<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 1995
REGISTRATION NO. 33-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NATIONAL MEDICAL ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 8062 95-2557091
(State or other (Primary standard (I.R.S. Employer
jurisdiction of industrial Identification No.)
incorporation or classification code
organization) number)
2700 COLORADO AVENUE
SANTA MONICA, CALIFORNIA 90404
(310) 998-8000
(Address, including zip code, and telephone number,
including area code, of Registrant's Principal Executive Offices)
SCOTT M. BROWN, ESQ.
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
NATIONAL MEDICAL ENTERPRISES, INC.
2700 COLORADO AVENUE
SANTA MONICA, CALIFORNIA 90404
(310) 998-8000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES OF ALL COMMUNICATIONS TO:
THOMAS C. JANSON, JR. STEPHEN D. SILBERT, ESQ. CHARLES E. GERBER, ESQ.
SKADDEN, ARPS, CHRISTENSEN, WHITE, NEAL GERBER & EISENBERG
SLATE, MEAGHER & FLOM MILLER, TWO NORTH LA SALLE STREET
300 SOUTH GRAND AVENUE FINK & JACOBS CHICAGO, ILLINOIS 60602
LOS ANGELES, CALIFORNIA 2121 AVENUE OF THE STARS (312) 269-8000
90071 LOS ANGELES, CALIFORNIA
(213) 687-5000 90067
(310) 553-3000
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions under the Merger Agreement (described in the Information
Statement/Prospectus herein) are satisfied or waived.
------------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE (3)
<S> <C> <C> <C> <C>
Common Stock, par value $0.075 per share........... 13,342,156 $24.44 $776,386,384.28 $59,590.88
<FN>
(1) The number of shares of common stock, par value $0.075 per share (the "NME
Common Stock"), of National Medical Enterprises, Inc. (the "Registrant")
to be registered has been determined based on (a) the sum of (i)
29,999,383 shares of common stock, par value $.01 per share (the "AMH
Common Stock"), of American Medical Holdings. Inc. ("AMH") outstanding and
not held by the Registrant or its subsidiaries or any of the parties to
the Stockholder Agreements (as defined in the Information
Statement/Prospectus), (ii) 186,054 shares of AMH Common Stock issuable to
holders of AMI 9 1/2% Convertible Debentures (as defined in the
Information Statement/Prospectus), (iii) 361,400 shares of AMH Common
Stock issuable to holders of AMI 8 1/4% Convertible Debentures (as defined
in the Information Statement/Prospectus) and (iv) 1,220,200 shares
issuable to certain holders of AMH stock options and (b) an exchange ratio
of 0.42 shares of NME Common Stock for each share of AMH Common Stock, as
provided in the Merger Agreement.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(1) of the Securities Act of 1933, as amended (the
"Securities Act"). Pursuant to Rule 457, with respect to the shares of NME
Common Stock being exchanged pursuant to the Merger Agreement, the maximum
offering price per share is $24.44, the average of the high and low sales
price of a share of AMH Common Stock reported on the New York Stock
Exchange on January 25, 1995, and the maximum aggregate offering price is
the product of $24.44 and 31,767,037, the maximum number of shares of AMH
Common Stock to be acquired by the Registrant or cancelled pursuant to the
Merger Agreement.
(3) The registration fee for the securities registered hereby has been
calculated pursuant to Section 6(b) of the Securities Act and Rule 457(f)
promulgated thereunder as follows: the sum of one twenty-ninth of one
percent of the product of $24.44 (the average of the high and low sales
price of a share of AMH Common Stock on the New York Stock Exchange on
January 25, 1995) and 31,767,037, the total number of shares of AMH Common
Stock to be acquired by the Registrant or cancelled pursuant to the Merger
Agreement (other than shares of NME Common Stock held by persons who have
previously consented to the Merger ("Consenting Holders")) less
$603,573,703, the amount of cash to be paid by the Registrant (other than
the Consenting Holders), in accordance with Rule 457(f)(3). A fee of
$131,660.54 was paid on November 17, 1994 pursuant to Section 6(b) of the
Securities Act, and Rules 457(f)(1) and (3) promulgated thereunder, in
respect of the transaction contemplated by the Merger Agreement upon
filing by AMH of a preliminary information statement relating thereto.
Pursuant to Rule 457(b) promulgated under the Securities Act and Section
14(g)(2) of the Exchange Act and Rule 0-11 promulgated thereunder, the
amount of such previously paid fee has been credited against the
registration fee payable in connection with this filing.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
Cross Reference Sheet pursuant to Rule 404(a) of the Securities Act of 1933,
as amended, and Item 501(b) of Regulation S-K showing the location in the
Information Statement/Prospectus of the information required by Part I of Form
S-4
<TABLE>
<CAPTION>
LOCATION OR
CAPTION IN INFORMATION
ITEM OF FORM S-4 STATEMENT/PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement
and Outside Front Cover Page
of Prospectus................................... Facing Page of the Registration Statement; Outside
Front Cover of Information Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Available Information; Incorporation of Documents
by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... Available Information; Incorporation of Documents
by Reference; Summary; Risk Factors; The Merger --
Regulatory Approval; Pro Forma Financial
Information
4. Terms of the Transaction........................ The Merger -- Background of the Merger, -- Approval
of NME Board of Directors; Reasons for the Merger,
-- Approval of AMH Board of Directors; Reasons for
the Merger, -- Opinion of Salomon Brothers Inc, --
Stockholder Consent, -- Terms of the Merger, --
Certain Federal Income Tax Consequences of the
Merger, -- Accounting Treatment of the Merger, --
Appraisal Rights in the Merger, -- Comparative
Rights of Stockholders
5. Pro Forma Financial Information................. Pro Forma Financial Information
6. Material Contracts with the Company Being
Acquired........................................ The Merger -- Background of the Merger
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters.................................... Not Applicable
8. Interests of Named Experts
and Counsel..................................... Not Applicable
9. Disclosure of Commission Position
on Indemnification for Securities Act
Liabilities..................................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OR
CAPTION IN INFORMATION
ITEM OF FORM S-4 STATEMENT/PROSPECTUS
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B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to
S-3 Registrants................................. Available Information; Incorporation of Documents
by Reference; Summary; Selected Information
Concerning NME and AMH
11. Incorporation of Certain Information by
Reference....................................... Available Information; Incorporation of Documents
by Reference
12. Information with Respect to S-2 or
S-3 Registrants................................. Not Applicable
13. Incorporation of Certain Information by
Reference....................................... Not Applicable
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants..................... Not Applicable
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
15. Information with Respect to
S-3 Companies................................... Available Information; Incorporation of Documents
by Reference; Summary
16. Information with Respect to S-2 or
S-3 Companies................................... Not Applicable
17. Information with Respect to Companies Other Than
S-2 or S-3 Companies............................ Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited.............. Not Applicable
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited, or in an
Exchange Offer.................................. Cover Page; Incorporation of Documents by
Reference; The Merger -- Appraisal Rights in the
Merger, -- Interests of Certain Persons in the
Merger
</TABLE>
<PAGE>
<TABLE>
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AMERICAN MEDICAL HOLDINGS, INC. NATIONAL MEDICAL ENTERPRISES, INC.
14001 Dallas Parkway 2700 Colorado Avenue
Dallas, Texas 75240 Santa Monica, California 90404
</TABLE>
--------------------------------------------------
INFORMATION STATEMENT/PROSPECTUS
--------------------------------------------------
This Information Statement/Prospectus constitutes the Information Statement
of American Medical Holdings, Inc., a Delaware corporation ("AMH"), to be used
in connection with the dissemination of information to its stockholders with
respect to the proposed merger (the "Merger") of AMH Acquisition Co., a Delaware
corporation ("Merger Sub") that is a newly formed, wholly owned subsidiary of
National Medical Enterprises, Inc., a Nevada corporation ("NME"), with and into
AMH. Pursuant to Section 251 of the Delaware General Corporation Law, the
affirmative vote of at least a majority of the outstanding shares of common
stock, par value $0.01 per share, of AMH (the "AMH Common Stock") is required to
approve and adopt the Merger and the Merger Agreement (as defined below). As of
the date of this Information Statement/Prospectus, holders of approximately
61.4% of the outstanding shares of AMH Common Stock have voted in favor of the
approval and adoption of the Merger and the Merger Agreement. Accordingly, no
further stockholder action is required by stockholders of AMH. AMH IS NOT ASKING
YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND AMH A PROXY. See "The Merger
- -- Background of the Merger" and "-- Terms of the Merger -- Stockholder
Approval; Stockholder Agreements."
As a result of the Merger, AMH will become a wholly owned subsidiary of NME.
The Merger will be effected pursuant to the Agreement and Plan of Merger, dated
as of October 10, 1994 (the "Merger Agreement"), by and among NME, Merger Sub
and AMH, a copy of which is attached hereto as Annex A. See "The Merger." At the
effective time of the Merger, each outstanding share of AMH Common Stock (other
than shares held by AMH stockholders who have elected appraisal rights and
shares held by NME and its subsidiaries) will be converted into the right to
receive (i) 0.42 of a share of NME common stock, par value $0.075 per share (the
"NME Common Stock") and (ii) $19.00 in cash ($19.25 if the Merger is consummated
after March 31, 1995) (collectively, the "Merger Consideration"). Under certain
limited circumstances, AMH stockholders will, at the option of AMH, be entitled
to receive $6.88 in cash in lieu of the fraction of a share of NME Common Stock
constituting part of the Merger Consideration. See "The Merger -- Terms of the
Merger."
AMH intends to declare a special dividend of $.10 per share of AMH Common
Stock payable on February 28, 1995 to stockholders of record on February 10,
1995. See "The Merger -- Terms of the Merger -- Special Dividend."
This Information Statement/Prospectus also constitutes the Prospectus of NME
with respect to the shares of NME Common Stock to be issued in connection with
the Merger, other than the shares to be received by the AMH stockholders that
previously have voted in favor of the approval and adoption of the Merger and
the Merger Agreement. NME has filed a Registration Statement on Form S-4 under
the Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission (the "Commission") covering the shares of NME
Common Stock to be issued in connection with the Merger and to which this
Information Statement/Prospectus relates.
This Information Statement/Prospectus is first being mailed to AMH
stockholders on or about January 31, 1995.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS INFORMATION
STATEMENT/PROSPECTUS AND, IF SO GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER NME
OR AMH. THIS INFORMATION STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
INFORMATION STATEMENT/PROSPECTUS NOR THE SALE OF ANY SECURITIES HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF NME OR AMH SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE IS CORRECT
AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN MATTERS WHICH SHOULD BE
CONSIDERED BY THE STOCKHOLDERS OF AMH WITH RESPECT TO THE MERGER.
--------------------------
THE SHARES OF NME COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS INFORMATION STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
AMH IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND AMH A PROXY.
THE DATE OF THIS INFORMATION STATEMENT/PROSPECTUS IS JANUARY 30, 1995.
<PAGE>
AVAILABLE INFORMATION
NME has filed a Registration Statement on Form S-4 (the "Registration
Statement") with the Commission under the Securities Act. This Information
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which are omitted in accordance with
the rules and regulations of the Commission. For further information pertaining
to NME and the shares of NME Common Stock offered hereby, reference is made to
the Registration Statement and the exhibits thereto, which may be inspected
without charge at the office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of which may be obtained from the Commission
at prescribed rates.
In addition, each of NME and AMH is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, file reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at its regional offices located at 7 World Trade Center, Suite 1300, New York,
New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and copies of such materials can be obtained from the public reference section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, material filed by NME and AMH can be inspected at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005, and material filed by NME can also be inspected at the offices of
the Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104.
INCORPORATION OF DOCUMENTS BY REFERENCE
THIS INFORMATION STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN
DOCUMENTS RELATING TO NME AND AMH WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. THESE DOCUMENTS (OTHER THAN THE EXHIBITS TO SUCH DOCUMENTS, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS)
ARE AVAILABLE WITHOUT CHARGE, ON REQUEST BY ANY PERSON TO WHOM THIS INFORMATION
STATEMENT/PROSPECTUS IS DELIVERED, FROM NME, 2700 COLORADO AVENUE, SANTA MONICA,
CALIFORNIA 90404, ATTENTION: SCOTT M. BROWN, ESQ., SENIOR VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL, TELEPHONE NUMBER (310) 998-8000; OR AMH, 14001
DALLAS PARKWAY, DALLAS, TEXAS 75240, ATTENTION: THOMAS J. SABATINO, JR., ESQ.,
VICE PRESIDENT AND GENERAL COUNSEL, TELEPHONE NUMBER (214) 789-2200. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY FEBRUARY
22, 1995.
The following NME documents are incorporated by reference herein:
1. Annual Report on Form 10-K for the fiscal year ended May 31, 1994 (as
amended, the "NME 10-K");
2. Form 10-K/A filed with the Commission on January 18, 1995, which amends
the aforesaid Annual Report on Form 10-K;
3. Quarterly Reports on Form 10-Q for the quarterly periods ended August
31, 1994 and November 30, 1994;
4. The portions of NME's Proxy Statement for the Annual Meeting of
Shareholders held on September 28, 1994 (the "NME Proxy Statement") that have
been incorporated by reference into the NME 10-K;
5. The portions of NME's 1994 Annual Report to Shareholders for the fiscal
year ended May 31, 1994 (the "NME Annual Report") that have been incorporated by
reference into the NME 10-K;
6. The description of the NME Common Stock which is contained in NME's
Registration Statement on Form 8-A filed with the Commission on April 8, 1971,
pursuant to Section 12 of the Exchange Act, including any amendments or reports
filed for the purpose of updating such description; and
2
<PAGE>
7. The description of certain preferred stock purchase rights attached to
the NME Common Stock which is contained in NME's Registration Statement on Form
8-A filed with the Commission on December 9, 1988, pursuant to Section 12 of the
Exchange Act, including any amendments or reports filed for the purpose of
updating such description.
The following AMH documents are incorporated by reference herein:
1. Annual Report on Form 10-K for the fiscal year ended August 31, 1994 (as
amended, the "AMH 10-K");
2. Form 10-K/A filed with the Commission on December 19, 1994, which amends
the aforesaid Annual Report on Form 10-K;
3. Form 10-K/A filed with the Commission on January 4, 1995, which amends
the aforesaid Annual Report on Form 10-K; and
4. Quarterly Report on Form 10-Q for the quarterly period ended November
30, 1994.
All documents and reports subsequently filed by NME or AMH pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and
prior to the effective time of the Merger shall be deemed to be incorporated by
reference herein and shall be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Information
Statement/Prospectus, shall be deemed to be modified or superseded for purposes
of this Information Statement/Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is deemed to
be incorporated herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part of this
Information Statement/Prospectus, except as so modified or superseded.
3
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC.
AMERICAN MEDICAL HOLDINGS, INC.
INFORMATION STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information............................ 2
Incorporation of Documents by Reference.......... 2
Summary
General........................................ 5
The Companies.................................. 5
The Merger..................................... 6
Comparative Stock Prices and Dividends......... 10
Risk Factors................................... 10
Selected Historical Financial Information...... 11
National Medical Enterprises, Inc.
and Subsidiaries Selected Historical
Financial Data.............................. 11
American Medical Holdings, Inc.
and Subsidiaries Selected Historical
Financial Data.............................. 13
Summary Pro Forma Financial Information........ 15
Introduction..................................... 17
Risk Factors
Competition.................................... 18
Limits on Reimbursement........................ 18
Extensive Regulation........................... 18
Healthcare Reform Legislation.................. 19
Certain Legal Proceedings...................... 20
Income Tax Examinations........................ 20
Dependence on Key Personnel
and Physicians................................ 20
Professional Liability Insurance............... 21
Certain Financing Considerations; Leverage..... 21
Potential Conflicts of Interest................ 22
Factors Affecting Market Price of
NME Common Stock.............................. 22
Shares Eligible for Future Issuance
and Sale...................................... 22
Certain Anti-Takeover Provisions............... 23
The Merger
Background of the Merger....................... 23
Approval of NME Board of Directors;
Reasons for the Merger........................ 29
Approval of AMH Board of Directors;
Reasons for the Merger........................ 30
Opinion of Salomon Brothers Inc................ 31
Stockholder Consent............................ 35
Terms of the Merger............................ 36
Closing; Effective Time...................... 37
AMH Stock Options............................ 37
Directors and Officers of the Surviving
Corporation................................. 37
Directors and Principal Officers of NME...... 38
Exchange of Certificates..................... 38
Fractional Shares............................ 38
Representations and Warranties............... 39
Registration Rights.......................... 39
Special Dividend............................. 39
Conditions................................... 39
Business of AMH and NME Pending
the Merger.................................. 40
Certain Employee Benefits.................... 41
Termination.................................. 41
Acquisition Proposals........................ 42
Liquidated Damages........................... 42
Indemnification and Insurance................ 43
Amendment and Waiver......................... 43
Expenses..................................... 43
Stockholder Approval; Stockholder
Agreements.................................. 43
Certain Federal Income Tax Consequences........ 46
Accounting Treatment of the Merger............. 46
<CAPTION>
PAGE
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Interests of Certain Persons in the Merger..... 47
AMH Stockholders Agreement................... 47
Stock Option Plans........................... 47
NME Stock Option Grants...................... 48
Severance Pay................................ 48
1990 Supplemental Benefit Plan............... 48
Tax Gross-Up................................. 49
Medical Benefits Continuation................ 49
Incentive Compensation Plans................. 49
Directors' Retirement Plan................... 50
Loan to Mr. Casey............................ 50
Directors and Officers of NME and the
Surviving Corporation....................... 50
Casey Letter of Understanding................ 50
Financial Advisor Fees....................... 50
Indemnification and Insurance................ 51
Waiver of Vesting Provisions in NME Director
Stock Option Plan........................... 51
Appraisal Rights in the Merger................. 51
Regulatory Approval............................ 53
Litigation Relating to the Merger.............. 53
Comparative Stock Prices and Dividends......... 54
Comparative Rights of Stockholders............. 55
Directors.................................... 56
Removal of Directors; Filling Vacancies on
the
Board of Directors.......................... 56
Limitation on Directors' Liability........... 57
Indemnification.............................. 57
Restrictions on Business Combinations/
Corporate Control........................... 57
Stockholder Action by Written Consent;
Special Meetings............................ 57
Amendment or Repeal of the Certificate of
Incorporation and Bylaws.................... 58
Cumulative Voting............................ 58
Stockholder Vote for Merger.................. 58
Appraisal Rights in Mergers.................. 59
Dividends.................................... 59
Rights Plan.................................. 59
AMH Stockholders Agreement................... 59
Financing for the Merger and the Related
Transactions
Merger Financing............................... 60
Related Transactions........................... 60
The AMI Tender Offers........................ 60
The AMI Redemptions.......................... 61
The NME Tender Offers........................ 62
The Refinancing of the NME and AMI Credit
Facilities and Other Indebtedness........... 62
Sources and Uses of Funds...................... 62
The New Credit Facility........................ 64
The Public Offering............................ 64
The New Senior Notes......................... 64
The New Subordinated Notes................... 64
Pro Forma Financial Information.................. 65
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements............................ 70
Selected Information Concerning NME and AMH
National Medical Enterprises, Inc.............. 73
Certain Legal Proceedings.................... 74
American Medical Holdings, Inc................. 74
AMI Convertible Debentures................... 75
Additional Information......................... 75
Legal Matters.................................... 75
Experts.......................................... 75
</TABLE>
<TABLE>
<S> <C> <C>
Annex A -- Agreement and Plan of Merger, dated as of October 10, 1994, by and among National Medical
Enterprises, Inc., AMH Acquisition Co. and American Medical Holdings, Inc.
Annex B -- Delaware General Corporation Law -- Section 262 -- Appraisal Rights
Annex C -- Opinion of Salomon Brothers Inc
</TABLE>
4
<PAGE>
SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED, OR
INCORPORATED BY REFERENCE, ELSEWHERE IN THIS INFORMATION STATEMENT/PROSPECTUS.
THIS SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MORE DETAILED INFORMATION APPEARING, OR INCORPORATED BY
REFERENCE, ELSEWHERE HEREIN. STOCKHOLDERS OF AMERICAN MEDICAL HOLDINGS, INC. ARE
URGED TO REVIEW THE ENTIRE INFORMATION STATEMENT/PROSPECTUS, THE ANNEXES HERETO
AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
GENERAL
This Information Statement/Prospectus is being provided to stockholders of
American Medical Holdings, Inc., a Delaware corporation ("AMH"), in connection
with the proposed merger (the "Merger") of AMH Acquisition Co., a Delaware
corporation ("Merger Sub") that is a newly formed, wholly owned subsidiary of
National Medical Enterprises, Inc., a Nevada corporation ("NME"), with and into
AMH. The Merger will be effected pursuant to the Agreement and Plan of Merger,
dated as of October 10, 1994 (the "Merger Agreement"), by and among NME, Merger
Sub and AMH, a copy of which is attached hereto as Annex A. See "The Merger."
THE COMPANIES
NME. NME is a leading investor-owned healthcare company that operates
general hospitals and related healthcare facilities serving primarily urban and
regional areas in the United States and abroad and that holds investments in
other healthcare companies. At November 30, 1994, NME operated 33 domestic
general hospitals, with a total of 6,622 licensed beds, located in California,
Florida, Louisiana, Missouri, Tennessee and Texas. NME operates six
rehabilitation hospitals, seven long-term care facilities and four psychiatric
facilities located on the same campus as, or nearby, NME's general hospitals. In
addition, NME operates ancillary facilities, including outpatient surgery
centers, home healthcare programs and ambulatory, occupational and rural
healthcare clinics. Through its international hospital division, NME also
operated 13 general hospitals in Australia, Singapore, Spain and Malaysia with a
total of 1,693 licensed beds at November 30, 1994.
NME's investments in other healthcare companies include: (i) an
approximately 27% voting interest in The Hillhaven Corporation ("Hillhaven"), a
publicly traded company listed on the New York Stock Exchange (the "NYSE") that
operated 287 long-term care facilities, 57 pharmacies and 19 retirement housing
communities in the United States at November 30, 1994; (ii) an approximately 42%
interest in Westminster Health Care Holdings PLC ("Westminster"), a publicly
traded company listed on the London Stock Exchange that operated 65 long-term
care facilities in the United Kingdom at November 30, 1994; (iii) an
approximately 23% interest in Total Renal Care, Inc. ("TRC"), which operated 42
freestanding kidney dialysis units in nine states at November 30, 1994; and (iv)
an approximately 23% interest in Health Care Property Partners, a partnership
that leases 21 long-term care facilities to Hillhaven and two general hospitals
to NME. NME's principal executive offices are located at 2700 Colorado Avenue,
Santa Monica, California 90404, telephone number (310) 998-8000. See "Selected
Information Concerning NME and AMH -- National Medical Enterprises, Inc."
AMH. AMH is a leading investor-owned healthcare company that operates
general hospitals and related healthcare facilities serving primarily urban and
regional areas in 13 states. At November 30, 1994, AMH operated 37 general
hospitals with a total of 8,831 licensed beds and one psychiatric facility with
171 licensed beds. The AMH hospitals are located in Texas, Florida, California,
Louisiana, Missouri, Tennessee, Arkansas, North Carolina, South Carolina,
Georgia, Alabama, Indiana and Nebraska. AMH also operates ancillary facilities
located on the same campus as, or nearby, many of its hospitals, including
outpatient surgery centers, rehabilitation units, long-term care facilities,
home healthcare programs and ambulatory, occupational and rural healthcare
clinics. AMH's principal executive offices are located at 14001 Dallas Parkway,
Dallas, Texas 75240, telephone number (214) 789-2200. See "Selected Information
Concerning NME and AMH -- American Medical Holdings, Inc."
5
<PAGE>
THE MERGER
GENERAL. Pursuant to the Merger Agreement, Merger Sub will be merged with
and into AMH. As a result of the Merger, AMH will become a wholly owned
subsidiary of NME and each outstanding share of common stock, par value $0.01
per share, of AMH (the "AMH Common Stock"), other than shares held by AMH
stockholders who have elected appraisal rights and shares held by NME and its
subsidiaries, will be converted into the right to receive (i) 0.42 of a share of
common stock, par value $0.075 per share, of NME (the "NME Common Stock") and
(ii) $19.00 in cash ($19.25 if the Merger is consummated after March 31, 1995)
(collectively, the "Merger Consideration"). Under certain limited circumstances,
AMH stockholders will, at the option of AMH, be entitled to receive $6.88 in
cash per share in lieu of the fraction of a share of NME Common Stock
constituting part of the Merger Consideration. The terms of the Merger Agreement
are more fully described under "The Merger -- Terms of the Merger."
THE AMH SPECIAL DIVIDEND. AMH intends to declare a special dividend (the
"AMH Special Dividend") with respect to AMH Common Stock of $.10 per share
payable on February 28, 1995 to stockholders of record on February 10, 1995. See
"The Merger -- Terms of the Merger -- Special Dividend."
AMH STOCK OPTIONS. As of January 10, 1995, options to purchase 3,280,567
shares of AMH Common Stock (the "AMH Options") had been granted and remained
outstanding and unexercised. At the Effective Time (as hereinafter defined),
except as described below, each AMH Option that is outstanding and unexercised
(other than certain AMH Options held by members of AMH's management), whether
vested or unvested, will be cancelled in consideration for payments by AMH
promptly after the Effective Time to holders of AMH Options of cash in an amount
equal to (i) the product of (A) the sum of (x) $19.00 ($19.25 if the Merger is
consummated after March 31, 1995), plus (y) 0.42 times the average closing sales
price of a share of NME Common Stock on the NYSE over the ten consecutive
trading days immediately preceding the consummation of the Merger and (B) the
number of shares of AMH Common Stock subject to AMH Options, less (ii) the
exercise price of such AMH Options. The foregoing notwithstanding, selected
executive employees of AMH who hold approximately 1,220,200 AMH Options have
agreed with AMH to cancel their AMH Options in exchange, promptly after the
Effective Time, for an amount in cash and NME Common Stock equal to the Merger
Consideration less an amount equal to the exercise price per share that such
employees would have paid to AMH had they exercised their AMH Options prior to
the Effective Time. See "The Merger -- Terms of the Merger -- AMH Stock Options"
and "-- Interests of Certain Persons in the Merger."
EFFECTIVE TIME OF THE MERGER. The Merger will become effective at the time
and on the date that a certificate of merger is filed with the Delaware
Secretary of State or at such later time as is specified in the certificate of
merger (the "Effective Time"). It is presently contemplated that the Effective
Time will occur as soon as practicable after the conditions specified in the
Merger Agreement are satisfied or waived. See "The Merger -- Terms of the Merger
- -- Closing; Effective Time."
EXCHANGE OF AMH STOCK CERTIFICATES. Promptly after the Effective Time,
instructions with regard to the surrender of stock certificates, together with a
letter of transmittal to be used for this purpose, will be furnished by mail, or
made available for delivery at the principal office of the exchange agent
appointed therefor, to all AMH stockholders for use in exchanging their stock
certificates for the Merger Consideration they will be entitled to receive as a
result of the Merger. STOCKHOLDERS OF AMH SHOULD NOT SUBMIT THEIR STOCK
CERTIFICATES FOR EXCHANGE UNTIL SUCH INSTRUCTIONS AND LETTER OF TRANSMITTAL ARE
RECEIVED OR ARE AVAILABLE FOR DELIVERY. See "The Merger -- Terms of the Merger
- -- Exchange of Certificates."
APPROVAL BY AMH STOCKHOLDERS. AMH has received written consents executed by
the holders of record of approximately 61.4% of the outstanding shares of AMH
Common Stock approving and adopting the Merger and the Merger Agreement pursuant
to the terms of Stockholder Voting and Profit Sharing Agreements between such
stockholders and NME, dated as of October 10, 1994 (the
6
<PAGE>
"Stockholder Agreements"). The terms of the Stockholder Agreements were
negotiated between NME and representatives of the AMH stockholders which are
parties thereto. In addition, certain terms included in the Merger Agreement,
including (i) undertakings with regard to reimbursement by AMH to those
stockholders of any Alternate Transaction Payments (as hereinafter defined) to
NME in specified circumstances and (ii) a continuing covenant by NME to file and
maintain the effectiveness of a registration statement under the Securities Act
to permit resales by affiliates of AMH (including the AMH stockholders who are
parties to the Stockholder Agreements) of NME Common Stock received by them in
the Merger, were incorporated as a result of negotiations between the
stockholders' representatives and NME. The form of the Stockholder Agreements is
attached as Exhibit A to Annex A hereto. Accordingly, no further action by other
stockholders of AMH is required to approve the Merger. In accordance with the
rules and regulations of the Commission under the Exchange Act, the Merger may
not be consummated prior to March 1, 1995, the 20th business day following the
date this Information Statement/Prospectus is given or sent to the stockholders
of AMH. See "The Merger -- Terms of the Merger -- Stockholder Approval;
Stockholder Agreements" and "-- Interests of Certain Persons in the Merger."
CONDITIONS TO THE MERGER. The obligations of the parties to consummate the
Merger are subject to the satisfaction of certain conditions, including, among
other things, the expiration or termination of any waiting period applicable to
the consummation of the Merger under the HSR Act (as defined below). The HSR Act
waiting period has expired with respect to the Merger. See "The Merger -- Terms
of the Merger -- Conditions."
ANTITRUST MATTERS. The Merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), which provides that
certain acquisition transactions (including the Merger) may not be consummated
until certain information has been furnished to the Antitrust Division of the
Department of Justice and the Federal Trade Commission and unless certain
waiting period requirements are met. On October 28, 1994, the Notification and
Report Forms for the Merger required pursuant to the HSR Act were filed by both
NME and AMH. The HSR Act waiting period has expired with respect to the Merger.
See "The Merger -- Regulatory Approval."
MANAGEMENT OF NME AFTER THE MERGER. NME will take such action as may be
necessary to increase the size of the Board of Directors of NME from ten members
to 13 members, and it is currently anticipated that Robert W. O'Leary, Chairman
of the Board and Chief Executive Officer of AMH and American Medical
International, Inc., a Delaware corporation ("AMI") that is a wholly owned
subsidiary of AMH, and John T. Casey, President and Chief Operating Officer of
AMH and AMI, each of whom is currently a director of AMH, and Thomas J.
Pritzker, a director of the general partner of a limited partnership which is a
general partner of GKH (as hereinafter defined), will be nominated and appointed
as of the date following the Effective Time to fill the vacancies created by
such increase in the size of the Board of Directors of NME. See "The Merger --
Terms of the Merger -- Directors and Principal Officers of NME" and "--
Interests of Certain Persons in the Merger." It also is anticipated that after
consummation of the Merger, Jeffrey C. Barbakow will continue to serve as
Chairman of the Board and Chief Executive Officer of NME and Messrs. O'Leary and
Casey will serve as Co-Vice Chairmen of the Board of Directors of NME. Michael
H. Focht, Sr. will continue to serve as a director and as President and Chief
Operating Officer of NME. See "The Merger -- Terms of the Merger -- Directors
and Principal Officers of NME."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. In reviewing the actions taken
by the Board of Directors and certain stockholders of AMH with respect to the
Merger Agreement and the transactions contemplated thereby, AMH stockholders
should be aware that certain members of the management and the Board of
Directors of AMH, as well as certain stockholders of AMH, have certain interests
in the Merger that are in addition to the interests of stockholders of AMH
generally (including acceleration of stock options, certain tax gross-up
payments relating to "excess parachute payments," vesting under certain AMH
benefit plans, certain severance agreements and medical and retirement benefit
programs for the benefit of certain members of the management and directors of
7
<PAGE>
AMH and the payment of financial advisory fees to certain of the parties to the
Stockholder Agreements or their affiliates). The AMH stockholders that have
executed the Stockholder Agreements and which in the aggregate own approximately
61.4% of the outstanding AMH Common Stock, namely: GKH Investments, L.P. (the
"Fund"); GKH Private Limited ("GKHPL"), a corporation the assets of which are
managed by GKH Partners, L.P. ("GKH"), the general partner of the Fund; Mellon
Bank, N.A., as trustee of First Plaza Group Trust ("First Plaza"); MB L.P. I
("MBLP") and 1987 Merchant Investment Partnership ("1987 MIP"); also are parties
with certain other stockholders of AMH to an Amended and Restated Stockholders
Agreement dated as of July 30, 1991 (the "AMH Stockholders Agreement"). Under
the terms of the AMH Stockholders Agreement, the Fund, GKHPL, First Plaza, MBLP
and 1987 MIP (MBLP and 1987 MIP are affiliates of CS First Boston Corporation
("CS First Boston"), financial advisor to AMH in connection with the Merger),
together with the other parties thereto, have the right to designate, and have
designated, a majority of the nominees who have been elected to AMH's Board of
Directors and, accordingly, effectively control the selection of executive
officers and other key employees and the establishment of AMH's operating
policies. AMH has also retained and agreed to pay financial advisory fees in
connection with services performed by CS First Boston and GKH in conjunction
with the Merger Agreement in the aggregate amount of $10,000,000, plus
reimbursement of up to $100,000 of expenses, pursuant to the recommendation of
an independent committee of the Board of Directors of AMH and upon approval of
retention of such persons to act as financial advisors by the Board of Directors
of AMH (with the interested directors abstaining with respect thereto). See "The
Merger -- Interests of Certain Persons in the Merger."
STOCKHOLDER AGREEMENTS. In connection with, and as a condition and
inducement to, NME's execution of the Merger Agreement, certain stockholders of
AMH agreed to enter into the Stockholder Agreements with NME. Pursuant to such
agreements, which were delivered subsequent to the execution of the Merger
Agreement, such stockholders have (i) voted all of the shares of AMH Common
Stock owned by them to approve and adopt the Merger and the Merger Agreement,
(ii) granted certain irrevocable proxies to NME with respect to the voting of
such shares in specified circumstances for a limited term and (iii) agreed to
pay to NME any amounts received by them from the sale of any shares of AMH
Common Stock under certain circumstances to the extent the sale price exceeds
certain amounts, which payments are subject to reimbursement to such
stockholders of up to $75 million by AMH. See "The Merger -- Terms of the Merger
- -- Stockholder Approval; Stockholder Agreements."
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time under certain circumstances,
which include, among others, by: (a) the mutual written consent of AMH and NME;
(b) action of the Board of Directors of either AMH or NME (i) if the Merger
shall not have been consummated by May 31, 1995 or (ii) if any court of
competent jurisdiction or Federal or state agency shall have issued an order,
decree or ruling enjoining or prohibiting the Merger that has become final and
nonappealable; (c) action of the Board of Directors of AMH, if (i) in the
exercise of its good faith judgment as to its fiduciary duties to its
stockholders, the Board of Directors of AMH determines that such termination is
required by reason of an Acquisition Proposal (as defined in the Merger
Agreement) having been made to AMH, (ii) there has been a breach by NME or
Merger Sub of any representation or warranty contained in the Merger Agreement
which would have or would be likely to have a material adverse effect on NME,
(iii) there has been a material breach by NME of any covenant or agreement
contained in the Merger Agreement which is not curable or, if curable, is not
cured within 30 days after written notice of such breach, or (iv) on or prior to
the earlier of May 31, 1995 or the Effective Time, NME has been unable to secure
the requisite financing to consummate the Merger; or (d) action of the Board of
Directors of NME, if (i) there has been a breach by AMH of any representation or
warranty contained in the Merger Agreement which would have or would be
reasonably likely to have a material adverse effect on AMH or (ii) there has
been a material breach by AMH of any covenant or agreement contained in the
Merger Agreement which is not curable or, if curable, is not cured within 30
days after written notice of such
8
<PAGE>
breach. The termination of the Merger Agreement under certain circumstances
obligates either NME or AMH, as required by the Merger Agreement, to pay to the
other party certain liquidated damage payments. See "The Merger -- Terms of the
Merger -- Termination" and "-- Liquidated Damages."
LIQUIDATED DAMAGES. If the Merger Agreement is terminated prior to the
Effective Time by the Board of Directors of AMH in the exercise of its good
faith judgment as to its fiduciary duties to its stockholders after receiving an
Acquisition Proposal, as set forth above, NME shall be entitled to receive
liquidated damages in an amount equal to $75 million. If the Merger Agreement is
terminated pursuant to certain other provisions in the Merger Agreement, the
terminating party shall be entitled to receive liquidated damages in an amount
equal to $150 million. If the liquidated damage payment is made, in the absence
of fraud or a willful breach of the Merger Agreement, the party making such
payment shall have no further obligation with respect to the payment of damages
under the Merger Agreement. See "The Merger -- Terms of the Merger --
Stockholder Approval; Stockholder Agreements" and "-- Liquidated Damages."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. The receipt by an
AMH stockholder of cash and NME Common Stock in exchange for AMH Common Stock in
the Merger (or the receipt of cash upon the exercise of appraisal rights or in
certain specified circumstances) will be a taxable transaction for Federal
income tax purposes and may be taxable under state, local or foreign tax laws as
well. Stockholders of AMH will recognize gain or loss equal to the difference
between the tax basis for the AMH Common Stock surrendered in the Merger and the
sum of the (i) cash and (ii) fair market value of the NME Common Stock received
in the Merger. Such gain or loss will be capital gain or loss if the AMH Common
Stock exchanged in the Merger has been held as a capital asset by the exchanging
AMH stockholder and will be long-term if the AMH Common Stock has been held for
more than one year. See "The Merger -- Certain Federal Income Tax Consequences."
RESALE RESTRICTIONS. All shares of NME Common Stock received by AMH
stockholders in the Merger will be freely transferable, except that the
20,001,739 shares of NME Common Stock received by persons that are parties to
the Stockholder Agreements and/or may be deemed to be "affiliates" (as defined
under the Securities Act) of AMH at the Effective Time may be resold by them
only in certain permitted circumstances; provided, however, pursuant to the
Merger Agreement, NME has agreed to file and have declared effective under the
Securities Act, no later than the Effective Time, a registration statement to
permit resales of shares of NME Common Stock received by such "affiliates" as
part of the Merger Consideration. Effectiveness of such registration statement
is a condition to AMH's obligation to consummate the Merger. See "The Merger --
Terms of the Merger -- Registration Rights."
STOCK EXCHANGE LISTING. The NME Common Stock is listed on the NYSE and the
Pacific Stock Exchange. NME has agreed to use its reasonable best efforts to
obtain, prior to the Effective Time, approval for the listing on the NYSE and
PSE of the shares of NME Common Stock to be issued in connection with the
Merger. The listing of the NME Common Stock on the NYSE is a condition to AMH's
obligation to consummate the Merger. See "The Merger -- Terms of the Merger --
Conditions."
APPRAISAL RIGHTS. Holders of AMH Common Stock, subject to certain
conditions, have the right to demand appraisal of, and to obtain payment for,
the "fair value" of their shares by following the procedures prescribed in
Section 262 of the Delaware General Corporation Law, a copy of which is attached
hereto as Annex B. Holders of AMH Common Stock that elect to demand appraisal
should read carefully the information on the required steps set forth under "The
Merger -- Appraisal Rights in the Merger." FAILURE TO TAKE ANY OF THE STEPS
REQUIRED UNDER SECTION 262 ON A TIMELY BASIS MAY RESULT IN THE LOSS OF APPRAISAL
RIGHTS. See "The Merger -- Appraisal Rights in the Merger" and Annex B.
ACCOUNTING TREATMENT. The Merger will be accounted for as a purchase
transaction. See "The Merger -- Accounting Treatment of the Merger."
COMPARATIVE RIGHTS OF STOCKHOLDERS OF AMH AND NME. The rights of holders of
AMH Common Stock are currently governed by Delaware law and the Restated
Certificate of Incorporation and
9
<PAGE>
Amended Bylaws of AMH. Upon consummation of the Merger, holders of AMH Common
Stock will become holders of NME Common Stock, and their rights as holders of
NME Common Stock will be governed by Nevada law and the Restated Articles of
Incorporation, as amended (the "NME Articles of Incorporation"), and the
Restated Bylaws, as amended (the "NME Bylaws"), of NME. There are various
differences between the rights of AMH stockholders and the rights of NME
shareholders, including, among others, certain provisions of the NME Articles of
Incorporation, that may have the effect of deterring or making it more difficult
for a third party to acquire control of NME. See "The Merger -- Comparative
Rights of Stockholders."
APPROVALS OF THE BOARDS OF DIRECTORS. The Board of Directors of NME has
unanimously approved (with one director absent) the Merger Agreement. The Board
of Directors of AMH has unanimously approved the Merger Agreement. For a
discussion of the factors considered by the respective Boards of Directors in
reaching their decisions, see "The Merger -- Approval of NME Board of Directors;
Reasons for the Merger" and "-- Approval of AMH Board of Directors; Reasons for
the Merger."
OPINION OF FINANCIAL ADVISOR. On October 10, 1994, Salomon Brothers Inc
("Salomon") delivered its opinion to the Board of Directors of AMH to the effect
that, as of the date of such opinion, the Merger Consideration was fair, from a
financial point of view, to the holders of AMH Common Stock (other than NME or
any of its affiliates). See "The Merger -- Opinion of Salomon Brothers Inc".
Copies of the full text of the written opinion of Salomon which sets forth
the assumptions made, procedures followed, matters considered and limits of its
review is attached to this Information Statement/Prospectus as Annex C and
should be read in its entirety. See "The Merger -- Opinion of Salomon Brothers
Inc".
EFFECT OF THE MERGER ON CERTAIN AMI INDEBTEDNESS. At the Effective Time,
the holders of approximately $550 million principal amount of outstanding debt
securities of AMI may have the right to require AMI to repurchase such debt
securities at 101% of the principal amount thereof, plus accrued interest
through the repurchase date. NME currently intends to (i) cause AMI to
repurchase any such debt securities properly tendered for repurchase and (ii)
transfer to AMI, from borrowings under the New Credit Facility (as hereinafter
defined), the amount of funds necessary to consummate such repurchases. See
"Risk Factors -- Certain Financing Considerations; Leverage" and "Financing for
the Merger and the Related Transactions -- The New Credit Facility."
Consummation of the Merger would also constitute an event of default in respect
of AMI's credit facility. Accordingly, NME anticipates that indebtedness under
such AMI credit facility will be repaid or otherwise refinanced. AMH has the
right to terminate the Merger Agreement and receive liquidated damages if NME
has not obtained sufficient financing for the Merger by the earlier of May 31,
1995 or the Effective Time. See "The Merger -- Terms of the Merger --
Termination" and "-- Liquidated Damages." In addition, as of January 10, 1995,
there was outstanding approximately $19.0 million principal amount of AMI
convertible debentures which are convertible into shares of AMH Common Stock. At
and after the Effective Time, such convertible debentures will become
convertible into the Merger Consideration payable with respect to the number of
shares of AMH Common Stock into which such convertible debentures were
convertible immediately prior to the Effective Time. See "Selected Information
Concerning NME and AMH -- American Medical Holdings, Inc. -- AMI Convertible
Debentures."
COMPARATIVE STOCK PRICES AND DIVIDENDS
For information with respect to market prices of and dividends on the NME
Common Stock and the AMH Common Stock, see "The Merger -- Comparative Stock
Prices and Dividends."
RISK FACTORS
The information set forth under "Risk Factors" should be reviewed and
carefully considered in evaluating the Merger and the ownership of the NME
Common Stock to be issued in the Merger.
10
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth selected historical financial data and other
operating information for NME for each of the fiscal years in the five-year
period ended May 31, 1994 and for the six months ended November 30, 1993 and
1994. The selected financial information for each of the five annual periods has
been derived from the Consolidated Financial Statements of NME, which have been
audited by KPMG Peat Marwick LLP, independent auditors for NME, and from the
underlying accounting records of NME. The report of KPMG Peat Marwick LLP
covering the May 31, 1994 Consolidated Financial Statements of NME refers to a
change in the method of accounting for income taxes. The selected financial
information for the six-month periods has been derived from unaudited condensed
consolidated financial statements of NME and reflects all adjustments
(consisting of normal recurring adjustments) that, in the opinion of the
management of NME, are necessary for a fair presentation of such information.
Operating results for the six months ended November 30, 1994 are not necessarily
indicative of the results that may be expected for fiscal 1995.
All information contained in the following tables should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Pro Forma Financial Information" and with the
Consolidated Financial Statements and related notes of NME included or
incorporated by reference herein. Certain amounts derived from the consolidated
statements of operations have been reclassified to conform with the presentation
below.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED MAY 31, ENDED NOVEMBER 30,
------------------------------------------------ ---------------------
1990 (2) 1991 1992 1993 (3) 1994 (4) 1993 (4) 1994 (4)
-------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1):
Net operating revenues.................. $2,914.0 $2,604.6 $2,934.3 $3,178.2 $2,943.2 $ 1,530.3 $ 1,301.6
Operating expenses:
Salaries and benefits................. 1,373.0 1,157.7 1,328.1 1,464.8 1,293.4 698.1 556.2
Supplies.............................. 211.6 252.8 318.9 349.2 339.4 167.9 159.1
Provision for doubtful accounts....... 114.7 133.7 123.1 114.6 107.0 58.5 46.8
Other operating expenses.............. 785.1 596.2 616.5 689.1 666.5 342.5 294.7
Depreciation.......................... 113.6 108.9 122.4 141.8 142.7 75.0 67.4
Amortization.......................... 16.5 16.2 18.4 18.6 18.1 9.5 7.7
Restructuring charges (5)............. -- -- 17.9 51.6 77.0 -- --
-------- -------- -------- -------- -------- --------- ---------
Operating income........................ 299.5 339.1 389.0 348.5 299.1 178.8 169.7
Interest, net of capitalized portion.... (130.9) (123.9) (89.4) (75.3) (70.0) (37.7) (35.0)
Investment earnings..................... 29.5 29.1 28.7 21.1 27.7 14.1 10.4
Equity in earnings of unconsolidated
affiliates............................. 2.9 5.3 6.7 12.5 23.8 14.7 12.4
Minority interest expense............... (0.2) (4.4) (6.8) (10.0) (8.2) (5.0) (3.8)
Net gain/(loss) on disposals of
facilities and long-term investments... (0.3) (0.1) 31.0 121.8 87.5 29.0 29.5
-------- -------- -------- -------- -------- --------- ---------
Income from continuing operations before
income taxes........................... 200.5 245.1 359.2 418.6 359.9 193.9 183.2
Taxes on income......................... (77.0) (100.0) (141.0) (155.0) (144.0) (80.0) (73.0)
-------- -------- -------- -------- -------- --------- ---------
Income from continuing operations....... $ 123.5 $ 145.1 $ 218.2 $ 263.6 $ 215.9 $ 113.9 $ 110.2
-------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- --------- ---------
Earnings per common share from
continuing operations, fully-diluted... $ 0.76 $ 0.87 $ 1.19 $ 1.49 $ 1.23 $ 0.65 $ 0.63
-------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- --------- ---------
Cash dividends per common share......... $ 0.36 $ 0.40 $ 0.46 $ 0.48 $ 0.12 $ 0.12 --
Ratio of earnings to fixed
charges (6)............................ 2.0x 2.3x 3.5x 4.3x 4.2x 4.2x 4.4x
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AS OF
AS OF MAY 31, NOVEMBER 30,
------------------------------------------------------------- ----------------------
1990 1991 1992 1993 1994 1993 1994
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit)............... $ 249.0 $ 346.0 $ 223.9 $ 155.9 $ (196.3) $ 466.8 $ (96.0)
Total assets............. 3,806.7 4,060.2 4,236.4 4,173.4 3,697.0 3,724.6 3,303.4
Long-term debt, excluding
current
portion................. 1,361.2 1,140.4 1,066.2 892.4 223.1 756.7 236.3
Shareholders' equity..... 1,257.9 1,762.3 1,674.0 1,752.1 1,319.9 1,475.7 1,434.6
<FN>
- ------------------------------
(1) Results of operations for all periods presented exclude NME's psychiatric
division which was discontinued as of November 30, 1993, but include other
divested businesses through the date of their divestiture that were not
classified as discontinued operations.
(2) Results of operations for the fiscal year ended May 31, 1990 include the
operations of Hillhaven for the eight months ended January 31, 1990, on
which date 85% of the common stock of Hillhaven was distributed to NME
shareholders.
(3) Results of operations for periods prior to April 1993 include, on a
consolidated basis, the results of Westminster, the ownership of which was
reduced from approximately 90% to 42% at April 1993 through a public
offering of Westminster common stock.
(4) Results of operations for the periods presented include the results,
through the respective dates of sale, of 28 inpatient rehabilitation
hospitals and 45 related satellite outpatient clinics sold in fiscal 1994,
23 long-term care facilities sold to Hillhaven in fiscal 1994 and TRC, in
which NME sold an approximately 75% interest in August 1994. See Notes (l)
and (v) of Notes to the Unaudited Pro Forma Condensed Combined Financial
Statements.
(5) The restructuring charges for 1994 relate to a plan initiated by NME in
April 1994 to significantly decrease overhead costs by reducing corporate
and division staffing levels and selling the corporate headquarters
building. In fiscal 1992 and fiscal 1993, the restructuring charges related
to the combination of NME's rehabilitation hospital division into its
general hospital division, a corporate overhead reduction program begun in
April 1993, and severance costs incurred in connection with a change in
senior executive management.
(6) The ratio of earnings to fixed charges is calculated by dividing income
from continuing operations before income taxes plus fixed charges by fixed
charges. Fixed charges consist of interest expense, including amortization
of financing costs, and that portion of rental expense deemed to be
representative of the interest component of rental expense.
</TABLE>
12
<PAGE>
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth selected historical financial data and other
operating information for AMI, the predecessor company to AMH, for the two
months ended October 31, 1989 and for AMH for the ten months ended August 31,
1990, for AMH for each of the fiscal years in the four-year period ended August
31, 1994 and for AMH for the three months ended November 30, 1993 and 1994. The
selected information for the two months ended October 31, 1989 has been derived
from the Consolidated Financial Statements of AMI which have been audited by
Price Waterhouse LLP, independent accountants for AMI, and from the underlying
accounting records of AMI. The selected information for the ten months ended
August 31, 1990 and for the fiscal years in the four-year period ended August
31, 1994 has been derived from the Consolidated Financial Statements of AMH
which have been audited by Price Waterhouse LLP, independent accountants for
AMH, and from the underlying accounting records of AMH. The selected financial
information for the three-month periods has been derived from unaudited
condensed financial statements of AMH and reflects all adjustments (consisting
of only normal recurring adjustments) that, in the opinion of the management of
AMH, are necessary for a fair presentation of such information.
All information contained in the following tables should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Pro Forma Financial Information" and with the
Consolidated Financial Statements and related notes of AMH included or
incorporated by reference herein. Certain amounts from the consolidated
statements of income of AMI and AMH have been reclassified to conform with the
presentation below.
