EXHIBIT 2.1
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AGREEMENT AND
PLAN OF MERGER
by and between
Quorum Health Group, Inc.
and
Triad Hospitals, Inc.
October 18, 2000
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ARTICLE 1 DEFINITIONS..................................................................... 1
1.1. Definitions..................................................................... 1
ARTICLE 2 THE MERGER...................................................................... 6
2.1. The Merger...................................................................... 6
2.2. Organizational Documents........................................................ 6
2.3. Directors and Officers.......................................................... 6
ARTICLE 3 CONVERSION OF SECURITIES AND RELATED MATTERS.................................... 7
3.1. Cancellation of Treasury Stock and Acquiror Owned Shares........................ 7
3.2. Conversion of Company Shares.................................................... 7
3.3. Capitalization Changes.......................................................... 8
3.4. Exchange of Certificates........................................................ 8
3.5. Company Stock Options........................................................... 10
3.6. Employee Stock Purchase Plan.................................................... 11
3.7. Dissenting Shares............................................................... 11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................... 12
4.1. Corporate Existence and Power................................................... 12
4.2. Corporate Authorization......................................................... 12
4.3. Governmental Authorization...................................................... 12
4.4. Non-Contravention............................................................... 12
4.5. Capitalization.................................................................. 13
4.6. Subsidiaries.................................................................... 14
4.7. Company SEC Documents........................................................... 14
4.8. Financial Statements; No Material Undisclosed Liabilities....................... 15
4.9. Information to Be Supplied...................................................... 15
4.10. Absence of Certain Changes...................................................... 16
4.11. Litigation...................................................................... 16
4.12. Taxes........................................................................... 16
4.13. Employee Benefits............................................................... 17
4.14. Labor Matters................................................................... 19
4.15. Compliance with Laws; Licenses, Permits and Registrations....................... 19
4.16. Title to Properties............................................................. 20
4.17. Intellectual Property........................................................... 20
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4.18. Finders' Fees; Opinion of Financial Advisor..................................... 21
4.19. Required Vote; Board Approval................................................... 21
4.20. State Takeover Statutes......................................................... 21
4.21. Company's Stockholder Rights Plan............................................... 21
4.22. Insurance....................................................................... 22
4.23. Agreements and Commitments...................................................... 22
4.24. Affiliate Agreements............................................................ 22
4.25. Environmental Matters........................................................... 22
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ACQUIROR...................................... 23
5.1. Corporate Existence and Power................................................... 23
5.2. Corporate Authorization......................................................... 23
5.3. Governmental Authorization...................................................... 23
5.4. Non-Contravention............................................................... 24
5.5. Capitalization of Acquiror...................................................... 24
5.6. Subsidiaries.................................................................... 25
5.7. Acquiror SEC Documents.......................................................... 25
5.8. Financial Statements; No Material Undisclosed Liabilities....................... 26
5.9. Information to Be Supplied...................................................... 27
5.10. Absence of Certain Changes...................................................... 27
5.11. Litigation...................................................................... 27
5.12. Taxes........................................................................... 27
5.13. Employee Benefits............................................................... 28
5.14. Labor Matters................................................................... 30
5.15. Compliance with Laws; Licenses, Permits and Registrations....................... 30
5.16. Title to Properties............................................................. 31
5.17. Intellectual Property........................................................... 31
5.18. Finders' Fees; Opinion of Financial Advisor..................................... 32
5.19. Required Vote; Board Recommendation............................................. 32
5.20. State Takeover Statutes......................................................... 32
5.21. Acquiror's Stockholder Rights Plan.............................................. 32
5.22. Insurance....................................................................... 33
5.23. Agreements and Commitments...................................................... 33
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5.24. Affiliate Agreements............................................................ 33
5.25. Environmental Matters........................................................... 33
5.26. Financial Capability............................................................ 33
ARTICLE 6 COVENANTS OF THE COMPANY........................................................ 34
6.1. Company Interim Operations...................................................... 34
6.2. Stockholder Meeting............................................................. 36
6.3. Acquisition Proposals; Board Recommendation..................................... 36
6.4. Affiliate Letters............................................................... 37
6.6. Subsidiary Guarantees........................................................... 39
ARTICLE 7 COVENANTS OF ACQUIROR........................................................... 39
7.1. Acquiror Interim Operations..................................................... 39
7.2. Stockholder Meeting; Board Recommendation....................................... 40
7.3. Director and Officer Liability.................................................. 40
7.4. Employee Benefits............................................................... 41
7.5. Severance Plan.................................................................. 42
7.6. Change in Control............................................................... 42
7.7. Health Insurance................................................................ 42
7.8. Third Party Beneficiaries....................................................... 42
7.9. Stock Exchange Listing.......................................................... 43
7.10. Transfer Taxes.................................................................. 43
7.11. Investment Banking Fee.......................................................... 43
7.12. Qui Tam/False Claims Act Litigation............................................. 43
7.13. Acquiror Standstill............................................................. 43
7.14. Preparation of Ruling Request................................................... 44
7.15. Alternative Financing........................................................... 45
ARTICLE 8 COVENANTS OF ACQUIROR AND THE COMPANY........................................... 45
8.1. Reasonable Best Efforts......................................................... 45
8.2. Certain Filings; Cooperation in Receipt of Consents............................. 46
8.3. Public Announcements............................................................ 47
8.4. Access to Information; Notification of Certain Matters.......................... 47
8.5. Further Assurances.............................................................. 47
8.6. Confidentiality................................................................. 47
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8.7. Tax Treatment................................................................... 48
ARTICLE 9 CONDITIONS TO MERGER............................................................ 48
9.1. Conditions to the Obligations of Each Party..................................... 48
9.2. Conditions to the Obligations of the Company.................................... 49
9.3. Conditions to the Obligations of Acquiror....................................... 49
ARTICLE 10 TERMINATION..................................................................... 50
10.1. Termination..................................................................... 50
10.2. Effect of Termination........................................................... 51
10.3. Termination Fees................................................................ 52
10.4. Fees and Expenses............................................................... 53
ARTICLE 11 MISCELLANEOUS................................................................... 53
11.1. Notices......................................................................... 53
11.2. Survival of Representations, Warranties and Covenants after the Effective Time.. 54
11.3. Amendments; No Waivers.......................................................... 54
11.4. Successors and Assigns.......................................................... 54
11.5. Counterparts; Effectiveness; Third Party Beneficiaries.......................... 54
11.6. Governing Law................................................................... 55
11.7. Jurisdiction.................................................................... 55
11.8. Enforcement..................................................................... 55
11.9. Entire Agreement................................................................ 55
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of the 18th day of October, 2000, by and between Quorum Health Group,
Inc., a Delaware corporation ("Company"), and Triad Hospitals, Inc., a Delaware
corporation ("Acquiror").
WHEREAS, the Boards of Directors of the Company and Acquiror each have
determined that a business combination between the Company and Acquiror is
advisable and in the best interests of their respective corporations and
stockholders and presents an opportunity for their respective corporations to
achieve long-term strategic and financial benefits;
WHEREAS, the parties intend that the merger qualify for U.S. federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
U.S. Internal Revenue Code of 1986, as amended (a "368 Reorganization");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Acquiror's willingness to enter into this
Agreement, Acquiror and a certain stockholder of the Company have entered into a
Voting Agreement dated as of the date of this Agreement and attached hereto as
Exhibit A (the "Voting Agreement"), pursuant to which such stockholder has
agreed, among other things, to vote its Company Shares in favor of adopting and
approving this Agreement and the Merger in accordance with the terms hereof and
thereof; and
WHEREAS, by resolutions duly adopted, the respective Boards of Directors of
the Company and Acquiror have approved and adopted this Agreement and the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and promises contained
herein, and intending to be legally bound, the parties hereto agree as set forth
below.
ARTICLE 1
DEFINITIONS
1.1. Definitions. (a) As used herein, the following terms have the meanings
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set forth below.
"Acquiror Balance Sheet" means Acquiror's consolidated balance sheet
included in the Acquiror 10-Q filed with the SEC relating to its quarter ended
on June 30, 2000.
"Acquiror Share" means one share of common stock of Acquiror, par value
$.01 per share, and the associated preferred stock purchase right issued in
accordance with the Rights Agreement, dated as of May 11, 1999, as amended from
time to time, between Acquiror and National City Bank.
"Acquiror SEC Documents" means (i) Acquiror's annual report on Form 10-K
for its fiscal year ended December 31, 1999 (the "Acquiror 10-K"), (ii)
Acquiror's quarterly reports on Form 10-Q (the "Acquiror 10-Qs") for its fiscal
quarters ended June 30 and March 31 of fiscal year 2000, (iii) Acquiror's proxy
statements relating to meetings of, or actions taken without a meeting by, the
Acquiror stockholders since December 31, 1999, and (iv) all other reports,
filings, registration statements and other documents filed by it with the SEC
since April 26, 1999; in each case including all exhibits, appendices and
attachments thereto, whether filed therewith or incorporated by reference
therein.
"Acquisition Proposal" means any offer or proposal with respect to (i) a
merger, consolidation, share exchange, business combination, reorganization,
recapitalization, liquidation, dissolution or other similar transaction
involving, or any purchase of 15% or more of any class of capital stock of the
Company or 50% or more of the assets of the Company, or (ii) any tender offer
(including a self tender) or exchange offer that if consummated would result in
any Person, other than Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII, L.P. beneficially
owning 15% or more, or Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII, L.P. beneficially
owning 30% or more, of any class of capital stock of the Company, other than the
transactions contemplated by this Agreement; provided, however, that the
conversion of the Company's 6.0% Convertible Subordinated Debentures shall not
be deemed to be an Acquisition Proposal.
"Affiliate" means, with respect to any Person, any other Person, directly
or indirectly, controlling, controlled by, or under common control with, such
Person. For purposes of this definition, the term "control" (including the
correlative terms "controlling", "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Business Day" means any day, other than a Saturday, Sunday or one on which
banks are authorized by law to close in New York, New York.
"Code" means the U.S. Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Company Balance Sheet" means the Company's consolidated balance sheet
included in the Company 10-K relating to its fiscal year ended on June 30, 2000.
"Company Share" means one share of common stock of the Company, $0.01 par
value per share, and the associated preferred stock purchase right issued in
accordance with the Rights Agreement, dated as of April 16, 1997, as amended
from time to time, between the Company and First Union National Bank of North
Carolina.
"Company SEC Documents" means (i) the Company's annual reports on Form 10-
K, for its fiscal years ended June 30, 1999 and 2000 (the "Company 10-Ks"), (ii)
the Company's quarterly reports on Form 10-Q (the "Company 10-Qs") for the
fiscal quarters ended September 30, December 31 and March 31 of fiscal years
1999 and 2000, (iii) the Company's proxy statement, dated April 28, 2000,
relating to its annual meeting, and (iv) all other reports, filings,
registration statements and other documents filed by the Company with the SEC
since June 30,
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1998; in each case including all exhibits, appendices and attachments thereto,
whether filed therewith or incorporated by reference therein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Governmental Entity" means any federal, state, local or foreign
governmental authority, any transgovernmental authority or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign.
"Knowledge" means, with respect to the matter in question, if any of the
executive officers of the Company or Acquiror, as the case may be, has actual
knowledge of the matter.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of an asset;
provided, however, that the term "Lien" shall not include (i) liens for
utilities and current taxes not yet due and payable or delinquent, (ii)
mechanics', carriers', workers', repairers', materialmen's, warehousemen's and
other similar liens arising or incurred in the ordinary course of business, or
(iii) liens being contested in good faith.
"Material Adverse Effect" means a material adverse effect on the financial
condition, business, assets or results of operations of a Person and its
Subsidiaries, taken as a whole, or on the ability of such Person and its
Subsidiaries to perform in all material respects its obligations hereunder, or
which would prevent or materially delay the consummation of the transactions
contemplated hereby, but shall exclude any material adverse effect arising out
of any change or development relating to (i) U.S. or global economic or industry
conditions, (ii) changes in U.S. or global financial markets or conditions,
(iii) any generally applicable change in law, rule or regulation or GAAP or
interpretation of any thereof and/or (iv) the announcement of this Agreement or
the transactions contemplated hereby, including the sale or attempted sale of
any assets or operations of the Company or any Company Subsidiary by or approved
by Acquiror. "Acquiror Material Adverse Effect" means a Material Adverse Effect
in respect of Acquiror and "Company Material Adverse Effect" means a Material
Adverse Effect in respect of the Company.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or any other entity or organization, including
any Governmental Entity.
"Proxy Statement/Prospectus" means the joint proxy statement/prospectus
included in the Registration Statement relating to the Company Stockholder
Meeting and the Acquiror Stockholder Meeting, together with any amendments or
supplements thereto.
"Qui Tam/False Claims Act Litigation" means the suit filed against Quorum
Health Group, Inc. (M.D. Fla. No. 99-413.-CIV-T-23B).
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"Registration Statement" means the Registration Statement on Form S-4 or
comparable form registering the Acquiror Shares issuable in connection with the
Merger under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, any corporation or other
entity (including joint ventures) of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are directly or
indirectly owned by such Person. "Acquiror Subsidiary" means a Subsidiary of
Acquiror and "Company Subsidiary" means a Subsidiary of the Company.
"Superior Proposal" means a bona fide, written Acquisition Proposal for at
least a majority of the outstanding Company Shares that is on terms which a
majority of the Company's Board of Directors determines in good faith, after
consultation with its outside counsel and its financial advisors (i) would
result in a transaction, if consummated, that would be more favorable to the
Company's Stockholders (in their capacities as Stockholders), than the
transactions contemplated hereby (after giving effect to any revised proposal
made by or on behalf of Acquiror prior to the end of the three Business-Day-
period referred to in Section 10.1(e)) and (ii) is reasonably likely to be
consummated, in each case taking into account all facts and circumstances,
including all legal, financial, regulatory, timing and other aspects of the
proposed offer and the identity of the offeror.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Terms Section
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368 Reorganization Recital
Acquiror Preamble
Acquiror Employee Plans 5.13
Acquiror Intellectual Property 5.16
Acquiror Recommendation 7.2
Acquiror Returns 5.12
Acquiror Rights Agreement 5.5(b)
Acquiror Securities 5.5(b)
Acquiror Stockholder Approval 5.18(a)
Acquiror Stockholder Meeting 7.2
Affiliate Letters 6.4
Agreement Preamble
Cap 7.3(c)
Cash Consideration 3.2(a)
Certificates 3.5
Certificate of Merger 2.1(b)
Change in Control Plans 7.6
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Closing 2.1(d)
Closing Date 2.1(d)
Commitment Letters 5.20
Company Preamble
Company Employee Plans 4.13(a)
Company Intellectual Property 4.16
Company Option 3.5(a)
Company Recommendation 6.2
Company Returns 4.12
Company Rights Agreement 4.5(b)
Company Securities 4.5(b)
Company Stockholder Approval 4.19(a)
Company Stockholder Meeting 6.2
DGCL 2.1(a)
Dissenting Shares 3.7
Effective Time 2.1(b)
End Date 10.1(b)(i)
Environmental Laws 4.25(b)
ERISA 4.13(a)
ERISA Affiliate 4.13(a)
ESPP 3.7(a)
ESPP Termination Date 3.7(a)
Exchange Agent 3.5(a)
Exchange Fund 3.5(a)
GAAP 4.8(a)
Hazardous Substance 4.25(b)
HSR Act 4.3(b)
Indemnified Parties 7.3(b)
Intellectual Property 4.17
Meeting Price 3.2(a)
Merger 2.1(a)
Merger Consideration 3.3(a)
MLCC 7.15
Multiemployer Plan 4.13(b)
Price Deficiency Notice 3.2(b)
Release 4.25(b)
Representatives 6.3
Ruling Request 7.14
Secretary of State 2.1(b)
Spread 3.5
Stock Consideration 3.2(a)
Surviving Corporation 2.1(a)
Total Option Consideration 3.5
Transfer Taxes 7.13
Voting Agreement Preamble
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THE MERGER
2.1. The Merger.
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(a) At the Effective Time, the Company shall be merged with and into
Acquiror (the "Merger") in accordance with the terms and conditions of this
Agreement and the Delaware General Corporation Law (the "DGCL"), at which time
the separate corporate existence of the Company shall cease and Acquiror shall
continue in existence. In its capacity as the corporation surviving the Merger,
this Agreement sometimes refers to Acquiror as the "Surviving Corporation".
(b) As soon as practicable on or after the Closing Date, Acquiror will
file a certificate of merger or other appropriate documents (the "Certificate of
Merger") with the Delaware Secretary of State (the "Secretary of State") and
make all other filings or recordings required by the DGCL in connection with the
Merger. The Merger shall become effective at the time when the Certificate of
Merger is duly filed with and accepted by the Secretary of State, or at such
later time as is agreed upon by the parties and specified in the Certificate of
Merger (such time as the Merger becomes effective is referred to herein as the
"Effective Time").
(c) From and after the Effective Time, the Merger shall have the effects
set forth in Section 259 of the DGCL.
(d) The closing of the Merger (the "Closing") shall be held at the offices
of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (or
such other place as agreed by the parties) on the later of one Business Day
after (a) the date of the Company Stockholder Meeting, (b) the date of the
Acquiror Stockholder Meeting, or (c) the day on which all of the conditions set
forth in Article 9 are satisfied or waived, unless the parties hereto agree to
another date. The date upon which the Closing occurs is hereinafter referred to
as the "Closing Date".
2.2. Organizational Documents. The Certificate of Merger shall provide
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that at the Effective Time (i) Acquiror's certificate of incorporation in effect
immediately prior to the Effective Time shall be the Surviving Corporation's
certificate of incorporation and (ii) Acquiror's bylaws in effect immediately
prior to the Effective Time shall be the Surviving Corporation's bylaws, in each
case until amended in accordance with applicable law.
