Exhibit (c)(1)
CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
by and among
SUN HEALTHCARE GROUP, INC.,
SUNREG ACQUISITION CORP.
and
REGENCY HEALTH SERVICES, INC.
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DATED AS OF JULY 26, 1997
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TABLE OF CONTENTS
Page
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ARTICLE 1 THE OFFER...................................................... 2
Section 1.1 The Offer................................................ 2
Section 1.2 Company Actions.......................................... 4
ARTICLE 2 THE MERGER..................................................... 5
Section 2.1 The Merger............................................... 5
Section 2.2 Closing; Effective Time.................................. 5
Section 2.3 Certificate of Incorporation............................. 6
Section 2.4 By-laws.................................................. 6
Section 2.5 Directors and Officers................................... 6
ARTICLE 3 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATION; EXCHANGE OF CERTIFICATES.......................... 6
Section 3.1 Effect on Capital Stock.................................. 6
Section 3.2 Exchange of Common Stock................................. 7
Section 3.3 No Liability............................................. 8
Section 3.4 Certain Adjustments...................................... 8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 9
Section 4.1 Organization............................................. 9
Section 4.2 Capitalization........................................... 9
Section 4.3 Subsidiaries............................................. 10
Section 4.4 Authorization; Binding Agreement......................... 10
Section 4.5 Noncontravention......................................... 10
Section 4.6 Governmental Approvals................................... 11
Section 4.7 SEC Filings; Financial Statements........................ 11
Section 4.8 Information Supplied..................................... 12
Section 4.9 Absence of Certain Changes or Events..................... 12
Section 4.10 Finders and Investment Bankers; Transaction Expenses..... 13
Section 4.11 Voting Requirement....................................... 13
Section 4.12 Litigation............................................... 13
Section 4.13 Taxes.................................................... 13
Section 4.14 Permits; Compliance with Laws............................ 14
Section 4.15 Title to Properties...................................... 15
Section 4.16 State Takeover Statutes.................................. 15
Section 4.17 Employee Benefit Plans................................... 16
Section 4.18 Insurance................................................ 17
Section 4.19 Environmental Matters.................................... 17
Section 4.20 Opinion of Financial Advisor............................. 18
Section 4.21 Intellectual Property.................................... 18
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ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ 19
Section 5.1 Organization............................................. 19
Section 5.2 Authorization; Binding Agreement......................... 19
Section 5.3 Noncontravention......................................... 19
Section 5.4 Governmental Approvals................................... 19
Section 5.5 Information Supplied..................................... 20
Section 5.6 Financing................................................ 20
Section 5.7 Regulatory Approval...................................... 20
Section 5.8 Compliance with Laws..................................... 21
Section 5.9 Litigation............................................... 21
ARTICLE 6 COVENANTS...................................................... 21
Section 6.1 Conduct of Business of the Company....................... 21
Section 6.2 Stockholder Approval; Proxy Statement.................... 23
Section 6.3 Access and Information................................... 24
Section 6.4 No Solicitation.......................................... 24
Section 6.5 Reasonable Efforts; Additional Actions................... 25
Section 6.6 Notification of Certain Matters.......................... 26
Section 6.7 Public Announcements..................................... 27
Section 6.8 Indemnification and Insurance............................ 27
Section 6.9 Directors................................................ 28
Section 6.10 Employee Matters......................................... 28
Section 6.11 Consummation of Merger................................... 29
Section 6.12 Debt Offers/Consent Solicitations........................ 30
ARTICLE 7 CONDITIONS..................................................... 30
Section 7.1 Conditions to Each Party's Obligations................... 30
ARTICLE 8 TERMINATION.................................................... 31
Section 8.1 Termination.............................................. 31
Section 8.2 Procedure for and Effect of Termination.................. 32
Section 8.3 Fees and Expenses........................................ 32
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ARTICLE 9 MISCELLANEOUS................................................ 33
Section 9.1 Certain Definitions................................... 33
Section 9.2 Amendment and Modification............................ 33
Section 9.3 Waiver of Compliance; Consents........................ 34
Section 9.4 Survival.............................................. 34
Section 9.5 Notices............................................... 34
Section 9.6 Assignment............................................ 35
Section 9.7 GOVERNING LAW......................................... 35
Section 9.8 Counterparts.......................................... 35
Section 9.9 Interpretation........................................ 36
Section 9.10 Entire Agreement...................................... 36
Section 9.11 No Third Party Beneficiaries.......................... 36
Section 9.12 Obligations of Parent................................. 36
EXHIBIT A - CONDITIONS OF THE OFFER
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 26, 1997 (the
"Agreement"), by and among SUN HEALTHCARE GROUP, INC., a Delaware corporation
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("Parent"), SUNREG ACQUISITION CORP., a Delaware corporation and a wholly owned
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subsidiary of the Parent ("Merger Sub"), and REGENCY HEALTH SERVICES, INC., a
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Delaware corporation (the "Company"). Merger Sub and the Company are sometimes
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collectively referred to herein as the "Constituent Corporations."
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WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each determined that it is advisable and in the best interests
of their respective stockholders for Parent to acquire the Company on the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Merger Sub to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "Offer") to purchase all the issued and
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outstanding shares ("Shares") of Common Stock, par value $.01 per share, of the
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Company (the "Common Stock"), at a price per share of Common Stock of $22.00 net
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to the seller in cash, upon the terms and subject to the conditions set forth in
this Agreement; and the Board of Directors of the Company has approved the Offer
and the Merger (as hereinafter defined) and is recommending that the Company's
stockholders accept the Offer;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, Parent, Merger Sub and
certain stockholders of the Company are entering into a Stockholder Agreement
(the "Stockholder Agreement") pursuant to which such stockholders have, among
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other things, agreed to tender all such stockholders' shares of Common Stock to
Merger Sub at the price per Share paid in the Offer, upon the terms and subject
to the conditions set forth in the Stockholder Agreement; and the Stockholder
Agreement has been approved by the Board of Directors of the Company;
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
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ARTICLE 1
THE OFFER
Section 1.1 The Offer.
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(a) Subject to the provisions of this Agreement, as promptly as
practicable but in no event later than the fifth business day from and including
the date of the public announcement of this Agreement, Merger Sub shall, and
Parent shall cause Merger Sub to, commence the Offer. The obligation of Merger
Sub to, and of Parent to cause Merger Sub to, commence the Offer and accept for
payment, and pay for, any shares of Common Stock tendered pursuant to the Offer
shall be subject only to the conditions set forth in Exhibit A (any of which may
be waived by Merger Sub in its sole discretion, provided that, without the
consent of the Company, Merger Sub shall not waive the Minimum Condition (as
defined in Exhibit A)) and to the terms and conditions of this Agreement.
Merger Sub may at any time transfer or assign to one or more corporations
directly or indirectly wholly owned by Parent the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but no such assignment
shall relieve Parent or Merger Sub of its obligations hereunder. Merger Sub
expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Merger Sub shall not (i) reduce the number
of shares of Common Stock subject to the Offer, (ii) reduce the price per share
of Common Stock to be paid pursuant to the Offer (except pursuant to Section
3.4), (iii) modify or add to the conditions set forth in Exhibit A, (iv) except
as provided in the remainder of this Section 1.1, extend the Offer, (v) change
the form of consideration payable in the Offer (other than by increasing the
cash offer price) or (vi) amend or modify any term of the Offer in any manner
adverse to any of the Company's stockholders. The initial expiration date shall
be September 15, 1997. Notwithstanding the foregoing, Merger Sub may, without
the consent of the Company, but subject to the Company's right to terminate this
Agreement pursuant to Section 8.1(b)(ii), (i) extend the Offer, if at the
scheduled expiration date of the Offer any of the conditions to Merger Sub's
obligation to purchase shares of Common Stock shall not be satisfied, until such
time as such conditions are satisfied or waived or (ii) extend the Offer for any
period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "SEC") or the staff thereof applicable
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to the Offer or in order to obtain any material regulatory approval applicable
to the Offer. Merger Sub agrees that: (A) in the event it would otherwise be
entitled to terminate the Offer at any scheduled expiration thereof due to the
failure of one or more of the conditions set forth in the first sentence of the
introductory paragraph or paragraphs (a) or (g) of Exhibit A to be satisfied or
waived, it shall give the Company notice thereof and, at the request of the
Company, if such conditions are reasonably likely to be satisfied during the
requested extension period, extend the Offer until the earlier of (1) such time
as such condition is, or conditions are, satisfied or waived and (2) the date
chosen by the Company, which shall not be later than (x) December 31, 1997 or
(y) the date on which the Company reasonably believes all such conditions will
be satisfied (it being understood that the Company shall not be entitled to make
such request if it is then in breach of this Agreement, and that nothing in this
Section 1.1 shall modify Parent's and Merger Sub's right to terminate this
Agreement in the event that the Company is in breach hereof or the conditions
specified in paragraphs (d) or (e) of Annex A are applicable); provided that if
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any such condition is not satisfied by the date so chosen by the Company, the
Company may request
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and Merger Sub shall make further extensions of the Offer in accordance with
the terms of this Section 1.1(a); and (B) in the event that Merger Sub would
otherwise be entitled to terminate the Offer at any scheduled expiration date
thereof due solely to the failure of the Minimum Condition to be satisfied, it
shall, at the request of the Company, extend the Offer for such period as may be
requested by the Company not to exceed ten business days from such scheduled
expiration date. Subject to the terms and conditions of the Offer and this
Agreement, Merger Sub shall, and Parent shall cause Merger Sub to, pay for all
shares of Common Stock validly tendered and not withdrawn pursuant to the Offer
that Merger Sub becomes obligated to purchase pursuant to the Offer immediately
after the expiration of the Offer; provided, however, that notwithstanding the
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foregoing Parent may, in its sole discretion, extend the expiration date of the
Offer for a period not to exceed ten business days and in no event ending after
December 31, 1997, if Parent reasonably believes that as a result of such
extension 90% or more of the Shares will be tendered in the Offer. If, at any
scheduled expiration date prior to October 1, 1997, there shall have been
tendered, and not withdrawn, fewer than 90% of the Shares, then Merger Sub
shall, at the request of the Company, extend the Offer for such number of days
(up to 20 calendar days) as the Company may request. No such request shall be
made by the Company if, in its sole judgment, it concludes that the Merger could
be consummated on or prior to October 6, 1997.
(b) On the date of commencement of the Offer, Parent and Merger Sub
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents and
exhibits included therein pursuant to which the Offer will be made, together
with any supplements or amendments thereto, the "Offer Documents"). The Offer
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Documents shall comply as to form in all material respects with the requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
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rules and regulations promulgated thereunder and the Offer Documents on the date
first published, sent or given to the Company's stockholders, shall 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 were made, not
misleading, except that no representation is made by Parent or Merger Sub with
respect to information supplied by the Company in writing for inclusion in the
Offer Documents. Each of Parent, Merger Sub and the Company agrees promptly to
correct any information provided by it for use in the Offer Documents if and to
the extent that such information shall have become false or misleading in any
material respect, and each of Parent and Merger Sub further agrees to take all
steps necessary to amend or supplement the Offer Documents and to cause the
Offer Documents as so amended or supplemented to be filed with the SEC and to be
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable Federal securities laws. The Company and its counsel
shall be given a reasonable opportunity to review the Offer Documents and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to stockholders of the Company. Parent and Merger Sub agree to
provide the Company and its counsel any comments Parent, Merger Sub or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
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(c) Parent shall contribute to Merger Sub on a timely basis the funds
necessary to purchase any shares of Common Stock that Merger Sub becomes
obligated to purchase pursuant to the Offer and to perform any of its other
obligations pursuant to this Agreement.
