PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER (the "Plan of Merger"), made and
entered into as of the 2nd day of December, 1996, by and among
HEALTHSOUTH Corporation, a Delaware corporation ("HEALTHSOUTH"),
HAMMER ACQUISITION CORPORATION, a Delaware corporation (the
"Subsidiary"), and HEALTH IMAGES, INC., a Delaware corporation
("Health Images") (the Subsidiary and Health Images being sometimes
collectively referred to herein as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of HEALTHSOUTH,
the Subsidiary and Health Images have approved the merger of the
Subsidiary with and into Health Images (the "Merger"), upon the
terms and conditions set forth in this Plan of Merger, whereby all
shares of Common Stock, par value $.01 per share, of Health Images
(the "Health Images Common Stock"), not owned directly or
indirectly by Health Images, will be converted into the right to
receive the Merger Consideration (as hereinafter defined);
WHEREAS, each of HEALTHSOUTH, the Subsidiary and Health Images
desires to make certain representations, warranties, covenants and
agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization under the provisions
of Section 368 of the Internal Revenue Code of 1986, as amended;
and
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests".
NOW, THEREFORE, in consideration of the premises, and the
mutual covenants and agreements contained herein, the parties
hereto do hereby agree as follows:
Section 1. The Merger.
1.1 The Merger. Upon the terms and conditions set forth in
this Plan of Merger, and in accordance with the Delaware General
Corporation Law (the "DGCL"), the Subsidiary shall be merged with
and into Health Images at the Effective Time (as defined in Section
1.3). Following the Effective Time, the separate corporate
existence of the Subsidiary shall cease and Health Images shall
continue as the surviving corporation (the "Surviving Corporation")
under the name "Health Images, Inc." and shall succeed to and
assume all the rights and obligations of the Subsidiary and Health
Images in accordance with the DGCL.
1.2 The Closing. The closing of the Merger (the "Closing")
will take place at 10:00 a.m. Central Time on a date to be
specified by the parties (the "Closing Date"), which (subject to
satisfaction or waiver of the conditions set forth in Sections 9.2
and 9.3) shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Section 9.1
(other than Section 9.1(a)), at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, L.L.C., Birmingham, Alabama, unless another date or place is
agreed to in writing by the parties hereto.
1.3 Effective Time. Subject to the provisions of this Plan
of Merger, the parties shall file a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or
recordings required under the DGCL as soon as practicable on or
after the Closing Date. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Delaware
Secretary of State, or at such other time as the Subsidiary and
Health Images shall agree should be specified in the Certificate of
Merger (the "Effective Time").
1.4 Effect of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL.
Section 2. Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates.
2.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of any
holder of shares of Health Images Common Stock or any shares of
capital stock of the Subsidiary:
(a) Subsidiary Common Stock. Each share of capital stock of
the Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Health
Images Common Stock that is owned by Health Images or by any
subsidiary of Health Images shall automatically be canceled and
retired and shall cease to exist, and none of the Common Stock, par
value $.01 per share, of HEALTHSOUTH ("HEALTHSOUTH Common Stock"),
cash or other consideration shall be delivered in exchange
therefor.
(c) Conversion of Health Images Shares. Subject to Section
2.2(e), each issued and outstanding share of Health Images Common
Stock (other than shares to be canceled in accordance with Section
2.1(b)) (collectively, the "Exchanging Health Images Shares") shall
be converted into the right to receive .446 (the "Exchange Ratio")
of a share of HEALTHSOUTH Common Stock, as may be adjusted as
provided in Section 2.1(e) below (the "Merger Consideration"). As
of the Effective Time, all such Exchanging Health Images Shares
shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a
certificate representing any Exchanging Health Images Shares shall
cease to have any rights with respect thereto, except the right to
receive the Merger Consideration and any cash in lieu of fractional
shares of HEALTHSOUTH Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in
accordance with Section 2.2, without interest.
(d) Stock Options and Warrants. At the Effective Time, all
rights with respect to Health Images Common Stock pursuant to any
Health Images stock options or stock purchase
warrants which are
outstanding at the Effective Time, whether or not then exercisable,
shall be converted into and become rights with respect to HEALTH-
SOUTH Common Stock, and HEALTHSOUTH shall assume each Health Images
stock option and stock purchase warrant, in accordance with the
terms of any stock option plan under which it was issued and any
stock option agreement or warrant agreement by which it is
evidenced. It is intended that, unless otherwise agreed between
HEALTHSOUTH and a particular optionee, the foregoing provisions
shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 424 of the Code, as to any
stock option which is an "incentive stock option". Each Health
Images stock option or stock purchase warrant so assumed shall be
exercisable for that number of shares of HEALTHSOUTH Common Stock
equal to the number of Health Images shares subject thereto
multiplied by the Exchange Ratio, and shall have an exercise price
per share equal to the Health Images exercise price divided by the
Exchange Ratio.
(e) Anti-Dilution Provisions. If after the date hereof and
prior to the Effective Time HEALTHSOUTH shall have declared a stock
split (including a reverse split) of HEALTHSOUTH Common Stock or a
dividend payable in HEALTHSOUTH Common Stock, or any other
distribution of securities or dividend (in cash or otherwise) to
holders of HEALTHSOUTH Common Stock with respect to their
HEALTHSOUTH Common Stock (including without limitation such a
distribution or dividend made in connection with a
recapitalization, reclassification, merger, consolidation,
reorganization, reclassification, merger, consolidation,
reorganization or similar transaction) then (i) the Exchange Ratio
shall be appropriately adjusted to reflect such stock split or
dividend or other distribution of securities and (ii) if such stock
split, dividend or distribution has a record date prior to the
Effective Time, then the number of shares of HEALTHSOUTH Common
Stock to be issued upon conversion of a share of Health Images
Common Stock pursuant to Section 2.1(c) shall be appropriately
adjusted to reflect such stock split, dividend or other
distribution of securities.
2.2 Exchange of Certificates. (a) Exchange Agent. Prior to
the Effective Time, HEALTHSOUTH shall enter into an agreement with
such bank or trust company as may be designated by HEALTHSOUTH (the
"Exchange Agent") which shall provide that HEALTH-
SOUTH shall
deposit with the Exchange Agent as of the Effective Time, for the
benefit of the holders of Exchanging Health Images Shares, for
exchange in accordance with this Section 2, through the Exchange
Agent, certificates representing the shares of HEALTHSOUTH Common
Stock (such shares of HEALTHSOUTH Common Stock, together with any
dividends or distributions with respect thereto with a record date
after the Effective Time, being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.1 in exchange for
outstanding shares of Health Images Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, but in any event within five business day
following the Effective Time, the Surviving Corporation shall cause
the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Health Images
Common Stock (the "Certificates") whose shares were converted into
the right to receive the Merger Consideration pursuant to Section
2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as
HEALTHSOUTH may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for
certificates representing shares of HEALTHSOUTH Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by HEALTH-
SOUTH, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of
whole shares of HEALTHSOUTH Common Stock which such holder has the
right to receive pursuant to the provisions of this Section 2, and
the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of shares of Health Images Common
Stock which is not registered in the transfer records of Health
Images, a certificate representing the proper number of shares of
HEALTHSOUTH Common Stock may be issued to a person other than the
person in whose name the Certificate so surrendered is registered,
if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the
issuance of shares of HEALTHSOUTH Common Stock
to a person other
than the registered holder of such Certificate or establish to the
satisfaction of HEALTHSOUTH that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2,
each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the
certificate representing shares of HEALTHSOUTH Common Stock and
cash in lieu of any fractional shares of HEALTHSOUTH Common Stock
as contemplated by this Section 2.2. No interest will be paid or
will accrue on any cash payable in lieu of any fractional shares of
HEALTHSOUTH Common Stock. To the extent permitted by law, former
stockholders of record of Health Images shall be entitled to vote
after the Effective Time at any meeting of HEALTHSOUTH stockholders
the number of whole shares of HEALTHSOUTH Common Stock into which
their respective shares of Health Images Common Stock are
converted, regardless of whether such holders have exchanged their
Certificates for certificates representing HEALTHSOUTH Common Stock
in accordance with this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to HEALTHSOUTH Common
Stock with a record date after the Effective Time of the Merger
shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of HEALTHSOUTH Common Stock represented
thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(e) until the
surrender of such Certificate in accordance with this Section 2.
Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder of the
certificate representing whole shares of HEALTHSOUTH Common Stock
issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a
fractional share of HEALTHSOUTH Common Stock to which such holder
is entitled pursuant to Section 2.2(e) and the amount of dividends
or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of HEALTHSOUTH
Common Stock, and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole
shares of HEALTHSOUTH Common Stock.
(d) No Further Ownership Rights in Exchanging Health Images
Shares. All shares of HEALTHSOUTH Common Stock issued upon the
surrender for exchange of Certificates in accordance with the terms
of this Section 2 (including any cash paid pursuant to Section
2.2(c) or 2.2(e)) shall be deemed to have been issued (and paid) in
full satisfaction of all rights pertaining to the Exchanging Health
Images Shares theretofore represented by such Certificates. If,
after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they
shall be canceled and exchanged as provided in this Section 2,
except as otherwise provided by law.
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of HEALTHSOUTH Common Stock shall be
issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to
vote or to any rights of a stockholder of HEALTHSOUTH.
Notwithstanding any other provision of this Plan of Merger, each
holder of Exchanging Health Images Shares exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction
of a share of HEALTHSOUTH Common Stock (after taking into account
all Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such
fractional part of a share of HEALTHSOUTH Common Stock multiplied
by the closing price per share of HEALTHSOUTH Common Stock on the
date on which the Effective Time occurs, as reported on the New
York Stock Exchange Composite Transactions Tape.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of the
Certificates for six months after the Effective Time shall be
delivered to HEALTHSOUTH, upon demand, and any holders of the
Certificates who have not theretofore complied with this Section 2
shall thereafter look only to HEALTHSOUTH for payment of HEALTH-
SOUTH Common Stock, any cash in lieu of fractional shares of
HEALTHSOUTH Common Stock and any dividends or distributions with
respect to HEALTHSOUTH Common Stock.
(g) No Liability. None of HEALTHSOUTH, the Subsidiary,
Health Images or the Exchange Agent shall be liable to any person
in respect of any shares of HEALTHSOUTH Common Stock (or dividends
or distributions with respect thereto) or cash from the Exchange
Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates
shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which
any shares of HEALTHSOUTH Common Stock, any cash in lieu of
fractional shares of HEALTHSOUTH Common Stock or any dividends or
distributions with respect to HEALTHSOUTH Common Stock in respect
of such Certificates would otherwise escheat to or become the
property of any governmental entity), any such shares, cash,
dividends or distributions in respect of such Certificates shall,
to the extent permitted by applicable law, become the property of
the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund in deposit accounts
or short-term money market instruments, as directed by HEALTHSOUTH,
on a daily basis. Any interest and other income resulting from
such investments shall be paid to HEALTHSOUTH.
2.3 Certificate of Incorporation of Surviving Corporation.
The Certificate of Incorporation of Health Images shall be amended
and restated, effective at the Effective Time, in a manner
satisfactory to HEALTHSOUTH. The Certificate of Incorporation of
Health Images, as so amended and restated, shall become the
Certificate of Incorporation of the Surviving Corporation from and
after the Effective Time and until thereafter amended as provided
by law.
2.4 Bylaws of the Surviving Corporation. The Bylaws of the
Subsidiary shall be the Bylaws of the Surviving Corporation from
and after the Effective Time and until thereafter altered, amended
or repealed in accordance with the laws of the State of Delaware,
the Certificate of Incorporation of Health Images and the said
Bylaws.
2.5 Directors and Officers of the Surviving Corporation. The
Directors and officers of the Subsidiary immediately prior to the
Effective Time shall be the Directors and officers of the Surviving
Corporation, each to hold office in accordance with the Certificate
of Incorporation and Bylaws of the Surviving Corporation.
