Exhibit 2.1
CONFORMED COPY
Execution Copy
PLEASE TAKE NOTE THAT THIS DOCUMENT HAS BEEN MARKED FOR
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AGREEMENT AND PLAN OF MERGER
By and Among
VENCOR, INC.,
LV ACQUISITION CORP.
and
TRANSITIONAL HOSPITALS CORPORATION
Dated as of June 18, 1997
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
18, 1997, is made by and among Vencor, Inc., a Delaware corporation ("Parent"),
LV Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and Transitional Hospitals Corporation, a Nevada corporation
("Company").
WHEREAS, the Boards of Directors of Parent, Sub and Company deem it
advisable and in the best interests of their respective stockholders that Sub
merge with and into Company (the "Merger"), and such Boards of Directors have
unanimously approved (with two directors of Company abstaining) the merger of
Sub with and into Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, on May 7, 1997, Sub commenced an offer to purchase (the
"Offer") all outstanding shares of Common Stock, par value $1.00 per share (the
"Shares"), of Company, including the associated rights to purchase (the
"Rights") Series B Junior Participating Preferred Stock (the "Series B
Preferred") issued pursuant to the Rights Agreement, dated as of June 21, 1996
(the "Rights Agreement"), between Company and ▇▇▇▇▇ ▇▇▇▇▇▇ Shareholder Services,
L.L.C. at a purchase price of $16.00 Share, net to the seller in cash, subject
to certain conditions and subject to increase as contemplated by Section 8.4 of
this Agreement;
WHEREAS, the Board of Directors of Company, Parent and Sub have each
determined that it is in the best interests of their respective stockholders for
Sub to acquire Shares pursuant to the Offer, as amended pursuant to the terms of
this Agreement (the "Amended Offer");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE AMENDED TENDER OFFER
Section 1.1 Amended Tender Offer.
(a) Parent and Sub have filed with the Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer which
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contains (included as an exhibit) Sub's Offer to Purchase dated May 7, 1997 (the
"Offer to Purchase") and form of the related letter of transmittal
(collectively, the "Offer Documents"). As promptly as practicable (but no later
than the third business day after the date of this Agreement), Parent and Sub
shall file with the SEC an amendment to the Offer Documents (as so amended, and
as the same may be further amended or supplemented in accordance with the terms
of this Agreement, the "Amended Offer Documents"), unless such Amended Offer
Documents shall have been filed on or prior to the date of this Agreement. The
Amended Offer Documents shall contain a supplement to the Offer to Purchase,
which shall be mailed to the holders of Shares and which shall describe this
Agreement and the negotiations preceding this Agreement and shall amend the
Offer to provide that the Offer shall only be subject to the conditions set
forth in Annex A hereto, and to extend the expiration date of the Amended Offer
to 12:00 midnight, New York City time, on June 19, 1997; it being understood and
agreed that, except for the foregoing amendments or as otherwise provided
herein, the Amended Offer shall be on the same terms and subject to the same
conditions as the Offer. Without the prior written consent of Company, Sub shall
not decrease the price per Share or waive the Minimum Condition (as defined in
Annex A), impose additional conditions to the Amended Offer, extend the
expiration date of the Amended Offer if the conditions to the Amended Offer have
been satisfied, provided that none of the conditions set forth in Annex A are
existing at such time, or amend any other term of the Amended Offer in any
manner adverse to the holders of Shares. Sub shall extend the expiration date of
the Offer until such time as the conditions to the Amended Offer have been
satisfied, provided that no single extension shall be for more than 10 business
days. Subject to the terms and conditions of the Amended Offer, upon the
expiration of the Amended Offer, Parent will promptly pay for all Shares duly
tendered. Company's Board of Directors shall recommend acceptance of the Amended
Offer to its stockholders in an amendment to its Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to be filed with the
Securities and Exchange Commission (the "SEC") concurrently with the execution
of this Agreement, provided that such recommendation may subsequently be
withdrawn, modified or amended to the extent Company's Board of Directors
determines in good faith that the fiduciary duties of such Board of Directors
under applicable law require such withdrawal, modification or amendment.
(b) Parent agrees, as to the Amended Offer Documents, and Company
agrees, as to the Schedule 14D-9, that such documents shall, in all material
respects, comply with the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations thereunder and
other applicable laws. Company and its counsel, as to the Amended Offer
Documents, and Sub and its counsel, as to the Schedule 14D-9, shall be given an
opportunity to review such documents (and any amendments thereto and any other
submissions to the SEC) prior to their being filed with the SEC.
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(c) In connection with the Offer, Company has caused its transfer agent
to furnish to Sub a list, as of a recent date, of the record holders of Shares
and their addresses, as well as a magnetic tape containing the names and
addresses of all record holders of Shares and lists of security positions of
Shares held in stock depositories. Company will furnish Sub with such additional
information (including, but not limited to, updated lists of holders of Shares
and their addresses, mailing labels and lists of security positions) and such
other assistance as Parent or Sub or their agents may reasonably request in
communicating the Amended Offer to the record and beneficial holders of Shares.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 2.2 hereof), Sub shall be
merged with and into Company and the separate corporate existence of Sub shall
thereupon cease, and Company shall be the surviving corporation in the Merger
(the "Surviving Corporation") and shall continue to be governed by the laws of
the State of Nevada and the separate corporate existence of Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, except as set forth in Section 3.1. The Merger shall have the
effects set forth in Section 92A.250 of the General Corporation Law of the State
of Nevada (the "GCL").
Section 2.2 Effective Time of The Merger. The Merger shall be effective
when properly executed Articles of Merger ("Articles of Merger") are duly filed
by the Secretary of State of the State of Nevada and a properly executed
certificate of merger ("Certificate of Merger") is duly filed with the Secretary
of State of the State of Delaware, which filings shall be made as soon as
practicable following the Closing (as hereinafter defined), and provided that
this Agreement has not been terminated or abandoned pursuant to Article X
hereof. When used in this Agreement, the term "Effective Time" shall mean the
later of the date and time at which such Articles of Merger and Certificate of
Merger are so filed.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 Articles of Incorporation. The Articles of Incorporation of
Company in effect at the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation, until duly amended in accordance with the terms
thereof and the GCL.
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Section 3.2 By-Laws. Subject to Section 8.7 hereof, the by-laws of
Company as in effect at the Effective Time shall be the by-laws of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
GCL.
Section 3.3 Directors and Officers of Surviving Corporation.
(a) The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Articles of Incorporation and by-laws of the
Surviving Corporation or as otherwise provided by law.
(b) The officers of Sub at the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Articles of Incorporation and by-laws of the
Surviving Corporation, or as otherwise provided by law.
Section 3.4 Board of Directors; Committees. If requested by Parent,
Company will, promptly following the purchase by Sub of Shares pursuant to the
Amended Offer, take all actions necessary to cause persons designated by Parent
to become directors of Company so that the total number of such persons equals
that number of directors, rounded up to the next whole number, which represents
the product of (x) the total number of directors on the board of directors of
Company (the "Board of Directors") multiplied by (y) the percentage that the
number of Shares so accepted for payment plus any Shares beneficially owned by
Parent or its affiliates on the date hereof bears to the number of Shares
outstanding at the time of such acceptance for payment. In furtherance thereof,
Company will increase the size of the Board of Directors, or use its reasonable
efforts to secure the resignation of directors, or both, as is necessary to
permit Parent's designees to be elected to the Board of Directors; provided,
however, that prior to the Effective Time, the Board of Directors shall always
have at least two, and at the Company's election three, members (one of whom
shall be ▇▇▇▇▇▇▇ ▇▇▇▇▇) who are neither officers of Parent nor designees,
stockholders or affiliates of Parent ("Parent Insiders"). At such time, Company,
if so requested, will use its reasonable efforts to cause persons designated by
Parent to constitute the same percentage of each committee of the Board of
Directors, each board of directors of each Company Subsidiary and each committee
of each such board (in each case to the extent of Company's ability to elect
such persons) provided, however. that prior to the Effective Time each such
committee and each subsidiary board shall, at Company's election, always have at
least one member (who may be ▇▇▇▇▇▇▇ ▇▇▇▇▇) who is not a Parent Insider.
Company's obligations to appoint designees to its Board of Directors shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. Company
shall promptly take all actions
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required pursuant to such Section and Rule in order to fulfill its obligations
under this Section 3.4 and shall include in the Schedule 14D-9 such information
as is required under such Section and Schedule. Parent agrees to furnish to
Company all information concerning Parent's designees which may be necessary to
comply with the foregoing and agrees that such information will comply with
the Exchange Act and the rules and regulations thereunder and other applicable
laws.
Section 3.5 Actions by Directors. For purposes of Article X hereof, no
action taken by the Board of Directors prior to the Merger shall be effective
unless such action is approved by the affirmative vote of at least a majority of
the directors of Company who are not Parent Insiders.
ARTICLE IV
CONVERSION OF SHARES
Section 4.1 Conversion or Cancellation of Shares. The manner of
converting or canceling shares of Company and Sub in the Merger shall be as
follows:
(a) At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Parent, Sub
or any other subsidiary of Parent (collectively, the "Parent Companies") or
Shares which are held by stockholders ("Dissenting Stockholders") exercising
appraisal rights pursuant to Section 92A.380 of the GCL) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive, without interest, an amount in cash equal to $16.00
or such greater amount which may be paid pursuant to the Offer (the "Merger
Consideration"). All such Shares, by virtue of the Merger and without any action
on the part of the holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall thereafter cease to have any rights with
respect to such Shares, except the right to receive the Merger Consideration for
such Shares upon the surrender of such certificate in accordance with Section
4.2 or the right, if any, to receive payment from the Surviving Corporation of
the "fair value" of such Shares as determined in accordance with Sections
92A.300 et seq. of the GCL.
(b) At the Effective Time, each Share issued and outstanding
at the Effective Time and owned by any of the Parent Companies, and each Share
issued and held in Company's treasury at the Effective Time, shall, by virtue of
the Merger and without any action on the part of the holder thereof, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
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(c) At the Effective Time, each share of Common Stock, par
value $0.25 per share, of Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Sub or the holders of such shares, be converted into one Share.