<TABLE>
<CAPTION>
AMI FOR THE
TWO MONTHS TEN MONTHS YEARS ENDED AUGUST 31,
ENDED ENDED --------------------------------------
OCTOBER 31, 1989 (1) AUGUST 31, 1990 (1)(2) 1991 (3) 1992 (4) 1993 1994
-------------------- ---------------------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenues........ $480.9 $2,052.4 $2,545.9 $2,237.9 $2,238.5 $2,381.7
Operating expenses:
Salaries and benefits....... 176.9 715.9 916.4 838.7 815.3 869.0
Supplies.................... 61.0 254.4 318.7 316.5 315.9 340.0
Provision for doubtful
accounts................... 28.7 119.8 162.8 163.8 148.1 165.5
Other operating expenses.... 132.0 570.1 687.8 496.3 505.7 524.3
Depreciation................ 27.9 98.8 126.3 109.6 110.3 118.1
Amortization................ 4.9 28.6 39.1 39.4 37.1 38.6
Merger costs................ 128.2 -- -- -- -- --
------- ---------- -------- -------- -------- --------
Operating income (loss)....... (78.7) 264.8 294.8 273.6 306.1 326.2
Interest expense.............. (28.3) (298.1) (330.4) (214.5) (180.5) (157.2)
Investment earnings........... 3.9 27.6 20.2 9.9 13.9 2.7
Minority interest expense..... (2.5) (0.8) (2.3) (2.1) (6.1) (5.9)
Gain on disposals of
facilities and long-term
investments.................. -- -- 18.6 119.8 -- 69.3
------- ---------- -------- -------- -------- --------
Income (loss) before income
taxes........................ (105.6) (6.5) 0.9 186.7 133.4 235.1
Taxes on income............... 37.0 (7.2) (19.9) (77.1) (66.5) (96.1)
------- ---------- -------- -------- -------- --------
Income (loss) before
extraordinary losses......... $(68.6) $ (13.7) $ (19.0) $ 109.6 $ 66.9 $ 139.0
------- ---------- -------- -------- -------- --------
------- ---------- -------- -------- -------- --------
Earnings (loss) per common
share before extraordinary
losses....................... $(0.98) $ (0.27) $ (0.38) $ 1.43 $ 0.87 $ 1.80
Cash dividends per common
share........................ -- -- -- -- -- --
Ratio of earnings to fixed
charges (5).................. -- -- -- 1.8x 1.8x 2.4x
<CAPTION>
THREE MONTHS
ENDED NOVEMBER
30,
--------------
1993 1994
------ ------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenues........ $558.2 $632.2
Operating expenses:
Salaries and benefits....... 205.4 236.9
Supplies.................... 79.5 91.8
Provision for doubtful
accounts................... 39.0 42.1
Other operating expenses.... 126.7 140.2
Depreciation................ 29.1 31.5
Amortization................ 9.2 9.6
Merger costs................ -- --
------ ------
Operating income (loss)....... 69.3 80.1
Interest expense.............. (39.4) (39.7)
Investment earnings........... 0.6 0.4
Minority interest expense..... (1.8) (1.1)
Gain on disposals of
facilities and long-term
investments.................. -- --
------ ------
Income (loss) before income
taxes........................ 28.7 39.7
Taxes on income............... (12.2) (16.7)
------ ------
Income (loss) before
extraordinary losses......... $ 16.5 $ 23.0
------ ------
------ ------
Earnings (loss) per common
share before extraordinary
losses....................... $ 0.21 $ 0.30
Cash dividends per common
share........................ -- --
Ratio of earnings to fixed
charges (5).................. 1.7x 1.9x
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
AS OF AUGUST 31, AS OF NOVEMBER 30,
----------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1993 1994
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................. $ (313.4) $ (263.4) $ (222.2) $ (140.0) $ (187.7) $ (137.9) $ (191.7)
Total assets.............................. 3,595.7 3,153.5 2,963.3 2,868.4 2,976.5 2,828.8 3,024.8
Long-term debt, excluding current
portion.................................. 2,246.4 1,613.3 1,343.7 1,294.2 1,141.7 1,274.2 1,146.9
Stockholders' equity...................... 332.0 552.2 663.7 697.8 848.7 714.2 873.6
<FN>
- ----------------------------------
(1) AMH acquired AMI on October 26, 1989. The period from September 1, 1989
through October 31, 1989 includes the historical results of AMI and the
periods after October 31, 1989 reflect the consolidated results of AMH and
AMI.
(2) Operating results relating to nine domestic general hospitals and two
psychiatric hospitals sold or under binding agreement to sell as of August
31, 1990 have been excluded from AMH's results of operations for the ten
months ended August 31, 1990. Accordingly, AMH's results of operations for
the ten months ended August 31, 1990 exclude net revenues, loss before
taxes and net loss of $320.9 million, $35.1 million and $23.1 million,
respectively, relating to assets sold or under binding agreement to sell as
of August 31, 1990.
(3) Results of operations for fiscal 1991 include results from four domestic
general hospitals, one psychiatric hospital, and certain other assets sold
during that fiscal year.
(4) Results of operations for fiscal 1992 include results from four domestic
general hospitals sold during that fiscal year.
(5) The ratio of earnings to fixed charges is calculated by dividing income
before income taxes plus fixed charges by fixed charges. Fixed charges
consist of interest expense, including amortization of costs, and that
portion of rental expense deemed to be representative of the interest
component of rental expense. For the fiscal year ended August 31, 1991, the
ten months ended August 31, 1990 and the two months ended October 31, 1989,
earnings were inadequate to cover fixed charges by approximately $3.7
million, $20.6 million and $108.5 million, respectively.
</TABLE>
14
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
The following table presents summary pro forma financial information derived
from the Unaudited Pro Forma Condensed Combined Financial Statements included
elsewhere in this Information Statement/Prospectus. The summary pro forma
financial information gives effect to the following transactions and events as
if they had occurred at the beginning of each period presented for purposes of
the pro forma statements of operations and other operating information and on
November 30, 1994 for purposes of the pro forma balance sheet data: (i) the
August 1994 sale of approximately 75% of the common stock of TRC; (ii) the March
1994 sale of one inpatient rehabilitation hospital and the January 1994 sale of
28 inpatient rehabilitation hospitals and 45 related satellite outpatient
clinics; (iii) the February 1994 sale of four long-term care facilities and the
September 1993 sale of 19 long-term care facilities to Hillhaven (all of which
properties previously had been leased to Hillhaven); (iv) the elimination of
restructuring charges recorded by NME of $77.0 million in fiscal 1994; (v) the
elimination of certain non-recurring gains recorded by NME and AMH; (vi) the
Merger, applying the purchase method of accounting; and (vii) the consummation
of the public offering of approximately $1.0 billion aggregate principal amount
of Senior Notes of NME and Senior Subordinated Notes of NME and the refinancing
of certain indebtedness of NME and AMI.
The Unaudited Pro Forma Condensed Combined Financial Statements do not
purport to present the financial position or results of operations of NME had
the transactions and events assumed therein occurred on the dates specified, nor
are they necessarily indicative of the results of operations that may be
achieved in the future. The following Summary Pro Forma Financial Information
does not reflect certain cost savings that management believes may be realized
following the Merger, currently estimated to be approximately $60.0 million
annually beginning in fiscal 1996 (before any severance or other costs of
implementing certain efficiencies). No assurances can be made as to the amount
of cost savings, if any, that actually will be realized. The Unaudited Pro Forma
Condensed Combined Financial Statements are based on certain assumptions and
adjustments described in the Notes to Unaudited Pro Forma Condensed Combined
Financial Statements and should be read in conjunction therewith. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the NME 10-K and the AMH 10-K, each of which is
incorporated by reference herein, "Pro Forma Financial Information" and
"Financing for the Merger and the Related Transactions."
NME reports its financial information on the basis of a May 31 fiscal year.
AMH reports its financial information on the basis of an August 31 fiscal year.
The Unaudited Pro Forma Condensed Combined Statement of Operations for the year
ended May 31, 1994 combines NME's Consolidated Statement of Operations for the
fiscal year ended May 31, 1994 with AMH's Consolidated Statement of Operations
for the fiscal year ended August 31, 1994. The Unaudited Pro Forma Combined
Statements of Operations for the six months ended November 30, 1993 and 1994
combine the Consolidated Statements of Operations of NME and AMH for the same
six-month periods.
15
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
YEAR ENDED ----------------------
MAY 31, 1994 1993 1994
------------ ---------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenues................................................ $ 4,965.7 $ 2,374.9 $ 2,555.4
Operating expenses:
Salaries and benefits............................................... 1,986.4 962.1 1,021.2
Supplies............................................................ 664.6 311.1 343.0
Provision for doubtful accounts..................................... 267.3 129.0 135.9
Other operating expenses............................................ 1,077.0 534.3 565.9
Depreciation........................................................ 238.3 118.2 123.9
Amortization........................................................ 71.4 35.3 35.3
------------ ---------- ----------
Operating income...................................................... 660.7 284.9 330.2
Interest expense, net of capitalized portion.......................... (324.4) (167.8) (165.8)
Investment earnings................................................... 28.0 24.1 9.4
Equity in earnings of unconsolidated affiliates....................... 24.3 14.7 12.3
Minority interest expense............................................. (11.1) (6.5) (5.4)
------------ ---------- ----------
Income from continuing operations before income taxes................. 377.5 149.4 180.7
Taxes on income....................................................... (163.0) (74.4) (77.6)
------------ ---------- ----------
Income from continuing operations..................................... $ 214.5 $ 75.0 $ 103.1
------------ ---------- ----------
------------ ---------- ----------
Earnings per common share from continuing operations,
fully diluted........................................................ $ 1.03 $ 0.36 $ 0.50
Weighted average number of shares outstanding (in 000's).............. 214,277 213,305 214,657
Ratio of earnings to fixed charges (1)................................ 1.9 x 1.9x
</TABLE>
<TABLE>
<CAPTION>
AS OF
NOVEMBER 30,
1994
---------------
<S> <C>
BALANCE SHEET DATA:
Working capital................................................................................................... $ 242.1
Total assets...................................................................................................... 7,700.1
Long-term debt, net of current portion............................................................................ 3,581.8
Shareholders' equity.............................................................................................. 1,924.1
<FN>
- ------------------------------
(1) The ratio of earnings to fixed charges is calculated by dividing income
from continuing operations before income taxes plus fixed charges by fixed
charges. Fixed charges consist of interest expense, including amortization
of financing costs, and that portion of rental expense deemed to be
representative of the interest component of rental expense.
</TABLE>
16
<PAGE>
INTRODUCTION
This Information Statement/Prospectus is being furnished to the stockholders
of American Medical Holdings, Inc., a Delaware corporation ("AMH"), in
connection with the proposed merger (the "Merger") of AMH Acquisition Co., a
Delaware corporation ("Merger Sub") and a newly formed, wholly owned subsidiary
of National Medical Enterprises, Inc., a Nevada corporation ("NME"), with and
into AMH. The Merger will be effected on the terms and conditions described
elsewhere in this Information Statement/Prospectus pursuant to the Agreement and
Plan of Merger, dated as of October 10, 1994 (the "Merger Agreement"), by and
among NME, Merger Sub and AMH, a copy of which is attached hereto as Annex A and
incorporated herein by reference. See "The Merger."
The information herein concerning NME has been supplied by NME. The
information herein concerning AMH has been supplied by AMH. This Information
Statement/Prospectus will be mailed to stockholders of AMH on or about January
31, 1995. This Information Statement/Prospectus also constitutes the Prospectus
of NME with respect to the shares of common stock, par value $0.075 per share,
of NME (the "NME Common Stock") to be issued in the Merger, other than shares to
be received by the AMH stockholders that previously have voted in favor of the
approval and adoption of the Merger and the Merger Agreement.
The Board of Directors of AMH has unanimously approved and adopted the
Merger Agreement and has recommended approval of the Merger to stockholders of
AMH. Stockholders of AMH holding an aggregate of 47,622,850 shares of common
stock, par value $.01 per share, of AMH (the "AMH Common Stock") (representing
approximately 61.4% of the AMH Common Stock outstanding as of September 30,
1994) have entered into Stockholder Voting and Profit Sharing Agreements, dated
as of October 10, 1994, with NME (the "Stockholder Agreements"), pursuant to
which they have voted such shares of stock in favor of the approval and adoption
of the Merger and the Merger Agreement. See "The Merger -- Interests of Certain
Persons in the Merger." ACCORDINGLY, NO FURTHER STOCKHOLDER ACTION IS REQUIRED
BY OTHER STOCKHOLDERS OF AMH. AMH IS NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND AMH A PROXY. See "The Merger -- Background of the Merger"
and "-- Terms of the Merger -- Stockholder Approval; Stockholder Agreements."
17
<PAGE>
RISK FACTORS
The following are certain factors that should be considered by the
stockholders of AMH in evaluating the Merger as well as an investment in NME
Common Stock after the Merger. References herein to NME after the Merger shall
be deemed to include NME and AMH.
COMPETITION
The healthcare industry has been characterized in recent years by increased
competition for patients and staff physicians, excess capacity at general
hospitals, a shift from inpatient to outpatient settings and increased
consolidation. The principal factors contributing to these trends are advances
in medical technology, cost-containment efforts by managed care payors,
employers and traditional health insurers, changes in regulations and
reimbursement policies, increases in the number and type of competing healthcare
providers and changes in physician practice patterns. NME's future success will
depend, in part, on the ability of NME's hospitals to continue to attract staff
physicians, to enter into managed care contracts and to organize and structure
integrated healthcare delivery systems with other healthcare providers and
physician practice groups. There can be no assurance that NME's hospitals will
continue to be able, on terms favorable to NME, to attract physicians to their
staffs, to enter into managed care contracts or to organize and structure
integrated healthcare delivery systems, for which other healthcare companies
with greater financial resources or a wider range of services may be competing.
NME's ability to continue to compete successfully for such contracts or to
form or participate in such systems also may depend upon, among other things,
NME's ability to increase the number of its facilities and services offered
through the acquisition of hospitals, groups of hospitals, other healthcare
businesses, ancillary healthcare providers, physician practices and physician
practice assets and NME's ability to finance such acquisitions. There can be no
assurance that suitable acquisitions, for which other healthcare companies with
greater financial resources than NME may be competing, can be accomplished on
terms favorable to NME or that financing, if necessary, can be obtained for such
acquisitions. See "-- Certain Financing Considerations; Leverage." There can be
no assurance that NME will be able to operate profitably any hospitals,
facilities, businesses or other assets it may acquire, effectively integrate the
operations of such acquisitions or otherwise achieve the intended benefits of
such acquisitions.
LIMITS ON REIMBURSEMENT
NME derives a substantial portion of its net operating revenues from
third-party payors, including the Medicare and Medicaid programs. Changes in
government reimbursement programs have resulted in limitations on increases in,
and in some cases in reduced levels of, reimbursement for healthcare services,
and additional changes are anticipated. Such changes are likely to result in
further limitations on reimbursement levels. In addition, private payors,
including managed care payors, increasingly are demanding discounted fee
structures or the assumption by healthcare providers of all or a portion of the
financial risk through prepaid capitation arrangements. Inpatient utilization,
average lengths of stay and occupancy rates continue to be negatively affected
by payor-required pre-admission authorization and utilization review and by
payor pressure to maximize outpatient and alternative healthcare delivery
services for less acutely ill patients. In addition, efforts to impose reduced
allowances, greater discounts and more stringent cost controls by government and
other payors are expected to continue. Although NME is unable to predict the
effect these changes will have on its operations, as the number of patients
covered by managed care payors increases, significant limits on the scope of
services reimbursed and on reimbursement rates and fees could have a material
adverse effect on the financial results of such operations.
EXTENSIVE REGULATION
The healthcare industry is subject to extensive Federal, state and local
regulation relating to licensure, conduct of operations, ownership of
facilities, addition of facilities and services and prices for services. In
particular, Medicare and Medicaid antifraud and abuse amendments codified under
Section 1128B(b) of the Social Security Act (the "Antifraud Amendments")
prohibit certain business
18
<PAGE>
practices and relationships that might affect the provision and cost of
healthcare services reimbursable under Medicare and Medicaid. Sanctions for
violating the Antifraud Amendments include criminal penalties and civil
sanctions, including fines and possible exclusion from the Medicare and Medicaid
programs. Pursuant to the Medicare and Medicaid Patient and Program Protection
Act of 1987, the Department of Health and Human Services ("HHS") has issued
regulations that describe some of the conduct and business relationships
permissible under the Antifraud Amendments ("Safe Harbors"). NME believes its
business arrangements comply in all material respects with applicable law and
satisfy the Safe Harbors. The fact that a given business does not fall within a
Safe Harbor does not render the arrangement PER SE illegal. Business
arrangements of healthcare service providers that fail to satisfy the applicable
Safe Harbor criteria, however, risk increased scrutiny by enforcement
authorities. Because NME may be less willing than some of its competitors to
enter into business arrangements that do not clearly satisfy the Safe Harbors,
it could be at a competitive disadvantage in entering into certain transactions
and arrangements with physicians and other healthcare providers. See "-- Certain
Legal Proceedings."
In addition, Section 1877 of the Social Security Act recently has been
amended, effective January 1, 1995, to significantly broaden the scope of
prohibited physician referrals under the Medicare and Medicaid programs to
providers with which they have financial arrangements. Many states have adopted
or are considering similar legislative proposals, some of which extend beyond
the Medicaid program to all healthcare services. NME's participation in and
development of joint ventures and other financial arrangements with physicians
could be adversely affected by these amendments and similar state enactments.
Certificates of Need, which are issued by certain state governmental
agencies with jurisdiction over healthcare facilities, are at times required for
capital expenditures exceeding a prescribed amount, changes in bed capacity or
services and certain other matters. After consummation of the Merger, NME will
operate hospitals in eight states that require state approval under Certificate
of Need programs. NME is unable to predict whether it will be able to obtain any
Certificates of Need in any jurisdiction where such Certificates of Need are
required.
NME is unable to predict the future course of Federal, state and local
regulation or legislation, including Medicare and Medicaid statutes and
regulations. Further changes in the regulatory framework could have a material
adverse effect on the financial results of NME's operations.
HEALTHCARE REFORM LEGISLATION
In recent years, an increasing number of legislative initiatives have been
introduced or proposed in Congress and in state legislatures that would effect
major changes in the healthcare system, either nationally or at the state level.
Among the proposals under consideration are price controls on hospitals,
insurance market reforms to increase the availability of group health insurance
to small businesses, requirements that all businesses offer health insurance
coverage to their employees and the creation of a government health insurance
plan or plans that would cover all citizens. In 1993, President Clinton
introduced a healthcare reform bill that included a number of measures that were
broadly viewed as increasing the scope of government regulation of the
healthcare industry. Key elements in the President's proposal and other
healthcare reform proposals included various insurance market reforms, the
requirement that businesses provide health insurance coverage for their
employees, reductions or lesser increases in future Medicare and Medicaid
reimbursement to providers and more stringent government cost controls. None of
these proposals has been adopted. There continue to be efforts at the Federal
level to introduce various insurance market reforms, expanded fraud and abuse
and anti-referral legislation and further reductions in Medicare and Medicaid
reimbursement. A broad range of both similar and more comprehensive healthcare
reform initiatives is likely to be considered at the state level. NME cannot
predict whether any of the above proposals or any other proposals will be
adopted, and, if adopted, no assurance can be given that the implementation of
such reforms will not have a material adverse effect on NME's business.
19
<PAGE>
CERTAIN LEGAL PROCEEDINGS
NME has been involved in certain significant legal proceedings and
investigations related principally to its discontinued psychiatric business.
These proceedings and investigations include class-action and derivative
lawsuits by certain stockholders, psychiatric patient litigation alleging fraud
and conspiracy, certain lawsuits filed by third-party private-payor insurance
companies and investigations by various state and Federal agencies. NME (i) has
reached agreements with the United States Department of Justice (the "DOJ"), HHS
and the Securities and Exchange Commission (the "Commission") resolving all
Federal healthcare and related disclosure investigations of NME (but various
government agencies are continuing to pursue investigations against certain
individuals), (ii) has reached an agreement with the District of Columbia and
all states where NME's psychiatric facilities received Medicaid payments,
settling all potential state claims related to the matters that were the subject
of the Federal investigations, (iii) has resolved the litigation between NME and
the insurers, (iv) has reached agreements in principle to resolve the
shareholder derivative lawsuit and one of the class action lawsuits, and (v)
continues to resolve the cases brought by individual psychiatric patients. NME
has disposed of substantially all of its psychiatric facilities, but continues
to operate the remainder as a discontinued operation, pending their planned
closure, sale or conversion to another use. NME has received inquiries from
various other insurance companies and health benefit providers regarding the
possible filing of claims. Additional lawsuits alleging malpractice at its
psychiatric facilities and the existence of a corporate-wide conspiracy to
commit wrongful acts have been filed, and NME expects that similar lawsuits may
be filed from time to time against NME, its officers or directors. NME's
reserves for unusual litigation costs represent management's estimate, based on
the information currently available to it, of the net costs (including legal
expenses) of the ultimate disposition of these matters. NME believes that its
remaining reserves established for these matters are adequate to cover its
ultimate liability. In the event such reserves are not adequate, however, the
adverse determination of these matters could have a material adverse effect on
NME's financial condition and results of operations. See "Selected Information
Concerning NME and AMH -- National Medical Enterprises, Inc. -- Certain Legal
Proceedings."
In its agreements with the DOJ and HHS, NME agreed to maintain its
previously established ethics program and ethics hotline and also agreed to
implement certain additional compliance-related oversight procedures. Should the
hotline or oversight procedures reveal, after investigation by NME, credible
evidence of violations of criminal, or material violations of civil, laws, rules
or regulations governing Federally funded programs, NME is required to report
any such violation to the DOJ and HHS. As a result of the existing agreements
with the DOJ and HHS and the recent legal proceedings and investigations in
which NME has been involved, NME is subject to increased Federal and state
regulatory scrutiny and, in the event that NME violates such decrees or engages
in conduct that violates Federal or state laws, rules or regulations, NME may be
subject to a risk of increased sanctions or penalties, including, but not
limited to, partial or complete disqualification as a provider of Medicare or
Medicaid services.
INCOME TAX EXAMINATIONS
The Internal Revenue Service (the "IRS") currently is examining NME's
Federal income tax returns for fiscal years 1986 through 1990 and has not yet
begun examining any returns for subsequent years (collectively, the "Open
Years.") Although the IRS has not challenged any of NME's positions in the Open
Years, there can be no assurance that significant issues will not be raised.
While NME has no reason to believe that the tax reserves it has established will
be inadequate, if audits of the Open Years or fiscal 1994, for which NME has not
yet filed a tax return, result in determinations significantly in excess of such
reserves, NME's financial condition could be materially adversely affected.
DEPENDENCE ON KEY PERSONNEL AND PHYSICIANS
NME's operations are dependent on the efforts, ability and experience of its
key executive officers. NME's continued growth depends on its ability to attract
and retain skilled employees, on the ability of its officers and key employees
to manage growth successfully and on NME's ability to attract
20
<PAGE>
and retain physicians at its hospitals. In addition, the success of NME is, in
part, dependent upon the number, specialties and quality of physicians on its
hospitals' medical staffs, most of whom have no long-term contractual
relationship with NME and may terminate their association with NME's hospitals
at any time. The loss of some or all of these key executive officers or an
inability to attract or retain sufficient numbers of qualified physicians could
have a material adverse impact on NME's future results of operations.
PROFESSIONAL LIABILITY INSURANCE
As is typical in the healthcare industry, each of NME and AMH is subject to
claims and legal actions by patients and others in the ordinary course of
business. Prior to the consummation of the Merger, NME and AMH have been
partially self-insured for professional and general liability risks. NME and AMH
each own a minority interest in HUG Services Inc. ("HUG"), which, through a
wholly owned subsidiary, insures the excess professional and general liability
risks for all NME hospitals and 35 AMH hospitals above the self-insured amounts,
up to $25 million per occurrence and $30 million in the aggregate. HUG reinsures
a substantial portion of the foregoing amounts. Both NME and AMH currently
account for their interests in HUG using the equity method. Following the
Merger, NME will own an approximately 81% equity interest in HUG, and the
assets, liabilities and results of operations of HUG will be consolidated with
those of NME. See "Pro Forma Financial Information."
NME, AMH and HUG maintain unfunded reserves for their professional liability
risks which are based on actuarial estimates calculated and evaluated by
independent actuaries. While cash from operations has been adequate to provide
for unforeseen liability claims in the past, there can be no assurance that
NME's cash flow will continue to be adequate to cover such claims following
consummation of the Merger. If actual payments of claims with respect to NME's
and HUG's self-insured liabilities exceed projected payments of claims, the
financial results of NME's operations could be materially adversely affected.
CERTAIN FINANCING CONSIDERATIONS; LEVERAGE
NME intends to enter into a new credit facility (the "New Credit Facility")
with Morgan Guaranty Trust Company of New York, as administrative agent, and
certain other lenders, that will provide for borrowings of up to $2.5 billion,
of which approximately $2.0 billion will be term loans and approximately $500.0
million will be available as revolving credit loans and letters of credit. See
"Financing for the Merger and the Related Transactions -- The New Credit
Facility." NME also intends to issue through an underwritten public offering
approximately $1 billion aggregate principal amount of senior and senior
subordinated debt securities (the "New Debt Securities"). See "Financing for the
Merger and the Related Transactions -- The New Credit Facility" and "-- The
Public Offering." The New Debt Securities and a portion of the New Credit
Facility will be used to pay the cash portion of the Merger Consideration (as
hereinafter defined). The remainder of the New Credit Facility will be used to
refinance certain existing indebtedness of NME and American Medical
International, Inc., a Delaware corporation that is a wholly owned subsidiary of
AMH ("AMI"), and for working capital purposes.
As of November 30, 1994, NME's total indebtedness was 37.0% of its total
capitalization including short-term debt. As adjusted on a pro forma basis to
give effect to the Merger and certain related transactions, NME's total
indebtedness would have been 66.0% of its total capitalization including
short-term debt. See "Pro Forma Financial Information."
The New Credit Facility will include covenants prohibiting or limiting,
among other things, the sale of assets, the making of acquisitions and other
investments, capital expenditures, the incurrence of additional debt and liens
and the payment of dividends, in addition to a minimum consolidated net worth
requirement and certain ratio coverage tests. See "Financing for the Merger and
the Related Transactions -- The New Credit Facility." In addition, the
indentures governing the New Debt Securities will include, among other things,
covenants limiting the incurrence of additional debt and liens and the payment
of dividends. NME's failure to comply with any of these covenants could result
in an event of default under its indebtedness including the New Debt Securities,
which in turn could have a material adverse effect on NME.
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The degree to which NME is leveraged and the covenants described above may
adversely affect NME's ability to finance its future operations and could limit
its ability to pursue business opportunities that may be in the interests of NME
and its securityholders. In particular, changes in medical technology, existing,
proposed and future legislation, regulations and the interpretation thereof, and
the increasing importance of managed care contracts and integrated healthcare
delivery systems may require significant investment in facilities, equipment,
personnel or services. Although NME believes that cash generated from operations
and amounts available under the revolving credit portion of the New Credit
Facility will be sufficient to allow it to make such investments, there can be
no assurance that NME will be able to obtain the funds necessary to make such
investments. Furthermore, tax-exempt or government-owned competitors have
certain financial advantages such as endowments, charitable contributions,
tax-exempt financing and exemption from sales, property and income taxes not
available to NME, providing them with a potential competitive advantage in
making such investments. See "Financing for the Merger and the Related
Transactions."
POTENTIAL CONFLICTS OF INTEREST
Salomon Brothers Inc ("Salomon") has delivered its opinion to the Board of
Directors of AMH to the effect that, based upon the matters presented to such
Board, as of October 10, 1994, the consideration to be received by the holders
of AMH Common Stock (other than NME or any of its affiliates) in connection with
the Merger was fair to such holders from a financial point of view. On or about
December 5, 1994, Salomon was engaged by NME to serve as co-manager, with
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") as lead underwriter,
for NME in the Public Offering (as hereinafter defined). On or about January 5,
1995, Salomon was engaged to serve as a dealer manager, with DLJ, to NME in the
NME Tender Offers and AMI Tender Offers (each as hereinafter defined). Such
engagements could give rise to a potential conflict of interest if Salomon were
asked to confirm its opinion to the Board of Directors of AMH. Salomon has
advised AMH, however, that Salomon does not believe that such engagements would
interfere with its ability, if requested by AMH, to render confirmation of its
opinion. See "The Merger -- Opinion of Salomon Brothers Inc".
FACTORS AFFECTING MARKET PRICE OF NME COMMON STOCK
Because the Merger Consideration is fixed and because the market price of
NME Common Stock is subject to fluctuation, the market value of the shares of
NME Common Stock that holders of AMH Common Stock will receive in the Merger may
increase or decrease prior to and following the Merger. There can be no
assurance that at or after the Effective Time (as hereinafter defined) of the
Merger such shares of NME Common Stock will maintain or equal the prices at
which such shares have traded in the past. The prices at which NME Common Stock
trades after the Merger may be influenced by many factors, including, among
others, the liquidity of the market for NME Common Stock, investor perceptions
of NME and the healthcare industry, the operating results of NME and its
subsidiaries, NME's dividend policy, restrictions on change of control and
general economic and market conditions. Similar factors affect the prices at
which AMH Common Stock currently trades. See "The Merger -- Comparative Stock
Prices and Dividends."
SHARES ELIGIBLE FOR FUTURE ISSUANCE AND SALE
As of December 30, 1994, 166,379,049 shares of NME Common Stock were
outstanding, and 28,757,977 shares of NME Common Stock were reserved for
issuance in connection with the exercise of outstanding options, warrants and
conversion rights. In addition to the 32,601,338 shares of NME Common Stock
proposed to be issued in the Merger, up to 229,931 shares issuable to holders of
AMI Convertible Debentures (as hereinafter defined) and 512,484 shares to be
issued to AMH which will concurrently transfer such shares to certain AMH
optionees, NME may issue shares of NME Common Stock and preferred stock in the
future in connection with acquisitions, corporate combinations, financing
activities or employee compensation plans. Sales of substantial amounts of NME
Common Stock in the open market or the availability of such shares for sale
could have an adverse short-term effect on the market price for NME Common
Stock. See "The Merger -- Terms of the Merger -- Registration Rights."
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CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Restated Articles of Incorporation, as amended
(the "NME Articles of Incorporation"), and Restated Bylaws, as amended (the "NME
Bylaws"), of NME may make an unsolicited acquisition of control of NME more
difficult or expensive. Furthermore, NME has adopted a stockholder rights plan,
which also will be applicable to NME Common Stock to be issued in the Merger and
which will make an unsolicited acquisition of NME more difficult or more
expensive. See "The Merger -- Comparative Rights of Stockholders."
THE MERGER
BACKGROUND OF THE MERGER
The terms of the Merger Agreement are the result of arm's length
negotiations between representatives of NME and AMH. The following is a brief
discussion of the background of these negotiations, the Merger and related
transactions.
Over the past several years, the United States healthcare industry has
undergone a period of great uncertainty. Competition from a variety of
healthcare providers has intensified, and the Clinton Administration and various
states have set reform of the healthcare system as a primary policy goal. These
factors, among others, have resulted in a significant trend toward consolidation
of healthcare providers and payors through acquisitions, mergers and other
strategic alliances. Each of AMH and NME has been aware that many other
healthcare providers were considering or had entered into a variety of strategic
transactions to strengthen their positions for the future, recognizing the
uncertainties surrounding the future of the healthcare industry and the rapid
pace of change in the industry. As a result, each of AMH and NME has actively
reviewed the dynamic healthcare business environment.
Commencing in the winter of 1992, the Board of Directors of AMH, together
with senior management, embarked on a program to evaluate various strategic and
financial alternatives which could optimize AMH's business and financial
prospects in response to the rapidly evolving and competitive healthcare
environment and to reform-oriented changes in the healthcare industry. In this
regard, AMH adopted a policy to actively pursue selected acquisitions of, or
investments in, not for profit hospitals, resulting in the purchase by AMH of
St. Francis Hospital in Memphis, Tennessee ("St. Francis Hospital") on May 1,
1994 and the acquisition of a 70% interest in Hilton Head Hospital in Hilton
Head, South Carolina ("Hilton Head Hospital") on September 1, 1994. As part of
related strategies, members of AMH's development team also targeted other
independent not for profit as well as for profit hospitals for participation
with each other and AMH hospitals in healthcare networks and also evaluated
asset swaps with both for profit and not for profit entities to rationalize
hospital portfolios and improve market penetration. Finally, in an effort to
provide AMH and its stockholders with a full range of options and to augment
internally generated strategic responses, the Board of Directors of AMH directed
senior management and AMH's legal and financial representatives to evaluate
business combinations involving compatible healthcare companies to determine
whether a consolidation of AMH and such companies could enhance AMH's presence
in the industry.
As a result of the initiatives adopted by the AMH Board of Directors, AMH
management and certain of its financial and legal representatives conducted
preliminary evaluations with respect to ten different publicly held healthcare
providers between December 1992 and the date that definitive negotiations
regarding the Merger were concluded between AMH and NME. These evaluations
consisted in each instance of a review and assessment of the periodic reports
filed by such companies with the Commission, internal consideration of
historical operating results and future prospects, including certain pro forma
combined effects of any such combination, and other relevant financial and
operational considerations. These preliminary investigations were, in many
cases, also accompanied by informal discussions between representatives of AMH
and such other companies to identify whether further evaluation or discussion
between the parties could be productive. Subject to this initial review, AMH
also entered into confidentiality agreements and exchanged certain due diligence
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information with each of HealthTrust, Inc. -- The Hospital Company ("HTI") in
July 1993, OrNda HealthCorp. ("OrNda") in September 1993, MedicalCare America,
Inc. ("MCA") in December 1993, Columbia/HCA Healthcare Corporation ("Columbia")
in February 1994, and NME in June 1994. Notwithstanding these preliminary
investigations, discussions and exchanges of information, AMH did not receive
any additional contacts or responses indicative of further interest by such
persons (other than NME) in pursuing a potential combination involving AMH. In
January 1994, AMH also submitted a proposal respecting a potential combination
with, or alternatively a strategic investment in, MCA, which was ultimately
acquired by Columbia.
During the summer of 1993, DLJ approached senior management of NME to
discuss the possibility of some form of business combination or strategic
alliance between NME and other healthcare providers, including AMH. NME's new
senior management engaged in general introductory discussions with a number of
other healthcare providers, but elected not to pursue any discussions concerning
a business combination or other strategic alliance at that time because of the
unusual legal proceedings and the DOJ investigation related principally to NME's
discontinued psychiatric business. See "Selected Information Regarding NME and
AMH -- National Medical Enterprises, Inc. -- Certain Legal Proceedings."
Although NME recognized the need to continually evaluate the changing
healthcare industry to determine whether a strategic alliance or business
combination with another healthcare provider would be beneficial from an
economic and operational standpoint, NME also recognized that an important step
in accomplishing any business combination transaction on terms acceptable to NME
would be a satisfactory resolution of the DOJ investigation and certain
insurance litigation. As a result, although senior management at NME did not
pursue any specific strategic alliances or business combination analyses at that
time, they actively monitored the industry environment for opportunities to
benefit NME shareholders.
In connection with NME's goal of concentrating on its core business of
operating general hospitals, on July 28, 1993, NME entered into an engagement
letter with DLJ pursuant to which NME retained DLJ to act as its financial
advisor for a period of 12 months with respect to the review and analysis of
NME's financial and structural alternatives. Pursuant to this engagement, DLJ
advised NME with respect to the divestiture of its psychiatric facilities,
rehabilitation hospitals and certain other non-core businesses. Pursuant to the
terms of that engagement letter, as amended by a July 5, 1994 letter, NME has
paid DLJ an initial retainer of $250,000. Such letter agreement provides that,
in the event NME determines to commence certain specified types of transactions
proposed by DLJ for which NME determines to retain a financial advisor,
placement agent or underwriter, as the case may be, DLJ shall have the right to
act as such financial advisor, placement agent or underwriter pursuant to
further agreements appropriate to the circumstances containing provisions for,
among other things, compensation and indemnification. NME also has agreed to
reimburse DLJ promptly for all reasonable and necessary out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel) incurred in
connection with the foregoing engagement and to indemnify DLJ and certain
related persons against certain liabilities in connection with such engagement.
Insofar as indemnification of DLJ for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted pursuant to the
foregoing provisions, NME has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Throughout the second half of 1993 and the first half of 1994, senior
management of NME focused its efforts on resolving the unusual legal proceedings
and disposing of substantially all of its rehabilitation hospitals, psychiatric
facilities and kidney dialysis operations. In April 1994, NME reached an
agreement in principle with the DOJ, and on June 29, 1994, NME executed a final
agreement with the DOJ that concluded the Federal investigations. See "Selected
Information Concerning NME and AMH -- National Medical Enterprises, Inc. --
Certain Legal Proceedings."
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During May and June 1994, senior management of NME began a preliminary
analysis with its financial and legal advisors of the options and opportunities
available to NME. During this time period, representatives of NME began having
preliminary discussions with representatives of AMH regarding the possibility of
a business combination or strategic alliance.
Based upon AMH's ongoing effort to evaluate business combinations involving
publicly held healthcare providers compatible with the business activities and
strategic objectives of AMH, the Board of Directors of AMH concluded that
participation in one or more business combination transactions, whether as the
surviving corporation in such transaction or otherwise, would enhance the
prospects of AMH for future growth and operating performance. Accordingly, in
early 1994, the Board of Directors of AMH directed senior management, AMH's
legal advisors, and each of CS First Boston Corporation ("CS First Boston") and
GKH Partners, L.P. ("GKH"), who were advising AMH on general financial matters
related to the evaluation of strategic and financial alternatives, to fully
assess the potential benefits to AMH and its stockholders of one or more
business combinations involving AMH and those companies who were the subject of
AMH's prior initial evaluation, to the extent such companies had not already
entered into alternative combination transactions. In response to this
directive, in early June 1994 representatives of the AMH Financial Advisors (as
hereinafter defined), on behalf of AMH, reinitiated prior contacts with NME
(which had been preliminarily evaluated by AMH in July 1993). All actions
undertaken by CS First Boston and GKH on behalf of AMH, whether in relation to
the discussions with NME or with regard to AMH strategic alternatives generally,
were taken in their capacity as advisors to AMH and not in the capacity which
they (or their affiliates) hold as stockholders of AMH.
On June 2, 1994, NME and AMH executed a confidentiality agreement pursuant
to which they agreed, among other things, that any confidential information
disclosed by the other party would be treated as confidential and would be used
solely for the purpose of evaluating a proposed transaction. Thereafter, the
senior managements of NME and AMH, together with their financial and legal
advisors, periodically discussed the businesses of the two companies in general
and continued preliminary discussions concerning the possibility of an
acquisition, merger or other form of business combination between NME and AMH.
In July 1994, in light of the fact that NME had resolved a significant
portion of its legal difficulties, senior management of NME began to devote
substantially more time and attention to evaluating NME's role in the evolving
healthcare industry. The resolution of the most significant of NME's legal
difficulties and the disposition of certain properties, together with the cost
control measures implemented during the second calendar quarter of 1994, left
NME positioned to expand its operations through some form of a business
combination or strategic alliance with one or more healthcare providers and
thereby to compete more effectively in the rapidly changing healthcare industry.
In late July 1994, representatives of NME continued their discussions with a
number of healthcare providers regarding the possibility of a business
combination or other strategic alliance.
In early August 1994, senior management of NME and AMH and their respective
financial advisors met and had telephone conferences on several occasions to
discuss due diligence matters and various business opportunities, including a
possible business combination involving both entities. During these meetings,
various forms of a possible transaction were discussed, and NME and AMH agreed
to further discussions regarding business terms for a possible business
combination.
On August 8, 1994, NME entered into an additional engagement letter with DLJ
pursuant to which NME engaged DLJ on an exclusive basis to act as its financial
advisor in connection with a possible sale, merger, consolidation or any other
business combination involving NME and AMH. Pursuant to the engagement letter,
NME has paid DLJ $2,500,000 for acting as financial advisor in connection with
the Merger and has agreed to pay DLJ $7,500,000 upon consummation of the Merger.
NME also has agreed, upon request by DLJ from time to time, to reimburse DLJ
promptly for up to $100,000 of reasonable expenses (including the reasonable
fees and expenses of counsel) incurred by DLJ in connection with its engagement,
whether or not a transaction is consummated. NME also
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agreed to indemnify DLJ and certain related persons against certain liabilities
in connection with its engagement, including liabilities under the Federal
securities laws. Insofar as indemnification of DLJ for liabilities arising under
the Securities Act may be permitted pursuant to the foregoing provisions, NME
has been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
On August 24 and 25, 1994, senior and operational management,
representatives and advisors of both companies met in Dallas, Texas to discuss
various strategic and operational issues, including the need of both parties to
conduct extensive due diligence investigations. As a result, the parties agreed
in principle to exchange certain further confidential information to better
facilitate discussions regarding a business combination.
In connection with the possible investigation by NME of two separate
transactions, one with AMH and the other with HTI, AMH and HTI entered into a
confidentiality agreement on August 26, 1994 to facilitate the flow of
information between AMH and HTI. In addition, on August 25, 1994, AMH and NME
amended the June 2, 1994 Confidentiality Agreement between NME and AMH to take
into account the existence of the confidentiality agreement between AMH and HTI.
On September 1, 1994, representatives of AMH, NME and HTI met in Atlanta,
Georgia to discuss due diligence issues. That meeting was followed up by
telephone conferences and meetings among representatives of AMH, NME and HTI. A
meeting was held on September 30, 1994 in Nashville, Tennessee between
representatives of AMH and HTI to discuss due diligence related issues.
Discussions among AMH, NME and HTI concerning any transaction involving HTI were
terminated on October 4, 1994 with the announcement of the proposed merger
between HTI and Columbia.
Throughout September 1994, NME and AMH exchanged confidential information as
part of their due diligence efforts, and senior and operational management,
representatives and financial and legal advisors of the respective companies
continued to discuss various structural, procedural and operational matters as
they related to the proposed transaction with AMH. During this period, DLJ, on
behalf of NME, and CS First Boston and GKH, on behalf of AMH, were actively
involved in direct negotiations. Persons designated by each of affiliates of CS
First Boston and GKH are members of the Board of Directors of AMH, and
affiliates of CS First Boston and GKH are also significant stockholders of AMH
and parties to the Stockholder Agreements. See "The Merger -- Terms of the
Merger -- Stockholder Approval; Stockholder Agreements" and "-- Interests of
Certain Persons in the Merger."
On September 28, 1994, the Board of Directors of NME held a meeting at which
members of NME's senior management and DLJ made presentations to the Board of
Directors of NME regarding the proposed transaction with AMH. After reviewing
the terms then being discussed regarding a proposed transaction together with
their financial and legal advisors, the Board of Directors of NME directed its
advisors and representatives to proceed with negotiations to ascertain whether
an agreement could be reached with respect to a proposed transaction. After this
meeting the discussions between AMH and NME and their respective representatives
and advisors intensified.
Following announcement of the proposed HTI/Columbia merger, at a regular
meeting of the Board of Directors of AMH on October 4 and 5, 1994, the Board of
Directors of AMH reviewed the competitive impact of the HTI/Columbia merger,
including the possible effect of such transaction upon the ability of AMH to
combine with one or more significant healthcare management companies on terms
favorable to AMH and its stockholders. At that time, the Board of Directors of
AMH discussed the results of the due diligence investigation with respect to NME
and reviewed the history and status of various discussions regarding a potential
business combination involving AMH and NME. Following a review and discussion of
the terms generally proposed by NME, the Board of Directors of AMH determined
that the value of NME's proposal, which was predicated upon components
consisting of a cash payment and a mix of NME securities, was not acceptable. In
view of the AMH Board's overall evaluation of the status of the AMH/NME
negotiations, however, the Board of Directors of AMH concluded that it would be
advisable and in the best interests of AMH that discussions with NME should be
expeditiously pursued and either concluded on terms favorable to
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AMH's stockholders or abandoned, with AMH continuing as an independent company.
Accordingly, the Board of Directors of AMH directed the advisors of AMH to
promptly continue further negotiation of acceptable terms and documentation with
respect to a merger with NME. Concurrently, Salomon was notified that it would
be engaged by AMH to render a fairness opinion should a mutually satisfactory
agreement be negotiated.
During the period from October 7 through October 9, 1994, the respective
members of senior management of NME and AMH, and representatives of DLJ, CS
First Boston, GKH and the companies' respective legal advisors engaged in
extensive meetings and negotiations in Los Angeles, California in an effort to
resolve various open issues and to establish terms of a transaction which could
be submitted for consideration to the Boards of Directors of AMH and NME. At the
conclusion of these meetings, the companies and their respective financial and
legal advisors resolved the terms of a tentative agreement on the Merger as
described herein, including the Merger Consideration, subject to consideration
and approval by the Boards of Directors of NME and AMH. In addition, NME reached
a tentative agreement with CS First Boston, GKH and certain of their respective
affiliates and another substantial stockholder of AMH with respect to the terms
of the Stockholder Agreements to be entered into between such persons and NME.
See "The Merger -- Terms of the Merger -- Stockholder Approval; Stockholder
Agreements."
On October 8, 1994, AMH formally engaged Salomon and thereafter entered into
an engagement letter pursuant to which Salomon agreed, on a non-exclusive basis,
to render financial and advisory services to AMH in connection with the proposed
Merger. The terms of Salomon's engagement letter required Salomon to render a
fairness opinion with respect to the Merger. Pursuant to the engagement letter,
AMH agreed to pay Salomon $1,000,000 for its services. AMH agreed to reimburse
Salomon for the reasonable fees and disbursements of its counsel and for its
reasonable travel and other out-of-pocket expenses. AMH also agreed to indemnify
Salomon and certain related persons against certain liabilities, including
liabilities under the Federal securities laws. Insofar as indemnification of
Salomon for liabilities arising under the Securities Act may be permitted
pursuant to the foregoing provisions, AMH has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.
On October 10, 1994, the Board of Directors of NME held a special meeting to
consider the terms of the proposed Merger. Members of NME's senior management
and their legal counsel and financial advisors made presentations to the Board
and discussed with the Board their views and analyses of various aspects of the
proposed Merger and certain strategic benefits and post-merger operational
efficiencies. At the meeting, DLJ made a financial presentation to the Board of
Directors of NME and delivered a letter indicating that DLJ was highly confident
of its ability to sell approximately $910 million principal amount of New Debt
Securities to enable NME to consummate the Merger. (DLJ subsequently provided
NME with a letter indicating that DLJ was highly confident of its ability to
sell approximately $1 billion principal amount of New Debt Securities.) DLJ's
confidence in its ability to complete such sale was conditioned upon certain
factors, including, among other matters, the terms and conditions of the New
Debt Securities and all other debt and equity financing for the Merger
(including any debt to be assumed) being satisfactory to DLJ, the absence of any
material adverse change in the business, condition, results of operations,
assets, liabilities or prospects of NME, AMH or NME and AMH as a combined
entity, satisfactory market conditions and DLJ's having reasonable time to
market the New Debt Securities with the assistance of management of NME and AMH.
During the course of such meeting, the Board of Directors raised certain
questions regarding the terms of the Stockholder Agreements. Subsequently, NME's
legal advisors negotiated with representatives of certain AMH stockholders to
effect certain modifications to the terms of such agreements requested by the
Board of Directors of NME.
Following such presentations and negotiations, and after extensive
consideration, the Board of Directors of NME determined by a unanimous vote of
those members who were present (one director was absent) (i) that the
transactions contemplated by the Merger Agreement were in the best
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interests of NME, (ii) that the Merger Consideration to be paid by NME was fair,
from a financial point of view, to NME, and (iii) to adopt and approve the
Merger Agreement and the transactions contemplated thereby.
On October 10, 1994, the Financial Advisory Committee of the Board of
Directors of AMH, consisting of disinterested members of the Board of Directors
of AMH, reviewed the terms of the engagement of and fees proposed to be paid by
AMH to each of AMH's financial advisors, GKH, CS First Boston and Salomon
(collectively, the "AMH Financial Advisors"), in connection with the Merger and
the transactions contemplated thereby. Pursuant to engagement agreements with
AMH, the AMH Financial Advisors are to receive an aggregate of $11,150,000 as
follows: $1,000,000 to Salomon and up to $50,000 as reimbursement of expenses of
Salomon, $5,000,000 to each of GKH and CS First Boston and up to $100,000 as
reimbursement of expenses of GKH and CS First Boston, collectively. AMH also
agreed to indemnify the AMH Financial Advisors and certain related persons and
entities against certain liabilities, including liabilities under the Federal
securities laws. Insofar as indemnification of Salomon for liabilities arising
under the Securities Act may be permitted pursuant to the foregoing provision,
AMH has been informed that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. The Financial Advisory Committee considered the scope of services
provided by, and range of fees paid to, financial advisors in prior comparable
transactions and determined that the scope of services and range of fees
proposed with respect to the AMH Financial Advisors' participation in the Merger
were within the range of those performed and paid to financial advisors in prior
comparable transactions. In connection with this consideration, the
representatives of the Financial Advisory Committee noted that CS First Boston
and GKH had provided significant assistance to AMH senior management in the
evaluation and negotiation of various substantive issues relating to the Merger
Agreement, including the final resolution of issues relating to the Merger
Consideration on terms acceptable to AMH. In this regard, the financial advisory
services provided by GKH and CS First Boston primarily related to the advice
generally provided with respect to AMH's evaluations of strategies and to their
assistance in the negotiation of substantive provisions of the Merger Agreement,
while the financial advisory services provided by Salomon related to the
financial presentation provided to the AMH Board of Directors on October 10,
1994 and the opinion delivered in conjunction therewith. Based on the Financial
Advisory Committee's report and recommendation, the AMH Board of Directors (with
the interested directors abstaining) approved the engagement of and payment of
related fees to the AMH Financial Advisors at the Board's October 10, 1994
meeting. Five of AMH's nine non-management directors have relationships with the
AMH Financial Advisors. Robert B. Calhoun, Jr. controls the general partner of
The Clipper Group, L.P., which acts as the manager of certain investments for CS
First Boston and certain of its affiliates, including the shares of AMH Common
Stock owned by MB L.P. I ("MBLP") and 1987 Merchant Investment Partnership
("1987 MIP") (see "The Merger -- Terms of the Merger -- Stockholder Approval;
Stockholder Agreements"), Dan W. Lufkin is the sole stockholder of a corporation
which is a General Partner of GKH, Harold S. Handelsman is Vice President and
Secretary of the general partner of a limited partnership which is a General
Partner of GKH, Melvyn N. Klein is the sole stockholder of a corporation which
is a General Partner of GKH and Harry J. Gray is a limited partner of GKH. GKH
previously provided financial advisory services to AMH in connection with the
sale of AMH's interest in EPIC Holdings Inc. ("EPIC") in connection with the
merger between EPIC and HTI which was consummated in May 1994. In consideration
for AMH's then equity interest in EPIC, AMH received $72.4 million and paid GKH
an advisory fee of $2.3 million. The payment of such fee to GKH also was
recommended and approved by the disinterested members of the Board of Directors
of AMH.
On October 10, 1994, the Board of Directors of AMH held a special meeting to
consider the terms of the proposed Merger and the transactions contemplated
thereby, including the Merger Consideration. At the Board meeting, members of
AMH's senior management, certain of AMH's directors and AMH's legal and
financial advisors reviewed with the Board of Directors of AMH, among other
matters, the background of the proposed Merger, AMH's alternatives to the
Merger, the strategic rationale for and potential risks and benefits of the
Merger, a summary of due diligence findings and
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financial and valuation analyses of the proposed transaction and the terms of
the Merger Agreement. In addition, Salomon delivered its opinion to the Board of
Directors of AMH to the effect that, based upon the matters presented to the
Board of Directors of AMH, as of such date, the proposed consideration to be
received by the holders of AMH Common Stock (other than NME or any of its
affiliates) in connection with the Merger was fair to such holders, from a
financial point of view. See "The Merger -- Opinion of Salomon Brothers Inc".
Following such presentations, and after extensive consideration, the Board
of Directors of AMH determined by a unanimous vote (i) that the transactions
contemplated by the Merger Agreement were in the best interests of AMH, (ii)
that the Merger Consideration was fair, from a financial point of view, to
holders of AMH Common Stock, and (iii) to adopt and approve the Merger Agreement
and the transactions contemplated thereby and to recommend the foregoing to
AMH's stockholders for their approval.
On the evening of October 10, 1994, the Merger Agreement was executed by
NME, Merger Sub and AMH. Immediately thereafter, NME and the holders of
approximately 61.4% of the outstanding AMH Common Stock (including certain
affiliates of GKH and CS First Boston) entered into the three Stockholder
Agreements pursuant to which each of such stockholders agreed to vote (or
consent with regard to) all shares of AMH Common Stock beneficially owned by it
in favor of the transactions contemplated by the Merger Agreement. See "The
Merger -- Stockholder Consent," "-- Terms of the Merger -- Stockholder Approval;
Stockholder Agreements" and "-- Interests of Certain Persons in the Merger."
Pursuant to such agreements, on October 19, 1994, such stockholders executed and
delivered to AMH a written consent approving the Merger and adopting the Merger
Agreement. There are no conditions to the effectiveness of Stockholder
Agreements, although the Stockholder Agreements will expire upon the earlier to
occur of (i) June 30, 1995, provided that if the Merger Agreement is terminated
by AMH as a result of there having been a material breach by NME in respect of
any representation and warranty, covenant or agreement set forth therein, which
has not been cured or, if curable, was not cured within 30 days after written
notice of such breach was given by AMH, or NME shall have been unable to obtain
financing to provide for consummation of the Merger prior to May 31, 1995,
termination of the Stockholder Agreements will occur on the effective date of
the termination of the Merger Agreement. The Stockholder Agreements will also
terminate at the Effective Time of the Merger or immediately following the
making of an Alternate Transaction Payment (as hereinafter defined). Upon any
termination, the Stockholder Agreements will have no further force or effect,
except for certain rights in regard to actions taken to enforce rights
thereunder which accrue prior to termination.
