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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
Date of Report (Date of earliest event reported):
April 23, 1995
VENCOR, INC.
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 1-10989 61-1055020
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3300 PROVIDIAN CENTER
400 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502) 569-7300
N/A
(Former name or former address, if changed since last report)
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Item 5. Other Events
On April 23, 1995, the Registrant entered into an Agreement and
Plan of Merger, dated as of April 23, 1995, among The Hillhaven
Corporation, the Registrant and Veritas Holdings Corp (the "Agreement").
The Agreement is filed as an exhibit hereto.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
1. Agreement and Plan of Merger, dated as of April 23, 1995,
among The Hillhaven Corporation, the Registrant and
Veritas Holdings Corp.
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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.
VENCOR, INC.
Date: May 5, 1995 By: /s/ Jill L. Force
Jill L. Force
Secretary and General Counsel
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EXHIBIT INDEX
Sequential
Exhibit No. Description Page Number
1. Agreement and Plan of Merger,
as of April 23, 1995, among
The Hillhaven Corporation, the
Registrant and Veritas Holdings
Corp.
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EXHIBIT 1
(Conformed Copy)
AGREEMENT AND PLAN OF MERGER
dated as of
April 23, 1995
among
THE HILLHAVEN CORPORATION,
VENCOR, INC.
and
VERITAS HOLDINGS CORP.
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER 1
SECTION 1.01. The Merger 1
SECTION 1.02. Conversion of Shares. 2
SECTION 1.03. Surrender and Payment. 3
SECTION 1.04. Stock Options. 5
SECTION 1.05. Adjustments. 7
SECTION 1.06. Fractional Shares. 7
ARTICLE II THE SURVIVING CORPORATION; PARENT DIRECTORS 7
SECTION 2.01. Certificate of Incorporation. 7
SECTION 2.02. Bylaws. 7
SECTION 2.03. Directors and Officers. 7
SECTION 2.04. Parent Directors. 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 8
SECTION 3.01. Corporate Existence and Power. 8
SECTION 3.02. Corporate Authorization. 8
SECTION 3.03. Governmental Authorization. 9
SECTION 3.04. Non-Contravention. 9
SECTION 3.05. Capitalization. 10
SECTION 3.06. Subsidiaries. 11
SECTION 3.07. Reports. 12
SECTION 3.08. Financial Statements; No Undisclosed
Liabilities. 13
SECTION 3.09. Joint Proxy Statement/Prospectus;
Registration Statement. 13
SECTION 3.10. Absence of Certain Changes. 13
SECTION 3.11. Litigation. 14
SECTION 3.12. Articles of Incorporation and Bylaws. 15
SECTION 3.13. ERISA. 15
SECTION 3.14. Taxes. 16
SECTION 3.15. Tax Matters; Pooling. 17
SECTION 3.16. Finders and Investment Bankers. 17
SECTION 3.17. Opinion of Financial Advisor. 17
SECTION 3.18. Vote Required. 17
SECTION 3.19. Acquiring Person. 17
SECTION 3.20. Medicare and Medicaid. 18
SECTION 3.21. Takeover Statutes. 18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT 19
SECTION 4.01. Corporate Existence and Power. 19
SECTION 4.02. Corporate Authorization. 19
SECTION 4.03. Governmental Authorization. 19
SECTION 4.04. Non-Contravention. 20
SECTION 4.05. Capitalization. 20
SECTION 4.06. Subsidiaries. 21
SECTION 4.07. Reports. 22
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SECTION 4.08. Financial Statements; No
Undisclosed Liabilities. 23
SECTION 4.09. Joint Proxy Statement/Prospectus;
Registration Statement. 23
SECTION 4.10. Absence of Certain Changes. 23
SECTION 4.11. Litigation. 24
SECTION 4.12. Articles of Incorporation and Bylaws. 24
SECTION 4.13. ERISA. 24
SECTION 4.14. Taxes. 25
SECTION 4.15. Tax Matters; Pooling. 25
SECTION 4.16. Finders and Investment Bankers. 25
SECTION 4.17. Opinion of Financial Advisor. 25
SECTION 4.18. Vote Required. 25
SECTION 4.19. No Change of Control. 26
SECTION 4.20. Medicare and Medicaid. 26
SECTION 4.21. Acquiring Person. 26
ARTICLE V COVENANTS OF THE COMPANY 27
SECTION 5.01. Conduct of the Company. 27
SECTION 5.02. Access to Information. 29
SECTION 5.03. Other Offers. 29
SECTION 5.04. Notices of Certain Events. 30
SECTION 5.05. Tax Letters. 30
SECTION 5.06. Rights Agreement. 30
SECTION 5.07. Financial Statements. 31
ARTICLE VI COVENANTS OF PARENT 31
SECTION 6.01. Conduct of Parent. 31
SECTION 6.02. Access to Information. 32
SECTION 6.03. Merger Subsidiary. 33
SECTION 6.04. Director and Officer Liability. 33
SECTION 6.05. Stock Exchange Listing. 34
SECTION 6.06. Parent Acquisition Proposals. 34
SECTION 6.07. Notice of Certain Events. 34
SECTION 6.08. Employee Benefits. 35
ARTICLE VII COVENANTS OF PARENT AND THE COMPANY 36
SECTION 7.01. Best Reasonable Efforts. 36
SECTION 7.02. Certain Filings. 36
SECTION 7.03. Public Announcements. 36
SECTION 7.04. Further Assurances. 36
SECTION 7.05. Stockholders Meetings. 37
SECTION 7.06. Preparation of the Joint Proxy
Statement/Prospectus and
Registration Statement. 37
SECTION 7.07. State Takeover Laws. 38
SECTION 7.08. Pooling. 38
SECTION 7.09. Consents. 38
SECTION 7.10. Affiliates. 38
SECTION 7.11. Restructuring the Merger. 38
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ARTICLE VIII CONDITIONS TO THE MERGER 39
SECTION 8.01. Conditions to the Obligations of
Each Party. 39
SECTION 8.02. Conditions to the Obligations of
Parent and Merger Subsidiary. 40
SECTION 8.03. Conditions to the Obligations of
the Company. 41
ARTICLE IX TERMINATION 42
SECTION 9.01. Termination. 42
SECTION 9.02. Effect of Termination. 44
ARTICLE X MISCELLANEOUS 44
SECTION 10.01. Notices. 44
SECTION 10.02. Survival. 46
SECTION 10.03. Amendments; No Waivers. 46
SECTION 10.04. Fees and Expenses. 46
SECTION 10.05. Successors and Assigns. 47
SECTION 10.06. Governing Law. 47
SECTION 10.07. Counterparts; Effectiveness. 48
SECTION 10.08. Entire Agreement. 48
SECTION 10.09. Headings. 48
SECTION 10.10. Severability. 48
SECTION 10.11. Specific Performance. 49
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EXHIBITS
Exhibit A Form of Company Affiliate Agreement
Exhibit B Form of Parent Affiliate Agreement
SCHEDULES
Schedule 3.03 Company Governmental Authorization
Schedule 3.04 Company Non-Contravention
Schedule 3.05 Company Capitalization
Schedule 3.06 Company Subsidiaries
Schedule 3.10 Absence of Certain Changes to Company
Schedule 3.11 Company Litigation
Schedule 3.13 Company ERISA
Schedule 3.20 Company Medicare and Medicaid
Schedule 4.03 Parent Governmental Authorization
Schedule 4.05 Parent Capitalization
Schedule 4.06 Parent Subsidiaries
Schedule 4.10 Absence of Certain Changes to Parent
Schedule 4.11 Parent Litigation
Schedule 4.19 No Change of Control
Schedule 5.01 Conduct of the Company
Schedule 6.01 Conduct of Parent
Schedule 6.09 Employee Benefits
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 23, 1995,
among THE HILLHAVEN CORPORATION, a Nevada corporation (the
"Company"), VENCOR, INC., a Delaware corporation ("Parent"), and
VERITAS HOLDINGS CORP., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Subsidiary").
WHEREAS, the Boards of Directors of Parent, Merger
Subsidiary and the Company deem it advisable and in the best
interests of their respective stockholders to consummate, and
have approved, the business combination transaction provided for
herein in which the Company would merge with and into Merger
Subsidiary, which would remain a wholly owned subsidiary of
Parent (the "Merger");
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in
Section 1.01(b)), the Company shall be merged with and into
Merger Subsidiary in accordance with (i) the General Corporation
Law of the State of Delaware ("Delaware Law") and (ii) the
corporation law of the State of Nevada ("Nevada Law"). As a
result of the Merger, the separate existence of the Company shall
cease and Merger Subsidiary shall be the surviving corporation
(the "Surviving Corporation"). The name of the Surviving
Corporation will be "The Hillhaven Corporation."
(b) As soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all conditions set forth in
Article VIII to the Merger, the parties hereto shall cause (i) a
certificate of merger in such form as is required by, and
executed in accordance with, Delaware Law to be duly filed with
the Secretary of State of the State of Delaware and (ii) articles
of merger in such form as is required by, and executed in
accordance with, Nevada Law to be duly filed with the Secretary
of State of the State of Nevada. The Merger shall become
effective at such time as both the certificate of merger is duly
filed with the Secretary of State of the State of Delaware and
the articles of merger are duly filed with the Secretary of State
of the State of Nevada (the "Effective Time").
(c) From and after the Effective Time, the Merger shall
have the effects specified in Delaware Law and Nevada Law.
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(d) The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on the first business day on which all
conditions set forth in Article VIII are satisfied or, to the
extent permitted hereunder, waived at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York,
NY 10004, or on such other date or at such other place as the
parties may agree.
SECTION 1.02. Conversion of Shares. At the Effective
Time:
(a) each share of common stock of Merger Subsidiary
issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding and be unchanged by the
Merger and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation;
(b) each share of common stock, $.75 par value per
share, of the Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time shall, except
as otherwise provided in Section 1.02(e) and Section 1.06, be
converted into the right to receive that number of fully paid and
nonassessable shares of the common stock, par value $0.25 per
share, of Parent (the "Parent Common Stock") equal to the
"Conversion Number" (as defined below). The "Conversion Number"
shall be determined by dividing $32.25 by the "Parent Average
Price" (as defined below), rounded to three decimal places;
provided that the Conversion Number shall not be less than .768
nor more than .977 (subject to Section 9.01(vii) hereof). The
"Parent Average Price" means the average closing price on the New
York Stock Exchange (the "NYSE") of Parent Common Stock (as
reported in the New York Stock Exchange Composite Transactions
reporting system as published in The Wall Street Journal or, if
not published therein, in another authoritative source) for the
10 consecutive trading days ending with the second trading day
immediately preceding the Effective Time;
(c) each share of Series C Preferred Stock, par value
$.15 per share, of the Company (the "Series C Preferred Stock")
issued and outstanding immediately prior to the Effective Time
shall, except as otherwise provided in Section 1.02(e), be
converted into the right to receive in cash $900 per share, plus
accrued and unpaid dividends to the Effective Time (the "Series C
Merger Consideration");
(d) each share of Series D Preferred Stock, par value
$.15 per share, of the Company (the "Series D Preferred Stock")
issued and outstanding prior to the Effective Time shall, except
as otherwise provided in Section 1.02(e), be converted into the
right to receive in cash $900 per share, plus accrued and unpaid
dividends to the Effective Time (the "Series D Merger
Consideration"); and
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(e) each outstanding share of the Company Common Stock,
the Series C Preferred Stock and the Series D Preferred Stock
(collectively, the "Company Stock") held by the Company as
treasury stock or owned by Parent or any subsidiary of Parent
immediately prior to the Effective Time shall be canceled, and no
payment shall be made with respect thereto.
SECTION 1.03. Surrender and Payment.
(a) Prior to the Effective Time, Parent shall appoint an
agent reasonably acceptable to the Company (the "Exchange Agent")
for the purpose of exchanging certificates representing shares of
Company Stock. Parent shall deposit with the Exchange Agent for
the benefit of the holders of Company Stock (other than the
Company, Parent or any Subsidiary of Parent), for exchange in
accordance with this Section 1.03 through the Exchange Agent, (i)
as of the Effective Time, (x) certificates representing the
shares of Parent Common Stock to be issued pursuant to
Section 1.02 in exchange for outstanding shares of Company Common
Stock and (y) cash in an amount equal to the sum of (A) the
aggregate Series C Merger Consideration to be paid to the holders
of the Series C Preferred Stock (including the aggregate amount
of any accrued and unpaid dividends) and (B) the aggregate Series
D Merger Consideration to be paid to the holders of the Series D
Preferred Stock (including the aggregate amount of any accrued
and unpaid dividends), and (ii) from time to time as necessary to
make payments, cash to be paid in lieu of fractional shares
pursuant to Section 1.06 (such certificates for shares of Parent
Common Stock and such cash being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver Parent Common Stock (and any
dividends or distributions related thereto) and/or cash in
exchange for surrendered certificates representing Company Shares
pursuant to Section 1.02 out of the Exchange Fund. Except as
contemplated by Section 1.03(f), the Exchange Fund shall not be
used for any other purpose.
(b) Promptly after the Effective Time, Parent will send,
or will cause the Exchange Agent to send, to each holder of a
certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of Company Stock
("Certificates") a letter of transmittal and instructions for use
in effecting such exchange of the Certificates for Parent Common
Stock and/or cash. Provision also shall be made for holders of
Certificates to procure a letter of transmittal and instructions
and deliver such letter of transmittal and Certificates in
exchange for Parent Common Stock and/or cash in person
immediately after the Effective Time.