2.3. Directors and Officers.
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(a) From and after the Effective Time (until successors are duly elected
or appointed and qualified), (i) Acquiror's directors at the Effective Time
shall be the Surviving Corporation's directors and (ii) the officers of Acquiror
immediately prior to the Effective Time shall be the Surviving Corporation's
officers.
(b) Acquiror agrees to take all necessary actions to slate and to use its
best efforts to obtain the approval of, the election of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇ (or, if unavailable, another member of the Company's current Board of
Directors reasonably acceptable to
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Acquiror) to serve, from and after the Effective Time, on Acquiror's Board of
Directors.
ARTICLE 3
CONVERSION OF SECURITIES AND RELATED MATTERS
3.1. Cancellation of Treasury Stock and Acquiror Owned Shares. As of the
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Effective Time, by virtue of the Merger and without any action on the part of
the holder of any Company Shares, each Company Share held by the Company as
treasury stock or owned by Acquiror, any Acquiror Subsidiary or any Company
Subsidiary immediately prior to the Effective Time shall be canceled and
retired, and no payment shall be made or consideration delivered in respect
thereof.
3.2. Conversion of Company Shares.
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(a) As of the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any Company Shares, except as otherwise
provided in this Section 3.2, each Company Share issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled in
accordance with Section 3.1) shall be converted into the right to receive .4107
Acquiror Shares (the "Stock Consideration") and the right to receive in cash
from Acquiror, without interest, an amount equal to $3.50 (the $3.50 and the
increase, if any, contemplated by Section 3.2(b) is hereinafter referred to as
the "Cash Consideration" and, together with the Stock Consideration, the "Merger
Consideration").
(b) In the event that the 20 trading day average closing price of an
Acquiror Share (as reported on NASDAQ) for the period ending five Business Days
prior to the date of the Company Stockholder Meeting (the "Meeting Price") is
less than $21.00, the Company shall have the right, in its sole discretion, and
no later than four Business Days prior to the Company Stockholder Meeting, to
give notice to Acquiror of the Company's intention to terminate this Agreement
(a "Price Deficiency Notice"); provided, however, that if the Company gives a
Price Deficiency Notice, Acquiror shall have the right, in its sole discretion
and by the giving of notice to the Company no later than two (2) Business Days
after the Company gives the Price Deficiency Notice, to increase the Cash
Consideration, by an amount equal to the difference between the Meeting Price
and $21.00, multiplied by .4107, rounded up to the nearest whole cent. If
Acquiror does not exercise its right to increase the Cash Consideration, the
Company shall have the right to terminate this Agreement as provided in Section
10.1(c)(i).
(c) Fractional Shares. No fractional shares shall be issued in the
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Merger All fractional shares that a holder of any Company Shares or Company
Stock Options would otherwise be entitled to receive as a result of the Merger
shall be aggregated. If a fractional Acquiror Share results from the
aggregation, the holder shall be entitled to receive, in lieu thereof, a cash
amount, without interest, determined by multiplying the fraction of an Acquiror
Share to which the holder would otherwise have been entitled by the Meeting
Price rounded up to the nearest whole cent. As promptly as practicable after
the determination of the amount of cash, if any, to be paid to holders of
fractional share interests, the Exchange Agent shall so notify Acquiror, and
Acquiror shall deposit that amount with the Exchange Agent and shall cause the
Exchange Agent
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to forward payments to the holders of fractional share interests, subject to and
in accordance with the terms of this Section 3.2.
3.3. Capitalization Changes. If at any time during the period between the
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date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Acquiror or securities convertible or exchangeable
into capital stock of Acquiror shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any dividend or distribution thereon (other than
regular quarterly cash dividends) or a record date with respect to any of the
foregoing shall occur during such period, the number of Acquiror Shares
constituting part of the Merger Consideration shall be appropriately adjusted to
provide to the holders of the Acquiror Shares and the Company Shares the same
economic effect as contemplated by this Agreement prior to the consummation of
such event.
3.4. Exchange of Certificates.
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(a) Exchange Agent. Promptly after the date hereof, Acquiror shall
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appoint a bank or trust company reasonably acceptable to the Company as an agent
(the "Exchange Agent") for the benefit of holders of Company Shares for the
purpose of exchanging, pursuant to this Article 3, certificates representing the
Company Shares (the "Certificates"). Acquiror will make available to the
Exchange Agent, as needed, the Merger Consideration, together with any dividends
or distributions with respect thereto, if any, to be paid in respect of Company
Shares pursuant to this Article 3 (the "Exchange Fund"), and, except as
contemplated by Section 3.4(e) or Section 3.4(g) hereof, the Exchange Fund shall
not be used for any other purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective
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Time, Acquiror shall send, or shall cause the Exchange Agent to send, to each
record holder of Certificates a letter of transmittal and instructions (which
shall be in customary form and specify that delivery shall be effected, and risk
of loss and title shall pass, only upon delivery of the Certificates to the
Exchange Agent), for use in the exchange contemplated by this Section 3.4. Upon
surrender of a Certificate to the Exchange Agent, together with a duly executed
letter of transmittal, the holder shall be entitled to receive in exchange
therefor the Merger Consideration and any unpaid dividends and distributions
thereon as provided in this Article 3 in respect of the Company Shares
represented by the Certificate (after giving effect to any required withholding
tax). Until surrendered as contemplated by this Section 3.4, each Certificate
shall be deemed after the Effective Time to represent only the right to receive
the Merger Consideration and any unpaid dividends and distributions thereon as
provided in this Article 3. If any portion of the Merger Consideration is to be
paid to a Person other than the registered holder of the Certificate, it shall
be a condition to payment that the Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the Person
requesting payment shall pay to the Exchange Agent any transfer or other taxes
required as a result of payment to a Person other than the registered holder of
the Certificate or establish to the satisfaction of the Exchange Agent that the
tax has been paid or is not payable.
(c) Distributions with Respect to Unexchanged Shares. Whenever a dividend
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or other distribution is declared by Acquiror in respect of the Acquiror Shares,
the record date for which is at or after the Effective Time, that declaration
shall include dividends or other distributions in
8
respect of all Acquiror Shares issuable pursuant to this Agreement. No dividends
or other distributions declared or made after the Effective Time with respect to
Acquiror Shares constituting part of the Merger Consideration shall be paid to
the holder of any unsurrendered Certificate, and no cash payment in lieu of
fractional shares shall be paid to any holder, until the Certificate is
surrendered as provided in this Section 3.4. Following surrender, there shall be
paid, without interest, to the Person in whose name the Acquiror Shares have
been registered (i) at the time of surrender, the amount of dividends or other
distributions with a record date after the Effective Time previously paid or
payable on the date of surrender with respect to whole Acquiror Shares, less the
amount of any withholding taxes that may be required thereon, and (ii) at the
appropriate payment date subsequent to surrender, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
whole Acquiror Shares, less the amount of any withholding taxes which may be
required thereon.
(d) No Further Rights in Company Shares. All Acquiror Shares issued or
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cash paid upon surrender of Certificates in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to Company Shares represented thereby. From and after the Effective
Time, the holders of Certificates shall cease to have any rights with respect to
Company Shares, except as otherwise provided herein or by law. As of the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers on the Company's stock
transfer books of any Company Shares. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Section 3.4.
(e) Return of Merger Consideration. Upon demand by Acquiror, the Exchange
------------------------------
Agent shall deliver to Acquiror any portion of the Merger Consideration made
available to the Exchange Agent pursuant to this Section 3.4 that remains
undistributed to holders of Company Shares six months after the Effective Time.
Holders of Certificates who have not complied with this Section 3.4 prior to the
demand by the Acquiror shall thereafter look only to Acquiror for payment of any
claim to the Merger Consideration and dividends or distributions, if any, in
respect thereof.
(f) No Liability. Neither Acquiror nor the Exchange Agent shall be liable
------------
to any Person in respect of any Company Shares (or dividends or distributions
with respect thereto) for any amounts paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) Withholding Rights. Acquiror shall be entitled to deduct and withhold
------------------
from the Merger Consideration (and any dividends or distributions thereon)
otherwise payable hereunder to any Person, and to deduct and withhold from any
cash or Acquiror Shares paid to any holder of a Company Option, any amounts
which it is required to deduct and withhold with respect to payment under any
provision of federal, state or local income, employment or other tax law. To
the extent that Acquiror withholds those amounts, the withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
Company Shares in respect of which deduction and withholding was made by
Acquiror.
9
(h) Lost Certificates. If any Certificate has been or is claimed to have
-----------------
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming that Certificate has been lost, stolen or destroyed and, if
required by Acquiror, the posting by such Person of a bond, in such reasonable
amount as Acquiror may direct, as indemnity against any claim that may be made
against it with respect to that Certificate, the Exchange Agent will deliver in
exchange for such lost, stolen or destroyed Certificate, the proper amount of
the Merger Consideration, together with any unpaid dividends and distributions
on any Acquiror Shares, as contemplated by this Article 3.
3.5. Company Stock Options.
---------------------
(a) At the Effective Time, each option to purchase Company Shares (each, a
"Company Option") outstanding under any stock option or compensation plan or
arrangement of the Company, whether or not vested or exercisable, shall be
converted, at the holder's election (made prior to the Effective Time) to
either (i) the right to receive, as soon as practicable following the Effective
Time, cash and a number of Acquiror Shares determined as follows:
x Cash Consideration
cash = _______________________ x Spread
Total Option Consideration
number of = .4107 x the Meeting Price x Spread
-------------------------
Acquiror Shares Total Option Consideration
________________________________
Meeting Price
or (ii) a fully vested and exercisable option to purchase, on the same terms and
conditions as were applicable to such Company Option as of the Effective Time
(A) a number of Acquiror Shares determined by dividing the Total Option
Consideration by the Meeting Price and multiplying the result by the number of
Company Shares subject to the Company Option (rounded to the nearest whole
Acquiror share), (B) at a price per share equal to the aggregate eeercise price
with respect to the Company Option divided by the total number of Acquiror
Shares subject to the new option (as determined under (A) immediately above),
rounded up to the nearest whole cent; provided, in the case of any Company
Option that would continue to qualify as an "incentive stock option" under
Section 422 of the Code, such adjustment shall be made in a manner consistent
with the requirements of Section 424(a) of the Code. If no such election is
made by the holder, the Company Option shall be treated as provided in (ii)
above.
For purposes of the foregoing:
"Total Option Consideration" means the Cash Consideration + (.4107 x the Meeting
Price)
"Spread" means (Total Option Consideration - exercise price number of
per Company Share x Company Shares
of the Company Option) subject to the
Company Option
10
(b) Prior to the Effective Time, the Company and the Acquiror shall take
all actions (including amending the terms of any Company stock option or
compensation plan or arrangement) necessary to give effect to the transactions
contemplated by Section 3.5(a), including obtaining all necessary consents.
3.6. Employee Stock Purchase Plan.
----------------------------
(a) The Company shall take all necessary action to provide that, not later
than five (5) Business Days prior to the Effective Time, (i) any outstanding
options to purchase Company Shares under the Company's Employee Stock Purchase
Plans (collectively, the "ESPP") shall terminate (the "ESPP Termination Date"),
and (ii) all amounts allocated to each participant's account under the ESPP
shall thereupon, at the election of the participant (x) be used to purchase from
the Company newly-issued whole Company Shares at a price equal to the lower of
85% of (A) the closing price per Share on the first day of the plan year, or (B)
the ESPP Termination Date, or (y) returned to the participant, and (iii) the
ESPPs will terminate. At the Effective Time, any Company Shares so purchased
will be treated as provided in Section 3.2 of this Agreement. The Company shall
take all actions necessary so as not to allow participants to increase the rate
of their contributions to the ESSP.
(b) Prior to the Effective Time, the Company shall take all actions
(including amending the terms of the ESPP) necessary to give effect to the
transactions contemplated by Section 3.6(a).
3.7. Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the contrary,
Company Shares that are outstanding immediately prior to the Effective Time and
which are held by persons who shall not have voted in favor of this Agreement
and the Merger or consented thereto in writing and who shall have properly
demanded in writing appraisal for such shares in accordance with Section 262 of
the DGCL (collectively, the "Dissenting Shares") shall not be converted into or
represent the right to receive the Merger Consideration as provided hereunder.
Such persons shall be entitled to receive payment of the appraised value of such
Company Shares in accordance with the provisions of Section 262 of the DGCL,
except that all Dissenting Shares held by persons who shall have failed to
perfect or who effectively shall have withdrawn or lost their right to appraisal
of such shares under Section 262 shall thereupon be deemed to have been
converted into, as of the Effective Time, the right to receive the Merger
Consideration without any interest thereon upon surrender of the certificate
therefor in the manner provided hereunder.
(b) The Company shall give Acquiror (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands and any other
instruments served pursuant to the DGCL and received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Acquiror, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands. All payments made
to any Dissenting Shareholder shall be made by the Company out of the Company's
own funds and shall not be reimbursed by Acquiror or any Acquiror Subsidiary.
11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in (i) the Company Disclosure Schedule attached hereto
or (ii) the Company SEC Documents filed prior to the date hereof, the Company
represents and warrants to Acquiror as set forth below.
4.1. Corporate Existence and Power. The Company is a corporation validly
-----------------------------
existing and in good standing under the laws of the State of Delaware, and has
all corporate powers and authority required to own, lease and operate its assets
and properties and to carry on its business as now conducted. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes qualification necessary,
except where the failure to be qualified or in good standing would not be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
4.2. Corporate Authorization. The execution, delivery and performance by
-----------------------
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby are within the Company's corporate powers and,
except for the Company Stockholder Approval, have been duly authorized by all
necessary corporate action. Assuming that this Agreement constitutes the valid
and binding obligation of Acquiror, this Agreement constitutes the valid and
binding agreement of the Company, enforceable in accordance with its terms.
4.3. Governmental Authorization. The execution, delivery and performance
--------------------------
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any Governmental Entity, other than (a) the filing of (i) a
certificate of merger in accordance with the DGCL and (ii) appropriate documents
with the relevant authorities of other states or jurisdictions in which the
Company is qualified to do business; (b) compliance with any applicable
requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇
"▇▇▇ ▇▇▇") and any comparable foreign filings or approvals; (c) compliance with
any applicable requirements of the Securities Act and the Exchange Act; (d) such
as may be required under any applicable state securities or blue sky laws; and
(e) such other consents, approvals, actions, orders, authorizations,
registrations, declarations and filings which, if not obtained or made, would
not be reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect.
4.4. Non-Contravention. The execution, delivery and performance by the
-----------------
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) contravene or conflict
with the Company's or any Company Subsidiary's certificate of incorporation,
bylaws or any similar organizational documents, (ii) assuming compliance with
the matters referred to in Section 4.3, to the Knowledge of the Company
contravene or conflict with or constitute a violation of any provision of any
law, statute, ordinance, rule, regulation, judgment, injunction, order, writ,
permit, license or decree binding upon or applicable to the Company, any Company
Subsidiary or any of their respective properties or assets, (iii) violate,
conflict with or result in a breach of any provision of, or
12
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to a right of, or result in, the
termination, cancellation, modification, acceleration or the loss of a material
benefit under any note, bond, mortgage, indenture, deed of trust, concession,
lease, contract or other instrument, obligation or agreement of any kind or any
license, franchise, permit or other similar authorization to which the Company
or any Company Subsidiary is a party or by which the Company or any Company
Subsidiary or any of their respective assets may be bound or affected, or (iv)
result in the creation or imposition of any Lien on any asset of the Company or
any Company Subsidiary, other than, in the case of each of (ii), (iii) and (iv),
any such items that would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect.
4.5. Capitalization.
--------------
(a) The authorized capital stock of the Company consists of 300,000,000
Company Shares. As of the date hereof, (i) 71,506,544 Company Shares were issued
and outstanding (no Company Shares were held in treasury, and no Company Shares
were owned by any Company Subsidiary) and (ii) the Company had outstanding stock
options to purchase an aggregate of 6,848,427 Company Shares (all of which will
become vested and exercisable upon consummation of the Merger). All outstanding
Company Shares have been duly authorized and validly issued and are fully paid,
non-assessable and free of statutory preemptive rights. As of the date hereof,
8,000,945 Company Shares were reserved for issuance upon exercise of options
issued and outstanding pursuant to stock option plans of the Company and
1,571,742 Company shares were reserved for issuance pursuant to employee stock
purchase plans of the Company. As of the date hereof, 13,333,333 Company Shares
were reserved for issuance upon conversion of the Company's 6% Convertible
Subordinated Debentures.
(b) As of the date hereof, except as set forth in this Section 4.5, there
are no outstanding (i) shares of capital stock, debt securities or other voting
securities of the Company, (ii) securities of the Company or any Company
Subsidiary convertible into or exchangeable for shares of capital stock, debt
securities or voting securities of the Company, or (iii) subscriptions, calls,
contracts, commitments, understandings, restrictions, arrangements, rights,
warrants, options or other rights to acquire from the Company, or obligations of
the Company to issue, any capital stock, debt securities, voting securities or
securities convertible into or exchangeable for capital stock, debt securities
or voting securities of the Company or obligating the Company or any Company
Subsidiary to grant, extend or enter into any such agreement or commitment (the
items in clauses (i), (ii) and (iii) being referred to collectively as the
"Company Securities"), other than the rights issued in connection with the
Rights Agreement dated as of April 16, 1997, between the Company and First Union
National Bank of North Carolina (the "Company Rights Agreement"). There are no
outstanding obligations of the Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any Company Securities. There are no voting trusts,
proxies or other agreements or understandings to which the Company or any
Company Subsidiary is a party or is bound with respect to the voting of any
shares of capital stock of the Company.
(c) Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII, L.P. has entered into the Voting
Agreement.