On the morning of October 11, 1994, NME and AMH issued a joint press release
announcing the execution of the definitive Merger Agreement.
APPROVAL OF NME BOARD OF DIRECTORS; REASONS FOR THE MERGER
The Board of Directors of NME believes the terms of the Merger Agreement and
the transactions contemplated thereby are fair to and in the best interests of
NME. Accordingly, the Board of Directors of NME has unanimously approved the
Merger (with one director absent). The Board of Directors of NME believes that
the Merger will result in an organization with the competitive strength required
by the increasing consolidation affecting the healthcare industry.
In reaching its determination, the Board of Directors of NME consulted with
NME management, as well as its financial and legal advisors, and considered a
number of factors, including, without limitation, the following:
(i) that by providing NME with the opportunity to combine with a company
having a substantial portfolio of hospitals known for high quality care and
strong financial performance, the Merger would support a major strategic
objective of NME to become a significant provider of healthcare services in
certain geographic areas throughout the United States;
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(ii) the potential efficiencies and synergies expected to be realized as a
result of the combination of the operations of NME and AMH, the integration of
office facilities and support functions, improved bad debt collection and the
increased purchasing power of the combined companies;
(iii) that based on the relative earnings of both companies and the Merger
Consideration, the Merger should be accretive to NME's earnings in fiscal year
1996 and thereafter, assuming certain expected savings and synergies are
achieved;
(iv) that the Merger would diversify NME's hospital portfolio, making NME's
overall results of operations less affected by fluctuations in the operating
performance of individual hospitals and less dependent on particular geographic
areas;
(v) that the addition of AMH's facilities in complementary geographic
areas would improve NME's ability to develop and offer more attractive networks
and provide more comprehensive coverage to Group Purchasers and to enter into
comprehensive healthcare delivery networks;
(vi) the improved ability of NME to pursue acquisitions where there is an
opportunity to enhance NME's network of hospitals;
(vii) information with respect to the financial condition, business,
operations and prospects of both NME and AMH on a historical and prospective
basis, including certain information reflecting the two companies on a pro forma
combined basis;
(viii) the financial presentation of DLJ;
(ix) the terms of the Merger Agreement and the Stockholder Agreements; and
(x) the opportunity to create a combined company with greater financial
resources and flexibility, competitive strengths and business opportunities than
would be possible for NME alone.
These factors were considered collectively by the Board of Directors of NME,
without giving specific weight to any particular factor.
APPROVAL OF AMH BOARD OF DIRECTORS; REASONS FOR THE MERGER
The Board of Directors of AMH believes that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to and in the best
interests of AMH and its stockholders. Accordingly, the Board of Directors of
AMH has approved the Merger Agreement and unanimously recommended approval
thereof by the stockholders of AMH. In reaching its determination, the Board of
Directors of AMH consulted with AMH management, as well as its legal counsel and
the AMH Financial Advisors, and considered a number of factors, including,
without limitation, the following:
(i) AMH's strategic alternatives, including remaining a separate company,
acquisitions, asset swaps, divesting certain assets and selling AMH to another
party;
(ii) AMH's financial alternatives, including recapitalization and other
releveraging transactions;
(iii) information concerning the financial performance, financial
condition, business operations and prospects of NME and AMH;
(iv) the opportunities for economies of scale and operating efficiencies
that are anticipated to result from the Merger, particularly in terms of the
integration of office facilities, information systems, support functions and the
combined purchasing power of the combined corporations;
(v) the Merger will better position the combined company to deal with
uncertainties which may face the industry due to healthcare reform;
(vi) as a combined entity AMH would be better positioned to develop a new
comprehensive integrated healthcare delivery network with physicians and other
healthcare providers in certain of AMH's markets;
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(vii) the Merger would improve the combined company's ability to access the
capital markets and otherwise increase its financial flexibility;
(viii) the lack of any substantial impediments on the ability of the AMH
Board to entertain alternative proposals, negotiate and give information to
third parties and terminate the Merger Agreement in the event of an alternative
proposal if required by the Board's fiduciary duties to AMH's stockholders;
(ix) the management strengths of AMH and NME;
(x) the Merger Consideration and recent trading prices for AMH Common
Stock and NME Common Stock;
(xi) the financial presentation and the opinion of Salomon to the effect
that the Merger Consideration was fair to the holders of AMH Common Stock (other
than NME or any of its affiliates) from a financial point of view; and
(xii) the terms of the Merger Agreement.
The Board of Directors of AMH believes that the Merger offers the
opportunity to create a combined company with greater financial resources and
flexibility, competitive strengths and business opportunities than would be
possible for AMH alone.
In view of the wide variety of factors considered in connection with its
evaluation of the proposed Merger, the Board of Directors of AMH did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weight to the specific factors considered in reaching its determination.
OPINION OF SALOMON BROTHERS INC
At the meeting of the Board of Directors of AMH on October 10, 1994, at
which the Board of Directors of AMH approved the Merger Agreement, Salomon
delivered its opinion to the effect that, based upon the matters presented to
such Board, as of such date, the consideration to be received by the holders of
AMH Common Stock (other than NME or any of its affiliates) in connection with
the Merger was fair to such holders from a financial point of view. No
limitations were imposed by the Board of Directors of AMH upon Salomon with
respect to the investigations made or the procedures followed by Salomon in
rendering its opinion. Salomon was not requested by the Board of Directors of
AMH to make any recommendation as to the form or amount of consideration to be
paid by NME pursuant to the Merger Agreement, which issues were resolved in
arm's length negotiations between NME and AMH.
The full text of the opinion of Salomon, dated October 10, 1994, is set
forth as Annex C to this Information Statement/Prospectus and sets forth the
assumptions made, matters considered and limits on the review undertaken. AMH
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. Salomon's opinion is
directed only to the fairness, from a financial point of view, of the
consideration which the holders of AMH Common Stock would receive in the Merger
and does not constitute a recommendation concerning the Merger. The summary of
the opinion of Salomon set forth in this Information Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion.
Salomon is an internationally recognized investment banking firm which
provides financial services in connection with a wide range of business
transactions. As part of its business, Salomon regularly engages in the
valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and for
other purposes. The Board of Directors of AMH retained Salomon based on
Salomon's expertise in the valuation of companies as well as its familiarity
with AMH and the hospital management industry in general.
Salomon is not affiliated with AMH or NME. Salomon has previously rendered
certain financial advisory and investment banking services to AMH, for which
Salomon received customary compensation. In the ordinary course of its business,
Salomon actively trades the debt and equity securities of
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AMH and NME for its own account and the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Pursuant to an engagement letter dated October 8, 1994, AMH paid Salomon
$1,000,000 for its services. AMH agreed to reimburse Salomon for the reasonable
fees and disbursements of its counsel and for its reasonable travel and other
out-of-pocket expenses. AMH also agreed to indemnify Salomon and certain related
persons against certain liabilities, including liabilities under the Federal
securities laws, relating to or arising out of its engagement. Insofar as
indemnification of Salomon for liabilities arising under the Securities Act may
be permitted pursuant to the foregoing provision, AMH has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In arriving at its opinion, Salomon reviewed the Merger Agreement and
related exhibits. It also reviewed certain publicly available business and
financial information relating to AMH, as well as certain other information,
including financial projections, provided to Salomon by AMH. Salomon discussed
the past and current operations and financial condition and prospects of AMH
with AMH's senior management. With respect to NME, Salomon reviewed publicly
available business, financial and trading information and financial projections
provided to it by NME and discussed the past and current operations and
financial condition and prospects of NME with NME's senior management. Salomon
also considered such other information, financial studies, analyses,
investigations and financial, economic, market and trading criteria which it
deemed relevant.
In connection with its review, Salomon assumed and relied on the accuracy
and completeness of the information it reviewed for the purpose of its opinion
and has not assumed any responsibility for independent verification of such
information or for any independent evaluation or appraisal of the assets of AMH
or NME. With respect to AMH's and NME's financial projections, Salomon assumed
that they had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of AMH or NME, as the case
may be, as to the future financial performance of AMH or NME, as the case may
be, and Salomon expressed no opinion with respect to such forecasts or the
assumptions on which they were based. Salomon's opinion was necessarily based
upon business, market, economic and other conditions as they existed on, and
could be evaluated as of, October 10, 1994 (the date of its opinion) and did not
address AMH's underlying business decision to effect the Merger or constitute a
recommendation to any holder of AMH Common Stock concerning the Merger. Salomon
was not requested to, and did not, solicit third-party offers to acquire all or
any part of AMH. Salomon's opinion did not imply any conclusion as to the likely
trading range for NME Common Stock following the consummation of the Merger,
which may vary depending on, among other factors, changes in interest rates,
dividend rates, market conditions, general economic conditions and other factors
that generally influence the price of securities.
The following is a summary of the report (the "Salomon Report") presented by
Salomon to the AMH Board of Directors in connection with the rendering of
Salomon's opinion:
(i) STOCK TRADING HISTORY. Salomon examined the history of trading
prices and volume for AMH Common Stock, NME Common Stock, a composite index
of certain companies similar to AMH and NME and the Standard & Poors
Composite Average of 500 industrial companies in relation to each other and
the relationship between price movements thereof. The composite index of
similar companies consisted of the common stock of Columbia, Community
Health Systems, Inc., Health Management Associates, Inc., HTI, OrNda and
Universal Health Services, Inc. Salomon noted, in its presentation to the
AMH Board of Directors, that there had been a significant amount of merger
activity in the hospital industry and that the common stock price of the
comparable companies, as well as AMH and NME, had appreciated, to various
extents, to reflect takeover speculation. Since its initial public offering
in 1991, AMH Common Stock has traded as high as $26.625 per share and as low
as $7 per share. Over the 52 weeks prior to the announcement of the Merger,
AMH Common Stock traded between $26.625 and $15.25 per share and had a price
immediately prior to announcement of the Merger of $22.375 per share. Over
the
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52 weeks prior to the announcement of the Merger, NME Common Stock traded
between $11 and $19.50 per share and had a price immediately prior to
announcement of the Merger of $16.25 per share.
(ii) CERTAIN FINANCIAL DATA. Salomon reviewed data relating to the
financial performance and characteristics of AMH and NME, each on an
independent basis. This data included five-year historical and latest 12-
and nine-month income statement, cash flow statement and balance sheet data
for AMH and five-year historical income statement, cash flow statement and
balance sheet data for NME.
(iii) DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow ("DCF")
methodology, Salomon valued each of AMH and NME estimating the present value
of future free cash flows available to their respective debt and equity
holders if each of AMH and NME were to perform on a stand-alone basis
(without giving effect to the Merger) in accordance with management
forecasts and certain variants thereof. Free cash flow represents the amount
of cash generated and available for principal, interest and dividend
payments after providing for ongoing business operations. For each company,
Salomon aggregated (x) the present value of the free cash flow over the
five-year period from 1995 to 1999 with (y) the present value of the range
of terminal values described below. The range of terminal values was
calculated by applying multiples of 7.0x to 9.0x to each of AMH's and NME's
earnings before depreciation, interest, amortization and taxes ("EBDIAT").
This range of terminal values represented, for each of AMH and NME, their
respective value beyond 1999. As part of the DCF analysis, Salomon used
discount rates of 13% to 17% for AMH and 10% to 14% for NME. This DCF
analysis resulted in a present value of the AMH Common Stock of $22 to $29
per share and a present value of the NME Common Stock of $15 to $19 per
share. Salomon also performed a DCF analysis on the combined AMH/NME entity,
giving effect to the Merger and various assumptions provided by AMH and NME
management, including certain synergies and cost savings expected to be
realized by the Merger. Applying an 11% to 15% discount rate and a 7.5x to
9.5x multiple to the combined company's estimated 1999 EBDIAT, the analysis
resulted in a present value for the common stock of the combined AMH/ NME
entity of $19 to $24 per share.
The discount rates described above as part of the DCF analysis were
calculated using the capital asset pricing model, which calculates the
expected rate of return offered in the capital markets by equivalent-risk
assets. This financial analysis takes into account the level of systematic
risk associated with a company's stock price (the beta) and the ratio of
debt to equity on such a company's balance sheet. These two factors, when
taken into account by the capital asset pricing model, contributed to the
difference in ranges of discount rates for AMH, NME and the combined AMH/NME
entity. The terminal values described above, which are used to imply the
value of a company at some point in the future, were selected because they
represented the current trading range of selected comparable companies. The
range of terminal values was slightly higher for the combined entity than
those used for AMH and NME as stand-alone entities in order to take into
account potential operating synergies estimated by AMH and NME for the
combined company.
(iv) COMPARABLE COMPANY ANALYSIS. Salomon compared the financial and
market performance of AMH and NME with that of the following group of
selected publicly traded hospital companies: Columbia; Community Health
Systems, Inc.; Health Management Associates, Inc.; HTI; OrNda; and Universal
Health Services, Inc. Salomon selected the foregoing companies on the basis
of various factors, including size, as measured by the number of hospitals,
revenue and geographic market conditions. Salomon examined certain publicly
available financial data of the comparable companies, including: the equity
market capitalization; the equity market capitalization plus total debt,
preferred stock and minority interests but less cash (collectively, "Firm
Value"); the ratio of Firm Value to latest 12-month net revenues, latest
12-month EBDIAT and latest 12-month earnings before interest and taxes
("EBIT"); and the ratio of current stock prices to latest 12-month earnings
per share, current fiscal year estimated earnings per share (as
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estimated by Institutional Brokerage Estimate Systems Inc. ("IBES")) and
next fiscal year estimated earnings per share (as estimated by IBES). The
data reviewed also included selected operating expense ratios. This analysis
resulted in an equity value reference range for AMH Common Stock of $21 to
$27 per share and of NME Common Stock of $16 to $21.50 per share. Salomon
also valued AMH by adding a takeover premium of 20% to 40% to the comparable
company analysis of AMH Common Stock, recognizing, however, that, as
discussed above, the public market price of AMH Common Stock, among others,
had already appreciated to include some takeover premium. A comparable
company analysis on the combined AMH/NME entity, giving effect to the Merger
and various assumptions provided by AMH and NME management, including
synergies and cost savings, resulted in an equity value reference range for
the common stock of the combined entity of $18 to $21 per share.
(v) COMPARABLE TRANSACTION ANALYSIS. Salomon also reviewed the
consideration paid or proposed to be paid in other acquisitions of hospital
companies. Specifically, Salomon reviewed the following acquiror/target
transactions: Columbia/HTI (1994); Community Health Systems, Inc./Hallmark
Healthcare Corp. (1994); HTI/Nashville Memorial Hospital (1994); HTI/Epic
(1994); OrNda/Summit Health Ltd. (1994); OrNda/American Healthcare
Management Inc. (1994); Columbia Healthcare Corporation/HCA Hospital
Corporation of America (1994); Quorum Health Group, Inc./Acute Care
Hospitals (1994); Columbia Hospital Corporation/Galan Health Care, Inc.
(1993); OrNda/Florida Medical Center (1993); and HTI/Medical Center
Hospitals (1993). The analysis considered the multiple of Firm Value to
latest 12-month revenue, EBDIAT and EBIT; the multiple of market
capitalization to latest 12-month net income, current fiscal year projected
net income (as estimated by IBES) and current tangible book value; and the
multiple of premium to the target's stock price 30 days prior to each
transaction's announcement. This analysis resulted in an equity value
reference range for AMH Common Stock of $22 to $29 per share and for NME
Common Stock of $16 to $24 per share.
No company or transaction used in the comparable company or comparable
transaction analyses summarized above is identical to AMH, NME, the combined
entity or the Merger itself. Accordingly, any such analysis of the value of
the Merger involves complex considerations and judgments concerning
differences in the potential financial and operating characteristics of the
comparable companies and other factors in relation to the trading and
acquisition values of the comparable companies and publicly announced
transactions.
(vi) CONTRIBUTION ANALYSIS. Salomon analyzed the balance sheet and income
statement contribution of AMH and NME to the combined entity on a pro forma
basis, including the respective contribution of AMH and NME to revenue,
gross margin, EBDIAT, EBIT, net income, debt, cash and stockholders' equity,
as well as certain other combined pro forma operating ratios for the latest
12 months ended May 31, 1994 and, based on projections provided by AMH and
NME management, for each of the projected fiscal years ending May 31, 1995
through May 31, 1999. No pro forma adjustments were made for the Merger, and
Salomon assumed that the AMH and NME projections were accurate. The analysis
showed, among other things, that AMH's income statement contribution to the
combined entity ranged from a low of 30% of net income for the latest
12-month period ended May 31, 1994 to a high of 49% of EBDIAT for the
projected fiscal year ended May 31, 1995.
(vii) PRO FORMA MERGER ANALYSIS. Salomon reviewed certain pro forma
financial effects on NME resulting from the Merger for the 12 months ended
May 31, 1994 and the projected 12-month periods thereafter for 1995 through
1999. This analysis was based upon certain assumptions, including that the
projections provided to Salomon by AMH and NME management were accurate.
Based on advice from AMH and NME management, Salomon assumed pre-tax
synergies from the Merger of $45 million in 1995, growing at 5% per year
thereafter. The financial analysis indicated that the 1995 projected
earnings were approximately 8.9% higher than the earnings per share
projected for NME as a stand-alone entity, although approximately 4.5% lower
for the 12 months ended May 31, 1994. Based on certain publicly available
data, Salomon also
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compared Firm Value and certain income and balance sheet items (such as debt
and EBDIAT) for the combined AMH/NME entity with those for the comparable
companies described above under "-- Comparable Company Analysis."
(viii) OTHER CONSIDERATIONS. Salomon also considered in its analyses
certain qualitative factors and industry trends. These included, among
others, operations, services and markets of AMH, NME and the combined entity
after giving effect for the Merger. Salomon also conducted an ownership
profile for AMH and NME Common Stock and reviewed the liquidity of the
trading in each such Common Stock.
The preparation of a fairness opinion is not susceptible to partial analysis
or summary descriptions. Salomon believes that its analyses and the summary set
forth above must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering all analyses and
factors, could create an incomplete view of the processes underlying the
analysis set forth in its opinion and the Salomon Report. Salomon has not
indicated that any of the analyses which it performed had a greater significance
than any other. The ranges of valuations resulting from any particular analysis
described above should not be taken to be the view of Salomon of the actual
value of AMH or NME.
In performing its analyses, Salomon made numerous assumptions with respect
to industry performance, general business, financial, market and economic
conditions and other matters, many of which are beyond the control of AMH or
NME. The analyses which Salomon performed are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of Salomon's analysis of the fairness, from a financial point of view, of
the consideration which the holders of AMH Common Stock would receive in the
Merger. The analyses do not purport to be appraisals or to reflect the prices at
which a company might actually be sold or the prices at which any securities may
trade at the present time or at any time in the future.
As described above, the opinion of Salomon was one of many factors taken
into consideration by the Board of Directors of AMH in making its determination
to approve the Merger. The opinion of Salomon does not address the relative
merits of the Merger as compared to any alternative business strategies that
might exist for AMH or the effect of any other business combination in which AMH
might have engaged.
On or about December 5, 1994, Salomon was engaged by NME to serve as
co-manager, with DLJ as lead underwriter, for NME in the Public Offering. On or
about January 5, 1995, Salomon was engaged to serve as a dealer manager, with
DLJ, to NME in the NME Tender Offers (as hereinafter defined). Salomon has
advised AMH that Salomon does not believe that such engagements would interfere
with its ability, if requested by AMH, to render confirmation of its opinion. In
connection with such engagements, NME has agreed to indemnify Salomon and
certain related persons against certain liabilities, including liabilities under
the Federal securities laws, relating to or arising out of such engagements.
Insofar as indemnification of Salomon for liabilities arising under the
Securities Act may be permitted pursuant to the foregoing provision, NME has
been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
STOCKHOLDER CONSENT
Section 228 of the Delaware General Corporation Law (the "DGCL") provides
that action on a matter required or permitted under such law to be voted upon at
a meeting of stockholders may be taken without a meeting, without prior notice
and without a vote, by the written consent of holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action if a meeting of stockholders were held at which
all shares entitled to vote thereon were present and voted.
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Pursuant to Section 251 of the DGCL, the affirmative vote or written consent
of the holders of at least a majority of the outstanding shares of AMH Common
Stock is required to approve and adopt the Merger and the Merger Agreement. As
provided by the Stockholder Agreements, written consents, representing
approximately 61.4% of the outstanding AMH Common Stock, approving and adopting
the Merger and the Merger Agreement have been executed in accordance with
Section 228 of the DGCL. See "The Merger -- Terms of the Merger -- Stockholder
Approval; Stockholder Agreements."
In accordance with the rules and regulations of the Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Merger may
not be consummated prior to March 1, 1995, the 20th business day following the
mailing of this Information Statement/Prospectus to the stockholders of AMH.
The Amended Bylaws of AMH incorporate by reference certain provisions of an
Amended and Restated Stockholders Agreement (the "AMH Stockholders Agreement"),
by and among GKH Investments, L.P. (the "Fund"), GKH Private Limited ("GKHPL"),
First Plaza Group Trust ("First Plaza"), MBLP, 1987 MIP (1987 MIP and MBLP are
affiliates of CS First Boston) and certain other AMH stockholders and AMH, dated
as of July 30, 1991. The AMH Stockholders Agreement requires the consent of
holders of 66 2/3% of the AMH Common Stock held by the parties to the AMH
Stockholders Agreement or their permitted transferees (the "AMH Stockholders
Agreement Shares") for approval of the Merger. The holders of more than the
required 66 2/3% of the AMH Stockholders Agreement Shares have executed written
consents to the Merger and the Merger Agreement. See "The Merger -- Interests of
Certain Persons in the Merger."
TERMS OF THE MERGER
Set forth below is a brief description of certain terms of the Merger
Agreement. This description does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement which is attached hereto as
Annex A and is incorporated herein by reference.
At the Effective Time, Merger Sub will be merged with and into AMH, and the
separate existence of Merger Sub will cease. AMH will be the surviving
corporation (the "Surviving Corporation") in the Merger and will continue to
exist as a wholly owned subsidiary of NME.
At the Effective Time, each share of AMH Common Stock then issued and
outstanding (other than shares held by persons seeking appraisal rights, shares
held by NME and its subsidiaries) will be converted into the right to receive
(i) 0.42 of a fully paid and nonassessable share of NME Common Stock and (ii)
$19.00 in cash ($19.25 if the Merger is consummated after March 31, 1995)
(collectively, the "Merger Consideration"). Notwithstanding the foregoing, all
shares of AMH Common Stock owned by NME or a direct or indirect wholly owned
subsidiary of NME will be cancelled pursuant to the Merger Agreement. No
fractional shares of NME Common Stock will be issued in the Merger, and holders
of AMH Common Stock whose shares are converted in the Merger will be entitled to
a cash payment in lieu of fractional shares of NME Common Stock as described
under "The Merger -- Terms of the Merger -- Fractional Shares" and "-- Exchange
of Certificates." Prior to the Effective Time, NME or any of its subsidiaries
may not engage in a business combination or material acquisition as a
consequence of which Salomon advises AMH that Salomon is required to withdraw
its fairness opinion, unless NME permits AMH stockholders to receive, at the
election of AMH, $6.88 in cash in lieu of 0.42 shares of NME Common Stock as
part of the Merger Consideration.
AMH may elect to require NME to pay $6.88 in cash in lieu of 0.42 shares of
NME Common Stock as part of the Merger Consideration if the Board of Directors
of AMH determines that the transaction(s) giving rise to the withdrawal of the
Salomon fairness opinion would be dilutive to the equity value of NME Common
Stock or could otherwise create uncertainties in value on a short-term basis
which would not permit former stockholders of AMH to otherwise make a timely and
informed decision with regard to the retention or disposition of the shares of
NME Common Stock otherwise receivable as part of the Merger Consideration.
Since, however, the election of AMH will be dictated by facts and circumstances
related to the specific business combination or material acquisition then
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involving NME, the ultimate determination will be dependent upon those facts and
circumstances, and AMH cannot currently predict whether it would elect to
receive cash in lieu of shares of NME Common Stock. If NME is unable to provide
sufficient cash to complete payment of the Merger Consideration upon an election
of AMH to receive an all cash payment of the Merger Consideration, NME's
inability to obtain financing sufficient to provide such cash by May 31, 1995
would entitle AMH to terminate the Merger Agreement and to receive a termination
fee from NME in the amount of $150,000,000.
At the Effective Time, each issued and outstanding share of the common stock
of Merger Sub will be converted into one share of common stock of the Surviving
Corporation, all of which will be held by NME.
A description of the relative rights, privileges and preferences of NME
Common Stock and AMH Common Stock, including certain material differences
between the rights of holders of NME Common Stock and AMH Common Stock, is set
forth under "The Merger -- Comparative Rights of Stockholders."
CLOSING; EFFECTIVE TIME. The closing of the Merger (the "Closing") will
take place on the later of (i) 20 business days after the date this Information
Statement/Prospectus is first given or sent to AMH stockholders, (ii) the third
business day following notice from NME to AMH that it has obtained the proceeds
from the financing necessary to provide for consummation of the Merger, and
(iii) the day on which all conditions set forth in the Merger Agreement are
satisfied or waived, or at such other date as NME and AMH shall agree. The
Merger will become effective upon the filing of a duly executed certificate of
merger with the Delaware Secretary of State or at such later time as is
specified in the certificate of merger (the "Effective Time").
AMH STOCK OPTIONS. As of January 10, 1995, options to purchase 3,280,567
shares of AMH Common Stock (the "AMH Options") had been granted and remained
outstanding and unexercised. The exercise prices of each of the foregoing grants
was equal to the fair market value of AMH Common Stock on the date that the
grant or the date on which commitment to make the grant was made and range from
$7.03 to $24.54 per share. At the Effective Time, except as described below,
each AMH option that is outstanding and unexercised, whether vested or unvested,
will be cancelled (such cancellation, together with the cancellation of the AMH
Options held by members of AMH's management described below, the "AMH Option
Cancellation") in consideration for payment by AMH promptly after the Effective
Time to holders of AMH Options of cash in an amount equal to (i) the product of
(A) the sum of (x) $19.00 ($19.25 if the Merger is consummated after March 31,
1995), plus (y) 0.42 times the average closing sales price of a share of NME
Common Stock on the New York Stock Exchange (the "NYSE") over the ten
consecutive trading days immediately preceding the consummation of the Merger,
and (B) the number of shares of AMH Common Stock subject to AMH Options, less
(ii) the exercise price of such AMH Options. The foregoing notwithstanding,
selected executive employees of AMH who hold approximately 1,220,200 AMH
Options, including Robert W. O'Leary and John T. Casey, have agreed with AMH to
cancel their AMH Options in exchange for an amount of cash and NME Common Stock
equal to the Merger Consideration less an amount equal to the exercise price per
share that such employees would have paid to AMH had they exercised their AMH
Options prior to the Effective Time. Payment of the AMH Option Cancellation will
be funded from AMH's available cash balances or from borrowings under AMI's
revolving credit facility and using shares of NME Common Stock issued to AMI, in
exchange for a note. See "The Merger -- Interests of Certain Persons in the
Merger -- Stock Option Plans."
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The Merger Agreement
provides that the directors of Merger Sub immediately prior to the Effective
Time will be the initial directors of the Surviving Corporation. It further
provides that the officers of AMH immediately prior to the Effective Time will
be the initial officers of the Surviving Corporation and will hold office from
the Effective
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Time until their respective successors are duly elected or appointed and qualify
in the manner provided by the Certificate of Incorporation and By-Laws of the
Surviving Corporation, or as otherwise provided by law.
DIRECTORS AND PRINCIPAL OFFICERS OF NME. It is anticipated that, as of the
date following the Effective Time, the Board of Directors of NME will be
increased from ten members to 13 members. Pursuant to the Merger Agreement, the
three additional directors created by the increase in the Board of Directors
will be nominated by AMH, subject to approval by NME, and appointed by the Board
of Directors of NME to fill such vacancies. It is currently expected that such
AMH nominees will be Robert W. O'Leary, currently Chairman of the Board and
Chief Executive Officer of AMH, John T. Casey, currently President and Chief
Operating Officer of AMH, and Thomas J. Pritzker, President and a director of
Hyatt Corporation, a diversified company primarily engaged in real estate and
hotel management activities, President and a director of the general partner of
a limited partnership which is a general partner of GKH, and Chairman of the
Board of Healthcare Compare Corp., a public company engaged in the managed
healthcare business. Each of Messrs. O'Leary and Casey are currently directors
of AMH and, if nominated, they, as well as Mr. Pritzker, have consented to serve
as directors of NME. See "The Merger -- Interests of Certain Persons in the
Merger -- Directors and Officers of NME and Surviving Corporation." It is
anticipated that after consummation of the Merger Jeffrey C. Barbakow will
continue to serve as Chairman of the Board and Chief Executive Officer of NME,
Messrs. O'Leary and Casey will serve as Co-Vice Chairmen of the Board of
Directors of NME and Michael H. Focht, Sr. will continue to serve as a director
and as President and Chief Operating Officer of NME.
EXCHANGE OF CERTIFICATES. AMH STOCKHOLDERS SHOULD NOT SUBMIT THEIR STOCK
CERTIFICATES EVIDENCING SHARES OF AMH COMMON STOCK FOR EXCHANGE UNLESS AND UNTIL
THE TRANSMITTAL INSTRUCTIONS AND A FORM OF LETTER OF TRANSMITTAL ARE RECEIVED OR
OBTAINED FROM THE EXCHANGE AGENT (AS DEFINED BELOW).
At or before the Effective Time, NME shall deposit in trust with The Bank of
New York, as exchange agent (the "Exchange Agent"), for the benefit of holders
of AMH Common Stock, (i) certificates representing the shares of NME Common
Stock issuable as part of the Merger Consideration and cash in an amount equal
to the aggregate cash component of the Merger Consideration to be paid to the
holders of AMH Common Stock and (ii) cash to be paid in lieu of the issuance of
fractional shares (as described below), as provided by the Merger Agreement.
Promptly after the Effective Time, the Exchange Agent will mail or make
available for delivery at its principal office letters of transmittal to the
former AMH stockholders, to be used in forwarding their certificates
representing shares of AMH Common Stock for surrender and exchange for the
Merger Consideration, as well as cash for any fractional share interests in NME
Common Stock to which such holders otherwise would be entitled. Until such
surrender, certificates representing shares of AMH Common Stock (other than
shares held by AMH stockholders who have elected appraisal rights and shares
held by NME and its subsidiaries) will be deemed to represent the number of
shares of NME Common Stock and the amount of cash into which such AMH shares
were converted in the Merger, except that holders of AMH Common Stock
certificates will not be entitled to receive dividends or any other
distributions from NME until such certificates are so surrendered. When such
certificates are surrendered, the holders of the NME certificates issued in
exchange therefor will be paid, without interest, any dividends or other
distributions which may have become payable with respect to such shares of NME
Common Stock after the Effective Time.
FRACTIONAL SHARES. No certificates or scrip representing a fractional share
interest in NME Common Stock will be issued. In lieu of any such fractional
share interest, each holder of AMH Common Stock who otherwise would be entitled
to receive a fractional share interest in NME Common Stock in the Merger will be
paid cash upon surrender of shares of AMH Common Stock in an amount equal to the
product of such fraction multiplied by the average reported closing sale price
of NME Common Stock on the NYSE over the ten consecutive trading days
immediately preceding the date of consummation of the Merger (the "Average
Price").
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REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties relating to, among other things, (a)
each of AMH's and NME's and certain of their respective subsidiaries'
organization and similar corporate matters; (b) each of AMH's and NME's capital
structure and the ownership of Merger Sub by NME; (c) authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters; (d) absence of conflicts under certificates of incorporation or
by-laws, required consents or approvals and absence of violations of any
instruments or law; (e) documents filed by each of NME and AMH with the
Commission and the accuracy of the information contained therein; (f) the
accuracy of information supplied by each of NME and AMH in connection with the
Registration Statement and this Information Statement/Prospectus; (g) subject to
certain exceptions, absence of certain specified material changes or events; (h)
litigation; (i) absence of undisclosed liabilities; (j) taxes; (k) title to
certain properties; (l) medicare participation/accreditation and recapture; (m)
labor matters; (n) employee benefits and matters relating to the Employee
Retirement Income Security Act of 1974, as amended; (o) patents, licenses,
franchises and formulas; (p) insurance; (q) approval by the respective Board of
Directors; and (r) the hiring of brokers and finders.
REGISTRATION RIGHTS. In satisfaction of a condition to the Merger
Agreement, prior to the Effective Time NME will enter into a registration rights
agreement (the "Registration Rights Agreement") with persons who may be
considered to be "affiliates" of AMH for the purposes of the Securities Act,
including without limitation the directors and executive officers of AMH and
those persons (including Distributees, as therein defined) other than NME who
are parties to Stockholder Agreements. The Registration Rights Agreement
provides for registration under the Securities Act, at NME's expense, of the
shares of NME Common Stock that such holders will receive in the Merger, which
will permit such holders to sell such shares of NME Common Stock. Such holders
have agreed not to effect a public sale or distribution of any of NME's
securities under certain circumstances, including during the ten-day period
prior to, and during the 80-day period beginning on, the closing date of an
underwritten offering if so requested by the underwriter; provided, however,
that no such request may be made by NME or any such underwriter prior to the
90th day following the Effective Time. A form of the Registration Rights
Agreement is an exhibit to the Merger Agreement which is attached hereto as
Annex A.
SPECIAL DIVIDEND. Pursuant to the terms of the Merger Agreement, AMH is
permitted and intends to declare a special dividend (the "AMH Special Dividend")
payable on February 28, 1995 to stockholders of record on February 10, 1995.
Payment of the AMH Special Dividend will be funded from AMH's available cash or
from borrowings under AMH's revolving credit facility.
CONDITIONS. The respective obligations of AMH and NME to effect the Merger
are subject to the following conditions: (a) the expiration or termination of
any waiting period applicable to the consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act") and no action shall have
been instituted by the DOJ or the Federal Trade Commission challenging or
seeking to enjoin the Merger; (b) the effectiveness of the Registration
Statement of which this Information Statement/Prospectus is a part and the
absence of a stop order at the Effective Time; (c) the approval and adoption of
the Merger Agreement and the transactions contemplated thereby by the requisite
vote of AMH stockholders (such approval, if not withdrawn, is assured pursuant
to the written consents received by AMH from holders of approximately 61.4% of
the outstanding AMH Common Stock) and 20 business days having passed after the
mailing of this Information Statement/Prospectus; (d) the absence of a
preliminary or permanent injunction or other order by any Federal or state court
or governmental authority in the United States prohibiting consummation of the
Merger; and (e) the receipt by NME and AMH of the requisite permits,
authorizations, consents or approvals from governmental entities.
In addition, the obligations of AMH to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions: (a) NME and Merger Sub each shall have performed in all material
respects their obligations under the Merger Agreement required to be performed
by it at or prior to the Effective Time and the representations and warranties
of NME and
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Merger Sub contained in the Merger 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 the Merger Agreement; (b) the receipt by AMH of
certain opinions of counsel; (c) the receipt of a comfort letter from KPMG Peat
Marwick LLP with respect to financial statements of NME included in this
Information Statement/Prospectus and other matters customarily addressed by such
letters; (d) that there has been no change in the financial condition, business,
operations or prospects of NME and its subsidiaries, taken as a whole, that have
had or would be reasonably likely to have a material adverse effect on NME,
other than any such change that affects both NME and AMH in a substantially
similar manner; (e) the NME Common Stock to be issued in connection with the
Merger shall have been approved for listing on the NYSE; and (f) the
registration statement relating to the Registration Rights Agreement shall have
been declared effective and no stop order shall have been issued in respect
thereof.
The obligations of NME and Merger Sub to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions: (a) AMH shall have performed in all material respects its
obligations under the Merger Agreement required to be performed by it at or
prior to the Effective Time and the representations and warranties of AMH
contained in the Merger 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 the Merger Agreement; (b) the receipt by NME of
certain opinions of counsel; (c) the receipt of a comfort letter from Price
Waterhouse LLP with respect to financial statements of AMH included in this
Information Statement/Prospectus and other matters customarily addressed by such
letters; and (d) that there has been no change in the financial condition,
business, operations or prospects of AMH and its subsidiaries, taken as a whole,
that would have had or would be reasonably likely to have a material adverse
effect, other than any such change that affects both AMH and NME in a
substantially similar manner.
BUSINESS OF AMH AND NME PENDING THE MERGER. AMH has agreed that, among
other things, prior to consummation of the Merger, unless NME otherwise shall
agree in writing or unless otherwise contemplated by the Merger Agreement, AMH
will conduct its business and the businesses of its subsidiaries in the ordinary
course consistent with past practice and it will not, and will not permit
without NME's prior written consent, which consent shall not be unreasonably
withheld, any of its subsidiaries to: adopt or propose any change to the
Restated Certificate of Incorporation or Amended Bylaws of AMH; declare, set
aside or pay any dividends or other distributions with respect to the AMH Common
Stock, except for the AMH Special Dividend; or redeem or otherwise acquire any
shares of its capital stock or shares of the capital stock of any of its
subsidiaries. AMH has further agreed that neither it nor any of its subsidiaries
shall issue any additional securities, except pursuant to existing obligations;
merge or consolidate with any other person or acquire a material amount of
assets of any other person; dispose of any fixed assets or any other material
assets other than pursuant to existing contracts or commitments or in the
ordinary course of business consistent with past practices; incur any
indebtedness, except pursuant to existing credit facilities or arrangements;
change any method of accounting or accounting practice, except for such change
required by generally accepted accounting practices; or enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing. AMH
has further agreed that neither it nor any of its subsidiaries will grant any
increases in the compensation of their respective officers and employees other
than increases in the ordinary course of business and consistent with past
practice.
NME has agreed that, among other things, prior to the Effective Time, unless
AMH shall otherwise agree in writing or unless otherwise contemplated by the
Merger Agreement, NME will conduct its businesses and the businesses of its
subsidiaries in the ordinary course consistent with past practice and will not
and will not permit without AMH's prior written consent, which consent shall not
be unreasonably withheld, any of its subsidiaries to: adopt or propose any
change to the NME Articles of Incorporation or the NME Bylaws if such amendment
would have an adverse effect on the Merger Consideration; declare, set aside or
pay any dividend or other distribution with respect to the NME Common Stock; or
redeem or otherwise acquire any shares of its capital stock or shares of the
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capital stock of any of its subsidiaries. NME has further agreed that neither it
nor any of its subsidiaries will, subject to certain exceptions, issue any
additional securities, except pursuant to existing obligations or the Merger
Agreement, other than in the ordinary course of business consistent with past
practice; dispose of any fixed assets or any other material assets other than
pursuant to existing contracts or commitments or in the ordinary course of
business consistent with past practices; incur any indebtedness, except pursuant
to existing credit facilities or arrangements; incur any indebtedness, other
than in the ordinary course of business consistent with past practices; change
any method of accounting or accounting practice, except for such change required
by generally accepted accounting principles; or enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing. In
addition, NME has agreed that it will not, and will not permit its subsidiaries
to, merge or consolidate with any other person or acquire a material amount of
assets from any other person if, prior to the consummation of such transaction,
AMH is advised by Salomon that, as a result of such transaction, it is required
to withdraw its fairness opinion unless NME permits the AMH stockholders, at the
election of AMH, to receive $6.88 in cash per share of AMH Common Stock in lieu
of the fraction of a share of NME Common Stock to be received as part of the
Merger Consideration, together with the balance of the Merger Consideration. In
such event, the Merger Consideration must be received by the AMH stockholders
prior to or simultaneously with the consummation of such other transaction. See
"The Merger -- Terms of the Merger."
Pursuant to the Merger Agreement, from the date of the Merger Agreement to
the Effective Time, Merger Sub will not engage in any activities of any nature
except as provided in or contemplated by the Merger Agreement.
CERTAIN EMPLOYEE BENEFITS. From and after the Effective Time, subject to
applicable law and except as contemplated by the Merger Agreement, NME has
agreed to honor, in accordance with their terms, all AMH employee benefit plans
(as set forth in the Merger Agreement); provided, however, that nothing in the
Merger Agreement precludes any change effected on a prospective basis in any
such plan from and after the Effective Time. NME will provide benefits to
employees of AMH who become employees of NME or continue after the Effective
Time as employees of AMH which will, in the aggregate, be no less favorable than
those provided to other similarly situated employees of NME from time to time.
With respect to NME's employee benefit plans (as set forth in the Merger
Agreement), NME has agreed to grant all employees of AMH from and after the
Effective Time credit for all service with AMH, its affiliates and predecessors
prior to the Effective Time for all purposes for which such service was
recognized by AMH. To the extent such NME plans provide medical or dental
welfare benefits after the Effective Time, such plans shall waive any
pre-existing conditions and actively-at-work exclusions and shall provide that
any expenses incurred on or before the Effective Time shall be taken into
account under deductible, coinsurance and maximum out-of-pocket provisions.
Certain AMH employees have agreed to make their services available to NME as
consultants during the period preceeding the Effective Time. In consideration
for these services (and in anticipation of services to be rendered following the
Effective Time), and in connection with a grant of options to certain NME
employees, the Compensation Committee of the Board of Directors, which
administers the NME option plan, has granted such AMH employees options to
purchase NME Common Stock, which options shall have an exercise price equal to
the fair market value of NME Common Stock on the date of grant and shall not be
exercisable until after the Effective Time of the Merger and shall be forfeited
if the Merger does not occur.
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the approval
by the stockholders of AMH, in a number of circumstances, which include, among
others by: (a) the mutual written consent of AMH and NME; (b) action of the
Board of Directors of either AMH or NME (i) if the Merger shall not have been
consummated by May 31, 1995 or (ii) if any court of competent jurisdiction or
federal or state governmental, regulatory or administrative agency or commission
shall have issued an order, decree, ruling or other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable; (c) action of the Board
of
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Directors of AMH, if (i) in the exercise of its good faith judgment as to its
fiduciary duties to its stockholders imposed by law, the Board of Directors of
AMH determines that such termination is required by reason of any offer or
proposal for, or any indication of interest in, a merger or other business
combination involving AMH or any of the Company Subsidiaries (as defined in the
Merger Agreement) or the acquisition of any equity interest in, or a substantial
portion of the assets of, any such party, other than the transactions
contemplated by the Merger Agreement (an "Acquisition Proposal"), being made,
(ii) there has been a breach by NME or Merger Sub of any representation or
warranty contained in the Merger Agreement which would have or would be likely
to have a material adverse effect on NME, (iii) there has been a material breach
by NME of any covenant or agreement contained in the Merger Agreement which is
not curable or, if curable, is not cured within 30 days after written notice of
such breach, or (iv) prior to the earlier of May 31, 1995 or the Effective Time
NME has been unable to secure the requisite financing for the Merger other than
as a result of a material breach by AMH of any of the covenants or agreements
set forth in the Merger Agreement; or (d) action of the Board of Directors of
NME, if (i) there has been a breach by AMH of any representation or warranty
contained in the Merger Agreement which would have or would be reasonably likely
to have a material adverse effect on AMH, or (ii) there has been a material
breach by AMH of any covenant or agreement contained in the Merger Agreement
which is not curable or, if curable, is not cured within 30 days after written
notice of such breach.
In the event of any such termination, the Merger Agreement shall forthwith
become void and, except for a termination resulting from a willful breach by a
party to the Merger Agreement, there shall be no liability on the part of any
party or their respective officers or directors, except with respect to the
payment of liquidated damages as specified below and sharing of certain
expenses.
ACQUISITION PROPOSALS. AMH has agreed that, until the Merger Agreement is
terminated, it will not, directly or indirectly (i) take any action to solicit,
initiate or encourage any Acquisition Proposal (as hereinafter defined), (ii)
waive any provision of any standstill or similar agreements entered into by AMH
or its subsidiaries, or (iii) engage in negotiations with, or disclose any
nonpublic information relating to AMH or its 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. However,
the Merger Agreement does not prohibit AMH and its Board of Directors from (i)
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 Commission under the
Exchange Act, or (ii) furnishing information to, or entering into negotiations
with, any person or entity that makes an unsolicited bona fide proposal to
acquire AMH 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, (A) the Board of Directors of AMH
determines in good faith that such action is required for the Board of Directors
of AMH to comply with its fiduciary duties to stockholders imposed by law, (B)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity, AMH provides written notice to the
other party to the Merger Agreement to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such person
or entity, and (C) subject to any confidentiality agreement with such person or
entity (which such party determined in good faith was required to be executed in
order for the Board of Directors of AMH to comply with its fiduciary duties to
stockholders imposed by law), AMH keeps NME informed of the status (but not the
terms) of any such negotiations or discussions.
LIQUIDATED DAMAGES. If, prior to the earlier of May 31, 1995 or the
Effective Time, the Merger Agreement is terminated by the Board of Directors of
AMH, (a) in the exercise of its good faith judgment as to its fiduciary duties
to its stockholders after receiving an Acquisition Proposal, NME shall be
entitled to liquidated damages in cash equal to $75 million (reduced by any
payment made to NME pursuant to the Stockholder Agreements, but subject to
reimbursement of such amounts by AMH to such stockholders); or (b) because (i)
there has been a breach by NME or Merger Sub of any representation or warranty
contained in the Merger Agreement which would have or would be reasonably likely
to have a material adverse effect on NME, (ii) there has been a material breach
by
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NME of any covenant or agreement contained in the Merger Agreement which is not
curable or, if curable, is not cured within 30 days after written notice of such
breach, or (iii) NME has been unable to secure the requisite financing for the
Merger, then AMH shall be entitled to liquidated damages in cash equal to $150
million.
If, prior to the earlier of May 31, 1995 or the Effective Time, the Merger
Agreement is terminated by the Board of Directors of NME because (i) there has
been a breach by AMH of any representation or warranty contained in the Merger
Agreement which would have or would be reasonably likely to have a material
adverse effect on AMH, or (ii) there has been a material breach by AMH of any
covenant or agreement contained in the Merger Agreement which is not curable or,
if curable, is not cured within 30 days after written notice of such breach,
then NME shall be entitled to liquidated damages in cash equal to $150 million.
If the liquidated damages payment is made and in the absence of termination
resulting from fraud or a willful breach by a party to the Merger Agreement, the
party making such payment shall have no further obligations to the terminating
party.
INDEMNIFICATION AND INSURANCE. NME has agreed that all rights to
indemnification existing in favor of the present or former directors, officers,
employees, fiduciaries and agents of AMH and certain of its subsidiaries
(collectively, the "Indemnified Parties") as provided by AMH or its subsidiaries
in effect as of the date of the Merger Agreement or pursuant to the terms of any
indemnification agreements entered into between AMH and any of the Indemnified
Parties with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect to the fullest
extent and for the maximum term permitted by law and shall be enforceable by the
Indemnified Party against both AMH and NME. At the Effective Time, NME shall
also directly assume AMH's indemnification obligations.
The Merger Agreement also provides that NME will cause to be maintained in
effect, for a period ending not sooner than the sixth anniversary of the
Effective Time, the current policies of directors' and officers' liability
insurance maintained by AMH or substitute policies providing at least equivalent
coverage with respect to AMH's officers and directors as the policies maintained
by AMH on behalf of such directors and officers of AMH as of the date hereof,
and containing terms and conditions which are no less advantageous with respect
to matters occurring prior to the Effective Time, provided that in no event
shall NME or the Surviving Corporation be required to expend, to maintain or
procure such insurance coverage, any amount per annum in excess of 200% of the
aggregate premiums paid in 1994 on an annualized basis for such purpose.
AMENDMENT AND WAIVER. Any of the provisions of the Merger Agreement may be
amended by or pursuant to written action by all of the respective parties at any
time before or after the approval of the Merger Agreement by AMH stockholders;
provided however, that after any such approval, no amendment shall be made which
alters the Merger Consideration or which in any way materially adversely affects
the rights of AMH stockholders without their further approval. Prior to the
earlier of May 31, 1995 or the Effective Time, the parties may extend the time
for performance of the obligations of the other parties to the Merger Agreement,
may waive any inaccuracies in the representations and warranties contained in
the Merger Agreement or in any document delivered pursuant to the Merger
Agreement or may waive compliance with any of the agreements or conditions
contained in the Merger Agreement for their respective benefit contained in the
Merger Agreement.
EXPENSES. Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expenses, except
that expenses incurred in connection with printing the Registration Statement
and this Information Statement/Prospectus as well as the filing fee relating to
the Registration Statement will be shared equally by NME and AMH.
STOCKHOLDER APPROVAL; STOCKHOLDER AGREEMENTS. In connection with, and as a
condition and inducement to, NME's execution of the Merger Agreement, NME
entered into three Stockholder Agreements, one with the Fund and GKHPL, one with
1987 MIP and MBLP (1987 MIP and MBLP are affiliates of CS First Boston), and one
with Mellon Bank N.A., as trustee of First Plaza (each, a
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"Stockholder"). Such agreements, which were exchanged following execution of the
Merger Agreement, were negotiated commencing on October 5, 1994 and thereafter
were part of the negotiations with respect to the Merger Agreement. See "The
Merger -- Background of the Merger" and "-- Interests of Certain Persons in the
Merger." The summary set forth below includes the material terms of the
Stockholder Agreements. However, such summary is subject to, and qualified in
its entirety by reference to, the terms of the Stockholder Agreements. A form of
the Stockholder Agreements is an exhibit to the Merger Agreement which is
annexed hereto as Annex A.
Pursuant to the Stockholder Agreements, the Stockholders have agreed to vote
all of their Stockholder Shares (as defined below) on matters as to which each
such Stockholder is entitled to vote at a meeting of the stockholders of AMH, or
by written consent without a meeting, as follows: (i) in favor of approval and
adoption of the Merger Agreement and all related matters; (ii) against any
action or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation or agreement of AMH
under the Merger Agreement; and (iii) against any action or agreement (other
than the Merger Agreement or the transactions contemplated thereby) that would
impede, interfere with, delay, postpone or attempt to discourage the Merger. In
connection with the voting provisions of the Stockholder Agreements, each
Stockholder appointed NME, with full power of substitution, as attorney and
proxy to vote all Stockholder Shares with respect to those matters described in
clauses (i), (ii) and (iii) above. NME does not have the right, ability or power
to vote any of the Stockholder Shares in connection with the election of
directors of AMH. In addition, in the event that the Board of Directors of AMH
elects to terminate the Merger Agreement in the exercise of its fiduciary duty
to pursue an Acquisition Proposal, voting rights in respect of the Stockholder
Agreements which could impact the Acquisition Proposal would expire on June 30,
1995, after which the Stockholders would be free to consider any such
Acquisition Proposal.
The "Stockholder Shares" covered by each Stockholder Agreement are shares of
AMH Common Stock beneficially owned by the respective Stockholder on October 10,
1994 (including without limitation any such shares acquired by way of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction). As of October 10, 1994, each of the Stockholders
beneficially owned the following Stockholder Shares, each of which is subject to
the provisions of their respective Stockholder Agreements: (i) the Fund and
GKHPL, 24,719,168 and 934,596 shares of AMH Common Stock, respectively; (ii)
MBLP and 1987 MIP, 10,595,282 and 710,168 shares of AMH Common Stock,
respectively (MBLP and 1987 MIP are controlled by CS First Boston, Inc., the
sole stockholder of CS First Boston, and, therefore, CS First Boston, Inc. may
be considered to be the beneficial owner of 11,305,450 shares of AMH Common
Stock); and (iii) Mellon Bank, N.A., as trustee of First Plaza, 10,663,636
shares of AMH Common Stock. As of September 30, 1994, such Stockholder Shares
constituted approximately 61.4% of the outstanding shares of AMH Common Stock.