2.6 Assets, Liabilities, Reserves and Accounts. At the
Effective Time, the assets, liabilities, reserves and accounts of
each of the Subsidiary and Health Images shall be taken up on the
books of the Surviving Corporation at the amounts at which they
respectively shall be carried on the books of said corporations
immediately prior to the Effective Time, except as otherwise set
forth in the Plan of Merger and subject to such adjustments, or
elimination of intercompany items, as may be appropriate in giving
effect to the Merger in accordance with generally accepted
accounting principles.
2.7 Corporate Acts of the Subsidiary. All corporate acts,
plans, policies, approvals and authorizations of the Subsidiary,
its sole stockholder, its Board of Directors, committees elected or
appointed by the Board of Directors, and all officers and agents,
valid immediately prior to the Effective Time, shall be those of
the Surviving Corporation and shall be as effective and binding
thereon as they were with respect to the Subsidiary. The employees
and agents of the Subsidiary shall become the employees and agents
of the Surviving Corporation and continue to be entitled to the
same rights and benefits which they enjoyed as employees and agents
of the Subsidiary.
Section 3. Representations and Warranties of Health Images.
Health Images hereby represents and warrants to HEALTHSOUTH
and the Subsidiary as follows:
3.1 Organization, Existence and Good Standing. Health Images
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Health Images
has all necessary corporate power to own its properties and assets
and to carry on its business as presently conducted. Health Images
is not, and has not been within the two years immediately preceding
the date of this Plan of Merger, a subsidiary or division of
another corporation, nor has Health Images within such time owned,
directly or indirectly, any shares of HEALTHSOUTH Common Stock or
Subsidiary Common Stock.
3.2 Health Images Capital Stock. Health Images's authorized
capital consists of 40,000,000 shares of Health Images Common
Stock, par value $.01 per share, of which
11,418,123 shares were
issued and outstanding as of September 30, 1996, and 2,040,762
shares were issued and held as treasury shares, and 2,000,000
shares of Preferred Stock, par value $.01 per share, none of which
shares are issued and outstanding or held as treasury stock. All
of the issued and outstanding shares of Health Images Common Stock
are duly and validly issued, fully paid and nonassessable. Except
as set forth on Exhibit 3.2 to the Disclosure Schedule delivered by
Health Images to HEALTHSOUTH simultaneously with the execution and
delivery hereof (the "Disclosure Schedule") or otherwise disclosed
in the Health Images Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Health Images 10-K"), there are no
options, warrants, or similar rights granted by Health Images or
any other agreements to which Health Images is a party providing
for the issuance or sale by it of any additional securities which
would remain in effect after the Effective Time. There is no
liability for dividends declared or accumulated but unpaid with
respect to any of the shares of Health Images Common Stock. Health
Images has not made any distributions to any holders of Health
Images Common Stock or participated in or effected any issuance,
exchange or retirement of shares of Health Images Common Stock, or
otherwise changed the equity interests of holders of Health Images
Common Stock, in contemplation of effecting the Merger within the
two years immediately preceding the date of this Plan of Merger.
Any shares of Health Images Common Stock that Health Images has re-
acquired during the two years immediately preceding the date of
this Plan of Merger have been so re-acquired only for purposes
other than "business combinations", as such term is defined in
Accounting Principles Board Opinion No. 16, as amended ("Business
Combinations").
3.3 Subsidiaries and Affiliated Partnerships. (a) Attached
to the Disclosure Schedule as Exhibit 3.3 is a list of all
subsidiaries of Health Images (individually, a "Health Images
Subsidiary", and collectively, the "Health Images Subsidiaries")
and their states of incorporation. Except as set forth on Exhibit
3.3, Health Images does not own stock in and does not control,
directly or indirectly, any other corporation, association or
business organization other than the Health Images Other Entities
(as defined below).
(b) Also disclosed on Exhibit 3.3 is a list of all general or
limited partnerships in which a general partner is Health Images,
a Health Images Subsidiary or another Health Images Partnership
(individually, a "Health Images Partnership" and collectively, the
"Health Images Partnerships"), and all limited liability companies
in which Health Images, a Health Images Subsidiary or a Health
Images Partnership is a member (individually, a "Health Images LLC"
and collectively, the "Health Images LLCs") (the Health Images
Partnerships and the Health Images LLCs being collectively called
the "Health Images Other Entities"), and their states of organiza-
tion. Except as set forth on Exhibit 3.3, neither Health Images
nor any Health Images Subsidiary owns an equity interest in, nor
does such entity control, directly or indirectly, any other joint
venture, limited liability company or partnership.
3.4 Organization, Existence and Good Standing of Health
Images Subsidiaries and Health Images Other Entities. (a) Each
Health Images Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its respective
state of incorporation. Each Health Images Subsidiary has all
necessary corporate power to own its properties and assets and to
carry on its business as presently conducted.
(b) Each Health Images Partnership that is a limited
partnership is validly formed, each Health Images Partnership that
is a general partnership has been duly organized, and each Health
Images Partnership is in good standing under the laws of its
respective state of organization. Each Health Images Partnership
has all necessary power to own its property and assets and to carry
on its business as presently conducted.
(c) Each Health Images LLC is a limited liability company
validly formed and in good standing under the laws of its
respective state of organization. Each Health Images LLC has all
necessary power to own its property and assets to carry on its
business as presently conducted.
3.5 Foreign Qualifications. Health Images, each Health
Images Subsidiary and each Health Images Other Entity that is not
a general partnership is qualified to do business as a foreign
corporation, foreign limited partnership or foreign limited
liability company, as the case may be, and is in good standing in
each jurisdiction where the nature or character of the property
owned, leased or operated by it or the nature of the business
transacted by it makes such qualification necessary, except where
the failure to so qualify would not have
a material adverse effect
on Health Images, the Health Images Subsidiaries and the Health
Images Other Entities, taken as a whole.
3.6 Power and Authority. Subject to the satisfaction of the
conditions precedent set forth herein, Health Images has the
corporate power to execute, deliver and perform the Plan of Merger
and all agreements and other documents executed and delivered or to
be executed and delivered by it pursuant to the Plan of Merger,
and, subject to the satisfaction of the conditions precedent set
forth herein, has taken all action required by its Certificate of
Incorporation, Bylaws or otherwise, to authorize the execution,
delivery and performance of the Plan of Merger and such related
documents. Except as set forth on Exhibit 3.6 to the Disclosure
Schedule, the execution and delivery of the Plan of Merger does not
and, subject to the receipt of required stockholder and regulatory
approvals and any other required third-party consents or approvals,
the consummation of the Merger will not, violate any provisions of
the Certificate of Incorporation of Health Images or any provisions
of, or result in the acceleration of any obligation under, any
material mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree, to which Health Images or
any Health Images Subsidiary or Health Images Other Entity is a
party, or by which it is bound, or violate any restrictions of any
kind to which it is subject which, if violated or accelerated,
would have a material adverse effect on Health Images, the Health
Images Subsidiaries and the Health Images Other Entities, taken as
a whole. The execution and delivery of this Plan of Merger has
been approved by the Board of Directors of Health Images. This
Plan of Merger has been duly executed and delivered by Health
Images and, assuming this Plan of Merger constitutes a valid and
binding obligation of HEALTHSOUTH and the Subsidiary, as the case
may be, constitutes a valid and binding obligation of Health
Images, enforceable against Health Images in accordance with its
terms.
3.7 Health Images Public Information. Health Images has
heretofore furnished HEALTHSOUTH with a true and complete copy of
each report, schedule, registration statement and definitive proxy
statement filed by it with the Securities and Exchange Commission
(the "SEC") (as any such documents have since the time of their
original filing been amended, the "Health Images Documents") since
January 1, 1995, which are all the documents (other than
preliminary material) that it was required to file with the SEC
from
such date through the date of this Plan of Merger. As of
their respective dates, the Health Images Documents did not contain
any untrue statements of material facts or omit to state material
facts required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. As of their respective dates, the
Health Images Documents complied in all material respects with the
applicable requirements of the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated under such statutes. The financial
statements contained in the Health Images Documents, together with
the notes thereto, have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the
periods indicated (except as may be indicated in the notes thereto,
or, in the case of the unaudited financial statements, as permitted
by Form 10-Q), reflect all known liabilities of Health Images
required to be stated therein, including all such known contingent
liabilities as of the end of each period reflected therein, and
present fairly the financial condition of Health Images at said
dates and the consolidated results of operations and cash flows of
Health Images for the periods then ended. The consolidated balance
sheet of Health Images at September 30, 1996 included in the Health
Images Documents is herein sometimes referred to as the "Health
Images Balance Sheet".
3.8 Visit Analysis. Exhibit 3.8 to the Disclosure Schedule
sets forth a visit analysis by facility for each facility operated
by Health Images, any Health Images Subsidiary or any Health Images
Other Entity describing aggregate patient visits by modality for
the three months and nine months ended September 30, 1996. Such
visit analysis is true and correct in all material respects.
3.9 Legal Proceedings. Except as disclosed in the Health
Images Documents or on Exhibit 3.9 to the Disclosure Schedule,
there is no material litigation, governmental investigation or
other proceeding pending or, so far as is known to Health Images,
threatened against or relating to Health Images, its properties or
business, or the transaction contemplated by the Plan of Merger
and, so far as is known to Health Images, no basis for any such
action exists.
3.10 Contracts, etc. (a) All material contracts, leases,
agreements and arrangements to which Health Images or any of the
Health Images Subsidiaries or Health Images Other Entities is a
party are legally valid and binding in accordance with their terms
and in full force and effect, and to the knowledge of Health
Images, no party is in default thereunder, and no event has
occurred which, but for the passage of time or the giving of notice
or both, would constitute a default thereunder, except, in each
case, where the invalidity of the lease, contract, agreement or
arrangement or the default or breach thereunder or thereof would
not, individually or in the aggregate, have a material adverse
effect on Health Images, the Health Images Subsidiaries and the
Health Images Other Entities, taken as a whole.
(b) Except as set forth on Exhibit 3.10 to the Disclosure
Schedule, no contract or agreement to which Health Images or any
Health Images Subsidiary or Health Images Other Entity is a party
will, by its terms, terminate as a result of the transactions
contemplated hereby or require any consent from any obligor thereto
in order to remain in full force and effect immediately after the
Effective Time, except for contracts or agreements which, if
terminated, would not have a material adverse effect on Health
Images, the Health Images Subsidiaries and the Health Images Other
Entities, taken as a whole.
(c) Except as set forth on Exhibit 3.10 to the Disclosure
Schedule, none of Health Images, any Health Images Subsidiary or
any Health Images Other Entity has granted any right of first
refusal or similar right in favor of any third party with respect
to any material portion of its properties or assets or entered into
any non-competition agreement or similar agreement restricting its
ability to engage in any business in any location.
3.11 Subsequent Events. Except as set forth on Exhibit 3.11
to the Disclosure Schedule or disclosed in the Health Images
Documents, Health Images has not, since the date of the last-filed
Health Images Document:
(a) Incurred any material adverse change,
including, but not limited to, any material adverse
change in patient visits by modality from those reflected
on Exhibit 3.8.
(b) Discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation
or liability (absolute, accrued, contingent or otherwise)
other than (i) liabilities shown or reflected on the
Health Images Balance Sheet or (ii) liabilities incurred
since the date of the last-filed Health Images Document
in the ordinary course of business, which discharge or
satisfaction would have a material adverse effect on
Health Images, the Health Images Subsidiaries and the
Health Images Other Entities, taken as a whole.
(c) Increased or established any reserve for taxes
or any other liability on its books or otherwise provided
therefor which would have a material adverse effect on
Health Images, the Health Images Subsidiaries and the
Health Images Other Entities, taken as a whole, except as
may have been required due to consolidated income or
operations of Health Images since the date of the last-
filed Health Images Document.
(d) Mortgaged, pledged or subjected to any lien,
charge or other encumbrance any of the assets, tangible
or intangible, which assets are material to the
consolidated business or financial condition of Health
Images.