13
4.6. Subsidiaries.
------------
(a) Each Company Subsidiary is a corporation duly incorporated or an
entity duly organized, and is validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, has all powers and
authority and all governmental licenses, authorizations, consents and approvals
required to own, lease and operate its assets and to carry on its business as
now conducted and is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of the property
owned, leased or operated by it or the nature of its activities makes such
qualification necessary, in each case with exceptions which would not be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
(b) All of the outstanding shares of capital stock of, or other ownership
interest in, each Company Subsidiary have been validly issued and are fully paid
and nonassessable and free of statutory preemptive rights. All of the
outstanding capital stock of, or other ownership interest, which is owned,
directly or indirectly, by the Company in, each of its Subsidiaries is owned
free and clear of any Lien and free of any other limitation or restriction
(including any limitation or restriction on the right to vote, sell or otherwise
dispose of the stock or other ownership interests) with exceptions which would
not be reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth on the Company Disclosure
Schedule, there are no outstanding (i) shares of capital stock, debt securities
or other voting securities of the Company or any Company Subsidiary convertible
into or exchangeable or exercisable for shares of capital stock, debt securities
or voting securities or ownership interests in any Company Subsidiary, (ii)
subscriptions, calls, contracts, commitments, understandings, restrictions,
arrangements, warrants, options, or other rights to acquire from the Company or
any Company Subsidiary, or obligations of the Company or any Company Subsidiary
to issue, any capital stock, debt securities, voting securities or other
ownership interests in, or any securities convertible into or exchangeable or
exercisable for any capital stock, voting securities, debt securities or
ownership interests in, any Company Subsidiary, or obligations of the Company or
any Company Subsidiary to grant, extend or enter into any such agreement or
commitment, or (iii) obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any outstanding securities of any
Company Subsidiary or any capital stock of, or other ownership interests in, any
Company Subsidiary.
4.7. Company SEC Documents.
---------------------
(a) The Company has made available to Acquiror the Company SEC Documents.
The Company has filed all reports, filings, registration statements and other
documents required to be filed by it with the SEC since June 30, 1998. No
Company Subsidiary is required under the Exchange Act or Securities Act to file
any form, report, registration statement or prospectus or other document with
the SEC.
(b) As of its filing date, each Company SEC Document complied as to form
in all material respects with the applicable requirements of the Securities Act
and/or the Exchange Act, as the case may be.
(c) No Company SEC Document filed since June 30, 1998 pursuant to the
Exchange Act contained, as of its filing date, any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. No Company SEC Document, as amended or supplemented,
if applicable, filed since June 30, 1998 pursuant to the Securities Act
contained, as of the date on which the document or amendment became effective,
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
4.8. Financial Statements; No Material Undisclosed Liabilities.
---------------------------------------------------------
(a) The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company included in the Company
10-Ks and the Company 10-Qs fairly present in all material respects, in
conformity with generally accepted accounting principles applied on a consistent
basis ("GAAP") (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and their consolidated results of operations and changes
in financial position for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements which in
the aggregate are not material).
(b) As of the date of this Agreement, except as set forth in the Company
SEC Documents filed prior to the date hereof, neither the Company nor any
Company Subsidiary is party to or bound by (i) any "material contract" (as such
term is defined in Item 601(b)(10) of regulation S-K of the SEC) or (ii) any
non-competition agreement or any other agreement or arrangement that similarly
limits the Company or any Company Subsidiary.
(c) There are no liabilities of the Company or any Company Subsidiary of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, in each case, other than:
(i) liabilities or obligations disclosed in the Company Balance
Sheet or the notes thereto;
(ii) liabilities or obligations incurred after June 30, 2000, in the
ordinary course of business consistent with past practice which would not
be reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect;
(iii) liabilities or obligations under this Agreement or incurred
in connection with the transactions contemplated hereby; and
(iv) other liabilities or obligations, which would not be reasonably
likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
4.9. Information to Be Supplied.
--------------------------
(a) The information to be supplied by the Company for inclusion or
incorporation by reference in the Proxy Statement/Prospectus will (i) in the
case of the Registration Statement, at the time it becomes effective, not
contain any untrue statement of a material fact or omit to state
14
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading and (ii) in the case of the remainder of
the Proxy Statement/Prospectus, at the time of the mailing thereof, at the time
of the Company Stockholder Meeting and at the time of the Acquiror Stockholder
Meeting, not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement/Prospectus will comply (with respect to
information relating to the Company) as to form in all material respects with
the provisions of the Securities Act and the Exchange Act.
(b) Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any statements made or incorporated by reference in the
Proxy Statement/Prospectus based on information supplied by Acquiror for
inclusion or incorporation by reference therein.
4.10. Absence of Certain Changes. Since June 30, 2000, except as
--------------------------
otherwise expressly contemplated by this Agreement, the Company and each of its
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been (a) any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the business or
assets of the Company or any Company Subsidiary that would be reasonably likely
to have, individually or in the aggregate, a Company Material Adverse Effect,
(b) any action, event, occurrence, development, transaction, commitment,
dispute, change, violation, inaccuracy or other condition (financial or
otherwise) of any character (whether or not in the ordinary course of business)
that would be reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect, or (c) any action prohibited by Section 6.1 of
this Agreement.
4.11. Litigation. There is no claim, action, suit, investigation,
----------
arbitration or proceeding pending, or to the Knowledge of the Company
threatened, against, relating to or affecting the Company or any Company
Subsidiary or any of their respective assets or properties before any arbitrator
or Governmental Entity that would be reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary is subject to any judgment, decree, injunction, rule or order
of any arbitrator or Governmental Entity which prohibits or restricts the
consummation of the transactions contemplated hereby or has had or would be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
4.12 Taxes. All material tax returns, statements, reports and forms
-----
(collectively, the "Company Returns") required to be filed with any taxing
authority by, or with respect to, the Company and the Company Subsidiaries have
been filed in accordance with all applicable laws; the Company and the Company
Subsidiaries have timely paid all taxes shown as due and payable on the Company
Returns that have been so filed, and, as of the time of filing, the Company
Returns correctly and completely reflected the facts regarding the income,
business, assets, operations, activities and the status of the Company and the
Company Subsidiaries (other than taxes which are being contested in good faith
and for which adequate reserves are reflected on the Company Balance Sheet); the
Company and the Company Subsidiaries have made adequate provision for all taxes
payable by them for which no Company Return has yet been filed; the charges,
accruals and reserves for taxes with respect to the Company and its Subsidiaries
reflected on the Company Balance Sheet are adequate under GAAP to cover the tax
liabilities
16
accruing through the date thereof; there is no action, suit, proceeding, audit
or claim now proposed or pending against or with respect to the Company or any
of the Company Subsidiaries in respect of any material amount of tax; neither
the Company nor any of the Company Subsidiaries has been a member of an
affiliated, consolidated, combined or unitary group, other than one of which the
Company was the common parent; neither the Company nor any Company Subsidiary is
a party to any tax allocation or sharing agreement; neither the Company nor any
Company Subsidiary has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
taxes or tax returns; and neither the Company nor any Company Subsidiary has
engaged in any transaction that could give rise to (i) a registration obligation
with respect to any Person under Section 6111 of the Code or the regulations
thereunder, (ii) a list maintenance obligation with respect to any Person under
Section 6112 of the Code or the regulations thereunder, or (iii) a disclosure
obligation as a "reportable transaction" under Section 6011 of the Code and the
regulations thereunder. The total adjusted basis for federal income tax purposes
of the assets to be transferred to Acquiror by the Company in the Merger will,
at the time of the Merger, equal or exceed the sum of the liabilities to be
assumed (within the meaning of (S)357(d) of the Code) by Acquiror.
4.13. Employee Benefits.
-----------------
(a) With respect to each material "employee benefit plan", as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
each employment, severance or similar contract, plan, arrangement or policy and
each other plan or arrangement (written or oral) providing for compensation,
bonuses, profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) which is
maintained, administered or contributed to by the Company or any ERISA Affiliate
(as defined below) and covers any consultant, director, employee or former
employee of the Company or any Company Subsidiary, the Company has delivered or
will make available upon request copies of the plans (and, if applicable,
related trust agreements) and all amendments thereto and written interpretations
thereof to Acquiror together with the most recent annual report (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
plan. The material plans are referred to collectively herein as the "Company
Employee Plans". An "ERISA Affiliate" of any Person means any other Person
which, together with such Person, would be treated as a single employer under
Section 414 of the Code.
(b) With respect to each Company Employee Plan that constitutes a
"multiemployer plan", as defined in Section 3(37) of ERISA (a "Multiemployer
Plan"), or any other plan subject to Title IV of ERISA (a "Retirement Plan"), no
"accumulated funding deficiency", as defined in Section 412 of the Code, has
been incurred with respect to any Company Employee Plan which is a Retirement
Plan, whether or not waived. With respect to any Company Employee Plans subject
to Title IV of ERISA, the actuarially determined present value of all "benefit
liabilities" within the meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in the plans' most recent
actuarial valuation) did not exceed the then current value of the assets of such
plans, and there has not been an adverse change in the financial condition of
such plans which would have caused a material change in the
17
funded status of such plans. To the Knowledge of the Company, no condition
exists and no event has occurred that would be reasonably likely to constitute
grounds for termination of any Company Employee Plan which is a Retirement Plan
or, with respect to any Company Employee Plan which is a Multiemployer Plan,
presents a material risk of a complete or partial withdrawal under Title IV of
ERISA and neither the Company nor any of its ERISA Affiliates has incurred any
liability under Title IV of ERISA arising in connection with the termination of,
or complete or partial withdrawal from, any plan covered or previously covered
by Title IV of ERISA that would be reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect. To the Knowledge of the
Company, nothing has been done or omitted to be done and no transaction or
holding of any asset under or in connection with any Company Employee Plan has
occurred that will make the Company or any Company Subsidiary, or any officer or
director of the Company or any Company Subsidiary, subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section 4975 of the
Code (assuming the taxable period of any such transaction expired as of the date
hereof) that would be reasonably likely to have a Company Material Adverse
Effect.
(c) Each Company Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. The Company has
furnished, or will make available upon request, to Acquiror copies of the most
recent Internal Revenue Service determination letters with respect to each
Company Employee Plan. Each Company Employee Plan has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations, including ERISA and the
Code, which are applicable to such Company Employee Plan.
(d) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company that, individually or collectively,
would be reasonably likely to give rise to the payment of any amount that would
not be deductible pursuant to the terms of Section 280G of the Code. The
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any Company Employee Plan that will
result in any payment (whether of severance pay or otherwise), acceleration of,
forgiveness of indebtedness owing from, vesting of, distribution of, or increase
in or obligation to fund, any benefits with respect to any current or former
employee, director or consultant of the Company or any Company Subsidiary.
(e) There has been no amendment to, written interpretation or announcement
(whether or not written) relating to, or change in employee participation or
coverage under, any Company Employee Plan which would increase materially the
expense of maintaining such Company Employee Plan above the level of the expense
incurred in respect thereof for the fiscal year ended June 30, 2000.
(f) Neither the Company nor any Company Subsidiary has any obligations to
provide retiree health and life insurance or other retiree death benefits under
any Company Employee Plan, other than benefits mandated by Section 4980B of the
Code or under applicable State law,
18
and each such Company Employee Plan may be amended or terminated without
incurring liability thereunder.
(g) To the Knowledge of the Company, no Company Employee Plan is
threatened with any dispute, lawsuit, claim (other than routine claims for
benefits), investigation or complaint to, or by, any Person or Governmental
Entity. No Company Employee Plan is the subject of an audit or, to the Knowledge
of the Company, under investigation by the Internal Revenue Service, the
Department of Labor, the Pension Benefit Guaranty Corporation or any other
Governmental Entity, nor, to the Knowledge of the Company, is any such audit or
investigation threatened.
4.14. Labor Matters. There is no pending or, to the Knowledge of the
-------------
Company, threatened union organizational effort, material labor dispute, strike
or work stoppage against the Company or any Company Subsidiary or charge or
complaint against the Company or any Company Subsidiary by the National Labor
Relations Board or any similar Governmental Entity alleging any unfair labor
practice by the Company or any Company Subsidiary in connection with the
operation of their respective business. The Company and all Company Subsidiaries
have in the past been and are currently in compliance in all material respects
with all applicable collective bargaining agreements and laws respecting
employment, employment practices, labor relations, safety and health (other than
environmental), wages, hours and terms and conditions of employment. Neither the
Company nor any Company Subsidiary has experienced within the past 12 months a
"plant closing" or "mass layoff" within the meaning of the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. (S)(S) 2101 et seq. Neither the execution
and delivery of this Agreement, nor the consummation by the Company of
transactions contemplated in accordance with the terms hereby will violate any
of the Company's or Company Subsidiaries' collective bargaining agreement(s)
with any labor organization(s).
4.15. Compliance with Laws; Licenses, Permits and Registrations.
---------------------------------------------------------
(a) Neither the Company nor any Company Subsidiary is in violation of, or
has violated, any applicable provisions of any laws, statutes, ordinances,
regulations, judgments, injunctions, orders or consent decrees, except for
violations which would not be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
(b) The Company and each Company Subsidiary has been and is in compliance
with all permits, licenses, franchises, variances, exceptions, orders, consents,
approvals, authorizations of and registrations with and under all federal,
state, local and foreign laws, and from all Governmental Entities required by
the Company and each of its Subsidiaries to carry on their respective businesses
as currently conducted, except where the failure to have or be in compliance
with the permits, licenses, franchises, variances, exceptions, orders, consents,
approvals, authorizations or registrations would not be reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect.
(c) The Company and each Company Subsidiary are, to the extent applicable
to their operations, certified for participation or enrollment in the Medicare
and Medicaid programs, have a current and valid provider contract with the
Medicare and Medicaid programs, are in substantial compliance with the
conditions of participation of such programs and have received all approvals or
qualifications necessary for capital reimbursement of the Company's and its
19
Subsidiaries' assets, except where the failure to be so certified, to have such
contracts, to be in such compliance or to have such approvals or qualifications
would not be reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. Neither the Company nor any Company Subsidiary
has received notice from the regulatory authorities which enforce the statutory
or regulatory provisions in respect of either the Medicare or Medicaid program
of any pending or threatened investigations, and neither the Company nor any of
its Subsidiaries has any reason to believe that any such investigations or
surveys are pending, threatened or imminent which may have, individually or in
the aggregate, a Company Material Adverse Effect.
4.16. Title to Properties.
-------------------
(a) The Company and each Company Subsidiary have good and marketable title
to, or valid leasehold interests in, all their properties and assets, except for
those which are no longer used or useful in the conduct of their businesses,
except for defects in title, easements, restrictive covenants and similar Liens,
encumbrances or impediments that (i) are not substantial in character, amount or
extent and do not detract from the value, or interfere with the present use of
the property subject thereto or affected thereby or otherwise impair the
Company's or any Company Subsidiary's business operations and (ii) in the
aggregate, would not be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect. All of these assets and
properties, other than assets and properties in which the Company or any of its
Subsidiaries has leasehold interests, are free and clear of all Liens, except
for Liens that, in the aggregate, would not have a Company Material Adverse
Effect.
(b) Except as would not be reasonably likely to have a Company Material
Adverse Effect, (i) the Company and each of its Subsidiaries are in compliance
with the terms of all leases to which they are a party and under which they are
in occupancy, and all such leases are in full force and effect and (ii) the
Company and each of its Subsidiaries enjoy peaceful and undisturbed possession
under all such leases.
4.17. Intellectual Property. Except as would not be reasonably likely
---------------------
to have, individually or in the aggregate, a Company Material Adverse Effect,
the Company and each of its Subsidiaries own or have a valid license to use each
trademark, service ▇▇▇▇, trade name, mask work, invention, patent, trade secret,
copyright, know-how (including any registrations or applications for
registration of any of the foregoing) or any other similar type of proprietary
intellectual property right (collectively, the "Company Intellectual Property")
necessary to carry on the business of the Company and the Company Subsidiaries,
taken as a whole, as currently conducted. Neither the Company nor any Company
Subsidiary has received any written notice of infringement of or challenge to
the validity or enforceability of, and, to the Company's Knowledge, there are no
claims pending with respect to the rights of others to the use of, any Company
Intellectual Property that, in any such case would be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect. To the
Company's Knowledge, there is no basis for any such claims. To the Company's
Knowledge, no other person is infringing any Company Intellectual Property,
except such infringement as would not have, individually or in the aggregate, a
Company Material Adverse Effect. Neither the Company nor any Company Subsidiary,
nor the respective businesses thereof as currently conducted, violates or
infringes the intellectual property or proprietary rights of any other
20
Person, except such violations and infringements as would not have, individually
or in the aggregate, a Company Material Adverse Effect.
4.18. Finders' Fees; Opinion of Financial Advisor.
-------------------------------------------
(a) Except pursuant to and in accordance with the terms of the agreement
with ▇▇▇▇▇▇▇, Sachs & Co. (a copy of which has been provided to Acquiror), there
is no investment banker, broker, finder or other intermediary which has been
retained by, or is authorized to act on behalf of, the Company or any Company
Subsidiary which might be entitled to any fee or commission from, the Company,
any Company Subsidiary, Acquiror or any of its Affiliates in connection with or
upon consummation of the transactions contemplated by this Agreement.
(b) The Company has received the opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. to the
effect that, as of the date hereof and subject to the qualifications stated
therein, the $3.50 in cash and the Stock Consideration to be received by the
holders of Company Shares (other than Acquiror and any Acquiror Subsidiary)
pursuant to this Agreement is fair from a financial point of view to such
holders.
4.19. Required Vote; Board Approval.
-----------------------------
(a) The only vote of the holders of any capital stock of the Company
required by law, rule or regulation to approve this Agreement, the Merger and/or
any of the other transactions contemplated hereby is the affirmative vote
("Company Stockholder Approval") of the holders of a majority of the outstanding
Company Shares in favor of the adoption of this Agreement and the Merger.
