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Exhibit 10(n)
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 1, 1997
BY AND AMONG
FPA MEDICAL MANAGEMENT, INC.,
FPA ACQUISITION CORP.
AND
HEALTH PARTNERS, INC.
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TABLE OF CONTENTS
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ARTICLE I THE MERGER................................................................... A-1
Section 1.1 The Merger............................................................. A-1
Section 1.2 Effective Time of the Merger........................................... A-1
ARTICLE II THE SURVIVING CORPORATION AND PARENT........................................ A-1
Section 2.1 Certificate of Incorporation........................................... A-1
Section 2.2 Bylaws................................................................. A-1
Section 2.3 Directors and Executive Officers of the Surviving Corporation.......... A-2
Section 2.4 Effects of Merger...................................................... A-2
ARTICLE III CONVERSION OF SHARES....................................................... A-2
Section 3.1 Conversion of Shares in the Merger..................................... A-2
Section 3.2 Equitable Adjustment................................................... A-3
Section 3.3 Exchange of Certificates............................................... A-3
Section 3.4 No Fractional Securities............................................... A-4
Section 3.5 Options to Purchase Company Stock...................................... A-5
Section 3.6 Closing................................................................ A-5
Section 3.7 Closing of the Company's Transfer Books................................ A-5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT
AND ACQUISITION......................................................................... A-6
Section 4.1 Organization and Qualification......................................... A-6
Section 4.2 Capitalization......................................................... A-6
Section 4.3 Authority; Non-Contravention; Approvals................................ A-7
Section 4.4 Reports and Financial Statements....................................... A-8
Section 4.5 Absence of Undisclosed Liabilities..................................... A-8
Section 4.6 Absence of Certain Changes or Events................................... A-8
Section 4.7 Litigation............................................................. A-9
Section 4.8 Registration Statement and Proxy Statement............................. A-9
Section 4.9 No Violation of Law.................................................... A-9
Section 4.10 Compliance............................................................. A-10
Section 4.11 Taxes.................................................................. A-10
Section 4.12 No Parent Stockholders' Approval Required.............................. A-10
Section 4.13 Pooling and Tax-Free Reorganization Matters............................ A-10
Section 4.14 Brokers................................................................ A-11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................ A-11
Section 5.1 Organization and Qualification......................................... A-11
Section 5.2 Capitalization......................................................... A-11
Section 5.3 Subsidiaries........................................................... A-12
Section 5.4 Authority; Non-Contravention; Approvals................................ A-12
Section 5.5 Financial Statements................................................... A-13
Section 5.6 Absence of Undisclosed Liabilities..................................... A-13
Section 5.7 Absence of Certain Changes or Events................................... A-14
Section 5.8 Litigation............................................................. A-14
Section 5.9 Registration Statement and Proxy Statement............................. A-14
Section 5.10 No Violation of Law.................................................... A-14
Section 5.11 Compliance............................................................. A-15
Section 5.12 Taxes.................................................................. A-15
Section 5.13 Employee Benefit Plans; ERISA.......................................... A-15
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Section 5.14 Labor Controversies.................................................... A-16
Section 5.15 Environmental Matters.................................................. A-16
Section 5.16 Title to Assets........................................................ A-16
Section 5.17 Company Stockholders' Approval......................................... A-17
Section 5.18 Pooling and Tax-Free Reorganization Matters............................ A-17
Section 5.19 Insurance.............................................................. A-17
Section 5.20 Opinion of Company's Financial Advisor................................. A-17
Section 5.21 Brokers................................................................ A-17
Section 5.22 Contracts and Commitments.............................................. A-17
Section 5.23 Intellectual Property.................................................. A-18
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER...................................... A-18
Section 6.1 Conduct of Business by the Company Pending the Merger.................. A-18
Section 6.2 Conduct of Business by Parent and Acquisition Pending the Merger....... A-20
Section 6.3 Control of the Company's Operations.................................... A-21
Section 6.4 Control of Parent's Operations......................................... A-21
Section 6.5 Conduct of Business of Acquisition..................................... A-21
ARTICLE VII ADDITIONAL AGREEMENTS...................................................... A-21
Section 7.1 Access to Information.................................................. A-21
Section 7.2 Registration Statement and Proxy Statement............................. A-22
Section 7.3 Company Stockholders' Approval......................................... A-22
Section 7.4 Affiliates of the Company and Parent................................... A-22
Section 7.5 Exchange Listing....................................................... A-23
Section 7.6 Expenses and Fees...................................................... A-23
Section 7.7 Agreement to Cooperate................................................. A-23
Section 7.8 Public Statements...................................................... A-23
Section 7.9 Employee Matters....................................................... A-23
Section 7.10 Notification of Certain Matters........................................ A-24
Section 7.11 Corrections to the Proxy Statement/Prospectus and Registration
Statement.............................................................. A-24
Section 7.12 Insurance; Indemnity................................................... A-24
Section 7.13 No Solicitations....................................................... A-25
Section 7.14 Roll-up Transactions................................................... A-25
Section 7.15 Bank Consent........................................................... A-26
ARTICLE VIII CONDITIONS................................................................. A-26
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger............. A-26
Section 8.2 Conditions to Obligation of the Company to Effect the Merger........... A-27
Section 8.3 Conditions to Obligations of Parent and Acquisition to Effect the
Merger................................................................. A-27
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER............................................ A-28
Section 9.1 Termination............................................................ A-28
Section 9.2 Effect of Termination.................................................. A-29
Section 9.3 Amendment.............................................................. A-29
Section 9.4 Waiver................................................................. A-30
ARTICLE X GENERAL PROVISIONS............................................................ ▇-▇▇
▇▇▇▇▇▇▇ ▇▇.▇ ▇▇▇-▇▇▇▇▇▇▇▇ of Representations and Warranties......................... A-30
Section 10.2 Notices................................................................ A-30
Section 10.3 Interpretation......................................................... A-31
Section 10.4 Miscellaneous.......................................................... A-31
Section 10.5 Counterparts........................................................... A-31
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is made this 1st day of July, 1997
("Agreement"), by and among FPA Medical Management, Inc., a Delaware corporation
("Parent"), FPA Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Acquisition"), and Health Partners, Inc., a Delaware
corporation (the "Company").
WITNESSETH:
WHEREAS, the boards of directors of Parent, Acquisition and the Company
believe it to be advisable and in the best interests of their respective
stockholders that Acquisition merge with and into the Company on the terms set
forth in this Agreement (the "Merger");
WHEREAS, the Merger is intended for Federal income tax purposes to qualify
as a reorganization under the provisions of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code");
WHEREAS, the Merger also is intended to qualify for treatment as a pooling
of interests under Accounting Principles Board Opinion ▇▇. ▇▇ ("▇▇▇ ▇▇. ▇▇").
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
Upon the terms and subject to the conditions of this Agreement, at the
Effective Time (as defined in Section 1.2 hereof), in accordance with the
Delaware General Corporation Law ("DGCL"), Acquisition shall be merged with and
into the Company and the separate existence of Acquisition shall thereupon
cease. The Company shall be the surviving corporation in the Merger and is
hereinafter sometimes referred to as the "Surviving Corporation."
SECTION 1.2 Effective Time of the Merger.
The Merger shall become effective at the date and time (the "Effective
Time") when a duly prepared and executed Certificate of Merger is filed with the
Secretary of State of the State of Delaware (the "Merger Filing") in accordance
with the DGCL. The Merger Filing shall be made simultaneously with or as soon as
practicable after the closing of the transactions contemplated by this Agreement
in accordance with Section 3.6 hereof.
ARTICLE II
THE SURVIVING CORPORATION AND PARENT
SECTION 2.1 Certificate of Incorporation.
The Certificate of Incorporation of Acquisition as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation after the Effective Time, and thereafter may be amended in
accordance with its terms and as provided by law and this Agreement.
SECTION 2.2 Bylaws.
The bylaws of Acquisition as in effect immediately prior to the Effective
Time shall be the bylaws of the Surviving Corporation after the Effective Time,
and thereafter may be amended in accordance with their terms and as provided by
law and the Certificate of Incorporation of the Surviving Corporation.
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SECTION 2.3 Directors and Executive Officers of the Surviving Corporation.
The directors of the Surviving Corporation shall be the directors of
Acquisition serving immediately prior to the Effective Time and the executive
officers of the Surviving Corporation shall be the executive officers of the
Company in office immediately prior to the Effective Time, and such directors
and executive officers shall serve in accordance with the bylaws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
SECTION 2.4 Effects of Merger.
The Merger shall have the effects set forth in Section 259 of the DGCL.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 Conversion of Shares in the Merger.
(a) Company Common Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, each issued and
outstanding share of Company Common Stock, par value $.001 per share (the
"Company Common Stock"), other than shares to be canceled in accordance with
Section 3.1(c) hereof and other than Dissenting Shares (as defined in Section
3.1(d) hereof), shall be converted into the right to receive the number of
shares of fully paid and nonassessable common stock, par value $.002 per share,
of Parent ("Parent Common Stock") determined by dividing the "Numerator" by the
"Denominator" (the quotient herein referred to as the "Exchange Ratio"). The
Denominator shall be the maximum number of shares of Company Common Stock issued
and outstanding at the Effective Time plus shares of Company Common Stock
issuable pursuant to Section 7.14 hereof. The Numerator shall be the remainder
which results when (y) the Stock Option Shares is subtracted from (z) the
quotient which results when $115,000,000 is divided by the Effective Valuation
Amount. The Effective Valuation Amount shall be:
(i) the average of the closing prices of Parent Common Stock as
reported on the Nasdaq National Market ("NNM") for the ten (10) consecutive
trading days ending on the date that is two (2) trading days prior to the
Closing Date (as defined in Section 3.6) (the "Parent Value") if such
average is greater than or equal to $18.00 but less than or equal to
$22.00; or
(ii) $18.00, if the Parent Value is less than $18.00; or
(iii) $22.00, if the Parent Value is greater than $22.00.
The Stock Option Shares shall equal the number of shares of Parent Common Stock
issuable pursuant to Section 3.5 hereof in respect of Company Stock Options (as
defined in Section 3.5 hereof) outstanding on the Closing Date whether or not
the same are vested immediately after giving effect to the Merger.
The Company shall provide to Parent, no later than the date on which the
Parent Value is determinable pursuant to this Section 3.1, a certificate (the
"Denominator Certificate") reasonably acceptable to Parent setting forth the
Denominator and the method used in the calculation thereof. If, prior to the
Effective Time, the announcement of a transaction by the Parent requires the
amendment or re-filing of the Registration Statement (as defined in Section
4.8), and, as a result of the re-filing or amendment of the Registration
Statement, the Closing occurs more than 90 days after the date of this
Agreement, notwithstanding clause (ii) of the definition of Effective Valuation
Amount, the Effective Valuation Amount shall equal the Parent Value if the
Parent Value is less than $18.00. Except as set forth in the immediately
preceding sentence, in no event will the number of shares of Parent Common Stock
issued upon the Merger (including shares issued under Section 3.5 hereof) exceed
6,388,889 shares.
(b) Company Preferred Stock. The Company shall use its reasonable best
efforts to cause, immediately prior to the Effective Time, each issued and
outstanding share of the Company's Series A Convertible Preferred Stock, par
value $.001 per share, and Series B Convertible Preferred Stock, par value $.001
per
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share (collectively, the "Company Preferred Stock") to be converted into shares
of Company Common Stock, in accordance with the provisions of the relevant
Certificate of Designations for such Company Preferred Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of the holder
thereof, such shares of Common Stock, other than shares to be canceled in
accordance with Section 3.1(c) hereof and other than Dissenting Shares, shall be
converted into the right to receive a number of shares of fully paid and
nonassessable shares of Parent Common Stock based on the Exchange Ratio.