Section 4.2 Payment for Shares.
(a) Parent shall make available, or shall cause to be made available,
with a paying agent selected by Parent and reasonably satisfactory to Company
(the "Paying Agent"), the following: (i) cash to be paid pursuant to Section
4.1(a) and (ii) cash to be paid on the exercise of any Options to purchase
Shares outstanding immediately prior to the Effective Time which have an
exercise price of less than the Merger Consideration, less, with respect to each
such Option, the exercise price thereof.
(b) Promptly after the Effective Time, Parent shall cause the Paying
Agent to mail (or deliver at its principal office) to each holder of record of a
certificate or certificates representing Shares (i) a letter of transmittal
which shall specify that delivery shall be effected, and risk of loss and title
to the certificates for Shares shall pass, only upon delivery of the
certificates for Shares to the Paying Agent and shall be in such form and have
such other provisions, including appropriate provisions with respect to back-up
withholding, as Parent may reasonably specify, and (ii) instructions for use in
effecting the surrender of the certificates for Shares. Upon surrender of a
certificate for Shares to the Paying Agent, or upon notice of the exercise of
Options, accompanied by such letter of transmittal, duly executed and completed
in accordance with the instructions thereto, the holder thereof shall be
entitled to receive the amount which such holder has the right to receive
pursuant to the provisions of this Article IV, after giving effect to any
required withholding tax, and the certificate for Shares so surrendered shall
forthwith be canceled. No interest will be paid or accrued on any amount payable
upon the surrender of any certificate for Shares. If payment is to be made to a
person other than the registered holder of the certificate surrendered, it shall
be a condition of such payment that the certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that 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 reasonable satisfaction of the Surviving
Corporation or the Paying Agent that such tax has been paid or is not
applicable. One hundred and eighty days following the Effective Time, the
Surviving Corporation shall be entitled to cause the Paying Agent to deliver to
it any funds (including any interest received with respect thereto) made
available to the Paying Agent which have not been disbursed to holders of
certificates formerly representing Shares outstanding on the Effective Time, and
thereafter such holders shall be entitled to look to the Surviving Corporation
only as general creditors thereof with respect to the cash payable upon due
surrender of their certificates. Notwithstanding the foregoing, neither the
Paying Agent
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nor any party hereto shall be liable to any holder of certificates formerly
representing Shares for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law. The Surviving Corporation
shall pay all charges and expenses, including those of the Paying Agent, in
connection with the exchange of cash for Shares and Parent shall reimburse the
Surviving Corporation for such charges and expenses.
Section 4.3 Dissenters' Rights. If any Dissenting Stockholder shall be
entitled to or shall assert entitlement to be paid the "fair value" of his or
her Shares, as provided in Sections 92A.300 et seq. of the GCL, Company shall
give Parent notice thereof and Parent shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Neither Company
nor the Surviving Corporation shall, except with the prior written consent of
Parent, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment. If any Dissenting Stockholder shall fail to
perfect or shall have effectively withdrawn or lost the right to dissent, the
Shares held by such Dissenting Stockholder shall thereupon be treated as though
such Shares had been converted into the Merger Consideration pursuant to Section
4.1.
Section 4.4 Closing of Company Transfer Books. At the Effective Time,
the stock transfer books of Company shall be closed, and no transfer of Shares
shall thereafter be made. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for Merger Consideration applicable to such Shares.
Section 4.5 Closing. The consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 a.m., local time, one
business day after the day on which all of the conditions set forth in Article
IX are satisfied or waived or at such other date, time and place as Parent and
Company shall agree.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as otherwise disclosed to Company in a disclosure schedule
delivered to it concurrently with the execution hereof (which disclosure
schedule shall contain appropriate references to identify the representations
and warranties herein to which the information in such disclosure schedule
relates) (the "Parent Disclosure Schedule"), and except as otherwise expressly
contemplated by this Agreement, Parent represents and warrants to Company as
follows:
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Section 5.1 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has the corporate power to carry on its business as it is
now being conducted or presently proposed to be conducted. Each of Parent and
Sub is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities make such qualification
necessary, except where the failure to be so qualified or to be in such good
standing, which, when taken together with all other such failures, would not
have a material adverse effect on the business, assets, liabilities, results of
operations or financial condition of Parent and its subsidiaries, taken as a
whole (a "Parent Material Adverse Effect").
Section 5.2 Authority Relative to This Agreement. Each of Parent and
Sub has the requisite corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by each of Parent and Sub of the transactions contemplated hereby
have been duly authorized by the Board of Directors of each of Parent and Sub
and by Parent as the sole stockholder of Sub, and no other corporate action or
proceedings on the part of either Parent or Sub (including without limitation
any action by Parent's stockholders) are necessary to authorize the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and Sub, as applicable, and constitutes a valid and binding
agreement of each of Parent and Sub, enforceable against each of Parent and Sub
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights and remedies generally or to general principles of equity.
Section 5.3 Consents and Approvals; No Violations. Except for
applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Exchange Act, state or foreign laws
relating to takeovers, if applicable, state securities or blue sky laws, certain
filings and approvals relating to healthcare licensing, certificate of need,
change of ownership filings pursuant to Medicare and Medicaid laws and similar
matters, and the filing of appropriate Articles of Merger and Certificate of
Merger in such form as required by, and executed in accordance with the relevant
provisions of, the GCL and the General Corporation Law of Delaware, no filing
with, and no permit, authorization, consent or approval of, any governmental or
regulatory authority, agency, commission or other governmental entity, domestic
or foreign ("Governmental Entity"), is necessary in connection with the
consummation by Parent or Sub of the transactions contemplated by this
Agreement, except for such filings, permits, authorizations, consents or
approvals the failure of which to be made or obtained would not individually or
in the aggregate prevent, materially delay or materially impair
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the ability of Parent or Sub to consummate the transactions contemplated by this
Agreement. Neither the execution and delivery by Parent or Sub of this
Agreement, nor the consummation by Parent or Sub of the transactions
contemplated hereby, nor compliance by Parent or Sub with any of the provisions
hereof, will (a) conflict with or result in any breach of any provisions of the
charter documents or by-laws of Parent or Sub, (b) result in a violation or
breach of, or constitute (with or without due 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, license, contract, agreement or other instrument or obligation to
which Parent or any of its subsidiaries is a party or by which any of them or
any of their properties or assets may be bound, or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in the case of clauses
(b) and (c) for violations, breaches or defaults which would not prevent,
materially delay or materially impair the ability of Parent or Sub to consummate
the transactions contemplated by this Agreement.
Section 5.4 Consents. Parent, as of the date hereof, after taking into
account, among other things, its compliance with health care regulatory
requirements, has no reason to believe that it will not obtain the consents
referred to in Section 9.1(d) on or before June 19, 1997.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as otherwise disclosed to Parent and Sub in a disclosure
schedule delivered to them concurrently with the execution hereof (which
disclosure schedule shall contain appropriate references to identify the
representations and warranties herein to which the information in such letter
relates) (the "Company Disclosure Schedule"), and except as otherwise expressly
contemplated by this Agreement, Company represents and warrants to Parent and
Sub as set forth below.
Section 6.1 Organization. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has the requisite corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. Company is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified or to be in such good standing, which, when taken
together with all other such failures, would not have a material adverse effect
on the business, assets, liabilities, results of operations or financial
condition of Company and Company Subsidiaries (as defined below), taken as a
whole (a "Company
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Material Adverse Effect"). Company has made available to Parent a complete and
correct copy of the Articles of Incorporation and the By-laws of Company (the
"By-laws"), each as amended to date and the articles of incorporation and
by-laws or similar governing instrument of each Company Subsidiary, each as
amended to date. The Articles of Incorporation and the By-laws and the articles
of incorporation, by-laws or similar governing instruments of each Company
Subsidiary so delivered are in full force and effect.
Section 6.2 Capitalization. The authorized capital stock of Company
consists of 100,000,000 Shares and 2,000,000 shares of Preferred Stock, par
value $1.00 per share (the "Preferred Stock"). As of June 11, 1997, (i)
38,994,413 Shares were issued and outstanding (excluding Shares held by Company
in treasury), (ii) options to acquire 3,824,848 Shares were outstanding under
all Plans (as defined in Section 6.14) of Company, (iii) 178,518 Shares were
subject to issuance in connection with Company's 5 3/4% Convertible Subordinated
Debentures due 2012, (iv) no shares of Preferred Stock were outstanding, and (v)
Rights to purchase 389,945 shares of Series B Preferred Stock were outstanding
(excluding Rights attached to Shares held by Company in its treasury). All of
the issued and outstanding Shares are duly authorized, validly issued, fully
paid and nonassessable and free of preemptive rights. There are not now, and at
the Effective Time there will not be, any shares of capital stock of Company
issued or outstanding or any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating Company to
issue, transfer or sell any shares of its capital stock or other issued or
unissued capital stock or other securities of Company or any Company Subsidiary
except as set forth above (including upon the exercise of the options and Rights
and conversion of the convertible debentures referred to above). Immediately
prior to the consummation of the Amended Offer, no Shares, Preferred Shares,
Preferred Stock or any other securities of Company will be subject to issuance
pursuant to the Rights Agreement, and after the Effective Time the Surviving
Corporation will have no obligation to issue, transfer or sell any Shares or
other capital stock or other securities of the Surviving Corporation pursuant to
any Plan or pursuant to any subscription, option, warrant, right, convertible
security or other agreement or commitment. Other than the Debentures, neither
Company nor any Company Subsidiary has outstanding any bonds, debentures, notes
or other obligations the holders of which have the right to vote (or are
convertible into or exercisable for securities having the right to vote) with
the stockholders of Company or any Company Subsidiary on any matter.