(b) The Company's Board of Directors has (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are in
the best interests of the Company and its stockholders, (ii) approved this
Agreement and the transactions contemplated hereby in accordance with the
provisions of Section 251 of the DGCL and (iii) resolved to recommend to such
Stockholders that they vote in favor of adopting and approving this Agreement
and the Merger in accordance with the terms hereof.
4.20. State Takeover Statutes. The Company has taken all actions
-----------------------
required to be taken by it in order to exempt this Agreement, the Voting
Agreement and the transactions contemplated hereby and thereby from the
provisions of Section 203 of the DGCL, and accordingly, that section does not
apply to the Merger or any of the transactions contemplated hereby. No other
"control share acquisition", "fair price" or other anti-takeover laws or
regulations enacted under state or federal laws in the United States apply to
this Agreement, the Voting Agreement or any of the transactions contemplated
hereby and thereby.
4.21. Company's Stockholder Rights Plan. The Board of Directors of the
---------------------------------
Company has complied with or amended the Company Rights Agreement in accordance
with its terms to render it inapplicable to the transactions contemplated by
this Agreement. The Company has delivered to Acquiror a true and correct copy of
the Company Rights Agreement, as amended, in effect as of execution and delivery
of this Agreement.
21
4.22. Insurance. True and complete copies of all insurance policies and
---------
binders of all insurance covering all material assets, business, equipment,
properties, operations, employees, officers and directors of the Company and the
Company Subsidiaries have been made available for inspection by Acquiror prior
to the Closing Date. The coverage under each such policy and binder is in full
force and effect, and no notice of cancellation or non-renewal has been received
by the Company or any Company Subsidiary.
4.23. Agreements and Commitments. Neither the Company nor any Company
--------------------------
Subsidiary nor, to the Knowledge of the Company, any other party, is in breach
or violation of, or in default in the performance or observance of any term or
provision of (and no event has occurred which, with lapse of time or notice by a
third party, would result in a breach or violation of, or the default under, or
give rise to any right of termination, amendment, cancellation, acceleration or
loss of benefits or result in the creation of any lien upon any of the
properties or assets of the Company or any Company Subsidiary under), any
contract to which the Company or any Company Subsidiary is a party or by which
it or any of its properties or assets are bound, other than breaches, violations
and defaults which have not had and would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
4.24. Affiliate Agreements. There are no material oral or written
--------------------
agreements or transactions between the Company or any Company Subsidiary on the
one hand, and any (i) officer or director of the Company or any Company
Subsidiary, (ii) record or beneficial owner of five percent or more of the
voting securities of the Company or (iii) to the Knowledge of the Company, an
Affiliate of any such officer, director or beneficial owner, on the other hand,
other than payment of compensation for services rendered in the ordinary course
of employment for the Company or any Company Subsidiary.
4.25. Environmental Matters.
---------------------
(a) Except as would not be reasonable likely to have, individually or in
the aggregate, a Company Material Adverse Effect; (i) the Company and each
Company Subsidiary complies with all applicable Environmental Laws; (ii) there
has not been any Release or, to the Knowledge of the Company, any threatened
Release of any Hazardous Substance, on, at or beneath any property (including
soils, groundwater, surface water, buildings and other structures, and
equipment) currently owned, leased, operated or used by the Company or any
Company Subsidiary; (iii) neither the Company nor any Company Subsidiary has
received any written notice, demand, letter, claim or request for information
alleging that the Company or any Company Subsidiary is in violation of, or
liable under, any Environmental Law; (iv) neither the Company nor any Company
Subsidiary is subject to any order, decree, injunction or other arrangement with
any Governmental Entity or is subject to any indemnity or other agreement with
any third party relating to liability under any Environmental Law or relating to
Hazardous Substances; and (v) there are no circumstances or conditions involving
the Company or any of the Company Subsidiaries (including, without limitation,
any Release or threatened Release of any Hazardous Substance at any location)
that would reasonably be likely to result in any claim, investigation, cost or
liability of any nature (whether civil or criminal, arising under theory of
negligence or strict liability, or otherwise), pursuant to any Environmental
Law.
22
(b) For the purposes of this Agreement, (i) "Environmental Law" means all
national, provincial, regional, federal, state, local or municipal statutes,
laws (including principles of common law and decisional law), regulations,
rules, orders, decrees, judgments, ordinances, permits, licenses, registrations,
approvals or requirements or authorizations of any Governmental Entity relating
to the environment, natural resources, safety or health of humans or other
living organisms, including the manufacture, distribution in commerce, and use
of, or Release to the natural environment of, Hazardous Substances, (ii)
"Hazardous Substance" means any pollutant, contaminant, hazardous substance,
hazardous waste, medical waste, special waste, toxic substance, petroleum or
petroleum-derived substance, waste, or additive, asbestos, PCBs, radioactive
material or other compound, element, material or substance in any form
whatsoever (including products) regulated, restricted or addressed by or under
any Environmental Law; and (iii) "Release" means any release, pumping, pouring,
emptying, injecting, escaping, leaching, migrating, dumping, seepage, spill,
leak, flow, discharge, disposal or emission.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Except as disclosed in (i) the Acquiror Disclosure Schedule attached hereto
or (ii) the Acquiror SEC Documents filed or made prior to the date hereof,
Acquiror represents and warrants to the Company as set forth below.
5.1. Corporate Existence and Power. Acquiror is a corporation validly
-----------------------------
existing and in good standing under the laws of the State of Delaware, and has
all corporate powers and authority required to own, lease and operate its assets
and property and to carry on its business as now conducted. Acquiror is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the properties owned or leased by it or
the nature of its activities makes qualification necessary, except where the
failure to be qualified or in good standing would not be reasonably likely to
have, individually or in the aggregate, an Acquiror Material Adverse Effect.
5.2. Corporate Authorization. The execution, delivery and performance by
-----------------------
Acquiror of this Agreement and the consummation by Acquiror of the transactions
contemplated hereby are within the corporate powers of Acquiror and, except for
the Acquiror Stockholder Approval, have been duly authorized by all necessary
corporate action. Assuming that this Agreement constitutes the valid and binding
obligation of the Company, this Agreement constitutes a valid and binding
agreement of Acquiror, enforceable in accordance with its terms.
5.3. Governmental Authorization. The execution, delivery and performance by
--------------------------
Acquiror of this Agreement and the consummation by Acquiror of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
Governmental Entity, other than (a) those set forth in clauses (a) through (d)
of Section 4.3 and (b) such other consents, approvals, actions, orders,
authorizations, registrations, declarations and filings which, if not obtained
or made, would not be reasonably likely to have, individually or in the
aggregate, an Acquiror Material Adverse Effect.
23
5.4. Non-Contravention. The execution, delivery and performance by
-----------------
Acquiror of this Agreement and the consummation by Acquiror of the transactions
contemplated hereby do not and will not (i) contravene or conflict with the
Acquiror's or any Acquiror Subsidiary's certificate of incorporation or bylaws
or any similar organizational documents, (ii) assuming compliance with the
matters referred to in Section 5.3, to the Knowledge of Acquiror, contravene or
conflict with any provision of law, statute, ordinance, rule, regulation,
judgment, injunction, order, writ, permit, license or decree binding upon or
applicable to Acquiror, any Acquiror Subsidiary or any of their respective
properties or assets, (iii) violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or give rise to a right of,
or result in, the termination, cancellation, modification, acceleration or the
loss of a material benefit under any note, bond, mortgage, indenture, deed of
trust, concession, lease, contract or other instrument, obligation or agreement
of any kind or any license, franchise, permit or other similar authorization to
which Acquiror or any Acquiror Subsidiary is a party or by which Acquiror or any
Acquiror Subsidiary is a party or by which Acquiror or any Acquiror Subsidiary
or any of their respective assets may be bound or affected, or (iv) result in
the creation or imposition of any Lien on any asset of Acquiror or any Acquiror
Subsidiary other than, in the case of each of (ii), (iii) and (iv), any such
items that would not, individually or in the aggregate, be reasonably likely to
have an Acquiror Material Adverse Effect.
5.5. Capitalization of Acquiror.
--------------------------
(a) The authorized capital stock of Acquiror consists of 90,000,000
Acquiror Shares. As of the date hereof, Acquiror has outstanding (i) 34,704,955
Acquiror Shares and no preferred shares (no Acquiror Shares were held in
treasury and no Acquiror Shares were owned by any Acquiror Subsidiary) and (ii)
stock options to purchase an aggregate of 5,734,301 Acquiror Shares (of which
1,493,497 were vested and exercisable). All outstanding Acquiror shares have
been duly authorized and validly issued and are fully paid, non-assessable and
free of statutory preemptive rights. As of the date hereof, 6,664,995 Acquiror
shares were reserved for issuance upon exercise of options issued and
outstanding pursuant to stock option plans of Acquiror.
(b) As of the date hereof, except as set forth in this Section 5.5, there
are no outstanding (i) shares of capital stock, debt securities or other voting
securities of Acquiror, (ii) securities of Acquiror or any Acquiror Subsidiary
convertible into or exchangeable for shares of capital stock, debt securities or
voting securities of Acquiror, or (iii) subscriptions, calls, contracts,
commitments, understandings, restrictions, arrangements, rights, warrants,
options or other rights to acquire from Acquiror, or obligations of Acquiror to
issue, any capital stock, debt securities, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Acquiror or obligating Acquiror or any Acquiror Subsidiary to grant, extend or
enter into any such agreement or commitment (the items in clauses (i), (ii) and
(iii) being referred to collectively as the "Acquiror Securities") other than
the rights issued in connection with the Rights Agreement dated as of May 11,
1999 between Acquiror and National City Bank (the "Acquiror Rights Agreement").
There are no outstanding obligations of Acquiror or any Acquiror Subsidiary to
repurchase, redeem or otherwise acquire any Acquiror Securities. There are no
voting trusts, proxies or other agreements or understandings to which the
Acquiror or any Acquiror Subsidiary is a party or is bound with respect to the
voting of any shares of capital stock of Acquiror.
24
(c) The Acquiror Shares to be issued as part of the Merger Consideration
have been duly authorized and, when issued and delivered in accordance with the
terms of this Agreement, will have been validly issued, fully paid and
nonassessable and free of any preemptive or other similar right.
5.6. Subsidiaries.
------------
(a) Each Acquiror Subsidiary is a corporation duly incorporated or an
entity duly organized, and is validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, has all powers and
authority and all governmental licenses, authorizations, consents and approvals
required to own, lease and operate its assets and to carry on its business as
now conducted and is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, in each case with exceptions which would not be reasonably likely to
have, individually or in the aggregate, an Acquiror Material Adverse Effect.
(b) All of the outstanding shares of capital stock of, or other ownership
interest in, each Acquiror Subsidiary have been validly issued and are fully
paid and nonassessable and free of statutory preemptive rights. All of the
outstanding capital stock of, or other ownership interest, which is owned,
directly or indirectly, by the Acquiror, in each of its Subsidiaries is owned
free and clear of any Lien and free of any other limitation or restriction
(including any limitation or restriction on the right to vote, sell or otherwise
dispose of the stock or other ownership interests) with exceptions which would
not be reasonably likely to have, individually or in the aggregate, an Acquiror
Material Adverse Effect. Except as set forth on the Acquiror Disclosure
Schedule, there are no outstanding (i) shares of capital stock, debt securities
or other voting securities of Acquiror or any Acquiror Subsidiary convertible
into or exchangeable or exercisable for shares of capital stock, debt securities
or voting securities or ownership interests in any Acquiror Subsidiary, (ii)
subscriptions, calls, contracts, commitments, understandings, restrictions,
arrangements, options, warrants or other rights to acquire from Acquiror or any
Acquiror Subsidiary, or obligations of Acquiror or any Acquiror Subsidiary to
issue, any capital stock, debt securities, voting securities or other ownership
interests in, or any securities convertible into or exchangeable or exercisable
for any capital stock, debt securities, voting securities or ownership interests
in, any Acquiror Subsidiary or obligations of Acquiror or any Acquiror
Subsidiary to grant, extend or enter into any such agreement or commitment, or
(iii) obligations of Acquiror or any Acquiror Subsidiary to repurchase, redeem
or otherwise acquire any outstanding securities of any Acquiror Subsidiary or
any capital stock of, or other ownership interests in, any Acquiror Subsidiary.
5.7. Acquiror SEC Documents.
----------------------
(a) Acquiror has made available to Company the Acquiror SEC Documents.
Acquiror has filed all reports, filings, registration statements and other
documents required to be filed by it with the SEC since April 26, 1999. No
Acquiror Subsidiary is at present required to file any form, report,
registration statement or prospectus or other document with the SEC.
25
(b) As of its filing date, each Acquiror SEC Document complied as to form
in all material respects with the applicable requirements of the Securities Act
and/or the Exchange Act, as the case may be.
(c) No Acquiror SEC Document filed since April 26, 1999 pursuant to the
Exchange Act contained, as of its filing date, any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. No Acquiror SEC Document, as amended or supplemented,
if applicable, filed since April 26, 1999 pursuant to the Securities Act
contained, as of the date the document or amendment became effective, any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading.
5.8. Financial Statements; No Material Undisclosed Liabilities.
---------------------------------------------------------
(a) The audited consolidated financial statements and unaudited
consolidated interim financial statements of Acquiror included in the Acquiror
10-Ks and the Acquiror 10-Qs fairly present in all material respects, in
conformity with GAAP (except as may be indicated in the notes thereto), the
consolidated financial position of Acquiror and its consolidated Subsidiaries as
of the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements which in
the aggregate are not material).
(b) As of the date of this Agreement, except as set forth in the Acquiror
SEC Documents filed prior to the date hereof, neither the Acquiror nor any
Acquiror Subsidiary is party to or bound by (i) any "material contract" (as such
term is defined in Item 601(b)(10) of regulation S-K of the SEC) or (ii) any
non-competition agreement or any other agreement or arrangement that similarly
limits Acquiror or any Acquiror Subsidiary.
(c) There are no liabilities of Acquiror or any Acquiror Subsidiary of any
kind whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, in each case, other than:
(i) liabilities or obligations disclosed in the Acquiror Balance
Sheet or the notes thereto;
(ii) liabilities or obligations incurred after December 31, 1999, in
the ordinary course of business consistent with past practice, which would
not be reasonably likely to have, individually or in the aggregate, an
Acquiror Material Adverse Effect;
(iii) liabilities or obligations under this Agreement or incurred in
connection with the transactions contemplated hereby; and
(iv) other liabilities or obligations, which would not be reasonably
likely to have, individually or in the aggregate, an Acquiror Material
Adverse Effect.
26
5.9. Information to Be Supplied.
--------------------------
(a) The information to be supplied by Acquiror for inclusion or
incorporation by reference in the Proxy Statement/Prospectus will (i) in the
case of the Registration Statement, at the time it becomes effective, not
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 and (ii) in the case of the remainder of the Proxy
Statement/Prospectus, at the time of the mailing thereof, at the time of the
Company Stockholder Meeting and at the time of the Acquiror Stockholder Meeting,
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement/Prospectus will comply (with respect to
information relating to Acquiror) as to form in all material respects with the
provisions of the Securities Act and the Exchange Act.
(b) Notwithstanding the foregoing, Acquiror makes no representation or
warranty with respect to any statements made or incorporated by reference in the
Proxy Statement/Prospectus based on information supplied by the Company for
inclusion or incorporation by reference therein.
5.10. Absence of Certain Changes. Since December 31, 1999, except as
--------------------------
otherwise expressly contemplated by this Agreement, Acquiror and each of its
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been (a) any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the business or
assets of Acquiror or any Acquiror Subsidiary that would be reasonably likely to
have, individually or in the aggregate, an Acquiror Material Adverse Effect or
(b) any action, event, occurrence, development, transaction, commitment,
dispute, change, violation, inaccuracy or other condition (financial or
otherwise) of any character (whether or not in the ordinary course of business)
that would be reasonably likely to have, individually or in the aggregate, an
Acquiror Material Adverse Effect, or (c) any action prohibited by Section 7.1 of
this Agreement.
5.11. Litigation. There is no claim, action, suit, investigation,
----------
arbitration or proceeding pending, or to the Knowledge of Acquiror threatened,
against, relating to or affecting Acquiror or any Acquiror Subsidiary or any of
their respective assets or properties before any arbitrator or Governmental
Entity that would be reasonably likely to have, individually or in the
aggregate, an Acquiror Material Adverse Effect. Neither the Acquiror nor any
Acquiror Subsidiary is subject to any judgment, decree, injunction, rule or
order of any arbitrator or Governmental Entity which prohibits or restricts the
consummation of the transactions contemplated hereby or has had or would be
reasonably likely to have, individually or in the aggregate, an Acquiror
Material Adverse Effect.
5.12. Taxes. All material tax returns, statements, reports and forms
-----
(collectively, the "Acquiror Returns") required to be filed with any taxing
authority by, or with respect to, Acquiror and the Acquiror Subsidiaries have
been filed in accordance with all applicable laws; Acquiror and the Acquiror
Subsidiaries have timely paid all taxes shown as due and payable on the Acquiror
Returns that have been so filed, and, as of the time of filing, the Acquiror
Returns correctly and completely reflected the facts regarding the income,
business, assets, operations, activities and the status of Acquiror and the
Acquiror Subsidiaries (other than taxes which are
27
being contested in good faith and for which adequate reserves are reflected on
the Acquiror Balance Sheet); Acquiror and the Acquiror Subsidiaries have made
adequate provision for all taxes payable by them for which no Acquiror Return
has yet been filed; the charges, accruals and reserves for taxes with respect to
Acquiror and its Subsidiaries reflected on the Acquiror Balance Sheet are
adequate under GAAP to cover the tax liabilities accruing through the date
thereof; there is no action, suit, proceeding, audit or claim now proposed or
pending against or with respect to Acquiror or any of the Acquiror Subsidiaries
in respect of any material amount of tax; neither Acquiror nor any of the
Acquiror Subsidiaries has been a member of an affiliated, consolidated, combined
or unitary group, other than one of which Acquiror was the common parent;
neither the Acquiror nor any Acquiror Subsidiary is a party to any tax
allocation or sharing agreement; neither the Acquiror nor any Acquiror
Subsidiary has executed any outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect to any taxes or tax
returns; and neither the Acquiror nor any Acquiror Subsidiary has engaged in any
transaction that could give rise to (i) a registration obligation with respect
to any Person under Section 6111 of the Code or the regulations thereunder, (ii)
a list maintenance obligation with respect to any Person under Section 6112 of
the Code or the regulations thereunder, or (iii) a disclosure obligation as a
"reportable transaction" under Section 6011 of the Code and the regulations
thereunder.