(e) Sold or transferred any of the assets material
to the consolidated business of Health Images, cancelled
any material debts or claims or waived any material
rights, except in the ordinary course of business.
(f) Granted any general or uniform increase in the
rates of pay of employees or any material increase in
salary payable or to become payable by Health Images to
any officer or employee, consultant or agent (other than
normal merit increases), or by means of any bonus or
pension plan, contract or other commitment, increased in
a material respect the compensation of any officer,
employee, consultant or agent, except for increases in
bonus compensation relating to Health Images' financial
performance during fiscal
1996, which increases shall not
exceed $300,000 in the aggregate for the executive
officers of Health Images.
(g) Except for this Plan of Merger and any other
agreement executed and delivered pursuant to this Plan of
Merger, entered into any material transaction other than
in the ordinary course of business or permitted under
other Sections hereof.
(h) Issued any stock, bonds or other securities,
other than stock options granted to employees, directors
or consultants of Health Images or warrants granted to
third parties, all of which are disclosed on Exhibit 3.2
to the Disclosure Schedule or reflected in the Health
Images Documents.
3.12 Accounts Receivable. (a) Since the date of the Health
Images 10-K, Health Images has not changed any material principle
or practice with respect to the recordation of accounts receivable
or the calculation of reserves therefor, or any material
collection, discount or write-off policy or procedure. Health
Images (including the Health Images Subsidiaries and Health Images
Other Entities) is in compliance with the terms and conditions of
all third-party payor arrangements relating to its accounts
receivable, except to the extent that such noncompliance would not
have a material adverse effect on Health Images, the Health Images
Subsidiaries and the Health Images Other Entities, taken as a
whole.
(b) Without limiting the generality of the foregoing, each of
Health Images and the Health Images Subsidiaries and the Health
Images Other Entities is in compliance with all Medicare and
Medicaid provider agreements to which it is a party, except to the
extent that such noncompliance would not have a material adverse
effect on Health Images, the Health Images Subsidiaries and the
Health Images Other Entities, taken as a whole.
3.13 Tax Returns. Health Images has filed all tax returns
required to be filed by it or requests for extensions to file such
returns or reports have been timely filed and granted and have not
expired, except to the extent that such failures to file, taken
together, do not have a material adverse effect on Health Images.
Health Images has made all payments
shown as due on such returns.
Health Images has not been notified that any tax returns of Health
Images are currently under audit by the Internal Revenue Service or
any state or local tax agency, except for local tax audits that in
the aggregate are not material. No agreements have been made by
Health Images for the extension of time or the waiver of the
statute of limitations for the assessment or payment of any
federal, state or local taxes.
3.14 Commissions and Fees. Except as set forth in
Exhibit 3.14 to the Disclosure Schedule, there are no valid claims
for brokerage commissions or finder's or similar fees in connection
with the transactions contemplated by this Plan of Merger which may
be now or hereafter asserted against HEALTHSOUTH resulting from any
action taken by Health Images or its stockholders, officers or
Directors, or any of them.
3.15 Employee Benefit Plans; Employment Matters. (a) Except
as described in the Health Images Documents or set forth on Exhibit
3.15(a) to the Disclosure Schedule, Health Images has neither
established nor maintains nor is obligated to make contributions to
or under or otherwise participate in (a) any bonus or other type of
incentive compensation plan, program, agreement, policy,
commitment, contract or arrangement (whether or not set forth in a
written document), (b) any pension, profit-sharing, retirement or
other plan, program or arrangement, or (c) any other employee
benefit plan, fund or program, including, but not limited to, those
described in Section 3(3) of ERISA. All such plans (individually,
a "Plan" and collectively, the "Plans") have been operated and
administered in all material respects in accordance with, as
applicable, ERISA, the Internal Revenue Code of 1986, as amended,
Title VII of the Civil Rights Act of 1964, as amended, the Equal
Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations
adopted by those federal agencies responsible for the administra-
tion of such laws. No act or failure to act by Health Images has
resulted in a "prohibited transaction" (as defined in ERISA) with
respect to the Plans that is not subject to a statutory or
regulatory exception. No "reportable event" (as defined in ERISA)
has occurred with respect to any of the Plans which is subject to
Title IV of ERISA. Health Images has not previously made, is not
currently making, and is not obligated in any way to make, any
contributions to any multi-employer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980.
(b) Except as described in the Health Images Documents or set
forth on Exhibit 3.15(b) to the Disclosure Schedule, Health Images
is not a party to any oral or written (i) union, guild or
collective bargaining agreement which agreement covers employees in
the United States (nor is it aware of any union organizing activity
currently being conducted in respect to any of its employees), (ii)
agreement with any executive officer or other key employee the
benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction of the
nature contemplated by this Plan of Merger and which provides for
the payment of in excess of $50,000, or (iii) agreement or plan,
including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting the benefits of which
will be accelerated, by the occurrence of any of the transactions
contemplated by this Plan of Merger or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Plan of Merger.
3.16 Compliance with Laws in General. Except as set forth on
Exhibit 3.16 to the Disclosure Schedule or disclosed in the Health
Images Documents, Health Images has not received any notices of
material violations of any federal, state and local laws,
regulations and ordinances relating to its business and operations,
including, without limitation, the Federal Environmental Protection
Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act, the Medicare or applicable Medicaid statutes and
regulations and any Environmental Laws, and no notice of any
pending inspection or violation of any such law, regulation or
ordinance has been received by Health Images which, if it were
determined that a violation had occurred, would have a material
effect on Health Images, the Health Images Subsidiaries and the
Health Images Other Entities, taken as a whole.
3.17 Licenses, Accreditation and Regulatory Approvals. (a)
Except as disclosed in the Health Images Documents or set forth on
Exhibit 3.17 to the Disclosure Schedule, Health Images and the
Health Images Subsidiaries and Health Images Other Entities hold
all licenses, permits, certificates of need and other regulatory
approvals which are needed or required by law with respect to their
businesses, operations and facilities as they are currently or
presently conducted (collectively, the "Licenses"), except where
the failure to
possess such Licenses does not have a material
adverse effect on Health Images, the Health Images Subsidiaries and
the Health Images Other Entities, taken as a whole. All such
Licenses are in full force and effect, and Health Images is in
compliance in all material respects with all conditions and
requirements of the Licenses and with all rules and regulations
relating thereto. Health Images, the Health Images Subsidiaries
and the Health Images Other Entities are, to the extent applicable
to their operations, (i) eligible to receive payment under Titles
XVIII and XIX of the Social Security Act, (ii) providers under
existing provider agreements with the Medicare program through the
applicable intermediaries and (iii) in compliance with the
conditions of participation in the Medicare program except for such
noncompliance as does not have a material adverse effect on Health
Images, the Health Images Subsidiaries and the Health Images Other
Entities, taken as a whole. Except to the extent that the failure
to timely make such filings would not have a material adverse
effect on Health Images, the Health Images Subsidiaries and the
Health Images Other Entities, taken as a whole, Health Images, the
Health Images Subsidiaries and the Health Images Other Entities
have timely filed all requisite claims and other reports required
to be filed in connection with the Medicare, Medicaid and other
governmental health programs due on or before the date hereof, all
of which were, when filed, complete and correct in all material
respects. There are no current claims, actions or appeals pending,
and neither Health Images nor the Health Images Subsidiaries nor
the Health Images Other Entities have filed any claims or reports
which would result in such claims, actions or appeals, before any
commission, board or agency, including, without limitation, any
intermediary or carrier, the Provider Reimbursement Review Board or
the Administrator of the Health Care Financing Administration with
respect to any Medicare claims, or any disallowances in connection
with any audit of claims, which would have a material adverse
effect on Health Images, the Health Images Subsidiaries and the
Health Images Other Entities taken as a whole. The amounts
established as provisions for adjustments by Medicare, Medicaid and
other third-party payors on the financial statements set forth in
the last-filed Health Images Document are sufficient to pay any
amounts for which Health Images believes it will be liable. To the
knowledge of Health Images, neither Health Images nor the Health
Images Subsidiaries nor the Health Images Other Entities nor their
respective employees have committed a violation of the Medicare and
Medicaid fraud and abuse provisions of the Social Security Act.
Any and all past litigation concerning such licenses, certificates
of need and
regulatory approvals, and all claims and causes of
action raised therein, has been finally adjudicated. No such
license, certificate of need or regulatory approval has been
revoked, conditioned (except as may be customary) or restricted,
and no action (equitable, legal or administrative), arbitration or
other process is pending, or to the knowledge of Health Images,
threatened, which in any way challenges the validity of, or seeks
to revoke, condition or restrict any such license, certificate of
need, or regulatory approval. Subject to compliance with
applicable securities laws, the ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and state or
local statutes, rules or regulations requiring notice, approval, or
other action upon the occurrence of a change in control of Health
Images or any of the Health Images Subsidiaries, the consummation
of the Merger will not violate any law or regulation to which
Health Images is subject which, if violated, would have a material
adverse effect on Health Images, the Health Images Subsidiaries and
the Health Images Other Entities, taken as a whole.
(b) Without limiting the generality of the foregoing, Health
Images is in compliance in all material respects with the Food,
Drug and Cosmetic Act, as amended, and all regulations of the Food
and Drug Administration (the "FDA") and holds all FDA approvals
required for the conduct of its business as currently conducted.
3.18 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock.
Health Images is not a party to any agreement the effect of which
would be to require HEALTHSOUTH directly or indirectly to retire or
re-acquire all or part of the shares of HEALTHSOUTH Common Stock
issued pursuant to Section 2.1 hereof.
3.19 Disposition of Assets of Surviving Corporation. Health
Images is not a party to any plan to dispose of a significant part
of the assets of the Surviving Corporation within two years after
the Closing Date, other than dispositions in the ordinary course of
business of the Surviving Corporation and dispositions intended to
eliminate duplicate facilities or excess capacity.
3.20 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of the Health Images Common
Stock entitled to vote thereon is the only
vote of the holders of
any class or series of Health Images capital stock necessary to
approve this Plan of Merger, the Merger and the transactions
contemplated hereby.
3.21 Opinion of Financial Advisor. The Board of Directors of
Health Images has received the oral opinion of ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. to
the effect that, as of the date of this Plan of Merger, the
Exchange Ratio is fair to the holders of Health Images Common Stock
from a financial point of view, a written copy of which opinion
will be delivered by Health Images to HEALTHSOUTH prior to the date
on which the definitive proxy materials for the Proxy Statement (as
defined in Section 7.4(a)) are filed with the SEC.
3.22 No Untrue Representations. No representation or warranty
by Health Images in this Plan of Merger, and no Exhibit or
certificate issued by Health Images and furnished or to be
furnished to HEALTHSOUTH pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact in response to the disclosure
requested, or omits or will omit to state a material fact necessary
to make the statements or facts contained therein in response to
the disclosure requested not misleading in light of all of the
circumstances then prevailing.
Section 4. Representations and Warranties of the Subsidiary and
HEALTHSOUTH.
The Subsidiary and HEALTHSOUTH, jointly and severally, hereby
represent and warrant to Health Images as follows:
4.1 Organization, Existence and Capital Stock. The
Subsidiary is a corporation duly organized and validly existing and
is in good standing under the laws of the State of Delaware. The
Subsidiary's authorized capital consists of 1,000 shares of Common
Stock, par value $.01 per share, all of which shares are issued and
registered in the name of HEALTHSOUTH. The Subsidiary has not,
within the two years immediately preceding the date of this Plan of
Merger, owned, directly or indirectly, any shares of Health Images
Common Stock.