Section 6.3 Subsidiaries. Each Company Subsidiary (as defined herein)
is, directly or indirectly, wholly owned by Company and Exhibit 6.3 contains a
true and complete list of each Company Subsidiary. As used herein, "Company
Subsidiary" shall mean any corporation, partnership, joint venture or other
business entity of which Company owns, directly or indirectly, greater than
fifty percent of the shares of capital stock or other equity interests
(including partnership interests) entitled (without regard to
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the occurrence of any contingency) to cast at least a majority of the votes that
may be cast by all shares or equity interests having ordinary voting power for
the election of directors or other governing body of such entity. Each of the
outstanding shares of capital stock or other equity interests of each Company
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
owned, either directly or indirectly, by Company free and clear of all liens,
pledges, security interests, claims or other encumbrances ("Liens"). Each of the
shares of capital stock of BHC beneficially owned by Company is duly authorized,
validly issued, fully paid and nonassessable and is owned free and clear of all
Liens (except as contained in the stockholders agreement relating to BHC) and
the transfer of control over such shares contemplated hereby will not violate,
or give any third party rights under, any agreement to which Company or any
Company Subsidiary is a party.
(a) Each Company Subsidiary is duly organized, validly existing and in
good standing under the laws of the state of its organization, except where the
failure to comply with the foregoing would not individually or in the aggregate
have a Company Material Adverse Effect.
(b) Each Company Subsidiary has the requisite power to carry on its
business as it is now being conducted or presently proposed to be conducted,
except where the failure to have such power would not individually or in the
aggregate have a Company Material Adverse Effect.
(c) Each Company Subsidiary is duly qualified to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except for such failures to be so qualified, or to be in good
standing, which, when taken together with all other such failures, would not
have a Company Material Adverse Effect.
(d) There are no outstanding options, warrants, subscriptions, calls,
rights, convertible securities or other agreements or commitments obligating
Company or any Company Subsidiary to issue, transfer or sell any securities or
other equity interests of any Company Subsidiary or otherwise take actions with
respect to the capital stock or other equity interests or securities of any
Company Subsidiary.
(e) There are no voting trusts, standstill, stockholder or other
agreements or understandings to which Company or any of Company Subsidiaries is
a party or is bound with respect to the voting of the capital stock or other
equity interests of Company or any of Company Subsidiaries.
Section 6.4 Authority Relative to This Agreement. Company has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and
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delivery by Company of this Agreement and the consummation by Company of the
transactions contemplated hereby have been duly authorized by Company's Board
of Directors and, to the extent required under the GCL, except for the approval
of Company's stockholders to be sought as contemplated by Section 8.3(a) hereof,
no other corporate action or proceedings on the part of Company are necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Company and constitutes a
valid and binding agreement of Company, enforceable against Company in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights and remedies generally or to general principles of equity. The Board of
Directors has unanimously (with two directors abstaining) approved this
Agreement, the Amended Offer and the Merger and the other transactions
contemplated hereby.
Section 6.5 Consents and Approvals; No Violation. Except for applicable
requirements of the HSR Act, the Exchange Act, state securities or blue sky
laws, certain filings and approvals relating to health care licensing,
certificate of need, change of ownership filings pursuant to Medicare and
Medicaid laws and similar matters, and the filings and recordation of the
Articles of Merger as required by the GCL, no filing with, and no permit,
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Company of the transactions contemplated by the this
Agreement, except for such filings, permits, authorizations, consents or
approvals the failure of which to be made or obtained would not individually or
in the aggregate have a Company Material Adverse Effect or could not prevent,
materially delay or materially impair the ability of Company to consummate the
transactions contemplated by this Agreement. Neither the execution and delivery
by Company of this Agreement, nor the consummation by Company of the
transactions contemplated hereby, nor compliance by Company with any of the
provisions hereof, will (i) conflict with or result in any breach of any
provisions of the charter documents or by-laws of Company or any of Company
Subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancel lation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation ("Contracts") to which
Company or any of Company Subsidiaries is a party or by which any of them or any
of their properties or assets may be bound, or (iii) assuming compliance with
the matters referred to in this Section 6.5, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Company, any of
Company Subsidiaries or any of their properties or assets, except in the case of
clauses (ii) and (iii) for violations, breaches or defaults which would not,
alone or in the aggregate, have a Company Material Adverse Effect or that would
not prevent, materially delay or materially impair the ability of Company to
consummate the transactions contemplated by this Agreement.
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Section 6.6 Reports and Financial Statements. Company has delivered to
Purchaser each registration statement, schedule, report, proxy statement or
information statement prepared by it since November 30, 1996 (the "Audit Date"),
including, without limitation, (i) Company's Annual Report on Form 10-K for the
year ended November 30, 1996 and (ii) Company's Quarterly Report on Form 10-Q
for the quarterly period ended February 28, 1997, each in the form (including
exhibits and any amendments thereto) filed with the SEC, and Company has timely
filed all reports required to be filed with the SEC pursuant to the Exchange Act
since January 1, 1994 (collectively, the "Company SEC Reports"). None of such
Company SEC Reports, as of their respective dates, contained any untrue
statement of a material fact or omitted 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. Each of the balance
sheets (including the related notes and schedules) included in or incorporated
by reference into the Company SEC Reports fairly presents the consolidated
financial position of Company and its consolidated subsidiaries as of the
respective dates thereof, and the other related statements (including the
related notes and schedules) included or incorporated by reference therein
fairly present the results of operations, retained earnings and the changes in
financial position of Company and Company Subsidiaries for the respective
periods or as of the respective dates set forth therein (subject, in the case of
unaudited statements, to normal year-end adjustments), all in conformity with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except as otherwise noted therein.
Section 6.7 Absence of Undisclosed Liabilities. Except for liabilities
or obligations which (i) are accrued or reserved against in Company's financial
statements or reflected in the notes thereto included in the Company SEC Reports
filed prior to the date hereof, or (ii) were incurred after February 28, 1997 in
the ordinary course of business and consistent with past practices, neither
Company nor any Company Subsidiary has any material liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of a nature required by
GAAP to be reflected in a corporate balance sheet or the notes thereto. Except
as accrued or reserved against in Company's financial statements included in
Company's SEC Reports filed prior to the date hereof, as of the date hereof
there are no obligations or liabilities, whether or not accrued, contingent or
otherwise and whether or not required to be disclosed, or any facts or
circumstances of which Company has knowledge that could result in any claims
against or liabilities of Company or any Company Subsidiaries that, alone or in
the aggregate, would be reasonably likely to have a Company Material Adverse
Effect.
Section 6.8 Absence of Certain Changes or Events. Except as set forth
in the Company SEC Reports filed prior to the date hereof, since the Audit Date
neither Company nor any of Company Subsidiaries has: (i) taken any of the
actions set forth in Section 7.1(b), clauses (i), (iii), (iv) or (v) of Section
7.1(c) or Section 7.1(e) hereof; (ii)
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suffered any material adverse change in the business, financial condition,
results of operations, properties, assets or liabilities of Company and Company
Subsidiaries taken as a whole (other than any change relating to the United
States economy in general or to the United States investor owned hospital
business or to the acute care hospital business in general) or any development
or combination of developments of which management of Company has knowledge
which is reasonably likely to result in any such change; (iii) any declaration,
setting aside or payment of any dividend or other distribution with respect to
the capital stock of Company; (iv) any change by Company in accounting
principles,practices or methods; or (v) except as permitted by Section 7.1
hereof, conducted its business and operations other than in the ordinary course
of business and consistent with past practices. Since November 30, 1996, except
as disclosed in the Company Reports filed prior to the date hereof and except as
permitted by Schedule 8.10 hereto, there has not been any increase in the
compensation payable or which could become payable by Company and its
subsidiaries to their officers or key employees, or any amendment of any Plans
except for such increases in compensation (i) reflected in Schedule 6.8 hereof
or (ii) which are given to persons who are not officers of Company in the
ordinary course of business and consistent with past practices.
Section 6.9 Litigation. Except for litigation disclosed in the notes to
the financial statements included in the Company SEC Reports filed prior to the
date hereof, there are no civil, criminal or administrative actions, suits,
claims, hearings, investigations or proceedings pending or, to the knowledge of
Company, threatened against Com pany or any Company Subsidiary that, alone or in
the aggregate, would be reasonably likely to have a Company Material Adverse
Effect.
Section 6.10 BHC. Since the Audit Date, to Company's knowledge, there
has not been any material adverse change in the business, financial condition,
results of operations, properties, assets or liabilities of BHC and its
subsidiaries, taken as a whole.
Section 6.11 No Default. Neither Company nor any of Company
Subsidiaries is in default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation) of
any term, condition or provision of (i) its charter documents or by-laws, (ii)
any Contract to which Company or any of Company Subsidiaries is a party or by
which they or any of their properties or assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to Com
pany or any of Company Subsidiaries, except in the case of clauses (ii) and
(iii) above for defaults or violations which, alone or in the aggregate, would
not have a Company Material Adverse Effect or that would not prevent, materially
delay or materially impair the ability of Company to consummate the transactions
contemplated by this Agreement.
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Section 6.12 Taxes.
(a) Except for such matters that would not, individually or in the
aggregate, have a Company Material Adverse Effect, Company and Company
Subsidiaries have duly filed all material Tax Returns required to be filed by
Company or Company Subsidiaries and have paid in full the Taxes shown to be due
thereon. Neither Company nor any Company Subsidiaries has any material liability
with respect to Taxes that accrued on or before the end of the most recent
period covered by the Company SEC Reports filed prior to the date hereof which
in the aggregate exceeds, by a material amount, the aggregate amounts accrued
with respect thereto that are reflected in the financial statements included in
the Company SEC Reports filed prior to the date hereof.
(b) To Company's knowledge, no Tax is required to be withheld pursuant
to Section 1445 of the Code as a result of the transfer contemplated by this
Agreement.