Section 1.2 Company Actions.
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(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly called
and held on July 26, 1997, unanimously adopted resolutions approving this
Agreement and the Stockholder Agreement and the transactions contemplated hereby
and thereby, including, the Offer and the Merger, determining that the terms of
the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders and recommending that the Company's stockholders accept
the Offer and tender their shares pursuant to the Offer and approve and adopt
this Agreement. The Company has been advised by each of its directors and
executive officers that each such person intends to tender all shares of Common
Stock owned individually by such person pursuant to the Offer.
(b) Promptly following the filing of the Offer Documents with the SEC,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendation described in
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Section 1.2(a) and shall mail the Schedule 14D-9 to the stockholders of the
Company; provided that the Company shall not be required to include such
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recommendation in the Schedule 14D-9 if the Company receives a bona fide written
Acquisition Proposal (as defined in Section 6.4) from any person or group, the
receipt of which was not related to a breach of Section 6.4, (i) that the Board
of Directors of the Company determines in its good faith judgment, after
consultation with the Company's financial advisor, is a Superior Proposal (as
defined in Section 6.4) and (ii) as a result of which, the Board determines in
good faith, after consultation with, and receipt of advice from, the Company's
outside counsel, that it would constitute a breach of the Board's fiduciary duty
under applicable law to so include such recommendation. The Schedule 14D-9
shall comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall 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 were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Parent or Merger Sub
in writing for inclusion in the Schedule 14D-9. Each of the Company, Parent and
Merger Sub agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to amend or supplement the Schedule 14D-9 and to cause
the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable Federal securities laws. Parent and its counsel shall be
given a reasonable opportunity to review the Schedule 14D-9 and all amendments
and supplements thereto prior to their filing with the SEC or dissemination to
stockholders of the
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Company. The Company agrees to provide Parent and its counsel in writing with
any comments the Company or its counsel may receive from the SEC or its staff
with respect to the Schedule 14D-9 promptly upon the receipt of such comments.
(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish Merger Sub promptly with mailing labels containing the names
and addresses of the record holders of Common Stock as of a recent date and of
those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Common Stock, and shall furnish to Merger Sub such
information and assistance (including updated lists of stockholders, security
position listings and computer files) as Parent may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Merger Sub shall hold in confidence the information
contained in any such labels, listings and files, will use such information only
in connection with the Offer and the Merger and, if this Agreement shall be
terminated, will, upon request, deliver to the Company all copies (in all forms)
of such information then in their possession or control.
ARTICLE 2
THE MERGER
Section 2.1 The Merger. Subject to the last two sentences of this
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Section 2.1, upon the terms and subject to the conditions of this Agreement, at
the Effective Time (as defined in Section 2.2) and in accordance with the
General Corporation Law of the State of Delaware (the "DGCL"), Merger Sub shall
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be merged with and into the Company, which shall be the surviving corporation in
the Merger (the "Surviving Corporation"). At the Effective Time, the separate
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existence of Merger Sub shall cease and the other effects of the Merger shall be
as set forth in Section 259 of the DGCL. At the election of Parent, if such
election would not in any manner adversely affect the Company's stockholders or
delay the transactions contemplated hereby, (i) any direct or indirect wholly
owned subsidiary (as defined in Section 9.1(e)) of Parent may be substituted for
and assume all of the rights and obligations of Merger Sub as a constituent
corporation in the Merger or (ii) the Company may be merged with and into Merger
Sub or Parent with Merger Sub or Parent, respectively, continuing as the
Surviving Corporation with the effects set forth above. In either such event,
the parties agree to execute an appropriate amendment to this Agreement in order
to reflect the foregoing.
Section 2.2 Closing; Effective Time. Subject to the provisions of
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Article 7, the closing of the Merger (the "Closing") shall take place in New
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York City at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, as soon as
practicable but in no event later than 10:00 a.m. New York City time on the
second business day after the date on which each of the conditions set forth in
Article 7 have been satisfied or waived by the party or parties entitled to the
benefit of such conditions, or at such other place, at such other time or on
such other date as Parent, Merger Sub and the Company may mutually agree. The
date on which the Closing actually
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occurs is hereinafter referred to as the "Closing Date." At the Closing,
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Parent, Merger Sub and the Company shall cause a certificate of merger (the
"Certificate of Merger") to be executed and filed with the Secretary of State of
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the State of Delaware in accordance with the DGCL. The Merger shall become
effective as of the date and time of such filing, or such other time within one
business day of such filing as Merger Sub and the Company shall agree to be set
forth in the Certificate of Merger (the "Effective Time").
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Section 2.3 Certificate of Incorporation. The certificate of
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incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall become, from and after the Effective Time, the certificate of
incorporation of the Surviving Corporation, until thereafter altered, amended or
repealed as provided therein and in accordance with applicable law.
Section 2.4 By-laws. The by-laws of Merger Sub, as in effect
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immediately prior to the Effective Time, shall become, from and after the
Effective Time, the by-laws of the Surviving Corporation, until thereafter
altered, amended or repealed as provided therein and in accordance with
applicable law.
Section 2.5 Directors and Officers. The directors and officers of
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Merger Sub immediately prior to the Effective Time shall become, from and after
the Effective Time, the directors and officers of the Surviving Corporation,
until their respective successors are duly elected or appointed and qualify or
their earlier resignation or removal.
ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATION; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Capital Stock. As of the Effective Time, by
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virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each share of the capital
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stock of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and become one fully paid and nonassessable share
of common stock, par value $0.01 per share, of the Surviving Corporation.
(b) Treasury Stock and Parent-Owned Stock. Each share of
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Common Stock that is owned by the Company or any subsidiary of the Company
("Treasury Shares") and each share of Common Stock that is owned by Parent,
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Merger Sub or any other subsidiary of Parent ("Parent Shares") shall
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automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Common Stock. Subject to Section 3.1(e),
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each issued and outstanding share of Common Stock (other than shares to be
canceled in accordance with Section 3.1(b)) shall be converted into the right to
receive from the Surviving Corporation
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in cash, without interest, the price paid for each share of Common Stock in the
Offer (the "Merger Consideration"). As of the Effective Time, all shares of the
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Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration, without
interest.
(d) Options. Immediately prior to the Effective Time, the
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unexercisable portion of each outstanding option (a "Company Stock Option") to
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purchase shares of Common Stock, shall become immediately exercisable in full
(by their terms or, if necessary, by action of the Company), subject to all
expiration, lapse, forfeiture and other terms and conditions thereof. The
Company shall take all action necessary so that each Company Stock Option (and
any rights thereunder) outstanding immediately prior to the Effective Time shall
be canceled immediately prior to the Effective Time in exchange for the right to
receive an amount in cash equal to the product of (A) the number of shares of
Common Stock subject to such Company Stock Option immediately prior to the
Effective Time (after giving effect to the first sentence of this Section
3.1(d)) and (B) the excess, if any, of (1) the Merger Consideration over (2) the
per share exercise price of such Company Stock Option, to be delivered by the
Surviving Corporation immediately following the Effective Time.
(e) Dissenting Shares. Notwithstanding anything in this Agreement to
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the contrary, each share of Common Stock that is issued and outstanding
immediately prior to the Effective Time and that is held by a stockholder who
has available to it, and who has properly exercised and perfected, appraisal
rights under Section 262 of the DGCL (the "Dissenting Shares"), shall not be
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converted into or exchangeable for the right to receive the Merger
Consideration, but shall be entitled to receive such consideration as shall be
determined pursuant to Section 262 of the DGCL; provided, however, that if such
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holder shall have failed to perfect or shall have effectively withdrawn or lost
the right to appraisal and payment under the DGCL, each share of Common Stock of
such holder shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
Merger Consideration, without any interest thereon, in accordance with Section
3.1(a), and such shares shall no longer be Dissenting Shares. The Company shall
give Parent (i) prompt notice of any demands for fair value for shares of Common
Stock received by the Company and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands. The
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
Section 3.2 Exchange of Common Stock.
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(a) From time to time, on or before the Effective Time, in the event
fewer than 80% of the then outstanding Shares are tendered and not withdrawn
pursuant to the Offer, Parent shall cause to be deposited in trust with a bank
or trust company designated by Parent and satisfactory to the Company (the
"Paying Agent") cash, cash equivalents or a combination thereof in amounts and
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at the times necessary for the prompt payment of the Merger Consideration upon
surrender of certificates representing Shares as part of the Merger pursuant
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to Section 3.1 (it being understood that any and all interest earned on funds
made available to the Paying Agent pursuant to this Agreement and not used to
pay Merger Consideration shall be turned over to Parent).
(b) Promptly after the Effective Time, the Paying Agent (which, for
the purposes of this subsection (b), may be Parent) shall mail to each holder of
record of a certificate or certificates that immediately prior to the Effective
Time represented outstanding shares of Common Stock that were converted into the
right to receive the Merger Consideration pursuant to Section 3.1 (the
"Certificates") a form letter of transmittal (which shall specify that delivery
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shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificates for payment
therefor. Upon surrender by such holder to the Paying Agent of a Certificate,
together with such letter of transmittal duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor, cash in an amount
equal to the product of the number of shares of Common Stock represented by such
Certificate multiplied by the Merger Consideration, and such Certificate shall
forthwith be canceled. No interest will be paid or accrued on the cash payable
upon the surrender of the Certificates. If the payment is to be made to a
person other than the person in whose name a Certificate surrendered is
registered, it shall be a condition of payment that (a) the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and (b) the person requesting such payment shall pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 3.2, each Certificate shall
represent for all purposes whatsoever only the right to receive the Merger
Consideration in cash multiplied by the number of shares evidenced by such
Certificate, without any interest thereon.
(c) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of the shares of Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for
transfer or for any other reason, they shall be canceled and exchanged for cash
as provided in this Article 3, except as otherwise provided by law.
Section 3.3 No Liability. None of Parent, Merger Sub, the Company or
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the Paying Agent shall be liable to any person in respect of any cash from the
Payment Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 3.4 Certain Adjustments. If between the date of this Agreement
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and the time of the Majority Acquisition (as defined below), the outstanding
shares of Common Stock shall be changed into a different number of shares by
reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities shall
be declared thereon with a record date within such period, or the number of
shares of Common Stock on a fully diluted basis is in excess of that specified
in Section 4.2 (regardless of whether such excess is a result of an additional
issuance of Common Stock or a
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correction to such Section) (excluding, however, changes in such number on a
fully diluted basis caused solely by a change in the price of the Common Stock
and by the exercise of Company Stock Options outstanding on the date of this
Agreement), then Parent may unilaterally cause the Merger Consideration and the
per share price to be paid in the Offer to be adjusted accordingly to provide to
the holders of Common Stock the same aggregate economic effect as contemplated
by this Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange, dividend or increase.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
Section 4.1 Organization. The Company and each of its subsidiaries is
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duly organized and validly existing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries are duly qualified to do
business and in good standing in its jurisdiction of organization and in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except for
such failures to be so duly qualified and in good standing that, individually or
in the aggregate, will not have a Material Adverse Effect (as defined in Section
9.1(c)) with respect to the Company. The Company has previously delivered or
made available to Parent correct and complete copies of the certificates of
incorporation and by-laws (or equivalent governing instruments), as currently in
effect, of the Company and each of its subsidiaries.