(c) Cancellation of Company Stock. All shares of Company Common Stock and
Company Preferred Stock (collectively, "Company Stock") which, immediately prior
to the Effective Time, are held by the Company in its treasury shall be canceled
and extinguished and shall cease to exist and no consideration shall be
delivered with respect thereto.
(d) Dissenting Shares. (i) If applicable, notwithstanding any provision of
this Agreement to the contrary, each outstanding share of Company Stock, the
holder of which (x) has not voted in favor of the Merger, (y) has perfected such
holder's right to an appraisal of such holder's shares in accordance with the
applicable provisions of the DGCL and (z) has not effectively withdrawn or lost
such right to appraisal (a "Dissenting Share"), shall not be converted into or
represent a right to receive shares of Parent Common Stock pursuant to Section
3.1(a) or 3.1(b), as applicable, but the holder thereof shall be entitled only
to such rights as are granted by the applicable provisions of the DGCL;
provided, however, that any Dissenting Share held by a person at the Effective
Time who shall, after the Effective Time, withdraw the demand for appraisal or
lose the right of appraisal, in either case pursuant to the DGCL, shall be
deemed to be converted into, as of the Effective Time, the right to receive
Parent Common Stock pursuant to Section 3.1(a) or 3.1(b), as applicable.
(ii) The Company shall give Parent prompt notice of any written demands for
appraisal, withdrawals of demands for appraisal and any other instruments served
pursuant to the applicable provisions of the DGCL relating to the appraisal
process received by the Company and shall allow Parent the right to direct any
proceedings and the resolution thereof relating to such process.
(e) Acquisition Shares. Each share of capital stock of Acquisition issued
and outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
SECTION 3.2 Equitable Adjustment.
The calculations set forth in Section 3.1 hereof shall be subject to
equitable adjustment in the event of, or the setting of a record date prior to
the Effective Time with respect to, any stock split, stock dividend, reverse
stock split, recapitalization, reclassification or combination of Company Stock
or Parent Common Stock or dividend or distribution with respect to Parent Common
Stock or Company Stock or other change in the number of shares of Company Stock
outstanding prior to the Closing (as defined in Section 3.6 hereof) other than
issuances of shares pursuant to the exercise of outstanding stock options and
issuance of shares pursuant to the transactions contemplated by Section 7.14
hereof.
SECTION 3.3 Exchange of Certificates.
(a) From and after the Effective Time, each holder of an outstanding
certificate which immediately prior to the Effective Time represented shares of
Company Stock shall be entitled to receive in exchange therefor, upon surrender
thereof to a bank or trust company designated before the Effective Time by
Parent and reasonably acceptable to the Company (the "Exchange Agent"), a
certificate or certificates representing the number of whole shares of Parent
Common Stock to which such holder is entitled pursuant to Section 3.1 hereof.
Notwithstanding any other provision of this Agreement, (i) until holders or
transferees of certificates theretofore representing shares of Company Stock
have surrendered them for exchange as provided herein, no dividends shall be
paid with respect to any shares represented by such certificates and no payment
for fractional shares shall be made and (ii) without regard to when such
certificates representing shares of Company Stock are surrendered for exchange
as provided herein, no interest shall be paid on any dividends or
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any payment for fractional shares. Upon surrender of a certificate which
immediately prior to the Effective Time represented shares of Company Stock,
there shall be paid to the holder of such certificate the amount of any
dividends which theretofore became payable, but which were not paid by reason of
the foregoing, with respect to the number of whole shares of Parent Common Stock
represented by the certificate or certificates issued upon such surrender.
(b) If any certificate for shares of Parent Common Stock is to be issued in
a name other than that in which the certificate for shares of Company Stock
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the person requesting such exchange shall pay any applicable
transfer or other taxes required by reason of such issuance.
(c) Promptly after the Effective Time, Parent shall make available to the
Exchange Agent the certificates representing shares of Parent Common Stock
required to effect the exchanges referred to in paragraph (a) above and cash for
payment of any fractional shares referred to in Section 3.4 hereof.
(d) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates that immediately prior to
the Effective Time represented outstanding shares of Company Stock (the "Company
Certificates") (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Company Certificates shall
pass, only upon actual delivery of the Company Certificates to the Exchange
Agent) and (ii) instructions for use in effecting the surrender of the Company
Certificates in exchange for certificates representing shares of Parent Common
Stock. Upon surrender of Company Certificates for cancellation to the Exchange
Agent, together with a duly executed letter of transmittal and such other
documents as the Exchange Agent shall reasonably require, the holder of such
Company Certificates shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares of Company Stock theretofore represented by the Company
Certificates so surrendered shall have been converted pursuant to the provisions
of Section 3.1 hereof, and the Company Certificates so surrendered shall be
canceled.
(e) Promptly following the date which is nine (9) months after the
Effective Time, the Exchange Agent shall deliver to Parent all cash,
certificates (including any Parent Common Stock) and other documents in its
possession relating to the transactions described in this Agreement, and the
Exchange Agent's duties shall terminate. Thereafter, each holder of a Company
Certificate may surrender such Company Certificate to the Surviving Corporation
and (subject to applicable abandoned property, escheat and similar laws) receive
in exchange therefor the Parent Common Stock, without any interest thereon. If
any certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Company Stock entitled to payment pursuant to
Section 3.1 hereof shall not have been surrendered for such payment prior to
such date on which any payment in respect thereof would otherwise escheat to or
become property of any governmental agency or other governmental entity, such
shares of Company Stock shall, to the extent permitted by applicable law, be
deemed to be canceled and no money or other payment will be due to the holder
thereof.
(f) In the event any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed, Parent shall issue in
exchange for such lost, stolen or destroyed Company Certificate the Parent
Common Stock deliverable in respect thereof determined in accordance with
Section 3.1 hereof. When authorizing such payment in exchange therefor, the
board of directors of Parent may, in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
Company Certificate to give the Surviving Corporation such indemnity as it may
reasonably direct as protection against any claim that may be made against the
Surviving Corporation with respect to the Company Certificate alleged to have
been lost, stolen or destroyed.
SECTION 3.4 No Fractional Securities.
Notwithstanding any other provision of this Agreement, no certificates or
scrip for fractional shares of Parent Common Stock shall be issued in the Merger
and no Parent Common Stock dividend, stock split or interest shall relate to any
fractional security, and such fractional interests shall not entitle the owner
thereof to vote or to any other rights of a security holder. In lieu of any such
fractional shares, each holder of Company
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Stock who would otherwise have been entitled to receive a fraction of a share of
Parent Common Stock (in the aggregate) upon surrender of Company Certificates
for exchange pursuant to Section 3.3 hereof shall be entitled to receive from
the Exchange Agent a cash payment equal to such fraction multiplied by the
Parent Value.
SECTION 3.5 Options to Purchase Company Stock.
(a) Each option to purchase shares of Company Common Stock (a "Company
Stock Option") which is outstanding immediately prior to the Effective Time
pursuant to any stock option plan of the Company in effect on the date hereof
(the "Company Stock Plans") shall be canceled at the Effective Time and the
holder of such Company Stock Option shall be entitled to receive a number of
shares of Parent Common Stock, decreased to the nearest whole share, equal to
the quotient which results when the "Fair Market Value" of such Company Stock
Option at the Effective Time is divided by the Parent Value. The Fair Market
Value of all Company Stock Options shall be the fair value thereof determined by
an investment banking firm selected by the Company that is acceptable to the
Parent based upon the Effective Valuation Amount and the Exchange Ratio and
otherwise using valuation techniques reasonably acceptable to Parent and the
Company and consistent with the requirements of ▇▇▇ ▇▇. ▇▇.
(b) Parent shall not issue fractional shares or pay cash to the holders of
Company Stock Options receiving shares of Parent Common Stock in lieu of issuing
fractional shares of Parent Common Stock. Instead, all fractional shares of
Parent Common Stock issuable under this Section 3.5 shall be decreased to the
nearest whole share.
(c) The Company shall use its reasonable best efforts to cause the holders
of Company Stock Options to execute prior to the Closing Date a form of
acknowledgement reasonably acceptable to Parent regarding their acceptance of
the treatment of Company Stock Options set forth in this Section 3.5 (each a
"Stock Option Acknowledgement").
SECTION 3.6 Closing.
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place at the offices of Pillsbury Madison & Sutro LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at any other location
mutually agreeable to Parent and the Company on the second business day
immediately following the date on which the last of the conditions set forth in
Article VIII is fulfilled or waived, or at such other time as Parent and the
Company shall agree (the date on which the Closing occurs is referred to in this
Agreement as the "Closing Date").
SECTION 3.7 Closing of the Company's Transfer Books.
At and after the Effective Time, holders of Company Certificates shall
cease to have any rights as stockholders of the Company, except for (a) the
right to an appraisal for Dissenting Shares pursuant to Section 3.1(d) hereof
(but solely as provided by the DGCL), (b) the right to receive shares of Parent
Common Stock pursuant to Section 3.3 hereof and (c) the right to receive cash
for payment of fractional shares pursuant to Section 3.4 hereof. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Stock which were outstanding immediately prior to
the Effective Time shall thereafter be made. If, after the Effective Time,
subject to the terms and conditions of this Agreement, Company Certificates
formerly representing Company Stock are presented to the Surviving Corporation,
they shall be canceled and exchanged for Parent Common Stock in accordance with
this Article III.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Parent and Acquisition each represent and warrant to the Company as
follows:
SECTION 4.1 Organization and Qualification.
Each of Parent and Acquisition is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Parent and Acquisition is qualified to do business and is in good standing in
each jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not have
a Parent Material Adverse Effect. As used in this Agreement, a "Parent Material
Adverse Effect" shall mean any event, circumstance, development or occurrence,
individually or when taken together with all other such events, circumstances,
developments or occurrences, causing, resulting in or having, or reasonably
likely to cause, result in or have, a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of Parent and its subsidiaries (as defined in Section 4.2 hereof),
taken as a whole. True, accurate and complete copies of each of Parent's and
Acquisition's Certificates of Incorporation and bylaws, in each case as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to the Company.
SECTION 4.2 Capitalization.
(a) The authorized capital stock of Parent consists of (i) 98,000,000
shares of Parent Common Stock, par value $.002, of which 33,234,157 shares were
outstanding as of the date of this Agreement, and (ii) 2,000,000 shares of
preferred stock, par value $.002 per share ("Parent Preferred Stock"), of which
no shares were outstanding as of the date of this Agreement. All of the issued
and outstanding shares of Parent Common Stock and Parent Preferred Stock are
validly issued and are fully paid, nonassessable and free of preemptive rights.
(b) The authorized capital stock of Acquisition consists of 100 shares of
Acquisition Common Stock, par value $.01, of which 10 shares are issued and
outstanding, which shares are owned beneficially and of record by Parent.
(c) Except as set forth on Schedule 4.2(c) attached hereto, as of the date
of this Agreement, there are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any rights plan or
other anti-takeover agreement, obligating Parent or any subsidiary of Parent to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of Parent or obligating Parent or any subsidiary of
Parent to grant, extend or enter into any such agreement or commitment. There
are no voting trusts, proxies or other agreements or understandings to which
Parent or any subsidiary of Parent is a party or by which Parent or any
subsidiary of Parent is bound with respect to the voting of any shares of
capital stock of Parent. The shares of Parent Common Stock issued to
stockholders of the Company in the Merger will be at the Effective Time duly
authorized, validly issued, fully paid, nonassessable, and free of preemptive
rights. As used in this Agreement, "subsidiary" means, with respect to any party
hereto (a "Subject Party"), any corporation or other organization, whether
incorporated or unincorporated, (i) of which more than fifty percent (50%) of
either the equity interests in, or the voting control of, such corporation or
other organization is, directly or indirectly through subsidiaries or otherwise,
beneficially owned by such Subject Party or (ii) which is a professional
corporation as to which such Subject Party or a subsidiary thereof has executed
a succession or similar stockholder agreement.