(c) After the Effective Time, Certificates shall
represent the right, upon surrender thereof to the Exchange
Agent, together with a duly executed and properly completed
letter of transmittal relating thereto, to receive in exchange
therefor that number of whole shares of Parent Common Stock
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- -- and/or cash which such holder has the right to receive
pursuant to Sections 1.02 and 1.06 after giving effect to any
required tax withholding, and the Certificate or Certificates so
surrendered shall be canceled. No interest will be paid or will
accrue on any cash amount payable upon the surrender of any such
Certificates. Until so surrendered, each such Certificate shall,
after the Effective Time, represent for all purposes only the
right to receive upon such surrender the shares of Parent Common
Stock and/or cash as contemplated by this Article I.
(d) If any shares of Parent Common Stock are to be
issued and/or cash to be paid to a Person other than the
registered holder of the Certificate or Certificates surrendered
in exchange therefor, it shall be a condition to such issuance
that the Certificate or Certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and
that the Person requesting such issuance shall pay to the
Exchange Agent any transfer or other taxes required as a result
of such issuance to a Person other than the registered holder or
establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. For purposes of this
Agreement, "Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or
any agency or instrumentality thereof.
(e) At and after the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no
further registration of transfers of Company Stock outstanding
prior to the Effective Time. If, at or after the Effective Time,
Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged as provided for, and in
accordance with the procedures set forth, in this Article I.
(f) Any shares of Parent Common Stock and/or cash in the
Exchange Fund that remain unclaimed by the holders of Company
Stock six months after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged
his shares of Company Stock in accordance with this Section 1.03
prior to that time shall thereafter look only to Parent, as
general creditors thereof, to exchange such shares or amounts to
which they are entitled pursuant to Section 1.02. If outstanding
Certificates are not surrendered prior to six years after the
Effective Time (or, in any particular case, prior to such earlier
date on which shares of Parent Common Stock issuable in respect
of such Certificates or the dividends and other distributions, if
any, described below would otherwise escheat to or become the
property of any governmental unit or agency), the shares of
Parent Common Stock issuable in respect of such Certificates, and
the amount of dividends and other distributions, if any, which
have become payable and which thereafter become payable on Parent
Common Stock evidenced by such Certificates as provided herein
shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation (and, to the extent not in
its possession, shall be paid over to it by Parent), free and
clear of all claims or interest of any Person previously entitled
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thereto. Notwithstanding the foregoing, Parent shall not be
liable to any holder of Company Stock for any amount paid, or any
shares of Parent Common Stock, cash or dividends delivered, to a
public official pursuant to applicable abandoned property,
escheat or similar laws.
(g) No dividends or other distributions on shares of
Parent Common Stock shall be paid to the holder of any
unsurrendered Certificates with respect to the shares of Parent
Common Stock represented thereby until such Certificates are
surrendered as provided in this Section 1.03. Following such
surrender, there shall be paid, without interest, to the Person
in whose name the certificates representing the shares of Parent
Common Stock issued in exchange therefor are registered, (i)
promptly all dividends and other distributions paid in respect of
such Parent Common Stock with a record date on or after the
Effective Time and theretofore paid, and (ii) at the appropriate
date, all dividends or other distributions in respect of such
Parent Common Stock with a record date after the Effective Time
but prior to surrender and a payment date occurring after
surrender.
(h) If 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 required by the Surviving Corporation, the posting by
such Person of a bond in such reasonable amount as the Surviving
Corporation may direct 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/or cash and
unpaid dividends and other distributions on shares of Parent
Common Stock deliverable in respect thereof pursuant to this
Agreement.
SECTION 1.04. Stock Options.
(a) At the Effective Time, (i) each outstanding option
to purchase Company Common Stock, stock appreciation right or
other similar right (each an "Option") granted under the
Company's 1990 Stock Incentive Plan and the Company's Directors'
Stock Option Plan (the "Company Option Plans"), whether or not
exercisable, and whether or not vested, shall become fully
exercisable and vested, (ii) each Option which is then
outstanding shall be canceled and (iii) in consideration of such
cancellation, Parent shall deliver to each Optionholder in
respect of each Option held by such holder the number of shares
of Parent Common Stock equal to the product of (x) the result of
multiplying (A) the Conversion Number by (B) a fraction, the
numerator of which is the excess, if any, of the Transaction
Value (as defined below) over the exercise or strike price of
such Option and the denominator of which is the Transaction Value
and (y) the number of shares of Company Common Stock subject to
such Option. "Transaction Value" means the product of the
Conversion Number and the Parent Average Price.
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(b) At the Effective Time, (i) each investment option to
purchase PIP Convertible Debentures (as defined in Section 3.05)
(the "PIP Options") granted pursuant to the Company's Performance
Incentive Plan, whether or not exercisable, and whether or not
vested, shall become fully exercisable and vested, (ii) each PIP
Option which is then outstanding will be canceled and (iii) in
consideration of such cancellation, Parent shall deliver to each
PIP Optionholder the number of shares of Parent Common Stock
having a value equal to the value which a PIP Optionholder would
realize had he exercised an option immediately prior to the
Effective Time, which is equal to the number of shares of Parent
Common Stock equal to the product of (x) the result of
multiplying (A) the Conversion Number by (B) a fraction, the
numerator of which is the excess, if any, of the Transaction
Value over $15.7105 and the denominator of which is the
Transaction Value and (y) the number of shares of Company Common
Stock subject to such PIP Option (upon conversion of the
underlying PIP Convertible Debentures (as defined below) and
Series B Preferred Stock).
(c) At the Effective Time, each restricted share
representing a share of Company Common Stock granted under the
Company Option Plans, whether or not vested, shall become fully
vested and shall be entitled to receive the consideration in the
Merger for shares of Company Common Stock specified in Section
1.02(b).
(d) Each performance share award under the Company
Option Plans shall at the Effective Time vest and be converted
into a performance share award with respect to the number of full
shares of Parent Common Stock equal to the product of (i) .75
times the Conversion Number, multiplied by (ii) the number of
shares of Company Common Stock subject to such award (which
represents the fair value of such awards as of the Effective
Time).
(e) Notwithstanding the foregoing, payments to award and
Optionholders contemplated by this Section 1.04 may be withheld
in respect of any award or Option until any necessary consent or
release is obtained or any necessary amendment to any Option Plan
has been made. Parent shall take all necessary action in order
to effect the provisions of this Section 1.04 as of the Effective
Time, including, if necessary, obtaining stockholder approval by
the stockholders of Parent and amending existing stock option
plans of Parent.
(f) Any action taken by the Company to effect this
Section 1.04 shall provide that such action shall be ineffective
to the extent it would interfere with accounting for the Merger
or the acquisition of Nationwide Care, Inc. and related entities
as a "pooling of interests". The parties shall cooperate to
restructure any of the actions taken pursuant to this
Section 1.04 if the effect of such actions would prevent the
Merger from qualifying as a "pooling of interests" for financial
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reporting purposes, provided that the parties will endeavor to
ensure that such restructuring shall have substantially the same
economic effect to the former Optionholders or holders of
restricted or performance shares.
SECTION 1.05. Adjustments. If at any time during the
period between the date of this Agreement and the Effective Time,
any change in the outstanding shares of Parent Common Stock shall
occur, including by reason of any reclassification,
recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a
record date during such period, the Conversion Number shall be
appropriately adjusted.
SECTION 1.06. Fractional Shares. No fractional shares
of Parent Common Stock shall be issued in the Merger and
fractional share interests shall not entitle the owner thereof to
vote or to any rights of a stockholder of Parent. All fractional
shares of Parent Common Stock that a holder of Company Common
Stock or a holder of Options or PIP Options would otherwise be
entitled to receive as a result of the Merger shall be aggregated
and if a fractional share results from such aggregation, such
holder shall be entitled to receive, in lieu thereof, an amount
in cash determined by multiplying the Parent Average Price by the
fraction of a share of Parent Common Stock to which such holder
would otherwise have been entitled.
ARTICLE II
THE SURVIVING CORPORATION; PARENT DIRECTORS
SECTION 2.01. Certificate of Incorporation. The
certificate of incorporation of Merger Subsidiary in effect at
the Effective Time shall be the certificate of incorporation of
the Surviving Corporation until amended in accordance with
applicable law.
SECTION 2.02. Bylaws. The bylaws of Merger Subsidiary
in effect at the Effective Time shall be the bylaws of the
Surviving Corporation until amended in accordance with applicable
law.
SECTION 2.03. Directors and Officers. From and after
the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law,
(i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation, and (ii) the
officers of the Company at the Effective Time shall be the
officers of the Surviving Corporation.
SECTION 2.04. Parent Directors. Parent shall take such
action as shall be necessary so that, at the Effective Time, the
number of directors comprising the full Board of Directors of
Parent shall be increased so that 3 persons shall be selected
prior to the Effective Time by the Company's Board of Directors
from among the present directors of the Company two of whom are
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neither officers of the Company nor designees of any affiliate of
the Company and the third of whom shall be Bruce L. Busby (the
"Designated Directors") to be appointed to the Board of Directors
of Parent to fill the vacancies created by such newly created
directorships to have terms expiring at the Company's annual
meeting of stockholders to be held in 1996. Parent hereby agrees
to cause the Designated Directors to be nominated for election to
the Board of Directors of Parent at the 1996 annual meeting.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent that:
SECTION 3.01. Corporate Existence and Power. The
Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Nevada, and has
all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business substantially
as now conducted, 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 condition (financial or
otherwise), business, assets or results of operations of the
Company and its Subsidiaries (as defined in Section 3.06(a)
hereof) taken as a whole (a "Company Material Adverse Effect").
The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where
the character of the property owned or leased by it or the nature
of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would
not have, individually or in the aggregate, a Company Material
Adverse Effect.
SECTION 3.02. Corporate Authorization. The execution,
delivery and performance by the Company of this Agreement and the
consummation of the Merger and the transactions contemplated
hereby by the Company, but excluding any amendments to any
existing agreements with directors, officers and other employees
of the Company required by this Agreement which require the
consent of such persons, by the Company are within the Company's
corporate power and authority and, except for any required
approval by the Company's stockholders in connection with the
consummation of the Merger, have been duly authorized by all
necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery
thereof by Parent and Merger Subsidiary, constitutes a legal,
valid and binding agreement of the Company.
SECTION 3.03. Governmental Authorization. The
execution, delivery and performance by the Company of this
Agreement and the consummation of the Merger and the transactions
contemplated hereby by the Company do not require any consent,
approval, authorization or permit of or other action by, or
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filing with, any governmental body, agency, official or authority
other than (i) as set forth on Schedule 3.03, (ii) the filing of
appropriate merger documents in accordance with Delaware Law and
Nevada Law and (iii) compliance with applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), the Securities Act of 1933 and the rules and
regulations promulgated thereunder (the "Securities Act"), the
Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder (the "Exchange Act"), and any applicable
state securities or "blue sky" laws, except where the failure of
any such action to be taken or filing to be made would not be
reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect or prevent or delay consummation
of the Merger.
SECTION 3.04. Non-Contravention. The execution,
delivery and performance by the Company of this Agreement and the
consummation of the Merger and the transactions contemplated
hereby by the Company do not and will not (i) contravene or
conflict with the Articles of Incorporation or By-Laws of the
Company, (ii) assuming compliance with the matters referred to in
Section 3.03, contravene or conflict with or constitute a
violation of any provision of any law, rule, regulation,
judgment, injunction, order or decree binding upon or applicable
to the Company or any of its Subsidiaries, (iii) constitute a
default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of the
Company or any of its Subsidiaries or to a loss of any benefit to
which the Company or any of its Subsidiaries is entitled under
any provision of any material agreement or other instrument
binding upon the Company or any of its Subsidiaries or any
license, franchise, permit or other similar authorization held by
the Company or any of its Subsidiaries, or (iv) result in the
creation or imposition of any Lien on any material asset of the
Company or any of its Subsidiaries, except as set forth in
Schedule 3.04 and except for any occurrences or results referred
to in clauses (ii), (iii), and (iv) which would not be reasonably
likely to have, individually or in the aggregate, a Company
Material Adverse Effect or prevent or delay consummation of the
Merger. For purposes of this Agreement, "Lien" means, with
respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance or right of another to or
adverse claim of any kind in respect of such asset.
Notwithstanding the foregoing, no representation is made with
respect to any agreement or instrument individually relating to
$5,000,000 or less in indebtedness or value ("Third Party
Agreement") or assets individually having a value of $5,000,000
or less.