5.13. Employee Benefits.
-----------------
(a) With respect to each material "employee benefit plan", as defined in
Section 3(3) of ERISA, each employment, severance or similar contract, plan,
arrangement or policy and each other plan or arrangement (written or oral)
providing for compensation, bonuses, profit-sharing, stock option or other stock
related rights or other forms of incentive or deferred compensation, vacation
benefits, insurance coverage (including any self-insured arrangements), health
or medical benefits, disability benefits, workers' compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits) which is maintained, administered or contributed to by Acquiror or any
ERISA Affiliate and covers any consultant, director, employee or former employee
of Acquiror or any Acquiror Subsidiary, Acquiror has delivered or will make
available upon request copies of the plans (and, if applicable, related trust
agreements) and all amendments thereto and written interpretations thereof to
the Company together with the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto) prepared in connection with any plan. The
material plans are referred to collectively herein as the "Acquiror Employee
Plans".
(b) With respect to each Acquiror Employee Plan that constitutes a
Multiemployer Plan or any Retirement Plan, no "accumulated funding deficiency",
as defined in Section 412 of the Code, has been incurred with respect to any
Acquiror Employee Plan which is a Retirement Plan, whether or not waived. With
respect to any Acquiror Employee Plans subject to Title IV of ERISA, the
actuarially determined present value of all "benefit liabilities" within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the plans' most recent actuarial valuation)
did not exceed the then current value of the assets of such plans, and there has
not been an adverse change in the financial condition of such plans which would
have caused a material change in the funded status of such plans. To the
Knowledge of Acquiror, no condition exists and no event has occurred that would
be reasonably
28
likely to constitute grounds for termination of any Acquiror Employee Plan which
is a Retirement Plan or, with respect to any Acquiror Employee Plan which is a
Multiemployer Plan, presents a material risk of a complete or partial withdrawal
under Title IV of ERISA and neither Acquiror nor any of its ERISA Affiliates has
incurred any liability under Title IV of ERISA arising in connection with the
termination of, or complete or partial withdrawal from, any plan covered or
previously covered by Title IV of ERISA that would be reasonably likely to have
, individually or in the aggregate, an Acquiror Material Adverse Effect. To the
Knowledge of Acquiror, nothing has been done or omitted to be done and no
transaction or holding of any asset under or in connection with any Acquiror
Employee Plan has occurred that will make Acquiror or any Acquiror Subsidiary,
or any officer or director of the Acquiror or any Acquiror Subsidiary, subject
to any liability under Title I of ERISA or liable for any tax pursuant to
Section 4975 of the Code (assuming the taxable period of any such transaction
expired as of the date hereof) that would be reasonably likely to have,
individually or in the aggregate, an Acquiror Material Adverse Effect.
(c) Each Acquiror Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. Acquiror has furnished,
or will make available upon request, to the Company copies of the most recent
Internal Revenue Service determination letters with respect to each Acquiror
Employee Plan. Each Acquiror Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including ERISA and the Code, which are
applicable to such Acquiror Employee Plan.
(d) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Acquiror that, individually or collectively,
would be reasonably likely to give rise to the payment of any amount that would
not be deductible pursuant to the terms of Section 280G of the Code. The
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any Acquiror Employee Plan that
will result in any payment (whether of severance pay or otherwise), acceleration
of, forgiveness of indebtedness owing from, vesting of, distribution of, or
increase in or obligation to fund, any benefits with respect to any current or
former employee, director or consultant of the Acquiror or any Acquiror
Subsidiary.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) relating to, or change in employee
participation or coverage under, any Acquiror Employee Plan which would increase
materially the expense of maintaining such Acquiror Employee Plan above the
level of the expense incurred in respect thereof for the fiscal year ended
December 31, 1999.
(f) Neither Acquiror nor any Acquiror Subsidiary has any obligations to
provide retiree health and life insurance or other retiree death benefits under
any Acquiror Employee Plan, other than benefits mandated by Section 4980B of the
Code or under applicable State law, and each such Acquiror Employee Plan may be
amended or terminated without incurring liability thereunder.
29
(g) To the Knowledge of Acquiror, no Acquiror Employee Plan is threatened
with any dispute, lawsuit, claim (other than routine claims for benefits),
investigation or complaint to, or by, any Person or Governmental Entity. No
Acquiror Employee Plan is the subject of an audit or, to the Knowledge of
Acquiror, under investigation by the Internal Revenue Service, the Department of
Labor, the Pension Benefit Guaranty Corporation or any other Governmental
Entity, nor, to the Knowledge of Acquiror, is any such audit or investigation
threatened.
5.14. Labor Matters. There is no pending or, to the Knowledge of Acquiror,
-------------
threatened union organizational effort, material labor dispute, strike or work
stoppage against Acquiror or any Acquiror Subsidiary or charge or complaint
against Acquiror or any Acquiror Subsidiary by the National Labor Relations
Board or any similar Governmental Entity alleging any unfair labor practice by
Acquiror or any Acquiror Subsidiary in connection with the operation of their
respective business. Acquiror and all Acquiror Subsidiaries have in the past
been and are currently in compliance in all material respects with all
applicable collective bargaining agreements and laws respecting employment,
employment practices, labor relations, safety and health (other than
environmental), wages, hours and terms and conditions of employment. Neither
Acquiror nor any Acquiror Subsidiary has experienced within the past 12 months a
"plant closing" or "mass layoff" within the meaning of the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. (S)(S) 2101 et seq. Neither the execution
and delivery of this Agreement, nor the consummation by Acquiror of transactions
contemplated in accordance with the terms hereby will violate any of Acquiror's
or Acquiror Subsidiaries' collective bargaining agreement(s) with any labor
organization(s).
5.15. Compliance with Laws; Licenses, Permits and Registrations.
---------------------------------------------------------
(a) Neither Acquiror nor any Acquiror Subsidiary is in violation of, or
has violated, any applicable provisions of any laws, statutes, ordinances,
regulations, judgments, injunctions, orders or consent decrees, except for
violations which would not be reasonably likely to have, individually or in the
aggregate, an Acquiror Material Adverse Effect.
(b) Acquiror and each Acquiror Subsidiary has been and is in compliance
with all permits, licenses, franchises, variances, exceptions, orders, consents,
approvals, authorizations of and registrations with and under all federal,
state, local and foreign laws, and from all Governmental Entities required by
Acquiror and each Acquiror Subsidiary to carry on their respective businesses as
currently conducted, except where the failure to have or be in compliance with
the permits, licenses, franchises, variances, exceptions, orders, consents,
approvals, authorizations or registrations would not be reasonably likely to
have, individually or in the aggregate, an Acquiror Material Adverse Effect.
(c) Acquiror and each Acquiror Subsidiary are, to the extent applicable
to their operations, certified for participation or enrollment in the Medicare
and Medicaid programs, have a current and valid provider contract with the
Medicare and Medicaid programs, are in substantial compliance with the
conditions of participation of such programs and have received all approvals or
qualifications necessary for capital reimbursement of Acquiror's and the
Acquiror's Subsidiaries' assets, except where the failure to be so certified, to
have such contracts, to be in such compliance or to have such approvals or
qualifications would not be reasonably likely to have, individually or in the
aggregate, an Acquiror Material Adverse Effect.
30
Neither Acquiror nor any Acquiror Subsidiary has received notice from the
regulatory authorities which enforce the statutory or regulatory provisions in
respect of either the Medicare or Medicaid program of any pending or threatened
investigations, and neither Acquiror nor any Acquiror Subsidiary has any reason
to believe that any such investigations or surveys are pending, threatened or
imminent which may have, individually or in the aggregate, an Acquiror Material
Adverse Effect.
5.16. Title to Properties.
-------------------
(a) Acquiror and each Acquiror Subsidiary have good and marketable title
to, or valid leasehold interests in, all their properties and assets, except for
those which are no longer used or useful in the conduct of their businesses,
except for defects in title, easements, restrictive covenants and similar Liens,
encumbrances or impediments that (i) are not substantial in character, amount or
extent and do not detract from the value, or interfere with the present use of
the property subject thereto or affected thereby or otherwise impair Acquiror's
or any Acquiror Subsidiary's business operations and (ii) in the aggregate,
would not be reasonably likely to have, individually or in the aggregate, an
Acquiror Material Adverse Effect. All of these assets and properties, other than
assets and properties in which Acquiror or any Acquiror Subsidiary has leasehold
interests, are free and clear of all Liens, except for Liens that, in the
aggregate, would not have an Acquiror Material Adverse Effect.
(b) Except as set forth on the Acquiror Disclosure Schedule or as would
not be reasonably likely to have an Acquiror Material Adverse Effect, (i)
Acquiror and each Acquiror Subsidiary are in compliance with the terms of all
leases to which they are a party and under which they are in occupancy, and all
of these leases are in full force and effect and (ii) Acquiror and each Acquiror
Subsidiary enjoy peaceful and undisturbed possession under all such leases.
5.17. Intellectual Property. Except as would not be reasonably likely to
---------------------
have, individually or in the aggregate, an Acquiror Material Adverse Effect,
Acquiror and the Acquiror Subsidiaries own or have a valid license to use each
trademark, service ▇▇▇▇, trade name, mask work, invention, patent, trade secret,
copyright, know-how (including any registrations or applications for
registration of any of the foregoing) or any other similar type of proprietary
intellectual property right (collectively, the "Acquiror Intellectual Property")
necessary to carry on the business of Acquiror and the Acquiror Subsidiaries,
taken as a whole, as currently conducted. Neither Acquiror nor any Acquiror
Subsidiary has received any written notice of infringement of or challenge to
the validity or enforceability of, and, to Acquiror's Knowledge, there are no
claims pending with respect to the rights of others to the use of, any Acquiror
Intellectual Property that, in any case, would be reasonably likely to have,
individually or in the aggregate, an Acquiror Material Adverse Effect. To
Acquiror's Knowledge, there is no basis for any such claims. To the Acquiror's
Knowledge, no other person is infringing any Acquiror Intellectual Property,
except such infringement as would not have, individually or in the aggregate, an
Acquiror Material Adverse Effect. Neither Acquiror nor any Acquiror Subsidiary,
nor the respective businesses thereof as currently conducted, violates or
infringes the intellectual property or proprietary rights of any other Person,
except such violations and infringements as would not have, individually or in
the aggregate, an Acquiror Material Adverse Effect.
31
5.18. Finders' Fees; Opinion of Financial Advisor.
-------------------------------------------
(a) Except pursuant to and in accordance with the terms of the agreement
with ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, whose fees will be paid
by Acquiror, and except for fees paid pursuant to the Commitment Letters
referenced in Section 5.20, there is no investment banker, broker, finder or
other intermediary which has been retained by, or is authorized to act on behalf
of Acquiror or any Acquiror Subsidiary which might be entitled to any fee or
commission from, the Company, any Company Subsidiary, Acquiror or any of its
Affiliates in connection with or upon consummation of the transactions
contemplated by this Agreement.
(b) Acquiror has received the opinion of ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ &
▇▇▇▇▇ Incorporated, to the effect that, as of the date hereof and subject to the
qualifications stated therein, the Merger is fair to the Acquiror from a
financial point of view.
5.19. Required Vote; Board Recommendation.
-----------------------------------
(a) The only vote of the holders of any class or series of capital stock
of Acquiror required by law, rule or regulation to approve this Agreement, the
Merger and/or any of the other transactions contemplated hereby are the
affirmative vote of the holders of a majority of the Acquiror Shares present and
voting at the Acquiror Stockholder Meeting (as defined in Section 7.2) in favor
of the issuance of the Acquiror Shares pursuant to the Merger (the "Acquiror
Stockholder Approval").
(b) Acquiror's Board of Directors has (i) determined that this Agreement
and the transactions contemplated hereby, including the Merger and the issuance
of the Acquiror Shares pursuant to the Merger, are in the best interests of
Acquiror and its stockholders, (ii) approved this Agreement, and the
transactions contemplated hereby in accordance with the provisions of Section
251 of the DGCL and (iii) resolved to recommend to such stockholders that they
vote in favor of adopting and approving this Agreement and the Merger and the
issuance of the Acquiror Shares pursuant to the Merger in accordance with the
terms hereof.
5.20. State Takeover Statutes. Acquiror has taken all actions required to
-----------------------
be taken by it in order to exempt this Agreement and the transactions
contemplated hereby and thereby from the provisions of Section 203 of the DGCL,
and accordingly, that section does not apply to the Merger or any of the
transactions contemplated hereby. No other "control share acquisition", "fair
price" or other anti-takeover laws or regulations enacted under state or federal
laws in the United States apply to this Agreement or any of the transactions
contemplated hereby and thereby.
5.21. Acquiror's Stockholder Rights Plan. The Board of Directors of
----------------------------------
Acquiror has complied with or amended the Acquiror Rights Agreement in
accordance with its terms to render it inapplicable to the transactions
contemplated by this Agreement. Acquiror has delivered to Company a true and
correct copy of the Acquiror Rights Agreement, as amended, in effect as of
execution and delivery of this Agreement.
5.22. Insurance. True and complete copies of all insurance policies and
---------
binders of all insurance covering all material assets, business, equipment,
properties, operations, employees,
32
officers and directors of Acquiror and the Acquiror Subsidiaries have been made
available for inspection by the Company. The coverage under each such policy and
binder is in full force and effect, and no notice of cancellation or non-renewal
has been received by Acquiror or any Acquiror Subsidiary.
5.23. Agreements and Commitments. Neither Acquiror nor any Acquiror
--------------------------
Subsidiary, nor, to the Knowledge of Acquiror, any other party, is in breach or
violation of, or in default in the performance or observance of any term or
provision of (and no event has occurred which, with lapse of time or notice by a
third party, would result in a breach or violation of, or the default under, or
give rise to any right of termination, amendment, cancellation, acceleration or
loss of benefits or result in the creation of any lien upon any of the
properties or assets of Acquiror or any Acquiror Subsidiary under), any contract
to which Acquiror or any Acquiror Subsidiary is a party or by which it or any of
its properties or assets are bound, other than breaches, violations and defaults
which have not had and would not be reasonably likely to have, individually or
in the aggregate, an Acquiror Material Adverse Effect.
5.24. Affiliate Agreements. There are no material oral or written
--------------------
agreements or transactions between Acquiror or any Acquiror Subsidiary on the
one hand, and any (i) officer or director of Acquiror or any Acquiror
Subsidiary, (ii) record or beneficial owner of five percent or more of the
voting securities of Acquiror or (iii) to the Knowledge of Acquiror, an
Affiliate of any such officer, director or beneficial owner, on the other hand,
other than payment of compensation for services rendered in the ordinary course
of employment for Acquiror or any Acquiror Subsidiary.
5.25. Environmental Matters. Except as would not be reasonable likely to
---------------------
have, individually or in the aggregate, an Acquiror Material Adverse Effect; (i)
Acquiror and each Acquiror Subsidiary complies with all applicable Environmental
Laws; (ii) there has not been any Release or, to the Knowledge of Acquiror, any
threatened Release of any Hazardous Substance, on, at or beneath any property
(including soils, groundwater, surface water, buildings and other structures,
and equipment) currently owned, leased, operated or used by Acquiror or any
Acquiror Subsidiary; (iii) neither Acquiror nor any Acquiror Subsidiary has
received any written notice, demand, letter, claim or request for information
alleging that Acquiror or any Acquiror Subsidiary is in violation of, or liable
under, any Environmental Law; and (iv) neither Acquiror nor any Acquiror
Subsidiary is subject to any order, decree, injunction or other arrangement with
any Governmental Entity or is subject to any indemnity or other agreement with
any third party relating to liability under any Environmental Law or relating to
Hazardous Substances; and (v) there are no circumstances or conditions involving
Acquiror or any of the Acquiror Subsidiaries (including, without limitation, any
Release or threatened Release of any Hazardous Substance at any location) that
would reasonably be likely to result in any claim, investigation, cost or
liability of any nature (whether civil or criminal, arising under theory of
negligence or strict liability, or otherwise), pursuant to any Environmental
Law.
5.26. Financial Capability. Acquiror has delivered to the Company complete
--------------------
and correct executed copies of Commitment Letters with respect to the financing
(the "Commitment Letters") required for the consummation of the transactions
contemplated hereby, which are attached as Schedule 5.26 hereto. The Commitment
Letters are in full force and effect. Assuming satisfaction of all applicable
conditions hereunder and as set forth in the Commitment
33
Letters and full funding thereunder, such financing, together with the other
funds available to Acquiror, will provide sufficient funds to consummate the
transactions contemplated hereby.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees as set forth below.
