EXHIBIT 2.1
PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER (the "Plan of Merger"), made and entered into
as of the 5th day of May, 1998, by and among HEALTHSOUTH Corporation, a
Delaware corporation ("HEALTHSOUTH"), FIELD ACQUISITION CORPORATION, a Delaware
corporation (the "Subsidiary"), and NATIONAL SURGERY CENTERS, INC., a Delaware
corporation ("NSC") (the Subsidiary and NSC being sometimes collectively
referred to herein as the "Constituent Corporations").
W I T N E S S E T H:
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WHEREAS, the respective Boards of Directors of HEALTHSOUTH, the Subsidiary
and NSC have approved the merger of the Subsidiary with and into NSC (the
"Merger"), upon the terms and conditions set forth in this Plan of Merger,
whereby all shares of Common Stock, par value $.01 per share, of NSC (the "NSC
Common Stock"), not owned directly or indirectly by NSC, will be converted into
the right to receive the Merger Consideration (as hereinafter defined);
WHEREAS, each of HEALTHSOUTH, the Subsidiary and NSC desires to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests".
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
and agreements contained herein, the parties hereto do hereby agree as follows:
Section 1. The Merger.
1.1 The Merger. Upon the terms and conditions set forth in this Plan of
Merger, and in accordance with the Delaware General Corporation Law (the
"DGCL"), the Subsidiary shall be merged with and into NSC at the Effective Time
(as defined in Section 1.3). Following the Effective Time, the separate
corporate existence of the Subsidiary shall cease and NSC shall continue as the
surviving corporation (the "Surviving Corporation") under the name "NSC, Inc."
and shall succeed to and assume all the rights and obligations of the Subsidiary
and NSC in accordance with the DGCL.
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1.2 The Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. Central Time on a date to be specified by the parties (the
"Closing Date"), which (subject to satisfaction or waiver of the conditions set
forth in Sections 9.2 and 9.3) shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in Section 9.1 (other
than Section 9.1(a), which shall be satisfied at the Closing Date), at the
offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.C., Birmingham, Alabama, unless
another date or place is agreed to in writing by the parties hereto.
1.3 Effective Time. Subject to the provisions of this Plan of Merger, the
parties shall file a certificate of merger (the "Certificate of Merger")
executed in accordance with the relevant provisions of the DGCL and shall make
all other filings or recordings required under the DGCL as soon as practicable
on or after the Closing Date. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Delaware Secretary of State, or
at such other time as the Subsidiary and NSC shall agree should be specified in
the Certificate of Merger (the "Effective Time").
1.4 Effect of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL.
Section 2. Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates.
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of shares of NSC Common
Stock or any shares of capital stock of the Subsidiary:
(a) Subsidiary Common Stock. Each share of capital stock of the
Subsidiary issued and outstanding immediately prior to the Effective Time
shall be converted into one fully paid and nonassessable share of common
stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of NSC Common Stock
that is owned by NSC or by any subsidiary of NSC shall automatically be
canceled and retired and shall cease to exist, and none of the Common
Stock, par value $.01 per share, of HEALTHSOUTH ("HEALTHSOUTH Common
Stock"), cash or other consideration shall be delivered in exchange
therefor.
(c) Conversion of NSC Shares. Subject to Section 2.2(e), each issued
and outstanding share of NSC Common Stock (other than shares to be canceled
in accordance with Section 2.1(b)) (collectively, the "Exchanging NSC
Shares") shall be converted into the right to receive that fraction of a
share of HEALTHSOUTH Common Stock determined by dividing $30.50 by the Base
Period Trading Price (as defined below), as may be adjusted as provided
below, computed to four decimal places (the "Exchange Ratio"); provided,
however, that if the Base Period Trading
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Price shall be greater than $35.00, the Exchange Ratio shall be .8714; and
provided further, however, that if the Base Period Trading Price shall be
less than $26.50, the Exchange Ratio shall be 1.1509. The number of shares
of HEALTHSOUTH Common Stock issuable with respect to each Exchanging NSC
Share, as determined as set forth herein, is herein called the "Merger
Consideration". For purposes of this Plan of Merger, the term "Base Period
Trading Price" shall mean the average of the daily closing prices per share
for the shares of HEALTHSOUTH Common Stock for the 20 consecutive trading
days on which such shares are actually traded (as reported on the New York
Stock Exchange Composite Transactions Tape as reported in The Wall Street
Journal, Eastern Edition, or if not reported thereby, any other
authoritative source) ending at the close of trading on the second New York
Stock Exchange trading day immediately preceding the day of the Special
Meeting (as defined in Section 7.3) (such period being herein called the
"Base Period"). Promptly after the close of trading on such day, the
parties shall issue joint press release publicly announcing the Exchange
Ratio. As of the Effective Time, all such Exchanging NSC Shares shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any
Exchanging NSC Shares shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration and any cash in lieu
of fractional shares of HEALTHSOUTH Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 2.2, without interest.
(d) Stock Options, Warrants and Convertible Securities. At the
Effective Time, all rights with respect to NSC Common Stock pursuant to any
NSC stock options, stock purchase warrants and convertible securities which
are outstanding at the Effective Time, whether or not then exercisable,
shall be converted into and become rights with respect to HEALTHSOUTH
Common Stock, and HEALTHSOUTH shall assume each NSC stock option, stock
purchase warrant or convertible securities, in accordance with the terms of
any stock option plan under which it was issued and any stock option
agreement, warrant agreement, indenture or other instrument by which it is
evidenced. It is intended that, unless otherwise agreed between
HEALTHSOUTH and a particular optionee, the foregoing provisions shall be
undertaken in a manner that will not constitute a "modification" as defined
in Section 424 of the Code, as to any stock option which is an "incentive
stock option". Each NSC stock option, stock purchase warrant or
convertible security so assumed shall be exercisable for, or convertible
into, that number of shares of HEALTHSOUTH Common Stock equal to the number
of NSC shares subject thereto multiplied by the Exchange Ratio, and shall
have an exercise price or conversion price per share equal to the NSC
exercise price or conversion price divided by the Exchange Ratio.
(e) Anti-Dilution Provisions. If after the date hereof and prior to
the Effective Time HEALTHSOUTH shall have declared a stock split (including
a reverse split) of HEALTHSOUTH Common Stock or a dividend payable in
HEALTHSOUTH Common Stock, or any other distribution of securities or
dividend (in cash or otherwise) to holders of HEALTHSOUTH Common Stock
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with respect to their HEALTHSOUTH Common Stock (including without
limitation such a distribution or dividend made in connection with a
recapitalization, reclassification, merger, consolidation, reorganization
or similar transaction) then (i) the amounts $30.50, $35.00 and $26.50
referred to in Section 2.1(c), and the Exchange Ratio, shall be
appropriately adjusted to reflect such stock split or dividend or other
distribution of securities and (ii) if such stock split, dividend or
distribution has a record date prior to the Effective Time, then the number
of shares of HEALTHSOUTH Common Stock to be issued upon conversion of a
share of NSC Common Stock pursuant to Section 2.1(c) shall be appropriately
adjusted to reflect such stock split, dividend or other distribution of
securities.
2.2 Exchange of Certificates. (a) Exchange Agent. Prior to the
Effective Time, HEALTHSOUTH shall enter into an agreement with such bank or
trust company as may be designated by HEALTHSOUTH (the "Exchange Agent") which
shall provide that HEALTHSOUTH shall deposit with the Exchange Agent as of the
Effective Time, for the benefit of the holders of Exchanging NSC Shares, for
exchange in accordance with this Section 2, through the Exchange Agent,
certificates representing the shares of HEALTHSOUTH Common Stock (such shares of
HEALTHSOUTH Common Stock, together with any dividends or distributions with
respect thereto with a record date after the Effective Time, being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 2.1 in exchange
for outstanding shares of NSC Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of NSC Common Stock
(the "Certificates") whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.1, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as HEALTHSOUTH
may reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing shares of
HEALTHSOUTH Common Stock. Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
HEALTHSOUTH, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange Agent, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of HEALTHSOUTH Common Stock
which such holder has the right to receive pursuant to the provisions of this
Section 2, and the Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of shares of NSC Common Stock which is not
registered in the transfer records of NSC, a certificate representing the proper
number of shares of HEALTHSOUTH Common Stock may be issued to a person other
than the person in whose name the Certificate so surrendered is registered, if
such Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance of shares of HEALTHSOUTH
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Common Stock to a person other than the registered holder of such Certificate or
establish to the satisfaction of HEALTHSOUTH that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate representing
shares of HEALTHSOUTH Common Stock and cash in lieu of any fractional shares of
HEALTHSOUTH Common Stock as contemplated by this Section 2.2. No interest will
be paid or will accrue on any cash payable in lieu of any fractional shares of
HEALTHSOUTH Common Stock. To the extent permitted by law, former stockholders of
record of NSC shall be entitled to vote after the Effective Time at any meeting
of HEALTHSOUTH stockholders the number of whole shares of HEALTHSOUTH Common
Stock into which their respective shares of NSC Common Stock are converted,
regardless of whether such holders have exchanged their Certificates for
certificates representing HEALTHSOUTH Common Stock in accordance with this
Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to HEALTHSOUTH Common Stock with a record date
after the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of HEALTHSOUTH Common Stock
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(e) until the surrender of such
Certificate in accordance with this Section 2. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificate representing whole shares of HEALTHSOUTH
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
HEALTHSOUTH Common Stock to which such holder is entitled pursuant to Section
2.2(e) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
HEALTHSOUTH Common Stock, and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
but prior to such surrender and with a payment date subsequent to such surrender
payable with respect to such whole shares of HEALTHSOUTH Common Stock.
(d) No Further Ownership Rights in Exchanging NSC Shares. All shares of
HEALTHSOUTH Common Stock issued upon the surrender for exchange of Certificates
in accordance with the terms of this Section 2 (including any cash paid pursuant
to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued (and paid) in
full satisfaction of all rights pertaining to the Exchanging NSC Shares
theretofore represented by such Certificates. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Section
2, except as otherwise provided by law.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of HEALTHSOUTH Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of HEALTHSOUTH.
Notwithstanding any other provision of this Plan of Merger, each holder of
Exchanging NSC Shares exchanged pursuant to the Merger who would
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otherwise have been entitled to receive a fraction of a share of HEALTHSOUTH
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of HEALTHSOUTH Common Stock multiplied
by the closing price per share of HEALTHSOUTH Common Stock on the date on which
the Effective Time occurs, as reported on the New York Stock Exchange Composite
Transactions Tape.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates six months after the
Effective Time shall be delivered to HEALTHSOUTH, upon demand, and any holders
of the Certificates who have not theretofore complied with this Section 2 shall
thereafter look only to HEALTHSOUTH for payment of HEALTHSOUTH Common Stock, any
cash in lieu of fractional shares of HEALTHSOUTH Common Stock and any dividends
or distributions with respect to HEALTHSOUTH Common Stock.
(g) No Liability. None of HEALTHSOUTH, the Subsidiary, NSC or the Exchange
Agent shall be liable to any person in respect of any shares of HEALTHSOUTH
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time (or immediately
prior to such earlier date on which any shares of HEALTHSOUTH Common Stock, any
cash in lieu of fractional shares of HEALTHSOUTH Common Stock or any dividends
or distributions with respect to HEALTHSOUTH Common Stock in respect of such
Certificates would otherwise escheat to or become the property of any
governmental entity), any such shares, cash, dividends or distributions in
respect of such Certificates shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund in deposit accounts or short-term money market
instruments, as directed by HEALTHSOUTH, on a daily basis. Any interest and
other income resulting from such investments shall be paid to HEALTHSOUTH.
