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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
______________________
MAY 29, 1996
(Date of Report; Date of Earliest Event Reported)
CHAMPION HEALTHCARE CORPORATION
(Exact Name of Registrant as specified in its Charter)
DELAWARE 0-11851 59-2283872
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
515 W. GREENS ROAD, SUITE 800, HOUSTON, TEXAS 77067
(Address of Principal Executive Offices) (Zip Code)
(713) 583-5491
(Registrant's telephone number, including area code)
______________________________________________________________________________
(Former name or former address, if changed since last report)
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Items 1-4. NOT APPLICABLE.
Item 5. OTHER EVENTS.
As of May 29, 1996, Champion Healthcare Corporation, a Delaware
corporation (the "Company"), Paracelsus Healthcare Corporation, a California
corporation ("Paracelsus"), and PC Merger Sub, Inc., a newly organized
Delaware corporation and a wholly-owned subsidiary of Paracelsus ("Merger
Sub") entered into an Amended and Restated Agreement and Plan of Merger (the
"Amended and Restated Merger Agreement") amending and restating the Agreement
and Plan of Merger, dated as of April 12, 1996, among the Company, Paracelsus
and Merger Sub (the "Merger Agreement") pursuant to which, among other
things, Merger Sub will be merged (the "Merger") with and into Champion with
Champion becoming a wholly owned subsidiary of Paracelsus.
The Amended and Restated Merger Agreement amends the Merger
Agreement and provides, among other things, that (i) each of the 450 shares
of Paracelsus common stock currently outstanding will be split into and
thereafter represent 66,159.426 shares of Paracelsus' common stock, (ii) in
addition to a grant of certain options to purchase shares of Paracelsus'
common stock upon consummation of the Merger, the holders of PSARs and PPSUs
(each as defined in the Merger Agreement) will receive, upon consummation of
the Merger, cash in exchange for their PSARs and PPSUs in an
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aggregate amount of $20,500,000 and (iii) the votes of the Company's
stockholders required to adopt and approve the Merger are (x) the affirmative
vote of the holders of a majority of the total voting power represented by
the outstanding shares of the Company's common stock, Series C Cumulative
Convertible Preferred Stock and Series D Cumulative Convertible Preferred
Stock, voting together as a single class, and (y) the affirmative vote of the
holders of at least 90% of the outstanding shares of each of the Company's
Series C Cumulative Convertible Preferred Stock and the Series D Cumulative
Convertible Preferred Stock, each voting as a separate class.
The foregoing description is qualified in its entirety by reference
to the Amended and Restated Merger Agreement, attached hereto as Exhibit 2.1
and incorporated by reference herein.
Item 6. NOT APPLICABLE.
Item 7. FINANCIAL STATEMENTS
PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) - (b) NOT APPLICABLE.
(c) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
2.1 Amended and Restated Agreement and Plan of Merger, dated
as of May 29, 1996, among Champion Healthcare
Corporation, Paracelsus Healthcare Corporation and PC
Merger Sub, Inc.
Item 8. NOT APPLICABLE.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: June 12, 1996
CHAMPION HEALTHCARE CORPORATION
By /s/ James G. VanDevender
__________________________________
James G. VanDevender
Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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2.1 Amended and Restated Agreement and Plan of Merger, dated
as of May 29, 1996, among Champion Healthcare
Corporation, Paracelsus Healthcare Corporation and PC
Merger Sub, Inc.
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EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN
OF
MERGER
DATED AS OF MAY 29, 1996
BY AND AMONG
PARACELSUS HEALTHCARE CORPORATION,
CHAMPION HEALTHCARE CORPORATION
AND
PC MERGER SUB, INC.
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TABLE OF CONTENTS
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ARTICLE I
CERTAIN DEFINITIONS....................................................................................... 5
ARTICLE II
THE MERGER................................................................................................ 9
Section 2.1 The Merger............................................................................ 9
Section 2.2 Effective Time........................................................................ 9
Section 2.3 Effects of the Merger................................................................. 9
Section 2.4 Certificate of Incorporation and Bylaws............................................... 9
Section 2.5 Company Directors and Officers........................................................ 10
Section 2.6 Parent and Stock Split; Conversion of Company Stock in Merger......................... 10
Section 2.7 Dissenting Shares..................................................................... 10
Section 2.8 Exchange of Shares.................................................................... 10
Section 2.9 Time and Place of Closing............................................................. 12
Section 2.10 Deliveries at the Closing............................................................. 12
ARTICLE III
CORPORATE GOVERNANCE MATTERS RELATING TO PARENT AND THE COMPANY AT OR AFTER THE EFFECTIVE TIME............ 12
Section 3.1 Charter Documents..................................................................... 12
Section 3.2 Directors and Officers of Parent Following the Effective Time......................... 13
Section 3.3 Rights Plan........................................................................... 13
Section 3.4 Parent Shareholder Arrangements....................................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................. 13
Section 4.1 Organization and Qualification........................................................ 13
Section 4.2 Capitalization........................................................................ 14
Section 4.3 Authority............................................................................. 15
Section 4.4 Consents and Approvals; No Violation.................................................. 15
Section 4.5 SEC Reports and Financial Statements.................................................. 15
Section 4.6 Absence of Certain Changes or Events.................................................. 16
Section 4.7 Litigation............................................................................ 16
Section 4.8 Information Supplied.................................................................. 16
Section 4.9 Employee Benefit Plans; ERISA......................................................... 17
Section 4.10 Tax Matters........................................................................... 18
Section 4.11 Taxes................................................................................. 18
Section 4.12 Affiliate Agreements.................................................................. 19
Section 4.13 Opinion of Financial Advisor.......................................................... 19
Section 4.14 Brokers and Finders................................................................... 19
Section 4.15 Vote Required......................................................................... 19
Section 4.16 Medicare and Medicaid................................................................. 19
Section 4.17 Medicare Participation/Accreditation.................................................. 20
Section 4.18 Medical Staff Matters................................................................. 20
Section 4.19 Takeover Statutes..................................................................... 20
Section 4.20 Compliance with Laws.................................................................. 20
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT.................................................................. 21
Section 5.1 Organization and Qualification........................................................ 21
Section 5.2 Capitalization........................................................................ 21
Section 5.3 Authority............................................................................. 22
Section 5.4 Consents and Approvals; No Violation.................................................. 22
Section 5.5 SEC Reports and Financial Statements.................................................. 22
Section 5.6 Absence of Certain Changes or Events.................................................. 23
Section 5.7 Litigation............................................................................ 23
Section 5.8 Information Supplied.................................................................. 23
Section 5.9 Employee Benefit Plans; ERISA......................................................... 23
Section 5.10 Taxes................................................................................. 25
Section 5.11 Affiliate Agreements.................................................................. 25
Section 5.12 Brokers and Finders................................................................... 25
Section 5.13 Vote Required......................................................................... 25
Section 5.14 Medicare and Medicaid................................................................. 25
Section 5.15 Medicare Participation/Accreditation.................................................. 26
Section 5.16 Medical Staff Matters................................................................. 26
Section 5.17 Takeover Statutes..................................................................... 26
Section 5.18 Compliance with Laws.................................................................. 26
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS................................................................. 27
Section 6.1 Conduct of Business of the Company Pending the Effective Time......................... 27
Section 6.2 Conduct of Business of Parent Pending the Effective Time.............................. 28
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS....................................................................... 29
Section 7.1 Company Takeover Proposals............................................................ 29
Section 7.2 Parent Takeover Proposals............................................................. 30
Section 7.3 Access to Information................................................................. 30
Section 7.4 Form S-4 and Proxy Statement.......................................................... 31
Section 7.5 Stockholder Approval; Recommendation.................................................. 31
Section 7.6 Affiliates............................................................................ 31
Section 7.7 Agreement to Cooperate; Further Assurances............................................ 31
Section 7.8 Company Options, Rights and Warrants.................................................. 32
Section 7.9 Parent Rights......................................................................... 32
Section 7.10 Public Statements..................................................................... 33
Section 7.11 Letter of Company's Accountants....................................................... 33
Section 7.12 Letter of Parent's Accountants........................................................ 33
Section 7.13 Directors and Officers' Indemnification............................................... 33
Section 7.14 Stock Exchange Listing................................................................ 34
Section 7.15 Execution of the Other Agreements..................................................... 34
Section 7.16 Tax Treatment......................................................................... 35
Section 7.17 Other Actions by the Company and/or Parent............................................ 35
ARTICLE VIII
CONDITIONS................................................................................................ 35
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger............................ 35
Section 8.2 Conditions to Obligation of the Company to Effect the Merger.......................... 36
Section 8.3 Conditions to Obligations of Parent to Effect the Merger.............................. 36
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER......................................................................... 37
Section 9.1 Termination........................................................................... 37
Section 9.2 Effect of Termination................................................................. 38
Section 9.3 Amendment............................................................................. 38
Section 9.4 Waiver................................................................................ 38
Section 9.5 Procedure for Certain Terminations.................................................... 38
Section 9.6 Fees and Expenses..................................................................... 38
ARTICLE X
GENERAL PROVISIONS........................................................................................ 40
Section 10.1 Non-Survival of Representations, Warranties and Agreements............................ 40
Section 10.2 Notices............................................................................... 40
Section 10.3 Interpretation........................................................................ 41
Section 10.4 Miscellaneous......................................................................... 41
Section 10.5 Counterparts.......................................................................... 41
Section 10.6 Parties in Interest................................................................... 41
Section 10.7 Severability.......................................................................... 42
Section 10.8 Attorneys' Fees....................................................................... 42
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SCHEDULES
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Schedule 1.5 Terms of Company Investor Group Registration Rights Agreement
Schedule 1.11 Terms of Employment Agreements
Schedule 1.20 Independent Director Designees
Schedule 1.26 Terms of Services Agreement
Schedule 1.28 Terms of Parent Shareholder Registration Rights Agreement
Schedule 1.43 Terms of Voting Agreement
Schedule 2.4 Amendment to the Restated Certificate of Incorporation of the Company
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EXHIBITS
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Exhibit A Form of Shareholder Agreement
Exhibit B Form of Non-Compete Agreement
Exhibit C Form of Dividend and Note Agreement
Exhibit D Form of Restated Articles of Incorporation of Parent
Exhibit E Form of Bylaws of Parent
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AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of May 29,
1996 (the "Agreement"), by and among PARACELSUS HEALTHCARE CORPORATION, a
California corporation ("Parent"), CHAMPION HEALTHCARE CORPORATION, a Delaware
corporation (the "Company"), and PC MERGER SUB, INC., a Delaware corporation and
a wholly owned subsidiary of Parent ("Merger Sub").
WHEREAS, as of April 12, 1996 Parent, the Company and Merger Sub entered
into an Agreement and Plan of Merger, and Parent, the Company and Merger Sub
desire to amend and restate in its entirety such Agreement and Plan of Merger;
WHEREAS, the board of directors of each of Parent, Merger Sub and the
Company deem it advisable and in the best interests of their respective
stockholders that Merger Sub be merged with and into the Company (the "Merger")
in accordance with the General Corporation Law of the State of Delaware (the
"DGCL") upon the terms and subject to the conditions of this Agreement; and
WHEREAS, for Federal income tax purposes it is intended that the Merger
qualify as a reorganization within the meaning of section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder.
NOW, THEREFORE, in consideration of the foregoing, the mutual
representations, warranties, covenants and agreements set forth herein and 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:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the following
meanings:
Section 1.1 "Affiliate" shall mean, as to any person, any other person that
directly or indirectly controls, or is under common control with or is
controlled by such person. For the purpose of this definition, "control," when
used with respect to any specified person, means the power to direct or cause
the direction of 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" shall have meanings
correlative to the foregoing.
Section 1.2 "Agreement in Contemplation of Merger" shall mean the Champion
Healthcare Corporation Agreement in Contemplation of Merger, dated as of April
12, 1996, by and among the Company and the parties named therein.
Section 1.3 "BA Partners" shall mean BA Partners, financial advisors to
Parent.
Section 1.4 "Company Common Stock" shall mean the common stock, par value
$.01 per share, of the Company.
Section 1.5 "Company Investment Group Registration Rights Agreements" shall
mean the three Registration Rights Agreements to be entered into by Parent and
certain stockholders of the Company at or prior to the Closing on substantially
the terms set forth in Schedule 1.5 attached hereto.
Section 1.6 "Company Preferred Stock" shall mean, collectively, the Series C
Preferred Stock and the Series D Preferred Stock.
Section 1.7 "Company Stock" shall mean, collectively, the Company Common
Stock and the Company Preferred Stock.
Section 1.8 "Confidentiality Agreement" shall mean, collectively, the
Confidentiality Agreements, each dated November 10, 1995, by and among Parent
and the Company.
5
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Section 1.9 "Coopers & Lybrand" shall mean Coopers & Lybrand, L.L.P., the
Company's independent auditors.
Section 1.9A "Dividend and Note Agreement" shall mean the Dividend and Note
Agreement to be entered into between Parent and the Parent Shareholder at or
prior to the Closing, in the form attached as Exhibit C hereto.
Section 1.10 "DLJ" shall mean Donaldson, Lufkin & Jenrette Securities
Corporation, financial advisor to the Company.
Section 1.11 "Employment Agreements" shall mean the employment agreements to
be entered into prior to the time the Form S-4 becomes effective under the
Securities Act between Parent and each of Mr. R.J. Messenger, Mr. Charles R.
Miller, Mr. James G. VanDevender, Mr. Ronald R. Patterson and Mr. Robert C.
Joyner, in each case substantially on the terms set forth in Schedule 1.11
attached hereto.
Section 1.12 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
Section 1.13 "ERISA Affiliate," with respect to any party, shall mean any
trade or business, whether or not incorporated, that together with such party
would be deemed a "single employer" within the meaning of Section 4001(b)(1) of
ERISA.
Section 1.14 "Ernst & Young" shall mean Ernst & Young LLP, Parent's
independent auditors.
Section 1.15 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
Section 1.16 "Form S-4" shall mean the Registration Statement on Form S-4 of
Parent to be filed with the SEC under the Securities Act in connection with the
Merger for the purpose of registering the shares of Parent Common Stock to be
issued in the Merger.
Section 1.17 "GAAP" shall mean generally accepted accounting principles as
in effect from time to time in the United States of America.
Section 1.18 "Governmental Entity" shall mean any court, administrative
agency, commission or other governmental authority or instrumentality, domestic
or foreign.
Section 1.19 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
Section 1.20 "Independent Designees" shall mean the persons either
identified on Schedule 1.20 hereto or designated in accordance with the terms
thereof to become directors of Parent no later than immediately after the
Effective Time.
