any such definitive agreement or any such
GranCare Business Combination Transaction being effected, shall be obligated
to pay Vitalink an additional fee of $17.5 million payable as follows: (i) in
the case of the proposed execution of a definitive agreement for a GranCare
Business Combination Transaction, prior to and as a condition of entering into
such definitive agreement, GranCare shall have made all the GranCare Payments
and (ii) in the case of a GranCare Business Combination Transaction proposed
to be effected without any agreement, prior to and as a condition of effecting
such GranCare Business Combination Transaction, GranCare shall promptly pay
Vitalink $17.5 million by wire transfer of immediately available funds to an
account specified by Vitalink. As used in this Section 10.05, the term
"GranCare Business Combination Transaction" shall mean any of the following
involving GranCare or any Pharmacy Subsidiary that is material to the
business, results of operation, prospects or financial condition of the
Institutional Pharmacy Business taken as a whole: (1) any merger,
consolidation, share exchange, business combination or other similar
transaction (other than the Merger) including the Skilled Nursing Business;
(2) any sale, lease, exchange, transfer or other disposition of 25% or more of
the assets of GranCare (other than assets related to the Skilled Nursing
Business) and its Pharmacy Subsidiaries, taken as a whole, in a single
transaction or series of transactions; or (3) the acquisition by a person or
entity, or any "group" (as such term is defined under Section 13(d) of the
Exchange
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Act and the rules and regulations thereunder) of beneficial ownership of 33
1/3% or more of GranCare Common Stock, whether by tender offer, exchange offer
or otherwise.
(c) In the event of (i) a termination of this Agreement pursuant to Section
10.01(b), (c) or (d) and if prior thereto any person shall have made a bona
fide proposal concerning an Vitalink Business Combination Transaction (as
hereinafter defined) or (ii) any termination of this Agreement by GranCare
pursuant to Section 10.03(a), (b), (c), (d) or (f) or any termination of this
Agreement by Vitalink pursuant to Section 10.02(e), then Vitalink shall
promptly pay GranCare by wire transfer of immediately available funds to an
account specified by GranCare up to $2.5 million for all documented fees and
expenses incurred by GranCare (including the fees and expenses of counsel,
accountants, consultants and advisors) in connection with this Agreement, the
Distribution Agreement and the transactions contemplated hereby or thereby. In
the event of a termination of this Agreement pursuant to Section 10.02(e)
Vitalink shall be obligated to pay GranCare an additional fee of $17.5 million
(the "Vitalink Termination Payment") payable prior to and as a condition of
such termination as follows: (i) $7.5 million promptly by wire transfer of
immediately available funds to an account specified by GranCare, (ii) $10
million by either, at Vitalink's discretion, (x) delivery to GranCare of an
irrevocable letter of credit for $10 million or (y) deposit of $10 million in
immediately available funds to an escrow, in the case of each of clause (x)
and (y) on terms satisfactory to GranCare with payment of such $10 million to
be made to GranCare in immediately available funds immediately prior to and as
a condition of effecting the Vitalink Business Combination Transaction
contemplated by such definitive agreement (the amount of such payments and the
manner specified herein for making such payments, the "Vitalink Payments"). To
the extent an Vitalink Termination Payment has not already become payable and
been paid and if, prior to any termination pursuant to Section 10.01(b), (c)
or (d) or 10.03(a), (b), (c), (d) or (f), any person shall have submitted a
bona fide proposal concerning an Vitalink Business Combination Transaction and
within eighteen months after the termination of this Agreement, Vitalink or
any of its Subsidiaries proposes to enter into a definitive agreement with a
third party with respect to a Vitalink Business Combination Transaction or a
Vitalink Business Combination Transaction is proposed to be effected, then
Vitalink, prior to entering into any such definitive agreement or any such
Vitalink Business Combination Transaction being effected, shall be obligated
to pay GranCare an additional fee of $17.5 million payable as follows: (i) in
the case of the proposed execution of a definitive agreement for an Vitalink
Business Combination Transaction, prior to and as a condition of entering into
such definitive agreement, Vitalink shall have made all the Vitalink Payments
and (ii) in the case of an Vitalink Business Combination Transaction proposed
to be effected without any agreement, prior to and as a condition of effecting
such Vitalink Business Combination Transaction, Vitalink shall promptly pay
GranCare $17.5 million by wire transfer of immediately available funds to an
account specified by GranCare. As used in this Section 10.05, the term
"Vitalink Business Combination Transaction" shall mean any of the following
involving Vitalink or any Subsidiary that is material to the business, results
of operation, prospects or financial condition of Vitalink and its
Subsidiaries taken as a whole: (1) any merger, consolidation, share exchange,
business combination or other similar transaction (other than the Merger); (2)
any sale, lease, exchange, transfer or other disposition of 25% or more of the
assets of Vitalink and its Subsidiaries, taken as a whole, in a single
transaction or series of transactions; or (3) the acquisition by a person or
entity, or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of beneficial ownership
of 33 1/3% or more of Vitalink Common Stock, whether by tender offer, exchange
offer or otherwise.