(c) For purposes of this Agreement:
(i) "Taxes" shall mean all Federal, state, local and foreign
taxes, including, without limitation, income, gross receipts, windfall
profits, gains, excise, severance, property, production, sales, use,
transfer, license, franchise, employment, withholding, environmental,
customs duty, capital stock, stamp, payroll, unemployment, disability,
production, value added, occupancy and other taxes, duties or
assessments of any nature whatsoever, together with all interest,
penalties and additional amounts imposed with respect to such amounts
and any interest in respect of such penalties and additions.
(ii) "Tax Returns" shall mean any Federal, state, local or
foreign tax returns, elections, disclosures, estimates, declarations,
statements, reports, schedules, forms and information returns and any
amended return required to be filed with respect to any Tax.
Section 6.13 Medicare Participation/Accreditation.
(a) All hospitals or significant health care facilities owned or
operated as of the date hereof as continuing operations by Company or any
Company Subsidiary (each, a "Company Facility") are certified for participation
in the Medicare and Medicaid programs, have a current and valid provider
agreement with the Medicare and Medicaid programs, have complied with all
Medicare and Medicaid laws, rules, regulations, manuals and other conditions of
participation of such programs, to the extent applicable, and have filed all
cost reports and other requests for payment in the manner prescribed thereby
except where the failure to be so certified, to have such agreements, or to be
in such compliance would, individually or in the aggregate not have a Company
Material Adverse
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Effect. Neither Company nor any of Company Subsidiaries has received notice from
any governmental agency, fiscal intermediary, carrier or similar entity which
enforces or administers the statutory or regulatory provisions in respect to any
Government Health Care Program of any pending or threatened investigations, and
to Company's knowledge no such investigations are pending, threatened or
imminent, which would be reasonably expected to have a Company Material Adverse
Effect. Each Company Facility eligible for such accreditation is accredited by
the Joint Commission on Accreditation of Healthcare Organizations or other
appropriate accreditation agency.
(b) All cost reports and other requests for payment made by Company and
Company Subsidiaries to Medicare, Medicaid or any other governmental health care
program or third party payor are complete and accurate, except where the failure
to be so complete and accurate would not, individually or in the aggregate, have
a Company Material Adverse Effect. No adjustment or disallowance in any such
cost reports and other requests for payment, including adjustments or
disallowances for late filings, has been made or, to Company's knowledge,
threatened by any Federal or state agency or instrumentality or other provider
reimbursement entities relating to Medicare or Medicaid or by any third party
payor, and to Company's knowledge, there is no basis for any successful claims
or requests for recovery of overpayments from any such agency, instrumentality,
entity or third party payor, except for any such claims or requests which would
not have, individually or in the aggregate, a Company Material Adverse Effect.
Since January 1, 1992 neither Company nor any Company Subsidiary has prior to
the date hereof been subject to any audit relating to fraudulent Medicare or
Medicaid practices and neither Company nor any Company Subsidiary is subject to
any audit relating to fraudulent Medicare or Medicaid practices that would be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
(c) Each such Company Facility is licensed by the state department of
health or applicable state agency and is authorized to operate the number of
beds utilized therein. The Company Facilities are presently in compliance with
the terms, conditions and provisions of such licenses except where the failure
to be in such compliance would not have a Company Material Adverse Effect. The
facilities, equipment, staffing and operations of Company Facilities satisfy the
applicable state health care licensing requirements in all material respects.
Section 6.14 Employee Benefit Plans; ERISA.
(a) With respect to each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension, or retirement, thrift, savings,
employee stock ownership, stock bonus, restricted stock, welfare and fringe
benefit plan, program, agreement or arrangement, and
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each other employee benefit plan, program, agreement (including but not limited
to employment agreements) or arrangement, other than such as are immaterial (the
"Plans"), currently maintained or contributed to or required to be contributed
to by (i) Company, (ii) any Company Subsidiary or (iii) any trade or business,
whether or not incorporated (a "Company ERISA Affiliate"), that together with
Company is considered a "single employer" within the meaning of Section 4001 of
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder ("ERISA"), or Section 414(b) or (c) of
the Code for the benefit of any employee or former employee, consultant or
former consultant, or director or former director of either Company, any Company
Subsidiary or any Company ERISA Affiliate.
(b) Except as set forth on Schedule 8.10 hereto, neither Company nor
any Company Subsidiary has any commitment to create any additional material Plan
or to modify or change any existing Plan in any material respect. If applicable,
Company has heretofore delivered or made available to Parent, upon request, true
and complete copies of:
(i) existing Plan documents(including all amendments
thereto);
(ii) the Form 5500, actuarial report and financial statement
for the two most recent plan years ending prior to the date hereof;
(iii) the most recent Summary Plan Description, together with
any Summary of Material Modifications;
(iv) trust instruments, insurance contracts or any other third
party funding vehicle(including all amendments thereto) and the latest
financial statements with respect to the last reporting period ended
immediately prior to the date hereof;
(v) the most recent determination letter received prior to
the date hereof from the Internal Revenue Service ("IRS") with respect
to each Plan intended to qualify under Section 401 of the Code; and
(vi) any Form 5310 or Form 5330 filed with the IRS.
(c) No liability under Title IV of ERISA has or is expected to be
incurred by Company, any Company Subsidiary or any Company ERISA Affiliate that
has not been satisfied in full when due. Company has no reason to expect to
incur any liability under ERISA arising in connection with the termination of,
or complete withdrawal from, any Plan previously covered by Title IV of ERISA
which would have a Company Material
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Adverse Effect or give rise to a lien under Title IV of ERISA. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Plan within the 12- month period ending on the date hereof, and no such
notice will be required to be filed as a result of the transactions contemplated
by this Agreement. The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted proceedings to terminate any Plan and, to Company's knowledge, no
condition exists that presents a material risk that such proceedings will be
instituted. To the knowledge of Company, there is no pending investigation or
enforcement action by the PBGC, the Department of Labor (the "DOL")or IRS or any
other governmental agency with respect to any Plan. Under each Plan to the
extent applicable, as of the date of the most recent actuarial valuation
performed prior to the date of this Agreement, the actuarially determined
present value of all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions
contained in such actuarial valuation of such Plan), did not exceed the then
current value of the assets of such Plan and since such date there has been
neither an adverse change in the financial condition of such Plan nor any
amendment or other change to such Plan that would increase the amount of
benefits thereunder which reasonably would be expected to change such result.
(d) No Plan subject to the minimum funding requirements of Section 412
of the Code or Section 302 of ERISA or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of such Plan ended prior to the date hereof. All
contributions required to be made with respect to any Plan on or prior to the
date hereof have been timely made. None of Company, any Company Subsidiary or
any Company ERISA Affiliate (x) has provided, or would reasonably be expected to
be required to provide, security to any Plan pursuant to Section 401(a)(29) of
the Code, and (y) has taken any action, or omitted to take any action, that has
resulted, or would reasonably be expected to result, in the imposition of a lien
under Section 412(n) of the Code or pursuant to ERISA.
(e) No Plan is a "multiemployer pension plan," as defined in Section
3(37) of ERISA, nor is any Plan a plan described in Section 4063(a) of ERISA.
None of Company, any Company Subsidiary or any Company ERISA Affiliate has
contributed, or has been obligated to contribute to a multiemployer plan under
Subtitle E of ERISA at any time since September 26, 1980.
(f) Each Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA and is intended to be "qualified" within the
meaning of Section 401(a) of the Code has received a favorable determination
letter including a determination that the related trust under such Plan is
exempt from tax under Section 501(a) of the Code from the IRS as to its
qualification for "TRA" (as defined in Rev. Proc 93-39) and, to
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Company's knowledge, there are no circumstances likely to result in the
disqualification of such Plan.
(g) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including, but not limited
to, ERISA and the Code. There is no material pending or, to the knowledge of
Company, threatened legal action, suit, or claim relating to the Plans.
(h) No Plan, individually or collectively, constitutes a "defined
benefit plan" as defined in Section 3(35) of ERISA.
(i) To Company's knowledge, none of Company, any Company Subsidiary or
any Company ERISA Affiliate, any of the ERISA Plans, any trust created
thereunder, or any trustee or administrator thereof has engaged in a transaction
in connection with which Company, any Company Subsidiary, any Company ERISA
Affiliate, any of the ERISA Plans, any such trust or any trustee or
administrator thereof, or any party dealing with the ERISA Plans or any such
trust is subject to either a civil liability under Section 409 of ERISA or
Section 502(i) of ERISA, or a tax imposed pursuant to Section 4975 or 4976 of
the Code which would reasonably be expected to have a Company Material Adverse
Effect.
(j) Neither Company nor any Company Subsidiary has any obligations to
provide retiree health and life insurance or other retiree death benefits under
any Plan, other than benefits mandated by Section 4980B of the Code, and each
Plan may be amended or terminated without incurring liability thereunder. There
has been no communication to employees by Company or any Company Subsidiary
that would reasonably be expected to promise or guarantee such employees retiree
health or life insurance or other retiree death benefits on a permanent basis.
(k) All Plans covering foreign employees comply in all material
respects with applicable local law. Company and any Company Subsidiary have no
material unfunded liabilities with respect to any Plan which covers foreign
employees.
(l) Except as provided in Schedule 8.10 hereto, the consummation of the
transactions contemplated by this Agreement would not, directly or indirectly
(including, without limitation, as a result of any termination of employment
prior to or following the Effective Time), reasonably be expected to (A) entitle
any current or former employee, consultant or director to any payment (including
severance pay or similar compensation) or any increase in compensation except in
connection with Shares and options held by them, (B) result in the vesting or
acceleration of any benefits under any Plan or (C) result in any material
increase in benefits payable under any Plan.
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(m) Neither Company nor any Company Subsidiary maintains any
compensation plans, programs or arrangements the payments under which would not
reasonably be expected to be deductible as a result of the limitations under
Section 162(m) of the Code and the regulations issued thereunder.