Each Stockholder has agreed pursuant to the Stockholder Agreements to pay to
NME an Alternate Transaction Payment (as defined below), subject to
reimbursement of such amount by AMH not to exceed $75,000,000 in the aggregate,
with respect to any Stockholder Shares sold, transferred or otherwise disposed
of by the respective Stockholder, promptly following the transfer of Stockholder
Shares to any person other than NME or its affiliates (any such person, an
"Acquiring Person") if, pursuant to any transaction which is consummated or with
respect to which an agreement is entered into on or prior to June 30, 1995, an
Acquiring Person (i) acquires beneficial ownership of any or all of a
Stockholder's Stockholder Shares or (ii) consummates a merger, consolidation or
other business combination with, or purchases all or substantially all of the
assets of, AMH (each such transaction described in the foregoing clause (i) or
(ii), an "Alternate Transaction").
An "Alternate Transaction Payment" is an amount equal to the product of (i)
the excess of the Alternate Transaction Price (as defined below) over $25.88,
or, if the transaction is consummated after March 31, 1995, $26.13, times (ii)
the number of Stockholder Shares, if any, sold or transferred by the Stockholder
to an Acquiring Person, or received by a Stockholder by virtue of an Alternate
Transaction. In the event that the consideration for the Stockholder Shares
consists in whole or in part of property other than cash, the Alternate
Transaction Payment shall be made by delivery to NME of a
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<PAGE>
percentage of each type of property received determined by dividing the amount
of the Alternate Transaction Payment (expressed on a per share basis) by the
Alternative Transaction Price. "Alternate Transaction Price" means the price per
share paid by any Acquiring Person after October 10, 1994 for any Stockholder
Shares, which includes, if applicable, the fair market value of securities or
other property other than cash exchanged for Stockholder Shares or received for
AMH's assets, calculated as a per share price, as determined by the investment
banking firm retained by AMH to evaluate such proposal.
For purposes of determining whether an Alternate Transaction exists, an
Acquiring Person will be deemed to have acquired beneficial ownership of any
Stockholder Shares which (i) such person or any of its Affiliates or Associates
(as such terms are defined in Rule 12b-2 under the Exchange Act) beneficially
owns, directly or indirectly; (ii) such person or any of its Affiliates or
Associates has, directly or indirectly, (x) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement, or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (y)
the right to vote pursuant to any agreement, arrangement or understanding; or
(iii) are beneficially owned, directly or indirectly, by any other person with
which such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of AMH Common Stock (other than shares of AMH Common
Stock owned by other persons that are parties to the AMH Stockholders
Agreement).
Pursuant to the Stockholder Agreements each Stockholder also has agreed not
to, and will cause its officers, directors, employees and agents not to,
directly or indirectly (i) take any action to initiate, solicit or encourage any
Acquisition Proposal, or (ii) engage in negotiations with, or disclose any
nonpublic information relating to AMH or its subsidiaries, or afford access to
their respective books or records to, any person that may be considering making,
or has made any Acquisition Proposal.
Each Stockholder has further agreed that if a record date for any dividend
or distribution to be paid (whether in cash or property, including without
limitation securities) on the Stockholder Shares occurs during the term of the
Stockholder Agreement (other than the AMH Special Dividend intended to be
declared by the Board of Directors of AMH, as permitted by the Merger
Agreement), NME and such Stockholder will enter into an escrow arrangement
pursuant to which any payment of any such dividend or distribution will be held
in escrow. Upon consummation of any Alternate Transaction, such dividend or
distribution made on such Stockholder Shares will be delivered to NME together
with the Alternate Transaction Payment.
Finally, under the Stockholder Agreements each Stockholder has agreed that,
without the prior written consent of NME, such Stockholder will not (i) sell,
transfer, assign, pledge or otherwise dispose of or hypothecate any of such
Stockholder's Stockholder Shares; (ii) grant any proxies, deposit any
Stockholder Shares into a voting trust or enter into a voting agreement with
respect to any Stockholder Shares as to any matter relating to the consummation
of the Merger; or (iii) take any action that would make any representation or
warranty of such Stockholder contained in the respective Stockholder Agreement
untrue or incorrect in any material respect or have the effect of preventing or
disabling such Stockholder from performing such Stockholder's obligations under
such Stockholder Agreement.
The Stockholder Agreements terminate upon the earlier to occur of (i) June
30, 1995, provided, that, if the Merger Agreement is terminated by AMH due to a
material breach by NME, the Stockholder Agreements will terminate on the
effective date of such termination of the Merger Agreement; (ii) the Effective
Time of the Merger; or (iii) with respect to each Stockholder, immediately
following the making of an Alternate Transaction Payment for all of the
Stockholder Shares owned by such Stockholder; provided, that, in the case of any
termination pursuant to clause (i), the Stockholder Agreements will continue
with respect to all Stockholder Shares with respect to which an agreement is
entered into prior to such termination until payment of the Alternate
Transaction Payment for such
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<PAGE>
shares is made or such agreement is terminated. Upon termination, the
Stockholder Agreements will have no further force or effect except that the
remedies of specific performance and injunctive relief afforded by such
agreements shall continue to apply.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is for general information only and is based on the
Federal income tax law now in effect, which is subject to change, possibly
retroactively. This summary does not discuss all aspects of Federal income
taxation which may be important to particular AMH stockholders or holders of AMI
9 1/2% Convertible Debentures (as hereinafter defined) in light of their
individual investment circumstances or to certain types of stockholders subject
to special tax rules (E.G., financial institutions, broker-dealers, insurance
companies, and tax-exempt organizations). In addition, there may be possible
state, local or foreign tax consequences, none of which are discussed below.
This summary assumes that AMH stockholders and holders of AMI 9 1/2% Convertible
Debentures have held their shares of AMH Common Stock or AMI Convertible
Debentures as "capital assets" (generally, property held for investment) under
the Internal Revenue Code of 1986, as amended (the "Code"). Each AMH stockholder
and each holder of AMI 9 1/2% Convertible Debentures is urged to consult his tax
advisor regarding the specific Federal, state, local, and foreign income and
other tax consequences of the Merger and the conversion of the AMI 9 1/2%
Convertible Debentures.
THE MERGER. The receipt by an AMH stockholder of cash and NME Common Stock
in exchange for AMH Common Stock in the Merger (or the receipt of cash upon the
exercise of appraisal rights or in certain specified circumstances) will be a
taxable transaction for Federal income tax purposes and may be taxable under
state, local or foreign tax laws as well. An AMH stockholder will recognize
capital gain or loss equal to the difference between the tax basis for the AMH
Common Stock surrendered in the Merger and the sum of the (i) cash and (ii) fair
market value of the NME Common Stock received in the Merger (or the cash
received in lieu of such stock) as determined at the Effective Time. Such gain
or loss will be long-term gain or loss if the exchanging AMH stockholder has
held his AMH Common Stock for more than one year. AMH stockholders will have a
tax basis in the NME Common Stock received in the Merger equal to its fair
market value as determined at the Effective Time.
AMH SPECIAL DIVIDEND. AMH intends to treat the AMH Special Dividend as the
payment of a dividend for Federal income tax purposes includible in the ordinary
income of AMH stockholders upon receipt.
CONVERSION OF THE AMI 9 1/2% CONVERTIBLE DEBENTURES. Upon conversion of the
AMI 9 1/2% Convertible Debentures into (i) shares of AMH Common Stock prior to
the Effective Time or (ii) cash and shares of NME Common Stock after the
Effective Time (or the receipt of cash in certain specified circumstances), a
holder of AMI 9 1/2% Convertible Debentures will recognize capital gain or loss
in an amount equal to the difference between his adjusted tax basis in the
converted debentures and the sum of any cash received and the fair market value
of the shares received determined as of the conversion date. Such gain or loss
will be long term if the AMI 9 1/2% Convertible Debentures have been held for
more than one year. A holder will have a tax basis in the shares received
pursuant to the conversion in an amount equal to their fair market value
determined as of the conversion date and his holding period for the shares
received will commence with the day following the date of conversion. The
Federal income tax consequences of exchanging, pursuant to the Merger, any
shares of AMH Common Stock received upon conversion of the AMI 9 1/2%
Convertible Debentures will be as described above under "-- The Merger." See
"Financing for the Merger and the Related Transactions -- The AMI Redemptions"
and "Selected Information Concerning NME and AMH -- American Medical Holdings,
Inc. -- AMI Convertible Debentures."
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for by the purchase method of accounting in
accordance with generally accepted accounting principles for accounting and
financial reporting purposes.
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<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In reviewing the actions of the Board of Directors and certain stockholders
of AMH with respect to the Merger Agreement and the transactions contemplated
thereby, stockholders of AMH should be aware that certain members of the
management of AMH and the Board of Directors of AMH, as well as certain AMH
stockholders, have interests in the Merger that are in addition to the interests
of stockholders of AMH generally.
AMH STOCKHOLDERS AGREEMENT. The AMH stockholders which have delivered the
Stockholder Agreements and who in the aggregate own approximately 61.4% of the
outstanding AMH Common Stock, namely the Fund, GKHPL, Mellon Bank, N.A., as
trustee of First Plaza, MBLP and 1987 MIP, also are parties with certain other
stockholders of AMH to the AMH Stockholders Agreement. Under the terms of the
AMH Stockholders Agreement, the Fund, GKHPL, First Plaza, MBLP and 1987 MIP
(MBLP and 1987 MIP are affiliates of CS First Boston), together with the other
parties thereto, have the right to designate, and have designated, a majority of
the nominees who have been elected to AMH's Board of Directors and, accordingly,
effectively control the selection of executive officers and other key employees
and the establishment of AMH's operating policies. AMH also has retained and
agreed to pay financial advisory fees in connection with services performed by
CS First Boston and GKH in conjunction with the Merger Agreement in the
aggregate amount of $10,000,000, plus reimbursement of up to $100,000 of
expenses, pursuant to the recommendation of an independent committee of the
Board of Directors of AMH and upon approval of retention of such persons to act
as financial advisors by the Board of Directors of AMH (with the interested
directors abstaining with respect thereto).
STOCK OPTION PLANS. The following table sets forth information with respect
to the number of vested AMH Options, and the acceleration of unvested AMH
Options, held by the persons named below, assuming the Effective Time is on
March 1, 1995.
<TABLE>
<CAPTION>
NUMBER OF UNVESTED NET PROCEEDS
AMH STOCK OPTIONS FROM AMH
NUMBER OF VESTED AT FEBRUARY 28, AVERAGE STOCK OPTIONS
AMH STOCK OPTIONS 1995 TO BE EXERCISE UNDER THE
AT FEBRUARY 28, ACCELERATED AT PRICE PER MERGER
NAME AND TITLE 1995 EFFECTIVE TIME SHARE AGREEMENT(1)
- ------------------------------------------ ------------------- ------------------- ------------ -------------
<S> <C> <C> <C> <C>
Robert O'Leary
Chairman and Chief Executive Officer 246,600 153,400 $ 9.75 $ 6,178,000
John T. Casey
President and Chief Operating Officer 120,080 80,120 9.75 3,092,089
Alan Chamison
Executive Vice President and Chief
Financial Officer 120,000 80,000 9.75 3,089,000
O. Edwin French
Senior Vice President 36,500 63,500 13.535 1,166,000
W. Randolph Smith
Executive Vice President 85,318 -- 7.03325 1,549,524
Terry Linn
Vice President -- Development 24,000 76,000 10.85625 1,433,875
Lawrence N. Kugelman
Executive Vice President 75,000 125,000 9.75 3,089,000
Thomas J. Sabatino, Jr.
Vice President and General Counsel 14,600 45,400 12.53125 759,825
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF UNVESTED NET PROCEEDS
AMH STOCK OPTIONS FROM AMH
NUMBER OF VESTED AT FEBRUARY 28, AVERAGE STOCK OPTIONS
AMH STOCK OPTIONS 1995 TO BE EXERCISE UNDER THE
AT FEBRUARY 28, ACCELERATED AT PRICE PER MERGER
NAME AND TITLE 1995 EFFECTIVE TIME SHARE AGREEMENT(1)
- ------------------------------------------ ------------------- ------------------- ------------ -------------
<S> <C> <C> <C> <C>
Bary G. Bailey
Vice President and Controller 30,000 -- 7.03325 544,852
Michael N. Murdock
Vice President and Treasurer 30,000 -- 7.03325 544,852
<FN>
- ------------------------
(1) Based upon an assumed value of a share of NME Common Stock of $14.75 and
consummation of the Merger prior to April 1, 1995. See "The Merger -- Terms
of the Merger -- AMH Stock Options" and "-- Interests of Certain Persons in
the Merger -- Tax Gross-Up."
</TABLE>
NME STOCK OPTION GRANTS. The Compensation and Stock Option Committee of
NME's Board of Directors (the "NME Compensation Committee") met on January 23,
1995 to consider granting stock option awards to various NME employees and
consultants under NME's 1991 Stock Option Plan (the "1991 Plan"). The NME
Compensation Committee considered that Messrs. Casey and Smith (a) have made
themselves available to serve as consultants and advisers to NME during the
transition period prior to the closing of the Merger, (b) are expected to assist
in the integration of the businesses of NME and AMH, and (c) are expected to
make significant contributions to NME's business following the Merger, and
resolved to grant Mr. Casey options to purchase 33,000 shares of NME Common
Stock and Mr. Smith options to purchase 100,000 shares of NME Common Stock. Such
options have an exercise price equal to $13.875 (the fair market value of the
NME Common Stock at the close of business on the date of the grant), have a term
of ten years and will vest one-third per year over three years, subject to the
terms and conditions set forth in the 1991 Plan and Mr. Casey's and Mr. Smith's
individual agreements evidencing such option awards. Such options also are
subject to forfeiture (a) in the event the Merger is not consummated by May 31,
1995 and (b) if Mr. Casey and/or Mr. Smith, as the case may be, does not become
an employee of NME or one of its subsidiaries immediately upon the effectiveness
of the Merger.
SEVERANCE PAY. AMH has entered into agreements with Messrs. O'Leary, Casey,
Chamison, French, Kugelman, Sabatino, Bailey and Murdock, which provide that if
the employee's employment is terminated either voluntarily within 120 days after
a change in control (which term would include consummation of the Merger) or
involuntarily within 12 months after a change in control, such employee will be
entitled to receive severance pay based upon the employee's annual base salary
for the fiscal year then most recently commenced. Agreements were entered into
with Messrs. O'Leary (as of June 12, 1991, as amended as of November 17, 1992),
Casey (as of October 1, 1991, as amended as of December 7, 1992), Chamison (as
of August 4, 1991, as amended as of November 17, 1992), French (as of November
15, 1991, as amended as of December 8, 1992), Kugelman (as of October 30, 1992,
as amended as of December 10, 1992) and Sabatino (as of November 1, 1992, as
amended as of October 10, 1994) and Messrs. Bailey and Murdock (each of which
was entered into as of October 10, 1994). Except for Mr. O'Leary, the amount of
severance pay is equal to 12 months base salary. Mr. O'Leary would receive 15
months base salary. Mr. Casey, however, has waived his entitlement to the
severance payment described above pursuant to a letter of understanding entered
into with NME. See "Casey Letter of Understanding" below.
1990 SUPPLEMENTAL BENEFIT PLAN. The AMH 1990 Supplemental Benefit Plan (the
"SERP") is a nonqualified supplemental retirement plan. The amount of the
benefit payable under the SERP is based upon a percentage of average annual
compensation multiplied by years of service with AMH up to 20 years less any
other AMH retirement benefits and social security benefits payable to the
executive. Normally participants vest in their benefits under the SERP after ten
years. AMH has
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<PAGE>
agreed to provide Messrs. O'Leary, Casey, Chamison, French, Kugelman, Sabatino,
Bailey and Murdock with full vesting in and 20 years of assumed service under
the SERP upon a change of control (which term would include consummation of the
Merger).
The present value of the additional benefits provided under such agreements
in relation to change of control vesting to Messrs. O'Leary, Casey, Chamison,
French, Kugelman, Sabatino, Bailey and Murdock, respectively, assuming an 8.75%
discount rate and using the 1984 Unisex Pension Mortality Table Set forward One
Year for Males (PBGC), and based on retirement at age 55, is as follows:
$2,113,507, $732,899, $1,408,219, $548,126, $1,132,027, $157,646, $126,275, and
$119,666, respectively. The AMH Compensation Committee determined to take such
action with respect to Messrs. O'Leary, Casey, Chamison, French, and Kugelman on
January 13, 1993, and, with respect to Messrs. Sabatino, Bailey and Murdock, on
October 10, 1994.
TAX GROSS-UP. Upon the occurrence of the Merger, certain executive officers
of AMH may be subject to the potential imposition of excise tax under Section
4999 of the Code, to the extent that payments resulting from the Merger are
deemed to constitute "excess parachute payments" under Section 280G of the Code.
In addition, AMH would not be permitted to claim a deduction for Federal income
tax purposes to the extent of any such excess parachute payments. On October 10,
1994, AMH agreed to make payment to affected executives in the group consisting
of Messrs. O'Leary, Casey, Chamison, French, Kugelman, Sabatino, Bailey and
Murdock in an amount equal to all excise taxes payable by such executives on
such excess parachute payments (the "Gross-Up Payment"), including any excise
and income tax payable by reason of the Gross Up Payment; provided, however, the
maximum aggregate Gross-Up Payments which AMH may be obligated to pay shall in
no event exceed $8 million. In the event that the amount of such taxes exceeds
$8 million, the Gross-Up Payments would be apportioned among the affected
executives on a pro rata basis. In order for an executive to be eligible to
receive Gross-Up Payments, such affected executive must agree in writing to
accept the consideration (including the mix of cash and securities, if
applicable) payable upon the Merger to AMH stockholders in general with respect
to any AMH Options then held by the affected executive, notwithstanding any
provision in the executive's employment or stock option agreement or the AMH
stock option plans under which such options were granted to the contrary
regarding payment in cash. Each of Messrs. O'Leary, Casey, Chamison, French,
Kugelman, Sabatino, Bailey and Murdock have so agreed in writing. See "The
Merger -- Terms of the Merger -- AMH Stock Options."
MEDICAL BENEFITS CONTINUATION. On October 10, 1994, AMH agreed that, if in
connection with or subsequent to a change of control (which term would include
the consummation of the Merger), any director's membership on the Board of
Directors is terminated for any reason, or Mr. Chamison's employment is
terminated for any reason, then such affected individual shall be entitled to
continue coverage under the terms of the AMH group health insurance plan (or
similar coverage) until the earlier of the date the affected individual becomes
eligible for Medicare or otherwise fails to pay any applicable premium. This
coverage is in addition to any continuation coverage that may otherwise be
required by law. The estimated cost of providing such benefits if the employment
and directorships of all such individuals were terminated following consummation
of the Merger is approximately $436,000 based upon certain actuarial assumptions
(i.e. medical cost increases of 5% per annum, annual employee premium increases
of 3%, discount rate of 9%, initial annual cost per participant of $7,215, and
initial annual premium charge per participant of $2,400).
INCENTIVE COMPENSATION PLANS. Under the AMH Annual Incentive Compensation
Plan and the AMH Long-Term Incentive Compensation Plan (collectively, the
"Incentive Compensation Plans") bonus compensation is payable by reason of
attainment of performance goals in two categories, operating income and
operating expense. If the threshold level is attained, then 25% of the potential
incentive opportunity is awarded, 60% is awarded upon attainment of target
goals, and 100% is awarded upon attainment of maximum goals. One-third of each
year's award is subject to mandatory deferral, and is payable ratably over two
years, if the performance goals for such subsequent years are met. Pursuant to
the agreements described in "-- Severance Pay" above with Messrs. O'Leary,
Casey, Chamison, French, Kugelman, Sabatino, Bailey and Murdock, upon a change
in control (which term
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<PAGE>
includes the consummation of the Merger) such individuals will be fully vested
in all amounts payable under the Incentive Compensation Plans, including all
deferred amounts. Additionally, these individuals will be deemed to have
satisfied the target performance goals for the 1995 fiscal year entitling them
to 100% of their awards. The target awards for Messrs. O'Leary, Casey, Chamison,
French, Kugelman, Sabatino, Bailey and Murdock for fiscal 1995 under the
Incentive Compensation Plans are $479,115, $227,136, $227,136, $117,219,
$219,625, $81,120, $65,572 and $65,572, respectively, and the amounts currently
deferred are $374,815, $207,840, $207,840, $107,894, $35,607, $56,390, $57,832,
and $57,832, respectively.
DIRECTORS' RETIREMENT PLAN. The AMH Directors' Retirement Plan (the
"Directors' Retirement Plan") is a nonqualified retirement plan which provides
retirement benefits to directors of AMH upon the later of their retirement from
the Board or age 65. The amount of yearly retirement payments is equal to the
base annual retainer paid by AMH to independent directors in the year of the
payment, but in no event less than the annual retainer in effect at the time the
recipients became members of the Board, or ceased to be members of the Board,
whichever is greater. Payments are made for a period of ten years or, if
greater, the number of the years the individuals were members of the Board, but
in no event later than the month in which the member's death occurs. Both
independent and employee directors are eligible to participate in the Directors'
Retirement Plan. On October 10, 1994, the Directors' Retirement Plan was amended
to provide that previously unvested independent directors (specifically, J.
Robert Buchanan, Robert B. Calhoun, Jr., Sheldon S. King, Dan W. Lufkin and
Harold M. Williams) were eligible to participate in the Directors' Retirement
Plan regardless of their years of service as members of the Board of Directors.
Previously, the Directors' Retirement Plan required independent directors who
did not serve previously as employee directors to be members of the Board of
Directors for a period of five years prior to being eligible to participate.
LOAN TO MR. CASEY. In July 1993, AMH made an interest free loan to Mr.
Casey in the amount of $375,000. Under the terms of his loan agreement AMH
agreed to forgive $10,417 of Mr. Casey's loan each month if he remained employed
by AMH on the last day of such month. On October 10, 1994, AMH agreed that in
the event of a change of control (which term would include consummation of the
Merger) all amounts due and owing on Mr. Casey's loan will be cancelled, and Mr.
Casey will not be required to repay any outstanding balance on such loan. As of
September 30, 1994 the outstanding balance on Mr. Casey's loan was $223,953.
DIRECTORS AND OFFICERS OF NME AND THE SURVIVING CORPORATION. It is
currently anticipated that Messrs. O'Leary and Casey will become directors of
NME immediately following the Effective Time. In addition, the directors of
Merger Sub at the Effective Time will be the initial directors of the Surviving
Corporation, and the officers of AMH at the Effective Time will be the initial
officers of the Surviving Corporation. See "The Merger -- Terms of the Merger"
"-- Directors and Officers of the Surviving Corporation" and "-- Directors and
Principal Officers of NME."
CASEY LETTER OF UNDERSTANDING. NME and Mr. Casey have entered into a letter
of understanding pursuant to which (i) effective April 1, 1995, Mr. Casey will
assume part-time at-will, rather than full-time, employee status, at a salary of
$12,500 per month (assuming a one-third time commitment), (ii) in lieu of any
entitlement to the severance payment described in "Interests of Certain Persons
- -- Severance Pay" above, which Mr. Casey has waived, Mr. Casey will receive a
one-time bonus equal to twelve times his current monthly base salary, (iii) Mr.
Casey will be granted non-qualified employee stock options to purchase NME stock
in an amount equal to one-third the number of options to be granted to employees
at the executive vice president level, (iv) Mr. Casey will be eligible to
receive an annual bonus (with a target of 50% of his base salary and a maximum
of 75% of his base salary) and other executive benefits (except participation in
certain retirement plans), and (v) if Mr. Casey is involuntarily terminated
prior to April 1, 1996, he will receive a severance benefit equal to six months
base salary at the rate of $12,500 per month.
FINANCIAL ADVISOR FEES. For information with respect to fees payable to the
AMH Financial Advisors, see "The Merger -- Background of the Merger."
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<PAGE>
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides for
indemnification of, and maintenance of liability insurance for, officers and
directors of AMH and its subsidiaries. See "The Merger -- Terms of the Merger --
Indemnification and Insurance."
WAIVER OF VESTING PROVISIONS IN NME DIRECTOR STOCK OPTION PLAN. On October
10, 1994, the NME Board of Directors adopted a resolution waiving the vesting
acceleration provisions of the NME Director Stock Option Plan and the NME
Director Restricted Share Plan. In the absence of such a waiver, all outstanding
director options, i.e., options for a total of 40,000 shares as of March 1, 1995
of NME Common Stock, would have vested upon effectiveness of the Merger and the
acquisition by parties to the Stockholder Agreements of greater than 5% of the
NME Common Stock, and all conditions associated with any unvested restricted
shares, a total of 18,000 shares of restricted stock, would have been deemed to
be met, and each such award would have become fully vested.
APPRAISAL RIGHTS IN THE MERGER
Holders of AMH Common Stock are entitled to appraisal rights under Section
262 of the DGCL. A person having a beneficial interest in shares of AMH Common
Stock held of record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow properly the steps
summarized below and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 which is reprinted in its entirety as Annex B to this
Information Statement/Prospectus. All references in Section 262 and in this
summary to a "stockholder" are to the record holder of the shares of AMH Common
Stock as to which appraisal rights are asserted.
Under the DGCL, holders of shares of AMH Common Stock who follow the
procedures set forth in Section 262 will be entitled to have their shares of AMH
Common Stock appraised by the Delaware Court of Chancery and to receive payment
of the "fair value" of such shares, exclusive of any element of value arising
from the accomplishment or expectation of the Merger, together with a fair rate
of interest, if any, as determined by such court.
Under Section 262, where a merger is approved pursuant to a written consent
of stockholders in lieu of a meeting thereof, as in the case of the Merger, AMH,
either before the Effective Date of the Merger or within ten days thereafter,
must notify each of its stockholders entitled to appraisal rights of the
Effective Date of the Merger and that such appraisal rights are available and
include in such notice a copy of Section 262. This Information
Statement/Prospectus shall constitute such notice to the holders of shares of
AMH Common Stock, and a copy of Section 262 is attached to this Prospectus/
Information Statement as Annex B. Any AMH stockholder who or which wishes to
exercise such appraisal rights or who or which wishes to preserve his or its
right to do so should review the following discussion and Annex B carefully
because failure to comply timely and properly with the procedures specified will
result in the loss of appraisal rights under the DGCL.
A HOLDER OF SHARES OF AMH COMMON STOCK WISHING TO EXERCISE HIS OR ITS
APPRAISAL RIGHTS MUST DELIVER TO AMH, AS THE SURVIVING CORPORATION IN THE
MERGER, PRIOR TO FEBRUARY 20, 1995 (BEING 20 DAYS AFTER THE DATE OF THE MAILING
OF THIS INFORMATION STATEMENT/PROSPECTUS), A WRITTEN DEMAND FOR APPRAISAL OF HIS
OR ITS SHARES OF AMH COMMON STOCK. IN ADDITION, A HOLDER OF SHARES OF AMH COMMON
STOCK WISHING TO EXERCISE HIS OR ITS APPRAISAL RIGHTS MUST HOLD OF RECORD SUCH
SHARES ON THE DATE THE WRITTEN DEMAND FOR APPRAISAL IS MADE AND MUST CONTINUE TO
HOLD SUCH SHARES UNTIL THE EFFECTIVE TIME OF THE MERGER.
Only a stockholder of record of AMH Common Stock is entitled to assert
appraisal rights for the shares of AMH Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as his or its name appears on his or its stock
certificates. If the shares of AMH Common Stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of AMH Common
Stock are owned of record by more than one person, as in a joint
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tenancy and tenancy in common, the demand should be executed by or on behalf of
all joint owners. An authorized agent, including one or more joint owners, may
execute a demand for appraisal on behalf of a holder of record; however, the
agent must identify the record owner or owners and expressly disclose the fact
that, in executing the demand, the agent is agent for such owner or owners. A
record holder, such as a broker, who or which holds shares of AMH Common Stock
as nominee for several beneficial owners may exercise appraisal rights with
respect to the shares of AMH Common Stock held for one or more beneficial owners
while not exercising such rights with respect to the shares of AMH Common Stock
held for other beneficial owners; in such case, the written demand should set
forth the number of shares of AMH Common Stock as to which appraisal is sought,
and where no number of shares of AMH Common Stock is expressly mentioned, the
demand will be presumed to cover all shares of AMH Common Stock held in the name
of the record owner. Stockholders who hold their shares of AMH Common Stock in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such a nominee. All
written demands for appraisal should be sent or delivered to AMH at 14001 Dallas
Parkway, Dallas, Texas 75240, Attention: Chief Financial Officer.
Within 120 days after the Effective Time of the Merger, but not thereafter,
AMH or any stockholder entitled to appraisal rights under Section 262 may file a
petition in the Delaware Court of Chancery demanding a determination of the fair
value of the shares of AMH Common Stock held by any such stockholder. AMH is
under no obligation and has no present intention to file a petition with respect
to the appraisal of the fair value of the shares of AMH Common Stock.
Accordingly, if no stockholder who or which has complied with each of the
requirements set forth above files such a petition within 120 days after the
Effective Time of the Merger, the rights of all such stockholders to appraisal
will cease.
Within 120 days after the Effective Time of the Merger, any stockholder of
AMH who has complied with the requirements for exercise of appraisal rights will
be entitled, upon written request, to receive from AMH a statement setting forth
the aggregate number of shares of AMH Common Stock not voted in favor of (by way
of any written consent) the approval and adoption of the Merger Agreement and
the Merger and with respect to which demands for appraisal have been received
and the aggregate number of such stockholders. Such statement must be mailed to
such stockholder within ten days after a written request therefor has been
received by AMH or within ten days after the expiration of the 20-day period for
delivery of demands for appraisal by stockholders outlined above, whichever is
later.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights. The Delaware Court of Chancery may require the
stockholders who have demanded an appraisal for their shares and who hold stock
represented by certificates to submit their certificates of stock to the
Register in Chancery for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such direction, the
Delaware Court of Chancery may dismiss the proceedings as to such stockholder.
After determining the stockholders entitled to an appraisal, the Delaware Court
of Chancery will appraise the fair value of their shares of AMH Common Stock,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. Stockholders considering seeking
appraisal should be aware that the fair value of their shares of AMH Common
Stock as determined under Section 262 could be more than, the same as or less
than the consideration they would receive pursuant to the Merger Agreement if
they did not seek appraisal of their shares of AMH Common Stock. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods which
are generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings. In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy. The costs of the action may be determined by the court and taxed upon
the parties as the court deems equitable. The court also may order that all or a
portion of the expenses
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incurred by any stockholder in connection with an appraisal, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts
utilized in the appraisal proceeding, be charged pro rata against the value of
all of the shares of AMH Common Stock entitled to appraisal.
Any holder of shares of AMH Common Stock who has duly demanded an appraisal
in compliance with Section 262 will not, after the Effective Time of the Merger,
be entitled to vote the shares of AMH Common Stock subject to such demand for
any purpose or be entitled to the payment of dividends or other distributions on
those shares (except dividends or other distributions payable to stockholders of
record of AMH Common Stock as of a date prior to the Effective Time of the
Merger).
If any stockholder who demands appraisal of his or its shares of AMH Common
Stock under Section 262 fails to perfect, or effectively withdraws or loses, his
or its right to appraisal, as provided in Section 262, the shares of AMH Common
Stock of such stockholder will be converted into the right to receive the Merger
Consideration in accordance with the Merger Agreement. A stockholder will fail
to perfect his or its right to appraisal by not making a timely written demand
as set forth above. A stockholder can effectively withdraw his or its right to
appraisal if the stockholder delivers to AMH a written withdrawal of his or its
demand for appraisal and acceptance of the Merger, except that any such attempt
to withdraw made more than 60 days after the Effective Time of the Merger will
require the written approval of AMH. A stockholder can lose his or its right to
appraisal if no petition for appraisal is filed within 120 days after the
Effective Time of the Merger or in the event the Delaware Court of Chancery
requires submission of the stock certificates to the Register in Chancery, if
the stockholder fails to comply with such direction.
The foregoing is a brief summary of the rights of dissenting stockholders,
does not purport to be a complete statement thereof and is qualified in its
entirety by reference to the applicable statutory provisions of the DGCL which
are set forth in Annex B hereto.
REGULATORY APPROVAL
Under the HSR Act, and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger could not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
specified waiting period requirements have been satisfied.
NME and AMH each filed notification and report forms under the HSR Act with
the FTC and the Antitrust Division on October 28, 1994 with respect to the
Merger. The required waiting period with respect to the Merger expired on
November 27, 1994. At any time before or after consummation of the Merger, the
Antitrust Division or the FTC could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking divestiture of substantial
assets of NME or AMH. At any time before or after the Effective Time, and
notwithstanding that the HSR Act waiting period has expired, any state could
take such action under its antitrust laws as it deems necessary or desirable.
Such action could include seeking to enjoin the consummation of the Merger or
seeking divestiture of substantial assets of NME or AMH. Private parties also
may seek to take legal action under the antitrust laws under certain
circumstances.
LITIGATION RELATING TO THE MERGER
To date, a total of nine purported class actions (the "Class Actions") have
been filed challenging the Merger. Seven of the Class Actions have been filed in
the Delaware Court of Chancery and are entitled (i) JEFFREY STARK AND GARY
PLOTKIN V. ROBERT W. O'LEARY, ROBERT J. BUCHANAN, JOHN T. CASEY, ROBERT B.
CALHOUN, HARRY J. GRAY, HAROLD J. [SIC] HANDELSMAN, SHELDON S. KING, MELVYN N.
KLEIN, DAN W. LUFKIN, WILLIAM E. MAYER AND HAROLD S. WILLIAMS (the "AMH
Directors") AND AMH, C.A. NO. 13792, (ii) 7457 PARTNERS V. THE AMH DIRECTORS AND
AMH, C.A. NO. 13793, (iii) MOISE KATZ V. THE AMH DIRECTORS AND AMH, C.A. NO.
13794, (iv) CONSTANTINOS KAFALAS V. THE AMH DIRECTORS AND AMH, C.A. NO. 13795,
(v) F. RICHARD MANSON V. THE AMH DIRECTORS, NME AND AMH, C.A. NO. 13797, (vi)
LISBETH GREENFELD V. THE AMH DIRECTORS AND AMH, C.A. NO. 13799 and (vii) JOSEPH
FRANKEL V. THE
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AMH DIRECTORS AND AMH, C.A. NO. 13800. The seven Class Actions filed in the
Delaware Court of Chancery have been consolidated under the caption, IN RE
AMERICAN MEDICAL HOLDINGS, INC., SHAREHOLDERS LITIGATION, C.A. No. 13797. In
addition, two purported class actions entitled RUTH LEWINTER AND RAYMOND CAYUSO
V. THE AMH DIRECTORS (with the exception of Harold S. Williams), NME AND AMH,
CASE NO. BC 115206 and DAVID F. AND SYLVIA GOLDSTEIN V. THE AMH DIRECTORS (with
the exception of Harold S. Williams), NME AND AMH, CASE NO. BC 116104, have been
filed in the Superior Court of the State of California, County of Los Angeles.
The California actions have been stayed pending the resolution of the Delaware
actions. The complaints filed in each of the Class Actions are substantially
similar, are brought by purported stockholders of AMH and, in general, allege
that the directors of AMH breached their fiduciary duties to the plaintiffs and
other members of the purported class. Plaintiffs allege that NME has aided and
abetted the AMH directors' alleged breach of their fiduciary duties. Plaintiffs
further allege that the directors of AMH wrongfully failed to hold an open
auction and encourage bona fide bids for AMH and failed to take action to
maximize value for AMH stockholders. Plaintiffs seek preliminary and permanent
injunctions against the proposed transaction until such time as a transaction to
be entered into between AMH and NME results from bona fide arm's-length
negotiation and/or requiring a fair auction for AMH. In addition, if the Merger
is consummated, the plaintiffs seek rescission or rescissory damages, an
accounting of all profits realized and to be realized by the defendants in
connection with the Merger and the imposition of a constructive trust for the
benefit of the plaintiffs and other members of the purported classes pending
such an accounting. Plaintiffs also seek monetary damages of an unspecified
amount together with prejudgment interest and attorneys' and experts' fees. AMH
and NME believe that the complaints are without merit.
COMPARATIVE STOCK PRICES AND DIVIDENDS
NME Common Stock is traded on the NYSE and the Pacific Stock Exchange
("PSE") under the symbol NME. AMH Common Stock is traded on the NYSE under the
symbol AMI.
The following table sets forth, for the calendar periods indicated, the high
and low closing prices per share of NME Common Stock and AMH Common Stock as
reported by the NYSE.
<TABLE>
<CAPTION>
NME AMH
COMMON STOCK COMMON STOCK
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1992
First Quarter.................................................... $ 18.125 $ 13.125 $ 11.625 $ 8.75
Second Quarter................................................... 15.875 12.50 10.00 7.00
Third Quarter.................................................... 16.75 11.125 10.375 8.00
Fourth Quarter................................................... 13.25 9.625 13.00 8.00
1993
First Quarter.................................................... $ 12.625 $ 8.625 $ 13.75 $ 10.25
Second Quarter................................................... 10.75 6.50 12.50 9.75
Third Quarter.................................................... 12.25 7.00 15.50 10.25
Fourth Quarter................................................... 14.375 9.50 19.50 15.125
1994
First Quarter.................................................... $ 17.625 $ 13.625 $ 24.00 $ 18.125
Second Quarter................................................... 18.125 14.75 26.625 18.00
Third Quarter.................................................... 19.50 15.75 26.00 21.50
Fourth Quarter................................................... 18.00 12.50 24.50 21.375
1995
First Quarter (through January 27, 1995)......................... $ 14.875 $ 13.75 $ 24.75 $ 24.375
</TABLE>
NME paid cash dividends on NME Common Stock of $0.48 and $0.12 per share in
fiscal years 1993 and 1994, respectively. On October 27, 1993, the Board of
Directors suspended payments of
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dividends on NME's Common Stock, effective following the first quarter of fiscal
year 1994. The Board of Directors of NME currently intends to retain earnings
for further development of NME's business and, therefore, does not intend to pay
cash dividends on its Common Stock in the foreseeable future.
Holders of AMH Common Stock are entitled to receive dividends when and as
declared by the Board of Directors. AMH has not paid dividends on the AMH Common
Stock in the past three years. Pursuant to the terms of the Merger Agreement,
AMH will declare the AMH Special Dividend with respect to the AMH Common Stock
of $.10 per share payable on February 28, 1995 to stockholders of record on
February 10, 1995. Payment of this dividend will be funded from AMH's available
cash or from borrowings under AMH's revolving credit facility. See "The Merger
- -- Terms of the Merger -- AMH Special Dividend."
The reported closing sale price of NME Common Stock on the NYSE Composite
Tape on October 10, 1994, the last full day of trading for NME Common Stock
prior to the announcement by NME and AMH of the execution of the Merger
Agreement, was $16.25 per share. The closing sale price of AMH Common Stock on
the NYSE Composite Tape on such date was $22.375 per share. On an equivalent per
share basis calculated by multiplying the closing sale price of NME Common Stock
on that day by 0.42 and adding $19.00 ($19.25 if the Merger is consummated after
March 31, 1995), the value of the Merger Consideration to be received by holders
of AMH Common Stock was $25.825 ($26.075 if the Merger is consummated after
March 31, 1995) per share of AMH Common Stock.
On January 27, 1995, the last full day of trading prior to the date of this
Information Statement/ Prospectus, the reported closing sale prices of NME
Common Stock and AMH Common Stock on the NYSE Composite Tape were $14.00 per
share and $24.50 per share, respectively.
Because the Merger Consideration is fixed and because the market price of
NME Common Stock is subject to fluctuation, the market value of the shares of
NME Common Stock that holders of AMH Common Stock will receive in the Merger may
increase or decrease prior to and following the Merger. STOCKHOLDERS ARE URGED
TO OBTAIN CURRENT MARKET QUOTATIONS FOR BOTH THE NME COMMON STOCK AND THE AMH
COMMON STOCK.
Following the Merger, NME Common Stock will continue to be traded on the
NYSE and the PSE. After such time, AMH Common Stock will cease to be quoted on
the NYSE, and there will be no further market for such stock.
COMPARATIVE RIGHTS OF STOCKHOLDERS
Upon consummation of the Merger, the stockholders of AMH will become
shareholders of NME and their rights will be governed by the NME Articles of
Incorporation and the NME Bylaws, which differ in certain material respects from
AMH's Restated Certificate of Incorporation ("AMH's Certificate of
Incorporation") and Amended Bylaws (the "AMH Bylaws"). As shareholders of NME,
the rights of former AMH stockholders will be governed by the Nevada General
Corporation Law (the "NGCL") instead of by the DGCL. Nevada is the jurisdiction
of incorporation of NME.
The following comparison of the DGCL and AMH's Certificate of Incorporation
and the AMH Bylaws, on the one hand, and the NGCL and NME's Articles of
Incorporation and the NME Bylaws, on the other, is not intended to be complete
and is qualified in its entirety by reference to AMH's Certificate of
Incorporation and the AMH Bylaws and NME's Articles of Incorporation and the NME
Bylaws. Copies of NME's Articles of Incorporation and the NME Bylaws are
available for inspection at the offices of NME, and copies will be sent to the
holders of AMH Common Stock upon request. Copies of AMH's Certificate of
Incorporation and the AMH Bylaws are available for inspection at the principal
executive offices of AMH, and copies will be sent to holders of AMH Common Stock
upon request. Reference is also directed to the discussion below respecting
certain contractual arrangements affecting AMH's Board of Directors, stockholder
action and certain related matters under the heading "-- AMH Stockholders
Agreement."
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DIRECTORS. Both the DGCL and the NGCL provide that a corporation's board of
directors shall consist of at least one member and that the authorized number of
directors may be fixed in either the corporation's certificate of incorporation
or articles of incorporation, as the case may be, or in the bylaws. The NME
Bylaws provide that the authorized number of directors constituting the NME
Board shall be ten directors. The AMH Bylaws provide that the AMH Board shall
consist of not more than eleven nor less than three directors. Pursuant to the
Merger Agreement, NME will take such action as may be required to increase the
authorized number of NME directors from ten to 13.
The number of directors of NME may be changed by the affirmative vote of a
majority of the NME Board of Directors entitled to vote at a meeting of the NME
Board; provided however, that neither the Board of Directors of NME nor the
shareholders may increase the number of directorships by more than one during
any 12-month period, without the affirmative vote of two-thirds of the directors
of each class or the affirmative vote of two-thirds of all outstanding shares of
NME Common Stock voting together. Notwithstanding the ability of NME's directors
to amend, alter or repeal the NME Bylaws, the stockholders of NME, under the
NGCL, also retain the right to make, alter or repeal the NME Bylaws.
The NME Articles of Incorporation provide that the Board of Directors of NME
will be divided into three classes, and each class will generally serve for a
term of three years. The term of one class of directors expires annually, so it
is only possible to elect one class of the Board of Directors (or approximately
one-third) in any one year. AMH does not have a classified board of directors.
One of the three directors to be added to the Board of Directors of NME at the
Effective Time will be added to each class of the NME Board of Directors.
The classification provisions could have the effect of discouraging a third
party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of NME, even though such an attempt might be
beneficial to NME and its shareholders. The classification of the Board of
Directors of NME could thus increase the likelihood that incumbent directors
will retain their positions. In addition, because the classification provisions
may discourage accumulations of large blocks of NME's stock by purchasers whose
objective is to take control of NME and remove a majority of the Board of
Directors of NME, the classification of the Board of Directors could tend to
reduce the likelihood of fluctuations in the market price of the NME Common
Stock that might result from accumulations of large blocks of stock.
Accordingly, shareholders could be deprived of certain opportunities to sell
their shares of NME Common Stock at a higher market price than otherwise might
be the case.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under
the NGCL, any director may be removed from office upon the vote of shareholders
representing not less than two-thirds of the outstanding voting stock of the
corporation. Although the NME Articles of Incorporation are silent as to removal
of directors from the NME Board, the NME Bylaws provide that any director or the
entire NME Board of Directors may be removed, with or without cause, by the
holders of two-thirds of the shares entitled to vote at an election of
directors. Under the DGCL, any director or the entire board of directors
generally may be removed, with or without cause, by the holders of a majority of
the shares entitled to vote at an election of directors. As permitted by the
DGCL, the AMH Bylaws provide that any director, whether elected by the
stockholders or appointed by the directors, may be removed from office by the
vote of stockholders representing a majority of the shares then entitled to vote
at an election of directors.
Both the DGCL and the NGCL generally provide that all vacancies on the board
of directors, including vacancies caused by an increase in the number of
authorized directors, may be filled by a majority of the remaining directors
even if they are less than a quorum. NME's Articles of Incorporation permit the
Board of Directors to fill vacancies, however created, except for vacancies
first filled by the shareholders. The NME Articles of Incorporation are silent
as to the number of directors whose affirmative vote is required to fill any
vacancy in the NME Board of Directors. However, the NME Bylaws provide that the
affirmative vote of two-thirds of the remaining directors of each class is
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required to fill such vacancies. AMH's Certificate of Incorporation is silent as
to the filling of vacancies on the AMH Board of Directors. However, the AMH
Bylaws provide that all vacancies on the Board of Directors, including vacancies
caused by an increase in the number of authorized directors, may be filled by a
majority of the remaining directors even if they are less than a quorum and
further provide that any such elected director shall serve until his successor
is duly elected and qualified, unless sooner replaced.
LIMITATION ON DIRECTORS' LIABILITY. As permitted under the DGCL, AMH's
Certificate of Incorporation provides that a director will not be personally
liable to AMH or its stockholders for monetary damages for breach of fiduciary
duty as a director, although AMH's Certificate of Incorporation does not
eliminate the liability of the director for breaches of the duty of loyalty,
acts or omissions not in good faith or involving intentional misconduct or
knowing violations of law, the unlawful repurchase or redemption of stock or
payment of unlawful dividends or any transaction from which a director derives
an improper personal benefit. As permitted under the NGCL, the NME Articles of
Incorporation provide that no director or officer shall be personally liable to
NME or its shareholders for damages for breach of fiduciary duty as a director
or officer, except for liability for acts or omissions which involve intentional
misconduct, fraud, or a knowing violation of the law or for the unlawful payment
of dividends.
INDEMNIFICATION. AMH's Certificate of Incorporation requires
indemnification of directors and officers to the full extent permitted by the
DGCL. The NGCL is similar to the DGCL except that it permits more extensive
indemnification with respect to shareholder derivative claims. The language in
the NME Articles of Incorporation and the NME Bylaws provides for
indemnification to the full extent permitted by the NGCL.
RESTRICTIONS ON BUSINESS COMBINATIONS/CORPORATE CONTROL. The DGCL contains
provisions restricting the ability of a corporation to engage in business
combinations with an interested stockholder. Under the DGCL, except under
certain circumstances, a corporation is not permitted to engage in a business
combination with any interested stockholder for a three-year period following
the date such stockholder became an interested stockholder. The DGCL defines an
interested stockholder generally as a person who owns 15% or more of the
outstanding shares of such corporation's voting stock.
Certain provisions of the NGCL disallow the exercise of voting rights with
respect to "control shares" of an "issuing corporation" held by an "acquiring
person," unless such voting rights are conferred by a majority vote of the
disinterested shareholders or if, within 10 days after the acquiring person's
acquisition of the control shares, the articles of incorporation or bylaws of
the issuing corporation state that such provisions of the the NGCL do not apply
to the issuing corporation. NME's Articles of Incorporation and the NME Bylaws
do not contain such a statement.
The NGCL also contains provisions restricting the ability of a corporation
to engage in any combination with an interested shareholder unless the
combination complies with certain fair price provisions or unless the board of
directors of the corporation approved of the interested shareholder's
acquisition of shares. The NGCL defines an interested shareholder generally as a
person who owns 10% or more of the outstanding shares of such corporation's
voting stock.
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS. Under the DGCL and
the NGCL, unless otherwise provided in the certificate of incorporation or
articles of incorporation, as the case may be, stockholders may take action
without a meeting, without prior notice and without a vote, upon the written
consent of stockholders having not less than the minimum number of votes that
would be necessary to authorize the proposed action at a meeting at which all
shares entitled to vote were present and voted. The AMH Bylaws provide that any
action that may be taken or is required to be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present. The AMH
Bylaws further provide that prompt notice of the taking of the corporate
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<PAGE>
action without a meeting by less than unanimous written consent must be given to
those stockholders who have not consented in writing. The NME Bylaws have a
similar provision, except that directors must be elected at an annual or special
meeting of shareholders and not by written consent of the shareholders.
The NME Bylaws provide that special meetings of shareholders may be called
by the Chief Executive Officer or by the Board of Directors. The AMH Bylaws
provide that special meetings of the stockholders may be called by the Board of
Directors, the President and/or a Vice President of AMH and must be called by
the Secretary at the request, in writing, of stockholders owning at least a
majority of the shares of AMH Common Stock issued and outstanding and entitled
to vote.
AMENDMENT OR REPEAL OF THE CERTIFICATE OF INCORPORATION AND BYLAWS. Under
the DGCL and the NGCL, unless the certificate of incorporation or articles of
incorporation, as the case may be, or bylaws otherwise provide, amendments to
the certificate of incorporation or articles of incorporation generally require
the approval of the holders of a majority of the outstanding stock entitled to
vote thereon, and if such amendments would increase or decrease the number of
authorized shares of any class or series or the par value of such shares or
would adversely affect the shares of such class or series, a majority of the
outstanding stock of such class or series would have to approve the amendment.
NME's Articles of Incorporation and the NME Bylaws are silent as to the
amendment and repeal of the articles of incorporation, except that amendments
relating to increasing the number of directors on the Board of Directors of NME
and the approval of a merger or consolidation of NME require the affirmative
vote of two-thirds of all of the outstanding shares voting together, or, in the
case of an amendment relating to expansion of the Board of Directors, two-thirds
of the directors of each class. The NME Bylaws provide that new or restated
bylaws may be adopted or existing bylaws repealed or amended, at the annual
meeting of shareholders or at any other meeting called for that purpose, by a
vote of shareholders entitled to exercise a majority of the voting power of NME.
Subject to the shareholders' rights described above, the Board of Directors of
NME may adopt, amend or repeal bylaws by the affirmative vote of two-thirds of
the directors of each class of the Board of Directors of NME.
AMH's Certificate of Incorporation provides that AMH reserves the right to
amend, alter, change or repeal any provision contained in its Certificate of
Incorporation in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders in AMH's Certificate of Incorporation are
subject to such reservation. AMH's Certificate of Incorporation provides that
the Board of Directors acting by a majority vote may alter, amend, change, add
to or repeal the AMH Bylaws. The AMH Bylaws provide that they may be altered,
amended or repealed or new bylaws adopted by the stockholders by a vote at a
meeting or by written consent without a meeting and, subject to the power of the
stockholders as aforesaid, by the Board of Directors of AMH.
CUMULATIVE VOTING. Under both the DGCL and the NGCL, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be, of a corporation. Neither AMH's
Certificate of Incorporation nor NME's Articles of Incorporation provide for
cumulative voting.
STOCKHOLDER VOTE FOR MERGER. Except with respect to certain mergers between
parent and subsidiary corporations, both the DGCL and the NGCL generally require
the affirmative vote of a majority of the outstanding shares of the constituent
corporations in a merger. The affirmative vote of the holders of two-thirds of
all outstanding shares of NME Common Stock, voting together and not by class, is
required to approve any merger or consolidation or sale of substantially all of
the assets of NME. Under the DGCL and the NGCL, holders of stock which is not by
its terms entitled to vote on such a transaction are entitled to notice of the
meeting at which the proposed transaction is considered. Neither the DGCL nor
the NGCL requires a stockholder vote of the surviving corporation in a merger,
however, if (a) the merger agreement does not amend the existing certificate of
incorporation, (b) each
58
<PAGE>
outstanding or treasury share of the surviving corporation before the merger is
unchanged after the merger, and (c) the number of shares to be issued by the
surviving corporation in a merger does not exceed 20% of the shares outstanding
immediately prior to such issuance.
APPRAISAL RIGHTS IN MERGERS. Both the DGCL and the NGCL provide that
stockholders have the right, in some circumstances, to dissent from certain
corporate reorganizations and to instead demand payment of the fair cash value
of their shares. Unless a corporation's certificate of incorporation provides
otherwise, the DGCL does not provide for such rights of appraisal with respect
to (a) a sale-of-assets reorganization, (b) a merger or consolidation by a
corporation, the shares of which are either listed on a national securities
exchange or widely held (by more than 2,000 stockholders), if stockholders
receive shares of the surviving corporation or of such a listed or widely-held
corporation, or (c) stockholders of a corporation surviving in a merger if no
vote of the stockholders of the surviving corporation is required to approve the
merger. Like the DGCL, the NGCL generally does not provide for appraisal rights
if no vote of the shareholders of the surviving corporation is required.