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ARTICLE XI.
DEFINITIONS
Section 11.01 Terms Defined in This Agreement. The following capitalized
terms used herein shall have the meanings ascribed in the indicated sections.
Affiliates................................................. 4.07
Agreement.................................................. First Paragraph
Amendment.................................................. 1.03
Antitrust Division......................................... 5.07
Average Market Value....................................... 2.04
California Act............................................. 1.01
CERCLA..................................................... 3.27
Certificate of Merger...................................... 1.02
Certificates............................................... 2.02
Certified Agreement........................................ 1.02
Closing.................................................... 9.01
Closing Consideration...................................... 2.01
Closing Date............................................... 9.01
COBRA...................................................... 3.26
Code....................................................... 3.25
Consent.................................................... 5.16
Constituent Corporations................................... First Paragraph
Debenture.................................................. 5.16
Delaware Act............................................... 1.01
Dissenting Shares.......................................... 2.01
Distribution............................................... Recitals
Distribution Agreement..................................... Recitals
Effective Time............................................. 1.02
Environment................................................ 3.27
Environmental Authorizations............................... 3.27
Environmental Laws......................................... 3.27
Environmental Notice....................................... 3.27
ERISA...................................................... 3.26
ERISA Affiliate............................................ 3.26
Exchange Act............................................... 3.08
Exchange Ratio............................................. 2.01
Foreign Plan............................................... 3.26
FTC........................................................ 5.07
GranCare................................................... First Paragraph
GranCare Acquisition Transaction........................... 5.03
GranCare Balance Sheet..................................... 4.19
GranCare Business Combination Transaction.................. 10.05
GranCare Common Stock...................................... 2.01
GranCare Compensation and Benefit Plans.................... 4.03
GranCare Contract.......................................... 4.03
GranCare Disclosure Statement.............................. Article IV
GranCare Licenses.......................................... 4.08
GranCare Material Adverse Effect........................... 4.01
GranCare Option Plans...................................... 4.15
GranCare Options........................................... 4.15
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GranCare Payments.......................................... 10.05
GranCare Pension Benefit Plans............................. 4.27
GranCare Permitted Encumbrance............................. 4.19
GranCare Pharmacy Contracts................................ 4.32
GranCare Preferred Stock................................... 4.15
GranCare SEC Reports....................................... 4.11
GranCare Termination Payment............................... 10.05
GranCare Welfare Plans..................................... 4.27
Hazardous Material......................................... 3.27
HSR Act.................................................... 3.03
Indenture.................................................. 5.16
Institutional Pharmacy Business............................ Recitals
Intellectual Property Rights............................... 3.24
IRS........................................................ 3.26
Merger..................................................... 1.01
Multiemployer Plan......................................... 3.26
NASDAQ..................................................... 2.02
Note Indenture............................................. 5.16
Parent..................................................... Recitals
PBGC....................................................... 3.26
Pharmacy Agreement......................................... 4.32
Pharmacy Subsidiaries...................................... 4.01
Proxy Statement............................................ 4.09
Registration Statement..................................... 3.08
Restructuring.............................................. Recitals
SEC........................................................ 3.08
Securities Act............................................. 3.08
Shareholders Agreement..................................... 8.02
Skilled Nursing Assets..................................... Recitals
Skilled Nursing Business................................... 4.01
Skilled Nursing Liabilities................................ Recitals
Special Meeting............................................ 1.05
SNFCo...................................................... Recitals
SNFCo Registration Document................................ 4.09
SNFCo Stock................................................ Recitals
Stockholder Approval....................................... 1.05
Subsidiary................................................. 12.09
Surviving Corporation...................................... 1.01
Tax Returns................................................ 3.25
Taxes...................................................... 3.25
Tender Offer............................................... 5.16
Vitalink................................................... First Paragraph
Vitalink Acquisition Transaction........................... 5.04
Vitalink Balance Sheet..................................... 3.18
Vitalink Business Combination Transaction.................. 10.05
Vitalink Common Stock...................................... 2.01
Vitalink Compensation and Benefit Plans.................... 3.03
Vitalink Contracts......................................... 3.03
Vitalink Disclosure Statement.............................. Article III
Vitalink Information Statement............................. 3.08
Vitalink Licenses.......................................... 3.07
Vitalink Material Adverse Effect........................... 3.01
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Vitalink Option Plans............................................. 3.14
Vitalink Options.................................................. 3.14
Vitalink Payments................................................. 10.05
Vitalink Pension Benefit Plans.................................... 3.26
Vitalink Permitted Encumbrance.................................... 3.18
Vitalink Pharmacy Contracts....................................... 3.31
Vitalink Preferred Stock.......................................... 3.14
Vitalink SEC Reports.............................................. 3.10
Vitalink Termination Payment...................................... 10.05
Vitalink Welfare Plans............................................ 3.26
Voting Agreement.................................................. Recitals
ARTICLE XII.