SECTION 3.05. Capitalization. (a) The authorized
capital stock of the Company consists of (i) 60,000,000 shares of
Company Common Stock, of which, as of February 28, 1995:
(A) 32,848,463 were issued and outstanding (of which up to
4,200,000 were held by the grantor trust established by the
Company on January 16, 1995), (B) 472,356 were reserved for
future issuance pursuant to outstanding Options granted pursuant
the Company Option Plans, (C) 1,067,325 shares were reserved
for future issuance pursuant to performance shares awarded
pursuant to the 1990 Stock Incentive Plan, (D) 3,500,750 shares
were reserved for issuance upon conversion of the Company's
Series B Preferred Stock pursuant to the terms of the Company's
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<PAGE> 10
Performance Investment Plan, (E) 4,450,730 shares were reserved
for issuance upon conversion of the Company's 7-3/4% Convertible
Subordinated Debentures due 2002 (the "7-3/4% Convertible
Debentures"), (F) 5,500,000 shares were reserved for issuance in
connection with the proposed merger with Nationwide Care, Inc.
and (G) except for 500,000 shares of Company Common Stock held in
the COLI Trust none was issued and held in treasury, and
(ii) 25,000,000 shares of preferred stock, par value $.15 per
share, of which, as of February 28, 1995, the following series
had been designated: (A) 3,000,000 shares of Series A Junior
Participating Preferred Stock, of which no shares are issued and
outstanding; (B) 950 shares of Series B Preferred Stock, of which
no shares are issued or outstanding and of which 618 shares have
been designated as Subseries 1 and are reserved for issuance upon
the conversion of the Company's Convertible Debentures due
May 29, 1999 (the "PIP Convertible Debentures") pursuant to the
terms of the Company's Performance Investment Plan; (C) 35,000
shares of Series C Preferred Stock, all of which are issued and
outstanding; and (D) 300,000 shares of Series D Preferred Stock,
of which 61,467 are issued and outstanding. Except as described
in this Section 3.05 or in Schedule 3.05, as of the date of this
Agreement, no shares of capital stock of the Company are reserved
for issuance for any other purpose. Since February 28, 1995, no
shares of capital stock have been issued by the Company except
pursuant to agreements for which shares are adequately reserved
under subclause (B), (C), (D) or (E) of clause (i) of this
paragraph (a). Since February 28, 1995 the Company has not
granted any options for, or other rights to purchase, any shares
of capital stock of the Company except for the award of options
to purchase 12,000 shares of Company Common Stock and awards of
24,000 restricted shares pursuant to the 1990 Stock Incentive
Plan and the Directors' Option Plan. Each of the issued shares
of capital stock of the Company is duly authorized, validly
issued and fully paid and nonassessable, and has not been issued
in violation of (nor are any of the authorized shares of capital
stock subject to) any preemptive or similar rights created by
statute, the Articles of Incorporation or Bylaws of the Company
or any agreement to which the Company is a party or is bound.
The Company has no outstanding bonds, notes or other obligations
the holders of which have the right to vote with the stockholders
of the Company on any matter.
(b) Except (i) as set forth in paragraph (a) above or as
set forth on Schedule 3.05, (ii) and the Company's obligations
under a Purchase and Sale Agreements relating to Windsor Estates
L.P. and Westfield Partnership L.P. or (iii) pursuant to the
terms of that certain Rights Agreement dated as of January 31,
1990 by and between the Company and Manufacturers Hanover Trust
Company of California (the "Company Rights Agreement"), there are
no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments of any character
<PAGE>
<PAGE> 11
to which the Company is a party relating to the issued or
unissued capital stock of the Company or obligating the Company
to grant, issue or sell any shares of the capital stock of the
Company. Except in accordance with the terms of the Series C and
Series D Preferred Stock and as set forth in Schedule 3.05, there
are no obligations, contingent or otherwise, of the Company to
(i) repurchase, redeem or otherwise acquire any shares of Company
Common Stock or other capital stock of the Company, or the
capital stock or other equity interests of any Subsidiary of the
Company; or (ii) (other than advances to Subsidiaries in the
ordinary course of business) provide material funds to, or make
any material investment in (in the form of a loan, capital
contribution or otherwise), or provide any guarantee with respect
to the obligations of, any Subsidiary of the Company or any other
Person.
(c) The Company has delivered to Parent complete and
correct copies of (i) the form of PIP Options to purchase PIP
Convertible Debentures and (ii) the Company Option Plans and all
forms of Options issued pursuant to the Company Option Plans,
including all amendments thereto. The Company has previously
delivered to Parent a complete and correct list setting forth as
of the date set forth on such list, (i) the number of Options
outstanding, and (ii) the exercise price of each outstanding
Option.
SECTION 3.06. Subsidiaries.
(a) Each Subsidiary of the Company is a corporation duly
incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation or is a partnership
duly constituted under its governing law, has all requisite
corporate or partnership power and authority to own, lease and
operate its properties and to carry on its business substantially
as now conducted and is duly qualified to do business as a
foreign corporation or partnership and is in good standing in
each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such
qualification necessary, except where failure to be so would not
be reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. For purposes of this Agreement,
"Subsidiary" of any Person means (i) any corporation or other
entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are
directly or indirectly owned by such Person, and (ii) any
partnership of which such Person is a general partner.
(b) Except for certain partnerships of which the Company
is the general partner disclosed in the Company SEC Reports and
except as set forth on Schedule 3.06, each Subsidiary of the
Company is wholly-owned by the Company, directly or indirectly,
free and clear of any Lien and free and clear of any other
limitation or restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other
ownership interests). Except as set forth in the Company SEC
<PAGE>
<PAGE> 12
Reports or on Schedule 3.06, there are no outstanding
(i) securities of the Company or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any such
Subsidiary of the Company, or (ii) options or other rights to
acquire from the Company or any of its Subsidiaries, and no other
obligation of the Company or any of its Subsidiaries to issue,
any capital stock, voting securities or other ownership interests
in, or any securities convertible into or exchangeable for any
capital stock, voting securities or ownership interests in, any
such Subsidiary of the Company (the items in clauses (i) and (ii)
being referred to collectively as the "Company Subsidiary
Securities"). There are no outstanding obligations of the
Company or any of such Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding Company Subsidiary Securities.
SECTION 3.07. Reports. Since May 31, 1992, the Company
and its Subsidiaries have filed (i) all forms, reports,
statements and other documents required to be filed with (A) the
Securities and Exchange Commission (the "SEC"), including without
limitation (1) all Annual Reports on Form 10-K, (2) all Quarterly
Reports on Form 10-Q, (3) all proxy statements relating to
meetings of stockholders (whether annual or special), (4) all
Current Reports on Form 8-K and (5) all other reports, schedules,
registration statements or other documents (collectively referred
to as the "Company SEC Reports"), and (B) any other applicable
state securities authorities and (ii) all forms, reports,
statements and other documents required to be filed with any
other applicable federal or state regulatory authorities,
including, without limitation, state insurance and health
regulatory authorities, except where the failure to file any such
forms, reports, statements or other documents would not be
reasonably likely to have a Company Material Adverse Effect (all
such forms, reports, statements and other documents in clauses
(i) and (ii) of this Section 3.07 being referred to herein,
collectively, as the "Company Reports"). The Company Reports (i)
were prepared in all material respects in accordance with the
requirements of applicable law (including, with respect to the
Company SEC Reports, the Securities Act or the Exchange Act, as
the case may be) and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 3.08. Financial Statements; No Undisclosed
Liabilities. The audited consolidated financial statements and
unaudited consolidated interim financial statements (including
the related notes and schedules) of the Company and its
consolidated Subsidiaries included or incorporated by reference
in the Company SEC Reports, including reports on Forms 10-K and
10-Q, (the "Company Financial Statements") were prepared in
accordance with generally accepted accounting principles applied
on a consistent basis (except as may be indicated in the notes
thereto), and fairly present the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates
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<PAGE> 13
thereof and their consolidated results of operations and cash
flows for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year-end
adjustments, none of which would, individually or in the
aggregate, be reasonably likely to have a Company Material
Adverse Effect). Neither the Company nor its Subsidiaries has
any liabilities, whether or not accrued, contingent or otherwise,
that individually or in the aggregate, are reasonably likely to
have a Company Material Adverse Effect other than liabilities
disclosed in the Schedules hereto or in the Company SEC Reports,
or for which the Company has made adequate reserves as reflected
in the Company Financial Statements.
SECTION 3.09. Joint Proxy Statement/Prospectus;
Registration Statement. None of the information to be supplied
by the Company for inclusion in (a) the joint proxy statement
relating to the meetings of the Company's and Parent's
stockholders to be held in connection with the Merger (also
constituting the prospectus in respect of Parent Common Stock to
be exchanged for shares of Company Common Stock in the Merger)
(the "Joint Proxy Statement/Prospectus"), to be filed by the
Company and Parent with the SEC, and any amendments or
supplements thereto, or (b) the Registration Statement on Form S-
4 (the "Registration Statement") to be filed by Parent with the
SEC in connection with the Merger, and any amendments or
supplements thereto, will, at the respective times such documents
are filed, and, in the case of the Joint Proxy
Statement/Prospectus, at the time the Joint Proxy
Statement/Prospectus or any amendment or supplement thereto is
first mailed to stockholders of the Company, at the time such
stockholders vote on approval and adoption of this Agreement and
at the Effective Time, and, in the case of the Registration
Statement, when it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading.
SECTION 3.10. Absence of Certain Changes. Except as
contemplated hereby or as described in any Company SEC Report
filed prior to the date hereof or as disclosed in Schedule 3.10
or any other Schedule to this Agreement, since May 31, 1994
(a) the Company and its Subsidiaries have conducted their
business in all material respects in the ordinary course
consistent with past practices (other than in connection with the
proposal of Horizon Healthcare Corp. to acquire the Company,
litigation relating thereto, and the Company's process of
exploring strategic alternatives), (b) there has not been any
change or development, or combination of changes or developments
which, individually or in the aggregate, are reasonably likely to
have a Company Material Adverse Effect, (c) there has not been
any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of
the Company (other than any dividends on the Series C or Series D
Preferred Stock in accordance with the terms thereof), or any
repurchase, redemption or other acquisition by the Company or any
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<PAGE> 14
of its Subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company
or any of its Subsidiaries, (d) there has not been any amendment
of any term of any outstanding security of the Company or any of
its Subsidiaries, (e) there has not been any incurrence,
assumption or guarantee by the Company or any of its Subsidiaries
of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with
past practices; (f) there has not been any creation or assumption
by the Company or any of its Subsidiaries of any Lien on any
material asset other than in the ordinary course of business
consistent with past practices (including the sale, pledging or
assignment of receivables); (g) there has not been any change in
any method of accounting or accounting practice by the Company or
any of its Subsidiaries, except for any such change required by
reason of a concurrent change in generally accepted accounting
principles or to conform a Subsidiary's accounting policies and
practices to those of the Company; and (h) except for contractual
obligations disclosed in any Company SEC Report filed prior to
the date hereof or in any Schedule to this Agreement there has
not been any (i) grant of any severance or termination pay to any
director, executive officer or key employee of the Company or any
of its Subsidiaries, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director,
executive officer or key employee of the Company or any of its
Subsidiaries, except in the ordinary course of business
consistent with past practice and except for commitments to make
loans to assist such persons in making tax payments in connection
with stock-based compensation, which loans shall be on terms
consistent with similar loans made in the past; provided that the
maturity of any such loan shall be six months after the date on
which Parent publishes financial results covering at least 30
days of combined operations of Parent and the Company,
(iii) increase in benefits payable under any existing severance
or termination pay policies or employment agreements with any
director, executive officer or key employee of the Company or any
of its Subsidiaries or (iv) increase in compensation, bonus or
other benefits payable to directors, executive, officers or key
employees of the Company or any of its Subsidiaries.
SECTION 3.11. Litigation. Except as disclosed in
Schedule 3.11, there are no actions, suits, investigations or
proceedings pending against the Company or any of its
Subsidiaries or any of their respective properties before any
court or arbitrator or any governmental body, agency or official
which, individually or in the aggregate, are reasonably likely to
have a Company Material Adverse Effect.
SECTION 3.12. Articles of Incorporation and Bylaws. The
Company has heretofore furnished to Parent complete and correct
copies of the Articles of Incorporation and the Bylaws or the
equivalent organizational documents, in each case as amended or
restated, of the Company and each of its Subsidiaries.
<PAGE>
<PAGE> 15
SECTION 3.13. ERISA.
(a) "Employee Plans" shall mean each "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), which (i) is subject to
any provision of ERISA and (ii) is maintained, administered or
contributed to by the Company or any affiliate (as defined below)
and covers any employee or former employee of the Company or any
affiliate or under which the Company or any affiliate has any
liability. Copies of such plans (and, if applicable, related
trust agreements) and all amendments thereto and written
interpretations thereof and the most recent Forms 5500 required
to be filed with respect thereto will be promptly furnished to
Parent after the date of this Agreement. For purposes of this
Section and Section 4.13, "affiliate" of any Person means any
other Person which, together with such Person, would be treated
as a single employer under Section 414 of the United States
Internal Revenue Code of 1986, as amended (the "Code"). Except
for the Supplemental Executive Retirement Plan, no Employee Plan
individually or collectively constitutes a "defined benefit plan"
as defined in Section 3(35) of ERISA.
(b) No Employee Plan constitutes a "multiemployer plan,"
as defined in Section 3(37) of ERISA, and no Employee Plan is
maintained in connection with any trust described in
Section 501(c)(9) of the Code except for The Hillhaven
Corporation Voluntary Participation Benefit Trust. Except as set
forth on Schedule 3.13, or in respect of no more than 5
individuals, no Employee Plan provides retiree medical or life
insurance benefits. No Employee Plan is subject to Title IV of
ERISA. Neither the Company nor any of its affiliates has
incurred, nor has reason to expect to incur, any liability under
Title IV of ERISA arising in connection with the termination of,
or complete or partial withdrawal from, any plan previously
covered by Title IV of ERISA that would have, individually or in
the aggregate, a Company Material Adverse Effect. Nothing done
or omitted to be done and no transaction or holding of any asset
under or in connection with any Employee Plan has or will make
the Company or any of its Subsidiaries or any officer or director
of the Company or any of its Subsidiaries subject to any
liability under Title I of ERISA or liable for any tax pursuant
to Section 4975 of the Code that would have, individually or in
the aggregate, a Company Material Adverse Effect.