6.1. Company Interim Operations. Except as set forth in the Company
--------------------------
Disclosure Schedule or as otherwise expressly contemplated hereby, without the
prior consent of Acquiror (which consent shall not be unreasonably withheld or
delayed), from the date hereof until the Effective Time, the Company shall, and
shall cause each Company Subsidiary to, conduct its business in all material
respects in the usual, regular and ordinary course consistent with past practice
and shall use commercially reasonable efforts to (i) preserve intact its present
business organizations, (ii) maintain in effect all material foreign, federal,
state and local licenses, approvals and authorizations, including, all material
licenses and permits that are required for the Company and its Subsidiaries to
carry on its business and (iii) preserve existing relationships with its
material customers, lenders, suppliers and others having material business
relationships with them; (iv) maintain insurance coverages and its books,
accounts and records in the usual manner consistent with prior practices; and
(v) maintain and keep its properties and equipment in good repair, working order
and condition (ordinary wear and tear excepted); provided, however, that in each
case, the Company shall not be held responsible for any change or development
relating to (A) U.S. or global economic or industry conditions, (B) changes in
U.S. or global financial markets or conditions , (C) any generally applicable
change in law, rule or regulation or GAAP or interpretation of any thereof
and/or (D) the announcement of this Agreement or the transactions contemplated
hereby. Without limiting the generality of the foregoing, except as set forth in
the Company Disclosure Schedule or as otherwise expressly contemplated by this
Agreement, from the date hereof until the Effective Time, without the prior
consent of Acquiror (which consent shall not be unreasonably withheld or
delayed), the Company shall not, nor shall it permit any Company Subsidiary to,
directly or indirectly:
(a) amend the Company's or any Company Subsidiary's certificate of
incorporation or by-laws;
(b) split, combine or reclassify any shares of capital stock of the
Company or declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem, repurchase or otherwise acquire or offer to redeem,
repurchase, or otherwise acquire any of its securities, except (i) for dividends
by Company Subsidiaries or (ii) pursuant to the existing terms of any Company
Employee Plan;
(c) issue, deliver or sell, or authorize the issuance, delivery or sale
of, any shares of its capital stock or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any capital
stock, including, without limitation, in connection with the Company Employee
Plans or other benefit plans or arrangements existing on the date hereof, other
than (i) the issuance of Company Shares upon the exercise of stock options in
accordance
34
with their present terms and (ii) the granting of options to acquire Company
Shares to Directors of the Company pursuant to the Directors Stock Option Plan
as in effect on the date hereof;
(d) acquire or agree to acquire (whether pursuant to merger, stock or
asset purchase or otherwise) in one transaction or series of related
transactions any assets (including any equity interests) or businesses, other
than (i) current assets in the ordinary course of business, (ii) the aggregate
amount set forth in the Company's capital budget for fiscal year 2001 previously
provided to Acquiror and identified as such and (iii) the aggregate amount set
forth in the Company's hospital construction budget for fiscal year 2001
previously provided to Acquiror and identified as such;
(e) sell, lease, pledge, encumber or otherwise dispose of or agree to
sell, lease, pledge, encumber or otherwise dispose of any assets, other than (i)
sales in the ordinary course of business which are not material, (ii) equipment
and property no longer used in the operation of the Company's business and (iii)
assets related to discontinued operations;
(f) incur any indebtedness for borrowed money or guarantee any
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries or
guarantee any debt securities of others, other than intercompany debt and
borrowing under the Company's existing lines in the ordinary course of business;
(g) except in the ordinary course of business, amend, modify or terminate
any material contract, agreement or arrangement of the Company or any of its
Subsidiaries or otherwise waive, release or assign any material rights, claims
or benefits of the Company or any of its Subsidiaries thereunder; in each case,
except for such actions as would not be material to the Company and its
subsidiaries, taken as a whole;
(h) (i) increase the amount of compensation of any director, executive
officer or employee or make any increase in or commitment to increase any
employee benefits, (ii) except as required by law, amend an agreement existing
on the date hereof or Company severance policy as of the date hereof, grant any
severance or termination pay to any director, officer or employee of the Company
or any Company Subsidiary, (iii) adopt any additional employee benefit plan or,
except in the ordinary course of business, make any contribution to any existing
plan or (iv) except as may be required by law, amend in any material respect any
Company Employee Plan;
(i) materially change the Company's methods of accounting in effect at
June 30, 2000, except as required by changes in GAAP or by Regulation S-X of the
Exchange Act, as concurred in by its independent public accountants;
(k) settle, or propose to settle, any litigation, investigation,
arbitration, proceeding or other claim that is material to the business of the
Company and the Company Subsidiaries, taken as a whole, other than the payment,
discharge or satisfaction, in the ordinary course of business consistent with
past practice, of liabilities (i) recognized or disclosed in the most recent
consolidated financial statements (or notes thereto) of the Company included in
the Company SEC Documents or (ii) incurred since the date of such financial
statements in the ordinary course
35
of business consistent with past practice which are not material to the Company
and its Subsidiaries taken as a whole;
(l) (i) make any tax election or take any position on any tax return filed
on or after the date of this Agreement or adopt any method thereof that is
inconsistent with elections made, positions taken or methods used in preparing
or filing similar returns in prior periods or (ii) enter into any settlement or
compromise of any tax liability that in either case is material to the business
of the Company and the Company Subsidiaries, taken as a whole;
(m) subject to Section 6.3(a), waive the benefits of, or agree to modify in
any manner, any confidentiality, standstill or similar agreement;
(n) enter into any new, or modify any existing, capitation contract,
agreement or arrangement;
(o) amend, modify or terminate the Company Rights Agreement or take any
action which would render the Company Rights Agreement inapplicable to a third
party;
(p) authorize any of, or announce an intention to, commit or agree to take
any of, the foregoing actions or any action or the failure to take any such
action which would result in a breach of any representation or warranty of the
Company contained in this Agreement as of the date when made or as of any future
date or would result in any of the covenants or conditions not being satisfied.
6.2. Stockholder Meeting. The Company shall cause a meeting of its
-------------------
Stockholders (the "Company Stockholder Meeting") to be duly called and held as
close as reasonably practicable to the date on which all of the other conditions
to the Closing, as specified in Article 9, are expected to be satisfied, for the
purpose of obtaining the Company Stockholder Approval. Subject to Section 6.3,
(i) the Company's Board of Directors shall recommend approval and adoption by
its Stockholders of this Agreement (the "Company Recommendation"), (ii) neither
the Company's Board of Directors nor any committee thereof shall amend, modify,
withdraw, condition or qualify the Company Recommendation in a manner adverse to
Acquiror or take any action or make any statement inconsistent with the Company
Recommendation and (iii) the Company shall take all lawful action to solicit the
Company Stockholder Approval.
6.3. Acquisition Proposals; Board Recommendation.
-------------------------------------------
(a) The Company agrees that it shall not, nor shall it permit any Company
Subsidiary to, nor shall it authorize or knowingly permit any officer, director,
employee, investment banker, attorney, accountant, agent or other advisor or
representative of the Company or any Company Subsidiary ("Representatives"),
directly or indirectly, to and it shall use reasonable best efforts to cause
such persons not to (i) solicit, initiate or encourage any inquiries or the
making of any proposal or offer with respect to any Acquisition Proposal, (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action knowingly to
facilitate any inquiries or the making of any proposal that constitutes or that
would reasonably be expected to lead to any Acquisition Proposal, (iii) grant
any waiver or release under any standstill or similar agreement with respect to
any class of the Company's equity securities, or (iv) enter into any agreement
with respect to any Acquisition Proposal;
36
provided, however, that (A) the Company may, and may authorize and permit its
Representatives to, furnish or cause to be furnished information and may
participate in negotiations and discussions with respect to any Acquisition
Proposal, which the Company's Board of Directors determines in good faith, after
consulting with its outside counsel and its financial advisors, is reasonably
likely to lead to the delivery of a Superior Proposal, (B) the Company's Board
of Directors may take the actions described in the last sentence of Section 6.2,
(C) the Company's Board of Directors may recommend an Acquisition Proposal to
Company Stockholders and (D) the Company may terminate this Agreement pursuant
to Section 10.3 in order to immediately thereafter enter into a definitive
agreement with respect to such Acquisition Proposal, in each case, if the
Company's Board of Directors determines, in good faith after consulting with its
outside counsel and its financial advisors, that such action is necessary to
comply with its fiduciary duties under applicable law; provided that such
Acquisition Proposal was not solicited in violation of this Section 6.3, and in
the case of (B), (C) or (D) there exists an Acquisition Proposal which
constitutes a Superior Proposal; provided, further, that prior to furnishing
non-public information to any such party, the Company shall have entered into a
confidentiality agreement no less favorable to the Company than the
Confidentiality Agreement between the Company and the Acquiror dated July 17,
2000.
(b) The Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any proposed Acquisition Proposal.
(c) Unless the Company's Board of Directors has previously withdrawn, or
is concurrently therewith withdrawing, the Company Recommendation in accordance
with Section 6.2, neither the Company's Board of Directors nor any committee
thereof shall recommend any Acquisition Proposal to the Company Stockholders.
Notwithstanding the foregoing, nothing contained in this Section 6.3(b) or
elsewhere in this Agreement shall prevent the Company's Board of Directors from
complying with Rule 14e-2 under the 1934 Act with respect to any Acquisition
Proposal or making any disclosure required by or otherwise complying with
applicable law.
(d) The Company shall notify Acquiror promptly (but in no event later
than the next Business Day) after receipt by the Company of any Acquisition
Proposal or any request for nonpublic information or for access to the
properties, books or records of the Company or any request for a waiver or
release under any standstill or similar agreement, by any person that has made
an Acquisition Proposal and the identity of the Person making such proposal or
request. The notice shall indicate the terms and conditions of the proposal or
request. The Company shall keep Acquiror informed, on a reasonably current
basis, of the status (including amendments or proposed amendments) of any
Acquisition Proposal or request.
6.4. Affiliate Letters. Prior to Closing, the Company shall deliver to
-----------------
Acquiror a list of all persons who will be, at the time of the Company
Stockholder Meeting in the Company's reasonable judgment, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall use
its reasonable best efforts to cause each person who is an Affiliate of the
Company to execute a written agreement on or prior to Closing in substantially
the form of Exhibit B hereto ("Affiliate Letters"). Acquiror shall be entitled
to place legends as specified in such Affiliate Letters on the certificates
evidencing any Acquiror Shares to be received by such
37
Affiliates of the Company pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Acquiror
Shares, consistent with the terms of such Affiliate Letters.
6.5. Company Standstill. If this Agreement is terminated, then, for two (2)
years after the date of termination, the Company and each of its successors or
assigns will not, and will cause its Affiliates not to:
(i) acquire, offer or propose or otherwise seek to acquire, or
agree to acquire, directly or indirectly, by merger, purchase or otherwise,
beneficial ownership of any assets or in excess of 1% of any class of
securities of Acquiror or its Affiliates or any direct rights or options to
acquire (through purchase, exchange, conversion or otherwise) any assets or
in excess of 1% of any class of securities of Acquiror or its Affiliates;
(ii) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of
Regulation 14A promulgated by the SEC as of the date hereof, disregarding
clause (iv) of Rule 14a-1(1)(2), but including any solicitation exempted
pursuant to Rule 14a-2(b)(1) to vote (including by the execution of actions
by written consent), or seek to advise, encourage or influence any person
or entity with respect to the voting of, any voting securities of Acquiror;
(iii) call, or in any way participate in a call for, any meeting of
Stockholders of Acquiror (or take any action with respect to Stockholders
acting by written consent);
(iv) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of Acquiror; or
(v) otherwise act to control or influence, or seek to control or
influence, Acquiror or the management, Board of Directors, policies or
affairs of Acquiror, including, (A) making any offer or proposal to acquire
any securities or assets of Acquiror or any of its Affiliates or soliciting
or proposing to effect or negotiate any form of business combination,
restructuring, recapitalization or other extraordinary transaction
involving Acquiror, its Affiliates or any of their respective securities or
assets, (B) seeking board representation or the removal of any directors or
a change in the composition or size of the Board of Directors of Acquiror,
(C) making any request to amend or waive any provision of this Section 6.5,
(D) disclosing any intent, purpose, plan or proposal with respect to
matters covered by this Section 6.5 with respect to Acquiror, its
Affiliates or the boards of directors, management, policies or affairs or
securities or assets of Acquiror or its Affiliates that is inconsistent
with this Section 6.5, including an intent, purpose, plan or proposal that
is conditioned on, or would require, waiver, amendment, nullification or
invalidation of any provision of this Section 6.5, or take any action that
could require Acquiror or any of its Affiliates to make any public
disclosure relating to any such intent, purpose, plan, proposal or
condition, or (E) assisting, advising or encouraging any person with
respect to, or seeking to do, any of the foregoing.
6.6. Subsidiary Guarantees. The Company shall (i) cause each entity in
---------------------
which it owns,
38
directly or indirectly, all of the equity ownership or voting stock and (ii) use
its reasonable best efforts to cause each entity in which it owns, directly or
indirectly, a majority of the equity ownership or voting stock, to execute, at
the Closing, such guarantees as are required in connection with any financing
contemplated by the Commitment Letters or any alternative financing contemplated
by Section 7.15 and any guarantees required pursuant to the Indenture, dated as
of May 11, 1999, as supplemented and amended, governing the 11% Senior
Subordinated Notes due 2009 of Triad Hospitals Holdings, Inc.
ARTICLE 7
COVENANTS OF ACQUIROR
The Acquiror agrees as set forth below.
7.1. Acquiror Interim Operations. Except as set forth in the Acquiror
---------------------------
Disclosure Schedule or as otherwise expressly contemplated hereby, without the
prior consent of the Company (which consent shall not be unreasonably withheld
or delayed), from the date hereof until the Effective Time, Acquiror shall and
shall cause each of the Acquiror Subsidiaries to, conduct their business in all
material respects in the ordinary course consistent with past practice and shall
use commercially reasonable efforts to (i) preserve intact its present business
organization, (ii) maintain in effect all material foreign, federal, state and
local licenses, approvals and authorizations, including, without limitation, all
material licenses and permits that are required for Acquiror or any Acquiror
Subsidiary to carry on its business and (iii) preserve existing relationship
with its material customers, lenders, suppliers and others having material
business relationships with it; provided, however, that in each case, the
Acquiror shall not be held responsible for any change or development relating to
(w) U.S. or global economic or industry conditions, (x) changes in U.S. or
global financial markets or conditions, (y) any generally applicable change in
law, rule or regulation or GAAP or interpretation of any thereof and/or (z) the
announcement of this Agreement or the transactions contemplated hereby. Without
limiting the generality of the foregoing, except as otherwise expressly
contemplated by this Agreement, from the date hereof until the Effective Time,
dwithout the prior consent of the Company (which consent shall not be
unreasonably withheld or delayed), Acquiror shall not, nor shall it permit any
Acquiror Subsidiary to:
(a) make any amendment to Acquiror's certificate of incorporation that
changes any material term or provision of the Acquiror Shares;
(b) engage in any material repurchase at a premium, recapitalization,
restructuring or reorganization with respect to Acquiror's capital stock,
including, without limitation, by way of any extraordinary dividend on, or other
extraordinary distributions with respect to, Acquiror's capital stock;
(c) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
Person or any business or division thereof, other than Triad Hospitals Holdings,
Inc., or otherwise acquire any assets, unless Acquiror concludes in good faith
that such acquisition or the entering into of a definitive agreement relating to
or the consummation of such transaction would not (i) impose any material delay
in
39
the obtaining of, or significantly increase the risk of not obtaining, any
authorizations, consents, orders, declarations or approvals of any Governmental
Entity necessary to consummate the Merger or the expiration or termination of
any applicable waiting period, (ii) significantly increase the risk of any
Governmental Entity entering an order prohibiting the consummation of the Merger
or (iii) significantly increase the risk of not being able to remove any such
order on appeal or otherwise; or
(d) agree, resolve or otherwise commit to do any of the foregoing.
7.2. Stockholder Meeting; Board Recommendation. Acquiror shall cause a
------------------------------------------
meeting of its Stockholders (the "Acquiror Stockholder Meeting") to be duly
called and held as close as reasonably practicable to the date on which all of
the other conditions to the Closing, as specified in Article 9, are expected to
be satisfied, for the purpose of obtaining the Acquiror Stockholder Approval.
Pursuant thereto, (i) Acquiror's Board of Directors shall recommend (the
"Acquiror Recommendation") approval and adoption by its Stockholders of the
issuance of Acquiror Shares pursuant to the Merger, (ii) neither Acquiror's
Board of Directors nor any committee thereof shall amend, modify, withdraw,
condition or qualify the Acquiror Recommendation in a manner adverse to the
Company or take any action or make any statement inconsistent with the Acquiror
Recommendation and (iii) Acquiror shall take all lawful action to solicit the
Acquiror Stockholder Approval.
7.3. Director and Officer Liability.
------------------------------
(a) Continuing Protection. Acquiror and the Surviving Corporation agree
---------------------
that the Surviving Corporation shall adopt prior to the Effective Time, in its
Certificate of Incorporation and bylaws, the same indemnification, limitation of
or exculpation from liability and expense advancement provisions as those set
forth in the Company's certificate of incorporation and bylaws, in each case as
of the date of this Agreement, and that such provisions shall not be amended,
repealed, revoked or otherwise modified for a period of six (6) years after the
Effective Time in any manner that would adversely affect the rights thereunder
of the individuals who on or prior to the Effective Time were directors,
officers, employees or agents of the Company or the Company Subsidiaries or are
otherwise entitled to the benefit of such provisions.
(b) Indemnification. To the fullest extent permitted under applicable
---------------
law, after the Effective Time, Acquiror shall, and Acquiror shall cause the
Surviving Corporation to, indemnify, defend and hold harmless, each present and
former director or officer of the Company and each Company Subsidiary and each
Person entitled to indemnification under the Certificate of Incorporation or
Bylaws of the Surviving Corporation (collectively, the "Indemnified Parties")
against all costs and expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and settlement amounts
paid in connection with any claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), arising out of or
pertaining to any action or omission in their capacity as director, officer,
trustee, partner or fiduciary in each case occurring on or before the Effective
Time (including the transactions contemplated by this Agreement). Without
limiting the foregoing, in the event of any claim, action, suit, proceeding or
investigation, (i) Acquiror and the Surviving Corporation shall (x) periodically
advance reasonable fees and expenses (including attorneys fees) with respect to
the foregoing, (y) pay the reasonable fees and expenses of counsel
40
selected by each Indemnified Party which counsel shall be reasonably
satisfactory to the Surviving Corporation, promptly after statements therefor
are received and (z) vigorously assist each Indemnified Party in such defense,
and (ii) Acquiror and the Surviving Corporation, as applicable, shall cooperate
in the defense of any matter; provided, however, that Acquiror and the Surviving
Corporation shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld or delayed).