4.2 Power and Authority. The Subsidiary has corporate power
to execute, deliver and perform the Plan of Merger and all
agreements and other documents executed and delivered, or to be
executed and delivered, by it pursuant to the Plan of Merger, and,
subject to the satisfaction of the conditions precedent set forth
herein, has taken all actions required by law, its Certificate of
Incorporation, its Bylaws or otherwise, to authorize the execution
and delivery of the Plan of Merger and such related documents. The
execution and delivery of the Plan of Merger does not and, subject
to the receipt of required stockholder and regulatory approvals and
any other required third-party consents or approvals, the
consummation of the Merger contemplated hereby will not, violate
any provisions of the Certificate of Incorporation or Bylaws of the
Subsidiary, or any agreement, instrument, order, judgment or decree
to which the Subsidiary is a party or by which it is bound, violate
any restrictions of any kind to which the Subsidiary is subject, or
result in the creation of any lien, charge or encumbrance upon any
of the property or assets of the Subsidiary.
4.3 No Subsidiaries. The Subsidiary does not own stock in,
and does not control directly or indirectly, any other corporation,
association or business organization. The Subsidiary is not a
party to any joint venture or partnership.
4.4 Legal Proceedings. There are no actions, suits or
proceedings pending or threatened against the Subsidiary, at law or
in equity, relating to or affecting the Subsidiary, including the
Merger. The Subsidiary does not know or have any reasonable
grounds to know of any justification for any such action, suit or
proceeding.
4.5 No Contracts or Liabilities. Other than the obligations
created under the Plan of Merger, the Subsidiary is not obligated
under any contracts, claims, leases, liabilities (contingent or
otherwise), loans or otherwise.
Section 5. Representations and Warranties of HEALTHSOUTH.
HEALTHSOUTH hereby represents and warrants to Health Images as
follows:
5.1 Organization, Existence and Good Standing. HEALTHSOUTH
is a corporation duly organized and validly existing and is in good
standing under the laws of the State of Delaware. HEALTHSOUTH has
all necessary corporate power to own its properties and assets and
to carry on its business as presently conducted. HEALTHSOUTH is
duly qualified to do business and is in good standing in all
jurisdictions in which the character of the property owned, leased
or operated or the nature of the business transacted by it makes
qualification necessary. HEALTHSOUTH is not, and has not been
within the two years immediately preceding the date of this Plan of
Merger, a subsidiary or division of another corporation, nor has
HEALTHSOUTH within such time owned, directly or indirectly, any
shares of Health Images Common Stock.
5.2 Power and Authority. HEALTHSOUTH has corporate power to
execute, deliver and perform the Plan of Merger and all agreements
and other documents executed and delivered, or to be executed and
delivered, by it pursuant to the Plan of Merger, and, subject to
the satisfaction of the conditions precedent set forth herein has
taken all actions required by law, its Certificate of
Incorporation, its Bylaws or otherwise, to authorize the execution
and delivery of the Plan of Merger and such related documents. The
execution and delivery of the Plan of Merger does not and, subject
to the receipt of required stockholder and regulatory approvals and
any other required third-party consents or approvals, the
consummation of the Merger contemplated hereby will not, violate
any provisions of the Certificate of Incorporation or Bylaws of
HEALTHSOUTH, or any provision of, or result in the acceleration of
any obligation under, any mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which
HEALTHSOUTH is a party or by which it is bound, or violate any
restrictions of any kind to which HEALTHSOUTH is subject. The
execution and delivery of this Plan of Merger has been approved by
the Board of Directors of HEALTHSOUTH. This Plan of Merger has
been duly executed and delivered by HEALTHSOUTH and the Subsidiary
and, assuming this Plan of Merger constitutes a valid and binding
obligation of Health Images, constitutes a valid and binding
obligation of
HEALTHSOUTH and the Subsidiary, enforceable against
HEALTHSOUTH and the Subsidiary in accordance with its terms.
5.3 HEALTHSOUTH Common Stock. On the Closing Date,
HEALTHSOUTH will have a sufficient number of authorized but
unissued and/or treasury shares of its Common Stock available for
issuance to the holders of Health Images Common Stock in accordance
with the provisions of the Plan of Merger. The HEALTHSOUTH Common
Stock to be issued pursuant to the Plan of Merger will, when so
delivered, be (i) duly and validly issued, fully paid and
nonassessable, (ii) issued pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and (iii)
authorized for listing on the New York Stock Exchange, Inc. (the
"Exchange") upon official notice of issuance.
5.4 Capitalization. HEALTHSOUTH's authorized capital stock
consists of 1,500,000 shares of Preferred Stock, par value $.10 per
share, of which no shares are issued and outstanding, and no shares
are held in treasury, and 250,000,000 shares of Common Stock, par
value $.01 per share, of which 155,481,368 shares are issued and
outstanding, and 93,000 shares are held in treasury. All of the
issued and outstanding shares of HEALTHSOUTH Common Stock have been
duly and validly issued and are fully paid and non-assessable.
Except as disclosed in the HEALTHSOUTH Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, as amended (the
"HEALTHSOUTH 10-K"), there are no options, warrants, convertible
debentures or similar rights granted by HEALTHSOUTH or any other
agreements to which HEALTHSOUTH is a party providing for the
issuance or sale by it of any additional securities, other than
stock options granted in the ordinary course since such date.
There is no liability for dividends declared or accumulated but
unpaid with respect to any shares of HEALTHSOUTH Common Stock.
HEALTHSOUTH has not made any distributions to any holder of
HEALTHSOUTH Common Stock or participated in or effected any
issuance, exchange or retirement of HEALTHSOUTH Common Stock, or
otherwise changed the equity interests of holders of HEALTHSOUTH
Common Stock, in contemplation of effecting the Merger within the
two years immediately preceding the date of this Plan of Merger.
Any shares of HEALTHSOUTH Common Stock that HEALTHSOUTH has re-
acquired during the two years immediately preceding the date of
this Plan of Merger have been so re-acquired only for purposes
other than Business Combinations.
5.5 Subsidiary Common Stock. HEALTHSOUTH owns, beneficially
and of record, all of the issued and outstanding shares of
Subsidiary Common Stock, which are validly issued and outstanding,
fully paid and nonassessable, free and clear of all liens and
encumbrances. HEALTHSOUTH has the corporate power to endorse and
surrender such Subsidiary Shares for cancellation pursuant to the
Plan of Merger. HEALTHSOUTH has taken all such actions as may be
required in its capacity as the sole stockholder of the Subsidiary
to approve the Merger.
5.6 HEALTHSOUTH Documents. HEALTHSOUTH has heretofore
furnished Health Images with a true and complete copy of each
report, schedule, registration statement and definitive proxy
statement filed by it with the SEC (as any such documents have
since the time of their original filing been amended, the
"HEALTHSOUTH Documents") since January 1, 1995, which are all the
documents (other than preliminary material) that it was required to
file with the SEC since such date. As of their respective dates,
the HEALTHSOUTH Documents did not contain any untrue statements of
material facts or omit to state material facts required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. As of their respective dates, the HEALTHSOUTH
Documents complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated under such statutes. The financial
statements contained in the HEALTHSOUTH Documents, together with
the notes thereto, have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the
periods indicated (except as may be indicated in the notes thereto,
or, in the case of the unaudited financial statements, as permitted
by Form 10-Q), reflect all known liabilities of HEALTHSOUTH
required to be stated therein, including all known contingent
liabilities as of the end of each period reflected therein, and
present fairly the financial condition of HEALTHSOUTH at said dates
and the consolidated results of operations and cash flows of
HEALTHSOUTH for the periods then ended.
5.7 Investment Intent. HEALTHSOUTH is acquiring the shares
of Health Images Common Stock hereunder for its own account and not
with a view to the distribution or sale
thereof, and HEALTHSOUTH
has no understanding, agreement or arrangement to sell, distribute,
partition or otherwise transfer or assign all or any part of the
shares of Health Images Common Stock to any other person, firm or
corporation.
5.8 Legal Proceedings. Except as disclosed in the
HEALTHSOUTH 10-K, there is no material litigation, governmental
investigation or other proceeding pending or, so far as is known to
HEALTHSOUTH, threatened against or relating to HEALTHSOUTH, its
properties or business, or the transaction contemplated by the Plan
of Merger and, so far as is known to HEALTHSOUTH, no basis for any
such action exists.
5.9 No Violations. Subject to compliance with applicable
securities laws and the HSR Act, the consummation of the Merger
will not violate any law or restriction to which HEALTHSOUTH is
subject.
5.10 Subsequent Events. Except as disclosed in the last-filed
HEALTHSOUTH Document, HEALTHSOUTH has not, since the date of the
last-filed HEALTHSOUTH Document:
(a) Incurred any material adverse change.
(b) Discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation
or liability (absolute, accrued, contingent or otherwise)
other than (i) liabilities shown or reflected on the
September 30, 1996 Balance Sheet contained in the HEALTH-
SOUTH Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 (the "HEALTHSOUTH September 30 10-Q")
or (ii) liabilities incurred since the date of the
HEALTHSOUTH September 30 10-Q in the ordinary course of
business, which discharge or satisfaction would have a
material adverse effect on HEALTHSOUTH.
(c) Increased or established any reserve for taxes
or any other liability on its books or otherwise provided
therefor which would have a
material adverse effect on
HEALTHSOUTH, except as may have been required due to
income or operations of HEALTHSOUTH since September 30,
1996.
(d) Mortgaged, pledged or subjected to any lien,
charge or other encumbrance any of the assets, tangible
or intangible, which assets are material to the
consolidated business or financial condition of HEALTH-
SOUTH.
(e) Sold or transferred any of the assets material
to the consolidated business of HEALTHSOUTH, cancelled
any material debts or claims or waived any material
rights, except in the ordinary course of business.
(f) Granted any general or uniform increase in the
rates of pay of employees or any material increase in
salary payable or to become payable by HEALTHSOUTH to any
officer or employee, consultant or agent (other than
normal merit increases), or by means of any bonus or
pension plan, contract or other commitment, increased in
a material respect the compensation of any officer,
employee, consultant or agent.
(g) Except for this Plan of Merger and any other
agreement executed and delivered pursuant to this Plan of
Merger, entered into any material transaction other than
in the ordinary course of business or permitted under
other Sections hereof.
(h) Issued any stock, bonds or other securities,
other than (i) stock options granted to employees or
consultants of HEALTHSOUTH or warrants granted to third
parties, all of which are described in the HEALTHSOUTH
Documents, and (ii) approximately 300,000 shares of
HEALTHSOUTH Common Stock issued in connection with
certain immaterial acquisitions.
5.11 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock.
HEALTHSOUTH has not agreed directly or indirectly to retire or re-
acquire all or part of the shares of HEALTHSOUTH Common Stock
issued pursuant to Section 2.1 hereof.
5.12 Disposition of Assets of Surviving Corporation.
HEALTHSOUTH does not intend or plan to dispose of, or to cause the
Surviving Corporation to dispose of, a significant part of the
assets of the Surviving Corporation within two years after the
Effective Time, other than dispositions in the ordinary course of
business of the Surviving Corporation and dispositions intended to
eliminate duplicate facilities or excess capacity.
5.13 No Untrue Representation. No representation or warranty
by HEALTHSOUTH in this Plan of Merger, and no Exhibit or
certificate issued by HEALTHSOUTH and furnished or to be furnished
to Health Images pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact in response to the disclosure
requested, or omits or will omit to state a material fact necessary
to make the statement or facts contained therein in response to the
disclosure requested not misleading in light of all of the
circumstances then prevailing.
Section 6. Access to Information and Documents.
6.1 Access to Information. Between the date hereof and the
Closing Date, each of Health Images and HEALTHSOUTH will give to
the other party and its counsel, accountants and other
representatives full access to all the properties, documents,
contracts, personnel files and other records of such party and
shall furnish the other party with copies of such documents and
with such information with respect to the affairs of such party as
the other party may from time to time reasonably request. Each
party will disclose and make available to the other party and its
representatives all books, contracts, accounts, personnel records,
letters of intent, papers, records, communications with regulatory
authorities and other documents relating to the business and
operations of such party. In addition, Health Images shall make
available to HEALTHSOUTH all such banking, investment and financial
information as shall be necessary to allow for the efficient
integration of Health Images
banking, investment and financial
arrangements with those of HEALTHSOUTH at the Effective Time.