Section 4.2 Capitalization. The authorized capital stock of the
--------------
Company is as disclosed in the SEC Filings (as defined in Section 4.7). At the
close of business on July 25, 1997, (a) 15,935,300 shares of Common Stock were
issued and outstanding, and (b) 1,801,859 shares of Common Stock were reserved
for issuance upon exercise of Company Stock Options. All issued and outstanding
shares of Common Stock have been duly authorized and are validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in this
Section 4.2 and on Schedule 4.2, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its subsidiaries is a party or by which any of them is bound (i) obligating
the Company or any of its subsidiaries to issue, deliver, sell, transfer,
repurchase, redeem or otherwise acquire or vote, or cause to be issued,
delivered, sold, transferred, repurchased, redeemed or otherwise acquired or
voted, any shares of capital stock or other voting securities of the Company or
of any of its subsidiaries, (ii) restricting the transfer of Common Stock or
(iii) obligating the Company or any of its subsidiaries to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. The Company is not aware of any voting
trust, stockholder agreement or other similar arrangement relating to any shares
of Common Stock. Schedule 4.2
9
sets forth a complete and correct list as of the date hereof of (w) the number
of options and warrants to purchase Common Stock outstanding and the number of
shares of Common Stock issuable thereunder, (x) the exercise price of each such
outstanding stock option and warrant, (y) the vesting schedule of each such
outstanding stock option (it being understood that all such stock options shall
become exercisable pursuant to Section 3.1(d)) and (z) the grantee or holder of
each such option and warrant. All shares of Common Stock subject to issuance as
aforesaid, upon issuance prior to the Effective Time on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. Except as is set
forth on Schedule 4.2, there are no material outstanding contractual obligations
of the Company to provide funds to, or make any material investment (in the form
of a loan, capital contribution or otherwise) in, any Company subsidiary or any
other person.
Section 4.3 Subsidiaries. All of the outstanding shares of capital
------------
stock of each of the Company's subsidiaries that are owned by the Company or any
other subsidiary of the Company (collectively, the "Subsidiary Shares") have
-----------------
been duly authorized and are validly issued, fully paid and nonassessable and
free of preemptive rights. Except as set forth on Schedule 4.3, all of the
Subsidiary Shares are owned by the Company free and clear of all liens, claims,
charges, encumbrances or security interests (collectively, "Liens") with respect
-----
thereto.
Section 4.4 Authorization; Binding Agreement. The Company has the full
--------------------------------
corporate power and authority to execute and deliver this Agreement and, subject
to adoption of this Agreement by the stockholders of the Company in accordance
with the DGCL, the certificate of incorporation and by-laws of the Company, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of the Company, subject to the adoption of this Agreement by the stockholders of
the Company in accordance with the DGCL and the certificate of incorporation and
by-laws of the Company. This Agreement has been duly and validly executed and
delivered by the Company and, subject to the adoption of this Agreement by the
stockholders of the Company in accordance with the DGCL and the certificate of
incorporation and by-laws of the Company, constitutes a legal, valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms except as may be limited by (a) bankruptcy, insolvency, reorganization or
other laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 4.5 Noncontravention. Neither the execution and delivery of
----------------
this Agreement nor the consummation of the transactions contemplated hereby or
thereby will (a) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws (or equivalent governing instruments) of
the Company or any of its subsidiaries, (b) except as set forth on Schedule 4.5
and in connection with the Consent Solicitations (as defined below), require any
consent, approval or notice under, or conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, agreement or other
10
instrument or obligation (collectively, "Contracts and Other Agreements") to
------------------------------
which the Company or any of its subsidiaries is a party or by which any of them
or any material portion of their properties or assets may be bound or (c)
subject to the approvals, filings and consents referred to in Section 4.6,
violate any order, judgment, writ, injunction, determination, award, decree,
law, statute, rule or regulation (collectively, "Legal Requirements") applicable
------------------
to the Company or any of its subsidiaries or any material portion of their
properties or assets; provided that no representation or warranty is made (i) in
--------
the foregoing clauses (b) or (c) or with respect to matters that, individually
or in the aggregate, will not (i) have a Material Adverse Effect with respect to
the Company or (ii) materially delay the transactions contemplated by this
Agreement.
Section 4.6 Governmental Approvals. No consent, approval or
----------------------
authorization of or declaration or filing with any foreign, federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality (each, a "Governmental Entity") on the part of the Company or
-------------------
any of its subsidiaries that has not been obtained or made is required in
connection with the execution or delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby, other
than (a) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware, (b) filings and other applicable requirements under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
---
Act"), and the Exchange Act, (c) the filing of appropriate documents with the
---
relevant authorities of states other than Delaware in which the Company or any
of its subsidiaries is authorized to do business, (d) such filings as may be
required in connection with any state or local tax which is attributable to the
beneficial ownership of the Company's or its subsidiaries, real property, if
any, (e) such filings and consents as may be required under any environmental,
health or safety law or regulation, or any health care licensure laws,
reimbursement authorities and their agents, certificate of need laws and other
health care laws and regulations, pertaining to any notification, disclosure or
required approval required by the Merger or the transactions contemplated by
this Agreement, (f) such filings as may be required by any applicable state
securities or "blue sky" laws or state takeover laws, and (g) consents,
approvals, authorizations, declarations or filings that, if not obtained or
made, will not, individually or in the aggregate, result in a Material Adverse
Effect with respect to the Company or a material delay in the transactions
contemplated by this Agreement or the Stockholder Agreement.
Section 4.7 SEC Filings; Financial Statements. The Company has made
---------------------------------
all filings required to be made under the Exchange Act with the SEC since
December 31, 1996 (the "SEC Filings"). As of their respective dates, the SEC
-----------
Filings complied as to form in all material respects with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
--------------
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Filings, and the SEC Filings did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements set forth in the SEC Filings comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC promulgated under the Securities Act or the
Exchange Act, as the case may be, and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except
11
as may be indicated in the notes to such financial statements) and fairly
present in all material respects the consolidated financial position of the
Company and its subsidiaries at the respective dates thereof and the
consolidated results of operations and cash flows for the respective periods
then ended (subject, in the case of unaudited interim financial statements, to
exceptions permitted by Form 10-Q under the Exchange Act and to normal year-end
adjustments). As of March 31, 1997, neither the Company nor any of its
subsidiaries had, and since such date neither the Company nor any of its
subsidiaries has incurred, any liabilities of any nature, whether accrued,
absolute, contingent or otherwise, whether due or to become due that are
required to be recorded or reflected on a consolidated balance sheet of the
Company under generally accepted accounting principles, except as reflected or
reserved against or disclosed in the financial statements of the Company
included in the SEC Filings or set forth on Schedule 4.7.
Section 4.8 Information Supplied. None of the information supplied or
--------------------
to be supplied by the Company for inclusion or incorporation by reference in (i)
the Offer Documents, (ii) the Schedule 14D-9, (iii) if applicable, the proxy
statement relating to the adoption of this agreement by the Company's
stockholders (the "Proxy Statement") or (iv) the information to be filed by the
---------------
Company in connection with the Offer pursuant to Rule 14f-1 promulgated under
the Exchange Act (the "Information Statement"), will, in the case of the Offer
---------------------
Documents and the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
holders, or, in the case of the Proxy Statement, at the date the Proxy Statement
is first mailed to the Company's stockholders or at the time of the meeting of
the Company's stockholders held to vote on approval and adoption of this
Agreement, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Merger Sub in writing specifically for
inclusion or incorporation by reference therein. The Schedule 14D-9, the Proxy
Statement and the Information Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Merger Sub in writing specifically for
inclusion or incorporation by reference therein or as set forth in any of
Parent's SEC Filings.
Section 4.9 Absence of Certain Changes or Events. Except as disclosed
------------------------------------
in the SEC Filings or on Schedule 4.9, since March 31, 1997, the Company and its
subsidiaries have conducted their respective businesses in the ordinary course
consistent with past practice and as of the date hereof there has not been (i)
any condition, event or occurrence that, individually or in the aggregate, has
resulted in a Material Adverse Effect with respect to the Company (without
regard, however, to changes in conditions generally applicable to the long-term
care industry or general economic conditions), (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any of the Company's capital stock, (iii) any
split, combination or reclassification of any of its capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, (iv) except
as reflected on Schedule 4.2 and except
12
as disclosed in this Agreement, (x) any granting by the Company or any of its
subsidiaries to any executive officer or other key employee of the Company or
any of its subsidiaries of any increase in compensation, except as required
under employment agreements in effect as of July 1, 1997 (true and correct
copies of which have been provided to Parent), or (y) any granting by the
Company or any of its subsidiaries to any such executive officer of any increase
in severance or termination pay, except as was required under any employment,
severance or termination agreements in effect as of July 1, 1997 (true and
correct copies of which have been provided to Parent) as the same may be amended
consistent with terms described on Schedule 6.10(c), (v) any damage, destruction
or loss, whether or not covered by insurance, that has had or will have a
Material Adverse Effect with respect to the Company or (vi) except insofar as
may have been disclosed in the SEC Filings or required by a change in generally
accepted accounting principles and set forth on Schedule 4.9, any change in
accounting methods, principles or practices except as required by generally
accepted accounting principles.
Section 4.10 Finders and Investment Bankers; Transaction Expenses.
----------------------------------------------------
Neither the Company nor any of its officers or directors has employed any
investment banker, business consultant, financial advisor, broker or finder in
connection with the transactions contemplated by this Agreement, except for
▇▇▇▇▇ ▇▇▇▇▇▇ Inc. ("▇▇▇▇▇ ▇▇▇▇▇▇") and ▇▇▇▇▇ Management Company ("SMC"), or
------------ ---
incurred any liability for any investment banking, business consultancy,
financial advisory, brokerage or finders' fees or commissions in connection with
the transactions contemplated hereby, except for fees payable to ▇▇▇▇▇ ▇▇▇▇▇▇
and SMC (as reflected in agreements between such firms and the Company, copies
of which have been delivered to Parent).
Section 4.11 Voting Requirement. The affirmative vote of the holders
------------------
of a majority of the outstanding shares of Common Stock in favor of adoption of
this Agreement and the Merger is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve this Agreement and
the transactions contemplated hereby under any applicable law, rule or
regulation or pursuant to the requirements of the Company's certificate of
incorporation or by-laws.
Section 4.12 Litigation. Except as disclosed in the SEC Filings or on
----------
Schedule 4.12, there is no suit, action, proceeding or investigation pending or,
to the knowledge of the Company, overtly threatened against the Company or any
of its subsidiaries that, individually or in the aggregate, will have a Material
Adverse Effect with respect to the Company, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its subsidiaries having any such effect.
Section 4.13 Taxes. The Company has filed all material tax returns
-----
required to be filed by it and has paid, or has set up an adequate reserve for
the payment of, all taxes required to be paid as shown on such returns, and the
most recent financial statements contained in the SEC Filings reflect an
adequate reserve for all taxes payable by the Company accrued through the date
of such financial statements. The unpaid taxes, including any contingent tax
liabilities and net deferred tax liabilities, of the Company which have accrued
as of the date of the most recent financial statements contained in the SEC
Filings do not materially exceed the
13
reserve for accrued tax liability set forth or included in such financial
statements. Except as disclosed in Schedule 4.13, no federal, state or local
audits, examinations or other administrative proceedings have been commenced or,
to the Company's knowledge, are pending with regard to any taxes or tax returns
of the Company or any of its subsidiaries which such audit, if determined
adversely, will have a Material Adverse Effect with respect to the Company. No
agreements have been made by the Company for the extension of time or the waiver
of the statute of limitations for the assessment or payment of any federal,
state or local taxes. Neither the Company nor any of its subsidiaries is or has
been a United States real property holding company within the meaning of Section
897(c)(2) of the Internal Revenue Code of 1986, as amended (the "Code").