2.3 Certificate of Incorporation of Surviving Corporation. The
Certificate of Incorporation of NSC shall be amended and restated, effective at
the Effective Time, in a manner satisfactory to HEALTHSOUTH. The Certificate of
Incorporation of NSC, as so amended and restated, shall become the Certificate
of Incorporation of the Surviving Corporation from and after the Effective Time
and until thereafter amended as provided by law.
2.4 Bylaws of the Surviving Corporation. The Bylaws of the Subsidiary
shall be the Bylaws of the Surviving Corporation from and after the Effective
Time and until thereafter altered, amended or repealed in accordance with the
laws of the State of Delaware, the Certificate of Incorporation of NSC and the
said Bylaws.
2.5 Directors and Officers of the Surviving Corporation. The Directors
and officers of the Subsidiary immediately prior to the Effective Time shall be
the Directors and officers of
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the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation.
2.6 Assets, Liabilities, Reserves and Accounts. At the Effective Time,
the assets, liabilities, reserves and accounts of each of the Subsidiary and NSC
shall be taken up on the books of the Surviving Corporation at the amounts at
which they respectively shall be carried on the books of said corporations
immediately prior to the Effective Time, except as otherwise set forth in this
Plan of Merger and subject to such adjustments, or elimination of intercompany
items, as may be appropriate in giving effect to the Merger in accordance with
generally accepted accounting principles.
2.7 Corporate Acts of the Subsidiary. All corporate acts, plans,
policies, approvals and authorizations of the Subsidiary, its sole stockholder,
its Board of Directors, committees elected or appointed by the Board of
Directors, and all officers and agents, valid immediately prior to the Effective
Time, shall be those of the Surviving Corporation and shall be as effective and
binding thereon as they were with respect to the Subsidiary. The employees and
agents of the Subsidiary shall become the employees and agents of the Surviving
Corporation and continue to be entitled to the same rights and benefits which
they enjoyed as employees and agents of the Subsidiary.
Section 3. Representations and Warranties of NSC.
NSC hereby represents and warrants to HEALTHSOUTH and the Subsidiary as
follows:
3.1 Organization, Existence and Good Standing. NSC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. NSC has all necessary corporate power to own its properties and
assets and to carry on its business as presently conducted. NSC is not, and has
not been within the two years immediately preceding the date of this Plan of
Merger, a subsidiary or division of another corporation, nor has NSC within such
time owned, directly or indirectly, any shares of HEALTHSOUTH Common Stock or
Subsidiary Common Stock.
3.2 NSC Capital Stock. NSC's authorized capital consists of 40,000,000
shares of NSC Common Stock, of which 18,572,111 shares were issued and
outstanding as of April 3, 1998, and no shares of which were issued and held as
treasury shares, 10,000,000 shares of Non-Voting Common Stock, par value $.01
per share, none of which shares are issued and outstanding or held as treasury
stock, and 10,000,000 shares of Preferred Stock, par value $.01 per share, none
of which shares are issued and outstanding or held as treasury stock. All of
the issued and outstanding shares of NSC Common Stock are duly and validly
issued, fully paid and nonassessable. Except as set forth on Exhibit 3.2 to the
Disclosure Schedule delivered by NSC to HEALTHSOUTH simultaneously with the
execution and delivery hereof (the "Disclosure Schedule") or otherwise disclosed
in the NSC Annual Report on Form 10-K for the fiscal year ended December 31,
1997 (the "NSC 10-K"), there are no options, warrants, convertible securities or
similar rights granted by NSC or any other agreements to which NSC is a party
providing for the issuance or sale by it of any additional securities which
would remain in effect after the Effective Time. There is no liability for
dividends declared or accumulated but unpaid
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with respect to any of the shares of NSC Common Stock. NSC has not made any
distributions to any holders of NSC Common Stock or participated in or effected
any issuance, exchange or retirement of shares of NSC Common Stock, or otherwise
changed the equity interests of holders of NSC Common Stock, in contemplation of
effecting the Merger within the two years immediately preceding the date of this
Plan of Merger. Any shares of NSC Common Stock that NSC has re-acquired during
the two years immediately preceding the date of this Plan of Merger have been so
re-acquired only for purposes other than "business combinations", as such term
is defined in Accounting Principles Board Opinion No. 16, as amended ("Business
Combinations").
3.3 Subsidiaries and Affiliated Partnerships. (a) Attached to the
Disclosure Schedule as Exhibit 3.3 is a list of all corporate subsidiaries of
NSC (individually, a "NSC Subsidiary", and collectively, the "NSC Subsidiaries")
and their states of incorporation. Except as set forth on Exhibit 3.3, NSC does
not own stock in and does not control, directly or indirectly, any other
corporation, association or business organization other than the NSC Other
Entities (as defined below).
(b) Also disclosed on Exhibit 3.3 is a list of all general or limited
partnerships in which a general partner is NSC, a NSC Subsidiary or another NSC
Partnership (individually, a "NSC Partnership" and collectively, the "NSC
Partnerships"), and all limited liability companies in which NSC, a NSC
Subsidiary or a NSC Partnership is a member (individually, a "NSC LLC" and
collectively, the "NSC LLCs") (the NSC Partnerships and the NSC LLCs being
collectively called the "NSC Other Entities"), and their states of organization.
Except as set forth on Exhibit 3.3, neither NSC nor any NSC Subsidiary owns an
equity interest in, nor does such entity control, directly or indirectly, any
other joint venture, limited liability company or partnership.
3.4 Organization, Existence and Good Standing of NSC Subsidiaries and NSC
Other Entities. (a) Each NSC Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its respective state of
incorporation, except where the failure to be in good standing would not have a
material adverse effect on NSC. Each NSC Subsidiary has all necessary corporate
power to own its properties and assets and to carry on its business as presently
conducted.
(b) Each NSC Partnership that is a limited partnership is validly formed,
each NSC Partnership that is a general partnership has been duly organized, and
each NSC Partnership is in good standing under the laws of its respective state
of organization, except where the failure to be in good standing would not have
a material adverse effect on NSC. Each NSC Partnership has all necessary power
to own its property and assets and to carry on its business as presently
conducted.
(c) Each NSC LLC is a limited liability company validly formed and in good
standing under the laws of its respective state of organization, except where
the failure to be in good standing would not have a material adverse effect on
NSC. Each NSC LLC has all necessary power to own its property and assets to
carry on its business as presently conducted.
3.5 Foreign Qualifications. NSC, each NSC Subsidiary and each NSC Other
Entity that is not a general partnership is qualified to do business as a
foreign corporation, foreign
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limited partnership or foreign limited liability company, as the case may be,
and is in good standing in each jurisdiction where the nature or character of
the property owned, leased or operated by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
so qualify or be in good standing would not have a material adverse effect on
NSC.
3.6 Power and Authority. Subject to the satisfaction of the conditions
precedent set forth herein, NSC has the corporate power to execute, deliver and
perform this Plan of Merger and all agreements and other documents executed and
delivered or to be executed and delivered by it pursuant to this Plan of Merger,
and, subject to the satisfaction of the conditions precedent set forth herein,
has taken all action required by its Certificate of Incorporation, Bylaws or
otherwise, to authorize the execution, delivery and performance of this Plan of
Merger and such related documents. Except as set forth on Exhibit 3.6 to the
Disclosure Schedule, the execution and delivery of this Plan of Merger does not
and, subject to the receipt of required stockholder and regulatory approvals and
any other required third-party consents or approvals, the consummation of the
Merger will not, violate any provisions of the Certificate of Incorporation of
NSC or any provisions of, or result in the acceleration of any obligation under,
any material mortgage, lien, lease, agreement, instrument, order, arbitration
award, judgment or decree, to which NSC or any NSC Subsidiary or NSC Other
Entity is a party, or by which it is bound, or violate any restrictions of any
kind to which it is subject which, if violated or accelerated, would have a
material adverse effect on NSC. The execution and delivery of this Plan of
Merger has been approved by the Board of Directors of NSC. This Plan of Merger
has been duly executed and delivered by NSC and, assuming this Plan of Merger
constitutes a valid and binding obligation of HEALTHSOUTH and the Subsidiary, as
the case may be, constitutes a valid and binding obligation of NSC, enforceable
against NSC in accordance with its terms.
3.7 NSC Public Information. NSC has heretofore furnished HEALTHSOUTH with
a true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by it with the Securities and Exchange
Commission (the "SEC") (as any such documents have since the time of their
original filing been amended, the "NSC Documents") since January 1, 1998, which
are all the documents (other than preliminary material) that it was required to
file with the SEC from such date through the date of this Plan of Merger. As of
their respective dates, the NSC Documents did not contain any untrue statements
of material facts or omit to state material facts required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of their respective dates, the NSC
Documents complied in all material respects with the applicable requirements of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated under such statutes. The
financial statements contained in the NSC Documents, together with the notes
thereto, have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods indicated (except as may
be indicated in the notes thereto, or, in the case of the unaudited financial
statements, as permitted by Form 10-Q), reflect all known liabilities of NSC
required to be stated therein, including all such known contingent liabilities
as of the end of each period reflected therein, and present fairly the financial
condition of NSC at said dates and the consolidated results of operations and
cash flows of NSC for the periods then ended. The
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consolidated balance sheet of NSC at December 31, 1997 included in the NSC
Documents is herein sometimes referred to as the "NSC Balance Sheet".
3.8 Legal Proceedings. Except as disclosed in the NSC Documents or on
Exhibit 3.9 to the Disclosure Schedule, so far as is known to NSC there is no
litigation, governmental investigation or other proceeding pending or threatened
against or relating to NSC, its properties or business, or the transaction
contemplated by this Plan of Merger other than litigation, governmental
investigations or other proceedings which would not individually or in the
aggregate, have a material adverse effect on NSC, and, so far as is known to
NSC, no basis for any such action exists which action would, individually or in
the aggregate, have a material adverse effect on NSC.
3.9 Contracts, etc. (a) All material contracts, leases, agreements and
arrangements to which NSC or any of the NSC Subsidiaries or NSC Other Entities
is a party are legally valid and binding in accordance with their terms and in
full force and effect (assuming such contracts, leases and arrangements are
enforceable against the other parties to such contracts, leases, agreements and
arrangements), and to the knowledge of NSC, no party is in default thereunder,
and no event has occurred which, but for the passage of time or the giving of
notice or both, would constitute a default thereunder, except, in each case,
where the invalidity of the lease, contract, agreement or arrangement or the
default or breach thereunder or thereof would not, individually or in the
aggregate, have a material adverse effect on NSC.
(b) Except as set forth on Exhibit 3.9(b) to the Disclosure Schedule, no
contract or agreement to which NSC or any NSC Subsidiary or NSC Other Entity is
a party will, by its terms, terminate as a result of the transactions
contemplated hereby or require any consent from any obligor thereto in order to
remain in full force and effect immediately after the Effective Time, except for
contracts or agreements which, if terminated, would not have a material adverse
effect on NSC.
(c) Except as set forth on Exhibit 3.9(c) to the Disclosure Schedule, none
of NSC, any NSC Subsidiary or any NSC Other Entity has granted any right of
first refusal or similar right in favor of any third party with respect to any
material portion of its properties or assets or entered into any non-competition
agreement or similar agreement restricting its ability to engage in any business
in any location.
3.10 Subsequent Events. Except as set forth on Exhibit 3.10 to the
Disclosure Schedule or disclosed in the NSC Documents, NSC has not, since the
date of the NSC 10-K:
(a) Incurred any material adverse change.
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on
the NSC Balance Sheet or (ii) liabilities incurred since the date of the
last-filed NSC Document in the ordinary course of business, which discharge
or satisfaction would have a material adverse effect on NSC.
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(c) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor which would have a
material adverse effect on NSC, except as may have been required due to
consolidated income or operations of NSC since the date of the NSC 10-K.
(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the assets, tangible or intangible, which assets are
material to the consolidated business or financial condition of NSC.
(e) Sold or transferred any of the assets material to the consolidated
business of NSC, canceled any material debts or claims or waived any
material rights, except in the ordinary course of business.