(c) Except to the extent it would not have, individually
or in the aggregate, a Company Material Adverse Effect, (i) each
Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each
trust forming a part thereof is exempt from tax pursuant to
Section 501 (a) of the Code, and (ii) each Employee Plan has been
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, final rules and final
regulations, including but not limited to ERISA and the Code,
which are applicable to such Employee Plan.
<PAGE>
<PAGE> 16
(d) "Benefit Arrangement" shall mean each employment,
severance or other similar contract, arrangement or policy and
each plan or arrangement (written or oral) providing for
compensation, bonus, profit-sharing, stock option, or other stock
related rights or other forms of incentive or deferred
compensation, which (i) is not an Employee Plan, (ii) is entered
into, maintained or contributed to, as the case may be, by the
Company or any of its affiliates, and (iii) covers any employee
or former employee or director or former director of the Company
or any of its affiliates. Schedule 3.13 lists each Benefit
Arrangement currently in effect (other than any immaterial
arrangement available to employees or groups of employees
generally or as disclosed in any Company SEC Report filed prior
to the date hereof) provided to any director or executive officer
of the Company or any former director or executive officer of the
Company and sets forth each Benefit Arrangement with respect to
which benefits will be accelerated or paid as a result of the
transactions contemplated by this Agreement. Copies of all such
Benefit Arrangements and all amendments thereto will be promptly
furnished to Parent after the date of this Agreement. Except to
the extent that it would not, individually or in the aggregate,
be reasonably likely to have a Company Material Adverse Effect,
each Benefit Arrangement has been maintained in compliance with
its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable to
such Benefit Arrangement.
SECTION 3.14. Taxes. Except for such matters that would
not be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect, (a) the Company and
its Subsidiaries have timely filed all returns and reports
required to be filed by them with any taxing authority with
respect to taxes for all periods heretofore ended, taking into
account any extension of time to file granted to or obtained on
behalf of the Company and its Subsidiaries, (b) all taxes
required to be paid with respect to the periods covered by such
returns or reports that are due prior to the Effective Time have
been paid or will be paid by the Effective Time, (c) as of the
date hereof, no deficiency for any amount of tax has been
asserted or assessed by a taxing authority against the Company or
any of its Subsidiaries, except for amounts for which the Company
has made an adequate reserve as reflected in the Company
Financial Statements, (d) all liability for taxes of the Company
or any of its Subsidiaries that are or will become due or payable
with respect to periods covered by the financial statements
referred to in Section 3.08 have been paid or adequately reserved
for on such financial statements to the extent required by
generally accepted accounting principles, and (e) the Company and
its Subsidiaries are not liable for any taxes arising out of
membership or participation in any consolidated, affiliated,
combined or unitary group in which it or any of its Subsidiaries
was at any time a member, other than such group the parent of
which is the Company or for which the Company and its
Subsidiaries have a right of indemnification pursuant to a Tax
Sharing Agreement with National Medical Enterprises, Inc. entered
into in 1990.
<PAGE>
<PAGE> 17
SECTION 3.15. Tax Matters; Pooling. Neither the Company
nor, to the knowledge of the Company, any of its affiliates has
taken or agreed to take any action that would prevent (a) the
Merger from constituting a reorganization qualifying under the
provisions of Section 368 of the Code or (b) the Merger from
being treated for financial accounting purposes as a "pooling of
interests" in accordance with generally accepted accounting
principals and the rules, regulations and interpretations of the
SEC (a "Pooling Transaction").
SECTION 3.16. Finders and Investment Bankers. Except
for Merrill Lynch & Co. ("Merrill Lynch"), whose fees will be
paid by the Company, there is no investment banker, broker,
finder or other intermediary which has been retained by or is
authorized to act on behalf of the Company or any of its
Subsidiaries who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.17. Opinion of Financial Advisor. The Company
has received the opinion of Merrill Lynch to the effect that, as
of the date of such opinion, the consideration to be received in
the Merger by the holders of Company Common Stock is fair to such
stockholders from a financial point of view.
SECTION 3.18. Vote Required. The only votes of the
holders of any class or series of Company capital stock necessary
to approve the Merger are the affirmative votes on a class-by-
class basis of the holders of a majority of the outstanding
shares of the Company Common Stock and of 66 2/3% of the
outstanding shares of each of the Series C Preferred Stock and
the Series D Preferred Stock.
SECTION 3.19. Acquiring Person. Neither Parent nor
Merger Sub is an "Acquiring Person" (as defined in the Company
Rights Plan) or will become an "Acquiring Person" as a result of
any of the transactions contemplated by this Agreement. The
Company has taken all necessary actions to ensure that, for the
purposes of the Company Rights Plan, the execution of this
Agreement does not, and the consummation of the Merger and the
other transactions contemplated hereby will not, result in the
grant of any rights to any person under the Company Rights
Agreement or enable or require any outstanding rights to be
exercised, distributed or triggered, and that the Rights (as
defined in the Company Rights Plan) will expire without any
further force or effect as of the Effective Time.
SECTION 3.20. Medicare and Medicaid. The Company and
its Subsidiaries have complied with all Medicare and Medicaid
laws, rules and regulations and have filed all returns, cost
reports and other filings in any manner prescribed, except where
the failure to do so would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect. All returns, cost reports and other filings made by the
Company and its Subsidiaries to Medicare, Medicaid or any other
governmental health or welfare related entity or third party
<PAGE>
<PAGE> 18
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 Company Material Adverse
Effect. 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 Federal or state
agency or instrumentality or other provider reimbursement
entities relating to Medicare or Medicaid or third party payor
claims, except as disclosed on Schedule 3.20, 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 agency, instrumentality, entity or third party
payor except for any deficiencies which would not be reasonably
expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as disclosed on Schedule 3.20,
neither the Company nor any of its Subsidiaries has been subject
to any audit relating to fraudulent Medicare or Medicaid
procedure or practices and except audits which would not be
reasonably expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
SECTION 3.21. 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, the Nevada Control Share Acquisition Act) 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 the Nevada Combination Moratorium Statute
and Articles Twelfth and Fifteenth of the Company's Certificate
of Incorporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Company that:
SECTION 4.01. Corporate Existence and Power. Each of
Parent and Merger Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its
business substantially as now conducted, 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 condition
(financial or otherwise), business, assets or results of
operations of Parent and its Subsidiaries taken as a whole (a
"Parent Material Adverse Effect"). Parent is duly qualified to
do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the
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<PAGE> 19
failure to be so qualified would not have, individually or in the
aggregate, a Parent Material Adverse Effect. Merger Subsidiary
has not engaged and will not engage in any activities other than
in connection with or as contemplated by this Agreement and the
transactions contemplated hereby.
SECTION 4.02. Corporate Authorization. The execution,
delivery and performance by each of Parent and Merger Subsidiary
of this Agreement and the consummation of the Merger by Merger
Subsidiary and the transactions contemplated hereby are within
the corporate powers and authority of each of Parent and Merger
Subsidiary and have been duly authorized by all necessary
corporate action on the part of each of Parent and Merger
Subsidiary, except for any required approval by Parent's
stockholders of the issuance of Parent Common Stock in connection
with the Merger. Parent, as sole stockholder of Merger
Subsidiary has approved the Merger and no further corporate or
stockholder action is required on the part of Merger Subsidiary
in connection with the consummation of the Merger other than the
filing of a certificate of merger as contemplated by this
Agreement. This Agreement has been duly executed and delivered
by Parent and Merger Subsidiary and, assuming the due
authorization, execution and delivery thereof by the Company,
constitutes a legal, valid and binding agreement of each of
Parent and Merger Subsidiary.
SECTION 4.03. Governmental Authorization. The
execution, delivery and performance by Parent and Merger
Subsidiary of this Agreement and the consummation of the Merger
by Merger Subsidiary and the transactions contemplated hereby do
not require any consent, approval, authorization or permit of or
other action by or filing with, any governmental body, agency,
official or authority other than (i) as set forth on Schedule
4.03, (ii) the filing of appropriate merger documents in
accordance with Delaware Law and Nevada Law and (iii) compliance
with any applicable requirements of the HSR Act, the Exchange
Act, the Securities Act, any applicable state securities or "blue
sky" laws, except where the failure of any such action to be
taken or filing to be made would not be reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse
Effect or prevent or delay consummation of the Merger.
SECTION 4.04. Non-Contravention. The execution,
delivery and performance by each of Parent and Merger Subsidiary
of this Agreement and the consummation of the Merger by Merger
Subsidiary and the transactions contemplated hereby do not and
will not (i) contravene or conflict with the certificate of
incorporation or bylaws of each of Parent or Merger Subsidiary,
(ii) assuming compliance with the matters referred to in Section
4.03, contravene or conflict with or constitute a violation of
any provision of law, rule, regulation, judgment, injunction,
order or decree binding upon or applicable to Parent or any of
its Subsidiaries, (iii) constitute a default under or give rise
to any right of termination, cancellation or acceleration of any
right or obligation of Parent or any of its Subsidiaries or to a
loss of any benefit to which Parent or any of its Subsidiaries is
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<PAGE> 20
entitled under any provision of any material agreement or other
instrument binding upon Parent or any of its Subsidiaries or any
license, franchise, permit or other similar authorization held by
Parent or any of its Subsidiaries, or (iv) result in the creation
or imposition of any Lien on any material asset of Parent or any
of its Subsidiaries, except for any occurrences or results
referred to in clauses (ii), (iii) and (iv) which would not be
reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect or prevent or delay consummation
of the Merger.
SECTION 4.05. Capitalization. (a) The authorized
capital stock of Parent consists of (i) 60,000,000 shares of
Parent Common Stock, of which, as of March 31, 1995, (A)
27,869,980 shares were issued and outstanding and (B) 2,137,352
shares were issued and held in treasury and, as of April 21,
1995, (C) 2,228,884 shares were reserved for future issuance
pursuant to Parent's Non-Qualified Incentive Compensation Plan
and ISO Incentive Compensation Plan and (D) 139,921 shares were
reserved for future issuance pursuant to Parent's Non-Employee
Directors Plan and (E) 1,500 shares were reserved for issuance
pursuant to options outside the plans and (ii) 1,000,000 shares
of Preferred Stock, of which, as of March 31, 1995, (A) no shares
were issued and outstanding and (B) 300,000 shares had been
designated as Series A Participation Preferred Stock with respect
to the Parent Rights Agreement (as defined below). Except as
described in this Section 4.05 or in Schedule 4.05, as of the
date of this Agreement, no shares of capital stock of Parent are
reserved for issuance for any other purpose. Since March 31,
1995, no shares of capital stock have been issued by Parent
except shares that are adequately reserved as described under
subclauses (C), (D) and (E) of clause (i) of this paragraph (a).
Since March 31, 1995, Parent has not granted any options for, or
other rights to purchase, any shares of capital stock of Parent.
Each of the issued shares of capital stock of Parent is duly
authorized, validly issued and fully paid and nonassessable, and
has not been issued in violation of (nor are any of the
authorized shares of capital stock subject to) any preemptive or
similar rights created by statute, the Certificate of
Incorporation or Bylaws of Parent, or any agreement to which
Parent is a party or is bound. Parent has no outstanding bonds,
notes or other obligations the holders of which have the right to
vote with the stockholders of the Parent on any matter.
(b) Except (i) as set forth in paragraph (a) above, (ii)
as set forth in Schedule 4.05 or (iii) pursuant to the terms of
that certain Rights Agreement dated as of July 20, 1993 by and
between Parent and National City Bank, as Rights Agent (the
"Parent Rights Agreement"), there are no options, warrants or
other rights (including registration rights), agreements,
arrangements or commitments of any character to which Parent is a
party relating to the issued or unissued capital stock of Parent
or obligating Parent to grant, issue or sell any shares of its
capital stock. Except as set forth in Schedule 4.05, there are
no obligations, contingent or otherwise, of Parent to (i)
repurchase, redeem or otherwise acquire any shares of Parent
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<PAGE> 21
Common Stock or other capital stock of Parent, or the capital
stock or other equity interests of any Subsidiary of Parent; or
(ii) (other than advances to Subsidiaries in the ordinary course
of business) provide material funds to, or make any material
investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the
obligations of, any Subsidiary of Parent or any other Person.
(c) Parent will deliver to the Company complete and
correct copies of Parent's stock option plans and all forms of
options issued pursuant thereto, including all amendments
thereto. Parent has previously delivered to the Company a
complete and correct list setting forth as of April 21, 1995, (i)
the number of options outstanding, (ii) the exercise price of
each outstanding option, and (iii) the number of options
exercisable.
(d) The shares of Parent Common Stock to be exchanged
for shares of Company Common Stock in the Merger have been duly
authorized, except for any required approval by Parent's
stockholders of the increase in the authorized Parent Common
Stock and the issuance of Parent Common Stock in connection with
the Merger, and when issued and delivered in accordance with the
terms of this Agreement, will have been validly issued and will
be fully paid and nonassessable and the issuance thereof is not
subject to any preemptive or other similar right.