(n) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result of
any termination of employment prior to or following the Effective Time), none of
the Parent, Sub, Company or the Surviving Corporation, or any of their
respective subsidiaries will be obligated to make a payment that would be
characterized as an "excess parachute payment" to an individual who is a
"disqualified individual" (as such terms are defined in Section 280G of the
Code), without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
Section 6.15 Vote Required. Approval of the Merger by the stockholders
of Company will require the affirmative vote or consent of the holders of at
least two-thirds of the outstanding Shares.
Section 6.16 Opinion of Financial Advisor. The Board of Directors of
Company has received the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Company's financial
advisor, substantially to the effect that the consideration to be received by
holders of the Shares pursuant to this Agreement is fair from a financial point
of view.
Section 6.17 Certain Actions Under Nevada Law. The Board of Directors
of Company has taken all appropriate action so that (i) neither Parent nor Sub
will be an "interested stockholder" within the meaning of Sections 78.378 to
78.3793 of the GCL by virtue of the execution of this Agreement or the
consummation of the transactions contemplated hereby and (ii) the entry into
this Agreement and the consummation of the transactions contemplated hereunder
shall be exempted from the provisions of Sections 78.411 to 78.444 of the GCL.
No other "fair price", "moratorium", "control share acquisition" or other
similar antitakeover statute or regulation (each a "Takeover Statute") is
applicable to Company, the Shares, the Offer, the Merger or the transactions
contemplated thereby or hereby.
Section 6.18 Stockholder Rights Plan. (i) The Company has amended the
Rights Agreement to provide that none of Parent, Sub or any of their respective
affiliates or associates will be deemed to be an Acquiring Person (as defined in
the Rights Agreement) and that the Distribution Date (as defined in the Rights
Agreement) shall not be deemed to occur, and the Rights will not separate from
the Shares, as a result of the commencement of the Offer or as a result of
consummation of the transactions contemplated hereby.
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(ii) The Company has taken all necessary action with respect
to the Rights Agreement to ensure that the Rights Agreement will expire at the
Effective Time pursuant to Section 7.1(iii) of the Rights Agreement.
Section 6.19 Real Property and Leases. (i) Company and Company
Subsidiaries have sufficient title or leasehold interests to all of their
respective properties to conduct their respective businesses as currently
conducted or as contemplated to be conducted, except where the failure to have
such sufficient title or leasehold interest would not, either individually or in
the aggregate, have a Company Material Adverse Effect. Section 6.19 of the
Disclosure Schedule sets forth a true and complete list of each lease, sublease
or other similar agreement relating to the possession of real property towhich
Company or any of Company Subsidiaries is a party which provides for annual
payments in excess of $60,000.
(ii) All leases of real property leased for the use or benefit
of Company or any Company Subsidiaries to which Company or any such subsidiary
is a party and all amendments and modifications thereto are in full force and
effect except where the failure to be in full force and effect would not have a
Company Material Adverse Effect.
Section 6.20 Termination of Select Medical Merger Agreement. The
Agreement and Plan of Merger, dated as of May 2, 1997 (the "Select Medical
Merger Agreement"), by and among Select Medical Corporation ("Select Medical"),
SM Acquisition Co. and Company has been terminated in accordance with its terms.
Company is not required under the Select Medical Merger Agreement (or under any
other Contract) to make any payment to Select Medical Corporation, SM
Acquisition Co. or any of their respective affiliates except pursuant to Section
9.2 thereof.
Section 6.21 Brokers. Company represents and warrants that, (i) except
for ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. and Cronus Partners, Inc.,
its financial advisors, no broker, finder or financial advisor is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
or the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of Company and (ii) Company's fee arrangements with such
financial advisors have been disclosed in writing to Parent and Sub.
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
Section 7.1 Conduct of Business by Company Pending The Merger. From the
date of this Agreement until the earlier of (i) the time that persons designated
by Parent are appointed as directors of Company pursuant to Section 3.4 hereof
and (ii) the Effec-
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tive Time, unless Parent shall otherwise agree in writing, or as otherwise
contemplated by this Agreement, any Schedule hereto or Company Disclosure
Schedule:
(a) the respective businesses of Company and Company Subsidiaries shall
be conducted only in the ordinary and usual course of business and consistent
with past practice, and there shall be no material change in the conduct of the
operations of Company and Company Subsidiaries taken as a whole and, to the
extent consistent therewith, each of Company and Company Subsidiaries shall use
its reasonable best efforts to preserve its business organization intact,
maintain its existing relations with customers, suppliers, employees and
business associates, and preserve the goodwill of those having business
relationships with it and Company Subsidiaries;
(b) Company shall not (i) sell or pledge or agree to sell, pledge,
dispose of or encumber any stock or other equity interests owned by it in any of
Company Subsidiaries; (ii) amend its Articles of Incorporation or by-laws or,
except as contemplated hereby, amend, modify, consummate or redeem the Rights
Agreement or Rights; or (iii) split, combine or reclassify any shares of its
outstanding capital stock; or (iv) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property, or redeem or otherwise
acquire any shares of its capital stock or shares of the capital stock of any of
Company Subsidiaries;
(c) neither Company nor any of Company Subsidiaries shall (i) authorize
for issuance, issue, pledge, dispose of, encumber or sell any additional shares
of, or rights of any kind to acquire, any shares of or securities convertible or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, its capital stock of any class (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise), except for unissued Shares which may be issued upon the exercise or
conversion of outstanding rights, options and debentures referred to in Section
6.2 hereof; (ii) except as otherwise permitted herein acquire, dispose of,
transfer, lease, guarantee, license, mortgage, pledge or encumber any fixed or
other assets in excess of $200,000 in any one or a series of related
transactions or more than $1,000,000 in the aggregate other than ordinary course
acquisitions of supplies used in the day-to-day operations of Company; (iii)
incur, assume or prepay any indebtedness or any other material liabilities; (iv)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
other than a wholly-owned Company Subsidiary in the ordinary course of business
and consistent with past practices in an amount in excess of $1,000,000 in the
aggregate; (v) make any loans, advances or capital contributions to, or
investments in, any other person in an amount in excess of $200,000 in any one
or a series of related transactions or more than $1,000,000 in the aggregate;
(vi) authorize capital expenditures (other than presently budgeted capital
expenditures set forth on Schedule 7.1(c)) in excess of $200,000 in any one or a
series of related transactions or $500,000 in the aggregate; or
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(vii) enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(d) neither Company nor any of Company Subsidiaries shall make any
change in the compensation payable or to become payable to any of its officers,
directors or employees, except pursuant to existing agreements, grant any
severance or termination pay to, or enter into or amend any employment,
severance, termination or other similar agreement, adopt any new Plan or amend
any existing Plan or voluntarily accelerate the vesting of any stock options,
restricted stock or other compensation or benefit or make any loans to any of
its officers, directors or employees or make any changes in its existing
borrowing or lending arrangements for or on behalf of any of such persons,
whether contingent on consummation of the Merger or otherwise, other than as may
be required under applicable law or the terms of any existing Plan or agreement
provided, however,that Company and Company Subsidiary may amend any Plan to
provide for the effectuation thereof immediately prior to the expiration of the
Amended Offer and/or the Effective Time so long as the amounts payable
thereunder, individually or in the aggregate, are not increased.
(e) neither Company nor any Company Subsidiary shall settle or
compromise any material claims or litigation or, except in the ordinary and
usual course of business, modify, amend or terminate any of its material
Contracts or waive, release or assign any material rights or claims;
(f) neither Company nor any Company Subsidiary shall take, or omit to
take, any action that is reasonably likely to cause any representation and
warranty of Company in this Agreement to become untrue in any material respect;
(g) neither Company nor any Company Subsidiary shall make any Tax
election or permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to Purchaser, except
in the ordinary and usual course of business; and
(h) neither Company nor any Company Subsidiary will authorize or enter
into an agreement to do any of the foregoing.
Section 7.2 Conduct of Business of Sub. From the date hereof to the
Effective Time, Sub shall not engage in any activities of any nature except as
provided in or contemplated by this Agreement or to facilitate the consummation
of the transactions contemplated hereby.
ARTICLE VIII
ADDITIONAL AGREEMENTS
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Section 8.1 Access and Information. Company shall, and shall cause each
Company Subsidiary to, afford to Parent and its financial advisors, legal
counsel, accountants, consultants and other representatives full access at all
reasonable times throughout the period prior to the Effective Time to all of its
books, records, properties, plants and personnel and, during such period, shall
furnish promptly to Parent (i) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal or
state securities laws and (ii) all other information as Parent may reasonably
request provided that no investigation pursuant to this Section 8.1 shall affect
or be deemed to modify any representation or warranty made by Company.
Notwithstanding the foregoing, Company shall not be required to permit any
access, or to disclose any information, which in the reasonable judgment of
Company (i) would result in the disclosure of any trade secrets of third parties
if Company shall have unsuccessfully used reasonable efforts to obtain the
consent of such third party to such inspection or disclosure, (ii) would be in
violation of applicable law, rules or regulation or (iii) consti tutes
information protected by attorney-client privilege, but only to the extent that
disclosure would impair Company's ability to assert such attorney-client
privilege. Parent and its respective affiliates, representatives and agents
shall keep confidential all nonpublic information in accordance with the terms
of the Confidentiality Letter dated October 28, 1996 (the "Confidentiality
Letter") between Company and Parent.