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SECTION 4.3 Authority; Non-Contravention; Approvals.
(a) Parent and Acquisition each have full corporate power and authority to
enter into this Agreement and, subject to the Parent Required Statutory
Approvals (as defined in Section 4.3(c) hereof), to consummate the transactions
contemplated hereby. This Agreement has been approved by the boards of directors
of Parent and Acquisition and by Parent as the sole stockholder of Acquisition,
and no other corporate proceedings on the part of Parent or Acquisition are
necessary to authorize the execution and delivery of this Agreement or the
consummation by Parent and Acquisition of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of Parent and
Acquisition, and, assuming the due authorization, execution and delivery hereof
by the Company, constitutes a valid and legally binding agreement of each of
Parent and Acquisition enforceable against each of them in accordance with its
terms, except that such enforcement may be subject to (i) bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles, and except that the availability of equitable
remedies, including specific performance and injunctive relief, is subject to
the discretion of the court before which any proceedings may be brought.
(b) Except as set forth on Schedule 4.3(b) attached hereto, the execution
and delivery of this Agreement by each of Parent and Acquisition do not violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Parent or any of its subsidiaries under
any of the terms, conditions or provisions of (i) the respective charters or
bylaws of Parent or any of its subsidiaries, (ii) any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or license
of any court or governmental authority applicable to Parent or any of its
subsidiaries or any of their respective properties or assets or (iii) any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which Parent or any of its subsidiaries is now a party or by which
Parent or any of its subsidiaries or any of their respective properties or
assets may be bound or affected. The consummation by Parent and Acquisition of
the transactions contemplated hereby will not result in any violation, conflict,
breach, termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the preceding
sentence, subject to (x) in the case of the terms, conditions or provisions
described in clause (ii) above, obtaining (prior to the Effective Time) the
Parent Required Statutory Approvals (as defined in Section 4.3(c) hereof) and
(y) in the case of the terms, conditions or provisions described in clause (iii)
above, obtaining (prior to the Effective Time) consents required from commercial
lenders, lessors or other third parties named in Schedule 4.3(b) attached
hereto. Set forth on Schedule 4.3(b) attached hereto is a list of hospital
contracts with respect to which the consent of any party other than Parent is
required in order that consummation by Parent of the transactions contemplated
hereby will not result in a breach or termination of the respective contracts.
Excluded from the foregoing sentences of this paragraph (b), insofar as they
apply to the terms, conditions or provisions described in clauses (ii) and (iii)
of the first sentence of this paragraph (b), are such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens, security
interests, charges or encumbrances that would not have a Parent Material Adverse
Effect.
(c) Except for (i) the filings by Parent and the Company required by the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of the Proxy Statement/Prospectus (as defined in Section
4.8 hereof) with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and
the declaration of the effectiveness thereof by the Commission and filings with
various state blue sky authorities, (iii) the making of the Merger Filing with
the Secretary of State of the State of Delaware in connection with the Merger
and (iv) any other required filings with or approvals from applicable Federal
and state governmental authorities (the filings and approvals referred to in
clauses (i) through (iv) are collectively referred to as the "Parent Required
Statutory Approvals"), no declaration, filing or registration with, or notice
to, or authorization, consent or approval of, any governmental or regulatory
body or authority is necessary for the execution and
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delivery of this Agreement by Parent or Acquisition or the consummation by
Parent or Acquisition of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not have a
Parent Material Adverse Effect.
SECTION 4.4 Reports and Financial Statements.
Since October 20, 1994, Parent has filed with the Commission all material
forms, statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by it under each of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the respective rules and regulations thereunder, all of which, as amended if
applicable, complied in all material respects at the time of filing with all
applicable requirements of the appropriate act and the rules and regulations
thereunder. Parent has previously delivered or made available to the Company a
copy of its (a) Annual Report on Form 10-K, as amended, for the fiscal years
ended December 31, 1994, 1995 and 1996, and its report on Form 10-Q for the
quarter ended March 31, 1997, each as filed with the Commission, (b) proxy and
information statements relating to (i) all meetings of its stockholders (whether
annual or special) and (ii) actions by written consent in lieu of a
stockholders' meeting from October 20, 1994, until the date hereof, and (c) all
other reports, including quarterly and current reports, or registration
statements filed by Parent with the Commission (the documents referred to in
clauses (a), (b) and (c) are collectively referred to as the "Parent SEC
Reports"). As of their respective dates, the Parent SEC Reports complied in all
material respects with the requirements of the Exchange Act and/or the
Securities Act and the rules and regulations of the Commission thereunder
applicable to such Parent SEC Reports. As of their respective dates, the Parent
SEC Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim consolidated financial statements of Parent included in such reports,
including the notes and schedules thereto (collectively, the "Parent Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
Parent and its subsidiaries as of the dates thereof and the results of their
operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein.
SECTION 4.5 Absence of Undisclosed Liabilities.
Except as disclosed in the Parent SEC Reports or with respect to
acquisitions or potential transactions or commitments heretofore disclosed to
the Company in writing or as set forth on Schedule 4.5 attached hereto, neither
Parent nor any of its subsidiaries had at December 31, 1996, or has incurred
since that date, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except: (a) liabilities, obligations or
contingencies (i) which are accrued or reserved against in the Parent Financial
Statements or reflected in the notes thereto or (ii) which were incurred after
December 31, 1996 and were incurred in the ordinary course of business and
consistent with past practices; and (b) liabilities and obligations which are of
a nature not required to be reflected in the consolidated financial statements
of Parent and its subsidiaries prepared in accordance with generally accepted
accounting principles consistently applied and which were incurred in the normal
course of business (provided that no liabilities, obligations or contingencies
excepted by subparagraphs (a)(ii) or (b) hereof will have, individually or in
the aggregate, a Parent Material Adverse Effect).
SECTION 4.6 Absence of Certain Changes or Events.
Except as disclosed in the Parent SEC Reports or with respect to
acquisitions or potential transactions or commitments heretofore disclosed to
the Company in writing or as set forth on Schedule 4.6 attached hereto, since
December 31, 1996, there has not been any change or event (other than changes
generally affecting the
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industry in which Parent and its subsidiaries operate or arising from general
business or economic conditions or as a result of this Agreement) that would
have a Parent Material Adverse Effect.
SECTION 4.7 Litigation.
Except as disclosed in the Parent SEC Reports, there are no claims, suits,
actions or proceedings pending or, to the knowledge of Parent, threatened
against, relating to or affecting Parent or any of its subsidiaries, before any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that seek to restrain or enjoin the consummation of
the Merger or which would have a Parent Material Adverse Effect. Except as set
forth in the Parent SEC Reports, neither Parent nor any of its subsidiaries is
subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or authority or any
arbitrator which prohibits or restricts the consummation of the transactions
contemplated hereby or would have any Parent Material Adverse Effect.
SECTION 4.8 Registration Statement and Proxy Statement.
None of the information to be supplied by Parent or its subsidiaries for
inclusion in (a) the Registration Statement on Form S-4 to be filed under the
Securities Act with the Commission by Parent in connection with the Merger for
the purpose of registering the shares of Parent Common Stock to be issued in the
Merger (the "Registration Statement") or (b) the proxy statement to be
distributed in connection with the Company's meeting of its stockholders to vote
upon this Agreement and the transactions contemplated hereby (the "Proxy
Statement" and, together with the prospectus included in the Registration
Statement, the "Proxy Statement/Prospectus") will, in the case of the Proxy
Statement or any amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement and any amendments or supplements thereto, and at
the time of the meeting of stockholders of the Company to be held in connection
with the transactions contemplated by this Agreement, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, or, in the case of
the Registration Statement, as amended or supplemented, at the time it becomes
effective and at the time of such meeting of the stockholders of the Company,
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 Proxy Statement/Prospectus, as of its Effective
Time, will comply as to form in all material respects with all applicable laws,
including the provisions of the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder, except that no representation is
made by Parent or Acquisition with respect to information supplied by the
Company for inclusion therein.
SECTION 4.9 No Violation of Law.
Except as disclosed in the Parent SEC Reports, neither Parent nor any of
its subsidiaries is in violation of, or has been given notice or been charged
with any violation of, any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable environmental law) of
any governmental or regulatory body or authority, except for violations which
would not have a Parent Material Adverse Effect. Except as disclosed in the
Parent SEC Reports, as of the date of this Agreement, to the knowledge of
Parent, no investigation or review by any governmental or regulatory body or
authority is pending or threatened, nor has any governmental or regulatory body
or authority indicated an intention to conduct the same, other than, in each
case, those the outcome of which would not have a Parent Material Adverse
Effect. Parent and its subsidiaries have all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted
(collectively, the "Parent Permits"), except for permits, licenses, franchises,
variances, exemptions, orders, authorizations, consents and approvals the
absence of which would not have a Parent Material Adverse Effect. Parent and its
subsidiaries are not in violation of the terms of any Parent Permit, except for
delays in filing reports or violations which would not have a Parent Material
Adverse Effect.
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SECTION 4.10 Compliance.
Except as disclosed in the Parent SEC Reports or on Schedule 4.10 attached
hereto, Parent and each of its subsidiaries are not in breach or violation of or
in default in the performance or observance of any term or provision of, and no
event has occurred which, with lapse of time or action by a third party, would
result in a default under (a) the respective charters, bylaws or other similar
organizational instruments of Parent or any of its subsidiaries or (b) any
contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which Parent or any of its
subsidiaries is a party or by which any of them is bound or to which any of
their property is subject, which breaches, violations and defaults, in the case
of clause (b) of this Section 4.10, would have a Parent Material Adverse Effect.
SECTION 4.11 Taxes.
(a) Parent and its subsidiaries have (i) duly filed (or timely requested
and received an extension to file) with the appropriate governmental authorities
all Tax Returns (as defined in Section 4.11(c) hereof) required to be filed by
them for all periods ending on or prior to the Effective Time, other than those
Tax Returns the failure of which to file would not have a Parent Material
Adverse Effect, and such Tax Returns are true, correct and complete in all
material respects and (ii) duly paid in full or made adequate provision for the
payment of all Taxes (as defined in Section 4.11(b) hereof) for all periods
ending at or prior to the Effective Time. The liabilities and reserves for Taxes
reflected in the Parent balance sheet included in the latest Parent SEC Report
are adequate to cover all Taxes for all periods ending at or prior to the date
of such balance sheet and there are no material liens for Taxes upon any
property or assets of Parent or any subsidiary thereof, except for liens for
Taxes not yet due. There are no unresolved issues of law or fact arising out of
a notice of deficiency, proposed deficiency or assessment from the Internal
Revenue Service (the "IRS") or any other governmental taxing authority with
respect to Taxes of Parent or any of its subsidiaries which, if decided
adversely would have a Parent Material Adverse Effect. Neither Parent nor any of
its subsidiaries is a party to any agreement providing for the allocation or
sharing of Taxes with any entity that is not, directly or indirectly, a
subsidiary of Parent other than agreements the consequences of which are
adequately reserved for in the Parent Financial Statements. Neither Parent nor
any of its subsidiaries has, with regard to any assets or property held,
acquired or to be acquired by any of them, filed a consent to the application of
Section 341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
including, without limitation, income, gross receipts, excise, property, sales,
withholding, social security, occupation, use, service, service use, license,
payroll, franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments imposed by the United States, or any
state, local or foreign government or subdivision or agency thereof, whether
computed on a separate, consolidated, unitary, combined or any other basis, and
such term shall include any interest, fines, penalties or additional amounts and
any interest in respect of any additions, fines or penalties attributable or
imposed or with respect to any such taxes, charges, fees, levies or other
assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall mean any
return, report or other document or information required to be supplied to a
taxing authority in connection with Taxes.