6.2 Return of Records. If the transactions contemplated
hereby are not consummated and this Plan of Merger terminates, each
party agrees to promptly return all documents, contracts, records
or properties of the other party and all copies thereof furnished
pursuant to this Section 6 or otherwise. All information
disclosed by any party or any affiliate or representative of any
party shall be deemed to be "Confidential Information" under the
terms of the Confidentiality Agreement dated October 31, 1996,
between Health Images and HEALTHSOUTH, (the "Confidentiality
Agreement").
6.3 Effect of Access. (a) Nothing contained in this Section
6 shall be deemed to create any duty or responsibility on the part
of either party to investigate or evaluate the value, validity or
enforceability of any contract, lease or other asset included in
the assets of the other party.
(b) With respect to matters as to which any party has made
express representations or warranties herein, the parties shall be
entitled to rely upon such express representations and warranties
irrespective of any investigations made by such parties, except to
the extent that such investigations result in actual knowledge of
the inaccuracy or falsehood of particular representations and
warranties.
Section 7. Covenants.
7.1 Preservation of Business. Health Images will use its
best efforts to preserve the business organization of Health Images
intact, to keep available to HEALTHSOUTH and the Surviving
Corporation the services of the present employees of Health Images,
and to preserve for HEALTHSOUTH and the Surviving Corporation the
goodwill of the suppliers, customers and others having business
relations with Health Images.
7.2 Material Transactions. Prior to the Effective Time,
Health Images will not (other than as required pursuant to the
terms of the Plan of Merger and the related
documents, and other
than with respect to transactions for which binding commitments
have been entered into prior to the date hereof which are described
on Exhibit 7.2 to the Disclosure Schedule), without first obtaining
the written consent of HEALTHSOUTH:
(a) Encumber any asset or enter into any
transaction or make any contract or commitment relating
to the properties, assets and business of Health Images,
other than in the ordinary course of business or as
otherwise disclosed herein.
(b) Enter into any employment contract which is not
terminable upon notice of 30 days or less, at will, and
without penalty to Health Images except as provided
herein.
(c) Enter into any contract or agreement (i) which
cannot be performed within three months or less, or (ii)
which involves the expenditure of over $250,000.
(d) Issue or sell, or agree to issue or sell, any
shares of capital stock or other securities of Health
Images, except upon exercise of currently outstanding
stock options or warrants or pursuant to the Health
Images Employee Stock Purchase Plan.
(e) Make any contribution, payment or distribution
to the trustee under any bonus, pension, profit-sharing
or retirement plan or incur any obligation to make any
such payment or contribution which is not in accordance
with Health Images's usual past practice, or establish
or enter into any other plan or contract or arrangement
providing for bonuses, executive incentive compensation,
pensions, deferred compensation, retirement payments,
profit-sharing or the like, or terminate any Plan.
(f) Extend credit to anyone, except in the ordinary
course of business consistent with prior practices.
(g) Guarantee the obligation of any person, firm or
corporation, except in the ordinary course of business
consistent with prior practices.
(h) Amend its Certificate of Incorporation or Bylaws.
(i) Take any action of a character described in
Section 3.11(a) to 3.11(h), inclusive.
7.3 Meeting of Health Images Stockholders. (a) Health
Images will take all steps necessary in accordance with its
Certificate of Incorporation and Bylaws to call, give notice of,
convene and hold a meeting of its stockholders (the "Special
Meeting") as soon as practicable after the effectiveness of the
Registration Statement (as defined in Section 7.4 hereof), for the
purpose of approving this Plan of Merger and for such other
purposes as may be necessary. Unless this Plan of Merger shall
have been validly terminated as provided herein, the Board of
Directors of Health Images (subject to the provisions of Section
8.1(d) hereof) will (i) recommend to Health Images stockholders the
approval of this Plan of Merger, the transactions contemplated
hereby and any other matters to be submitted to the stockholders in
connection therewith, to the extent that such approval is required
by applicable law in order to consummate the Merger, and (ii) use
reasonable, good faith efforts to obtain the approval by Health
Images' stockholders of this Plan of Merger and the transactions
contemplated hereby.
(b) Nothing contained herein shall affect the right of Health
Images to take action by written consent in lieu of meeting to the
extent permitted by applicable law and its Certificate of
Incorporation and Bylaws.
7.4 Registration Statement. (a) HEALTHSOUTH shall prepare
and file with the SEC and any other applicable regulatory bodies,
as soon as reasonably practicable, a Registration Statement on Form
S-4 with respect to the shares of HEALTHSOUTH Common Stock to be
issued in the Merger (the "Registration Statement"), and will
otherwise proceed promptly to satisfy the requirements of the
Securities Act of 1933 (the "Securities Act"), including Rule 145
thereunder. Such Registration Statement shall contain a proxy
statement
of Health Images (the "Proxy Statement") containing the
information required by the Securities Exchange Act of ▇▇▇▇ (▇▇▇
"▇▇▇▇▇▇▇▇ ▇▇▇"). HEALTHSOUTH shall take all reasonable steps to
cause the Registration Statement to be declared effective and to
maintain such effectiveness until all of the shares covered thereby
have been distributed. HEALTHSOUTH shall promptly amend or
supplement the Registration Statement to the extent necessary in
order to make the statements therein not misleading or to correct
any misstatements which have become false or misleading.
HEALTHSOUTH shall use its reasonable, good faith efforts to have
the Registration Statement cleared by the SEC under the provisions
of the Securities Act and the Exchange Act. HEALTHSOUTH shall
provide Health Images with copies of all filings made pursuant to
this Section 7.4 and shall consult with Health Images on responses
to any comments made by the Staff of the SEC with respect thereto.
(b) The information specifically designated as being supplied
by Health Images for inclusion in the Registration Statement shall
not, at the time the Registration Statement is declared effective
and at the time the Proxy Statement is first mailed to holders of
Health Images Common Stock, 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. The information specifically designated as being
supplied by Health Images for inclusion in the Proxy Statement
shall not, at the date the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to holders of Health
Images Common Stock, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event
or circumstance relating to Health Images, or its officers or
directors, should be discovered by Health Images which should be
set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Health Images shall promptly
inform HEALTHSOUTH. All documents, if any, that Health Images is
responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and
substance in all material respects with the applicable requirements
of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
(c) The information specifically designated as being supplied
by HEALTHSOUTH for inclusion in the Registration Statement shall
not, at the time the Registration Statement is declared effective
and at the time the Proxy Statement is first mailed to holders of
Health Images Common Stock, 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. The information specifically designated as being
supplied by HEALTHSOUTH for inclusion in the Proxy Statement to be
sent to the holders of Health Images Common Stock in connection
with the Special Meeting shall not, at the date the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to
holders of Health Images Common Stock, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time
any event or circumstance relating to HEALTHSOUTH or its officers
or directors, should be discovered by HEALTHSOUTH which should be
set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, HEALTHSOUTH shall promptly
inform Health Images and shall promptly file such amendment to the
Registration Statement. All documents that HEALTHSOUTH is
responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and
substance in all material respects with the applicable requirements
of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
(d) Prior to the Closing Date, HEALTHSOUTH shall use its
reasonable, good faith efforts to cause the shares of HEALTHSOUTH
Common Stock to be issued pursuant to the Merger to be registered
or qualified under all applicable securities or Blue Sky laws of
each of the states and territories of the United States, and to
take any other actions which may be necessary to enable the Common
Stock to be issued pursuant to the Merger to be distributed in each
such jurisdiction.
(e) Prior to the Closing Date, HEALTHSOUTH shall file an
additional listing application (the "Listing Application") with the
Exchange relating to the shares of HEALTHSOUTH Common Stock to be
issued in connection with the Merger, and shall use
its reasonable,
good faith efforts to cause such shares of HEALTHSOUTH Common Stock
to be approved for listing on the Exchange, upon official notice of
issuance, prior to the Closing Date.
(f) Health Images shall furnish all information to
HEALTHSOUTH with respect to Health Images and the Health Images
Subsidiaries and Health Images Other Entities as HEALTHSOUTH may
reasonably request for inclusion in the Registration Statement, the
Proxy Statement and the Listing Application, and shall otherwise
cooperate with HEALTHSOUTH in the preparation and filing of such
documents.
7.5 Exemption from State Takeover Laws; Health Images Rights
Plan. Health Images shall take all reasonable steps necessary to
(a) exempt the Merger from the requirements of any state takeover
statute or other similar state law which would prevent or impede
the consummation of the transactions contemplated hereby, by action
of Health Images's Board of Directors or otherwise and (b) to cause
the Merger to be a "Permitted Offer" as such term is used in the
Stockholder Rights Plan of Health Images.
7.6 HSR Act Compliance. HEALTHSOUTH and Health Images shall
promptly make their respective filings, and shall thereafter use
their reasonable, good faith efforts to promptly make any required
submissions, under the HSR Act with respect to the Merger and the
transactions contemplated hereby. HEALTHSOUTH and Health Images
will use their respective reasonable, good faith efforts to obtain
all other permits, authorizations, consents and approvals from
third parties and governmental authorities necessary to consummate
the Merger and the transactions contemplated hereby.
7.7 Public Disclosures. HEALTHSOUTH and Health Images will
consult with each other before issuing any press release or
otherwise making any public statement with respect to the
transactions contemplated by this Plan of Merger, and shall not
issue any such press release or make any such public statement
prior to such consultation except as may be required by applicable
law or requirements of the Exchange. The parties shall issue a
joint press release, mutually acceptable to HEALTHSOUTH and Health
Images, promptly upon execution and delivery of this Plan of
Merger.
7.8 Resignation of Health Images Directors. On or prior to
the Closing Date, Health Images shall deliver to HEALTHSOUTH
evidence satisfactory to HEALTHSOUTH of the resignation of the
Directors of Health Images, such resignations to be effective on
the Closing Date.
7.9 Notice of Subsequent Events. Each party hereto shall
notify the other parties of any changes, additions or events which
would cause any material change in or material addition to any
Exhibit to the Disclosure Schedule delivered by the notifying party
under this Plan of Merger, promptly after the occurrence of the
same. If the effect of such change or addition would, individually
or in the aggregate with the effect of changes or additions
previously disclosed pursuant to this Section 7.9, constitute a
material adverse effect on the notifying party, the non-notifying
party may, within ten days after receipt of such notice, elect to
terminate this Plan of Merger. If the non-notifying party does not
give written notice of such termination within such 10-day period,
the non-notifying party shall be deemed to have consented to such
change or addition and shall not be entitled to terminate this Plan
of Merger by reason thereof.
7.10 No Solicitations. Health Images may, directly or
indirectly, furnish information and access, in response to
unsolicited requests therefor, to the same extent permitted by
Section 6.1, to any corporation, partnership, person or other
entity or group, pursuant to appropriate confidentiality
agreements, and may participate in discussions and negotiate with
such corporation, partnership, person or other entity or group
concerning any proposal to acquire Health Images upon a merger,
purchase of assets, purchase of or tender offer for shares of
Health Images Common Stock or similar transaction (an "Acquisition
Transaction"), if the Board of Directors of Health Images
determines in its good faith judgment in the exercise of its
fiduciary duties or the exercise of its duties under Rule 14e-2
under the Exchange Act, after consultation with legal counsel and
its financial advisors, that such action is appropriate in
furtherance of the best interest of its stockholders. Except as
set forth above, Health Images shall not, and will direct each
officer, director, employee, representative and agent of Health
Images not to, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with or
provide any information to any corporation, partnership, person or
other entity or group (other than HEALTHSOUTH or an
affiliate or
associate or agent of HEALTHSOUTH) concerning any merger, sale of
assets, sale of or tender offer for shares of Health Images Common
Stock or similar transactions involving Health Images. Health
Images shall promptly notify HEALTHSOUTH if it shall, on or after
the date hereof, have entered into a confidentiality agreement with
any third party in response to any unsolicited request for
information and access in connection with a possible Acquisition
Transaction involving such party, such notification to include the
identity of such third party.