Further, appraisal rights are not available under the NGCL for shares registered
on a securities exchange on the record date for the meeting at which the
reorganization is considered by the shareholders.
DIVIDENDS. Under the DGCL, corporations may pay dividends out of surplus,
or if no surplus exists, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. Under the NGCL,
corporations may only pay dividends if after such distribution the corporation
would be able to pay its debts as they become due in the ordinary course of
business.
RIGHTS PLAN. On December 7, 1988, NME declared a dividend distribution of
one right (the "Rights") for each share of NME Common Stock outstanding on
December 22, 1988 and authorized the issuance of additional Rights for common
stock issued after that date. NME may redeem the Rights at $.025 per right at
any time until they become exercisable. With certain exceptions, the Rights
become exercisable ten business days after an investor (an "Acquiring Investor")
has (i) commenced a tender or exchange offer for 30% or more of the outstanding
shares of NME Common Stock or (ii) made or is the subject of a public
announcement that an investor has acquired 20% or more of the outstanding shares
of NME Common Stock (a "Stock Acquisition Date"). Upon the occurrence of such
events and the expiration of NME's right to redeem the Rights, the Rights may be
exchanged for one two-thousandth (.0005) of a share of NME's Series A Junior
Participating Preferred Stock at an exercise price of $40.61, subject to
adjustment. The Rights are redeemable by NME in whole, but not in part, up to
and including the 20th business day after a Stock Acquisition Date at a price of
$.05 per Right, subject to adjustment.
In the event that, on or after the date the Rights become exercisable, NME
is acquired or merged and the Rights have not been redeemed, each Right holder
will be entitled to purchase, for the then-current exercise price of each Right,
common stock of the surviving company having a market value equal to two times
the exercise price of each Right. However, no such right shall apply with
respect to Rights beneficially owned by an Acquiring Investor. The Rights expire
in December 1998 unless exercised or redeemed and do not entitle the holder
thereof to vote as shareholders or receive dividends.
The Rights could have the effect of discouraging a third party from making a
tender offer or otherwise attempting to obtain control of NME, even though such
an attempt might be beneficial to NME and its shareholders. In addition, because
the Rights may discourage accumulations of large blocks of NME Common Stock by
purchasers whose objective is to take control of NME, the Rights could tend to
reduce the likelihood of fluctuations in the market price of the NME Common
Stock that might result from accumulations of large blocks of stock.
Accordingly, shareholders could be deprived of certain opportunities to sell
their shares of NME Common Stock at a higher market price than otherwise might
be the case. AMH does not have a stockholder rights plan.
AMH STOCKHOLDERS AGREEMENT. Under the terms of the AMH Stockholders
Agreement by and among AMH, the Fund, GKHPL, First Plaza, MBLP, MIP, certain
specified investors and others, the Fund, together with GKHPL, has the power to
designate a majority of the nominees for AMH's Board
59
<PAGE>
of Directors and thereby effectively controls the selection of executive
officers and other key employees and the establishment of AMH's operating
policies. MBLP and MIP are entitled to designate up to two nominees to AMH's
Board of Directors, and the designated other stockholders are entitled to
designate at least one (but not more than two) of the nominees for AMH's Board
of Directors. The AMH Stockholders Agreement also requires each of the parties
to vote all shares of AMH Common Stock held thereby for all persons nominated
pursuant to the AMH Stockholders Agreement. The rights and obligations of the
parties to designate and vote for nominees for AMH's Board of Directors
terminate as to a party under certain circumstances, including the failure to
maintain the ownership of AMH Common Stock at specified levels. Pursuant to the
AMH Stockholders Agreement, the Fund and GKHPL have designated Messrs. Gray,
Handelsman, Klein, Lufkin, Mayer and O'Leary as their nominees for directors,
MBLP and MIP have designated Mr. Calhoun as its nominee for director, and Mr.
Casey has been designated as the nominee for the other specified stockholders.
In addition to the provisions respecting the election of directors, the AMH
Stockholders Agreement also restricts the ability of AMH to take certain
corporate actions, including amending its charter documents and to enter into
any merger or other business combination, or otherwise sell or acquire material
assets without the consent of certain of the parties thereto. The AMH
Stockholders Agreement also provides for certain rights-of-first-refusal,
restrictions on dispositions of AMH Common Stock and requires the parties
thereto to sell all of their shares of AMH Common Stock in certain circumstances
if the Fund and GKHPL propose to sell all of their shares of AMH Common Stock by
way of merger or similar transaction. Thus, by virtue of the AMH Stockholders
Agreement the parties thereto may effectively have the power to determine the
policies of AMH, the persons constituting its management and the outcome of
certain corporate actions requiring stockholder approval by majority action. As
a result, the overall rights of stockholders under the DGCL may be significantly
impacted by the contractual provisions of the AMH Stockholders Agreement. Upon
consummation of the Merger, the AMH Stockholders Agreement will terminate and be
of no further force and effect with respect to NME after the Effective Time.
FINANCING FOR THE MERGER AND THE RELATED TRANSACTIONS
MERGER FINANCING
NME intends to finance the cash portion of the Merger Consideration and the
related transactions, together with the fees and expenses incurred in connection
with the Merger and such related transactions, with the proceeds from the public
offering (the "Public Offering") of $300 million in aggregate principal amount
of Senior Notes (the "New Senior Notes") and $700 million in aggregate principal
amount of Senior Subordinated Notes (the "New Subordinated Notes" and, together
with the New Senior Notes, the "New Debt Securities") of NME, borrowings under
the New Credit Facility and the available cash balances of NME and AMH. See "--
The New Credit Facility" and "-- The Public Offering" for a description of the
anticipated terms of the New Credit Facility and the New Debt Securities,
respectively.
RELATED TRANSACTIONS
THE AMI TENDER OFFERS. NME has commenced tender offers (the "AMI Tender
Offers") to purchase for cash any and all of AMI's outstanding 11% Senior Notes
due 2000, 9 1/2% Senior Subordinated Notes due 2006, 13 1/2% Senior Subordinated
Notes due 2001 and 15% Junior Subordinated Discount Debentures due 2005
(collectively, the "AMI Post 1991 Debt Securities") and 6 1/2% Dual Currency
Bonds due 1997 (the "AMI Dual Currency Bonds") and 5% Swiss Franc Bonds due 1996
(the "AMI 5% Bonds" and, together with the AMI Dual Currency Bonds, the "AMI
Swiss Bonds"). The AMI Swiss Bonds had an aggregate principal amount outstanding
of approximately $127.3 million at November 30, 1994. The AMI Post 1991 Debt
Securities had an aggregate outstanding principal amount (accreted principal
amount in the case of the 15% Junior Subordinated Discount Debentures) of
approximately $553.8 million at January 10, 1995.
60
<PAGE>
In connection with the AMI Tender Offers for the AMI Post 1991 Debt
Securities, NME is soliciting consents (the "Consent Solicitations") from the
holders of the AMI Post 1991 Debt Securities to eliminate certain of the
restrictive covenants in the indentures relating to such securities, including
restricted payment covenants that would limit NME's access to the cash flow of
AMI following the Merger. Each of such indentures requires the affirmative
consent of holders of record of not less than 66 2/3% of the outstanding
principal amount or accreted principal amount, as the case may be, of the
securities issued thereunder in order to effect the proposed amendments. The
obligation pursuant to the AMI Tender Offers to purchase securities of each
issue properly tendered and not withdrawn is conditioned upon, among other
things, (i) the execution of a supplemental indenture with respect to the
applicable indenture providing for the proposed amendments, (ii) satisfaction or
waiver of all of the conditions to the Merger set forth in the Merger Agreement
and (iii) NME having entered into arrangements satisfactory to it with respect
to financing necessary to complete the Merger, the AMI Tender Offers, the NME
Tender Offers (as hereinafter defined) and certain related transactions. In
addition, NME's obligation to make consent payments with respect to each issue
of the AMI Post 1991 Debt Securities is conditioned upon NME's acceptance of
securities of such issue for purchase pursuant to the applicable AMI Tender
Offer. The AMI Tender Offers and Consent Solicitations are subject to a number
of additional conditions. The AMI Tender Offers are expected to expire
approximately five business days prior to the Effective Time. Immediately after
the Effective Time, NME intends to assign its right and obligation to purchase
(and make consent payments with respect to) the AMI Post 1991 Debt Securities
and the AMI Swiss Bonds under the AMI Tender Offers to AMI and transfer to AMI,
from borrowings under the New Credit Facility, the amount of funds necessary to
consummate such tender offers and make such payments. It is currently
anticipated that AMI will consummate the AMI Tender Offers immediately
thereafter. NME currently estimates that substantially all of the AMI Post 1991
Debt Securities and the AMI Swiss Bonds will be tendered and repurchased
pursuant to the AMI Tender Offers. If a lesser aggregate principal amount of AMI
Post 1991 Debt Securities or AMI Swiss Bonds is tendered pursuant to the AMI
Tender Offers, NME currently intends to permit the untendered securities to
remain outstanding and reduce borrowings under the New Credit Facility
accordingly. Changes in the assumptions regarding the aggregate amount of AMI
Post 1991 Debt Securities or AMI Swiss Bonds purchased pursuant to the AMI
Tender Offers are not expected to have a significant impact on NME's pro forma
interest expense or consolidated indebtedness following the Merger although the
New Debt Securities will be effectively subordinated to any untendered AMI Post
1991 Debt Securities and AMI Swiss Bonds with respect to the assets of AMI.
Consummation of the AMI Tender Offers and adoption of the proposed indenture
amendments are conditions of the Public Offering. In addition, the New Credit
Facility is conditioned upon the adoption of the proposed amendments and the
reduction of outstanding indebtedness of subsidiaries of NME to an amount
acceptable to the banks that are parties to the New Credit Facility.
THE AMI REDEMPTIONS. AMI intends to call for redemption (the "AMI
Redemptions") all of its outstanding 9 1/2% Convertible Subordinated Debentures
due 2001 (the "AMI 9 1/2% Convertible Debentures") and 11 1/4% Sinking Fund
Debentures due 2015 (the "AMI 11 1/4% Debentures" and, together with the AMI
Post 1991 Debt Securities, the AMI Swiss Bonds and the AMI 9 1/2% Convertible
Debentures, the "AMI Debt Securities"). As of January 10, 1995 there were
outstanding approximately $47.8 million in aggregate principal amount of AMI
11 1/4% Debentures, which are redeemable at a redemption price of 106.195% of
the principal amount thereof for redemptions occurring prior to June 1, 1995,
and 105.632% of the principal amount for a 12-month period thereafter, plus
accrued interest to the redemption date. As of January 10, 1995, there were
outstanding approximately $4.5 million in aggregate principal amount of the AMI
9 1/2% Convertible Debentures, which are redeemable at a redemption price of
100% of the principal amount thereof, plus accrued interest through the
redemption date. The AMI 9 1/2% Convertible Debentures currently are convertible
into an aggregate of 186,054 shares of AMH Common Stock at a conversion price of
$24.38 per share. Because the conversion price is below the per share value of
the Merger Consideration, based on the closing
61
<PAGE>
market price of NME Common Stock at January 27, 1995, NME currently expects that
all of the outstanding AMI 9 1/2% Convertible Debentures will be converted by
the holders thereof into shares of AMI Common Stock prior to the Effective Time.
NME currently expects that the redemption date for the AMI 9 1/2%
Convertible Debentures will be as soon as practicable after the Effective Time
and that notices of redemption will be given with respect to the AMI 11 1/4%
Debentures as soon as practicable following the Effective Time. Amounts required
for the redemption of the AMI 9 1/2% Convertible Debentures, if any, and the AMI
11 1/4% Debentures will be transferred to AMI by NME. The Public Offering is
conditioned upon the concurrent redemption or call for redemption of the AMI
11 1/4% Debentures and the AMI 9 1/2% Convertible Debentures pursuant to the AMI
Redemptions. See "Selected Information Concerning NME and AMH -- American
Medical Holdings, Inc. -- AMI Convertible Debentures."
THE NME TENDER OFFERS. NME has commenced tender offers (the "NME Tender
Offers") to purchase for cash any and all of an aggregate of approximately
$169.5 million principal amount of NME's outstanding unsecured medium term
notes, with maturities through 1997, and the 7 3/8% Notes due 1997 (collectively
the "NME Medium Term Notes"). The NME Tender Offers are subject to a number of
conditions but are not conditioned on any minimum principal amount of NME Medium
Term Notes of any series being properly tendered and not withdrawn prior to the
expiration of the NME Tender Offers. The NME Tender Offers are expected to
expire approximately five business days prior to the Effective Time, and
payments for any NME Medium Term Notes accepted for payment are expected to be
made immediately after the Effective Time. If less than all of the currently
outstanding NME Medium Term Notes are tendered pursuant to the NME Tender
Offers, NME currently intends to permit the untendered Medium Term Notes to
remain outstanding and reduce borrowings under the New Credit Facility
accordingly. Any change in the assumptions regarding the aggregate amount of NME
Medium Term Notes purchased pursuant to the NME Tender Offers will not have a
significant impact on NME's pro forma interest expense or consolidated
indebtedness following the Merger.
THE REFINANCING OF THE NME AND AMI CREDIT FACILITIES AND OTHER
INDEBTEDNESS. NME intends to refinance the outstanding credit facilities of NME
and AMI with borrowings under the New Credit Facility (together with the AMI
Tender Offers, the AMI Redemptions and the NME Tender Offers, the
"Refinancing"). At November 30, 1994, the balance outstanding under each of the
NME credit facility and the AMI credit facility was $364.6 million and $262.0
million, respectively. In addition, NME and AMI anticipate repaying
approximately $92.9 million and $151.5 million principal amount, respectively,
of indebtedness that matures prior to or shortly after the consummation of the
Merger.
SOURCES AND USES OF FUNDS
NME intends to finance the cash paid in connection with the Merger and the
related transactions, together with the fees and expenses incurred in connection
therewith, with the proceeds from the Public Offering, borrowings under the New
Credit Facility and the available cash balances of NME and AMH.
62
<PAGE>
The following table sets forth the sources and uses of funds to be used to
consummate the Merger and the Refinancing assuming (i) that the Merger is
consummated on or prior to March 31, 1995, (ii) that the New Debt Securities are
sold at a price to the public equal to 100% of the principal amount thereof,
(iii) that substantially all of the NME Medium Term Notes and the AMI Post 1991
Debt Securities and the AMI Swiss Bonds are properly tendered and not withdrawn
pursuant to the NME Tender Offers and the AMI Tender Offers, respectively, and
(iv) that all of the AMI 9 1/2% Convertible Debentures are converted prior to
the Effective Time. The sources and uses of funds set forth below are based upon
NME's best estimate of the results of the NME Tender Offers and the AMI Tender
Offers and the other assumptions described above, which estimates and
assumptions are subject to change.
<TABLE>
<CAPTION>
(DOLLARS
IN
MILLIONS)
<S> <C>
SOURCES
New Credit Facility:
Term Loan.......................................................................................... $ 2,000.0
Revolver........................................................................................... 265.4
New Senior Notes..................................................................................... 300.0
New Subordinated Notes............................................................................... 700.0
Cash of NME and AMH.................................................................................. 129.5
-----------
$ 3,394.9
-----------
-----------
USES
Cash portion of the Merger Consideration............................................................. $ 1,478.3
Repayment of certain AMI debt (1).................................................................... 1,090.5
Cash portion of the AMH Option Cancellation (2)...................................................... 41.3
AMH Special Dividend................................................................................. 7.8
Repayment of certain NME debt (3).................................................................... 611.4
Estimated fees and expenses (4)...................................................................... 165.6
-----------
$ 3,394.9
-----------
-----------
<FN>
- ------------------------
(1) Includes repayment of the balance of $262.0 million outstanding under the
existing AMI credit facility as of November 30, 1994, the balance of the
AMI Debt Securities that are being called for redemption (other than the
AMI 9 1/2% Convertible Debentures that are assumed to be converted prior to
the Effective Time), the balance (or the accreted value, as applicable) of
the AMI Debt Securities that are expected to be repurchased and cancelled
pursuant to the AMI Tender Offers, and the balance of AMI's 11 3/8% Notes
due 1995 and 11 1/4% Pound Notes due 1995.
(2) Assumes a per share price for the NME Common Stock of $14.75 (representing
the average closing price per share of NME Common Stock, as reported on the
NYSE over the ten consecutive trading days immediately following the
announcement of the Merger).
(3) Includes repayment of the balance of $364.6 million outstanding under the
existing NME credit facility as of November 30, 1994, the principal amount
of NME's 12 1/8% unsecured notes due April 1, 1995 and the principal amount
of the NME Medium Term Notes that are expected to be repurchased and
cancelled pursuant to the NME Tender Offers.
(4) To reflect estimated fees, costs and expenses of NME and AMH in the
aggregate amount of approximately $165.6 million, including transaction
fees, costs and expenses, deferred financing costs and an amount equivalent
to the write-up of the debt to be refinanced to its fair value at November
30, 1994, which amounts are based on actual agreements, estimates provided
by outside advisors and estimated payments in connection with the
Refinancing, as determined by NME's financial advisors.
</TABLE>
63
<PAGE>
THE NEW CREDIT FACILITY
In connection with the Merger and the Refinancing, Morgan Guaranty Trust
Company of New York, Bank of America NT&SA, The Bank of New York and Bankers
Trust Company (collectively, the "Arranging Agents") and a syndicate of other
lenders (the "Lenders") have committed to provide NME with the New Credit
Facility consisting of (i) a six and a half year amortizing term loan in the
aggregate principal amount of $2.0 billion (the "Term Loan") and (ii) a six and
a half year $500.0 million revolving credit facility, with a letter of credit
option not to exceed $100.0 million. The Arranging Agents have also committed to
provide a separate letter of credit facility to NME in an aggregate principal
amount of approximately $91.0 million, upon terms substantially similar to the
New Credit Facility (the "Metrocrest Letter of Credit Facility"). The Metrocrest
Letter of Credit Facility is intended to replace an existing letter of credit
facility established in connection with the issuance of certain bonds issued by
Metrocrest Hospital Authority as part of the financing of two hospitals operated
by subsidiaries of NME. NME's obligations under the New Credit Facility and the
Metrocrest Letter of Credit Facility will rank PARI PASSU with the New Senior
Notes and will constitute senior debt with respect to the New Subordinated Notes
and any other subordinated debt of NME outstanding at any time after the
Effective Time. In addition, borrowings under the New Credit Facility will be
secured by a first priority lien on the capital stock of NME's direct
subsidiaries, all intercompany indebtedness owed to NME and NME's and certain of
its subsidiaries' equity investments in Westminster (as hereinafter defined) and
Hillhaven and will have priority as to such collateral over the New Debt
Securities.
THE PUBLIC OFFERING
THE NEW SENIOR NOTES. The New Senior Notes are expected to be limited to
$300 million principal amount and to mature in September 2002. The New Senior
Notes will rank PARI PASSU with borrowings under the New Credit Facility and
senior in right of payment to the New Subordinated Notes.
THE NEW SUBORDINATED NOTES. The New Subordinated Notes are expected to be
limited to $700 million principal amount and to mature in March 2005. The New
Subordinated Notes will rank junior in right of payment to all senior debt of
NME, including borrowings under the New Credit Facility and the New Senior
Notes. The terms of the Notes to be issued in the Public Offering are subject to
change.
64
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Financial Statements give effect
to the following transactions and events as if they had occurred at the
beginning of each period presented for purposes of the pro forma statements of
operations and other operating information and on November 30, 1994 for purposes
of the pro forma balance sheet data: (i) the August 1994 sale of approximately
75% of the common stock of Total Renal Care, Inc. ("TRC"); (ii) the March 1994
sale of one inpatient rehabilitation hospital and the January 1994 sale of 28
inpatient rehabilitation hospitals and 45 related satellite outpatient clinics;
(iii) the February 1994 sale of four long-term care facilities and the September
1993 sale of 19 long-term care facilities to The Hillhaven Corporation
("Hillhaven") (all of which properties previously had been leased to Hillhaven);
(iv) the elimination of restructuring charges recorded by NME of $77.0 million
in fiscal 1994; (v) the elimination of certain non-recurring gains recorded by
NME and AMH; (vi) the Merger, applying the purchase method of accounting; and
(vii) consummation of the Public Offering and the Refinancing.
The Unaudited Pro Forma Condensed Combined Financial Statements do not
purport to present the financial position or results of operations of NME had
the transactions and events assumed therein occurred on the dates specified, nor
are they necessarily indicative of the results of operations that may be
achieved in the future. The Unaudited Pro Forma Condensed Combined Financial
Statements do not reflect certain cost savings that management believes may be
realized following the Merger, currently estimated to be approximately $60.0
million annually beginning in fiscal 1996 (before any severance or other costs
of implementing certain efficiencies). These savings are expected to be realized
primarily through the elimination of duplicative corporate overhead, reduced
supplies expense through the incorporation of AMH into NME's group purchasing
program and improved collection of AMH accounts receivable by Syndicated Office
Systems, Inc., NME's wholly owned debt collection business. No assurances can be
made as to the amount of cost savings, if any, that actually will be realized.
The Unaudited Pro Forma Condensed Combined Financial Statements are based on
certain assumptions and adjustments described in the Notes to Unaudited Pro
Forma Condensed Combined Financial Statements and should be read in conjunction
therewith and with "The Merger," "Financing for the Merger and the Related
Transactions," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and related
notes of NME and AMH included or incorporated by reference in this Information
Statement/ Prospectus.
NME reports its financial information on the basis of a May 31 fiscal year.
AMH reports its financial information on the basis of an August 31 fiscal year.
The Unaudited Pro Forma Condensed Combined Statement of Operations combines
NME's Consolidated Statements of Operations for the fiscal year ended May 31,
1994 with AMH's Consolidated Statements of Operations for the fiscal year ended
August 31, 1994. The Unaudited Pro Forma Combined Statements of Operations for
the six months ended November 30, 1993 and 1994 combine the Consolidated
Statements of Operations of NME and AMH for these same six-month periods.
65
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1994
---------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
NME AMH ADJUSTMENTS COMBINED
---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 131.8 $ 21.3 $(1,527.4)(a) $ 38.5
1,563.5(b)
(165.6)(c)
14.9(d)
Short-term investments, at cost which
approximates market............................ 51.4 51.4
Accounts and notes receivable, less allowance
for doubtful accounts.......................... 411.4 167.5 19.5(d) 598.4
Inventories of supplies, at cost................ 54.8 64.2 119.0
Deferred income taxes........................... 304.0 15.5 21.9(e) 341.4
Assets held for sale............................ 26.5 26.5
Prepaid expenses and other current assets....... 56.5 19.2 75.7
---------- ---------- ------------- ---------
Total current assets........................ 1,036.4 287.7 (73.2) 1,250.9
Long-term receivables............................. 67.7 16.3 84.0
Investments and other assets...................... 306.2 84.7 60.2(d) 451.1
Property, plant and equipment, net................ 1,780.9 1,482.2 275.0(f) 3,538.1
Intangible assets, at cost less accumulated
amortization..................................... 112.2 1,153.9 1,109.9(g) 2,376.0
---------- ---------- ------------- ---------
$ 3,303.4 $ 3,024.8 $ 1,371.9 $ 7,700.1
---------- ---------- ------------- ---------
---------- ---------- ------------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and notes................. $ 112.9 $ $ $ 112.9
Accounts payable................................ 139.0 98.2 1.8(d) 239.0
Employee compensation and benefits.............. 82.5 106.2 188.7
Reserve related to discontinued operations...... 76.5 76.5
Income taxes payable............................ 22.5 1.6(d) --
(24.1)(e)
Other current liabilities......................... 203.9 118.8 25.8(d) 348.5
Current portion of long-term debt................. 495.1 156.2 (608.1)(b) 43.2
---------- ---------- ------------- ---------
Total current liabilities................... 1,132.4 479.4 (603.0) 1,008.8
---------- ---------- ------------- ---------
Long-term debt, net of current portion............ 236.3 1,146.9 2,171.6(b) 3,581.8
(3.0)(h)
30.0(f)
Other long-term liabilities and minority
interests........................................ 374.1 306.2 65.4(d) 745.7
Deferred income taxes............................. 126.0 218.7 95.0(e) 439.7
Shareholders' equity:
Common stock.................................... 13.9 0.8 2.4(i) 16.3
(0.8)(j)
Other shareholders' equity...................... 1,698.8 872.8 478.5(i) 2,184.8
(41.3)(k)
(7.8)(k)
3.0(h)
(819.2)(j)
Less: Common stock in treasury, at cost......... (278.1) 1.1(i) (277.0)
---------- ---------- ------------- ---------
Total shareholders' equity.................. 1,434.6 873.6 (384.1) 1,924.1
---------- ---------- ------------- ---------
$ 3,303.4 $ 3,024.8 $ 1,371.9 $ 7,700.1
---------- ---------- ------------- ---------
---------- ---------- ------------- ---------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
66
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL AMH YEAR
NME YEAR NME ENDED AMH PRO
ENDED MAY ADJUSTMENTS NME AS AUGUST 31, ADJUSTMENTS AMH AS PRO FORMA FORMA
31, 1994 (L) ADJUSTED 1994 (M) ADJUSTED ADJUSTMENTS COMBINED
---------- ----------- -------- ---------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net operating
revenues..................... $2,943.2 $(359.2) $2,584.0 $2,381.7 $-- $2,381.7 $ -- $4,965.7
Operating expenses:
Salaries and benefits....... 1,293.4 (176.0) 1,117.4 869.0 869.0 1,986.4
Supplies.................... 339.4 (14.8) 324.6 340.0 340.0 664.6
Provision for doubtful
accounts................... 107.0 (5.2) 101.8 165.5 165.5 267.3
Other operating expenses.... 666.5 (113.8) 552.7 524.3 524.3 1,077.0
Depreciation................ 142.7 (11.9) 130.8 118.1 118.1 (10.6)(n) 238.3
Amortization................ 18.1 (2.3) 15.8 38.6 38.6 17.0(o) 71.4
Restructuring charges....... 77.0 (77.0) -- -- -- --
---------- ----------- -------- ---------- ----------- -------- ----------- --------
Operating income.............. 299.1 41.8 340.9 326.2 326.2 (6.4) 660.7
Interest expense, net of
capitalized portion.......... (70.0) 5.0 (65.0) (157.2) (157.2) (102.2)(p) (324.4)
Investment earnings........... 27.7 1.9 29.6 2.7 2.7 (4.3)(q) 28.0
Equity in earnings of
unconsolidated affiliates.... 23.8 0.5 24.3 -- -- 24.3
Minority interest expense..... (8.2) 3.0 (5.2) (5.9) (5.9) (11.1)
Net gain on disposals of
facilities and long-term
investments.................. 87.5 (87.5) -- 69.3 (69.3) -- --
---------- ----------- -------- ---------- ----------- -------- ----------- --------
Income from continuing
operations before income
taxes........................ 359.9 (35.3) 324.6 235.1 (69.3) 165.8 (112.9) 377.5
Taxes on income............... (144.0) 13.8 (130.2) (96.1) 25.9 (70.2) 37.4(r) (163.0)
---------- ----------- -------- ---------- ----------- -------- ----------- --------
Income from continuing
operations................... $ 215.9(s) $ (21.5) $ 194.4 $ 139.0(t) $(43.4) $ 95.6 $ (75.5) $ 214.5
---------- ----------- -------- ---------- ----------- -------- ----------- --------
---------- ----------- -------- ---------- ----------- -------- ----------- --------
Earnings per common share from
continuing operations,
fully-diluted................ $1.23 $1.11 $1.73 $1.19 $1.03
---------- -------- ---------- -------- --------
---------- -------- ---------- -------- --------
Weighted average number of
shares outstanding,
fully-diluted
(in 000's)................... 181,087 181,087 33,190(u) 214,277
---------- -------- ----------- --------
---------- -------- ----------- --------
Ratio of earnings to fixed
charges...................... 4.2x 4.2x 2.4x 1.9x 1.9x
---------- -------- ---------- -------- --------
---------- -------- ---------- -------- --------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
67
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1994
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NME PRO
HISTORICAL ADJUSTMENTS NME AS HISTORICAL PRO FORMA FORMA
NME (V) ADJUSTED AMH ADJUSTMENTS COMBINED
---------- ----------- ----------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues........ $ 1,301.6 $ (16.6) $1,285.0 $1,270.4 $ -- $2,555.4
Operating expenses:
Salaries and benefits....... 556.2 (5.9) 550.3 470.9 1,021.2
Supplies.................... 159.1 -- 159.1 183.9 343.0
Provision for doubtful
accounts................... 46.8 (0.4) 46.4 89.5 135.9
Other operating expenses.... 294.7 (6.8) 287.9 278.0 565.9
Depreciation................ 67.4 (0.6) 66.8 62.4 (5.3)(n) 123.9
Amortization 7.7 (0.2) 7.5 19.6 8.2(o) 35.3
---------- ----------- ----------- ------------ ----------- --------
Operating income.............. 169.7 (2.7) 167.0 166.1 (2.9) 330.2
Interest expense, net of
capitalized portion.......... (35.0) -- (35.0) (79.7) (51.1)(p) (165.8)
Investment earnings........... 10.4 -- 10.4 1.2 (2.2)(q) 9.4
Equity in earnings of
unconsolidated affiliates.... 12.4 (0.1) 12.3 12.3
Minority interest expense..... (3.8) 0.4 (3.4) (2.0) (5.4)
Net gain on disposals of
facilities and long-term
investments.................. 29.5 (29.5) -- -- -- --
---------- ----------- ----------- ------------ ----------- --------
Income from continuing
operations before income
taxes........................ 183.2 (31.9) 151.3 85.6 (56.2) 180.7
Taxes on income............... (73.0) 12.4 (60.6) (35.7) 18.7(r) (77.6)
---------- ----------- ----------- ------------ ----------- --------
Income from continuing
operations................... $ 110.2 $ (19.5) $ 90.7 $ 49.9(t) $(37.5) $ 103.1
---------- ----------- ----------- ------------ ----------- --------
---------- ----------- ----------- ------------ ----------- --------
Earnings per common share from
continuing operations,
fully-diluted................ $ 0.63 $ 0.52 $ 0.63 $ 0.50
---------- ----------- ------------ --------
---------- ----------- ------------ --------
Weighted average number of
shares outstanding,
fully-diluted (in 000's)..... 181,467 181,467 33,190(u) 214,657
---------- ----------- ----------- --------
---------- ----------- ----------- --------
Ratio of earnings to fixed
charges...................... 4.4x 3.8x 1.9x 1.9x
---------- ----------- ------------ --------
---------- ----------- ------------ --------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
68
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1993
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NME PRO
HISTORICAL ADJUSTMENTS NME AS HISTORICAL PRO FORMA FORMA
NME (L) ADJUSTED AMH ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues............. $1,530.3 $(278.6) $1,251.7 $ 1,123.2 $-- $2,374.9
Operating expenses:
Salaries and benefits............ 698.1 (141.5) 556.6 405.5 962.1
Supplies......................... 167.9 (12.5) 155.4 155.7 311.1
Provision for doubtful
accounts........................ 58.5 (5.6) 52.9 76.1 129.0
Other operating expenses......... 342.5 (74.2) 268.3 266.0 534.3
Depreciation..................... 75.0 (9.3) 65.7 57.8 (5.3)(n) 118.2
Amortization..................... 9.5 (2.0) 7.5 18.5 9.3(o) 35.3
----------- ----------- ----------- ---------- ----------- --------
Operating income................... 178.8 (33.5) 145.3 143.6 (4.0) 284.9
Interest, net of capitalized
portion........................... (37.7) 3.9 (33.8) (82.9) (51.1)(p) (167.8)
Investment earnings................ 14.1 1.9 16.0 10.3 (2.2)(q) 24.1
Equity in earnings of
unconsolidated affiliates......... 14.7 -- 14.7 -- 14.7
Minority interest expense.......... (5.0) 2.3 (2.7) (3.8) (6.5)
Net gain on disposals of facilities
and long-term investments......... 29.0 (29.0) -- -- --
----------- ----------- ----------- ---------- ----------- --------
Income from continuing
operations before income taxes.... 193.9 (54.4) 139.5 67.2 (57.3) 149.4
Taxes on income.................... (80.0) 21.2 (58.8) (34.3) 18.7(r) (74.4)
----------- ----------- ----------- ---------- ----------- --------
Income from continuing
operations........................ $ 113.9(s) $ 33.2 $ 80.7 $ 32.9(t) $ (38.6) $ 75.0
----------- ----------- ----------- ---------- ----------- --------
----------- ----------- ----------- ---------- ----------- --------
Earnings per common share from
continuing operations,
fully-diluted..................... $ 0.65 $ 0.46 $ 0.42 $ 0.36
----------- ----------- ---------- --------
----------- ----------- ---------- --------
Weighted average number of shares
outstanding, fully-diluted (in
000's)............................ 180,115 180,115 33,190(u) 213,305
----------- ----------- ----------- --------
----------- ----------- ----------- --------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
69
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Combined Statements of Operations do not
give effect to any cost savings which may be realized after the consummation of
the Merger, estimated by NME management to be approximately $60 million annually
beginning in fiscal 1996 (before any severance or other costs of implementing
such efficiencies). The anticipated savings are based on estimates and
assumptions made by NME that are inherently uncertain, though considered
reasonable by NME, and are subject to significant business, economic and
competitive uncertainties and contingencies, all of which are difficult to
predict and many of which are beyond the control of management. There can be no
assurance that such savings, if any, will be achieved.
The adjustments to arrive at the Unaudited Pro Forma Condensed Combined
Financial Statements are as follows:
(a) To record cash paid in connection with the Merger (in millions):
<TABLE>
<S> <C>
Cash portion of the Merger Consideration.......................... $ 1,478.3
Cash portion of the AMH Option Cancellation (representing
3,280,567 options cancelled)..................................... 41.3
AMH Special Dividend.............................................. 7.8
---------
Total cash paid in connection with the Merger................... $ 1,527.4
---------
---------
</TABLE>
(b) To reflect borrowings under the New Credit Facility and the proceeds
from the Public Offering and the application of such amounts as follows (in
millions):
<TABLE>
<S> <C>
New Credit Facility
Term loan...................................................... $ 2,000.0
Revolver....................................................... 265.4
New Senior Notes................................................. 300.0
New Subordinated Notes........................................... 700.0
---------
Total sources................................................ 3,265.4
Repayment of certain AMI debt (including current portion
with a carrying value of $150.5)................................ (1,090.5)
Repayment of certain NME debt (including current portion
with a carrying value of $457.6)................................ (611.4)
---------
Net increase in cash......................................... $ 1,563.5
---------
---------
</TABLE>
(c) To reflect estimated fees, costs and expenses of NME and AMH of
approximately $165.6 million in the aggregate. The $165.6 million estimate
includes the following: (i) an estimated $28.4 million of transaction fees,
costs and expenses; (ii) $64.7 million of deferred financing costs; and
(iii) an estimated $72.5 million, substantially all of which represents the
write-up of the debt to be refinanced to its fair value at November 30,
1994. See Note (g) below. These amounts are based on actual agreements,
estimates provided by outside advisors and estimated payments in connection
with the Refinancing, as determined by NME's financial advisors.
(d) To consolidate the assets, liabilities and stockholders' equity of
HUG, currently accounted for as investments by both NME and AMH under the
equity method. Upon completion of the Merger, NME will own approximately 81%
of HUG.
(e) To record deferred income taxes in connection with the increase in
the carrying values of AMH buildings and equipment and the balance of AMH
indebtedness not expected to be refinanced in connection with the Merger and
to reduce income taxes payable related to the redemption of certain
indebtedness of AMI and the AMH Option Cancellation.
(f) To increase by $275.0 million the carrying value of AMH's buildings
and equipment to the estimated fair values thereof and to increase by $30.0
million the carrying value of the balance
70
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
of AMH's indebtedness not expected to be refinanced to the preliminary
estimate of the fair value thereof, both as required by the purchase
accounting treatment of the Merger. NME expects to obtain and record final
valuations based upon independent appraisals following the consummation of
the Merger. It is not expected that the final valuations will result in any
significant reclassification between goodwill and buildings and equipment or
long-term debt. For purposes of these Unaudited Pro Forma Condensed Combined
Financial Statements, NME has assumed that the fair value of the remaining
net assets of AMH approximates the existing net book value of such assets.
(g) To record the increase in intangible assets representing deferred
financing costs and the excess of the purchase price of the AMH Common Stock
over the fair value of the net assets acquired (in millions):
<TABLE>
<S> <C> <C>
Cash portion of the Merger Consideration.................. $ 1,478.3
Value of stock portion of the Merger Consideration........ 482.0
Stockholders' equity of AMH at November 30, 1994.......... (873.6)
Conversion of AMI 9 1/2% Convertible Debentures........... (3.0)
Cash portion of AMH Option Cancellation................... 41.3
Value of stock portion of AMH Option Cancellation......... 7.5
AMH Special Dividend...................................... 7.8
---------
Adjusted AMH stockholders' equity....................... (820.0)
Adjustment to fair value of AMH buildings and equipment... (275.0)
Adjustment to fair value of AMH indebtedness not
refinanced............................................... 30.0
Estimated fees and expenses ($64.7 million of which
represent deferred financing costs)...................... 165.6
Net adjustment to income taxes payable and deferred income
taxes.................................................... 49.0
---------
Net increase in intangible assets....................... $ 1,109.9
---------
---------
</TABLE>
(h) To give effect to the assumed conversion of the AMI 9 1/2%
Convertible Debentures which had a carrying value of $3.0 million at
November 30, 1994.
(i) To record the issuance of (i) 32,601,338 shares of NME Common Stock
(which reflects 0.42 shares of NME Common Stock to be exchanged per share of
AMH Common Stock) to be issued in connection with the Merger for all of the
outstanding AMH Common Stock; (ii) 78,143 shares of NME Common Stock held in
treasury in exchange for AMH Common Stock issuable upon conversion of the
AMI 9 1/2% Convertible Debentures; and (iii) 512,484 shares of NME Common
Stock issuable to AMH in exchange for a note, with an estimated principal
amount of $7.6 million, which shares will constitute the stock portion of
the AMH Option Cancellation, assuming in each case a value of $14.75 per
share of NME Common Stock (representing the average closing price as
reported on the NYSE on the 10 trading days immediately following the
announcement of the Merger). AMH will transfer the shares of NME Common
Stock received from NME in exchange for the note to cancel 1,220,200 stock
options held by certain executives of AMH. See "Financing for the Merger and
the Related Transactions."
(j) To give effect to the elimination of the AMH Common Stock and other
stockholders' equity, as adjusted in note (g) above.
(k) To give effect to the AMH Option Cancellation and to the AMH Special
Dividend. See "Financing for the Merger and the Related Transactions."
(l) To adjust the results of operations of NME to reflect (i) the August
1994 sale of approximately 75% of the common stock of TRC; (ii) the March
1994 sale of one inpatient rehabilitation
71
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
hospital; (iii) the February 1994 sale of four long-term care facilities and
the September 1993 sale of 19 long-term care facilities to Hillhaven (all of
which properties previously had been leased to Hillhaven); (iv) the January
1994 sale of 28 inpatient rehabilitation hospitals and 45 related satellite
outpatient clinics; (v) the elimination of restructuring charges recorded by
NME of $77.0 million in fiscal 1994; and (vi) the elimination of certain
non-recurring gains on disposals of facilities and long-term investments
recorded by NME.
(m) To eliminate non-recurring gains on disposals of facilities and
long-term investments relating to the sale of AMH's interest in EPIC
Healthcare Group, Inc. and to reflect the effect on income taxes of these
adjustments.
(n) To adjust depreciation expense for the year ended May 31, 1994 as
follows (in millions):
<TABLE>
<S> <C>
To reflect additional depreciation on the stepped-up values of AMH's
buildings and equipment............................................ $ 9.0
To conform the estimated useful lives of the acquired buildings and
equipment to those used by NME..................................... (19.6)
---------
Net decrease in depreciation expense.............................. $ (10.6)
---------
---------
</TABLE>
The adjustments made for the six months ended November 30, 1993 and 1994 are
equal to one half of the amount above.
(o) To reflect amortization of the excess of the purchase price of AMH
over the preliminary estimate of the fair value of the net assets acquired
using the straight-line method over 40 years.
(p) To adjust interest expense, including the amortization of deferred
financing costs over the term of the related indebtedness, for the year
ended May 31, 1994 as follows (in millions):
<TABLE>
<S> <C>
To reflect pro forma interest expense related to the New Credit
Facility and the New Debt Securities.............................. $ 270.8
To reduce interest expense to give effect to the Refinancing and
the repayment of certain indebtedness............................. (165.8)
To reduce interest expense to reflect the amortization of the
adjustment to fair value of AMH indebtedness not refinanced....... (2.8)
---------
Net increase in interest expense................................. $ 102.2
---------
---------
</TABLE>
The adjustments made for the six months ended November 30, 1993 and 1994 are
equal to one half of the amount above.
(q) To reflect an estimated reduction of interest income related to a
lower balance of cash and cash equivalents available for investment.
(r) To reflect income taxes at an assumed marginal rate of 39% on the
pro forma adjustments described in (n), (p) and (q) above. Amortization of
goodwill is not deductible for tax purposes.
(s) Does not reflect the cumulative effect of NME's change in the method
of accounting for income taxes.
(t) Does not reflect the extraordinary loss on early extinguishment of
AMH debt.
(u) Represents the additional weighted average common shares that would
have been outstanding upon consummation of the Merger.
(v) To reflect the August 1994 sale of approximately 75% of the common
stock of TRC; to eliminate non-recurring gains on disposals of facilities
and long-term investments; and to reflect income taxes on these adjustments.
72
<PAGE>
SELECTED INFORMATION CONCERNING NME AND AMH
NATIONAL MEDICAL ENTERPRISES, INC.
NME is a leading investor-owned healthcare company that operates general
hospitals and related healthcare facilities serving primarily urban and regional
areas in the United States and abroad and that holds investments in other
healthcare companies. At November 30, 1994, NME operated 33 domestic general
hospitals, with a total of 6,622 licensed beds, located in California, Florida,
Louisiana, Missouri, Tennessee and Texas. NME operates six rehabilitation
hospitals, seven long-term care facilities and four psychiatric facilities,
located on the same campus as, or nearby, NME's general hospitals. In addition,
NME operates ancillary facilities, including outpatient surgery centers, home
healthcare programs and ambulatory, occupational and rural healthcare clinics.
Through its international hospital division, NME also operated 13 general
hospitals in Australia, Singapore, Spain and Malaysia, with a total of 1,693
licensed beds at November 30, 1994.
NME's investments in other healthcare companies include: (i) an
approximately 27% voting interest in Hillhaven, a publicly traded company listed
on the NYSE that operated 287 long-term care facilities, 57 pharmacies and 19
retirement housing communities in the United States at November 30, 1994; (ii)
an approximately 42% interest in Westminster Health Care Holdings, PLC
("Westminster"), a publicly traded company listed on the London Stock Exchange
that operated 65 long-term care facilities in the United Kingdom at November 30,
1994; (iii) an approximately 23% interest in TRC, which operated 42 freestanding
kidney dialysis units in nine states at November 30, 1994; and (iv) an
approximately 23% interest in Health Care Property Partners, a partnership that
leases 21 long-term care facilities to Hillhaven and two general hospitals to
NME.
In the course of reviewing its alternatives with respect to its investment
in Hillhaven, NME has had discussions with Hillhaven and third parties
concerning possible courses of action. On January 25, 1995, after entering into
the letter agreement with NME described below, Horizon Healthcare Corporation
("Horizon") submitted to Hillhaven a written proposal for a business combination
(the "Transaction"). In the Transaction, shareholders of Hillhaven would receive
$28 in value of shares of common stock of a newly formed holding company
("Newco") for each outstanding share of common stock of Hillhaven ("Hillhaven
Common Stock") and shareholders of Horizon would receive one share of Newco
common stock for each outstanding share of Horizon common stock. In addition, as
part of the Transaction, each outstanding share of Hillhaven's Series C and
Series D preferred stock would be redeemed at $1,000 per share in cash, plus any
accrued and unpaid dividends, whether or not declared, to the date of
redemption.
In consideration of the mutual covenants contained therein and in order to
provide the opportunity presented by the Transaction to Hillhaven and all of its
shareholders, NME has entered into a letter agreement with Horizon (the "Letter
Agreement"). If prior to consummating the Transaction but within 12 months of
the date of the Letter Agreement there is a merger, consolidation or other
transaction with any party other than Horizon (an "Other Transaction") in which
NME receives consideration for any of its shares of Hillhaven Common Stock equal
to or greater than $27.50 per share, then Horizon shall be entitled to receive
upon consummation of an Other Transaction an amount equal to the greater of (i)
$5,000,000 or (ii) 50% of the consideration received by NME in excess of $29 per
share of Hillhaven Common Stock. Horizon agreed in the Letter Agreement to
actively pursue the Transaction in good faith. The letter agreement also
provides that nothing therein shall be construed to impose any requirement or
restriction on NME with respect to its right to acquire or dispose of any shares
of Hillhaven Common Stock from or to any party, or to vote any shares of
Hillhaven Common Stock, and all decisions with respect thereto shall be made by
NME in its sole discretion.
NME believes that a business combination transaction will provide all of
Hillhaven's shareholders with the best alternative to achieve maximum values.
NME believes that the Transaction provides
73
<PAGE>
an attractive opportunity for Hillhaven and its shareholders and believes that
the Transaction requires the serious review and consideration of Hillhaven's
Board of Directors. NME understands that the Board of Directors of Hillhaven has
established a committee to review, among other things, business combination
proposals involving Hillhaven.
CERTAIN LEGAL PROCEEDINGS. NME has been involved in certain significant
legal proceedings and investigations related principally to its discontinued
psychiatric business. These proceedings and investigations include class-action
and derivative lawsuits by certain stockholders, psychiatric patient litigation
alleging fraud and conspiracy, certain lawsuits filed by third-party
private-payor insurance companies and investigations by various state and
Federal agencies. NME has resolved its litigation with the insurers, has entered
into agreements in principle to resolve the shareholder derivative lawsuit and
certain of the class action lawsuits and continues to resolve the cases brought
by psychiatric patients. As a result of negotiations between NME and the Civil
and Criminal Divisions of the DOJ and HHS, subsidiaries of NME entered into
various agreements on June 29, 1994, resolving all Federal healthcare
investigations of NME (but various government agencies are continuing to pursue
investigations against certain individuals). As a result of those agreements, on
July 12, 1994, the United States District Court for the District of Columbia
accepted a plea by a subsidiary operating NME's psychiatric hospitals for
violations relating to the payment of remuneration to induce referrals and a
conspiracy to make such payments. In addition, NME agreed to pay $362.7 million
to the Federal government. The court also accepted a plea agreement relating to
a single general hospital and activities that occurred while an individual
convicted of defrauding the hospital was its chief executive, pursuant to which
another subsidiary pled guilty to making illegal payments concerning programs
receiving Federal funds. On July 12, 1994, NME, without admitting or denying
liability, consented to the entry, by the United States District Court for the
District of Columbia, of a civil injunctive order in response to a complaint by
the Commission. The complaint alleged that NME failed to comply with anti-fraud
and recordkeeping requirements of the Federal securities laws concerning the
manner in which NME recorded the revenues from the activities that were the
subject of the Federal government settlement relating to the psychiatric
operations referred to above. In the order, NME is directed to comply with such
requirements of the Federal securities laws. On October 17, 1994, NME also
signed final agreements with 26 states and the District of Columbia,
representing all of the jurisdictions from which NME's psychiatric subsidiaries
received Medicaid payments during the time frame at issue in the Federal
investigations. These agreements settle all potential state claims related to
the matters that were the subject of the Federal investigations. NME has
received inquiries from various other insurance companies and health benefit
providers regarding the possible filing of claims. Additional lawsuits alleging
malpractice at its psychiatric facilities and the existence of a corporate-wide
conspiracy to commit wrongful acts have been filed, and NME expects that similar
lawsuits may be filed from time to time against NME, its officers and directors.
In its agreements with the DOJ and HHS, NME agreed to maintain its
previously established ethics program and ethics hotline and also agreed to
implement certain additional compliance-related oversight procedures. Should the
hotline or oversight procedures reveal, after investigation by NME, credible
evidence of violations of criminal, or material violations of civil, laws, rules
or regulations governing Federally funded programs, NME is required to report
any such violation to the DOJ and HHS.
AMERICAN MEDICAL HOLDINGS, INC.
AMH is a leading invester-owned healthcare company that operates general
hospitals and related healthcare facilities serving primarily urban and regional
areas in 13 states. At November 30, 1994, AMH operated 37 general hospitals with
a total of 8,831 licensed beds and one psychiatric facility with 171 licensed
beds. The AMH hospitals are located in Texas, Florida, California, Louisiana,
Missouri, Tennessee, Arkansas, North Carolina, South Carolina, Georgia, Alabama,
Indiana and Nebraska. AMH also operates ancillary facilities located on the same
campus as, or nearby, many of its hospitals,
74
<PAGE>
including outpatient surgery centers, rehabilitation units, long-term care
facilities, home healthcare programs and ambulatory, occupational and rural
healthcare clinics ambulatory, occupational and rural healthcare clinics.
AMI CONVERTIBLE DEBENTURES. The holders of the AMI 9 1/2% Convertible
Debentures and the 8 1/4% Convertible Subordinated Debentures due 2008 of AMI
(the "AMI 8 1/4% Convertible Debentures" and, together with the AMI 9 1/2%
Convertible Debentures, the "AMI Convertible Debentures") are entitled to
convert the AMI Convertible Debentures into shares of AMH Common Stock. In the
event holders of the AMI Convertible Debentures elect to convert such debentures
into AMH Common Stock prior to the Effective Time, such holders will be entitled
to receive the Merger Consideration in accordance with the terms of the Merger
Agreement. Following the Effective Time, the AMI Convertible Debentures can be
converted into the right to receive the Merger Consideration, without interest,
multiplied by the number of shares of AMH Common Stock which would have been
issued upon conversion immediately prior to the Effective Time. As of January
10, 1995, there were $14.5 million and $4.5 million outstanding principal amount
of the AMI 8 1/4% Convertible Debentures and the AMI 9 1/2% Convertible
Debentures, respectively. The AMI 8 1/4% Convertible Debentures are convertible
into 25 shares of AMH Common Stock (subject to adjustment) for each $1,000
principal amount, and the AMI 9 1/2% Convertible Debentures are convertible into
41.017 shares of AMH Common Stock (subject to adjustment) for each $1,000
principal amount. AMI intends to call for redemption all of its AMI 9 1/2%
Convertible Debentures. See "Financing for the Merger and the Related
Transactions -- The AMI Redemptions"
ADDITIONAL INFORMATION
Certain information relating to the executive compensation, voting
securities and the principal holders thereof, certain relationships and related
transactions, and other related matters concerning NME and AMH is included or
incorporated by reference in the NME 10-K, the NME Proxy Statement and NME
Annual Report and the AMH 10-K, respectively, which are incorporated by
reference in this Information Statement/Prospectus. See "Incorporation of
Documents by Reference." Stockholders of AMH desiring copies of such documents
may contact NME or AMH at the addresses or phone numbers indicated under
"Available Information" above.
LEGAL MATTERS
The validity of the issuance of the shares of NME Common Stock being offered
hereby will be passed upon for NME by Scott M. Brown, Esq., Senior Vice
President, Secretary and General Counsel of NME.
EXPERTS
The consolidated financial statements of American Medical Holdings, Inc.
incorporated in this Information Statement/Prospectus by reference to the Annual
Report on Form 10-K for the year ended August 31, 1994, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements and schedules of National Medical
Enterprises, Inc. as of May 31, 1994 and 1993, and for each of the years in the
three-year period ended May 31, 1994, have been incorporated by reference herein
and in the registration statement in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the May 31, 1994
consolidated financial statements refers to a change in the method of accounting
for income taxes.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NATIONAL MEDICAL ENTERPRISES, INC.,
AMH ACQUISITION CO.