----
Section 4.14 Permits; Compliance with Laws.
-----------------------------
(a) The Company and the Company subsidiaries have (i) all franchises,
grants, authorizations, licenses, establishment registrations, product listings,
permits, easements, variances, exceptions, consents, certificates,
identification and registration numbers, approvals and orders of any
Governmental Entity necessary for the Company or any Company subsidiary to own,
lease and operate its properties or to produce, store, distribute and market its
products or otherwise to carry on its business as it is now being conducted and
(ii) agreements and certifications from all Federal, state, foreign and local
governmental agencies and accrediting and certifying organizations having
jurisdiction over such facility or facilities that are required to operate the
facility or facilities in the manner in which it or they are currently operated
and receive reimbursement for care provided to patients covered under the
Federal Medicare program ("Medicare"), any applicable state Medicaid program
--------
("Medicaid") or any comparable foreign medical reimbursement program (all the
--------
matters referred to in clauses (i) and (ii) collectively, the "Company
-------
Permits"), except where the failure to have, or the suspension or cancellation
-------
of, any of the Company Permits will not have, individually or in the aggregate,
a Material Adverse Effect with respect to the Company, and no suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Company Permits will not have, individually or in
the aggregate, a Material Adverse Effect with respect to the Company. Without
limiting the generality of the foregoing, except as set forth in Schedule
4.14(a), all of the Company's facilities are certified for participation or
enrollment in the Medicare program and the Medicaid programs for states in which
the Company has facilities, have current and valid provider contracts with the
Medicare program and the Medicaid programs for states in which the Company has
facilities and are in substantial compliance with the conditions of
participation of such programs. Neither the Company nor any Company subsidiary
is in conflict with, or in default or violation of, (A) any law applicable to
the Company or any Company subsidiary or by which any property or asset of the
Company or any Company subsidiary is bound or affected or (B) any Company
Permits, except in the case of clauses (A) and (B) for any such conflicts,
defaults or violations that will not have, individually or in the aggregate, a
Material Adverse Effect with respect to the Company. Neither the Company nor
any Company subsidiary has received notice from the regulatory authorities that
enforce the statutory or regulatory provisions in respect of either the Medicare
or the Medicaid program of any pending or threatened investigations or surveys,
and no such investigations or surveys are pending or, to the knowledge of the
Company, threatened or imminent. Schedule 4.14(a) sets
14
forth, as of the date of this Agreement, all actions, proceedings,
investigations or surveys pending or, to the knowledge of the Company,
threatened against the Company or any Company subsidiary that could reasonably
be expected to result in (i) the loss or revocation of a Company Permit
necessary to operate one or more facilities or for a facility to receive
reimbursement under the Medicare or Medicaid programs or (ii) the suspension or
cancellation of any other Company Permit, except, in the case of clauses (i) and
(ii), any such Company Permit where such suspension or cancellation will not
have, individually or in the aggregate, a Material Adverse Effect with respect
to the Company.
(b) The Company and each Company subsidiary, as appropriate, is an
approved participating provider in and under all third party payment programs
from which it receives revenues. No action or investigation is pending, or to
the knowledge of the Company, threatened to suspend, limit, terminate,
condition, or revoke the status of the Company or any Company subsidiary as a
provider in any such program, and neither the Company nor any Company subsidiary
has been provided written notice by any third party payor of its intention to
suspend, limit, terminate, revoke, condition or fail to renew in whole or in
part or decrease the amounts payable under any arrangement with the Company or
such Company subsidiary as a provider, which action, investigation, proceeding,
suspension, limitation, termination, revocation, conditioning or failure to
renew will have, individually or in the aggregate, a Material Adverse Effect
with respect to the Company.
(c) Neither the Company nor any Company subsidiary is delinquent with
respect to the filing of any claims, cost reports or annual filings required to
be filed to secure payments for services rendered by them under any third-party
payment program from which they receive or expect to receive revenues,
including, without limitation, Medicare and Medicaid, except where such
delinquency will not individually or in the aggregate have a Material Adverse
Effect with respect to the Company. Except as indicated in its financial
statements included in the SEC Filings, the Company or each Company subsidiary,
as applicable, has paid, or caused to be paid, all refunds, discounts,
adjustments, or amounts owing that have become due to such third party payors
pursuant to such claims, reports or filings and, to the knowledge of the
Company, there are no material changes required to be made to any cost reports,
claims or filings made by it for any period or of any deficiency in any such
claim, report, or filing, except for changes and deficiencies that in the
aggregate will not have a Material Adverse Effect with respect to the Company.
Section 4.15 Title to Properties. The Company and its subsidiaries
-------------------
have good, valid and marketable title to the properties and assets reflected on
the most recent consolidated balance sheet included in the SEC Filings (the
"Balance Sheet") (other than properties and assets disposed of in the ordinary
-------------
course of business since the date of the Balance Sheet, and all such properties
and assets are free and clear of any Liens, except as described in the SEC
Filings and the financial statements included therein or on Schedule 4.3 or
4.15, liens for current taxes not yet due and other than Liens or title
imperfections that will not have a Material Adverse Effect with respect to the
Company.
Section 4.16 State Takeover Statutes. The Board of Directors of the
-----------------------
Company has approved the Offer, the Merger, this Agreement, the Stockholder
Agreement, the pledge,
15
if any, of Shares by Merger Sub to a provider of financing for the Offer to
Parent or Merger Sub and the exercise of remedies after the Majority Acquisition
with regard to any such pledged Shares and such approval is sufficient to render
inapplicable to the Offer, the Merger, this Agreement, the Stockholder
Agreement, the pledge, if any, of Shares by Merger Sub to a provider of
financing for the Offer to Parent or Merger Sub and the exercise of remedies
after the Majority Acquisition with regard to any such pledged Shares and the
transactions contemplated by this Agreement and the Stockholder Agreement, the
provisions of Section 203 of the DGCL.
Section 4.17 Employee Benefit Plans.
----------------------
(a) The Company and each of its subsidiaries have complied, and
currently are in compliance, in all material respects with the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code with respect to each employee benefit plan (as defined
-----
under Section 3(3) of ERISA) maintained by the Company or any of its
subsidiaries (each, a "Plan"). There has been no prohibited transaction (within
----
the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to
any Plan.
(b) Each of the Plans that is intended to qualify under Section 401(a)
of the Code does so qualify and is exempt from taxation pursuant to Section
501(a) of the Code. The Company has no Plans which are employee pension benefit
plans (within the meaning of Section 3(2)(A) of ERISA).
(c) Neither the Company nor any of its subsidiaries has maintained,
adopted or established, contributed or been required to contribute to, or
otherwise participated in or been required to participate in, any employee
benefit plan or other program or arrangement subject to Title IV of ERISA
(including, without limitation, a "multi-employer plan" (as defined in Section
3(37) of ERISA) and a defined benefit plan (as defined in Section 3(35) of
ERISA)).
(d) No Plan provides benefits, including, without limitation, death,
health or medical benefits (whether or not insured), with respect to current or
former employees of the Company beyond their retirement or other termination of
service with the Company (other than (i) coverage mandated by applicable law,
(ii) deferred compensation benefits accrued as liabilities on the books of the
Company, or (iii) benefits the full cost of which is borne by the current or
former employee (or his beneficiary)).
(e) The Company has made available to Parent (i) copies of all
employment agreements with officers of the Company; (ii) copies of all
agreements with consultants who are individuals obligating the Company to make
annual cash payments in an amount exceeding $100,000 and which are not
terminable on less than 60 days' notice without penalty; (iii) copies of all
plans, programs, agreements and other arrangements of the Company with or
relating to its employees which contain change of control provisions; and (iv)
the various forms of employment agreement, if any, of the Company for its non-
executive employees.
16
(f) To the Company's knowledge, the Company and the Company
subsidiaries are in compliance with the requirements of the Americans With
Disabilities Act and the health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985.
(g) The Company and the Company subsidiaries are in compliance with
the requirements of the Workers Adjustment and Retraining Notification Act
("WARN") and have no liabilities pursuant to WARN.
----
(h) Except as set forth on Schedule 4.17(h), neither the Company nor
any Company subsidiary is a party to any collective bargaining or other labor
union contract applicable to persons employed by the Company or any Company
subsidiary and no collective bargaining agreement is being negotiated by the
Company or any Company subsidiary. As of the date of this Agreement, there is
no labor dispute, strike or work stoppage against the Company or any Company
subsidiary pending or, to the knowledge of the Company, threatened which may
interfere with the respective business activities of the Company or any Company
subsidiary. As of the date of this Agreement, to the knowledge of the Company,
none of the Company, any Company subsidiary, or any of their respective
representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of the Company or any
Company subsidiary, and there is no charge or complaint against the Company or
any Company subsidiary by the National Labor Relations Board or any comparable
governmental entity pending or threatened in writing, except where such unfair
labor practice, charge or complaint will not have a Material Adverse Effect with
respect to the Company.
Section 4.18 Insurance. The Company maintains, and has maintained,
---------
without interruption, during the past three years, policies or binders of
insurance covering such risks, and events, including personal injury, property
damage and general liability, in amounts the Company reasonably believes
adequate for its business and operations.
Section 4.19 Environmental Matters.
---------------------
(a) Except as set forth in the SEC Filings, (i) the assets,
properties, businesses and operations of the Company and its subsidiaries are
and have been in compliance with applicable Environmental Laws (as defined
below), except for such non-compliance which has not had and will not have a
Material Adverse Effect with respect to the Company); (ii) the Company and its
subsidiaries have obtained and, as currently operating, are in compliance with
all Company Permits necessary under any Environmental Law for the conduct of the
business and operations of the Company and its subsidiaries in the manner now
conducted except for such non-compliance which has not had and will not have a
Material Adverse Effect with respect to the Company; (iii) all Hazardous
Substances generated at or in connection with the real properties and operation
of the Company have been transported and otherwise handled, treated and disposed
of in compliance with all applicable Environmental Laws and in a manner that
does not result in liability under Environmental Laws, except for noncompliance
or liability which has not had and will not have a Material Adverse Effect with
respect to the Company, (iv) no Hazardous Substances have been disposed of or
otherwise released, handled or stored by the Company on the real properties on
which the Company's business is conducted or elsewhere in
17
violation of applicable Environmental Laws or in a manner that would result in
liability under applicable Environmental Laws which will have a Material Adverse
Effect with respect to the Company and (v) neither the Company nor any of its
subsidiaries nor any of their respective assets, properties, businesses or
operations has received or is subject to any outstanding order, decree,
judgment, complaint, agreement, claim, citation, notice, or to the knowledge of
the Company, any investigation, inquiry or proceeding indicating that the
Company or any of its subsidiaries is or may be (a) liable for a violation of
any Environmental Law or (b) liable for any Environmental Liabilities and Costs
(including, without limitation, any such Environmental Liabilities or Costs
incurred in connection with being designated as a "potentially responsible
party" pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act or any analogous state law (any such designation of the Company
being set forth on Schedule 4.19)), where such liabilities, individually or in
the aggregate, will have a Material Adverse Effect with respect to the Company.