7.11 Other Actions. Subject to the provisions of Section
7.10 hereof, none of Health Images, HEALTHSOUTH and the Subsidiary
shall knowingly or intentionally take any action, or omit to take
any action, if such action or omission would, or reasonably might
be expected to, result in any of its representations and warranties
set forth herein being or becoming untrue in any material respect,
or in any of the conditions to the Merger set forth in this Plan of
Merger not being satisfied, or (unless such action is required by
applicable law) which would materially adversely affect the ability
of Health Images or HEALTHSOUTH to obtain any consents or approvals
required for the consummation of the Merger without imposition of
a condition or restriction which would have a material adverse
effect on the Surviving Corporation or which would otherwise
materially impair the ability of Health Images or HEALTHSOUTH to
consummate the Merger in accordance with the terms of this Plan of
Merger or materially delay such consummation.
7.12 Accounting Methods. Neither HEALTHSOUTH nor Health
Images shall change, in any material respect, its methods of
accounting in effect at its most recent fiscal year end, except as
required by changes in generally accepted accounting principles as
concurred in such parties' independent accountants.
7.13 Pooling and Tax-Free Reorganization Treatment. Neither
HEALTHSOUTH nor Health Images shall intentionally take or cause to
be taken any action, whether on or before the Effective Time, which
would disqualify the Merger as a "pooling of interests" for
accounting purposes or as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended.
7.14 Affiliate and Pooling Agreements. Health Images will use
its reasonable, good faith efforts to cause each of its Directors
and executive officers and each of its "affiliates" (within the
meaning of Rule 145 under the Securities Act of 1933, as amended)
to execute and deliver to HEALTHSOUTH as soon as practicable an
agreement in the form attached hereto as Exhibit 7.14 relating to
the disposition of shares of Health Images Common Stock and shares
of HEALTHSOUTH Common Stock held by such person and the shares of
HEALTHSOUTH Common Stock issuable pursuant to this Plan of Merger.
7.15 Cooperation. (a) HEALTHSOUTH and Health Images shall
together, or pursuant to an allocation of responsibility agreed to
between them, (i) cooperate with one another in determining whether
any filings required to be made or consents required to be obtained
in any jurisdiction prior to the Effective Time in connection with
the consummation of the transactions contemplated hereby and
cooperate in making any such filings promptly and in seeking to
obtain timely any such consents, (ii) use their respective best
efforts to cause to be lifted any injunction prohibiting the
Merger, or any part thereof, or the other transactions contemplated
hereby, and (iii) furnish to one another and to one another's
counsel all such information as may be required to effect the
foregoing actions.
(b) Subject to the terms and conditions herein provided, and
unless this Plan of Merger shall have been validly terminated as
provided herein, each of HEALTHSOUTH and Health Images shall use
all reasonable efforts (i) to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements
which may be imposed on such party (or any subsidiaries or
affiliates of such party) with respect to the Plan of Merger and to
consummate the transactions contemplated hereby, subject to the
vote of Health Images's stockholders described above, and (ii) to
obtain (and to cooperate with the other party to obtain) any
consent, authorization, order or approval of, or any exemption by,
any governmental entity and/or any other public or private third
party which is required to be obtained or made by such party or any
of its subsidiaries or affiliates in connection with this Plan of
Merger and the transactions contemplated hereby. Each of
HEALTHSOUTH and Health Images will promptly cooperate with and
furnish information to the other in connection with any such burden
suffered by, or requirement imposed upon, either of them or any of
their subsidiaries or affiliates in connection with the foregoing.
7.16 Health Images Stock Options and Warrants. WP5 As soon
as reasonably practicable after the Effective Time of the Merger,
HEALTHSOUTH shall deliver to the holders of Health Images stock
options and warrants appropriate notices setting forth such
holders' rights pursuant to any stock option plans under which such
Health Images stock options were issued and any stock option
agreements or warrant agreements evidencing such options or
warrants, which shall continue in full force and effect on the same
terms and conditions (subject to the adjustments required by
Sections 2.1(d) or this Section 7.16 after giving effect to the
Merger and the assumption of such options and warrants by HEALTH-
SOUTH as set forth herein) as in effect immediately prior to the
Effective Time. HEALTHSOUTH shall comply with the terms of the
stock option plans, the stock option agreements and the warrant
agreements as so adjusted, and shall use its reasonable, good faith
efforts to ensure, to the extent required by, and subject to the
provisions of, such plans or agreements, that the Health Images
stock options which qualified as incentive stock options prior to
the Effective Time shall continue to qualify as incentive stock
options after the Effective Time.
(b) HEALTHSOUTH shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of HEALTHSOUTH
Common Stock for delivery upon exercise of the Health Images stock
options and warrants assumed by HEALTHSOUTH in accordance with
Section 2.1(d). As soon as practicable after the Effective Time,
HEALTHSOUTH shall file with the SEC (i) a registration statement
on Form S-8 with respect to shares of HEALTHSOUTH Common Stock
subject to such Health Images stock options and (ii) a registration
statement on Form S-3 covering the resale of the shares of
HEALTHSOUTH Common Stock subject to such Health Images warrants and
shall use its best efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such
Health Images stock options and warrants remain outstanding.
HEALTHSOUTH shall administer the plans assumed pursuant to Section
2.1(d) hereof in a manner that complies with Rule 16b-3 promulgated
under the Exchange Act to the extent the applicable plan complied
with such rule prior to the Merger.
(c) Except to the extent otherwise agreed to by the parties,
all restrictions or limitations on transfer with respect to the
Health Images stock options awarded under any plan, program, or
arrangement of Health Images or any of its subsidiaries, to the
extent that such restrictions or limitations shall not have already
lapsed, shall remain in full force and effect with respect to such
options after giving effect to the Merger and the assumption by
HEALTHSOUTH as set forth above. HEALTHSOUTH hereby acknowledges
that all Health Images stock options outstanding, to the extent not
already vested, shall become fully vested at the Effective Time.
7.17 Publication of Combined Results. HEALTHSOUTH agrees that
within 20 days after the end of the first calendar month following
at least 30 days after the Effective Time, HEALTHSOUTH shall cause
publication of the combined results of operations of HEALTHSOUTH
and Health Images. For purposes of this Section 7.17, the term
"publication" shall have the meaning provided in SEC Accounting
Series Release No. 135.
7.18 Health Images Employees. HEALTHSOUTH shall retain all
employees of Health Images who are employed at the Effective Time
as employees-at-will (except to the extent that such employees are
parties to contracts providing for other employment terms, in which
case such employees shall be retained in accordance with the terms
of such contracts) and shall provide such employees with the same
customary employee benefits as HEALTHSOUTH provides its existing
employees. HEALTHSOUTH shall cause Health Images to maintain a
severance plan for a period of at least 12 months following the
Effective Time, which plan shall contain eligibility and benefit
provisions no less favorable than those existing under the terms of
the Health Images severance policy in effect immediately prior to
the Effective Time, a copy of which has been provided to
HEALTHSOUTH. HEALTHSOUTH shall give employees of Health Images
credit for their respective periods of employment with Health
Images prior to the Effective Time for purposes of determining
their eligibility for and level of participation in any employee
benefit program, plan or arrangement which the Surviving
Corporation adopts, maintains or contributes to following the
Effective Time.
7.19 Consulting and Non-Competition Agreement. At the
Effective Time, HEALTHSOUTH shall enter into a Consulting and Non-
Competition Agreement with ▇▇▇▇▇▇ ▇. ▇▇▇▇, III, which Consulting
and Non-Competition Agreement shall provide for consulting and non-
competition fees to ▇▇. ▇▇▇▇ of $350,000 per year for the three
years following the Effective Time, and shall contain such other
terms and conditions as the parties may agree. The payments to ▇▇.
▇▇▇▇ under such Consulting and Non-Competition Agreement shall be
in lieu of any other payments to which Mr. ▇▇▇▇ ▇▇▇ be entitled
after the Effective Time under any employment agreement, severance
arrangement or non-competition agreement or arrangement of any kind
whatsoever between Health Images and ▇▇. ▇▇▇▇.
7.20 Certain Information. For as long as any affiliate (as
defined for purposes of Rule 145 under the Securities Act of 1933)
of Health Images holds shares of HEALTHSOUTH Common Stock issued in
the Merger (but not for a period in excess of two years from the
date of consummation of the Merger), HEALTHSOUTH shall file with
the Securities and Exchange Commission or otherwise make publicly
available all information about HEALTHSOUTH required pursuant to
Rule 144(c) under the Securities Act of 1933 to enable such
affiliate to resell such shares under the provisions of Rule 145(d)
under the Securities Act of 1933.
Section 8. Termination, Amendment and Waiver.
8.1 Termination. This Plan of Merger may be terminated at
any time prior to the Effective Time, whether before or after
approval of matters presented in connection with the Merger by the
holders of shares of Health Images Common Stock:
(a) by mutual written consent of HEALTHSOUTH and
Health Images;
(b) by either HEALTHSOUTH or Health Images:
(i) if, upon a vote at a duly held meeting
of stockholders or any adjournment thereof, any
required approval of the holders of shares of
Health Images Common Stock shall not have been
obtained;
(ii) if the Merger shall not have been
consummated on or before May 31, 1997, unless the
failure to consummate the Merger is the result of
a willful and material breach of this Plan of
Merger by the party seeking to terminate this Plan
of Merger; provided, however, that the passage of
such period shall be tolled for any part thereof
(but not exceeding 60 days in the aggregate)
during which any party shall be subject to a
nonfinal order, decree, ruling or action
restraining, enjoining or otherwise prohibiting
the consummation of the Merger or the calling or
holding of a meeting of stockholders;
(iii) if any court of competent
jurisdiction or other governmental entity shall
have issued an order, decree or ruling or taken
any other action permanently enjoining,
restraining or otherwise prohibited the Merger and
such order, decree, ruling or other action shall
have become final and nonappealable;
(iv) in the event of a breach by the other
party of any representation, warranty, covenant or
other agreement contained in this Plan of Merger
which (A) would give rise to the failure of a
condition set forth in Section 9.2(a) or (b) or
Section 9.3(a) or (b), as applicable, and (B)
cannot be or has not been cured within 30 days
after the giving of written notice to the
breaching party of such breach (a "Material
Breach") (provided that the terminating party is
not then in Material Breach of any representation,
warranty, covenant or other agreement contained in
this Plan of Merger); or
(v) if either HEALTHSOUTH or Health Images
gives notice of termination as a non-notifying
party pursuant to Section 7.9;
(c) By either HEALTHSOUTH or Health Images in the
event that (i) all of the conditions to the obligation of
such party to effect the Merger set forth in Section 9.1
shall have been satisfied and (ii) any condition to the
obligation of such party to effect the Merger set forth
in Section 9.2 (in the case of HEALTHSOUTH) or Section
9.3 (in the case of Health Images) is not capable of
being satisfied prior to the end of the period referred
to in Section 8.1(b)(ii);
(d) By Health Images, if Health Images's Board of
Directors shall have (i) determined, in the exercise of
its fiduciary duties under applicable law, not to
recommend the Merger to the holders of Health Images
Common Stock or shall have withdrawn such recommendation
or (ii) approved, recommended or endorsed any Acquisition
Transaction (as defined in Section 7.10) other than this
Plan of Merger or (iii) resolved to do any of the
foregoing; or
(e) By either HEALTHSOUTH or Health Images, if the
condition set forth in Section 9.1(g)(i) is not satisfied
by December 31, 1996.
8.2 Effect of Termination. In the event of termination of
this Plan of Merger as provided in Section 8.1, this Plan of Merger
shall forthwith become void and have no effect, without any
liability or obligation on the part of any party, other than the
provisions of Sections 6.2, 8.2 and 8.6, and except to the extent
that such termination results from the willful and material breach
by a party of any of its representations, warranties, covenants or
other agreements set forth in this Plan of Merger.