Section 8.2 Acquisition Proposals. From the date hereof until the
termination hereof, Company and Company Subsidiaries will not, and will cause
their respective officers, directors, employees or other agents (including,
without limitation, investment bankers, attorneys or accountants) not to,
directly or indirectly, (i) solicit, initiate, encourage, enter into any
agreement or otherwise facilitate any offer or proposal for, or any indication
of interest in, a merger or other business combination involving Company or the
acquisition of any equity interest in, or a substantial portion of the assets of
Company or any transaction that would conflict with or interfere with
consummation of the transactions contemplated by this Agreement, other than the
transactions contem plated by this Agreement and other than the sale of the
hospital in Kirkland, Washington and the sale of real estate and buildings
relating to hospitals formerly operated by Company or a Company Subsidiary or
real property set forth on Schedule 8.2 at hospitals presently operated by
Company or a Company Subsidiary (any such proposal being an "Acquisition
Proposal" and any such acquisition or transaction being an "Acquisition
Transaction"), or (ii) engage in or continue discussions or negotiations with,
or disclose any nonpublic information relating to Company or Company
Subsidiaries, respectively, or afford access to their respective properties,
books or records to, any person that may be considering making, or has made, an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. Notwithstanding the foregoing, nothing
contained in this Section 8.2 shall prohibit Company and its Board of Directors
from (i)
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taking and disclosing a position with respect to a tender offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated by the SEC under the Exchange
Act, or (ii) furnishing information to, or entering into negotiations with, any
person or entity that makes an unsolicited bona fide written proposal to acquire
Company pursuant to a merger, consolidation, share exchange, purchase of a
substantial portion of the assets, business combination or other similar
transaction, if, and only to the extent that, (i) Company's Board of Directors
concludes in good faith (after consultation with its financial advisors) that
such Acquisition Proposal is reasonably capable of being completed, taking into
account all legal, financial and other aspects of the proposal and the person or
entity making the proposal, and would, if consummated, result in a transaction
more favorable to Company's stockholders from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Acquisition
Proposal being referred to in this Agreement as a "Superior Proposal") and (ii)
such Board of Directors determines in good faith upon advice of counsel that
such action is required for the Board of Directors to comply with its fiduciary
duties to stockholders imposed by law. Company agrees that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Company agrees that it will take the necessary steps to
promptly inform the individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 8.2. Company agrees that it
will notify Parent promptly if any such proposals or offers are received by, any
such information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its representatives indicating,
in connection with such notice, the name of such person and the terms and
conditions of any proposals or offers and thereafter shall keep Parent informed,
on a current basis, of the status and terms of any such proposals or offers and
the status of any such discussions or negotiations. Company also agrees that it
will promptly request that each person that has heretofore executed a
confidentiality agreement in connection with its consideration of any
Acquisition Proposal to return all confidential information heretofore furnished
to such Person by or on behalf of Company or any of its subsidiaries.
Section 8.3 Proxy Statement; Stockholder Approval.
(a) Company, acting through its Board of Directors, shall, in
accordance with applicable law and its Articles of Incorporation and by-laws:
(i) as soon as practicable following the purchase of Shares by
the Purchaser pursuant to the Amended Offer, Company will prepare and
file with the SEC a Proxy Statement (the "Proxy Statement") with
respect to a special meeting of shareholders of Company (the "Special
Meeting") (except to the extent approval of shareholders of Company is
not required to be obtained pursuant to the GCL or may be obtained by
written consent) for the purpose of voting to approve and
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adopt this Agreement (or, in the event that the Parent Companies shall
have the right to vote a sufficient number of Shares such that the
Parent Companies may approve and adopt this Agreement, an Information
Statement with respect to the Special Meeting (the "Information
Statement")) and shall use its reasonable efforts to obtain such
stockholder approval; and
(ii) promptly and duly call, give notice of, convene and hold
the Special Meeting (except to the extent approval of shareholders of
Company is not required to be obtained pursuant to the GCL or may be
obtained by written consent) as soon as practicable following the date
upon which the Proxy Statement or Information Statement is cleared for
mailing by the SEC, (except to the extent approval of shareholders of
Company is not required to be obtained pursuant to the GCL or may be
obtained by written consent); and
(iii) recommend approval and adoption of this Agreement by the
stockholders of Company and include in the Proxy Statement or
Information Statement such recommendation, and take all lawful action
to solicit such approval.
(b) Company, as promptly as practicable following the date upon which
the Proxy Statement or Information Statement is cleared for mailing by the SEC,
shall cause the definitive Proxy Statement or Information Statement to be mailed
to its stockholders. At the Special Meeting (i) Company shall vote or cause to
be voted in favor of approval and adoption of this Agreement all Shares as to
which it holds proxies at such time and (ii) the Parent Companies shall vote or
cause to be voted in favor of the approval and adoption of this Agreement all
Shares owned by them or as to which they hold proxies at such time. The Proxy
Statement or Information Statement, at the date thereof and, if applicable, at
the date of such meeting, will not include an 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; provided, however, that the foregoing shall not apply
to the extent that any such untrue statement of a material fact or omission to
state a material fact was made by Company in reliance upon and in conformity
with written information concerning the Parent Companies furnished to Company by
Parent specifically for use in the Proxy Statement or Information Statement.
Parent agrees that the information provided to Company for use in the Proxy
Statement or Information Statement shall in all material respects comply with
the requirements of the Exchange Act and the rules and regulations thereunder.
The Proxy Statement or Information Statement shall not be filed, and no
amendment or supplement to the Proxy Statement or Information Statement will be
made by Company, without consultation with Parent and its counsel.
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(c) Company's obligations under this Section 8.3 shall at all times
remain subject to its fiduciary duties imposed under applicable law, in the
event that, if required by such fiduciary duties as advised by counsel, the
Board of Directors of Company shall have withdrawn or modified its
recommendation that stockholders approve and adopt this Agreement.
Section 8.4 Antitrust Laws. As promptly as practicable, Company, Parent
and Sub shall make all filings and submissions required by any Governmental
Entity as may be reasonably required to be made in connection with this
Agreement and the transactions contemplated hereby. Company will furnish to
Parent and Sub, and Parent and Sub will furnish to Company, such information and
assistance as the other may reasonably request in connection with the
preparation of any such filings or submissions. Company will provide Parent and
Sub, and Parent and Sub will provide Company, with copies of all correspondence,
filings or communications (or memoranda setting forth the substance thereof)
between such party or any of its representatives, on the one hand, and any
governmental agency or authority or members of their respective staffs, on the
other hand,with respect to this Agreement and the transactions contemplated
hereby. The Company, Parent and Sub each agree that they shall use best
reasonable efforts to oppose the imposition of any Offer Order (as defined in
Annex A) or any Order (as defined herein) and to appeal the imposition of any
such Offer Order or any Order. If the Purchaser shall not have accepted Shares
for payment pursuant to the Amended Offer on or before September 1, 1997 due to
the existence of an Offer Order, Parent and the Purchaser agree to increase the
$16.00 per share consideration to be paid pursuant to the Amended Offer by an
amount per Share equal to interest accruing on $16.00 from September 1, 1997 at
a rate of 5% per annum through and including the date Shares are accepted for
payment pursuant to the Amended Offer.
Section 8.5 Employee Stock Options. At the Effective Time (or, at
Company's election, prior to expiration of the Amended Offer) all outstanding
Options to acquire Shares shall immediately vest and become fully exercisable.
At the Effective Time (or, at Company's election, prior to expiration of the
Amended Offer) Company shall take such actions as may be necessary to cause each
Option with an exercise price of less than the Merger Consideration (a "Lower
Priced Option") to be amended to provide that the holder thereof need not tender
any exercise price therefor and that upon exercise such holder shall receive an
amount of cash equal to the product of (x) the amount by which the Merger
Consideration exceeds the exercise price per Share subject to such Lower Priced
Option, and (y) the number of Shares issuable pursuant to the unexercised
portion of such Lower Priced Option, less any required withholding
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of taxes. At such time, all Options other than Lower Price Options shall be
converted into a right to receive, upon exercise of such options (including
payment of the exercise price of such options), an amount in cash equal to the
product of (x) the Merger Consideration, and (y) the number of Shares issuable
pursuant to the unexercised portion of such option, less any required
withholding of taxes. Anything to the contrary in this Agreement
notwithstanding, no payment shall be made pursuant to this Section 8.5 that
would be inconsistent with and would violate Article 12 of Company's 1989 Stock
Incentive Plan. Prior to the Expiration Date of the Amended Offer Company shall
cancel the converging options issued to ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ under Company's 1989 Stock Incentive Plan
and shall use its best efforts to cancel all other converging options issued
under Company's 1989 Stock Incentive Plan. The Company shall take all action
necessary to ensure that following the Effective Time no participant in any Plan
shall have any right thereunder to acquire equity securities of Parent, Company,
Sub, Surviving Corporation or any subsidiary thereof or any cash payment with
respect thereto, other than cash amounts payable to holders of Options pursuant
to this Section 8.5.
Section 8.6 Public Announcements. Parent and Sub, on the one hand, and
Company, on the other hand, agree that they will consult with each other prior
to issuing any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby.
Section 8.7 Continuance of Existing Indemnification Rights.
(a) The Articles of Incorporation and By-laws of the Surviving
Corporation shall contain provisions with respect to indemnification of
individuals who at any time prior to the expiration of the Amended Offer (or at
any time after expiration of the Amended Offer and prior to the Effective Time)
were directors, officers, or otherwise entitled to indemnification thereunder
(the "Indemnified Parties") which are at least as favorable to each Indemnified
Party as the Articles of Incorporation and By-laws of Company as of the date
hereof. The Articles of Incorporation and By-laws of the Surviving Corporation
shall not be amended, repealed or otherwise modified for a period of six years
after the Effective Time in any manner that would adversely affect the rights
thereunder of an Indemnified Party. For a period of six years from and after the
Effective Time, Parent and Surviving Corporation shall indemnify, defend and
advance expenses in matters that may be subject to indemnification to the
Indemnified Parties with respect to liabilities and claims (and related
expenses) made against them resulting from their service as such prior to the
Effective Time to the fullest extent permitted under, and subject to the
requirements and other provisions of, Company's Articles of Incorporation,
By-laws and indemnification agreements in effect on the date of this Agreement
and applicable provisions of Law. In addition, for a period expiring six years
after the expiration or termination of any consulting obligations under any
agreement requiring any Indemnified Party to provide consulting services to
Parent or the Surviving Corporation following the expiration of the Amended
Offer or the Effective Time, Parent, Company and the Surviving Corporation shall
indemnify, defend and advance expenses to Indemnified Parties in matters that
would be subject to indemnification with respect to liabilities and claims (and
related expenses) made against them resulting from their service as a
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consultant under any such agreement to the fullest extent permitted under, and
subject to the requirements and other provisions of, Company's Articles of
Incorporation, By-laws, indemnification and consulting agreements in effect on
the date of this Agreement and applicable provisions of Law.