SECTION 4.12 No Parent Stockholders' Approval Required.
No vote of stockholders of Parent is required by Parent's Certificate of
Incorporation, bylaws, any applicable law or any national securities exchange or
The NNM for the approval of this Agreement or the consummation of the
transactions contemplated hereby (including the issuance, registration and
inclusion on the NNM of Parent Common Stock)
SECTION 4.13 Pooling and Tax-Free Reorganization Matters.
To the knowledge of Parent and based upon consultation with its independent
accountants, neither Parent nor Acquisition nor any of their affiliates has
taken or agreed to take any action that would interfere with the ability of
Parent to (a) account for the business combination to be effected by the Merger
as a pooling of
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interests under ▇▇▇ ▇▇. ▇▇ for accounting and financial statement purposes or
(b) treat the Merger as a tax-free reorganization pursuant to Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code.
SECTION 4.14 Brokers.
Parent and Acquisition represent and warrant that no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or
Acquisition.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Acquisition as follows:
SECTION 5.1 Organization and Qualification.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. The Company is qualified to
do business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing would not have a Company Material Adverse Effect. As used
in this Agreement, a "Company Material Adverse Effect" shall mean any event,
circumstance, development or occurrence, individually or when taken together
with all other such events, circumstances, developments or occurrences, causing,
resulting in or having, or reasonably likely to cause, result in or have, a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries (as defined in Section 4.2 hereof), taken as a whole. True,
accurate and complete copies of the Company's Certificate of Incorporation and
bylaws, in each case as in effect on the date hereof, including all amendments
thereto, have heretofore been delivered to Parent.
SECTION 5.2 Capitalization.
(a) The authorized capital stock of the Company consists of 15,000,000
shares of Company Common Stock, par value $.001 per share, and 50,000 shares of
Company Preferred Stock, par value $.001 per share, of which 25,000 shares have
been designated Series A Convertible Preferred Stock and 25,000 shares have been
designated Series B Convertible Preferred Stock. As of the date of this
Agreement, 1,673,500 shares of Company Common Stock and 50,000 shares of Company
Preferred Stock were issued and outstanding (25,000 and 25,000 shares of which
are designated Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock respectively). All of such issued and outstanding shares are
validly issued and are fully paid, nonassessable and free of preemptive rights.
(b) Except as set forth on Schedule 5.2(b) attached hereto, as of the date
hereof there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement and also including any rights plan or other
anti-takeover agreement, obligating the Company or any subsidiary of the Company
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of the Company or obligating the Company or any
subsidiary of the Company to grant, extend or enter into any such agreement or
commitment. Except as set forth on Schedule 5.2(b) attached hereto, there are no
voting trusts, proxies or other agreements or understandings to which the
Company or any subsidiary of the Company is a party or by which the Company or
any subsidiary of the Company is bound with respect to the voting of any shares
of capital stock of the Company.
(c) Each Stock Option Acknowledgement executed and delivered by the holder
of a Company Stock Option as contemplated by Section 3.5(a) above shall, from
and after the Effective Time, be binding upon the holder of the Company Stock
Option to which such Stock Option Acknowledgement relates on the terms and
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subject to the conditions provided in Section 3.5(a) and such Stock Option
Acknowledgement. Except as set forth on Schedule 5.2(c) attached hereto, none of
the benefits available under the Company Stock Options are subject to
acceleration as a result of the Merger or otherwise, and the Company shall take
no action to permit or ▇▇▇▇▇▇ any such acceleration.
SECTION 5.3 Subsidiaries.
Schedule 5.3 sets forth the name, state of incorporation and stockholders
of each subsidiary of the Company. Each subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each subsidiary of the Company is
qualified to do business, and is in good standing, in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing would not have a Company Material Adverse
Effect. All of the outstanding shares of capital stock of each corporate
subsidiary of the Company are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and are owned directly or indirectly
by the Company, free and clear of any liens, claims, encumbrances, security
interests, equities, charges and options of any nature whatsoever except as set
forth on Schedule 5.3 attached hereto. There are no subscriptions, options,
warrants, rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights with respect to any shares of
capital stock of any corporate subsidiary of the Company, including any right of
conversion or exchange under any outstanding security, instrument or agreement
except as disclosed on Schedule 5.3 attached hereto.
SECTION 5.4 Authority; Non-Contravention; Approvals.
(a) The Company has full corporate power and authority to enter into this
Agreement and, subject to the Company Stockholders' Approval of the Merger (as
defined in Section 7.3(a)) and the Company Required Statutory Approvals (as
defined in Section 5.4(c)), to consummate the transactions contemplated hereby.
This Agreement has been approved by the board of directors of the Company, and
no other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement or, except for the
Company Stockholders' Approval, the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by Parent and Acquisition, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to (i) bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally and
(ii) general equitable principles, and except that the availability of equitable
remedies, including specific performance and injunctive relief, is subject to
the discretion of the court before which any proceedings may be brought.
(b) Except as set forth on Schedule 5.4(b) attached hereto, the execution
and delivery of this Agreement by the Company do not violate, conflict with or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its subsidiaries under any of the
terms, conditions or provisions of (i) the respective charters or bylaws of the
Company or any of its subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or governmental authority applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, or (iii) any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which the Company or any of its subsidiaries is now a party or by which
the Company or any of its subsidiaries or any of their respective properties or
assets may be bound or affected. The consummation by the Company of the
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transactions contemplated hereby will not result in any violation, conflict,
breach, termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the preceding
sentence, subject to (x) in the case of the terms, conditions or provisions
described in clause (ii) above, obtaining (prior to the Effective Time) the
Company Required Statutory Approvals and the Company Stockholders' Approval and
(y) in the case of the terms, conditions or provisions described in clause (iii)
above, obtaining (prior to the Effective Time) consents required from commercial
lenders, lessors or other third parties. Set forth on Schedule 5.4(b) attached
hereto is a list of hospital contracts with respect to which the consent of any
party other than the Company is required in order that consummation by the
Company of the transactions contemplated hereby will not result in a breach or
termination of the respective contracts. Excluded from the foregoing sentences
of this paragraph (b), insofar as they apply to the terms, conditions or
provisions described in clauses (ii) and (iii) of the first sentence of this
paragraph (b), are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests, charges or encumbrances
that would not have a Company Material Adverse Effect.
(c) Except for (i) the filings by Parent and the Company required by the
HSR Act, (ii) the filing of the Proxy Statement/Prospectus with the Commission
pursuant to the Securities Act and the declaration of the effectiveness thereof
by the Commission and filings with various state blue sky authorities, (iii) the
making of the Merger Filing with the Secretary of State of the State of Delaware
in connection with the Merger and (iv) any other required filings with or
approvals from applicable Federal and state governmental authorities (the
filings and approvals referred to in clauses (i) through (iv) are collectively
referred to as the "Company Required Statutory Approvals"), no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not have a
Company Material Adverse Effect.
SECTION 5.5 Financial Statements.
The Company has previously delivered or made available to Parent a copy of
the following financial statements (the "Company Financial Statements"), all of
which have been prepared on a consolidated basis (except as otherwise indicated)
in accordance with generally accepted accounting principles consistently applied
throughout the periods indicated (except as may be indicated in the notes
thereto):
(a) Audited Consolidated Statements of Financial Position, Operations,
Cash Flows and Changes in Stockholders' Equity of the Company and its
consolidated subsidiaries at or for the twelve (12) months ended December
31, 1994, 1995, 1996 and related Notes to the Consolidated Financial
Statements as of and for the years ended December 31, 1994, 1995, 1996; and
(b) Unaudited Consolidated Statements of Financial Position and
Operations at or for the three (3) months ended March 31, 1997.
The Company Financial Statements fairly present the financial position of the
Company and its subsidiaries as of the dates thereof and the results of their
operations and changes in financial position for the periods then ended,
although the unaudited Company Financial Statements do not contain the footnotes
required by generally accepted accounting principles and are subject to normal
year-end and audit adjustments and any other adjustments described therein.
SECTION 5.6 Absence of Undisclosed Liabilities.
Except with respect to acquisitions or potential transactions or
commitments disclosed on Schedule 5.6 attached hereto, neither the Company nor
any of its subsidiaries had at December 31, 1996, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except: (a) liabilities, obligations or contingencies
(i) which are accrued or reserved against in the Company Financial Statements or
reflected in the notes thereto or (ii) which were incurred after December 31,
1996 and were incurred in the ordinary course of business and consistent with
past practices; and (b)
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liabilities and obligations which are of a nature not required to be reflected
in the consolidated financial statements of the Company and its subsidiaries
prepared in accordance with generally accepted accounting principles
consistently applied and which were incurred in the normal course of business
(provided that no liabilities, obligations or contingencies excepted by
subparagraphs (a)(ii) or (b) hereof will have, individually or in the aggregate,
a Company Material Adverse Effect).
SECTION 5.7 Absence of Certain Changes or Events.
Except as set forth on Schedule 5.7 attached hereto, since December 31,
1996, there has not been any change or event (other than changes generally
affecting the industry in which the Company and its subsidiaries operate or
arising from general business or economic conditions or as a result of this
Agreement) that would have a Company Material Adverse Effect.
SECTION 5.8 Litigation.
Except as set forth on Schedule 5.8 attached hereto, there are no claims,
suits, actions or proceedings pending or, to the knowledge of the Company,
threatened against, relating to or affecting the Company or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seek to restrain the
consummation of the Merger or which would have a Company Material Adverse
Effect. Except as referred to in Schedule 5.8 attached hereto, neither the
Company nor any of its subsidiaries is subject to any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator which prohibits or
restricts the consummation of the transactions contemplated hereby or would have
any Company Material Adverse Effect.
SECTION 5.9 Registration Statement and Proxy Statement.
None of the information to be supplied by the Company or its subsidiaries
for inclusion in (a) the Registration Statement or (b) the Proxy Statement will,
in the case of the Proxy Statement or any amendments thereof or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the meeting of stockholders of the
Company to be held in connection with the transactions contemplated by this
Agreement, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, or, in the case of the Registration Statement, as amended or
supplemented, at the time it becomes effective and at the time of such meeting
of the stockholders of the Company, 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 Proxy
Statement/Prospectus, as of its Effective Time, will comply as to form in all
material respects with all applicable laws, including the provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by the Company with respect to
information supplied by Parent or Acquisition for inclusion therein.
SECTION 5.10 No Violation of Law.
Except as set forth on Schedule 5.10 attached hereto, neither the Company
nor any of its subsidiaries is in violation of or has been given notice or been
charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any governmental or regulatory
body or authority, except for violations which would not have a Company Material
Adverse Effect. As of the date of this Agreement, to the knowledge of the
Company, no investigation or review by any governmental or regulatory body or
authority is pending or threatened, nor has any governmental or regulatory body
or authority indicated an intention to conduct the same, other than, in each
case, those the outcome of which would not have Company Material Adverse Effect.
The Company and its subsidiaries have all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted
(collectively, the "Company Permits"), except for permits, licenses, franchises,
variances, exemptions, orders,
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authorizations, consents and approvals the absence of which would not have a
Company Material Adverse Effect. The Company and its subsidiaries are not in
violation of the terms of any Company Permit, except for delays in filing
reports or violations which would not have a Company Material Adverse Effect.
SECTION 5.11 Compliance.
Except as set forth on Schedule 5.11 attached hereto, the Company and each
of its subsidiaries are not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party, would result in a default
under, (a) the respective charters, bylaws or similar organizational instruments
of the Company or any of its subsidiaries or (b) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which the Company or any of its subsidiaries is
a party or by which any of them is bound or to which any of their property is
subject, which breaches, violations and defaults, in the case of clause (b) of
this Section 5.11, would have a Company Material Adverse Effect.