(f) Granted any general or uniform increase in the rates of pay of
employees or any material increase in salary payable or to become payable
by NSC to any officer or employee, consultant or agent (other than normal
merit increases), or by means of any bonus or pension plan, contract or
other commitment, increased in a material respect the compensation of any
officer, employee, consultant or agent.
(g) Except for this Plan of Merger and any other agreement executed
and delivered pursuant to this Plan of Merger, entered into any material
transaction other than in the ordinary course of business or permitted
under other Sections hereof.
(h) Issued any stock, bonds or other securities, other than stock
options granted to employees, directors or consultants of NSC or warrants
granted to third parties, all of which are disclosed on Exhibit 3.2 to the
Disclosure Schedule or reflected in the NSC Documents.
3.11 Accounts Receivable. (a) Since the date of the NSC 10-K, NSC has
not changed any material principle or practice with respect to the recordation
of accounts receivable or the calculation of reserves therefor, or any material
collection, discount or write-off policy or procedure. NSC (including the NSC
Subsidiaries and NSC Other Entities) is in compliance with the terms and
conditions of all third-party payor arrangements relating to its accounts
receivable, except to the extent that such noncompliance would not have a
material adverse effect on NSC.
(b) Without limiting the generality of the foregoing, each of NSC and the
NSC Subsidiaries and the NSC Other Entities is in compliance with all Medicare
and Medicaid provider agreements to which it is a party, except to the extent
that such noncompliance would not have a material adverse effect on NSC.
3.12 Tax Returns. NSC has filed all tax returns required to be filed by
it or requests for extensions to file such returns or reports have been timely
filed and granted and have not expired, except to the extent that such failures
to file, taken together, do not have a material adverse effect on NSC. NSC has
made all payments shown as due on such returns, except to the extent that the
11
failure to make such payments would not have material adverse effect on NSC.
Except as set forth on Exhibit 3.12 to the Disclosure Schedule, NSC has not been
notified that any tax returns of NSC are currently under audit by the Internal
Revenue Service or any state or local tax agency, except for local tax audits
that in the aggregate are not material. No agreements have been made by NSC for
the extension of time or the waiver of the statute of limitations for the
assessment or payment of any federal, state or local taxes.
3.13 Commissions and Fees. Except as set forth in Exhibit 3.13 to the
Disclosure Schedule, there are no valid claims for brokerage commissions or
finder's or similar fees in connection with the transactions contemplated by
this Plan of Merger which may be now or hereafter asserted against HEALTHSOUTH
resulting from any action taken by NSC or its stockholders, officers or
Directors, or any of them.
3.14 Employee Benefit Plans; Employment Matters. (a) Except as described
in the NSC Documents or set forth on Exhibit 3.14(a) to the Disclosure Schedule,
NSC has neither established nor maintains nor is obligated to make contributions
to or under or otherwise participate in (a) any bonus or other type of incentive
compensation plan, program, agreement, policy, commitment, contract or
arrangement (whether or not set forth in a written document), (b) any pension,
profit-sharing, retirement or other plan, program or arrangement, or (c) any
other employee benefit plan, fund or program, including, but not limited to,
those described in Section 3(3) of ERISA. All such plans (individually, a
"Plan" and collectively, the "Plans") have been operated and administered in all
material respects in accordance with, as applicable, ERISA, the Internal Revenue
Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act
of 1967, as amended, and the related rules and regulations adopted by those
federal agencies responsible for the administration of such laws. No act or
failure to act by NSC has resulted in a "prohibited transaction" (as defined in
ERISA) with respect to the Plans that is not subject to a statutory or
regulatory exception. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Plans which is subject to Title IV of ERISA. NSC has
not previously made, is not currently making, and is not obligated in any way to
make, any contributions to any multi-employer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980.
(b) Except as described in the NSC Documents or set forth on Exhibit
3.14(b) to the Disclosure Schedule, NSC is not a party to any oral or written
(i) union, guild or collective bargaining agreement which agreement covers
employees in the United States (nor is it aware of any union organizing activity
currently being conducted in respect to any of its employees), (ii) agreement
with any executive officer or other key employee the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction of the nature contemplated by this Plan of Merger and which
provides for the payment of in excess of $50,000, or (iii) agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Plan of Merger or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Plan of Merger.
12
3.15 Compliance with Laws in General. Except as set forth on Exhibit 3.15
to the Disclosure Schedule or disclosed in the NSC Documents, NSC has not
received any notices of material violations of any federal, state and local
laws, regulations and ordinances relating to its business and operations,
including, without limitation, the Federal Environmental Protection Act, the
Occupational Safety and Health Act, the Americans with Disabilities Act, the
Medicare or applicable Medicaid statutes and regulations and any Environmental
Laws, and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by NSC which, if it were determined
that a violation had occurred, would have a material effect on NSC.
3.16 Licenses, Accreditation and Regulatory Approvals. Except as
disclosed in the NSC Documents or set forth on Exhibit 3.16 to the Disclosure
Schedule, NSC and the NSC Subsidiaries and NSC Other Entities hold all licenses,
permits, certificates of need and other regulatory approvals which are needed or
required by law with respect to their businesses, operations and facilities as
they are currently or presently conducted (collectively, the "Licenses"), except
where the failure to possess such Licenses does not have a material adverse
effect on NSC. All such Licenses are in full force and effect, and NSC is in
compliance with all conditions and requirements of the Licenses and with all
rules and regulations relating thereto, except for such noncompliance as does
not have a material adverse effect on NSC. NSC, the NSC Subsidiaries and the
NSC Other Entities are, to the extent applicable to their operations, (i)
eligible to receive payment under Titles XVIII and XIX of the Social Security
Act, (ii) providers under existing provider agreements with the Medicare program
through the applicable intermediaries and (iii) in compliance with the
conditions of participation in the Medicare program except where such inability
in the case of either items (i) or (ii) or noncompliance in item (iii) does not
have a material adverse effect on NSC. Except to the extent that the failure to
make or to timely make such filings would not have a material adverse effect on
NSC, NSC, the NSC Subsidiaries and the NSC Other Entities have timely filed all
requisite claims and other reports required to be filed in connection with the
Medicare, Medicaid and other governmental health programs due on or before the
date hereof, all of which were, when filed, complete and correct except to the
extent that such failure to be complete and correct would not have a material
adverse effect on NSC. There are no current claims, actions or appeals pending,
and neither NSC nor the NSC Subsidiaries nor the NSC Other Entities have filed
any claims or reports which would result in such claims, actions or appeals,
before any commission, board or agency, including, without limitation, any
intermediary or carrier, the Provider Reimbursement Review Board or the
Administrator of the Health Care Financing Administration with respect to any
Medicare claims, or any disallowances in connection with any audit of claims,
which in any such case would have a material adverse effect on NSC. The amounts
established as provisions for adjustments by Medicare, Medicaid and other third-
party payors on the financial statements set forth in the last-filed NSC
Document are sufficient to pay any material amounts for which NSC believes it
will be liable. To the knowledge of NSC, neither NSC nor the NSC Subsidiaries
nor the NSC Other Entities nor their respective employees have committed a
violation of the Medicare and Medicaid fraud and abuse provisions of the Social
Security Act, which violation would have a material adverse effect on NSC. Any
and all past litigation concerning such Licenses and all claims and causes of
action raised therein, has been finally adjudicated. No such License has been
revoked, conditioned (except as may be customary) or restricted, and no action
13
(equitable, legal or administrative), arbitration or other process is pending,
or to the knowledge of NSC, threatened, which in any way challenges the validity
of, or seeks to revoke, condition or restrict any such License where such
invalidity, revocation, condition or restriction would have a material adverse
effect on NSC. Subject to compliance with applicable securities laws, the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and
state or local statutes, rules or regulations requiring notice, approval, or
other action upon the occurrence of a change in control of NSC or any of the NSC
Subsidiaries or NSC Other Entities, the consummation of the Merger will not
violate any law or regulation to which NSC is subject which, if violated, would
have a material adverse effect on NSC.
3.17 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock. NSC is not
a party to any agreement the effect of which would be to require HEALTHSOUTH
directly or indirectly to retire or re-acquire all or part of the shares of
HEALTHSOUTH Common Stock issued pursuant to Section 2.1 hereof.
3.18 Disposition of Assets of Surviving Corporation. NSC is not a party
to any plan to dispose of a significant part of the assets of the Surviving
Corporation within two years after the Closing Date, other than dispositions in
the ordinary course of business of the Surviving Corporation and dispositions
intended to eliminate duplicate facilities or excess capacity.
3.19 Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of the NSC Common Stock entitled to vote thereon is the
only vote of the holders of any class or series of NSC capital stock necessary
to approve this Plan of Merger, the Merger and the transactions contemplated
hereby.
3.20 Opinion of Financial Advisor. The Board of Directors of NSC has
received the oral opinion of BT Alex. ▇▇▇▇▇ Incorporated to the effect that, as
of the date of this Plan of Merger, the consideration to be received by the
holders of NSC Common Stock is fair to such holders from a financial point of
view, a written copy of which opinion will be delivered by NSC to HEALTHSOUTH
prior to the date on which the definitive proxy materials for the Proxy
Statement (as defined in Section 7.4(a)) are filed with the SEC.
Section 4. Representations and Warranties of the Subsidiary and HEALTHSOUTH.
The Subsidiary and HEALTHSOUTH, jointly and severally, hereby represent and
warrant to NSC as follows:
4.1 Organization, Existence and Capital Stock. The Subsidiary is a
corporation duly organized and validly existing and is in good standing under
the laws of the State of Delaware. The Subsidiary's authorized capital consists
of 1,000 shares of Common Stock, par value $.01 per share, all of which shares
are issued and registered in the name of HEALTHSOUTH. The Subsidiary has not,
within the two years immediately preceding the date of this Plan of Merger,
owned, directly or indirectly, any shares of NSC Common Stock. The Subsidiary
has (i) not engaged directly or indirectly in any business or activities of any
type or kind whatsoever nor entered into any agreements or arrangements with any
person or entity, or become subject to or bound by any obligation or undertaking
which is not contemplated by this Agreement and (ii) not
14
created, granted or suffered to exist any lien upon its properties or assets
which would attach to any properties or assets of HEALTHSOUTH or the Surviving
Corporation after the Effective Time.
4.2 Power and Authority. The Subsidiary has corporate power to execute,
deliver and perform this Plan of Merger and all agreements and other documents
executed and delivered, or to be executed and delivered, by it pursuant to this
Plan of Merger, and, subject to the satisfaction of the conditions precedent set
forth herein, has taken all actions required by law, its Certificate of
Incorporation, its Bylaws or otherwise, to authorize the execution and delivery
of this Plan of Merger and such related documents. The execution and delivery
of this Plan of Merger does not and, subject to the receipt of required
stockholder and regulatory approvals and any other required third-party consents
or approvals, the consummation of the Merger contemplated hereby will not,
violate any provisions of the Certificate of Incorporation or Bylaws of the
Subsidiary, or any agreement, instrument, order, judgment or decree to which the
Subsidiary is a party or by which it is bound, violate any restrictions of any
kind to which the Subsidiary is subject, or result in the creation of any lien,
charge or encumbrance upon any of the property or assets of the Subsidiary.
4.3 No Subsidiaries. The Subsidiary does not own stock in, and does not
control directly or indirectly, any other corporation, association or business
organization. The Subsidiary is not a party to any joint venture or
partnership.
4.4 Legal Proceedings. There are no actions, suits or proceedings pending
or threatened against the Subsidiary, at law or in equity, relating to or
affecting the Subsidiary, including the Merger. The Subsidiary does not know or
have any reasonable grounds to know of any justification for any such action,
suit or proceeding.