MISCELLANEOUS
Section 12.01 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement
of Vitalink and GranCare at any time prior to the Effective Time with respect
to any of the terms contained herein; provided, however, that after this
Agreement is adopted by the stockholders of GranCare, no such amendment or
modification shall change the amount or form of the Closing Consideration.
Section 12.02 Waiver of Compliance; Consents. Any failure of Vitalink, on
the one hand, or GranCare, on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by GranCare or Vitalink,
respectively, only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto,
such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 12.02.
Section 12.03 Survivability; Investigations. The respective representations
and warranties of Vitalink and GranCare contained herein or in any
certificates or other documents delivered prior to or at the Closing shall not
be deemed waived or otherwise affected by any investigation made by any party
hereto and shall not survive the Closing.
Section 12.04 Notices. All notices and other communications hereunder shall
be in writing and shall be delivered personally, by next-day courier or mailed
by registered or certified mail (return receipt requested) with first class
postage prepaid, or telecopied with written machine generated confirmation of
receipt, to the parties at the addresses specified below (or at such other
address for a party as shall be specified by like notice; provided, that
notices of a change of address shall be effective only upon receipt thereof).
Any such notice shall be effective upon receipt, if personally delivered or
telecopied, one day after delivery to a courier for next-day delivery, or
three days after mailing, if deposited in the U.S. mail, first class postage
prepaid.
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(a) if to GranCare, to
GranCare, Inc.
Xxx Xxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
with a copy to
Powell, Goldstein, Xxxxxx & Xxxxxx
16th floor
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(b) if to Vitalink, to
Vitalink Pharmacy Services, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
with a copy to
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: W. Xxxxxx Xxxxx, Esq.
Section 12.05 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other parties,
nor is this Agreement intended to confer any rights or remedies hereunder upon
any other person except the parties hereto and, with respect to Section 5.10,
the officers and directors of GranCare.
Section 12.06 Governing Law. Except as the laws of the State of California
are by their terms applicable, this Agreement shall be governed by the laws of
the State of Delaware (regardless of the laws that might otherwise govern
under applicable Delaware principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies.
Section 12.07 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.08 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall
only apply as to such party in the specific jurisdiction where such judgment
shall be made.
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Section 12.09 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof; and (ii) the term "Subsidiary" of any specified
corporation shall mean any corporation of which a majority of the outstanding
securities having ordinary voting power to elect a majority of the board of
directors is directly or indirectly beneficially owned by such specified
corporation or any other person of which a majority of the equity interests
therein is, directly or indirectly, owned by such specified corporation.
Section 12.10 Entire Agreement. This Agreement, including the exhibits
hereto and the documents and instruments referred to herein (including the
Confidentiality Agreement dated May 26, 1996 between Vitalink and GranCare),
embodies the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein and supersedes all prior
agreements and the understandings between the parties with respect to such
subject matter. There are no representations, promises, warranties, covenants,
or undertakings, other than those expressly set forth or referred to herein
and therein.
IN WITNESS WHEREOF, Vitalink and GranCare have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
VITALINK PHARMACY SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman and Chief
Executive Officer
GRANCARE, INC.
By: /s/ Xxxx X. Xxxxxxxx
----------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
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