Paragon Health Network Exhibit 3
SCHEDULE 13D
PROXY AND VOTING AGREEMENT
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THIS PROXY AND VOTING AGREEMENT (this "Agreement") is made and entered
into as of this 4th day of November, 1997, by and among Apollo Management, L.P.,
a Delaware limited partnership ("Apollo Management" and together with its
affiliates and managed investment funds "Apollo"), and the stockholders listed
on the signature pages hereto (the "Stockholders").
WHEREAS, Living Centers of America, Inc., a Delaware corporation
("LCA"), Apollo Management, on behalf of one or more managed investment funds,
and Apollo LCA Acquisition Corp., a Delaware corporation ("Apollo Sub" and
together with any other successor thereto including LCA upon consummation of the
Merger (as defined below), the "Company"), have entered into an agreement (the
"Merger Agreement"), with respect to a merger of Apollo Sub with and into LCA
(the "Merger") pursuant to which LCA will be the surviving corporation; and
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as
September 17, 1997 (the "Stock Purchase Agreement"), the Stockholders have
agreed to purchase and Apollo Sub has agreed to issue and sell 5,925,920 shares
of common stock of Apollo Sub, par value $.01 per share (the "Apollo Sub Common
Stock");
WHEREAS, pursuant to the terms of the Merger Agreement, upon
consummation of the Merger, each outstanding share of Apollo Sub Common Stock
will be converted into a duly authorized, validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of LCA (or any
successor) (the "Company Common Stock"), the surviving corporation;
WHEREAS, in connection with the Stock Purchase Agreement and the
Merger Agreement, and in order to provide for certain rights and obligations in
respect of the shares of common stock of the Company owned by each of them as of
the date hereof, each of the Stockholders has agreed to enter into a
Stockholders Agreement, substantially in the form of Exhibit A to the Stock
Purchase Agreement (the "Stockholders Agreement"); and
WHEREAS, in addition to the Stockholders Agreement, the parties hereto
desire to provide for certain voting rights and obligations in respect of the
Shares as provided herein.
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, covenants and agreements contained herein and in
the Stock Purchase Agreement, and intending to be legally bound, the parties
hereto agree as follows:
1. Definitions. As used in this Agreement, (i) the term "Shares"
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includes the shares of Apollo Sub Common Stock sold pursuant to the Stock
Purchase Agreement, the
shares of Apollo Sub Common Stock subject to a warrant sold pursuant to that
certain Warrant Purchase Agreement, dated as of September 17, 1997, and all
shares of capital stock of the Company issued as a result of any stock dividend
on, or stock split or reclassification or conversion of, any such shares or
issued with respect to any such shares in connection with any merger or
reorganization involving the Company including, without limitation, the shares
of Company Common Stock issued upon consummation of the Merger, and (ii) the
term "Holders" means Apollo, the Stockholders and all subsequent holders of
Shares who acquired the same directly or indirectly from the Stockholders in a
transaction or series of transactions not involving any public offering.
2. Grant of Proxy. For a period ending on the third anniversary of
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the consummation of the Merger, each Stockholder hereby appoints Apollo
Management, with full power of substitution (Apollo Management and its
substitutes being referred to herein as the "Proxy"), as attorneys and proxies
to vote all the Shares on matters as to which such Stockholder is entitled to
vote at a meeting of the stockholders of the Company or to which it is entitled
to express consent or dissent to corporate action in writing without a meeting,
in the Proxy's absolute, sole and binding discretion. Each Stockholder agrees
that the Proxy may, in such Stockholder's name and stead, (i) attend any annual
or special meeting of the stockholders of the Company and vote all the Shares at
any such annual or special meeting, and (ii) execute with respect to all the
Shares any written consent to, or dissent from, corporate action in writing
without a meeting. Except as contemplated by Section 3 of this Agreement or
with the prior written consent of Proxy, each Stockholder agrees to refrain from
(A) voting at any annual or special meeting of the stockholders of the Company,
(B) executing any written consent in lieu of a meeting of the stockholders of
the Company, (C) exercising any rights of dissent with respect to the Shares,
and (D) granting any proxy or authorization to any person with respect to the
voting of the Shares, except pursuant to this Agreement, or taking any action
contrary to or in any manner inconsistent with the terms of this Agreement. Each
Stockholder agrees that this grant of proxy is irrevocable and coupled with an
interest in accordance with the provisions of Section 212 of the Delaware
General Corporation Law and agrees that the person designated as Proxy pursuant
hereto may at any time name any other person as its substituted Proxy to act
pursuant hereto, either as to a specific matter or as to all matters. Each
Stockholder hereby revokes any proxy previously granted by it with respect to
the Shares. In discharging its powers under this Agreement, the Proxy may rely
upon advice of counsel to Apollo Management, and any vote made or action taken
by the Proxy in reliance upon such advice of counsel shall be deemed to have
been made in good faith by the Proxy.
3. Voting Agreement. If requested by Proxy, each Stockholder hereby
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agrees to appear (in person or by proxy) at any annual or special meeting of
stockholders of the Company for the purpose of obtaining a quorum. For a period
ending on the third anniversary of the consummation of the Merger, each
Stockholder hereby agrees to vote all of the Shares at any annual or special
meeting of stockholders or by executing any written consent: (i) in favor of the
approval and adoption of the Merger Agreement and all related matters, (ii)
against any action or agreement that would result in a breach in any material
respect of any covenant, representation or warranty or any other obligation or
agreement of the
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Company under the Merger Agreement; (iii) against any action or agreement (other
than the Merger Agreement or the transactions contemplated thereby) that would
impede, interfere with, delay, postpone or attempt to discourage the Merger; and
(iv) in accordance with the instructions of Apollo Management with respect to
any other action.