Section 1.21 "Material Adverse Effect," with respect to any party, shall
mean a material adverse effect (or any development which in the future is
reasonably likely to have a material adverse effect) on the business, assets,
financial or other condition or results of operations of such party and its
Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that any such effect
resulting from any change (i) in law, rule or regulation or GAAP or
interpretations thereof that applies to both Parent and the Company or (ii) in
economic or business conditions generally or in the health care industry
specifically that similarly affects both Parent and the Company shall not be
considered when determining if a Material Adverse Effect has occurred.
Section 1.22 "Non-Compete Agreement" shall mean the non-compete agreement
to be entered into between Parent and Dr. Krukemeyer at or prior to Closing
in the form attached as Exhibit B hereto.
Section 1.23 "Officers" shall mean the senior executive officers of Parent
at the Effective Time.
Section 1.24 "Parent Bylaws" shall mean the Bylaws to be adopted by Parent
at or prior to the Closing in the form attached as Exhibit D hereto.
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Section 1.25 "Parent Common Stock" shall mean the Common Stock, no stated
value per share,
of Parent.
Section 1.26 "Parent Shareholder" shall mean Dr. Manfred George Krukemeyer
or a corporation wholly owned by Dr. Krukemeyer.
Section 1.27 "Parent Shareholder Registration Rights Agreement" shall mean
the Registration Rights Agreement to be entered into by Parent and the Parent
Shareholder at or prior to the Closing substantially on the terms set forth in
Schedule 1.28 attached hereto.
Section 1.28 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
Section 1.29 "Proxy Statement" shall mean the proxy statement/prospectus
included as part of the Form S-4 and filed by the Company pursuant to Section
14(a) of the Exchange Act to be distributed to holders of shares of Company
Stock in connection with the meeting of such holders to be held in connection
with the transactions contemplated by this Agreement.
Section 1.30 "Registration Rights Agreements" shall mean, collectively, the
Parent Shareholder Registration Rights Agreement and the Company Investment
Group Registration Rights Agreements.
Section 1.31 "Restated Articles of Incorporation" shall mean the amended and
restated articles of incorporation to be adopted by Parent at or prior to the
Closing in the form attached as Exhibit C hereto.
Section 1.32 "Rights Plan" shall mean a rights plan to be adopted and
implemented by Parent as promptly as practicable following the Closing meeting
the requirements of Section 3.3 hereof.
Section 1.33 "SEC" shall mean the Securities and Exchange Commission.
Section 1.34 "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.35 "Series C Preferred Stock" shall mean the Series C Preferred
Stock, par value $.01 per share, of the Company.
Section 1.36 "Series D Preferred Stock" shall mean the Series D Preferred
Stock, par value $.01 per share, of the Company.
Section 1.37 "Services Agreement" shall mean the Services Agreement to be
entered into between Parent and Dr. Krukemeyer at or prior to the Closing,
substantially on the terms set forth in Schedule 1.26 attached hereto.
Section 1.38 "Shareholder Agreement" shall mean the Shareholder Agreement to
be entered into between Parent and the Parent Shareholder at or prior to the
Closing, in the form attached as Exhibit A hereto.
Section 1.39 "Significant Subsidiary" shall have the meaning set forth in
Rule 1-02 of Regulation S-X of the SEC.
Section 1.40 "Subsidiary" shall have the meaning set forth in Rule 1-02 of
Regulation S-X of the SEC.
Section 1.41 "Takeover Proposal" with respect to a person means (i) any BONA
FIDE offer or proposal with respect to a merger, reorganization, consolidation
or other similar business combination or any transaction involving the purchase
of all or any significant portion of the assets, or 30% or more of such person's
equity securities (on a fully diluted basis), by tender offer or otherwise
(collectively, an "Acquisition"), of such person or any of its Subsidiaries;
(ii) any direct or indirect Acquisition by such person involving either the
issuance by such person or acquisition by such person of 30% or more of the
outstanding equity securities (on a fully diluted basis) of it or another
entity, or the acquisition of another entity or a business for consideration in
an amount valued at 30% or more of such person's aggregate equity market
capitalization (PROVIDED that this clause (ii) shall not apply to hospital
acquisitions made by such person so long as such hospital acquisitions are not
part of a series of
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transactions that would otherwise be a Takeover Proposal), or (iii) any issuance
of equity securities of such person through which another person becomes the
beneficial owner (other than through underwriting arrangements) of 30% or more
of the outstanding equity securities (on a fully diluted basis), in each case
other than the transactions contemplated by this Agreement.
Section 1.42 "Third Party" shall mean any person or group that is deemed to
be a "person" within the meaning of Section 13(d) of the Exchange Act, PROVIDED,
that with respect to any person, "Third Party" shall not include such person's
Affiliates or Associates.
Section 1.43 "Voting Agreement" shall mean the Voting Agreement among the
Parent Shareholder, Mr. Charles R. Miller and Mr. James G. VanDevender to be
entered into at or prior to the Closing substantially on the terms set forth in
Schedule 1.43 attached hereto.
OTHER DEFINED TERMS
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TERM SECTION
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Acquisition................................................................................. 1.41
Agreement................................................................................... Recitals
AmeriHealth................................................................................. 4.2(a)
AMEX........................................................................................ 7.14
Certificate................................................................................. 2.7(b)
Certificate of Merger....................................................................... 2.2
Cancelled Warrants.......................................................................... 2.6(a)
Company..................................................................................... Recitals
Company Acquiring Party..................................................................... 9.6(c)
Company ERISA Plans......................................................................... 4.9(a)
Company Expenses............................................................................ 9.6(b)
Company Hospitals........................................................................... 4.17
Company Option Plans........................................................................ 4.2(a)
Company Options and Rights.................................................................. 7.8(b)
Company Options, Warrants or Rights......................................................... 7.8(b)
Company Requisite Vote...................................................................... 4.15
Company SEC Reports......................................................................... 4.5
Company Warrants............................................................................ 4.2(a)
Code........................................................................................ Recitals
Cost Reports................................................................................ 4.16
Costs....................................................................................... 7.13(a)
Closing..................................................................................... 2.9
DGCL........................................................................................ Recitals
Dissenting Shares........................................................................... 2.7
Effective Time.............................................................................. 2.2
Exchange Agent.............................................................................. 2.8(a)
Exchange Ratio.............................................................................. 2.6(b)
Expenses.................................................................................... 9.6(c)
Government Antitrust Entity................................................................. 7.7(b)
Indemnified Parties......................................................................... 7.13(a)
Independent Designees....................................................................... 2.5(a)
Insurance Agreement......................................................................... 7.15
maximum amount.............................................................................. 9.6(d)
Merger...................................................................................... Recitals
New Parent Board............................................................................ 3.2(a)
NYSE........................................................................................ 7.14
Parent...................................................................................... Recitals
Parent Acquiring Party...................................................................... 9.6(c)
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TERM SECTION
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Parent ERISA Plans.......................................................................... 5.9(a)
Parent Expenses............................................................................. 9.6(c)
Parent Hospitals............................................................................ 5.15
Parent Options, Warrants or Rights.......................................................... 7.8(b)
Parent Plans................................................................................ 5.9(a)
Parent PSAR Plan............................................................................ 7.9(b)
Parent Requisite Vote....................................................................... 5.13
Parent SEC Reports.......................................................................... 5.5
Parent Stock Split.......................................................................... 2.6(a)
payee....................................................................................... 9.6(d)
payor....................................................................................... 9.6(d)
PPSUs....................................................................................... 7.9(b)
PSARs....................................................................................... 7.9(b)
Representative.............................................................................. 7.1(a)
Series D Stockholder Agreement.............................................................. 4.2(b)
Series D and Series E Warrants.............................................................. 2.6(a)
SPD......................................................................................... 4.9(b)
Split Ratio................................................................................. 2.6(a)
Surviving Subsidiary........................................................................ 2.1
Taxes....................................................................................... 4.11(c)
Tax Returns................................................................................. 4.11(c)
Termination Date............................................................................ 9.1(b)
Termination Fee............................................................................. 9.6(b)
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ARTICLE II
THE MERGER
Section 2.1 THE MERGER.
Upon the terms and subject to the satisfaction or waiver of the conditions
set forth in Article VIII and in accordance with the DGCL, at the Effective
Time, Merger Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Subsidiary") and shall become a wholly owned subsidiary of Parent.
From and after the Effective Time, the identity and separate existence of Merger
Sub shall cease, and the Company shall succeed, without other transfer, to all
the rights, properties, debts and liabilities of Merger Sub.
Section 2.2 EFFECTIVE TIME. At the time of the Closing, upon the terms and
subject to the satisfaction or waiver of the conditions set forth in Article
VIII, the parties shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (such time and date are
referred to herein as the "Effective Time").
Section 2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the DGCL.
Section 2.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of the Surviving Subsidiary shall be the Restated Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time, except that Article IV thereof shall be amended to read in its entirety as
set forth in Schedule 2.4 hereto. The bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the bylaws of the Surviving
Subsidiary, except that the name of the corporation specified therein shall be
"Champion Healthcare Corporation."
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Section 2.5 COMPANY DIRECTORS AND OFFICERS. The directors and officers of
Merger Sub at the Effective Time shall be the directors and officers,
respectively, of the Surviving Subsidiary until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
Section 2.6 PARENT STOCK SPLIT; CONVERSION OF COMPANY STOCK IN MERGER.
(a) Prior to the Effective Time Parent shall take all action necessary so
that each issued and outstanding share of Parent Common Stock shall be split
into and, without any action on the part of the holder thereof, shall become and
thereafter represent 66,159.426 shares (the "Split Ratio") of Parent Common
Stock (the "Parent Stock Split").
(b) At the Effective Time, following the adjustments to the Parent Common
Stock contemplated by Section 2.6(a), by virtue of the Merger and without any
action on the part of any holder of any capital stock of the Company, Parent or
Merger Sub (i) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any such shares owned by
Parent or any of its Subsidiaries, held in the Company's treasury or owned by
any Subsidiary of the Company) shall automatically be converted into one share
of Parent Common Stock (the "Exchange Ratio"); (ii) each share of Company
Preferred Stock issued and outstanding immediately prior to the Effective Time
(other than any such shares owned by Parent or any of its Subsidiaries, held in
the Company's treasury or owned by any Subsidiary of the Company, and other than
Dissenting Shares) shall automatically be converted into two shares of Parent
Common Stock; (iii) each share of Company Stock issued and outstanding
immediately prior to the Effective Time and owned by Parent or any of its
Subsidiaries, held in the Company's treasury or owned by any Subsidiary of the
Company shall be cancelled and cease to exist at and after the Effective Time by
virtue of the Merger and without any action on the part of the holder thereof
and no consideration shall be payable with respect thereto; and (iv) each share
of common stock, par value $.01 per share, of Merger Sub shall be converted into
and become one share of common stock, par value $.01 per share, of the Surviving
Subsidiary.
Section 2.7 DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, shares of Company Preferred Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by a
stockholder who has not voted such shares of Company Preferred Stock in favor of
the Merger and who is entitled by the DGCL to appraisal rights, and who shall
have properly demanded in writing appraisal for such shares of Company Preferred
Stock in accordance with Section 262 of the DGCL (collectively, the "Dissenting
Shares"), shall not be converted into or represent the right to receive shares
of Parent Common Stock as set forth in Section 2.6, unless and until such holder
shall have failed to perfect or shall have effectively withdrawn or lost his
rights to appraisal and payment under the DGCL. If any such holder shall have so
failed to perfect or shall have effectively withdrawn or lost such right, such
holder's shares of Company Preferred Stock shall thereupon be deemed to have
been converted into and to have become exchangeable for, at the Effective Time,
shares of Parent Common Stock as set forth in Section 2.6(b). Prior to the
Effective Time, the Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any such
demands. Any payments relating to Dissenting Shares shall be made solely by the
Surviving Subsidiary and no funds or other property have been or will be
provided by the Company or any of its other direct or indirect Subsidiaries for
such payment.
Section 2.8 EXCHANGE OF SHARES.
(a) As of the Effective Time, Parent shall deposit with a bank or trust
company designated by Parent and the Company (the "Exchange Agent"), for the
benefit of holders of shares of Company Stock, for exchange in accordance with
this Article II, through the Exchange Agent, certificates representing shares of
Parent Common Stock issuable pursuant to Section 2.6(b) in exchange for
outstanding shares of Company Stock.
(b) As soon as reasonably practicable after the Effective Time, the
Surviving Subsidiary shall cause the Exchange Agent to mail to each person who
was, immediately prior to the Effective Time, a
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holder of record of shares of Company Stock whose shares of Company Stock were
converted into shares of Parent Common Stock, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to a
certificate which, immediately prior to the Effective Time, represented any
shares of the Company Stock (a "Certificate") shall pass, only upon proper
delivery of the Certificate to the Exchange Agent and shall be in such form and
have such other provisions consistent with the terms of this Agreement as Parent
and the Company may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificate in exchange for certificates
representing shares of Parent Common Stock. Upon surrender to the Exchange Agent
of a Certificate, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and any other documents
as may be required pursuant to such instructions, including in the case of the
persons specified in Section 7.6 the agreements required to be delivered by such
persons thereunder, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of shares of Parent
Common Stock that such holder has the right to receive under Section 2.6(b),
together with a check in the amount (after giving effect to any required tax
withholdings) of any cash dividends or other dividends or distributions that
such holder has the right to receive as provided in the last sentence of Section
2.8(c), and the Certificate so surrendered shall be cancelled. In the event of a
transfer of ownership of shares of Company Stock which is not registered in the
transfer records of the Company, a certificate representing the proper number of
shares of Parent Common Stock, and any related payment with respect to dividends
or distributions contemplated by the immediately preceding sentence, may be
issued to a transferee if the Certificate representing such shares of Company
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered in accordance with the
provisions of this Section 2.8, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Parent Common Stock and any
related payment with respect to dividends or distributions as contemplated
above.
(c) Subject to the effect of applicable laws, all shares of Parent Common
Stock to be issued pursuant to the Merger shall be deemed issued and outstanding
as of the Effective Time for purposes of determining holders of record of shares
of Parent Common Stock entitled to receive any dividend or other distribution
declared by Parent with a record date after the Effective Time. No dividends or
other distributions declared with respect to shares of Parent Common Stock with
a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby until the holder of such Certificate shall surrender such
Certificate in accordance with this Article II. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time and theretofore paid with respect to such
shares of Parent Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such shares of Parent Common Stock.
(d) All shares of Parent Common Stock issued upon the surrender for exchange
of shares of Company Stock in accordance with the terms hereof (including any
dividends paid pursuant to Section 2.8(c)) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company Stock,
subject, however, to the Surviving Subsidiary's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which may have been declared or made by the Company on such shares of Company
Stock in accordance with the terms of this Agreement or prior to the date hereof
and which remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
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Subsidiary of shares of Company Stock which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Subsidiary for any reason, they shall be cancelled and
exchanged as provided in this Article II.