AND
AMERICAN MEDICAL HOLDINGS, INC.
DATED AS OF OCTOBER 10, 1994
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
Section 1.1 The Merger.............................................................................. A-2
Section 1.2 Effective Time of the Merger............................................................ A-2
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation............................................................ A-2
Section 2.2 By-Laws................................................................................. A-2
Section 2.3 Directors and Officers of Surviving Corporation......................................... A-2
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Merger Consideration.................................................................... A-3
Section 3.2 Exchange of Certificates Representing Shares............................................ A-3
Section 3.3 Dividends............................................................................... A-4
Section 3.4 No Fractional Securities................................................................ A-4
Section 3.5 Closing of Company Transfer Books....................................................... A-4
Section 3.6 Unclaimed Amounts....................................................................... A-5
Section 3.7 Lost Certificates....................................................................... A-5
Section 3.8 Dissenting Shares....................................................................... A-5
Section 3.9 Closing................................................................................. A-5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Organization............................................................................ A-5
Section 4.2 Capitalization; Registration Rights..................................................... A-6
Section 4.3 Subsidiaries............................................................................ A-6
Section 4.4 Material Investments.................................................................... A-7
Section 4.5 Authority Relative to this Agreement.................................................... A-7
Section 4.6 Consents and Approvals; No Violations................................................... A-7
Section 4.7 Parent SEC Reports...................................................................... A-8
Section 4.8 Absence of Certain Changes or Events.................................................... A-8
Section 4.9 Litigation.............................................................................. A-9
Section 4.10 Absence of Undisclosed Liabilities...................................................... A-9
Section 4.11 No Default.............................................................................. A-9
Section 4.12 Taxes................................................................................... A-9
Section 4.13 Title to Certain Properties; Encumbrances............................................... A-10
Section 4.14 Medicare Participation/Accreditation and Recapture...................................... A-10
Section 4.15 Labor Matters........................................................................... A-11
Section 4.16 Employee Benefit Plans; ERISA........................................................... A-11
Section 4.17 Patents, Licenses, Franchises and Formulas.............................................. A-13
Section 4.18 Insurance............................................................................... A-13
Section 4.19 Board Approvals; Opinion of Financial Advisor........................................... A-13
Section 4.20 Brokers................................................................................. A-13
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization............................................................................ A-14
Section 5.2 Capitalization.......................................................................... A-14
Section 5.3 Subsidiaries............................................................................ A-14
Section 5.4 Material Investments.................................................................... A-15
Section 5.5 Authority Relative to this Agreement.................................................... A-15
Section 5.6 Consents and Approvals; No Violations................................................... A-15
Section 5.7 Company SEC Reports..................................................................... A-16
Section 5.8 Absence of Certain Changes or Events.................................................... A-16
Section 5.9 Litigation.............................................................................. A-16
Section 5.10 Absence of Undisclosed Liabilities...................................................... A-17
Section 5.11 No Default.............................................................................. A-17
Section 5.12 Taxes................................................................................... A-17
Section 5.13 Title to Certain Properties; Encumbrances............................................... A-18
Section 5.14 Compliance with Applicable Law.......................................................... A-18
Section 5.15 Medicare Participation/Accreditation and Recapture...................................... A-18
Section 5.16 Labor Matters........................................................................... A-19
Section 5.17 Employee Benefit Plans; ERISA........................................................... A-19
Section 5.18 Patents, Licenses, Franchises and Formulas.............................................. A-21
Section 5.19 Insurance............................................................................... A-21
Section 5.20 Board Approval; Opinion of Financial Advisor............................................ A-21
Section 5.21 Brokers................................................................................. A-21
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger................................... A-22
Section 6.2 Conduct of Business by Parent Pending the Merger........................................ A-23
Section 6.3 Conduct of Business of SUB.............................................................. A-24
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information.................................................................. A-24
Section 7.2 Acquisition Proposals................................................................... A-24
Section 7.3 Registration Statement.................................................................. A-25
Section 7.4 Listing Application..................................................................... A-25
Section 7.5 Information Statement and Stockholder Approval.......................................... A-25
Section 7.6 Filings; Other Action................................................................... A-26
Section 7.7 Public Announcements.................................................................... A-26
Section 7.8 Company Indemnification Provision....................................................... A-26
Section 7.9 Registration Statement for Securities Act Affiliates.................................... A-27
Section 7.10 Certain Benefits........................................................................ A-27
Section 7.11 Directors of Parent..................................................................... A-27
Section 7.12 Special Dividend........................................................................ A-27
Section 7.13 Additional Agreements................................................................... A-28
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.............................. A-28
Section 8.2 Conditions to Obligation of the Company to Effect the Merger............................ A-28
Section 8.3 Conditions to Obligations of Parent and SUB to Effect the Merger........................ A-29
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination by Mutual Consent........................................................... A-30
Section 9.2 Termination by Either Parent or the Company............................................. A-30
Section 9.3 Termination by the Company.............................................................. A-30
Section 9.4 Termination by Parent................................................................... A-30
Section 9.5 Effect of Termination and Abandonment................................................... A-30
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Survival of Representations, Warranties and Agreements.................................. A-31
Section 10.2 Notices................................................................................. A-31
Section 10.3 Descriptive Headings.................................................................... A-32
Section 10.4 Entire Agreement: Assignment............................................................ A-32
Section 10.5 Governing Law........................................................................... A-32
Section 10.6 Expenses................................................................................ A-32
Section 10.7 Amendment............................................................................... A-32
Section 10.8 Waiver.................................................................................. A-32
Section 10.9 Counterparts; Effectiveness............................................................. A-32
Section 10.10 Severability; Validity; Parties in Interest............................................. A-32
Section 10.11 Enforcement of Agreement................................................................ A-33
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 10, 1994, by and among
National Medical Enterprises, Inc., a Nevada corporation ("Parent"), AMH
Acquisition Co., a Delaware corporation and a wholly owned subsidiary of Parent
("Sub"), and American Medical Holdings, Inc., a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent and Sub and the Company have
approved the merger upon the terms and subject to the conditions set forth
herein (the "Merger").
WHEREAS, in conjunction with the execution and delivery of this Agreement
and as an inducement to Parent's and Sub's willingness to enter into this
Agreement, certain holders of shares of the Company's common stock, par value
$.01 per share (the "Common Stock"), have agreed to and will enter into
Stockholder Voting and Profit Sharing Agreements with Parent, in the form
attached hereto as Exhibit A (the "Stockholder Voting and Profit Sharing
Agreements").
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 MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.2 hereof), Sub shall be
merged with and into the Company and the separate corporate existence of Sub
shall thereupon cease, and the Company shall be the surviving corporation in the
Merger (the "Surviving Corporation") and all of its rights, privileges, powers,
immunities, purposes and franchises shall continue unaffected by the Merger. The
Merger shall have the effects set forth in Section 259 of the General
Corporation Law of the State of Delaware (the "DGCL").
Section 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective when a properly executed Certificate of Merger meeting the
requirements of Section 251 of the DGCL is duly filed with the Secretary of
State of the State of Delaware or at such later time as the parties hereto shall
have designated in such filing as the Effective Time of the Merger (the
"Effective Time"), which filing shall be made as soon as practicable after the
closing of the transactions contemplated by this Agreement in accordance with
Section 3.9 hereof.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of the Surviving Corporation shall be the Certificate of Incorporation of Sub in
effect immediately prior to the Effective Time.
Section 2.2 BY-LAWS. The By-Laws of Sub as in effect immediately prior to
the Effective Time shall be the By-Laws of the Surviving Corporation.
Section 2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
(a) The directors of Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation as of the Effective Time.
(b) The officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation at the Effective Time and
shall hold office from the Effective Time until
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their respective successors are duly elected or appointed and qualify in the
manner provided in the Certificate of Incorporation and By-Laws of the Surviving
Corporation, or as otherwise provided by law.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 MERGER CONSIDERATION. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Each share of Common Stock (the "Shares"), issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares (as
hereinafter defined) and Shares held in the treasury of the Company or owned
by Parent or any subsidiary of the Company or the Parent) shall be converted
into the right to receive (i) 0.42 of a share of Common Stock, par value
$.075 per share ("Parent Shares"), of Parent (holders of which shall
thereafter be entitled to issuance of Parent's Series A Junior Participating
Preferred Stock issuable in connection with Parent's Preferred Stock
Purchase Rights (as hereinafter defined) in the circumstances specified in
Parent's Certificate of Designation relating thereto), subject to the right
of holders of Shares pursuant to Section 6.2(c) to elect, under certain
circumstances, to receive cash in lieu of such fraction of a Parent Share as
set forth in such Section 6.2(c); and (ii) $19.00 in cash or, if the Closing
shall not have been consummated on or before March 31, 1995, $19.25 in cash,
all of which shall be payable upon the surrender of the certificate(s)
formerly representing such Shares (the Parent Shares (or cash in lieu
thereof as aforesaid) and cash so deliverable being herein referred to
collectively as the "Merger Consideration"). As of the Effective Time, all
such Shares shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except to receive the Merger Consideration, without
interest.
(b) At the Effective Time, all options (individually, a "Company Option"
or collectively, the "Company Options") then outstanding under the Company's
Nonqualified Employee Stock Option Plan and the Company's Nonqualified
Performance Stock Option Plan for Key Employees, each as amended
(collectively, the "Company Stock Option Plans"), shall, by virtue of the
Merger and without any further action on the part of the Company or any
holder of such Company Options, unless otherwise agreed to in writing by the
holder of a Company Option, be cancelled in consideration for payment by the
Surviving Corporation to holders of Company Options of cash in an amount
equal to (i)(A) the sum of (x) the cash component of the Merger
Consideration, plus (y) 0.42 times the Average Price (as hereinafter
defined) of a Parent Share, multiplied by (B) the Shares subject to Company
Options, less (ii) the exercise price of such Company Options.
(c) Each Share issued and held in the treasury of the Company or owned
by any subsidiary of the Company and each Share held by Parent or any
subsidiary of Parent immediately prior to the Effective Time shall be
cancelled and retired and cease to exist and no payment shall be made with
respect thereto.
(d) Each share of common stock, par value $.01 per share, of Sub issued
and outstanding immediately prior to the Effective Time shall be converted
into and become a fully paid and non-assessable share of Common Stock of the
Surviving Corporation.
Section 3.2 EXCHANGE OF CERTIFICATES REPRESENTING SHARES.
(a) As of the Effective Time, Parent shall deposit, or shall cause to be
deposited, with an exchange agent selected by Parent and reasonably satisfactory
to the Company (the "Exchange Agent"), for the benefit of the holders of Shares,
for exchange in accordance with this Article III, (i)(x) certificates
representing the number of Parent Shares issuable as part of the Merger
Consideration
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(subject to the election contained in Section 6.2(c)) and (y) cash in an amount
equal to the aggregate cash component of the Merger Consideration, in each case
to be paid in respect of all Shares outstanding immediately prior to the
Effective Time and which are to be exchanged pursuant to the Merger (exclusive
of shares to be cancelled pursuant to Section 3.1(c)), and (ii) cash to be paid
in lieu of the issuance of fractional shares as provided in Section 3.4 hereof
(such cash and certificates for Parent Shares, if any, together with dividends
or distributions with respect thereto being hereinafter referred to collectively
as the "Exchange Fund").
(b) Promptly after the Effective Time, Parent shall cause the Exchange 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 Exchange 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 for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder thereof shall be entitled to receive in
exchange therefor that portion of the Exchange Fund which such holder has the
right to receive pursuant to the provisions of this Article III, after giving
effect to any required withholding tax, and the certificate for Shares so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
the cash to be paid as part of the Merger Consideration. In the event of any
transfer of ownership of Shares which has not been registered in the transfer
records of the Company, certificates representing the proper number of Parent
Shares, if any, together with a check in an amount equal to the cash component
of the Exchange Fund, will be issued to the transferee of the certificate
representing the transferred Shares presented to the Exchange Agent, accompanied
by all documents required to evidence and effect the prior transfer thereof and
to evidence that any applicable stock transfer taxes associated with such
transfer were paid.
Section 3.3 DIVIDENDS. No dividends or other distributions with respect to
securities of Parent constituting part of the Merger Consideration shall be paid
to the holder of any unsurrendered certificates representing Shares until such
certificates are surrendered as provided in Section 3.1. Upon such surrender,
all dividends and other distributions payable in respect of such securities on a
date subsequent to, and in respect of a record date after the Effective Time,
shall be paid, without interest, to the person in whose name the certificates
representing the securities of Parent into which such Shares were converted are
registered or as otherwise directed by that person. In no event shall the person
entitled to receive such dividends or distributions be entitled to receive
interest on any such dividends or distributions.
Section 3.4 NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional Parent Shares shall be issued upon the surrender for
exchange of certificates representing Shares pursuant to this Article III and no
dividend, stock split or other change in the capital structure of the Company
shall relate to any fractional interest, and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In lieu
of any such fractional interest, each holder of Shares who would otherwise have
been entitled to a fraction of a Parent Share upon surrender of stock
certificates for exchange pursuant to this Article III will be paid cash upon
such surrender in an amount equal to the product of such fraction multiplied by
the average closing sale price of Parent Shares on the New York Stock Exchange
over the ten (10) consecutive trading days immediately preceding the Closing
Date, as such closing sale price shall be reported in THE WALL STREET JOURNAL
or, if not available, such other authoritative publication as may be reasonably
selected by Parent (such average over such period being the "Average Price").
Section 3.5 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the 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
cancelled and exchanged for the Merger Consideration.
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Section 3.6 UNCLAIMED AMOUNTS. Any portion of the Exchange Fund which is
attributable to Dissenting Shares or which remains unclaimed by the former
stockholders of the Company one year after the Effective Time shall be delivered
by the Exchange Agent to the Parent. Any former stockholders of the Company who
have not theretofore complied with this Article III shall thereafter look only
to the Parent for payment of the Merger Consideration, cash in lieu of
fractional shares, and unpaid dividends and distributions in respect of Parent
Shares deliverable as part of the Merger Consideration as determined pursuant to
this Agreement, in all cases without any interest thereon. None of Parent, the
Surviving Corporation, the Exchange Agent or any other person will be liable to
any former holder of Shares for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
Section 3.7 LOST CERTIFICATES. In the event any certificate evidencing
Shares shall have been lost, stolen or destroyed, upon the making and delivery
of an affidavit of that fact by the person claiming such certificate to have
been lost, stolen or destroyed and, if required by Parent, the posting by such
person of a bond in such reasonable amount as Parent may direct as indemnity
against any claim that would be made against the Company or Parent with respect
to such certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed certificate the portion of the Exchange Fund deliverable in
respect thereof pursuant to this Agreement.
Section 3.8 DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, any issued and outstanding Shares held by a stockholder (a
"Dissenting Stockholder") who objects to the Merger and complies with all the
provisions of the DGCL concerning the right of holders of Shares to dissent from
the Merger and require appraisal of the Shares ("Dissenting Shares") shall not
be converted as described in Section 3.1 but shall become the right to receive
such consideration as may be determined to be due to such Dissenting Stockholder
pursuant to the DGCL. If, after the Effective Time, such Dissenting Stockholder
withdraws his demand for appraisal or fails to perfect or otherwise loses his
right of appraisal, in any case pursuant to the DGCL, or if the Parent otherwise
consents thereto, his Shares shall be deemed to be converted as of the Effective
Time into the right to receive the Merger Consideration, without interest. The
Company shall give Parent (a) prompt notice of any demands for appraisal of
Shares received by the Company and (b) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands. The
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
Section 3.9 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Neal, Gerber &
Eisenberg, 2 North LaSalle Street, Chicago, Illinois, at 10:00 a.m., local time,
on the later of (a) twenty (20) business days after the mailing of the
Information Statement/Prospectus (as defined in Section 7.3 hereof), (b) the
third business day following notice from Parent to the Company that it has
obtained the proceeds from the financing necessary to provide for consummation
of the Merger (except that the foregoing shall not prejudice the rights of the
Company under Section 9.3(d) hereof) and (c) the day on which all of the
conditions set forth in Article VIII hereof are satisfied or waived, or at such
other date, time and place as Parent and the Company shall agree (the "Closing
Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as otherwise disclosed to the Company in a letter delivered to it
prior to the execution hereof (which letter shall contain appropriate references
to identify the representations and warranties herein to which the information
in such letter relates) (the "Parent Disclosure Letter"), the Parent represents
and warrants to the Company as follows:
Section 4.1 ORGANIZATION. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has the
corporate power to carry on its business as it is now being conducted or
presently proposed to be conducted. Parent is duly qualified as a foreign
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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 would not individually or in the aggregate have a material adverse
effect on the business, assets, liabilities, results of operations or financial
condition of Parent and the Parent Subsidiaries (as defined below), taken as a
whole (a "Parent Material Adverse Effect"). Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Sub has not engaged in any business since the date of its incorporation other
than in connection with this Agreement.
Section 4.2 CAPITALIZATION; REGISTRATION RIGHTS. The authorized capital
stock of Parent consists of 450,000,000 Parent Shares and 2,500,000 shares of
preferred stock, par value $.15 per share ("Parent Preferred Stock"). As of
September 30, 1994, (i) 166,324,747 Parent Shares were issued and outstanding,
19,262,919 Parent Shares were issued and held in treasury and no shares of
Parent Preferred Stock were outstanding, (ii) employee stock options to acquire
15,107,151 Parent Shares (the "Parent Employee Stock Options") were outstanding
under all employee stock option plans of Parent, (iii) non-employee director
stock options to acquire 248,740 Parent Shares (the "Parent Director Stock
Options") were issued and outstanding under all non-employee director stock
option plans of Parent, (iv) 2,102 shares of Series B Convertible Preferred
Stock were reserved for issuance upon conversion of Parent's Convertible
Floating Rate Debentures due 1996, (v) 13,977,549 Parent Shares were reserved
for issuance upon conversion of Parent's Series B Convertible Preferred Stock,
(vi) 500,000 Parent Shares were reserved for issuance in connection with
Parent's Deferred Compensation Plan Trust, (vii) 1,000,000 Parent Shares were
reserved for issuance in connection with Parent's 1994 SERP Trust, and (viii)
225,000 shares of Parent Series A Junior Participating Preferred Stock were
reserved for issuance upon the exercise of Parent's Preferred Stock Purchase
Rights. All of the issued and outstanding Parent Shares are validly issued,
fully paid and nonassessable and free of pre-emptive rights. All of the Parent
Shares reserved for issuance in exchange for Shares at the Effective Time in
accordance with this Agreement will be, when so issued, duly authorized, validly
issued, fully paid and nonassessable and free of pre-emptive rights. The
authorized capital stock of Sub consists of 1,000 shares of common stock, par
value $.01 per share, all of which shares are validly issued and outstanding,
fully paid and nonassessable and are owned by Parent. Except as set forth above
or as specified in Section 4.2 of the Parent Disclosure Letter, as of the date
of this Agreement there are no shares of capital stock of Parent issued or
outstanding or any options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating Parent to issue,
transfer, sell, redeem, repurchase or otherwise acquire any shares of its
capital stock or securities, or the capital stock or securities of Sub. Except
as provided in this Agreement or as disclosed in Section 4.2 of the Parent
Disclosure Letter, after the Effective Time Parent will have no obligation to
issue, transfer or sell any shares of its capital stock pursuant to any employee
benefit plan or otherwise.
Section 4.3 SUBSIDIARIES.
(a) The subsidiaries of Parent that (i) directly or indirectly own or lease
any interest in any hospitals, health care facilities or medical office
buildings, (ii) directly or indirectly conduct any insurance activities or (iii)
are otherwise material to Parent (collectively, the "Parent Subsidiaries") are
listed in Section 4.3(a) of the Parent Disclosure Letter. Each Parent Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not
individually or in the aggregate have a Parent Material Adverse Effect. Each
Parent Subsidiary is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not individually or in the
aggregate have a Parent Material Adverse Effect.
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(b) Except as set forth in Section 4.3(b) of the Parent Disclosure Letter,
Parent is, directly or indirectly, the record and beneficial owner of all of the
outstanding shares of capital stock of each of the Parent Subsidiaries, there
are no proxies with respect to any such shares, and no equity securities of any
Parent Subsidiary are or may become required to be issued by reason of any
options, warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
or exercisable for, shares of any capital stock of any Parent Subsidiary, and
there are no contracts, commitments, understandings or arrangements by which
Parent or any Parent Subsidiary is or may be bound to issue, redeem, purchase or
sell additional shares of its capital stock or securities convertible into or
exchangeable or exercisable for any such shares. All of such shares so owned by
Parent are validly issued, fully paid and nonassessable and are owned by it free
and clear of any claim, mortgage, deed of trust, pledge, lien, security
interest, charge, encumbrance or similar agreement of any kind or nature
whatsoever ("Lien"), restraint on alienation, or any other restriction with
respect to the transferability or assignability thereof (other than restrictions
on transfer imposed by federal or state securities laws).
Section 4.4 MATERIAL INVESTMENTS. Except as set forth in Section 4.4 of
the Parent Disclosure Letter, Parent does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation (other
than a subsidiary), partnership, joint venture or other business association or
entity that directly or indirectly owns or leases any interest in any hospital
or health care facility, directly or indirectly conducts any insurance activity,
or which is otherwise material to Parent. With respect to those entities
indicated on Section 4.4 of the Parent Disclosure Letter, Parent has heretofore
delivered to the Company financial statements (audited to the extent available)
and interim unaudited financial statements of each of such entities (through the
most recently concluded fiscal quarter for each of such persons) and, to the
best knowledge of Parent, such financial statements fairly present, in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as may be indicated in the notes thereto or in Section
4.4 of the Parent Disclosure Letter), the financial condition of each thereof as
at and the results of operations for the periods so indicated (subject to normal
year-end adjustments in the case of the interim unaudited financial statements),
and Parent's disclosures with respect to its investment in each such entities
otherwise included in the Parent SEC Reports (as defined below) do not contain
any untrue statements of material fact or omit to state any material fact
required to be stated therein or which are necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except as set forth in Section 4.4 of the Parent Disclosure
Letter, Parent (or, as indicated thereon, a Parent Subsidiary) has good and
marketable title to the securities evidencing its investment in the entities
indicated in Section 4.4 of the Parent Disclosure Letter, which have been
validly issued and are fully paid and non-assessable and are held by Parent or a
Parent Subsidiary free and clear of any Lien, restraint on alienation, or any
other restriction with respect of the transferability or assignability thereof
(other than restrictions on transfer imposed by federal or state securities
laws).
Section 4.5 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Sub
has the power to enter into this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this Agreement by Parent
and Sub and the consummation by Parent and Sub of the transactions contemplated
hereby have been duly authorized by the Boards of Directors of Parent and Sub,
and by Parent as the sole shareholder of Sub, and no other corporate proceedings
on the part of Parent or Sub are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Sub and constitutes a valid and
binding agreement of each of Parent and Sub, enforceable against Parent and Sub
in accordance with its terms.
Section 4.6 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Securities Act of 1933, as amended (the "Securities
Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act") (the
HSR Act, Securities Act and Exchange Act, collectively, the "Governmental
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Requirements"), state or foreign laws relating to takeovers, if applicable,
state securities or blue sky laws, state and local laws and regulations relating
to the licensing and transfer of hospitals and health care facilities and
similar matters and the filing of the Certificate of Merger as required by the
DGCL, no filing with, and no permit, authorization, consent or approval of, any
court or tribunal or administrative, governmental or regulatory body, agency or
authority is necessary for the execution, delivery and performance of this
Agreement by Parent and Sub of the transactions contemplated by this Agreement.
Neither the execution, delivery nor performance of this Agreement by Parent or
Sub, 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
(i) conflict with or result in any breach of any provisions of the Articles of
Incorporation or By-Laws of Parent and Sub or the Articles or Certificate of
Incorporation, as the case may be, or By-Laws of any of the Parent Subsidiaries,
(ii) except as set forth in Section 4.6(ii) of the Parent Disclosure Letter,
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, acceleration, vesting, payment, exercise, suspension or
revocation) under, any of the terms, conditions or provisions of any note, bond,
mortgage, deed of trust, security interest, indenture, license, contract,
agreement, plan or other instrument or obligation to which Parent or any of the
Parent Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or affected, (iii) except as set forth in
Section 4.6(iii) of the Parent Disclosure Letter, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any Parent
Subsidiary or any of their properties or assets, (iv) except as set forth in
Schedule 4.6(iv) of the Parent Disclosure Letter, result in the creation or
imposition of any Lien on any asset of Parent or any Parent Subsidiary, or (v)
except as set forth in Section 4.6(v) of the Parent Disclosure Letter, cause the
suspension or revocation of any certificates of need, accreditation,
registrations, licenses, permits and other consents or approvals of governmental
agencies or accreditation organizations, except in the case of clauses (ii),
(iii), (iv) and (v) for violations, breaches, defaults, terminations,
cancellations, accelerations, creations, impositions, suspensions or revocations
which would not individually or in the aggregate have a Parent Material Adverse
Effect.
Section 4.7 PARENT SEC REPORTS. Parent has delivered to the Company true
and complete copies of each registration statement, report and proxy or
information statement, including, without limitation, its Annual Reports to
Shareholders incorporated in material part by reference in certain of such
reports, in the form (including exhibits and any amendments thereto) required to
be filed with the Securities and Exchange Commission ("SEC") since June 1, 1992
(collectively, the "Parent SEC Reports"). Except as set forth in Section 4.7 of
the Parent Disclosure Letter, as of the respective dates such Parent SEC Reports
were filed or, if any such Parent SEC Reports were amended, as of the date such
amendment was filed, each of the Parent SEC Reports (i) complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act, and the rules and regulations promulgated thereunder, and (ii) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of the audited consolidated financial statements and unaudited
consolidated interim financial statements of Parent (including any related notes
and schedules) included (or incorporated by reference) in its Annual Reports on
Form 10-K for each of the three fiscal years ended May 31, 1992, 1993 and 1994
and Quarterly Reports on Form 10-Q for all interim periods subsequent thereto
fairly present, in conformity with GAAP applied on a consistent basis (except as
may be indicated in the notes thereto), the consolidated financial position of
the Parent and the Parent Subsidiaries as of its date and the consolidated
results of operations and changes in financial position for the period then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements).
Section 4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since May 31, 1994,
except as set forth in Section 4.8 of the Parent Disclosure Letter or in the
Parent SEC Reports or as otherwise permitted in Section 6.2 hereof, Parent and
the Parent Subsidiaries have in all material respects conducted their business
in the ordinary course consistent with past practices.
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Section 4.9 LITIGATION. Except for litigation disclosed in the notes to
the financial statements included in the Parent SEC Reports or as set forth in
Section 4.9 of the Parent Disclosure Letter, there is no suit, action or
proceeding (whether at law or equity, before or by any federal, state or foreign
court, tribunal, commission, board, agency or instrumentality, or before any
arbitrator) pending or, to the best knowledge of Parent, threatened against or
affecting Parent or any of the Parent Subsidiaries, the outcome of which, in the
reasonably judgment of Parent, is likely individually or in the aggregate to
have a Parent Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against Parent or any of the
Parent Subsidiaries having, or which, insofar as can reasonably be foreseen, in
the future may have, any such effect.
Section 4.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities or
obligations which are accrued or reserved against in Parent's financial
statements (or reflected in the notes thereto) included in the Parent SEC
Reports or which were incurred after May 31, 1994 in the ordinary course of
business and consistent with past practices or in connection with the
transactions contemplated by this Agreement, Parent and the Parent Subsidiaries
do not have any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of a nature required by GAAP to be reflected in a
consolidated balance sheet (or reflected in the notes thereto).
Section 4.11 NO DEFAULT. Except as set forth in Section 4.11 of the Parent
Disclosure Schedule, neither Parent, Sub nor any of the Parent Subsidiaries is
in violation or breach of, or default under (and no event has occurred which
with notice or the lapse of time or both would constitute a violation or breach
of, or default under) any term, condition or provision of (a) its Articles or
Certificate of Incorporation, as the case may be, or By-Laws, (b) any note,
bond, mortgage, deed of trust, security interest, indenture, license, agreement,
plan, contract, lease, commitment or other instrument or obligation to which
Parent or any of the Parent Subsidiaries is a party or by which they or any of
their properties or assets may be bound or affected, (c) any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent or any of
the Parent Subsidiaries or any of their properties or assets, or (d) any
certificate of need, accreditation, registration, license, permit and other
consent or approval of governmental agencies or accreditation organization,
except in the case of clauses (b), (c) and (d) above for violations, breaches or
defaults which would not individually or in the aggregate have a Parent Material
Adverse Affect.
Section 4.12 TAXES. Except as set forth in Section 4.12 of the Parent
Disclosure Letter:
(a) Parent and each of the Parent Subsidiaries has (i) timely filed (or
has had timely filed on its behalf) or will cause to be timely filed all
material Tax Returns (as defined below) required by applicable law to be
filed by any of them for tax years ended prior to the date of this Agreement
and all such Tax Returns and amendments thereto are or will be true,
complete, and correct in all material respects, (ii) has paid (or has had
paid on its behalf) all Taxes due or has properly accrued or reserved for
all such Taxes for such periods and (iii) has accrued for all Taxes for
periods subsequent to the periods covered by such Tax Returns.
(b) There are no material liens for Taxes upon the assets of Parent or
any of the Parent Subsidiaries, except liens for Taxes not yet due.
(c) There are no material deficiencies or adjustments for Taxes that
have been proposed or assessed by any Tax Authority (as defined below)
against Parent or any of the Parent Subsidiaries and which remain unpaid.
(d) The Federal income tax returns of Parent and each of the Parent
Subsidiaries have been examined by the Internal Revenue Service for all past
taxable years and periods to and including the year ended May 31, 1985, and
all material deficiencies finally assessed as a result of such examinations
have been paid. Section 4.12 of the Parent Disclosure Letter sets forth (i)
all taxable years and periods of Parent and the Parent Subsidiaries that are
presently under Audit (as defined below) or in respect of which Parent or
any of the Parent Subsidiaries has been notified in
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writing by the relevant Tax Authority that it will be Audited, (ii) the
taxable years of Parent and the Parent Subsidiaries in respect of which the
statutory period of limitations for the assessment of Federal, state and
local income or franchise Taxes has expired, and (iii) all waivers extending
the statutory period of limitation applicable to any material Tax Return
filed by Parent or any of the Parent Subsidiaries for any taxable period
ending prior to the date of this Agreement.
(e) Prior to the date hereof, Parent and the Parent Subsidiaries have
disclosed all material Tax sharing, Tax indemnity, or similar agreements to
which Parent or any of the Parent Subsidiaries is a party to, is bound by,
or has any obligation or liability for Taxes.
(f) Parent and the Parent Subsidiaries have not paid, and do not expect
to pay, in any taxable year commencing on or after January 1, 1994,
remuneration that would result in a disallowance of any material amount of
tax deductions under section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). There are no changes in the tax accounting methods
subject to section 481(a) of the Code which have an ongoing material effect
on Parent or any of the Parent Subsidiaries. No "consent" within the meaning
of section 341(f) of the Code has been filed with respect to Parent or any
of the Parent Subsidiaries.
(g) As used in this Agreement, (i) "Audit" shall mean any audit,
assessment of Taxes, other examination by any Tax Authority, proceeding or
appeal of such proceeding relating to Taxes, (ii) "Taxes" shall mean all
Federal, state, local and foreign taxes, and other assessments of a similar
nature (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto, (iii) "Tax
Authority" shall mean the Internal Revenue Service and any other domestic or
foreign governmental authority responsible for the administration of any
Taxes, and (iv) "Tax Returns" shall mean all Federal, state, local and
foreign tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax Return relating to Taxes.
Section 4.13 TITLE TO CERTAIN PROPERTIES; ENCUMBRANCES. Except as set
forth in Section 4.13 of the Parent Disclosure Letter, no person has any
contractual right or option to purchase or acquire, directly or indirectly, any
interest in, and there are no contracts pursuant to which the Parent or any
Parent Subsidiary is or may be bound to sell, lease, transfer or otherwise
dispose of, any of the hospitals owned by the Parent or any Parent Subsidiary.
Section 4.14 MEDICARE PARTICIPATION/ACCREDITATION AND RECAPTURE.
(a) All hospitals or significant health care facilities owned or operated as
continuing operations by the Parent or the Parent Subsidiaries (the "Parent
Facilities") are certified for participation or enrollment in the Medicare,
Medicaid and Civilian Health and Medical Program of the Uniformed Services
("CHAMPUS") programs, have a current and valid provider contract with the
Medicare, Medicaid and CHAMPUS programs, are in substantial compliance with the
terms and conditions of participation of such programs and have received all
approvals or qualifications necessary for capital reimbursement of Parent's
assets except where the failure to be so certified, to have such contracts, to
be in such compliance or to have such approvals or qualifications would not
individually or in the aggregate have a Parent Material Adverse Effect. To the
knowledge of Parent, the amounts established as provisions for Medicare,
Medicaid, or CHAMPUS adjustments and adjustments by any other third party payors
on the financial statements of Parent and the Parent Subsidiaries are sufficient
in all material respects to pay any amounts for which Parent or any of the
Parent Subsidiaries may be liable. Neither Parent nor any of the Parent
Subsidiaries has received notice from the regulatory authorities which enforce
the statutory or regulatory provisions in respect of the Medicare, Medicaid or
CHAMPUS programs of any pending or threatened investigations, surveys (other
than routine surveys conducted by accreditation organizations) or
decertification proceedings, and neither Parent nor any of the Parent
Subsidiaries has any reason to believe that any such investigations, surveys or
proceedings are pending, threatened or imminent which may individually or in the
aggregate have a Parent Material Adverse Effect. All Parent Facilities eligible
for such accreditation are accredited by
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the Joint Commission on Accreditation on Healthcare Organizations, the
Commission on Accreditation of Rehabilitation or other appropriate accreditation
agency. Section 4.14(a) of the Parent Disclosure Letter sets forth a complete
and correct list of all hospitals and significant separately licensed health
care facilities owned or operated by Parent and the Parent Subsidiaries and
their respective accreditation.
(b) Each such Parent Facility is licensed by the proper state department of
health to conduct its business in substantially the manner conducted by such
Parent Facility and is authorized to operate the number of beds utilized
therein. The Parent Facilities are presently in substantial compliance with all
of the terms, conditions and provisions of such licenses. Parent has heretofore
made available to the Company correct and complete copies of all such licenses.
The facilities, equipment, staffing and operations of the Parent Facilities
satisfy the applicable state hospital licensing requirements in all material
respects.
(c) No funds were received on behalf of the Parent or any of the Parent
Subsidiaries to construct, improve or acquire any of its facilities under the
"Hill-Burton" Act as a result of which Parent or any of the Parent Subsidiaries
are currently or will in the future be required to pay any amounts for which
there shall be any "recapture" as a result of the consummation of the
transactions contemplated by this Agreement.
Section 4.15 LABOR MATTERS. Except as set forth in Section 4.15 of the
Parent Disclosure Letter, neither Parent nor any of the Parent Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of Parent, threatened against Parent or the Parent Subsidiaries
relating to their business, except for any such proceeding which would not
individually or in the aggregate have a Parent Material Adverse Effect. To the
knowledge of Parent, there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made or threatened
involving employees of Parent or any of the Parent Subsidiaries. There is no
labor strike, dispute, slow down, work stoppage, or lockout actually pending or,
to the knowledge of Parent, threatened against Parent or the Parent
Subsidiaries. To the knowledge of Parent, there are no labor union or
organization claims to represent the employees of Parent or any of the Parent
Subsidiaries, nor does any question concerning the representation of such
employees by any labor union or organization exist.
Section 4.16 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 4.16(a) of the Parent Disclosure Letter contains a true and
complete list of 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 plan, program, agreement or arrangement,
and each other employee benefit plan, program, agreement or arrangement (the
"Parent Plans"), maintained or contributed to or required to be contributed to
by (i) Parent, (ii) any Parent Subsidiary or (iii) any trade or business,
whether or not incorporated, that together with Parent would be deemed 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") (a "Parent ERISA Affiliate"), for the benefit of any
employee or former employee of Parent, any Parent Subsidiary or any Parent ERISA
Affiliate. Section 4.16(a) of the Parent Disclosure Letter identifies each of
the Parent Plans that is an "employee benefit plan," as that term is defined in
Section 3(3) of ERISA (such plans being hereinafter referred to collectively as
the "Parent ERISA Plans").
(b) With respect to each of the Parent Plans, Parent has heretofore
delivered to the Company true and complete copies of each of the following
documents: (i) a copy of the Parent Plan (including all amendments thereto),
(ii) a copy of the annual report and actuarial report, if required under ERISA,
with respect to the Parent ERISA Plan for the last two years, (iii) a copy of
the most recent Summary Plan Description, together with each Summary of Material
Modification, required under ERISA with respect to the Parent ERISA Plan, (iv)
if the Parent Plan is funded through a trust or any third party
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funding vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof, and (v) the
most recent determination letter received from the Internal Revenue Service with
respect to each Parent ERISA Plan intended to qualify under Section 401 of the
Code.
(c) No liability under Title IV of ERISA has been incurred by Parent, any
Parent Subsidiary or any Parent ERISA Affiliate since the effective date of
ERISA that has not been satisfied in full, and, except as set forth in Section
4.16(c) of the Parent Disclosure Letter, no condition exists that presents a
material risk to Parent, any Parent Subsidiary or any Parent ERISA Affiliate of
incurring any liability under such Title (other than liability for premiums due
to the Pension Benefit Guaranty Corporation (the "PBGC"). To the extent this
representation applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it
is made not only with respect to the Parent ERISA Plans but also with respect to
any employee benefit plan, program, agreement or arrangement subject to Title IV
of ERISA to which Parent, a Parent Subsidiary or a Parent ERISA Affiliate made,
or was required to make, contributions during the five-year period ending on the
date of this Agreement.
(d) With respect to each Parent ERISA Plan which is subject to Title IV of
ERISA, except as set forth in Section 4.16(d) of the Parent Disclosure Letter,
the present value of accrued benefits under such plan, based upon the actuarial
assumptions used for financial reporting purposes in the most recent actuarial
report prepared by such plan's actuary with respect to such plan, did not
exceed, as of its latest valuation date, the then current value of the assets of
such plan allocable to such accrued benefits.
(e) No Parent ERISA Plan 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 each Parent ERISA Plan ended prior to the date of this
Agreement, and all contributions required to be made with respect thereto
(whether pursuant to the terms of any Parent ERISA Plan or otherwise) on or
prior to the date of this Agreement have been timely made. (f) Except as set
forth in Section 4.16(f) of the Parent Disclosure Letter, no Parent ERISA Plan
is a "multi-employer pension plan," as defined in Section 3(37) of ERISA, nor is
any Parent ERISA Plan a plan described in Section 4063(a) of ERISA.
(g) Except as set forth in Section 4.16(g) of the Parent Disclosure Letter,
each Parent ERISA Plan intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined by the Internal Revenue Service to be so
qualified and the trusts maintained thereunder have been determined to be exempt
from taxation under Section 501(a) of the Code and, to the best knowledge of
Parent, no event has occurred nor does any condition exist which would adversely
affect such qualification and exemption.
(h) Except as set forth in Section 4.16(h) of the Parent Disclosure Letter,
each of the Parent Plans has been operated and administered in all material
respects in accordance with applicable laws, including, but not limited to,
ERISA and the Code.
(i) Except as set forth in Section 4.16(i) of the Parent Disclosure Letter,
no amounts payable under the Parent Plans or any other contract, arrangement or
agreement will fail to be deductible for federal income tax purposes by virtue
of Section 280G of the Code.
(j) Except as set forth in Section 4.16(j) of the Parent Disclosure Letter,
no Parent Plan provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former employees
of Parent, any Parent Subsidiary or any Parent ERISA Affiliate beyond such
employees' retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (iii)
deferred compensation benefits accrued as liabilities on the books of Parent,
any Parent Subsidiary or any Parent ERISA Affiliate or (iv) benefits the full
cost of which is borne by such employees or their beneficiaries.
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(k) Except as set forth in Section 4.16(k) of the Parent Disclosure Letter,
the consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or officer of Parent, any Parent
Subsidiary or any Parent ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided by this
Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount, of any compensation due any such employee or officer, or (iii) result in
any prohibited transaction described in Section 406 of ERISA or Section 4975 of
the Code for which an exemption is not available.
(l) With respect to each Parent Plan that is funded wholly or partially
through an insurance policy, there will be no liability of Parent, any Parent
Subsidiary or any Parent ERISA Affiliate, as of the Effective Time, under any
such insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring prior to the closing.
(m) There are no pending, threatened or anticipated claims by or on behalf
of any of the Parent Plans, by any employee or beneficiary covered under any
such Parent Plan, or otherwise involving any such Parent Plan (other than
routine claims for benefits).
(n) None of Parent, any Parent Subsidiary, any Parent ERISA Affiliate, any
of the Parent ERISA Plans, any trust created thereunder or any trustee or
administrator thereof has engaged in a transaction in connection with which
Parent, any Parent Subsidiary or any Parent ERISA Affiliate, any of the Parent
ERISA Plans, any such trust, or any trustee or administrator thereof, or any
party dealing with the Parent ERISA Plans or any such trust could be subject to
either a material civil liability under Section 409 of ERISA, Section 502(i) of
ERISA, or Section 502(l) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code.
Section 4.17 PATENTS, LICENSES, FRANCHISES AND FORMULAS. Each of Parent
and the Parent Subsidiaries owns all of the patents, trademarks, service marks,
copyrights, permits, trade names, licenses, franchises and formulas, or rights
with respect to the foregoing, and has obtained assignments of all such rights
and other rights of whatever nature, necessary for the present conduct of its
business, in each case except as would not individually or in the aggregate have
a Parent Material Adverse Effect.
Section 4.18 INSURANCE. Section 4.18 of the Parent Disclosure Letter sets
forth a complete and correct list of all material insurance policies currently
in force insuring against risks of Parent and the Parent Subsidiaries. Parent
previously has delivered to the Company true and correct schedules listing the
name of carrier, policy coverage, policy limits and deductibles with respect to
the policies listed in Section 4.18 of the Parent Disclosure Letter. Parent and
the Parent Subsidiaries are in compliance with the terms of such policies and
except as set forth in Section 4.18 of the Parent Disclosure Letter, there are
no claims by Parent or any of the Parent Subsidiaries under any such policy as
to which any insurance company is denying liability or defending under a
reservation of rights clause, in each case except as would not individually or
in the aggregate result in a Parent Material Adverse Effect.
Section 4.19 BOARD APPROVALS; OPINION OF FINANCIAL ADVISOR. Each of the
Board of Directors of Parent and Sub (at meetings duly called and held) has
unanimously determined that the transactions contemplated hereby are fair to and
in the best interests of Parent and Sub. Parent has received the opinion of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Parent's financial
advisor, substantially to the effect that the Merger Consideration to be paid by
Parent in the Merger is fair to Parent from a financial point of view.
Section 4.20 BROKERS. No broker, finder or investment banker (other than
DLJ) is entitled to any brokerage, finder's fee or other fee or commission
payable by Parent in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of Parent.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Parent and Sub in a letter delivered to
them prior to the execution hereof (which letter shall contain appropriate
references to identify the representations and warranties herein to which the
information in such letter relates) (the "Company Disclosure Letter"), the
Company represents and warrants to Parent and Sub as follows:
Section 5.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. The 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 would not individually or in the aggregate have a
material adverse effect on the business, assets, liabilities, results of
operations or financial condition of the Company and the Company Subsidiaries
(as defined below), taken as a whole (a "Company Material Adverse Effect").
Section 5.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 200,000,000 Shares and 5,000,000 shares of preferred stock, par
value $.01 per share (the "Preferred Stock"). As of September 30, 1994 (i)
77,563,054 Shares were issued and outstanding, (ii) Company Options to acquire
3,081,005 Shares were outstanding under all stock option plans and agreements of
the Company, (iii) 6,306,601 Shares (including Shares issuable upon exercise of
the options identified in clause (ii) above) were reserved for issuance pursuant
to all employee plans of the Company, and (iv) there were no shares of Preferred
Stock outstanding. All of the issued and outstanding Shares are validly issued,
fully paid and nonassessable and free of preemptive rights. Except as set forth
above or as specified in Section 5.2 of the Company Disclosure Letter, as of the
date of this Agreement there are no shares of capital stock of the Company
issued or outstanding or any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating the Company
to issue, transfer, sell, redeem, repurchase or otherwise acquire any shares of
its capital stock or securities. Except as provided in this Agreement or as set
forth in Section 5.2 of the Company Disclosure Letter, after the Effective Time
the Company will have no obligation to issue, transfer or sell any shares of its
capital stock pursuant to any employee benefit plan or otherwise.
Section 5.3 SUBSIDIARIES.
(a) The subsidiaries of the Company that (i) directly or indirectly own or
lease any interest in any hospitals, health care facilities or medical office
buildings, (ii) directly or indirectly conduct any insurance activities, or
(iii) are otherwise material to the Company (collectively, the "Company
Subsidiaries") are listed in Section 5.3(a) of the Company Disclosure Letter.
Each Company Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not individually or in the aggregate have a Company Material
Adverse Effect. Each Company Subsidiary is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a Company Material Adverse Effect.
(b) Except as set forth in Section 5.3(b) of the Company Disclosure Letter,
the Company is, directly or indirectly, the record and beneficial owner of all
of the outstanding shares of capital stock of each of the Company Subsidiaries,
there are no proxies with respect to any such shares, and no equity securities
of any Company Subsidiary are or may become required to be issued by reason of
any
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options, warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
or exercisable for, shares of any capital stock of any Company Subsidiary, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any Company Subsidiary is or may be bound to issue, redeem, purchase
or sell additional shares of its capital stock or any Company Subsidiary or
securities convertible into or exchangeable or exercisable for any such shares.
Except as set forth in Section 5.3(b) of the Company Disclosure Letter, all of
such shares so owned by the Company are validly issued, fully paid and
nonassessable and are owned by it free and clear of any Lien, restraint on
alienation, or any other restriction with respect to the transferability or
assignability thereof (other than restrictions on transfer imposed by federal or
state securities laws).
Section 5.4 MATERIAL INVESTMENTS. Except as set forth in Section 5.4 of
the Company Disclosure Letter, the Company does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation (other than a subsidiary), partnership, joint venture or other
business association or entity that directly or indirectly owns or leases any
interest in any hospital or health care facility, directly or indirectly
conducts any insurance activity, or which is otherwise material to the Company.
With respect to those entities listed on Section 5.4 of the Company Disclosure
Letter, the Company has heretofore delivered to Parent financial statements
(audited to the extent available) and interim unaudited financial statements of
each of such entities (through the most recently concluded fiscal quarter for
each of such persons) and, to the best knowledge of the Company, such financial
statements fairly present, in conformity with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto or in Section 5.4 of the
Company Disclosure Letter), the financial condition of each thereof as at and
the results of operations for the periods so indicated (subject to normal
year-end adjustments in the case of the interim unaudited financial statements),
and the Company's disclosures with respect to its investment in each of such
entities otherwise included in the Company SEC Reports (as defined below) do not
contain any untrue statements of material fact or omit to state any material
fact required to be stated therein or which are necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except as set forth in Schedule 5.4 of the Company Disclosure
Letter, the Company (or, as indicated thereon, a Company Subsidiary) has good
and marketable title to the securities evidencing its investment in the entities
listed on Section 5.4 of the Company Disclosure Letter, which have been validly
issued and are fully paid and non-assessable and are held by the Company (or, as
indicated thereon, a Company Subsidiary) free and clear of any Lien, restraint
on alienation, or any other restriction with respect of the transferability or
assignability thereof (other than restrictions on transfer imposed by federal or
state securities laws).
Section 5.5 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
power to enter into this Agreement and to carry out its obligations hereunder.
The execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by the Company's Board of Directors and, except for the approval
of its stockholders to be provided by written consent pursuant to Section 7.5
hereof promptly but in any event within ten (10) days after the execution of
this Agreement and notification to all stockholders of such action in accordance
with the DGCL and Regulation 14C of the Exchange Act, no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or the transactions contemplated hereby. Subject to the foregoing, this
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms.
Section 5.6 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for applicable
requirements of the Governmental Requirements, state or foreign laws relating to
takeovers, if applicable, state securities or blue sky laws, state and local
laws and regulations relating to the licensing and transfer of hospitals and
health care facilities and similar matters and the filing of a Certificate of
Merger as required by the DGCL, no filing with, and no permit, authorization,
consent or approval of, any court or tribunal
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or administrative, governmental or regulatory body, agency, public body or
authority is necessary for the execution, delivery and performance of this
Agreement by the Company of the transactions contemplated by this Agreement.
Neither the execution, delivery and performance of this Agreement by the
Company, nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the provisions hereof, will
(i) conflict with or result in any breach of any provisions of the Certificate
of Incorporation or By-Laws of the Company or the Certificate or Articles of
Incorporation, as the case may be, or By-Laws of any of the Company
Subsidiaries, (ii) except as set forth in Section 5.6(a)(ii) of the Company
Disclosure Letter, 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, vesting, payment, exercise, acceleration,
suspension or revocation) under, any of the terms, conditions or provisions of
any note, bond, mortgage, deed of trust, security interest, indenture, license,
contract, agreement, plan or other instrument or obligation to which the Company
or any of the Company Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or affected, (iii) except as set forth
in Section 5.6(a)(iii) of the Company Disclosure Letter, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company,
any of the Company Subsidiaries or any of their properties or assets, (iv)
except as set forth in Section 5.6(a)(iv) of the Company Disclosure Letter,
result in the creation or imposition of any Lien on any asset of the Company or
any Company Subsidiary or (v) except as set forth in Section 5.6(a)(v) of the
Company Disclosure Letter, cause the suspension or revocation of any
certificates of need, accreditation, registrations, licenses, permits and other
consents or approvals of governmental agencies or accreditation organizations,
except in the case of clauses (ii), (iii), (iv) and (v) for violations,
breaches, defaults, terminations, cancellations, accelerations, creations,
impositions, suspensions or revocations which would not individually or in the
aggregate have a Company Material Adverse Effect.
Section 5.7 COMPANY SEC REPORTS. The Company has delivered to Parent true
and complete copies of each registration statement, report and proxy or
information statement, including, without limitation, its Annual Reports to
Stockholders incorporated in material part by reference in certain of such
reports, in the form (including exhibits and any amendments thereto) required to
be filed with the SEC since September 1, 1992 (collectively, the "Company SEC
Reports"). As of the respective dates the Company SEC Reports were filed or, if
any such Company SEC Reports were amended, as of the date such amendment was
filed, each of the Company SEC Reports (i) complied in all material respects
with all applicable requirements of the Securities Act and Exchange Act, and the
rules and regulations promulgated thereunder, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Each of the
audited consolidated financial statements and unaudited consolidated interim
financial statements of the Company (including any related notes and schedules)
included (or incorporated by reference) in its Annual Reports on Form 10-K for
each of the three fiscal years ended August 31, 1991, 1992 and 1993 and its
Quarterly Reports on Form 10-Q for all interim periods subsequent thereto fairly
present, in conformity with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company and the Company Subsidiaries as of its date and the consolidated results
of operations and changes in financial position for the period then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements).
Section 5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since May 31, 1994,
except as set forth in Section 5.8 of the Company Disclosure Letter or in the
Company SEC Reports or as otherwise permitted in Section 6.1 hereof, the Company
and the Company Subsidiaries have in all material respects conducted their
business in the ordinary course consistent with past practices.
Section 5.9 LITIGATION. Except for litigation disclosed in the notes to
the financial statements included in the Company SEC Reports or as set forth in
Section 5.9 of the Company Disclosure Letter, there is no suit, action or
proceeding (whether at law or equity, before or by any federal, state or
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foreign commission, court, tribunal, board, agency or instrumentality, or before
any arbitrator) pending or, to the best knowledge of the Company, threatened
against or affecting the Company or any of the Company Subsidiaries, the outcome
of which, in the reasonable judgment of the Company, is likely individually or
in the aggregate to have a Company Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against the Company or any of the Company Subsidiaries having, or which, insofar
as can reasonably be foreseen, in the future many have, any such effect.