(b) For purposes of this Agreement, the terms below shall have the
following meanings:
"Environmental Law" means any law (including, without limitation, common
-----------------
law), regulation, ordinance, guideline, code, decree, judgment, order, permit or
authorization or other legally enforceable requirement of any Governmental
Authority relating to worker or public safety and the indoor and outdoor
environment, including, without limitation, pollution, contamination, Hazardous
Substances, cleanup, regulation and protection of the air, water or soils in the
indoor or outdoor environment; and
"Environmental Liabilities and Costs" means all damages, penalties,
-----------------------------------
obligations or clean-up costs assessed or levied pursuant to any Environmental
Law;
"Hazardous Substances" means petroleum products, asbestos, radioactive
--------------------
material, or hazardous or toxic substances or wastes as defined or regulated
under any Environmental Law.
Section 4.20 Opinion of Financial Advisor. The Board of Directors of
----------------------------
the Company has received the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇, dated the date of this
Agreement, to the effect that, as of the date of this Agreement, the cash
consideration to be received in the Offer and the Merger by the holders of
Common Stock (other than Parent and its affiliates) is fair, from a financial
point of view, to such holders, and a complete and correct signed copy of such
opinion will be delivered to Parent after receipt thereof by the Company.
Section 4.21 Intellectual Property. The Company neither owns nor
---------------------
licenses any intellectual property (including, without limitation, patents,
copyrights, trademarks or know-how) the absence of which will have a Material
Adverse Effect with respect to the Company.
18
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
Section 5.1 Organization. Each of Parent and Merger Sub is a
------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Merger Sub is a newly formed, wholly
owned subsidiary of the Parent and, except for activities incident to the
acquisition of the Company, Merger Sub has not engaged in any business
activities of any type or kind whatsoever.
Section 5.2 Authorization; Binding Agreement. Each of Parent and
--------------------------------
Merger Sub has the full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of each of Parent and Merger Sub. This
Agreement has been duly and validly executed and delivered by each of Parent and
Merger Sub and constitutes a legal, valid and binding agreement of each of
Parent and Merger Sub, enforceable against each of them in accordance with its
terms except as may be limited by (a) bankruptcy, insolvency, reorganization or
other laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 5.3 Noncontravention. Neither the execution and delivery of
----------------
this Agreement nor the consummation of the transactions contemplated hereby will
(a) conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws of Parent or Merger Sub, (b) require any consent,
approval or notice under or conflict with or result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any Contracts and Other Agreements to
which Parent or Merger Sub is a party or by which either of them or any material
portion of their properties or assets may be bound or (c) subject to the matters
referred to in clauses (a), (b) and (c) of Section 5.4 below, violate any Legal
Requirements applicable to Parent or Merger Sub or any material portion of their
properties or assets; provided that no representation or warranty is made in the
--------
foregoing clauses (b) and (c) with respect to matters that, individually or in
the aggregate, will neither materially delay the transactions contemplated
hereby nor have a Material Adverse Effect with respect to Parent.
Section 5.4 Governmental Approvals. No consent, approval or
----------------------
authorization of, or declaration or filing with, any Governmental Entity on the
part of either Parent or Merger Sub that has not been obtained or made is
required in connection with the execution or delivery by Parent or Merger Sub of
this Agreement or the consummation by Parent or Merger Sub of the transactions
contemplated hereby, other than (a) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, (b) filings under the HSR Act,
the Exchange Act
19
and as set forth on Schedule 5.4, (c) the filing of appropriate documents with
the relevant authorities of states other than Delaware in which Parent or any of
its subsidiaries is authorized to do business, (d) such filings as may be
required in connection with any state or local tax which is attributable to the
beneficial ownership of Parent's or its subsidiaries' real property, if any, (e)
such filings and consents as may be required under any environmental, health or
safety law or regulation, or any health care licensure laws, reimbursement
authorities and their agents, certificate of need laws and other health care
laws and regulations, pertaining to any notification, disclosure or required
approval required by the Merger or the transactions contemplated by this
Agreement, (f) such filings as may be required by any applicable state
securities or "blue sky" laws or state takeover laws and (g) consents,
approvals, authorizations, declarations or filings that, if not obtained or
made, will neither, individually or in the aggregate, materially delay the
transactions contemplated hereby nor have a Material Adverse Effect with respect
to Parent.
Section 5.5 Information Supplied. None of the information supplied or
--------------------
to be supplied in writing by Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Offer Documents, the Schedule 14D-9, the
Information Statement, or, if applicable, the Proxy Statement will, in the case
of the Offer Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
holders, or, in the case of the Proxy Statement, at the date the Proxy Statement
is first mailed to the Company's stockholders or at the time of the meeting of
the Company's stockholders held to vote on approval and adoption of this
Agreement, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Offer Documents will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty is made by
Parent or Merger Sub with respect to statements made or incorporated by
reference therein based on information supplied in writing by the Company
specifically for inclusion or incorporation by reference therein.
Section 5.6 Financing. After giving effect to borrowings under
---------
Parent's financing commitments, Merger Sub will have sufficient funds available
to purchase all the outstanding shares on a fully diluted basis of Common Stock
pursuant to the Offer and the Merger, to satisfy its obligations under Section
3.1(d), to refinance all indebtedness that will or may become due as a result of
the consummation of the Offer or the Merger, to comply with Section 10.1 of each
of the Indentures (as defined in Section 6.12) and to pay all fees and expenses
incurred by it or disclosed pursuant to Section 4.10 related to the transactions
contemplated by this Agreement.
Section 5.7 Regulatory Approval. Parent is not aware of any existing
-------------------
impediment to the approval of the transactions contemplated hereby by any
Governmental Authority whose approval is required to consummate the transactions
contemplated hereby.
20
Section 5.8 Compliance with Laws. Except as set forth in Parent's SEC
--------------------
Filings, neither Parent nor any of its subsidiaries is in conflict with, or in
default or violation of, any law, rule, regulation, order, judgment or decree
applicable to Parent or any subsidiary or by which any property or asset of
Parent or any subsidiary is bound or affected, except for any such conflicts,
defaults or violations that will not in the aggregate materially delay the
transactions contemplated hereby. Except as set forth in Parent's SEC Filings,
Parent and its subsidiaries have all permits, licenses, authorizations,
consents, approvals and franchises from governmental agencies required to
conduct their businesses as now being conducted (the "Parent Permits"), except
--------------
for such permits, licenses, authorizations, consents, approvals and franchises
the absence of which would not in the aggregate materially delay the
transactions contemplated hereby. Except as set forth in the Parent's SEC
Filings, Parent and its subsidiaries are in compliance with the terms of the
Parent Permits, except where the failure so to comply would not in the aggregate
materially delay the transactions contemplated hereby.
Section 5.9 Litigation. Except as disclosed in Parent's Filings, there
----------
is no suit, action, proceeding or investigation pending or, to the knowledge of
Parent, overtly threatened in writing against Parent or any of its subsidiaries
that, individually or in the aggregate, will materially delay the transactions
contemplated hereby, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against Parent or any
of its subsidiaries having any such effect.
ARTICLE 6
COVENANTS
Section 6.1 Conduct of Business of the Company. Except as contemplated
----------------------------------
by this Agreement, during the period commencing on the date hereof and ending at
the Effective Time, the Company shall, and shall cause each of its subsidiaries
to, conduct its operations according to its ordinary course of business
consistent with past practice, and the Company shall, and shall cause each of
its subsidiaries to, use all reasonable efforts to preserve intact its business
organization and to maintain satisfactory relationships with its customers,
suppliers, employees and others having material business relationships with it.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Effective Time, neither the
Company nor any or its subsidiaries will, without the prior written consent of
the Parent:
(a) amend or propose to amend its certificate of incorporation or
by-laws;
(b) authorize for issuance, issue, sell, pledge, deliver or agree
or commit to issue, sell, pledge or deliver (whether through the issuance or
granting of any options, warrants, calls, subscriptions, stock appreciation
rights or other rights or other agreements) any capital stock of any class or
any securities convertible into or exchangeable for shares of capital stock of
any class of the Company, or any other ownership interest (including stock
appreciation
21
rights or phantom stock) other than shares of Common Stock issuable upon
exercise of Company Stock Options outstanding on the date of this Agreement;
(c) split, combine or reclassify any shares of Common Stock or
declare, pay or set aside for payment any dividend or other distribution in
respect of any Common Stock, or redeem, purchase or otherwise acquire any shares
of Common Stock or any other securities of the Company or any rights, warrants
or options to acquire any such shares of other securities;
(d) enter into any other agreements, commitments or contracts that are
material to the Company and its subsidiaries taken as a whole or otherwise make
any material change that is adverse to the Company in (i) any existing
agreement, commitment or arrangement that is material to the Company and its
subsidiaries taken as a whole or (ii) the conduct of the business or operations
of the Company and its subsidiaries;
(e) sell, pledge, dispose of or encumber any assets of the Company or
any of its subsidiaries (except for (i) sales of assets in the ordinary course
of business and in a manner consistent with past practice, (ii) dispositions of
obsolete or worthless assets, (iii) the dispositions described on, and pursuant
to the terms described in, Schedule 6.1(e) and (iv) the sale of the assets on
Schedule 6.1(e) hereto (the "Meridian Assets") on an "as is, where is," basis to
---------------
the individuals named thereon for a cash purchase price of $3,000,000 without
recourse to the Company if, and only if, five days prior to such sale the chief
financial officer of the Company shall have certified in writing to Parent that
as of the date of this Agreement the twelve months trailing EBITDA (determined
on the basis disclosed to Parent prior to the date of this Agreement) associated
with such assets is $1,300,000 or less;
(f) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof, except for the acquisitions described on Schedule 6.1(f); (ii) incur
any indebtedness for borrowed money (other than pursuant to the Company's credit
facilities as in effect on the date of this Agreement) or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances; (iii) enter into or amend any material contract or agreement other
than in the ordinary course of business or enter into any management contract
for a facility not cancelable without penalty within 30 days of notice; (iv)
authorize or make any capital expenditures or purchase of fixed assets which
are, in the aggregate, in excess of $7,400,000 (exclusive of management
information systems expenditures as described in the proviso hereto) for the
Company and its subsidiaries, taken as a whole; provided, however, the Company
-------- -------
will give Parent prior notice of the making or the firm commitment of capital
expenditure or lease payment in any calendar quarter relating to management
information systems equipment with a fair market value greater than $1,000,000;
or (v) terminate any material contract or amend any of its material terms (other
than amendments to existing credit arrangements designed to remedy defaults
thereunder);
(g) increase the compensation payable or to become payable to its
officers or employees, or grant any severance or termination pay to, or, except
as set forth on
22
Schedule 6.10(c), enter into any employment or severance agreement with any
director, officer or other employee of the Company or any of its subsidiaries;
(h) take any action, other than as required by GAAP, to change
accounting policies or procedures or cash maintenance policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
capitalization of development costs, payments of accounts payable and collection
of accounts receivable);
(i) make any material Tax election inconsistent with past practices or
settle or compromise any material federal, state, local or foreign tax liability
or agree to an extension of a statute of limitations for any assessment of
federal income tax or material state corporate income or franchise tax, except
to the extent the amount of any such settlement has been reserved for on the
Company's most recent SEC Filings;
(j) pay, discharge, settle, or satisfy any lawsuits, claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in the financial statements of the Company or
incurred in the ordinary course of business and consistent with past practice;
(k) except as may be required by law, take any action to establish,
adopt or enter into, or to terminate or amend any Plan;
(l) (i) permit any increase in the number of employees of the Company
employed by the Company on the date hereof other than pursuant to an employee
plan to be agreed to by the Company and Parent as promptly as practicable after
the date hereof acting reasonably and in good faith or (ii) terminate any
employees of the Company identified on Schedule 6.10(c) other than for Cause (as
defined below);
(m) enter into any contract or arrangement with any affiliate of the
Company (other than subsidiaries of the Company); or
(n) agree, commit or arrange to do any of the foregoing.