4.5 No Contracts or Liabilities. Other than the obligations created under
this Plan of Merger, the Subsidiary is not obligated under any contracts,
claims, leases, liabilities (contingent or otherwise), loans or otherwise.
Section 5. Representations and Warranties of HEALTHSOUTH.
HEALTHSOUTH hereby represents and warrants to NSC as follows:
5.1 Organization, Existence and Good Standing. HEALTHSOUTH is a
corporation duly organized and validly existing and is in good standing under
the laws of the State of Delaware. HEALTHSOUTH has all necessary corporate
power to own its properties and assets and to carry on its business as presently
conducted. HEALTHSOUTH is duly qualified to do business and is in good standing
in all jurisdictions in which the character of the property owned, leased or
operated or the nature of the business transacted by it makes qualification
necessary. HEALTHSOUTH is not, and has not been within the two years
immediately preceding the date of this Plan of Merger, a subsidiary or division
of another corporation, nor has HEALTHSOUTH within such time owned, directly or
indirectly, any shares of NSC Common Stock.
15
5.2 Power and Authority. HEALTHSOUTH has corporate power to execute,
deliver and perform this Plan of Merger and all agreements and other documents
executed and delivered, or to be executed and delivered, by it pursuant to this
Plan of Merger, and, subject to the satisfaction of the conditions precedent set
forth herein has taken all actions required by law, its Certificate of
Incorporation, its Bylaws or otherwise, to authorize the execution and delivery
of this Plan of Merger and such related documents. The execution and delivery
of this Plan of Merger does not and, subject to the receipt of required
regulatory approvals and any other required third-party consents or approvals,
the consummation of the Merger contemplated hereby will not, violate any
provisions of the Certificate of Incorporation or Bylaws of HEALTHSOUTH, or any
provision of, or result in the acceleration of any obligation under, any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which HEALTHSOUTH is a party or by which it is bound, or violate
any restrictions of any kind to which HEALTHSOUTH is subject. The execution and
delivery of this Plan of Merger has been approved by the Board of Directors of
HEALTHSOUTH. This Plan of Merger has been duly executed and delivered by
HEALTHSOUTH and the Subsidiary and, assuming this Plan of Merger constitutes a
valid and binding obligation of NSC, constitutes a valid and binding obligation
of HEALTHSOUTH and the Subsidiary, enforceable against HEALTHSOUTH and the
Subsidiary in accordance with its terms. No vote of the holders of any class or
series of HEALTHSOUTH capital stock is necessary to approve this Plan of Merger,
the Merger and the transactions contemplated hereby.
5.3 HEALTHSOUTH Common Stock. On the Closing Date, HEALTHSOUTH will have
a sufficient number of authorized but unissued and/or treasury shares of its
Common Stock available for issuance to the holders of NSC Common Stock in
accordance with the provisions of this Plan of Merger. The HEALTHSOUTH Common
Stock to be issued pursuant to this Plan of Merger will, when so delivered, be
(i) duly and validly issued, fully paid and nonassessable, (ii) issued pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, and (iii) authorized for listing on the New York Stock Exchange, Inc.
(the "Exchange") upon official notice of issuance.
5.4 Capitalization. HEALTHSOUTH's authorized capital stock consists of
1,500,000 shares of Preferred Stock, par value $.10 per share, of which no
shares are issued and outstanding, and no shares are held in treasury, and
500,000,000 shares of Common Stock, par value $.01 per share, of which
399,952,852 shares were issued and outstanding as of March 30, 1998, and 186,000
shares are held in treasury. All of the issued and outstanding shares of
HEALTHSOUTH Common Stock have been duly and validly issued and are fully paid
and non-assessable. Except as disclosed in the HEALTHSOUTH Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, as amended (the
"HEALTHSOUTH 10-K"), there are no options, warrants, convertible debentures or
similar rights granted by HEALTHSOUTH or any other agreements to which
HEALTHSOUTH is a party providing for the issuance or sale by it of any
additional securities, other than stock options granted in the ordinary course
since such date, up to 8,579,627 shares of HEALTHSOUTH Common Stock to be issued
pursuant to a Plan and Agreement of Merger, as amended between HEALTHSOUTH,
▇▇▇▇▇▇▇▇ Acquisition Corporation and The Company Doctor, and HEALTHSOUTH's
$567,750,000 principal amount of 3.25% Convertible Subordinated Debentures due
2003. There is no liability for dividends declared or accumulated but unpaid
with respect to any shares of HEALTHSOUTH Common Stock. HEALTHSOUTH has not made
any distributions to any holder of HEALTHSOUTH Common Stock or participated in
or
16
effected any issuance, exchange or retirement of HEALTHSOUTH Common Stock, or
otherwise changed the equity interests of holders of HEALTHSOUTH Common Stock,
in contemplation of effecting the Merger within the two years immediately
preceding the date of this Plan of Merger. Any shares of HEALTHSOUTH Common
Stock that HEALTHSOUTH has re-acquired during the two years immediately
preceding the date of this Plan of Merger have been so re-acquired only for
purposes other than Business Combinations.
5.5 Subsidiary Common Stock. HEALTHSOUTH owns, beneficially and of
record, all of the issued and outstanding shares of Subsidiary Common Stock,
which are validly issued and outstanding, fully paid and nonassessable, free and
clear of all liens and encumbrances. HEALTHSOUTH has the corporate power to
endorse and surrender such Subsidiary Shares for cancellation pursuant to this
Plan of Merger. HEALTHSOUTH has taken all such actions as may be required in
its capacity as the sole stockholder of the Subsidiary to approve the Merger.
5.6 HEALTHSOUTH Documents. HEALTHSOUTH has heretofore furnished NSC with
a true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by it with the SEC (as any such documents have
since the time of their original filing been amended, the "HEALTHSOUTH
Documents") since January 1, 1998, which are all the documents (other than
preliminary material) that it was required to file with the SEC since such date.
As of their respective dates, the HEALTHSOUTH Documents did not contain any
untrue statements of material facts or omit to state material facts required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their
respective dates, the HEALTHSOUTH Documents complied in all material respects
with the applicable requirements of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated under such statutes. The financial statements contained in the
HEALTHSOUTH Documents, together with the notes thereto, have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods indicated (except as may be indicated in the notes
thereto, or, in the case of the unaudited financial statements, as permitted by
Form 10-Q), reflect all known liabilities of HEALTHSOUTH required to be stated
therein, including all known contingent liabilities as of the end of each period
reflected therein, and present fairly the financial condition of HEALTHSOUTH at
said dates and the consolidated results of operations and cash flows of
HEALTHSOUTH for the periods then ended.
5.7 Investment Intent. HEALTHSOUTH is acquiring the shares of NSC Common
Stock hereunder for its own account and not with a view to the distribution or
sale thereof, and HEALTHSOUTH has no understanding, agreement or arrangement to
sell, distribute, partition or otherwise transfer or assign all or any part of
the shares of NSC Common Stock to any other person, firm or corporation.
5.8 Legal Proceedings. Except as disclosed in the HEALTHSOUTH Documents,
there is no material litigation, governmental investigation or other proceeding
pending or, so far as is known to HEALTHSOUTH, threatened against or relating to
HEALTHSOUTH, its properties or business, or the transaction contemplated by this
Plan of Merger and, so far as is known to HEALTHSOUTH, no basis for any such
action exists.
17
5.9 Compliance with Laws in General. Except as disclosed in the
HEALTHSOUTH Documents, HEALTHSOUTH has not received any notices of material
violations of any federal, state and local laws, regulations and ordinances
relating to its business and operations, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act, the Medicare or applicable Medicaid
statutes and regulations and any Environmental Laws, and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by HEALTHSOUTH which, if it were determined that a violation had
occurred, would have a material effect on HEALTHSOUTH.
5.10 Licenses, Accreditation and Regulatory Approvals. Except as
disclosed in the HEALTHSOUTH Documents, HEALTHSOUTH and its subsidiaries (the
"HEALTHSOUTH Subsidiaries") and controlled general or limited partnerships and
limited liability companies (the "HEALTHSOUTH Other Entities") hold all Licenses
which are needed or required by law with respect to their businesses, operations
and facilities as they are currently or presently conducted, except where the
failure to possess such Licenses does not have a material adverse effect on
HEALTHSOUTH. All such Licenses are in full force and effect, and HEALTHSOUTH is
in compliance with all conditions and requirements of the Licenses and with all
rules and regulations relating thereto, except for such noncompliance as does
not have a material adverse effect on HEALTHSOUTH. HEALTHSOUTH, the HEALTHSOUTH
Subsidiaries and the HEALTHSOUTH Other Entities are, to the extent applicable to
their operations, (i) eligible to receive payment under Titles XVIII and XIX of
the Social Security Act, (ii) providers under existing provider agreements with
the Medicare program through the applicable intermediaries and (iii) in
compliance with the conditions of participation in the Medicare program except
where such inability in the case of either items (i) or (ii) or noncompliance in
item (iii) does not have a material adverse effect on HEALTHSOUTH. Except to
the extent that the failure to make or to timely make such filings would not
have a material adverse effect on HEALTHSOUTH, HEALTHSOUTH, the HEALTHSOUTH
Subsidiaries and the HEALTHSOUTH Other Entities have timely filed all requisite
claims and other reports required to be filed in connection with the Medicare,
Medicaid and other governmental health programs due on or before the date
hereof, all of which were, when filed, complete and correct except to the extent
that such failure to be complete and correct would not have a material adverse
effect on HEALTHSOUTH. There are no current claims, actions or appeals pending,
and neither HEALTHSOUTH nor the HEALTHSOUTH Subsidiaries nor the HEALTHSOUTH
Other Entities have filed any claims or reports which would result in such
claims, actions or appeals, before any commission, board or agency, including,
without limitation, any intermediary or carrier, the Provider Reimbursement
Review Board or the Administrator of the Health Care Financing Administration
with respect to any Medicare claims, or any disallowances in connection with any
audit of claims, which in any such case would have a material adverse effect on
HEALTHSOUTH. The amounts established as provisions for adjustments by Medicare,
Medicaid and other third-party payors on the financial statements set forth in
the HEALTHSOUTH 10-K are sufficient to pay any material amounts for which
HEALTHSOUTH believes it will be liable. To the knowledge of HEALTHSOUTH,
neither HEALTHSOUTH nor the HEALTHSOUTH Subsidiaries nor the HEALTHSOUTH Other
Entities nor their respective employees have committed a violation of the
Medicare and Medicaid fraud and abuse provisions of the Social Security Act,
which
18
violation would have a material adverse effect on HEALTHSOUTH. Any and all past
litigation concerning such Licenses and all claims and causes of action raised
therein, has been finally adjudicated. No such License has been revoked,
conditioned (except as may be customary) or restricted, and no action
(equitable, legal or administrative), arbitration or other process is pending,
or to the knowledge of HEALTHSOUTH, threatened, which in any way challenges the
validity of, or seeks to revoke, condition or restrict any such License where
such invalidity, revocation, condition or restriction would have a material
adverse effect on HEALTHSOUTH. Subject to compliance with applicable securities
laws, the HSR Act and state or local statutes, rules or regulations requiring
notice, approval, or other action upon the occurrence of a change in control of
NSC or any of the NSC Subsidiaries or NSC Other Entities, the consummation of
the Merger will not violate any law or regulation to which HEALTHSOUTH is
subject which, if violated, would have a material adverse effect on HEALTHSOUTH.
5.11 Subsequent Events. Except as disclosed in the HEALTHSOUTH 10-K,
HEALTHSOUTH has not, since the date of the HEALTHSOUTH 10-K:
(a) Incurred any material adverse change.
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on
the December 31, 1997 Balance Sheet contained in the HEALTHSOUTH 10-K or
(ii) liabilities incurred since the date of the HEALTHSOUTH 10-K in the
ordinary course of business, which discharge or satisfaction would have a
material adverse effect on HEALTHSOUTH.