SECTION 4.06. Subsidiaries. (a) Each Subsidiary of
Parent is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of
incorporation or is a partnership duly constituted under its
governing law, has all requisite corporate or partnership power
and authority to own, lease and operate its properties and to
carry on its business substantially as now conducted and is duly
qualified to do business as a foreign corporation or partnership
and is in good standing in each jurisdiction where the character
of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except where
failure to be would not, individually or in the aggregate, be
reasonably likely to have a Parent Material Adverse Effect.
(b) Except as set forth on Schedule 4.06, all of the
outstanding capital stock of, or other ownership interests in,
each Subsidiary of Parent is owned by Parent, directly or
indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other
ownership interests). Except as set forth in any Parent SEC
Report or on Schedule 4.06, there are no outstanding
(i) securities of Parent or any of its Subsidiaries convertible
into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Subsidiary of Parent, or
(ii) options or other rights to acquire from Parent or any of its
Subsidiaries, and no other obligation of Parent or any of its
Subsidiaries to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into
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<PAGE> 22
or exchangeable for any capital stock, voting securities or
ownership interests in, any Subsidiary of Parent (the items in
clauses (i) and (ii) being referred to collectively as the
"Parent Subsidiary Securities"). There are no outstanding
obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any outstanding Parent Subsidiary
Securities.
SECTION 4.07. Reports. Since December 31, 1992, Parent
and its Subsidiaries have filed (i) all forms, reports,
statements and other documents required to be filed with (A) the
SEC, including without limitation (1) all Annual Reports on Form
10-K, (2) all Quarterly Reports on Form 10-Q, (3) all proxy
statements relating to meetings of stockholders (whether annual
or special), (4) all Current Reports on Form 8-K and (5) all
other reports, schedules, registration statements or other
documents (collectively referred to as the "Parent SEC Reports"),
and (B) any other applicable state securities authorities and
(ii) all forms, reports, statements and other documents required
to be filed with any other applicable federal or state regulatory
authorities, including, without limitation, state insurance and
health regulatory authorities, except where the failure to file
any such forms, reports, statements or other documents would not
be reasonably likely to have a Parent Material Adverse Effect
(all such forms, reports, statements and other documents in
clauses (i) and (ii) of this Section 4.07 being referred to
herein, collectively, as the "Parent Reports"). The Parent
Reports (i) were prepared in all material respects in accordance
with the requirements of applicable law (including, with respect
to the Parent SEC Reports, the Securities Act or the Exchange
Act, as the case may be) and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 4.08. Financial Statements; No Undisclosed
Liabilities. The audited consolidated financial statements and
unaudited consolidated interim financial statements (including
the related notes and schedules) of Parent and its consolidated
Subsidiaries included or incorporated by reference in the Parent
SEC Reports, including reports on Forms 10-K and 10-Q (the
"Parent Financial Statements"), were prepared in accordance with
generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto), and
fairly present the consolidated financial position of Parent and
its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial
position for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year-end
adjustments, none of which would individually or in the
aggregate, be reasonably likely to have a Parent Material Adverse
Effect). Except as disclosed in the Schedules hereto or in the
Parent SEC Reports neither Parent nor its Subsidiaries has any
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<PAGE> 23
liabilities, whether or not accrued, contingent or otherwise,
that individually or in the aggregate are reasonably likely to
have a Parent Material Adverse Effect.
SECTION 4.09. Joint Proxy Statement/Prospectus;
Registration Statement. None of the information to be supplied
by Parent for inclusion in (a) the Joint Proxy
Statement/Prospectus to be filed by the Company and Parent with
the SEC and any amendments or supplements thereto, or (b) the
Registration Statement to be filed by Parent with the SEC and any
amendments or supplements thereto, will, at the respective times
when such documents are filed, and, in the case of the Joint
Proxy Statement/Prospectus, at the time the Joint Proxy
Statement/Prospectus or any amendment or supplement thereto is
first mailed to stockholders of Parent, at the time such
stockholders vote on approval and adoption of the proposals
contained in the Joint Proxy Statement/Prospectus and at the
Effective Time, and, in the case of the Registration Statement,
when it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not
misleading.
SECTION 4.10. Absence of Certain Changes. Except as
contemplated hereby or as described in any Parent SEC Report
filed prior to the date hereof or as disclosed in Schedule 4.10
or any other Schedule to this Agreement, since December 31, 1994,
(a) Parent and its Subsidiaries have conducted their business in
all material respects in the ordinary course consistent with past
practices, (b) there has not been any change or development, or
combination of changes or developments which, individually or in
the aggregate, are reasonably likely to have a Parent Material
Adverse Effect, (c) there has not been any declaration, setting
aside or payment of any dividend or other distribution with
respect to any shares of capital stock of Parent, or any
repurchase, redemption or other acquisition by Parent or any of
its Subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, Parent or
any of its Subsidiaries, (d) there has not been any amendment of
any term of any outstanding security of Parent or any of its
Subsidiaries, (e) there has not been any incurrence, assumption
or guarantee by Parent or any of its Subsidiaries of any
indebtedness for borrowed money other than in the ordinary course
of business and in amounts and on terms consistent with past
practices; (f) there has not been any creation or assumption by
Parent or any of its Subsidiaries of any Lien on any material
asset other than in the ordinary course of business consistent
with past practices (including the sale, pledging or assignment
of receivables); and (g) there has not been any change in any
method of accounting or accounting practice by Parent or any of
its Subsidiaries, except for any such change required by reason
of a concurrent change in generally accepted accounting
principles or to conform a Subsidiary's accounting policies and
practices to those of Parent.
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<PAGE> 24
SECTION 4.11. Litigation. Except as described in
Schedule 4.11, there are no actions, suits, investigations or
proceedings pending against Parent or any of its Subsidiaries or
any of their respective properties before any court or arbitrator
or any governmental body, agency or official which, individually
or in the aggregate are reasonably likely to have a Parent
Material Adverse Effect.
SECTION 4.12. Articles of Incorporation and Bylaws.
Parent has heretofore furnished to the Company complete and
correct copies of the Articles of Incorporation and the Bylaws of
Parent and each of its Subsidiaries.
SECTION 4.13. ERISA. (a) "Parent Employee Plans" shall
mean each "employee benefit plan," as defined in Section 3(3) of
ERISA, which (i) is subject to any provision of ERISA and (ii) is
maintained, administered or contributed to by Parent or any
affiliate (as defined in Section 3.13) and covers any employee or
former employee of Parent or any affiliate or under which Parent
or any affiliate has any liability. No Parent Employee Plan
individually or collectively constitutes a "defined benefit plan"
as defined in Section 3(35) of ERISA.
(b) No Parent Employee Plan constitutes a multiemployer
plan.
(c) Except to the extent it would not have, individually
or in the aggregate, a Parent Material Adverse Effect, (i) each
Parent Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each
trust forming a part thereof is exempt from tax pursuant to
Section 501(a) of the Code, and (ii) each Parent Employee Plan
has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, final
rules and final regulations, including but not limited to ERISA
and the Code, which are applicable to such Parent Employee Plan.
SECTION 4.14. Taxes. Except for such matters that would
not have, individually or in the aggregate, a Parent Material
Adverse Effect, (a) Parent and its Subsidiaries have timely filed
all returns and reports required to be filed by them with any
taxing authority with respect to taxes for all periods heretofore
ended, taking into account any extension of time to file granted
to or obtained on behalf of Parent and it Subsidiaries, (b) all
taxes required to be paid with respect to the periods covered by
such returns or reports that are due prior to the Effective Time
have been paid or will be paid by the Effective Date, (c) as of
the date hereof, no deficiency for any amount of tax has been
asserted or assessed by a taxing authority against Parent or any
of its Subsidiaries except for amounts for which the Parent has
made an adequate reserve as reflected in the Parent Financial
Statements, (d) all liability for taxes of Parent or any of its
Subsidiaries that are or will become due or payable with respect
to periods covered by the financial statements referred to in
Section 4.08 of this Agreement have been paid or adequately
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<PAGE> 25
reserved for on such financial statements to the extent required
by generally accepted accounting principals, and (e) Parent and
its Subsidiaries are not liable for any taxes arising out of
membership or participation in any consolidated, affiliated,
combined or unitary group in which it or any of its Subsidiary
was at any time a member, other than such group the parent of
which is Parent.
SECTION 4.15. Tax Matters; Pooling. Neither Parent nor,
to the knowledge of Parent, any of its affiliates has taken or
agreed to take any action that would prevent (a) the Merger from
constituting a reorganization qualifying under the provisions of
Section 368 of the Code or (b) the Merger from being treated for
financial accounting purposes as a Pooling Transaction.
SECTION 4.16. Finders and Investment Bankers. Except
for CS First Boston Corporation ("First Boston") whose fees will
be paid by Parent, there is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized
to act on behalf of Parent or any of its Subsidiaries who might
be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
SECTION 4.17. Opinion of Financial Advisor. Parent has
received the opinion of First Boston to the effect that, as of
the date of such opinion, the consideration to be paid by Parent
in the Merger is fair to Parent from a financial point of view.
SECTION 4.18. Vote Required. The increase in the
authorized Parent Common Stock requires the affirmative vote of
the holders of a majority of the shares of Parent Common Stock
entitled to vote at a meeting of stockholders and the affirmative
vote of a majority of the shares of Parent Common Stock voted at
a meeting of stockholders is necessary pursuant to applicable
rules of the NYSE to approve the issuance of Parent Common Stock
pursuant to the Agreement and the increase in the number of
shares authorized for issuance under, and any necessary amendment
to the Parent's stock option plans to effect the transactions
contemplated by this Agreement (the "Option Plan Amendment").
SECTION 4.19. No Change of Control. Except as set forth
on Schedule 4.19, the consummation of the Merger and the
transactions contemplated by this Agreement will not constitute a
change of control under any severance, employment or similar
agreements of Parent or any of its Subsidiaries which will result
in the acceleration of or payment of any benefits to participants
under such agreements.
SECTION 4.20. Medicare and Medicaid. Parent and its
Subsidiaries have complied with all Medicare and Medicaid laws,
rules and regulations and have filed all returns, cost reports
and other filings in any manner prescribed, except where the
failure to do so would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse
Effect. All returns, cost reports and other filings made by
Parent and its Subsidiaries to Medicare, Medicaid or any other
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<PAGE> 26
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 Parent Material Adverse
Effect. 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 Federal or state agency or
instrumentality or other provider reimbursement entities relating
to Medicare or Medicaid or third party payor claims, and to the
best of Parent's knowledge, after reasonable investigation, there
is no basis for any successful claims or requests for
reimbursement from any such agency, instrumentality, entity or
third party payor except for any deficiencies which would not be
reasonably expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
SECTION 4.21. Acquiring Person. Neither the Company nor
any stockholder of the Company is an "Acquiring Person" (as
defined in the Parent Rights Plan) or will become an "Acquiring
Person" as a result of any of the transactions contemplated by
this Agreement. Parent has taken all necessary actions to ensure
that, for the purposes of the Parent Rights Plan, the execution
of this Agreement does not, and the consummation of the Merger
and the other transactions contemplated hereby will not, result
in the grant of any rights to any person under the Parent Rights
Agreement or enable or require any outstanding rights to be
exercised, distributed or triggered.
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.01. Conduct of the Company. Except as
expressly contemplated by this Agreement or, as disclosed on
Schedule 5.01 hereto or on the other Schedules hereto, from the
date hereof until the Effective Time, the Company and its
Subsidiaries shall conduct their business in the ordinary course
consistent with past practice and shall use their reasonable best
efforts to preserve intact their business organizations and
relationships with third parties and to keep available the
services of their present officers and key employees. Except as
otherwise approved in writing by Parent or as expressly
contemplated by this Agreement, and without limiting the
generality of the foregoing, from the date hereof until the
Effective Time:
(a) the Company will not adopt or propose any change or
amendment in its Articles of Incorporation or Bylaws or the
Company Rights Agreement;
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<PAGE> 27
(b) the Company will not, and will not permit any of its
Subsidiaries to, merge, consolidate or enter into a share
exchange with any other Person or acquire any stock or any
material amount of assets of any other Person or sell, lease,
license, mortgage, pledge or otherwise dispose of any material
assets or property except (i) pursuant to existing contracts or
commitments, (ii) in the ordinary course consistent with past
practice or (iii) transfers between the Company and/or its
wholly-owned Subsidiaries;
(c) the Company will not declare, set aside, or pay any
dividends or make any distributions on Company Common Stock or
pay any dividends on Series C Preferred Stock or Series D
Preferred Stock except in accordance with the terms thereof and
in a form of consideration consistent with past practice;
(d) the Company will not, and will not permit any of its
Subsidiaries to, (i) issue, deliver, sell, encumber or authorize
or propose the issuance, delivery, sale or encumbrance of, any
capital stock or other securities of the Company or any Company
Subsidiary Securities, other than the issuance of shares of
Company Common Stock either upon the exercise of Options or to
fulfill existing obligations to issue such shares in each case as
described in Section 3.05 or in respect of performance share
awards scheduled to vest prior to the Effective Time, (ii) split,
combine or reclassify any Company Stock or Company Subsidiary
Securities or (iii) except as required or permitted by this
Agreement or as disclosed in Section 3.05, repurchase, redeem or
otherwise acquire any Company Stock or any Company Subsidiary
Securities;
(e) except as otherwise expressly permitted hereby, the
Company will not make any commitment or enter into any contract
or agreement material to the Company and its Subsidiaries taken
as a whole except in the ordinary course of business consistent
with past practice and shall consult with Parent before making or
committing to make any capital expenditure of $500,000 or more;
(f) the Company will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing;
(g) the Company will not, and will not permit any of its
Subsidiaries to, take or agree to commit to take any action that
would make any representation and warranty of the Company
hereunder inaccurate in any material respect at, or as of any
time prior to, the Effective Time or which is reasonably likely
to result in a delay in consummation of the Merger, including
delaying the effectiveness of the Joint Proxy
Statement/Prospectus and the mailing thereof;
(h) except to the extent required by law, the Company
will not increase in any manner the compensation or fringe
benefits of any of its directors, officers and other key
employees or pay any pension or retirement allowance not required
by any existing plan or agreement to any such employees, or
become a party to, amend or commit itself to any pension,
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<PAGE> 28
retirement, profit-sharing or welfare benefit plan or agreement
or employment agreement with or for the benefit or any employee,
other than general increases in the compensation of key employees
(excluding any officers of the Company) in the ordinary course of
business consistent with past practice, or voluntarily accelerate
the vesting of any compensation or benefit or take any action
with respect to any Employee Plan or Benefit Arrangement which
could prevent the Merger from being treated for financial
accounting purposes as a Pooling Transaction; provided, however,
that (i) the Company bonus payments typically paid as of May 31
may be paid consistent with past practice and (ii) the Company
can increase the compensation of the one individual previously
identified to Parent; or
(i) the Company will not amend or waive any provision of
the agreement relating to the acquisition of Nationwide Care,
Inc., and related entities.