Section 6.2 Stockholder Approval; Proxy Statement. Following the
-------------------------------------
purchase of shares of Common Stock pursuant to the Offer, if required by
applicable law in order to consummate the Merger, the Company shall take all
action necessary in accordance with applicable law to convene a meeting of its
stockholders as promptly as practicable to consider and vote upon this Agreement
and the transactions contemplated hereby. The Company shall, through its Board
of Directors (the "Board"), recommend that the Company's stockholders vote in
-----
favor of the adoption of this Agreement and the transactions contemplated
hereby, subject to the Board's fiduciary duty under applicable law. As soon as
practicable following the purchase of shares of Common Stock pursuant to the
Offer, the Company shall prepare and file with the SEC under the Exchange Act
the Proxy Statement and shall use its reasonable best efforts to cause the Proxy
Statement to be mailed to stockholders of the Company as promptly as practicable
after such filing. At the meeting of the Company's stockholders, the Parent
shall
23
cause all Parent Shares to be voted in favor of the adoption of this Agreement
and the transactions contemplated hereby.
Section 6.3 Access and Information. Between the date of this Agreement
----------------------
and the Effective Time, the Company shall, and shall cause its subsidiaries to,
afford the Parent and its authorized representatives (including its accountants,
financial advisors and legal counsel) reasonable access during normal business
hours to all of the properties, personnel, Contracts and Other Agreements, books
and records of the Company and its subsidiaries and shall promptly deliver or
make available to the Parent (a) a copy of each report, schedule and other
document filed by the Company pursuant to the requirements of Federal or state
securities laws and (b) all other information concerning the business,
properties, assets and personnel of the Company and its subsidiaries as the
Parent may from time to time reasonably request. The terms of the
Confidentiality Agreement dated July 8, 1997 (the "Confidentiality Agreement")
-------------------------
between the Company and the Parent) are incorporated herein by reference and
shall remain in full force and effect.
Section 6.4 No Solicitation.
---------------
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, representative or agent of the Company or any of
its subsidiaries, solicit or encourage (including by way of furnishing
information) the initiation of any inquiries or proposals regarding an
Alternative Transaction (as defined below) (any of the foregoing inquiries or
proposals being referred to herein as an "Acquisition Proposal"). Provided that
--------------------
the Company and the Board shall have complied with the first sentence of this
Section 6.4(a), nothing contained in this Section 6.4(a) or any other provision
of this Agreement shall prevent the Board if it determines in good faith, after
consultation with, and the receipt of advice from, outside counsel, that it is
required to do so in order to discharge properly its fiduciary duties, from
considering, negotiating, approving and recommending to the stockholders of the
Company an unsolicited bona fide written Acquisition Proposal (provided that
--------
such Acquisition Proposal is for not less than $23.00 per Share and has no
financing contingencies) which the Board of Directors of the Company determines
in good faith (after consultation with its financial advisors) would result in a
transaction more favorable to the Company's stockholders than the transaction
contemplated by this Agreement (any Acquisition Proposal meeting such criteria,
including those specified in the immediately preceding parenthetical proviso,
being referred to herein as a "Superior Proposal"). Nothing herein shall
-----------------
prohibit the Company from complying with Rules 14d-9 and 14e-2 under the
Exchange Act with respect to any other tender offers.
(b) The Company shall promptly, but in no event later than 24 hours,
notify Parent after receipt of any Acquisition Proposal or any request for
nonpublic information relating to the Company or any of its subsidiaries in
connection with an Acquisition Proposal or for access to the properties, books
or records of the Company or any subsidiary by any person or entity that informs
the Board that it is considering making, or has made, an Acquisition Proposal.
Such notice to Parent shall be made orally and in writing and shall indicate in
reasonable detail the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact.
24
(c) If the Board receives a request for material nonpublic information
by a party who makes an unsolicited bona fide Acquisition Proposal and the Board
determines that such proposal, if consummated pursuant to its terms would be a
Superior Proposal, then, and only in such case, the Company may, subject to the
execution of a confidentiality agreement substantially similar to that then in
effect between the Company and Parent, provide such party with access to
information regarding the Company.
(d) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties (other than Parent and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from any confidentiality or
standstill agreement to which the Company is a party.
(e) The Company shall ensure that the officers, directors and
employees of the Company and its subsidiaries and any investment banker or other
advisor or representative retained by the Company are aware of the restrictions
described in this Section; and shall be responsible for any breach of this
Section 6.4 by such bankers, advisors and representatives.
Section 6.5 Reasonable Efforts; Additional Actions.
--------------------------------------
(a) Upon the terms and subject to the conditions of this Agreement,
each of the parties hereto shall use all reasonable efforts to take, or cause to
be taken, all action, and to do or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, including using all reasonable efforts to (i)
obtain all consents, amendments to or waivers under the terms of any of the
Company's contractual arrangements required by the transactions contemplated by
this Agreement, (ii) effect promptly all necessary or appropriate registrations
and filings with Governmental Entities, including, without limitation, filings
and submissions pursuant to the HSR Act, the Exchange Act, the DGCL and state
and Federal licensing authorities, (iii) defend any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby and (iv) fulfill or
cause the fulfillment of the conditions to Closing set forth in Article 7. In
connection with and without limiting the foregoing, the Company and its Board of
Directors shall (x) take all action necessary to ensure that no state takeover
statute or similar statute or regulation (including, without limitation, Section
203 of the DGCL) is or becomes applicable to the Offer, the Merger, this
Agreement or any of the other transactions contemplated by this Agreement and
(y) if any state takeover statute or similar statute or regulation becomes
applicable to the Offer, the Merger, this Agreement, the Stockholder Agreement
or any other transaction contemplated by this Agreement or the Stockholder
Agreement, take all action necessary to ensure that the Offer, the Merger and
the other transactions contemplated by this Agreement and the Stockholder
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and the Stockholder Agreement and otherwise to
minimize the effect of such statute or regulation on the Offer, the Merger, this
Agreement, the Stockholder Agreement and the other transactions contemplated by
this Agreement and the Stockholder Agreement. Notwithstanding the foregoing,
the Board of Directors of the Company shall not be prohibited from taking any
action expressly permitted by the terms of this Agreement.
25
(b) If, at any time after the Effective Time, the Surviving
Corporation shall determine or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation the right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
(c) In furtherance and without limiting the above provisions, each of
the Company and Parent shall as promptly as practicable following the execution
and delivery of this Agreement file with the United States Federal Trade
Commission (the "FTC") and the United States Department of Justice ("DOJ") the
--- ---
notification and report form, if any, required for the transactions contemplated
hereby (using reasonable best efforts to make such filings within ten business
days after the date hereof) and any supplemental information requested in
connection therewith pursuant to the HSR Act. Any such notification and report
form and supplemental information shall be in substantial compliance with the
requirements of the HSR Act. Each of the Company and Parent shall furnish to
the other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission which is
necessary under the HSR Act. The Company and Parent shall keep each other
apprised of the status of any communications with, and any inquiries or requests
for additional information from, the FTC and the DOJ and shall comply promptly
with any such inquiry or request. Each of Parent and the Company shall use all
reasonable efforts to obtain any clearance required under the HSR Act for, and
to provide assistance to the other in any antitrust proceedings related to, the
consummation of the transactions contemplated by this Agreement.
(d) Each of Parent and the Company agrees to cause to be filed as
promptly as practicable all other applications and notices ("Applications")
------------
required to be filed with Governmental Authorities in order to consummate the
Offer and the Merger (using reasonable best efforts to make such filings within
ten business days after the date hereof), and to pursue diligently the approval
of such Applications.
(e) The Company shall use all reasonable efforts to cause its present
and past, if any, independent auditors to consent to the inclusion or
incorporation by reference of the Company's historical financial statements any
registration statement or proxy statement of Parent, to the extent such consents
are required by applicable law or regulation.
Section 6.6 Notification of Certain Matters. The Company shall give
-------------------------------
notice to Parent, and Parent and Merger Sub shall give notice to the Company,
promptly upon becoming aware of (a) any occurrence, or failure to occur, of any
event, which occurrence or
26
failure to occur has caused or will cause any representation or warranty in this
Agreement to be untrue or inaccurate in any material respect at any time after
the date hereof and prior to the Effective Time and (b) any material failure on
its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided that the delivery of any
--------
notice pursuant to this Section 6.6 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 6.7 Public Announcements. The initial press release or
--------------------
releases with respect to the transactions contemplated by this Agreement shall
be in the form agreed to by Parent and the Company. Thereafter, for as long as
this Agreement is in effect, Parent and Merger Sub, on the one hand, and the
Company, on the other hand, shall not, and shall cause their subsidiaries and
affiliates not to, issue or cause the publication of any press release or any
other announcement with respect to the Offer, the Merger, this Agreement or the
other transactions contemplated hereby without the consent of the other (which
shall not be unreasonably withheld or delayed), except where such release or
announcement is required by applicable law or pursuant to any listing agreement
with, or the rules or regulations of, any securities exchange or any other
regulatory requirement.
Section 6.8 Indemnification and Insurance.
-----------------------------
(a) Parent agrees that all rights to indemnification existing in favor
of the present or former directors, officers, and employees of the Company (as
such) or any of its subsidiaries or present or former directors of the Company
or any of its subsidiaries serving or who served at the Company's or any of its
subsidiaries' request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, as provided in the Company's certificate of incorporation or by-
laws, or the articles of incorporation, by-laws or similar organizational
documents of any of the Company's subsidiaries and the indemnification
agreements with such present and former directors, officers and employees as in
effect as of the date hereof (true and correct copies of which have been
provided to Parent) with respect to matters occurring at or prior to the
Effective Time shall survive the Merger and shall continue in full force and
effect and without modification (other than modifications following the Merger
which would enlarge the indemnification rights) for a period of not less than
six years, and the Surviving Corporation shall comply fully with its obligations
hereunder and thereunder.
(b) For a period of not less than six years after the Effective Time,
the Surviving Corporation shall maintain officers' and directors' liability
insurance and fiduciary liability insurance covering the persons described in
paragraph (a) of this Section 6.8 (whether or not they are entitled to
indemnification thereunder) who are currently covered by the Company's existing
officers' and directors' or fiduciary liability insurance policies on terms no
less advantageous to such indemnified parties than such existing insurance;
provided, however, that in no event shall Parent be required to expend in any
-------- -------
one year an amount in excess of 150% of the annual premiums currently paid by
the Company for such insurance.
(c) This Section 6.8, which shall survive the consummation of the
Merger at the Effective Time and shall continue for the periods specified
herein, is intended to
27
benefit the Company, the Surviving Corporation, and any person or entity
referenced in this Section 6.8 or indemnified hereunder each of whom may enforce
the provisions of this Section 6.8 (whether or not parties to this Agreement).