(c) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor which would have a
material adverse effect on HEALTHSOUTH, except as may have been required
due to income or operations of HEALTHSOUTH since December 31, 1997.
(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the assets, tangible or intangible, which assets are
material to the consolidated business or financial condition of
HEALTHSOUTH.
(e) Sold or transferred any of the assets material to the consolidated
business of HEALTHSOUTH, canceled any material debts or claims or waived
any material rights, except in the ordinary course of business.
(f) Granted any general or uniform increase in the rates of pay of
employees or any material increase in salary payable or to become payable
by HEALTHSOUTH to any officer or employee, consultant or agent (other than
normal merit increases), or by means of any bonus or pension plan, contract
or other commitment, increased in a material respect the compensation of
any officer, employee, consultant or agent.
19
(g) Except for this Plan of Merger and any other agreement executed
and delivered pursuant to this Plan of Merger, entered into any material
transaction other than in the ordinary course of business or permitted
under other Sections hereof.
(h) Issued any stock, bonds or other securities, other than stock
options granted to employees or consultants of HEALTHSOUTH or warrants
granted to third parties, all of which are described in the HEALTHSOUTH
Documents.
5.12 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock.
HEALTHSOUTH has not agreed directly or indirectly to retire or re-acquire all or
part of the shares of HEALTHSOUTH Common Stock issued pursuant to Section 2.1
hereof.
5.13 Disposition of Assets of Surviving Corporation. HEALTHSOUTH does not
intend or plan to dispose of, or to cause the Surviving Corporation to dispose
of, a significant part of the assets of the Surviving Corporation within two
years after the Effective Time, other than dispositions in the ordinary course
of business of the Surviving Corporation and dispositions intended to eliminate
duplicate facilities or excess capacity.
Section 6. Access to Information and Documents.
6.1 Access to Information. Between the date hereof and the Closing Date,
each of NSC and HEALTHSOUTH will give to the other party and its counsel,
accountants and other representatives full access to all the properties,
documents, contracts, personnel files and other records of such party and shall
furnish the other party with copies of such documents and with such information
with respect to the affairs of such party as the other party may from time to
time reasonably request. Each party will disclose and make available to the
other party and its representatives all books, contracts, accounts, personnel
records, letters of intent, papers, records, communications with regulatory
authorities and other documents relating to the business and operations of such
party. In addition, NSC shall make available to HEALTHSOUTH all such banking,
investment and financial information as shall be necessary to allow for the
efficient integration of NSC banking, investment and financial arrangements with
those of HEALTHSOUTH at the Effective Time.
6.2 Return of Records. If the transactions contemplated hereby are not
consummated and this Plan of Merger terminates, each party agrees to promptly
return all documents, contracts, records or properties of the other party and
all copies thereof furnished pursuant to this Section 6 or otherwise. All
information disclosed by any party or any affiliate or representative of any
party shall be deemed to be "Evaluation Material" under the terms of the
Confidentiality Agreements dated April 30, 1998, between NSC and HEALTHSOUTH and
May 1, 1998, between HEALTHSOUTH and NSC (the "Confidentiality Agreements").
6.3 Effect of Access. (a) Nothing contained in this Section 6 shall be
deemed to create any duty or responsibility on the part of either party to
investigate or evaluate the value, validity or enforceability of any contract,
lease or other asset included in the assets of the other party.
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(b) With respect to matters as to which any party has made express
representations or warranties herein, the parties shall be entitled to rely upon
such express representations and warranties irrespective of any investigations
made by such parties, except to the extent that such investigations result in
actual knowledge of the inaccuracy or falsehood of particular representations
and warranties.
Section 7. Covenants.
7.1 Preservation of Business. Prior to the Effective Time, NSC will use
its best efforts to preserve the business organization of NSC intact, to keep
available to HEALTHSOUTH and the Surviving Corporation the services of the
present employees of NSC, and to preserve for HEALTHSOUTH and the Surviving
Corporation the goodwill of the suppliers, customers and others having business
relations with NSC.
7.2 Material Transactions. Prior to the Effective Time, NSC will not
(other than as required pursuant to the terms of this Plan of Merger and the
related documents, and other than with respect to transactions for which binding
commitments have been entered into prior to the date hereof which are described
on Exhibit 7.2 to the Disclosure Schedule), without first obtaining the written
consent of HEALTHSOUTH:
(a) Encumber any asset or enter into any transaction or make any
contract or commitment relating to the properties, assets and business of
NSC, other than in the ordinary course of business or as otherwise
disclosed herein.
(b) Enter into any employment contract which is not terminable upon
notice of 30 days or less, at will, and without penalty to NSC except as
provided herein.
(c) Enter into any contract or agreement (i) which cannot be performed
within three months or less, or (ii) which involves the expenditure of over
$100,000.
(d) Issue or sell, or agree to issue or sell, any shares of capital
stock or other securities of NSC, except upon exercise of currently
outstanding stock options or warrants or pursuant to the NSC Employee Stock
Purchase Plan.
(e) Make any contribution, payment or distribution to the trustee
under any bonus, pension, profit-sharing or retirement plan or incur any
obligation to make any such payment or contribution which is not in
accordance with NSC's usual past practice, or establish or enter into any
other plan or contract or arrangement providing for bonuses, executive
incentive compensation, pensions, deferred compensation, retirement
payments, profit-sharing or the like, or terminate any Plan.
(f) Extend credit to anyone, except in the ordinary course of business
consistent with prior practices.
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(g) Guarantee the obligation of any person, firm or corporation,
except in the ordinary course of business consistent with prior practices.
(h) Amend its Certificate of Incorporation or Bylaws.
(i) Take any action of a character described in Section 3.10(b) to
3.10(h), inclusive.
7.3 Meeting of NSC Stockholders. (a) NSC will take all steps necessary
in accordance with its Certificate of Incorporation and Bylaws to call, give
notice of, convene and hold a meeting of its stockholders (the "Special
Meeting") as soon as practicable after the effectiveness of the Registration
Statement (as defined in Section 7.4 hereof), for the purpose of approving this
Plan of Merger and for such other purposes as may be necessary. Unless this
Plan of Merger shall have been validly terminated as provided herein, the Board
of Directors of NSC (subject to the exercise of its fiduciary duties under
applicable law) will (i) recommend to NSC stockholders the approval of this Plan
of Merger, the transactions contemplated hereby and any other matters to be
submitted to the stockholders in connection therewith, to the extent that such
approval is required by applicable law in order to consummate the Merger, and
(ii) use reasonable, good faith efforts to obtain the approval by NSC's
stockholders of this Plan of Merger and the transactions contemplated hereby.
(b) Nothing contained herein shall affect the right of NSC to take action
by written consent in lieu of meeting to the extent permitted by applicable law
and its Certificate of Incorporation and Bylaws.
7.4 Registration Statement. (a) HEALTHSOUTH shall prepare and file with
the SEC and any other applicable regulatory bodies, as soon as reasonably
practicable, a Registration Statement on Form S-4 with respect to the shares of
HEALTHSOUTH Common Stock to be issued in the Merger (the "Registration
Statement"), and will otherwise proceed promptly to satisfy the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), including Rule
145 thereunder. Such Registration Statement shall contain a proxy statement of
NSC (the "Proxy Statement") containing the information required by the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). HEALTHSOUTH
shall take all reasonable steps to cause the Registration Statement to be
declared effective and to maintain such effectiveness until all of the shares
covered thereby have been distributed. HEALTHSOUTH shall promptly amend or
supplement the Registration Statement to the extent necessary in order to make
the statements therein not misleading or to correct any misstatements which have
become false or misleading. HEALTHSOUTH shall use its reasonable, good faith
efforts to have the Registration Statement declared effective by the SEC under
the provisions of the Securities Act and the Exchange Act. HEALTHSOUTH shall
provide NSC with copies of all filings made pursuant to this Section 7.4 and
shall consult with NSC on responses to any comments made by the Staff of the SEC
with respect thereto.
(b) The information specifically designated as being supplied by NSC for
inclusion in the Registration Statement shall not, at the time the Registration
Statement is declared effective and at the time the Proxy Statement is first
mailed to holders of NSC Common Stock, contain
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any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information specifically designated as being
supplied by NSC for inclusion in the Proxy Statement shall not, at the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to holders of NSC Common Stock, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. If at any time prior to the Effective Time
any event or circumstance relating to NSC, or its officers or directors, should
be discovered by NSC which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, NSC shall
promptly inform HEALTHSOUTH. All documents, if any, that NSC is responsible for
filing with the SEC in connection with the transactions contemplated herein will
comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
(c) The information specifically designated as being supplied by
HEALTHSOUTH for inclusion in the Registration Statement shall not, at the time
the Registration Statement is declared effective and at the time the Proxy
Statement is first mailed to holders of NSC Common Stock, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. The information specifically designated as being supplied by
HEALTHSOUTH for inclusion in the Proxy Statement to be sent to the holders of
NSC Common Stock in connection with the Special Meeting shall not, at the date
the Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to holders of NSC Common Stock, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. If at any time prior
to the Effective Time any event or circumstance relating to HEALTHSOUTH or its
officers or directors, should be discovered by HEALTHSOUTH which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement, HEALTHSOUTH shall promptly inform NSC and shall promptly file such
amendment to the Registration Statement. All documents that HEALTHSOUTH is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
(d) Prior to the Closing Date, HEALTHSOUTH shall use its reasonable, good
faith efforts to cause the shares of HEALTHSOUTH Common Stock to be issued
pursuant to the Merger to be registered or qualified under all applicable
securities or Blue Sky laws of each of the states and territories of the United
States, and to take any other actions which may be necessary to enable the
Common Stock to be issued pursuant to the Merger to be distributed in each such
jurisdiction.
(e) Prior to the Closing Date, HEALTHSOUTH shall file an additional listing
application (the "Listing Application") with the Exchange relating to the shares
of
23
HEALTHSOUTH Common Stock to be issued in connection with the Merger, and shall
use its reasonable, good faith efforts to cause such shares of HEALTHSOUTH
Common Stock to be approved for listing on the Exchange, upon official notice of
issuance, prior to the Closing Date.
(f) NSC shall furnish all information to HEALTHSOUTH with respect to NSC
and the NSC Subsidiaries and NSC Other Entities as HEALTHSOUTH may reasonably
request for inclusion in the Registration Statement, the Proxy Statement and the
Listing Application, and shall otherwise cooperate with HEALTHSOUTH in the
preparation and filing of such documents.
7.5 Exemption from State Takeover Laws; NSC Rights. NSC shall take all
reasonable steps necessary to (a) exempt the Merger from the requirements of any
state takeover statute or other similar state law which would prevent or impede
the consummation of the transactions contemplated hereby, by action of NSC's
Board of Directors or otherwise, and (b) to redeem the outstanding preferred
share purchase rights (the "Rights") of NSC or otherwise cause the Merger to be
a transaction which does not trigger the detachment and distribution of the
Rights (otherwise than by issuing shares of NSC Common Stock or preferred stock
in exchange for the Rights).
7.6 HSR Act Compliance. HEALTHSOUTH and NSC shall promptly make their
respective filings, and shall thereafter use their reasonable, good faith
efforts to promptly make any required submissions, under the HSR Act with
respect to the Merger and the transactions contemplated hereby. HEALTHSOUTH and
NSC will use their respective reasonable, good faith efforts to obtain all other
permits, authorizations, consents and approvals from third parties and
governmental authorities necessary to consummate the Merger and the transactions
contemplated hereby.
7.7 Public Disclosures. HEALTHSOUTH and NSC will consult with each other
before issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Plan of Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation except as may be required by applicable law or requirements of the
Exchange or Nasdaq, as applicable. The parties shall issue a joint press
release, mutually acceptable to HEALTHSOUTH and NSC, promptly upon execution and
delivery of this Plan of Merger.