SECTION 5.12 Taxes.
The Company and its subsidiaries have (i) duly filed (or timely requested
and received an extension to file) with the appropriate governmental authorities
all Tax Returns required to be filed by them for all periods ending on or prior
to the Effective Time, other than those Tax Returns the failure of which to file
would not have a Company Material Adverse Effect, and such Tax Returns are true,
correct and complete in all material respects, and (ii) duly paid in full or
made adequate provision for the payment of all Taxes for all periods ending at
or prior to the Effective Time. The liabilities and reserves for Taxes reflected
in the most recent audited Company balance sheet are adequate to cover all Taxes
for all periods ending at or prior to the Effective Time and there are no
material liens for Taxes upon any property or assets of the Company or any
subsidiary thereof, except for liens for Taxes not yet due. There are no
unresolved issues of law or fact arising out of a notice of deficiency, proposed
deficiency or assessment from the IRS or any other governmental taxing authority
with respect to Taxes of the Company or any of its subsidiaries which, if
decided adversely would have a Company Material Adverse Effect. Neither the
Company nor any of its subsidiaries is a party to any agreement providing for
the allocation or sharing of Taxes with any entity that is not, directly or
indirectly, a wholly-owned corporate subsidiary of Company other than agreements
the consequences of which are adequately reserved for in the Company Financial
Statements. Neither the Company nor any of its corporate subsidiaries has, with
regard to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the application of Section 341(f) of the Code.
SECTION 5.13 Employee Benefit Plans; ERISA.
(a) All material employee benefit plans, programs, arrangements or
practices covering current or former employees of the Company, including
employee benefit plans within the meaning set forth in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), are
listed in Schedule 5.13(a) attached hereto (such plans, programs, arrangements
or practices of Company together with those of its subsidiaries being referred
to as the "Company Plans"). True and complete copies of each Company Plan has
been made available to the Company. To the extent applicable, each Company Plan
complies in all material respects with the requirements of its terms, ERISA and
the Code. Each Company Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the IRS. No Company Plan
is covered by Title IV of ERISA or Section 412 of the Code. Neither the Company
nor any of its subsidiaries has incurred any liability or penalty under Section
4975 of the Code or Section 502(i) of ERISA with respect to any Company Plan. To
the knowledge of the Company, there are no pending, threatened or anticipated
claims against or otherwise involving the Company Plans, except routine claims
for benefits. All material contributions required to be made as of the date of
this Merger Agreement to the Company Plans have been made or properly accounted
for. Neither the Company nor any entity under "common control" with the Company
within the meaning of Section 4001 of ERISA has contributed to or been required
to contribute to, any "multiemployer plan" (as defined in Section 3(37) of
ERISA). No Company Plan provides for post-retirement medical benefits, other
than as required by applicable law.
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SECTION 5.14 Labor Controversies.
Except as set forth on Schedule 5.14 attached hereto, (a) there are no
significant controversies pending or, to the knowledge of the Company,
threatened between the Company or its subsidiaries and any representatives of
any of their employees, (b) to the knowledge of the Company, there are no
material organizational efforts presently being made involving any of the
presently unorganized employees of the Company or its subsidiaries, (c) the
Company and its subsidiaries have, to the knowledge of the Company, complied in
all material respects with all laws relating to the employment of labor,
including, without limitation, any provisions thereof relating to wages, hours,
collective bargaining, and the payment of social security and similar taxes, and
(d) no person has, to the knowledge of the Company, asserted that the Company or
any of its subsidiaries is liable in any amount for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing, except for
such controversies, organizational efforts, noncompliance and liabilities which
would not have a Company Material Adverse Effect.
SECTION 5.15 Environmental Matters.
Except as set forth on Schedule 5.15 attached hereto, (i) the Company and
its subsidiaries have conducted their respective businesses in compliance with
all applicable Environmental Laws, including, without limitation, having all
permits, licenses and other approvals and authorizations necessary for the
operation of their respective businesses as presently conducted, (ii) none of
the properties owned by the Company or any of its subsidiaries contain any
Hazardous Substance as a result of any activity of the Company or any of its
subsidiaries in amounts exceeding the levels permitted by applicable
Environmental Laws, (iii) neither the Company nor any of its subsidiaries has
received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that the Company or any of its subsidiaries may be in violation of, or liable
under, any Environmental Law in connection with the ownership or operation of
their businesses, (iv) there are no civil, criminal or administrative actions,
suits, demands, claims, hearings, investigations or proceedings pending or, to
the knowledge of the Company and its subsidiaries, threatened against the
Company or any of its subsidiaries relating to any violation, or alleged
violation, of any Environmental Law, (v) no reports have been filed, or are
required to be filed, by the Company or any of its subsidiaries concerning the
release of any Hazardous Substance or the threatened or actual violation of any
Environmental Law, (vi) no Hazardous Substance has been disposed of, released or
transported in violation of any applicable Environmental Law from any properties
owned by the Company or any of its subsidiaries as a result of any activity of
the Company or any of its subsidiaries during the time such properties were
owned, leased or operated by the Company or any of its subsidiaries, (vii) there
have been no environmental investigations, studies, audits, tests, reviews or
other analyses regarding compliance or noncompliance with any applicable
Environmental Law conducted by or which are in the possession of the Company or
its subsidiaries relating to the activities of the Company or its subsidiaries
which have not been delivered to Parent prior to the date hereof, (viii) there
are, to the knowledge of Company and its subsidiaries, no underground storage
tanks on, in or under any properties owned by the Company or any of its
subsidiaries and no underground storage tanks have been closed or removed from
any of such properties during the time such properties were owned, leased or
operated by the Company or any of its subsidiaries, (ix) there is, to the
knowledge of Company and its subsidiaries, no asbestos or asbestos containing
material present in any of the properties owned by the Company and its
subsidiaries, and no asbestos has been removed from any of such properties
during the time such properties were owned, leased or operated by the Company or
any of its subsidiaries, and (x) neither the Company, its subsidiaries nor any
of their respective properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law, except for violations of the foregoing
clauses (i) through (x) that would not reasonably be expected to have a Company
Material Adverse Effect.
SECTION 5.16 Title to Assets.
Except as set forth on Schedule 5.16 attached hereto, the Company and each
of its subsidiaries has good and marketable title in fee simple to all its real
property and good title to all its leasehold interests and other
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properties, as reflected in the most recent balance sheet included in the
Company Financial Statements, except for properties and assets that have been
disposed of in the ordinary course of business since the date of such balance
sheet, free and clear of all mortgages, liens, pledges, charges or encumbrances
of any nature whatsoever, except (i) the lien for current taxes, payments of
which are not yet delinquent, (ii) such imperfections in title and easements and
encumbrances, if any, as are not substantial in character, amount or extent and
do not materially detract from the value or interfere with the present use of
the property subject thereto or affected thereby, or otherwise materially impair
the Company's business operations (in the manner presently carried on by the
Company) or (iii) as disclosed in Schedule 5.16 attached hereto, and except for
such matters which would not have a Company Material Adverse Effect. All leases
under which the Company leases any substantial amount of real or personal
property have been made available to Parent and are in good standing, valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event which with notice or lapse of time
or both would become a default other than defaults under such leases which would
not have a Company Material Adverse Effect.
SECTION 5.17 Company Stockholders' Approval.
The affirmative vote of stockholders of the Company required for approval
and adoption of this Agreement and the Merger is a majority of the outstanding
shares of Company Common Stock and sixty percent (60%) of the holders of each
class of Company Preferred Stock.
SECTION 5.18 Pooling and Tax-Free Reorganization Matters.
To the knowledge of the Company and based upon consultation with its
independent accountants, neither the Company nor any of its affiliates has taken
or agreed to take any action that would interfere with the ability of Parent to
(a) account for the business combination to be effected by the Merger as a
pooling of interests or (b) treat the Merger as a tax-free reorganization
pursuant to Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
SECTION 5.19 Insurance.
Except as set forth on Schedule 5.19 attached hereto, the Company maintains
insurance with financially responsible insurance companies in amounts customary
in its industry to insure it against risks and losses associated with the
operation of its business and its properties. Copies of such policy or policies
have been made available to Parent.
SECTION 5.20 Opinion of Company's Financial Advisor.
The Board of Directors of the Company has received the opinion of ▇▇▇▇▇
▇▇▇▇▇▇ Inc. ("▇▇▇▇▇ ▇▇▇▇▇▇"), financial advisor to the Company, to the effect
that, as of the date of this Agreement, the Exchange Ratio is fair, from a
financial point of view, to the holders of Company Common Stock (the "▇▇▇▇▇
▇▇▇▇▇▇ Opinion").
SECTION 5.21 Brokers.
The Company represents and warrants that no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company (except for fees,
expenses and amounts of indemnity payable to ▇▇▇▇▇ ▇▇▇▇▇▇).
SECTION 5.22 Contracts and Commitments.
(a) There is no default or event that with notice or lapse of time, or
both, would constitute a material default by the Company or any of its
subsidiaries under any of the material contracts (a "Material Contract") to
which it is a party. Neither the Company nor any of its subsidiaries has
received written notice of an outstanding, uncured default under any Material
Contract by any other party thereto. Except as set forth in Schedule 5.22
attached hereto, neither the Company nor any of its subsidiaries has any
knowledge (i) that any
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hospital, hospital system, independent practice association ("IPA"), physician
group, physician, pharmacy, laboratory, home health care agency, nursing
facility, mental health provider, therapist or other allied health care
professional or institution (each a "Provider" and collectively "Providers")
representing individually or in the aggregate in excess of ten percent (10%) of
the enrollees of the Company or of the total number of Providers are organized
or attempting to organize any entity (whether or not incorporated) for the
purpose of bargaining or otherwise dealing with the Company on a collective
basis (except with respect to individual Providers who have formed professional
corporations or partnerships with respect to IPAs and medical groups which
already contract with the Company or its subsidiaries); (ii) that IPAs, medical
groups or individual physicians which contract with the Company or its
subsidiaries and which serve individually or in the aggregate more than ten
percent (10%) of the enrollees of the Company or its subsidiaries have provided
written notice of an intent (whether or not legally binding) to terminate or not
to renew their respective contracts with the Company or its subsidiaries; (iii)
of any circumstances likely to result in disenrollment of enrollees, the loss of
which individually and in the aggregate would have a Company Material Adverse
Effect, other than those occurring as a result of general economic or financial
conditions or other conditions or developments that are not unique to the
Company and its subsidiaries but also affect other persons who participate or
are engaged in the lines of business in which the Company and its subsidiaries
participate or are engaged; or (iv) of any Provider providing services to the
Company and its subsidiaries that does not maintain professional liability
insurance.
(b) Each of the Material Contracts is enforceable against the Company or
any of its subsidiaries, as the case may be, in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
by bankruptcy, insolvency or other similar laws relating to rights of creditors.
Neither the Company nor any of its subsidiaries has received written notice that
any party to any of the Material Contracts intends to cancel or terminate any of
the Material Contracts or to exercise or not exercise any options under any of
the Material Contracts.
SECTION 5.23 Intellectual Property.
Except as set forth on Schedule 5.23 attached hereto, the Company does not
have any patents, trademarks, service marks, trade names, corporate names
(including all registrations and applications therefor) and copyright
registrations and applications that are material to the business or condition of
the Company or any of its subsidiaries.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 Conduct of Business by the Company Pending the Merger.