8.3 Amendment. This Plan of Merger may be amended by the
parties at any time before or after any required approval of
matters presented in connection with the Merger by the holders of
shares of Health Images Common Stock; provided, however, that after
any such approval, there shall be made no amendment that pursuant
to Section 251(d) of the DGCL requires further approval by such
stockholders without the further approval of such stockholders.
This Plan of Merger may not be amended except by an instrument in
writing signed on behalf of each of the parties.
8.4 Extension; Waiver. At any time prior to the Effective
Time of the Merger, the parties may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and
warranties contained in this Plan of Merger or in any document
delivered pursuant to this Plan of Merger or (c) subject to the
proviso of Section 8.3, waive compliance with any of the agreements
or conditions contained in this Plan of Merger. Any agreement on
the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Plan of Merger to
assert any of its rights under this Plan of Merger or otherwise
shall not constitute a waiver of such rights, except as otherwise
provided in Section 7.9.
8.5 Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Plan of Merger pursuant to Section
8.1, an amendment of this Plan of Merger pursuant to Section 8.3,
or an extension or waiver pursuant to Section 8.4 shall, in order
to be effective, require in the case of HEALTHSOUTH, the Subsidiary
or Health Images, action by its Board of Directors or the duly
authorized designee of the Board of Directors.
8.6 Expenses; Break-up Fees. (a) All costs and expenses
incurred in connection with this Plan of Merger and the
transactions contemplated hereby shall be paid by the party
incurring such expense, except that expenses (other than legal,
accounting and investment banking costs, which shall be paid by the
party incurring such expenses) incurred in connection with
preparing, filing, printing and mailing the Proxy Statement and the
Registration Statement shall be shared equally by Health Images and
HEALTHSOUTH.
(b) (i) If this Plan of Merger is terminated by Health
Images pursuant to Section 8.1(d), and within one year after the
effective date of such termination Health Images is the subject of
a Third Party Acquisition Event with any Person (as defined in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act) (other than a
party hereto), then at the time of consummation of such a Third
Party Acquisition Event, Health Images shall pay to HEALTHSOUTH a
break-up fee of $10,000,000 in immediately available funds, which
fee represents the parties' best estimates of the out-of-pocket
costs incurred by HEALTHSOUTH and the value of management time,
overhead, opportunity costs and other unallocated costs of HEALTH-
SOUTH incurred by or on behalf of HEALTHSOUTH in connection with
this Plan of Merger. Health Images shall not enter into any
agreement with respect to any Third Party Acquisition Event which
does not, as a condition precedent to the consummation of such
Third Party Acquisition Event, require such break-up fee to be paid
to HEALTHSOUTH upon such consummation.
(ii) As used herein, the term "Third Party Acquisition
Event" shall mean either of the following:
(A) Health Images shall enter into any agreement
for, or otherwise be the subject of, any Acquisition
Transaction (as defined in Section 7.10) which is
consummated (regardless of whether such consummation
occurs within the one-year period described in Section
8.6(b)(i)); or
(B) any Person (other than a party hereto or its
affiliates) shall have acquired beneficial ownership (as
such term is defined in Rule 13d-3 under the Exchange
Act) or the right to acquire beneficial ownership of, or
a new group has been formed which beneficially owns or
has the right to acquire beneficial ownership of, 30% or
more of the outstanding Health Images Common Stock.
(c) Health Images acknowledges that the provisions for the
payment of break-up fees and allocation of expenses contained in
this Section 8.6 are an integral part of the transactions
contemplated by this Plan of Merger and that, without these
provisions, HEALTHSOUTH would not have entered into this Plan of
Merger. Accordingly, if a break-up fee shall become due and
payable by Health Images, and Health Images shall fail to pay such
amount when due pursuant to this Section, and, in order to obtain
such payment, suit is commenced which results in a judgment against
Health Images therefor, Health Images shall pay HEALTHSOUTH
reasonable costs and expenses (including reasonable attorneys'
fees) in connection with such suit, together with interest computed
on any amounts determined to be due pursuant to this Section
(computed from the date upon which such amounts were due and
payable pursuant to this Section) and such costs (computed from the
date incurred) at the prime rate of interest announced from time to
time by NationsBank,
N.A. (South). The obligations of Health
Images under this Section 8.6 shall survive any termination of this
Plan of Merger.
Section 9. Conditions to Closing.
9.1 Mutual Conditions. The respective obligations of each
party to effect the Merger shall be subject to the satisfaction, at
or prior to the Closing Date of the following conditions (any of
which may be waived in writing by HEALTHSOUTH and Health Images):
(a) None of HEALTHSOUTH, the Subsidiary or Health
Images nor any of their respective subsidiaries shall be
subject to any order, decree or injunction by a court of
competent jurisdiction which (i) prevents or materially
delays the consummation of the Merger or (ii) would
impose any material limitation on the ability of
HEALTHSOUTH effectively to exercise full rights of
ownership of the Common Stock of the Surviving
Corporation or any material portion of the assets or
business of Health Images, the Health Images Subsidiaries
and the Health Images Other Entities, taken as a whole.
(b) No statute, rule or regulation shall have been
enacted by the government (or any governmental agency) of
the United States or any state, municipality or other
political subdivision thereof that makes the consummation
of the Merger and any other transaction contemplated
hereby illegal.
(c) Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
(d) The Registration Statement shall have been
declared effective and no stop order with respect to the
Registration Statement shall be in effect.
(e) The holders of Health Images Common Stock shall
have approved the adoption of this Plan of Merger and any
other matters submitted to them in accordance with the
provisions of Section 7.3 hereof.
(f) The shares of HEALTHSOUTH Common Stock to be
issued in connection with the Merger shall have been
approved for listing on the Exchange.
(g) The Merger shall qualify for "pooling of
interests" accounting treatment, and HEALTHSOUTH and
Health Images shall each have received letters to that
effect from Ernst & Young, LLP, independent accountants
for HEALTHSOUTH, dated (i) not later than December 31,
1996, (ii) the date of the mailing of the Proxy Statement
and (iii) the Closing Date.
(h) HEALTHSOUTH and the Subsidiary shall have
obtained, or obtained the transfer of, any licenses,
certificates of need and other regulatory approvals
necessary to allow the Surviving Corporation to operate
the Health Images facilities, unless the failure to
obtain such transfer or approval would not have a
material adverse effect on the Surviving Corporation.
(i) HEALTHSOUTH and the Subsidiary shall have
received all consents, approvals and authorizations of
third parties with respect to all material leases and
management agreements to which the Health Images
Subsidiaries and the Health Images Other Entities are
parties, which consents, approvals and authorizations are
required of such third parties by such documents, in form
and substance acceptable to HEALTHSOUTH, except where the
failure to obtain such consent, approval or authorization
would not have a material effect on the business of the
Surviving Corporation.
9.2 Conditions to Obligations of HEALTHSOUTH and the
Subsidiary. The obligations of HEALTHSOUTH and the Subsidiary to
consummate the Merger and the other transactions contemplated
hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions (any of which may be
waived by HEALTHSOUTH and the Subsidiary):
(a) Each of the agreements of Health Images to be
performed at or prior to the Closing Date pursuant to the
terms hereof shall have been duly performed in all
material respects, and Health Images shall have
performed, in all material respects, all of the acts
required to be performed by it at or prior to the Closing
Date by the terms hereof.
(b) The representations and warranties of Health
Images set forth in Section 3.11(a) shall be true and
correct as of the date of this Plan of Merger and as of
the Closing Date. The representations and warranties of
Health Images set forth in this Plan of Merger that are
qualified as to materiality shall be true and correct,
and those that are not so qualified shall be true and
correct in all material respects, as of the date of this
Plan of Merger and as of the Closing as though made at
and as of such time, except to the extent such
representations and warranties expressly relate to an
earlier date (in which case such representations and
warranties that are qualified as to materiality shall be
true and correct, and those that are not so qualified
shall be true and correct in all material respects, as of
such earlier date); provided, however, that Health Images
shall not be deemed to be in breach of any such
representations or warranties by taking any action
permitted (or approved by HEALTHSOUTH) under Section 7.2.
HEALTHSOUTH and the Subsidiary shall have been furnished
with a certificate, executed by a duly authorized officer
of Health Images, dated the Closing Date, certifying in
such detail as HEALTHSOUTH and the Subsidiary may
reasonably request as to the fulfillment of the foregoing
conditions.
(c) HEALTHSOUTH shall have received an opinion from
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.C., to the effect that the
merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended, which opinion may be based upon
reasonable
representations of fact provided by officers
of HEALTHSOUTH, Health Images and the Subsidiary.
(d) HEALTHSOUTH shall have received an opinion from
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ substantially to the
effect set forth in Exhibit 9.2(d) hereto.
9.3 Conditions to Obligations of Health Images. The
obligations of Health Images to consummate the Merger and the other
transactions contemplated hereby shall be subject to the
satisfaction, at or prior to the Closing Date, of the following
conditions (any of which may be waived by Health Images):
(a) Each of the agreements of HEALTHSOUTH and the
Subsidiary to be performed at or prior to the Closing
Date pursuant to the terms hereof shall have been duly
performed, in all material respects, and HEALTHSOUTH and
the Subsidiary shall have performed, in all material
respects, all of the acts required to be performed by
them at or prior to the Closing Date by the terms hereof.
(b) The representations and warranties of
HEALTHSOUTH set forth in Section 5.10(a) shall be true
and correct as of the date of this Plan of Merger and as
of the Closing Date. The representations and warranties
of HEALTHSOUTH set forth in this Plan of Merger that are
qualified as to materiality shall be true and correct,
and those that are not so qualified shall be true and
correct in all material respects, as of the date of this
Plan of Merger and as of the Closing as though made at
and as of such time, except to the extent such
representations and warranties expressly relate to an
earlier date (in which case such representations and
warranties that are qualified as to materiality shall be
true and correct, and those that are not so qualified
shall be true and correct in all material respects, as of
such earlier date). Health Images shall have been
furnished with a certificate, executed by duly authorized
officers of HEALTHSOUTH and the Subsidiary, dated the
Closing
Date, certifying in such detail as Health Images
may reasonably request as to the fulfillment of the
foregoing conditions.
(c) Health Images shall have received an opinion
from Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ to the effect
that the Merger will constitute a reorganization with the
meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended, which opinion may be based upon
reasonable representations of fact provided by officers
of HEALTHSOUTH, Health Images and the Subsidiary.
(d) Health Images shall have received an opinion
from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Young, L.L.C., substantially to
the effect set forth in Exhibit 9.3(d) hereto.
Section 10. Miscellaneous.
10.1 Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Plan of Merger or in any
instrument delivered pursuant to this Plan of Merger shall survive
the Effective Time.
10.2 Notices. Any communications required or desired to be
given hereunder shall be deemed to have been properly given if sent
by hand delivery or by facsimile and overnight courier to the
parties hereto at the following addresses, or at such other address
as either party may advise the other in writing from time to time:
If to HEALTHSOUTH:
HEALTHSOUTH Corporation
Two Perimeter Park South
Birmingham, Alabama 35243
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
HEALTHSOUTH Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Health Images:
Health Images, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
Sixteenth Floor
191 Peachtree Street, N.E.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All such communications shall be deemed to have been delivered on
the date of hand delivery or on the next business day following the
deposit of such communications with the overnight courier.
10.3 Further Assurances. Each party hereby agrees to perform
any further acts and to execute and deliver any documents which may
be reasonably necessary to carry out the provisions of this Plan of
Merger.