(e) TERMINATION OF EXCHANGE FUND. Any certificates representing shares of
Parent Common Stock that Parent has deposited with the Exchange Agent pursuant
to Section 2.8(a) that remains unclaimed by the stockholders of the Company for
180 days after the Effective Time shall be delivered to Parent. Any holders of
Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their shares of Parent Common
Stock and any dividends and distributions in respect of the Parent Common Stock
payable as provided in the last sentence of Section 2.8(c) upon due surrender of
their Certificates (or affidavits of loss in lieu thereof), in each case,
without any interest thereon. Notwithstanding the foregoing, none of Parent, the
Surviving Subsidiary, the Exchange Agent or any other person shall be liable to
any former holder of shares of Company Stock for any amount properly delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(f) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost, stolen or
destroyed and, if and as required by Parent, the posting by such person of a
bond in customary amount as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common Stock
and any unpaid dividends or other distributions in respect of Parent Common
Stock pursuant to the last sentence of Section 2.8(c).
(g) AFFILIATES. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined pursuant
to Section 7.6) of the Company shall not be exchanged until Parent has received
the written agreement from such person as provided in Section 7.6.
Section 2.9 TIME AND PLACE OF CLOSING. The closing (the "Closing") of the
transactions in connection with the Merger shall take place at the offices of
Skadden, Arps, Slate, Meagher & Flom, 300 South Grand Avenue, Suite 3400, Los
Angeles, California, at 10:00 a.m. (local time) on or before the fifth business
day following the date on which all of the conditions to each party's
obligations hereunder have been satisfied or waived or at such other place or
time as Parent and the Company may agree.
Section 2.10 DELIVERIES AT THE CLOSING. At the Closing:
(a) There shall be delivered to Parent and the Company the certificates,
opinions and other documents and instruments required to be delivered
hereunder; and
(b) Parent, the Company and Merger Sub shall cause the Certificate of
Merger to be filed with the Secretary of the State of the State of Delaware
in accordance with the relevant provisions of the DGCL.
ARTICLE III
CORPORATE GOVERNANCE MATTERS RELATING TO PARENT AND
THE COMPANY AT OR AFTER THE EFFECTIVE TIME
Section 3.1 CHARTER DOCUMENTS. Parent shall adopt and take any and all
action necessary to make effective, immediately prior to the Effective Time, the
Restated Certificate of Incorporation and the Parent Bylaws, which shall remain
effective through the Effective Time and thereafter may be amended only in
accordance with their terms and applicable law.
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Section 3.2 DIRECTORS AND OFFICERS OF PARENT FOLLOWING THE EFFECTIVE TIME.
(a) GOVERNANCE.
(i) Parent shall take any and all actions necessary (including without
limitation obtaining the resignation of any directors, as necessary) to
cause the directors comprising the full board of directors of Parent (the
"New Parent Board") at the Effective Time to be comprised of nine directors,
in order to enable (w) Mr. Charles R. Miller and Mr. James G. VanDevender to
be appointed as directors in Class III and Class II, respectively; (x) the
Independent Directors to be appointed as Directors, in the classes set forth
on Schedule 1.20 hereto; and (y) Dr. Krukemeyer and Mr. R.J. Messenger
to be appointed as directors in Class III, and one person chosen by the
Parent Shareholder to be appointed as a director in each of Class II and
Class I, in each case such appointments to be in accordance with the
Restated Articles of Incorporation effective immediately prior to the
Effective Time and to remain effective through and from the Effective Time
in accordance with Parent's charter documents and applicable law.
Thereafter, all nominations and elections shall be governed in accordance
with the Shareholder Agreement, the Restated Articles of Incorporation, the
Parent Bylaws and applicable law, each as amended from time to time.
(ii) Parent shall take any and all actions necessary such that at the
Effective Time the Officers shall become the officers of Parent.
(b) TENURE. The officers and directors of Parent shall hold their
positions until their resignation or removal or the election or appointment of
their successors in the manner provided by each corporation's respective charter
documents and applicable law.
Section 3.3 RIGHTS PLAN. The parties shall, prior to the Effective Time,
present to the New Parent Board the Rights Plan and, as approved by the New
Parent Board subject to fiduciary duties and applicable law, adopt and effect
the Rights Plan. The Rights Plan shall have customary terms and conditions and
such other provisions as may reasonably be agreed to by Parent and the Company,
provided that the Rights Plan shall exempt (a) the Parent Shareholder's
beneficial ownership of Parent Common Stock at the Effective Time, (b) any
acquisition of Parent Common Stock by the Parent Shareholder in accordance with
the Shareholder Agreement and (c) any acquisition of Parent Common Stock by
another Third Party in accordance with the Shareholder Agreement.
Section 3.4 PARENT SHAREHOLDER ARRANGEMENTS. (a) The Company acknowledges
that prior to the Effective Time and not as part of the Merger, Parent shall
declare a cash dividend, payable to the Parent Shareholder after the Effective
Time, in an aggregate amount not to exceed $21,113,387, plus, in the event that
the dividend is paid after July 30, 1996, an additional amount equal to
$3,574.26 for each day from and including July 31, 1996 to the date such
dividend is paid.
(b) Prior to the Effective Time, Parent shall enter into the Services
Agreement substantially on the terms set forth in Schedule 1.26 attached
hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Company represents and warrants to Parent as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. Each of the Company and its
Significant Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has the
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, and is duly qualified to do
business and in good standing in each jurisdiction in which the properties
owned, leased or operated by it, or where the nature of the business conducted
by it make such qualification necessary, except where the failure to so qualify
or be in good standing would not have a Material Adverse Effect on the Company.
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True and complete copies of the certificate of incorporation and bylaws of the
Company as in effect on the date hereof, including all amendments thereto, have
heretofore been made available or delivered to Parent.
Section 4.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 25,000,000
shares of Company Common Stock, 500,000 shares of Series C Preferred Stock and
2,200,000 shares of Series D Preferred Stock. As of the close of business on May
24, 1996, there were (i) 14,463,997 shares of Company Common Stock issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
are not subject to and were not issued in violation of any preemptive rights,
(ii) 448,811 shares of Series C Preferred Stock issued and outstanding, all of
which are validly issued, fully paid and nonassessable and are not subject to
and were not issued in violation of any preemptive rights, and which, as of the
date hereof and at or immediately prior to the Effective Time, in accordance
with their terms, are convertible into Company Common Stock at the rate of two
shares of Company Common Stock for every one share of Series C Preferred Stock,
(iii) 2,156,903 shares of Series D Preferred Stock issued and outstanding, all
of which are validly issued, fully paid and nonassessable and are not subject to
and were not issued in violation of any preemptive rights, and which, as of the
date hereof and at or immediately prior to the Effective Time, in accordance
with their terms, are convertible into Company Common Stock at the rate of two
shares of Company Common Stock for every one share of Series D Preferred Stock,
(iv) options to purchase an aggregate of 1,297,204 shares of Company Common
Stock are issued and outstanding under the Company Option Plans, (v) 81,250
shares of Company Common Stock reserved for issuance in connection with the
Brookside Non-Negotiable Exchangeable Promissory Notes, (vi) 50,067 shares of
Company Common Stock reserved for issuance in connection with the Select
Acquisition Convertible Notes, (vii) 15,000 shares of Company Common Stock
reserved for issuance under an Employment Agreement with Robert L. Hancock,
(viii) 80,000 shares of the Company Common Stock reserved for issuance under a
subscription agreement with Mr. VanDevender (such shares issued under the
agreements referenced in (v), (vi), (vii) and (viii), the "Company Issuable
Securities") and (ix) 422,286 shares of Company Common Stock reserved for
issuance pursuant to outstanding warrants to purchase shares of Company Common
Stock identified in Section 4.2(a) of the letter, dated the date hereof,
delivered by the Company to Parent in connection with this Agreement (the
"Company Disclosure Letter") (collectively, the "Company Warrants"). "Company
Option Plans" shall mean the AmeriHealth Amended and Restated 1988 Non-Qualified
Stock Option Plan, as modified May 27, 1993, the Company's Employee Stock Option
Plan, dated December 31, 1991, the Company's Employee Stock Option Plan No. 2,
dated May 27, 1992, the Company's Employee Stock Option Plan No. 3, dated
September 1992, the Company's Senior Executive Stock Option Plan No. 4, dated
January 5, 1994, the Company's Directors' Stock Option Plan, dated December 8,
1992, options granted to certain directors, officers and key employees of
AmeriHealth, Inc. in December 1994, the Company's Selected Executive Stock
Option Plan No. 5, approved May 25, 1995, the Company's Founders Stock Option
Plan, dated December 1990, and the Company's Physicians Stock Option Plan, dated
May 27, 1993. No Subsidiary of the Company holds any shares of Company Stock.
Other than as described in Section 4.2 of the Company Disclosure Letter, there
has been no change in the information set forth in the second sentence of this
Section 4.2(a) between the close of business on April 8, 1996 and the date
hereof.
(b) Except as set forth in Section 4.2(a) or pursuant to the Agreement in
Contemplation of Merger or the Series D Stockholders Agreement, dated December
31, 1993, by and between the Company and the holders of the Series C Preferred
Stock, the holders of the Series D Preferred Stock and certain other parties
named therein (the "Series D Stockholder Agreement"), there are not now, and at
the Effective Time there will not be, any outstanding shares of Company capital
stock or any options, warrants, calls, rights, subscriptions, convertible
securities or other rights or agreements, arrangements or commitments of any
kind obligating the Company or any of its Subsidiaries to issue, transfer or
sell any securities of the Company. All shares of Company Common Stock subject
to issuance as set forth in Section 4.2(a), upon issuance on the terms and
conditions specified in the
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instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual or other obligations of the Company or any of its Subsidiaries to
purchase, redeem or otherwise acquire any shares of Company Stock. Except for
the Agreement in Contemplation of Merger and the Series D Stockholder Agreement,
there is not now, and at the Effective Time there will not be, any stockholder
agreement, voting trust or other agreement or understanding to which the Company
or any of its Subsidiaries is a party or bound relating to the voting of any
shares of the capital stock of the Company or any of its Subsidiaries.
Section 4.3 AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and, subject to approval of this
Agreement by the Company Requisite Vote, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, and the
consummation by the Company of the transactions contemplated hereby, have been
duly authorized by the Company's board of directors and no other corporate
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement and the consummation by the Company of the
transactions contemplated hereby, except for the approval of this Agreement by
the Company Requisite Vote. This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Merger Sub and Parent, constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except that such enforceability may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and (ii) by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATION. None of the execution
and delivery by the Company of this Agreement, the consummation by Company of
the transactions contemplated hereby or compliance by the Company with any of
the provisions hereof will (i) conflict with or result in a breach of any
provision of the respective charters or bylaws (or similar governing documents)
of the Company or any of its Subsidiaries, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except (A) pursuant to the Exchange Act, the Securities Act and the HSR
Act and (B) for filing the Certificate of Merger with respect to the Merger
pursuant to the DGCL, (iii) except as disclosed in Section 4.4 of the Company
Disclosure Letter, result in a default (or an event which with notice or lapse
of time or both would become a default) or give to any third party any right of
termination, cancellation, amendment or acceleration under, or result in the
creation of a lien or encumbrance on any of the assets of the Company or any of
its Subsidiaries pursuant to, any note, license, agreement or other instrument
or obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their respective assets
may be bound or affected, or (iv) violate or conflict with any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its Subsidiaries or any of their respective properties or assets, other than
(A) such defaults, rights of termination, cancellation, amendment or
acceleration, liens and encumbrances, violations and conflicts as set forth
pursuant to (iii) and (iv) above, and (B) such consents, approvals,
authorizations, permits or filings as set forth pursuant to (ii) above that are
not obtained, which, in the aggregate, would not have a Material Adverse Effect
on the Company, or would not prevent or delay in any material respect the
consummation of any of the transactions contemplated by this Agreement. Holders
of not less than 100% in aggregate principal amount of each of the Company's
Series D 11% Senior Subordinated Notes and 100% of the Series E 11% Senior
Subordinated Notes have entered into the Agreement in Contemplation of Merger
and such agreement is in full force and effect.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. Each form, report,
schedule, registration statement and definitive proxy statement filed by the
Company with the SEC since December 31, 1994 (as such documents have since the
time of their filing been amended, the "Company SEC Reports"), which include all
the documents (other than preliminary material) that the Company was required to
file with the SEC since such date, as of their respective dates, complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and
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regulations of the SEC thereunder applicable to such Company SEC Reports. None
of the Company SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except for such statements, if any, as have been modified
by subsequent filings prior to the date hereof. The financial statements of the
Company included in the Company SEC Reports comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q under the Securities Act) and
fairly present (subject, in the case of the unaudited quarterly financial
statements, to the absence of notes, and to normal, recurring audit adjustments)
the consolidated financial position of the Company and its Subsidiaries as at
the dates thereof and the consolidated results of their operations and cash
flows (or changes in financial position prior to the adoption of FASB 95) for
the periods then ended. Since December 31, 1995, neither the Company nor any of
its Subsidiaries has incurred any liabilities or obligations, whether absolute,
accrued, fixed, contingent, liquidated, unliquidated or otherwise and whether
due or to become due, except (i) as disclosed in the Company SEC Reports filed
after December 31, 1995 and prior to the date hereof, (ii) as incurred in
connection with the transactions contemplated, or as provided, by this
Agreement, (iii) as incurred after December 31, 1995 in the ordinary course of
business and consistent with past practices and not in violation of Section 6.1,
or (iv) except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
except as disclosed in the Company SEC Reports filed since December 31, 1995 and
prior to the date hereof, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course, consistent with past
practice, and there has not occurred or arisen any event or events which,
individually or in the aggregate, have had or are reasonably likely to have, a
Material Adverse Effect on the Company or which is reasonably likely to prevent
or delay in any material respect the consummation of any of the transactions
contemplated by this Agreement.
Section 4.7 LITIGATION. Except as disclosed in (i) Section 4.7 of the
Company Disclosure Letter or (ii) the Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 filed by the Company, there is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or Affiliates (and the Company
is not aware of any basis for any such suit, action or proceeding) that,
individually or in the aggregate, is reasonably likely to (i) have a Material
Adverse Effect on the Company or (ii) prevent or delay in any material respect
the Company from performing its obligations under, or consummating the
transactions contemplated by, this Agreement. There is not any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its Subsidiaries which has had or is reasonably
likely to have any Material Adverse Effect on the Company.