Except as otherwise contemplated by this Agreement, after the date hereof
and prior to the Closing Date or earlier termination of this Agreement, unless
Parent shall otherwise agree in writing, the Company shall, and shall cause its
subsidiaries, to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charters or
bylaws, (ii) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, except for the
declaration and payment of dividends by a wholly-owned subsidiary solely to
its parent corporation, (iii) split, combine, reclassify or take similar
action with respect to any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, (iv) adopt a plan of
complete or partial liquidation or resolutions providing for or authorizing
such liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (v) directly or indirectly
redeem, repurchase or otherwise acquire any shares of its capital stock or
any option with respect thereto;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of, their capital stock of any
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class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that the Company (i) may grant options to the
extent required to be granted automatically under the Company's Plans or
pursuant to written employment agreements disclosed on a Schedule hereto,
(ii) may issue shares upon conversion of convertible securities and
exercise of options outstanding on the date hereof, or options granted
pursuant to subsection (c)(i) of this Section 6.1 and (iii) may issue
shares necessary to effect the transactions contemplated by Section 7.14;
(d) not (i) incur (which shall not be deemed to include entering into
credit agreements, lines of credit or similar arrangements until borrowings
are made under such arrangements) any indebtedness for borrowed money or
guarantee any such indebtedness other than in the ordinary course of its
business consistent with past practice in an aggregate principal amount
exceeding $5,000,000 (net of any amounts of any such indebtedness
discharged during such period), or (ii) voluntarily purchase, cancel,
prepay or otherwise provide for a complete or partial discharge in advance
of a scheduled repayment date with respect to, or waive any right under,
any indebtedness for borrowed money other than in the ordinary course of
its business consistent with past practice in an aggregate principal amount
exceeding $5,000,000, (iii) redeem, purchase, acquire or offer to purchase
or acquire any shares of its capital stock or any options, warrants or
rights to acquire any of its capital stock or any security convertible into
or exchangeable for its capital stock, (iv) knowingly take any action which
would jeopardize the treatment of the Merger as a pooling of interests
under APB No. 16, (v) knowingly take or fail to take any action which
action or failure would cause the Company or its stockholders (except to
the extent that any stockholders receive cash in lieu of fractional shares)
to recognize gain or loss for Federal income tax purposes as a result of
the consummation of the Merger, (vi) make any acquisition of any assets or
businesses in an aggregate amount in excess of $250,000, (vii) sell,
pledge, dispose of or encumber any assets or businesses other than sales in
the ordinary course of business or (viii) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
(e) not, except to the extent required by applicable law, (x) permit
any material change in (A) any pricing, marketing, purchasing, investment,
accounting, financial reporting, inventory, credit, allowance or tax
practice or policy or (B) any method of calculating any bad debt,
contingency or other reserve for accounting, financial reporting or tax
purposes or (y) make any material tax election or settle or compromise any
material income tax liability with any governmental or regulatory body or
authority;
(f) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(g) confer on a regular and frequent basis with one or more
representatives of Parent to report operational matters of materiality and
the general status of ongoing operations;
(h) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice;
(i) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in applicable law; and
(j) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts and
against such risks and losses as are consistent with past practice.
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SECTION 6.2 Conduct of Business by Parent and Acquisition Pending the Merger.
Except as otherwise contemplated by this Agreement, after the date hereof
and prior to the Closing Date or earlier termination of this Agreement, unless
the Company shall otherwise agree in writing, Parent and Acquisition shall, and
shall cause their subsidiaries, to:
(a) not (i) amend or propose to amend their respective charters or
bylaws, (ii) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, except for the
declaration and payment of dividends by a wholly-owned subsidiary solely to
its parent corporation, (iii) split, combine, reclassify or take similar
action with respect to any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, (iv) adopt a plan of
complete or partial liquidation or resolutions providing for or authorizing
such liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization (except in connection with the
potential acquisitions described on Schedule 6.2 attached hereto or
subsequently disclosed to Company in writing) or (v) directly or indirectly
redeem, repurchase or otherwise acquire any shares of its capital stock or
any option with respect thereto;
(b) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any shares of Parent Common Stock, or any options,
warrants or rights of any kind to acquire any shares of their capital stock
of any class or any debt or equity securities convertible into or
exchangeable for such capital stock, except that Parent may issue shares
(i) upon conversion of convertible securities and exercise of options
outstanding on the date hereof or granted following the date hereof
consistent with Parent's prior practices and (ii) in connection with the
potential acquisitions described on Schedule 6.2 attached hereto or
subsequently disclosed to Company in writing;
(c) not (i) incur (which shall not be deemed to include entering into
credit agreements, lines of credit or similar arrangements until borrowings
are made under such arrangements) any indebtedness for borrowed money or
guarantee any such indebtedness other than in the ordinary course of its
business consistent with past practice in an aggregate principal amount
exceeding $300,000,000 (net of any amounts of any such indebtedness
discharged during such period), (ii) voluntarily purchase, cancel, prepay
or otherwise provide for a complete or partial discharge in advance of a
scheduled repayment date with respect to, or waive any right under, any
indebtedness for borrowed money other than in the ordinary course of its
business consistent with past practice in an aggregate principal amount
exceeding $300,000,000, (iii) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iv) knowingly take
any action which would jeopardize the treatment of the Merger as a pooling
of interests under APB No. 16, (v) knowingly take or fail to take any
action which action or failure to take action would cause the Company or
its stockholders (except to the extent that any stockholders receive cash
in lieu of fractional shares) to recognize gain or loss for Federal income
tax purposes as a result of the consummation of the Merger, (vi) make any
acquisition of any assets or businesses other than expenditures for fixed
or capital assets in the ordinary course of business and as described on
Schedule 6.2 attached hereto or subsequently disclosed to Company in
writing, (vii) sell, pledge, dispose of or encumber any assets or
businesses other than sales in the ordinary course of business or (viii)
enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(d) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement; and
(e) be reasonably available to confer on a regular and frequent basis
with one or more representatives of the Company to report operational
matters of materiality and the general status of ongoing operations.
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SECTION 6.3 Control of the Company's Operations.
Nothing contained in this Agreement shall give to Parent, directly or
indirectly, rights to control or direct the Company's operations prior to the
Effective Time. Prior to the Effective Time, the Company shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision of its operations.
SECTION 6.4 Control of Parent's Operations.
Nothing contained in this Agreement shall give to the Company, directly or
indirectly, rights to control or direct Parent's or Acquisition's operations
prior to the Effective Time. Prior to the Effective Time, Parent and Acquisition
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision of their respective operations.
SECTION 6.5 Conduct of Business of Acquisition.
During the period from the date of this Agreement to the Effective Time,
Acquisition shall not engage in any activities of any nature except as provided
in or contemplated by this Agreement. Parent shall take all actions necessary to
cause Acquisition to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth herein.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information.
(a) The Company and its subsidiaries shall afford to Parent and Acquisition
and their respective accountants, counsel, financial advisors and other
representatives (the "Parent Representatives") and Parent and its subsidiaries
shall afford to the Company and its accountants, counsel, financial advisors and
other representatives (the "Company Representatives") reasonable access during
normal business hours throughout the period prior to the earlier of the
termination of this Agreement or the Effective Time to all of their respective
properties, books, contracts, commitments and records (including, but not
limited to, Tax Returns) and, during such period, shall furnish promptly to one
another (i) a copy of each report, schedule and other document filed or received
by any of them pursuant to the requirements of Federal or state securities laws
or filed by any of them with the Commission in connection with the transactions
contemplated by this Agreement or which may have a material effect on their
respective businesses, properties or personnel and (ii) such other information
concerning their respective businesses, properties and personnel as Parent,
Acquisition or the Company, as the case may be, shall reasonably request;
provided that no investigation pursuant to this Section 7.1 shall amend or
modify any representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the Merger. Parent and its
subsidiaries shall hold and shall use their reasonable best efforts to cause the
Parent Representatives to hold, and the Company and its subsidiaries shall hold
and shall use their reasonable best efforts to cause the Company Representatives
to hold, in strict confidence all such information in accordance with the terms
of the confidentiality agreement dated as of November 6, 1996 (the
"Confidentiality Agreement"), between Parent and the Company.
(b) In the event that this Agreement is terminated in accordance with its
terms, each party shall promptly return to the other all non-public written
material provided pursuant to this Section 7.1 or the Confidentiality Agreement
and shall not retain any copies, extracts or other reproductions in whole or in
part of such written material. In such event, all documents, memoranda, notes
and other writings prepared by Parent or the Company based on the information in
such material shall be destroyed (and Parent and the Company shall use their
respective reasonable best efforts to cause their advisors and representatives
to similarly destroy their documents, memoranda and notes), and such destruction
(and reasonable best efforts) shall be certified in writing by an authorized
officer supervising such destruction.
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(c) The Company shall promptly advise Parent and Parent shall promptly
advise the Company in writing of any change or the occurrence of any event after
the date of this Agreement having, or which could reasonably be expected to
have, any Company Material Adverse Effect or Parent Material Adverse Effect, as
the case may be.
SECTION 7.2 Registration Statement and Proxy Statement.
Parent shall file with the Commission as soon as is reasonably practicable
after the date hereof the Proxy Statement/Prospectus and shall use all
reasonable efforts to have the Registration Statement declared effective by the
Commission as promptly as practicable. Parent shall also take any action
required to be taken under applicable state blue sky, securities laws or rules
or regulations of any national securities exchange or the NNM in connection with
the issuance of Parent Common Stock pursuant hereto. Parent and the Company
shall promptly furnish to each other all information, and take such other
actions, as may reasonably be requested in connection with any action by any of
them in connection with the preceding two sentences.
SECTION 7.3 Company Stockholders' Approval.
The Company, Parent and Stockholders of the Company holding, in the
aggregate, a number of shares of Company Common Stock and Company Preferred
Stock sufficient to approve and adopt this Agreement are parties to a
Stockholder Agreement dated the date of this Agreement whereby such stockholders
have agreed to vote for approval and adoption of the Agreement and the
transactions contemplated hereby, among other matters (the "Stockholder
Agreement"). The Stockholder Agreement is in form attached hereto as Exhibit
7.3. The Company shall, as promptly as practicable, submit this Agreement and
the transactions contemplated hereby for the approval of its stockholders at a
meeting of stockholders and shall use its best efforts to seek to obtain
stockholder approval and adoption (the "Company Stockholders' Approval") of this
Agreement and the transactions contemplated hereby. Such meeting of stockholders
shall be held as soon as practicable following the date upon which the
Registration Statement becomes effective. Subject to the fiduciary duties of the
board of directors of the Company under applicable law, the Company shall,
through its board of directors, recommend to its stockholders approval of the
transactions contemplated by this Agreement. Subject to the foregoing, the
Company (i) acknowledges that a breach of its covenant contained in this Section
7.3(a) to convene a meeting of its stockholders and call for a vote thereat with
respect to the approval of this Agreement and the Merger will result in
irreparable harm to Parent which will not be compensable in money damages and
(ii) agrees that such covenant shall be specifically enforceable and that
specific performance and injunctive relief shall be a remedy properly available
to Parent for a breach of such covenant.
SECTION 7.4 Affiliates of the Company and Parent.
On or prior to July 15, 1997, the Company and Parent shall each deliver to
the other a letter pursuant to Staff Accounting Bulletins 65 & 76 and Accounting
Series Releases 130 & ▇▇▇ (▇▇▇ "▇▇▇ ▇▇. ▇▇ Affiliate Letter") identifying all
persons who may be deemed affiliates of the Company or Parent, respectively, for
the purposes of the foregoing, including, without limitation, all directors and
executive officers of the Company or of the Parent as of the date of the ▇▇▇ ▇▇.
▇▇ Affiliate Letter. On or prior to the date that is five (5) days prior to the
Closing Date, (i) the Company shall deliver to Parent another letter (the "Rule
145 Letter") identifying all persons who may be affiliates of the Company, as
defined under Rule 145 under the Securities Act ("Rule 145"), as of the date of
the Rule 145 Letter, and (ii) the Company shall advise the persons identified in
the Rule 145 Letter of the resale restrictions imposed by applicable securities
laws. Each of the Company and Parent shall use its reasonable best efforts to
obtain as soon as practicable from each person listed on the respective ▇▇▇ ▇▇.