(c) Insurance. For six (6) years from the Effective Time, the Surviving
---------
Corporation shall, and the Acquiror shall cause the Surviving Corporation to,
provide to the Company's and each Company Subsidiary's directors and officers
liability and fiduciary liability insurance protection with substantially the
same coverage and in substantially the same amount, and on terms no less
favorable to the directors and officers than, that provided by the Company's
directors' and officers' liability insurance policies in effect on the date
hereof; provided, however, that the Surviving Corporation shall be obligated to
purchase and maintain such insurance only to the extent such insurance is
available; and provided, further, the Surviving Corporation shall not be
required in order to maintain or procure such coverage to pay an annual premium
in excess of 150% of the current annual premium paid by the Company for its
existing coverage (the "Cap"). If equivalent coverage cannot be obtained, or can
be obtained only by paying an annual premium in excess of the Cap, Acquiror
shall only be required to obtain as much coverage as can be obtained by paying
an annual premium equal to the Cap. With the Acquiror's consent, which consent
shall not be unreasonably withheld, the Company may purchase such insurance
prior to the Closing on a prepaid noncancellable basis, so long as the premium
does not exceed six times the Cap.
7.4. Employee Benefits. For one (1) year from the Effective Time, Acquiror
-----------------
shall provide (or shall cause the Surviving Corporation to provide) employees of
the Company and the Company Subsidiaries with salary and benefits under employee
benefit plans that are comparable in the aggregate than those currently provided
by the Company and the Company Subsidiaries to its employees (including benefits
pursuant to qualified and nonqualified retirement plans, savings plans, medical,
dental, disability and life insurance plans and programs, deferred compensation
arrangements, bonus and retiree benefit plans, policies and arrangements). For
purposes of any employee benefit plan or arrangement maintained by Acquiror or
any Acquiror Subsidiary, Acquiror shall recognize (or cause to be recognized),
as vesting and eligibility service, any service with the Company and its
Subsidiaries and any predecessor entities under similar benefit plans (and any
other service credited by the Company under similar benefit plans). In addition,
such service shall be recognized for benefit accrual purposes under any vacation
and severance plans of Acquiror or any Acquiror Subsidiary; provided, however,
that solely to the extent necessary to avoid duplication of benefits, amounts
payable under employee benefit plans provided by Acquiror or an Acquiror
Subsidiary may be reduced by amounts payable under similar Company Employee
Plans with respect to the same periods of service). From and after the Effective
Time, Acquiror shall, and Acquiror shall cause the Acquiror Subsidiaries to,
waive any pre-existing condition limitations and credit any flexible spending
account balances, deductibles and out-of-pocket expenses to the same extent
applicable and/or covered under the Company Employee Plans, and are incurred by
the employees and their beneficiaries during the portion of the plan year prior
to participation in the benefit plans provided by Acquiror and the Acquiror
Subsidiaries. The provisions of this Section 7.4 shall not create in any
employee or former employee of the Company or any Company Subsidiary any rights
to employment or
41
continued employment with Acquiror or the Company or any of their respective
Subsidiaries, successors or Affiliates. The provisions of this Section 7.4 shall
apply to employees and the Company who are on disability or leave of absence.
Participants in the Company's 401(k) plan and non-qualified retirement
plans will receive all Company contributions for the partial year ending on the
Effective Time without regard to any last day of the plan year requirement or
service requirement.
7.5. Severance Plan. For one (1) year from the Effective Time, Acquiror
--------------
shall provide employees of the Company and the Company's subsidiaries with a
Severance Plan that is no less favorable than the Company's plan currently in
effect. Acquiror shall recognize (or cause to be recognized) service with the
Company and its Subsidiaries or any predecessor entities (and any other services
credited by the Company under similar severance plans) for all purposes under
such severance plan; provided, however, that solely to the extent necessary to
avoid duplication of benefits, amounts payable under other severance plans
provided by Acquiror or an Acquiror Subsidiary may be reduced by the amounts
payable under the Company's Severance Plan.
7.6. Change in Control. With respect to the Executive Employment
-----------------
Agreements, the Severance Agreements and the Plans listed on Schedule 7.6(a) of
the Company Disclosure Schedule (the "Change in Control Plans"), (a) the
consummation of the Merger will constitute a Change in Control as of the
Effective Time for purposes of each Change in Control Plan and (b) any
termination of employment at or following the Effective Time of or by any
individual listed on Schedule 7.6(b) of the Company Disclosure Schedule shall be
deemed to be for "Good Reason" for purposes of any Change in Control Plan in
which such individual participates or to which he or she is a party.
7.7. Health Insurance. Acquiror will permit the individuals listed in
----------------
Schedule 7.7 of the Company Disclosure Schedule and their dependents to receive
benefits under the Acquiror's healthcare plans until such individual reaches age
65 or is employed by another employer offering health care coverage (including
coverage of then pre-existing conditions), for the same net cost to such
individual as he or she was paying while employed by the Company (subject to
adjustment based on changes in the consumer price index).
7.8. Third Party Beneficiaries.
-------------------------
(a) From and after the Effective Time, Acquiror will, and will cause the
Surviving Corporation to, honor, pay and perform all obligations under each
Change in Control Plan (including each employment, bonus, severance, termination
or similar agreement or arrangement with any current or former officer or other
employee of Company or any Company Subsidiary) in accordance with this Agreement
and the terms thereof in effect as of the date hereof (or, with the written
approval of Acquiror, as the same may be amended from time to time after the
date hereof). The obligations of Acquiror under Sections 7.3, 7.6, 7.7 and 7.8,
shall not be terminated, amended, repealed, revoked or modified in any manner
which will adversely affect any director or officer to whom such Section applies
without the consent of the affected director or officer (it being expressly
agreed that each director and officer to whom such Sections apply shall be
third-party beneficiaries of such Sections).
42
(b) If Acquiror or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity in a consolidation or merger or (ii) transfers
all or substantially all of its properties and assets to any Person, then, and
in each case, proper provision shall be made so that the successors and assigns
of Acquiror honor the obligations set forth in Sections 7.3, 7.6, 7.7 and 7.8.
7.9. Stock Exchange Listing. Acquiror shall cause the Acquiror Shares to
-----------------------
be issued in connection with the Merger to be listed on the NASDAQ National
Market, subject to official notice of issuance.
7.10. Transfer Taxes. All state, local or foreign sales, use, real
--------------
property transfer, stock transfer or similar taxes (including any interest or
penalties with respect thereto) attributable to the Merger (collectively, the
"Transfer Taxes") shall be timely paid by Acquiror.
7.11. Investment Banking Fee. Pursuant to the agreement referenced in
-----------------------
Section 4.18(a), promptly following the Effective Time, Acquiror shall pay or
cause to be paid all fees and expenses due to ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. from the
Company.
7.12. Qui Tam/False Claims Act Litigation. Acquiror acknowledges that
-----------------------------------
the Company has agreed in principle with the U.S. Department of Justice to
settle the Qui Tam/False Claims Act Litigation with a payment by the Company of
$77.5 million plus relator's attorneys' fees, subject to execution of a
settlement agreement acceptable to the Company and DOJ and a corporate integrity
agreement acceptable to the Company and the Office of Inspector General of the
Department of Health and Human Services (collectively, the "Settlement
Documents").
Acquiror agrees to participate in good faith with the Company in
negotiating the Settlement Documents and executing such agreements as soon as
possible after the date hereof. The Company agrees to permit the Acquiror to
participate in such discussions. Acquiror further agrees to continue such good
faith negotiations if, as of the Effective Time, the Settlement Documents have
not been signed.
7.13. Acquiror Standstill. If this Agreement is terminated, then, for
-------------------
two (2) years after the date of termination, Acquiror and each of its successors
or assigns will not, and will cause its Affiliates not to:
(i) acquire, offer or propose or otherwise seek to acquire, or agree
to acquire, directly or indirectly, by merger, purchase or otherwise,
beneficial ownership of any assets or in excess of 1% of any class of
securities of the Company or its Affiliates or any direct rights or options
to acquire (through purchase, exchange, conversion or otherwise) any assets
or in excess of 1% of any class of securities of the Company or its
Affiliates;
(ii) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of
Regulation 14A promulgated by the SEC as of the date hereof, disregarding
clause (iv) of Rule 14a-1(1)(2), but including any solicitation exempted
pursuant to Rule 14a-2(b)(1) to vote (including by the execution of actions
by written consent), or seek to advise, encourage or influence any person
or entity with respect to the voting of, any voting securities of the
Company;
43
(iii) call, or in any way participate in a call for, any meeting of
Stockholders of the Company (or take any action with respect to
Stockholders acting by written consent);
(iv) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of the Company; or
(v) otherwise act to control or influence, or seek to control or
influence, the Company or the management, Board of Directors, policies or
affairs of the Company, including, (A) making any offer or proposal to
acquire any securities or assets of the Company or any of its Affiliates or
soliciting or proposing to effect or negotiate any form of business
combination, restructuring, recapitalization or other extraordinary
transaction involving the Company, its Affiliates or any of their
respective securities or assets, (B) seeking board representation or the
removal of any directors or a change in the composition or size of the
Board of Directors of the Company, (C) making any request to amend or waive
any provision of this Section 7.13, (D) disclosing any intent, purpose,
plan or proposal with respect to matters covered by this Section 7.13 with
respect to the Company, its Affiliates or the boards of directors,
management, policies or affairs or securities or assets of the Company or
its Affiliates that is inconsistent with this Section 7.13, including an
intent, purpose, plan or proposal that is conditioned on, or would require,
waiver, amendment, nullification or invalidation of any provision of this
Section 7.13, or take any action that could require the Company or any of
its Affiliates to make any public disclosure relating to any such intent,
purpose, plan, proposal or condition, or (E) assisting, advising or
encouraging any person with respect to, or seeking to do, any of the
foregoing.
7.14. Preparation of Ruling Request. Acquiror shall be responsible for
-----------------------------
preparing a ruling request for submission by Acquiror to the Internal Revenue
Service (the "Ruling Request") requesting rulings to the effect that the
transactions contemplated hereunder and related transactions will not cause
section 355(e) of the Code to apply to the spin-off of Acquiror or LifePoint
Hospitals, Inc. by Columbia/HCA Healthcare Corporation and will not adversely
affect the tax treatment of the internal restructuring transactions that
preceded such spin-off or any portion thereof. Prior to submitting the Ruling
Request or any supplement thereto to the Internal Revenue Service, Acquiror
shall deliver to the Company a draft of such item for review and comment, and
the Company shall provide its comments to Acquiror within three (3) Business
Days of the Company's receipt of such draft. Acquiror shall in good faith
consider any changes, modifications, additions or deletions suggested by the
Company. Acquiror shall furnish the Company with copies of all correspondence
and an oral description of all oral communications with the Internal Revenue
Service by or to Acquiror relating to the Ruling Request or the subject matter
thereof. Notwithstanding the foregoing, Acquiror shall not be obligated to
provide to the Company any information that Acquiror determines is confidential
information with respect to HCA-The Healthcare Company or LifePoint Hospitals,
Inc. The Company shall not take any action reasonably likely to negatively
affect the receipt by Acquiror or HCA-The Healthcare Company of the Internal
Revenue Service rulings described in Section 9.1(f).
44
7.15. Alternative Financing. If ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital Corporation
---------------------
("MLCC") terminates the Commitment Letters or indicates to Acquiror that any
condition to MLCC's obligation to provide the financing contemplated by the
Commitment Letters is not likely to be satisfied or if for any other reason the
funding contemplated by the Commitment Letters is reasonably likely to be
unavailable at Closing, Acquiror will promptly notify the Company of such fact
and will use its reasonable best efforts to obtain funding from another source
or sources to consummate the transactions contemplated by this Agreement. From
the date hereof until the Effective Time, Acquiror shall advise the Company of
any termination and of any material amendment or modification of the Commitment
Letters or any substitute therefor, including providing copies thereof to the
Company, and will provide the Company with copies of all agreements and
documents relevant to the Company's obligations under Section 6.6.
ARTICLE 8
COVENANTS OF ACQUIROR AND THE COMPANY
The parties hereto agree as set forth below.
8.1. Reasonable Best Efforts.
-----------------------
(a) Subject to the terms and conditions hereof, each party will use
reasonable best efforts to take, or cause to be taken, all actions, to file, or
caused to be filed, all documents and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
promptly as practicable. Acquiror and the Company shall have the right to review
in advance, and to the extent reasonably practicable each will consult the other
on, all the information relating to the other and its Subsidiaries, that appear
in any filing made with, or written materials submitted to, any third party or
any Governmental Entity in connection with the Merger; provided, however, that
with respect to documents that one party reasonably believes should not be
disclosed to the other party, such party shall instead furnish those documents
to counsel for the other party pursuant to a mutually satisfactory
confidentiality agreement. In exercising the foregoing right, each of the
Company and Acquiror shall act reasonably and as promptly as reasonably
practicable.
(b) Acquiror and the Company shall promptly respond to any request for
additional information pursuant to the HSR Act. Upon the terms and subject to
the provisions hereof, Acquiror and the Company shall each use their reasonable
best efforts to resolve objections, if any, as may be asserted by any
Governmental Entity with respect to the Merger under any antitrust or trade or
regulatory laws or regulations of any Governmental Entity, which, in the case of
Acquiror, will include if necessary to resolve such objections, offering, and
agreeing to enter into any necessary agreements, including agreements to sell,
license or otherwise dispose of, or hold separate or otherwise divest itself of,
all or any portion of Acquiror's businesses or assets or any portion of the
businesses or assets of any of its Subsidiaries or any portion of the businesses
or assets of the Company or the Company's Subsidiaries. Acquiror shall
reasonably consult with the Company with regard to matters covered in this
Section 8.1.
45
8.2. Certain Filings; Cooperation in Receipt of Consents.
---------------------------------------------------
(a) Promptly after the date hereof, Acquiror and the Company shall prepare
and Acquiror shall file with the SEC the Registration Statement, in which the
Proxy Statement/Prospectus will be included as Acquiror's prospectus. Each of
the Company and Acquiror shall use reasonable best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after the filing and to keep the Registration Statement effective
as long as is necessary to consummate the Merger. Each of the Company and
Acquiror shall mail the Proxy Statement/Prospectus to their respective
Stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act and, if necessary, after the Proxy
Statement/Prospectus shall have been so mailed, promptly circulate amended,
supplemental or supplemented proxy material, and, if required in connection
therewith, resolicit proxies. Acquiror shall also take any action required to be
taken under any applicable state securities or blue sky laws in connection with
the issuance of Acquiror Shares in the Merger.
(b) No amendment or supplement to the Proxy Statement/Prospectus will be
made by the Company or Acquiror without the approval of the other party, which
approval will not be unreasonably withheld or delayed. Each party will advise
the other party, promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the Acquiror Shares issuable in connection with the Merger for offering or
sale in any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or comments thereon and responses thereto or requests by
the SEC for additional information. If at any time prior to the Effective Time,
the Company or Acquiror discovers any information relating to either party, or
any of their respective Affiliates, officers or directors, that should be set
forth in an amendment or supplement to the Proxy Statement/Prospectus, so that
the document will not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, the party that
discovers any misleading information shall promptly notify the other parties
hereto and an appropriate amendment or supplement describing the information
shall be promptly filed with the SEC and, to the extent required by law or
regulation, disseminated to the Stockholders of the Company and Acquiror.
(c) The Company and Acquiror shall cooperate with one another in (i)
determining whether any other action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the Merger, (ii) seeking any consents, approvals or waivers,
taking any actions, or making any filings, furnishing information required in
connection therewith and seeking promptly to obtain any consents, approvals or
waivers and (iii) setting a mutually acceptable date, as close to the
anticipated Closing Date as is reasonably practicable, for the Company
Stockholder Meeting and the Acquiror Stockholder Meeting, if any, so as to
enable them to occur, to the extent practicable, on the same date. Each party
shall permit the other party to review any communication given by it to, and
consult with each other in advance of any meeting or conference with, any
Governmental Entity or, in connection with any proceeding by a private party,
with any other Person, and to the extent permitted by the applicable
Governmental Entity or other Person, give the other party the opportunity to
attend
46
and participate in the meetings and conferences, in each case in connection with
the transactions contemplated hereby.
8.3. Public Announcements. The parties shall consult with each other
--------------------
before issuing any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby and, except as may be
required by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any public statement
prior to such consultation.
8.4. Access to Information; Notification of Certain Matters. From the
------------------------------------------------------
date hereof until the Effective Time and subject to applicable law, the Company
and Acquiror shall (i) give to the other party, its counsel, financial advisors,
auditors and other authorized representatives reasonable access to its
personnel, offices, properties, books and records, (ii) furnish or make
available to the other party (and to any third party who has entered into a
confidentiality agreement with Acquiror, which agreement acknowledges that the
Company is a beneficiary thereunder and a copy is delivered to each party
hereto), its counsel, financial advisors, auditors and other authorized
representatives any financial and operating data and other information as those
Persons may reasonably request and (iii) instruct its employees, counsel,
financial advisors, auditors and other authorized representatives to cooperate
with the reasonable requests of the other party in its investigation. Any
investigation pursuant to this Section shall be conducted in a manner, which
will not interfere unreasonably with the conduct of the business of the other
party. Unless otherwise required by law, each of the Company and Acquiror will
hold, and will cause its respective officers, employees, counsel, financial
advisors, auditors and other authorized representatives to hold, any nonpublic
information obtained in any investigation in confidence in accordance with
Section 8.6.