7.8 Resignation of NSC Directors. On or prior to the Closing Date, NSC
shall deliver to HEALTHSOUTH evidence satisfactory to HEALTHSOUTH of the
resignation of the Directors of NSC, such resignations to be effective on the
Closing Date.
7.9 Notice of Subsequent Events. Each party hereto shall notify the other
parties of any changes, additions or events which would cause any material
change in or material addition to any Exhibit to the Disclosure Schedule
delivered by the notifying party under this Plan of Merger, promptly after the
occurrence of the same. If the effect of such change or addition would,
individually or in the aggregate with the effect of changes or additions
previously disclosed pursuant to this Section 7.9, constitute a material adverse
effect on the notifying party, the non-notifying party may, within ten days
after receipt of such notice, elect to terminate this
24
Plan of Merger. If the non-notifying party does not give written notice of such
termination within such 10-day period, the non-notifying party shall be deemed
to have consented to such change or addition and shall not be entitled to
terminate this Plan of Merger by reason thereof.
7.10 No Solicitations. (a) Subject to the provisions of Section 7.10(b)
below, NSC shall not, and shall not suffer any of the NSC Subsidiaries or the
NSC Other Entities or any of their respective directors, officers, employees,
agents or representatives to, directly or indirectly (i) solicit or initiate
(including by way of furnishing or publishing nonpublic information) any
inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination involving NSC or the acquisition of
all or any significant part, including by way of merger, acquisition or other
business combination, of the assets or capital stock or other equity interests
of NSC or of any NSC Subsidiaries or NSC Other Entities which, individually or
in the aggregate constitute a significant part of the consolidated assets of NSC
or any similar transaction (an "Acquisition Transaction"), (ii) negotiate,
explore or otherwise engage in discussions with any persons (other than
HEALTHSOUTH and its representatives) with respect to any Acquisition Transaction
or which may reasonably be expected to lead to a proposal for an Acquisition
Transaction or (iii) enter into any agreement, arrangement or understanding with
respect to any such Acquisition Transaction or which would require NSC to
abandon, terminate or fail to consummate the Merger or any other transaction
contemplated by this Plan of Merger. Except as may be required by the fiduciary
duties of NSC's Board of Directors under applicable law, NSC agrees that, as of
the date hereof, NSC and the NSC Subsidiaries and the NSC Other Entities and
their respective directors, officers, employees, agents and representatives
shall immediately cease and cause to be terminated any existing activities,
discussions or negotiations conducted heretofore with respect to any Acquisition
Transaction.
(b) Notwithstanding the provisions of Section 7.10(a) above, NSC may (i),
directly or indirectly, furnish information and access, in response to an
unsolicited written proposal for an Acquisition Transaction, to the same extent
permitted by Section 6.1, to any corporation, partnership, person or other
entity or group (in each case, a "person"), pursuant to appropriate
confidentiality agreements, and may participate in discussions and negotiate
with such corporation, partnership, person or other entity or group concerning
any proposal for an Acquisition Transaction, if the Board of Directors of NSC
determines in its good faith judgment in the exercise of its fiduciary duties,
after consultation with legal counsel and its financial advisors, that such
action is appropriate in furtherance of the best interest of its stockholders
and (ii) comply with Rule 14e-2 promulgated under the Exchange Act with regard
to an Acquisition Transaction. NSC shall promptly advise HEALTHSOUTH of the
existence of any inquiries or proposals received by, any requests for such
information from, or any negotiations or discussions initiated or continued
with, NSC or any of the NSC Subsidiaries or the NSC Other Entities or any of
their respective directors, officers, employees, agents or representatives, in
each case from or by a person (other than HEALTHSOUTH and its representatives)
with respect to an Acquisition Transaction and the identity of such person and,
except as may otherwise be required pursuant to the fiduciary duties of NSC's
Board of Directors under applicable law, the terms, the proposed form of
consideration and the general terms of any financing arrangement or commitment
in connection with such Acquisition Transaction.
25
7.11 Other Actions. Subject to the provisions of Sections 7.3 and 7.10
hereof, none of NSC, HEALTHSOUTH and the Subsidiary shall knowingly or
intentionally take any action, or omit to take any action, if such action or
omission would, or reasonably might be expected to, result in any of its
representations and warranties set forth herein being or becoming untrue in any
material respect, or in any of the conditions to the Merger set forth in this
Plan of Merger not being satisfied, or (unless such action is required by
applicable law) which would materially adversely affect the ability of NSC or
HEALTHSOUTH to obtain any consents or approvals required for the consummation of
the Merger without imposition of a condition or restriction which would have a
material adverse effect on the Surviving Corporation or which would otherwise
materially impair the ability of NSC or HEALTHSOUTH to consummate the Merger in
accordance with the terms of this Plan of Merger or materially delay such
consummation.
7.12 Accounting Methods. Neither HEALTHSOUTH nor NSC shall change, in any
material respect, its methods of accounting in effect at its most recent fiscal
year end, except as required by changes in generally accepted accounting
principles as concurred in any such parties' independent accountants.
7.13 Pooling and Tax-Free Reorganization Treatment. Neither HEALTHSOUTH
nor NSC shall intentionally take or cause to be taken any action, whether on or
before the Effective Time, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a "reorganization" within the meaning
of Section 368(a) of the Code.
7.14 Affiliate and Pooling Agreements. NSC will use its reasonable, good
faith efforts to cause each of its Directors and executive officers and each of
its "affiliates" (within the meaning of Rule 145 under the Securities Act of
1933) to execute and deliver to HEALTHSOUTH as soon as practicable an agreement
in the form attached hereto as Exhibit 7.14 relating to the disposition of
shares of NSC Common Stock and shares of HEALTHSOUTH Common Stock held by such
person and the shares of HEALTHSOUTH Common Stock issuable pursuant to this Plan
of Merger.
7.15 Cooperation. (a) HEALTHSOUTH and NSC shall together, or pursuant to
an allocation of responsibility agreed to between them, (i) cooperate with one
another in determining whether any filings are required to be made or consents
are required to be obtained in any jurisdiction prior to the Effective Time in
connection with the consummation of the transactions contemplated hereby and
cooperate in making any such filings promptly and in seeking to obtain timely
any such consents, (ii) use their respective best efforts to cause to be lifted
any injunction prohibiting the Merger, or any part thereof, or the other
transactions contemplated hereby, and (iii) furnish to one another and to one
another's counsel all such information as may be required to effect the
foregoing actions.
(b) Subject to the terms and conditions herein provided, and unless this
Plan of Merger shall have been validly terminated as provided herein, each of
HEALTHSOUTH and NSC shall use all reasonable efforts (i) to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on such party (or any subsidiaries or affiliates of such
party) with respect to this Plan of Merger and to consummate the
26
transactions contemplated hereby, subject to the vote of NSC's stockholders
described above, and (ii) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any governmental entity and/or any other public or private third party which is
required to be obtained or made by such party or any of its subsidiaries or
affiliates in connection with this Plan of Merger and the transactions
contemplated hereby. Each of HEALTHSOUTH and NSC will promptly cooperate with
and furnish information to the other in connection with any such burden suffered
by, or requirement imposed upon, either of them or any of their subsidiaries or
affiliates in connection with the foregoing.
7.16 NSC Stock Options and Warrants. (a) As soon as reasonably
practicable after the Effective Time of the Merger, HEALTHSOUTH shall deliver to
the holders of NSC stock options and warrants appropriate notices setting forth
such holders' rights pursuant to any stock option plans under which such NSC
stock options were issued and any stock option agreements or warrant agreements
evidencing such options or warrants, which shall continue in full force and
effect on the same terms and conditions (subject to the adjustments required by
Section 2.1(d) or this Section 7.16 after giving effect to the Merger and the
assumption of such options and warrants by HEALTHSOUTH as set forth herein) as
in effect immediately prior to the Effective Time. HEALTHSOUTH shall comply
with the terms of the stock option plans, the stock option agreements and the
warrant agreements as so adjusted, and shall use its reasonable, good faith
efforts to ensure, to the extent required by, and subject to the provisions of,
such plans or agreements, that the NSC stock options which qualified as
incentive stock options prior to the Effective Time shall continue to qualify as
incentive stock options after the Effective Time.
(b) HEALTHSOUTH shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of HEALTHSOUTH Common Stock for delivery
upon exercise of the NSC stock options and warrants assumed by HEALTHSOUTH in
accordance with Section 2.1(d). As soon as practicable after the Effective
Time, HEALTHSOUTH shall file with the SEC a registration statement on Form S-8
with respect to shares of HEALTHSOUTH Common Stock subject to such NSC stock
options and shall use its best efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such NSC stock options remain
outstanding. HEALTHSOUTH shall administer the plans assumed pursuant to Section
2.1(d) hereof in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent the applicable plan complied with such rule prior to
the Merger.
(c) Except to the extent otherwise agreed to by the parties, all
restrictions or limitations on transfer with respect to the NSC stock options
awarded under any plan, program, or arrangement of NSC or any of its
subsidiaries, to the extent that such restrictions or limitations shall not have
already lapsed, shall remain in full force and effect with respect to such
options after giving effect to the Merger and the assumption by HEALTHSOUTH as
set forth above.
7.17 Publication of Combined Results. HEALTHSOUTH agrees that within 25
days after the end of the first calendar month following at least 30 days after
the Effective Time, HEALTHSOUTH shall cause publication of the combined results
of operations of
27
HEALTHSOUTH and NSC. For purposes of this Section 7.17, the term "publication"
shall have the meaning provided in SEC Accounting Series Release No. 135.
7.18 NSC Employees. HEALTHSOUTH shall retain all employees of NSC who are
employed at the Effective Time as employees-at-will (except to the extent that
such employees are parties to contracts providing for other employment terms, in
which case such employees shall be retained in accordance with the terms of such
contracts) and shall provide such employees with the same customary employee
benefits as HEALTHSOUTH provides its existing employees. HEALTHSOUTH shall give
employees of NSC credit for their respective periods of employment with NSC
prior to the Effective Time for purposes of determining their eligibility for
and level of participation in any employee benefit program, plan or arrangement
which the Surviving Corporation adopts, maintains or contributes to following
the Effective Time. In addition, HEALTHSOUTH agrees that it will execute and
deliver on the Closing Date agreements with the employees designated on Exhibit
7.18 to the Disclosure Schedule providing the benefits set forth on such Exhibit
7.18 to those employees.
7.19 Certain Information. For as long as any affiliate (as defined for
purposes of Rule 145 under the Securities Act) of NSC holds shares of
HEALTHSOUTH Common Stock issued in the Merger (but not for a period in excess of
two years from the date of consummation of the Merger), HEALTHSOUTH shall file
with the SEC or otherwise make publicly available all information about
HEALTHSOUTH required pursuant to Rule 144(c) under the Securities Act of 1933 to
enable such affiliate to resell such shares under the provisions of Rule 145(d)
under the Securities Act of 1933.
7.20 Tax Treatment. HEALTHSOUTH and NSC agree to treat the Merger as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code. During the period from the date of this Agreement through the
Effective Time, unless the parties shall otherwise agree in writing, none of
HEALTHSOUTH, NSC or any of their respective Subsidiaries shall knowingly take or
fail to take any action which action or failure to act would jeopardize
qualification of the Merger as a reorganization under such provisions of the
Code.
7.21 Conduct of Business of the Subsidiary Pending the Merger. Prior to
the Effective Time and subject to any applicable regulatory approvals,
HEALTHSOUTH shall cause the Subsidiary to (i) perform its obligations under this
Agreement in accordance with the terms hereof and take all other actions
necessary or appropriate for the consummation of the transactions contemplated
hereby, (ii) not incur, directly or indirectly, any liabilities or obligations
except those incurred in connection with the performance of its obligations
under this Agreement and the consummation of the transactions contemplated
hereby, (iii) not engage directly or indirectly in any business or activities of
any type or kind whatsoever and not enter into any agreements or arrangements
with any person or entity, or be subject to or be bound by any obligation or
undertaking which is not contemplated by this Agreement, and (iv) not create,
grant or suffer to exist any lien upon its properties or assets which would
attach to any properties or assets of HEALTHSOUTH or the Surviving Corporation
after the Effective Time.