SECTION 5.02. Access to Information. From the date
hereof until the Effective Time, the Company will, upon
reasonable notice, give Parent, its counsel, financial advisors,
auditors and other authorized representatives access to the
offices, properties, books and records of the Company and its
Subsidiaries, will furnish to Parent, its counsel, financial
advisors, auditors and other authorized representatives such
financial and operating data and other information as such
Persons may reasonably request and will instruct the Company's
employees, counsel and financial advisors to cooperate with
Parent in its investigation of the business of the Company and
its Subsidiaries; provided that no investigation pursuant to this
Section shall affect any representation or warranty given by the
Company to Parent hereunder. All nonpublic information provided
to, or obtained by, Parent in connection with the transactions
contemplated hereby shall be "Information" for purposes of the
Confidentiality Agreement dated March 23, 1995 between Parent and
the Company. Notwithstanding the foregoing, the Company shall
not be required to provide any information which it reasonably
believes it may not provide to Parent by reason of applicable
law, rules or regulations, which constitutes information
protected by attorney/client privilege, or which the Company or
any Subsidiary is required to keep confidential by reason of
contract or, agreement with third parties.
SECTION 5.03. Other Offers. From the date hereof until
the termination of this Agreement, the Company and its
Subsidiaries will not, and will use their reasonable best efforts
to cause their officers, directors, employees or other agents not
to, directly or indirectly, (i) take any action to solicit or
initiate any Company Acquisition Proposal (as defined below) or
(ii) engage in negotiations with, or disclose any nonpublic
information relating to the Company or any of its Subsidiaries or
afford access to the properties, books or records of the Company
or any of its Subsidiaries to any Person, unless with respect to
the actions referred to in this clause (ii) otherwise required in
accordance with the fiduciary duties of the Board of Directors
under applicable law as advised by independent legal counsel to
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<PAGE> 29
the Company, in response to a Person that has made a Company
Acquisition Proposal in writing. (Nothing herein shall prohibit
the Company from amending or waiving the provisions of
confidentiality agreements it has entered into with third persons
in respect of the ability of such persons to submit a Company
Acquisition Proposal to the Company or its stockholders and the
Company has done so.) The Company will promptly as reasonably
practicable notify Parent after receipt of any Company
Acquisition Proposal or any indication that any Person is
considering making a Company Acquisition Proposal and identify
the party with whom it has negotiated or to whom it has disclosed
confidential information. For purposes of this Agreement,
"Company Acquisition Proposal" means any good faith offer or
proposal for a merger or other business combination involving the
Company or any of its Subsidiaries or the acquisition of any
equity interest in, or a substantial portion of the assets of,
the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
SECTION 5.04. Notices of Certain Events. The Company
shall promptly as reasonably practicable notify Parent of:
(i) any notice or other communication from any Person
alleging that the consent of such Person (or another Person) is
or may be required in connection with the transactions
contemplated by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in connection with
the transactions contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting the
Company or any of its Subsidiaries which, if pending on the date
of this Agreement, would have been required to have been
disclosed pursuant to Section 3.11 or which relate to the
consummation of the transactions contemplated by this Agreement;
(iv) any notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both,
would become a default, received by the Company or any of its
Subsidiaries subsequent to the date of this Agreement, under any
material agreement; and
(v) any Company Material Adverse Effect or the
occurrence of any event which is reasonably likely to result in a
Company Material Adverse Effect.
SECTION 5.05. Tax Letters. If the parties hereto
reasonably believe it appropriate, the Company will cooperate
with Parent in requesting of its directors and officers and such
other persons as Parent may reasonably request, at or before the
Effective Time, a representation letter stating that such person
has no present plan or intention to sell any of the shares of
Parent Common Stock which such stockholder receives in the
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<PAGE> 30
Merger. The refusal of any such person who is not a director or
employee of the Company or one of its Subsidiaries to provide
such a letter shall not be a breach by the Company of its
obligations hereunder.
SECTION 5.06. Rights Agreement. The Company shall take
all action (including, if necessary, amending or terminating the
Company Rights Agreement) so that the execution of this Agreement
and any agreements between the Company and Parent or Merger
Subsidiary and the consummation of the Merger and the other
transactions contemplated hereby and do not and will not result
in the grant of any rights to any person under the Company Rights
Agreement or enable or require any outstanding rights to be
exercised, distributed or triggered.
SECTION 5.07. Financial Statements. The Company agrees
to prepare, and to cause KPMG Peat Marwick to take appropriate
action with respect to such consolidated financial statements of
the Company and its Subsidiaries as are required to be included
in or necessary for the preparation of the Joint Proxy
Statement/Prospectus.
ARTICLE VI
COVENANTS OF PARENT
Parent agrees that:
SECTION 6.01. Conduct of Parent. Except as expressly
contemplated by this Agreement or as described on Schedule 6.01
hereto, from the date hereof until the Effective Time, Parent and
its Subsidiaries shall conduct their business in the ordinary
course consistent with past practice and shall use their
reasonable best efforts to preserve intact their business
organizations and relationships with third parties and to keep
available the services of their present officers and key
employees. Except as otherwise approved in writing by the
Company or as expressly contemplated by this Agreement, and
without limiting the generality of the foregoing, from the date
hereof until the Effective Time:
(a) Parent and Merger Subsidiary will not adopt or
propose any change in its certificate of incorporation or bylaws;
(b) Parent will not, and will not permit any of its
Subsidiaries to, merge or consolidate with any other Person
(other than another Subsidiary) or, acquire a material amount of
stock or assets of any other Person; provided that Parent and its
Subsidiaries may merge or consolidate with, or acquire the stock
or assets of a Person primarily engaged in a business in which
Parent or any of its Subsidiaries is presently engaged, provided
that such transaction may not be undertaken if it would require
the preparation of pro forma financial statements in accordance
with applicable rules and regulations of the SEC or might
reasonably be expected to delay the transactions contemplated by
this Agreement;
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(c) Parent will not, and will not permit any of its
Subsidiaries to sell, lease, license, mortgage, pledge or
otherwise dispose of any material assets or property except
(i) pursuant to existing contracts or commitments, (ii) in the
ordinary course consistent with past practice or (iii) transfers
between Parent and/or its wholly-owned Subsidiaries;
(d) Parent will not declare or pay any dividends or make
any distributions on Parent Common Stock;
(e) Parent will not, and will not permit any of its
Subsidiaries to (i) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any capital stock of
Parent or Parent Subsidiary Securities, other than to increase
the total number of authorized shares of Parent Common Stock up
to 200,000,000 (the "Charter Amendment"), the Option Plan
Amendment or the issuance of Parent Common Stock upon the
exercise of employee stock options or convertible securities or
to fulfill obligations to issue shares of Parent Common Stock in
each case as described in Section 4.05, or to consummate a
transaction permitted by Section 6.01(b) above or to the Vencor
Foundation in accordance with past practice, (ii) split, combine
or reclassify any capital stock of Parent or Parent Subsidiary
Securities or (iii) repurchase, redeem or otherwise acquire any
capital stock of Parent or Parent Subsidiary Securities;
(f) Parent will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing;
(g) Parent will not, and will not permit any of its
Subsidiaries to, take or agree or commit to take any action that
would make any representation and warranty of Parent hereunder
inaccurate in any material respect at, or as of any time prior
to, the Effective Time or which is reasonably likely to result in
a delay in consummation of the Merger, including delaying the
effectiveness of the Joint Proxy Statement/Prospectus and the
mailing thereof; or
(h) except to the extent required by law, Parent will
not voluntarily accelerate the vesting of any compensation or
benefit or take any action with respect to any Parent Employee
Plan or Benefit Arrangement which could prevent the Merger from
being treated for financial accounting purposes as a Pooling
Transaction.
SECTION 6.02. Access to Information. From the date
hereof until the Effective Time, Parent will, upon reasonable
notice, give the Company, its counsel, financial advisors,
auditors and other authorized representatives access to the
offices, properties, books and records of Parent and its
Subsidiaries, will furnish to the Company, its counsel, financial
advisors, auditors and other authorized representatives such
financial and operating data and other information as such
Persons may reasonably request and will instruct Parent's
employees, counsel and financial advisors to cooperate with the
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<PAGE> 32
Company in its investigation of the business of Parent and its
Subsidiaries; provided that no investigation pursuant to this
Section shall affect any representation or warranty given by
Parent to the Company hereunder. All nonpublic information
provided to, or obtained by, the Company in connection with the
transactions contemplated hereby shall be "Information" for
purposes of the Confidentiality Agreement dated March 23, 1995
between Parent and the Company. Notwithstanding the foregoing,
Parent shall not be required to provide any information which it
reasonably believes it may not provide to the Company by reason
of applicable law, rules or regulations, which constitutes
information protected by attorney/client privilege, or which
Parent or any Subsidiary is required to keep confidential by
reason of contract or agreement with third parties.
SECTION 6.03. Merger Subsidiary. Parent will take all
action necessary (a) to cause Merger Subsidiary to perform its
obligations under this Agreement and to consummate the Merger on
the terms and conditions set forth in this Agreement and (b) to
ensure that, prior to the Effective Time, Merger Subsidiary shall
not conduct any business or make any investments other than as
specifically contemplated by this Agreement and will not have any
assets (other than a de minimus amount of cash paid to Merger
Subsidiary for the issuance of its stock to Parent).
SECTION 6.04. Director and Officer Liability. From and
after the Effective Time, (a) Parent shall indemnify, defend and
hold harmless the present and former officers and directors of
the Company and its Subsidiaries against all losses, claims,
damages and liability in respect of acts or omissions occurring
at or prior to the Effective Time to the fullest extent that the
Company or such Subsidiary would have been permitted under
applicable law and the certificate of incorporation and by-laws
of the Company or such Subsidiary in effect on the date hereof to
indemnify such person and (b) the Surviving Corporation shall
indemnify, defend and hold harmless the present and former
officers and directors of the Company and its Subsidiaries
against all losses, claims, damages and liability in respect of
acts or omissions occurring at or prior to the Effective Time to
the fullest extent that the Company or such Subsidiary would have
been permitted under applicable law and the certificate of
incorporation and by-laws of the Company or such Subsidiary in
effect on the date hereof to indemnify such person. Parent shall
cause the Surviving Corporation (and its successors) to establish
and maintain provisions in its Certificate of Incorporation and
Bylaws concerning the indemnification and exoneration of the
Company's former and present officers, directors, employees and
agents that are no less favorable to those persons than the
provisions of the Company's Articles of Incorporation and Bylaws
in effect on the date hereof. For at least six years after the
Effective Time, Parent will use its best efforts to, without any
lapse in coverage, provide officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the
Effective Time covering each such Person currently covered by the
Company's officers' and directors' liability insurance policy on
terms with respect to coverage and amount no less favorable than
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<PAGE> 33
those of such policy in effect on the date hereof; provided, that
in no event shall Parent be required to pay more than 200% of the
premium paid by the Company in its most recently ended fiscal
year. Parent shall cause the Surviving Corporation to reimburse
all expenses including reasonable attorney's fees, incurred by
any person to enforce successfully the obligations of Parent and
Surviving Corporation under this Section 6.04.
SECTION 6.05. Stock Exchange Listing. Parent shall use
its best efforts to cause the shares of Parent Common Stock to be
issued in the Merger to be approved for listing on the New York
Stock Exchange, subject to official notice of issuance, prior to
the Effective Time.