8.5. Further Assurances. At and after the Effective Time, the officers
------------------
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on behalf of the
Company, any other actions and things to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title and interest in,
to and under any of the rights, properties or assets of the Company acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger.
8.6. Confidentiality. Subject to Schedule 8.6, prior to the Effective
---------------
Time and after any termination of this Agreement, each party hereto will hold,
and will use its reasonable best efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning the other parties hereto furnished to the party in connection with
the transactions contemplated by this Agreement, except to the extent that the
information can be shown to have been (a) previously known on a nonconfidential
basis by the party, (b) in the public domain through no fault of the party or
(c) later lawfully acquired by such party from sources other than any of the
other parties hereto which sources are not known to be subject to any
confidentiality obligations; provided that a party may disclose information to
its officers, directors, employees, accountants, counsel, consultants, advisors
and agents in connection with the transactions contemplated by this Agreement,
so long as those Persons are informed by the party of the confidential nature of
47
information and are directed by the party to treat such information
confidentially. Each party's obligation to hold any information in confidence
shall be satisfied, if it exercises the same care with respect to the
information as it would take to preserve the confidentiality of its own similar
information. If this Agreement is terminated, each party hereto will, and will
use its reasonable best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver to
the party from whom the material was obtained, upon request, all documents and
other materials, and all copies thereof, obtained from the other party from the
other parties in connection with this Agreement that are subject to this
confidentiality requirement.
8.7. Tax Treatment. Prior to the Effective Time, each party shall use
-------------
its reasonable best efforts to cause the Merger to qualify as a 368
Reorganization, and will not take any action reasonably likely to cause the
Merger not so to qualify. Acquiror shall not take, or cause the Surviving
Corporation to take, any action after the Effective Time reasonably likely to
cause the Merger not to qualify as a 368 Reorganization.
ARTICLE 9
CONDITIONS TO MERGER
9.1. Conditions to the Obligations of Each Party. The obligations of
-------------------------------------------
the Company and Acquiror to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) each of the Company Stockholder Approval and the Acquiror
Stockholder Approval, if required, shall have been obtained;
(b) the Acquiror Shares to be issued in the Merger shall have been
authorized for listing on the NASDAQ National Market, subject to official notice
of issuance;
(c) (i) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, no stop order suspending
the effectiveness of the Registration Statement shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated by the SEC and
not concluded or withdrawn and (ii) all state securities or blue sky
authorizations necessary to carry out the transactions contemplated hereby shall
have been obtained and be in effect;
(d) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been earlier terminated; and
(e) no Governmental Entity of competent authority or jurisdiction shall
have issued any order, injunction or decree, or taken any other action then in
effect, which restrains, enjoins or otherwise prohibits the consummation of the
Merger.
(f) Acquiror and HCA-The Healthcare Company each shall have obtained a
private letter ruling from the Internal Revenue Service in form and substance
reasonably acceptable to the Acquiror with respect to the ruling obtained by the
Acquiror and acceptable to HCA-The Healthcare Company, in its sole and absolute
discretion with respect to the ruling obtained by it,
48
to the effect that the transactions contemplated hereunder and related
transactions will not cause the spin-off of Acquiror or LifePoint Hospitals,
Inc. by Columbia/HCA Healthcare Corporation or the internal restructuring
transactions that preceded such spin-off, to fail to qualify for the tax
treatment stated in the private letter rulings issued by the Internal Revenue
Service to Columbia/HCA Healthcare Corporation with respect to such spin-off and
internal restructuring transactions.
9.2. Conditions to the Obligations of the Company. The obligations of
--------------------------------------------
the Company to consummate the Merger are subject to the satisfaction of the
following further conditions:
(a) (i) Acquiror shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the time of
the filing of the Certificate of Merger, (ii) (A) the representations and
warranties of Acquiror contained in this Agreement that are qualified by
reference to an Acquiror Material Adverse Effect shall be true and correct when
made and at and as of the time of filing the Certificate of Merger, as if made
at and as of such time and (B) all other representations and warranties of
Acquiror shall have been true and correct when made and at and as of the time of
the filing of the Certificate of Merger as if made at and as of such time,
except for inaccuracies which would not be reasonably likely to have,
individually or in the aggregate, an Acquiror Material Adverse Effect, and (iii)
the Company shall have received a certificate signed by the Chief Executive
Officer or Chief Financial Officer of Acquiror to the foregoing effect;
(b) The Company shall have received an opinion of ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇
in form and substance reasonably satisfactory to the Company, dated the date of
the filing of the Certificate of Merger, and based upon reasonably requested
letters from Acquiror and the Company and certain facts and assumptions set
forth in the opinion to the effect that, for federal income tax purposes, the
Merger will be treated as a 368 Reorganization, that each of Acquiror and the
Company will be a party to the reorganization within the meaning of Section 368
of the Code and that no gain or loss shall be recognized by the holders of
Company Shares on the conversion of their shares into the Merger Consideration
pursuant to the Merger, except with respect to any cash received; and
(c) Acquiror shall have obtained or made all consents, approvals,
actions, orders, authorizations, registrations, declarations, announcements and
filings contemplated by Section 5.3, which if not obtained or made (i) would
render consummation of the Merger illegal or (ii) (assuming the Effective Time
had occurred) would be reasonably likely to have, individually or in the
aggregate, an Acquiror Material Adverse Effect or a Company Material Adverse
Effect.
9.3. Conditions to the Obligations of Acquiror. The obligations of
------------------------------------------
Acquiror to consummate the Merger are subject to the satisfaction of the
following further conditions:
(a) (i) The Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) (A) the representations and warranties of the Company
contained in this Agreement that are qualified by reference to a Company
Material Adverse Effect shall be true and correct when made and at and as of the
time of the filing of the Certificate of Merger, as if made at and as of such
time and (B) all other representations and warranties of the Company shall have
been true and correct when
49
made and at and as of the time of filing of the Certificate of Merger, as if
made as of such time, except for such inaccuracies which would not be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect, and (iii) Acquiror shall have received a certificate signed by the Chief
Executive Officer or Chief Financial Officer of the Company to the foregoing
effect; and
(b) Acquiror shall have received an opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP in
form and substance reasonably satisfactory to Acquiror, dated the date of the
filing of the Certificate of Merger, and based upon reasonably requested letters
from Acquiror and the Company and certain facts and assumptions set forth in the
opinion to the effect that, for federal income tax purposes, the Merger will be
treated as a 368 Reorganization, and that each of Acquiror and the Company will
be a party to the reorganization within the meaning of Section 368 of the Code;
(c) The Company shall have obtained or made all consents, approvals,
actions, orders, authorizations, registrations, declarations, announcements and
filings contemplated by Section 4.3 which if not obtained or made (i) would
render consummation of the Merger illegal or (ii) (assuming the Effective Time
had occurred) would be reasonably likely to have an Acquiror Material Adverse
Effect or a Company Material Adverse Effect; and
(d) The funding contemplated by the Commitment Letters shall have been
obtained on substantially the terms set forth in the Commitment Letters or the
funding of the alternative financing contemplated by Section 7.15 shall have
been obtained.
ARTICLE 10
TERMINATION
10.1. Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time by written notice, whether before or after the Company
Stockholder Approval and/or the Acquiror Stockholder Approval shall have been
obtained:
(a) by mutual written agreement of Acquiror and the Company;
(b) by either Acquiror or the Company, if
(i) the Merger shall not have been consummated by June 30, 2001
(the "End Date"); provided, however, that the right to terminate this
Agreement under this Section 10.1(b)(i) shall not be available to any party
whose breach of any provision of this Agreement has been the cause of, or
resulted in, the failure of the Merger to occur on or before the End Date;
provided further, that if the reason that the Merger shall not have been
consummated by the End Date is the failure to obtain the funding
contemplated by the Commitment Letters, Acquiror may not terminate this
Agreement pursuant to this Section 10.1(b)(i), until the date that is 45
Business Days after Acquiror provided notice to the Company of the
termination of the Commitment Letters.
(ii) there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise permanently prohibited or
any judgment, injunction, order or decree of any Governmental Entity having
competent jurisdiction permanently enjoining the
50
Company or Acquiror from consummating the Merger is entered and the
judgment, injunction, judgment or order shall have become final and
nonappealable and, prior to that termination, the parties shall have used
reasonable best efforts to resist, resolve or lift, as applicable, the law,
regulation, judgment, injunction, order or decree;
(iii) at the Acquiror Stockholder Meeting (including any adjournment
or postponement thereof), the Acquiror Stockholder Approval shall not have
been obtained; or
(iv) at the Company Stockholder Meeting (including any adjournment
or postponement thereof), the Company Stockholder Approval shall not have
been obtained.
(c) by the Company, (i) if the Meeting Price is less than $21.00 and the
Acquiror has not increased the Cash Consideration as set forth in Section
3.2(b); or (ii) if a breach of any representation, warranty, covenant or
agreement on the part of Acquiror set forth in this Agreement shall have
occurred which would cause the condition set forth in Section 9.2(a) not to be
satisfied, and such condition shall be incapable of being satisfied by the End
Date.
(d) by Acquiror, (i) if the Company's Board of Directors shall have (A)
amended, modified, withdrawn, conditioned or qualified the Company
Recommendation in a manner adverse to Acquiror and/or (B) recommended any
Acquisition Proposal to the Company's Stockholders or entered into an
acquisition agreement with respect to a Superior Proposal; or (ii) if a breach
of or failure to perform any representation, warranty, covenant or agreement on
the part of the Company set forth in this Agreement shall have occurred which
would cause the condition set forth in Section 9.3(a) not to be satisfied, and
the condition is incapable of being satisfied by the End Date.
(e) by the Company, if (i) the Company receives an Acquisition Proposal
that the Company's Board of Directors determines to be a Superior Proposal and
(ii) the Company's Board of Directors determines in good faith, after
consultation with its outside counsel and its financial advisors, that it is
legally required for the discharge of its fiduciary duties to accept such
Superior Proposal and enter into a binding agreement concerning such Superior
Proposal; provided, however, that the Company shall not be permitted to
terminate this Agreement pursuant to this Section 10.1(e) unless it has provided
Acquiror with at least three (3) Business Days' notice of its intention to so
terminate this Agreement, specifying the material terms and conditions of the
Acquisition Proposal and the identity of the Person making the Acquisition
Proposal; provided, further, that Acquiror shall receive the fee set forth in
Section 10.3(b) immediately upon any termination of this Agreement pursuant to
this Section 10.1(e).
10.2. Effect of Termination. Except as otherwise set forth in this
---------------------
Agreement, if this Agreement is terminated pursuant to Section 10.1, there shall
be no liability or obligation on the part of Acquiror, the Company or any of
their respective officers, directors, Stockholders, agents or Affiliates, except
no such termination shall relieve any party hereto of any liability or damages
resulting from any breach of this Agreement; provided that the provisions of
Sections 6.5, 7.13, 8.3, 8.6, 10.2, 10.3, 10.4, 11.1, 11.2, 11.4, 11.5, 11.7,
11.8 and 11.9 of this Agreement shall remain in full force and effect and
survive any termination of this Agreement.
51
10.3. Termination Fees.
----------------
(a) If this Agreement shall be terminated pursuant to Section
10.1(b)(iv), 10.1(d)(i) or 10.1(e) hereof, then the Company shall, upon such
termination, pay Acquiror a non-refundable fee (not to exceed $5 million) equal
to all actual and documented expenses incurred by or on behalf of Acquiror in
connection with or in anticipation of the Merger, this Agreement and the
consummation of the transactions contemplated hereby (including, without
limitation, the reasonable fees and expenses of their counsel and accountants
and investment banking fees), and the arrangement of, obtaining the commitment
to provide, or obtaining, the financing for the transactions contemplated hereby
(including any fees payable to the entities providing such financing and their
respective counsel).
(b) If this Agreement shall be terminated pursuant to (i) Section
10.1(b)(iv) and (x) at any time after the date hereof and prior to the Company
Stockholder Meeting an Acquisition Proposal shall have been publicly announced
or otherwise communicated to the Company's Board of Directors and (y) within
twelve months of the termination of this Agreement, the Company enters into a
definitive agreement with respect to, or consummates, a transaction similar to
the transactions contemplated by an Acquisition Proposal with any third party or
(ii) Section 10.1(d)(i) or 10.1(e) hereof, then, in any such case in addition to
any fee paid to Acquiror pursuant to Section 10.3(a), the Company shall, upon
termination of this Agreement (or in the case of termination pursuant to clause
(i) of this Section 10.3(b), upon the earlier to occur of the entering into such
agreement or consummation of such transaction, pay Acquiror a non-refundable fee
in an amount equal to $75 million, payable by wire transfer of immediately
available funds to an account designated by Acquiror.
(c) If this Agreement shall be terminated pursuant to Section
10.1(b)(iii), then the Acquiror shall, upon such termination, pay the Company a
non-refundable fee (not to exceed $5 million) equal to all actual and documented
expenses incurred by or on behalf of the Company in connection with or in
anticipation of the Merger, this Agreement and the consummation of the
transactions contemplated hereby (including, without limitation, the reasonable
fees and expenses of their counsel and accountants and investment banking fees).
(d) If this Agreement shall be terminated pursuant to Section 10.1(c)(i),
then the Company shall, upon such termination, pay Acquiror a non-refundable fee
of $20 million payable by wire transfer of immediately available funds to an
account designated by Acquiror.
(e) The Company and Acquiror acknowledge that the agreements contained in
this Section 10.3 are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Acquiror and the Company
respectively, would not enter into this Agreement; accordingly, if the Company
or Acquiror fail to promptly pay any amount due pursuant to this Section 10.3,
and, in order to obtain such payment Acquiror or the Company commences a suit
which results in a judgment against the other party for a fee set forth in this
Section 10.3, the party against whom the judgment is entered shall pay to the
other party such other party's costs and expenses (including attorney's fees) in
connection with such suit, together with interest on the amount of the fee at a
rate of 12% per annum.
52
10.4. Fees and Expenses. Except as otherwise expressly set forth in
-----------------
this Agreement, all fees and expenses incurred in connection herewith and the
transactions contemplated hereby shall be paid by the party incurring expenses,
whether or not the Merger is consummated.
ARTICLE 11
MISCELLANEOUS
11.1. Notices. Except as otherwise expressly set forth in Section
-------
6.3(c), all notices, requests and other communications to any party hereunder
shall be in writing (including facsimile or similar writing) and shall be given,
if to Acquiror, to:
Triad Hospitals, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
if to the Company, to:
Quorum Health Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or facsimile number as a party may hereafter specify for
the purpose by notice to the other parties hereto. Each notice, request or other
communication shall be effective (a) if given by facsimile, when the facsimile
is transmitted to the facsimile number specified in
53
this Section and the appropriate facsimile confirmation is received or (b) if
given by any other means, when delivered at the address specified in this
Section.
11.2. Survival of Representations, Warranties and Covenants after the
---------------------------------------------------------------
Effective Time. The representations and warranties contained herein and in any
--------------
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement. The covenants contained in
Articles 2 and 3 and Sections 6.5, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.12, 7.13,
8.5, 8.6, 8.7, 11.2, 11.4, 11.5, 11.7, 11.8 and 11.9 shall survive the Effective
Time.
11.3. Amendments; No Waivers.
----------------------
(a) Any provision of this Agreement may be amended or waived prior to the
Effective Time, if, and only if, the amendment or waiver is in writing and
signed, in the case of an amendment, by the Company and Acquiror or in the case
of a waiver, by the party against whom the waiver is to be effective; provided
that (i) after the Company Stockholder Approval, no such amendment or waiver
shall, without the further approval of the Stockholders, be made that would
require such approval under any applicable law, rule or regulation and (ii)
after the Acquiror Stockholder Approval, no such amendment or waiver shall,
without the further approval of the Stockholders, be made that would require
such approval under any applicable law, rule or regulation.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
11.4. Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto, except that Acquiror may transfer or assign
to any wholly owned Acquiror Subsidiary the right to enter into the transactions
contemplated by this Agreement; provided that no assignment shall be permitted,
if it would delay or impede the Merger or any of the other transactions
contemplated by this Agreement, and any transfer or assignment will not relieve
Acquiror of its obligations hereunder. Any purported assignment in violation
hereof shall be null and void.
11.5. Counterparts; Effectiveness; Third Party Beneficiaries. This
------------------------------------------------------
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by all of the other
parties hereto. Except as set forth in Sections 3.5 and 7.3, 7.6, 7.7 and 7.8,
no provision of this Agreement is intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.
54
11.6. Governing Law. This Agreement shall be construed in accordance
-------------
with and governed by the internal laws of the State of Delaware.
11.7. Jurisdiction. Except as otherwise expressly provided in this
------------
Agreement, the parties hereto agree that any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought in the United States District Court for the District of Delaware or, if
such court does not have jurisdiction over the subject matter of such proceeding
or if such jurisdiction is not available, in the Court of Chancery of the State
of Delaware, County of New Castle, and each of the parties hereby consents to
the exclusive jurisdiction of those courts (and of the appropriate appellate
courts therefrom) in any suit, action or proceeding and irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any suit, action or proceeding in any of
those courts or that any suit, action or proceeding which is brought in any of
those courts has been brought in an inconvenient forum. Process in any suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any of the named courts. Without limiting
the foregoing, each party agrees that service of process on it by notice as
provided in Section 11.1 shall be deemed effective service of process.
11.8. Enforcement. The parties agree that irreparable damage would
-----------
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
11.9. Entire Agreement. This Agreement (together with the Schedules
----------------
hereto) constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter
hereof.
55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TRIAD HOSPITALS, INC. QUORUM HEALTH GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------- ------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman and Chairman of the Board
Chief Executive Officer
56