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7.22 Consulting and Noncompetition Agreements. HEALTHSOUTH and each of
E. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ will
execute and deliver prior to the Closing Date Consulting and Noncompetition
Agreements in the respective forms set forth on Exhibit 7.22 to the Disclosure
Schedule.
Section 8. Termination, Amendment and Waiver.
8.1 Termination. This Plan of Merger may be terminated at any time prior
to the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the holders of shares of NSC Common Stock:
(a) by mutual written consent of HEALTHSOUTH and NSC;
(b) by either HEALTHSOUTH or NSC:
(i) if, upon a vote at a duly held meeting of stockholders or any
adjournment thereof, any required approval of the holders of shares of
NSC Common Stock shall not have been obtained;
(ii) if the Merger shall not have been consummated on or before
November 30, 1998, unless the failure to consummate the Merger is the
result of a willful and material breach of this Plan of Merger by the
party seeking to terminate this Plan of Merger; provided, however,
that the passage of such period shall be tolled for any part thereof
(but not exceeding 60 days in the aggregate) during which any party
shall be subject to a nonfinal order, decree, ruling or action
restraining, enjoining or otherwise prohibiting the consummation of
the Merger or the calling or holding of a meeting of stockholders;
(iii) if any court of competent jurisdiction or other
governmental entity shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibited the Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in
this Plan of Merger which (A) would give rise to the failure of a
condition set forth in Section 9.2(a) or (b) or Section 9.3(a) or (b),
as applicable, and (B) cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such
breach (a "Material Breach") (provided that the terminating party is
not then in Material Breach of any representation, warranty, covenant
or other agreement contained in this Plan of Merger); or
29
(v) if either HEALTHSOUTH or NSC gives notice of termination as a
non-notifying party pursuant to Section 7.9;
(c) By either HEALTHSOUTH or NSC in the event that (i) all of the
conditions to the obligation of such party to effect the Merger set forth
in Section 9.1 shall have been satisfied and (ii) any condition to the
obligation of such party to effect the Merger set forth in Section 9.2 (in
the case of HEALTHSOUTH) or Section 9.3 (in the case of NSC) is not capable
of being satisfied prior to the end of the period referred to in Section
8.1(b)(ii); or
(d) By NSC, if NSC's Board of Directors shall have (i) determined, in
the exercise of its fiduciary duties under applicable law, not to recommend
the Merger to the holders of NSC Common Stock or shall have withdrawn such
recommendation or (ii) approved, recommended or endorsed any Acquisition
Transaction (as defined in Section 7.10) other than this Plan of Merger or
(iii) resolved to do any of the foregoing.
8.2 Effect of Termination. In the event of termination of this Plan of
Merger as provided in Section 8.1, this Plan of Merger shall forthwith become
void and have no effect, without any liability or obligation on the part of any
party, other than the provisions of Sections 6.2, 8.2 and 8.6, and except to the
extent that such termination results from the willful and material breach by a
party of any of its representations, warranties, covenants or other agreements
set forth in this Plan of Merger.
8.3 Amendment. This Plan of Merger may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the holders of shares of NSC Common Stock; provided, however,
that after any such approval, there shall be made no amendment that pursuant to
Section 251(d) of the DGCL requires further approval by such stockholders
without the further approval of such stockholders. This Plan of Merger may not
be amended except by an instrument in writing signed on behalf of each of the
parties.
8.4 Extension; Waiver. At any time prior to the Effective Time of the
Merger, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Plan of Merger or in any
document delivered pursuant to this Plan of Merger or (c) subject to the proviso
of Section 8.3, waive compliance with any of the agreements or conditions
contained in this Plan of Merger. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this Plan
of Merger to assert any of its rights under this Plan of Merger or otherwise
shall not constitute a waiver of such rights, except as otherwise provided in
Section 7.9.
8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Plan of Merger pursuant to Section 8.1, an amendment of this
Plan of Merger pursuant to Section 8.3, or an extension or waiver pursuant to
Section 8.4 shall, in order to be effective,
30
require in the case of HEALTHSOUTH, the Subsidiary or NSC, action by its Board
of Directors or the duly authorized designee of the Board of Directors.
8.6 Expenses; Break-up Fees. (a) All costs and expenses incurred in
connection with this Plan of Merger and the transactions contemplated hereby
shall be paid by the party incurring such expense, except that expenses incurred
in connection with printing and mailing the Proxy Statement and the Registration
Statement shall be shared equally by NSC and HEALTHSOUTH.
(b) (i) If this Plan of Merger is terminated by NSC pursuant to Section
8.1(d), and within one year after the effective date of such termination NSC is
the subject of a Third Party Acquisition Event with any Person (as defined in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act) (other than a party hereto),
then at the time of consummation of such a Third Party Acquisition Event, NSC
shall pay to HEALTHSOUTH a break-up fee of $15,000,000 in immediately available
funds, which fee represents the parties' best estimates of the out-of-pocket
costs incurred by HEALTHSOUTH and the value of management time, overhead,
opportunity costs and other unallocated costs of HEALTHSOUTH incurred by or on
behalf of HEALTHSOUTH in connection with this Plan of Merger. Such break-up fee
shall be due and payable on the earliest of (i) the date on which NSC enters
into any definitive agreement for an Acquisition Transaction, (ii) the date on
which an Acquisition Transaction is consummated, or (iii) the earliest date on
which NSC has notice of an event described in Section 8.6(b)(ii)(B). NSC shall
not enter into any agreement with respect to any Third Party Acquisition Event
which does not, as a condition precedent to the effectiveness of such agreement,
require such break-up fee to be paid to HEALTHSOUTH upon the execution of such
agreement.
(ii) As used herein, the term "Third Party Acquisition Event" shall
mean the occurrence of either of the following within the one-year period
specified in Section 8.6(b)(i):
(A) NSC shall enter into any definitive agreement for any
Acquisition Transaction (regardless of whether such Acquisition Transaction
is consummated), or shall otherwise be the subject of an Acquisition
Transaction which is consummated (regardless of whether such consummation
occurs within the one-year period described in Section 8.6(b)(i)); or
(B) any Person (other than HEALTHSOUTH or its affiliates) shall
have acquired beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) or the right to acquire beneficial ownership of, or
a new group has been formed which beneficially owns or has the right to
acquire beneficial ownership of, 30% or more of the outstanding NSC Common
Stock.
(c) NSC acknowledges that the provisions for the payment of break-up fees
and allocation of expenses contained in this Section 8.6 are an integral part of
the transactions contemplated by this Plan of Merger and that, without these
provisions, HEALTHSOUTH would not have entered into this Plan of Merger.
Accordingly, if a break-up fee shall become due and payable by NSC, and NSC
shall fail to pay such amount when due pursuant to this Section, and, in order
to obtain such payment, suit is commenced which results in a judgment against
NSC
31
therefor, NSC shall pay HEALTHSOUTH's reasonable costs and expenses (including
reasonable attorneys' fees) incurred in connection with such suit, together with
interest computed on any amounts determined to be due pursuant to this Section
(computed from the date upon which such amounts were due and payable pursuant to
this Section) and such costs (computed from the date incurred) at the prime rate
of interest announced from time to time by NationsBank, N.A. (South). The
obligations of NSC under this Section 8.6 shall survive any termination of this
Plan of Merger.
Section 9. Conditions to Closing.
9.1 Mutual Conditions. The respective obligations of each party to effect
the Merger shall be subject to the satisfaction, at or prior to the Closing Date
of the following conditions (any of which may be waived in writing by
HEALTHSOUTH and NSC):
(a) None of HEALTHSOUTH, the Subsidiary or NSC nor any of their
respective subsidiaries shall be subject to any order, decree or injunction
by a court of competent jurisdiction which (i) prevents or materially
delays the consummation of the Merger or (ii) would impose any material
limitation on the ability of HEALTHSOUTH effectively to exercise full
rights of ownership of the Common Stock of the Surviving Corporation or any
material portion of the assets or business of NSC, the NSC Subsidiaries and
the NSC Other Entities, taken as a whole.
(b) No statute, rule or regulation shall have been enacted by the
government (or any governmental agency) of the United States or any state,
municipality or other political subdivision thereof that makes the
consummation of the Merger and any other transaction contemplated hereby
illegal.
(c) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(d) The Registration Statement shall have been declared effective and
no stop order with respect to the Registration Statement shall be in
effect.
(e) The holders of NSC Common Stock shall have approved the adoption
of this Plan of Merger and any other matters submitted to them in
accordance with the provisions of Section 7.3 hereof.
(f) The shares of HEALTHSOUTH Common Stock to be issued in connection
with the Merger shall have been approved for listing on the Exchange.
(g) The Merger shall qualify for "pooling of interests" accounting
treatment, and HEALTHSOUTH and NSC shall each have received letters to that
effect from Ernst & Young, LLP, independent accountants for HEALTHSOUTH,
dated (i) the date of the mailing of the Proxy Statement and (ii) the
Closing Date.
32
(h) HEALTHSOUTH and the Subsidiary shall have obtained, or obtained
the transfer of, any licenses, certificates of need and other regulatory
approvals necessary to allow the Surviving Corporation to operate the NSC
facilities, unless the failure to obtain such transfer or approval would
not have a material adverse effect on the Surviving Corporation.
(i) HEALTHSOUTH and the Subsidiary shall have received all consents,
approvals and authorizations of third parties with respect to all material
leases and management agreements to which the NSC Subsidiaries and the NSC
Other Entities are parties, which consents, approvals and authorizations
are required of such third parties by such documents, in form and substance
acceptable to HEALTHSOUTH, except where the failure to obtain such consent,
approval or authorization would not have a material adverse effect on the
business of the Surviving Corporation.
9.2 Conditions to Obligations of HEALTHSOUTH and the Subsidiary. The
obligations of HEALTHSOUTH and the Subsidiary to consummate the Merger and the
other transactions contemplated hereby shall be subject to the satisfaction, at
or prior to the Closing Date, of the following conditions (any of which may be
waived by HEALTHSOUTH and the Subsidiary):
(a) Each of the agreements of NSC to be performed at or prior to the
Closing Date pursuant to the terms hereof shall have been duly performed in
all material respects, and NSC shall have performed, in all material
respects, all of the acts required to be performed by it at or prior to the
Closing Date by the terms hereof.
(b) The representations and warranties of NSC set forth in Section
3.10(a) shall be true and correct as of the date of this Plan of Merger and
as of the Closing Date. The representations and warranties of NSC set forth
in this Plan of Merger that are qualified as to materiality shall be true
and correct, and those that are not so qualified shall be true and correct
in all material respects, as of the date of this Plan of Merger and as of
the Closing as though made at and as of such time, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those that are not so qualified
shall be true and correct in all material respects, as of such earlier
date); provided, however, that NSC shall not be deemed to be in breach of
any such representations or warranties by taking any action permitted (or
approved by HEALTHSOUTH) under Section 7.2. HEALTHSOUTH and the Subsidiary
shall have been furnished with a certificate, executed by a duly authorized
officer of NSC, dated the Closing Date, certifying in such detail as
HEALTHSOUTH and the Subsidiary may reasonably request as to the fulfillment
of the foregoing conditions.
33
(c) HEALTHSOUTH shall have received an opinion from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
& Young, L.L.C., to the effect that the merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, which
opinion may be based upon reasonable representations of fact provided by
officers of HEALTHSOUTH, NSC and the Subsidiary.