Section 4.8 INFORMATION SUPPLIED. The information supplied or to be
supplied by the Company or its Subsidiaries for inclusion or incorporation by
reference in the Form S-4 will not, either at the time the Form S-4 is filed
with the SEC or at the time it becomes effective under the Securities Act,
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. The information supplied or to be supplied by the Company or its
Subsidiaries for inclusion or incorporation by reference in the Proxy Statement,
including any amendments and supplements thereto, will not, either at the date
mailed to stockholders or at the time of the meeting of stockholders of the
Company to be held in connection with the transactions contemplated by this
Agreement and the Merger Agreement, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Proxy Statement and the Form S-4
will each comply as to form in all material respects with all applicable laws,
including the provisions of the Securities Act and the
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Exchange Act and the rules and regulations promulgated thereunder, except that
no representation is made by the Company with respect to information supplied by
Parent for inclusion or incorporation by reference therein.
Section 4.9 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 4.9(a) of the Company Disclosure Letter contains a true and
complete list of each employment, 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 ("Plans"), sponsored, maintained or contributed to or
required to be contributed to by the Company or any ERISA Affiliate for the
benefit of any employee or former employee of the Company or any of its
Subsidiaries (the "Company Plans"). Section 4.9(a) of the Company Disclosure
Letter identifies each of the Company Plans that is an "employee welfare benefit
plan," or "employee pension benefit plan" as such terms are defined in sections
3(1) and 3(2) of ERISA (such plans being hereinafter referred to collectively as
the "Company ERISA Plans"). Neither the Company nor any of its ERISA Affiliates
has any formal plan or commitment to create any additional Company Plan or
modify or change any existing Company Plan that would affect any employee or
terminated employee of the Company or any such ERISA Affiliate.
(b) With respect to each of the Company Plans, the Company has heretofore
delivered or made available 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, if required under ERISA, with respect
to each such Company Plan for the last three years;
(iii) a copy of the actuarial report, if required under ERISA, with
respect to each such Company Plan for the last three years;
(iv) a copy of the most recent summary plan description ("SPD"), together
with all summaries of material modification issued with respect to such SPD,
required under ERISA with respect to such Company Plan;
(v) if the Company Plan is funded through a trust or any other funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof;
(vi) all contracts relating to the Company Plans with respect to which
the Company or any of its ERISA Affiliates may have any liability,
including, without limitation, insurance contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements; and
(vii) the most recent determination letter received from the Internal
Revenue Service with respect to each Company Plan that is intended to be
qualified under section 401 of the Code.
(c) No Company ERISA Plan is subject to Title IV of ERISA. No liability
under Title IV of ERISA has been incurred by the Company or any of its ERISA
Affiliates since the effective date of ERISA that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any such ERISA Affiliate of incurring a liability under such Title, other than
liability for premiums due the PBGC, which payments have been or will be made
when due. 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 or any of its
ERISA Affiliates made, or was required to make, contributions during the
five-year period ending on the last day of the Company's most recent fiscal
year.
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(d) None of the Company, any of its ERISA Affiliates, any of the Company
ERISA Plans, any trust created thereunder nor any trustee or administrator
thereof has engaged in a transaction or has taken or failed to take any action
in connection with which the Company or any of its ERISA Affiliates may be
subject to either a civil penalty assessed pursuant to section 409 or 502(i) of
ERISA or a tax imposed pursuant to section 4975, 4976 or 4980B of the Code.
(e) Full payment has been made, or will be made in accordance with section
404(a)(6) of the Code, of all amounts which the Company or any of its ERISA
Affiliates is required to pay under the terms of each of the Company ERISA
Plans, and all such amounts properly accrued through the Effective Time with
respect to the current plan year thereof will be paid by the Company on or prior
to the Effective Time or will be properly recorded in accordance with GAAP. No
Company ERISA Plan is subject to section 412 of the Code.
(f) 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.
(g) Each of the Company ERISA Plans that is intended to be "qualified"
within the meaning of section 401(i) of the Code is so qualified.
(h) Each of the Company ERISA Plans that is intended to satisfy the
requirements of section 501(c)(9) of the Code has so satisfied such
requirements.
(i) Except as set forth in Section 4.9(a) of the Company Disclosure Letter,
no amounts payable or benefits accrued under the Company Plans or any other
agreement or arrangement to which the Company or any of its ERISA Affiliates is
a party will, as a result of the transactions contemplated hereby (A) become
payable, vested or exercisable on an accelerated basis or (B) fail to be
deductible for federal income tax purposes by virtue of section 280G of the
Code.
(j) No "leased employee," as that term is defined in section 414(n) of the
Code, performs services for the Company or any of its ERISA Affiliates.
(k) Except as set forth in Section 4.9(k) 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
after 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 or its ERISA Affiliates, or (iv) benefits, the full cost of which is
borne by the current or former employee (or his beneficiary)).
(l) With respect to each Company Plan that is funded wholly or partially
through an insurance policy, there will be no material liability of the Company
or any of its ERISA Affiliates, 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 Effective Time.
Section 4.10 TAX MATTERS. As of the date hereof, neither the Company nor
any of its Affiliates has taken or agreed to take any action, nor does the
Company have any knowledge of any fact or circumstance, that would prevent the
Merger and the other transactions contemplated by this Agreement from qualifying
as a "reorganization" within the meaning of section 368(a) of the Code.
Section 4.11 TAXES.
(a) The Company and each of its Subsidiaries have timely filed (or have had
timely filed on their behalf) or will file or cause to be timely filed, all
material Tax Returns required by applicable law to be filed by any of them on or
before the date of the Effective Time of the Merger, taking into account any
extension of the time within which to file such returns. All such Tax Returns
are, or will be at the time of filing, true, complete and correct in all
material respects.
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(b) The Company and each of its Subsidiaries have paid (or have had paid on
their behalf), or where payment is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), or will
establish or cause to be established on or before the date of the Effective Time
of the Merger, an adequate accrual for the payment of, all material Taxes due
with respect to any period ending on or before the date of the Effective Time of
the Merger.
(c) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "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.
(ii) "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 4.12 AFFILIATE AGREEMENTS. Except for the Agreement in
Contemplation of Merger, the Series D Stockholder Agreement or as set forth in
Section 4.12 of the Company Disclosure Letter, as of the date of this Agreement
neither the Company nor any of its Subsidiaries is a party to any oral or
written agreement with any of its Affiliates, other than with any of its
Subsidiaries.
Section 4.13 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of DLJ to the effect that, as of the date of such opinion, the Exchange
Ratio is fair to the holders of Company Common Stock from a financial point of
view.
Section 4.14 BROKERS AND FINDERS. Other than DLJ, whose fees will be paid
by the Company, none of the Company or any of its Subsidiaries, nor any of their
respective directors, officers or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or similar payments in connection with the transactions contemplated
by this Agreement.
Section 4.15 VOTE REQUIRED. The only votes of the holders of any class or
series of Company capital stock necessary to approve the Merger (the "Company
Requisite Vote") are (i) the affirmative vote of the holders of a majority of
the total voting power represented by the outstanding shares of the Company
Common Stock, the Series C Preferred Stock and the Series D Preferred Stock,
voting as a single class, and (ii) the affirmative vote of the holders of at
least 90% of the outstanding shares of each of the Series C Preferred Stock and
the Series D Preferred Stock, voting as separate classes.
Section 4.16 MEDICARE AND MEDICAID. The Company and its Subsidiaries have
complied with all Medicare and Medicaid laws, rules and regulations and have
timely filed all returns, cost reports and other filings in the manner
prescribed, except where the failure to do so would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company. All returns, cost reports and other filings made by Company and its
Subsidiaries to Medicare, Medicaid or any other governmental health or welfare
related entity or third party payor are true and complete, except where the
failure to be so true and complete would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, and
true and correct copies of all such cost reports for the three most recent
fiscal years of the Company have been furnished to Parent. No deficiency in any
such returns, cost reports and other filings, including deficiencies for late
filings, has been asserted or to the best of the Company's knowledge, after
reasonable investigation, threatened by any Governmental Entity or other
provider reimbursement entities relating to Medicare or Medicaid or third party
payor claims, and to the best of the Company's knowledge, after reasonable
investigation, there is no basis for any successful claims or requests for
reimbursement from any such Governmental Entity, other entity or third party
payor except for any deficiencies or bases which are not reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. Since December 31, 1992, neither the Company nor any of
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its Subsidiaries has been subject to any audit or investigation relating to
fraudulent Medicare or Medicaid procedure or practices, except audits or
investigations which would not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect on the Company.
Section 4.17 MEDICARE PARTICIPATION/ACCREDITATION. All of the hospitals
and other healthcare providers owned, operated or managed by the Company or any
of its Subsidiaries are certified for participation or enrollment in the
Medicare and Medicaid programs, have a current and valid provider contract with
the Medicare and Medicaid programs, are in substantial compliance with the
conditions of participation of such programs and have received all approvals or
qualifications necessary for capital reimbursement of the Company and its
Subsidiaries' assets. No validation review or program integrity review related
to any of the hospitals owned or operated by the Company or any of its
Subsidiaries (the "Company Hospitals"), the operation thereof, or the
consummation of the transactions contemplated hereby has been conducted by any
commission, board or agency in connection with the Medicare or Medicaid
programs, and to the knowledge of the Company, no such reviews are scheduled,
pending or threatened against or affecting any Company Hospital or the
consummation of the transaction contemplated hereby. All of the Company
Hospitals are in compliance in all material respects with all rules, regulations
and requirements of all Governmental Entities having jurisdiction over any of
the Company Hospitals. All of the Company Hospitals are accredited by the Joint
Commission on Accreditation of Health Care Organizations (the "Joint Commission
on Accreditation") and the Company has delivered to Parent true and complete
copies of each of such hospital's most recent Joint Commission on Accreditation
survey report and deficiency list, if any, and the most recent Statement of
Deficiencies and Plan of Correction. All deficiencies noted thereon have been
cured in all material respects. Neither the Company nor any of its Subsidiaries
has received notice from the regulatory authorities which enforce the statutory
or regulatory provisions in respect of either the Medicare or Medicaid program
of any pending or threatened investigations or surveys, and the Company has no
reason to believe that there are pending, threatened or imminent any such
investigations or surveys which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on the Company.
Section 4.18 MEDICAL STAFF MATTERS. There are no pending, or to the
Company's knowledge, threatened disputes with medical staff applicants, medical
staff members or health professional affiliates which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on the
Company, and all appeal periods in respect of any medical staff member or
applicant against whom an adverse action has been taken have expired.
Section 4.19 TAKEOVER STATUTES. No "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the United States applicable to the Company
(including, without limitation, Section 203 of the DGCL) is applicable to the
Merger or the other transactions contemplated hereby. The Board of Directors of
the Company has taken all appropriate action to exempt the transactions
contemplated in this Agreement from Section 203 of the DGCL.
Section 4.20 COMPLIANCE WITH LAWS. Neither the Company nor any of its
Subsidiaries has violated or failed to comply with any statute, law, ordinance,
regulation, rule, judgment, decree or order of any Governmental Entity
applicable to its business or operations, except for violations and failures to
comply that would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Company.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION.
(a) Each of Parent and its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted, and is duly qualified to do business and in good standing in each
jurisdiction in which the properties owned, leased or operated by it, or where
the nature of the business conducted by it make such qualification necessary,
except where the failure to so qualify or be in good standing would not have a
Material Adverse Effect on Parent. True and complete copies of the articles of
incorporation and bylaws of Parent as in effect on the date hereof, including
all amendments thereto, have heretofore been made available or delivered to the
Company.
(b) Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Merger Sub has been formed solely for the
purpose of engaging in the Merger and has not conducted any business prior to
the date hereof and has no, and prior to the Effective Time will have no,
assets, liabilities or obligations of any nature other than those incident to
its formation and pursuant to this Agreement and the Merger and the other
transactions contemplated by this Agreement.
Section 5.2 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 1,000 shares of
Parent Common Stock. As of the date hereof, there are 450 shares of Parent
Common Stock issued and outstanding, all of which are validly issued, fully paid
and nonassessable and are not subject to and were not issued in violation of any
preemptive rights and all of which are beneficially owned by the Parent
Shareholder. No Subsidiary of Parent holds any shares of Parent Common Stock.
(b) Except as set forth in Section 5.2(b) of the letter, dated the date
hereof, delivered by Parent to the Company in connection with this Agreement
(the "Parent Disclosure Letter") or pursuant to this Agreement, the options to
be issued pursuant to Section 7.9 hereof, the Shareholder Agreement, the
Registration Rights Agreement and the rights contemplated by the Rights Plan,
there are not now, and at the Effective Time there will not be, any outstanding
shares of Parent capital stock or any options, warrants, calls, rights,
subscriptions, convertible securities or other rights or agreements,
arrangements or commitments of any kind obligating Parent or any of its
Subsidiaries to issue, transfer or sell any securities of Parent. There are no
outstanding contractual or other obligations of Parent or any of its
Subsidiaries to purchase, redeem or otherwise acquire any shares of Parent
Common Stock. Except as set forth in Section 5.2(b) of the Parent Disclosure
Letter or pursuant to the Shareholder Agreement, the Registration Rights
Agreement and the Voting Agreement, there is not now, and at the Effective Time
there will not be, any stockholder agreement, voting trust or other agreement or
understanding to which Parent or any of its Subsidiaries is a party or bound
relating to the voting of any shares of the capital stock of Parent or any of
its Subsidiaries.
(c) The authorized capital stock of Merger Sub consists of 1,000 shares of
Common Stock, par value $.01 per share, all of which are validly issued and
outstanding. All of the issued and outstanding capital stock of Merger Sub is,
and at the Effective Time will be, owned by Parent, and there are (i) no other
shares of capital stock or other voting securities of merger Sub, (ii) no
securities of Merger Sub convertible into or exchangeable for shares of capital
stock or voting securities of Merger Sub and (iii) no options or other rights to
acquire from Merger Sub, and no obligations of Merger Sub to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of Merger Sub.