SECTION 6.06. Parent Acquisition Proposals. From the
date hereof until the termination of this Agreement, Parent and
its Subsidiaries will not, and will use their best efforts to
cause their officers, directors, employees or the agents not to,
directly or indirectly, (i) take any action to solicit or
initiate any Parent Acquisition Proposal (as defined below) or
(ii) engage in negotiations with, or disclose any nonpublic
information relating to Parent or any of its Subsidiaries or
afford access to the properties, books or records of Parent or
any of its Subsidiaries to, any Person unless with respect to the
actions referred to in this clause (ii) otherwise required in
accordance with the fiduciary duties of the Board of Directors
under applicable law as advised by independent legal counsel to
Parent, in response to a Person that has made a Parent
Acquisition Proposal in writing. Parent will promptly as
reasonably practicable notify the Company after receipt of any
Parent Acquisition Proposal and identify the party with whom it
has negotiated and to whom it has disclosed confidential
information. For purposes of this Agreement, "Parent Acquisition
Proposal" means any good faith offer or proposal for a merger or
proposal for, or combination involving Parent or any of its
Subsidiaries or the acquisition of any equity interest in, or a
substantial portion of the assets of Parent and its Subsidiaries
taken as a whole, other than the transactions contemplated by
this Agreement.
SECTION 6.07. Notice of Certain Events. Each of Parent
and Merger Subsidiary shall promptly as reasonably practicable
notify the Company of:
(i) any notice or other communication from any Person
alleging that the consent of such Person (or other Person) is or
may be required in connection with the transactions contemplated
by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in connection with
the transactions contemplated by this Agreement;
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<PAGE> 34
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting it or
any of its Subsidiaries which, if pending on the date of this
Agreement, would have been required to have been disclosed
pursuant to Section 4.12 or which relate to the consummation of
the transactions contemplated by this Agreement;
(iv) any notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both,
would become a default, received by the Parent or any of its
Subsidiaries subsequent to the date of this Agreement, under any
material agreement; and
(v) any Parent Material Adverse Effect or the occurrence
of any event which is reasonably likely to result in a Parent
Material Adverse Effect.
SECTION 6.08. Employee Benefits. (a) It is the
intention of Parent that, following the Effective Time through
December 31, 1995, Parent will continue, to the extent
practicable and appropriate, the existing level of employee
benefits provided by the Company and its Subsidiaries (other than
employee benefit plans based on Company capital stock) and
thereafter to provide to officers and employees of the Company
and its Subsidiaries benefits comparable to those provided to
similarly situated employees of Parent and its Subsidiaries under
the Parent's employee benefit plans; (b) Parent agrees to honor
and perform, and to cause Merger Subsidiary to honor and perform,
all severance, indemnification and similar agreements of the
Company disclosed in Schedule 6.09 hereof (including the
Directors' Retirement Plan with respect to the directors of the
Company whether or not they continue as Designated Directors);
provided that the Company shall use its best efforts to amend all
severance agreements to eliminate, as a basis upon which
severance benefits may be paid, all references to title; (c) For
purposes of the Company's Supplemental Executive Retirement Plan,
the Effective Time shall be deemed to be a change in control.
ARTICLE VII
COVENANTS OF PARENT
AND THE COMPANY
The parties hereto agree that:
SECTION 7.01. Best Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each party will use its
best reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
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<PAGE> 35
SECTION 7.02. Certain Filings. The Company and Parent
shall cooperate with one another (a) in connection with the
preparation of the Registration Statement and Joint Proxy
Statement/Prospectus, (b) in determining whether any action by or
in respect of, or filing with, any governmental body, agency or
official, or authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to
any material contracts, in connection with the consummation of
the transactions contemplated by this Agreement and (c) in
seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information required in
connection therewith or with the Registration Statement and Joint
Proxy Statement/Prospectus and seeking timely to obtain any such
actions, consents, approvals or waivers. Parent and the Company
shall each promptly file Notification and Report Forms under the
HSR Act and each of Parent and the Company agrees to use its best
reasonable efforts to respond as promptly as practicable to all
inquiries received from the Antitrust Division of the United
States Department of Justice or the Federal Trade Commission for
additional information or documentation. Parent and the Company
each shall consult with the other in connection with the
foregoing and each shall use its best reasonable efforts to take
any steps as may be necessary in order to obtain any consents,
approvals, permits or authorizations required in connection with
the Merger, including negotiating a resolution of disputes with
governmental or regulatory authorities and performing the
resolution as negotiated.
SECTION 7.03. Public Announcements. Parent and the
Company will consult with each other before issuing any press
release or making any public statement with respect to this
Agreement and the transactions contemplated hereby and, except as
may be required by applicable law or any listing agreement with
the NYSE, will not issue any such press release or make any such
public statement prior to such consultation.
SECTION 7.04. Further Assurances. At and after the
Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the
name and on behalf of the Company or Merger Subsidiary, any
deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger
Subsidiary, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the
rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in
connection with, the Merger. None of Parent, Merger Subsidiary
or the Company will knowingly take or agree to take any action
that would prevent Parent from accounting for the business
combination to be effected by the Merger as a pooling of
interests.
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<PAGE> 36
SECTION 7.05. Stockholders Meetings. Each of Parent and
the Company shall cause a meeting of its stockholders (each, a
"Stockholder Meeting") to be duly called and held as soon as
reasonably practicable for the purpose of voting on the approval
and adoption of this Agreement and the Merger, in the case of the
Company, or the issuance of Parent Common Stock, the Charter
Amendment and the Option Plan Amendment. The Directors of Parent
and the Directors of the Company shall, unless otherwise required
in accordance with their fiduciary duties as advised by outside
counsel, recommend such approval and adoption or issuance. In
connection with such meetings, each of Parent and the Company
will, subject to the foregoing, use its best efforts to obtain
the necessary approvals by its stockholders of this Agreement,
the transactions contemplated hereby and such other matters as
are contemplated by the terms of this Agreement or required by
Delaware Law or Nevada Law, as the case may be, and will
otherwise comply with all legal requirements applicable to such
meetings.
SECTION 7.06. Preparation of the Joint Proxy
Statement/Prospectus and Registration Statement. Parent and the
Company shall promptly prepare and file with the SEC a
preliminary version of the Joint Proxy Statement/Prospectus and
will use their best efforts to respond to the comments of the SEC
in connection therewith and to furnish all information required
to prepare the definitive Joint Proxy Statement/Prospectus.
After receiving comments from the SEC, Parent shall promptly file
with the SEC the Registration Statement containing the Joint
Proxy Statement/Prospectus. Each of Parent and the Company shall
use its best efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable
after such filing. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not
now so qualified or filing a general consent to service of
process in any jurisdiction) required to be taken under any
applicable state securities laws in connection with the issuance
of Parent Common Stock in the Merger and the Company shall
furnish all information concerning the Company and the holders of
shares of Company Stock as may be reasonably requested in
connection with any such action. Promptly after the
effectiveness of the Registration Statement, each party will
cause the Joint Proxy Statement/Prospectus to be mailed to its
stockholders, and if necessary, after the definitive Joint Proxy
Statement/Prospectus shall have been mailed, promptly circulate
amended, supplemented or supplemental proxy materials and, if
required in connection therewith, resolicit proxies.
SECTION 7.07. State Takeover Laws. If any "fair price"
or "control share acquisition" statute or other similar statute
or regulation shall become applicable to the transactions
contemplated by this Agreement, the Company, Parent and
Acquisition and their respective Boards of Directors shall use
their reasonable best efforts to grant such approvals and take
such actions as are necessary so that the transactions
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<PAGE> 37
contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to minimize
the effects of such statute or regulation on the transactions
contemplated hereby.
SECTION 7.08. Pooling. If it is determined at any time
prior to the Effective Time that any action or inaction by any
party hereto or one of its respective affiliates has had the
effect of causing the condition set forth in Section 8.01(vii) to
be unable to be satisfied, such party shall, consistent with the
terms and conditions of this Agreement, use its best efforts to
cause the condition set forth in Section 8.01(vii) to be
satisfied.
SECTION 7.09. Consents. The Company and Parent shall
use their best efforts to obtain any approval, consent or waiver
with respect to any Third Party Agreements or to refinance such
agreements in order to facilitate consummation of the Merger
("Third Party Consents") necessary to consummate the transactions
contemplated by the Merger prior to the Effective Time.
SECTION 7.10. Affiliates. Prior to the Effective Time,
the Company shall cause to be delivered to Parent a list
identifying each person who might at the time of the meeting of
the Company's stockholders be deemed to be an "affiliate" of the
Company for purposes of (i) Rule 145 under the Securities Act or
(ii) for purposes of the SEC's Accounting Series Releases
concerning "pooling of interests" treatment for business
combinations (each, a "Company Affiliate"). The Company shall
use its best efforts to obtain from each person who is identified
as a possible Company Affiliate prior to the Effective Time an
agreement (a "Company Affiliate Agreement") in the form attached
hereto as Exhibit A. Parent shall cause to be delivered to the
Company a list identifying each person who might at the time of
the meeting of the stockholders of the Parent be deemed an
"affiliate" (each, a "Parent Affiliate"). Parent shall use its
best efforts to obtain from each person who is identified as a
possible Parent Affiliate from the Parent prior to the Effective
Time an agreement (a "Parent Affiliate Agreement") in the form
attached hereto as Exhibit B.
SECTION 7.11. Restructuring the Merger. If requested by
Parent within 30 days of the date of this Agreement, the parties
hereto shall amend this Agreement in form reasonably satisfactory
to both to provide for a transaction resulting in a newly formed
holding company owning each of the Company and Parent as wholly
owned subsidiaries and qualifying under the provisions of Section
351 of the Code and treated as a pooling of interests for
financial accounting purposes. In such transactions, each share
of Parent Common Stock shall be converted into one share of
common stock of the holding company and each share of Company
Common Stock shall be converted into the product of the
Conversion Number and one share of common stock of the holding
company. Notwithstanding the foregoing, the Agreement shall not
be amended as aforesaid if such amendment would have a Parent
Material Adverse Effect or Company Material Adverse Effect.
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ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each
Party. The obligations of the Company, Parent and Merger
Subsidiary to consummate the Merger are subject to the
satisfaction of the following conditions:
(i) this Agreement and the Merger shall have been
approved by the requisite vote of the stockholders of the Company
in accordance with Nevada Law;
(ii) the waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
(iii) no provision of any applicable domestic law or
regulation and no judgment, injunction, order or decree of a
court or governmental agency or authority of competent
jurisdiction which has the effect of making the Merger illegal or
shall otherwise restrain or prohibit the consummation of the
Merger is in effect (each party agreeing to use its best
reasonable efforts, including appeals to higher courts, to have
any judgment, injunction, order or decree lifted);
(iv) there shall have been approved, by the requisite
vote of Parent's stockholders, the issuance of Parent Common
Stock in connection with the Merger in accordance with the rules
of the NYSE and the Charter Amendment and the Option Plan
Amendment;
(v) the Registration Statement shall have been declared
effective under the Securities Act and no stop order suspending
the effectiveness of the Registration Statement shall be in
effect and no proceedings for such purpose shall have been
initiated or threatened by the SEC;
(vi) the shares of Parent Common Stock to be issued in
the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance;
(vii) receipt by Parent and the Company of an
opinion, in form and substance reasonably satisfactory to Parent
and the Company, dated the effective date of the Merger, from
KPMG Peat Marwick and Ernst & Young to the effect that the Merger
will qualify as a "pooling of interests" transaction under the
relevant Accounting Principles Board guidelines and the SEC shall
not have objected to such accounting treatment; and
(viii) all consents, authorizations, orders and
approvals of (or filings or registrations with) any governmental
commission, board or other regulatory body required in connection
with the execution, delivery and performance of this Agreement
shall have been obtained or made, except for the filings in
connection with the Merger contemplated by Section 1.01(b) and
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<PAGE> 39
any other documents required to be filed after the Effective Time
and except where the failure to have obtained or made any such
consent, authorization, order, approval, filing or registration
would not be reasonably likely to have a Company Material Adverse
Effect or a Parent Material Adverse Effect, as the case may be,
following the Effective Time or would render the Merger illegal
or provide a reasonable basis to conclude that the parties hereto
or their affiliates or any of their respective directors or
officers will be subject to the risk of criminal liability.
(ix) all Third Party Consents shall have been obtained
except where the failure of the Company to obtain any Third Party
Consents, individually or in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect.
SECTION 8.02. Conditions to the Obligations of Parent
and Merger Subsidiary. The obligations of Parent and Merger
Subsidiary to consummate the Merger are subject to the
satisfaction of the further conditions:
(i) that the Company shall have performed in all
material respects all of its obligations hereunder required to be
performed by it at or prior to the Effective Time, the
representations and warranties of the Company contained in this
Agreement shall be true in all material respects at and as of the
Effective Time as if made at and as of such time except to the
extent that any representation or warranty is made as of a
specified date, in which case such representation or warranty
shall be true as of such date, and Parent shall have received a
certificate signed by an executive officer and by the chief
financial officer of the Company to the foregoing effect;
(ii) Parent shall have received from the Company "cold
comfort" letters of KPMG Peat Marwick of the kind contemplated by
the Statement of Auditing Standards with respect to Letters to
Underwriters promulgated by the American Institute of Certified
Public Accountants (the "AICPA Statement") dated the date on
which the Registration Statement shall become effective and the
Effective Time, respectively, and addressed to Parent, in form
and substance reasonably satisfactory to Parent, in connection
with the procedures undertaken by them with respect to the
financial statements of the Company and its Subsidiaries
contained in the Registration Statement and the other matters
contemplated by the AICPA Statement and customarily included in
comfort letters relating to transactions similar to the Merger;
and
(iii) the Parent shall have received two opinions of
Sullivan & Cromwell (or such other counsel selected by the
Parent) in form and substance reasonably satisfactory to it,
based, in each case, upon representation letters dated on or
about the date of such opinions from persons reasonably requested
to provide such letters, and such other assumptions and
representations as counsel may reasonably deem relevant, to the
effect that the Merger would qualify for federal income tax
purposes as a reorganization within the meaning of Section 368 of
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<PAGE> 40
the Code, the first of which shall be dated on or about the date
that is two business days prior to the date of the Joint Proxy
Statement/Prospectus and the second of which shall be dated as of
the Effective Time.