Section 6.9 Directors. Promptly upon the acceptance for payment of,
---------
and payment for, such number of shares of Common Stock by Merger Sub pursuant to
the Offer as satisfies the Minimum Condition (the "Majority Acquisition"), and
--------------------
from time to time thereafter, Merger Sub shall be entitled to designate such
number of directors on the Board of Directors of the Company, rounded up to the
next greatest whole number, subject to compliance with Section 14(f) of the
Exchange Act, as shall represent a percentage of the Board of Directors equal to
the percentage of the outstanding shares of Common Stock owned by Merger Sub;
provided that, from the Majority Acquisition until the Effective Time, at least
--------
two persons who are directors of the Company on the date hereof shall be
directors of the Company (the "Continuing Directors"); and provided further
-------------------- --- -------- -------
that, if the number of Continuing Directors shall be reduced below two for any
reason whatsoever, any remaining Continuing Directors shall be entitled to
designate a person to fill such vacancy as a Continuing Director for purposes of
this Agreement or, if no Continuing Directors then remain, the other directors
shall designate two persons to fill such vacancies who shall not be officers,
directors, stockholders or affiliates of Parent, Merger Sub or the Company, and
such persons shall be deemed to be Continuing Directors for purposes of this
Agreement. The Company and its Board of Directors shall, at such time, take all
such action needed to cause Merger Sub's designees to be appointed to the
Company's Board of Directors. Subject to applicable law, the Company shall take
all action requested by Parent necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder not later than ten days prior to the scheduled expiration date of the
Offer, and the Company agrees to make such mailing with the mailing of the
Schedule 14D-9 (provided that Merger Sub shall have provided to the Company on a
timely basis all information required to be included in the Information
Statement with respect to Merger Sub's designees). At such times, the Company
will also cause (i) each committee of the Board of Directors, (ii) if requested
by Merger Sub, the board of directors of each of the Company's subsidiaries and
(iii) if requested by Merger Sub, each committee of such board to include
persons designated by Merger Sub constituting the same percentage of each such
committee or board as Merger Sub's designees are of the Board. The Company
shall, upon request by Merger Sub, promptly increase the size of the Board or
exercise its best efforts to secure the resignations of such number of directors
as is necessary to enable Merger Sub designees to be elected to the Board and
shall cause Merger Sub's designees to be so elected.
Section 6.10 Employee Matters.
----------------
(a) Parent agrees to cause the Surviving Corporation to comply in all
respects with the change of control provisions of the employment agreements of
each of the persons identified in Schedule 6.10(a) (the "Executives"). Without
----------
limiting the foregoing, all amounts payable upon such change in control shall be
paid in cash immediately following the Majority Acquisition, excluding payments
with respect to Company Stock Options which shall be paid as provided in Section
3.1(d).
28
(b) (A) Parent agrees to pay or to cause the Surviving Corporation to
pay, in either case upon the terms and subject to the conditions set forth in
this Section 6.10(b), to each of the employees of the Company identified on
Schedule 6.10(b) (the "Affected Employees") an amount (the "Accrued Bonus
------------------ -------------
Payment") equal to such Affected Employee's annual bonus (which amount is set
-------
forth opposite such Affected Employee's name on Schedule 6.10(b) under the
heading "Stakeholder Bonus 1997") multiplied by a fraction, the numerator of
which is the number of days that have elapsed from December 31, 1996 (or the
date of hire of the Affected Employee, if later) until the earlier to occur of
the dates set forth in clauses (B)(i) and (B)(ii) hereof and the denominator of
which is 365; provided, that if any such Affected Employee (other than the
--------
persons referred to in Section 6.10(a)) voluntarily terminates his or her
employment other than for Good Reason to Terminate (as defined below), or dies
or becomes disabled, or is terminated for Cause prior to December 31, 1997, the
Surviving Corporation shall not be obligated to make such payment with respect
to such Affected Employee.
(B) Payment of each Affected Employee's Accrued Bonus Payment
shall be payable within two weeks after the earlier to occur of (i) the
termination following the purchase of shares of Common Stock pursuant to the
Offer of such Affected Employee's employment (other than for Cause, disability,
death or termination by such Affected Employee without Good Reason to Terminate)
and (ii) December 31, 1997, if the Affected Employee is employed by the
Surviving Corporation or any of its subsidiaries at such time.
(c) Parent, Merger Sub and the Company agree to comply with the terms,
policies and procedures specified on Schedule 6.10(c).
(d) For purposes of this Section 6.10, "Cause" means conviction of a
-----
felony or a crime involving personal dishonesty or theft or misappropriation of
the property of the Surviving Corporation or its subsidiaries; and "Good Reason
-----------
to Terminate" shall be deemed to occur if Parent, the Surviving Corporation or
------------
any of their subsidiaries or affiliates shall (i) take any action which
substantially reduces an Affected Employee's title, duties, responsibilities,
salary, or, unless such change affects all employees of the Surviving
Corporation or its subsidiaries at a comparable level of seniority and
responsibility, benefits, or (ii) require the Affected Employee to relocate
permanently in excess of 35 miles from the Affected Employees' primary place of
business.
(e) Notwithstanding anything to the contrary contained herein or in
any other document, agreement or instrument, if any person is terminated by the
Company (other than for Cause) following the purchase of shares of Common Stock
pursuant to the Offer but prior to the Effective Time, all Company Stock Options
held by any such person shall be treated as provided in Section 3.1(d) hereof.
Section 6.11 Consummation of Merger. Parent agrees that, subject to
----------------------
the satisfaction of the conditions set forth in Section 7.1, in the event ninety
percent or more of the Shares are tendered pursuant to the Offer, it will unless
precluded by applicable law cause Merger Sub to consummate the Merger as soon as
practicable, but in no event later than five business days after the expiration
of the Offer.
29
Section 6.12 Debt Offers/Consent Solicitations. Subject to the
---------------------------------
provisions of this Agreement, Merger Sub shall, and Parent shall cause Merger
Sub to, commence (i) a tender offer (the "Junior Tender Offer") to purchase all
-------------------
of the principal amount of, and a consent solicitation (the "Junior Consent
--------------
Solicitation") to the holders of, the Company's 12 1/4% Subordinated Securities
------------
due 2003 (the "Junior Securities") upon the terms and subject to the conditions
-----------------
set forth in Schedule 6.12 and (ii) a tender offer (the "Senior Tender Offer"
-------------------
and, together with the Junior Tender Offer, the "Debt Offers") to purchase all
-----------
of the principal amount of, and a consent solicitation (the "Senior Consent
--------------
Solicitation" and, together with the Junior Consent Solicitation, the "Consent
------------ -------
Solicitations") to the holders of, the Company's 9 7/8% Senior Subordinated
-------------
Securities due 2002 (the "Senior Securities" and, together with the Junior
-----------------
Securities, the "Securities") upon the terms and subject to the conditions set
----------
forth in Schedule 6.12. The obligations of Merger Sub to, and of Parent to
cause Merger Sub to, (i) commence the Debt Offers and the Consent Solicitations,
(ii) accept for payment, and pay for, any Securities tendered pursuant to the
Debt Offers and (iii) effect amendments to the terms of the respective
indentures governing the Junior Securities and the Senior Securities (the
"Junior Indenture" and the "Senior Indenture", respectively, and together the
---------------- ----------------
"Indentures") by means of consents obtained pursuant to the Consent
----------
Solicitations, shall be subject only to the conditions set forth in Schedule
6.12 (any of which may be waived by Merger Sub in its sole discretion). Parent
shall contribute to Merger Sub on a timely basis the funds necessary to purchase
any Securities that Merger Sub becomes obligated to purchase pursuant to the
Debt Offers. The Company shall make all reasonable efforts to assist and
cooperate with Merger Sub in conducting the Debt Offers and the Consent
Solicitations.
ARTICLE 7
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations. The respective
--------------------------------------
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) If required by applicable law, the Merger shall have been
approved by holders of Common Stock as required by such applicable law;
(b) No Legal Requirements shall have been enacted, entered,
promulgated or enforced by any court or Governmental Entity that prohibits or
prevents the consummation of the Merger;
(c) Merger Sub shall have previously accepted for payment and
paid for Shares pursuant to the Offer; and
(d) Any waiting period applicable to the Merger under the HSR
Act shall have expired or been terminated.
30
ARTICLE 8
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the
-----------
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, whether before or after adoption by the stockholders of the Company:
(a) By the mutual written consent of Parent, Merger Sub and the
Company (but only by action of the Continuing Directors after the purchase of
Common Stock pursuant to the Offer);
(b) By Parent, Merger Sub or the Company (but only by action of
the Continuing Directors after the purchase of Common Stock pursuant to the
Offer):
(i) if a court of competent jurisdiction or other
Governmental Entity shall have issued an order or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Offer or
the Merger and such order or other action shall have become final and
nonappealable; or
(ii) (x) as a result of the failure, occurrence or
existence of any of the conditions set forth in Exhibit A (1) Merger Sub
shall have failed to commence the Offer within five business days following
the date of this Agreement or (2) the Offer shall have terminated or
expired in accordance with its terms without Merger Sub having accepted for
payment any shares of Common Stock pursuant to the Offer or (y) Merger Sub
shall not have accepted for payment any shares of Common Stock pursuant to
the Offer by December 31, 1997; provided, however, that the right to
-------- -------
terminate this Agreement pursuant to this Section 8.1(b)(ii) shall not be
available to any party whose failure to perform any of its obligations
under this Agreement results in the failure, occurrence or existence of any
such condition;
(c) By the Company in connection with the entering into, or
consummation of, a Superior Proposal in accordance with Section 6.4, provided
that it has complied with all provisions thereof, including the notice
provisions therein, and that it complies with applicable requirements relating
to the payment (including the timing of any payment) of the Expenses and the
Fee;
(d) By Parent or Merger Sub prior to the purchase of Shares of
Common Stock pursuant to the Offer in the event of a breach by the Company of
any representation, warranty, covenant or other agreement contained in this
Agreement, which (A) would give rise to the failure of a condition set forth in
paragraph (d) or (e) of Exhibit A, and (B) has not been or cannot be cured
within 20 days after the giving of written notice to the Company;
(e) By the Company, if Parent or Merger Sub shall have breached
in any material respect any of their respective representations, warranties,
covenants or other
31
agreements contained in this Agreement, which failure to perform has not been
cured within 20 days after the giving of written notice to Parent or Merger Sub;
or
(f) by Parent or Merger Sub if either Parent or Merger Sub is
entitled to terminate the Offer as a result of the occurrence of any event set
forth in paragraph (c) of Exhibit A.
Section 8.2 Procedure for and Effect of Termination. In the event that
---------------------------------------
this Agreement is terminated and the Merger is abandoned by the Parent or the
Merger Sub, on the one hand, or by the Company, on the other hand, pursuant to
Section 8.1, written notice of such termination and abandonment shall forthwith
be given to the other parties and this Agreement shall terminate and the Merger
shall be abandoned without any further action. If this Agreement is terminated
as provided herein, no party hereto shall have any liability or further
obligation to any other party under the terms of this Agreement except with
respect to the willful breach by any party hereto and except that the provisions
of this Section 8.2, the final sentence of Section 6.3, Section 8.3 and Article
9 shall survive the termination of this Agreement.
Section 8.3 Fees and Expenses. (a) Except as set forth in this Section
-----------------
8.3, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
(b) The Company shall pay Parent a fee of $12,000,000 (the
"Fee"), and reimburse Parent for actual and documented out-of-pocket expenses of
---
Parent relating to the transactions contemplated by this Agreement (including,
but not limited to, fees and expenses of Parent's counsel) not in excess of
$4,000,000 ("Expenses"), in the event that:
--------
(i) this Agreement is terminated (x) by Parent pursuant
to Section 8.1(f) or (y) by the Company pursuant to Section
8.1(c);
(ii) this Agreement is terminated by Parent pursuant to
Section 8.1(d) after a breach of Section 6.4 by the Company; or
(iii) (A) the Company shall have received an Acquisition
Proposal at or prior to, or within 30 days after, the termination
of this Agreement and (B) an Alternative Transaction is
consummated on or prior to the one-year anniversary of the
termination of this Agreement.