(d) HEALTHSOUTH shall have received an opinion from ▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇
substantially to the effect set forth in Exhibit 9.2(d) hereto.
9.3 Conditions to Obligations of NSC. The obligations of NSC to consummate
the Merger and the other transactions contemplated hereby shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions
(any of which may be waived by NSC):
(a) Each of the agreements of HEALTHSOUTH and the Subsidiary to be
performed at or prior to the Closing Date pursuant to the terms hereof
shall have been duly performed, in all material respects, and HEALTHSOUTH
and the Subsidiary shall have performed, in all material respects, all of
the acts required to be performed by them at or prior to the Closing Date
by the terms hereof.
(b) The representations and warranties of HEALTHSOUTH set forth in
Section 5.11(a) shall be true and correct as of the date of this Plan of
Merger and as of the Closing Date. The representations and warranties of
HEALTHSOUTH set forth in this Plan of Merger that are qualified as to
materiality shall be true and correct, and those that are not so qualified
shall be true and correct in all material respects, as of the date of this
Plan of Merger and as of the Closing as though made at and as of such time,
except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties that
are qualified as to materiality shall be true and correct, and those that
are not so qualified shall be true and correct in all material respects, as
of such earlier date). NSC shall have been furnished with a certificate,
executed by duly authorized officers of HEALTHSOUTH and the Subsidiary,
dated the Closing Date, certifying in such detail as NSC may reasonably
request as to the fulfillment of the foregoing conditions.
(c) NSC shall have received an opinion from ▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ to the
effect that the Merger will constitute a reorganization with the meaning of
Section 368(a) of the Code, which opinion may be based upon reasonable
representations of fact provided by officers of HEALTHSOUTH, NSC and the
Subsidiary.
(d) NSC shall have received an opinion from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Young,
L.L.C., substantially to the effect set forth in Exhibit 9.3(d) hereto.
34
Section 10. Miscellaneous.
10.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Plan of Merger or in any instrument
delivered pursuant to this Plan of Merger shall survive the Effective Time.
10.2 Notices. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery or by
facsimile and overnight courier to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to HEALTHSOUTH:
HEALTHSOUTH Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
HEALTHSOUTH Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to NSC:
National Surgery Centers, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: E. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇
Three First National Plaza
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
35
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications with the overnight courier.
10.3 Further Assurances. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Plan of Merger.
10.4 Indemnification. (a) NSC shall, and from and after the Effective Time
HEALTHSOUTH and the Surviving Corporation shall, indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date of
this Plan of Merger or who becomes prior to the Effective Time, an officer,
director or employee of NSC or any of its subsidiaries (the "Indemnified
Parties") against (i) all losses, claims, damages, costs, expenses, liabilities
or judgments, or amounts that are paid in settlement with the approval of the
Indemnifying Party (which approval shall not be unreasonably withheld) of, or in
connection with, any claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of NSC or any of its
subsidiaries, or is or was serving at the request of NSC as a director, officer
employee or agent of any other corporation, partnership, joint venture or other
enterprise, whether pertaining to any matter existing or occurring at or prior
to, or at or after, the Effective Time ("Indemnified Liabilities") and (ii) all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Plan of Merger, the Merger or any other
transactions contemplated hereby or thereby, in each case to the full extent a
corporation is permitted under the DGCL to indemnify its own directors, officers
and employees, as the case may be (and HEALTHSOUTH and the Surviving
Corporation, as the case may be, will pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
full extent permitted by law upon receipt of any undertaking contemplated by
Section 145(e) of the DGCL). Without limiting the foregoing, in the event any
such claim, action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising before or after the Effective Time), (i) the
Indemnified Parties may retain counsel satisfactory to them and NSC (or them and
HEALTHSOUTH and the Surviving Corporation after the Effective Time), (ii) NSC
(or after the Effective Time, HEALTHSOUTH and the Surviving Corporation) shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received and (iii) NSC (or after the
Effective Time, HEALTHSOUTH and the Surviving Corporation) will use all
reasonable efforts to assist in the vigorous defense of any such matter,
provided that none of NSC, HEALTHSOUTH or the Surviving Corporation shall be
liable for any settlement of any claim effected without its written consent,
which consent, however, shall not be unreasonably withheld. Any Indemnified
Party wishing to claim indemnification under this Section 10.4, upon learning of
any such claim, action, suit, proceeding or investigation, shall notify NSC,
HEALTHSOUTH or the Surviving Corporation (but the failure so to notify an
Indemnifying Party shall not relieve it from any liability which it may have
under this Section 10.4 except to the extent such failure prejudices such
party), and shall deliver to NSC (or after the Effective Time, HEALTHSOUTH and
the Surviving Corporation) the undertaking contemplated by Section 145(e) of the
DGCL. The Indemnified Parties as a group may retain only one law firm
36
to represent them with respect to such matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(b) Until such time as the applicable statute of limitations shall have
expired, HEALTHSOUTH shall, and shall cause the Surviving Corporation to,
provide with respect to each of the Indemnified Parties the indemnification
rights which such Indemnified Party had, whether from NSC or any NSC Subsidiary,
immediately prior to the Effective Time, whether under the Certificate or
Articles of Incorporation or Bylaws of NSC or such NSC Subsidiary or otherwise,
except as otherwise provided in Section 10.4(a).
(c) Immediately following the Effective Time, HEALTHSOUTH shall cause to be
in effect the current policies of directors' and officers' liability insurance
maintained by NSC or any NSC Subsidiary (provided that HEALTHSOUTH may
substitute therefor policies of at least the same coverage and limits containing
terms and conditions that are substantially as advantageous) with respect to
claims arising from facts or events which occurred at or before the Effective
Time, and HEALTHSOUTH shall maintain such coverage for a period of six years
after the Effective Time; provided, however, that in no event shall HEALTHSOUTH
or the Surviving Corporation be required to expend more than 200% of the current
annual premiums paid by NSC for such insurance.
(d) This Section 10.4 shall survive the Closing and is intended to benefit
NSC, the Surviving Corporation and each of the Indemnified Parties and his or
her heirs and representatives (each of whom shall be entitled to enforce this
Section 10.4 against HEALTHSOUTH and the Surviving Corporation, as the case may
be) and shall be binding upon all successor and assigns of HEALTHSOUTH and the
Surviving Corporation.
10.5 Governing Law. This Plan of Merger shall be interpreted, construed
and enforced in accordance with the laws of the State of Delaware, applied
without giving effect to any conflicts-of-law principles.
10.6 "Including". The word "including", when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation", "but not limited to", or words of
similar import) is used with reference to the word "including" or the similar
items or matters, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the broadest possible scope of the
general statement, term or matter.
10.7 "Knowledge". "To the knowledge", "to the best knowledge, information
and belief", or any similar phrase shall be deemed to refer to the knowledge of
the Chairman of the Board, Chief Executive Officer, Chief Operating Officer or
Chief Financial Officer of a party (or persons performing comparable functions
for such party, irrespective of title) and to include the assurance that such
knowledge is based upon a reasonable investigation, unless otherwise expressly
provided.
37
10.8 "Material adverse change" or "material adverse effect". "Material
adverse change" or "material adverse effect" means, when used in connection with
NSC or HEALTHSOUTH, any change, effect, event or occurrence that has, or is
reasonably likely to have, individually or in the aggregate, a material adverse
impact on the business or financial position of such party and its subsidiaries
and other consolidated entities taken as a whole; provided, however, that
"material adverse change" and "material adverse effect" shall be deemed to
exclude the impact of (i) changes in generally accepted accounting principles
and (ii) the public announcement of the Merger and compliance with the
provisions of this Plan of Merger, (iii) any changes resulting from any
restructuring or other similar charges or write-offs taken by NSC with the
consent of HEALTHSOUTH, provided, however, that no such charges or write-offs
will be taken if such would adversely affect pooling-of-interests accounting
treatment for the Merger, (iv) the termination or failure to be consummated or
completed of any acquisition, joint venture, development project or other
transaction which was not consummated or completed prior to the execution and
delivery of this Plan of Merger, (v) any change in the Social Security Act,
Medicare, Medicaid or other similar laws, rules or regulations of generally
applicability or interpretations thereof by courts or governmental authorities,
and (vi) any change in general economic conditions, in interest rates or in
conditions affecting the healthcare or ambulatory surgery industries generally.
10.9 "Hazardous Materials". The term "Hazardous Materials" means any
material which has been determined by any applicable governmental authority to
be harmful to the health or safety of human or animal life or vegetation,
regardless of whether such material is found on or below the surface of the
ground, in any surface or underground water, airborne in ambient air or in the
air inside any structure built or located upon or below the surface of the
ground or in building materials or in improvements of any structures, or in any
personal property located or used in any such structure, including, but not
limited to, all hazardous substances, imminently hazardous substances, hazardous
wastes, toxic substances, infectious wastes, pollutants and contaminants from
time to time defined, listed, identified, designated or classified as such under
any Environmental Laws (as defined in Section 10.10) regardless of the quantity
of any such material.
10.10 Environmental Laws. The term "Environmental Laws" means any federal,
state or local statute, regulation, rule or ordinance, and any judicial or
administrative interpretation thereof, regulating the use, generation, handling,
storage, transportation, discharge, emission, spillage or other release of
Hazardous Materials or relating to the protection of the environment.
10.11 Taxes. For purposes of this Agreement, the term "tax" or "taxes"
shall mean all taxes, charges, fees, levies, penalties or other assessment
imposed by any United States federal, state, local or foreign taxing authority,
including, but not limited to, income, excise, property, sales, transfer,
franchise, payroll, withholding, Social Security or other taxes, including any
interest, penalties or additions attributable thereto. For purposes of this Plan
of Merger, the term "tax return" shall mean any return, report, information
return or other document (including any related or supporting information) with
respect to taxes.
38
10.12 Captions. The captions or headings in this Plan of Merger are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this Plan of
Merger.
10.13 Integration of Exhibits. All Exhibits attached to this Plan of
Merger are integral parts of this Plan of Merger as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all purposes
and not only in connection with the specific representation in which they are
explicitly referenced.
10.14 Entire Agreement. This instrument, including all Exhibits attached
hereto, together with the Confidentiality Agreements, contains the entire
agreement of the parties and supersedes any and all prior or contemporaneous
agreements between the parties, written or oral, with respect to the
transactions contemplated hereby. It may not be changed or terminated orally,
but may only be changed by an agreement in writing signed by the party or
parties against whom enforcement of any waiver, change, modification, extension,
discharge or termination is sought.
10.15 Counterparts. This Plan of Merger may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
10.16 Binding Effect. This Plan of Merger shall be binding on, and shall
inure to the benefit of, the parties hereto, and their respective successors and
assigns, and, except as provided in Sections 2, 7.16, 7.18 and 10.4, no other
person shall acquire or have any right under or by virtue of this Plan of
Merger. No party may assign any right or obligation hereunder without the prior
written consent of the other parties.
10.17 No Rule of Construction. The parties acknowledge that this Plan of
Merger was initially prepared by HEALTHSOUTH, and that all parties have read and
negotiated the language used in this Plan of Merger. The parties agree that,
because all parties participated in negotiating and drafting this Plan of
Merger, no rule of construction shall apply to this Plan of Merger which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Plan of Merger.
39
IN WITNESS WHEREOF, HEALTHSOUTH, the Subsidiary and NSC have caused this
Plan and Agreement of Merger to be executed by their respective duly authorized
officers, and have caused their respective corporate seals to be hereunto
affixed, all as of the day and year first above written.
NATIONAL SURGERY CENTERS, INC.
By /s/ E. ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------------
E. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Chairman of the Board, Chief Executive Officer
and President
ATTEST:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Secretary
[CORPORATE SEAL]
HEALTHSOUTH Corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President,
Chief Financial Officer and Treasurer
ATTEST:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
[ CORPORATE SEAL ]
FIELD ACQUISITION CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
40