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Section 5.3 AUTHORITY. Parent has all requisite corporate power and
authority to execute and deliver this Agreement and, subject to approval of this
Agreement by the Parent Requisite Vote, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, and the
consummation by Parent of the transactions contemplated hereby, have been duly
authorized by Parent's board of directors and no other corporate proceedings on
the part of Parent are necessary to authorize the execution and delivery of this
Agreement and the consummation by Parent of the transactions contemplated hereby
and thereby, except for the approval of this Agreement by the Parent Requisite
Vote. This Agreement has been duly and validly executed and delivered by Parent
and Merger Sub, and, assuming the due authorization, execution and delivery
hereof by the Company, constitutes a valid and binding agreement of Parent and
Merger Sub, enforceable against Parent and Merger Sub in accordance with its
terms, except that such enforceability may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and (ii) by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
Section 5.4 CONSENTS AND APPROVALS; NO VIOLATION. None of the execution
and delivery by Parent of this Agreement, the consummation by Parent of the
transactions contemplated hereby or compliance by Parent with any of the
provisions hereof will (i) conflict with or result in a breach of any provision
of the respective charters or bylaws (or similar governing documents) of Parent
or any of its Subsidiaries, (ii) except as disclosed in Section 5.4 of the
Parent Disclosure Letter, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entity, except (A)
pursuant to the Exchange Act, the Securities Act and the HSR Act and (B) for
filing the Certificate of Merger with respect to the Merger pursuant to the
DGCL, (iii) except as disclosed in Section 5.4 of the Parent Disclosure Letter,
result in a default (or an event which with notice or lapse of time or both
would become a default) or give to any third party any right of termination,
cancellation, amendment or acceleration under, or result in the creation of a
lien or encumbrance on any of the assets of Parent or any of its Subsidiaries
pursuant to, any note, license, agreement or other instrument or obligation to
which Parent or any of its Subsidiaries is a party or by which Parent or any of
its Subsidiaries or any of their respective assets may be bound or affected, or
(iv) violate or conflict with any order, writ, injunction, decree, statute, rule
or regulation applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets, other than (A) such defaults, rights of
termination, cancellation, amendment or acceleration, liens and encumbrances,
violations and conflicts as set forth pursuant to (iii) and (iv) above, and (B)
such consents, approvals, authorizations, permits or filings, as set forth
pursuant to (ii) above that are not obtained, which, in the aggregate, would not
have a Material Adverse Effect on Parent, or would not prevent or delay in any
material respect the consummation of any of the transactions contemplated by
this Agreement or the Shareholder Agreement.
Section 5.5 SEC REPORTS AND FINANCIAL STATEMENTS. Each form, report,
schedule, registration statement and definitive proxy statement filed by Parent
with the SEC since September 30, 1994 (as such documents have since the time of
their filing been amended, the "Parent SEC Reports"), which include all the
documents (other than preliminary material) that Parent was required to file
with the SEC since such date, as of their respective dates, complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Parent SEC Reports. None of the Parent SEC Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
for such statements, if any, as have been modified by subsequent filings prior
to the date hereof. The financial statements of Parent included in the Parent
SEC Reports comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Form
10-Q under the Securities Act) and fairly present (subject in the case of the
unaudited quarterly financial statements,
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to the absence of notes, and to normal, recurring audit adjustments) the
consolidated financial position of Parent and its Subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows (or
changes in financial position prior to the adoption of FASB 95) for the periods
then ended. Since December 31, 1995, neither Parent nor any of its Subsidiaries
has incurred any liabilities or obligations, whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise and whether due or to become
due, except (i) as disclosed in the Parent SEC Reports filed since December 31,
1995 and prior to the date hereof, (ii) as incurred in connection with the
transactions contemplated, or as provided, by this Agreement, (iii) as incurred
after December 31, 1995 in the ordinary course of business and consistent with
past practices and not in violation of Section 6.2, or (iv) as would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
except as disclosed in the Parent SEC reports filed prior to the date hereof,
Parent and its Subsidiaries have conducted their respective businesses only in
the ordinary course, consistent with past practice, and there has not occurred
or arisen any event or events which, individually or in the aggregate, have had
or are reasonably likely to have, a Material Adverse Effect on Parent or which
is reasonably likely to prevent or delay in any material respect the
consummation of any of the transactions contemplated by this Agreement.
Section 5.7 LITIGATION. Except as disclosed in the Parent SEC Reports
filed prior to the date hereof or in Section 5.7 of the Parent Disclosure
Letter, there is no suit, action or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or any of Parent's Subsidiaries
or Affiliates (and Parent is not aware of any basis for any of such suit, action
or proceeding) that, individually or in the aggregate, is reasonably likely to
(i) have a Material Adverse Effect on Parent or (ii) prevent or delay in any
material respect Parent from performing its obligations under, or consummating
the transactions contemplated by, this Agreement. There is not any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Parent or any of its Subsidiaries which has had or is
reasonably likely to have a Material Adverse Effect on Parent.
Section 5.8 INFORMATION SUPPLIED. The information supplied or to be
supplied by Parent or its Subsidiaries for inclusion or incorporation by
reference in the Form S-4 will not, either at the time the Form S-4 is filed
with the SEC or at the time it becomes effective under the Securities Act,
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. The information supplied or to be supplied by Parent or its
Subsidiaries for inclusion or incorporation by reference in the Proxy Statement,
including any amendments and supplements thereto, will not, either at the date
mailed to shareholders of the Company or at the time of the meeting of
shareholders of the Company to be held in connection with the transactions
contemplated by this Agreement, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Proxy Statement and the Form S-4 will each
comply as to form in all material respects with all applicable laws, including
the provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
Parent with respect to information supplied by the Company for inclusion or
incorporation by reference therein.
Section 5.9 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 5.9(a) of the Parent Disclosure Letter contains a true and
complete list of each Plan sponsored, maintained or contributed to or required
to be contributed to by Parent or any of its ERISA Affiliates for the benefit of
any employee or former employee of Parent or any of its Subsidiaries (the
"Parent Plans"). Section 5.9(a) of the Parent Disclosure Letter identifies each
of the Parent Plans that is an "employee welfare benefit plan," or "employee
pension benefit plan" as such terms are defined in sections 3(1) and 3(2) of
ERISA (such plans being hereinafter referred to collectively as the "Parent
ERISA Plans"). Neither Parent nor any of its ERISA Affiliates has any formal
plan or commitment to create any additional Parent Plan or modify or change any
existing Parent Plan that would affect any employee or terminated employee of
Parent or any such ERISA Affiliate of Parent.
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(b) With respect to each of the Parent Plans, Parent has heretofore
delivered or made available 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, if required under ERISA, with respect
to each such Parent Plan for the last three years;
(iii) a copy of the actuarial report, if required under ERISA, with
respect to each such Parent Plan for the last three years;
(iv) a copy of the most recent SPD, together with all summaries of
material modification issued with respect to such SPD, required under ERISA
with respect to such Parent Plan;
(v) if the Parent Plan is funded through a trust or any other funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof;
(vi) all contracts relating to the Parent Plans with respect to which
Parent or any of its ERISA Affiliates may have any liability, including,
without limitation, insurance contracts, investment management agreements,
subscription and participation agreements and record keeping agreements; and
(vii) the most recent determination letter received from the Internal
Revenue Service with respect to each Parent Plan that is intended to be
qualified under section 401 of the Code.
(c) No Parent ERISA Plan is subject to Title IV of ERISA. No liability under
Title IV of ERISA has been incurred by Parent or any of its ERISA Affiliates
since the effective date of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to Parent or any of its ERISA
Affiliates of incurring a liability under such Title, other than liability for
premiums due the PBGC, which payments have been or will be made when due. 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 or any of its ERISA Affiliates made, or was
required to make, contributions during the five-year period ending on the last
day of Parent's most recent fiscal year.
(d) None of Parent, any of its ERISA Affiliates, any of the Parent ERISA
Plans, any trust created thereunder nor any trustee or administrator thereof has
engaged in a transaction or has taken or failed to take any action in connection
with which Parent or any of its ERISA Affiliates may be subject to either a
civil penalty assessed pursuant to section 409 or 502(i) of ERISA or a tax
imposed pursuant to section 4975, 4976 or 4980B of the Code.
(e) Full payment has been made, or will be made in accordance with section
404(a)(6) of the Code, of all amounts which Parent or any its ERISA Affiliates
is required to pay under the terms of each of the Parent ERISA Plans, and all
such amounts properly accrued through the Effective Time with respect to the
current plan year thereof will be paid by Parent on or prior to the Effective
Time or will be properly recorded in accordance with GAAP. No Parent ERISA Plan
is subject to section 412 of the Code.
(f) 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.
(g) Each of the Parent ERISA Plans that is intended to be "qualified" within
the meaning of section 401(a) of the Code is so qualified.
(h) Each of the Parent ERISA Plans that is intended to satisfy the
requirements of section 501(c)(9) of the Code has so satisfied such
requirements.
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(i) Except as specifically contemplated by this Agreement or as set forth in
Section 5.9(i) of the Parent Disclosure Letter, no amounts payable or benefits
accrued under the Parent Plans or any other agreement or arrangement to which
Parent or any of its ERISA Affiliates is a party will, as a result of the
transactions contemplated hereby (A) become payable, vested or exercisable on an
accelerated basis or (B) fail to be deductible for federal income tax purposes
by virtue of section 280G of the Code.
(j) No "leased employee," as that term is defined in section 414(n) of the
Code, performs services for Parent or any of its ERISA Affiliates.
(k) No Parent Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees after 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 or any of its ERISA Affiliates, or (iv) benefits, the full cost of
which is borne by the current or former employee (or his beneficiary)).
(l) With respect to each Parent Plan that is funded wholly or partially
through an insurance policy, there will be no material liability of Parent or
any of its ERISA Affiliates, 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 Effective Time.
Section 5.10 TAXES.
(a) Parent and each of its Subsidiaries have timely filed (or have had
timely filed on their behalf) or will file or cause to be timely filed, all
material Tax Returns required by applicable law to be filed by any of them on or
before the date of the Effective Time of the Merger, taking into account any
extension of the time within which to file such returns. All such Tax Returns
are, or will be at the time of filing, true, complete and correct in all
material respects.
(b) Parent and each of its Subsidiaries have paid (or have had paid on their
behalf), or where payment is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), or will
establish or cause to be established on or before the date of the Effective Time
of the Merger, an adequate accrual for the payment of, all material Taxes due
with respect to any period ending on or before the date of the Effective Time of
the Merger.
Section 5.11 AFFILIATE AGREEMENTS. Except as set forth in Section 5.11 of
the Parent Disclosure Letter, as of the date of this Agreement neither Parent
nor any of its Subsidiaries is a party to any oral or written agreement with any
of its Affiliates, other than with any of its Subsidiaries.
Section 5.12 BROKERS AND FINDERS. Other than BA Partners, whose fees will
be paid by Parent, none of Parent or any of its Subsidiaries, nor any of their
respective directors, officers or employees, has employed any broker or finder
or incurred any liability for any financial advisory fees, brokerage fees,
commissions or similar payments in connection with the transactions contemplated
by this Agreement.
Section 5.13 VOTE REQUIRED. The affirmative vote of a majority of the
outstanding shares of Parent is the only vote of a holder of capital stock of
Parent required to approve this Agreement and the transactions contemplated
hereby (the "Parent Requisite Vote").
Section 5.14 MEDICARE AND MEDICAID. Parent and its Subsidiaries have
complied with all Medicare and Medicaid laws, rules and regulations and have
timely filed all returns, cost reports and other filings in the manner
prescribed, except where the failure to do so would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Parent.
All returns, cost reports and other filings made by Parent and its Subsidiaries
to Medicare, Medicaid or any other governmental health or welfare related entity
or third party payor are true and complete, except where the failure to be so
true and complete would not be reasonably expected to have, individually or in
the aggregate,
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a Material Adverse Effect on Parent, and true and correct copies of all such
reports for the three most recent fiscal years of Parent have been furnished to
the Company. No deficiency in any such returns, cost reports and other filings,
including deficiencies for late filings, has been asserted or to the best of
Parent's knowledge, after reasonable investigation, threatened by any
Governmental Entity or other provider reimbursement entities relating to
Medicare or Medicaid or third party payor claims, and to the best of Parent
knowledge, after reasonable investigation, there is no basis for any successful
claims or requests for reimbursement from any such Governmental Entity, other
entity or third party payor except for any deficiencies or bases which are not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent. Since December 31, 1992, neither Parent nor any of its
Subsidiaries has been subject to any audit or investigation relating to
fraudulent Medicare or Medicaid procedure or practices, except audits or
investigations which would not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent.
Section 5.15 MEDICARE PARTICIPATION/ACCREDITATION. All of the hospitals
and other healthcare providers owned, operated or managed by Parent or its
Subsidiaries, except the psychiatric facilities set forth in Section 5.15 of the
Parent Disclosure Letter, are certified for participation or enrollment in the
Medicare and Medicaid programs, have a current and valid provider contract with
the Medicare and Medicaid programs, are in substantial compliance with the
conditions of participation of such programs and have received all approvals or
qualifications necessary for capital reimbursement of Parent and its
Subsidiaries' assets. No validation review or program integrity review related
to any of the hospitals owned or operated by Parent or any of its Subsidiaries
(the "Parent Hospitals"), the operation thereof, or the consummation of the
transactions contemplated hereby has been conducted by any commission, board or
agency in connection with the Medicare or Medicaid programs, and to the
knowledge of Parent, no such reviews are scheduled, pending or threatened
against or affecting any Parent Hospital or the consummation of the transaction
contemplated hereby. All of the Parent Hospitals are in compliance in all
material respects with all rules, regulations and requirements of all
Governmental Entities having jurisdiction over any of the Parent Hospitals.
Except as set forth in Section 5.15 of the Parent Disclosure Letter, all of the
Parent Hospitals are accredited by the Joint Commission on Accreditation and
Parent has delivered to Company true and complete copies of each of such
hospital's most recent Joint Commission on Accreditation survey report and
deficiency list, if any, and the most recent Statement of Deficiencies and Plan
of Correction. All deficiencies noted thereon have been cured in all material
respects. Neither Parent nor any of its Subsidiaries has received notice from
the regulatory authorities which enforce the statutory or regulatory provisions
in respect of either the Medicare or the Medicaid program of any pending or
threatened investigations or surveys, and Parent has no reason to believe that
there are pending, threatened or imminent any such investigations or surveys
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Parent.
Section 5.16 MEDICAL STAFF MATTERS. There are no pending, or to Parent's
knowledge, threatened disputes with medical staff applicants, medical staff
members or health professional affiliates which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Parent, and all appeal periods in respect of any medical staff member or
applicant against whom an adverse action has been taken have expired.
Section 5.17 TAKEOVER STATUTES. No "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the United States applicable to Parent (including
without limitation pursuant to Chapter 12 of the California General Corporation
Law) is applicable to the Merger, the Shareholder Agreement or the other
transactions contemplated hereby or thereby.
Section 5.18 COMPLIANCE WITH LAWS. Neither Parent nor any of its
Subsidiaries has violated or failed to comply with any statute, law, ordinance,
regulation, rule, judgment, decree or order of any Governmental Entity
applicable to its business or operations, except for violations and failures to
comply that would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Parent.