SECTION 8.03. Conditions to the Obligations of the
Company. The obligations of the Company to consummate the Merger
are subject to the satisfaction of the following further
conditions:
(i) Parent and Merger Subsidiary shall have performed in
all material respects all of their respective obligations
hereunder required to be performed by them at or prior to the
Effective Time, the representations and warranties of Parent and
Merger Subsidiary contained in this Agreement shall be true in
all material respects at and as of the Effective Time as if made
at and as of such time, and the Company shall have received a
certificate signed by the chief financial officer of Parent to
the foregoing effect;
(ii) the Company shall have received two opinions of
Fried, Frank, Harris, Shriver & Jacobson (or such other counsel
selected by the Company) in form and substance reasonably
satisfactory to it, based, in each case, upon representation
letters dated on or about the dates of such opinions from persons
reasonably requested to provide such letters and such other facts
and representations as counsel may reasonably deem relevant, to
the effect that the Merger should be treated for federal income
tax purposes as a reorganization qualifying under the provisions
of Section 368 of the Code, the first of which shall be dated on
or about the date that is two business days prior to the date of
the Joint Proxy Statement/Prospectus and the second of which
shall be dated as of the Effective Time;
(iii) the Designated Directors shall have been
elected to the Board of Directors of Parent effective as of the
Effective Time;
(iv) the Company shall have received from Parent "cold
comfort" letters of Ernst & Young of the kind contemplated by the
AICPA Statement dated the date on which the Registration
Statement shall become effective and the Effective Time,
respectively, and addressed to the Company, in form and substance
reasonably satisfactory to the Company, in connection with the
procedures undertaken by them with respect to the financial
statements of Parent and the Parent Subsidiaries contained in the
Registration Statement and the other matters contemplated by the
AICPA Statement and customarily included in comfort letters
relating to transactions similar to the Merger.
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<PAGE> 41
ARTICLE IX
TERMINATION
SECTION 9.01. Termination. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time (notwithstanding any approval of this
Agreement by the stockholders of the Company or Parent):
(i) by mutual written consent of the Company and Parent,
by action of their respective Boards of Directors;
(ii) by action of the Board of Directors of either the
Company or Parent, if the Merger has not been consummated by
December 31, 1995 (provided that the right to terminate this
Agreement under this clause (ii) shall not be available to any
party who at such time is in material breach of any of its
obligations under this Agreement);
(iii) by action of the Board of Directors of either the
Company or Parent, if there shall be any applicable domestic law,
rule or regulation that makes consummation of the Merger illegal
or if any judgment, injunction, order or decree of a court or
governmental agency or authority of competent jurisdiction shall
restrain or prohibit the consummation of the Merger, and such
judgment, injunction, order or decree shall become final and
nonappealable;
(iv) by action of the Board of Directors of either the
Company or Parent, if any of the stockholder approvals referred
to in Section 8.01(i) or (iv) shall not have been obtained by
reason of the failure to obtain the requisite vote upon a vote at
a duly held meeting of stockholders or at any adjournment or
postponement thereof;
(v) by action of the Board of Directors of either the
Company or Parent, if (x) there shall have been a material breach
of any representation or warranty contained in this Agreement on
the part of the other party which breach by its nature cannot be
cured prior to the Effective Time and which breach is reasonably
likely to have a Parent Material Adverse Effect or Company
Material Adverse Effect, as the case may be, or (y) there shall
have been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of the other party, which
breach by its nature cannot be cured or, if curable, is not cured
within 30 days after written notice of such breach is given by
the terminating party to the other party;
(vi) (A) by action of the Board of Directors of Parent,
if the Board of Directors of the Company does not publicly
recommend in the Joint Proxy Statement/Prospectus that the
Company's stockholders approve and adopt this Agreement and the
Merger, or if it shall have withdrawn, modified or changed such
recommendation in any manner adverse to Parent, or (B) by action
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<PAGE> 42
of the Board of Directors of the Company, if the Board of
Directors of Parent does not publicly recommend in the Joint
Proxy Statement/Prospectus that Parent's stockholders approve the
issuance of Parent Common Stock in connection with the Merger;
(vii) by the Company, if the product of the Parent
Average Price times the Conversion Number is less than $31.00 per
share, provided, however, that the Company may not terminate this
Agreement if it has been advised in writing by Parent that the
Conversion Number shall be determined by dividing $31.00 by the
Parent Average Price (without regard to any maximum imposed on
the Conversion Number absent this clause by Section 1.02(b)
hereof); or
(viii) by the Company, if the Company receives an
unsolicited written proposal with respect to a Company
Acquisition Proposal that the Board of Directors of the Company
determines in good faith, after consultation with its legal and
financial advisors is reasonably likely to lead to a merger,
acquisition, consolidation or similar transaction that is more
favorable to the stockholders of the Company than this Agreement
and the Merger and that failure to take such action would
constitute a breach of the fiduciary duties of the Board of
Directors of the Company and the Company accepts such Company
Acquisition Proposal; provided, however, that the Company shall
not be permitted to terminate this Agreement pursuant to this
Section 9.01(viii) unless it has provided Parent and Merger
Subsidiary with five business days prior written notice of its
intent to so terminate this Agreement together with a detailed
summary of the terms and conditions of such Company Acquisition
Proposal; provided, further, that Purchaser shall receive the
fees set forth in Section 10.04 immediately prior to any
termination pursuant to this Section 9.01(viii) by wire transfer
in same day funds.
SECTION 9.02. Effect of Termination. If this Agreement
is terminated and the Merger is abandoned pursuant to Section
9.01, no party hereto (or any of its directors or officers) shall
have any liability or further obligation to any other party
hereto except (a) as provided in Section 10.04, (b) that the
agreements contained in Section 10.04 in the last sentence of
Section 5.02 and the last sentence of Section 6.02 shall survive
the termination hereof and (c) that nothing herein will relieve
any party from liability for any breaches hereof.
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ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including telecopy, telex or similar writing) and shall be
given,
if to Parent or Merger Subsidiary, to:
Vencor, Inc.
3300 Providian Center
4000 West Market Street
Louisville, KY 40202
Telephone: (502) 569-7300
Telecopy: (502) 569-1104
Attention: Jill L. Force, General Counsel
with a copy to:
Joseph Frumkin, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Telephone:(212) 558-4101
Telecopy:(212) 558-3588
if to the Company, to:
1148 Broadway Plaza
Tacoma, WA 98402
Telephone: (206) 572-4901
Telecopy: (206) 756-4845
Attention: Richard P. Adcock, Senior Vice President
and General Counsel
with a copy to:
Peter Golden, Esq.
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, NY 10004
Telephone: (212) 859-8112
Telecopy: (212) 859-4000
or such other address or telex or telecopy number as such party
may hereafter specify for the purpose by notice to the other
parties hereto. Each such notice, request or other communication
shall be effective (i) if given by telecopy, when such telex is
transmitted to the telex number specified in this Section and the
appropriate answerback is received or (ii) if given by any other
means, when delivered at the address specified in this Section.
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<PAGE> 44
SECTION 10.02. Survival. The representations and
warranties and agreements contained herein and in any certificate
or other writing delivered pursuant hereto shall not survive the
Effective Time, except Sections 6.04, 6.08, 6.09, 7.04 and
Article I.
SECTION 10.03. Amendments; No Waivers. (a) Subject to
the applicable provisions of Delaware Law and Nevada Law any
provision of this Agreement may be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by the Company,
Parent and Merger Subsidiary or, in the case of a waiver, by the
party against whom the waiver is to be effective; provided that
any waiver or amendment shall be effective against a party only
if the Board of Directors of such party approves such waiver or
amendment.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 10.04. Fees and Expenses. (a) Subject to
paragraphs (b) and (c) of this Section, all costs and expenses
incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense, except that Parent and the
Company shall each pay one-half of all printing, filing and
mailing costs for the Registration Statement and the Joint Proxy
Statement/Prospectus and all SEC and other regulatory filing
fees.
(b) If this Agreement is terminated (i) by the Company
pursuant to Section 9.01(viii) or a Company Acquisition Proposal
shall have been made and thereafter this Agreement is terminated
pursuant to Section 9.01(ii) or 9.01(iv) because the stockholders
of the Company shall have failed to approve this Agreement or a
Company Acquisition Proposal shall have been made and thereafter
this Agreement is terminated pursuant to Section 9.01(vi)(A) or
(ii) a bona-fide Parent Acquisition Proposal shall have been made
and thereafter this Agreement is terminated pursuant to
Section 9.01(ii) or 9.01(iv) because the stockholders of Parent
shall have failed to approve the issuance of Parent Common Stock
pursuant to this Agreement or a Company Acquisition Proposal
shall have been made and thereafter this Agreement is terminated
pursuant to Section 9.01(vi)(B), then, in the case of clause (i)
above, the Company shall pay Parent and, in the case of
clause (ii) above, Parent shall pay the Company, a cash fee of
$35,000,000; provided, that, if the proposed Company Acquisition
Transaction or Parent Acquisition Transaction, respectively, is
intended to be accounted for as a "pooling of interests" for
accounting purposes, then the amount of the cash fee shall be
reduced to $13,500,000.
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<PAGE> 45
The Company shall reimburse Parent for all of its out-of-
pocket expenses and fees (subject to a maximum reimbursement
obligation of $5,000,000) actually incurred by Parent or Merger
Subsidiary in connection with the Transactions contemplated by
this Agreement prior to the termination of this Agreement
(including, without limitation, all fees and expenses of counsel,
financial advisors, accountants, environmental and other experts
and consultants to Parent and its affiliates, and all printing
and advertising expenses) and in connection with the negotiation,
preparation, execution, performance and termination of this
Agreement, the structuring of the transactions contemplated by
this Agreement, any agreements relating thereto and any filings
to be made in connection therewith if this Agreement is
terminated pursuant to Section 9.01(iv) because the stockholders
of the Company shall have failed to approve this Agreement and no
Business Combination Transaction Proposal involving the Company
shall be outstanding at the time of such vote.
Parent shall reimburse the Company for all of its out-of-
pocket expenses and fees (subject to a maximum reimbursement
obligation of $5,000,000) actually incurred by the Company in
connection with the Transactions contemplated by this Agreement
prior to the termination of this Agreement (including, without
limitation, all fees and expenses of counsel, financial advisors,
accountants, environmental and other experts and consultants to
the Company and its affiliates, and all printing and advertising
expenses) and in connection with the negotiation, preparation,
execution, performance and termination of this Agreement, the
structuring of the transactions contemplated by this Agreement,
any agreements relating thereto and any filings to be made in
connection therewith if this Agreement is terminated pursuant to
Section 9.01(iv) because the stockholders of Parent shall have
failed to approve this Agreement and no Parent Acquisition
Proposal shall be outstanding at the time of such vote.
SECTION 10.05. Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns,
provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
SECTION 10.06. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of the State
of Nevada without regard to principles of conflict of laws.
SECTION 10.07. Counterparts; Effectiveness. This
Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto
shall have received counterparts hereof signed by all of the
other parties hereto.
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<PAGE> 46
SECTION 10.08. Entire Agreement. This Agreement and the
Confidentiality Agreement dated March 23, 1995 between Parent and
the Company constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior
agreements, understandings and negotiations, both written and
oral, between the parties with respect to the subject matter of
this Agreement. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has
been made or relied upon by either party hereto. Neither this
Agreement nor any provision hereof is intended to confer upon any
Person other than the parties hereto any rights or remedies
hereunder except for the provisions of Section 6.04, which are
intended for the benefit of the Company's former and present
officers, directors, employees and agents and the provisions of
Article I, which is intended for the benefit of the Company's
stockholders, including holders of Company Options.
SECTION 10.09. Headings. The headings contained in this
Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
SECTION 10.10. Severability. If any term or other
provision of this Agreement is invalid, illegal or unenforceable,
all other provisions of this Agreement shall remain in full force
and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner
materially adverse to any party.
SECTION 10.11. Specific Performance. The parties hereto
agree that irreparable damage would occur in the event any of the
provisions of this Agreement were not to be performed in
accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof in addition
to any other remedies at law or in equity.
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<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
THE HILLHAVEN CORPORATION
By: /s/ Bruce L. Busby
Bruce L. Busby
Title: Chief Executive Officer
VENCOR, INC.
By: /s/ W. Earl Reed, III
W. Earl Reed, III
Title: Vice President - Finance and
Development
VERITAS HOLDINGS CORP.
By: /s/ W. Earl Reed, III
W. Earl Reed, III
Title: Vice President - Finance and
Development
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