10.4 Indemnification. (a) Health Images shall, and from and
after the Effective Time HEALTHSOUTH and the Surviving Corporation
shall, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date of this Plan of Merger or
who becomes prior to the Effective Time, an officer, director or
employee of Health Images or any of its subsidiaries (the
"Indemnified Parties") against (i) all losses, claims,
damages, costs, expenses, liabilities or judgments, or amounts that are paid
in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of, or in connection
with, any claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact
that such person is or was a director, officer or employee of
Health Images or any of its subsidiaries, whether pertaining to any
matter existing or occurring at or prior to, or at or after, the
Effective Time ("Indemnified Liabilities") and (ii) all Indemnified
Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Plan of Merger, the Merger or
any other transactions contemplated hereby or thereby, in each case
to the full extent a corporation is permitted under the DGCL to
indemnify its own directors, officers and employees, as the case
may be (and HEALTHSOUTH and the Surviving Corporation, as the case
may be, will pay expenses in advance of the final disposition of
any such action or proceeding to each Indemnified Party to the full
extent permitted by law upon receipt of any undertaking
contemplated by Section 145(e) of the DGCL). Without limiting the
foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether
arising before or after the Effective Time), (i) the Indemnified
Parties may retain counsel satisfactory to them and Health Images
(or them and HEALTHSOUTH and the Surviving Corporation after the
Effective Time), (ii) Health Images (or after the Effective Time,
HEALTHSOUTH and the Surviving Corporation) shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received and (iii) Health
Images (or after the Effective Time, HEALTHSOUTH and the Surviving
Corporation) will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that none of Health
Images, HEALTHSOUTH or the Surviving Corporation shall be liable
for any settlement of any claim effected without its written
consent, which consent, however, shall not be unreasonably
withheld. Any Indemnified Party wishing to claim indemnification
under this Section 10.4, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify Health Images,
HEALTHSOUTH or the Surviving Corporation (but the failure so to
notify an Indemnifying Party shall not relieve it from any
liability which it may have under this Section 10.4 except to the
extent such failure prejudices such party), and shall deliver to
Health Images (or after the Effective Time, HEALTHSOUTH and the
Surviving Corporation) the undertaking contemplated by Section
145(e) of the DGCL. The Indemnified Parties as
a group may retain
only one law firm to represent them with respect to such matter
unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties.
(b) The provisions of this Section 10.4 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified
Party and his or her heirs and representatives.
10.5 Governing Law. This Plan of Merger shall be interpreted,
construed and enforced in accordance with the laws of the State of
Delaware, applied without giving effect to any conflicts-of-law
principles.
10.6 "Including". The word "including", when following any
general statement, term or matter, shall not be construed to limit
such statement, term or matter to the specific terms or matters as
provided immediately following the word "including" or to similar
items or matters, whether or not non-limiting language (such as
"without limitation", "but not limited to", or words of similar
import) is used with reference to the word "including" or the
similar items or matters, but rather shall be deemed to refer to
all other items or matters that could reasonably fall within the
broadest possible scope of the general statement, term or matter.
10.7 "Knowledge". "To the knowledge", "to the best knowledge,
information and belief", or any similar phrase shall be deemed to
refer to the knowledge of the Chairman of the Board, Chief
Executive Officer, Chief Operating Officer or Chief Financial
Officer of a party and to include the assurance that such knowledge
is based upon a reasonable investigation, unless otherwise
expressly provided.
10.8 "Material adverse change" or "material adverse effect".
"Material adverse change" or "material adverse effect" means, when
used in connection with Health Images or HEALTHSOUTH, any change,
effect, event or occurrence that has, or is reasonably likely to
have, individually or in the aggregate, a material adverse impact
on the business or financial position of such party and its
subsidiaries taken as a whole; provided, however, that "material
adverse change" and "material adverse effect" shall be deemed to
exclude the
impact of (i) changes in generally accepted accounting
principles and (ii) the public announcement of the Merger and
compliance with the provisions of this Plan of Merger, and (iii)
any changes resulting from any restructuring or other similar
charges or write-offs taken by Health Images with the consent of
HEALTHSOUTH; provided, however, that no such charges or write-offs
will be taken if such would adversely affect pooling-of-interests
accounting treatment for the Merger.
10.9 "Hazardous Materials". The term "Hazardous Materials"
means any material which has been determined by any applicable
governmental authority to be harmful to the health or safety of
human or animal life or vegetation, regardless of whether such
material is found on or below the surface of the ground, in any
surface or underground water, airborne in ambient air or in the air
inside any structure built or located upon or below the surface of
the ground or in building materials or in improvements of any
structures, or in any personal property located or used in any such
structure, including, but not limited to, all hazardous substances,
imminently hazardous substances, hazardous wastes, toxic
substances, infectious wastes, pollutants and contaminants from
time to time defined, listed, identified, designated or classified
as such under any Environmental Laws (as defined in Section 10.10)
regardless of the quantity of any such material.
10.10 Environmental Laws. The term "Environmental Laws"
means any federal, state or local statute, regulation, rule or
ordinance, and any judicial or administrative interpretation
thereof, regulating the use, generation, handling, storage,
transportation, discharge, emission, spillage or other release of
Hazardous Materials or relating to the protection of the
environment.
10.11 Taxes. For purposes of this Agreement, the term
"tax" or "taxes" shall mean all taxes, charges, fees, levies,
penalties or other assessment imposed by any United States federal,
state, local or foreign taxing authority, including, but not
limited to, income, excise, property, sales, transfer, franchise,
payroll, withholding, Social Security or other taxes, including any
interest, penalties or additions attributable thereto. For
purposes of this Agreement, the term "tax return" shall mean any
return, report, information return or other document (including any
related or supporting information) with respect to taxes.
10.12 Captions. The captions or headings in this Plan of
Merger are made for convenience and general reference only and
shall not be construed to describe, define or limit the scope or
intent of the provisions of this Plan of Merger.
10.13 Integration of Exhibits. All Exhibits attached to
this Plan of Merger are integral parts of this Plan of Merger as if
fully set forth herein, and all statements appearing therein shall
be deemed disclosed for all purposes and not only in connection
with the specific representation in which they are explicitly
referenced.
10.14 Entire Agreement. This instrument, including all
Exhibits attached hereto, together with the Confidentiality
Agreement, contains the entire agreement of the parties and
supersedes any and all prior or contemporaneous agreements between
the parties, written or oral, with respect to the transactions con-
templated hereby. It may not be changed or terminated orally, but
may only be changed by an agreement in writing signed by the party
or parties against whom enforcement of any waiver, change,
modification, extension, discharge or termination is sought.
10.15 Counterparts. This Plan of Merger may be executed
in several counterparts, each of which, when so executed, shall be
deemed to be an original, and such counterparts shall, together,
constitute and be one and the same instrument.
10.16 Binding Effect. This Plan of Merger shall be
binding on, and shall inure to the benefit of, the parties hereto,
and their respective successors and assigns, and, except as
provided in Section 10.4, no other person shall acquire or have any
right under or by virtue of this Plan of Merger. No party may
assign any right or obligation hereunder without the prior written
consent of the other parties.
10.17 No Rule of Construction. The parties acknowledge
that this Plan of Merger was initially prepared by HEALTHSOUTH, and
that all parties have read and negotiated the language used in this
Plan of Merger. The parties agree that, because all parties
participated in negotiating and drafting this Plan of Merger, no
rule of construction shall
apply to this Plan of Merger which construes ambiguous language
in favor of or against any party by reason of that party's role in
drafting this Plan of Merger.
IN WITNESS WHEREOF, HEALTHSOUTH, the Subsidiary and Health
Images have caused this Plan and Agreement of Merger to be executed
by their respective duly authorized officers, and have caused their
respective corporate seals to be hereunto affixed, all as of the
day and year first above written.
HEALTH IMAGES, INC.
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇, III
-----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, III
Chairman of the Board, President
and Chief Executive Officer
ATTEST:
By:/s/▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Secretary
[CORPORATE SEAL]
HEALTHSOUTH Corporation
By:/s/▇▇▇▇▇▇▇ ▇.▇▇▇▇▇▇
--------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
and Treasurer
ATTEST:
By:/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Secretary
[ CORPORATE SEAL ]
HAMMER ACQUISITION CORPORATION
By:/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
ATTEST:
By:/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Secretary
[CORPORATE SEAL]
EXHIBIT 7.14
Gentlemen:
I have been advised that I might be considered to be an
"affiliate" of Health Images, Inc. ("Health Images") for purposes
of Rule 145 under the Securities Exchange Act of 1933, as amended
(the "1933 Act"), and for purposes of generally accepted accounting
principles as such term relates to pooling of interests accounting
treatment for certain business combinations or the Securities and
Exchange Commission's Staff Accounting Bulletin No. 65.
HEALTHSOUTH Corporation ("HEALTHSOUTH"), Hammer Acquisition
Corporation and Health Images have entered into a Plan and
Agreement of Merger dated as of the 2nd day of December, 1996 (the
"Plan of Merger"). Upon consummation of the transactions contem-
plated by the Plan of Merger (the "Merger"), I will receive shares
of capital stock of HEALTHSOUTH for all of the shares of capital
stock of Health Images owned by me or as to which I may be deemed
a beneficial owner. I own _______ shares of common stock of Health
Images. Such shares will be converted in the Merger into shares of
common stock of HEALTHSOUTH as described in the Plan of Merger.
The shares of Health Images capital stock and HEALTHSOUTH capital
stock owned by me or as to which I may deemed to be a beneficial
owner prior to the Merger are hereinafter collectively referred to
as the "Pre-Merger Stock" and the shares of HEALTHSOUTH capital
stock received by me in the Merger are hereinafter collectively
referred to as the "Exchange Stock". This agreement is hereinafter
referred to as the "Letter Agreement".
I represent and warrant to, and agree with, HEALTHSOUTH,
Health Images and the Subsidiary that:
A. I have read this Letter Agreement and the Plan of Merger
and have discussed their requirements and other applicable
limitations upon my ability to sell, transfer or otherwise dispose
of the Pre-Merger Stock and Exchange Stock, to the extent I felt
necessary, with my counsel or counsel for Health Images.
B. The shares of common stock of HEALTHSOUTH that I shall
receive in exchange for my shares of common stock of Health Images
are not being acquired by me with a view to their distribution
except to the extent and in the manner provided for in paragraph
(d) of Rule 145 under the 1933 Act.
C. I agree with you not to dispose of any such shares of
common stock of HEALTHSOUTH in any manner that would violate Rule
145.
I further agree with you that the certificate or certificates
representing such shares of common stock of HEALTHSOUTH may bear a
legend referring to the restrictions on disposition thereof in
accordance with the provisions of the foregoing paragraph and that
stop transfer instructions may be filed with respect to such shares
with the transfer agent for such shares.
D. I understand that stop transfer instructions will be
given to HEALTHSOUTH, Health Images and their respective transfer
agents, as the case may be, with respect to the shares of Pre-
Merger Stock and the Exchange Stock in connection with the restric-
tions set forth herein.
E. Notwithstanding the foregoing and any other agreements on
my part in connection with the Pre-Merger Stock and the Exchange
Stock, I hereby agree (i) that I will not sell or otherwise reduce
my risk relative to any shares of Pre-Merger Stock during the
period of thirty days prior to the effective date of Merger and
(ii) that I will not sell or otherwise reduce my risk relative to
any shares of Exchange Stock until financial results covering at
least thirty days of combined operations have been published
following the effective date of the Merger so as to ensure that the
Merger qualified as a pooling of interests for accounting purposes.
It is understood and agreed that this Letter Agreement shall
terminate and be of no further force and effect if the Plan of
Merger is terminated pursuant to the terms thereof.
The agreements made by me in the foregoing paragraphs are on
the understanding and condition that you agree, in the event that
any shares may be disposed of in accordance with the provisions of
paragraph E above, to deliver in exchange for the certificate or
certificates representing such shares a new certificate or
certificates representing such shares not bearing the legend and
not subject to the stop transfer instruction referred to in para-
graph D above, and so long as I hold shares of stock subject to the
provisions of the foregoing paragraph (but not for a period in
excess of two years from the date of consummation of the Merger) to
file with the Securities and Exchange Commission or otherwise make
publicly available all information about HEALTHSOUTH, to the extent
available to you without unreasonable effort or expense, necessary
to enable me to resell shares under the provisions of paragraph (d)
of Rule 145.
This Letter Agreement shall be binding on my heirs, legal
representatives and successors.
Very truly yours,
[Name of Stockholder]
HS-22294.1