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ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 CONDUCT OF BUSINESS OF THE COMPANY PENDING THE EFFECTIVE
TIME. Except as expressly permitted or contemplated by this Agreement or as
shall be consented to by Parent (which consent shall not be unreasonably
withheld or delayed), until the Effective Time the Company shall, and shall
cause each of its Subsidiaries to, conduct its operations in the ordinary and
usual course of business consistent with past practice and use its reasonable
best efforts (in the ordinary course of business consistent with past practice)
to preserve intact their respective business organizations' goodwill, keep
available the services of their respective present officers and key employees,
and preserve the goodwill and business relationships with suppliers,
distributors, customers and others having business relationships with them.
Without limiting the generality of the foregoing, and except as otherwise
permitted by this Agreement, prior to the Effective Time, without the consent of
Parent (which consent shall not be unreasonably withheld), the Company will not,
and will cause each of its Subsidiaries not to:
(a) amend or propose to amend their respective charters or bylaws (other
than as contemplated by this Agreement); or split, combine or reclassify
their outstanding capital stock or declare, set aside or pay any dividend or
distribution in respect of any capital stock (other than dividends paid by
subsidiaries of the Company solely to the Company or another wholly-owned
subsidiary of the Company) or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for shares
of its capital stock;
(b) (i) issue or authorize or propose the issuance of, sell, pledge or
dispose of, or agree to issue or authorize or propose the issuance of, sell,
pledge or dispose of, any additional shares of, or any options (except for
up to 40,000 options under the Company's Directors' Stock Option Plan),
warrants or rights of any kind to acquire any shares of their capital stock
of any class or any debt or equity securities convertible into or
exchangeable for such capital stock, other than any such issuance pursuant
to options, warrants, rights or convertible securities outstanding as of the
date hereof in accordance with their terms as in effect on the date hereof;
(ii) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets in each case which are
material, individually or in the aggregate, to Company and its Subsidiaries,
taken as a whole; (iii) sell (including by sale-leaseback), lease, pledge,
dispose of or encumber any assets or interests therein which are material,
individually or in the aggregate, to Company and its Subsidiaries, taken as
a whole, other than in the ordinary course of business and consistent with
past practice; (iv) incur or become contingently liable with respect to any
material indebtedness for borrowed money or guarantee any such indebtedness
or issue any debt securities or otherwise incur any material obligation or
liability (absolute or contingent) other than short-term indebtedness in the
ordinary course of business and consistent with past practice; (v) redeem,
purchase, acquire or offer to purchase or acquire any (x) shares of its
capital stock or any options, warrants or rights of any kind to acquire any
shares of their capital stock or any debt or equity securities convertible
into or exchangeable for such capital stock or (y) long-term debt, other
than as required by the governing instruments relating thereto or as
required by the terms of the Company Plans, the Company Options or the
Company Warrants as in effect on the date hereof; or (vi) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(c) enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other arrangements
or agreements with any directors, officers or key employees;
(d) adopt, enter into or amend any, or become obligated under any new,
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, health care,
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employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law occurring after the date
hereof and except, with respect to all plans other than bonus plans, in the
ordinary course of business and consistent with past practice;
(e) amend any agreements relating to its outstanding indebtedness or
capital stock, including without limitation the Agreement in Contemplation
of Merger or the Series D Stockholder Agreement; or
(f) make any material Tax election or settle any material Tax audit or
controversy.
Section 6.2 CONDUCT OF BUSINESS OF PARENT PENDING THE EFFECTIVE
TIME. Except as expressly permitted or contemplated by this Agreement or as
shall be consented to by the Company (which consent shall not be unreasonably
withheld or delayed), until the Effective Time Parent shall, and shall cause
each of its Subsidiaries to, conduct its operations in the ordinary and usual
course of business consistent with past practice and use their reasonable best
efforts to preserve intact their respective business organizations' goodwill,
keep available the services of their respective present officers and key
employees, and preserve the goodwill and business relationships with suppliers,
distributors, customers and others having business relationships with them.
Without limiting the generality of the foregoing, and except as otherwise
permitted by this Agreement, prior to the Effective Time, without the consent of
Company (which consent shall not be unreasonably withheld), Parent will not, and
will cause each of its Subsidiaries not to:
(a) amend or propose to amend their respective charters or bylaws (other
than as contemplated by this Agreement); or split, combine or reclassify
their outstanding capital stock or declare, set aside or pay any dividend or
distribution in respect of any capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (other than (i) dividends paid
by Subsidiaries of Parent solely to Parent or another wholly-owned
subsidiary of Parent, (ii) the Parent Stock Split, (iii) as contemplated by
Section 3.4(a) hereof or (iv) as set forth in Section 6.2(a) of the Parent
Disclosure Letter);
(b) (i) except as contemplated by Article II or by Sections 7.8 and 7.9,
issue or authorize or propose the issuance of, sell, pledge or dispose of,
or agree to issue or authorize or propose the issuance of, sell, pledge or
dispose of, any additional shares of, or any options, warrants or rights of
any kind to acquire any shares of their capital stock of any class or any
debt or equity securities convertible into or exchangeable for such capital
stock, other than any such issuance pursuant to options, warrants, rights or
convertible securities outstanding as of the date hereof in accordance with
their terms in effect on the date hereof; (ii) acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets in each case which are material, individually or in the
aggregate, to Parent and its Subsidiaries, taken as a whole, other than
acquisitions of facilities with respect to which Parent has entered into
binding agreements prior to the date hereof and which are described in
Section 6.2 of the Parent Disclosure Letter (it being understood that, as
between the Company and Parent, Parent shall not be obligated to consummate
such acquisitions, and the failure to consummate any such acquisition shall
not affect any obligation of the parties hereunder, nor shall it be taken
into account in determining whether a Material Adverse Effect with respect
to Parent shall have occurred); (iii) sell (including by sale-leaseback),
lease, pledge, dispose of or encumber any assets or interests therein, which
are material, individually or in the aggregate, to such party and its
Subsidiaries, taken as a whole, other than in the ordinary course of
business and consistent with past practice; (iv) except as contemplated by
Section 7.17(b), or in connection with the Agreement in Contemplation of
Merger, incur or become contingently liable with respect to any material
indebtedness for borrowed money or guarantee any such indebtedness or issue
any debt securities
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or otherwise incur any material obligation or liability (absolute or
contingent) other than short-term indebtedness in the ordinary course of
business and consistent with past practice; (v) redeem, purchase, acquire or
offer to purchase or acquire any (x) shares of its capital stock or any
options, warrants or rights of any kind to acquire any shares of their
capital stock or any debt or equity securities convertible into or
exchangeable for such capital stock or (y) long-term debt, other than as
required by the governing instruments relating thereto or as required by the
Parent PSAR Plan or Section 7.9; or (vi) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(c) enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other arrangements
or agreements with any directors, officers or key employees, except as
contemplated by Section 3.4(b) or Section 7.15 hereof;
(d) adopt, enter into, amend or become obligated under any new, bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, health care, employment or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or welfare of any
employee or retiree, except (i) as required to comply with changes in
applicable law occurring after the date hereof, (ii) with respect to all
plans other than bonus plans, in the ordinary course of business and
consistent with past practice or (iii) as permitted by Sections 7.9 and 7.13
hereof; or
(e) make any material Tax election or settle any material Tax audit or
controversy.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
Section 7.1 COMPANY TAKEOVER PROPOSALS.
(a) The Company shall not, nor shall it permit any of its Subsidiaries to,
nor shall it authorize or permit any officer, director or employee of or any
investment banker, attorney or other advisor or representative (each a
"Representative" and collectively, the "Representatives") of, the Company or any
of its Subsidiaries to, (i) solicit, initiate or encourage or otherwise
facilitate any inquiries or the making of any proposal or offer with respect to
a Takeover Proposal, (ii) except in accordance with Section 9.1(c), enter into
any agreement with respect to any Takeover Proposal, (iii) participate in any
discussions or negotiations regarding, or furnish to any person any nonpublic
information with respect to, a Takeover Proposal or (iv) otherwise facilitate
any effort or attempt to make or implement any Takeover Proposal; PROVIDED,
HOWEVER, that nothing contained in this Agreement shall prevent the Company or
its board of directors from (x) furnishing nonpublic information to, or entering
into discussions or negotiations with, any person in connection with an
unsolicited bona fide written Takeover Proposal to the Company or its
stockholders, or recommending such unsolicited bona fide written Takeover
Proposal to the stockholders of the Company, if and only to the extent that (A)
the board of directors of the Company determines in good faith based on the
written advice of its special outside legal counsel that such action is
necessary for the Company's directors to comply with their respective fiduciary
duties to the Company's stockholders under applicable law and (B) prior to
furnishing such nonpublic information to, or entering into discussions or
negotiations with, such person, the board of directors of the Company receives
from such person or entity an executed confidentiality agreement with terms no
less favorable to the Company than those contained in the Confidentiality
Agreement (it being understood that such confidentiality agreement may permit
the making by such person or entity of the Takeover Proposal), or (y) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a Takeover
Proposal. Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by any Representative of
the Company or any of its Subsidiaries shall be deemed to be a breach of this
Section 7.1 by the Company. The Company shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations by the Company
or any of its Representatives with any parties conducted heretofore with respect
to any of the foregoing.
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(b) The Company shall promptly advise Parent orally and in writing of any
Takeover Proposal or any inquiry or request for information with respect to or
which could lead to any Takeover Proposal and the identity of the person making
such Takeover Proposal or inquiry. The Company shall keep Parent promptly and
fully informed in all material respects of the status and details of any such
Takeover Proposal or inquiry.
Section 7.2 PARENT TAKEOVER PROPOSALS.
(a) Parent shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any Representative of Parent or any of its
Subsidiaries to, (i) solicit, initiate or encourage or otherwise facilitate any
inquiries or the making of any proposal or offer with respect to a Takeover
Proposal, (ii) except in accordance with Section 9.1(d), enter into any
agreement with respect to any Takeover Proposal, (iii) participate in any
discussions or negotiations regarding, or furnish to any person any nonpublic
information with respect to, a Takeover Proposal or (iv) otherwise facilitate
any effort or attempt to make or implement any Takeover Proposal; PROVIDED,
HOWEVER, that nothing contained in this Agreement shall prevent Parent or its
board of directors from furnishing nonpublic information to, or entering into
discussions or negotiations with, any person in connection with an unsolicited
bona fide written Takeover Proposal to Parent or its shareholders, or
recommending such unsolicited bona fide written Takeover Proposal to the
shareholders of Parent, if and only to the extent that (x) the board of
directors of Parent determines in good faith based on the written advice of its
special outside legal counsel that such action is necessary for Parent's
directors to comply with their fiduciary duties to the Parent Shareholder under
applicable law and (y) prior to furnishing such nonpublic information to, or
entering into discussions or negotiations with, such person, the board of
directors of Parent receives from such person or entity an executed
confidentiality agreement, with terms no less favorable to Parent than those
contained in the Confidentiality Agreement (it being understood that such
confidentiality agreement may permit the making by such person or entity of the
Takeover Proposal). Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
Representative of Parent or any of its Subsidiaries shall be deemed to be a
breach of this Section 7.2 by Parent. Parent shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations by Parent
or any of its Representatives with any parties conducted heretofore with respect
to any of the foregoing.
(b) Parent promptly shall advise the Company orally and in writing of any
Takeover Proposal or any inquiry or request for information with respect to or
which could lead to any Takeover Proposal and the identity of the person making
such Takeover Proposal or inquiry. Parent shall keep the Company promptly and
fully informed in all material respects of the status and details of any such
Takeover Proposal or inquiry.
Section 7.3 ACCESS TO INFORMATION. Subject to compliance with applicable
law, upon reasonable notice Parent and the Company shall each (and shall cause
each of their respective Subsidiaries to) afford to the other and the officers,
employees, accountants, counsel, financial advisors and other representatives of
the other, reasonable access during normal business hours throughout the period
prior to the Effective Time to all of its properties, books, contracts,
commitments and records and, during such period, each of Parent and the Company
shall (and shall cause each of their respective Subsidiaries to) furnish
promptly to the other or their counsel (a) a copy of each filing made by such
party with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby, including without limitation each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of Federal securities laws, (b)
frequent reports on operational matters of materiality and the general status of
ongoing operations and (c) all other information concerning its businesses,
properties and personnel as such other party may reasonably request. Unless
otherwise required by law, the parties will hold any such information which is
nonpublic in confidence pursuant to the terms of the Confidentiality Agreement.
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Section 7.4 FORM S-4 AND PROXY STATEMENT. As soon as is reasonably
practicable after the date hereof, the Company and Parent shall prepare and file
the Proxy Statement with the SEC and Parent shall promptly prepare and file with
the SEC the Form S-4 in which the Proxy Statement will be included. Each of the
Company and Parent shall use its best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
Parent shall also use its best efforts to take any action required to be taken
under applicable state securities and blue sky laws in connection with the
issuance of shares of Parent Common Stock in the Merger and the other
transactions contemplated by this Agreement. Parent and the Company shall
promptly furnish to each other all information, and take such other actions, as
may reasonably be requested in connection with any action by any of them in
connection with this Section 7.4.
Section 7.5 STOCKHOLDER APPROVAL; RECOMMENDATION.
(a) Subject to the fiduciary obligations of its directors under applicable
law, the Company will take, in accordance with applicable law and its
certificate of incorporation and bylaws, all action necessary to convene a
meeting of holders of shares of Company Stock as promptly as practicable after
the Form S-4 is declared effective to consider and vote upon the approval of
this Agreement and the Merger and any other proposals mutually agreed with
Parent. Subject to its fiduciary obligations under applicable law, the Company's
board of directors shall recommend such approval and shall take all lawful
action to solicit such approval.
(b) Subject to the fiduciary obligations of its directors under applicable
laws, Parent will take, in accordance with applicable law and its articles of
incorporation and bylaws, all action necessary to obtain the Requisite Parent
Vote, whether by written consent or at a meeting.
Section 7.6 AFFILIATES. The Company shall use its best efforts to cause
each principal executive officer, each director and each other person who may be
deemed to be an "affiliate," for purposes of Rule 145 under the Securities Act,
of the Company to deliver to Parent on or prior to the Effective Time a written
agreement to the effect that such person will not offer to sell, sell or
otherwise dispose of any shares of Parent Common Stock issued in the Merger,
except, in each case, pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a transaction
which, in the opinion of legal counsel satisfactory to Parent, is exempt from
the registration requirements of the Securities Act.
Section 7.7 AGREEMENT TO COOPERATE; FURTHER ASSURANCES.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, subject to the requisite vote
of the stockholders of Parent and the Company, to consummate and make effective
the transactions contemplated by this Agreement and to satisfy the conditions
set forth in Article VIII hereof including providing information and using
reasonable efforts to obtain all necessary or appropriate waivers, consents and
approvals, and effecting all necessary registrations and filings (including
filings under the HSR Act) and executing, or causing the execution of, such
consents or resolutions on the part of Merger Sub as may be necessary to
consummate the transactions contemplated hereby. 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 directors of each party to
this Agreement shall take all necessary actions to the extent not inconsistent
with their other duties and obligations or applicable law.