4. Transfer. Subject to the provisions of the Stock Purchase
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Agreement and the Stockholders Agreement, the Stockholders may sell, transfer,
assign or otherwise dispose of any of the Shares; provided, however, that each
Stockholder hereby agrees not to sell, transfer, assign or otherwise dispose of
any of the Shares unless (i) such Stockholder delivers written notice to Apollo
Management of its intent to transfer Shares not less than five (5) business days
prior to such transfer, and (ii) such transferee becomes a party to this
Agreement. Any purported transfer in violation of the provisions of this
Agreement (an "Unauthorized Transfer") shall be null and void. The Company will
not register, recognize or give effect to any Unauthorized Transfer and the
purported transferee of any Shares pursuant to an Unauthorized Transfer will not
thereby acquire any rights in such Shares. The Company will, immediately upon
becoming aware of an actual or attempted Unauthorized Transfer, instruct the
transfer agent for the Shares to issue an appropriate stop transfer order with
regard to such transaction or attempted transaction.
5. Standstill. Apollo and each Stockholder hereby agrees not to
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take any action in its capacity as Proxy or as a Stockholder, as the case may
be, that would cause any Stockholder to be in breach of Article V of the
Stockholders Agreement.
6. Termination. This Agreement shall terminate upon the earlier to
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occur of (i) the third anniversary of the consummation of the Merger and (ii)
the termination of the Merger Agreement in accordance with its terms.
7. Representations and Warranties. Each Stockholder, severally as
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to itself and not jointly or as to any other Stockholder, hereby represents and
warrants to Apollo as follows:
(a) Authority Relative to this Agreement. Such Stockholder has all
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necessary power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by such Stockholder and no other proceedings on
the part of such Stockholder are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by such Stockholder and, assuming that this
Agreement has been duly and validly authorized, executed and delivered by Apollo
Management, this Agreement constitutes a valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its terms.
(b) Ownership of Shares. Such Stockholder has good and marketable
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title to all of the shares of the Company Common Stock indicated opposite the
Stockholder's
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name on the signature page hereto, which constitute all the shares of the
Company Common Stock owned by such Stockholder. There are no restrictions on the
voting rights pertaining to such shares of Company Common Stock except pursuant
to this Agreement and the Stockholders Agreement.
(c) No Conflicts. Neither the execution and delivery of this
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Agreement nor the consummation by such Stockholder of the transactions
contemplated hereby will conflict with or constitute a violation of or default
under any contract, commitment, agreement, arrangement or restriction of any
kind to which such Stockholder is a party or by which such Stockholder is bound.
Other than this Agreement and the Stockholders Agreement, there are no other
agreements or understandings with respect to the voting of the Shares, and such
Stockholder hereby agrees that it will not enter into such an agreement.
8. Entire Agreement. This Agreement (a) constitutes the entire
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agreement between the parties hereto with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof; (b) shall not be amended, altered or modified in any manner whatsoever,
except by a written instrument executed by the parties hereto; and (c) shall be
governed in all respects, including validity, interpretation and effect, by the
laws of the State of Delaware (without giving effect to the provisions thereof
relating to conflicts of law).
9. Specific Performance. The parties hereto acknowledge that
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damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
10. Parties in Interest. This Agreement shall be binding upon and
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inure solely to the benefit of each party hereto and their respective
successors, assigns, heirs, executors, administrators and other legal
representatives. Nothing in this Agreement, express or implied, is intended to
confer upon any other person not a party hereto any rights or remedies of any
nature whatsoever under or by reason of this Agreement.
11. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
12. Notices. Any notices or other communications required or
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permitted hereunder shall be in writing and shall be deemed duly given upon (a)
transmitter's confirmation of a receipt of a facsimile transmission, (b)
confirmed delivery by a standard overnight carrier or (c) the expiration of five
business days after the day when mailed by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address as the
parties hereto shall specify by like notice):
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(a) If to Apollo Management to:
Apollo Management, L.P.
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Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Sidley & Austin
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) If to the Stockholders, to the addresses noted on the
signature pages hereto.
13. Descriptive Headings. The headings herein are inserted for
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convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
14. Validity. The invalidity or unenforceability of any provision of
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this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and effect
parties hereto.
15. Further Assurances. The parties hereto will execute and deliver
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all such further documents and instruments and take all such further actions as
may be necessary in order to consummate the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
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APOLLO MANAGEMENT, L.P.,
on behalf of one or more managed investment funds
By: AIF III Management, Inc.
Its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
Title:
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CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Partner
666,667 shares of Company Common Stock
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy of notices and other communications to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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HEALTHCARE EQUITY PARTNERS, L.P.
By: Beecken, ▇▇▇▇▇ & Company, L.L.C.
Its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Managing Director
60,864 shares of Company Common Stock
Address: ▇/▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇.▇.▇.
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
HEALTHCARE EQUITY QP PARTNERS, L.P.
By: Beecken, ▇▇▇▇▇ & Company, L.L.C.
Its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Managing Director
186,050 shares of Company Common Stock
Address: ▇/▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇.▇.▇.
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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KEY CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
92,593 shares of Company Common Stock
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
KEY EQUITY PARTNERS 97
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: General Partner
30,864 shares of Company Common Stock
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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DRAX HOLDINGS L.P.
By: ▇▇▇▇▇ Corporation
Its: General Partner
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
25,000 shares of Company Common Stock
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
WALNUT GROWTH PARTNERS LIMITED PARTNERSHIP
By: Walnut GP, L.L.C.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇, its Managing Member
24,691 shares of Company Common Stock
Address: Suite 700
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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50,000 shares of Company Common Stock
Address: c/o Paragon Health Network, Inc.
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