Section 5.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities or
obligations which are accrued or reserved against in the Company's financial
statements (or reflected in the notes thereto) included in the Company's SEC
Reports or which were incurred after August 31, 1993 in the ordinary course of
business and consistent with past practices, the Company and the Company
Subsidiaries do not have any material liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature required by GAAP to be
reflected in a consolidated balance sheet (or reflected in the notes thereto).
Section 5.11 NO DEFAULT. Neither the Company nor any of the Company
Subsidiaries is in violation or breach of, or default under (and no event has
occurred which with notice or the lapse of time or both would constitute a
violation or breach of, or a default under) any term, condition or provision of
(a) its Articles or Certificate of Incorporation, as the case may be, or
By-Laws, (b) any note, bond, mortgage, deed of trust, security interest,
indenture, license, agreement, plan, contract, lease, commitment or other
instrument or obligation to which the Company or any of the Company Subsidiaries
is a party or by which they or any of their properties or assets may be bound or
affected, (c) any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of the Company Subsidiaries or any of their
properties or assets, or (d) any certificate of need, accreditation,
registration, license, permit and other consent or approval of governmental
agencies or accreditation organizations, except in the case of clauses (b), (c)
and (d) above for breaches, defaults or violations which would not individually
or in the aggregate have a Company Material Adverse Effect.
Section 5.12 TAXES. Except as set forth in Section 5.12 of the Company
Disclosure Letter,
(a) The Company and each of the Company Subsidiaries has (i) timely filed
(or has had timely filed on its behalf) or will cause to be timely filed all
material Tax Returns required by applicable law to be filed by any of them for
tax years ended prior to the date of this Agreement and all such Tax Returns and
amendments thereto are or will be true, complete, and correct in all material
respects, (ii) has paid (or has had paid on its behalf) all Taxes due or has
properly accrued or reserved for all such Taxes for such periods and (iii) has
accrued for all Taxes for periods commencing after the periods covered by such
Tax Returns and ending prior to the date hereof.
(b) There are no material liens for Taxes upon the assets of the Company or
any of the Company Subsidiaries, except liens for taxes not yet due.
(c) There are no material deficiencies or adjustments for Taxes that have
been proposed or assessed and which remain unpaid (except as heretofore
disclosed by the Company to Parent) by any Tax Authority against the Company or
any of the Company Subsidiaries.
(d) Set forth in Section 5.12 of the Company Disclosure Schedule is a
listing of the Federal income tax returns of the Company and each of the Company
Subsidiaries which are currently being examined by the Internal Revenue Service
or which are the subject of litigation. Section 5.12 of the Company Disclosure
Letter sets forth (i) all taxable years and periods of the Company and the
Company Subsidiaries that are presently under Audit or in respect of which the
Company or any of the Company Subsidiaries has been notified in writing by the
relevant Tax Authority that it will be Audited, (ii) the taxable years of the
Company and the Company Subsidiaries in respect of which the statutory period of
limitations for the assessment of material Federal, state and local income or
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franchise Taxes has expired, and (iii) all waivers extending the statutory
period of limitation applicable to any material Tax Return filed by the Company
or any of the Company Subsidiaries for any taxable period ending prior to the
date of this Agreement.
(e) Prior to the date hereof, the Company and the Company Subsidiaries have
disclosed all material Tax sharing, Tax indemnity, or similar agreements to
which the Company or any of the Company Subsidiaries is a party to, is bound by,
or has any obligation or liability for Taxes.
(f) The Company and the Company Subsidiaries have not paid, and do not
expect to pay, in any taxable year commencing on or after January 1, 1994,
remuneration that would result in a disallowance of any material amount of tax
deductions under section 162(m) of the Code, PROVIDED, that certain plans must
be submitted to the Company's stockholders for approval by written consent or at
the next meeting of stockholders of the Company. There are no changes in the tax
accounting methods subject to section 481(a) of the Code which have an ongoing
material effect on the Company or any of the Company Subsidiaries. No "consent"
within the meaning of section 341(f) of the Code has been filed with respect to
the Company or any of the Company Subsidiaries.
Section 5.13 TITLE TO CERTAIN PROPERTIES; ENCUMBRANCES. Except as set
forth in Section 5.13 of the Company Disclosure Letter, no person has any
contractual right or option to purchase or acquire, directly or indirectly, any
interest in, and there are no contracts pursuant to which the Company or any
Company Subsidiary is or may be bound to sell, lease, transfer or otherwise
dispose of, any hospital owned by the Company or any Company Subsidiary.
Section 5.14 COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in the
Company SEC Reports, each of the Company and the Company Subsidiaries is in
compliance with all applicable Laws, except where the failure to be in such
compliance would not individually or in the aggregate have a Company Material
Adverse Effect.
Section 5.15 MEDICARE PARTICIPATION/ACCREDITATION AND RECAPTURE.
(a) All hospitals and significant health care facilities owned or operated
by the Company and the Company Subsidiaries (the "Company Facilities") are
certified for participation or enrollment in the Medicare, Medicaid and CHAMPUS
programs, have a current and valid provider contract with the Medicare, Medicaid
and CHAMPUS programs, are in substantial compliance with the terms and
conditions of participation of such programs and have received all approvals or
qualifications necessary for capital reimbursement of the Company's assets
except where the failure to be so certified, to have such contracts, to be in
such compliance or to have such approvals or qualifications would not
individually or in the aggregate have a Company Material Adverse Effect. To the
knowledge of the Company, the amount established as provisions for Medicare,
Medicaid or CHAMPUS adjustments and adjustments by any other third party payors
on the financial statements of the Company and the Company Subsidiaries are
sufficient in all material respects to pay any amounts for which the Company or
any of the Company Subsidiaries may be liable. Neither the Company nor any of
the Company Subsidiaries has received notice from the regulatory authorities
which enforce the statutory or regulatory provisions in respect of the Medicare,
Medicaid or CHAMPUS programs of any pending or threatened investigations,
surveys or decertification proceedings, and neither Company nor any of the
Company Subsidiaries has any reason to believe that any such investigations,
surveys (other than routine surveys conducted by accreditation organizations) or
proceedings are pending, threatened or imminent which may individually or in the
aggregate have a Company Material Adverse Effect. Except as set forth in Section
5.15(a) of the Company Disclosure letter, all of the Company Facilities eligible
for such accreditation are accredited by the Joint Commission on Accreditation
of Healthcare Organizations, the Commission on Accreditation of Rehabilitation
or other appropriate accreditation agency. Section 5.15(a) of the Company
Disclosure Letter sets forth a complete and correct list of all hospitals and
significant separately licensed health care facilities owned and operated by the
Company and the Company Subsidiaries and their respective accreditation.
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(b) Each Company Facility is licensed by the proper state department of
health to conduct its business in substantially the manner conducted by such
Company Facility and is authorized to operate the number of beds utilized
therein. The Company Facilities are presently in substantial compliance with all
of the terms, conditions and provisions of such licenses. The Company has
heretofore made available to Parent correct and complete copies of all such
licenses. The facilities, equipment, staffing and operations of such Company
Facilities satisfy the applicable state hospital licensing requirements in all
material respects.
(c) No funds were received on behalf of the Company or any of the Company
Subsidiaries to construct, improve or acquire any of its facilities under the
"Hill-Burton" Act as a result of which the Company or any of the Company
Subsidiaries are currently or will in the future be required to pay any amounts
for which there shall be any "recapture" as a result of the consummation of the
transactions contemplated by this Agreement.
Section 5.16 LABOR MATTERS. Except as set forth in Section 5.16 of the
Company Disclosure Letter, neither the Company nor any of the Company
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company or
the Company Subsidiaries relating to their business, except for any such
proceeding which would not have individually or in the aggregate have a Company
Material Adverse Effect. To the knowledge of the Company, there are no
organizational efforts with respect to the formation of a collective bargaining
unit presently being made or threatened involving employees of the Company or
any of the Company Subsidiaries. There is no labor strike, dispute, slow down,
work stoppage, or lockout actually pending or, to the knowledge of the Company,
threatened against the Company or the Company Subsidiaries. To the knowledge of
the Company, there are no labor union or organization claims to represent the
employees of the Company or any of the Company Subsidiaries, nor does any
question concerning the representation of such employees by any labor union or
organization exist.
Section 5.17 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 5.17(a) of the Company Disclosure Letter contains a true and
complete list of 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 plan, program, agreement or arrangement,
and each other employee benefit plan, program, agreement or arrangement (the
"Company Plans"), maintained or contributed to or required to be contributed to
by (i) the Company, (ii) any Company Subsidiary or (iii) any trade or business,
whether or not incorporated, that together with the Company would be deemed a
"single employer" within the meaning of ERISA (a "Company ERISA Affiliate"), for
the benefit of any employee or former employee of the Company, any Company
Subsidiary or any Company ERISA Affiliate. Section 5.17(a) of the Company
Disclosure Letter identifies each of the Company Plans that is an "employee
benefit plan," as that term is defined in Section 3(3) of ERISA (such plans
being hereinafter referred to collectively as the "Company ERISA Plans").
(b) With respect to each of the Company Plans, the Company has heretofore
delivered to Parent true and complete copies of each of the following documents:
(i) a copy of the Company Plan (including all amendments thereto), (ii) a copy
of the annual report and actuarial report, if required under ERISA, with respect
to the Company ERISA Plan for the last two years, (iii) a copy of the most
recent Summary Plan Description, together with each Summary of Material
Modifications, required under ERISA with respect to the Company ERISA Plan, (iv)
if the Company Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof, and (v) the
most recent determination letter received from the Internal Revenue Service with
respect to each Company ERISA Plan intended to qualify under Section 401 of the
Code.
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(c) No liability under Title IV of ERISA has been incurred by the Company,
any Company Subsidiary or any Company ERISA Affiliate since the effective date
of ERISA that has not been satisfied in full, and except as disclosed in Section
5.17(c) of the Company Disclosure Letter, no condition exists that presents a
material risk to the Company, any Company Subsidiary or any Company ERISA
Affiliate of incurring any liability under such Title (other than liability for
premiums due to PBGC). To the extent this representation applies to Sections
4064, 4069 or 4204 of Title IV of ERISA, it is made not only with respect to the
Company ERISA Plans but also with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which the Company, a
Company Subsidiary or a Company ERISA Affiliate made, or was required to make,
contributions during the five-year period ending on the date of this Agreement.
(d) With respect to each Company ERISA Plan which is subject to Title IV of
ERISA, except as set forth in Section 5.17(d) of the Company Disclosure Letter,
the present value of accrued benefits under such plan, based upon the actuarial
assumptions used for financial reporting purposes in the most recent actuarial
report prepared by such plan's actuary with respect to such plan, did not
exceed, as of its latest valuation date, the then current value of the assets of
such plan allocable to such accrued benefits.
(e) No Company ERISA Plan 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 each Company ERISA Plan ended prior to the date of this
Agreement, and all contributions required to be made with respect thereto
(whether pursuant to the terms of any Company ERISA Plan or otherwise) on or
prior to the date of this Agreement have been timely made.
(f) Except as set forth in Section 5.17(f) of the Company Disclosure Letter,
no Company ERISA Plan is a "multi-employer pension plan," as defined in section
3(37) of Company ERISA, nor is any ERISA Plan a plan described in Section
4063(a) of ERISA.
(g) Except as set forth in Section 5.17(g) of the Company Disclosure Letter,
each Company ERISA Plan intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined by the Internal Revenue Service to be so
qualified and the trusts maintained thereunder have been determined to be exempt
from taxation under Section 501(a) of the Code and, to the best knowledge of the
Company, no event has occurred nor does any condition exist which would
adversely affect such qualification and exemption.
(h) Except as set forth in Section 5.17(h) of the Company Disclosure Letter,
each of the Company Plans has been operated and administered in all material
respects in accordance with applicable laws, including, but not limited to,
ERISA and the Code.
(i) Except as set forth in Section 5.17(i) of the Company Disclosure Letter,
no amounts payable under the Company Plans or any other contract, arrangement or
agreement will fail to be deductible for federal income tax purposes by virtue
of Section 280G of the Code.
(j) Except as set forth in Section 5.17(j) of the Company Disclosure
Letter, no Company Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of the Company, any Company Subsidiary or any Company ERISA Affiliate
beyond such employees' retirement or other termination of service, other than
(i) coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in Section
3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on
the books of the Company, any Company Subsidiary or any Company ERISA Affiliate
or (iv) benefits the full cost of which is borne by such employees or their
beneficiaries.
(k) Except as set forth in Section 5.17(k) of the Company Disclosure Letter,
the consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or officer of the Company, any Company
Subsidiary or any Company ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement,
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(ii) accelerate the time of payment or vesting, or increase the amount, of any
compensation due any such employee or officer, or (iii) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available.
(l) With respect to each Company Plan that is funded wholly or partially
through an insurance policy, there will be no liability of the Company, any
Company Subsidiary or any Company ERISA Affiliate, as of the Effective Time,
under any such insurance policy or ancillary agreement with respect to such
insurance policy in the nature of a retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or partially
out of events occurring prior to the closing.
(m) There are no pending, threatened or anticipated claims by or on behalf
of any of the Company Plans, by any employee or beneficiary covered under any
such Company Plan, or otherwise involving any such Company Plan (other than
routine claims for benefits).
(n) None of the Company, any Company Subsidiary, any Company ERISA
Affiliate, any of the Company ERISA Plans, any trust created thereunder or any
trustee or administrator thereof has engaged in a transaction in connection with
which the Company, any Company Subsidiary or any Company ERISA Affiliate, any of
the Company ERISA Plans, any such trust, or any trustee or administrator
thereof, or any party dealing with the Company ERISA Plans or any such trust
could be subject to either a material civil liability under Section 409 of
ERISA, Section 502(i) of ERISA, or Section 502(l) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code.
Section 5.18 PATENTS, LICENSES, FRANCHISES AND FORMULAS. Each of the
Company and the Company Subsidiaries owns all of the patents, trademarks,
service marks, copyrights, permits, trade names, licenses, franchises and
formulas, or rights with respect to the foregoing, and has obtained assignments
of all such rights and other rights of whatever nature, necessary for the
present conduct of its business, in each case except as would not individually
or in the aggregate have a Company Material Adverse Effect.
Section 5.19 INSURANCE. Section 5.19 of the Company Disclosure Letter sets
forth a complete and correct list of all material insurance policies currently
in force insuring against risks of the Company and the Company Subsidiaries. The
Company previously has delivered to Parent true and correct schedules listing
the name of carrier, policy coverage, policy limits and deductibles with respect
to the policies listed in Section 5.19 of the Company Disclosure Letter. The
Company and the Company Subsidiaries are in compliance with the terms of such
policies and except as set forth in Section 5.19 of the Company Disclosure
Letter, there are no claims by the Company or any of the Company Subsidiaries
under any such policy as to which any insurance company is denying liability or
defending under a reservation of rights clause, in each case except as would not
individually or in the aggregate result in a Company Material Adverse Effect.
Section 5.20 BOARD APPROVAL; OPINION OF FINANCIAL ADVISOR. The Board of
Directors of the Company (at a meeting duly called and held) has unanimously
approved this Agreement and the transactions contemplated hereby. The Board of
Directors of the Company has received the opinion of Salomon Brothers Inc
("SBI"), one of the Company's financial advisors, substantially to the effect
that the Merger Consideration to be received in the Merger by the holders of the
Shares is fair to such
stockholders from a financial point of view (the "Fairness Opinion").
Section 5.21 BROKERS. No broker, finder or investment banker (other than
SBI, CS First Boston and GKH Partners, L.P.) is entitled to any brokerage,
finder's fee or other fee or commission payable by the Company in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of the Company.
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ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. From
the date hereof until the Effective Time, unless Parent shall otherwise agree in
writing, or except as set forth in the Company Disclosure Letter or as otherwise
contemplated by this Agreement, the Company and the Company Subsidiaries shall
conduct their business in the ordinary course consistent with past practice and
shall use their reasonable best efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and key employees, subject to the terms of
this Agreement. Except as set forth in the Company Disclosure Letter or as
otherwise provided in this Agreement, from the date hereof until the Effective
Time, without the prior written consent of Parent, which consent shall not be
unreasonably withheld:
(a) the Company will not adopt or propose any change in its Certificate of
Incorporation or By-Laws;
(b) the Company will not, and will not permit any Company Subsidiary to,
declare, set aside or pay any dividend or other distribution with respect to any
shares of capital stock of the Company (except as permitted by Section 7.12
hereof), or any repurchase, redemption or other acquisition or investment by the
Company or any Company Subsidiary of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company or any Company
Subsidiary;
(c) the Company will not, and will not permit any Company Subsidiary to,
merge or consolidate with any other person or acquire a material amount of
assets of any other person;
(d) the Company will not, and will not permit any Company Subsidiary to,
sell, lease, license or otherwise surrender, relinquish or dispose of (i) any
Company Facility or (ii) any assets or property which are material to the
Company and the Company Subsidiaries, taken as a whole, except (i) pursuant to
existing contracts or commitments (the terms of which have been disclosed to
Parent prior to the date hereof), or (ii) in the ordinary course of business
consistent with past practice;
(e) the Company will not settle any material Audit, make or change any
material Tax election or file amended Tax Returns;
(f) the Company will not issue any securities (except pursuant to existing
obligations), enter into any amendment of any material term of any outstanding
security of the Company or of any Company Subsidiary, incur any indebtedness
except pursuant to existing credit facilities or arrangements, fail to make any
required contribution to any Company ERISA Plan, increase compensation, bonus or
other benefits payable to any employee or former employee or enter into any
settlement or consent with respect to any pending litigation, except in the
ordinary course of business consistent with past practice or as otherwise
permitted by this Agreement;
(g) the Company will not change any method of accounting or accounting
practice by the Company or any Company Subsidiary, except for any such required
change in GAAP;
(h) the Company will not, and will not permit any Company Subsidiary to,
agree or commit to do any of the foregoing; and
(i) except to the extent necessary to comply with the requirements of
applicable laws and regulations, the Company will not, and will not permit any
Company Subsidiary to (i) take, or agree or commit to take, any action that
would make any representation and warranty of the Company hereunder inaccurate
in any respect at, or as of any time prior to, the Effective Time or (ii) omit,
or agree or commit to omit, to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time, provided however that the Company shall be permitted to take or omit to
take such action which can (without any uncertainty) be cured at or prior to the
Effective Time.
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Section 6.2 CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER. From the
date hereof until the Effective Time, unless the Company shall otherwise agree
in writing, or except as set forth in the Parent Disclosure Letter or as
otherwise contemplated by this Agreement or previously disclosed to the Company
in writing, Parent and the Parent Subsidiaries shall conduct their business in
the ordinary course consistent with past practice and shall use their best
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
key employees, subject to the terms of this Agreement. Except as set forth in
the Parent Disclosure Letter or as otherwise provided in this Agreement, from
the date hereof until the Effective Time, without the prior written consent of
the Company, which consent shall not be unreasonably withheld:
(a) Parent will not adopt or propose any change in its Articles of
Incorporation or By-Laws which would have an adverse effect on the Merger
Consideration;
(b) Parent will not, and will not permit any Parent Subsidiary to, declare,
set aside or pay any dividend or other distribution with respect to any shares
of capital stock of Parent, or any repurchase, redemption or other acquisition
or investment by Parent or any Parent Subsidiary of any outstanding shares of
capital stock or other securities of, or other ownership interests in, Parent or
any Parent Subsidiary;
(c) Parent will not, and will not permit any Parent Subsidiary to, merge or
consolidate with any other person or acquire a material amount of assets of any
other person if, prior to the consummation of such transaction, the Company is
advised by SBI that, as a result of such transaction, SBI is required to
withdraw the Fairness Opinion unless Parent permits the Company's stockholders
to receive, at the election of the Company, $6.88 in cash in lieu of the 0.42 of
a Parent Share to be received as part of the Merger Consideration and, if so
elected, such cash consideration together with the balance of the Merger
Consideration is received prior to or simultaneously with the consummation of
such other transaction. The Company shall promptly notify Parent of its election
after receiving notice of any such transaction by Parent.
(d) Parent will not, and will not permit any Parent Subsidiary to, sell,
lease, license or otherwise surrender, relinquish or dispose of (i) any Parent
Facility or (ii) any assets or property which are material to Parent and the
Parent Subsidiaries, taken as a whole, except (x) pursuant to existing contracts
or commitments (the terms of which have heretofore been disclosed to the Company
prior to the date hereof), or (y) in the ordinary course of business consistent
with past practice;
(e) Parent will not, and will not permit any Parent Subsidiary to, settle
any material Audit, make or change any material Tax election or file amended tax
returns;
(f) the Parent will not issue any securities or indebtedness (except
pursuant to existing obligations or in transactions permitted by Section 6.2(c)
hereof), enter into any amendment of any material term of any outstanding
security or indebtedness of Parent or of any Parent Subsidiary which would have
an adverse effect on the Merger Consideration (or the ability of Parent to incur
indebtedness necessary to pay the Merger Consideration), incur any indebtedness
except pursuant to existing credit facilities or arrangements, fail to make any
required contribution to any Parent ERISA Plan, materially increase any
compensation or benefits payable to any employee or former employee or enter
into any settlement or consent with respect to any pending litigation, except in
the ordinary course of business consistent with past practice or as otherwise
contemplated or permitted by this Agreement;
(g) Parent will not change any method of accounting or accounting practice
by Parent or any Parent Subsidiary, except for any such required change in GAAP;
(h) Parent will not, and will not permit any Parent Subsidiary to, agree or
commit to do any of the foregoing; and
(i) except to the extent necessary to comply with the requirements of
applicable laws and regulations, Parent will not, and will not permit any Parent
Subsidiary to (i) take, or agree or commit
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to take, any action that would make any representation and warranty of Parent
hereunder inaccurate in any respect at, or as of any time prior to, the
Effective Time or (ii) omit, or agree or commit to omit, to take any action
necessary to prevent any such representation or warranty from being inaccurate
in any respect at any such time, provided however that Parent shall be permitted
to take or omit to take such action which can (without any uncertainty) be cured
at or prior to the Effective Time.
Section 6.3 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.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS AND INFORMATION. The Company and Parent shall each
afford to the other and to the other's financial advisors, legal counsel,
accountants, consultants, financing sources, and other authorized
representatives access during normal business hours throughout the period prior
to the Effective Time to all of its books, records, properties, plants and
personnel and, during such period, each shall furnish promptly to the other (a)
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 (b) all
other information as such other party reasonably may request, provided that no
investigation pursuant to this Section 7.1 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. Each party shall hold in confidence all
nonpublic information until such time as such information is otherwise publicly
available and, if this Agreement is terminated, each party will deliver to the
other all documents, work papers and other materials (including copies) obtained
by such party or on its behalf from the other party as a result of this
Agreement or in connection herewith, whether so obtained before or after the
execution hereof.
Section 7.2 ACQUISITION PROPOSALS.
(a) From the date hereof until the termination hereof, the Company and the
Company Subsidiaries will not, and will cause their respective officers,
directors, employees or other agents not to, directly or indirectly, (i) take
any action to solicit, initiate or encourage any Acquisition Proposal (as
hereinafter defined), (ii) waive any provision of any standstill or similar
agreements entered into by the Company or the Company Subsidiaries, or (iii)
engage in negotiations with, or disclose any nonpublic information relating to
the 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. Nothing contained in this Section
7.2 shall prohibit the Company and its Board of Directors from (i) 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 proposal to acquire the 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, (A) such Board of Directors determines in good
faith that such action is required for the Board of Directors to comply with its
fiduciary duties to stockholders imposed by law, (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company provides written notice to the other party to this
Agreement to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity, and (C) subject to any
confidentiality agreement with such person or entity (which such party
determined in good faith was required to be executed in order for the Board of
Directors to comply with its fiduciary duties to shareholders or stockholders
imposed by law), the Company keeps Parent informed of the status (but not the
terms) of any such negotiations or discussions.
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(b) The term "Acquisition Proposal" as used herein means any offer or
proposal for, or any indication of interest in, a merger or other business
combination involving the Company or any Company Subsidiary or the acquisition
of any equity interest in, or a substantial portion of the assets of, any such
party, other than the transactions contemplated by this Agreement.
Section 7.3 REGISTRATION STATEMENT. As promptly as practicable, Parent and
the Company shall cooperate and promptly prepare and file with the SEC the
Information Statement and Parent shall prepare and file with the SEC the
Registration Statement (collectively, such Information Statement and
Registration Statement, being the "Information Statement/Prospectus"). Parent
shall use its reasonable best efforts, and the Company will cooperate with
Parent, to have the Registration Statement declared effective by the SEC as
promptly as practicable. Parent shall also use its reasonable best efforts to
take any action required to be taken under state securities or blue sky laws in
connection with the issuance of the Parent Shares pursuant hereto. The Company
shall furnish Parent with all information concerning the Company and the holders
of its capital stock and shall take such other action as Parent reasonably may
request in connection with such Information Statement/ Prospectus and issuance
of the Parent Shares hereunder. Parent agrees that the Information
Statement/Prospectus and each amendment or supplement thereto at the time of
mailing thereof through twenty (20) business days thereafter, or, in the case of
the Registration Statement and each amendment or supplement thereto, at the time
it is filed or becomes effective, 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 Parent in reliance upon and in
conformity with written information concerning the Company furnished to Parent
by the Company specifically for use in the Information Statement/Prospectus. The
Company agrees that the information provided by it for inclusion in the
Information Statement/Prospectus and each amendment or supplement thereto, at
the time of mailing thereof through twenty (20) business days thereafter, or, in
the case of information provided by the Company for inclusion in the
Registration Statement or any amendment or supplement thereto, at the time it is
filed or becomes effective, 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. Except as otherwise required by law, no amendment or
supplement to the Information Statement/Prospectus will be made by Parent or the
Company without the approval of the other party, which approval will not be
unreasonably withheld. Parent will advise the Company, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of Parent Shares issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Information Statement/Prospectus or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
Section 7.4 LISTING APPLICATION. Parent shall promptly prepare and submit
to each of the New York Stock Exchange and Pacific Stock Exchange a listing
application covering the Parent Shares to be issued in connection with the
Merger and this Agreement, and shall use its reasonable best efforts to obtain,
prior to the Effective Time, approval for the listing of such Parent Shares,
subject to official notice of issuance.
Section 7.5 INFORMATION STATEMENT AND STOCKHOLDER APPROVAL.
(a) The Company, acting through its Board of Directors, shall, in accordance
with applicable law and its Certificate of Incorporation and By-Laws (i)
promptly and duly, give notice of, as soon as practicable following the date
upon which the Registration Statement becomes effective, mail to
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stockholders of the Company the Information Statement/Prospectus in accordance
with the requirements of the DGCL and Regulation 14C of the Exchange Act and
take all lawful action necessary to provide notification of the written consent
of stockholders of the Company of the approval of the Merger as contemplated by
Section 7.1(b) hereof.
(b) Promptly hereafter, but in no event later than ten (10) days after the
execution of this Agreement by the parties hereto, stockholders representing the
requisite number of Shares necessary to approve the Merger will deliver written
consents in accordance with Section 228 of the DGCL.
Section 7.6 FILINGS; OTHER ACTION. Subject to the terms and conditions
herein provided, as promptly as practicable, the Company, Parent and Sub shall:
(i) promptly make all filings and submissions under the HSR Act as reasonably
may be required to be made in connection with this Agreement and the
transactions contemplated hereby, (ii) use all reasonable efforts to cooperate
with each other in (A) determining which filings are required to be made prior
to the Effective Time with, and which material consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states
or District of Columbia, and foreign jurisdictions in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (B) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations, and
(iii) use all reasonable efforts to take, or cause to be taken, all other action
and do, or cause to be done, all other things necessary or appropriate to
consummate the transactions contemplated by this Agreement. In connection with
the foregoing, the Company will provide Parent and Sub, and Parent and Sub will
provide the Company, with copies of 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. Each of Parent and the
Company acknowledge that certain actions may be necessary with respect to the
foregoing in making notifications and obtaining clearances, consents, approvals,
waivers or similar third party actions which are material to the consummation of
the transactions contemplated hereby, and each of Parent and the Company agree
to take such action as is necessary to complete such notifications and obtain
such clearances, approvals, waivers or third party actions, except where such
consequence, event or occurrence would have a Parent Material Adverse Effect or
Company Material Adverse Effect, as the case may be.
Section 7.7 PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and the
Company, on the other hand, agree that they will not issue any press release or
otherwise make any public statement or respond to any press inquiry with respect
to this Agreement or the transactions contemplated hereby without the prior
approval of the other party (which approval will not be unreasonably withheld),
except as may be required by applicable law.
Section 7.8 COMPANY INDEMNIFICATION PROVISION. Parent agrees that all
rights to indemnification existing in favor of the present or former directors,
officers, employees, fiduciaries and agents of the Company or any of the Company
Subsidiaries (collectively, the "Indemnified Parties") as provided in the
Company's Certificate of Incorporation or By-Laws or the certificate or articles
of incorporation, by-laws or similar organizational documents of any of the
Company Subsidiaries as in effect as of the date hereof or pursuant to the terms
of any indemnification agreements entered into between the Company and any of
the Indemnified Parties with respect to matters occurring prior to the Effective
Time shall survive the Merger and shall continue in full force and effect
(without modification or amendment, except as required by applicable law or
except to make changes permitted by law that would enlarge the Indemnified
Parties' right of indemnification), to the fullest extent and for the maximum
term permitted by law, and shall be enforceable by the Indemnified Party against
both the Company and Parent (which shall also directly assume such obligations
at the Effective Time). Parent shall cause to be maintained in effect for not
less than six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company (provided
that
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Parent may substitute therefor policies of at least equivalent coverage
containing terms and conditions which are no less advantageous) with respect to
matters occurring prior to the Effective Time, provided that in no event shall
Parent or the Surviving Corporation be required to expend to maintain or procure
insurance coverage pursuant to this Section 7.8 any amount per annum in excess
of 200% of the aggregate premiums paid in 1994 on an annualized basis for such
purpose. In the event the payment of such amount for any year is insufficient to
maintain such insurance or equivalent coverage cannot otherwise be obtained, the
Surviving Corporation shall purchase as much insurance as may be purchased for
the amount indicated. The provisions of this Section 7.8 shall survive the
consummation of the Merger and expressly are intended to benefit each of the
Indemnified Parties.
Section 7.9 REGISTRATION STATEMENT FOR SECURITIES ACT AFFILIATES. Parent
shall enter into a Registration Rights Agreement substantially in the form
attached as Exhibit B, providing for the registration under the Securities Act
covering the Parent Shares receivable by Securities Act Affiliates (as therein
defined), which registration statement will permit such Securities Act
Affiliates and their partners, shareholders, beneficiaries or other similar
persons to whom they may distribute Parent Shares through a dividend,
partnership distribution or other similar distribution (collectively, the
"Distributees") to sell such Parent Shares.
Section 7.10 CERTAIN BENEFITS.
(a) From and after the Effective Time, subject to applicable law and except
as contemplated hereby, Parent and the Parent Subsidiaries will honor, in
accordance with their terms, all Company Plans; provided, however, that nothing
herein shall preclude any change effected on a prospective basis in any Company
Plan from and after the Effective Time. Parent and the Parent Subsidiaries will
provide benefits to employees of the Company and the Company Subsidiaries who
become employees of Parent and the Parent Subsidiaries or continue after the
Effective Time as employees of the Company or the Company Subsidiaries which
will, in the aggregate, be no less favorable than those provided to other
similarly situated employees of Parent and the Parent Subsidiaries from time to
time. With respect to the Parent Plans, Parent and the Surviving Corporation
shall grant all employees of the Company and the Company Subsidiaries from and
after the Effective Time credit for all service with the Company and the Company
Subsidiaries, their affiliates and predecessors prior to the Effective Time for
all purposes for which such service was recognized by the Company and the
Company Subsidiaries. To the extent the Parent Plans provide medical or dental
welfare benefits after the Effective Time, such plans shall waive any
pre-existing conditions and actively-at-work exclusions and shall provide that
any expenses incurred on or before the Effective Time shall be taken into
account under deductible, coinsurance and maximum out-of-pocket provisions.
(b) Parent agrees that it will cause the Company to comply with the WARN
Act, to the extent applicable to the Company and its subsidiaries, in connection
with actions taken after the Effective Time.
(c) The provisions of this Section 7.10 shall survive the consummation of
the Merger.
Section 7.11 DIRECTORS OF PARENT. Prior to the date of the mailing of the
Information Statement/ Prospectus, the Company shall nominate three persons who
are acceptable to Parent in its reasonable judgment to serve as directors of
Parent in accordance with the policies for directors of Parent and Parent shall
take such action as is necessary to cause such persons to become directors of
Parent effective as of the Effective Time.
Section 7.12 SPECIAL DIVIDEND. Notwithstanding anything contained in this
Merger Agreement to the contrary, the Board of Directors of the Company on or
prior to Closing shall declare a special dividend of $.10 per share payable to
holders of Shares on or prior to the Effective Time. Payment of such dividend,
which shall be made by the Company's transfer agent in accordance with the
requirements of applicable law and subject to the rules of the New York Stock
Exchange and the SEC, may be funded from the Company's available cash or
borrowings under the Company's Revolving Credit Agreement.
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Section 7.13 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 in connection with the Governmental Requirements, to effect all
necessary registrations and filings and to obtain all necessary financing. 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 the Company shall take all such necessary
action.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 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 satisfaction 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, and no action shall
have been instituted by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
(b) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceeding for such purpose shall be pending before or threatened by the
SEC.
(c) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of the
Company respectively in accordance with and subject to applicable law and
twenty (20) business days shall have passed since the mailing of the
Information Statement/Prospectus to the Company's stockholders.
(d) No statute, rule, regulation, executive order, decree, ruling or
preliminary or permanent injunction shall have been enacted, entered,
promulgated or enforced by any federal or state court or governmental
authority which prohibits, restrains, enjoins or restricts the consummation
of the Merger.
(e) Each of the Company and Parent shall have obtained such permits,
authorizations, consents, or approvals, required by the Governmental
Requirements to consummate the transactions contemplated hereby.
Section 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions:
(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 which are qualified with respect to
materiality shall be true and correct in all respects, and such
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and at and as of the Effective Time as if made at and as of such
time, except as contemplated by the Parent Disclosure Letter or this
Agreement, and the Company shall have received a certificate of the Chairman
of the Board, the President, an Executive Vice President, a Senior Vice
President or the Chief Financial Officer of Parent as to the satisfaction of
this condition.
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(b) The Company shall have received a "comfort" letter from KPMG Peat
Marwick, L.L.P., Parent's independent accountants, dated the Effective Time
and addressed to the Company, of the kind contemplated by the Statement on
Auditing Standards with respect to Letters to Underwriters promulgated by
the American Institute of Certified Public Accountants (the "AICPA
Statement"), in form reasonably acceptable to the Company, in connection
with the procedures undertaken by KPMG Peat Marwick, L.L.P., with respect to
the financial statements of Parent included in the Registration Statement
and the other matters contemplated by the AICPA Statement and customarily
included in comfort letters relating to transactions similar to the Merger.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business,
operations or prospects of Parent and the Parent Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have a Parent
Material Adverse Effect, other than any such change that affects both Parent
and the Company in a substantially similar manner.
(d) The Company shall have received an opinion from Scott M. Brown,
Senior Vice President, Secretary and General Counsel of Parent, or from
Skadden, Arps, Slate, Meagher & Flom, special counsel to Parent, dated the
Effective Time, in substantially the form set forth as Exhibit C hereto. As
to any matter in such opinion which involves matters of fact or matters
relating to laws other than federal securities or Delaware corporate law,
such counsel may rely upon the certificates of officers and directors of
Parent and Sub and of public officials and opinions of local counsel,
reasonably acceptable to the Company.
(e) The listing application referred to in Section 7.4 shall have been
approved by the New York Stock Exchange and the registration statement
referred to in Section 7.9 hereof shall have been declared effective and no
stop order shall have been issued with respect thereto.
Section 8.3 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 conditions:
(a) The Company 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 the Company
contained in this Agreement which are qualified with respect to materiality
shall be true and correct in all respects, and such representations and
warranties that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and at and
as of the Effective Time as if made at and as of such time, except as
contemplated by the Company Disclosure Letter or this Agreement, and Parent
and Sub shall have received a Certificate of the Chairman of the Board, the
President, an Executive Vice President, Senior Vice President or the Chief
Financial Officer of the Company as to the satisfaction of this condition.
(b) Parent and Sub shall have received a letter from Price Waterhouse &
Co., the Company's independent accountants, dated the Effective Time and
addressed to Parent and Sub, in form and substance reasonably satisfactory
to Parent in connection with the procedures undertaken by them with respect
to the financial statements and other financial information of the Company
and the Company Subsidiaries contained in the Registration Statement and the
other matters contemplated by the AICPA Statement No. 72 and customarily
included in comfort letters relating to transactions similar to the Merger.
(c) Parent and Sub shall have received an opinion from Thomas J.
Sabatino, Jr., General Counsel of the Company, or from Neal Gerber &
Eisenberg, special counsel to the Company, dated the Effective Time, in
substantially the form set forth as Exhibit D hereto. As to any matter in
such opinion which involves matters of fact or matters relating to laws
other than federal
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securities or Delaware corporate law, such counsel may rely upon the
certificates of officers and directors of the Company and of public
officials and opinions of local counsel, reasonably acceptable to Parent and
Sub.
(d) From the date of the Agreement through the Effective Time, there
should not have occurred any change in the financial condition, business,
operations or prospects of the Company and the Company's Subsidiaries, taken
as a whole, that would have or would be reasonably likely to have a Company
Material Adverse Effect, other than any such change that affects both the
Company and Parent in a substantially similar manner.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after
approval by the stockholders of the Company by mutual written consent of Parent
and the Company.
Section 9.2 TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement
may be terminated and the Merger may be abandoned by action of the Board of
Directors of either Parent or the Company if (a) the Merger shall not have been
consummated on or before May 31, 1995, or (b) a United States federal or state
court of competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action 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
non-appealable; provided, that the party seeking to terminate this Agreement
pursuant to this clause (b) shall have used all reasonable efforts to remove
such injunction, order or decree.
Section 9.3 TERMINATION BY THE COMPANY. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the adoption and approval by the stockholders of the Company referred
to in Section 7.5(b), by action of the Board of Directors of the Company, if (a)
in the exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law, the Board of Directors of the Company determines
that such termination is required by reason of an Acquisition Proposal having
been made to it, or (b) there has been a breach by Parent or Sub of any
representation or warranty contained in this Agreement which would have or would
be likely to have a Parent Material Adverse Effect, or (c) there has been a
material breach of any of the covenants or agreements set forth in this
Agreement on the part of Parent, which breach is not curable or, if curable, is
not cured within thirty (30) days after written notice of such breach is given
by the Company to Parent or (d) Parent shall have been unable to obtain prior to
the Effective Time financing to provide for consummation of the Merger other
than as a result of a material breach by the Company of any representation or
warranty contained in this Agreement, the nonsatisfaction of the condition
contained in Section 8.3(d) or a material breach of any of the covenants or
agreements set forth in this Agreement on the part of the Company.
Section 9.4 TERMINATION BY PARENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action of
the Board of Directors of Parent, if (a) there has been a breach by the Company
of any representation or warranty contained in this Agreement which would have
or would be reasonably likely to have a Company Material Adverse Effect, or (b)
there has been a material breach of any of the covenants or agreements set forth
in this Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within thirty (30) days after written notice of such
breach is given by Parent to the Company.
Section 9.5 EFFECT OF TERMINATION AND ABANDONMENT.
(a) (i) If this Agreement is terminated by (A) the Company pursuant to
Sections 9.3(b) through 9.3(d), then in any such event the Company shall be
entitled to receive from Parent the Termination Fee, and (ii) if this Agreement
is terminated by (A) Parent pursuant to Sections 9.4(a) and 9.4(b), or
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(B) by the Company pursuant to Section 9.3(a), then in any such event Parent
shall be entitled to receive from the Company the Termination Fee, provided in
the case of a termination by the Company pursuant to Section 9.3(a) hereof, the
Termination Fee shall be reduced by the amount of any payments received by
Parent under the Stockholder Voting and Profit Sharing Agreements. If Parent has
received payment under the Stockholder Voting and Profit Sharing Agreement, the
Company agrees to promptly reimburse in full the persons making such payments to
Parent, but in any event such reimbursement shall not exceed $75,000,000.
(b) Within three business days following any termination event described in
Section 9.5(a) above, the party entitled to compensation thereunder shall
receive a payment in the amount of $75,000,000 (less any amount received by
Parent under the Stockholder Voting and Profit Sharing Agreement as of such
date) in the event this Agreement is terminated pursuant to Section 9.3(a) or
$150,000,000 in the event this Agreement is terminated pursuant to any other
termination event described in Section 9.5(a) above (the "Termination Fee") from
the party whose action or failure to take action shall have given rise to the
right to such payment, it being understood and agreed by the parties hereto that
the Termination Fee is intended to constitute liquidated damages, except in the
case of fraud or a deliberate and wilful breach by a party hereto, since the
actual amount of damages which would be sustained by a non-breaching party
hereunder as a result of such termination is difficult, if not impossible, of
ascertainment and that the agreement of the parties with regard to the payment
of the foregoing sum as liquidated damages represents a good faith effort by
each of the parties to establish the reasonable amount of restitution necessary
to provide for recovery of all costs and expenses associated with efforts to
consummate the Merger, including, without limitation, opportunity costs.
(c) In the event of termination of the Agreement and the abandonment of the
Merger pursuant to this Article IX, all obligations of the parties shall
terminate, except the obligations of the parties pursuant to this Section 9.5
and except for the provisions of Sections 4.20, 5.21, 10.4 and 10.6, and the
last sentence of Section 7.1 hereof.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive beyond the Effective Time. This Section
10.1 shall not limit any covenant or agreement after the Effective Time.
Section 10.2 NOTICES. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given upon (a)
confirmation of receipt of a facsimile transmission, (b) confirmed delivery by a
standard overnight carrier or when delivered by hand or (c) the expiration of
five business days after the day when mailed by registered or certified mail
(postage prepaid, return receipt requested), addressed to the respective parties
at the following addresses (or such other address for a party as shall be
specified by like notice):
(a) If to Parent or Sub, to:
National Medical Enterprises, Inc.
2700 Colorado Boulevard
Santa Monica, California 90404
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Brian J. McCarthy
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(b) if to the Company, to:
American Medical Holdings, Inc.
14001 Dallas Parkway
Dallas, Texas 75240
Attention: General Counsel
with a copy to:
Neal, Gerber & Eisenberg
Two LaSalle Street
Chicago, Illinois 60602
Attention: Charles Gerber
Section 10.3 DESCRIPTIVE HEADINGS. 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.
Section 10.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
Exhibits, Parent Disclosure Letter, Company Disclosure Letter and other
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings (other
than that certain confidentiality letter agreement between the parties dated
June 2, 1994, as thereafter supplemented by letter dated August 25, 1994, which
are hereby incorporated by reference herein), both written and oral among the
parties or any of them, with respect to the subject matter hereof, including,
without limitation, any transaction between or among the parties hereto; (b) is
not intended to confer upon any other person any rights or remedies hereunder;
and (c) shall not be assigned by operation of law or otherwise, provided that
Parent or Sub may assign its rights and obligations hereunder to a direct or
indirect subsidiary of Parent, but no such assignment shall relieve Parent or
Sub, as the case may be, of its obligations hereunder.
Section 10.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
Section 10.6 EXPENSES. 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
Information Statement/Prospectus, as well as the filing fee relating to the
Registration Statement, will be shared equally by Parent and the Company.
Section 10.7 AMENDMENT. This Agreement may be amended by action taken by
Parent, Sub and the Company at any time before or after approval hereof by the
stockholders of the Company, but, after any such approval, no amendment shall be
made which alters the Merger Consideration or which in any way materially
adversely affects the rights of such stockholders, without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 10.8 WAIVER. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
Section 10.9 COUNTERPARTS; EFFECTIVENESS. 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. This Agreement shall
become effective with each party hereto shall have received counterparts thereof
signed by all of the other parties hereto.
Section 10.10 SEVERABILITY; VALIDITY; PARTIES IN INTEREST. If any
provision of this Agreement, or the application thereof to any person or
circumstance is held invalid or unenforceable, the remainder of
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this Agreement, and the application of such provision to other persons or
circumstances, shall not be affected thereby, and to such end, the provisions of
this Agreement are agreed to be severable. Except as provided in Section 7.8 and
the last sentence of Section 9.5(a) hereof, nothing in this Agreement, express
or implied, is intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
Section 10.11 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Delaware Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
IN WITNESS WHEREFORE, each of Parent, Sub and the Company has caused this
Agreement to be executed on its behalf by its officers thereunder to duly
authorized, all as of the date first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/ JEFFREY BARBAKOW
-----------------------------------
Name: Jeffrey Barbakow
Title: Chairman and Chief Executive
Officer
AMH ACQUISITION CO.
By: /s/ JEFFREY BARBAKOW
-----------------------------------
Name: Jeffrey Barbakow
Title: Chairman and Chief Executive
Officer
AMERICAN MEDICAL HOLDINGS, INC.
By: /s/ ROBERT W. O'LEARY
-----------------------------------
Name: Robert W. O'Leary
Title: Chairman and Chief Executive
Officer
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EXHIBIT A
STOCKHOLDER VOTING AND PROFIT SHARING AGREEMENT
THIS STOCKHOLDER VOTING AND PROFIT SHARING AGREEMENT (this "Agreement") is
made and entered into as of this 10th day of October, 1994, by and among
National Medical Enterprises, Inc. a Nevada corporation ("Acquiror"), and the
stockholder named on the signature page hereto ("Stockholder"). On the date
hereof the Stockholder Beneficially Owns (as defined in Section 13(a) hereof)
the shares of common stock, par value $.01 per share (the "Company Shares"), of
American Medical Holdings, Inc., a Delaware corporation ("Company"), set forth
next to the Stockholder's name on the signature page hereto.
WHEREAS, Acquiror and the Company concurrently herewith are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), providing for, among other things, the merger (the "Merger") of a
wholly owned subsidiary of Acquiror with and into the Company with the Company
as the surviving corporation; and
WHEREAS, as an inducement to Acquiror's execution of the Merger Agreement,
Acquiror has requested that the Stockholder agree, and the Stockholder has
agreed, to grant to Acquiror certain rights (i) to receive payment from the
Stockholder in the event that an Alternate Transaction (as defined in Section
1(a) hereof) is consummated; and (ii) to vote (or consent with regard to) all
Company Shares as to which the Stockholder has voting power as provided herein.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein and in the Merger
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. PAYMENTS TO ACQUIROR UPON CERTAIN EVENTS.
(a) ALTERNATE TRANSACTION PAYMENT.
(i) If a person other than Acquiror or its Affiliates (as defined in
Section 13(c) hereof) (an "Acquiring Person"):
(A) acquires Beneficial Ownership of any or all of the Stockholder
Shares (as hereinafter defined); or
(B) consummates a merger, consolidation or other business combination
with, or purchases all or substantially all of the assets of, the Company
(each transaction specified in the foregoing clause (A) or in this clause
(B), an "Alternate Transaction"), the Stockholder shall pay to Acquiror
an amount (the "Alternate Transaction Payment") equal to the product of
(x) the excess of the Alternate Transaction Price (as hereinafter
defined), over $25.88, or, if the Alternate Transaction is consummated
after March 31, 1995, $26.13 (the "Base Price") times (y) the number of
Stockholder Shares, if any, sold or transferred by the Stockholder to an
Acquiring Person or received by a Stockholder by virtue of an Alternate
Transaction which is consummated, or with respect to which an agreement
is entered into, on or prior to June 30, 1995 (the "Outside Date"). Such
payment shall be made promptly following the transfer of Stockholder
Shares to an Acquiring Person. In the event that the consideration for
the Stockholder Shares consists in whole or in part of property other
than cash, the Alternate Transaction Payment shall be made by delivering
to the Acquiror a percentage of each type of property received determined
by dividing the amount of the Alternate Transaction Payment (expressed on
a per share basis) by the Alternate Transaction Price.
(ii) "Alternate Transaction Price" shall mean, with respect to any
Stockholder Shares, the price per share paid by any Acquiring Person after
the date hereof for such Stockholder Shares which shall include, if
applicable, the fair market value of securities or other property other than
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cash exchanged for Stockholder Shares or received for the Company's assets,
calculated as a per share price, as determined by the investment banking
firm retained by the Company to evaluate such proposal.
(iii) "Stockholder Shares" shall mean the Shares of Company capital stock
(including without limitation the Company Shares) Beneficially Owned by such
Stockholder as of the date hereof.
(iv) For purposes of determining whether an Alternate Transaction exists,
an Acquiring Person shall be deemed to have acquired "Beneficial Ownership"
of any Stockholder Shares (x) which such person or any of its Affiliates or
Associates (as defined in Section 13(c) hereof) Beneficially Owns, directly
or indirectly; (y) which such person or any of its Affiliates or Associates
has, directly or indirectly (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to
any agreement, arrangement, or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or
(B) the right to vote pursuant to any agreement, arrangement or
understanding; or (z) which are Beneficially Owned, directly or indirectly,
by any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any Company Shares (other than
the Company Shares owned by other persons that are parties to the Amended
and Restated Stockholder Agreement, dated as of July 30, 1991, among the
Stockholder, the Company and certain other stockholders (the "Stockholder
Agreement").
(b) ADJUSTMENT UPON CERTAIN CHANGES IN CAPITALIZATION. In the event of any
change in the Company Shares by reason of a stock dividend, stock split,
split-up, recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities that constitute
Stockholder Shares hereunder, and the Base Price therefor, shall be adjusted
appropriately.
2. VOTING RIGHTS.
(a) VOTING AGREEMENT. The Stockholder agrees to vote all Stockholder
Shares on matters as to which the Stockholder is entitled to vote at a meeting
of the Stockholders of the Company, or by written consent without a meeting with
respect to all Stockholder Shares as follows: (i) in favor of approval and
adoption of the Merger Agreement and all related matters; (ii) against any
action or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement; and (iii) against any action or agreement
(other than the Merger Agreement or the transactions contemplated thereby) that
would impede, interfere with, delay, postpone or attempt to discourage the
Merger.
(b) GRANT OF PROXY. The Stockholder hereby appoints Acquiror, with full
power of substitution (Acquiror and its substitutes being referred to herein as
the "Proxy"), as attorneys and proxies to vote all Stockholder Shares on matters
as to which Stockholder is entitled to vote at a meeting of the stockholders of
the Company or to which they are entitled to express consent or dissent to
corporate action in writing without a meeting, in the Proxy's absolute, sole and
binding discretion on the matters specified in Section 2(a) above. The
Stockholder agrees that the Proxy may, in such Stockholder's name and stead, (i)
attend any annual or special meeting of the stockholders of the Company and vote
all Stockholder Shares at any such annual or special meeting as to the matters
specified in Section 2(a) above, and (ii) execute with respect to all
Stockholder Shares any written consent to, or dissent from, corporate action
respecting any matter specified in Section 2(a) above. The Stockholder agrees to
refrain from (A) voting at any annual or special meeting of the stockholders of
the Company, (B) executing any written consent in lieu of a meeting of the
stockholders of the Company, (C) exercising any rights of dissent with respect
to the Stockholder Shares, and (D) granting any proxy or authorization to any
person with respect to the voting of the Stockholder Shares, except pursuant to
this Agreement, or taking any action contrary to or in any manner inconsistent
with the terms of this Agreement. The Stockholder agrees that this grant of
proxy is irrevocable and coupled with an
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interest and agrees that the person designated as Proxy pursuant hereto may at
any time name any other person as its substituted Proxy to act pursuant hereto,
either as to a specific matter or as to all matters. The Stockholder hereby
revokes any proxy previously granted by it with respect to its Stockholder
Shares as to the matters specified in Section 2(a) above. In discharging its
powers under this Agreement, the Proxy may rely upon advice of counsel to
Acquiror, and any vote made or action taken by the Proxy in reliance upon such
advice of counsel shall be deemed to have been made in good faith by the Proxy.