(c) As used herein, "Alternative Transaction" means (i) a
-----------------------
transaction pursuant to which any person (or group of persons) other than Parent
or its affiliates (a "Third Party") acquires more than 40% of the outstanding
-----------
Shares, whether from the Company or pursuant to a tender offer or exchange offer
or otherwise, (ii) a merger or other business combination involving the Company
pursuant to which any Third Party acquires more than 40% of the outstanding
equity securities of the Company or the entity surviving such merger or business
combination or (iii) any other transaction pursuant to which any Third Party
acquires control of assets (including for this purpose the outstanding equity
securities of subsidiaries of
32
the Company, and the entity surviving any merger or business combination
including any of them) of the Company and its subsidiaries having a fair market
value equal to more than 40% of the fair market value of all the assets of the
Company and its subsidiaries, taken as a whole, immediately prior to such
transaction; provided, however, that the term Alternative Transaction shall not
-------- -------
include any acquisition of securities by a broker dealer in connection with a
bona fide public offering of such securities.
(d) The Fee and Expenses payable pursuant to Section 8.3(b) shall be
paid upon the earlier of (i) immediately prior to the termination of this
Agreement by the Company pursuant to Section 8.1(c) and (ii) within one business
day after the first to occur of the events described in Section 8.3(b)(i)(x),
(ii) and (iii).
ARTICLE 9
MISCELLANEOUS
Section 9.1 Certain Definitions. For purposes of this Agreement, the
-------------------
following terms shall have the meanings ascribed to them in this Section 9.1(a):
(a) "affiliate," with respect to any person, shall mean any person
---------
controlling, controlled by or under common control with such person;
(b) "knowledge," with respect to the Company, shall mean the actual
---------
knowledge of any executive officer or director of the Company;
(c) "Material Adverse Effect," with respect to any person, shall mean
-----------------------
a material adverse effect on the business, assets, properties, financial
condition or results of operations of such person and its subsidiaries taken as
a whole;
(d) "person" shall mean and include an individual, a partnership, a
------
joint venture, a limited liability company, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof; and
(e) "subsidiary," with respect to any person, shall mean any
----------
corporation 50% or more of the outstanding voting power of which, or any
partnership, joint venture, limited liability company or other entity 50% or
more of the total equity interest of which, is directly or indirectly owned by
such person. For purposes of this Agreement, all references to "subsidiaries"
of a person shall be deemed to mean "subsidiary" if such person has only one
subsidiary.
Section 9.2 Amendment and Modification. Subject to applicable law,
--------------------------
this Agreement may be amended, modified or supplemented only by a written
agreement signed by each of the parties hereto at any time prior to the
Effective Time with respect to any of the terms contained herein; provided,
--------
however, that after this Agreement is adopted by the Company's stockholders
-------
pursuant to Section 6.2, no such amendment or modification shall
33
(a) alter or change the amount or kind of the consideration to be delivered to
the stockholders of the Company, (b) alter or change any term of the certificate
of incorporation of the Surviving Corporation or (c) alter or change any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the stockholders of the Company. If Merger Sub's designees are
appointed or elected to the Board of Directors of the Company as provided in
Section 6.10, after the acceptance for payment of shares of the Common Stock
pursuant to the Offer and prior to the Effective Time, the affirmative vote of a
majority of the Continuing Directors of the Company shall be required for the
Company to take action to (i) amend or terminate this Agreement, (ii) exercise
or waive any of the Company's rights or remedies under this Agreement, (iii)
extend the time for performance of Parent's and Merger Sub's respective
obligations under this Agreement, (iv) take any action to amend or otherwise
modify the Company's certificate of incorporation or by-laws or (v) take any
action that would adversely affect the rights of the holders of Common Stock or
the holders of Company Stock Options with respect to the transactions
contemplated hereby.
Section 9.3 Waiver of Compliance; Consents. Any failure of Parent or
------------------------------
Merger Sub, on the one hand, or the Company, on the other hand, to comply with
any obligation, covenant, agreement or condition herein may, subject to Section
9.2, be waived by Parent, Merger Sub or the Company, respectively, only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
or permits consent by or on behalf of any party hereto, such consent shall be
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 9.3 and in Section 9.2. Notwithstanding
anything herein to the contrary, if Merger Sub accepts Shares for payment prior
to October 1, 1997, Parent and Merger Sub shall not be obligated to, and shall
not, consummate the Merger (subject to the other terms and conditions hereof)
until October 2, 1997.
Section 9.4 Survival. The respective representations and warranties of
--------
Parent, Merger Sub and the Company contained herein shall not survive the
Closing hereunder.
Section 9.5 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given when delivered
in person or by telecopier (with a confirmed receipt thereof), and on the next
business day when sent by overnight courier service, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Merger Sub, to:
Sun Healthcare Group, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
34
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
Regency Health Services, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, Weiss, Rifkind,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.6 Assignment. This Agreement and all of the provisions
----------
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, except that Parent and Merger Sub may assign all or any of their rights
hereunder to any affiliate provided that no such assignment shall relieve the
assigning party of its obligations hereunder.
Section 9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 9.8 Counterparts. This Agreement may be executed and delivered
------------
(including by facsimile transmission) in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
35
Section 9.9 Interpretation. The article and section headings contained
--------------
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 9.10 Entire Agreement. This Agreement (including the
----------------
schedules, exhibits, documents or instruments referred to herein) and the
Confidentiality Agreement embody the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof and supersede
all prior agreements and understandings, both written and oral, among the
parties, or between any of them, with respect to the subject matter hereof and
thereof.
Section 9.11 No Third Party Beneficiaries. Except as expressly
----------------------------
provided in Section 6.8, this Agreement is not intended to, and does not, create
any rights or benefits of any party other than the parties hereto.
Section 9.12 Obligations of Parent. Wherever this Agreement requires
---------------------
Merger Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of Parent to cause Merger Sub to take such action.
36
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
SUN HEALTHCARE GROUP, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President for Financial
Services and Chief Financial Officer
SUNREG ACQUISITION CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
REGENCY HEALTH SERVICES, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive
Officer
EXHIBIT A
CONDITIONS OF THE OFFER
-----------------------
Notwithstanding any other term of the Offer or this Agreement, Merger Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Merger Sub's obligation to pay for or return tendered shares of
Common Stock after the termination or withdrawal of the Offer), to pay for any
shares of Common Stock tendered pursuant to the Offer unless, (i) there shall
have been validly tendered and not properly withdrawn prior to the expiration of
the Offer such number of shares of Common Stock which would constitute a
majority of the outstanding shares of Common Stock on a fully-diluted basis on
the date of purchase (the "Minimum Condition") ("on a fully-diluted basis"
-----------------
means, as of the date of the purchase of shares of Common Stock pursuant to the
Offer, the number of shares of Common Stock outstanding, together with all
shares of Common Stock issuable pursuant to options, convertible securities and
any other rights to acquire Shares) and (ii) any waiting period under the HSR
Act or applicable state regulatory statutes or regulations applicable to the
purchase of shares of Common Stock pursuant to the Offer shall have expired or
been terminated. Furthermore, notwithstanding any other term of the Offer or
this Agreement, Merger Sub shall not be required to accept for payment or,
subject as aforesaid, to pay for any shares of Common Stock not theretofore
accepted for payment or paid for, and (subject to Sections 1.1(a) and 6.5(a) of
this Agreement) may terminate the Offer if, at any time on or after the date of
this Agreement and before the acceptance of such shares for payment or the
payment therefor, any of the following conditions exists:
(a) there shall be pending by any Governmental Entity or other person any
suit, action or proceeding (i) challenging the acquisition by Parent or Merger
Sub of any shares of Common Stock under the Offer, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by this Agreement or
the Stockholder Agreement or seeking to obtain from the Company, Parent or
Merger Sub any damages that are material in relation to the Company and its
subsidiaries taken as a whole, (ii) seeking to prohibit or limit the ownership
or operation by the Company, Parent or any of their respective subsidiaries of a
material portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or Parent and its subsidiaries, taken as a whole, or to compel
the Company or Parent to dispose of or hold separate any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole, or
Parent and its subsidiaries, taken as a whole, as a result of the Offer, the
Merger or any of the other transactions contemplated by this Agreement or the
Stockholder Agreement, (iii) seeking to impose material limitations on the
ability of Parent or Merger Sub to acquire or hold, or exercise full rights of
ownership of, any shares of Common Stock accepted for payment pursuant to the
Offer, including, without limitation, the right to vote such Common Stock on all
matters properly presented to the stockholders of the Company, (iv) seeking to
prohibit Parent or any of its subsidiaries from effectively controlling in any
material respect the business or operations of the Company and its subsidiaries,
taken as a whole or (v) which otherwise is reasonably likely to have a Material
Adverse Effect with respect to the Company;
A-1
(b) there shall be any statute, rule, regulation, legislation, judgment,
order or injunction enacted, entered, enforced, promulgated, or deemed
applicable to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act which, in any case, is reasonably
likely to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (v) of paragraph (a) above;
(c) (i) the Board or any committee thereof shall have withdrawn or modified
in a manner adverse to Parent or Merger Sub its approval or recommendation of
the Offer or the Merger or its adoption of this Agreement, or approved or failed
to reject within 10 business days, any Acquisition Proposal, (ii) the Company
shall have entered into any agreement with respect to any Superior Proposal in
accordance with Section 6.4 of this Agreement or (iii) the Board or any
committee thereof shall have resolved to take any of the foregoing actions;
(d) any of the representations and warranties of the Company set forth in
this Agreement that are qualified as to materiality shall not be true and
correct or any such representations and warranties that are not so qualified
shall not be true and correct in any material respect, in each case at the date
of this Agreement and, in the case of representations and warranties other than
those made specifically as of the date of this Agreement, at the scheduled or
extended expiration of the Offer;
(e) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or covenant
of the Company to be performed or complied with by it under this Agreement;
(f) this Agreement shall have been terminated in accordance with its terms or
the Offer shall have been terminated with the consent of the Company;
(g) (i) less than a majority in principal amount of either of the Securities
shall have been tendered and not withdrawn pursuant to the Debt Offers or (ii)
consents shall have been obtained in the Consent Solicitations from holders
(other than the Company and its Affiliates (as such term is defined in the
applicable Indenture)) of less than a majority in principal amount as of the
applicable record date of either of the Securities;
(h) there shall have occurred (i) any general suspension of, or limitation of
prices for, trading on the NYSE, AMEX, Nasdaq National Market, (ii) any
declaration of banking moratorium or suspension or payment in respect of banks
in the United States, (iii) any general limitation by a Government Entity on, or
any other event that would limit, the extension of credit by banks or other
lending institutions, (iv) any commencement of war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States having a significant adverse effect on the functionality of financial
markets in the United States or (v) in the case of any of the foregoing,
existing at time of the commencement of the Offer, a material acceleration or
worsening thereof which, in the reasonable judgment of Merger Sub in any case
and regardless of circumstances, makes it inadvisable to proceed with such
acceptance for payment or payment.
A-2
The foregoing conditions are for the sole benefit of Merger Sub and Parent
and may, subject to the terms of this Agreement, be waived by Merger Sub and
Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent, or Merger Sub at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances and each
such right shall be deemed an ongoing right that may be asserted at any time and
from time to time.
A-3