(b) Without limiting the generality of the undertakings pursuant to this
Section 7.7, the Company (in the case of clauses (i) and (iii)) and Parent (in
all cases set forth below) agree to take or cause to be taken the following
actions: (i) provide promptly to any and all Federal, state, local or foreign
court or Government Entity with jurisdiction over enforcement of any applicable
antitrust laws
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("Government Antitrust Entity") information and documents requested by any
Government Antitrust Entity or necessary, proper or advisable to permit
consummation of the Merger and the transactions contemplated by this Agreement;
(ii) if necessary, the proffer by Parent of its willingness to promptly enter
into good faith negotiations with the relevant Government Antitrust Entity (and
to enter into agreements with the relevant Government Antitrust Entity with
respect thereto) with respect to actions reasonably necessary or advisable to
avoid the commencement of a proceeding to delay, restrain, enjoin or otherwise
prohibit consummation of the Merger by any Government Antitrust Entity; and
(iii) in the event that any permanent or preliminary injunction or other order
is entered or becomes reasonably foreseeable to be entered in any proceeding
which would make consummation of the Merger in accordance with the terms of this
Agreement unlawful or that would prevent or materially delay consummation of the
Merger or the other transactions contemplated by this Agreement, use its best
efforts to take promptly any and all steps (including the appeal thereof, the
posting of a bond or the taking of the steps contemplated by clause (ii) of this
paragraph) reasonably necessary to vacate, modify or suspend such injunction or
order so as to permit such consummation on a schedule as close as possible to
that contemplated by this Agreement.
Section 7.8 COMPANY OPTIONS, RIGHTS AND WARRANTS.
(a) The Board of Directors of the Company shall not take any action to cause
or cause the transactions contemplated by this Agreement to result in the
acceleration of payment, vesting or exercisability of any benefit under any
Company Options, Warrants or Rights, or any other incentive compensation
arrangement or agreement other than as required under the agreements evidencing
or under which the Company Options, Warrants or Rights were issued (or such
other incentive compensation arrangements or agreements), in each case as in
effect on the date hereof.
(b) As of the Effective Time, each outstanding option to purchase shares of
Company Common Stock and each outstanding stock appreciation right with respect
to Company Common Stock (collectively the "Company Options and Rights"), each
outstanding security of the Company under which Company Common Stock may be
issued on conversion, exchange or subscription (the "Company Issuable
Securities"), and the agreements relating thereto, and each outstanding Company
Warrant (the Company Warrants, the Company Options, the Rights and the Company
Issuable Securities being referred to herein collectively as the "Company Common
Equivalents") as of the Effective Time, shall be assumed by Parent and converted
into options, warrants, convertible or exchangeable securities or subscription
rights, as the case may be, to purchase shares of and stock appreciation rights
with respect to (collectively, "Parent Common Equivalents") that number of
shares of Parent Common Stock equal to the number of shares of Company Common
Stock subject to such Company Common Equivalents at an exercise, conversion or
subscription price, as applicable, equal to the per share exercise price of the
respective Company Common Equivalents, which respective Parent Common
Equivalents shall be subject as nearly as possible to the same terms and
conditions (including vesting schedule) as the respective Company Common
Equivalents.
(c) At or as soon as practicable after the Effective Time, Parent shall file
one or more registration statements on Form S-8 (or any successor or other
appropriate forms) with respect to the shares of Parent Common Stock subject to
the options to purchase and rights with respect to Parent Common Stock ("Parent
Options and Rights") outstanding or reserved for issuance as of the Effective
Time and shall use its reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
Parent Options and Rights remain outstanding. Parent shall use its best efforts
to administer the Parent Options and Rights assumed pursuant to this Section 7.8
in a manner that complies with Rule 16b-3 promulgated under the Exchange Act,
but only to the extent the Company Options and Rights complied with such Rule
prior to the Merger.
Section 7.9 PARENT RIGHTS.
(a) Except as provided in Section 7.9(b) below or is otherwise required
under the agreements evidencing or under which such benefits are provided, the
board of directors of Parent shall not take
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any action to cause the transactions contemplated by this Agreement to result in
the acceleration of payment, vesting or exercisability of any benefit under the
Parent PSAR Plan or any other incentive compensation arrangement or agreement.
(b) Effective as of the Effective Time of the Merger, the Board of Directors
of Parent shall take such steps as may be necessary to terminate the Paracelsus
Healthcare Corporation Phantom Equity Long-Term Incentive Plan (the "Parent PSAR
Plan") and provide that, subject to the receipt by Parent of all necessary
consents and releases, each participant under the Parent PSAR Plan shall receive
in full satisfaction of all rights accrued thereunder with respect to any
outstanding Phantom Stock Appreciation Rights ("PSARs") (whether or not vested)
and any outstanding Phantom Preferred Stock Units ("PPSUs") credited to such
participant under the Parent PSAR Plan, an allocable portion of the following
aggregate consideration: (i) options to purchase that number of shares of Parent
Common Stock equal to 3.0% of the number determined by dividing (a) the product
of 450 and the Split Ratio by (B) 0.57; and (ii) $20.5 million in cash. All such
options shall (x) be fully vested and exercisable, (y) have an exercise price
equal to $0.01 per share of Parent Common Stock subject to such option, and (z)
be issued pursuant to a new stock option plan adopted by Parent prior to the
time the Form S-4 becomes effective under the Securities Act in compliance with
the provisions of Rule 16b-3 promulgated under the Securities Act and section
162(m) under the Code and subject to such other terms and conditions as may be
set forth in such plan.
Section 7.10 PUBLIC STATEMENTS. The parties shall consult with each other
prior to issuing any public announcement or statement with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
public announcement or statement prior to such consultation, except as may be
required by law.
Section 7.11 LETTER OF COMPANY'S ACCOUNTANTS. The Company shall use its
best efforts to cause to be delivered to Parent letters of Coopers & Lybrand,
dated the date on which the Form S-4 shall become effective and the third
business day prior to the Effective Time and addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and substance
for "comfort" letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
Section 7.12 LETTER OF PARENT'S ACCOUNTANTS. Parent shall use its best
efforts to cause to be delivered to the Company letters of Ernst & Young, dated
the date on which the Form S-4 shall become effective and the third business day
prior to the Effective Time and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance for
"comfort" letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
Section 7.13 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) From and after the Effective Time, Parent shall indemnify and hold
harmless, to the fullest extent permitted under applicable law (and Parent shall
also advance reasonable expenses as incurred to the fullest extent permitted
under applicable law provided that prior to any such advance the person to whom
expenses are so advanced provides to Parent an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification), each present and former director, officer and employee of the
Company and its Subsidiaries (collectively, the "Indemnified Parties") against
any costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time, including the
transactions contemplated by this Agreement; PROVIDED that Parent shall not be
required to indemnify any Indemnified Party pursuant hereto unless the
Indemnified Party acted in good faith and in a manner such Indemnified Party
reasonably believed to be in, or not opposed to, the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
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(b) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect policies of directors and officers' liability
insurance maintained by the Company for the benefit of those persons who are
currently covered by such policies on terms no less favorable than the terms of
such current insurance coverage; PROVIDED, HOWEVER, that Parent shall not be
required to expend in any year an amount in excess of 175% of the annual
aggregate premiums currently paid by the Company for such insurance, as
disclosed by the Company in Section 7.14 of the Company Disclosure Letter; and
PROVIDED, FURTHER, that if the annual premiums of such insurance coverage exceed
such amount, Parent shall be obligated to obtain a policy with the best coverage
available, in the reasonable judgment of the Parent Board, for a cost not
exceeding such amount.
(c) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 7.13, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve Parent of any liability it may have to
such Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) (i) Parent or
the Surviving Subsidiary shall have the right to assume the defense thereof and
Parent shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if Parent or the
Surviving Subsidiary elects not to assume such defense or if Parent is a party
to any such action, suit or proceeding and counsel for the Indemnified Parties
advises Parent in writing that there are issues which raise conflicts of
interest between Parent or the Surviving Subsidiary and the Indemnified Parties,
the Indemnified Parties may retain counsel, and, subject to the provisions of
Section 7.13(a) and applicable law and with respect to the advancement of
expenses, Parent or the Surviving Subsidiary shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties as statements therefor are
received; PROVIDED, HOWEVER, that Parent shall be obligated pursuant to this
paragraph (c) to pay for only one firm of counsel for all Indemnified Parties,
which counsel shall be reasonably satisfactory to Parent; (ii) the Indemnified
Parties shall cooperate in the defense of any such matter; and (iii) neither
Parent nor the Surviving Subsidiary shall be liable for any settlement effected
without their prior written consent (which shall not be unreasonably withheld).
Neither Parent nor the Surviving Subsidiary shall have any obligation hereunder
to any Indemnified Party if and when a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(d) If Parent or the Surviving Subsidiary or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets or any individual, corporation or other entity, then and
in each such case, proper provisions shall be made so that the successors and
assigns of Parent or the Surviving Subsidiary shall assume all of the
obligations set forth in this Section 7.13.
(e) The provisions of this Section 7.13 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives.
Section 7.14 STOCK EXCHANGE LISTING. The parties shall use their best
efforts to cause the shares of Parent Common Stock to be issued in the Merger
and as otherwise contemplated by Sections 7.8 and 7.9 hereof to be approved for
listing on the New York Stock Exchange, Inc. (the "NYSE"), or, if such listing
would not be available to Parent immediately following the Effective Time, the
American Stock Exchange, Inc. (the "AMEX"), in each case subject to official
notice of issuance, prior to the Effective Time. The Company shall use its best
efforts to cause the shares of Company Common Stock to be no longer listed on
the AMEX and de-registered under the Exchange Act as soon as practicable
following the Effective Time.
Section 7.15 EXECUTION OF THE OTHER AGREEMENTS. At or prior to the
Effective Time, Parent shall execute and deliver to the other parties thereto
(i) the Shareholder Agreement, (ii) the Voting
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Agreement, (iii) the Parent Shareholder Registration Rights Agreement, (iv) the
Company Investment Group Registration Rights Agreement, (v) the Employment
Agreements, (vi) the Services Agreement and the Insurance Agreement (the
"Insurance Agreement") between Dr. Krukemeyer and Paracelsus providing for
a $1 million annual death benefit with payments commencing on his death and
extending to the tenth anniversary of the Effective Time, (vii) the Non-
Compete Agreement and (viii) the Dividend and Note Agreement.
Section 7.16 TAX TREATMENT. Each of the parties shall use its reasonable
best efforts, whether before or after the Effective Time, to cause the Merger to
qualify as a "reorganization" within the meaning of section 368(a) of the Code
and to obtain the opinions of counsel referred to in Sections 8.2(d) and 8.3(d)
and to provide counsel with such representations as are customarily necessary to
issue such opinions.
Section 7.17 OTHER ACTIONS BY THE COMPANY AND/OR PARENT.
(a) TAKEOVER STATUTE. If any takeover statute is or may become applicable
to the Merger, the Shareholder Agreement or the other transactions contemplated
by this Agreement, each of Parent and the Company and its board of directors
shall grant such approvals and take such actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement or by the Merger and otherwise act to eliminate
or minimize the effects of such statute or regulation on such transactions.
(b) DEBT RESTRUCTURING. Parent and Company shall use their reasonable best
efforts to refinance, including without limitation by means of a public offering
of debt and/or equity securities as promptly as practicable after the Effective
Time, or obtain reasonable amendments or waivers to the currently outstanding
debt of Parent and Company or guarantees of the outstanding senior indebtedness
of such parties, as appropriate in order to effect the Closing and to facilitate
the combined operations of the companies after the Effective Time. Parent agrees
that, from and after the Effective Time, it shall guarantee the then outstanding
debt obligations of the Surviving Subsidiary if and to the extent required by
the Agreement in Contemplation of Merger.
ARTICLE VIII
CONDITIONS
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 fulfillment or waiver, at or prior to the Effective Time, of the
following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by (i) the Company Requisite Vote and (ii) the
Parent Requisite Vote;
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated;
(c) The Form S-4 shall have become effective in accordance with the
provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect;
(d) No temporary restraining order, preliminary or permanent injunction
or other order or decree by any court or Governmental Entity of competent
jurisdiction which prevents the consummation of the Merger or the
transactions contemplated hereby shall have been issued and remain in
effect;
(e) No action shall have been taken, and no statute, rule or regulation
shall have been enacted, by any state or Federal government or governmental
agency which would prevent the consummation of the Merger or the
transactions contemplated hereby;
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(f) The shares of Parent Common Stock required to be issued hereunder
shall have been approved for listing on the NYSE or AMEX, as the case may
be, subject to official notice of issuance; and
(g) The Employment Agreements shall have been executed and delivered by
(i) Parent and (ii) each of the respective parties.
Section 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of Company to effect the Merger shall be subject to the
fulfillment or waiver, at or prior to the Effective Time, of the following
additional conditions:
(a) Parent shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time and the representations and warranties of Parent contained in
this Agreement shall be true and correct on and as of the date of this
Agreement and on and as of the Effective Time as if made on and as of such
date, except as contemplated or permitted by this Agreement and the Company
shall have received a certificate of the Chief Executive Officer and the
Chief Financial Officer of Parent to that effect;
(b) Parent shall have obtained the consent or approval of each person
whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Parent,
or upon the consummation of the transactions contemplated hereby;
(c) The Company shall have received the letter of Ernst & Young referred
to in Section 7.12 hereof;
(d) The Company shall have received an opinion from Sullivan & Cromwell
substantially to the effect that (i) the Merger will qualify as a
reorganization within the meaning of section 368(a) of the Code and (ii) no
gain or loss will be recognized by the Company stockholders who receive
shares of Parent Common Stock in the merger in exchange for shares of
Company Stock, except with respect to cash received with respect to
Dissenting Shares by holders of Company Preferred Stock who properly
exercise appraisal rights in accordance with Section 2.7;
(e) (i) Parent and the Parent Shareholder or Dr. Krukemeyer shall have
executed and delivered (x) the Shareholder Agreement, (y) the Non-Compete
Agreement and (z) the Dividend and Note Agreement; and (ii) Parent shall
have executed and delivered the Company Investment Group Registration Rights
Agreement; and
(f) The Company shall have received an opinion from Skadden, Arps,
Slate, Meagher & Flom substantially to the effect that the Restated Articles
of Incorporation do not violate the applicable provisions of the California
General Corporation Law.