3. DIVIDENDS. The Stockholder agrees that if a record date for any
dividend or distribution to be paid (whether in cash or property, including
without limitation securities) on the Stockholder Shares occurs during the term
hereof (other than the cash dividend of $.10 per share permitted by Section 7.12
of the Merger Agreement), Acquiror and the Stockholder shall enter into an
escrow arrangement pursuant to which any payment of any such dividend or
distribution shall be held in escrow. Upon consummation of any Alternate
Transaction, such dividend or distribution made on such Stockholder Shares shall
be delivered to Acquiror together with the Alternate Transaction Payment.
4. TERMINATION.
(a) This Agreement shall terminate upon the earlier to occur of (i) the
Outside Date, PROVIDED, that, if the Merger Agreement is terminated by the
Company in accordance with Section 9.3(b), (c) or (d) thereof, this Agreement
shall terminate on the effective date of such termination of the Merger
Agreement; (ii) the Effective Time of the Merger; and (iii) immediately
following the making of an Alternate Transaction Payment for all of the
Stockholder Shares; PROVIDED, that, in the case of any termination pursuant to
clause (i), this Agreement shall continue with respect to all Stockholder Shares
with respect to which an agreement is entered into prior to such termination
until payment of the Alternate Transaction Payment for such shares is made or
such agreement is terminated.
(b) Upon termination, this Agreement shall have no further force or effect,
except for Section 9 which shall continue to apply to any case, action or
proceeding relating to the enforcement of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. The Stockholder hereby
represents and warrants to Acquiror as follows:
(a) DUE AUTHORIZATION. The Stockholder has the legal capacity and all
necessary corporate, partnership and trust power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The Stockholder Beneficially Owns all of the Stockholder Shares listed on the
signature page hereof and specified as so owned with no restrictions on the
voting rights or rights of disposition pertaining thereto, except as set forth
in the Stockholder Agreement, which constitute all Company Shares Beneficially
Owned by such Stockholder. Assuming this Agreement has been duly and validly
authorized, executed and delivered by Acquiror, this Agreement constitutes a
valid and binding agreement of the Stockholder, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights generally or by the
principles governing the availability of equitable remedies.
(b) NO CONFLICTS. Neither the execution and delivery of this Agreement nor
the consummation by the Stockholder of the transactions contemplated hereby will
conflict with or constitute a violation of or default under any contract,
commitment, agreement, arrangement or restriction of any kind to which the
Stockholder is a party or by which the Stockholder is bound.
6. REPRESENTATIONS AND WARRANTIES OF ACQUIROR. Acquiror hereby represents
and warrants to the Stockholder as follows:
(a) DUE AUTHORIZATION. Acquiror has the requisite corporate power and
authority to enter into and perform this Agreement. This Agreement has been duly
authorized by all necessary corporate action on the part of Acquiror and has
been duly executed by a duly authorized officer of Acquiror.
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Assuming this Agreement has been duly and validly executed and delivered by the
Stockholder, this Agreement constitutes a valid and binding agreement of
Acquiror, enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies.
7. NO TRANSFER.
(a) The Stockholder hereby agrees, without the prior written consent of
Acquiror, except pursuant to the terms hereof, not to (i) sell, transfer,
assign, pledge or otherwise dispose of or hypothecate any of its Stockholder
Shares; (ii) grant any proxies, deposit any Stockholder Shares into a voting
trust or enter into a voting agreement with respect to any Stockholder Shares as
to any matter specified in Section 2(a); or (iii) take any action that would
make any representation or warranty of the Stockholder contained herein untrue
or incorrect in any material respect or have the effect of preventing or
disabling the Stockholder from performing its obligations under this Agreement.
Any permitted transferee of Stockholder Shares must become a party to this
Agreement and any purported transfer of Stockholder Shares to a person or entity
that has not become a party hereto shall be null and void.
(b) Until the earlier of the Outside Date and the termination of the Merger
Agreement in accordance with its terms, the Stockholder will not, and will cause
its officers, directors, employees and agents not to, directly or indirectly,
(i) take any action to solicit, initiate or encourage any Acquisition Proposal
(as defined in the Merger Agreement), or (ii) engage in negotiations with, or
disclose any nonpublic information relating to the Company or its subsidiaries,
or afford access to their respective properties, books or records to, any person
that may be considering making, or has made, an Acquisition Proposal (but
nothing in this Section 7(b) shall prohibit any such person, solely in their
capacity as a director of the Company, from participating in deliberations at a
meeting of the board of directors of the Company or voting with respect to any
Acquisition Proposal, provided, that no representatives of any person making
such Acquisition Proposal are present).
8. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof; (b) shall
not be assigned by operation of law or otherwise without the prior written
consent of the other parties hereto, except that Acquiror may assign, in its
sole discretion, all or any of its rights, interests and obligations hereunder
to any direct or indirect wholly owned subsidiary of Acquiror; (c) shall not be
amended, altered or modified in any manner whatsoever, except by a written
instrument executed by the parties hereto; and (d) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Delaware (without giving effect to the provisions thereof relating to
conflicts of law).
9. REMEDIES. The parties acknowledge that it would be impossible to fix
money damages for violations of this Agreement and that such violations will
cause irreparable injury for which adequate remedy at law is not available and,
therefore, this Agreement must be enforced by specific performance or injunctive
relief. The parties hereto agree that any party may, in its sole discretion,
apply to any court of competent jurisdiction for specific performance or
injunctive or such other relief as such court may deem just and proper in order
to enforce this Agreement or prevent any violation hereof and, to the extent
permitted by applicable law, each party waives any objection or defense to the
imposition of such relief. Nothing herein shall be construed to prohibit any
party from bringing any action for damages in addition to an action for specific
performance or an injunction for a breach of this Agreement.
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10. LEGENDS ON CERTIFICATES. Until such time as this Agreement shall
terminate pursuant to Section 4 hereof, all certificates representing
Stockholder Shares shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A
STOCKHOLDER VOTING AND PROFIT SHARING AGREEMENT, DATED AS OF OCTOBER 10,
1994, BY AND BETWEEN NATIONAL MEDICAL ENTERPRISES, INC. AND THE STOCKHOLDER.
ANY TRANSFEREE OF THESE SHARES TAKES SUBJECT TO THE TERMS OF SUCH AGREEMENT,
COPIES OF WHICH ARE ON FILE AT THE OFFICES OF AMERICAN MEDICAL HOLDINGS,
INC., 14001 DALLAS PARKWAY, SUITE 200, DALLAS, TEXAS 76380.
11. PARTIES IN INTEREST. Subject to the provisions of Section 8(b) hereof,
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, permitted
assigns, heirs, executors, administrators and other legal representatives, and
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
12. 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.
13. DEFINITIONS. Unless the context otherwise requires, the following
terms shall have the following respective meanings:
(a) "Beneficial Owner" has the meaning set forth in Rule 13d-3 of the Rules
and Regulations to the Exchange Act, and "Beneficially Owned" and "Beneficially
Owns" shall have correlative meanings; PROVIDED, HOWEVER, that for purposes of
this Agreement a person shall be deemed to be the Beneficial Owner of Company
Shares that may be acquired pursuant to the exercise of an option or other right
regardless of when such option is exercisable.
(b) "person" means a corporation, association, partnership, joint venture,
organization, business, individual, trust, estate or any other entity or group
(within the meaning of Section 13(d)(3) of the Exchange Act).
(c) The terms "Affiliates" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act, as in
effect on the date hereof (the term "registrant" in said Rule 12b-2 meaning in
this case the Company).
14. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) If to Acquiror to:
National Medical Enterprises, Inc.
2700 Colorado Boulevard
Santa Monica, California 90404
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Telecopy No. (213) 687-5600
Attention: Thomas C. Janson, Jr.
(b) If to the Stockholder, to the address set forth on the signature page,
hereto.
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15. INTERPRETATION. 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. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
16. SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
17. FURTHER ASSURANCES. The Stockholder further agrees to execute all
additional writings, consents and authorizations as may be reasonably requested
by Acquiror to evidence the agreements herein or the powers granted to the Proxy
hereby or to enable the Proxy to exercise those powers.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
By
-----------------------------------
Name:
Title:
STOCKHOLDER:
By
-----------------------------------
Name:
Title:
No. of Shares Beneficially Owned:
--------------------------------------
Address for Notices:
[ ]
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of October , 1994, by and among National Medical Enterprises, Inc., a
Nevada corporation (together with its permitted successors and assigns, the
"Company"), and the persons whose signatures appear on the execution pages of
this Agreement (the "Stockholders").
This Agreement is made pursuant to the Agreement and Plan of Merger by and
among the Company, AMH Acquisition Co. and American Medical Holdings, Inc. dated
as of October 10, 1994 (the "Merger Agreement"), pursuant to which the
Stockholders will receive shares of Common Stock (as defined below) of the
Company.
The parties hereto, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be bound hereby, agree
as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
ADVICE: See Section 4 hereof.
AFFILIATE means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
BUSINESS DAY means any day that is not a Saturday, a Sunday or a legal
holiday on which banking institutions in the State of New York are not required
to be open.
COMMON STOCK means the Common Stock, par value $.075 per share, of the
Company, or any other shares of capital stock of the Company into which such
stock shall be reclassified or changed (by operation of law or otherwise). If
the Common Stock has been so reclassified or changed, or if the Company pays a
dividend or makes a distribution on its Common Stock in shares of capital stock,
or subdivides (or combines) its outstanding shares of Common Stock into a
greater (or smaller) number of shares of Common Stock, a share of Common Stock
shall be deemed to be such number of shares of capital stock and amount of other
securities to which a holder of a share of Common Stock outstanding immediately
prior to such reclassification, exchange, dividend, distribution, subdivision or
combination would be entitled.
DELAY PERIOD: See Section 2(b) hereof.
DISTRIBUTEE: See Section 6.4 hereof.
EFFECTIVENESS PERIOD: See Section 2(b) hereof.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
PERSON means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
PROSPECTUS means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable
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Shares covered by such Registration Statement and all other amendments and
supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
REGISTRABLE SHARES means the shares of Common Stock issued to the
Stockholders pursuant to the Merger Agreement or thereafter distributed by the
Stockholder to a Distributee, until in the case of any such share (i) it has
been effectively registered under Section 5 of the Securities Act and disposed
of pursuant to an effective registration statement under the Securities Act,
(ii) it has been transferred other than pursuant to Rule "4(1 1/2)" (or any
similar private transfer exemption) under the Securities Act or (iii) it may be
transferred by a holder without registration pursuant to Rule 144 under the
Securities Act or any successor rule without regard to the volume limitation
contained in such rule.
REGISTRATION STATEMENT means any registration statement of the Company that
covers any of the Registrable Shares pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
SEC means the Securities and Exchange Commission.
SECURITIES ACT means the Securities Act of 1933, as amended.
SHELF REGISTRATION: See Section 2(a) hereof.
STOCKHOLDERS: See the introductory clauses hereof.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING means a registration in
which securities of the Company are sold to or through one or more underwriters
for reoffering or sale to the public.
2. SHELF REGISTRATION.
(a) The Company shall file with, and shall cause to be declared effective
by, the SEC prior to the Effective Time (as defined in the Merger Agreement), a
Registration Statement under the Securities Act relating to the Registrable
Shares, which Registration Statement shall provide for the sale by the holders
thereof of the Registrable Shares from time to time on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration").
(b) The Company agrees to use its best efforts to keep the Registration
Statement filed pursuant to this Section 2 continuously effective and usable for
the resale of Registrable Shares for a period ending on the earlier of (i) two
years from the Effective Time (as defined in the Merger Agreement) and (ii) the
first date on which all the Registrable Shares covered by such Shelf
Registration have been sold pursuant to such Registration Statement. The
foregoing notwithstanding, the Company shall have the right in its sole
discretion, based on any valid business purpose (including without limitation to
avoid the disclosure of any corporate development that the Company is not
otherwise obligated to disclose or to coordinate such distribution with other
shareholders that have registration rights with respect to any securities of the
Company or with other distributions of the Company (whether for the account of
the Company or otherwise)), to suspend the use of the Registration Statement for
a reasonable length of time (a "Delay Period") and from time to time; PROVIDED,
that (i) the aggregate number of days in all Delay Periods occurring in any
period of twelve consecutive months shall not exceed 90 and (ii) the Company
shall not have the right to commence any Delay Period prior to the 90th day
after the Effective Time. The Company shall provide written notice to each
holder of Registrable Shares covered by each Shelf Registration of the beginning
and end of each Delay Period and such holders shall cease all disposition
efforts with respect to Registrable Shares held by them immediately upon receipt
of notice of the beginning of any Delay Period. The two year time period for
which the Company is required to maintain the effectiveness of the Registration
Statement shall be extended by the aggregate number of days of all Delay Periods
and such two year period or the extension thereof required by the preceding
sentence is hereafter referred to as the "Effectiveness Period."
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(c) The Company may, in its sole discretion, include other securities in
such Shelf Registration (whether for the account of the Company or otherwise,
including without limitation any securities of the Company held by security
holders, if any, who have piggyback registration rights with respect thereto) or
otherwise combine the offering of the Registrable Shares with any offering of
other securities of the Company (whether for the account of the Company or
otherwise).
3. HOLD-BACK AGREEMENT.
Each holder of Registrable Shares agrees, if such holder is requested by an
underwriter in an underwritten offering for the Company (whether for the account
of the Company or otherwise), not to effect any public sale or distribution of
any of the Company's equity securities, including a sale pursuant to Rule 144
(except as part of such underwritten registration), during the 10-day period
prior to, and during the 80-day period beginning on, the closing date of such
underwritten offering; PROVIDED, that neither the Company nor any underwriter
may request a holder not to effect any such sales or distributions prior to the
90th day after the Effective Time.
4. REGISTRATION PROCEDURES.
In connection with the registration obligations of the Company pursuant to
and in accordance with Section 2 hereof (and subject to the Company's rights
under Section 2), the Company will use its best efforts to effect such
registration to permit the sale of such Registrable Shares in accordance with
the intended method or methods of disposition thereof (other than pursuant to
any underwritten registration or underwritten offering), and pursuant thereto
the Company shall as expeditiously as possible:
(a) prepare and file with the SEC such amendments (including post-effective
amendments) to the Registration Statement, and such supplements to the
Prospectus, as may be required by the rules, regulations or instructions
applicable to the Securities Act or the rules and regulations thereunder during
the applicable period in accordance with the intended methods of disposition by
the sellers thereof (other than pursuant to any underwritten registration or
underwritten offering) and cause the Prospectus as so supplemented to be filed
pursuant to Rule 424 under the Securities Act;
(b) notify the selling holders of Registrable Shares promptly and (if
requested by any such person) confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related Prospectus
or for additional information regarding such holder, (iii) of the issuance by
the SEC of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose, and (v) of the happening of any event that requires the making
of any changes in such Registration Statement, Prospectus or documents so that
they will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(c) use commercially reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement, or the lifting
of any suspension of the qualification or exemption from qualification of any of
the Registrable Shares for sale in any jurisdiction in the United States;
(d) if requested by the selling holders, furnish to counsel for the selling
holders of Registrable Shares, without charge, one conformed copy of each
Registration Statement as declared effective by the SEC and of each
post-effective amendment thereto, in each case including financial statements
and schedules and all exhibits and reports incorporated or deemed to be
incorporated therein by reference; and such number of copies of the preliminary
prospectus, each amended preliminary
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prospectus, each final Prospectus and each post-effective amendment or
supplement thereto, as the selling holders may reasonably request in order to
facilitate the disposition of the Registrable Shares covered by each
Registration Statement in conformity with the requirements of the Securities
Act;
(e) prior to any public offering of Registrable Shares register or qualify
such Registrable Shares for offer and sale under the securities or Blue Sky laws
of such jurisdictions in the United States as any selling holder shall
reasonably request in writing; and do any and all other reasonable acts or
things necessary or advisable to enable such holders to consummate the
disposition in such jurisdictions of such Registrable Shares covered by the
Registration Statement; PROVIDED, HOWEVER, that the Company shall in no event be
required to qualify generally to do business as a foreign corporation or as a
dealer in any jurisdiction where it is not at the time so qualified or to
execute or file a general consent to service of process in any such jurisdiction
where it has not theretofore done so or to take any action that would subject it
to general service of process or taxation in any such jurisdiction where it is
not then subject;
(f) except during any Delay Period, upon the occurrence of any event
contemplated by paragraph 4(b)(ii) or 4(b)(v) above, prepare a supplement or
post-effective amendment to each Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Shares being sold thereunder, such Prospectus will
not contain an untrue statement of a material fact or omit to state any 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; and
(g) cause all Registrable Shares covered by the Registration Statement to be
listed on each securities exchange, if any, on which similar securities issued
by the Company are then listed.
The Company may require each seller of Registrable Shares as to which any
registration is being effected to furnish such information regarding the
distribution of such Registrable Shares and as to such seller as it may from
time to time reasonably request. If any such information with respect to any
seller is not furnished prior to the filing of the Registration Statement, the
Company may exclude such seller's Registrable Shares from such Registration
Statement.
Each holder of Registrable Shares (including, without limitation, any
Distributee) agrees by acquisition of such Registrable Shares that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in Section 4(b)(ii), 4(b)(iii), 4(b)(iv) or 4(b)(v) hereof or upon
notice of the commencement of any Delay Period, such holder shall forthwith
discontinue disposition of such Registrable Shares covered by such Registration
Statement or Prospectus until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4(f) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amended or
supplemented Prospectus or any additional or supplemental filings which are
incorporated, or deemed to be incorporated, by reference in such Prospectus and,
if requested by the Company, such holder shall deliver to the Company (at the
expense of the Company) all copies, other than permanent file copies then in
such holder's possession, of the Prospectus covering such Registrable Shares at
the time of receipt of such request.
Each holder of Registrable Shares further agrees not to utilize any material
other than the applicable current Prospectus in connection with the offering of
Registrable Shares pursuant to the Shelf Registration.
5. REGISTRATION EXPENSES.
Whether or not any Registration Statement becomes effective, the Company
shall pay all costs, fees and expenses incident to the Company's performance of
or compliance with this Agreement including, without limitation, (i) all
registration and filing fees, (ii) fees and expenses of compliance with
securities or Blue Sky laws, (iii) printing expenses (including, without
limitation, expenses of
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printing of prospectuses if the printing of prospectuses is requested by the
holders of a majority of the Registrable Shares included in any Registration
Statement), (iv) fees and disbursements of counsel for the Company, (v) fees and
disbursements of all independent certified public accountants of the Company and
all other Persons retained by the Company in connection with the Registration
Statement and (vi) the fees and expenses (not to exceed $50,000) for one counsel
on behalf of all of the holders of Registrable Shares. Notwithstanding the
foregoing, the fees and expenses of counsel to, or any other Persons retained
by, any holder of Registrable Shares, and any discounts, commissions,
underwriting or advisory fees, brokers' fees or fees of similar securities
industry professional (including any "qualified independent underwriter"
retained for the purpose of Section 3 of Schedule E of the By-laws of the
National Association of Securities Dealers, Inc.) relating to the distribution
of the Registrable Shares, will be payable by such holder and the Company will
have no obligation to pay any such amounts.
6. MISCELLANEOUS.
6.1 TERMINATION. This Agreement and the obligations of the Company
hereunder shall terminate on the earliest of (i) the first date on which no
Registrable Shares remain outstanding, and (ii) the close of business on the
last day of the Effectiveness Period.
6.2 AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of holders
representing a majority of the Registrable Shares. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter which relates exclusively to the rights of holders of Registrable
Shares whose securities are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect the rights of a holder whose
securities are not being sold pursuant to such Registration Statement may be
given by holders of a majority of the Registrable Shares being sold by such
holders; PROVIDED, HOWEVER, that the provision of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
6.3 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed given:
when delivered personally; one Business Day after being deposited with a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back if telexed and when receipt is
acknowledged, if telecopied, in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice; PROVIDED that notices of a change of address shall be effective only
upon receipt thereof):
(i) if to a holder, at the most current address given by such holder to
the Company in accordance with the provisions of this Section 6.3, which
address initially is with respect to each holder, the address set forth on
the signature pages hereto; and
(ii) if to the Company, initially at 2700 Colorado Boulevard, Santa
Monica, California 90404, Attention: Scott Brown, Esq., with a copy to
Skadden, Arps, Slate, Meagher & Flom, 300 South Grand Avenue, Los Angeles,
California 90071, Attention: Thomas C. Janson, Jr.
6.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties; PROVIDED
that the holders may not assign their rights hereunder except to an Affiliate of
such holder or a Distributee (as defined below) and no person (other than any
such Affiliate or Distributee) who acquires Registrable Shares from a holder
shall have any rights hereunder. For purposes of this Agreement, the term
"Distributee" shall mean any person that is a stockholder or partner of a
Stockholder, or any person that is a stockholder or partner of a Distributee, to
which Registrable Shares are transferred or distributed by such Stockholder or
Distributee. This Agreement shall survive any transfer of Registrable Shares to
a Distributee and shall inure to the benefit of such Distributee.
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6.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.6 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT
TO THE PROVISIONS THEREOF GOVERNING CONFLICT OF LAWS PRINCIPLES.
6.8 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
6.9 ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein, with respect to
the registration rights granted by the Company with respect to the Registrable
Shares issued pursuant to the Merger Agreement. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
6.10 CALCULATION OF TIME PERIODS. Except as otherwise indicated, all
periods of time referred to herein shall include all Saturdays, Sundays and
holidays; PROVIDED, that if the date to perform the act or give any notice with
respect to this Agreement shall fall on a day other than a Business Day, such
act or notice may be timely performed or given if performed or given on the next
succeeding Business Day.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
NATIONAL MEDICAL ENTERPRISES, INC.
By ___________________________________
Name:
Title:
STOCKHOLDER:
______________________________________
Name:
Address for Notice:
Number of Shares:
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EXHIBIT C
FORM OF LEGAL OPINION OF
SKADDEN, ARPS, SLATE, MEAGHER & FLOM,
COUNSEL FOR PARENT
1. Parent and each of the Parent Subsidiaries that is a "significant
subsidiary" within the meaning of Rule 1-01 of Regulation S-X under the Exchange
Act is a corporation validly existing and in good standing under the laws of its
respective jurisdiction of incorporation.
2. The shares of Parent common stock to be issued in the Merger will, upon
the issuance thereof in accordance with the terms of the Merger Agreement, be
validly issued, fully paid and nonassessable and free of preemptive rights.
3. Each of the Parent and Sub has the corporate power and corporate
authority to enter into the Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Merger Agreement by each
of Parent and Sub and the consummation of the transactions contemplated thereby
have been duly authorized by the requisite corporate action on the part of each
of Parent and Sub. The Merger Agreement has been executed and delivered by each
of Parent and Sub and (assuming it has been duly authorized, executed and
delivered by the Company) is a valid and binding obligation of each of Parent
and Sub, enforceable against Parent and Sub in accordance with its terms, except
(i) to the extent that enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws not or hereafter in
effect relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity) and (ii) we express no opinion with respect to the
enforceability of Section 9.5 of the Merger Agreement.
4. The execution, delivery and performance of the Merger Agreement by each
of Parent and Sub will not result in a breach or violation of any provision of
the charter or by-laws of either Parent or Sub.
5. The Registration Statement as of the effective date thereof and as of
the date hereof appeared on its face to be appropriately responsive in all
material respects to the applicable requirements of the Securities Act and the
rules and regulations thereunder, except that, in each case, we express no
opinion or belief as to the financial statements, schedules and other financial
and statistical data included or incorporated, or deemed to be incorporated, by
reference therein or excluded therefrom, any information to the extent it was
furnished by or relates to the Company or the exhibits to the Registration
Statement, and we do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement.
In addition, we have participated in conferences with officers and other
representatives of Parent, representatives of the independent public accountants
of Parent, officers and other representatives of the Company, counsel for the
Company and representatives of the independent public accountants of the
Company, at which the contents of the Registration Statement, including the
Prospectus included therein, and related matters were discussed and, although we
are not passing upon, and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus and have made no independent check or verification
thereof, on the basis of the foregoing, no facts have come to our attention that
have led us to believe that, insofar as it relates to Parent, the Registration
Statement, at the time it became effective, contained an untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that,
insofar as it relates to Parent, the Prospectus, as of its date and the date
hereof, contained an untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading,
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except that we express no opinion or belief with respect to (a) the financial
statements, schedules and other financial and statistical data incorporated, or
deemed to be incorporated, by reference in the Registration Statement or the
Prospectus, (b) statements in or omissions from any documents or the information
incorporated, or deemed to be incorporated, by reference in the Registration
Statement or the Prospectus or (c) information contained or incorporated by
reference in the Registration Statement or the Prospectus to the extent such
information was furnished by or relates to the Company.
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EXHIBIT D
FORM OF LEGAL OPINION OF
NEAL, GERBER & EISENBERG
COUNSEL FOR THE COMPANY
1. The Company and each of the Company Subsidiaries that is a "significant
subsidiary" within the meaning of Rule 1-01 of Regulation S-X under the Exchange
Act is a corporation validly existing and in good standing under the laws of its
respective jurisdiction of incorporation.
2. The Company has the corporate power and corporate authority to enter
into the Merger Agreement and to consummate the transactions contemplated
thereby. The execution and delivery of the Merger Agreement by the Company and
the consummation of the transactions contemplated thereby have been duly
authorized by all requisite corporate action on the part of the Company. The
Merger Agreement has been executed and delivered by the Company and (assuming it
has been duly authorized, executed and delivered by Parent and Sub) is a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except (i) to the extent that enforcement thereof may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws not or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity), and (ii) we express no opinion
with respect to the enforceability of Section 9.5 of the Merger Agreement.
3. The execution, delivery and performance of the Merger Agreement by the
Company will not result in a breach or violation of any provision of the charter
or by-laws of the Company.
4. The Information Statement of the Company as of the date it was mailed to
stockholders of the Company and as of the date hereof appeared on its face to be
appropriately responsive in all material respects to the applicable requirements
of the Exchange Act and the rules and regulations thereunder, except that, in
each case, we express no opinion or belief as to the financial statements,
schedules and other financial and statistical data included or incorporated, or
deemed to be incorporated, by reference therein or excluded therefrom or any
information to the extent it was furnished by or relates to the Parent, and we
do not assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Information Statement.
In addition, we have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants of the Company, officers and other representatives of the Parent,
counsel for the Parent and representatives of the independent public accountants
of the Parent, at which the contents of the Information Statement and related
matters were discussed and, although we are not passing upon, and do not assume
any responsibility for, the accuracy, completeness or fairness of the statements
contained in the Information Statement and have made no independent check or
verification thereof, on the basis of the foregoing, no facts have come to our
attention that have led us to believe that, insofar as it relates to the
Company, the Information Statement, as of its date and the date hereof,
contained an untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that we express no opinion or belief with respect to (a) the
financial statements, schedules and other financial and statistical data
included or incorporated, or deemed to be incorporated, by reference in the
Information Statement, (b) statements in or omissions from any documents or
information incorporated, or deemed to be incorporated, by reference in the
Information Statement or (c) information included or incorporated, or deemed to
be incorporated, by reference in the Information Statement to the extent such
information was furnished by or relates to the Parent.
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ANNEX B
262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; AND THE WORDS "DEPOSITORY RECEIPT" MEAN A RECEIPT OR OTHER
INSTRUMENT ISSUED BY A DEPOSITORY REPRESENTING AN INTEREST IN ONE OR MORE
SHARES, OR FRACTIONS THEREOF SOLELY OF STOCK OF A CORPORATION, WHICH STOCK IS
DEPOSITED WITH THE DEPOSITORY.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, WHICH STOCK, OR
DEPOSITORY RECEIPTS IN RESPECT THEREOF, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 HOLDERS; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the holders of the surviving corporation as provided in
subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, OR DEPOSITORY RECEIPTS IN RESPECT THEREOF;
b. Shares of stock of any other corporation, OR DEPOSITORY RECEIPTS
IN RESPECT THEREOF, WHICH SHARES OF STOCK OR DEPOSITORY RECEIPTS at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 HOLDERS;
c. Cash in lieu of fractional shares OR FRACTIONAL DEPOSITORY
RECEIPTS described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, DEPOSITORY RECEIPTS and
cash in lieu of fractional shares OR FRACTIONAL DEPOSITORY RECEIPTS
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares.
Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of his shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented
to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10
days thereafter, shall notify each of the stockholders entitled to
appraisal rights of the effective date of the merger or consolidation and
that appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw his demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation surviving
the merger or resulting from the consolidation a statement setting forth the
aggregate number of shares not voted in favor of the merger or consolidation
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written
B-2
<PAGE>
statement shall be mailed to the stockholder within 10 days after his
written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and
place fixed for the hearing of such petition by registered or certified mail
to the surviving or resulting corporation and to the stockholders shown on
the list at the addresses therein stated. Such notice shall also be given by
1 or more publications at least 1 week before the day of the hearing, in a
newspaper of general circulation published in the City of Wilmington,
Delaware or such publication as the Court deems advisable. The forms of the
notices by mail and by publication shall be approved by the Court, and the
costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may participate
fully in all proceedings until it is finally determined that he is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as
the Court may direct. Payment shall be so made to each such stockholder, in
the case of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree
may be enforced as other decrees in the Court of Chancery may be enforced,
whether such surviving or resulting corporation be a corporation of this
State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the
B-3
<PAGE>
appraisal proceeding, including, without limitation, reasonable attorney's
fees and the fees and expenses of experts, to be charged pro rata against
the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed
within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of his demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the right of
such stockholder to an appraisal shall cease. Notwithstanding the foregoing,
no appraisal proceeding in the Court of Chancery shall be dismissed as to
any stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation. (Last amended
by Ch. 262, L. '94, eff. 7-1-94.)
B-4
<PAGE>
ANNEX C
October 10, 1994
Board of Directors
American Medical Holdings, Inc.
14001 Dallas Parkway, Suite 200
Dallas, Texas 75380-9088
Dear Sirs:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $0.01 per share ("Common
Stock"), of American Medical Holdings, Inc. (the "Company"), other than National
Medical Enterprises, Inc. ("NME") or any of its affiliates, of the consideration
to be received by such holders in connection with the proposed merger (the
"Merger") of the Company with a subsidiary of NME (the "NME Subsidiary")
pursuant to the Merger Agreement dated as of October 10, 1994 (the "Merger
Agreement"), among NME, the NME Subsidiary and the Company. In the Merger, each
issued and outstanding share of Common Stock (subject to certain exceptions)
will be converted into the right to receive (subject to adjustment in certain
circumstances) $19.00 per share in cash, or $19.25 in the event that the Merger
is not consummated on or prior to March 31, 1995, and 0.42 of a share of common
stock, par value $0.075 per share ("NME common stock"), of NME (or, under
certain circumstances, at the option of the Company, cash in lieu of such
fraction of a share of NME common stock in accordance with the terms of the
Merger Agreement). In addition, pursuant to the Merger Agreement, on or prior to
the consummation of the Merger, the Board of Directors of the Company will
declare a special dividend of $0.10 per share payable to the holders of Common
Stock on or prior to such consummation.
In arriving at our opinion, we have reviewed the Merger Agreement and its
related exhibits. We have also reviewed certain publicly available business and
financial information relating to the Company, as well as certain other
information, including financial projections, provided to us by the Company. We
have discussed the past and current operations and financial condition and
prospects of the Company with its senior management. With respect to NME, we
have reviewed publicly available business, financial and trading information and
financial projections provided to us by NME and have discussed the past and
current operations and financial condition and prospects of NME with its senior
management. We have also considered such other information, financial studies,
analyses, investigations and financial, economic, market and trading criteria
which we deemed relevant.
We have assumed and relied on the accuracy and completeness of the
information reviewed by us for the purpose of this opinion and we have not
assumed any responsibility for independent verification of such information or
for any independent evaluation or appraisal of the assets of the Company or NME.
With respect to the Company's and NME's financial projections, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's or NME's, as the case may be,
management as to the future financial performance of the Company or NME, as the
case may be, and we express no opinion with respect to such forecasts or the
assumptions on which they are based. Our opinion is necessarily based upon
business, market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter and does not address the Company's
underlying business decision to effect the Merger or constitute a recommendation
to any holder of Common Stock as to how such holder should vote with respect to
the Merger. We were not requested to, and did not, solicit third party offers to
acquire all or any part of the Company. Our opinion as expressed below does not
imply any conclusion as to the likely trading range for NME common stock
following the consummation of the Merger, which may vary depending on, among
other factors, changes in interest rates, dividend rates, market conditions,
general economic conditions and other factors that generally influence the price
of securities.
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<PAGE>
We have acted as financial advisor to the Board of Directors of the Company
in connection with the Merger and will receive a fee for our services which is
payable upon the initial submission of this opinion. In the ordinary course of
our business, we actively trade the debt and equity securities of the Company
and NME for our own account and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the holders of Common Stock
(other than NME or any of its affiliates) in connection with the Merger is fair
to such holders from a financial point of view.
Very truly yours,
Salomon Brothers Inc
By: _______/s/_LOUIS B. SUSMAN________
Louis B. Susman
MANAGING DIRECTOR
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada General Corporation Law ("Nevada Law") provides
generally and in pertinent part that a Nevada corporation may indemnify its
directors and officers against expenses, judgments, fines, and settlements
actually and reasonably incurred by them in connection with any civil suit or
action, except actions by or in the right of the corporation, or any
administrative or investigative proceeding if, in connection with the matters in
issue, they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the corporation, and in connection
with any criminal suit or proceeding, if in connection with the matters in
issue, they had no reasonable cause to believe their conduct was unlawful.
Section 78.751 further provides that, in connection with the defense or
settlement of any action by or in the right of the corporation, a Nevada
corporation may indemnify its directors and officers against expenses actually
and reasonably incurred by them if, in connection with the matters in issue,
they acted in good faith, in a manner they reasonably believed to be in, or not
opposed to, the best interest of the corporation. Section 78.751 further permits
a Nevada corporation to grant its directors and officers additional rights of
indemnification through by-law provisions and otherwise.
Article X of the Restated Articles of Incorporation of the Registrant and
Article IX of the Restated By-Laws of the Registrant provide that the Registrant
shall indemnify its directors and officers to the fullest extent permitted by
Nevada Law. The Registrant has entered into indemnification agreements with each
of its directors and executive officers. Such indemnification agreements are
intended to provide a contractual right to indemnification, to the maximum
extent permitted by law, for expenses (including attorneys' fees), judgments,
penalties, fines, and amounts paid in settlement actually and reasonably
incurred by the person to be indemnified in connection with any proceeding
(including, to the extent permitted by applicable law, any derivative action) to
which they are, or are threatened to be made, a party by reason of their status
in such positions. Such indemnification agreements do not change the basic legal
standards for indemnification set forth under Nevada Law or the Restated
Articles of Incorporation of the Registrant. Such agreements are intended to be
in furtherance, and not in limitation of, the general right to indemnification
provided in the Registrant's Restated Articles of Incorporation.
Section 78.037 of the Nevada Law provides that the articles of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director or officer (i) for acts or
omissions which involve intentional misconduct or a knowing violation of law, or
(ii) under Section 78.300 of the Nevada Law (relating to liability for
unauthorized acquisitions or redemptions of, or dividends on, capital stock).
Article X of the Restated Articles of Incorporation of the Registrant contains
such a provision.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ -----------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 10, 1994, by and
among the Registrant, American Medical Holdings, Inc. and AMH
Acquisition Co., Inc. (attached as Annex A to the Information
Statement/Prospectus included in this Registration Statement)*
3.1 Restated Articles of Incorporation of Registrant, as amended October
13, 1987 (Incorporated by reference to Exhibit 3(a) to Registrant's
Annual Report on Form 10-K dated August 30, 1993)
3.2 Restated Bylaws of Registrant, as amended September 28, 1994
(Incorporated by reference to Exhibit 3.1 to Registrant's Registration
Statement on Form S-3 dated October 23, 1994)
4.1 Form of Indenture for the Registrant's Convertible Floating Rate
Debentures, dated as of February 1, 1992, among NME PIP Funding I,
Inc., the Registrant and Bankers Trust Company, as Trustee
(Incorporated by reference to Exhibit 4(a) to Registration Statement
on Form S-3, Registration No. 33-45689, dated February 14, 1992)
4.2 Form of Convertible Floating Rate Debenture due April 3, 1996
(Incorporated by reference to Exhibit 4(e) to Registrant's
Registration Statement on Form S-3, Registration No. 33-45689, dated
February 14, 1992)
4.3 Agreement Providing for First Amendment to Convertible Floating Rate
Debentures due April 3, 1996, dated as of December 11, 1991, between
the Registrant and NME PIP Funding I, Inc. (Incorporated by reference
to Exhibit 4(f) to Registrant's Registration Statement on Form S-3,
Registration No. 33-45689, dated February 14, 1992)
4.4 Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock (Incorporated by reference to Exhibit 4(d)
to Registrant's Annual Report on Form 10-K dated August 23, 1991)
4.5 Form of Investment Option Agreement (Incorporated by reference to
Exhibit 10(e) to Registrant's Annual Report on Form 10-K dated August
28, 1989)
4.6 Indenture, dated as of March 1, 1991, between the Registrant and The
Bank of New York, as Trustee (Incorporated by reference to Exhibit
4(a) to Registrant's Annual Report on Form 10-K dated August 23, 1991)
4.7 Indenture, dated as of April 1, 1985, between the Registrant and The
Bank of New York, as Trustee (Incorporated by reference to Exhibit 4.1
to Amendment No. 1 to the Registrant's Registration Statement on Form
S-3, File No. 2-96780, filed with the Securities and Exchange
Commission on April 3, 1985)
4.8 Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock (Incorporated by reference to Exhibit
4(h) to Registrant's Annual Report on Form 10-K dated August 30, 1993)
5 Opinion of Scott M. Brown, Esq., Senior Vice President, General Counsel
and Secretary of Registrant*
11 Statement Re: Computation of Pro Forma Per Share Earnings*
12 Statement Re: Computation of Ratio of Earnings to Fixed Charges*
23.1 Accountants' Consent (KPMG Peat Marwick LLP)*
23.2 Consent of Scott M. Brown, Esq. (included as part of Exhibit 5)
23.3 Accountants' Consent (Price Waterhouse LLP)*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ -----------------------------------------------------------------------
23.4 Consent of Robert O'Leary*
<C> <S>
23.5 Consent of John Casey*
23.6 Consent of Thomas J. Pritzker*
24 Power of Attorney (included on page II-4 hereof)
<FN>
- ------------------------
* Filed herewith
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required or are
inapplicable, and therefore have been omitted, or the required information has
been disclosed in the Consolidated Financial Statements.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(b) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (a) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Monica, State of
California on January 27, 1995.
NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/ JEFFREY C. BARBAKOW
-----------------------------------
Jeffrey C. Barbakow
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jeffrey C. Barbakow, Raymond L. Mathiasen and
Scott M. Brown and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and to file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
Chairman of the Board of
/s/ JEFFREY C. BARBAKOW Directors and Chief
- ----------------------------------- Executive Officer January 27, 1995
Jeffrey C. Barbakow (Principal Executive
ATTORNEY-IN-FACT Officer)
/s/ MICHAEL H. FOCHT, SR. President, Chief
- ----------------------------------- Operating Officer and January 27, 1995
Michael H. Focht, Sr. Director
/s/ RAYMOND L. MATHIASEN Senior Vice President and
- ----------------------------------- Chief Financial Officer
Raymond L. Mathiasen (Principal Financial and January 27, 1995
ATTORNEY-IN-FACT Accounting Officer)
/s/ BERNICE B. BRATTER
- ----------------------------------- Director January 27, 1995
Bernice B. Bratter
II-4
<PAGE>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ MAURICE J. DEWALD
- ----------------------------------- Director January 27, 1995
Maurice J. DeWald
/s/ PETER DE WETTER
- ----------------------------------- Director January 27, 1995
Peter de Wetter
- ----------------------------------- Director
Edward Egbert, M.D.
/s/ RAYMOND A. HAY
- ----------------------------------- Director January 27, 1995
Raymond A. Hay
/s/ LESTER B. KORN
- ----------------------------------- Director January 27, 1995
Lester B. Korn
/s/ JAMES P. LIVINGSTON
- ----------------------------------- Director January 27, 1995
James P. Livingston
/s/ RICHARD S. SCHWEIKER
- ----------------------------------- Director January 27, 1995
Richard S. Schweiker
II-5
<PAGE>
EXHIBIT 5
January 30, 1995
National Medical Enterprises, Inc.
2700 Colorado Avenue
Santa Monica, California 90404
Ladies and Gentlemen:
I am the General Counsel of National Medical Enterprises, Inc., a Nevada
corporation (the "Company"), and in such capacity I am charged with general
supervisory responsibilities for the legal affairs of the Company and its
subsidiaries. This opinion is furnished in connection with the preparation of a
Registration Statement on Form S-4 (the "Registration Statement") to be filed by
the Company with the Securities and Exchange Commission (the "Commission") on
January 30, 1995. The Registration Statement relates to the registration under
the Securities Act of 1933, as amended (the "Act"), of 13,342,156 shares (the
"Shares") of the common stock of the Company, par value $0.075 (the "NME Common
Stock"), to be issued in connection with the Merger (as defined below). This
opinion is delivered in connection with the requirements of Item 601(b)(5) of
Regulation S-K under the Act.
The Shares are to be issued in connection with an Agreement and Plan of
Merger, dated as of October 10, 1994, by and among the Company, AMH Acquisition
Co., a Delaware corporation that is a wholly owned subsidiary of the Company
("Merger Subsidiary"), and American Medical Holdings, Inc., a Delaware
corporation ("AMH"), pursuant to which, among other things, (i) Merger
Subsidiary will be merged with and into AMH (the "Merger"), with AMH as the
surviving corporation and (ii) each share of common stock, par value $0.01 per
share, of AMH outstanding at the effective time of the Merger will be converted
into the right to receive (x) 0.42 of a share of NME Common Stock, and (y)
$19.00 in cash ($19.25 in cash if the Merger is consummated after March 31,
1995).
In connection with this opinion, I have examined and am familiar with
originals or copies, certified or otherwise identified to my satisfaction, of
(i) the Restated Articles of Incorporation and the Restated Bylaws of the
Company, each as amended to date; (ii) copies of certain resolutions adopted by
the Company's Board of Directors relating to the Merger, including without
limitation, the authorization and issuance of the Shares; (iii) the Registration
Statement (together with the Information Statement and Prospectus forming a part
thereof); and (iv) such other documents, instruments and agreements as I have
deemed necessary or appropriate as a basis for the opinion set forth below.
In rendering the opinion set forth herein, I have assumed the satisfaction
of the following conditions: the issuance by appropriate regulatory agencies of
all necessary permits, consents, approvals, authorizations and orders relating
to the issuance and sale of the Shares in their respective jurisdictions; the
Registration Statement being declared effective by the Commission; the
consummation of the Merger and the offering and sale of the Shares in the manner
set forth in the Registration Statement, in accordance with the Merger Agreement
and pursuant to said permits, consents, approvals, authorizations and orders;
the genuineness and authenticity of all signatures on original documents
submitted to me; the legal capacity of all natural persons; the authenticity of
all documents submitted to me as originals; and the conformity to original
documents of all documents submitted to me as certified, conformed or
photostatic copies.
Based on and subject to the foregoing, I am of the opinion that the Shares
are duly authorized and when the certificates representing the Shares are duly
executed, countersigned, registered and delivered by the Company in accordance
with the terms of the Merger Agreement, such Shares will be legally issued,
fully paid and nonassessable.
This opinion is furnished to you solely for your benefit in connection with
the filing of the Registration Statement and is not to be used, circulated,
quoted or otherwise referred to for any other purpose without my prior written
consent. Notwithstanding the foregoing, I hereby consent to the filing of this
opinion with the Commission as Exhibit 5 to the Registration Statement and to
the
<PAGE>
reference to my name under the caption "Legal Matters" in the Registration
Statement. In giving such consent, I do not thereby admit that I come within the
category of persons whose consent is required under Section 7 of the Act, as
amended, or the rules and regulations of the Commission thereunder.
Very truly yours,
Scott M. Brown
<PAGE>
EXHIBIT 11
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PRO FORMA PER SHARE EARNINGS*
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
------------------------ YEAR ENDED
1994 1993 MAY 31, 1994
----------- ----------- ------------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
FOR PRIMARY EARNINGS PER SHARE
Shares outstanding at beginning of period................................ 166,081 165,898 165,898
Shares issued upon exercise of stock options............................. 171 8 60
Dilutive effect of outstanding stock options............................. 2,138 198 1,114
Shares issued as grants of restricted stock, net of
cancellations........................................................... -- (11) (48)
Shares assumed issued in the Merger...................................... 33,190 33,190 33,190
----------- ----------- ------------
Weighted average number of shares and share equivalents outstanding...... 201,580 199,283 200,214
----------- ----------- ------------
----------- ----------- ------------
Income from continuing operations before cumulative effect of a change in
accounting principle.................................................... $ 103,146 $ 75,008 $ 214,521
----------- ----------- ------------
----------- ----------- ------------
Earnings per share from continuing operations before cumulative effect of
a change in accounting principle........................................ $ 0.51 $ 0.38 $ 1.07
----------- ----------- ------------
----------- ----------- ------------
FOR FULLY DILUTED EARNINGS PER SHARE
Weighted average number of shares used in primary calculation............ 201,580 199,283 200,214
Additional dilutive effect of stock options.............................. 168 44 97
Assumed conversion of dilutive convertible debentures.................... 12,909 13,978 13,966
----------- ----------- ------------
Fully diluted weighted average number of shares.......................... 214,657 213,305 214,277
----------- ----------- ------------
----------- ----------- ------------
Income from continuing operations used in primary calculation............ $ 103,146 $ 75,008 $ 214,521
Adjustments for interest expense, contractual allowances and income
taxes................................................................... 3,728 2,491 5,981
----------- ----------- ------------
Adjusted income from continuing operations used in fully diluted
calculation............................................................. $ 106,874 $ 77,499 $ 220,502
----------- ----------- ------------
----------- ----------- ------------
Earnings per share from continuing operations before cumulative effect of
a change in accounting principle........................................ $ 0.50 $ 0.36 $ 1.03
----------- ----------- ------------
----------- ----------- ------------
<FN>
- ------------------------
* All shares in these tables are weighted on the basis of the number of days
the shares were outstanding or assumed to be outstanding during each
period.
</TABLE>
<PAGE>
EXHIBIT 12
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA AS REPORTED FOR THE
SIX MONTHS ENDED PRO FORMA SIX MONTHS ENDED
----------------------- YEAR ENDED NOVEMBER 30,
NOVEMBER NOVEMBER MAY 31, --------------------
30, 1994 30, 1993 1994 1994 1993
---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
EARNINGS FROM
CONTINUING OPERATIONS
Income before income taxes.............. $180,746 $149,408 $ 377,501 $183,246 $193,908
Less:
Equity in earnings of unconsolidated
affiliates........................... 12,362 14,707 24,300 12,462 14,707
Add:
Cash dividends received............... 894 178 178 894 178
Portion of rents representative
of interest.......................... 21,726 18,921 40,528 13,014 16,582
Interest, net of capitalized
portion.............................. 165,806 167,859 324,437 35,006 37,759
Amortization of previously capitalized
interest............................. 1,939 1,892 3,784 1,939 1,892
---------- ---------- ---------- ---------- -------
Earnings, as adjusted................... $358,749 $323,551 $ 722,128 $221,637 $235,612
---------- ---------- ---------- ---------- -------
---------- ---------- ---------- ---------- -------
FIXED CHARGES:
Interest, net of capitalized portion.... $165,806 $167,859 $ 324,437 $ 35,006 $37,759
Capitalized interest.................... 3,725 2,776 7,249 2,225 1,676
Portion of rents representative
of interest............................ 21,726 18,921 40,528 13,014 16,582
---------- ---------- ---------- ---------- -------
Total fixed charges................. $191,257 $189,556 $ 372,214 $ 50,245 $56,017
---------- ---------- ---------- ---------- -------
---------- ---------- ---------- ---------- -------
RATIO OF EARNINGS TO
FIXED CHARGES.......................... 1.9x 1.7x 1.9x 4.4x 4.2x
<CAPTION>
AS REPORTED FOR THE YEARS ENDED MAY 31,
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
EARNINGS FROM
CONTINUING OPERATIONS
Income before income taxes.............. $359,901 $418,644 $359,199 $245,142 $200,486
Less:
Equity in earnings of unconsolidated
affiliates........................... 23,846 12,489 6,673 5,338 2,902
Add:
Cash dividends received............... 178
Portion of rents representative
of interest.......................... 30,728 35,822 35,477 31,803 38,257
Interest, net of capitalized
portion.............................. 70,037 75,343 89,376 123,852 130,882
Amortization of previously capitalized
interest............................. 3,784 3,595 3,368 2,967 2,538
-------- -------- -------- -------- --------
Earnings, as adjusted................... $440,782 $520,915 $480,747 $398,426 $369,261
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
FIXED CHARGES:
Interest, net of capitalized portion.... $ 70,037 $ 75,343 $ 89,376 $123,852 $130,882
Capitalized interest.................... 3,749 9,028 11,021 16,890 19,492
Portion of rents representative
of interest............................ 30,728 35,822 35,477 31,803 38,257
-------- -------- -------- -------- --------
Total fixed charges................. $104,514 $120,193 $135,874 $172,545 $188,631
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIO OF EARNINGS TO
FIXED CHARGES.......................... 4.2x 4.3x 3.5x 2.3x 2.0x
</TABLE>
<PAGE>
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
National Medical Enterprises, Inc.
We consent to the use of our reports dated July 27, 1994 incorporated by
reference in the registration statement on Form S-4 of National Medical
Enterprises, Inc., relating to the consolidated balance sheets of National
Medical Enterprises, Inc. and subsidiaries as of May 31, 1994 and 1993, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended May 31, 1994, and all
related schedules, and to the reference to our firm under the headings "Selected
Historical Financial Information of NME" and "Experts" in the prospectus. Our
report on the 1994 consolidated financial statements refers to a change in the
method of accounting for income taxes.
KPMG Peat Marwick LLP
Los Angeles, California
January 27, 1995
<PAGE>
EXHIBIT NO. 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Information
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of National Medical Enterprises, Inc. of our reports dated October 20, 1994
appearing on pages F-2 and S-1 of American Medical Holdings, Inc.'s Annual
Report on Form 10-K for the year ended August 31, 1994. We also consent to the
references to us under the headings "Experts" and "Selected Historical Financial
Information" in such Information Statement/Prospectus. However, it should be
noted that Price Waterhouse LLP has not prepared or certified such "Selected
Historical Financial Data."
Price Waterhouse LLP
Dallas, Texas
January 30, 1995
<PAGE>
EXHIBIT 23.4
CONSENT
I hereby consent to the reference to me under the caption "The Merger --
Terms of the Merger -- Directors and Principal Officers of NME" in the
Information Statement on Schedule 14C of American Medical Holdings, Inc. ("AMH")
and in the Prospectus forming a part of the Registration Statement on Form S-4
of National Medical Enterprises, Inc. ("NME") relating to the merger of AMH with
and into NME.
Date: January 27, 1995
/s/ ROBERT O' LEARY
--------------------------------------
Robert O' Leary
<PAGE>
EXHIBIT 23.5
CONSENT
I hereby consent to the reference to me under the caption "The Merger --
Terms of the Merger -- Directors and Principal Officers of NME" in the
Information Statement on Schedule 14C of American Medical Holdings, Inc. ("AMH")
and in the Prospectus forming a part of the Registration Statement on Form S-4
of National Medical Enterprises, Inc. ("NME") relating to the merger of AMH with
and into NME.
Date: January 27, 1995
/s/ JOHN CASEY
--------------------------------------
John Casey
<PAGE>
EXHIBIT 23.6
CONSENT
I hereby consent to the reference to me under the caption "The Merger --
Terms of the Merger -- Directors and Principal Officers of NME" in the
Information Statement on Schedule 14C of American Medical Holdings, Inc. ("AMH")
and in the Prospectus forming a part of the Registration Statement on Form S-4
of National Medical Enterprises, Inc. ("NME") relating to the merger of AMH with
and into NME.
Date: January 27, 1995
/s/ THOMAS J. PRITZKER
--------------------------------------
Thomas J. Pritzker