▇▇ Affiliate Letter and from any person who may be deemed to have become an
affiliate of the Company or Parent for the purposes of the foregoing after such
party's delivery of the ▇▇▇ ▇▇. ▇▇ Affiliate Letter and in any event not later
than July 31, 1997, an agreement not to sell shares of Company Common Stock or
Parent Common Stock in excess of an amount which would, in the aggregate,
contravene the provisions of the foregoing until combined results of operations
of the Company and Parent
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covering at least thirty (30) days of combined operations are made public.
Parent will keep current its filings under the Exchange Act for purposes of
reliance by Company affiliates upon the resale provisions of Rule 145.
SECTION 7.5 Exchange Listing.
Parent shall use its reasonable best efforts to effect, at or before the
Effective Time, authorization for inclusion on the NNM, upon official notice of
issuance, of the shares of Parent Common Stock to be issued pursuant to the
Merger.
SECTION 7.6 Expenses and Fees.
All costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
SECTION 7.7 Agreement to Cooperate.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto shall use its reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using its
reasonable best efforts to obtain all necessary or appropriate waivers, consents
and approvals and Commission "no-action" letters to effect all necessary
registrations, filings and submissions and to lift any injunction or other legal
bar to the Merger (and, in such case, to proceed with the Merger as
expeditiously as possible).
(b) Without limitation of the foregoing, each of Parent and the Company
undertakes and agrees to (i) take all actions necessary to cause the Merger to
(a) qualify as a tax-free merger under Section 368 of the Code and (b) be
treated as a pooling of interests under ▇▇▇ ▇▇. ▇▇ for accounting and financial
statement purposes, and (ii) file as soon as practicable after the date hereof a
Notification and Report Form under the HSR Act with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the
"Antitrust Division"). Each of Parent and the Company shall (i) use its
reasonable efforts to comply as expeditiously as possible with all lawful
requests of the FTC or the Antitrust Division for additional information and
documents and (ii) not extend any waiting period under the HSR Act or enter into
any agreement with the FTC or the Antitrust Division not to consummate the
transactions contemplated by this Agreement, except with the prior written
consent of such parties.
SECTION 7.8 Public Statements.
The parties shall consult with each other prior to issuing any press
release or any written public statement with respect to this Agreement or the
transactions contemplated hereby and shall not issue any such press release or
written public statement prior to such consultation unless required by law, by
regulation of the NNM or upon written advice of counsel.
SECTION 7.9 Employee Matters.
(a) From and after the Effective Time, Parent and the Surviving
Corporation, and their respective affiliates will honor in accordance with their
terms all existing employment, severance, consulting and salary continuation
agreements between the Company and any current or former officer, director,
employee or consultant to the Company.
(b) Parent agrees that, for one year after the Effective Time, Parent
shall, or shall cause the Surviving Corporation to, provide employee benefit
plans and programs for the benefit of employees and former employees of the
Company ("Company Employees"), which, in the aggregate, are no less favorable
than the Company employee benefit plans and programs in effect immediately prior
to the Effective Time. Parent further agrees that, for the two year period
beginning on the date one year following the Effective Time, Parent shall
provide, or shall cause the Surviving Corporation to provide, Company Employees
with employee benefit plans and programs that are no less favorable in the
aggregate to those provided from time to time to
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employees of Parent of comparable status and seniority. Except with respect to
plans and programs set forth on Schedule 7.9 attached hereto, with respect to
such benefits, past service, compensation and expense credits of such Company
Employees shall be recognized, whenever reasonably possible consistent with the
terms of such plans and programs, for all purposes under such plans (including,
but not limited to, participation, eligibility, vesting and calculation of
benefits), and each employee or fringe benefit plan or program available to
Company Employees as contemplated hereby shall be applied to such Company
Employees.
SECTION 7.10 Notification of Certain Matters.
Each of the Company, Parent and Acquisition agrees to give prompt notice to
each other of, and to use their respective reasonable best efforts to prevent or
promptly remedy, (a) the occurrence or failure to occur or the impending or
threatened occurrence or failure to occur, of any event which occurrence or
failure to occur would be likely to cause any of its representations or
warranties in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time and (b) any material
failure on its part to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 7.10 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 7.11 Corrections to the Proxy Statement/Prospectus and Registration
Statement.
Prior to the date of the Company Stockholders' Approval of the Merger, each
of the Company, Parent and Acquisition shall correct promptly any information
provided by it to be used in the Proxy Statement/Prospectus and Registration
Statement that shall have become false or misleading in any material respect and
shall take all reasonable steps necessary to file with the Commission and have
declared effective or cleared by the Commission any amendment or supplement to
the Proxy Statement/Prospectus or the Registration Statement so as to correct
the same and to cause the Proxy Statement/Prospectus as so corrected to be
disseminated to the stockholders of the Company and Parent, in each case to the
extent required by applicable law.
SECTION 7.12 Insurance; Indemnity.
For a period of six (6) years following the Effective Time, Parent shall
indemnify, defend and hold harmless to the fullest extent permitted under
applicable law each person who is now or has been an officer, director,
employee, trustee or agent of the Company (or any subsidiary or division
thereof), including, without limitation, each person controlling any of the
foregoing persons (individually, an "Indemnified Party" and collectively, the
"Indemnified Parties"), against all losses, claims, damages, liabilities, costs
or expenses (including reasonable attorneys' fees), judgments, fines, penalties
and amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to acts or omissions,
or alleged acts or omissions, by them in their capacities as such, whether
commenced, asserted or claimed before or after the Effective Time. In the event
of any such claim, action, suit, proceeding or investigation (an "Action"), (i)
Parent shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Party, which counsel shall be reasonably acceptable to Parent, in
advance of the final disposition of any such Action to the full extent and under
all circumstances permitted by Delaware law as in effect on the date hereof,
upon receipt of any undertaking required by applicable law, and (ii) Parent will
direct the defense of any such matter; provided, however, that Parent shall not
be obligated pursuant to this Section to pay the fees and disbursements of more
than one counsel for all Indemnified Parties in any single Action, except to the
extent that, in the opinion of counsel for the Indemnified Parties, two or more
of such Indemnified Parties have conflicting interests in the outcome of such
action. Immediately following the Effective Time, Parent shall purchase and
maintain or cause the Surviving Corporation to purchase and maintain, for a
period of six (6) years following the Effective Time, policies of directors' and
officers' liability insurance covering each person who was a director or officer
of the Company at any time prior to the Effective Time with respect to claims
arising from facts or events that occurred on or prior to the Effective Time and
providing at least the same coverage and amounts and containing terms that are
no less advantageous to the insured parties as those in effect immediately prior
to the Effective Time for officers and directors of Parent. The provisions of
this
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Section 7.12 are intended to be for the benefit of, and shall be enforceable by,
each Indemnified Party and each party entitled to insurance coverage under the
previous sentence hereof, respectively, and his or her heirs and legal
representatives, and shall be in addition to any other rights an Indemnified
Party may have under the certificate or articles of incorporation or bylaws of
the Surviving Company or any of its subsidiaries, under the DGCL or otherwise.
SECTION 7.13 No Solicitations.
Prior to the Effective Time, the Company agrees (a) that neither it nor any
of its subsidiaries shall, and it shall use its best efforts to cause their
respective representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its stockholders)
with respect to a merger, consolidation or other business combination including
the Company or any of its subsidiaries or any acquisition or similar transaction
(including, without limitation, a tender or exchange offer) involving the
purchase of (i) all or any portion of the assets of the Company and its
subsidiaries taken as a whole, (ii) any of the outstanding shares of Company
Common Stock or (iii) any of the outstanding shares of the capital stock of any
subsidiary of the Company (any such proposal or offer being hereinafter referred
to as an "Alternative Proposal"), or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any person or group relating to an Alternative Proposal (excluding the
transactions contemplated by this Agreement), or otherwise facilitate any effort
or attempt to make or implement an Alternative Proposal; and (b) that it will
notify Parent immediately if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it or any such person
or group. There shall be excepted from this Section 7.13 the transactions
effected pursuant to Section 7.14 hereof.
SECTION 7.14 Roll-up Transactions.
(a) Roll-up Notices. Following the execution of this Agreement, the Company
shall deliver notices to each of the holders ("Minority Holders"), excluding the
Company and its affiliates, of stock ("Minority Shares") and/or stock options
("Minority Options") in any of the Company's subsidiaries (as defined in Section
4.2(c) above), which notices shall serve to inform the Minority Holders of the
Company's intention to undertake the transactions contemplated by the
shareholder agreements ("Minority Shareholder Agreements") and stock option
plans ("Minority Option Plans") relating to such subsidiaries to eliminate the
Minority Holders' interests in each such subsidiary ("Roll-up Transactions").
The Company will use its best efforts to consummate all of the Roll-up
Transactions as of the Effective Time.
(b) Minority Shares. If the Roll-up Transactions relating to the Minority
Shares of a particular subsidiary are consummated as of the Effective Time, such
Minority Shares shall be exchanged for Company Common Stock at the Effective
Time as provided in the related Minority Shareholder Agreement and shall be
treated in the Merger as other issued and outstanding Company Common Stock is
treated pursuant to Section 3.1 of this Agreement. If the Roll-up Transactions
relating to the Minority Shares of a particular subsidiary will not be
consummated as of the Effective Time, the Company shall use its best efforts to
induce each holder of Minority Shares in such subsidiary to enter into an escrow
agreement with Parent and the Company ("Escrow Agreement") providing that such
holder shall have no actions, causes of action or claims against the Company or
Parent with respect to such holder's Minority Shares other than for a number of
shares of Parent Common Stock not to exceed those held in the escrow
specifically to complete the Roll-up Transactions for such subsidiary.
(c) Minority Options. If the Roll-up Transactions relating to the Minority
Options issued by a particular subsidiary are consummated as of the Effective
Time, such Minority Options shall be exchanged for Company Stock Options at the
Effective Time as provided in the related Minority Option Plan and shall be
treated in the Merger as other issued and outstanding Company Stock Options are
treated pursuant to Section 3.5 of this Agreement. If the Roll-up Transactions
relating to the Minority Options of a particular subsidiary will not be
consummated as of the Effective Time, the Company shall use its best efforts to
induce each holder of such Minority Options to enter into an Escrow Agreement
providing that such holder shall have
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no actions, causes of action or claims against the Company or Parent with
respect to such holder's Minority Options other than for a number of shares of
Parent Common Stock and/or Parent Stock Options held in the escrow specifically
to complete the Roll-up Transactions for such subsidiary.
(d) Escrow Provisions. Any shares of Parent Common Stock or Parent Stock
Options held in any escrow pursuant to this Section 7.14 shall constitute shares
or options which would otherwise be issuable to stockholders or optionees of the
Company in the Merger. The terms of each Escrow Agreement and any related escrow
arrangements shall be reasonably agreed upon by Parent and the Company.
(e) Adjustments Following Completion of Roll-up Transactions. If, following
the completion of a Roll-up Transaction for any subsidiary after the Effective
Time, there are shares of Parent Common Stock remaining in any escrow account
established with respect to the Minority Shares of or Minority Options issued by
such subsidiary, a number of such shares remaining in all such escrow account
shall be distributed to the former Company stockholders and option holders who
received shares of Parent Common Stock pursuant to Section 3.1 and Section 3.5,
respectively.
SECTION 7.15 Bank Consent.
Parent shall use its reasonable best efforts to obtain the consent of its
senior lender with respect to the transactions contemplated by this Agreement on
or before August 15, 1997.