(b) Parent shall cause to be maintained in effect for a period ending
not sooner than the sixth anniversary of the Effective Time directors' and
officers' liability insurance providing at least the same coverage with
comparable carriers with respect to Company's directors and officers as the
policies maintained on behalf of directors and officers of Company as of the
date hereof, and containing terms and conditions which are no less advantageous,
with respect to matters occurring on or prior to the Effective Time (to the
extent such insurance is available with respect to such matters); provided, that
in no event shall Parent be required to expend to maintain or procure insurance
coverage pursuant to this Section 8.7 an amount per annum in excess of 200% of
the current annual premiums for the twelve-month period ended November 30, 1996
(the "Maximum Premium") with respect to such insurance, or, if the cost of such
coverage exceeds the Maximum Premium, the maximum amount of coverage that can be
purchased or maintained for the Maximum Premium.
(c) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.7, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent thereof,
provided that the failure of an Indemnified Party to promptly notify Parent
shall not relieve Parent of its obligations under this Section 8.7 except to the
extent Parent is materially prejudiced by such failure. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) Parent or the Surviving Corporation shall have
the right to assume the defense thereof and Parent shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, (ii) the Indemnified Parties will cooperate in the defense
of any such matter and (iii) Parent shall not be liable for any settlement
effected without its prior written consent, which consent shall not be
unreasonably withheld; and provided further that Parent shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
juris diction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is pro hibited by applicable law.
(d) Without limiting any other provision of this Agreement, in the
event that any claim for which coverage under Company's directors' and officers'
liability insurance policy would be available is not paid pursuant to such
directors' and officers' liability insurance policy because such amount does not
exceed the "deductible" or "retention amount" of such policy, Parent or Sub
shall promptly, at the election of the director or
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officer, reimburse or pay or promptly cause Company to reimburse or pay any
officer or director for any amount, up to an aggregate of $500,000 for all
officers and directors, payable or paid because such amount is not in excess of
the "deductible" or the "retention amount". In the event that rights shall be
reserved with regard to whether coverage for any claim is available under
Company's directors' and officers' insurance policy, upon written request from
an officer or director, Parent or Sub shall pay or cause Company to pay, upon
receipt of an undertaking from the officer or director making the written
request to reimburse any amounts paid if it is ultimately determined that
coverage with respect to such claim is not available under such policy, any
officer or director for any amount, up to an aggregate of $500,000, together
with all other amounts payable pursuant to this subsection (d) of this Section
8.7 for all officers and directors, payable by such persons because such amount
is not in excess of the "deductible" or "retention amount".
Section 8.8 Expenses. Except as set forth in this Section 8.8, whether
or not the Merger is consummated all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expenses except that those expenses incurred
in connection with printing the Schedule 14D-9, the Proxy Statement and any
information statement, as well as the filing fee relating to the Proxy Statement
and any information statement will be shared equally by Parent and Company.
Section 8.9 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers, consents
and approvals and to effect all necessary registra tions and filings. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and/or
directors of Parent, Sub and Company shall take all such necessary action.
Section 8.10 Certain Employee Benefits. Parent and Company agree to
take the action described in Schedule 8.10 hereto.
Section 8.11 Notification of Certain Matters. Company shall give prompt
notice to Parent of: (a) any notice of, or other communication relating to, any
actual or alleged noncompliance with any state licensure law, rule or regulation
or any laws, rules, regulations, manuals and other conditions relating to the
Medicare and Medicaid programs or any other government health care program or
third party payor requirements except for such instances of noncompliance which,
individually, or in the aggregate, would be immaterial to the financial
condition, operation, properties, prospects, business or results of operations
of Company and Company Subsidiaries taken as a whole, or a default or
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event that, with notice or lapse of time or both, would become a default,
received by Company or any of its subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, under any Contract to which Company
or any of Company Subsidiaries is a party or is subject except for defaults or
events which, individually or in the aggregate, would not be reasonably likely
to have a Company Material Adverse Effect; (b) any material adverse change in
the business, assets, liabilities, results of operations or financial condition
of Company and Company Subsidiaries taken as a whole or the occurrence of any
event which, so far as reasonably can be foreseen at the time of its occurrence,
would result in any such change. Each of Company and Parent shall give prompt
notice to the other party of any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement and the
occurrence or failure to occur of an event that would, or, with the lapse of
time could reasonably be expected to cause any representation or warranty of
Company in this Agreement to become inaccurate in any material respect.
Section 8.12 Consummation of the Merger. Parent and Sub shall take such
reasonable actions as may be reasonably necessary to cause the Effective Time to
occur as promptly as reasonably practicable following consummation of the
Amended Offer.
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 9.1 Conditions to Each Party's Obligation to Effect The Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfac tion at or prior to the Effective Time of the following
conditions:
(a) Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(b) To the extent required by the GCL, this Agreement and the
transactions contemplated hereby shall have been approved and adopted by the
requisite vote or consent of the stockholders of Company in accordance with
applicable law.
(c) No court or other Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, preliminary or permanent injunction or other order
which is in effect and prohibits consummation of the transactions contemplated
by this Agreement (collectively, an "Order").
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(d) Each of Company and Parent shall have obtained such consents from
Governmental Entities in addition to pursuant to the HSR Act as shall be
required and which are material to Parent or Company and to consummation of the
transactions contemplated hereby.
(e) Sub shall have purchased Shares pursuant to the Offer.
Section 9.2 Conditions to Obligation of Company to Effect the Merger.
The obligation of Company to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following additional
condition:
(a) Each of Parent and Sub shall have performed in all material
respects its obligations under this Agreement required to be performed by it at
or prior to the Effective Time and the representations and warranties of Parent
and Sub contained in this Agreement shall be true and correct in all material
respects at and as of the Effective Time as if made at and as of such time,
except as contemplated by this Agreement, and Company shall have received a
certificate of the Chairman of the Board, the Chief Executive Officer, the
President or an Executive Vice President of Parent as to the satisfaction of
this condition.
Section 9.3 Conditions to Obligations of Parent and Sub to Effect The
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
additional condition:
(a) Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the earlier of (i) the time that persons designated by Parent are appointed as
directors of Company pursuant to Section 3.4 hereof and (ii) the Effective Time
and the representations and warranties of Company contained in this Agreement
shall be true and correct in all material respects at and as of the earlier of
(i) the time that persons designated by Parent are appointed as directors of
Company pursuant to Section 3.4 hereof and (ii) the Effective Time as if made at
and as of such time, except as contemplated by this Agreement, and Parent and
Sub shall have received a Certificate of the Chairman of the Board, the Chief
Operating Officer, or an Executive Vice President of Company as to the
satisfaction of this condition.
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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be terminated at any time
before the Effective Time, either before or after the approval of the
stockholders of Company shall have been obtained, in each case as authorized by
the respective Board of Directors of Parent or Company:
(a) By mutual written consent of the parties;
(b) By either Parent or Company if the Merger shall not have been
consum mated on or before November 30, 1997 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 10.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been directly or indirectly the cause of, or resulted
in, the failure of the Effective Time to occur on or before the Termination
Date;
(c) By either Parent or Company if a court of competent jurisdiction or
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling the parties shall use their
commercially reasonable efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable;
(d) By Parent if Company shall be in material breach of its obligations
under this Agreement and such breach has not been cured within ten days' written
notice thereofto Company; or by Company if Parent or Sub shall be in material
breach of their respective obligations under this Agreement and such breach has
not been cured within ten days' notice thereof to Parent.
(e) By Parent if the Board of Directors of Company (i) shall withdraw
or modify (or publicly announce an intention to withdraw or modify) in any
adverse manner its approval or recommendation of this Agreement or the Merger,
(ii) shall approve or recommend any Acquisition Proposal, other than by a party
to this Agreement or an affiliate of Parent or (iii) shall resolve to take any
of the actions specified in clause (i) or (ii) above;
(f) By either Parent or Company if any required approval of the
stockholders of Company shall fail to have been obtained;
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(g) By Company upon five days' prior written notice to Parent, if, as a
result of a written Acquisition Proposal received by Company from a person other
than Parent or any of its affiliates, the Board of Directors of Company
determines in good faith and in accordance with the conditions set forth in
Section 8.2 that the members' fiduciary obligations under applicable law require
that such Acquisition Proposal be accepted; provided, however, that (i) the
Board of Directors of Company shall have determined in good faith, after
considering applicable provisions of state law and after giving effect to all
concessions, if any, which have been offered by Parent pursuant to clause (ii)
below, on the basis of oral or written advice of outside counsel, that such
action is required by the members' fiduciary obligations under applicable law,
and (ii) prior to any such termination, Company shall, and shall cause its
respective financial and legal advisors to, negotiate with Parent to make such
adjustments in the terms and conditions of this Agreement as would enable such
party to proceed with the transactions contemplated hereby; provided, however,
that no termination shall be effective pursuant to Section 10.1(g) under
circumstances in which a Company Termination Fee (as defined below) is payable
by the terminating party under Section 10.2(b) unless concurrently with such
termination such termination fee is paid in accordance with the provisions of
Sections 10.2(b); or
(h) By Parent if the Board of Directors of Company shall have failed to
take any of the actions contemplated by Section 8.3(a) as a result of the
exercise of its rights under Section 8.3(c).
Section 10.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in
Section 10.1 hereof, and except as otherwise provided in this Agreement, this
Agreement shall forthwith become void and there shall be no liability on the
part of any of the parties or any of their respective directors, officers,
employees or representatives, except (i) as set forth in this Section 10.2 and
in Sections 8.1 and 8.8 and (ii) nothing herein shall relieve any party from
liability for any breach hereof.