Section 8.3 CONDITIONS TO OBLIGATIONS OF PARENT TO EFFECT THE MERGER. The
obligations of Parent to effect the Merger shall be subject to the fulfillment
or waiver, at or prior to the Effective Time, of the additional following
conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time and the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the date
of this Agreement and on and as of the Effective Time as if made on and as
of such date, except as contemplated by this Agreement, and Parent shall
have received a certificate of the Chief Executive Officer and the Chief
Financial Officer of the Company to that effect;
(b) The Company shall have obtained the consent or approval of each
person whose consent or approval shall be required in connection with the
transactions contemplated hereby under any
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loan or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain such
consents and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, or upon the consummation of the
transactions contemplated hereby;
(c) Parent shall have received the letter of Coopers & Lybrand referred
to in Section 7.11 hereof;
(d) Parent shall have received an opinion from Skadden, Arps, Slate,
Meagher & Flom substantially to the effect that the Merger will qualify as a
reorganization under Section 368(a) of the Code;
(e) The following agreements shall have been executed and delivered by
the relevant parties thereto (other than Parent and the Parent Shareholder):
(i) the Voting Agreement, and (ii) the Parent Shareholder Registration
Rights Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by the mutual written consent of Parent and the Company;
(b) by either Parent or the Company if (i) at a duly held stockholders
meeting of the Company, or any adjournment or postponement thereof, the
Company's stockholders shall not have approved the Merger by the Company
Requisite Vote; (ii) the Parent Shareholder shall not have approved this
Agreement and the transactions contemplated hereby by the Parent Requisite
Vote; (iii) the Merger shall not have been consummated on or before December
31, 1996 (the "Termination Date"); PROVIDED that the right to terminate this
Agreement under this Section 9.1(b)(iii) shall not be available to any party
whose willful and material failure to fulfill any obligation under this
Agreement has been the cause of or resulted in, the failure of the Effective
Time to occur on or before the Termination Date; (iv) in the event of a
breach by the other party of any representation, warranty, covenant or
agreement set forth herein which (x), would give rise to a failure of a
condition set forth in Section 8.2(a) or 8.3(a), as applicable, and (y)
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach (PROVIDED that the terminating
party is not then in breach of any representation, warranty, covenant or
other agreement that would give rise to a failure of a condition as
described in clause (x) above); (v) any Governmental Entity, the consent of
which is a condition to the obligations of Parent and the Company to
consummate the transactions contemplated hereby shall have determined not to
grant its consent and all appeals of such determination shall have been
taken and have been unsuccessful; or (vi) any court of competent
jurisdiction in the United States or any State shall have issued an order,
judgment or decree (other than a temporary restraining order) restraining,
enjoining or otherwise prohibiting either of the Merger and such order,
judgment or decree shall have become final and nonappealable;
(c) by the Company if the board of directors of the Company shall
concurrently approve, and the Company shall concurrently enter into, a
binding written agreement concerning a transaction that constitutes a
Takeover Proposal; PROVIDED, HOWEVER, that (i) the board of directors of the
Company shall have complied with Section 9.5 in connection with such
Takeover Proposal; (ii) no termination pursuant to this Section 9.1(c) shall
be effective unless the Company shall simultaneously make the payments
required by Section 9.6; and (iii) the right to terminate this Agreement
under this Section 9.1(c) shall not be available to the Company if the
Company at such time is in material breach of any of the terms of this
Agreement.
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(d) by Parent if the board of directors of Parent shall concurrently
approve, and Parent shall concurrently enter into, a binding written
agreement concerning a transaction that constitutes a Takeover Proposal;
PROVIDED, HOWEVER, that (i) the board of directors of Parent shall have
complied with Section 9.5 in connection with such Takeover Proposal; (ii) no
termination pursuant to this Section 9.1 shall be effective unless Parent
shall simultaneously make the payments required by Section 9.6; and (iii)
the right to terminate this Agreement under this Section 9.1(d) shall not be
available to Parent if Parent at such time is in material breach of any of
the terms of this Agreement.
Section 9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 9.1 hereof,
this Agreement shall forthwith become void (except as set forth in this Section
9.2 and in Article X, the last sentence of Sections 7.3 and Section 9.6 hereof
and in the Confidentiality Agreement, all of which shall survive the
termination) and there shall be no liability on the part of Parent, the Company
or Merger Sub or their respective officers or directors except for any breach of
any of its obligations under this Section 9.2 and the last sentence of Section
7.3 and Section 9.6 hereof. Notwithstanding the foregoing, no party hereto shall
be relieved from liability for any willful, material breach of this Agreement.
Section 9.3 AMENDMENT. This Agreement may be amended by the parties hereto
at any time before or after approval hereof by the shareholders of Parent or the
Company, PROVIDED that after any such approval, no amendment shall be made which
(a) changes the number of shares of Parent Common Stock into which shares of
Company Stock are converted pursuant to the terms hereof or (b) in any way
materially adversely affects the rights of holders of shares of Parent Common
Stock or Company Stock. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 9.4 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 if set forth in an instrument in writing
signed on behalf of such party.
Section 9.5 PROCEDURE FOR CERTAIN TERMINATIONS. A terminating party shall
provide to the other party written notice prior to any termination of this
Agreement pursuant to Section 9.1(c) or 9.1(d), as applicable, advising such
other party (i) that the board of directors of the terminating party intends to
enter into a binding written agreement concerning a Takeover Proposal in
accordance with the terms of this Agreement, and (ii) as to the material terms
of any such Takeover Proposal. At any time after five business days following
receipt of such notice, the terminating party may terminate this Agreement as
provided in Section 9.1(c) or 9.1(d), as applicable, only if the board of
directors of the terminating party determines that such proposal is more
favorable to its shareholders than the transactions contemplated by this
Agreement (taking into account all terms of such Takeover Proposal and this
Agreement, including all conditions, and which determination shall be made in
light of any revised proposal made by the non-terminating party prior to the
expiration of such five business day period) and concurrently enters into a
binding written agreement providing for the implementation of the transactions
contemplated by such Takeover Proposal.
Section 9.6 FEES AND EXPENSES.
(a) The Surviving Subsidiary shall pay all charges and expenses of the
Company and the Exchange Agent, in connection with the transactions contemplated
by Article II, and Parent shall reimburse the Surviving Subsidiary for such
charges and expenses. Except as otherwise provided in this Section 9.6, whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement, the Shareholder Agreement, the Voting Agreement and the
other transactions contemplated hereby and thereby shall be paid by the party
incurring such costs or
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expenses, except that expenses incurred in connection with the filing fee for
the Form S-4, printing and mailing the Proxy Statement and the Form S-4 and
actions required to be taken under applicable state securities and blue sky laws
shall be shared equally by Parent and the Company.
(b) If this Agreement is terminated (i) pursuant to Section 9.1(d) hereof or
(ii) pursuant to (x) Section 9.1(b)(ii), (y) Section 9.1(b)(iii) (PROVIDED, that
the Company shall not be entitled to any Termination Fee or Company Expenses in
connection with a termination pursuant to Section 9.1(b)(iii) if (A) any
conditions in Article VIII (other than the condition in Section 8.1(a)(ii)) of
Parent to consummate the Merger have not been satisfied or waived and (B) as of
the Termination Date Parent shall have taken all actions required to be taken by
it under this Agreement and otherwise shall not be in material breach of its
obligations under this Agreement; PROVIDED, FURTHER, that nothing herein shall
be construed to affect the parties' obligations under Section 7.7) or (z)
Section 9.1(b)(iv) hereof, and in each case within twelve months from such
termination a Takeover Proposal involving Parent shall be consummated, then
Parent shall (in the case of Section 9.6(b)(i) upon such termination, and in the
case of Section 9.6(b)(ii) upon the consummation of such Takeover Proposal)
promptly (and in any event within two days of receipt by Parent of written
notice from the Company) pay to the Company (by wire transfer of immediately
available funds to an account designated by the Company) a termination fee of
$7,500,000 (the "Termination Fee"), and shall reimburse the Company for all
documented out-of-pocket expenses (including all fees and expenses of its
counsel, advisors, accountants and consultants) incurred by or on behalf of the
Company in connection with the transactions contemplated by this Agreement up to
an additional $2,500,000 ("Company Expenses"). Parent's payment shall be the
sole and exclusive remedy of the Company against Parent and any of its
Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the breach of any covenant or
agreement giving rise to such payment, other than with respect to any claims for
willful breach or bad faith by Parent or Merger Sub.
(c) If this Agreement is terminated (i) pursuant to Section 9.1(c) hereof,
or (ii) pursuant to (x) Section 9.1(b)(i), (y) Section 9.1(b)(iii) (PROVIDED,
that Parent shall not be entitled to any Termination Fee or Parent Expenses in
connection with a termination pursuant to Section 9.1(b)(iii) if (A) any
conditions in Article VIII (other than the condition in Section 8.1(a)(i)) of
Company to consummate the Merger have not been satisfied or waived and (B) as of
the Termination Date Company shall have taken all actions required to be taken
by it under this Agreement and otherwise shall not be in material breach of its
obligations under this Agreement; PROVIDED, FURTHER, that nothing herein shall
be construed to affect the parties' obligations under Section 7.7) or (z)
Section 9.1(b)(iv) hereof, and in each case within twelve months from such
termination a Takeover Proposal involving the Company shall be consummated, then
the Company shall (in the case of Section 9.6(c)(i) upon such termination, and
in the case of Section 9.6(c)(ii) upon the consummation of such Takeover
Proposal) promptly (and in any event within two days of receipt by the Company
of written notice from Parent) pay to Parent (by wire transfer of immediately
available funds to an account designated by Parent) the Termination Fee, and
shall reimburse Parent for all documented out-of-pocket expenses (including all
fees and expenses of its counsel, advisors, accountants and consultants)
incurred by or on behalf of Parent in connection with the transactions
contemplated by this Agreement up to an additional $2,500,000 ("Parent
Expenses," and hereinafter "Expenses" shall mean Parent Expenses or Company
Expenses, as applicable). The Company's payment shall be the sole and exclusive
remedy of Parent against the Company and any of its Subsidiaries and their
respective directors, officers, employees, agents, advisors or other
representatives with respect to the breach of any covenant or agreement giving
rise to such payments, other than with respect to any claim for willful breach
or bad faith by the Company.
(d) If payment of a Termination Fee and Expenses is required hereunder in
connection with a Takeover Proposal that is intended to be accounted for as a
"pooling of interests" under APB 16 and any applicable interpretations thereof
and, but for such payment of the Termination Fee and Expenses, such accounting
treatment would be available for the transaction involved in such Takeover
Proposal, then such Termination Fee and Expenses shall be reduced to the maximum
amount that would permit such accounting treatment (the "maximum amount");
PROVIDED, that, in order for a
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party obligated to pay a Termination Fee and Expenses (a "payor") to reduce the
Termination Fee and Expenses pursuant to this Section 9.6(d), (i) such payor
shall (in the case of a termination pursuant to Sections 9.1(c) and (d), upon
termination, and in the case of Section 9.1(b)(i), (ii), (iii) or (iv),
reasonably prior to the time such Termination Fee and Expenses is payable)
provide the party entitled to the Termination Fee and Expenses (the "payee") a
written opinion of a nationally recognized accounting firm that such Takeover
Proposal qualifies for such accounting treatment and providing such firm's
estimation of the maximum amount and (ii) a nationally recognized accounting
firm retained by the payee must not reasonably object to such opinions. In the
event of a disagreement between the payor and payee accounting firms, those
firms shall mutually agree on a third nationally recognized accounting firm
whose judgment as to these matters shall be final.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. Except for the last sentence of Section 7.7(a) and Sections 7.8(c)
and (d), 7.13, 7.16 and 9.6(a), and this Article X, none of the representations,
warranties and agreements in this Agreement shall survive the Effective Time.
Section 10.2 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed duly given upon (a)
transmitter's confirmation of a receipt of a facsimile transmission, (b)
confirmed delivery by a standard overnight carrier or when delivered by hand, or
(c) the expiration of five business days after the day when mailed by certified
or registered mail, postage prepaid, addressed at the following addresses (or at
such other address as the parties hereto shall specify by like notice):
If to Parent, to:
Paracelsus Healthcare Corporation
155 North Lake Avenue
Suite 1100
Pasadena, California 91101
Telecopy No. (818) 304-9588
Attention: R.J. Messenger,
President and Chief Executive Officer
with a copy to: Robert C. Joyner,
Vice President and General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Los Angeles, California 90071
Telecopy No. (213) 687-5600
Attention: Thomas C. Janson, Jr.
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If to the Company, to:
Champion Healthcare Corporation
515 West Greens Road
Suite 800
Houston, Texas 77067
Telecopy No. (713) 878-6686
Attention: Charles R. Miller,
President and Chief Executive Officer
with a copy to: James G. VanDevender,
Executive Vice President and Chief Financial
Officer
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004-2498
Telecopy No. (212) 558-3588
Attention: Neil T. Anderson
and a copy to:
Michener, Larimore, Swindle, Whitaker
Flowers, Sawyer, Reynolds & Chalk, L.L.P.
3500 City Center Tower II
301 Commerce Street
Fort Worth, Texas 76102
Telecopy No. (817) 335-6935 or (817) 878-0706
Attention: Wayne Whitaker
Section 10.3 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."
Section 10.4 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) together with the Shareholder Agreement, the
Confidentiality Agreement and the Voting Agreement, constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof; (b) shall not be assigned by operation of law or otherwise
without the prior written consent of the other parties hereto; and (c) shall be
governed in all respects, including validity, interpretation and effect, by the
laws of the State of Delaware (without giving effect to the provisions thereof
relating to conflicts of law). The parties hereby acknowledge that, except as
hereinafter agreed to in writing, no party shall have the right to acquire or
shall be deemed to have acquired shares of capital stock of the other party
pursuant to the Merger until consummation thereof.
Section 10.5 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.
Section 10.6 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns and, except as otherwise
specifically provided in Section 7.13 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.
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Section 10.7 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.
Section 10.8 ATTORNEYS' FEES. If any action at law or equity, including an
action for declaratory relief, is brought to enforce or interpret any provision
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and expenses from the other party, which fees and expenses shall
be in addition to any other relief which may be awarded.
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
PARACELSUS HEALTHCARE CORPORATION
By: /s/ ROBERT C. JOYNER
----------------------------------------
Name: Robert C. Joyner
Title:Vice President and General Counsel
CHAMPION HEALTHCARE CORPORATION
By: /s/ JAMES G. VANDEVENDER
----------------------------------------
Name: James G. VanDevender
Title: Executive Vice President and
Chief Financial Officer
PC MERGER SUB, INC.
By: /s/ ROBERT C. JOYNER
----------------------------------------
Name: Robert C. Joyner
Title: Director
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