ARTICLE VIII
CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite
vote of the stockholders of the Company under the Company's Certificate of
Incorporation and applicable law.
(b) Inclusion of Parent Common Stock. The shares of Parent Common
Stock issuable in the Merger shall have been authorized for listing on the
NNM upon official notice of issuance.
(c) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(d) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act
and state blue sky laws, if applicable, and no stop order suspending such
effectiveness shall have been issued and remain in effect and no proceeding
for that purpose shall have been instituted by the Commission or any state
regulatory authorities.
(e) No Injunction. No preliminary or permanent injunction or other
order or decree by any Federal or state court which prevents the
consummation of the Merger shall have been issued and remain in effect
(each party agreeing to use its reasonable efforts to have any such
injunction, order or decree lifted).
(f) Pooling. Parent and the Company shall have received letters from
Deloitte & Touche LLP and KPMG Peat Marwick LLP, respectively, dated not
more than two business days prior to the Effective Time, to the effect that
the Merger qualifies for "pooling of interests" accounting treatment if
consummated in accordance with this Agreement and if the operations of
Parent and the Surviving Corporation are conducted in a manner that do not
violate "pooling of interests" accounting treatment.
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SECTION 8.2 Conditions to Obligation of the Company to Effect the Merger.
Unless waived by the Company, the obligation of the Company to effect the
Merger shall be subject to the fulfillment at or prior to the Closing Date of
the following additional conditions:
(a) Compliance with Covenants; Accuracy of Representations and
Warranties. Parent and Acquisition shall have performed in all material
respects their agreements, covenants and obligations contained in this
Agreement required to be performed or complied with by Parent and
Acquisition on or prior to the Closing Date and the representations and
warranties of Parent and Acquisition contained in this Agreement shall be
true and correct in all material respects (except for such representations
and warranties that are qualified by a reference to materiality, which
representations and warranties as so qualified shall be true in all
respects) on and as of the date made and on and as of the Closing Date as
if made at and as of such date, and the Company shall have received a
certificate of the Chairman of the Board and Chief Executive Officer, the
President or a Vice President of Parent and of the President and Chief
Executive Officer or a Vice President of Acquisition to that effect.
(b) Tax Opinion. The Company shall have received from ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, counsel to the Company, on the date of the Proxy Statement
and on the Closing Date opinions, in each case dated as of such respective
dates and stating that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code and that Parent, Acquisition and the Company will each be a party to
that reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinions, counsel for the Company shall be entitled to rely
upon representations of officers and affiliates of Parent, Acquisition and
the Company reasonably satisfactory in form and substance to such counsel
and to Parent and Acquisition.
(c) Fairness Opinion. The ▇▇▇▇▇ ▇▇▇▇▇▇ Opinion shall not have been
withdrawn.
(d) Consents; Approvals. Parent shall have obtained all of the
consents set forth on Schedule 4.3(b) attached hereto. With respect to the
Parent Required Statutory Approvals, all approvals shall have been obtained
and all filings which are required to be made prior to the Effective Time
shall have been submitted.
(e) Employee Matters. Parent shall have entered into employment
agreements and have taken such other employee related matters as are listed
on a Memorandum of even date herewith initialed among the parties.
(f) Registration Rights Agreement. Parent shall have executed and
delivered the Registration Rights Agreement in the form attached hereto as
Exhibit 8.2(f).
(g) Opinions of Counsel. The Company shall have received the opinions
of Pillsbury Madison & Sutro LLP, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., counsel to
Parent, dated the Closing Date, in form reasonably satisfactory to the
Company.
(h) Bank Consent. Parent shall have received the consent of its senior
lender with respect to the transactions contemplated by this Agreement not
later than the date set forth in Section 7.15.
SECTION 8.3 Conditions to Obligations of Parent and Acquisition to Effect the
Merger.
Unless waived by Parent and Acquisition, the obligations of Parent and
Acquisition to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the additional following conditions:
(a) Compliance with Covenants; Accuracy of Representations and
Warranties. The Company shall have performed in all material respects its
agreements, covenants and obligations contained in this Agreement required
to be performed or complied with by the Company on or prior to the Closing
Date and the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects (except
for such representations and warranties that are qualified by their terms
by a referral to materiality, which representations and warranties as so
qualified shall be true in all respects) on and as of the date made and on
and as of the Closing Date as if made at and as of such date,
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and Parent shall have received a Certificate of the President and Chief
Executive Officer or of a Vice President of the Company to that effect.
(b) Tax Opinion. Parent shall have received from Pillsbury Madison &
Sutro LLP, counsel to Parent, on the date of the Proxy Statement and on the
Closing Date opinions, in each case dated as of such respective dates and
stating that the Merger will be treated for Federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code and that
Parent, Acquisition and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinions, counsel for Parent shall be entitled to rely upon
representations of officers and affiliates of Parent, Acquisition and the
Company reasonably satisfactory in form and substance to such counsel and
to the Company.
(c) Consents; Approvals. The Company shall have obtained all of the
consents set forth on Schedule 5.4(b) attached hereto. With respect to the
Company Required Statutory Approvals, all approvals shall have been
obtained and all filings which are required to be made prior to the
Effective Time shall have been submitted.
(d) Resignations. Parent shall have received from the Company the
resignations of all individuals serving as directors of the Company
immediately prior to the Effective Time.
(e) Master Strategic Agreement for Private Practice Partnerships. The
Company and Oxford Health Plans, Inc., a Delaware corporation ("Oxford"),
shall have executed a master strategic agreement substantially in the form
of Exhibit 8.3(e) hereof.
(f) Wellpoint Memorandum of Understanding. The Company and Wellpoint
Health Networks, Inc., a Delaware corporation ("Wellpoint"), shall have
executed a Memorandum of Understanding substantially in the form of Exhibit
8.3(f) hereof.
(g) Opinion of Counsel. Parent shall receive the opinion of ▇▇▇▇▇▇,
▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to the Company, dated the Closing Date, in
form reasonably satisfactory to Parent.
(h) No Preferred Stock Outstanding. The Company and the holders of
Company Preferred Stock shall have taken all necessary actions to ensure
that all of the outstanding shares of Preferred Stock will be canceled or
converted into shares of Company Common Stock no later than immediately
prior to the Effective Time.
(i) Stock Option Acknowledgements. Stock Option Acknowledgements shall
have been executed and delivered by the holders of Company Stock Options
representing no less than eighty percent (80%) of the shares of Company
Stock available under all Company Stock Options (whether such Company Stock
Options are vested or unvested) as of immediately prior to the Effective
Time.
(j) Roll Up. Each Roll-up Transaction shall either be complete as of
the Effective Time or the parties with respect thereto shall have entered
into Escrow Agreements as contemplated by Section 7.14.
(k) Denominator Certificate. Parent shall have received the
Denominator Certificate in form reasonably acceptable to Parent.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination.
This Agreement may be terminated at any time prior to the Closing Date,
whether before or after approval by the stockholders of the Company, as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) if the Merger is not completed by the date 120 days from the
date of this Agreement otherwise than on account of delay or default on
the part of the Company, provided that Parent may
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extend such date for an additional 30 days if all Parent Required
Statutory Approvals and all Company Required Statutory Approvals have
not then been obtained or if the transactions contemplated by Section
7.14 shall not have been concluded;
(ii) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of the Company or any of
its 5% stockholders or any of their affiliates or associates;
(iii) if Parent (A) fails to perform in any material respect any of
its material covenants in this Agreement and (B) does not cure such
default in all material respects within thirty (30) days after written
notice of such default is given to Parent by the Company;
(iv) if any condition set forth in Section 8.1 or Section 8.2
hereof is not satisfied, other than as a result of the conduct of the
Company;
(v) if the Parent Value is less than $15.65; or
(vi) if the Parent shall not have received the consent of its
senior lender specified in Section 8.2(h) by not later than August 15,
1997.
(b) Parent shall have the right to terminate this Agreement.
(i) if the Merger is not completed by the date 120 days from the
date of this Agreement otherwise than account of delay or default on the
part of Parent, provided that Company may extend such date for an
additional 30 days if all Parent Required Statutory Approvals and
Company Required Statutory Approvals have not then been obtained or if
the transactions contemplated by Section 7.14 shall not have been
concluded;
(ii) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of Parent or any of its
5% stockholders or any of their affiliates or associates;
(iii) if the Company (A) fails to perform in any material respect
any of its material covenants in this Agreement and (B) does not cure
such default in all material respects within thirty (30) days after
written notice of such default is given to the Company by Parent; or
(iv) if any condition set forth in Section 8.1 or Section 8.3
hereof is not satisfied, other than as a result of the conduct of
Parent.
(c) As used in this Agreement, (i) "affiliate" has the meaning
assigned to it in the Federal securities laws and (ii) "group" has the
meaning set forth in Section 13(d) of the Exchange Act and the rules and
regulations thereunder.
SECTION 9.2 Effect of Termination.
In the event of termination of this Agreement by either Parent or the
Company, as provided in Section 9.1 hereof, this Agreement shall forthwith
become void and there shall be no further obligation on the part of the Company,
Parent, Acquisition or their respective officers or directors with respect to
obligations existing thereunder prior to the termination (except as set forth in
this Section 9.2 and in Sections 7.1, 7.6 and 7.8 hereof and except for the
rights of any non-breaching party in respect of a willful breach or a knowing
violation by another party of a covenant, representation or warranty hereunder,
all of which shall survive the termination).
SECTION 9.3 Amendment.
This Agreement may not be amended except by action taken by the parties'
respective boards of directors or duly authorized committees thereof and then
only by an instrument in writing signed on behalf of each of the parties hereto
and in compliance with applicable law.
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SECTION 9.4 Waiver.
At any time prior to the Effective Time, the parties hereto may (a) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant thereto and
(c) waive compliance with any provisions of this Agreement or conditions
contained herein except that, after the vote of the Company's stockholders with
respect to this Agreement, the Exchange Ratio shall not be changed from that
provided herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival of Representations and Warranties.
All representations and warranties in this Agreement shall not survive the
Merger, and after effectiveness of the Merger neither the Company, Parent, the
Surviving Corporation or their respective officers or directors shall have any
further obligation with respect thereto.
SECTION 10.2 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by nationally recognized
overnight mail service or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to Parent or Acquisition to:
FPA Medical Management, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
with copies to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Senior Vice President,
General Counsel & Secretary
FPA Medical Management, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
Pillsbury Madison & Sutro LLP
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) If to the Company, to:
Health Partners, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇,
Chief Executive Officer
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with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECTION 10.3 Interpretation.
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
In this Agreement, unless a contrary intention appears, (i) the words "herein",
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision and (ii) reference to any Article or Section means such Article or
Section hereof. No provision of this Agreement shall be interpreted or construed
against any party hereto solely because such party or its legal representative
drafted such provision.
SECTION 10.4 Miscellaneous.
This Agreement (including the documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all other prior agreements
and understandings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof, (b) except with respect to the
provisions of Sections 3.5 and 7.12, is not intended to confer upon any other
person any rights or remedies hereunder and shall be binding upon and inure to
the benefit solely of each party hereto, and their respective successors and
assigns, and (c) shall not be assigned by operation of law or otherwise, except
that Acquisition may assign this Agreement to any other wholly-owned subsidiary
of Parent. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
SECTION 10.5 Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement. Each party agrees (i) to accept the facsimile signature of the
other party's representatives hereto and (ii) to be bound by its own
representative's facsimile signature hereon.
IN WITNESS WHEREOF, Parent, Acquisition and the Company have caused this
Agreement to be signed by their respective officers as of the date first written
above.
Parent
FPA MEDICAL MANAGEMENT, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Print Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: President & Chief Executive
Officer
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Acquisition
FPA ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Print Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: President & Chief Executive
Officer
Company
HEALTH PARTNERS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
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