(b) If (x) (i) the Offer and the Amended Offer shall together in the
aggregate have remained open for a minimum of at least 20 business days, (ii) a
number of Shares necessary to satisfy the Minimum Condition (as defined in Annex
A) shall not have been validly tendered and not withdrawn and the Amended Offer
is terminated without the purchase of any Shares thereunder, (iii) no Offer
Order shall be in effect (as defined in Annex A), (iv) a competing Acquisition
Proposal which provides for a transaction equal to or more favorable to
Company's shareholders from a financial point of view than the transactions
contemplated by this Agreement shall be made prior to the termination of the
Amended Offer, and (v) Company or any Company Subsidiary shall consummate an
Acquisition Transaction within eighteen months after the termination of this
Agreement or (y) Parent shall have terminated this Agreement pursuant to Section
10.1(e) or (h) hereof,
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or (z) Company shall have terminated (or seek to terminate) this Agreement
pursuant to Section 10.1(g) hereof, then at the request of Parent, Company shall
promptly, but in no event later than two days after the date of such request,
pay Parent a fee of $17,415,000 which amount shall be payable in cash in same
day funds plus an amount equal to Parent's out-of-pocket expenses up to
$2,000,000, including fees and expenses paid to investment bankers, lawyers and
financing sources, incurred in connection with the transactions contemplated by
this Agreement; provided, that, in no event shall the Company be required to pay
more than $19,415,000 pursuant to this section 10.2(b).
(c) Parent and Company agree that the agreements contained in Section
10.2(b) above are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. If Company fails
to promptly pay any fee due under such Section 10.2(b), Company shall pay the
costs and expenses (including legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on the amount of any unpaid fee at the
publicly announced reference rate of Bank of America N.T. & S.A. from the date
such fee was required to be paid.
Section 10.3 Amendment. Subject to applicable provisions of the GCL,
this Agreement may be amended by the parties pursuant to a writing adopted by
action taken by all of the parties at any time before the Effective Time.
Section 10.4 Waiver. At any time before the Effective Time, any party
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties, (ii) waive, in whole or in part, any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
to any such extension or waiver shall be valid only as against such party and
only if set forth in an instrument in writing signed by such party. At any time
after the appointment of persons designated by Parent as directors of Company
pursuant to Section 3.4 hereof, a majority of the directors of Company who are
not Parent Insiders may grant such extensions or waivers.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Survival of Representations, Warranties and Agreements. No
representations, warranties or agreements contained herein shall survive beyond
the Effective Time, except that the representations, warranties or agreements
contained in Sections 4.1, 4.2, 4.3, 4.4, 8.5, 8.7, and 8.10 hereof shall
survive beyond the Effective Time. Such representations, warranties and
agreements shall be deemed to have been
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made to, and may be enforced by, (i) the Holders in the case of Sections 4.1,
4.2, and 4.3, (ii) holders of Options in the case of Section 8.5, (iii) the
persons referred to in Sections 8.7 and Schedule 8.10 in the case of Sections
8.7 and 8.10, respectively, in each case after the appointment of persons
designated by Parent as directors of Company pursuant to Section 3.4 hereof or
the Effective Time, whichever is earlier. Prior to such time, such persons shall
not be deemed to be third party beneficiaries of this Agreement.
Section 11.2 Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed duly given or
made as follows: (i) if delivered personally, upon receipt; (ii) if sent by
registered or certified mail (postage prepaid, return receipt requested), upon
receipt; (iii) if sent by reputable overnight air courier (such as Federal
Express or DHL), two business days after mailing; or (iv) if sent by facsimile
transmission, with a copy mailed as provided in clauses (ii) or (iii) above,
when transmitted and receipt is confirmed by telephone. Such notices, claims,
demands and other communications shall be sent to the respective parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Company, to:
Transitional Hospitals Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
Transitional Hospitals Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
and:
Christensen, Miller, Fink, Jacobs,
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
2121 Avenue of the Stars, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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(b) if to Parent or Sub, to:
Vencor, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Sr. Vice President Planning
and Development
with copies to:
Vencor, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
and
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Section 11.3 Descriptive Headings; Dating. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. References herein to "The Date
of this Agreement", "as of the date hereof", "prior to the date hereof" or
similar expressions shall for all purposes shall be deemed to refer to as of
June 12, 1997.
Section 11.4 Entire Agreement, Assignment. This Agreement (including
the Exhibits, Annexes, Schedules, Disclosure Schedules and other documents and
instruments referred to herein) and the Confidentiality Letter (i) constitutes
the entire agreement and supersedes all other prior agreements and
understandings, both written and oral among the parties or any of them, with
respect to the subject matter hereof; (ii) except as set forth in Section 11.1
hereof, is not intended to confer upon any other person any rights or remedies
hereunder; and (iii) shall not be assigned by operation of law or otherwise.
Section 11.5 Severability. If any provision of this Agreement or the
application of any such provision shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof. In lieu of any such invalid, illegal or unenforceable
-37-
provision, the parties hereto intend that there shall be added as part of this
Agreement a provision as similar in terms to such invalid, illegal or
unenforceable provision as may be possible and be valid, legal and enforceable.
Section 11.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada without giving
effect to the provisions thereof relating to conflicts of law. Each party
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Nevada located in ▇▇▇▇▇ County, Nevada, and the
courts of the United States of America located in ▇▇▇▇▇ County, Nevada (the
"Nevada Courts"), for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any litigation relating thereto except in the Nevada Courts), waives any
objection to the laying of venue of any such litigation in the Nevada Courts and
agrees not to plead or claim in any Nevada Court that such litigation brought
therein has been brought in an inconvenient forum. In any action between Parent,
Company or the Surviving Corporation and any of the individuals referred to in
clauses (i), (ii) and (iii) of the second sentence of Section 11.1, the
prevailing party in any such action brought pursuant to Section 11.1 thereof
shall be entitled to recover its reasonable fees and disbursements of counsel.
Section 11.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
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IN WITNESS WHEREOF each of the parties hereto has caused this Agreement
to be executed on behalf of its officers thereunto duly authorized, all as of
the date first above written.
Attest: VENCOR, INC.
/s/ ▇▇▇▇ ▇. Force By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇ ▇. Force Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Secretary Title: Sr. VP Planning and Development
Attest: LV ACQUISITION CORP.
/s/ ▇▇▇▇ ▇. Force By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇ ▇. Force Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Secretary Title: Sr. VP Planning and Development
Attest: TRANSITIONAL HOSPITALS CORPORATION
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Secretary Title: Chairman of the Board, Chief Executive
Officer and President
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ANNEX A
Notwithstanding any other provision of the Amended Offer, until receipt
of all approvals under health care licensing, certificate of need, change of
ownership laws and regulations and similar matters which are material to Parent
or Company or to the consummation of the transactions contemplated hereby,
neither Parent nor Sub, shall be required to accept for payment or, subject to
any applicable rules and regulations of the SEC, including Rules 14e-l(c)
promulgated under the Exchange Act (relating to Parent's obligation to pay for
or return tendered shares promptly after termination or withdrawal of the
Amended Offer), neither Parent nor Sub shall be required to pay for, or may
delay the acceptance for payment of or payment for, any tendered shares, or may
(subject to the Merger Agreement) terminate or amend the Amended Offer as to any
Shares not then accepted for payment if at least two-thirds of the total Shares
outstanding on a fully diluted basis at such time shall not have been properly
and validly tendered pursuant to the Amended Offer and not withdrawn prior to
the expiration of the Amended Offer (the "Minimum Condition"), or, if on or
after June 12, 1997 and at or before the Expiration Date of the Amended Offer
any of the following events shall occur (subject to any required extension of
the Amended Offer as provided in the Merger Agreement):
(a) Company shall have breached or failed to perform in any material
respect any of its obligations, covenants or agreements under the Merger
Agreement which failure is incapable of being cured or has not been cured within
ten days after the giving of notice to Company (provided, that if such notice is
given within ten days of the expiration date, the expiration date will be
extended so as to provide Company with a minimum of ten days from the date of
such written notice to cure such breach or failure) or any representation or
warranty of Company set forth in the Merger Agreement shall have been inaccurate
or incomplete in any material respect when made or thereafter shall become
inaccurate or incomplete in any material respect;
(b) any court or other Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and (i) prohibits consummation of the Amended Offer or (ii)
imposes material restrictions on Parent, Sub or Company in connection with
consummation of the Amended Offer or with respect to their business operations,
either prior to or subsequent to the consummation of the Offer (collectively, an
"Offer Order"); provided that, Parent shall have used best reasonable efforts to
cause any such Offer Order to be lifted.
(c) any person, entity or group shall have entered into a definitive
agreement with Company with respect to a tender offer or exchange offer for some
portion or all of the Shares or a merger, consolidation or other business
combination with or involving Company;
A-1
(d) the Board of Directors of Company (i) shall withdraw or modify (or
publicly announce an intention to withdraw or modify) in any adverse manner its
approval or recommendation of the Merger Agreement, the Amended Offer or the
Merger, (ii) shall approve or recommend any Acquisition Proposal, other than by
Parent, Sub or an affiliate thereof, or (iii) shall resolve to take any of the
actions specified in clause (i) or (ii) above; or
(e) the Merger Agreement shall have been terminated by Company or
Parent or Sub in accordance with its terms or Parent or Sub shall have reached
an agreement or understanding in writing with Company providing for termination
or amendment of the Amended Offer or delay in payment for the Shares;
which, in the reasonable judgment of Parent and Sub, in any such case, and
regardless of the circumstances (including any permitted action or inaction by
Parent or Sub, but excluding any action or inaction by Parent or Sub in breach
of the Merger Agreement) giving rise to any such conditions, makes it
inadvisable to proceed with the Amended Offer and/or with such acceptance for
payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and Sub and
may be asserted by Parent or Sub regardless of the circumstances (including any
permitted action or inaction by Parent or Sub but excluding any action or
inaction by Parent or Sub in breach of the Merger Agreement) giving rise to such
condition or may be waived by Parent or Sub, by and specific action to that
effect in whole or in part at any time and from time to time in its sole
discretion.
A-2